Citadel NYC Archives

Buying A Home Remains An Affordable Choice

Despite rising prices and higher mortgage rates, an analysis of homes sold during the final quarter of 2016 found that 59.9 percent of both new and existing homes were affordable to a family earning the median income of $65,700. The numbers – from the National Association of Home Builders Housing Opportunity Index – show that the majority of homes available for sale are still within reach for Americans hoping to buy this year. Robert Dietz, NAHB’s chief economist, says buying remains an affordable choice, despite the fact that affordability conditions fell slightly from the previous quarter. “Affordability remains positive nationwide even as demand is outstripping supply in many markets,” Dietz said. “Though mortgage rates are rising, incomes should rise faster as well, helping to keep home prices affordable.” The report found the national median home price increased to $250,000 in the fourth quarter, up from $247,000. Still, a stronger job market and rising wages should help offset the effects of higher prices and rising mortgage rates. In addition, builders remain confident that the market will continue to improve this year, which could lead to more new homes being built. As more homes become available for sale, price increases should begin to moderate, which would help improve affordability conditions even further. More here.

Mortgage Rates Mixed In Latest Survey

According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates were up and down last week. For example, rates for 30-year fixed-rate loans with conforming balances fell, while jumbo loans moved up slightly. On the other hand, mortgages backed by the Federal Housing Administration saw a decline and rates for 15-year fixed-rate loans were unchanged from the week before. But despite the fact that rates remained within a fairly steady range last week, demand for mortgage applications was down overall. Refinance activity fell to an eight-year low – mostly due to mortgage rates moving higher over the past few months. At the same time, purchase activity is 3 percent higher than it was at the same time last year, though down from the week before. In other news from the MBA, mortgage credit availability increased for the fifth consecutive month in January. That’s good news for prospective buyers. When lending standards are easing, it makes it more likely that qualified home buyers will be approved for a loan. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of retail residential mortgage applications. More here.

February Named Best Month To Find A Bargain

If asked, most people would name spring or summer as the best time to shop for a house. After all, those are typically the busiest seasons for house hunting, regardless of what part of the country you look at. There are a few reasons for this – including the school year, weather, summer vacations, and a general sense of starting anew. However, new numbers from ATTOM Data Solutions might make you question conventional wisdom on the subject. That’s because, after analyzing 16 years worth of data covering 50 million home sales, they found February is the best month to buy a house at a discount. In fact, their analysis shows homes sold during the month went for 6.1 percent less per square foot than the rest of the year on average. By comparison, April home sales numbers show more than a million more homes sold but at a median price just 1.8 percent below the annualized sales price. In other words, if you’re looking to buy a house and are hoping to find a great deal, now may be the best time to start hunting. And, in addition to being the best month to find a bargain, February also registered the top five days for buying a home at the biggest discount. More here.

Homeowners Often Overestimate Their Home’s Value

For home buyers and sellers, appraisals are important. They represent an official reading of what a particular property is actually worth, as opposed to what its owner hopes to sell it for. Based on similar properties in the same area, an appraiser will look at a house, compare it to recently sold homes in the neighborhood, and determine what the home’s current market value is. Of course, their estimation may catch the current owner by surprise if it comes in either higher or lower than they expected. And, according to one index that tracks price perceptions, they often do. In fact, Quicken Loans’ Home Price Perception Index found the average appraisal value was 1.47 percent below homeowners’ estimates when looked at nationally, though that percentage varies widely depending on where you look. For example, in many western cities – including Denver, Portland, San Francisco, and Los Angeles – appraised values were as much as 3 percent higher than homeowners estimated, while appraisals came in below expectations more often in cities on the East Coast and in the Midwest. If you’re selling, refinancing, or buying a home, it’s a good idea to familiarize yourself with what homes are currently selling for in your area. That way, if and when you call for an appraisal, you’ll be less likely to end up surprised by the result. More here.

59 Million Americans Say They Want To Buy

A recent survey conducted by Princeton Survey Research Associates says 59 million Americans are considering buying a home this year. Thatâ€™s roughly one in four adults. Conducted on behalf of Bankrate, the survey shows the strongest demand among parents with young children and adults between the ages of 27 and 52 â€“ not surprising considering the lower-than-usual number of first-time home buyers active in the market over the past few years. Holden Lewis, a mortgage analyst with Bankrate, says thereâ€™s a lot of pent-up demand among younger buyers. â€œThey have been stymied by stagnant wages, student loans and a lack of available starter homes,â€ Lewis said. â€œIf enough affordable homes are put on the market, we might see a surge of first-time home buyers in their early to mid-30s.â€ That, however, is the big question for home buyers this year. Will there be enough affordable homes on the market to support the increasing number of interested buyers? There have been signs recently that home builders are beginning to build smaller, more affordable homes but, without a spike in the number of Americans hoping to sell their homes, buyers may face another competitive spring market this year. MoreÂ here.

Will Wage Increases Offset Affordability Worries?

Buying a home is not something many people do without weighing the pros and cons. After all, there are a lot of factors that play into whether or not a homeowner decides to sell their house or a renter makes the jump and buys a home of their own. Mortgage rates, home prices, employment conditions, and personal finances can all play a role for Americans deciding whether or not to enter the housing market. For this reason, Fannie Maeâ€™s monthly Home Purchase Sentiment Index measures how consumers are feeling about their financial situation and the real-estate market in an effort to gauge overall optimism and how likely Americans are to buy or sell a home this year. In January, the index moved up after five consecutive months of decline. The bump in optimism was mostly related to an increasing sense of job security and a spike in the number of respondents who said their household income is significantly higher than it was at the same time last year. Doug Duncan, Fannie Maeâ€™s senior vice president and chief economist, says optimism about economic conditions is high but whether that means more home buyers and sellers this spring remains to be seen. â€œAny significant acceleration in housing activity will depend on whether consumersâ€™ favorable expectations are realized in the form of income gains sufficient to offset constrained housing affordability,â€ Duncan said. MoreÂ here.

Older Home Buyers May Ignite Housing Boom

Baby boomers are reaching retirement age and many of them have expressed a desire to move from their current home. Whether theyâ€™re downsizing or buying their dream house in another state, what these boomers do in retirement will have an effect on the housing market over the next several years. Because of this, the National Association of Home Builders saw a big end-of-the-year jump in their quarterly 55+ Housing Market Index. In fact, during the fourth quarter of last year, the index â€“ which measures buildersâ€™ confidence in the market among buyers over the age of 55 â€“ reached its highest level since the survey began in 2008. Dennis Cunningham, chairman of the NAHBâ€™s 55+ Industry Council, says some of the optimism was due to the November election but demographics also play a large role. â€œBuilders and developers in this market segment are also encouraged by the fact that for the next 15 years, 10,000 baby boomers will be turning 65 every day,â€ Cunningham said. â€œThe consistent pressure of this age group wanting to downsize from a large home, shifting to other regions of the country or just simply looking for a newer home or community also plays a key role in the index movement.â€ MoreÂ here.

How Long Does It Take To Break Even On A House?

Conventional wisdom says, after buying a house, you should stay there at least five years before selling. The reason is that, due to the substantial upfront costs of buying a home â€“ including the down payment, closing costs, etc. â€“ you need to allow yourself some time to build up equity in order to recoup that money. However, the exact amount of time it takes to break even will vary from market to market. After all, home values donâ€™t rise at the same exact rate in every town across the country. In fact, according to Zillowâ€™s Q4 2016 Breakeven Horizon report, the typical break even point can be anywhere from just under a year and a half to over five years, depending on where you live. For example, home buyers break even fastest in markets in the South and Midwest, such as Indianapolis, Orlando, Detroit, Atlanta, and Tampa. On the other end of the spectrum, California homeowners have the longest break even points. Buyers in cities like San Jose, San Francisco, Los Angeles, and San Diego should expect to stay in a house at least four years before they break even. Of course, there are a lot of factors that go into determining how long itâ€™ll be before you have enough equity in your house to make back the money you put down to purchase it. But with the national average at just under two years, planning on staying in your home for five years seems like a safe bet. MoreÂ here.

Mortgage Rates Moved Higher Last Week

According to the Mortgage Bankers Associationâ€™s Weekly Applications Survey, mortgage interest rates moved up last week. Rates increased for 30-year fixed-rate loans with both jumbo and conforming balances, as well as 15-year fixed-rate mortgages. Loans backed by the Federal Housing Administration saw rates flat from the week before. The rate increase contributed to a 3.2 percent drop in the number of Americans requesting applications for loans last week. Another reason for the drop in demand, according to MBA chief economist, Michael Fratantoni, was changes to a proposal that wouldâ€™ve reduced mortgage insurance premiums on FHA loans. â€œFollowing the decision to suspend a proposed decrease in the FHA mortgage insurance premium, FHA refinance applications dropped more than 25 percent, while FHA purchase applications fell almost 6 percent,â€ Fratantoni told CNBC. Still, even with last weekâ€™s decline, the number of applications for loans to buy homes remains higher than it was last year at the same time and Fratantoni continues to believe home sales this year will exceed last yearâ€™s levels. The MBAâ€™s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. MoreÂ here.

Home Price Index Shows Continued Gains

Home prices were up 5.6 percent year-over-year, according to the latest results from the S&P CoreLogic Case-Shiller U.S. National Home Price Indices. Considered the leading measure of U.S. home values, the index found prices relatively flat month-over-month but up on an annual basis. Seattle, Portland, and Denver reported the sharpest increases but, in total, eight of the 20 included cities saw greater gains than they did over the same period one year earlier. David M. Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices, says home prices have fully recovered after years of volatility. â€œWith the S&P CoreLogic Case-Shiller National Home Price Index rising at about 5.5 percent annual rate over the last two-and-a-half years and having reached a new all-time high recently, one can argue that housing has recovered from the boom-bust cycle that began a dozen years ago,â€ Blitzer said in a press release. â€œThe recovery has been supported by a few economic factors: low interest rates, falling unemployment, and consistent gains in per-capita disposable personal income.â€ Blitzer added that continued personal income and employment gains could boost demand for housing even further this year. MoreÂ here.