Freddie Mac Archives

Homeowners See Big Gains On Home Sales

Home prices have been climbing for the past few years. And while that has presented affordability challenges for buyers in some markets, it’s also produced big gains for homeowners who’ve sold a home recently. Take, for example, new estimates showing that, nationally, the typical home seller, after living somewhere for eight years, made nearly $40,000 on their home sale. That’s good news for homeowners. And, in some markets, the sales gain is even higher. Homeowners in the Dallas-Fort Worth area saw a median sales gain of $56,297 after just 7.4 years and, in San Jose, sellers’ median price gain was nearly $300,000. But while that may be encouraging for anyone who hopes to sell soon, there is a flip side. Because many home sellers hope to use any money they make on their home sale as a down payment for their next home, the amount gained on a sale may not seem as significant, especially if you’re buying a home in the same market and price range. More here.

Three Trends Key To Real Estate’s Future

So much time is spent analyzing monthly numbers and mortgage rate fluctuations that the big picture can sometimes get lost in all that data. Sure, paying attention to the short term movements of the market can give buyers and sellers an idea of what they should expect once they put their home up for sale or make an offer on a house, but in order to really know where the real estate market is headed in the future, there are some other more significant trends to watch. According to Freddie Mac’s most recent monthly insight report, increasing income inequality, the rising share of land costs, and the increase in land use restrictions will play a large role in determining who buys homes, where they buy, and how much they pay in the years to come. “The change in income distribution shifts the demand for housing – both the total demand for homeownership and the demand for different types of housing,” Sean Becketti, Freddie Mac’s chief economist, says. “The rising share of land costs shifts the supply of housing – houses cost more than before because of the higher cost of the land component of the house. And land use restrictions limit the supply of more-affordable housing in richer states. No analysis of the future housing market is complete without considering them.” More here.

Housing Outlooks Have Differing Visions

The housing market has been sort of a mixed bag this year. While home sales are expected to exceed last year’s levels and mortgage rates are still hovering near record lows, fewer houses for sale have presented potential home buyers in many markets with increased competition and higher prices. In short, you could look at the numbers and come to a couple of different conclusions. As an example, two recently released forecasts have differing views on what lies ahead for the residential real estate market. Fannie Mae’s Economic & Strategic Research Group’s October 2016 Economic and Housing Outlook sees housing momentum beginning to slow. Doug Duncan, Fannie Mae’s chief economist, says recent declines in sales, construction, and mortgage applications may mean continued weakness in the near term. However, Duncan also acknowledges the fact that improved demand from first-time home buyers is an encouraging sign. On the other side of the fence, Freddie Mac’s most recent forecast calls for continued gains and calls the housing market an economic bright spot. “As the economy sputters along a little bit faster than stall speed, the U.S. housing market continues to be a bright spot, though there’s less room to run than in the prior few years,” Sean Becketti, Freddie Mac’s chief economist, says. “We see new home sales improving some next year driven by increases in single-family housing construction which will push total home sales slightly higher.” More here.

Hot Housing Market Will Continue In 2017

Forecasts from Fannie Mae, Freddie Mac, the National Association of Realtors, and the Mortgage Bankers Association all say that home sales should surpass this year’s totals in 2017. In fact, the forecasts call for somewhere between 6 million and 6.5 million homes to be sold next year. Part of the thinking behind the predictions has to do with the number of young Americans who are now reaching their prime home buying years. Because the number of first-time home buyers has been lower-than-normal recently, there should be growing pent-up demand among younger Americans, who will be eager to buy next year and beyond. Because of this, economists estimate that sales should continue to be strong over the next three years. That’s significant, especially if you’re a current homeowner who has been debating whether or not now is a good time to sell your home. It’s also important for potential buyers. Why? Because an influx of interested buyers could mean more competition and, if for-sale inventory stays low, higher prices. That means, prospective home buyers who are hoping to buy should start getting their finances in order now, so they’ll be able to put their best foot forward when the time comes. More here.

Low Rates Help Sustain Market Momentum

Mortgage rates and home prices have been headed in opposite directions for a while now. Following the housing crash, rates dropped to record lows and have hovered there over the past few years while home prices skyrocketed back from their post-crash decline. This, of course, has been fortunate for the housing market and potential home buyers – as price increases and their effect on affordability conditions have been muted somewhat by consistently low mortgage rates. Buyers who may’ve been discouraged by price spikes in their local market continued to find opportunities because of their ability to lock in a low rate on a long-term loan. This remains true. In fact, according to Freddie Mac’s Multi-Indicator Market Index – which compares current conditions to historic norms – 75 percent of the top 100 metropolitan areas are showing a three-month improving trend, despite the fact that prices are still rising. Len Kiefer, Freddie Mac’s deputy chief economist, says mortgage rates are the reason. “Nationally, MiMi in July was largely unchanged for the third consecutive month,” Kiefer said. “Despite rising house prices, the majority of housing markets have sustained their momentum due in large part to low mortgage rates. For example, purchase applications, as measured by MiMi, were up more than 17 percent year-over-year and remain at their highest level since December 2007.” More here.

A Few Tips On Making A Successful Offer

There are many steps in the home buying process. Arguably the most important step, however, is making a successful offer. The good news, according to Freddie Mac senior vice president, Chris Bowden, is that today’s market is more traditional than it has been in recent years. In other words, there are fewer real-estate investors and cash sales, which means potential buyers should see more opportunities. Still, it’s important to know what you’re doing before making an offer on a house. Bowden offers a few tips in a recent article for Freddie Mac’s Executive Perspectives series. Among them, he names fully understanding your finances as the most critical. A buyer needs to know how much house they can afford in order to know if their budget can cover, not only their prospective mortgage payment, but any unexpected maintenance costs that come up as well. Buyers also have to act fast. Though there are fewer investors competing for homes, there are also fewer homes for sale. And since inventory is low, there’s going to be competition from other buyers. Being prepared for it can make the difference between a successful offer and a rejected one. Finally, Bowden says to rely on the expertise of the professionals you’ve hired to help guide you through the process. They should be able to help you make your strongest offer by comparing it to other recent sales in the neighborhood. More here.

Majority Of Markets Show Improving Trend

Of the top 100 metropolitan areas included in Freddie Mac’s Multi-Indicator Market Index, 84 percent are showing an improving three-month trend. The index – which compares current housing conditions to long-term norms – also found 42 of the 50 states on the upswing. Len Kiefer, Freddie Mac’s deputy chief economist, says it was the 50th straight month the index registered year-over-year gains. “Nationally, MiMi in June was largely unchanged at 85, marking a 5.76 percent year-over-year increase and the 50thconsecutive month of year-over-year increases,” Kiefer said. “Low mortgage rates and consistent job gains are helping to bolster home buyer demand, which is reflected in the MiMi purchase applications indicator. Purchase applications, as measured by MiMi, rose 1.75 percent month-over-month in June to the highest level since December 2007.” But though the index’s results are definitely positive, the upward trend was even stronger last year at this time when all of the top 100 metros were showing gains. Also in the report, the most improved metropolitan areas since last year at this time include Orlando, Denver, Tampa, Chattanooga, and Dallas. Among states, Oregon, Colorado, Florida, Tennessee, and New Jersey lead the list. More here.

Home Sales To Have Best Year In A Decade

The housing market is likely to see its best year of sales in a decade, according to a new outlook from Freddie Mac. In fact, the group’s forecast calls for sales to reach 6.04 million by the end of the year. Sean Becketti, Freddie Mac’s chief economist, says the housing market still has some challenges but is far better balanced than it was even just a few years ago. “This is a good sign for the housing market as it continues to be an even brighter spot in the economy,” Becketti said. “However, the housing market still has challenges, which is reflected in our housing starts forecast. Low levels of inventory across many markets will continue to put upward pressure on house prices for the foreseeable future.” But though Freddie Mac expects home prices to continue to increase due to a lower than normal number of available homes for sale and has revised their forecast for new home construction downward, they also expect mortgage rates to remain low through the end of the year. In other words, the residential real-estate market will continue to look much as it does today for the next several months. Inventory will continue to be the big issue, causing prices to rise while mortgage rates near historic lows help support both refinance and home purchase activity. More here.

Survey Says Many Boomers Would Like To Move

During their lifetime, the typical American will move 11 times, according to the U.S. Census Bureau. In fact, by age 30, the average person will have changed addresses six times already. But what about older Americans? Well according to a recent survey from Freddie Mac, there are a lot of Americans age 55 and older who say they’d like to move at least one more time. Among survey respondents, 63 percent said they’d prefer to age in place but nearly 40 percent said they’d like to move. Dave Lowman, Freddie Mac’s executive vice president of single-family business, says the way we age has changed and it could have a significant impact on housing trends in the future. “Consider that at age 55, our grandparents started moving to retirement and senior living communities,” Lowman writes. “By contrast, todays’ baby boomers are a vibrant, confident generation who are living longer and are definitely on the move.” Among the top factors influencing whether or not to move, older Americans named affordability, amenities, and less maintenance as their highest priorities. Other factors included living closer to other family members, downsizing, warmer weather, and living somewhere that is walkable and has access to public transportation. More here.

Housing Trends Improve In Nearly Every State

The residential real estate market’s rebound following the housing crash has been gradual, with month-over-month volatility sometimes masking the fact that things were getting better one small step at a time. Year-over-year results, on the other hand, have consistently revealed the slow upward grind of housing markets across the country. As proof of that, Freddie Mac’s most recent Multi-Indicator Market Index – which compares current conditions to long-term norms in each of the 50 states and the top 100 metropolitan areas – found that 88 percent of metros are showing an improving three-month trend. Additionally, 46 of 50 states are trending upward. Len Kiefer, Freddie Mac’s deputy chief economist, says the improvement has been consistent, if varied from region to region. “Nationally, MiMi in May registered 85, a 7.3 percent year-over-year increase and the 49th consecutive month of year-over-year increases,” Kiefer said. “Many of the Western markets continue to see strong home sales. However, it’s the Southern states where MiMi continues to register some of the strongest gains buoyed by an improving employment picture. For example, the majority of Southern states showed stronger employment growth than the national average and all of the eight markets in Florida that MiMi tracks are now back to their historic benchmark levels of housing activity.” More here.