The National Association of Realtors’ Pending Home Sales Index is a forward-looking indicator that tracks contract signings, not closings. The index, which is released monthly, is a predictor of future existing-home sales. In December, the index fell 8.7 percent from November’s downwardly revised total. Lawrence Yun, NAR’s chief economist, said unusually disruptive weather across large stretches of the country forced people indoors and prevented some buyers from looking at homes and making offers. According to Yun, rising home prices and lack of for-sale inventory are also to blame for the poor sales performance in December. Still, existing-home sales are expected to be at about the same level this year as last year, despite the fact that inventory is limited in much of the country. Prices, though still rising, are expected to moderate this year, gaining about 5.4 percent in 2014. More here.
Archive for January 2014
According to the Mortgage Bankers Association’s Weekly Applications Survey, the average contract interest rate for 30-year fixed-rate mortgages dropped again last week, falling to the lowest level since November. Rates decreased for loans with conforming and jumbo balances, as well as mortgages backed by the FHA. Despite the declines, demand for mortgage loan applications was virtually unchanged from the previous week. The Market Composite Index, which measures total mortgage loan application volume, decreased just 0.2 percent. The Refinance Index fell 2 percent from the week before, while the seasonally adjusted Purchase Index gained 2 percent. The results include an adjustment for the Martin Luther King, Jr. holiday. The MBA’s survey, which has been conducted weekly since 1990, covers more than 75 percent of all U.S. retail residential mortgage applications. More here.
Though prices usually weaken at the end of the year, the most recent S&P/Case-Shiller Home Price Indices show year-over-year increases of nearly 14 percent in both the 10-city and 20-city Composites through the end of November 2013. The gains continue the upward trend of year-over-year improvement that began in June 2012. David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices, said home prices continue to rise despite last May’s jump in mortgage rates. According to Blitzer, mortgage applications for purchase were up in recent weeks which validates home builders’ optimism as seen in the most recent survey from the National Association of Home Builders. Combined with low inflation, homeowners are enjoying real appreciation and rising equity values, Blitzer said. Though home price increases are expected to moderate this year, Blitzer feels housing will make further contributions to the economy in 2014. More here.
An estimated 428,000 new homes were sold in 2013, according to figures released by the U.S. Census Bureau and the Department of Housing and Urban Development. Last year, sales reached their highest level since 2008 and beat year-before figures by 16.4 percent. But despite the year-over-year improvements, December saw a 7 percent drop in sales from November’s revised rate of 445,000, marking the second consecutive month-over-month decline following a sales surge in October. Regionally, the Northeast and Midwest experienced double-digit decreases, indicating cold winter weather may have contributed to what is already a slow sales month, historically. The median sales price of new homes sold in December was $270,200; the average price was $311,400. Also, there were an estimated 171,000 new homes for sale at the end of December. That represents a 5-month supply at the current sales rate. More here.
Economic growth is expected to gain momentum in the new year, according to Fannie Mae’s Economic & Strategic Research Group. A rebound in consumer sentiment, an improving labor market, and the continued housing recovery are all expected to drive economic activity and boost consumer and business spending throughout the year. Doug Duncan, Fannie Mae’s chief economist, said the housing recovery’s contribution to GDP should double last year’s, due in large part to increased homebuilding activity and continued improvement in the market overall. According to Duncan, consumer attitudes about housing are strengthening, despite last year’s mortgage rate and home price increases. That, and the fact that many housing indicators posted strong gains at the end of 2013, bodes well for a continued but measured housing recovery this year. Less uncertainty surrounding the federal government’s fiscal and monetary policy is also expected to lead to improved private-sector activity and economic gains. Overall, Duncan feels the economy is on a sustainable path for continued growth in 2014. More here.
In 2006 – the final year of the housing bubble – 6.48 million homes were sold. Last year, sales of previously owned homes reached 5.09 million. It was the strongest year of sales since the bubble burst and a 9.1 percent improvement on 2012’s totals, according to new data released by the National Association of Realtors. Lawrence Yun, NAR’s chief economist, said housing has experienced a healthy recovery over the past two years. Existing-home sales have risen nearly 20 percent since 2011, with job growth, record low mortgage interest rates, and a large pent-up demand driving the market, Yun said. Though housing lost some momentum in the fall, sales were up 1.0 percent in December and ended the year near normal, despite limited inventory and disappointing job growth. Total housing inventory at the end of December was down 9.3 percent to 1.86 million homes available for sale, which represents a 4.6-month supply at the current sales pace. Also in the report, the median existing-home price for all housing types was up 9.9 percent from December 2012 at $198,000. More here.
According to the Mortgage Bankers Association’s Weekly Applications Survey, the average contract interest rate for 30-year fixed-rate mortgages fell last week, reaching its lowest level since November 2013. It was the second consecutive week of decreases after ending 2013 on an upward swing. The drop led to a 10 percent increase in the Refinance Index and a 4.7 percent gain in overall mortgage loan application volume. The refinance share of total mortgage activity was at its highest level in a month, improving to 64 percent from 62 percent the month before. The seasonally adjusted Purchase Index, on the other hand, decreased 4 percent from one week early and was 15 percent lower than the same week one year ago. The MBA’s survey covers 75 percent of all U.S. retail residential mortgage applications and has been conducted weekly since 1990. More here.
A few months ago, a 1st Time Buyer contacted me about a Renovation project in Locust Point, which is also home to the Under Armour Headquarters. The property he was interested in had a beauty salon on the 1st floor and an apartment on the 2nd floor. The buyer knew where he wanted to live in Baltimore, and he knew exactly how he wanted his house to look. But he also knew he did not want to pay full price to a Real Estate Investor who bought a property, renovated, and then marked it up for his resale profit. This transaction was the perfect scenario for the FHA 203k Renovation Loan Program.
After reviewing the Buyer’s income and asset documentation, along with his credit report, I was able to provide a Pre-Approval letter. The buyer’s next step involved writing a contract offer, and meeting with a licensed contractor to review his plans for the property. Due to the amount of the renovation costs, and the fact that structural renovations were required, a 203k Consultant was brought in to inspect the property and write a report detailing the repairs and improvements to the property.
A licensed Real Estate Appraiser was then brought in to assess the property’s current value, as well as the “after-improved value” once repairs and renovations were complete. Locust Point, located in zip code 21230, is a popular area for Baltimore homebuyers who wish to be close to the downtown nightlife, sports venues and nearby interstates. Renovation projects are common, as much of the building supply dates back to the early 1900’s, and most buyers want the modern amenities and style of a brand new home.
The Buyer paid $180,000 for the house, and the Renovation costs were about $48,000. Renovations included a brand new kitchen and master bath, a new roof and several repairs required by FHA. I spoke with his Realtor recently, and he informed that the project was now complete, and based on recent sales comps, the property now had $70-$80k in equity. The Buyer is now in the process of refinancing out of FHA, into a conventional loan, so he can drop the monthly FHA Mortgage Insurance Premium. According to his Realtor, the market rent for a similar house in this area is about $2,000 a month; his new payment, after refinancing out of FHA is just $1,500. And the Buyer has a roommate paying $1,000 a month, so his net monthly housing payment is just $500.
In a period of just 6 months, this Baltimore homebuyer bought a house where he wanted, exactly the way he wanted it. The standard 30 Year Fixed Rate mortgage pays off about 1% of the balance each year, for the 1st several years. This buyer saw his property value increase 67% in just 6 months. Not only did he save money on the cost of the house, he will also save a big chunk of money in interest over the term of the loan. Buyers who complain of a lack of quality inventory should take a good look at the 203k program. That diamond in the rough is worth a lot more than you think!
Freddie Mac’s U.S. Economic and Housing Market Outlook for January finds four of the key housing indicators moving in the right direction to begin the year. The unemployment rate, though still high at 6.7 percent, is vastly improved and should continue its gradual path to a more consistent and historically normal level. Mortgage delinquencies have also shown great improvement, having been nearly cut in half since their peak. Finally, both affordability levels and home sales continue to trend in the right direction, with the average mortgage payment remaining very affordable in most markets – suggesting there’s still room for more recovery in home prices. Frank Nothaft, Freddie Mac’s chief economist, said the housing recovery continues on a steady pace. According to Nothaft, home prices should rise about 5 percent this year, while home sales – along with other key indicators – will continue to trend in the right direction. More here.
New residential construction ended 2013 at the highest level in six years, according to estimates from the U.S. Census Bureau and the Department of Housing and Urban Development. An estimated 923,400 housing units were started last year, which is 18.3 percent above year-before levels and the best total since 2007. That year, housing starts came in at 1.4 million. Still, despite a strong finish year-over-year, monthly figures fell in December. Privately-owned housing starts dropped 9.8 percent, after surging to the highest pace of the year the month before. But, though starts fell nearly 10 percent, December’s estimate was still the third best month of 2013. Also in the report, building permits were down 3 percent from the previous month. Permits – which are a barometer of future building activity – ended the year 17.5 percent above 2012’s estimate. There were an estimated 974,700 housing units authorized in 2013. More here.