Weekly Mortgage and Real Estate Blog – Week of August 29,2016

ECONOMIC COMMENTARY
Early End of Summer Jobs ReportIt is unofficially the end of summer this week. Of course, we understand that the official last day of summer this year is September 21. But in reality, the summer ends with Labor Day because the kids are going back to school and vacation season ends. In addition, within many areas of the country, after Labor Day starts the fall real estate season. The fall real estate season is not usually as robust as the spring real estate market, but activity does pick up after the vacation season ends.

This year it did not seem like we had a real estate slowdown during the summer. With interest rates near record lows, the only thing which seemed to be holding sales back was a shortage of listings in many areas of the country. When assessing the potential for a strong fall showing, we must ask — will rates continue near record lows? The direction of interest rates depends upon several factors, one of which we will see this Friday when the jobs report is released.

We had strong jobs reports the last two months, however, rates did not react much because of the Brexit situation and also because we had a very weak employment report released in early June. Basically, the two strong reports evened out the numbers over the past three months. A third strong report could be seen as the evidence the Federal Reserve is looking for in order to justify raising rates later in September — especially if there is any hint of increased wage inflation. On the other hand, a weaker report with tame inflation would most likely keep any action by the Fed on hold until later in the year, or perhaps even next year.

REAL ESTATE NEWS
  Americans spend an average of 55 minutes per online visit with real estate apps on their phones, according to new research unveiled by Google. Basically, “customers roll over in the morning and start looking at real estate listings [on their phone],” John Thornton, a partner in Google’s real estate business, said about the study’s findings. Sixty-nine percent of respondents Google surveyed call shopping for real estate “fun” from their phone and online. In fact, Americans are so addicted to home shopping online that 64 percent say they keep checking out houses and home values even after they purchase a home. The Google study also finds that people start hunting on real estate sites three years before they buy, on average. Also, one in five of the people checking out homes on real estate apps and websites are actually in the current market to purchase a home, the study found. Source: The Republic/AZcentral.comThe sentiment of US homebuyers continues to edge higher with the improving economy. The latest Fannie Mae Home Purchase Sentiment Index has increased to a new high of 86.5 in July, up 3.3. points from June. Doug Duncan, senior vice president and chief economist at Fannie Mae said, “One interesting potential bright note for housing in the July survey is that younger households may finally be shifting toward buying rather than renting in greater numbers.” Duncan noted that it is too soon to say whether that shift among younger buyers is a trend but said that there is some further evidence coming through which is encouraging in this respect. The main components of the index increased including: now is a good time to buy (up 1 point to 33 per cent); now is a good time to sell (up 2 points to 20 per cent); rates on home loans will be lower over the next 12 months (up 5 points to a negative 36 per cent); and home prices will be higher after decline in June (up 8 points to 41 per cent). Source: Mortgage Professional America

In an effort to create more affordable housing options for entry-level buyers, home builders are increasingly turning to townhomes. In recent years, builders focused on constructing higher-end homes. Less than 20 percent of newly built single-family homes were priced below $200,000, and the size of a new home grew to an average of 2,700 square feet, according to Census Bureau data. The National Association of Home Builders say that rising regulatory costs – up about 30 percent over the past 5 years – means that it is more expensive to build a house today. As such, first-time home buyers have mostly been priced out of the new-home market. But builders think townhomes may change that. These homes tend to be smaller (the average size was 1,983 square feet, according to 2015 Census data). Townhouse starts totaled 94,000 in the last four quarters ending with the first quarter of 2016 – a 29 percent increase over the prior year, estimates Robert Dietz, chief economist for NAHB. In fact, the growth rate exceeds the total single-family building market, Dietz notes. “These trends will continue,” Dietz says. “As regulatory cost impacts persist and millennials enter the for-sale market, the cost of construction and the growing demand for medium-density housing in walkable neighborhoods in inner and outer suburbs will support townhouse development growth.” Source: Builder

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Weekly Mortgage and Real Estate Blog – Week of August 22, 2016

ECONOMIC COMMENTARY
The Election Rhetoric Heats UpAs one would expect, as the date of the presidential election draws near, the words are heating up from both sides. And while we don’t take sides with regard to these words, we must point out that these heated exchanges can affect the performance of the markets. Certainly, strong statements can affect consumer behavior. For example, if both sides claim that if you elect their opponent the economy will be a disaster, then logic would tell you that the economy will be a disaster either way.

Of course, intellectually, you know that this can’t be the case. But that does not mean that strong statements like these can’t affect consumer behavior in the short run. And with the Olympics over, we also know that the presidential election will be occupying more and more of the news. At least until the football season starts! As we get closer to the election, the rhetoric is likely to get even stronger, especially from the side which is behind in the polls at that time.

We pointed out previously that the timing of the election can also affect the timing of decisions to raise rates or make strong statements coming from the Federal Reserve Board. If you believe that the Fed will avoid taking action right before the election, then September is their last chance to raise rates because their November meeting is one week before the election takes place. This is not to say that this makes the Fed more likely to raise rates in September. We did get a strong employment report for July, but there have been weak reports as well, such as the retail sales data. Our guess is that we would need a really strong jobs report for August in order to prompt the Fed to raise rates in September.

REAL ESTATE NEWS
  As technology grows in the housing industry, so does the need for real estate agents, with the two working in conjunction with each other rather than against each other, Chris Heller, CEO of Keller Williams, explained in an interview after an earnings release. “Even with more technology and a stronger market, we are seeing fewer people doing it on their own,” Heller said. “Buyers and sellers still need advice and interpretation of the data that is available to them, and they still need that expert guiding them through the transaction.” Due to the emergence of technology, the role of a real estate agent changed, but definitely is not going away. The National Association of Realtors® noted in a survey last year that even though the Internet is a top source of where Millennials found their home, they still used an agent to purchase their home. And for those potential buyers unsure of whether they would use a real estate agent or not, Heller said his advice to the industry would be, regardless of whether it’s his sister or a stranger, “find a great agent to help you. A great agent will save you more time and energy than they could possibly cost you.” Source: HousingWireRenters are paying more for less. New apartments hitting the market this year are 8 percent smaller than they were a decade ago, according to a new report by RentCafe, an online rental marketplace. But that doesn’t mean renters are paying any less for them: Rents for all apartments have jumped 7 percent in the last five years. The square footage of all new apartments combined — including studios, one-bedrooms, and two-bedrooms — averaged 934 square feet. A decade ago, new units averaged 1,015 square feet. What’s more, the average rent in 2016 is $1,296; in 2011, rent averaged $977. New studio apartments are shrinking the fastest, having been downsized nearly 18 percent since 2006. The average size is now 504 square feet. One-bedroom apartments have shrunk by 5 percent, from 794 square feet 10 years ago to 752 square feet today. Two-bedroom apartments, however, have mostly held steady over the past 10 years, actually increasing 1 percent to 1,126 square feet. Source: CNN/Money

When home buyers go to the closing, it’s unlikely they’re thinking about what happens if they die before their mortgage gets paid off. “It’s the last thing on their minds,” says Bernard A. Krooks, founding partner and elder law specialist with New York-based Littman Krooks LLP. “They’re thinking about whether or not an inspection went well or when the contractors will get repairs done.” But while nobody wants to think about dying, borrowers should take advance steps to ensure an outstanding home loan doesn’t become a burden for loved ones. Unlike credit-card debt, the home loan is secured by the house, says Nanci L. Weissgold, a partner in the Washington, D.C., office of Alston & Bird. Unless heirs are cosigned on a home loan, nonpayment can’t damage their credit score, but they should continue to pay the loan if they are able, since missed payments could incur penalties and/or lead to foreclosure, Ms. Weissgold says. She adds that when lenders are promptly notified of the borrower’s death, they usually are understanding about time needed to resolve estate issues to avoid foreclosure. Source: The Wall Street Journal

Weekly Mortgage and Real Estate Report – Week of August 15, 2016

ECONOMIC COMMENTARY
The Dogless Days of AugustThe dog days of August are a time when everything slows down. People are on vacation and those who stay home are moving slowly because it is so hot. But not this year. This August, there seems to be no letup in the markets and the news. Do you want news? How about a Presidential election occupying the front pages every day? We also have the Olympics going on in the midst of a Zika virus alert and a doping scandal.

The markets are making a lot of noise as well. The stock market has bounced back from the shock of Brexit and set new records. Oil prices have plunged back to near $40 per barrel and interest rates have hovered near record lows. Even though the economy seems to be dragging, the jobs creation machine has not slowed down one iota, and the real estate market continues to show strength. There is so much going on that we wonder how things could get any livelier come September when we are supposed to wake up from our summer slumber.

One things for sure, the Presidential election will be heating up come September. We will also start the month with another jobs report released early before Labor Day. And just for good measure, the Federal Reserve Board will be meeting and this should be their last chance to raise interest rates before the election. We say that it is the last chance, because the next meeting after September is just a few days before the election, and we don’t expect the Fed to take any major stance at that time. It has been a busy summer season and it looks like things will stay hot this fall. And we are not talking about global warming here.

REAL ESTATE NEWS
  Are millions of homeowners sitting on much bigger equity nest eggs than they think? Do you know how much equity you’ve got? If not, could you be missing opportunities to tap into it for worthwhile projects at close to all-time low interest rates? Academic and financial industry research suggests that large numbers of Americans don’t keep track of their equity and don’t really know how they could use it. That’s curious because home equity has almost never been higher or easier to access. The Federal Reserve estimates that, thanks to rising prices and principal paydowns, total home equity surpassed $13 trillion in the first quarter of this year, more than double what it was in 2011. Black Knight Financial Services estimates that $4.4 trillion of equity is immediately “tappable,” that is, owners can withdraw funds via equity credit lines, equity loans and cash-out refinancing, and still retain a healthy equity cushion in their homes. Equity is the difference between the market value of your home and the total debt you’ve got against it. A $350,000 house with $175,000 in debt has equity of $175,000, a 50 percent equity position. Thirty-eight million owners nationwide have at least 20 percent equity, averaging $116,000 per owner, according to Black Knight. Many lenders will allow owners to tap into that equity to the extent that their total debt does not exceed 80 percent of the home’s appraised value. But before any of that happens you need to know the basics about equity, starting with how much you’ve got. Source: Ken Harney, The Nations’ Housing — Would you like to know what means are available to ball-park your equity without a formal appraisal? Contact us.In recent months, there has been a well-publicized shortage of affordable homes for today’s first-time buyers. That situation may soon change, much to the relief of young consumers anxiously waiting for available homes they can afford. News reports carried on Builder online and by the National Association of Realtors point to a new trend that could result in many new homes keyed to the needs and qualifications of first-timers. It noted that the number of homebuilders offering entry-level housing rose 25 percent last year compared to the year prior. “Since the recession, the number of new entry-level homes plummeted. Builder online even declared the starter home ‘nearly extinct’ last year. “However, the analysis of the 2016 Builder 100/Next Builder list points out an increasing number of builders are devoting at least 50 percent of their business to building entry-level homes. While the numbers are rising, the entry-level market is still a fraction of what it once was in 2010.” Still, “the re-entry of the entry-level buyer has begun, but this group’s next moves will be gradual,” says Metrostudy’s Brad Hunter about young buyers’ emergence into the housing market. Source: Chicago Daily Herald

Big cities across the U.S. are seeing their post recession population surge slow as Americans uproot for new jobs and suburbs regain some of their appeal. Census Bureau figures show the top 50 cities accounted for 20% of the nation’s population growth for the 12 months ended July 1, 2015. That figure is down from 21% the prior fiscal year, and has slid each of the years since 2011, when cities accounted for 26.7% of U.S. population growth. U.S. cities have experienced a population surge since the recession ended in 2009 as revitalized downtown cores drew millennials, empty nesters and immigrants with lower crime, pedestrian-friendly environments and job growth. That growth is slowing as a bulge of late-20s Americans reaches prime homebuying age and high urban real-estate costs are making suburbs and exurbs more attractive, according to economists and demographers. Source: The Wall Street Journal

Weekly Mortgage and Real Estate Report – Week of August 8, 2016

ECONOMIC COMMENTARY
Employment Report Spotlight
Though the Federal Reserve Board’s comments after their most recent Open Market Committee meeting indicated that the economy is getting stronger, the economic reports released since that time have not supported their statement. The preliminary growth estimate for the economy during the second quarter was much lower than forecast. In addition, consumer sentiment came in slightly less than forecast, while construction spending and factory orders were also lower. Meanwhile the auto and real estate industries continue to show strength.

Overall, these reports made it look less likely that the Fed would be raising rates before the election. However, despite the disappointing economic reports, we know that the most important single economic statistic is the jobs report. A strong report can give the Fed the optimism it needs to raise rates. So how did we do in this regard last week?

The jobs report for July came in strong, with over 250,000 jobs added and the unemployment rate steady at 4.9%. In addition, wages increased slightly more than forecast, a number the Fed is watching carefully for any hint of inflation getting stronger. The bottom line is that we are on pace to add well over two million jobs this year, and because the unemployment rate is not moving down, this means that more Americans are either entering or re-entering the workforce. While the jobs numbers raise the possibility of an increase in rates in September, the other data indicate that rates will still remain very low while we create jobs and this could mean continued good times in the real estate and auto sectors.

REAL ESTATE NEWS
   Almost half of renters surveyed by Bankrate.com say they haven’t purchased a home yet because they believe their credit isn’t good enough to qualify for a home loan or they can’t afford a down payment. “A lot of people make assumptions that they can’t afford to buy based on just some perceptions, and many have not taken the step to figure out how mortgage-ready they are,” says Marietta Rodriguez, vice president of NeighborWorks America, a national home ownership program. Bankrate.com’s survey found that Hispanics are the ethnic group most likely to say that their credit is blocking them from home ownership. On the other hand, blacks and whites cited the main reason for not buying yet as they just weren’t ready to own a home yet. Many non-home owners are under the assumption that they need a higher down payment to purchase a house than is actually needed. About 20 percent of respondents to Bankrate’s survey said they need between 11 percent to 20 percent for a down payment, while 17 percent said they need 6 percent to 10 percent. Nearly a quarter of non-home owners said they “don’t’ know” how much they need for a down payment. Only 9 percent of respondents said they could do a 1 percent to 5 percent down payment. Source: BankRate.comFifty-five percent of Americans say they are willing to pay more in order to get to work and recreational activities without having to use a car, a new study of transit-oriented developments by the HNTB Corp revealed. Millennials, in particular, show much more willingness to pay more each month than older Americans – 70 percent versus 49 percent. Fifty-one percent of Americans agree the availability of good public transportation increases their interest in moving to and living in a particular area (again, with Millennials the most likely to report this), the survey showed. Nearly three in four Americans – or 73 percent – say they would support changes in land use and zoning regulations in their community to encourage more transit development. “The desire to more fully integrate lifestyle with mobility options is causing Americans to rethink their priorities about where they choose to live, and how they travel to work and play,” says Mike Sweeney, HNTB senior vice president. “The willingness of people to pay more to live in a particular area in exchange for enhanced lifestyle and mobility options sends a clear message about the growing interest, value, and importance of transit-oriented development. This fact will directly impact future decisions about the location and modes of transportation options that respond to these emerging trends.” Source: HNTB 

The U.S. continues to be an attractive destination for real estate investors, but the level of property purchasing has fallen off somewhat, according to the National Association of Realtors’ (NAR) 2016 Profile of International Activity in U.S. Residential Real Estate. NAR’s measurement of U.S. residential real estate sales to international clients between April 2015 and March 2016 found that foreign buyers acquired $102.6 billion worth of residential properties, a 1.3 percent dip from the $103.9 billion of property purchases one year earlier. Nonetheless, foreign buyers bought a total of 214,885 U.S. residential properties, or 2.8 percent of all residential sales, and these properties carried a higher median price ($277,380) when compared to all U.S. existing home sales ($223,058). For the fourth year in a row, Chinese buyers commanded the highest dollar volume of sales at $27.3 billion, but that level was below last year’s $28.6 billion level. The second highest level of foreign buying came from Canadians, with a dollar volume of sales at $8.9 billion. Source: NAR

Weekly Mortgage and Real Estate Report Week of August 1, 2016

ECONOMIC COMMENTARY
The Fed Meets While Jobs Report LoomsPolitical conventions, Brexit, terrorist attacks and more. Could we have anything else happening in the markets while the Federal Reserve Board’s Open Market Committee met on the future direction of interest rates? Being on that committee is a tough enough job as it is, but this year the factors influencing the world’s economies are just tremendous. Few were expecting the Fed to raise interest rates this month, but before we start thinking about the next meeting in late September, we must remember that there is a Presidential election coming up.

What does this have to do with the Fed? With only approximately six weeks between the next Fed meeting and the election, any move to take action or make any strong statements could be seen as a move which might affect the results of the election. Not that the Fed is all-powerful, but the Fed’s statements and actions affect the markets and the markets’ performance affects how voters feel. Therefore, it would be surprising if the Fed raised rates or gave a date for such at the next meeting. Surprising, but not out of the question.

Speaking of factors, another such factor coming up this week is the jobs report for July. Lately, the jobs numbers have been more volatile, with a very weak report for May and a very strong report for June. Every month the jobs report is analyzed with a microscope by the markets and July’s numbers will be no different in this regard. If the report is very strong, it will be harder for the Fed to hold off on a rate increase in September, regardless of the upcoming elections.

REAL ESTATE NEWS
   Millions of Americans lost their homes to foreclosures or short sales during the housing crisis. Fortunately for the economy, time heals most wounds — and credit reports. The number of people joining the rolls of those knocked from homeownership peaked seven years ago, so those blotches to their histories are starting to roll off the books right about now. The resulting improvement in credit means more Americans will find themselves with the ability and means to once again apply for loans, and not just for home purchases. The number of consumers with a new foreclosure added to their credit reports peaked at about 566,000 in the second quarter of 2009, according to data from the Federal Reserve Bank of New York. In the four years through 2010, that group totaled 6.8 million. Negative events such as short sales, when a home is sold for less than what’s owed on it, and foreclosures generally roll off a person’s credit report after seven years, according to the three major providers of consumer credit scores and reports: Experian Plc, Equifax Inc. and TransUnion. With that anniversary fast approaching, better access to credit may be on the way for many. The obvious effect will be in stronger demand for homes, which may also translate into higher spending on durable goods such as appliances and furnishings, said Oubina. Consumers may also feel more comfortable applying for new credit cards, auto loans or other types of debt. The credit repair alone could help people improve their financial standing by reducing their borrowing costs, freeing up money that could then be used for consumption. Source: Bloomberg Want a reading on your or your client’s status regarding where they stand with regard to purchasing again? Contact us for an assessment.First-time home buyers flooded the market recently, reaching their greatest share in nearly four years, according to NAR’s latest housing report. Existing-home sales climbed across the country in June as the summer continued to see high demand. Existing-home sales rose 1.1 percent to a seasonally adjusted annual rate of 5.57 million in June, NAR reported. Sales are now up 3 percent compared to a year ago and are at the highest annual pace since February 2007. First-time buyers comprised 33 percent of the market last month, the highest level since July 2012 (34 percent at the time), NAR reports. “The bump in June sales to first-time buyers can be attributed to interest rates near all-time lows and perhaps a hopeful indication that more affordable, lower-priced homes are beginning to make their way onto the market,” says Yun. In addition, median-existing-home prices for all housing types in June was $247,700, increasing 4.8 percent from a year ago and unsold inventory is at a 4.6-month supply at the current sales pace, down from 4.7-months in May. Source: National Association of Realtors®

SAM is a bricklayer who never takes a day off, doesn’t call in sick, never checks his cellphone and doesn’t even take a coffee break. Some would say that’s inhuman, and they’d be right. SAM — Semi-Automated Mason, that is — is a robot. Once he’s programmed by his handlers, he takes off, laying brick after brick after brick without saying a word. He can lay 1,000 bricks an hour and finish the typical two-story house in two days. Created by engineers in Perth, Australia, SAM auto-corrects 1,000 times per second to prevent interference from sway and vibrations. Slapping mortar on the bricks and then putting them in place — the exact opposite of the way humans do brickwork — the machine is 20 times faster than a journeyman mason. Some people don’t think the robotic bricklayer will ever catch on in the real world of residential construction. They may be right. But there’s no doubt that robotics will one day be commonplace — if not to help erect the house, then inside the house to help simplify its inhabitants’ lives. How about big, strong robotic helicopters, hoisting roof joists or wall sections into place? And there are already driverless cars, so why not driverless construction vehicles? Then there’s the giant 3-D robot printer created by a University of Southern California (USC) professor that can build a complete house in a single day. The robot can read an architect’s computer-aided design drawings and spit out exactly what the plans call for. USC’s Behrokh Khoshnevis, a professor of industrial and systems engineering, says his “Contour Crafting” robot can also build fast post-disaster housing for the displaced, military housing for our service members, inner-city and in-fill houses for people in need, and houses in developing countries. Source: Lou Sichelman, The Housing Scene