Weekly Mortgage and Real Estate Report – Week of January 7, 2019

New Year Jobs Report


Actually, the data is from 2018, but it is the most significant data thus far released in 2019. On Friday, the jobs numbers showed the addition of 312,000 jobs last month, more than making up for a miss the previous month. In addition, the previous two months’ numbers were revised upward by well over 50,000 jobs. All in all, 2018 was another good year for jobs growth, with more jobs added than the previous year. This strength is reflected in the unemployment rate which finished the year at 3.9%. This is close to the lowest rate in nearly 50 years, with the uptick from 3.7% last month attributed to more Americans entering the work force.

Also important was the release of wage inflation data. Wages were up 0.4% for the month and 3.2% for 2018, higher than expected. The increase in jobs and in wage growth have contributed to the decision of the Federal Reserve Board to raise rates more rapidly in 2018, compared to the previous few years. And we are seeing just how important interest rates are when it comes to the economy and every-day decisions by consumers. Higher rates certainly have contributed to the increased volatility and downtrend in stocks during the latter part of 2018.

The increase in rates is also being cited as a factor with regard to predictions for slower economic growth this year. What is interesting to see is, as the stock market has declined, long-term rates and oil prices have also dropped as well. Thus, we might be seeing an economy which is self-correcting. If a slowdown occurs because of higher rates, that slow down can cause rates to ease in turn. Does that mean the economy will pick up more than expected in 2019? More jobs might be a sign that additional growth is in the cards. Stay tuned….

 Higher rates prices have led to high anxiety among many buyers about whether they can afford the home of their dreams. But many house hunters aren’t aware of a plethora of low down-payment loans that can clear their path to homeownership. Lending experts say the combination of loan programs designed to reduce up-front costs and technology that speeds the loan process can save consumers significant cash. “We’re seeing an increasing number of people choose low down-payment loans and take advantage of down-payment assistance programs,” said Michael Fratantoni, chief economist for Mortgage Bankers Association. “Lenders are trying to streamline the process for using gift funds for down payments, too, although they’re still being very careful to document the source of the money.” These days, many buyers can choose from an array of programs offering down payments as low as zero percent (VA and Rural Housing Loans). The “Home Possible” and “Home Ready” programs from Freddie Mae and Fannie Mae allow first-time buyers with an income at or below the median for their area to buy with a down payment of three percent. The down payment funds can be a gift from a relative or an employer, or come through a down-payment assistance program. Both Fannie Mae and Freddie Mac also have guidelines for loan programs with a three percent down payment that are available to all first-time buyers, regardless of their income. Joe Tyrrell, executive vice president of corporate strategy for Ellie Mae, a mortgage software company, said that’s because would-be borrowers are self-selecting themselves out of the housing market. “People still have the misunderstanding that they need a FICO score above 720 and more cash for a down payment, so they don’t apply for loans because they assume they’ll be denied,” Tyrrell said. “The minimum FICO score we require to insure a loan with a three percent down payment is 620. Just a few years ago, we required a minimum score of 680 and wouldn’t insure loans with a down payment of less than five percent.” said Claudia Merkle, President of National Mortgage Insurance Company. Source: The Washington PostRates for home loans have spent the past decade or so doing anything but what’s expected of them. Every year, it seems, the general consensus is that in the coming months, financial conditions will finally get back to “normal,” taking rates with them. And every year something has brought that “normalization” to a screeching halt. In 2015, for example, shock-and-awe bond-buying by the European Central Bank helped push bond yields into negative territory in Europe and behind. In early 2016, markets were rocked so badly by concerns about earnings that there were fears of another recession – and then rocked again by the upset Brexit vote. The year 2017 started off with concerns about surging bond yields under a pro-growth, anti-tax president, but instead saw many months of a slump when tax reform took a while to materialize. Rates on home loans in 2018 may be the closest thing to “normal” we’ve seen in a long time, with the full-year average of approximately 4.54% for 30-year fixed-rates. That will be the highest since 2010. And for 2019? Given all the variables in both financial markets and housing, forecasting rates on home loans is for the “intrepid,” in the words of Mark Zandi, chief economist for Moody’s Analytics, and a long-time housing watcher. With that in mind, here are some thoughts from a few of those “intrepid” souls? The full year average forecasts for 30-year fixed rates range from 4.8% (Doug Duncan, Fannie Mae) to 5.3% (Danelle Hale, Realtor.com) — with economists from Moody’s Analytics, Wells Fargo Economics Group, the MBA and Freddie Mac in-between. Source: Market Watch

If the average renter is feeling a greater sense of claustrophobia coupled by fewer dollars in his or her wallet, that’s because their residential spaces are shrinking while their rents are increasing. According to a data analysis of the top 100 cities with the largest rental stock, the average apartment has seen a 52-square-foot reduction over the last 10 years. Today, an average apartment measures 941 square feet. and renters are getting less bang for their buck: rents in newly-built apartments have increased by 28 percent, but their size is five percent smaller compared to 2008. Source: RENTCafé


Weekly Mortgage and Real Estate Report – Week of December 31, 2018

Interest Rate Predictions


It is officially 2019! Every year high-paid economists come out with their predictions for a host of economic indicators, from economic growth to the pace of inflation. It is always interesting to look at these in hind sight, especially when forecasting the direction of interest rates. It seems that just about every year during the recovery of the Great Recession, there have been predictions that rates will rise. And even though the recovery took almost a decade, rates did not actually start rising significantly until the last year.

Last year was a pretty easy prediction because of the passage of the tax package at a time in which the Federal Reserve Board was raising rates. Just about everyone was predicting at least a short-term boost for the economy and the vision of higher rates were right on target — until late in the year. For next year, Market Watch reviewed the predictions of rates on home loans by several major economists. The range was an annual average of between 4.8% to 5.3% for 30-year fixed rates. In general, that means the economists believe that rates will rise some more.

Will they be right two whole years in a row? Keep in mind, as of right now, there is no new tax package coming to the table and plenty of other factors in play which could render these predictions worthless. We think we should keep our eyes on the more immediate future. Like the weather, they are usually right a day or so in advance. For example, perhaps we can see if the economists are correct in predicting a rebound from the 155,000 jobs added in December. The report is due out on Friday. Strong data to top off the year could drive rates higher. If we have two mild job reports in a row, the predictions regarding rates may start the year missing the mark.

 Findings from the National Association of Home Builders’ (NAHB’s) Housing Trends Survey Report indicate that prospective home buyers take the decision seriously. In its fourth and final report derived from the third quarter survey, NAHB analyst Rose Quint says that 13 percent of those polled indicated they intend to buy a home in the next 12 months and of those, almost half (46 percent) have already begun the search. Of those, 54 percent have been trying to find the right home for at least three months. The numbers indicate that home buying is a protracted event and NAHB asked respondents why it was taking so long. The number one reason given was the difficulty finding a home at a price the buyer could afford. This was followed by responses that were essentially variations on the same theme; they are unable to find a home with the desired features, or in the right neighborhood, or because of the competitive nature of homebuying. But they are a hardy and determined bunch. When those who have been in the hunt for three months or more were asked what they intended to do if the right house remains elusive, 61 percent said they would continue the pursuit in their preferred location while 37 percent said they would expand the area in which they were willing to live. Slightly less than one quarter were open to buying a smaller or older home while 16 percent indicated they would raise their price target. Only 18 percent said they will give up trying to buy a home.Source: NAMBA sizeable share of homebuyers and renters say they didn’t physically walk through the property they decided on — one in five. But almost three quarters said that they toured or viewed images online before deciding which homes to physically visit. The survey also reveals that 60% of respondents said they prefer to see homes furnished and professionally staged, or both furnished and empty, before making a purchase or signing a lease. When moving into a new space, 65.4% of respondents said their top pain points included the stress of buying new furniture at once, shopping for furniture or designing their homes and finding furnishings to match their existing pieces. The study was carried out by roOomy, a virtual staging and 3D modeling company which has just launched custom augmented reality (AR) and virtual reality (VR) tools for the real estate industry. The technologies allow for enhanced live views or an immersive digital experience. Source: MPA

Freddie Mac released its forecast for 2019, predicting the housing market will see modest growth, and revealing the “great unknown” for the year ahead. The biggest unknown for housing in 2019 are the current negative trends, according to Freddie Mac’s forecast. These trends include lack of housing supply and whether the shortage will persist, as well as rising interest rates and if the market will adjust to these rates and resume its modest growth. “Almost all the trends in the U.S. housing market have been negative in recent months as housing market activity continues to adjust to higher rates on home loans,” Freddie Mac Chief Economist Sam Khater said. “If new home sales are to resume growth in 2019, builders may have to shift their focus to more modestly priced homes and smaller sized homes to help offset housing affordability concerns,” Khater said. “But with cost pressures pinching profitability, this will be a significant challenge.” A recent forecast from realtor.com agreed affordability will be a rising concern in 2019, saying homebuyers and sellers alike will struggle next year. Freddie Mac also forecasted 2018 will end with 3% annual GDP growth, followed by 2.4% in 2019 and 1.8% in 2020. The total number of home sales will decrease 1.6% to 6.02 million in 2018, but then slowly gain momentum and increase 1% to 6.08 million in 2019 and 2% to 6.2 million in 20202. Home prices will continue to increase, rising 5.1% in 2018, then moderating slightly to a growth rate of 4.3% in 2019 and falling to a growth of 2.9% in 2020. Source: HousingWire

Weekly Mortgage and Real Estate Report – Week of December 17, 2018

Fed Statement Will Influence Predictions


Tomorrow, the Federal Reserve Board releases their announcement from the conclusion of their last meeting of the year. The Fed will also release their economic projections and Fed Chair Powell will conduct a press conference. The markets have been predicting another 0.25% rate hike all along, though the probabilities have been lowered slightly due to the volatility in the financial markets. If we assume that the markets are correct in their predictions, the real intrigue will be concerning what the Fed says about the future.

As we have indicated in the past few weeks, recent statements from Fed members have hinted about a softening of their approach for next year. The statement released may very well change the viewpoint of those who are making predictions for the coming months. With so much volatility in the financial markets recently, it is becoming harder and harder to figure out where we are heading — not that economic predictions are ever more than stabs in the dark.

There is no doubt that next year will be a harder year for predictions. At the beginning of this year we had a strong stock market and a tax cut providing fuel to the recovery. Though we may still have a Santa Claus rally this year, the markets are much more in flux. The economic recovery will become one decade old in mid-2019. That is very old in “recovery” years. Some believe a recession is inevitable, but not necessarily a sharp recession. We still believe that a slight slowdown could be good news as lower rates could become a possibility. We have already seen rates come off their highs. Perhaps that is our holiday present.

 The housing market is showing several signs of slowing, providing a much-needed break for potential buyers who have been waiting to jump into the market. Existing-home sales were 2.4 percent lower in the third quarter than a year ago, and the drop comes at a time when many areas are starting to see an uptick in new listings. Home prices in many markets are no longer rising by double digits—or even single digits—annually. But with a strong economy and low unemployment, the housing dip is more of a rebalancing of the market than a sign of a downturn, housing analysts say. Sellers are realizing there is a slowdown and are starting to cut their prices to better compete. Nearly 29 percent of listings in major markets during the month ending Oct. 14 saw price reductions, according to the real estate brokerage Redfin. “The cycle has moved from seller-advantage to at least mildly buyer-advantage in many parts of the United States,” writes Kenneth Harney, a nationally syndicated real estate columnist. “If you’re a buyer, take your time. But keep in mind: If you shop diligently, this fall could be a smart time to catch a deal—a marked-down price on the house you really want.” Source: The Washington PostThe IRS published rules on the 20 percent business income deduction that was created as part of last year’s tax reform law. The rules are a win for real estate because they make clear that broad limitations included in the law will not apply to real estate professionals. Under the new law, individual owners of sole proprietorships, including independent contractors and owners of S corporations, LLCs, or partnerships, can take the 20 percent deduction on their net qualified (non-investment) business income. The calculation will depend on income thresholds, what type of business you own, and how you meet certain wage and qualified property tests. But the basic structure is very favorable to you as a small business or independent contractor. The new deduction is available for tax years beginning after Dec. 31, 2017. You’ll be able to claim it for the first time on the 2018 federal income tax return you file next year. It’s a complicated provision, and how it works for you will depend on many factors unique to your business structure and your income. Consult with your accountant or tax attorney on how this deduction should be applied in your situation. Source: DSNews

Consumers should expect home sales to flatten and home prices to continue to increase, though at a slower pace, according to a residential housing and economic forecast by Lawrence Yun, chief economist at the National Association of Realtors®. “Ninety percent of markets are experiencing price gains while very few are experiencing consistent price declines,” said Yun. “2017 was the best year for home sales in ten years, and 2018 is only down 1.5 percent year to date. Statistically, it is a mild twinge in the data and a very mild adjustment compared to the long-term growth we’ve been experiencing over the past few years.” Yun added, “Most states are reporting stable or strong market conditions, housing starts are under-producing instead of over-producing and we are seeing historically low foreclosure levels, indicating that people are living within their means and not purchasing homes they cannot afford. This is a stronger, more stable market compared to the loosely regulated market leading up to the bust.” With a few months of data remaining in 2018, Yun estimates that existing-home sales will finish at a pace of 5.345 million—a decrease from 2017 (5.51 million). In 2019, sales are forecasted to increase to 5.4 million, a one percent increase. The national median existing-home price is expected to rise to around $266,800 in 2019 (up 3.1 percent from 2018 this year and $274,000 in 2020). Source: National Association of Realtors®

Weekly Mortgage and Real Estate Report – Week of December 10, 2018

  Jobs Data — Fed Almost Finished?


On Friday we had the last jobs report before the Federal Reserve Board meets again next week to consider whether to raise interest rates one more time in 2018. Heading into the report, market analysts were pegging the probability of a hike at close to 80%. The volatility in the stock and oil markets did not seem to sway market analysts much with regard to feeling that the Fed would back off. With the jobs numbers out, the probability of a rate hike initially trended lower, but was still greater than 70%.

The fact that the economy added 155,000 jobs last month and the unemployment rate remained at 3.7%, was seen as somewhat disappointing. Additional data included the revision downward of previous reports by 12,000 jobs and wage inflation at 0.3% monthly and 3.1% on an annual basis. Wage inflation is a major indicator being watched by the Fed.

Usually, when we get close to a possible rate hike, long-term rates are moving upward in anticipation of the move. However, rates have been falling since a recovery from a spike in early November. There was also a spike in early October, but rates eased back then as well. The stock market volatility certainly has been a major factor in keeping rates in check recently. Overall, the trend has been higher this entire year, with the Fed raising short-term rates in the face of strong economic news. Because the Fed has provided hints that they are coming closer to slowing down the rate increases, this has also helped keep long-term rates stable.

 The number of For Sale by Owner transactions fell to a record low of seven percent of all home sales in 2018, down from eight percent last year, according to the National Association of Realtors®’ 2018 Profile of Home Buyers and Sellers. FSBOs—homeowners who try to sell their properties themselves without a real estate agent—have decreased dramatically since 1981, when they accounted for 15 percent of all home sales. Today, consumers rely heavily on real estate agents, with 87 percent of home buyers using real estate agents last year, according to NAR’s report. Sellers—90 percent of whom listed their homes in the MLS—placed high priority on the following five benefits of using a real estate professional: market the home to potential buyers (20 percent), price the home competitively (20 percent), sell the home within a specific time frame (19 percent), find a buyer for the home (14 percent), and help fix the home to sell better (14 percent). Sellers by far say the agent’s reputation is the most important factor selecting an agent, at 31 percent. Sellers also placed high value on the agent’s trustworthiness and honesty (19 percent) and whether the agent was a friend or family member (15 percent). Most FSBOs, on the other hand, say they decided not to use an agent because they sold to a friend, relative, or neighbor, according to the NAR report, which also showed that FSBOs typically sold for less than the selling price of homes represented by an agent. Source: NAR — Want to View an Article Entitled — “First Home? The Right Realtor® is the Key”? Contact UsMore than 70 percent of homeowners said the best way to add value to their existing properties is by spending money on home improvements, according to a survey from NerdWallet. Americans spent nearly $450 billion on home improvements between 2015 and 2017, according to U.S. Census Bureau data cited by NerdWallet, on 113 million projects. Those projects included everything from kitchen repairs to repairing roofs. Most Americans opt to hire professionals to carry out the renovations, but 43 million homes were repaired by homeowners between 2015 and 2017 – accounting for almost 40 percent of total home improvements. The most popular do-it-yourself projects were landscaping, bedroom additions and renovations, recreational room additions, bathroom remodels and fence additions. The majority of Americans consider a home their most important investment. Source: Fox Business

ATTOM Data Solutions, Irvine, Calif., said 14.5 million U.S. properties were “equity rich” in the third quarter, up by more than 433,000 from a year ago, representing nearly 26 percent of all financed properties. The company’s quarterly U.S. Home Equity & Underwater Report showed equity rich properties were up from 24.9 percent in the previous quarter but down from 26.4 percent a year ago. It also reported 4.9 million U.S. properties remained seriously underwater–where the combined estimated balance of loans secured by the property was at least 25 percent higher than the property’s estimated market value, representing 8.8 percent of all financed properties. The share of seriously underwater homes was down from 9.3 percent in the previous quarter but up from 8.7 percent a year ago. “As homeowners stay put longer, they continue to build more equity in their homes despite the recent slowing in rates of home price appreciation,” said Daren Blomquist, senior vice president with ATTOM Data Solutions. Source: Mortgage Bankers Association

Weekly Mortgage and Real Estate Report – Week of December 3, 2018

How Important is Oil? 

Last week we asked how important housing is with regard to the national economy. With the markets so volatile in the past several weeks, we would like to follow with another question — how important is oil? While the housing crisis was one of the sparks which created the recession just about a decade ago, it has been a long-time since energy prices have created economic havoc nationally. You would have to go back to the period of 1973 to 1981 to see recessions based upon precipitous rises in energy prices.

On the other hand, while the Great Recession of the last decade was highlighted by interrelated financial and real estate crises, we are reminded that the price of oil also peaked at over $120 per barrel around the time of the recession. For the past four years we have seen relatively inexpensive oil prices and, at the same time, a good burst of strength in the economy. This year oil prices again rose significantly, though the peak was not near the peak in 2008. Since then, oil prices have plummeted.

We have to wonder whether the recent drop in oil prices is due to temporary market factors, or a reflection that the economy is about to slow down. We asked ourselves the same question in response to rising interest rates and the slowing real estate market. Regardless of the answer, lower oil prices are good news for the economy because it frees up dollars for consumers to spend on something else rather than gas for their cars and heat for their homes. As for the predictive power of oil–that is something we will have to wait and observe in the coming months. We have a jobs report coming out this week. Perhaps we will see a clue.

 The Federal Housing Finance Agency (FHFA) announced the maximum conforming loan limits for conventional conforming loans to be acquired by Fannie Mae and Freddie Mac in 2019. In most of the U.S., the 2019 maximum conforming loan limit for one-unit properties will be $484,350, an increase from $453,100 in 2018. According to FHFA’s seasonally adjusted, expanded-data HPI, house prices increased 6.9 percent, on average, between the third quarters of 2017 and 2018. Therefore, the baseline maximum conforming loan limit in 2019 will increase by the same percentage. For areas in which 115 percent of the local median home value exceeds the baseline conforming loan limit, the maximum loan limit will be higher than the baseline loan limit. The new ceiling loan limit for one-unit properties in most high-cost areas will be $726,525 — or 150 percent of $484,350. As a result of generally rising home values, the increase in the baseline loan limit, and the increase in the ceiling loan limit, the maximum conforming loan limit will be higher in 2019 in all but 47 counties or county equivalents in the U.S. For a map showing the 2019 maximum loan limits across the U.S. click hereSource: FHFA — Note, announcements of similar increases for FHA and VA Loans should be coming shortly and this means more options for low-cost/low down payment financing for most Americans. Generation Z is ambitious about homeownership, and it shows through their savings habits. According to realtor.com®, Gen Z-ers (ages 18 to 24) interested in homeownership are two times more likely than previous generations to be saving or plan to be saving for a home by age 25 – and two of five Gen Z-ers are aiming to become homeowners by that age. These insights are the result of a survey realtor.com® conducted in conjunction with Harris Interactive to better understand the generational differences in relation to homeownership and aspirations. “Gen Z-ers don’t just want to become homeowners; they want to do it at a younger age and we found that they’re saving or planning to save for it accordingly,” said Danielle Hale, chief economist at realtor.com® — “Their desire for homeownership may be similar to that of millennials and Gen X-ers, but graduating into one of the best labor markets in generations might give them the boost they need.” Generation Z’s homeownership fervor closely resembles that of millennials and Generation X, as 79 percent are certain they want to (or already do) own a home, compared to 82 percent for both Gen Y and Gen X. Gen Z-ers who answered “yes” or “maybe” to desiring homeownership are more than twice as likely to have started or plan to start saving for a home before age 25 (74 percent), compared to what Gen Y (33 percent) and Gen X (33 percent) actually reported accomplishing. Overall, only 4 percent of Gen Z-ers are sure that they don’t want to own a home, on par with Gen Y (5 percent) and Gen X (6 percent). Generation Z is least likely to become or plan to become a homeowner for investment purposes (29 percent) or tax benefits (16 percent). Instead, they cite wanting to customize their space (61 percent) as the top reason for homeownership and tied with millennials for wanting to raise their family in a home they owned (55 percent). Source: PR Newswire

There’s no place like home. The median length of time Americans have owned their homes rose to a record of more than eight years in the third quarter, according to ATTOM Data Solutions. That’s up from 4.5 years when the recession ended in June 2009. With interest rates on the rise, moving will be “even less appealing as homeowners may not want to give up their rock-bottom rate to buy a new home at the now-higher rates,” according to Daren Blomquist, senior vice president at the firm. The lengthening home-ownership tenure is also a consequence of tight housing inventory, a trend toward aging in place and a lack of appealing job opportunities in other communities. Source: Bloomberg

Weekly Mortgage and Real Estate Report – Week of November 26, 2018

How Important is Housing? 

This week’s topic is very interesting. The economy is rolling along and, thus far the housing sector has contributed to this economic growth. But recent evidence is pointing towards at least a slight slowdown in the sector. The question is, how much will this slowdown affect the overall economy? Generally, real estate construction itself contributes about 7.0% of the total economic output, or GDP. It should be noted that this number includes commercial construction and there is no evidence that the commercial real estate sector is slowing down — yet.

It also should be noted that real estate’s influence on the economy is much more far reaching than the actual construction. The building and purchase of real estate affects consumer consumption greatly and the economy is heavily based upon personal consumption — to the tune of about 70%. That is a larger number to say the least. No one needs to be reminded that the Great Recession was triggered by a real estate crisis just over ten years ago.

No one is predicting a major real estate downturn today. As a matter of fact, a slight slowdown could be beneficial, as it could loosen the tight reins on inventory and cause housing prices to moderate. If that causes the economy to slow a bit, it could also be the precursor for slightly lower interest rates. Perhaps the recent drop in oil prices also represents part of this coming trend–though the size of the decrease would indicate that there are other factors in play with regard to energy prices. In conclusion, the performance of housing can affect the economy. We may be about to find out how much and we are hoping that the result is good news for potential homebuyers.

 With more and more renters feeling the affordability crunch, there seemed to be some light on the horizon recently with the steady rise in rents appearing to finally slow down over the last few months. Never mind. As it turns out, rents are still going up and just hit an all-time high, again. The U.S. Census Bureau reported that during the third quarter, the nationwide median asking rent topped $1,000 for the first time ever. According to the Census data, the median asking rent during the third quarter was $1,003, an increase of $52 over the second quarter and an increase of $91 over the same time period last year. That’s an increase of nearly 10% in just one year, when rents checked in at $912. The increase has been dramatic over the last few years. Just three years ago, the asking rent was a full $200 less per month than it is right now. The rise in asking prices isn’t confined to rental units either. The median asking sales price for homes is going up as well. According to the Census data, the nationwide median asking sales price for a home rose to $206,400 during the third quarter, which marks the first time that figure has crossed $200,000. Source: HousingWireLower affordability and continued inventory crunches aren’t sidelining single women home buyers, who, for the second consecutive year, account for 18 percent of all buyers, according to the National Association of Realtors®’ 2018 Profile of Home Buyers and Sellers. Single women are the second most common buyer type behind married couples (63 percent), according to NAR’s report. Single men are the third most common buyer type, accounting for half the number of their female counterparts at 9 percent. However, single men tend to purchase pricier homes than single women—a median of $215,000 compared to $189,000. Single women buyers, many of whom are first-timers, are proving a powerful force in the housing market. First-time buyers comprised 33 percent of the housing market this year, down from 34 percent last year. “With the lower end of the housing market—smaller, moderately priced homes—seeing the worst of the inventory shortage, first-time home buyers who want to enter the market are having difficulty finding a home they can afford,” says NAR Chief Economist Lawrence Yun. “Low inventory, rising interest rates, and student loan debt are all factors contributing to the suppression of first-time home buyers.” However, Yun notes that existing-home sales data has shown in recent months that inventory is rising slowly on a year-over-year basis. That may “encourage more would-be buyers who were previously convinced they could not find a home to enter the market,” Yun says. Source: National Association of Realtors®

The national housing inventory grew by two percent, or 25,000 listings, in October, according to new data from realtor.com. This marks the first time in four years that the inventory level increased. The fastest inventory growth was found in condominiums and townhomes, which are now up seven percent year-over-year, compared to single family homes which are up one percent. The increased volume of new listings in October were eight percent less expensive than existing homes for-sale. During October, the national median listing price remained at $295,000, a seven percent increase year-over-year but lower than last year’s 10 percent increase. “Buyers have been struggling for four years to find homes in their price range, while dealing with bidding wars and multiple offer situations,” said Danielle Hale, Chief Economist for realtor.com. “The inventory increase will not solve the problem overnight, but it should provide some relief to those still in the market, especially if the growth we’re seeing in more affordable homes and condos holds steady. However, affordability is still an issue with increasing interest rates and prices keeping many would-be buyers on the sidelines.” Source: NMP

Weekly Mortgage and Real Estate Report – Week of November 19, 2018

Thanksgiving Perspective


Thing are quieting down as we move into the Thanksgiving holiday. This is a great time for reflection as we all have a lot to be thankful for. It is also a time to look back to see how far we have come, as well as a look at what the future may bring. Regarding the future, the economic predictions for 2019 are already starting to roll in and we will spend some time reviewing these in the coming weeks. As we look back at how far we have come, it is interesting to note that the stronger economy and weaker real estate market we are now experiencing did not arrive overnight.

Today’s economy and real estate market are a product of a long and slow recovery from a very deep recession. For example, our economic growth has exceeded 2.0% six out of nine years since the recession and has never dropped below 1.5% during that time. It looks like this year will top 3.0% for the first time in over ten years–but that is not indicative of an overheated economy. Likewise, if you look at existing home sales, they have risen steadily since the recession from a low of just over four million to a high of just over 5.5 million. They have hovered between 5.25 and 5.6 million for the past five years. The small drop in housing sales will keep them towards the high end of that range. Certainly not a sign of a major slump.

Now that the economic recovery has matured, we don’t think that we can expect significant spikes in growth and that is probably a good thing, because that would cause rates to continue to rise significantly. The spikes we have had in the past years were due to temporary stimuli such as housing tax credits for first time buyers and the more recent tax cut. But we can’t do that every year with our budget deficit so high. So, let’s be thankful for the steady recovery we have and be hopeful that it continues for a few more years.

 Financial experts are growing concerned by how millennials’ lack of homeownership will impact them financially when they retire. “Homeownership is one of the touchstones of being prepared for retirement,” Tamera Sims, research scientist at the Stanford Center on Longevity, told CNBC. “Buying a home at age 50 or 60 isn’t going to do you much good in funding a 30-year retirement.” But young adults are “not able to hit the [housing] market at the same age as their parents,” Sims says. Researchers found homeownership is falling the most among people under the age of 30 compared to previous generations. The homeownership rate among early millennials (those born between 1980 and 1984) at age 30 is 35.8 percent, according to the Stanford Center on Longevity. For comparison, the rate of homeownership among baby boomers at age 30 was 48.3 percent. Young adults are delaying marriage and having children and are loaded with student debt, all factors for their slow start at homeownership compared to previous generations. In 1960, the average age for men and women to get married was in their early 20s. The median age nowadays has slid closer to 30. A study in 2013 from the Urban Institute found that if a person delays buying a home to age 40 instead of age 30, that alone could result in a $42,000 loss in home equity by the time that person reaches age 60. Source: CNBCThe inventory crisis which is hampering home sales and growing demand from potential first-time buyers is starting to see improvement. Realtor.com’s September housing report shows an 8% rise in new listings year-over-year with inventory down just 0.2% from a year earlier. The year-over-year percentage rise in new listings was the highest since 2013. “After years of record-breaking inventory declines, September’s almost flat inventory signals a big change in the real estate market,” said Danielle Hale, chief economist for realtor.com® — “Would-be buyers who had been waiting for a bigger selection of homes for sale may finally see more listings materialize.” The US median home price was up 7% year-over-year to $295,000, marking a slower pace than the 10% annual rise of a year earlier. The 465,000 newly-listed homes in September were, on average, 8% cheaper ($25,000) and 10% smaller (200 sq. ft.) than existing inventory in the market. Source: realtor.com®

The US median home price increased just 4.8% in the third quarter of 2018, the slowest pace since the second quarter of 2016. The median sales price of a single-family or condo home in Q3 2018 was $256,000, 1% higher than in the previous three months. Almost half (74) of the 150 metros analyzed by ATTOM Data Solutions saw a slower rate of appreciation than a year earlier. The data showed that there were still plenty of markets posting double-digit gains, despite the overall slow-down. The average home seller in Q3 2018 gained $61,232 since purchase; a 32.3% return on the original purchase price. Distressed sales accounted for 11.6% of all US single family home and condo sales in Q3 2018, up from an 11-year low of 11.2% in the previous quarter but still down from 12.8% in Q3 2017. Source: ATTOM Data Solutions