Weekly Mortgage and Real Estate Report – Week of August 14, 2017

ECONOMIC COMMENTARY
The Dog Days of Summer 

August 15 is supposed to be right in the middle of the dog days of August. But we learned recently that the phrase “dog days of August” relates to the period that Sirius, a star known as the “Dog Star,” rises at the same time as the sun. This period is typically in late July until early August. Thus, the phrase is also known more generally as the “dog days of summer.”

What does the dog days of summer mean for the markets? Not only are families taking vacations, so are institutions. The Federal Reserve Board’s Open Market Committee does not meet in August. Congress is in recess and the President is on a long working vacation. Even equity traders and market analysts are on vacation, which typically results in lower trading volume for stocks, bonds and more. Thus, everyone should be taking a long-deserved break during August.

Does that mean that the month will be completely quiet? We can’t really predict a complete time of rest for the markets. Traditionally, during times of lower trading volume, any type of major event could produce more volatility than usual. And, though it seems that everyone in D.C. is on vacation, the world does not go to sleep. Nor does the weather. For our part, we do hope that everyone has a restful remainder of the summer and that the quiet enables those economic sleeping dog days to lie about as well.

REAL ESTATE NEWS
  Sixty-two percent of listing agents say professional staging decreases the amount of time a home spends on the market, while 40 percent of buyer’s agents say their clients are more willing to walk through a home that has been staged, according to the National Association of Realtors®’ 2017 Profile of Home Staging. “Realtors® know how important it is for buyers to be able to picture themselves living in a home, and staging a home makes that process much easier for potential buyers,” says NAR President William E. Brown. “While all real estate is local and many factors play into what a home is worth and how much buyers are willing to pay for it, staging can be the extra step sellers take to help sell their home more quickly and for a higher dollar value.” Thirty-one percent of respondents to NAR’s survey say staging increased the dollar value of a home they sold by 1 percent to 5 percent; 13 percent of respondents say it increased a home’s dollar value by 6 percent to 10 percent. Agents on both the buying and selling side agree that the living room is the most important part of a home to stage, followed by the master bedroom, the kitchen, and outdoor space. Thirty-eight percent of listing agents say they stage every one of their sellers’ homes before listing them. Fourteen percent say they will only stage homes that are difficult to sell, while 7 percent say they only stage homes in higher price brackets. However, 37 percent of listing agents say they do not stage homes at all before listing them. Instead, they say they make recommendations to sellers to declutter their homes and fix any issues. Source: NARThe National Association of Realtors released a report that said foreign buyers and recent immigrants spent an estimated $153 billion on American properties in the year ending March 2017. That was a 49% increase over the previous year and the highest level since record-keeping began in 2009. The purchases accounted for 10% of the total value of existing home sales in the U.S. The report did not include new homes. America’s neighbors to the north were one big factor behind the surge. Canadian real estate investors nearly doubled their purchases of American homes over the period because of the relative affordability of properties in the States. Many Canadians have been squeezed out of property markets in cities like Toronto and Vancouver that have experienced rapid price gains. Canadians were the second biggest foreign purchasers of homes after the Chinese. Buyers from China shelled out nearly $32 billion over the period, while Canadians spent $19 billion. Foreign buyers had to brush off U.S. political turmoil in order to make their purchases. “The political and economic uncertainty both here and abroad did not deter foreigners from exponentially ramping up their purchases of U.S. property over the past year,” said Lawrence Yun, chief economist at the National Association of Realtors. Source: CNN/Money

Competition is heating up among millennials and baby boomers for smaller, more affordable homes — but builders have been slow to meet demand. That may be showing signs of changing. Home sizes are beginning to shrink, which may also help prices edge down, too. “We are starting to see [smaller] starter homes come back,” says Rick Palacios Jr., director of research at John Burns Real Estate Consulting. The uptick started slightly in mid-2016 as employment and wages rose. More buyers are “now in that life stage of their early 30s [where] they’ve got a good job now, they’re getting married, they’re having kids,” Palacios says. Some builders are heading farther from cities, where land is cheaper, or they may construct more homes on smaller lots or build a line of attached townhouses. “A builder can’t pay through the nose for land and then build a starter home on that land,” Palacios says. “It just doesn’t pencil out for them. [We’ve] started to see more builders gaining confidence in building lower-priced, smaller homes.” Nearly 29 percent of the homes built between 2010 and 2015 were 3,000 square feet or more—hardly small by any standards. More builders focused on the high end of the market following the recession and built fewer smaller homes. Census data shows that 14.72 percent of new homes in the 1990s were between 1,000 and 1,499 square feet. Between 2010 to 2015, that percentage shrunk to 9.75 percent. Source: Realtor.com

Weekly Mortgage and Real Estate Report – Week of August 7, 2017

ECONOMIC COMMENTARY
The Economic Expansion ContinuesThe long road back from the Great Recession began in mid-2009 and July marks the 96th month of recovery. This makes it the third longest expansion on record, and if we continue at the present pace, this recovery will become the second longest expansion in history in the middle of next year. There are two reasons for the length of this recovery. First, the Great Recession was a very deep recession, thus we had a very long road back.

Second, the recovery has been slow and steady. Even though our growth has not been strong, we have stayed out of a recession partly because the economy has not overheated. If the economic expansion did heat up, then interest rates would be much higher and this could endanger the recovery. We have enjoyed very low interest rates for the past decade and this year is no exception.

Nowhere is the length of the recovery more evident than the jobs market. The economy lost close to nine million jobs in a very short period of time. In the decade that has followed, we have added approximately 17 million jobs. While these are really strong numbers, we have only added eight million jobs net of the recession, and this averages out to less than one million per year over the past decade. This helps us put July’s job numbers in perspective. We added just over 200,000 jobs for the month with an unemployment rate of 4.3%, both solid numbers. We still have some work to do in creating better paying jobs and taking care of those who have left the workforce but did not retire. However, we have come a long, long way.

REAL ESTATE NEWS
  Getting married and buying a home are two milestones that couples often try to achieve at the same time. But the finances involved in both of those feats can be daunting. The average wedding costs reached a record high in 2016: $35,329. That is about the equivalent of a 20 percent down payment on a $175,000 home. “There are some people that can do both at the same time, but for most, you have to choose one [goal] and delay the other by a year or two,” says Pamela Capalad, a certified financial planner and founder of Brunch & Budget in Brooklyn, N.Y. Some couples in wedding prep mode are setting up a gift registry asking for down payment assistance to help in their home purchase instead of filling their registry with traditional house gifts. Cash registries for a home or other major ticket purchases, such as a home renovation or car, are growing more popular as the average ages for brides and grooms increase, says Kristen Maxwell Cooper, executive editor of The Knot. For example, some couples are using online sites like Deposit a Gift to set up a down payment cash registry. “They already have a lot of the stuff you would add to a traditional registry,” Cooper says. “Ultimately, they want to make sure that if their friends and family want to give them a gift—and of course, they do—that it’s something useful.” After all, saving enough for a wedding alone can really add up. Nearly half of couples recently surveyed say they ended up spending more than they intended on their wedding, according to The Knot. Further, a wedding that overlaps with a home purchase can actually jeopardize closing, in some cases too. Wedding-related debt could damage a person’s credit score. Source: CNBCWaive an inspection before buying a home and chances are, it will only take the heater to not work and out comes thousands of dollars from your pocket. Buyers can feel pressure from competition in purchasing a home, but it’s important to stay smart. Bidding for a potential home is no joke, and waiving inspections is a bad idea. Some alternatives to straight-up inspections while remaining competitive include doing a pre-sale inspection before signing a contract. It can also be the seller’s own inspection, which could be a win-win for both buyer and seller, putting both at ease as the seller can put a proper price tag and the buyer is aware of the home’s current condition. “Sellers in hot markets can quickly generate several competing offers, but what they really need to be on their way to their next home purchase is a committed buyer who will make it to the closing table without delays or hassles,” Redfin Chief Economist Nela Richardson said, “To provide this assurance, savvy buyers aren’t just offering the highest price; they are using creative strategies like pre-inspections and non-refundable deposits to demonstrate to sellers their commitment to close the deal.” Another win-win situation is when the buyer writes a one- or two-day inspection contingency. The seller is at least confident that they won’t lose momentum in selling even if the buyer walks away. Source: Zillow

Housing sentiment has increased for the third consecutive month after taking a dip in March. The latest Fannie Mae Home Purchase Sentiment Index (HPSI) reported a rise of 2.1 percentage points in June to 88.3 – up 5.1 percentage points year over year – due to an increase in four of the six HPSI components. “The June HPSI reading matches the previous record set in February and reflects the trend toward a sellers’ market that respondents indicated last month,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “Consumers are also growing more optimistic about their ability to get a home loan, and lenders expect credit standards to ease further going forward, as shown in our Lender Sentiment Survey. “While consumer optimism on this metric is as high as we’ve seen in the survey’s seven-year history, it’s worth noting that this record is relative to the fairly tight standards in place post-crisis when we started collecting National Housing Survey data,” Duncan said. Source: Fannie Mae

Weekly Mortgage and Real Estate Report – Week of July 31, 2017

ECONOMIC COMMENTARY
Jobs and the Fed 

Last week’s meeting of the Federal Reserve Board’s Open Market Committee was not so much about what they would do when they met. It was more about what they would say about the future. The two topics of interest were future interest rate hikes and selling off their stockpile of assets, which is comprised of bonds and home loans. Obviously, both of these topics might affect the direction of rates and are subject to change based upon the direction of the economy and any intervening factors.

The Fed does not meet again until September and that leaves more time to access the state of the economy. This week we have the first major data release since the meeting. The July jobs numbers are all important with regard to their decision-making process and we will also have the August jobs numbers released before they meet again. The preliminary growth estimate for the second quarter was released last Friday and these numbers will be revised at the end of this month.

Of course, we can’t predict what intervening factors might arise. In the past, we have had major world-wide economic, political and weather events which have affected the markets. And we certainly are not trying to predict the occurrence of a particular event. Whatever the Fed said, we are just pointing out that their statements are subject to change as the summer comes to a close in the next several weeks.

REAL ESTATE NEWS
  So, what does it take to get approved for a loan to buy a house this summer, whether you’re a first-timer or planning to move up or downsize? Maybe not all that you think. For most people, the key requirement is that you’ve got the right package of stuff — credit score, down payment, financial reserves, debt-to-income ratio — to get an acceptable grade from the automated underwriting systems, or “black boxes,” installed at the dominant investors in the market, Fannie Mae and Freddie Mac. Debt-to-income (DTI) ratios are a major factor hard-wired into the black boxes that refer to the ratio between your monthly credit-related expenses — including housing payments, credit cards, student loans and the like — and your monthly gross income. In an important policy change taking effect this summer, Fannie eased its reserve and down payment requirements for DTI’s in excess of 45 percent up to a maximum of 50 percent. Note that FHA uses its own proprietary underwriting system, which often yields more-generous decisions on approvals than Fannie’s or Freddie’s. Regarding credit, in June of this year the average FICO score for home-purchase loans at Fannie and Freddie was 754. That’s a big reach for millions of would-be buyers. But that’s not the whole picture. According to data compiled by Ellie Mae, a software and analytics firm that tracks loan characteristics, substantial percentages of applications are receiving approvals from Fannie and Freddie with lower FICO scores than you might imagine. Nearly 13 percent of their approved loans in June had scores between 650 and 699. FHA’s average score for home-purchase loans was 683, but many were much lower than this average. Down-payment requirements also are super-low at the moment. Fannie and Freddie both have programs that permit just 3 percent down with many state and local housing agencies providing grants and/or loans designed to ease the cash required even more. The bottom line? Get rid of preconceived notions you may have about how tough it is to get approved. Standards are more flexible and not as tough as you probably thought. Sources: Ken Harney, The Nation’s Housing, Fannie Mae and additional industry publications 

About 23 percent of residential homes built for one to four families are now owned by investors, according to a study recently released by REAL Trends, Inc., and NEXZUS Publishing Group. The vast majority of those homes are not owned by institutional investors but rather individual investors or small investment groups. The Iceberg Report outlines the size of the single-family residential market, as well as uncovers trends in terms of demographics, attitudes, and behaviors of owners of single-family investment homes. It specifically looks at investor-owned houses and mobile homes, which total between 23 million and 24 million nationwide. The study found that institutional owners actually own fewer than 400,000 single-family residential homes, while nearly 8 million non-institutional investors own the rest. Most use a property management firm once they’ve accumulated more than four units. Additionally, the majority of single-family home investors use a real estate professional to help buy and sell properties. “The Iceberg Report confirms what we suspected,” says Steve Murray, president of REAL Trends. “More successful investors rely on professional real estate agents and leading property managers to help them find, manage, and profit from an increasingly mainstream asset: the standalone single-family residential house.” Source: RealTrendsA new consumer spending analysis from the National Association of Home Builders (NAHB) highlights another reason why home building helps drive a healthy economy: In their first year of ownership, new home buyers spend about $10,601 on appliances, furnishings and home improvement projects – 2.6 times as much as other home owners in a typical year. NAHB economists studied the U.S. Bureau of Labor Statistics Consumer Expenditure Survey to help quantify the wave of activity – and cash – spent to install new refrigerators, buy couches and make other improvements as new owners personalize their homes. “While construction jobs are the most obvious impact of new homes on the economy, it’s important to realize that it doesn’t stop there,” said NAHB Chairman Granger MacDonald, a home builder and developer in Kerrville, Texas. “It’s the architects, the heating technicians, the lumber suppliers. And it’s the mom-and-pop owners at the local furniture or appliance store who are helping these buyers make their house a home,” he said. During the first two years after closing on the house, a typical buyer of a newly built single-family home tends to spend on average $4,500 more than a similar non-moving home owner. Source: NAHB

Weekly Mortgage and Real Estate Report – Week of July 24, 2017

ECONOMIC COMMENTARY
Another Balancing Act

 

The Federal Reserve Board meets this week to decide what to do with short-term interest rates. With Chairperson Yellen having testified before Congress recently, the tone of her remarks has led the markets to believe that there is little chance of a rate hike this time around. However, analysts will be watching for any wording in the announcement regarding the Fed starting to sell off their bond and mortgage assets later this year. As usual, the Fed is trying to maneuver through a delicate balancing act.

Recent moves to raise short-term rates demonstrate that the Fed is comfortable with the current state of the economy. However, if the Fed floods the market with their assets, this could cause a rise in long-term rates, which might in turn slow down the economy. Thus, the Fed will need to carefully divest itself of these assets taken on during the recession and long recovery. Just as Yellen has indicated that the Fed is looking to raise rates gradually, the selling of these assets will need to follow the same course.

The good news is that recent economic reports have shown inflation to be under control. Absent the threat of increased inflation, the Fed can be more deliberate when implementing these actions. At this point, there seems to be no sign that the economy is quickly gaining steam. Of course, with the first reading on the second quarter economic growth and the August employment report coming out shortly, the balance we currently are seeing could change very quickly.

REAL ESTATE NEWS
  Homeowners who seek an estimate of their home’s value online often find that it doesn’t match the actual value. You need to know how to talk to your clients about this discrepancy, and the Economists’ Outlook blog, which is run by the National Association of Realtors®, recently offered tips from data scientist Karen Belita. She notes that Automated Valuation Models, or AVMs, are based on computer algorithms and calculations that “take different sets of property data and look for patterns and relationships between property value and the input data.” This allows web visitors to find a home value estimate easily and quickly by just searching an address. But these estimates should not be confused or used as a substitute for appraisals, Belita notes. Appraisals use comparative market analyses and in-depth expertise of real estate professionals to draw a conclusion on the value of the property. Another caveat with AVMs is that they fail to take into account the unique qualities of a home, neighborhood, or local market. “As technologies advance and more data becomes available, the number of sites that provide home value estimates may grow,” Belita writes. “With the knowledge of where to find home value estimates online, it is important to note that these home value estimates are not interchangeable with formal appraisals, comparative market analyses, and they cannot be used as a basis for a loan approval.” Source: National Association of Realtors® Economists’ Outlook BlogIn a poll of 3,350 buyers and sellers, 33 percent of respondents said they made an offer sight unseen; in a similar survey released a year ago, that level was 19 percent. Among Millennials, 41 percent said they made an offer without first visiting the property. The Redfin survey also determined that affordability was the primary economic concern of 40 percent of buyers, with 21 percent admitting to searching in other metro areas where home prices were lower. The survey also touched on some sensitive issues related to sociopolitical issues: 41 percent of buyers expressed apprehension about moving to an area where people have different political views from their own, while 45 percent of minority buyers felt sellers and their brokers might have been less enthused to work with them due to racism. Source: Redfin

Many people seek to downsize their home in retirement—but not their homebuying wish list. Retirees reportedly are flocking to smaller newly built homes that are customized to their personal needs and tastes. One advantage older home buyers find with these custom homes is that they can be built to accommodate medical conditions or physical restrictions, such as wider hallways to accommodate mobility devices. The home also can be outfitted with age-in-place features such as outdoor ramps and lower kitchen cabinets. Retirees are looking to cut back on home maintenance and repairs, which is why their preferences are straying away from larger, older homes. However, building a custom home can be stressful because of the wide availability of options. Real estate experts recommend researching building plans and contractors carefully to make sure buyers get the type of craftsmanship they seek. Source: RIS Media

Weekly Mortgage and Real Estate Report – Week of July 17, 2017

ECONOMIC COMMENTARY
The Brexit Adjustment

 

Sometimes it is hard to explain why certain things happen in the markets. Much of the time the markets seem to have a mind of their own, and market analysts are reaching for explanations as to what happened after the markets moved in one direction or another. Of course, usually there are several factors affecting the markets at once and it is typically impossible to determine which is the dominant factor.

For example, let’s discuss the recent movement in interest rates. The Federal Reserve Board has raised rates three times in the past six months or so. To the public, this would indicate higher rates to borrow money to purchase homes or cars. But as we have indicated previously, the Fed controls short-term rates and they have an indirect influence on long-term rates. Indeed, the Fed has raised short-term rates by 1.0% overall, but as of a few weeks ago, long-term rates for home loans had barely moved half of that amount.

One reason long-term rates have not moved is the fact that the economy is not overheating and there is no sign of inflation. Job growth continues to be solid, but the economy grew by less than 2.0% in the first quarter. Then why did long-term rates start rising more recently? Remember Brexit and how the markets were worried that slow growth in Europe would affect our economy? Well, apparently Europe has shaken off the Brexit worries and growth is stronger than expected overseas. Like here, there are no signs of the European economies overheating. Thus, while rates remain low, the fact that Europe appears to be awakening from their slumber has put some pressure on the bond markets, and thus our long-term rates.

REAL ESTATE NEWS
  While the majority of prospective homebuyers do their research on home loans online, they prefer to handle their applications in the presence of a loan officer. According to a new survey of nearly 2,000 adults conducted on behalf of the American Bankers Association, 60 percent of Americans stated that, while they use the Internet to research their home loans, they would rather apply for a home loan in person. In comparison, 17 percent of respondents preferred to apply for a home loan online, while the remaining 23 percent said they were unsure. The survey’s respondents also complained about overcoming obstacles to homeownership. Twenty-one percent of respondents said student debt prevented them from purchasing a home—among the 18-29 year-olds surveyed, that number was 39 percent. Furthermore, only 34 percent considered their knowledge about the process to be above average or excellent. “Organizations invest billions of dollars to offer their customers the latest technology,” said Bob Davis, ABA Executive Vice President of Mortgage Markets, Financial Management and Public Policy. “But at the end of the day, nothing compares to sitting across the table, face-to-face with a lender when you’re making the single most important investment of your life.” Source: National Mortgage ProfessionalFirst-time home buyers are showing a strong desire for taking on remodeling projects. First-time buyer renovators in 2016 spent $33,800, on average, on their projects. That marks a 22 percent increase over 2015, according to the sixth annual Houzz & Home Survey of more than 100,000 respondents in the U.S. “Younger and cash-constrained first-time buyers are responding to the low inventory of affordable homes by purchasing properties that require more than just cosmetic upgrades,” says Nino Sitchinava, Houzz principal economist. “Not surprisingly, we are seeing their spending on home renovations increasing significantly in 2016 and expect this trend to continue through 2017.” Both first-time and repeat buyers are taking on larger scope projects, such as remodeling up to four rooms at the same time, the Houzz survey shows. Kitchen and bathrooms continue to be the most popular rooms in the house to renovate. And while “recent home buyers drive a significant share of home renovations today, repeat buyers are investing twice as much in their home as first-time home buyers,” Sitchinava notes. Overall, homeowners spent $60,400 in 2016 on home renovation projects, up from a $59,800 average in 2015. Source: Houzz

More than 10 percent of new single-family homes that began construction in 2016 were part of a teardown project, according to new data from the National Association of Home Builders. That’s up from 7.7 percent in 2015. NAHB defines a teardown as a home that is built on a site where a previous structure existed. Nationwide, there were 79,300 single-family teardowns started in 2016, up from 55,200 in 2015, NAHB estimates. Builders continue to cite lot shortages as a major setback to new-home construction. Home shoppers and builders are now eyeing teardowns because many of the properties are in prime locations.Source: NAHB

Weekly Mortgage and Real Estate Report – Week of July 10, 2107

ECONOMIC COMMENTARY
Jobs and The Cost of Housing

 

Last week we counted our blessings with regard to the shape of the economy. This week we will talk about the release of the June jobs numbers which give us another reading regarding the health of the economy. Overall this reading was stronger than forecasts. Thus far this year, job growth has been solid, with just over one million jobs created in the first half of the year. This compares to 2.2 million jobs created in 2016, which puts the economy on track to match last year’s numbers. Despite strong jobs growth for the month, the unemployment rate rose to 4.4% last month, but that is not necessarily a bad thing, as it typically means that more long-term unemployed are re-entering the workforce.

Just as important as the jobs created, wages increased by 0.2% last month and 2.5% over the last year, which was slightly lower than economists expected. Higher wages are important, because they positively influence consumer spending for big ticket items. For example, if wages do not go up as fast as the cost of housing, this provides a burden on renters and discourages home buying as well. Recently, home price data for April, as measured by the S&P CoreLogic Case-Shiller National Home Price Index, showed another record high — the fifth consecutive month of new peaks. Does that mean that housing will become unaffordable?

We caution you against reaching that conclusion. The First American Real Home Price Index currently shows that housing prices are still around 33% below their peak. To calculate the “real” cost of housing under the Real Home Price Index, incomes and mortgage rates are used to inflate or deflate house prices which are unadjusted for inflation in order to better reflect consumers’ purchasing power and capture the true cost of housing. It should be noted that lower interest rates do not directly benefit renters. The message? As long as rates stay low, housing is still more affordable today than it was when peak prices were achieved a decade ago.

REAL ESTATE NEWS
  Twenty-six percent of millennial college students say they plan to move back home as soon as they earn their degree in order to pay off some of their student loans, according to TD Ameritrade’s Young Money Survey of about 2,000 young adults. Thirty-two percent of millennials between the ages of 20 and 26 say they owe between $10,000 and $50,000 in student loans. The average student loan balance was $10,205. That is prompting more graduates to move back home with their parents to curb costs. Nearly half of the post-college millennials surveyed say they had “moved back to my parents’ home after college.” About one-fourth of those who are still in college say they expect to move back with their parents following graduation. “Today’s college grads are clearly under financial strain due to escalating tuition and stagnant wages,” says JJ Kinahan, chief strategist at TD Ameritrade. “Moving back in with mom and dad is a short-term sacrifice that could pay off in the long run. But that’s only if the ‘boomerang’ young adults are saving and wisely investing the thousands of dollars they would’ve spent on rent and other living expenses, and paying down their student debt.” Survey respondents ages 20 to 26 say they think it would be “embarrassing” to still be living with their parents by age 28. However, nearly 30 percent of respondents say they wouldn’t start to feel embarrassed until they were between the ages of 30 and 34. Eleven percent say they would not feel embarrassed about living with their parents beyond the age of 35. Source: USA TodayHomeowners may be reluctant to sell, but they still want to see a piece of that equity in their homes now. They’re cashing out in levels that have not been seen since the financial crisis, Freddie Mac reports. Nearly half of borrowers who refinanced their homes during the first quarter did a cash-out option, the highest level since the fourth quarter of 2008, according to Freddie Mac. Still, the number of borrowers doing a cash-out refi remains well below the nearly 90 percent peak reached prior to the housing crash. But it is up significantly from the post-crisis 12 percent in the second quarter of 2012. Rising home prices have helped increase the number of homeowners who now have equity in their homes. As such, more owners are finding they can refinance to get a lower rate and also take out some cash for other uses. In hot markets in which home prices have surged by some of the highest amounts in the country, more than half of refinancers opted to refinance for cash last year, according to Freddie Mac. Source: The Wall Street Journal

Renters made up a large share of those shopping for a home loan in the first quarter of 2017, which could put landlords under pressure. A new TransUnion analysis found that among the 55% of non-homeowners looking for a home loan, 3 in 10 were millennials. That share is up slightly from 2016 and continues the upward trend of recent years. The figures reveal that 34 million renters aged 25-44, a prime age for home purchase, were credit eligible for a home loan with two thirds of under 44’s having a VantageScore 3.0 credit score of 580 or above. While the report is good news for many in the housing market, landlords could be facing a slowdown following a period of growth. “The rental market has seen sustained growth for the last several years, but occupancy rates have flattened from their peak in the second quarter of 2016,” said Mike Doherty, senior vice president of TransUnion’s rental screening solutions group. Source: TransUnion

Weekly Mortgage and Real Estate Report – Week of June 26, 2017

ECONOMIC COMMENTARY
Half-Way There

 

We are approaching the half-way point of 2017. We can make an observation that it has been a very strange year. And we are not just talking about the political turmoil. For example, despite the fact that the Federal Reserve Board has raised short-term interest rates for the third consecutive quarter, we still do not have a fix on how strong the economy is right now. In their statement accompanying the increase two weeks ago, the Fed expressed optimism that the economy was getting stronger. Yet, every economic report released that week was disappointing, including readings on retail sales and industrial production.

Even though just about everyone was expecting rates on home loans to rise significantly this year, this uncertainty is one reason that mortgage rates are lower than the analysts expected. One would hope that the upcoming June jobs report would lend some certainty to the equation, but thus far this year, we have even seen ambiguity within the employment sector. The unemployment rate is dropping, but the pace of jobs added has not accelerated from last year.

Despite this uncertainty, the stock market has remained strong this year as the post-election rally has continued. Does this mean that the markets are optimistic that it is only a matter of time before the economy shows signs that it is picking up? Or is this rally merely a reaction to improved corporate profits? We feel that the picture will become clearer over the next several weeks, as we see additional jobs reports and a reading on the growth of the economy for the second quarter. For now, the lower long-term rates should be helping the economy in conjunction with higher stock prices.

REAL ESTATE NEWS
  You’ve found the house you want. Now, where do you go for a home loan? If you’re buying a brand-spanking-new place, do you go with the builder’s in-house lender? His reason for being so magnanimous: He wants to keep your deal in-house so he can be on top of it and make sure everything goes according to Hoyle. If you’re buying an existing house, do you go with the lender your real estate agent recommends? After all, your agent has just as much riding on your deal as you do. If it doesn’t close because you can’t get a loan or something falls through at the last minute, he/she doesn’t get paid. Experienced agents know who handles glitches the best and who gets loans to the settlement table with as few blips as possible. Or do you listen to Mom and Dad’s advice? After all, they’ve probably done this a few times in their lives, so they should know what they are talking about. Shouldn’t they? As it turns out, buyers who chose a lender because of financial incentives provided by their builders were only marginally satisfied with their experiences. That’s according to the National Borrower Satisfaction Index produced by the Stratmor Group, a Colorado-based consulting firm. Those who listened to their realty agents were more satisfied, and those who paid heed to advice from their folks, a friend or another relative were even happier with their choices. But the borrowers who were most fulfilled were those who made a connection of their own with their loan agent. Their antennae wiggled. They hit it off. He or she was personable, but also took the time to answer all their questions, listen to their concerns and work with them every step of the way. In the Stratmor study, 31 percent of the huge 10,000-borrower sample chose their officer based on “loan officer interaction.” And that group reported a 95 out of 100 when asked about their overall “borrower satisfaction.” “Their loan officers engaged with them and made them feel comfortable,” says the company’s senior partner, Garth Graham. It’s why he believes that loan officers — also known as “humans” — remain a central part of the loan process. Source: Lew Sichelman, uExpressIn some of the hottest housing markets in the US, renters are looking outside of the city as urban renting is becoming more expensive, according to a new report from Zillow. For the first time in four years, the monthly cost of suburban rent is rising faster than the cost of urban rent. The monthly cost of rent in the suburbs is up 2.5%, versus a 2.3% increase in urban rent. “An increase in multifamily construction has slowed rent growth across the country, with rents rising at their slowest pace in five years. The suburbs often offer larger apartments and more single-family homes for rent with more space – about 19% of all single-family homes in the US are rentals, up from 13% in 2005,” the report said. Zillow Chief Economist Svenja Gudell listed hardship in rental affordability, an inclination to newer apartments and preference for the spatial capacity of single-family homes in the suburbs as some of the reasons for this new trend. “Rents themselves are still lower in the suburbs, but if demand keeps growing for suburban rentals and supply continues to lag, that will also start to change,” Gudell said. “As more formerly urban renters move to the suburbs in coming years, we’ll likely start seeing more apartment buildings and walkable amenities popping up in those communities.”Source: Zillow

For the first time in years, home sizes are getting smaller. That’s the main finding of the U.S. Census Bureau in its annual report on characteristics of new housing. The report said the median home size fell to 2,422 square feet in 2016, down from a record high 2,467 feet in 2015. Relatively speaking, however, home prices are still 8 percent higher than the pre-crisis peak in 2007 and nearly 50 percent bigger than in 1978. The report said the share of new homes in excess of 3,000 feet declined; the share of new homes under 2,000 feet increased. Source: The MBA