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

ECONOMIC COMMENTARY
  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.

REAL ESTATE NEWS
 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

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

ECONOMIC COMMENTARY
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.

REAL ESTATE NEWS
 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

ECONOMIC COMMENTARY
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.

REAL ESTATE NEWS
 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

ECONOMIC COMMENTARY
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.

REAL ESTATE NEWS
 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

Weekly Mortgage and Real Estate Report – Week of November 12, 2018

ECONOMIC COMMENTARY
 How Did The Predictions Go? 

Though we are not in the business of predicting the future, it is sometimes very interesting to go back and see how forecasts play out after the fact. Especially when there is a lot of news happening during a short period of time. First, we had the jobs report released on November 2. The expectations were for an increase of just under 200,000 jobs after a weaker than expected 118,000 added in September (adjusted downward from 134,000 originally reported). The unemployment rate was expected to remain at 3.7%. The numbers came in at 250,000 and 3.7%, respectively. The general assessment was that the report was strong and more than offset the weak growth the previous month due to Hurricane Florence.

Just four days later, we had Election Day on November 6. The forecast was for a changeover in the House with status quo on the Senate side. This prediction was right on point. We also made the remark ahead of time that such a result would not change the divisions in Washington. We can’t comment on this prediction because it will take some time for this to play out; however, we are still not optimistic for improvement in this regard.

Finally, the Federal Reserve Board started their meeting the day after the election. The Fed was expected to keep rates the same for this month, but to continue to raise the possibility of a fourth increase in December. Again, this forecast was right on. Actually, the Fed announcement after the meeting did not seem to lower the probability of another hike in December. So, what was the reaction to all this news? Looking at the stock market as one indicator, stocks had a very volatile and down month in October, but started to rally as the month closed. Stocks continued that rally past election day, but paused after the Fed decision.

REAL ESTATE NEWS
 The Home Affordable Refinance Program, or HARP, is expiring on December 31, 2018. HARP was created in coordination with Fannie Mae and Freddie Mac to help homeowners with no equity or negative equity refinance their home loans. Since its inception in 2009, the program has put millions of people into more affordable home loans. Fannie and Freddie are each rolling out high loan-to-value programs that will fill the gap HARP leaves behind at the end of this year. Fannie’s program is simply known as the high LTV refinance option, while Freddie’s is called Enhanced Relief Refinance. HARP and these two new programs have some things in common as well as some important differences. A key distinction is that HARP was created in response to the financial crisis. Its mission was to fix a specific problem, whereas both of the new high LTV programs are designed to be a permanent refinance solution for eligible borrowers. As of October 2018, there were 49,000 HARP-eligible homeowners, according to the FHFA. In effect, thousands of people are potentially missing out on getting into less-expensive loans and building or rebuilding their home equity faster. These borrowers can’t count on the new Fannie and Freddie programs to help them because the qualifications are different. “Borrowers who don’t elect to refi under HARP, while the program is still available, may be missing a really great opportunity since it’s ending this year,” says Lauren Shepherd, project manager for HARP. Folks who qualify for HARP should talk to their financial advisor or lender about the benefits and risks of refinancing their home loan. If you’re a homeowner who took out a home loan after October 1, 2017 and owe more than your house is valued at, then you might qualify for the new Freddie or Fannie high LTV refinance option. Keep in mind, you must be up to date on your payments and the loan has to be at least 15 months old to be eligible. Source: BankRate.comThe best neighbors are trustworthy, quiet, friendly, and respectful, according to realtor.com®’s 2018 Good Neighbors Report (which is not affiliated with the National Association of Realtors®’ Good Neighbor Awards program). But there’s no need to maintain a close friendship to be considered a “good neighbor,” according to the survey of 1,000 consumers across the country. “While it’s true that some people focus on what annoys them about their neighbor, it’s a welcome surprise to see that people generally think positively of their neighbors,” says Nate Johnson, chief marketing officer at realtor.com®. “Trust and dependability play an integral part in helping a neighborhood feel like ‘home.’ Building it can be as easy as stopping by to say hello.” Millennials and Gen Z respondents (ages 18 to 34) and older adults (ages 55 and up) tended to care the most about having friendly neighbors, according to the survey. Researchers found the least appreciated quality for all groups, however, was having a close friendship with a neighbor. Only 9 percent of women see a close friendship with a neighbor as a must-have for a good neighbor; men rated it higher at 20 percent. Some of the most off-putting neighborly traits: Disrespectful of property, loud, untrustworthiness, and being nosy, messy, or unfriendly, the survey found. Welcoming new neighbors can create a “good neighborly” vibe, the survey found. The most common welcoming method preferred by 65 percent of respondents was just a simple introduction. However, the reality is that many new neighbors don’t get welcomed. Only 46 percent of respondents reported that their neighbors stopped by for a quick greeting, and 39 percent say they were never welcomed to the neighborhood. Source: realtor.com®

Consumers between the ages of 62 and 70 can earn up to 8 percent more in Social Security for every year they delay taking disbursements. Therefore, some homeowners in this age bracket are borrowing against their properties’ equity to fund their daily living expenses, hoping to push off taking Social Security benefits—a tactic some lenders even tout for retirees. But the Consumer Financial Protection Bureau warns that the costs and risks of such a financial strategy are too great. However, some financial experts say it’s a more plausible option than people may think. Jamie Hopkins, co-director of the American College’s New York Life Center for Retirement Income, wrote in a column for Forbes that the CFPB’s conclusion is wrong. “The CFPB’s analysis, misrepresentations, and inaccurate conclusions fail to provide a comprehensive review of potential benefits of Social Security deferral and proper use of home equity,” Hopkins wrote. “Instead, the report unleashed an overly broad and inaccurate censure that could hamper meaningful discussion.” Tom Dickson, an adviser at Reverse Mortgage Funding, told HousingWire that the organization still considers this a strategy for some retirees. “We found that while financial advisers are interested in the idea, they have a very, very, very difficult time persuading their clients to defer their benefit,” Dickson says. “It’s certainly a solid idea. It’s just that in the marketplace, it’s not one that advisers have had a lot of success with in terms of client adoption.” Source: HousingWire

Weekly Mortgage and Real Estate Report – Week of November 5, 2018

ECONOMIC COMMENTARY
It’s Election Day 

For right now let’s forget the fact that we just had a jobs report released and the Federal Reserve Board is meeting starting tomorrow. Today is Election Day. Our most important message to our readers today is to get out and vote. Our country is not perfect by any means, but on Election Day the fact that we can vote, and it means something, separates us from many other countries in the world.

Your vote will not change the world, but if everyone votes, our world becomes a little bit better. Did you know that in over 20 countries in the world, it is mandatory to vote? The fact that we have an option of voting is part of our freedom. On the other hand, voting is always a good idea — as well as your civic duty.

Now back to economics. Could the results of the election affect the markets? That is always a possibility, especially if there is a surprise. In a mid-term election, we will only have changes in administrations at the state level and in Congress on the federal level. Right now, the predictions are that control of the House may change, but that is not likely to happen in the Senate. We won’t try to predict the outcome, though we are not optimistic that the result will cause Washington to be less divided. On the other hand, hopefully, we will be pleasantly surprised.

REAL ESTATE NEWS
 Millennials want to own their own homes and rank it the most important priority apart from being able to retire. A new survey from Bank of America shows that 72% of 23 to 40 -year-olds say homeownership is their top priority, with retirement at 80%. Marriage (50%) and having children (44%) are far lower on the list. Millennials see owning a home as a sign of personal success (53%), financial success (45%), maturity and acting like an adult (47%), and independence (36%). Among renters, there’s an almost even split between those who think renting will be more expensive than homeownership long term, even though 69% believe their rent will increase each year or every other year. However, the dream of homeownership is being challenged by saving for a down payment (44%) or affording the home they want (23%). Almost half think they need a 20% down payment and almost a quarter think they need a perfect credit score to qualify. Almost two in five respondents plan to buy in the next 2-5 years with 57% of all first-time buyers planning to buy with a spouse or partner and 37% saying they plan to purchase their first home solo. Ninety percent of first-time buyers would rather pay more for their preferred location than be in a less desirable location with lower home prices and 45% are looking to stay within their current neighborhood, city, county or township/school district, while just one in five is planning to buy out of state. Source: MPA — Note: The average down payment for first time homebuyers is closer to 6.0%!It’s official, the housing market has cooled off, but it will take some time for it to become a buyers’ market. “Now we have seen several months of data that tells me the housing market is softening,” said Cheryl Young, a senior economist at Trulia. Existing home sales have peaked, according to Michelle Meyer, an economist at BAML, and a number of experts have adjusted their forecasts downward for key housing indicators, including home sales and single-family housing starts. Even home prices, which have been heading north, are rising at a slower clip. Last month, Freddie Mac said it expects home sales (existing and new) this year to come in below 2017. It projects total home sales to decline 0.9% to 6.07 million. “The spring and summer home buying and selling season ultimately ended up being a letdown, despite a faster growing economy and healthy demand for buying a home,” said Freddie Mac Chief Economist Sam Khater in a press statement. Meyer recently noted that existing home sales peaked in November 2017 at 5.72 million. Existing home sales remained unchanged in August, as rising rates and stagnant wage growth held back sales. New homes sales, a smaller portion of the market, recorded a small uptick of 3.5% but are still well below levels prior to the Great Recession. In previous housing cycles, a peak in existing home sales is usually followed by a peak in home price growth, according to Meyer, referencing the peak in existing home sales and home price growth in September 2005. But this time around that’s probably not going to be the case. “An outright contraction in home prices seems unlikely,” said Meyer, adding that she does think the rate of home price appreciation will slow. “Remember, this is not a normal market. The supply of homes on the market for sale has been quite low.” The number of homes for sale in the U.S. has fallen for three straight years, eight of the past 10 years, according to the National Association of Realtors. But relief may be on the way. Last month, the NAR said inventory appears to finally be leveling off — declining only 0.2% from a year ago. Source: Yahoo Finance

An analysis of data from the American Housing Survey by the Urban Institute has revealed some interesting information. Pets play a big part in home choices and with the millennial generation delaying marriage and having fewer children, pet ownership may become a bigger factor in the US housing market. The choices that people will make if they have pets – and if they have pets rather than children – may be different to traditional choices made at certain stages of life. The researchers uncovered trends from their research, including the fact that Americans are increasingly choosing pets over children. They found that only those households headed by 30-44 year olds were more likely to have children than pets. Pet ownership is 40-60% for households in their 20s through to 70s and peaks in their 40s. Plus, homeowners are more likely than renters to have pets – 57% vs. 37%. Source: The Urban Institute

Weekly Mortgage and Real Estate Report Week of October 29, 2018

ECONOMIC COMMENTARY
 Will Jobs Week Be Sweeps Week? 

It will likely be a very busy end of the year and this current period will significantly contribute to that forecast. Last week we had the first reading of economic growth for the third quarter and minutes released from the last meeting of the Federal Reserve Board’s Open Market Committee. Those minutes showed that the Fed is committed to their “gradual” rate increases, despite pressure from the Adminstration. This week we have a jobs report which will be the first reading of fourth quarter data and next week we have a little event called the “mid-term” elections in which the balance of power within Congress is up for grabs.

It is no wonder that the stock market has been extremely volatile in the past couple of weeks. Rising interest rates have been driving stocks downward, while excellent corporate earnings reports have been providing quite a lift. Corporate profits are up this year, not surprising with the economy strong. We seem to be experiencing a tug of war–one that has actually kept the markets’ overall progress fairly limited this year.

We believe that we will know a lot about where the economy stands by the end of the fourth quarter. Some are predicting a slowdown in 2019, as the economy starts to run out of steam after a long run. Higher interest rates and the waning effects of tax reform are cited to buttress that position. On the other hand, additional prognosticators are predicting that the economy still has the steam to grow at a good pace for another few years. It will be interesting to see how a busy fourth quarter may affect these forecasts.

REAL ESTATE NEWS
 Homebuying dreams can become real for shoppers in unmarried but committed relationships. According to Jessica Lautz, the National Association of Realtors®’s Director of Survey Research and Communication, a report from NAR found that the highest share of first-time buyers who are unmarried couples was in 2017—the highest on record since 1981. Of course, there are significant risks when buying a home with an unmarried partner. But there are precautionary steps you can take to ensure you can deal with the posed risks throughout the home planning and shopping together.

  1. Sign a prenup for the home. Renee Bergmann, a real estate attorney and owner of Bergmann Law in Westmont, N.J., says couples must have a conversation about potentially breaking up if they want to be co-homeowners. Using help from a legal professional, she says coupled clients should establish a co-ownership contract before closing day. Do not “wait and see what happens”—without a written agreement, Bergmann says, things could get messy very quickly.
  2. Choose the right title. Ownership titles are different in various states, but usually these titles include: sole ownership (one person has the full ownership), joint tenancy (a 50-50 split ownership, with one tenant’s share transferring to the other in the case of death), and tenants in common (allows unequal ownership, such as a 75-25 split). All three approaches have pros and cons, but Bergmann says your clients should consider revising the deed to reflect their new legal status, using a “quitclaim deed,” if they decide to get married after buying. Source: Seattle Times

Home improvements to boost energy efficiency can be a good investment that can reap rewards for both buyers and sellers. But the Appraisal Institute, which represents professional real estate appraisers, says not all improvements will bring the same benefits. “The latest research shows that green and energy-efficient home improvements have the potential to pay dividends for buyers and sellers,” said Appraisal Institute President James L. Murrett, MAI, SRA. “However, it depends on the improvements made. Some green renovations, such as adding Energy Star appliances and extra insulation, are likely to pay the homeowner back in lowered utility bills relatively quickly.” The Institute says that homeowners may be eligible for a federal tax credit if they opt for an energy-efficient product or renewable energy system for a home. Murrett says there is a difference between a truly green home and one with green features. To be green it must contain all six elements of green building: site; water efficiency; energy efficiency; indoor air quality; materials; and operations and maintenance. He also says that homeowners should keep all documentation relating to construction for real estate agents, appraisers and buyers; and that buyers chose lenders that have knowledge of high-performance homes. “Builders and homeowners should collect and share with appraisers data about cost and benefits of green building materials and energy-efficient features to establish historical data regarding return on investment of green construction,” Murrett said. Source: Mortgage Professional America