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

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.

  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

Weekly Mortgage and Real Estate Report – Week of June 19, 2017

The Deed is Done


The Federal Reserve Board’s Open Market Committee met last week to consider raising short-term interest rates. As we approached the meeting, the consensus was that the Fed would move their Discount and Federal Funds Rate higher by one-quarter of one percent. The weaker than expected jobs report put a bit of doubt in some analysts’ minds; however, most were still expecting the increase to be approved.

Thus, no increase would have been somewhat of a surprise and an increase of more than one-quarter of a percent would have been a major surprise. Therefore, the fact that the Fed moved by one-quarter of one percent was seen as somewhat of a non-event. Just as importantly, their statement released at the conclusion of the meeting provided us clues as to what the members thought of the state of the economy. The statement lauded the progress of the economy and downgraded their forecast for inflation. They continue to espouse a gradual rise in rates and, in the fourth quarter, the Fed expects to start selling off some of the assets they have amassed in the past to help the economy.

Anytime we are focused upon actions by the Federal Reserve Board, we have to remind our readers which interest rates the Fed controls directly. The Federal Funds Rate and the Discount Rate are rates the Fed charges member banks and member banks charge each other for overnight funds to balance their sheets. Thus, when we indicated that these are short-term rates, they are very short term. In reaction, other short-term rates such as three- and six-month T-Bills are affected most directly. On the other side of the coin, long-term rates, such as home loans, can move in tandem or have a different reaction, especially if the markets feel that the Fed is staying ahead of any threat of inflation. Thus, an increase in interest rates for home loans are not guaranteed to follow suit, though certainly the Fed’s action last week does pose that possibility.

  Recent data has shown that renting can cost more than owning a home, and with millennials gearing up to the responsibility of owning a home, home builders are shifting their strategy in order to cater to this age group. In the first quarter of 2017, more new US households preferred to purchase a home than rent in the first quarter of 2017– the first time the scale has tipped that way in more than a decade, according to a Wall Street Journal report. Data from the Census Bureau indicated that 854,000 new-owner households were formed in the first quarter of the year, handily beating the 365,000 new-renter households formed in the same quarter. “They’re crawling out of their parents’ basements, they’re forming households and they’re looking to buy,” Doug Bauer, chief executive of home builder Tri Pointe Group told the Journal. Zelman & Associates, a housing-research firm, said that in Q1 2017, 31% of homes built by major builders were reportedly in the starter-home range (2,250 square feet). Millennials recently eclipsed baby boomers as the nation’s largest generation, so it is imperative that they have quality long-term housing options,” Steve Hovland, director of research for HomeUnion, told the Journal. Source: The Wall Street JournalToday, homebuyers have returned to the market in full force, but the lack of new construction over the last decade has contributed to an inventory shortage that’s pushed home prices out of reach for many. Now, the same young homebuyers who must cope with bidding wars to buy a first home may face a shortage in another key resource: schools for their kids. State and local governments spent $12.6 billion on elementary school construction in 2016, according to Census Bureau data—the highest amount in six years, but a 31 percent decrease compared with 2008, even before adjusting for inflation. Meanwhile, while construction spending has plummeted, enrollment has increased by four percent. Most funding for school construction comes from local governments, said Alex Donahue, deputy director for policy and research at the 21st Century School Fund, a Washington-based nonprofit. With local finances continuing to suffer years after the collapse, there is less money for school funding in general, and facilities upgrades in particular. “Spending declined during the recession mainly because 80 percent of that spending is local dollars, and the local governments didn’t have the money,” Donahue said. The shortfalls were compounded by state and federal funding cuts to education. Thirty-five states provided less total funding per student for primary and secondary education in 2014 as compared to 2008, according to a report last year from the Center for Budget and Policy Priorities (CBPP) that covers the most recent available data. Quality of local schools, meanwhile, has long been a key selling point for house-hunters—part of a feedback loop that helps rich school districts get richer. “If there’s a period of under-investment, particularly in places that haven’t recovered yet, that has implications for subsequent generations,” said Ralph McLaughlin, chief economist at Trulia. “That potentially is widening income equality for the next generation.” Source: BloombergImmigration is increasing to swell America’s population and foreign buyers will have a greater impact on future demand in the US housing market. That was a key message delivered at an international real estate forum as part of the 2017 Realtors’ Legislative Meetings & Expo. NAR’s Danielle Hale, managing director of housing research, was joined by Alex Nowrasteh, immigration policy analyst at the Center for Global Liberty and Prosperity at the Cato Institute, delivering presentations at the meeting. Nowrasteh spoke of the growing number of immigrant households with the 2015 American Community Survey estimating 43.3 million foreign-born residents. “Immigration affects rents and home prices far more than it affects the labor market,” said Nowrasteh. “An expected 1% increase in a city’s population produces a 1% uptick in rents, while an unexpected increase results in a 3.75% rise.” He also said that each immigrant adds 11.6 cents to housing value in the low-to-middle income counties in which they tend to reside. In total, $3.7 trillion was added to US housing wealth by 40 million immigrants in 2012. “A majority of foreign buyers in recent years are coming from China, which surpassed Canada as the top country by dollar volume of sales in 2013 and total sales 2015,” said Hale. “Foreign buyers on average purchase more expensive homes than U.S. residents and are more likely to pay in cash.” Source: MPA

Weekly Mortgage and Real Estate Report – Week of June 12, 2017

Fed Meeting Amid Shortages


We have previously brought up the listing shortages which seems to be constraining the real estate market while price growth continues. This shortage of listings presents a major opportunity for builders. Of course, builders are facing several shortages as well and these are constraining their ability to keep up with demand, especially within the first-time buyer market. These shortages include a lack of skilled labor and a lack of buildable lots in many areas. Thus, there are several shortages which are constraining the growth of the real estate market.

Could these shortages be related to the labor situation? We had another jobs report recently which showed a similar pattern. The number of jobs added was disappointing again. Yet, the unemployment rate moved to lows not seen since 2001. Could it be that we are running into a labor shortage? With the overall labor participation rate low, we expected that people would be coming back into the labor force as jobs were created, but perhaps their skills do not match the types of jobs that are open. Similarly, there are plenty of buildable lots in America, but not near many cities which are growing.

If the Federal Reserve Board meets this week feeling that we are facing a labor shortage and that wages are about to rise, they are likely to raise rates. If they feel that we just need to create more jobs, then they may not raise rates. While this one question may be an over-simplification of the situation and will not be the only one they face, it will be interesting to hear their statement after the meeting.

  If you’ve heard that some people might get a boost to their FICO credit scores — without having to do anything — you’re right. According to a new study of 30 million credit files by score developer FICO, many Americans will experience bumps in the coming months, mainly modest increases of less than 20 points. But hundreds of thousands of the increases will be super-sized — in the range of 40 to 60 points and higher. That’s because, as part of an agreement with state attorneys general, in early July the three national credit bureaus will stop collecting public information on virtually all civil judgments and roughly half of all tax liens. Equifax, Experian and TransUnion have determined that the accuracy of the public records in these areas does not meet their standards. That means the wrong people too often got tagged with issues that affected their ability to get the terms they deserved. But unanswered questions remain: How many credit files contain civil judgment or tax liens, erroneous or otherwise? After all, though many consumers’ credit files include bad information, other consumers face legitimate judgments and liens. So, some applicants’ credit scores may be artificially inflated. Examining giant samples of credit files supplied by the credit bureaus, FICO estimated that between 12 million and 14 million Americans have judgments or tax liens listed that could be affected by the changes. When these items are purged, their FICO scores tend to jump. Most of the affected consumers’ files had score increases between 1 and 19 points — not a big deal. But between 1 million and 2 million consumers appear to be in line for score boosts of 20 points to 39 points. At least 300,000 people could see increases of 60 points or higher, simply because negative information will be expunged from their files. Source: Ken Harney, The Nation’s HousingAfter the recession, renters—particularly millennials—were flocking to urban areas, and as such, urban apartment construction surged to record-high levels. But now, a new study shows that’s changing. Renters are now targeting the suburbs in greater numbers. From 2011 to 2015, suburban areas outpaced urban areas in renter household gains in 19 of the 20 largest U.S. metros. Rent Café researchers speculate that cheaper rents may be one major factor driving new renters to the suburbs. In an analysis of a database of the 20 largest U.S. metros, Rent Café found that, on average, renters can save about a month’s worth of rent in one year by opting to rent in the suburbs over an urban area. Source: Rent Café Blog

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 Today

Weekly Real Estate and Mortgage Report – Week of June 5, 2017

Cat and Mouse Game
For many years during and after the recession, the monthly jobs report was important to gauge the strength of the recovery. However, during the past two years, the release of the report has taken on a new meaning. Now we are not only measuring the strength of the economy, but also tying that information directly to actions by the Federal Reserve Board’s Open Market Committee. If we added 250,000 jobs in a particular month five years ago, that was good news. But we did not have to worry about the Fed raising interest rates as a result of that information. Today, a strong report can lead us to direct action by the Fed.And so it is with the report which came out on Friday. The increase of jobs of 138,000 and the revision of last month’s data was seen as weakness. However, the unemployment rate moved to 4.1%, another post-recession low, and monthly wage growth came in at forecast. The question at this point is — are we approaching full employment, which means we are also experiencing a shortage of labor? This information, taken together with the previous month’s report, tells us that there is still a decent chance that the Fed will act when they meet next week, but slightly less of a chance than before the report was released.

The meeting will also be accompanied by the release of economic projections which will give us a gauge of where the Fed thinks that the economy is heading in the next several months. Keep in mind that the Fed will be considering other information which measure the strength of the economy. For example, on Tuesday last week, measures of personal income and spending for April came in with moderate strength following weak readings in March. Until the Fed meets next week, we can’t say exactly how they will react, but certainly the data we saw last week give us some important clues.

  The pace of young adults leaving their parents’ homes is accelerating significantly, Fannie Mae’s Economic and Strategic Research Group notes in a new analysis. Young adults in their mid- to late 20s or early 30s living with their parents fell between 2013 and 2015—a period known as the economic recovery—much more so than between 2010 and 2012, when the economy and housing market were still recovering from the Great Recession, researchers note. Young adults aged 24 to 25 in 2013 and 26 to 27 in 2015 residing with their parents dropped by 7.6 percentage points. On the other hand, those who passed through that same age range between 2010 and 2012 saw a decline of only 5.4 percentage points, researchers note. “Stronger income growth and an accelerated rate of marriage are likely two primary reasons why millennials are starting to leave their parents’ homes at a faster pace,” researchers note. Millennials in their 20s or early 30s saw their income, adjusted for inflation, grow by at least 23 percent between 2013 and 2015 when compared to 2010 and 2012. Also, millennials in their late 20s and early 30s between 2013 and 2015 were getting married at a markedly faster rate than their predecessors did in that same age range during the recession and the recovery thereafter, Fannie Mae’s report notes. “Millennials’ accelerated rate of departure from their parents’ homes bodes well for housing demand,” Fannie Mae’s Economic and Strategic Research Group notes in the report. “Cohort analysis shows that the increased pace of leaving home has been accompanied by accelerated young-adult household formation.” Source: Fannie Mae Housing InsightsAlmost half of young American home buyers are opting to live in suburbs compared to 33 per cent choosing an urban lifestyle and 20 per cent living in rural areas. Research from Zillow shows that millennials made up 42 per cent of homebuyers in 2016, making them the single largest generational group, and most of them were first time buyers. They are also loyal to their city with 64 per cent remaining in the same city when they move; just 7 per cent moved state in 2016. Starter homes are less attractive for today’s young buyers; they want similar homes to those that older generations buy and will pay a median $217,000 for a 1,800 square foot house. “Millennials have delayed home buying more than earlier generations, but don’t underestimate their impact on the housing market now that they’re buying,” said Jeremy Wacksman, Zillow Group chief marketing officer. “As members of this huge generation start moving into the next stage of life, expect the homeownership rate to tick up and suburbs to change to suit their urban tastes.” Source: ZillowThere was a 12% increase in business activity in 2016 among members of the National Association of Realtors® but there is disparity in their finances. The association’s latest Member Profile report shows that a typical member saw gross income increase, with a median 8% rise. They also saw the highest number of transactions in recent years. Transactions hit an average 12 per agent despite the pressure of tight inventories; that’s the highest since 2014 when the average per agent was 11. Sales volume grew to a median $1.9 million, up $100,000 from the previous year and median income was up to $42,500 in 2016 from $39,200 in 2015. Gross income for 2016 was a median $111,400, up from $98,300 in 2015. However, the figures show that 24% of NAR members made less than $10k while another 24% made more than $100,000. “The return of pre-recession market levels and rising home sales and prices have led to increased business activity among Realtors. It is a highly entrepreneurial business, with some members earning six-figure incomes while others were barely scratching out less than $10,000,” said NAR chief economist Lawrence Yun. Experience makes a big difference for typical real estate agents. The NAR data shows that those who make the most (median $78,850 in 2016) had been in business for at least 16 years. Those who made the least ($8,930 median) had been in business for less than 2 years. There continues to be a steady stream of new entrants to the industry with those with less than 2 years making up 28% of NAR members in 2016 while 20% of members had less than 1 year of experience. Meanwhile, those aged 60 or over made up 30% of NAR members and the median age of a Realtor was 53. “It has become evident over the last few years that individuals are realizing the many benefits and business opportunities that working in real estate provides,” said NAR President William E. Brown. Source: NAR

Weekly Mortgage and Real Estate Report – Week of May 22, 2017

The Pendulum Moves
Our economic growth is very cyclical. And the last few cycles we have experienced have been some of the most severe we have seen in history. In the early 2000’s we had a very strong economic boom fueled by an explosion in real estate values. From late 2007 to the middle of 2009, we were subjected to a very severe recession, led by the collapse of the financial and real estate markets. Our latest cycle has been much less severe, as we have witnessed a very gradual recovery. But the length of the recovery has been extraordinary and is now approaching the longest recoveries in history, which have ranged from 80 to 120 months.

There are other types of cycles that typically occur concurrently with these economic cycles. For example, during the real estate boom, just about anyone could qualify to purchase a home. During the recession, credit standards tightened tremendously, and at that time only those with pristine credit could qualify for a home loan. Now, during the recovery, we have seen a gradual swing of the credit pendulum on the other side. No, we are not approaching the days in which anyone who breathed could get a loan.

However, if you look at many aspects of qualification, we have come a long way over time, just as the economy has. For example, FICO score minimums have come down. There are also more programs which require lower down payments. Though verification of income is almost universally required, there is more flexibility with regard to income qualification. As rates have moved up, lenders have become more adventurous regarding qualifying more prospects. Again, we don’t believe we are moving back to the cowboy days of the real estate boom. But we do believe that many who don’t believe they could qualify to purchase a home, now might very well be able to do so.

  Fifty-six percent of consumers recently surveyed believe that a standard homeowner’s policy covers flood damage. But they’re mistaken, and their assumption could be a costly mistake. The survey by insuranceQuotes of about 1,000 consumers shows a lot of misunderstandings when it comes to home insurance and what’s covered and what’s not. “Being misinformed about your home policy can be an extremely expensive mistake—especially when a few inches of water in a 1,000 square-foot home can easily cost over $10,000 in repairs,” says Laura Adams, senior insurance analyst at insuranceQuotes. “There are a number of widespread myths ranging from coverage for dog bites to items stolen from your car that frequently trip up policyholders.” Consumers tend to overestimate the amount of coverage they have when it comes to flooding protection, according to the study. Further, 81 percent of survey respondents knew that valuables stolen from their home were covered under most standard homeowner’s policies, yet only 28 percent knew that renter’s insurance would cover valuables stolen from their cars. “It’s critical for consumers to thoroughly explore their options and really understand the protections that are included or excluded with a standard renter’s or home insurance policy,” says Adams. “Don’t wait until right before a big storm is headed your way to get coverage because there may be a waiting period.” Source: REALTOR® MagazineNew homes are getting larger, but their lot sizes are getting smaller. The median size of a new home increased from 1,938 square feet in 1990 to 2,300 square feet in 2016, but lot sizes during this same period decreased from 8,250 square feet to 6,970 square feet. That amounts to about a 16 percent decrease. However, the trend hasn’t been consistent: Between 2006 and 2011, home buyers were showing demand for larger homes and larger lots. As home prices dropped during the housing crisis, greater affordability gave buyers opportunities to seek larger outdoor spaces. Today’s pullback in lot sizes come as builders look to cut costs. “When home prices appreciate at a fast pace, the land value rises even faster, which, in turn, drives the cost of homes higher,” according to CoreLogic’s Insights blog. “In order to mitigate the high cost of the land value, home builders reduce the size of the lots to bring the cost of the new home down so they can price these homes at a reasonable level.” Indeed, the data shows that sizable price gains on large homes between 2014 and 2016 put pressure on builders in the cost of acquiring and developing land. More builders responded by building larger homes but on smaller lots. Source: CoreLogic InsightsMillennials may often get all the attention, but members of Generation X are really the ones who have been driving the housing market lately. Gen Xers, who are between the ages of 37 and 51, make up the second largest share of home buyers, comprising 28 percent in 2016, according to data from the National Association of Realtors®. They also are buying the largest, most expensive homes compared to any other generation. The median price of homes purchased by Gen X buyers is $261,000, and the median size of the homes is 2,100 square feet, according to the NAR. Further, Gen Xers boast a median household income of $106,600, higher than any other generation. Some Gen Xers are drawn to previously owned homes for their charm and character, while others prefer new homes in order to customize design features, NAR data shows. Gen X buyers are also the most likely to purchase a home in neighborhoods that are convenient to schools. But they’re willing to compromise: 21 percent of Gen Xers indicate a willingness to make concessions on the condition of a home, more than any other generation. Source: NAR

Weekly Mortgage and Real Estate Report – Week of May 15, 2017

The Listing ShortageWe have had a decent recovery for the real estate market over the past decade. The recovery has been slow, but steady. While slow and steady may be frustrating for some, it is actually a good thing when you compare it to the real estate boom of 2001 to 2005, which created a housing “bubble” because of rapidly escalating housing prices. A steady increase is more sustainable in the long run.

However, there is no doubt that the market recovery is being held back by a listing shortage, especially in the lower price ranges. The Millennials are coming of age and are ready to buy. However, the Baby Boomers are working longer than ever and are not quite ready to give up their homes. If a Baby Boomer has not paid off their home as of yet, they are likely to have exceptionally low interest rates through refinancing and thus living in their home is typically cheaper than renting. The question is–how will this “stalemate” be broken?

The answer is — gradually. Builders continue to slowly increase their production and this new inventory is sorely needed in most areas of the country. Again, a slow increase is more orderly than a building boom, even though we are not building enough to satisfy present demand. And the Baby Boomers will gradually retire and have to leave their properties as they age. Some of these homes will be handed down to heirs and others will hit the markets. In the long run, the listing shortage will be resolved. In the short run, purchasing a home in the lower-to-moderate price ranges is a very competitive game for those entering the market for the first time.

  New buyers are gradually increasing their stake in the housing market. First-timers comprised 32 percent of existing-home sales in March, up from 30 percent a year ago and 29 percent in 2014. The looming threat of interest rate increases may be prompting more buyers to enter the market this year. But also, sustained job and income growth is playing a role, according to last month’s Realtors® Confidence Index. The aging of the millennial generation may also be modestly increasing buying behavior; the report notes that first-time buyers are most likely to be between the ages of 25 and 34. “Realtors® in most markets are saying interest from first-timers is up this year, but competition is stiff for listings in their price range,” says William E. Brown, president of the National Association of Realtors®. The good news is those who do find a home in their price range aren’t having to bring their life savings to the closing table. Sixty-three percent of first-time buyers put down anywhere from zero to 6 percent to secure a mortgage. That said, the report notes that the impact of these measures in attracting first-timers is modest due to a general lack of knowledge about the opportunities available. Only 13 percent of those aged 34 years or younger believe they can purchase a home with a down payment of 5 percent or less, according to NAR’s 2016 Third Quarter Housing Opportunities and Market Experience (HOME) Survey. Source: NARResidential construction accounted for more than 15% of GDP growth in the fourth quarter of 2016, according to data from the U.S. Commerce Department. The National Association of Home Builders (NAHB) noted that by building 100 single-family units in a metro area, 297 full-time jobs are created and $28 million in wage and business income is generated, as well as $11.1 million in federal, state and local taxes. “Home building is a key driver of the American economy,” said Granger MacDonald, NAHB chairman. “Housing creates new income and jobs, purchases of goods and services and revenue for local governments.” “Our builders remain optimistic about the market for newly-built single-family homes and consumer confidence is strong, which should set the stage for a strong spring home buying season,” MacDonald said. “Americans continue to place a high priority on homeownership and work hard to achieve this goal for their families.” Source: NAMB

Baby boomers say first impressions count when they enter a new community. They are closely sizing up neighborhood amenities like the pool, clubhouse area, and walking trails. They’re also looking at the location of the community, judging how near it is to shopping, dining, medical services, and entertainment. Hanley Wood and home builder Taylor Morrison identified what the 55-plus age group of home buyers are searching for in a home through surveys and focus groups. At 77 million strong, baby boomers are expected to continue to have a major impact on the housing market for years to come, and builders are closely paying attention to what they want in their home. Baby boomers say that space is very important to them in their home-buying decision, and they seek a home with openness and flow. What’s more, 81 percent say they find more space in a less populated community more appealing than having less space in a more populated community. Baby boomers also are looking for large common spaces with open floor plans, high ceilings, and natural light, the surveys showed. Integrated indoor and outdoor space also was important as well as sheltered areas, native plants, sustainable and energy efficient technology and materials, and sufficient storage space. Source: BUILDER

Weekly Mortgage and Real Estate Report – Week of May 8, 2017

Economic OverloadThe first week of the month is always busy with data announcements because the employment data is released on the first Friday of the month. But this month we started out firing on all cylinders because we had a meeting of the Federal Reserve’s Open Market Committee the same week, plus April was a short month and some end of the month data was pushed into May. This included personal income and spending, which are key economic indicators.

So how did we make out with all of this data and activity? Personal income and spending came in lower than forecast. The fact that personal spending did not rise at all was certainly of concern because stagnant consumer spending was a major factor contributing to the disappointing preliminary estimate for economic growth in the first quarter, which was released the previous Friday. Spending will likely need to increase for economic growth to pick up.

The announcement from the Fed came on Wednesday and, as expected, there was no action on interest rates. The announcement indicated that the Fed was comfortable with previous statements regarding future activity, despite the slow rate of growth in the first quarter. The Fed did not have the ability to see the employment numbers for April when they met and the release showed that jobs increased by 211,000, slightly more than forecast, though the job creation was partially offset by a downward revision of the previous month’s numbers. The unemployment rate fell to 4.4%, which puts us very close to what economists consider full employment, but does not consider those who are working part time or out of the workforce, which gives us some room to grow before inflation sets in. Wages grew by 0.3%, which was right on forecast. These numbers would support the Fed raising rates in June; however, there will be another jobs report released before they meet again.

  The spring home-buying market is shaping up to be one of the most competitive in recent memory, and is even tougher for first-time homebuyers, i.e. Millennials. The market as a whole continues to struggle with low housing inventory, but a recent report from Trulia shows the dwindling inventory is especially acute for starter homes or even trade ups, while the number of premium homes actually increased. A major reason many Millennials are delaying homeownership is because about 38% have subprime credit, according to TransUnion’s consumer credit database. In that case, there are several steps Millennials can take toward improving their credit scores. TransUnion Vice President Heather Battison passed along these tips that Millennials should consider when preparing to buy a home:

  • Check your credit early: TransUnion recommends all homebuyers check their credit report three to six months before shopping for a home to allow time to build credit if needed.
  • Talk to your landlord: Renting Millennials should ask their landlord to report existing rent payments to TransUnion and the other bureaus to demonstrate positive payment history.
  • Get pre-approved: Knowing the loan size a financial institution is willing to approve can prevent people from falling in love with homes they can’t afford.
  • Have a contingency budget: There are a lot of financial unknowns when buying a home so it’s important for homebuyers to have money set aside for any surprises upon move-in. Source: TransUnion

Sales of newly built single-family homes increased for the third consecutive month, posting a strong showing to the spring selling season, the Commerce Department reported. Single-family new-home sales rose 5.8 percent in March to a seasonally adjusted annual rate of 621,000 units. “The March sales numbers are the second highest on record since the Great Recession, which is especially encouraging considering the poor weather conditions throughout many parts of the country,” says Robert Dietz, chief economist of the National Association of Home Builders. “With tight existing-home inventory, rising household formations, and continued job creation, we can expect further growth in new-home sales moving forward.” In March, the inventory of new homes for sale was 268,000, a 5.2-month supply at the current sales pace, the Commerce Department reports. The median price of a new home sold in March was $315,100. “This month’s increase in new-home sales is aligned with solid builder confidence and shows that the spring homebuying season is off to a strong start,” says Granger MacDonald, NAHB chairman. “However, builders are concerned that ongoing increases in building material costs will hurt housing affordability.” MacDonald says the association is concerned about an announcement from the U.S. Commerce Department proposing a 20 percent countervailing duty on Canadian lumber imports. Thirty-three percent of the lumber used in the U.S. last year was imported with the bulk of it coming from Canada, the NAHB reports. Source: NAHB