Weekly Mortgage and Real Estate Report – Week of December 11, 2017

ECONOMIC COMMENTARY
Taxes, Jobs and Rates

 

We promised a busy December and certainly we have not been disappointed in this regard. We entered December with the tax legislation flying through the Senate faster than anyone would have predicted. This is not to say that the work is finished, as there are many differences between the House and Senate versions — differences that must be reconciled in conference before the final package is put to a vote. While it seems like there are a few weeks left in the year, the holidays make it a very short month to get this accomplished. Though you can see that the stock market seems to be very optimistic that it will get done.

Then we had the jobs report released. The economic numbers leading up to the report had been strong, and this had resulted in some optimistic expectations. In reality, the number of jobs created was even higher than expected. The unemployment rate of 4.1% keeps us near full employment and wage inflation continued to be tame. In addition, the average work week increased to 34.5 hours from 34.4 hours and 18,300 temporary workers were added.

Taking the data into account — along with the specter of a tax package passing — there is little doubt left that the Federal Reserve will not be raising short-term rates this week. The announcement will be coming Wednesday afternoon and the Fed should be comfortable that the economy can withstand another increase as it returns rates closer to what it considers “normalcy.” The stimulus of a tax cut will also place the Fed on high alert with regard to the threat of future of inflationary pressures.

REAL ESTATE NEWS
 As was the case recently for conventional conforming loan amounts, loan limits on forward and reverse mortgages insured by the Federal Housing Administration have been boosted for next year. FHA floor loan limits are determined based on 65 percent of conforming limits on residential loans that are acquired by Fannie Mae and Freddie Mac. Late last month, the regulator and conservator of Fannie and Freddie, the Federal Housing Finance Agency, reported that the 2018 conforming limit has been set at $453,100. On Thursday, the Department of Housing and Urban Development issued a letter indicating that the FHA floor limit on forward mortgages for next year on one-unit properties will increase to $294,515 from $275,665 in 2017. This floor applies to those areas where 115 percent of the median home price is less than the floor limit,” the letter stated. “Any areas where the loan limit exceeds this ‘floor’ is considered a high-cost area, and HERA requires FHA to set its maximum loan limit ‘ceiling’ for high-cost areas at 150 percent of the national conforming limit.” In high-cost areas, the one-unit ceiling limit is increasing to $679,650 in 2018 from $636,150 last year. Thanks to rising home prices, FHA loan limits are increasing in 3,011 counties, while no change will occur in 223 counties. HUD also issued a letter indicating that the maximum loan limit for FHA-insured home-equity conversion (reverse) mortgages will be $679,650 next year. Source: Mortgage DailyZillow has dusted off its crystal ball for 2018 housing market predictions, and the forecast is laced with both new and ongoing trends. Looking into the new year, Zillow predicted that the ongoing inventory shortage will persist, with more existing homeowners opting to remodel and stay in place rather than try to elbow their way through tight markets with limited and expensive selections. Home prices will grow 4.1 percent next year, which will be particularly painful for first-time homebuyers in the nation’s more expensive markets. Zillow also predicted that builders will finally respond to the inventory crisis by creating more new construction for entry-level homes. However, much of this construction will be in suburban markets, thus creating a new wave of suburban sprawl. The rise in new suburban construction will be due primarily to higher costs and limited land options in urban centers. “In most markets around the country, housing has become a game of musical chairs, and nobody wants to be the last one without a seat,” said Zillow Chief Economist Svenja Gudell. “Homeowners who are looking for a change will turn to remodeling and redecorating instead of selling their home and facing the challenges of being a buyer in a sellers’ market. New homes will be designed to be particularly appealing to the Millennial and Boomer generations. Wide hallways can make it easier to move in, as well as make it easier to navigate a stroller or wheelchair through the halls. Large drawers will replace cabinets, making it easier to access everyday items that previously were hard to reach.” Source: National Mortgage Professional America

Single women are making up a bigger share of sales. Single females comprised 18 percent of sales this year, which matches the highest share since 2011, according to the National Association of Realtors®’ 2017 Profile of Home Buyers and Sellers. Single women were the second most common household buyer type, behind married couples at 65 percent. Single women tend to purchase slightly pricier homes than single men, despite earning less, according to the report. “Solid job prospects, higher incomes, and improving credit conditions translated to continued momentum in the growing share of single female buyers,” according to NAR’s report. Single men, on the other hand, aren’t as likely to buy alone. For the second consecutive year, the overall share of single male buyers was 7 percent, which is below unmarried couples at 8 percent. Source: NAR

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Weekly Mortgage and Real Estate Report – Week of November 4, 2017

ECONOMIC COMMENTARY
Do We Move Closer or Further Away? 

This week we will see the release of the November employment numbers. The key question we will be watching is whether we will be moving closer to a rate increase or further away with respect to the Federal Reserve Board’s meeting next week. According to the minutes of the last meeting, the Fed’s members had a healthy debate about the threat of inflation. Inflation “hawks” were worried that the tight labor market carries a risk that rising wages will quickly increase inflationary pressures.

On the other hand, the “doves” feel that the absence of large wage increases could mean that if the Fed raised short-term interest rates, it could cause inflation to stay too far below the Fed’s target of 2.0% for a prolonged period of time. Thus, we will not only be looking at the number of jobs created, but also looking for any sign that wage inflation is starting to take off. Judging by the economic reports we have seen in the past month, market analysts are still counting on a rate increase.

Speaking of higher costs, the Federal Housing Agency raised the limits for conforming mortgage loans for 2018. This affects the size of loans allowed under Fannie Mae and Freddie Mac mortgage programs. The new limits are $453,100 for 1-unit properties, with a maximum of $679,650 in high cost areas. While we have talked about higher housing prices making purchasing less affordable, the higher loan limits are one of the benefits of higher housing prices. Owners of homes gain more equity when prices go up. And these higher conforming limits will allow first time home buyers to purchase more home with a smaller down payment.

REAL ESTATE NEWS
 The Federal Housing Finance Agency (FHFA) announced the maximum conforming loan limits for home loans to be acquired by Fannie Mae and Freddie Mac in 2018. In most of the U.S., the 2018 maximum conforming loan limit for one-unit properties will be $453,100, an increase from $424,100 in 2017. The Housing and Economic Recovery Act (HERA) requires that the baseline conforming loan limit be adjusted each year for Fannie Mae and Freddie Mac to reflect the change in the average U.S. home price. According to FHFA’s seasonally adjusted, expanded-data HPI, house prices increased 6.8 percent, on average, between the third quarters of 2016 and 2017. Therefore, the baseline maximum conforming loan limit in 2018 will increase by the same percentage. In addition, the new maximum loan limit for one-unit properties in high-cost areas will be $679,650 — or 150 percent of $453,100. Areas which exist between the base limits and maximum high-cost areas may have increased as well. For a list of the 2018 maximum loan limits for all counties and county-equivalent areas in the U.S. click here. It is expected that FHA and VA will follow suit with increased loan limits. Source: FHFAAbout 60 percent of first-time home buyers put down 6 percent or less on a home purchase in September. The median down payment has dropped from 6 percent to 5 percent for first-time buyers, according to the National Association of Realtors®’ 2017 Profile of Home Buyers and Sellers. But there are still many potential buyers who may be under the impression they need a bigger down payment before they can buy. NAR conducted a survey of non-homeowners earlier this year and found that most consumers believe you need a down payment of 10 percent or 20 percent to buy a home. “They may not be aware that these programs are available, and they may not be taking advantage of them,” Jessica Lautz, NAR’s managing director of survey research and communications, said in the latest Down Payment Report, published by the Down Payment Resource. Thirty-two percent of first-time buyers said they saved for more than two years in order to be able to have enough to buy a home. Student loan debt was the most often cited obstacle to saving. The second most cited barrier for saving was credit card debt. Source: The Down Payment Report

As more builders face labor shortages, they’re starting to look for new and faster ways to train more workers. For example, the Colorado Homebuilding Academy, a nonprofit organization, opened this year to offer a free eight-week “boot camp” to help increase the builder labor force. The course is founded and funded by Oakwood Homes, a homebuilder based in Denver that is owned by Berkshire Hathaway. “Every single year, the labor situation has basically gotten worse,” Patrick Hamill, CEO of Oakwood, told CNBC. “People retire, and there’s nobody to replace them, and as an industry, ultimately we’ve just done a lousy job marketing our opportunities to young people.” The construction labor shortage is worsening nationwide and it’s causing the new-home sector to be unable to keep up with buyer demand. Homebuilders blame growing costs and a shortage of labor as the two biggest challenges confronting them this year, according to surveys conducted by the National Association of Home Builders. During the housing crash, many builders left the industry and have never returned. Also, an aging workforce approaching retirement age and a lack of young people drawn to the building industry are making the situation worse, builders say. Only 3 percent of young adults ages 18 to 25 recently surveyed by NAHB said they wanted to go into the construction trades when they start their career. Source: CNBC

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

ECONOMIC COMMENTARY
Long Road to Travel 

The tax reform proposal is now in print. For a year we have been hearing about the concept of tax reform. But now that there is ink on paper — Can we still use that expression today? — the stark reality has hit. When talking about changing the tax system, it is not a zero-sum game. There will be winners and losers in the end. And if you look at the reaction of industry groups such as the National Associations of Realtors® and Home Builders, as well as the Mortgage Bankers Association, they certainly feel that the initial proposals will make real estate less attractive.

Certainly, further limiting the mortgage interest and state/local tax deductions, as well as increasing the standard deduction, are proposals in the package which have these industry associations concerned. And as always, we are not here to predict the future with regard to what final impact these proposals would have upon homeownership in the United States. Our purpose today is to say that the process still has a long distance to travel still.  Adding the Senate alternatives to the mix is just one extra step.

Right now, these associations and thousands of additional lobbyists have descended upon Washington, and they will represent their special interests. The proposal is likely to undergo several reiterations before it is finished. The finished product may or may not resemble what is being proposed initially. And even after these changes are made, the final proposal may or may not pass. Thus, while we don’t like trying to predict the future, we are certain about one result — the lobbyists in Washington will be making a lot of money this holiday season.

REAL ESTATE NEWS
 More Americans are actively seeking to improve their credit scores to help achieve their financial goals including home ownership. Chase Slate’s 2017 Credit Outlook reveals that 72% of survey respondents have taken steps to improve their score in the last year with 88% having checked their score, including 52% doing so in the last 6 months. “Americans are more ambitious and action-oriented toward their credit health,” said Mical Jeanlys, General Manager of the Chase Slate card. “They are not only expressing a desire to improve their scores, but also are creating and carrying out specific strategies to achieve their goals.” A third of consumers say they check their credit score every month. More than half of respondents said they want to improve their credit score and 45% say they have a plan to do so. Data from FICO shows that the average US consumer has a credit score of 700, 14 points above the level at the end of the financial crisis in 2009. Meanwhile the share of those with scores below 600 has fallen to 20% of the population, down from 25% in 2009. “Credit plays a critical role in nearly all facets of one’s finances, but strong credit health isn’t achieved overnight,” says Farnoosh Torabi, a personal finance expert and Chase Slate Financial Education Ambassador. Source: Mortgage Professional America — Want help in determining what you can do in order increase your score? Contact usThere’s a growing quest among homebuyers to live in sustainable, greener homes according to data from the National Association of Realtors®. More than half of its members say that consumers are interested in sustainable real estate issues and practices. As a result of demand, more MLS listings are including data on features such as renewable energy. Efficient use of lighting, smart/connected homes and bike lines and green spaces in neighborhoods were the top 3 green features that Realtors® say clients consider most important. “As consumers’ interest in sustainability grows, Realtors® understand the necessity of promoting sustainability in their real estate practice, such as marketing energy efficiency in property listings to homebuyers,” said NAR President William E. Brown. “The goal of the NAR Sustainability Program is to provide leadership and strategies on topics of sustainability to benefit members, consumers and communities.” 80 per cent of Realtors® say that solar panels are available in their market and 42 per cent say that solar panels increase the perceived value of a home. However, the market for green properties is at a relatively early stage with 70 per cent of Realtors® reporting that they had not worked with any properties with green features. Source: NAR

A cul-de-sac offers plenty of appeal to buyers: It may be quieter and safer for kids to play because of less traffic. Some home buyers are willing to pay more for a house on a cul-de-sac—but is it really the best option for your buyer? Because cul-de-sacs are attractive areas for children to play, says Fiona Tustian, GRI, a sales associate with Roy Wheeler Realty Company in Ruckersville, Va., the frenzy of activity has made some buyers regret their purchase. “My clients were seniors looking for peace and quiet,” she says. Parking in a cul-de-sac can also be an issue if the neighbors are hosting an event that attracts a large crowd. However, neighborhoods tend to be tightly knit, says Meg Colford, who lives in a cul-de-sac on Long Island, N.Y. “Our neighbors are really close. Everyone is friendly, but you definitely have to plan on seeing someone at least every day. … So, if you’re not into helping your neighbors do things like snow-blow or shovel the driveway, a cul-de-sac probably isn’t a great choice.” Buyers also may want to watch for any potential insurance issues. Since there’s only one way in and out of a cul-de-sac, large vehicles such as a fire truck can get jammed up. That can make it more difficult to get insurance, insurance broker Diane Beatty told MarketWatch. Source: MarketWatch

Weekly Mortgage and Real Estate Report – Week of November 6, 2017

ECONOMIC COMMENTARY
Weathering the Storms 

The storms are over. The regions hit by the storms are recovering to various degrees. We all thought that the third quarter would see a pause because of the storms’ devastation. However, with a preliminary reading of 3.0% economic growth, a lot of forecasters were surprised. What this number tells us is one of two things. First, the national economy could be a lot stronger than we were thinking and should sprint in the fourth quarter. Or, since the hurricanes hit during the second half of the quarter, we may see a downward revision of this preliminary number.

We do know that the storms negatively affected the jobs numbers for September. We felt that October’s numbers would give us a better reading of the storms’ damage — with the revision of September’s numbers just as telling as the October results. It is hard to accomplish accurate surveys when people are in shelters and the power is out. So, how did the report come out? Indeed, the numbers for October were as expected, with an upward revision to September’s dismal numbers and a bounce back for October.

Looking at the two months together, we had approximately 140,000 jobs added each month, which is about 50,000 less than the previous year’s average. Wage growth for the month was dismal but the unemployment rate dropped one more time. Again, we expect additional recovery as the year ends, which is important because the latest meeting of the Federal Reserve indicated that they are still on track to raise rates one more time this year, and that means December, which is the only remaining meeting date. Add that to a new Fed Chairman nomination and haggling over the tax plan — especially the mortgage interest deduction — and it should be a very, very busy end of the year.

REAL ESTATE NEWS
  In its most recent study, Zillow Group examined the newest generation to enter the housing market – Generation Z. Wait, what? Already? Are they even old enough to enter the housing market? As it turns out, yes, they are. Generation Z is considered to be those born from 1995 to 2010, meaning the oldest in the generation are now 22 years old. The Zillow Group Report on Consumer and Housing Trends 2017 shows this new generation now makes up more than 21% of the U.S. population, and is the most ethnically and racially diverse generation in our history. And they are beginning to enter the housing market as renters. However, this generation is just as likely as older generations to say owning a home is a key component of the American Dream. In fact, 57% responded that they already considered buying a home while looking for their last rental. “It’s encouraging to see that Generation Z is inheriting the same notion of what home means as their parents and Millennial siblings,” Zillow Chief Marketing Officer Jeremy Wacksman said. The 2017 Zillow Group Report is the second annual survey of U.S. home buyers, sellers, owners and renters, and asked more than 13,000 U.S. residents aged 18 to 75 about their homes – how they search for them, pay for them, maintain and improve them and what frustrations and aspirations color their decisions. Source: HousingWireFinding and evaluating a home improvement contractor is a difficult process. Do it right, and you will be happy with the work. But do it wrong, and your project could be a nightmare. Unfortunately, most people don’t have a clue how to go about it. According to a survey of its members by the National Association of the Remodeling Industry, customers are asking the wrong questions. The most common ones: When can you start? When will you finish? What time will you start each morning? What time will you stop working for the day? Are you going to work every day? Can you finish by a certain date? How much will it cost per square foot? In other words, “How fast and how much?” Certainly, these are important questions, to which you will want answers. But there are far more important things you need to know. After all, you are not only going to be inviting a stranger into your home, you are asking the contractor to rip up your house and interrupt your life, perhaps for a long period of time. Here’s what you really need to ask. Ask for the contractor’s license number and confirm it is valid and current. Verify the experience of the contractor and how long they have been in business. Also confirm their insurance is up-to-date and obtain referrals. Source: Lew Sichelman, UExpress

A new study by Redfin has concluded it is more cost-effective for students at some public colleges to buy their own condo rather than rent an on-campus dorm room. According to Redfin, dorm rents range from $232 to $1,817 per month, with a median monthly rate of $705. Redfin compared the monthly dorm rate at 195 public colleges with the median monthly payment on a condo in each of those cities and found 47 locations where owning was a better financial option than renting. Redfin real estate broker Misty Hurley noted that this solution could ultimately benefit students in their post-college lives. “Homeownership can be a great way to build wealth,” said Hurley. “Students will build equity that they can one day use as a down payment on a move-up home or to pay off student loans. If they choose not to sell right away, they’ll have a piece of property that’s ripe for renting, as there are always new college students looking for rentals.” Source: National Mortgage Professional

Weekly Mortgage and Real Estate Report – Week of October 30, 2017

ECONOMIC COMMENTARY
Trick or Treat 

We rarely get to publish on Halloween (technically once every seven years) and thus we could not resist the headline. There are many theories about the origins of Halloween and evidence of somewhat similar practices go back as far as the Middle Ages. Like other holidays in the United States, Halloween has evolved and grown and become a big commercial — or dare we say “sweet” — success. For some it is the real start of the holiday season in which our economy has grown so dependent upon.

Like every jobs report, every holiday season is a very important indicator of the direction of our economy. Consumer spending makes up about 70 percent of gross domestic product, and a solid chunk of it takes place in November and December, mainly in the form of gift purchases. A fifth of all retail sales occur in the year’s last two months, according to the National Retail Federation. Thus, these holidays are very, very important to our economy.

Speaking of the jobs report, the time has come for another reading. Last month the numbers were skewed as expected because of two major hurricanes. During this month’s statistical period we added another major hurricane and also devastating wildfires in Northern California. Thus, we are expecting major volatility in the numbers. This volatility may not only apply to the October numbers, but also to the revision of the September numbers already released. It will be hard for the markets to interpret these numbers, and therefore reactions may be muted as well.

REAL ESTATE NEWS
  Projections for next year’s housing market are already underway, as 2018 could be seeing significantly more home renovations and repairs taking place. A report released from the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University predicts a growing momentum in 2018 for money spent on remodeling homes. The Leading Indicator of Remodeling Activity finds annual gains in home renovation spending will surge from 6.3 percent in the fourth quarter of 2017 to 7.7 percent by the third quarter of next year. “Recent strengthening of the US economy, tight for-sale housing inventories, and healthy home equity gains are all working to boost home improvement activity,” says Chris Herbert, managing director of the Joint Center for Housing Studies. “Over the coming year, owners are projected to spend in excess of $330 billion on home upgrades and replacements, as well as routine maintenance.” “And while it’s too early for our LIRA model to capture the effects of recent hurricanes and other natural disasters experienced around the country, there is certainly potential for even stronger growth in remodeling next year as major reconstruction and repairs get underway in affected regions,” says Abbe Will, research associate in the Remodeling Futures Program at the JCHS. Source: Joint Center for Housing Studies of Harvard University — Want help finding financing for major renovations? Contact Us.Prospective homebuyers are resorting to creative approaches in shopping for a home to stand apart in a market seeing increased competition, according to Berkshire Hathaway HomeServices’ latest Homeowner Sentiment Survey. The survey found that 58% of millennial respondents would offer more of an earnest deposit to show their commitment to sellers. Other ways millennial respondents would compete in the market include sending personal letters to sellers (36%) and making offers above asking price to secure the home (31%). Also, 45% of prospective homebuyers are willing to cover closing costs to remain competitive, according to the survey. Although the market is seeing tight competition, consumers continue to view the market enthusiastically given low interest rates and potential increases in home values. Seventy-one percent of homeowner respondents expressed a positive sentiment toward the real estate market, with 51% saying low rates drove their favorable feeling and 44% citing price appreciation. “Historically low interest rates continue making homeownership achievable for many Americans,” Berkshire Hathaway HomeServices President and CEO Gino Blefari said. “We believe rates will remain within a range of current low levels for the foreseeable future.” Source: MPA

Consumers view homeownership as a priority and say they’re willing to make significant compromises in order to purchase a home, according to a survey of more than 1,000 consumers considering a home purchase, conducted by the online brokerage firm Owners.com. Sixty-nine percent of survey respondents say they’re concerned they won’t have enough cash for a down payment in order to buy a home. As such, they’re willing to forgo some financial goals and investments to make sure they save enough. Respondents said that saving for a home takes priority over saving for an emergency (61 percent) or contributing to retirement funds (60 percent). Seventy-two percent of survey respondents said they would limit their contributions to other investment funds in order to save enough to buy a home. Surveyed consumers also say they’re willing to compromise on some elements of the home if it means they can move into a home this year. For example, 51 percent said they would consider buying a fixer-upper, and 36 percent said they would purchase a smaller home than what they desire.Source: USA Today

Weekly Mortgage and Real Estate Report – Week of October 23, 2017

ECONOMIC COMMENTARY
The Market’s Passion 

Sure, the stock market has risen for over eight years. But the run which started in October of 2016 is quite extraordinary, to say the least. Usually when bull markets get older, they fluctuate and run out of steam, but this one seems to have gotten quite a second wind. The question is — where is the excitement coming from?

When you look at the economy as a whole, the economy has gotten slightly stronger as the year goes on. Though, we should keep in mind that we may see a pause in this quarter with the natural disasters that have hit our country. Slightly stronger does not explain the jubilance the market seems to be experiencing. We believe that the passion is coming from not today’s performance, but is a response to hope for a major corporate tax cut. It is simple math. If a corporation’s tax liability goes down by 10 to 30 percent, their profits will go up barring other unforeseen circumstances. Higher profits make companies more valuable.

We caution that tax reform has not been enacted yet, and even if it is, we don’t know the final result. Regardless of what “side” you were on, the health care debate reminded us of how tough it is to implement changes in Washington — even when everyone knows something needs to be done. If our theory about tax reform is true, then any failure to enact significant tax reforms could be seen as a negative by the markets. Even if reforms are enacted, the markets might correct initially because the good news was built into the prices of stocks. We are not trying to predict the future, but when the markets have moved this far, it always is a good idea to be ready for at least a correction.

REAL ESTATE NEWS
  The spring homebuying season may be long gone but that doesn’t mean first-time buyers should wait months to start looking. A report from Trulia looked at the supply of starter, trade-up and premium homes across the 100 largest metros and found that starter homes inventory will increase typically around 7% in the fall; while prices decline 4.8% in the winter compared to the spring. The strongest season for starter homes in 70 of the 100 largest metros is between October and December. Seven of the top 10 metros will see this swing in inventory and prices. “Starter homebuyers should begin looking now. The fall season provides a great opportunity for finding the right home and neighborhood thanks to a bump in homes for sale on the market, followed by lower winter prices,” said Trulia senior economist Cheryl Young. Source: TruliaThe impact immigrants have on U.S. real estate is growing, as 13 percent of the nation’s population—about 42 million people—hails from foreign countries, according to the National Conference of State Legislatures. “Immigrants are a big driving force for housing markets across the nation,” Kusum Mundra, an economics professor at Rutgers University in Newark, N.J., told realtor.com®. “Most want the American dream, which is to own a home.” But the road to homeownership for immigrants can be challenging. It takes an average of five to 10 years for immigrants to be able to purchase a home after arriving in the U.S., says Gary Painter, director of social policy at the University of Southern California’s Sol Price Center for Social Innovation. In 2016, about 40.7 percent of immigrants were homeowners compared to 66.1 percent of native-born Americans, according to a realtor.com® analysis. “Just like those born in the U.S., [immigrants] view home buying as putting down roots in the community,” Painter says. “On average, where immigrants are settling, property values have gone up.” Source: realtor.com®

Americans are still buying homes in areas with high risk of natural hazards and the homes in those cities continue to appreciate in value far faster than homes in low natural hazard locales. The 2017 U.S. Natural Hazard Housing Risk Index by the property analytics firm ATTOM Data Solutions found that median home prices in U.S. cities in the top 20 percent of highest risk for natural hazards have increased more than twice as fast over the past five years and over the past 10 years than median home prices in U.S. cities in the bottom 20 percent with lowest risk. For the report, ATTOM indexed natural hazard risk in more than 3,000 counties and more than 22,000 U.S. cities based on the risk of six natural disasters: earthquakes, floods, hail, hurricane storm surge, tornadoes, and wildfires. ATTOM also analyzed housing trends in 3,441 cities and 735 counties — containing more than 71 million single family homes and condos — broken into five equal quintiles of natural hazard housing risk. Median home prices in cities in the top 20 percent (Very High) for natural hazard risk have appreciated 65 percent on average over the past five years and 9 percent on average over the past 10 years, while median home prices cities in the bottom 20 percent (Very Low) for natural hazard risk have appreciated 32 percent on average over the past five years and 3 percent on average over the past 10 years. “Strong demand for homes in high-risk natural hazard areas has helped to accelerate price appreciation in those areas over the past decade despite the potential for devastating damage to homes that can be caused by a natural disaster — as evidenced by the recent hurricanes that made landfall in Texas and Florida,” said Daren Blomquist, senior vice president at ATTOM Data Solutions. “That strong demand is driven largely by economic fundamentals, primarily the presence of good-paying jobs, although the natural beauty that often comes hand-in-hand with high natural hazard risk in these areas is also attractive to many homebuyers.” Source: The Insurance Journal

Weekly Mortgage and Real Estate Report – Week of October 9, 2017

ECONOMIC COMMENTARY
The Story Continues 

With the release of last month’s job numbers, we were able to get a glimpse of the major effects of three major hurricanes hitting within a few weeks. We have seen many pictures of devastation from Texas to Puerto Rico. The jobs report was one more picture which has made the national numbers look bad, even considering the drop in the national unemployment rate, but the national numbers still dwarf the drastic effects upon the local economies and millions of lives.

This story will not be a short story. It will be a novel with many chapters. It starts with mass devastation and the delivery of food and water, as well as other supplies of survival. It will end differently for many. Some will relocate and many others will be part of the rebuilding process. That rebuilding process will create thousands upon thousands of jobs. This is likely to result in construction job shortages in other parts of the country.

How long will it take to recover? No one knows the answer to that question. Many economic reports will be skewed as these regions go through the process. Even the federal budget deficits will be affected by a slowing economy and increased funds spent on recovery efforts. Along with the budget deficits, there will be a spike in mortgage defaults. But again, the housing stock will be rebuilt. For market analysts, this will be a very interesting story, but not nearly as meaningful as those affected locally.

REAL ESTATE NEWS
  An adage in the legal profession goes, “A man who represents himself has a fool for a client.” In the housing industry–particularly realtors–feel the same way about those who attempt to sell their own homes. And yet, For Sale By Owner, or FSBO, persists, with the temptation to cut out an agent and the typical 6 percent commission that comes with them. Trulia, San Francisco, estimated 6.2 percent of all home listing in the U.S. are FSBO. But with such temptation comes risk, Trulia said. When it comes to actually listing the home, Trulia reported FSBO sellers are slightly more optimistic about the value of their home and list their homes at a 2 percent premium nationally. “This sounds like great news for sellers, but there is a risk: FSBOs often see their homes sit on the market longer than agent-listed homes, sometimes by more than a month,” Trulia said. So, is FSBO worth it? “Ultimately, it’s not unreasonable for sellers to consider a FSBO listing considering the potential payoff,” Trulia said. “But it’s important to remember the value agents bring to the table. They have access to more listings and buyers, know a market’s ins and outs and have experience negotiating a deal.” More importantly, a listed price in many markets is just a starting point,” Trulia said. “In some markets, properties can be priced lower to start bidding wars,” it said. “FSBOs also run the risk of underpricing their homes.” Additionally, Trulia said FSBO properties run the risk of languishing–perhaps due to the inexperience of the seller in finding and negotiating with a potential buyer. Source: The Mortgage Bankers AssociationAmericans with an education level of bachelor’s degree or higher are more likely to own a home by age 30, according to a new study from the Federal Reserve Bank of New York. That’s regardless of their student debt situation too, the study finds. Researchers who tracked college attendance and homeownership rate by age for those born between 1980 and 1986 concluded that college graduation is associated with higher homeownership rates. By age 33, the homeownership rate for those who did not attend college trails about two years behind those who did attend college with debt but did not graduate, the study showed. “Past research has not been able to disentangle how different types of educational attainment and student debt interact to impact the likelihood of owning a home,” according to a blog post at Liberty Street Economics. “Because we observe not only whether an individual owes student debt and has attended college but also graduation status, level of degree obtained, and homeownership status, we are able to further disentangle the relationship between different education levels and homeownership.” Yet, the amount of student debt a person has is related to homeownership rates, the study concluded. Americans carrying more than $25,000 of debt are less likely to own a home than those with smaller debt numbers. Source: RIS Media

Recent housing data point to house buying as actually being cheaper than renting, but the demand for apartments reached a record high over the second quarter of the year. Nationwide, apartment demand increased by a third in the second quarter year over year, according to a recent RealPage report. “Today’s strong demand for apartments reflects the combination of solid job formation and widespread availability of appealing new apartments,” said Greg Willett, chief economist for RealPage. There were 175,645 apartments completed last quarter – exceeding 86,431 units completed in the same period in 2016. Mid-year apartment occupancy stood at 95% but still stood a bit shy from mid-2016’s 95.3% rating, according to Axiometrics. Source: MPA