Category: Home Loans
TIME TO TRADE UP?
Despite an improving economy and rock-bottom rates, inventory of available homes is inconsistent. Anything more than a trickle of listings sends prices down, causing sellers to pull their homes off the market. Then prices go up again because competition gets fierce, and sellers re-emerge. As a result, a bustle of trade-up activity is expected for this spring’s selling season, before conditions change again.
Other positive signs: new single-family housing starts are at a high since 2008, according to the Commerce Department’s latest report. Also, fewer homeowners are renting out their homes to delay selling them, down to 35 percent in 2014 from 39 percent in 2013, according to Redfin, a real-estate brokerage.
And more consumers have positive equity. Last spring, 19 percent of homeowners in Redfin markets (such as Atlanta and Philadelphia) had low or negative equity. That was down to 11 percent in November. Nela Richardson, Redfin’s chief economist, expects it to hit 8 percent by March 2015.
Even better for buyers, interest rates are near-historic lows below 4 percent. “The question of staying versus leaving is shifting. For people who were afraid to leave their mortgage because they thought it was the best they’re ever going to get, now there is another good mortgage around the corner,” Richardson says.
HOUSING STARTS HIT 6 1/2 YEAR HIGH
U.S. housing starts rose more than expected in December as groundbreaking for single-family homes hit its highest level in more than 6-1/2 years, in a hopeful sign for the sluggish housing market recovery.
Starts increased 4.4 percent to a seasonally adjusted annual pace of 1.09 million units, the Commerce Department said.
November’s starts were revised up to a 1.04 million-unit pace. For all of 2014, groundbreaking increased 8.8 percent to 1.01 million units, the highest since 2007.
Single-family homes starts, the largest part of the market, jumped 7.2 percent to a 728,000-unit pace, the highest level since March 2008. Groundbreaking on single-family projects in the West hit a seven-year high, while starts in the Midwest were the highest since December 2011. Groundbreaking in the volatile multi-family homes segment fell 0.8 percent to a 361,000-unit pace.
HOME BUILDER SENTIMENT REMAINS HIGH
Confidence among U.S. home builders held steady in January, giving back very little following a sizable jump toward the end of 2014. A monthly index of builder sentiment from the National Association of Home Builders fell just one point in January to 57 from an upwardly-revised December reading. Anything above 50 is considered positive sentiment, and this marks seven straight months above 50.
“Steady economic growth, rising consumer confidence and a growing labor market will help the housing market continue to move forward in 2015,” said the association’s Chief Economist David Crowe in a release.
Of the index’s three components, current sales conditions remained unchanged at 62. Expectations for future sales dropped four points to 60, and traffic of prospective buyers fell two points to 44. Buyer traffic is the only component that seems unable to break into positive territory. On a three-month moving average, builder confidence in the West rose by four points to 66, in the Midwest gained three points to 57 and in the Northeast was up two points to 47. Confidence among builders in the South dropped two points to 58.
LOWER FHA PREMIUMS TO FUEL HOME BUYING IN 2015
In a move designed to bring more first-time homebuyers into the housing market, the Federal Housing Administration (FHA), the government insurer of home loans, will lower its annual insurance premiums from 1.35 percent to 0.85 percent.
Mortgage bankers praised the decision. “It couldn’t come at a better time,” said David Stevens, CEO of the Mortgage Bankers Association. “February is the beginning of the spring market. I think it will have a definitive impact particularly in the first-time homebuyer market.” For the typical FHA applicant, the reduction in premiums means a savings of about $80 on their monthly payment, according to CoreLogic’s chief economist, Sam Khater.
The FHA had been the only low down payment product available, with a minimum 3.5 percent down, but recently Fannie Mae and Freddie Mac announced a new 3 percent down payment product that would require private mortgage insurance. The product would compete directly with the FHA and could have offered some borrowers a cheaper option if they had a good credit score. But many applicants that would qualify under FHA’s credit and debt-to-income guidelines would not have been approved for the new Fannie and Freddie programs, so this move by FHA will add more purchasers into 2015.
PENDING HOME SALES JUMP 4.1% IN 2014
The Realtors’ Pending Home Sales Index is up 4.1 percent from a year ago, the third straight month of annual gains and the largest gain since August of 2013. These contracts are an indicator of closed sales in the next one to two months.
Signed contracts to buy existing homes increased 0.8 percent from a downwardly-revised October reading, according to the National Association of Realtors (NAR), due to favorable mortgage rates and easing home prices.
“The consistent economic growth and steady hiring we’ve seen the second half of this year is giving buyers enough assurance to consider purchasing a home before year’s end,” said Lawrence Yun, NAR’s chief economist in a release. “With rents now rising at a seven-year high, historically low rates and moderating price growth are likely to entice more buyers to enter the market in upcoming months.”
Regionally, pending home sales rose 1.4 percent in the Northeast month-to-month, fell 0.4 percent in the Midwest, rose 1.3 percent in the South and increased 0.4 percent in the West.
HOMEOWNERS GET A $1.7 TRILLION HOLIDAY BONUS
Potential homebuyers who don’t have a lot of cash to put down now have a cheaper way to get a loan.
Home prices have picked up in 2014, and made enough gains to give U.S. homeowners a collective $1.7 trillion in additional home equity, according to real estate company Zillow. Some tapped that immediately, taking out home equity lines of credit. In fact, that was the fastest growing segment of the mortgage market.
Others, many of whom came up from under water on their mortgages, decided to sell. Inventory is up nearly 12 percent from a year ago. Seven million borrowers have escaped negative equity since 2012, either through foreclosure, short sale, paying down debt or home price appreciation; nearly 9 million are still drowning in housing debt, according to Zillow.