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  • Dwindling Inventory, Glass Half Full

    Home sales in August fell slightly, according to a recent report from Ten-X. The Ten-X Residential Real Estate Nowcast predicts a 0.1 percent decrease in home sales for August. The nowcast reports that sales will hit a seasonally adjusted rate (SAAR) between 5.33 and 5.68 million with a targeted number of 5.43 million.

    "Existing home sales are in a classic 'glass half full/glass half empty' situation right now," said Ten-X EVP Rick Sharga. "While sales in August should be up slightly from last year, our nowcast model shows that they'll continue their downward trend and be lower than July sales. The combination of falling inventory and rising prices is proving to be a difficult hurdle for the market to overcome."

    Last month’s Nowcast had predicted a slight drop in home sales, which was confirmed by the National Association of Realtors (NAR) data. In July, total existing home sales fell to a seasonally adjusted rate of 5.44 million, 1.3 percent lower than in June when the rate was 5.51 million. Ten-X notes that this is still 2.1 percent higher year-over-year.

    Meanwhile, home prices have risen. Ten-X predicted an increase in home prices, which was confirmed by data from NAR. The median existing home price for all types of housing went up by 6.2 percent year-over-year in July.

    "US home sales are bouncing around at an elevated level amid a number of continuing crosscurrents," said Ten-X Chief Economist Peter Muoio. "On one hand, a firm labor market is lifting demand for homes, while on the other, tight inventory levels have limited home sales growth. And, although the resulting price gains continue to benefit existing homeowners, they also erode affordability, effectively sidelining potential buyers. While a couple of months of data is hardly confirmation of a trend, the recent decline in sales is worth monitoring to see if home sales are beginning to lose steam."

    AUTHOR:  

    Seth Welborn of DSNEWS

  • Hot or Not?

    Long-term growth, equity, and profit are influenced by more than just the structural characteristics, according to recent research by WalletHub. Square footage and a newly renovated kitchen may contribute to property value, but investors are looking at historical market trends and economic health of the area, not just the visual aspects of buying a home.

    WalletHub compared 300 various sized cities on two measures of criteria: “Real-Estate Market” and “Affordability & Economic Environment.” Using 21 different metrics, which were weighted differently depending on the subject, WalletHub organized the list based on their weight on a 100-point scale, 100 meaning the market is perfectly healthy. The sample was categorized by large cities (more than 300,000 people), midsize cities (150,000 to 300,000 people), and small cities (fewer than 150,000 people).

    Seattle, Washington came in at No. 1 for large cities, followed by Nashville, Tennessee, and Denver, Colorado.

    WalletHub asked Kirk McClure, Professor in the Department of Urban Planning at the University of Arkansas, what the top five indicators for evaluating the healthiest housing markets were, to which he replied, “Jobs, jobs, jobs, jobs, and jobs.” the places with the jobs, the income and the urban environments where the “creative class” wants to live. This makes their housing markets hot. But hot is not necessarily healthy.”

    Out of all the metros, "the places with the jobs, the income, and the urban environments where the “creative class” wants to live . . . makes their housing markets hot. But hot is not necessarily healthy,” McClure said.

    McClure explained that healthy markets keep the growth of housing stock in line with the growth of households. If you add too many or too few houses, it has negative consequences, such as blight in older neighborhoods or rent that rises faster than renter’s incomes.

    WalletHub rated Miami, Florida as the third coolest large market in the U.S. followed by Cleveland, Ohio, and last, but not least (unless you mean least hot market), Detroit, Michigan.

    “I encourage people not to follow price trends,” McClure said. “These can change, as we learned painfully in 2008. Rather, they should look at the growth of incomes among homeowners and renters.”

    To see the full list, click here.

    Author: Brianna Gilpin of DSNEWS 

  • Cash Making a Comeback

    Housing starts charted lower than anticipated during Q2, according to Freddie Mac’s August Outlook. which is putting a strain on the preferred home-buying route and forcing buyers to pursue alternative avenues.

    The report examines how today’s limited supply of homes has resulted in an amount of cash sales in lieu of traditional originations, a number that sits above the historic norm.

    “Usually, not many people like to invest a lot of cash into real estate, which is illiquid and has high transaction costs,” said Sean Becketti, Chief Economist at Freddie Mac, which opens up homeownership to millions by furnishing mortgage capital to lenders. “However, in the current, highly competitive housing market, a cash offer is an effective way to gain an advantage over other bidders. In a cash sale, the seller doesn't have to worry about the buyer’s ability to obtain a mortgage or the chances that an appraisal will come in below the agreed sales price. And each cash sale means one less mortgage origination.”

    With Freddie Mac's prime mortgage market survey interest rates expected to remain under 4 percent for the rest of 2017, home sales should hit 6.2 million units for the year, a 3 percent jump over 2016, Freddie’s report says. That number would reach even greater heights, however, if inventory weren’t so hard to come by, it notes.

    Due to the intense demand and scant supply, house price appreciation is poised to average 6.3 percent for full-year 2017, the Outlook says.

    For comparison’s sake, in June, cash sales represented about 18 percent of all home sales. While that was sizably less than the high of 35 percent, it was still well above the historical average of 10 percent, Freddie Mac reported.

    So what impact might today’s mad dash for cash have on the mortgage market? If cash sales hold tight around 20 percent, the report maintains, that would translate to $172 billion less in mortgage originations than if the cash share reverted to its historical norm.

     

    About Author: Alison Rich of DSNEWS

  • Bubble Ahead?

    Home prices are rising and inventory is low—sound familiar? That fact has been talked about nearly to death, but it’s for good reason. Though it means that housing confidence is up and on a positive trajectory, it also means for certain areas that we could be headed for a correction.

    Eight in 10 American’s, or 79 percent, say that homeownership is still a part of the American Dream, which is why ValueInsured has ranked the Housing Confidence Index score at 68.7 on a hundred-point scale. However, the expectation that homes will continue on their value path has decreased significantly.

    According to ValueInsured, 57 percent of the American homeowners that were surveyed think their area is overvalued and home prices are unsustainable. Since last quarter, that is a 7 percent increase. Homeowners in Urban areas are particularly concerned with 65 percent believing that homes are overvalued and unsustainable.

    “We see more homebuyers concerned with timing the market,” said Joe Melendez, CEO of ValueInsured. “This is especially true for millennials, who are more likely to switch jobs, relocate or need to upsize in the next few years. No one wants to buy at the peak and find themselves underwater as so many did a decade ago.”

    Overall, 62 percent of those surveyed think there will be another housing bubble, but there are five states that could especially be on the road to correction. Seventy-one percent of those surveyed think Washington is the number one place headed for correction followed by New York (68 percent), Florida (63 percent), California (59 percent), and Texas (58 percent).

    “Beyond the jitters, I see in our survey an increasingly informed nation of homebuyers, who understand the risk of the market,” said Melendez. “To those concerned about a price correction, or waiting to time the market, I recommend a proactive approach. Have an exit plan, then anytime you find a home you love is a good time to buy.”

    To read the full report, click here.

    About Author: Brianna Gilpin of DSNEWS

  • Home Prices Won’t Drop Anytime Soon

    Home prices are up, and that’s not likely to change anytime soon—at least according to the recent Housing and Mortgage Market Review released by Arch MI on Tuesday.

    The report, which presents a state- and metro-level Arch MI Risk Index based on economic and housing market data, showed the likelihood of overall housing price decreases across all U.S. states and major cities at just 4 percent over the next two years. Last year, likelihood of pricing declines was 5 percent and two years ago, it was at 8 percent.

    The Risk Index showed risk for pricing drops was relatively stable across the country, with only minor changes in some of the heavy coal-, oil-, and gas-producing regions.

    ”The vast majority of housing markets across the nation remain healthy and are projected to stay that way through 2018,” said Dr. Ralph G. DeFranco, Global Chief Economist for Mortgage Services of Arch Capital Services Inc. “Looking back at 2016, home prices grew 6 percent and rose in all 50 states.”

    According to the report, no single state had more than 50-percent chance of housing price drops over the next two years. This means home price growth will likely continue—and on a sweeping scale.

    “This year, conditions are in place for home prices to grow faster than incomes as a result of a tightening job market, still relatively low interest rates, tight supply, and an overall shortage of housing,” DeFranco said.

    If pricing declines do happen, they’re most likely in North Dakota, which had a 38 percent change of declines), Wyoming (36 percent), and Alaska (31 percent). All three are currently plagued with weak employment and low home sales, the report stated.

    At a metro level, areas most likely to seeing price drops were: Miami and West Palm Beach, Florida; Baton Rouge and New Orleans, Louisiana; Albuquerque, New Mexico; Oklahoma City and Tulsa, Oklahoma; Houston, Texas; Birmingham, Alabama; and Little Rock, Arkansas. Oklahoma City has the highest chances with 21 percent.

    The report also included a section on millennials, particularly whether they’re really flocking to more urban areas like everyone seems to assume.

    “It turns out that the percentages of millennials choosing to live in cities, suburbs, and rural areas are about the same as for the overall population,” the report stated. “The main obstacle to urban living for this group is likely the cost—few people starting their careers can afford to live in close-in areas (where housing costs have been rising fast for decades.)”

    Arch MI releases its Housing and Mortgage Market Review quarterly. To view the full report, visit ArchMI.com/HAMMR.

    Author: Aly J. Yale of DSNEWS

  • Inventory & Prices Prevent Some Homeowners from Moving

    Housing inventory nationwide dropped to its lowest level on record in the first quarter of 2017, according to the Trulia Inventory and Price Watch released today. The number of homes on the market dropped for the eighth consecutive quarter, falling 5.1 percent during the past year. Homebuyers have now been stifled by low inventory for the last two years despite prices rising to pre-recession highs in many markets.

    The report states that, in fact, home value recovery may be limiting the supply of homes in the markets that have recovered the most value. It seems that homebuyers in markets with the biggest gains are facing the tightest supply.

    Trulia analyzed the trends and direction of the housing market in the 100 largest U.S. metros from the first quarter of 2012 to the first quarter of 2017. From this analysis, the following information was obtained:

    • The number of starter and trade-up homes was 8.7 percent and 7.9 percent respectively, a 1.7 percent drop from last year.
    • Starter and trade-up homebuyers need to spend 2.9 percent and 1.6 percent more of their income than this time last year, and premium homebuyers only need to shell out 0.9 percent more of their income.

    The Trulia report provided a few reasons why inventory is low: (1) Investors bought up much of the foreclosure home inventory during the financial crisis and turned them into rental units; (2) Price increases made it difficult for some existing homeowners to move up to a larger home; and (3) Slow home value recovery made it difficult for some homeowners to break even on their homes. 

    This is one of the first studies to discuss the relationship between home values and inventory. The conclusion is that too little recovery might make it difficult for homeowners to sell their homes, but easier to buy another. On the other hand, too much recovery makes it easy for them to sell, but difficult to buy another home.

    The Trulia Inventory and Price Watch is an analysis of the supply and affordability of starter homes, trade-up homes, and premium homes currently on the market. 

  • Rate Hike Affect on Bank Cards and Mortgages

    Bank card default rates went up by one basis point to 3.22 percent between February and January, according to S&P/Experian Consumer Credit Default Indices. February’s 3.22 percent default rate is a 44-month high, the highest rate since July 2013.

    Interest rates on bank cards can be expected to rise due to the recent federal reserve rate hike, which will affect not only bank cards, but mortgages as well. February’s mortgage default rate was 0.74 percent, two basis points higher than January.

    "The increase in the Fed funds rate announced last week by the Federal Reserve will push up the interest rate charged on bank cards in the near future," says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. "The quarter percentage point increase will be gradually passed through to the charges faced by those borrowing with their credit cards. Based on the projections made by members of the Fed's policy committee, we could see three or possibly four additional increases this year. Given the prospect of higher interest rates and continuing economic expansion, the recent rise in bank card default rates is not expected to immediately reverse. Interest rates on auto loans and home mortgages are also likely to advance following the Fed's action.”

    Mortgage rates will inevitably rise following the rate hike. However, rising rates will not be detrimental to the market, according to the Chief Economist of First American, Mark Fleming.

    “Reports have suggested, or surely will, that this rise in mortgage rates will be the demise of the housing market. That’s just not so," said Fleming. “Yes, many existing homeowners will have a financial disincentive to sell because they would lose their lower than prevailing mortgage rates in doing so, the so-called rate lock-in effect. I have suggested that this is one of the reasons we see low inventories in most markets today, but it’s not as simple as that. We don’t act rationally. Even economists who, of all people, should know better.”

     

    Author: Seth Welborn of DSNEWS

  • Down Payment Assistance Programs are Not a Problem

    The HUD Office of the Inspector General (OIG) has criticized a Federal Housing Administration (FHA) program which allows state housing finance agencies to offer down payment assistance to borrowers. A blog from the Urban Wire, however, argues that “these payment assistance programs are valuable and present minimal risk to FHA’s finances.” According to Urban Wire, the criticism is “perplexing”.

    Borrowers pay for assistance through higher rates, in violation of FHA rules, according to the OIG, and additionally, these loans can pose an unnecessary economic risk to the mutual mortgage insurance fund.
    A prior report from Urban Institute, however, shows that these claims are mistaken, and nothing indicates that these programs are a problem. Though borrowers participating in these programs tend to have rates than those who don’t, The Urban Institute lists a few reasonable explanations.

    For example, borrowers who participate in down payment assistance programs are more likely to be higher risk. That, coupled with the fact that these borrowers are more likely to finance their costs, can lead to higher rates.
    Additionally, State Housing Finance loans tend to be smaller than other FHA loans, leading to closing costs which make up a larger percentage of the loan amount. Urban Wire notes that these independent factors were not considered when the OID determined whether program participants were paying more due to their participation.

    Even if there is a negative impact, it is tiny. Most mortgages originated from these programs had note rates within normal limits. The average rate on state down payment assistance loans was just .26 percent higher than those with no assistance, and less than 10 percent of the loans had rates .80 percent higher than the benchmark rate.

    The OIG’s claims that these loans present an economic risk, though this appears to also be a mistake. A slightly higher risk does not pose an economic problem, as long as pricing covers that risk, according to the Urban Institute.
    Read the full post from the Urban Institute here.

    Author: Staff Writer for DSNEWS 

  • Down Payment Assistance Programs are Not a Problem Print This Post Print This Post Down Payment Assistance Programs are Not a Problem

    The HUD Office of the Inspector General (OIG) has criticized a Federal Housing Administration (FHA) program which allows state housing finance agencies to offer down payment assistance to borrowers. A blog from the Urban Wire, however, argues that “these payment assistance programs are valuable and present minimal risk to FHA’s finances.” According to Urban Wire, the criticism is “perplexing”.

    Borrowers pay for assistance through higher rates, in violation of FHA rules, according to the OIG, and additionally, these loans can pose an unnecessary economic risk to the mutual mortgage insurance fund.
    A prior report from Urban Institute, however, shows that these claims are mistaken, and nothing indicates that these programs are a problem. Though borrowers participating in these programs tend to have rates than those who don’t, The Urban Institute lists a few reasonable explanations.

    For example, borrowers who participate in down payment assistance programs are more likely to be higher risk. That, coupled with the fact that these borrowers are more likely to finance their costs, can lead to higher rates.
    Additionally, State Housing Finance loans tend to be smaller than other FHA loans, leading to closing costs which make up a larger percentage of the loan amount. Urban Wire notes that these independent factors were not considered when the OID determined whether program participants were paying more due to their participation.

    Even if there is a negative impact, it is tiny. Most mortgages originated from these programs had note rates within normal limits. The average rate on state down payment assistance loans was just .26 percent higher than those with no assistance, and less than 10 percent of the loans had rates .80 percent higher than the benchmark rate.

    The OIG’s claims that these loans present an economic risk, though this appears to also be a mistake. A slightly higher risk does not pose an economic problem, as long as pricing covers that risk, according to the Urban Institute.
    Read the full post from the Urban Institute here.

     

    Author: Staff Writer for DSNEWS / 3-16-17

  • Low Down Payment Programs Attracting Millennials

    Down Payment Resource reports that in January, 65 percent of first-time home buyers only put down a zero to six percent down payment, a decrease from 66 percent in December. Among all buyers whose transactions closed in January, 62 percent of those who obtained a mortgage made a down payment of less than 20 percent, the same percentage as in December.

    However, the percentage increased for other types of loans. According to Ellie Mae Origination Insights Report, average down payments for January included (1) all loans, LTV 78 percent, 22 percent average down payment; (2) FHA Purchases, LTV 96 percent, 4 percent average down payment; (3) Conventional Purchase, LTV 80 percent, 20 percent average down payment; and (4) VA purchase, LTV 98 percent, 2 percent average down payment.

    There are some new programs targeted to homebuyers who do not have adequate money for down payments on a home. Overlooked and disadvantaged communities may also soon benefit from these funds. “Last year, more homes were sold in America than any year since 2006. Yet the housing recovery is bypassing dozens of communities and millions of Americans,” according to the Down Payment Resource, a service that tracks approximately 2,400 homebuyer programs.

    By giving buyers an incentive to choose a home in languishing neighborhoods, these programs are catalysts for change, according to Rob Chrane, CEO, Down Payment Resource. “New owners invest in their communities, stimulating growth and community revival. Down payment assistance can leverage a minor investment into turning communities around and putting young families on a path to homeownership.”

    Funds for down payments are available through federal programs like the Treasury Department’s Capital Magnet Fund and TARP’s Hardest Hit Fund that may be able to help. In addition, state housing finance agencies are launching new down payment assistance programs to bring the housing recovery to overlooked urban and rural neighborhoods.

    In addition, innovative state and local housing finance agencies are the key to turning federal initiatives into local opportunities that improve lives and build communities. The Wisconsin Housing and Economic Development Authority and the Tennessee Housing Development Agency are just two of a number of agencies pioneering the targeted application of down payment assistance to communities and neighborhoods that need it the most.

    “The idea here is that neighborhood stabilization requires more than investment; it requires the presence of an invested home owner. This encourages people to buy and to stay and to help build up these neighborhoods,” said Ralph M. Perrey, executive director, Tennessee Housing Development Agency.  

    Among commercial lenders, Wells Fargo has expanded its credit criteria to offer more first-time and low-to moderate income buyers the chance to qualify for a loan, according to an article in Builder Magazine. Under the program, credit history includes nontraditional sources such as tuition, rent, or utility bill payments. Borrowers need a minimum credit score of 620 to qualify. Wells launched its yourFirstMortgage program in May 2016, which offers fixed-rate mortgages for a down payment of as little as 3 percent. The yourFirstMortgage program does not have an income limit and is not restricted to first-time buyers.

    It seems that the long-awaited influx of millennial home buyers is beginning. Ellie Mae reported that mortgages to millennial borrowers for new home purchases continued their ascent in January, accounting for 84 percent of closed loans. FHA loans remained attractive among Millennials, representing 35 percent of all loans closed in January. “It is not surprising to see Millennial borrowers leverage FHA loans because they typically offer lower down payments and lower average FICO score requirements than conventional loans," said Joe Tyrrell, executive vice president of corporate strategy at Ellie Mae. "Across the board, we're continuing to see strong interest in homeownership from this younger generation.”

    Author - Sandra Lane of DSNEWS

  • Home Sales Increase as Buyers Avoid Rising Rents

    As rents in some areas continue to rise, people are beginning to realize that home ownership might be a better choice. Three Florida economists say this truly is a good time to buy a home in most U.S. cities.

    Research on this issue was performed by Ken Johnson, Ph.D., Florida Atlantic University; William G. Hardin III, Ph.D., Florida International University; and Eli Beracha, Ph.D., Florida International University. Together, these economists author The Beracha, Hardin & Johnson (BH&J) Buy vs. RentIndex.

    "This is great news for home ownership and the financial returns to ownership," said Johnson, a real estate economist who is an associate dean of graduate programs and professor in FAU’s College of Business. "We are not where we were in 2012, when nearly any purchase was a sound financial decision. However, overall, we are now in a situation where aggressive marketing from sellers combined with due diligence and sound negotiation from buyers is creating a housing market that's more in line with what we've seen historically."

    The latest BH&J Index comes on the heels of the latest S&P/Case-Shiller Home Price Index, which found that home prices rose 5.8 percent year over year, the highest annual increase since June 2014.

    The BH&J Index is designed to signal whether current market conditions favor buying or renting a home in terms of wealth creation over a fixed holding period in a particular market relative to historical market conditions and alternative investment opportunities. The index summarizes 23 major metropolitan housing markets and the U.S. real estate market as a whole (represented by the member index metropolitan areas).

    In order to arrive at the index value for each location and each point in time, the index conducts a “horse race” comparison between an individual that is buying a home and an individual that rents a similar quality home and reinvests all monies otherwise invested in home ownership. The end results of each comparison are calibrated to yield a value between -1 and 1. The comparison between buying and renting considers many factors including, but not limited to, rent-to-price ratio, mortgage rates, expected rate of inflation, real past stock market long term returns, long term rent growth and housing price appreciation, costs associated with maintenance and property taxes, homeownership tax benefits, transaction costs and average homeowners’ duration between relocations.

    The major goal of the BH&J Index is to provide information on the health of housing markets around the country enabling consumers, real estate market professionals, developers, lenders and housing policy makers to make more informed decisions.

    Both indexes incorporate property appreciation from housing markets around the country, but unlike Case-Shiller, the BH&J Index adds additional rental, maintenance and alternative investment data streams, among others, to indicate when and why housing markets might be changing direction.

    These latest numbers show that 15 of the 23 cities in the index are solidly in buy territory, while another five are only marginally in rent territory. Only three cities—Dallas, Denver, andHouston—present scores that are worrisome in terms of local housing market conditions. 

    "The scores for Dallas, Denver, and Houston have worried us for some time now," said Beracha, co-author of the index and assistant professor in the T&S Hollo School of Real Estate at FIU. "The last time we saw scores of this magnitude, housing market crashes soon followed."

     AUTHOR - Sandra Lane of DSNEWS 

  • Up, Up, and Away: Home Prices on the Rise

    Home prices are up on both a year-over-year and a month-over-month basis, according to a CoreLogic report for January 2017 released on Tuesday. The CoreLogic Home Price Index (HPI) shows nationwide sales, including distressed sales, jumped 6.9 percent year over year and 0.7 percent month-over-month. By state, Washington saw the largest year-over-year home price increase of 10.8 percent. Of all 50 states, Maine was the only state to experience a decline in year-over-year home prices, with a loss of 1.8 percent.

    “With lean for-sale inventories and low rental vacancy rates, many markets have seen housing prices outpace inflation,” said Dr. Frank Nothaft, Chief Economist for CoreLogic. “Over the 12 months through January of this year, the CoreLogic Home Price Index recorded a 6.9 percent rise in home prices nationally and the CoreLogic Single-Family Rental Index was up 2.7 percent—both rising faster than inflation.”

    Home prices have been steadily rising since 2012, and CoreLogic hasn’t been the only company reporting the trend. Last month, the Federal Housing Finance Agency released its HPI report, as covered by MReportwhich showed an increase of 6.1 percent for November 2016. The National Association of Realtors additionally reported growth, with the median home price of $232,000 in December 2016, up 4 percent year-over-year.

    CoreLogic data shows that this trend is to continue in 2018. CoreLogic’s HPI Forecast, a projection made with CoreLogic HPI data and other economic variables, predicts an increase of 4.8 percent on a year over year basis in January 2018 and a month over month increase of 0.1 percent in February 2017. “Home prices continue to climb across the nation, and the spring home buying season is shaping up to be one of the strongest in recent memory,” said Frank Martell, President and CEO of CoreLogic. “A potent mix of progressive economic recovery, demographics, tight housing stocks, and continued low mortgage rates are expected to support this robust market outlook for the foreseeable future.”

    CoreLogic HPI and CoreLogic HPI Forecast data is an early indicator of home prices of single-family with information available the national level from to the ZIP Code level.

     AUTHOR - DSNEWS Staff Writer 

  • Metro Atlanta housing basics good, prices up

    In the past year, the metro Atlanta housing market has kept moving forward by most measures -- but the exceptions are enough to give pause.

    For sure, the median prices of homes sold has continued to rise, steadily if not spectacularly, by nearly all surveys. According to Re/Max Georgia, for example, the median Atlanta home price last month was $222,130 -- up 6 percent from a year before.

    And the spring is when there is the largest rush of homes onto the market and the most frenetic search for purchases, so many real estate professionals say they expect the next few months to be very strong.

    Of course, real estate people are optimistic -- almost by definition. And there are fundamental reasons to be upbeat.

    The basic equation for housing has been healthy: job growth, income growth, low-interest rates. There is some concern about rates, but they are still historically low.

    But there is a troubling variable: inventory -- that is, the number of homes for sale. The number of homes listed for sale is down 9 percent from a year earlier, Re/Max said.

    A weak flow of for-sale homes in many areas means that sellers have the advantage, buyers bid against each other, prices go up and some first-time, lower-income households get priced out of the market.

    And, since first-time buyers are crucial to long-term growth, anything that shuts them out can ultimately have something of a chilling effect on the market.

    One of the problems is a reluctance of homeowners to sell. Anyone who bought during the last years of the housing bubble -- or who re-financed their way out of equity -- may be inclined to hold on to their home until they can turn a profit on the sale.

    But much of the shortfall is because construction has not caught up with demand. And that is at least partly because building is dominated now by big companies who are more cautious than the many small builders who powered metro Atlanta's boom.

    The big builders may also be building more in other metros where the profits are higher.

    So the Atlanta market will catch up with demand, but it may take some time. Meanwhile, inventories are shallow and the prices keep going up.

    A year ago, Atlanta prices were up 5.7 percent from the year before.

  • Will Housing Become Less Affordable?

    Affordability is strong in the U.S. housing market for now, according to Arch Mortgage Insurance, but how much longer will that be the case?

    Arch MI’s Winter 2017 Housing and Mortgage Market Review (HaMMR) has the answer—over the next two years, housing affordability will take a hit, particularly among millennials. During that time, home price appreciation is expected to continue to outpace incomes.

    “Housing will become less affordable, hurting millennials and renters the most,” the report stated. “With future interest-rate increases also set to hurt affordability, this suggests that the sooner someone who is willing and able makes the jump from renting to owning, the better.”

    Despite the prospect of declining affordability, the current housing market features several positive fundamentals. The likelihood of home prices declining over the next two years was at 4 percent, and is at an unusually low point in the vast majority of cities, according to Arch.

    “Positive fundamentals in today’s housing market include strong affordability due to below-normal mortgage rates, total employment growth of 2 to 2.5 million jobs a year, an extremely tight inventory of homes for sale, accelerating rent increases, and low vacancy rates,” Arch MI Chief Economist Ralph DeFranco said. “While there are many negatives, ranging from weak wage growth to a near-tripling of student debt over the past 10 years, rapid price growth suggests the supply shortfall is more important. Given these positives for home prices, it isn’t surprising that our models give a very low chance that home prices could be lower in two years in the vast majority of cities across the country.”

    Arch MI predicts that the incoming administration will loosen lending guidelines which have tightened up since the crisis, which will stimulate demand more than supply.

    “Much of the drag on supply comes from higher building fees in recent years and local governments’ tight building restrictions, which will not be affected much by changes in Washington,” the report stated.

    According to Arch MI, residential construction will increase by 5 to 15 percent over the next two years, but it needs to continue to ramp up for “several more years” based on the company’s estimates of household growth during that time.

    “We estimate construction needs are closer to 1.4 million units a year, compared to actual housing starts now of around 1.2 million, up from 1.0 million in 2015,” the report stated. “Purchase originations will grow 10-15 percent a year as cash purchases decline and construction increases. On top of that, there is also some pent-up demand from Millennials that will add to demand as wage growth finally picks up with the tightening labor market.”

    Click here to view the complete HaMMR from Arch MI.

    Author: Brian Honea of DSNEWS 

  • Borrowers are Getting Back Into the Black

    Homeowner equity improved over the first three quarters of 2016 to levels not seen since before the recession, according to the Black Knight Financial Services Mortgage Monitor for November 2016 released Monday.

    The report found that 4.4 percent of homeowners, or 2.2 million, were in negative equity‒‒the fewest since early 2007‒‒and roughly 1 million homes returned to positive equity over the first three quarters of 2016. This has created $4.6 trillion in available equity, or nearly $118,000 available per borrower. This is the highest market total and highest average per borrower total since 2006 and is within 6 percent of peak totals.

    “There are now over 39 million borrowers with tappable equity, meaning they have current combined loan-to-value ratios of less than 80 percent,” the report stated.

    Homes in the bottom 20 percent by price were also nine times more likely to be underwater than those in top 20 percent, according to Black Knight.

    Ben Graboske, EVP for Data and Analytics at Black Knight, said that whereas negative home equity was once a widespread national problem‒‒with roughly 30 percent of all homeowners being underwater on their mortgages at the end of 2010‒‒it has now become much more of a localized issue.

    “By and large, the majority of states have negative equity rates below the national average of 4.4 percent,” Graboske said. There are, though, some pockets where homeowners continue to struggle.”

    Three states in particular stand out: Nevada, Missouri, and New Jersey, all of which have negative equity rates more than twice the national average, he said. Atlantic City leads the nation, with 23 percent of its borrowers underwater, followed by St. Louis at 20 percent.

    “On the other hand,” Graboske said, “even though the total equity tapped via first-lien refinances hit a seven-year high of more than $70 billion over the first three quarters of 2016, that means less than two percent of available equity has been tapped so far this year. That equity also continues to be accessed safely, with the resulting average post-cash out LTV of 66 percent at near 10-year lows and the average credit score above 750.”

    Much like the negative equity situation, tappable equity is geographically concentrated as well, although in different areas, he said. The top 10 metropolitan areas contain half of all available lendable equity, and California alone accounts for nearly 40 percent, despite having only 16 percent of the nation’s mortgages.

    Click here to view the entire Mortgage Monitor for November.

    Author -  Scott Morgan

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