The single-family rental market has grown by 5 million from 2006 to 2017 – wiping out 270,000 potential home sales annually.
An analysis by Zillow considered the impact on the nationwide home inventory and calculated that booming rental market meant a 5% decline in for-sale inventory each year.
The figures reveal that 120,000 of the total lost sales would have been the starter homes desperately sought by first time buyers. In the past 5 years, almost 40% of the single-family homes bought and converted to rentals have been starter homes.
A major reason for the rental surge was the financial crisis as mortgage borrowers who lost their homes were forced into rentals. The share of single-family homes that were rented out jumped from 13% in 2007 to 19.2% in 2016.
There’s still strong demand for single-family homes to rent with 45% of renters wanting one but only 28% finding an available home.
“The combination of foreclosures and growing rental demand following the housing crash was an attractive opportunity for investors – large and small – who were able to buy foreclosed homes and use them to meet the rental demand. At the same time, many long-time owners have opted to hold onto their homes as rentals even after they decide to move somewhere else,” said Zillow senior economist Aaron Terrazas.
Source: Steve Randall, Mortgage Professional America, 12-14-17
In many markets across the country, the number of buyers searching for their dream homes greatly outnumbers the number of homes for sale. This has led to a competitive marketplace where buyers often need to stand out. One way to show you are serious about buying your dream home is to get pre-qualified or pre-approved for a mortgage before starting your search.
Even if you are in a market that is not as competitive, knowing your budget will give you the confidence of knowing if your dream home is within your reach.
Freddie Mac lays out the advantages of pre-approval in the ‘My Home’ section of their website:
“It’s highly recommended that you work with your lender to get pre-approved before you begin house hunting. Pre-approval will tell you how much home you can afford and can help you move faster, and with greater confidence, in competitive markets.”
One of the many advantages of working with a local real estate professional is that many have relationships with lenders who will be able to help you with this process. Once you have selected a lender, you will need to fill out their loan application and provide them with important information regarding “your credit, debt, work history, down payment and residential history.”
Freddie Mac describes the ‘4 Cs’ that help determine the amount you will be qualified to borrow:
- Capacity: Your current and future ability to make your payments
- Capital or cash reserves: The money, savings, and investments you have that can be sold quickly for cash
- Collateral: The home, or type of home, that you would like to purchase
- Credit: Your history of paying bills and other debts on time
Getting pre-approved is one of many steps that will show home sellers that you are serious about buying, and it often helps speed up the process once your offer has been accepted.
Many potential home buyers overestimate the down payment and credit scores needed to qualify for a mortgage today. If you are ready and willing to buy, you may be pleasantly surprised at your ability to do so as well.
Source: Keeping Current Matters, 12-11-17
Rising rents are making renting less and less affordable, while mortgage payments are accounting for a smaller share of income than they have historically, according to new data.
Currently, the median US rental eats up 29.1% of the median monthly income, according to a new study by Zillow. That’s a sharp increase from the years before the housing collapse, when renters spend an average of 25.8% of their income on housing. According to Zillow, renters are spending an average of $1,957 more on rent in 2017 than they did before the crash.
Homeowners, on the other hand, are spending less of their income on house payments than they did before the crash – an average of about $3,300 per year less. Mortgage payments in the third quarter of 2017 took up about 15.4% of the median income, down from 21% previously.
Rent affordability is even worse in expensive markets. In San Jose, renters are spending an average of close to 39% of their rents on income – about $13,525 more this year that the historic level of 26%, Zillow found. Renters in San Francisco are spending an average of $11,236 more this year than they would have if rents had remained proportional to income.
“In most markets, current renters are at a disadvantage compared to years past because paying the rent takes up a much larger share of their income than it did before,” said Dr. Svenja Gudell, Zillow’s chief economist. “For many people, that can mean less cash to put toward paying off student debt, building an emergency fund, or saving for retirement. For those hoping to buy a home, it could be a significant part of their down payment. For parents, it could mean additional childcare or a family vacation. This is another example of how much worse rent affordability has gotten.”
Source: Ryan Smith, Mortgage Professional America, 11-30-17
The Federal Housing Finance Agency (FHFA) is increasing conforming loan limits for the second year in a row.
The agency announced Tuesday that in most of the country, the maximum conforming loan limit for one-unit properties will be $453,100 for 2018. That’s a 6.8% increase from the 2017 limit of $424,100.
“As a result of generally rising home values, the increase in the baseline loan limit, and the increase in the ceiling loan limit, the maximum conforming loan limit will be higher in 2018 in all but 71 counties or county equivalents in the US,” the FHFA said in a statement.
The Housing and Economic Recovery Act (HERA) requires that the baseline conforming loan limit for Fannie Mae and Freddie Mac be adjusted each year in order to reflect changes in average home prices. According to the FHFA’s latest House Price Index (HPI) report, home prices rose an average of 6.8% between the third quarters of 2016 and 2017.
The loan limits will be higher in designated “high-cost” areas – markets in which 115% of the local medium home value exceeds the baseline conforming loan limit. HERA requires that the maximum loan limit in those areas be a multiple of the area’s median home value, with a ceiling set at 150% of the baseline limit. Median home values generally increased in high-cost areas this year, so the maximum loan limits in those areas will generally be rising in those areas as well. According to the FHFA, the loan limit for one-unit properties in most high-cost areas will be $679,650 for 2018.
There are special statutory provisions that establish different loan-limit calculations for Alaska, Hawaii, Guam and the US Virgin Islands, according to the FHFA. While the baseline loan limit in these areas will be $679,500, loan limits may be higher in some specific locations.
Source: Ryan Smith, Mortgage Professional America, 11-29-17
According to Freddie Mac’s latest Primary Mortgage Market Survey, interest rates for a 30-year fixed rate mortgage are currently at 3.92%, which is still near record lows in comparison to recent history!
The interest rate you secure when buying a home not only greatly impacts your monthly housing costs, but also impacts your purchasing power.
Purchasing power, simply put, is the amount of home you can afford to buy for the budget you have available to spend. As rates increase, the price of the house you can afford will decrease if you plan to stay within a certain monthly housing budget.
The chart below shows what impact rising interest rates would have if you planned to purchase a home within the national median price range, and planned to keep your principal and interest payments between $1,850-$1,900 a month.
With each quarter of a percent increase in interest rate, the value of the home you can afford decreases by 2.5% (in this example, $10,000). Experts predict that mortgage rates will be closer to 5% by this time next year.
Act now to get the most house for your hard-earned money.
Source: Keeping Current Matters 11/29/2017
Despite the slowdowns this year, 2017 is still on track to be the best year for housing in a decade, according to Freddie Mac’s November 2017 Outlook.
Freddie Mac explained this year’s modest economic growth, robust jobs gains and low interest rates made the environment more favorable for mortgages. But despite these factors, the housing market began to stall in the summer and fall this year due to a lack of affordable homes for sale.
And Freddie Mac doesn’t expect the favorable environment to continue, saying the next couple of years will see interest rates begin to increase.
“It’s unlikely the economic environment will be much more favorable for housing and mortgage markets in 2018 and 2019,” Freddie Mac Chief Economist Sean Becketti said. “We forecast that interest rates will remain low by historical standards, but gradually creep higher over the next two years.”
Freddie Mac decreased its prediction slightly to just 1.2 million housing starts in 2017. Back in September, the mortgage giant said it expected housing starts to come in at 1.22 million for the year.
It also predicted 6.13 million home sales in 2017, saying that despite the rough second half of the year, it is still on track for the best year in housing in a decade. Even amid the rising interest rates and other struggles to come in 2018, Freddie Mac forecasted sales will continue increasing in 2018 and 2019.
Next year, Freddie Mac predicts housing construction will gradually pick up, helping supply more homes in inventory-starved markets.
“We also forecast that housing construction will gradually pick up, helping to supply more homes to inventory-starved markets,” Becketti said. “More housing supply and modestly higher rates will lead to a moderation in house price growth. Refinance activity will drop to very low levels and the mortgage market will be dominated by purchase activity.”
Source: Kelsey Ramirez, Housingwire.com 11/21/17
Whether you are a renter who is searching for your dream home or a homeowner who feels like your only option is to renovate, you have at least one thing in common: feeling stuck in place.
According to data from the National Association of Realtors’ Profile of Home Buyers & Sellers, the average amount of time that a family stays in their home remained at 10 years in 2017. This mark ties the highest marks set in 2014 and 2016. Back in 1985, when data was first collected on this subject, homeowners stayed in their homes for an average of only 5 years.
There are many reasons why homeowners have decided to stay and not to sell. A recent Wall Street Journalarticle had this to say,
“Americans aren’t moving in part because inventory levels have fallen near multidecade lows and home prices have risen to records. Many homeowners are choosing to stay and renovate, in turn making it more difficult for renters to enter the market.”
Sam Khater, Deputy Chief Economist for CoreLogic, equated the lack of inventory to “not having enough oil in your car and your gears slowly [coming] to a grind.”
Historically, a normal market (in which prices increase at the rate of inflation) requires a 6-7 month supply of inventory. There hasn’t been that much supply since August of 2012! Over the course of the last 12 months, inventory has hovered between a 3.5 to 4.4-month supply, meaning that prices have increased and buyers are still out in force!
Challenges in the new-home construction market have “helped create a bottleneck in the market in which owners of starter homes aren’t trading up to newly built homes, which tend to be pricier, in turn creating a squeeze for millennial renters looking to get into the market.”
“Economists said baby boomers also aren’t in a hurry to trade in the dream homes they moved into in middle age for condominiums or senior living communities because many are staying healthy longer or want to remain near their children.”
So, what can you do if you feel stuck & want to move on?
Don’t give up! If you are looking to move-up to an existing luxury home, there are deals to be had in the higher-priced markets. Demand is strong in the starter and trade-up home markets which means that your house will sell quickly. Work with your real estate professional to build in contingencies that allow you more time to find your dream home; the right buyer will wait.
Source: Keeping Current Matters, 11-15-17
Serious mortgage delinquency rates are at their lowest levels in a decade, according to new data, and forclosure rates also hit a new low, according to new data.
The foreclosure inventory rate, which measures the share of mortgages in some stage of the foreclosure process, was 0.6% in August, according to the latest data from analytics firm CoreLogic. That’s the lowest August foreclosure rate since 2006, when the rate was 0.5%.
The overall delinquency rate (mortgages 30 days or more past due, including those in foreclosure) was 4.6% in August. That’s down from 5.2% in August of 2016. Early-stage delinquencies (30-59 days past due) represented 2% of all mortgages in August, down from 2.1% last year, according to CoreLogic. The share of mortgages that were 60-89 days past due was 0.7%, unchanged from August of 2016. The serious delinquency rate (mortgages 90 or more days past due) dropped from 2.4% in August of 2016 to 1.9% in August of this year. That’s the lowest serious delinquency rate since October of 2007, when the rate was 1.7%. Alaska was the only state to see a hike in its serious delinquency rate in August, according to CoreLogic.
“The effect of the drop in crude oil prices since 2014 has taken a toll on mortgage loan performance in some markets,” said Frank Nothaft, CoreLogic’s chief economist. “Crude oil prices this August were less than half their level three years ago. This has led to oil-related layoffs and an increase in loan delinquency rates in states like Alaska and in oil-centric metro areas like Houston.”
Still, the overall drop in foreclosures and delinquencies is good news for the mortgage industry, said Frank Martell, president and CEO of CoreLogic.
“Serious delinquency and foreclosure rates are at their lowest levels in more than a decade, signaling the final stages of recovery in the US housing market,” Martell said. “As the construction and mortgage industries move forward, there needs to be not only a ramp-up in homebuilding, but also a focus on maintaining prudent underwriting practices to avoid repeating past mistakes.”
Source: Ryan Smith, Mortgage Professional America, 11-15-17