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
America’s housing market is booming with home prices nationwide now back to where they were a decade ago, just before the financial crisis.
But that rise in prices does not mean we’re about to repeat the devastating slump because a lot has changed in the 10 years since the market crashed and the world was rocked.
A new report from realtor.com highlights the stronger conditions of the market today.
Although prices and buyer demand stir memories of a decade ago; the low inventory, tighter mortgage underwriting, job and wage growth, and economic fundamentals, make this time very different.
“As we compare today’s market dynamics to those of a decade ago, it’s important to remember rising prices didn’t cause the housing crash,” said Danielle Hale, chief economist for realtor.com®. “It was rising prices stoked by subprime and low documentation mortgages, as well as people looking for short term gains — versus today’s truer market vitality — that created the environment for the crash.”
Prices are certainly up with a median sales price in 2016 of $236,000, up 2% from a decade earlier, while realtor.com says listing prices for 2017 have increased in double-digits.
Mortgage lending conditions have improved with even the bottom 10% of borrowers in 2017 having FICO scores of 649 compared to 602 in 2006.
“Lending standards are critical to the health of the market,” added Hale. “Unlike today, the boom’s under-regulated lending environment allowed borrowing beyond repayable amounts and atypical mortgage products, which pushed up home prices without the backing of income and equity.”
The report says that flipping and overbuilding are largely in check, although it acknowledges the impact this is having on constrained construction levels.
The low inventory is exacerbated by the rise in the economy, especially the growing labor market and wages.
“The healthy economy is creating more jobs and households, but not giving these people enough places to live, added Hale.
The tight inventory will continue to hit the affordability of homes which will eventually reach the highest limit that the market can tolerate. At that point Hale says things will start to moderate rather than a crash.
“We expect a gradual tapering as buyers are priced out of the market – not a market correction, but an easing of demand and price growth as renting or adding roommates becomes a more affordable alternative,” she concluded.
Source: Steve Randall, Mortgage Professional America, 11-14-17
Mortgage interest rates, as reported by Freddie Mac, have increased over the last several weeks. Freddie Mac, along with Fannie Mae, the Mortgage Bankers Association and the National Association of Realtors, is calling for mortgage rates to continue to rise over the next four quarters.
This has caused some purchasers to lament the fact that they may no longer be able to get a rate below 3.5%. However, we must realize that current rates are still at historic lows.
Here is a chart showing the average mortgage interest rate over the last several decades:
Though you may have missed getting the lowest mortgage rate ever offered, you can still get a better interest rate than your older brother or sister did ten years ago, a lower rate than your parents did twenty years ago, and a better rate than your grandparents did forty years ago.
Source: Keeping Current Matters, 11-14-17
With residential home prices continuing to appreciate at levels above historic norms, some are questioning if we are heading toward another housing bubble (and subsequent burst) like the one we experienced in 2006-2008.
Recently, five housing experts weighed in on the question.
Rick Sharga, Executive VP at Ten-X:
“We’re definitely not in a bubble.”
“We have a handful of markets that are frothy and probably have hit an affordability wall of sorts but…while prices nominally have surpassed the 2006 peak, we’re not talking about 2006 dollars.”
Christopher Thornberg, Partner at Beacon Economics:
“There is no direct or indirect sign of any kind of bubble.”
“Steady as she goes. Prices continue to rise. Sales roughly flat.…Overall this market is in an almost boring place.”
Bill McBride, Calculated Risk:
“I wouldn’t call house prices a bubble.”
“So prices may be a little overvalued, but there is little speculation and I don’t expect house prices to decline nationally like during the bust.”
David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices:
“Housing is not repeating the bubble period of 2000-2006.”
“…price increases vary unlike the earlier period when rising prices were almost universal; the number of homes sold annually is 20% less today than in the earlier period and the months’ supply is declining, not surging.”
Bing Bai & Edward Golding, Urban Institute:
“We are not in a bubble and nowhere near the situation preceding the 2008 housing crisis.”
“Despite recent increases, house prices remain affordable by historical standards, suggesting that home prices are tracking a broader economic expansion.”
Source: Keeping Current Matters, 11-9-17