Pending Sales at Strongest Pace Since 2006

Daily Real Estate News | Thursday, June 27, 2013

Pending home sales rose in May to the highest level since late 2006, implying a possible spark as mortgage interest rates began to rise, according to the National Association of REALTORS®.
The Pending Home Sales Index, a forward-looking indicator based on contract signings, increased 6.7 percent to 112.3 in May from a downwardly revised 105.2 in April, and is 12.1 percent above May 2012 when it was 100.2. Contract activity is at its strongest pace since December 2006, when it reached 112.8. Also, pending sales have been above year-ago levels for the past 25 months.
Lawrence Yun, NAR chief economist, said there may be a fence-jumping effect.  “Even with limited choices, it appears some of the rise in contract signings could be from buyers wanting to take advantage of current affordability conditions before mortgage interest rates move higher,” he said.  “This implies a continuation of double-digit price increases from a year earlier, with a strong push from pent-up demand.”
Regionally, the index went unchaged in the Northeast, but is 14.3 percent above a year ago.  In the Midwest, it jumped 10.2 percent to 115.5 in May and is 22.2 percent higher than May 2012.  Pending home sales in the South rose 2.8 percent and 16 percent in the West.

Source: NAR

First Bipartisan Housing Finance Bill Introduced in Senate

Daily Real Estate News | Wednesday, June 26, 2013

A bipartisan group of Senators introduced Tuesday a bill to remake the role of the federal government in mortgage finance. The bill proposes replacing Fannie Mae and Freddie Mac with a new guarantor, the Federal Mortgage Insurance Corp. The FMIC would offer reinsurance of mortgage securities if private creditors ever reached another crisis in the future.
The legislation would “require private entities to buy mortgages from lenders and issue them to investors as securities,” Reuters reports. “Private equity would be required to absorb a 10 percent loss of the principal underlying those new mortgage-backed securities if the loans went bad.”
The government took control over Fannie Mae and Freddie Mac in 2008 and has spent $187.5 billion in keeping the government sponsored enterprises afloat. Recently, the GSEs have emerged from needing taxpayer bailout funding and have been posting record profits since the housing market has picked up. Fannie Mae and Freddie Mac back nearly half of all new U.S. home loans.
"It lessens the footprint of the federal government in housing and winds down Fannie and Freddie," says Sen. Bob Corker, R-Tenn., one of the lawmakers who introduced the bill. “But at the same time it keeps the housing finance industry in a liquid state."
The bill is only the first step and it will likely take years before Fannie Mae and Freddie Mac are fully wound down, analysts say. Analysts say that  even if the proposed legislation won the support of the Democrat-led Senate it would still need to gain approval in the Republican-controlled House of Representatives. Many lawmakers in the House have said they favor a fully private system.
The legislation “represents a milestone in the government's response to the housing crisis as it is the first comprehensive, bipartisan measure to deal with Fannie, Freddie and mortgage finance," writes Jaret Seiberg, a senior policy analyst at Guggenheim Securities, in a research note. However, Seiberg was doubtful the legislation would be approved as is.

Source: “Senators push bill to scrap mortgage firms Fannie, Freddie,” Reuters (June 25, 2013)

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Are Appraisals Finally Playing Catch-Up?

 

Daily Real Estate News | Monday, June 24, 2013

Many real estate professionals have been blaming low appraisals for derailing transactions over the last few years. But now home prices are heating up across the country. Are appraisals still coming in lower than the agreed-upon sales price?
Even with prices rising and the number of foreclosures falling, some appraisers say assigning a value to a property isn’t getting any easier. One of the big reasons, they say, is because of low inventories in many markets. “An undersupply of available homes has prompted bidding wars above list price, a price that isn’t necessarily justified by an appraisal,” The Chicago Tribune reports.
"That's been happening a lot this winter and spring — the appraisal isn't coming in," Alvin "Chip" Wagner, of A.L. Wagner Appraisal Group Inc. told The Chicago Tribune. "It's an appreciating market, and the closed data that appraisers use is behind what the homes are actually selling for right now. We're just now on the cusp of good data."
Appraisers say they are using sound data to base their valuations, including motivations of buyers and sellers.
Consumers "don't always value us in a friendly light because we are the person coming in and saying yea or nay, and we've been the bearer of bad news for too many years," says Sharon Bagby, an appraiser at Crystal Lake Appraisal Service Inc. "Home owners don't really know where the values are. They're hearing some really rosy values in some markets, but we have to work with the value that's there."

Source: “As housing warms up, appraisers feel the heat,” The Chicago Tribune (June 21, 2013)

Should Boomers Worry About Millennials' Housing Shift?

Daily Real Estate News | Monday, June 17, 2013

The Millennial generation is showing different housing preferences than previous generations, and some analysts say that Baby Boomers may be growing concerned that they will have a tough time selling their suburban, larger homes due to the Millennials’ differing tastes.
The Millennial generation has been called a key to the housing recovery, and housing experts are taking careful note of how the younger group's housing preferences differ from previous generations.
A new survey by the Urban Land Institute’s Terwilliger Center for Housing shows that about 60 percent of the millennial genreation say they prefer a mix of housing choices and prefer to be near shops, restaurants, offices, and transit. Seventy-five percent of Millennials say they value walkability. Of the 63 percent of Millennials who say they plan to move within the next five years, about 40 percent say they expect to move to multifamily housing.
“I do think their preferences are going to result in sustained change,” says Lynn Ross, the executive director of the ULI Terwilliger Center for Housing. “This group is so different from previous generations.”
One of the biggest obstacles facing this generation is student loan debt. Fifty-four percent of those aged 22 to 32 said that debt is their biggest financial concern. Forty-two percent referred to their debt as “overwhelming.”
“This generation has been through an incredibly difficult time, and I think it is ultimately going to operate very similarly to the generation that went through the Great Depression,” Ross says.

Source: “Home Loans for Millennials,” The New York Times (June 13, 2013)

Why Some Buyers Are Feeling Like They Missed Out

Daily Real Estate News | Tuesday, June 11, 2013

Mortgage rates and home prices are on the rise, and some home buyers who were waiting around for the housing market to reach bottom are realizing now they may have missed the boat.
Mortgage rates are inching up, with the 30-year fixed-rate mortgage averaging 3.91 percent last week -- up from 3.3 percent in early May, according to mortgage giant Freddie Mac.
"It's unlikely that rates will ever be that low again," says Doug Duncan, Fannie Mae's chief economist.
The Fed has been keeping interest rates at record lows by buying up to $85 billion a month in Treasury bonds and mortgage-backed securities, which has helped bolster the housing market.
"Up until recently, expectations were that the Fed would begin to taper purchases of mortgage-backed securities and Treasury bonds late in 2013, but that time frame appears to have moved to September, possibly sooner," says Keith Gumbinger, vice president of HSH.com, a mortgage information company.
As the economy continues to gain traction, interest rates are expected to continue to increase, Gumbinger says, since low rates often are associated with a distressed economy.
But even if mortgage rates move up a percentage point or two, housing experts note that mortgage rates will still be low by historical standards.
"The 30-year [mortgage rate] hit a 37-year low in 2003 at 5.23 percent," Gumbinger says. "That was the previous low-watermark prior to this financial crisis, and it's likely we will move closer to that mark as we grind forward."
Source: “Why You Missed the Boat On Record-Low Mortgage Rates,” CNNMoney (June 6, 2013)

Most Renters Plan to Buy, But Fear Lending Standards

Daily Real Estate News | Friday, June 07, 2013

Ninety percent of renters say they expect to buy a home in the future, but the majority are fearful of their ability to qualify for a mortgage at today’s stringent underwriting standards, according to a new survey conducted by Fannie Mae. In fact, 42 percent of those who intend to buy a home one day say they don’t think they’ll be able to do so for at least five years.
"Younger renters who prefer to own are much more likely than their older counterparts to say that they are renting mainly to make themselves financially ready to own," according to the survey.
The majority of renters surveyed said that if they had trouble qualifying for a mortgage, they would take steps to improve their credit score or financial situation, or consider buying a less expensive home. Only a quarter of renters said that if they were denied a mortgage, they would stop pursuing a mortgage altogether.
The survey showed that renters believe home ownership is better than renting in terms of privacy, security, and for raising a family. Fifty-one percent of renters say that owning makes more sense than renting when comparing both the financial and lifestyle benefits, according to the survey.
"The strength of the economy, particularly job creation and real income growth, as well as the favorability of credit conditions should play significant roles in determining if and when many of these renters will see the fruit of their efforts to become home owners," says Sarah Shahdad, analyst of Economic & Strategic Research at Fannie Mae.

Source: “Renters pursue the American Dream of homeownership,” HousingWire (June 6, 2013)

Home Prices Soar to Largest Gain in 7 Years

Daily Real Estate News | Wednesday, June 05, 2013

The housing recovery has picked up speed, as home prices posted their highest year-over-year gain since February 2006, according to the latest housing data from CoreLogic.
CoreLogic's home price index climbed 12.1 percent in April over year-ago levels. Home prices have been on the rise for more than a year.
"The pace of the housing market recovery quickened in April as home prices rose across the U.S.," says Anand Nallathambi, CoreLogic's chief executive officer. "We expect this trend to continue, bolstered by tight supplies and pent-up buyer demand."
CoreLogic economists predict home prices will rise another 2.7 percent in May.
The following five states had the largest price gains over the past year:

• Nevada: +24.6%
• California: +19.4%
• Arizona: +17.3%
• Hawaii: +17%
• Oregon: +15.5%

Source: “April home prices see biggest yearly gain in seven years: CoreLogic,” Reuters (June 4, 2013) and “U.S. Home Prices In April Jumped Most in 7 Years,” The Associated Press (June 4, 2013)

Downsizing Trend Reverses, Americans Want Big Homes Again

Daily Real Estate News | Tuesday, June 04, 2013

For the past three years, the average size of new homes has been on the rise. The median new-home size in 2012 reached a record high at 2,306 square feet, according to newly released data from the Census Bureau. That is an 8 percent increase from 2009.
During the Great Recession, Americans showed a preference for smaller homes, and many housing experts were saying it meant the end of the McMansion.
But Jeffry Roos, a regional president for homebuilder Lennar, told CNNMoney that it wasn’t that Americans wanted less space, they just couldn’t afford more space at the time.
Now, they’re upsizing again. A spokeswoman for GL Homes says that the builder has been selling homes that average 7 percent larger than during the first five months of 2012.
Some consumers are choosing to buy larger because they have more people under their roof. Lennar offers homes known as Next Gen, which feature separate suites for a mother-in-law or college grad who has moved back home.
Home shoppers tend to buy bigger than what they originally plan, Fred Cooper, a spokesman for Toll Brothers, told CNNMoney.
"In the downturns, in upturns, whenever, our customers typically added another 18 to 20 percent of floor space onto what already was a very nice house to begin with," Cooper says.
Source: “McMansions are making a comeback,” CNNMoney (June 4, 2013)

It's Not Over: Report Warns Shadow Inventory Threat Remains

Daily Real Estate News | Monday, June 03, 2013

Foreclosures have been falling in recent months, but two government watchdogs warn that the foreclosure crisis isn’t over yet. About 1.7 million borrowers have missed more than one payment on their government-backed mortgages, according to a newly released report by the inspectors general of the Federal Housing Finance Agency and Department of Housing and Urban Development.
The shadow inventory is made up of loans that have been delinquent for at least 90 days. If these delinquent loans become foreclosures, they could pose significant financial challenges to mortgage giants Fannie Mae, Freddie Mac, or other federal housing agencies, the report notes.
"Not only are current REO inventory levels elevated ... they may rise over the next several years depending on the number of shadow inventory properties that are ultimately foreclosed on," the report stated.
According to the report, the shadow inventory is more than seven times the inventory of REOs that Fannie Mae, Freddie Mac, and HUD currently own.
"Even a fraction of the shadow inventory falling into foreclosure could considerably swell ... inventories of REO properties," the report notes.

Source: “'Shadow' homes could burden U.S. housing agencies: report,” Reuters (May 31, 2013)