Purchase season, who has the power?

Realtor.com just provided data that reveals Millennials are finally ready to dominate the market. In January 2017, Gen X finally gave up its spot at the top for the most new mortgages. Millennials have held this position strong as their share of the mortgage market continues to rise. At the end of 2018 they were responsible for 45% of all new mortgages. However, while they are taking on larger mortgage payments, their down payments are significantly lower. The average for Millennials was only 8.8% while Gen X boasted an 11.9%.

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Roofstock is a real estate platform for buying and selling single-family rental homes. The company just announced that is it introducing a new program that will allow consumers to invest in a share of a single-family rental home without having to act as the landlord. With this new program investors can reap the reward of property ownership without the risk. Roofstock itself will be responsible for the financing, the insurance, property management, asset management, and the leasing. Profits from investment will be price appreciation, along with tax benefits and potential dividends. Investments can start as low as $5000.

According to LendingTree, 86.5% of mortgages borrowers now have a rate under 5% regarding a 30-year fixed. The most common rate offered was a 4.625%, which accounted for 19.2% of borrowers. This is notably below 2018. In 2018 87.3% of purchase mortgages were given a rate under 5%.

Over the past week purchase applications have rose 2% after four consecutive declines. This is also increased 2.5% from last year. With interest rates remaining low, there is certainly incentive for not only purchasing, but for refinancing as well. The refinance index just moved forward 6% from the previous week, while the purchase index moved forward 7%. This is a solid 3% higher than where the index was in 2018.

Lackluster Home Sales and Baby Boomers

In an analysis of 54 metropolitan areas, RE/MAX National Housing Report has conveyed the largest inventory increase in a decade. Although home sales themselves have scaled back by 11% on an annual basis, the increase in inventory has averaged 6% year-over-year. This greatly improves the market as there was a multi-year scarcity of homes for sale. Compared to just last year, January which is typically a slower month for home sales, had an improvement of .5 overall.

Baby Boomers continue to retire in waves without adequate savings to support themselves and their family during their golden years. It is becoming extraordinarily clear that the country is on the brink of a retirement crisis. As health care costs continue to skyrocket and pensions dwindle, Social Security is simply insufficient for the longevity of this generation. This all sounds doom and gloom, until it’s pointed out that many Americans are literally sitting in a pile of cash; their homes. Capitalizing on the equity of one’s home can solve many later in life money issues.

The Department of Housing and Urban Development announced its plan for awarding $10 million in “sweat equity” grants to nonprofit organizations. The funding is sourced from HUD’s Self-Help Home-ownership Opportunity Program. The actual money in combination with the labor from both volunteers and home-buyers will lower the overall cost of home-ownership. A minimum of 50 hours is required for a single ownership household, and the hours are doubled for a household of two. Community service is another requirement for eligibility. During the initial round of grants awarded more than half of the capital, around $5.3 million is going to Habitat for Humanity.

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While inventory is at a decade high, the affordability of homes for sale on the market is at a decade low. With only 56.6% of homes being affordable for the country’s median income, the National Association of Home Builders is calling on policymakers to make some changes. The Chief Economist of the NAHB, Robert Dietz indicates that wage growth is under performing while home appreciation continues to rise.

The U.S. Census Bureau’s most recent American Community Survey reported homeowners are currently spending more money per month than renters in all 50 states. This data was compiled tracking the median housing costs from 2013-2017. Costs such as mortgage payments, home insurance, property taxes and maintenance are making it far more expensive to own a home. However, experts say while renting saves money month to month it will not pay off in the end. Investing in a home can increase the home’s equity and look to put cash back in your pocket.  A mortgage is a major expense, but once it is dropped off the monthly spending homeowners can expect a significant increase in their savings.

Loan Insights, Rent Burdens, & More.

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CoreLogic’s Loan Performance Insights report for September 2018 was released last week, showing the nation’s labor market and increased home prices overall has had a positive impact on serious delinquent loans and foreclosure rates—the overall delinquency rate is down 0.6 percent since September 2017. The 30-day delinquencies showed an increase of 0.4 percent but is being entirely attributed to Hurricane Florence.

Will more homeowners tap into their home equity in 2019. While increases in home prices might keep some homebuyers from making a move, it’s also resulting in record levels of home equity, and more homeowners are projected to have more opportunity to tap into that equity. Consumers in need of paying off higher interest rate credit card debt or in need of home improvements are prime candidates. This also allows for homeowners who might otherwise upgrade to a bigger home save money by tapping into that home equity and invest in home additions or upgrades.

Builder Confidence dropped four points to 56 according to the National Association of Home Builders Housing Market Index. Buyer Traffic was the only piece below 50, the threshold. Current Sales and Future Sales, however, both remained in the 60s. A reading above 50 signals growth. We should note Builder Confidence dropped significantly in areas with high home prices—the current deterrent of buyers is not mortgage rates thanks to recent declines. The demand is still there but consumers are hesitating due to “rising home costs.”

While the overall level of homelessness across the nation has fallen despite housing costs continuing to increase, the rent burden is becoming so extreme it’s risking thousands of Americans becoming homeless. Many areas are already pass the 32 percent tipping point, where over 32 percent of a household’s income is going to rent. Monroe Country in Florida is almost double, “with a median market rate rent consuming 62.9 percent of the area’s median household income.” That’s insane.

Ann Arbor, MI might rank as the No. 1 best small college town in the nation but it was ranked third overall for best college towns and cities, regardless of size—Austin, TX scored the hot seat. Ann Arbor is noted for its low unemployment rate of only 3 percent but the college town is also known for its social environment and academic and economic opportunities. The city is booming with part-time jobs for college students.

The Federal Reserve meets this week and there’s an 80% expectation they will hike rates another quarter point. Wednesday we find out their decision after their two-day meeting but more importantly, we’re hoping for any indications of what 2019 will look like for rate hikes.

Housing Balance.

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Pending Home Sales fell 2.6 percent in October, a disappointing read and a miss. The National Association of Realtors is attributing this decline to the rise in mortgage rates, which really began in October, reducing the pool of eligible homebuyers. Last week we saw a dip in mortgage rates and compared to 18 years ago, rates are still favorable. Back in October 2000, mortgage rates averaged almost 8 percent for a 30-year fixed. What does all this mean? Short-term, experts are having difficulty finding consensus on the housing outlook. Mortgage rates are expected to rise modestly but they don’t know what that translates to for borrowers and homebuyers as it seems many hesitate. Long-term, there’s confidence homebuyers will accept the new norm for mortgage interest rates and continue to buy based on lifestyle and need. The benefit to sales cooling: the inventory of homes for sale is recovering.

Is 2019 the year for balance? That’s what Zillow is predicting as home values begin to slow down and are expected to continue the trend through next year, with mortgage rates expected to keep rising. 2019 should bring a more balanced market among buyers, sellers, and renters. Housing competition will remain strong in the most desirable areas.

The Federal Reserve Minutes from their meeting earlier this month were released yesterday afternoon, showing most Fed members still believe we need 3 more rate hikes, with a December quarter-point rate hike still on deck and expectations for the next one to not be until at least March 2019. While rate hikes are a sign of a healthy economy there is also risk of hiking too early, making December’s possibility of one still debatable.

Earlier this week, we mentioned home renovations are becoming more popular. Here’s some top common-sense tips we have found since:

  • “My dad told me, ‘You can do anything yourself, except foundation, electrical, or plumbing.'” —Kirsten Selvage, homeowner in Ontario, Canada.
  • “It’s cheaper to do it right than it is to do it over.” —Jim Molinelli, architect in Columbia, MD.
  • Renovate with the next buyer in mind but do so long before you sell in order to enjoy the improvements yourself.
  • Over schedule to not feel stressed by lack of time in case any mishaps come up.

Initial Jobless Claims for last week were reported at 234K. While compared to recent months and weeks this is higher than normal, it remains far below that 300K mark highlighting a good, healthy labor market. The ADP and BLS Job Reports are both scheduled for release next week and expectations are 190K and 170K job creations, respectively.

Home Renovations on the Rise.

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The level of New Homes on the market is at the highest since January 2009—almost 10 years! New Home Sales, however, were down almost 9 percent in October, below expectations; though, a decrease in signed contracts on new homes was expected.

Home renovations: the popular solution for those who don’t want to face the homebuying competition or have hesitations with increased home prices. Not to mention, many have secured a very low mortgage interest rate they don’t want to give up by moving. In fact, there’s been about a 30 percent increase in home remodeling projects over the last five years, and unfortunately over 30 percent haven’t set aside the money for such renovations.

Home prices are slowing down and it’s welcomed news. The Case-Shiller Home Price Index, tracking changes in the value of residential Real Estate, showed a 5.5 percent annual gain for the National Index. The Federal Housing Finance Agency (FHFA) Housing Price Index, highlighting home appreciation on single-family housing, rose 0.2 percent in September and showed a 6 percent annual gain. For both these indices, the year over year appreciation rate decreased very slightly (talking .1 or .2 percent). This does not mean home prices overall decreased but rather are rising at a slower rate than they did last year. This is not a negative appreciation but rather a slower positive appreciation. (It’s a good time for cash out refinances before home prices do drop, though; help fund those renovation projects.)

Mortgage Applications for last week were up 5.5 percent, with purchases up 9 percent and refinances up 1 percent.

Over the last 20 years rent prices have more than doubled, going from about $450 in 1998 to over $1000 in the third quarter of 2018; and since 2008, the average rent for a new apartment has increased 28 percent. Over the last 10 years, the average size of a new apartment has decreased 5 percent—paying for less! California apartments have decreased in size by 12 percent. What’s driving this decline in size? Millennials looking to save a penny—they’d rather live in a smaller unit because of rental costs—and construction limitations: cost and space. Building smaller can yield room for more units to be built, increasing profit.

Debt doesn’t love Michigan—or maybe it does? Two Michigan cities, Ann Arbor and Lansing, made the Cities Where Home Buyers Have the Least Debt list with the former ranking at number 2! The median mortgage borrower’s debt-to-income (DTI) ratio is only 33.7 percent for the city. Honolulu held the highest DTI at 45.1 percent.

Older homeowners love Florida, with the state dominating all of the top 5 Metros with the Highest Average Homeowner Age. With the temperatures dropping in Michigan, we can’t blame anyone retiring to Florida.

Strong Housing.

10.10.2018Thanks to the unemployment rate falling to the lowest level in nearly 50 years and home prices continuing to rise but at a slower pace, when it comes to loan performance, housing is very strong. In every category of CoreLogic’s Loan Performance Insights report for July, rates dropped. Seriously delinquent loans in foreclosure were the lone sailor remaining stable. Even better: with the unemployment rate remaining below 4 percent since July, we are hopeful to see delinquency rates continue to drop in the future. However, natural disasters and any unemployment rises could impact delinquency rates at a local level not a national level.

A record of 77 percent of homeowners believe now is a good time to sell. It might be a seller’s market for most locations but for some millennials, homes aren’t selling fast enough, leaving the generation “the most likely to make concessions, change the date of their closing, and have an offer fall through.” If you didn’t catch our latest Live on Real Estate podcast, we’re talking about this sudden cool off compared to traffic we saw four months ago.

Mortgage rates have hit the 5 percent level but this isn’t terrible news. With home prices cooling off slightly and the historical average between 8 to 9 percent, those 5s are still looking good for homebuyers, especially in a market that is thriving with little percent down.

The dreaded lack of inventory has seen some slight relief, with September’s new listings up 8 percent year over year according to Realtor.com’s housing report. This is the highest annual jump since 2013. Unfortunately, this was driven by condos and townhomes.

A hundred years ago, kit homes allowed many Americans to become homeowners and now, they might be making a comeback. Fortunately, this time, we’re talking rooms and additions; you don’t need to buy the whole house. Unfortunately, with today’s regulations, depending on the kit a contractor or expert might need to be hired to assemble the kit.

Staged Homes & Forecasted Rate Hikes.

10.01.2018As expected, the Federal Reserve hiked rates last week by 0.25 percent to 2.25 percent. What we’re more interested in is the forecast: 12 of the 16 Fed members forecasted a 4th rate hike this year, expected in December, and 3 rate hikes in 2019. Then you have the outliers in the group, with one believing there will be no more hikes over the next several years and another who thinks 2019 will see 5 rate hikes. Very interesting.

Pending Home Sales report was released last week but was a disappointing miss, down 1.2 percent in August. New Home Sales, however, were up 3.5 percent in August, and are up almost 13 percent year over year. We’re also starting to see a welcomed growth in inventory for Existing and New Home Sales.

Fact: staging your home can not only help you sell your home faster but can also potentially bring in higher bids. What are the tips of the trade to do it yourself? Essentially, lose the clutter but here’s 3 specific tips:

  • Curb appeal! It’s all about first impressions and for the buyer, that’s before they even walk up to the front door.
  • Remove at least 30 percent of your personal belongings: you want to allow the buyer to picture themselves in the home and they can’t do this with your belongings everywhere. This also helps you to create space.
  • Think neutral: the house should remain the focus, keep the walls neutral but use accent colors for décor and for show.

On average, staged homes sell 73 percent faster. Well, when you put it like that, who is ready to pull weeds and move some furniture?

Home Investment, Dream Home, & More.

09.25.2018Rent is not friendly on the wallet. With rent overall rising 3 percent year over year, it was the lower end market value (equivalent to $100K – $300K homes) that rose nearly 4 percent. Right now is a good time to make a move and see if buying is right for you before rent prices continue to rise. Why pay a landlord when you can invest in a home?

The average homeowner gained over $16K in home equity from Q2 of July 2017 to Q2 of July 2018. Last week, CoreLogic released their Equity report, highlighting homeowners with a mortgage (which CoreLogic estimates about 63 percent of homes have a mortgage) have seen their equity increase by 12.3 percent since last year. Less than 3 percent of all homes are under water; housing remains healthy.

Home appreciation is still going strong but thankfully, at a slower rate. The Case-Shiller Home Price Index showed a 6 percent annual gain in July. The media might dramatize this cool off but it’s healthy and let’s be honest, we want it. We want homes to appreciate but to remain affordable for buyers. Las Vegas, Seattle, and San Francisco still saw double-digit annual gains.

The Federal Housing Finance Agency also released their House Price Index for July today, also showing a deceleration in home price appreciation on single-family homes with conforming loan amounts. Home prices rose 0.2 percent in July, missing expectations of a 0.3 percent rise, but are still up 6.4 percent from a year prior.

Loan officer employment from 2016 to 2026 is expected to grow faster than the average for all occupations and is ranked No. 57 on the 100 Best Jobs in 2018. (Yes, we are hiring.)

The American dream home defined: over 10 acres of land, almost 5,000 square feet, swimming pool, four bedrooms, three bathrooms, waterfront (or at least with a view to a cost, city, or hills), suburban area, ranch- or farmhouse-style made of brick, covered front porch, wood flooring (except for bedrooms and kitchen), central air conditioning, fireplace, finished basement, skylights, vaulted ceilings, and granite countertops in the kitchen. Oh yes, the recent survey results from Porch.com got that specific and Europeans have something completely different in mind for their ideal home: 1,589 square feet and less than an acre of land—now that’s more realistic. When we factor in maintenance, we wonder how many Americans would actually choose to live in their dream home or if it’s just a fantasy.

Confident Builders, Confident Older Borrowers.

The number of homeowners over 60 years old are more likely to have a mortgage today than 35 years ago. Why? Basically, it comes down to older generations taking advantage of the equity in their home. The three reasons quoted for influencing older households to carry a mortgage into retirement:

  1. Financial planners advising on the benefits of a mortgage in retirement planning.
  2. Tax incentives and mortgage interest rates being “deductible from income taxes at the federal level and in most states.”
  3. Home equity is a primary source of wealth for those without pensions, with low incomes, and who are less affluent.

Highlight of the report: they don’t appear to be stressed over their mortgage.

Time to sell a home depends on more than just supply and demand in the area, it also depends on the home being correctly priced ­and competitively priced. In less terms, it’s all up to you. It might be a seller’s market in most areas but appealing to buyers still plays an important role. Getting greedy with price could turn away potential buyers and the longer a home is on the market, the more buyers grow wary. Don’t discount staging a home if you’re looking to sell fast.

Builders remain confident in September thanks to a stable and low unemployment rate, growing economy, rising incomes, and increasing household formations. Expectation: boosted demand for new single-family homes. Challenges: rising material costs, moderately higher interest rates (emphasis on moderate because they’re still quite low compared to history), and “burdensome regulations”.

The Best Places to Live in America for 2018 is in but the median household income averages $120K—these cities aren’t for the single folk and only areas with populations over 50K were taken into account. These lists are all about the details. Frisco, TX won the No. 1 spot.

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Digging Into Housing.

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New Home Sales fell almost 2 percent in July, missing expectations of a 2 percent rise. Of course, this appeared worse given the revision to June’s figure being higher than originally documented. The media didn’t waste time jumping on the negativity but let’s make sure to highlight New Home Sales are up almost 13 percent from a year ago and new home inventory increased slightly.

Existing Home Sales were down 0.7 percent in July, also missing expectations, and are down 1.5 percent year over year. However, given the lack of inventory and modestly higher rates, this isn’t bad news but it’s also not what we want to hear. Homes are going under contract within a month of being listed. Distressed sales (foreclosures and short sales) made up only 3 percent of sales and is the lowest share since 2008 when the National Association of Realtors began tracking it.

Where is inventory up? Think pricier markets and the nation’s more expensive metros. Not exactly what you want to hear but San Jose, California, for example, saw a 44 percent increase in listings over the last year. The city also happens to rank third on the top 5 places where a downpayment is least affordable and can take someone a decade to save for a 20 percent downpayment. The median entry level home value is over $1.1M and takes almost an annual savings of $19K. The good news: Detroit still ranks as the most affordable city for median renters looking to hop the fence and purchase home.

First American’s Real House Price Index for June showed Michigan had one of the greatest year-over-year increases at 17.5 percent. Nevada showed the greatest with a 21 percent increase. The report is based on changes in single-family home prices, interest rates, and incomes. More specifically, “how much one can buy based on household income and the 30-year, fixed-rate mortgage.” Fortunately, consumers buy homes based on a monthly mortgage cost not the price of a home. The still low mortgage rates and growing household incomes continue to provide homebuyers with the opportunity to afford more home and borrow more.