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HUD: Hispanics Key to Real Estate’s Growth

September 22 2014

A booming Hispanic population will be the key to the nation’s future residential real estate market, Julian Castro, the newly confirmed secretary of the Housing and Urban Development, told The Associated Press.

“The prosperity of the United States and the prosperity of the Hispanic community, as the fastest-growing community, are one and the same,” Castro told the Associated Press. “The destinies are one and the same.”

Nearly half of first-time homebuyers nationwide will be Hispanic in six years, according to a 2013 study from the National Association of Hispanic Real Estate Professionals. What’s more, Hispanics are forecasted to account for 40 percent of the estimated 12 million net new households nationwide within the next decade.

Castro says that an overhaul of federal immigration laws could further aid the U.S. housing market. Federal immigration law changes could add about 3 million home owners and generate more than $500 billion in sales, income, and spending into the housing economy, estimates the National Association of Hispanic Real Estate Professionals study.

Source: “Castro: Hispanics Key to U.S. Housing Sector Future,” Associated Press (Sept. 20, 2014)

Maybe Millennials’ Housing Tastes Aren’t So Different

September 17 2014

The majority of millennials’ housing preferences may not be as different from previous generations as once believed, according to a new report released this week from The Demand Institute, Millennials and Their Homes: Still Seeking the American Dream.The report finds that the majority of millennials want to own a house in the suburbs as they look to raise families and they want more space, a veer from other studies that have shown twenty somethings will likely choose walkable urban neighborhoods when it comes time to buy.

“A fundamental question about millennials is whether their coming of age in the Great Recession has shaped their goals and aspirations to be different from those of previous generations,” said Louise Keely, president of the Demand Institute and senior vice president at Nielsen. “We found that, while this generation has many unique characteristics when it comes to their housing choices, they share many of the same intentions as young adults in previous decades.”

Like previous generations, they still have a big thirst for home ownership. Twenty-four percent of 1,000 households aged 18 to 29 surveyed say they already own their home while 60 percent say they plan to buy a home in the future. Seventy-five percent described home ownership as an “important long-term goal.”

What they want in their home isn’t that different, either. Sixty-two percent said their next home would be a single-family house, while 38 percent said they plan to have their next home be in the city.

Source: “Millenials’ ‘American Dream’ Not So Different From Anyone Else’s,” The Los Angeles Times (Sept. 16, 2014); “Millennials and Their Homes: Still Seeking the American Dream,” Demand Institute (September 2014); and “Millennials and the American Dream,” National Association of REALTORS® Economists’ Outlook Blog (Sept. 16, 2014) 

Proposition 90 Ordinance: Transfers of Property Tax Base Aassessments

September 13 2014

Ordinarily under Proposition 13, the value of a home for property tax purposes is re-assessed to market level whenever achange in ownership takes place. This usually results in higher property taxes for the homebuyer. 

In November 1988, the state‘s voters approved Proposition 90, which is designed to induce greater turnover of homes owned by senior citizens. The measure provides anyone over the age of 55 with relief from Proposition 13 by allowing them to move from one county to another without undergoing a change in their basic property taxes.

Proposition 90 is a “local-option” law; each county has the option of participating. If a county has adopted a Proposition 90 ordinance, it accepts transfers of property tax base assessments from other California counties. If the county that the homeowner is moving from does not have a Proposition 90 ordinance, this does not affect the eligibility of the homeowner.

El Dorado County is one of only a handful of counties participating in this tax saving program.  However, Prop 90 is due to expire in February of 2015. 

20% of Households Are Throwing Away $11,500.

September 11 2014

About 20 percent of households who would benefit from refinancing are not doing it — and they could be losing out on lessening their mortgage payments by thousands of dollars over the life of the loan, according to a new report from the National Bureau of Economic Research.

In analyzing a large random sample of outstanding mortgages from December 2010, researchers found that the median household could save $160 per month over the remaining life of the loan, amounting to a total savings of about $11,500.

“Despite the large stakes, anecdotal evidence suggests that many households may fail to refinance when they otherwise should,” according to the report. “Failing to refinance is puzzling due to the large financial incentives involved.”

The report found that borrowers may fail to refinance because they are unable to calculate the full financial benefit to them, they fail to see the benefits over time, or the high amount of upfront costs may deter them.

“Our results suggest the presence of information barriers regarding the potential benefits and costs of refinancing,” per the NBER. “Expanding and developing partnerships with certified housing counseling agencies to offer more targeted and in-depth workshops and counseling surrounding the refinancing decision is a potential direction for policy to alleviate these barriers for the population most in need of financial education.”

Source: “Here’s Why Some Home Owners Throw Away $11,500 a Year on Mortgage Payments,” HousingWire (Sept. 10, 2014)

FHA Ends Post-Payment Penalties

September 8 2014

The Federal Housing Administration is overhauling a long-held policy of charging extra interest payments on loans it insures to borrowers who have already paid off the principal debts on their mortgages.

FHA has permitted its lenders to charge borrowers a full month of interest when they sell or refinance a home, even if borrowers had paid off the mortgage weeks prior to the end of the month. For example, if borrowers went to closing on an FHA loan on Sept. 3, lenders would be allowed to continue to charge them interest through Sept. 30.

Beginning Jan. 21 of next year, new FHA mortgages will require lenders to collect interest only on the balance remaining on the date of closing for a home sale or refinancing. (However, sellers and refinancers who currently have FHA loans and expect to close before Jan. 21 likely won’t see much benefit from the new policy.)

The Consumer Financial Protection Bureau raised the issue with FHA last year, asking why FHA was allowing its lenders to collect post-payment penalties from borrowers at closing. FHA had argued that its bond investors, who purchase packages of insured mortgages, expected full-month payments of interest plus principal. FHA said that its lenders did charge borrowers slightly below market rates to help compensate for the post-closing payments.

However, critics argued that the policy was unfair to borrowers. The National Association of REALTORS® had lobbied against the FHA policy for more than a decade. NAR estimated that during 2003 alone, sellers and refinancers paid nearly $690 million in extra interest charges due to the policy.

Source: “FHA to Ban Lenders From Charging Extra Interest Payments on Mortgages,” The Los Angeles Times (Sept. 7, 2014)

 

Mortgage Rates Hold at Yearly Low This Week

August 29 2014

The 30-year fixed-rate mortgage is heading into the holiday weekend at its yearly low, giving home shoppers and home owners another opportunity to snag the lowest rate of the year,  weekly mortgage market surveys in its weekly mortgage market survey.

“Mortgage rates were little changed following mixed housing news,” says Frank Nothaft, Freddie Mac’s chief economist. “Existing-home sales rose for the fourth consecutive month to an annualized pace of 5.15 million, the highest of the year. On the other hand, new-home sales fell for the third consecutive month to an annualized rate of 412,000 units.”

Freddie Mac reports the following national averages for the week ending Aug. 28:

  • 30-year fixed-rate mortgages: averaged 4.10 percent, with an average 0.5 point, holding the same as last week’s new low for 2014. A year ago at this time, 30-year rates averaged 4.51 percent.
  • 15-year fixed-rate mortgages: averaged 3.25 percent, with an average 0.6 point, rising from last week’s 3.23 percent average. Last year at this time, 15-year rates averaged 3.54 percent.
  • 5-year hybrid adjustable-rate mortgages: averaged 2.97 percent, with an average 0.5 point, rising from last week’s 2.95 percent average. Last year at this time, 5-year ARMs averaged 3.24 percent.

Source: Freddie Mac

Lower Rates Give Loan Demand Slight Boost

August 27 2014

After several weeks of drops in interest rates, mortgage applications finally got a modest lift as refinancers and home buyers took advantage of the dip, CNBC reports.

The Mortgage Bankers Association’s weekly mortgage market index showed that total mortgage application volume rose 2.8 percent during the week ending Aug. 22 compared to a week earlier.

Broken out, applications for refinancings increased 3 percent last week but remain 25 percent below a year ago — even when mortgage rates were higher, MBA reports. Home-purchase mortgage applications also rose 3 percent during the week and remain 11 percent below its rate last year at this time.

The 30-year fixed-rate mortgage fell to 4.28 percent during the week from 4.29 percent the prior week, MBA reports.

Source: “U.S. Mortgage Volume Ekes Out Gain on Tiny Drop in Rates,” CNBC (Aug. 27, 2014)

Days to Close a Home Loan Drops to New Low

August 25 2014

Both closing times and credit requirements are dropping, according to the latest report from Ellie Mae. The mortgage industry services provider states in its Origination Insight Report that the average number of days to close a loan has dropped to 37 in July, compared to 41 days in June. Ellie Mae notes that’s the the lowest average they’ve seen since they began tracking. On average, it took 38 days to close a FHA loan, 36 days to close a conventional loan, and 38 days to close a VA loan in the month of July.

The report also notes that the average FICO score fell one point to 727 in July, reversing a four-month trend of increases. Researchers also noted another “sign of easing” is that 32 percent of closed loans had an average FICO score under 700 last month, compared to only 25 percent one year ago.

Meanwhile, the purchase market climbed in July, as the share of closed purchase loans hit 67 percent, up 2 percent from June – and the highest percentage since Ellie Mae began tracking the data in 2011. Refinanced loans took up the remaining 32 percent of closed loans.

The report focuses on loans that closed or were denied over the course of a month, comparing the data to other time frames, according to Ellie Mae.

Source: “Ellie Mae Releases July 2014 Origination Insight Report,” (August 20, 2014)

Mortgage Rates Sink to a ‘New Low for 2014′

August 22 2014

Despite predictions that mortgage rates were to inch up in the second half of this year, fixed-rate mortgages continue to tumble.

Borrowing costs moved lower this week, as the 30-year fixed-rate mortgage dipped to a 4.10 percent average, Freddie Mac reports in its weekly mortgage market survey. The 30-year fixed-rate mortgages previous low average for the year was 4.12 percent.

Freddie Mac reports the following average mortgage rates for the week ending Aug. 21:

  • 30-year fixed-rate mortgages: averaged 4.10 percent, with an average 0.5 point, dropping from last week’s 4.12 percent. Last year at this time, 30-year rates averaged 4.58 percent.
  • 15-year fixed-rate mortgages: averaged 3.23 percent, with an average 0.6 point, dropping from last week’s 3.24 percent average. A year ago, 15-year rates averaged 3.60 percent.
  • 5-year hybrid adjustable-rate mortgages: averaged 2.95 percent, with an average 0.5 point, dropping from last week’s 2.97 percent average. Last year at this time, 5-year ARMs averaged 3.21 percent.

Source: Freddie Mac

Refis Tick Up Loan Demand in Latest Week

August 20 2014

A drop in mortgage rates renew home owners’ interest in refinancing their mortgage.

The rise in refinancing applications helped to give overall loan demand a boost for the week ending Aug. 15, the Mortgage Bankers Association reports in its weekly mortgage market survey, which reflects 75 percent of the residential mortgage market.

Mortgage application activity, including both loans for refinancings and home purchases, increased 1.4 percent during the week.

Broken out, refinancing applications increased 2.7 percent, while loans for home purchases, viewed as a leading indicator of future home sales, fell 0.4 percent.

The 30-year fixed-rate mortgage averaged 4.29 percent during the week, down 6 basis points from the prior week, the MBA reports.

Source: “U.S. Mortgage Applications Rise in Latest Week: MBA,” Reuters (Aug. 20, 2014)