Owning Is Easier Than Renting

Survey: A majority of homeowners recently surveyed say they believe owning a home isn’t as difficult as renting, according to a new survey from LendingTree, an online loan marketplace. Only 15% of homeowners believe renting is easier than owning a home, compared with 67% of more than 2,000 homeowners who said owning is easier.

The longer homeowners have been in their homes, the more likely they are to believe owning is easier, according to the study. For example, nearly 72% of homeowners who have spent seven to nine years in their home say owning is easier than renting.

Multiple Refinance Problems

It can be financially harmful to borrowers and investors to repeatedly refinance their mortgages, warns Ginnie Mae, a government-backed firm that guarantees government mortgage bonds. That’s why the institution is taking steps to crack down on the practice of “churning,” where lenders push borrowers to refinance their home loans over and over again. Homeowners may be drawn to the idea of lowering their monthly mortgage payments, but multiple refinances can lead to more lender fees and a higher bill in the end.

Ginnie Mae started to take action against individual lenders last year when their activity suggested they were pushing refis on borrowers, even when they wouldn’t benefit from it. Ginnie Mae is honing in on mortgages where borrowers pull cash out of their home during a refinancing. The loan then results in more than 90% of value.

Source: “Ginnie Mae Moves to Crack Down on Repeated Refinancers,” The Wall Street Journal (May 3, 2019) [Log-in required.]

 

Retirees Aren’t Downsizing?

All the buzz about retirees downsizing and putting down roots in urban areas may be overrated. After all, neither practice is all that popular among millennial’s, who are usually the trendsetters.

Contrary to many projections, about 87 percent of boomers and Gen Xers don’t plan to make a beeline for urban down towns, instead choosing a suburban or rural setting where they can slow down and enjoy some peace and tranquility. “Data from our most recent survey clearly indicates that true urban living appeals to only a limited number of future retirees,” says Jay Mason, vice president of market intelligence for PulteGroup. “Both Gen Xers and baby boomers nearing retirement are looking for a different quality of life when considering their next move.”

 

 

Has the 2017 Tax Overhaul Hurt Home Sales?

The Tax Cuts and Jobs Act, an overhaul of the U.S. tax code enacted in 2017 that puts a cap on some deductions for homeowners, has “negatively impacted the housing market” by tamping down sales volume, according to a study by the New York Federal Reserve.

The 2017 tax law placed a $10,000 cap on deductions of state and local taxes, increased the standard deduction, and placed a $750,000 limit on the amount of mortgage debt that qualifies for interest write-offs.

Lawrence Yun, chief economist for the National Association of REALTORS®, said in NAR’s March existing-home sales report that tax policy changes continue to impact some markets. “The lower-end market is hot while the upper-end market is not,”

Source: “Overall, 2017’s Massive Tax Overhaul Hasn’t Hurt Home Values,” The Washington Post (April 27, 2019) and “Is the Recent Tax Reform Playing a Role in the Decline of Home Sales?” Federal Reserve Bank of New York (April 15, 2019)

Home Loan Interest Rates Rise

Mortgage rates have slowly been inching up over the past month, but they remain below their levels a year ago.

“Despite the recent rise in mortgage rates, both existing- and new-home sales continue to show strength—indicating the lagged effect of lower rates on housing demand,” says Sam Khater, Freddie Mac’s chief economist.

Freddie Mac reports the following national averages for the week ending April 25:

  • 30-year fixed-rate mortgages: averaged 4.20 percent, with an average 0.5 point, rising from last week’s 4.17 percent average. Last year at this time, 30-year rates averaged 4.58 percent.
  • 15-year fixed-rate mortgages: averaged 3.64 percent, with an average 0.5 point, rising from last week’s 3.62 percent average. A year ago, 15-year rates averaged 4.02 percent.
Source: Freddie Mac

Waiting Longer for Loan Approval?

If you’ve been following the news, you might have heard that the Federal Housing Administration is putting up hurdles for higher-risk borrowers to get their home loan application approved. On March 14, the FHA said applicants with a credit score of 620 or lower, or with a debt-to-income ratio of 43 percent, would get their loan application reviewed manually rather than through automated underwriting. This isn’t a new policy—it’s a return to a policy the agency had but moved away from in 2016.

As a result of this return to its previous practice, high-risk borrowers will still have their application reviewed, but it will get extra scrutiny and take longer.

In a sense, the agency is going back to basics. There’s been an uptick in higher risk loans getting into its insurance fund, and it wants to take action before problems appear. “Continuing to endorse mortgages with higher risk characteristics, without changes, negatively affects the Mutual Mortgage Insurance Fund,” the agency says in its memo announcing the policy.

 

Winter Is Best Time to Sell a Home, Study Shows

The housing market doesn’t hibernate in the winter. Sellers who list and buyers who buy often find the winter season the most advantageous time to make a move in real estate, according to a new study by the real estate brokerage Redfin. The winter season officially takes place between Dec. 21 and March 20, and real estate professionals should be ready for a season that often brings in more focused and active sellers and buyers.

In an update to a two-year analysis it completed last year, Redfin researchers studied nationwide home listings, sales prices, and time-on-market data from 2010 through October 2014.

The winter tends to net sellers’ more than their asking price during the months of December, January, February, and March than listings from June through November. Listing during those four winter months has resulted in higher percentages of above-asking-price sales than listing during any months, other than April and May.

Researchers say the winter market is less competitive for sellers since many people tend to wait until the spring to list. The smaller inventory of active listings help sellers get more attention from buyers on their properties. Also, many large corporations often transfer employees or hire new ones early in the year, creating opportunities for winter sellers from very motivated purchasers.

Source: “Best Time to List a Home for Sale? Winter, Redfin Says,” Los Angeles Times (Dec. 14, 2014)

Stage Set to Revive First-Time Home Buyer Market

The move by Fannie Mae and Freddie Mac this week to offer 3 percent down payment loans may reignite the first-time home buyer market.

The new loans announced by Fannie Mae and Freddie Mac will be fixed-rate mortgages for up to 30 years, available only on a primary residence. Fannie plans to begin issuing the 3 percent loans before the end of the year. Mortgage insurance payments will be required, and qualified buyers will need to complete a financial counseling program.

Freddie Mac plans to start issuing its 3 percent loans to low- and moderate-income borrowers in March 2015. Eligible borrowers will be required to earn less than an area’s median income and will have to pay mortgage insurance and do financial counseling. Monthly payments also will have to fall under 43 percent of the borrower’s income.

Source: “More Americans to Buy Homes with 3 Percent Down,” The Associated Press (Dec. 11, 2014)