We agree with an article in CNNMoney recently highlighted several reasons why this spring would be the perfect time for home owners to get off the fence. Here’s why:
- Less competition: A limited number of homes on the market will help sellers nab top dollar, and may even spur bidding wars and multiple offers.
- Mortgage rate hikes loom: Mortgage rates are still sitting near historical lows, with the 30-year fixed-rate mortgage hovering under 4 percent. The low rates have helped push more buyers into the marketplace, but they could also be a good thing for sellers who are looking to rebuy.
- Soaring rental costs: Also spurring more potential home buyers off the sidelines: Rising rental costs. Rental prices have increased 15 percent nationwide in the past five years in many areas, according to NAR research.
Source: “4 Reasons to Sell Your Home Now,” CNNMoney (March 25, 2015)
Existing-home sales increased modestly in February, but constrained inventory levels pushed price growth to its fastest pace in a year, according to the National Association of Realtors®.
Total existing-home sales1, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 1.2 percent to a seasonally adjusted annual rate of 4.88 million in February from 4.82 million in January. Sales are 4.7 percent higher than a year ago and above year-over-year totals for the fifth consecutive month.
The median existing-home price2 for all housing types in February was $202,600, which is 7.5 percent above February 2014. This marks the 36th consecutive month of year-over-year price gains and the largest since last February (8.8 percent).
Lawrence Yun, NAR chief economist, says although February sales showed modest improvement, there’s been some stagnation in the market in recent months. “Insufficient supply appears to be hampering prospective buyers in several areas of the country and is hiking prices to near unsuitable levels,” he said. “Stronger price growth is a boon for homeowners looking to build additional equity, but it continues to be an obstacle for current buyers looking to close before rates rise.”
Before becoming home owners, some buyers are undergoing counseling first. A new survey shows a rising number of Americans are taking housing counseling courses, which could be a sign that more educated, prepared first-time buyers are ready to step off the sidelines in the coming months.
More than 73,000 people received housing counseling from the National Foundation for Credit Counseling member agencies during 2014, the highest in past five years.
Housing counseling may help some buyers even save money by learning the process, McClary says. A recent Consumer Financial Protection Bureau survey showed that 47 percent of home buyers do not compare lenders when shopping for a mortgage – which means they may not be getting the best rates. Potential buyers who undergo housing counseling are more likely to review multiple mortgage offers and find possible savings.
Source: “New Trend Shows Positive Signs for Homebuyers,” RISMedia (March 16, 2015)
Fifty-four percent of for-sale listings of existing homes are within reach for a median-income household in the U.S., according to a new analysis by realtor.com®. Their analysts used the national median income of $51,801 to determine how many of the site’s 1.6 million listings would be affordable to an average family, while also assuming a 20 percent down payment and 30-year fixed-rate mortgage. The monthly payment could not exceed 28 percent of the family’s income.
“So far this year we are hearing from home shoppers that finding a home that meets their needs or budget is the biggest impediment to buying,” says economist Jonathan Smoke, at realtor.com®. “The good news from this data is that more than half of the listings nationwide are by definition affordable. If affordability is a challenge, this tight market favors activity in the heartland, where markets have a high number of affordable homes.”
Realtor.com® analysts also found that existing homes tended to be much more affordable than new homes. In February, realtor.com® had more than 7,700 actively selling new-home communities listed, with an inventory of nearly 57,000 homes available for sale. Only 21 percent of those new homes, however, were deemed affordable.
Source: “Where America’s Affordable Homes Are – and Aren’t – in 2015,” realtor.com® (March 19, 2015)
The 30-year fixed-rate mortgage continues to average below 4 percent – a positive sign launching into the spring home-buying season, Freddie Mac reports in its weekly mortgage market survey. Average fixed-rate mortgages moved down this week. Freddie Mac reports the following national averages for the week ending March 19:
- 30-year fixed-rate mortgages: averaged 3.78 percent, with an average 0.6 point, dropping from last week’s 3.86 percent average. Last year at this time, 30-year rates averaged 4.32 percent.
- 15-year fixed-rate mortgages: averaged 3.06 percent, with an average 0.6 point, dropping from last week’s 3.10 percent average. A year ago, 15-year rates averaged 3.32 percent.
- 5-year hybrid adjustable-rate mortgages: averaged 2.97 percent, with an average 0.5 point, dropping from last week’s 3.01 percent average. Last year at this time, 5-year ARMs averaged 3.02 percent.
Source: Freddie Mac
By age 61, the majority of people feel free to choose where they most want to live, according to Merrill Lynch, “Home in Retirement: More Freedom, New Choices.”
“Throughout most of people’s lives, where they live is determined by their responsibilities,” according to the report. “Most careers demand that people live within a reasonable commuting distance from where they and/or their spouse work. However, as people enter their 50s and 60s, they begin to cross what this study reveals to be the ‘Freedom Threshold.’” That’s the age when people say they can finally choose where they want to live, according to the survey of more than 3,600 retirees.
Most retirees move at least once during retirement. But surprisingly, only half choose to downsize into a smaller home. Three in ten of retirees decide to upsize into a larger home. The top reason to upsize: They want to have a home that’s comfortable enough for family members to visit and stay with them, according to the survey.
Source: “Home in Retirement: More Freedom, New Choices,” Merrill Lynch
Freddie Mac will begin offering mortgages with down payments of only 3 percent — the first time they’ve been this low on the GSE’s loans in nearly five years — starting March 23. The move is expected to make more credit available to entry-level borrowers.
“By launching our 3 percent down payment mortgage now, at the start of the spring homebuying season, lenders will be ready to serve qualified working families who are ready to buy and keep the recovery going,” Dave Lowman, executive vice president for Freddie Mac’s single-family business, writes on its Executive Perspectives blog.
Besides 3 percent down payments, Freddie Mac’s Our Home Possible Advantage Program, which is aimed at supporting first-time buyers as well as low- and moderate-income borrowers, is allowing no minimum from borrowers in contributions. That means parents or relatives now can cover 100 percent of the down payment through gifts.
Source: “Advantage: Home Buyers,” Freddie Mac (March 9, 2015)
The gap between rental costs and household income is widening to unsustainable levels across the country. As more renters face steeper costs, it may put them even further away from home ownership, according to the National Association of REALTORS®. NAR evaluated income growth, housing costs, and changes in share of renter and owner-occupied households over the past five years in metropolitan statistical areas.
Over the last five years, a typical rent rose 15 percent, while the income of renters grew by only 11 percent, according to research in a new study just released.
“Current renters seeking relief and looking to buy are facing the same dilemma: Home prices are rising much faster than their incomes,” says Lawrence Yun, NAR’s chief economist. “With rents taking up a larger chunk of household incomes, it’s difficult for first-time buyers – especially in high-cost areas – to save for an adequate down payment.”
“The result has been an unequal distribution of wealth as renters continue to feel the pinch of increasing housing costs every year,” according to NAR’s study.
Source: National Association of REALTORS®
In 2013, 31 percent of 18- to 34-year-olds still lived with their parents. Prior to the housing crisis, however, that percentage stood at 27 percent. If the number of 18- to 34-year-olds who live with their parents returns to pre-recession levels over the next five years that could mean an extra 400,000 young adults leaving home each year.
“[A] normalization in the share of young adults living with their parents looks set to provide a boost to household formation, underpinning the recovery in housing starts,” says Ed Stansfield, chief property economist for Capital Economics. “But unless it is also accompanied by a marked loosening in lending criteria it is unlikely to trigger a new house price boom, as house price growth will be constrained by income growth.”
“The U.S. economy is now growing strongly, with real incomes rising rapidly and mortgage credit conditions loosening,” says Stansfield. “That means more young adults will have the means to strike out on their own.”
Source: “Is Household Formation Set for a Rebound?” HousingWire (March 12, 2015)
“This month kicks off spring home buying season,” says Len Kiefer, deputy chief economist at Freddie Mac. “Between now and the end of June, we’ll see about 40 percent of all home sales for the year.”
That optimism has Freddie Mac forecasters expecting 2015 “to be the best year for home sales and new home construction since 2007, when total home sales were about 5.8 million for the year,” says their U.S. Economic and Housing Market Outlook for March.
An improving job market is driving young professionals, ages 25 to 34, back to the labor force. The millennial age group now has 76.8 percent of its generation employed, as of last month, up from 75.9 percent last year.
Freddie Mac economists predict that rents will continue to rise at or above inflation this year, which will likely push more prospective buyers into home ownership. Rents rose 3.6 percent, on average, in 2014, and are up nearly 11 percent over the last three years, according to Freddie Mac’s report.
Source: “Freddie Mac March 2015 U.S. Economic and Housing Market Outlook,” Freddie Mac (March 11, 2015)