In Past 15 Years, ‘Home-Buying Power’ Grew 44%

Falling mortgage rates have increased the purchasing power of home buyers by 44 percent since mid-2001, according to analysis by John Burns Real Estate Consulting.

The 30-year fixed-rate mortgage plunged from 7.2 percent in June 2001 to 3.9 percent today – which has allowed home buyers to qualify for a 44 percent larger mortgage just due to falling mortgage rates, according to the analysis.

Still, home price appreciation has been outpacing wage growth in 28 of the 30 largest housing markets in the country, the analysis shows.

An interesting data chart highlights the nine markets where appreciation has exceeded income growth at analysis source: John Burns Real Estate Consulting

 

Home Sellers Net equals Highest Profits in 8 Years

Rising home prices over the last few years are finally putting more money back into home sellers’ pockets. Home owners who sold during the third quarter saw an average price gain of $40,658 – or 17 percent – from the purchase price of their property – the highest average price increase for sellers since the third quarter of 2007, according to RealtyTrac’s Third Quarter 2015 U.S. Home Sales Report.

“An increasing number of home owners in 2015 have been cashing out the home equity they’ve gained during the housing recovery of the past three years,” says Daren Blomquist, vice president at RealtyTrac. “That may be a good decision because the data points to a plateauing market going forward. Home price appreciation is slowing, a trend that will continue if interest rates rise in the coming months as expected. Meanwhile the threat of rising interest rates combined with lowered premiums for buyers using FHA loans is spurring more demand.”

Its analysis of 171 counties nationwide is at: RealtyTrac

91% of Properties Now Have Equity

About 759,000 properties regained equity in the second quarter, bringing the total number of residential mortgages that are lower than their property’s value to about 45.9 million. That equates to about 91 percent of all mortgaged properties. Borrower equity has risen year-over-year by $691 billion, according to CoreLogic’s recent equity report.

“For much of the country, the negative equity epidemic is lifting,” says Anand Nallathambi, CoreLogic’s CEO and president. “The biggest reason for this improvement has been the relentless rise in home prices over the past three years which reflects increasing money flows into housing and a lack of housing stock in many markets.”

CoreLogic predicts home prices to rise an additional 4.7 percent over the next year, if that prediction holds true, 800,000 home owners could regain positive equity by July 2016.

Source: CoreLogic

Home Prices Surge Above Wage Growth

Home price appreciation outpaced wage growth in 76 percent of the U.S. markets during the housing recovery, according to a new report released by RealtyTrac, which analyzed growth in average weekly wages compared to median home prices in 184 metro areas.

Between the second quarter of 2012 and second quarter of 2014, home prices have gone up 17 percent, while wages have only risen 1.3 percent, RealtyTrac’s study finds.

“Home prices in many housing markets across the country found a floor in 2012 and since then have rapidly appreciated, particularly in markets attracting institutional investors, international buyers or some other flavor of cash buyer not constrained by income as much as traditional buyers,” says Daren Blomquist, vice president at RealtyTrac. “Eventually, however, those traditional buyers will need to play a bigger role in the housing market for the recovery to maintain its momentum.”

Source: REALTOR® Magazine Daily News

Home Loan Interest Rates Continue to Move Up!

Averages on fixed mortgage rates inched up again this week, amid solid housing data on new home sales and strong home price appreciation, Freddie Mac reports in its weekly mortgage market survey. Despite this week’s uptick, fixed-rate mortgage continue to hover near May 2013 lows.

Freddie Mac reports the following mortgage rates for the week ending Feb. 26:

  • 30-year fixed-rate mortgages: averaged 3.80 percent, with an average 0.6 point, rising from last week’s 3.76 percent average. A year ago, 30-year rates averaged 4.37 percent.
  • 15-year fixed-rate mortgages: averaged 3.07 percent, with an average 0.6 point, rising from last week’s 3.05 percent average. Last year at this time, 15-year rates averaged 3.39 percent.
  • 5-year hybrid adjustable-rate mortgages: averaged 2.99 percent, with an average 0.5 point, rising from last week’s 2.97 percent average. Last year at this time, 5-year ARMs averaged 3.05 percent.

Source: Freddie Mac

7.4M Home Owners Lose Out by Not Refinancing

Recent reductions in the 30-year fixed-rate mortgage could net the population of borrowers big savings if they would refinance, according to Black Knight Financial Services’ latest Mortgage Monitor Report.

“Before the most recent reductions in the average 30-year mortgage interest rate, approximately 6 million borrowers met broad-based ‘refinancibility’ criteria,” says Trey Barnes, Black Knight’s senior vice president of Loan Data Products. “These criteria assume loan-to-value ratios of 80 percent or below, good credit, non-delinquent loan status, and current interest rates high enough that borrowers have an incentive to refinance. In light of where rates are today, and looking at borrowers with current notes at 4.5 percent and above, that population has now swelled to 7.4 million — almost a 25 percent increase. This is a relatively conservative assessment, though, as those with current rates of 4.25 percent to 4.5 percent could arguably benefit from refinancing as well. That group adds another 1.7 million borrowers to the population.”

A separate study by the National Bureau of Economic Research found in an analysis of 1 million fixed-rate mortgages that 20 percent of Americans who failed to refinance could have saved more than $45,000 in payments over the life of their loan. At the time of the study, average interest rates were around 4.3 percent. In recent weeks, the 30-year fixed-rate mortgage dipped below 4 percent, sinking to the lowest levels in more than a year, according to Freddie Mac. However, some home owners are struggling to refinance as their home values continue to recover.

Source: Black Knight Financial Services

Spring Was Healthiest Market in 3 Years

July housing data shows that price appreciation and inventory increases during the peak home-buying season helped the market to post the largest spring gains in three years, realtor.com® reports in its National Housing Trend Report.

“In July 2012 and 2013, we saw external economic factors overwhelm the healthy gains established in the housing market during the spring home-buying season,” says Jonathan Smoke, chief economist for realtor.com®. “This year, we’re ending the traditional season with high buyer and seller confidence demonstrated by price appreciation, increases in inventory, and quick home sales.”

In July, housing inventories rose 2.3 percent year-over-year, as the median list price posted a 7.5 percent increase year-over-year, realtor.com® reports. The median list price was $214,900 nationwide in July.

“This is the first time since the beginning of the recovery that we expect to see positive momentum throughout the second half of the year,” Smoke says. “While seasonal patterns are emerging in July month-to-month comparisons, all other metrics point to fundamental market health and a build-up of momentum.”

Source: realtor.com®

3 Challenges Still Facing the Housing Market

Existing-home sales gained momentum in June, reaching an annual pace of 5 million sales for the first time since October 2013, according to the National Association of REALTORS®’ latest housing report. Rising inventories also are pushing the overall supply of homes for sale toward a more balanced market, with unsold inventories 6.5 percent higher than a year ago, NAR notes.

“Inventories are at their highest level in over a year and price gains have slowed to much more welcoming levels in many parts of the country,” says Lawrence Yun, NAR’s chief economist. “This bodes well for rising home sales in the upcoming months as consumers are provided with more choices.”

Still, the market is facing several headwinds that continue to subdue a more robust recovery. NAR noted three in its most recent housing report:

1. Sluggish new-home construction: While overall housing inventories showed improvement in June, inventory problems continue to weigh on the market and could become more problematic if new-home construction doesn’t increase in more markets, NAR notes. “New-home construction needs to rise by at least 50 percent for a complete return to a balanced market because supply shortages — particularly in the West — are still putting upward pressure on prices,” Yun notes.

2. Stagnant wage growth: Yun also noted that stagnant wage growth is holding back what should be a stronger pace of sales. “Hiring has been a bright spot in the economy this year, adding an average of 230,000 jobs each month,” Yun notes. “However, the lack of wage increases is leaving a large pool of potential home buyers on the sidelines who otherwise would be taking advantage of low interest rates. Income growth below price appreciation will hurt affordability.”

3. Dwindling first-time home buyers: The percentage of first-time buyers continues to be low by historical standards. First-time home buyers made up 28 percent of the market in June, down from a typical 40 percent of the market historically.

Source: National Association of REALTORS®

 

Home Prices Likely to Moderate Soon?

Home owners have been enjoying big home price rises across the country, but those increases – often by double-digit percentages – will likely level off soon, according to CoreLogic’s latest Home Price Index, which reflects February data. The index, which also includes distressed sales, was up 12.2 percent in February compared to year-ago levels.

“As the spring home-buying season kicks off, house price appreciation continues to be strong,” says Mark Fleming, CoreLogic’s chief economist. “Although prices should remain strong in the near term due to a short supply of homes on the market, price increases should moderate over the next year as home equity releases pent-up supply.”

The National Association of REALTORS®’ most recent existing-home sales report showed that the median existing-home price for all housing types was $189,000 in February, a 9.1 percent rise over February 2013. “Price gains have translated into an additional $4 trillion of housing wealth recovery over the past three years,” Lawrence Yun, NAR’s chief economist, said in a statement.

Source: CoreLogic and “Home Prices Will Keep Rising, But Level-Off Soon,” Mortgage News Daily (April 1, 2014)

Uneven Recovery to Continue for 5 Years

The Demand Institute, a nonprofit think tank operated by The Conference Board and Nielsen, predicts an uneven recovery for the U.S. housing sector over the next five years. The study says it wont be until 2018 that the median price of single-family homes will be near the peak reached in 2006, before the housing crisis began. But some states will get there faster than others.

The study showed that among the 50 largest metros where housing prices are expected to appreciate between 2012 and 2018, the top five metros (Memphis, Tampa, Jacksonville, Milwaukee, and St. Louis) will see increases averaging 32 percent. The five cities projected to have the lowest price appreciation (Washington, D.C., Oklahoma City, Denver, Minneapolis, and Phoenix) will see gains of around 11 percent.

“The strength of the local housing market is among the most telling metrics that helps us assess community health and well-being,” says Louise Keely, chief research officer at the Demand Institute and co-author of the report. Researchers analyzed 2,200 cities and towns in the U.S. and conducted interviews with 10,000 consumers for the report.

The report notes that the double-digit price increases of the last two years were largely driven by investors buying distressed homes to meet rising rental demands. The report notes that a main driver of housing demand for the next five years will be the formation of new households, particularly as the economy strengthens and employment rises.

Source: “U.S. Housing Recovery Uneven Across Markets, Study Finds,” Reuters (Feb. 26, 2014)