26 Million Consumers Are ‘Credit Invisible’

The Consumer Financial Protection Bureau finds that one in every 10 adults – or 26 million people – do not have any credit history with a nationwide consumer reporting agency, according to their new report. Black consumers, Hispanics, and consumers in low-income neighborhoods are more likely to have no credit history with a national consumer reporting agency or have enough credit history to produce a credit score.

Consumers with a limited or nonexistent credit history face greater challenges in getting credit, such as in being able to qualify for a mortgage to buy a home, according to CFPB. Credit histories help consumer reporting agencies determine how likely consumers are to repay their debts and the information is used to produce credit reports and scores.

“Today’s report sheds light on the millions of Americans who are credit invisible,” says CFPB Director Richard Cordray. “A limited credit history can create real barriers for consumers looking to access the credit that is often so essential to meaningful opportunity—to get an education, start a business, or buy a house. Further, some of the most economically vulnerable consumers are more likely to be credit invisible.”

Source: Consumer Financial Protection Bureau

The Younger Generation will Drive Down Home Sizes

Millennials will make their mark on the look of homes in the coming years as homes likely will get smaller, separate laundry rooms will become essential, and home technology will be a must, according to a panel of builders and designers speaking at the International Builder Show last week.

A growing number of first-time buyers will likely lead to smaller homes — a downsizing home trend that may start showing itself even in 2015, predicts Rose Quint, the assistant vice president of research at the National Association of Home Builders.

As younger, first-time buyers re-emerge on to the market, “they will demand smaller, more affordable homes,” Quint says. “Builders will build whatever demand calls out for.”

Seventy-five percent of millennials surveyed said they want to live in a single-family home, and 66 percent said they prefer to live in the suburbs.

Since millennials tend to be more cash-strapped than older home owners, they often seek less expensive, low-maintenance choices in a home, such as landscaping that needs less watering and mowing and larger patios instead, said Jill Waage, editorial director for home content at Better Homes and Gardens, surveys buyers on home preferences. Millennails are often very tech savvy, and increasingly are asking for ways to control their home’s heating, air conditioning, security, and lighting from their phones or tablets.

Source: National Association of Home Builders

2015 Remodeling Cost vs. Value: ‘Less Is More’

With home-price gains slowing in most parts of the country, sellers will be looking for ways to get top dollar for their listing. Cleaning and staging make a big difference. But for some sellers — such as investors seeking to bring a property up to neighborhood standards before the sale — remodeling work may be the ticket.

As the 2015 Remodeling Cost vs. Value Report makes clear, large-scale jobs aren’t likely to return sellers their full cost. But there are improvements worth doing in anticipation of an upcoming sale. Some will return almost 100 percent of their cost. Others may not have as great a payback, but they can improve the market position of the property in relation to the competition. (Think about the impact of beautiful kitchen photos on online home shoppers.) In addition, several pricier projects can provide owners with a few years of enjoyment while still offering a decent payback down the road.

Find out which remodeling projects get you the most bang for your buck.

Home Sales Only Going Up From Here!

Existing-home sales will likely rise about 7 percent this year, as a strengthening economy and job growth leads to a healthier market, according to the National Association of REALTORS®’ 2015 housing forecast.

“Home prices have risen for the past three years cumulatively about 25 percent, which boosts confidence in the market and traditionally gives current home owners the ability to use their equity buildup as a down payment towards their next home purchase,” says Lawrence Yun, NAR’s chief economist. “Furthermore, first-time buyers are expected to slowly return as the economy improves and new mortgage products are made available in the marketplace with low down payments and private mortgage insurance.”

Yun is forecasting growth in home prices, but at a more moderate pace than recent years. The national median existing-home price for 2014 will likely near $208,000, up 5.6 % from 2013, but it’s expected to moderate between 4 % and 5 % growth in 2015.

Source: National Association of REALTORS®

Home Buyers Took a Break During the Holidays

Mortgage applications dropped sharply during the holidays, plunging 9.1 percent for the week ending Jan. 2 compared to two weeks earlier, according to the Mortgage Bankers Association’s mortgage activity index. The index reflects adjustments for New Year’s Day and Christmas Day when banks are closed.

Applications for refinancings dropped 12 percent from two weeks ago, while mortgage applications for home purchases, viewed as a leading gauge activity, dropped 5 percent.

“Beyond the seasonal slowdown, purchase application volume remains about 8 percent below last year’s level, indicating that home buyers are still cautious,” says the MBA’s chief economist, Mike Fratantoni.

Home shoppers have been slow to jump into the housing market, despite low mortgage rates. The 30-year fixed-rate mortgage fell to 4.01 percent for the week ending Jan. 2, according to the MBA. Lower bond yields this week are pushing rates even lower, with the average 30-year fixed-rate mortgage now a full quarter point lower than average rates available in the second half of December, the MBA notes.

Source: “Weekly Mortgage Applications Fall Sharply Over Holidays,” CNBC (Jan. 7, 2015)

Home Loan Interest Rates End 2014 Near Yearly Lows

Mortgage rates defied forecasts in 2014 by not inching up to 5 percent as predicted during the year. Instead, the 30-year fixed-rate mortgage is still hovering under 4 percent.

The 30-year fixed-rate mortgage, the most popular loan among home buyers, remained below 4 percent for every week except for two since Oct. 16, Freddie Mac reports.

Despite fixed-rate mortgages ticking up slightly this week, rates remain near 2014 lows, according to Freddie Mac’s weekly mortgage market survey. Freddie Mac reports the following national averages with mortgage rates for the week ending Dec. 31, 2014:

  • 30-year fixed-rate mortgages: averaged 3.87 percent, with an average 0.6 point, rising from last week’s 3.83 percent average. Last year at this time, 30-year rates averaged 4.53 percent. The 30-year fixed-rate mortgage reached a record low on Nov. 21, 2012, when it averaged 3.31 percent.
  • 15-year fixed-rate mortgages: averaged 3.15 percent, with an average 0.6 point, rising from last week’s 3.10 percent average. A year ago, 15-year rates averaged 3.55 percent.
  • 5-year hybrid adjustable-rate mortgages: averaged 3.01 percent, with an average 0.5 point, holding the same average as last week. Last year at this time, 5-year ARMs averaged 3.05 percent.

Source: Freddie Mac

Top Moving Trends for 2015

MovingCompanyReviews.com, provides consumers with information about moving companies, predicted how housing trends will impact the moving industry in 2015:

1. Mover availability is likely to be tight in the spring and summer months. Consumers are urged to book a moving company as soon as they know their moving date. A shortage of nationwide truck drivers is expected in the spring and summer months, according to MCR. The average consumer books the mover only two weeks in advance. But the busiest times of year are between Memorial Day and Labor Day, with moves peaking in August, according to MCR.

2. Major metros will be popular moving destinations. MCR reported the highest amount of moves in the nation’s largest cities in 2014, including Chicago, Atlanta, Houston, Denver, and Dallas. MCR expects continued urban population growth and the return of post recession new construction will continue to make major moving destinations in 2015.

3. Square footage will flatten. In 2014, MCR reported that more movers upgraded their home sizes by a median of 628 square feet. But MCR is projecting that trend won’t continue in 2015 with significant upgrades to square footage. Also, MCR’s forecast projects that the rental market will remain strong with many moves being into rentals.

4. Mover scams remain a threat but will moderate some. The past two years has seen the rise of illegitimate moving companies that offer consumers low prices and then scam them by drastically increasing the rate at the point of delivery or even holding their items hostage. The American Moving and Storage Association and state moving associations issued warnings to consumers and urged consumers to more carefully vet their movers.

Source: MovingCompanyReviews.com

Commercial Real Estate Market Predictions for 2015

Expect a bright year ahead in 2015 for the U.S. commercial real estate market: The National Association of REALTORS® projects rent increases and tighter vacancy rates. “Solid economic growth in the third quarter proved that the second quarter wasn’t an anomaly, as business spending increased, commercial construction rose, and the labor market continued to make positive strides,” says Lawrence Yun, NAR’s chief economist. “Job growth is the catalyst to improved demand for commercial real estate leasing and new construction projects.” Here are NAR’s projections for the commercial market in 2015:

  • Apartment market: The rental market will likely remain a “landlord’s market” in 2015, with vacancy rates expected to stay below 5 percent in the new year. That will likely lead to demand pushing rents up even higher and keeping them above inflation, Yun notes. Apartment rents are projected to increase 4 percent in 2014 and 4.1 percent in 2015.
  • Office market: Vacancy rates will likely fall from 15.7 percent to 15.6 percent in 2015, with rents expected to rise 2.4 percent this year and another 3.3 percent next year.
  • Industrial market: Vacancies will likely rise from 8 percent to 8.4 percent next year, while annual rents will rise 2.4 percent this year and another 2.9 percent in 2015.
  • Retail marketVacancy rates are projected to drop from 9.7 percent this year to 9.5 percent in 2015. Average retail rents likely will rise 2 percent this year and another 2.5 percent next year.

Source: “Commercial Real Estate Prospects Appear Bright for 2015,” The Wall Street Journal (Nov. 24, 2014)

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®

 

What Consumers Want Smart Homes to Do

When it comes to smart homes, consumers are more interested in their security features than the gadgets that control the homes’ appliances. New research by Icontrol Networks, a home technology company, shows that 90 percent of 932 respondents recently surveyed say that security is one of the most important reasons for using a smart-home system. In fact, 67 percent rank it the No.1 reason, and the majority of consumers say security is a must-have in any home automation, according to Icontrol’s 2014 State of the Smart Home Report.

Fire and carbon monoxide alarms, as well as gas leak alarms, were listed as top security features, according to the survey.

“For now, safety and security are driving initial mass market adoption,” says Jim Johnson, executive vice president of Icontrol Networks. “But the convenience associated with a connected home will likely play a greater role as consumers realize how much easier automation makes their lives.”

Seventy-eight percent of respondents also ranked energy management as one of the top features that matter most to them in a smart home. HVAC heating and cooling management was cited as the most important feature in helping to reduce utility bills. Nearly 43 percent of respondents say they’d be interested in replacing their thermostat with a “smart thermostat,” one that automatically adjusts when the home is occupied.

Would home owners be willing to pay for extra costs in making homes smarter and more connected? The survey found that 51 percent of respondents would be willing to pay up to $500 for a fully equipped smart home; 32 percent say they’d pay $500 to $3,000.

Source: “What Consumers Want in Home Automation,” Builder (July 17, 2014)