Is Calif.’s Housing Crisis Spinning Out of Control?

California has a severe lack of affordable homes and apartments for middle-class families, The New York Times reports. Their median cost of a home has surged to $500,000—double the national cost.

“The extreme rise in housing costs has emerged as a threat to the state’s future economy and its quality of life,” The New York Times reports. “It has pushed the debate over housing to the center of state and local politics, fueling a resurgent rent control movement and the growth of neighborhood ‘Yes in My Back Yard’ organizations, battling long-established neighborhood groups and local elected officials as they demand an end to strict zoning and planning regulations.”

The state has introduced 130 housing measures this year. Among one of the most recent actions, the Senate approved a bill to crack down on communities that have delayed or derailed housing construction proposals. The bill would restrict the ability to use zoning, environmental, and procedural laws to kill projects that may be considered “out of character” with the neighborhood. The bill is expected to be voted on again later this summer.

Source: “The Cost of a Hot Economy: A Severe Housing Crisis,” The New York Times (July 17, 2017)

Home Loan Interest Rates Push Above 4%

Average mortgage rates are moving up, posting increases for the second consecutive week.

“After fully absorbing the sharp increases in Treasury yields over the past couple of weeks, the 30-year mortgage rate has cleared the psychologically important 4 percent mark for the first time since May,” says Sean Becketti, Freddie Mac’s chief economist.

Freddie Mac reports the following national averages for the week ending July 13:

30-year fixed-rate mortgages averaged 4.03 percent, with an average 0.5 point, increasing from last week’s 3.96 percent average. Last year at this time, 30-year rates averaged 3.42 percent.

15-year fixed-rate mortgages averaged 3.29 percent, with an average 0.5 point, increasing from last week’s 3.22 percent average. A year ago, 15-year rates averaged 2.72 percent.

Source: Freddie Mac

The Real Costs of Tiny Homes

The tiny home movement—homes that often fall within the 100- to 400-square-foot range—is becoming more trendy as owners are drawn to the homes’ minimalism and sliced costs. But buyers may not want to count on cutting their savings by purchasing a tiny home.

A tiny home usually has more costs up front. If you build it yourself, the average cost is about $23,000, according to The Tiny Life. This usually doesn’t include the land price, so buyers will need to pay more to purchase a plot of land or lease land for the home. Additionally, about 68 percent of tiny home owners don’t have a mortgage at all, compared to just 29.3 percent of buyers of traditional homes.

Tiny-home living promotes less spending on utilities as an added perk, but buyers will need to watch those upfront payments as well. Tiny homes often use alternate forms of energy, such as propane, solar energy, or composting. Even for a tiny house, a solar-power system can cost about $8,000, according to The Financial Times.

Source: “Tiny House Living: How Much Money Can You Really Save?” CheatSheet.com (July 11, 2017)

Survey: More Buyers Make Offers Sight Unseen

The number of buyers making offers sight unseen—meaning they haven’t physically visited the property is on the rise, according to a survey of recent home buyers conducted by real estate brokerage Redfin. Thirty-three percent of respondents in 11 major markets say they made an offer on at least one house sight unseen. These types of offers are more common when working with foreign buyers and in markets where homes are selling quickly, real estate professionals say.

New uses of 3-D photos, video tours, and virtual reality are giving some buyers enough confidence to purchase a home without an in-person showing. The Wall Street Journal reports that some real estate pros are conducting property walkthroughs with long-distance buyers remotely via FaceTime, Skype, or WhatsApp. Some agents are working with technology companies to create 3-D photo and video tours within the virtual reality space to make long-distance buyers feel like they’re at the property in person.

Source: “Buying a Home Sight Unseen Is Easier Than Ever – and More Common,” The Wall Street Journal (June 22, 2017) [Log-in required.]

Retirees Look to Build Smaller, Custom Homes

Many people seek to downsize their home in retirement—but not their home buying wish list. Retirees reportedly are flocking to smaller newly built homes customized to their personal needs and tastes.

One advantage older home buyers find with these custom homes is that they can be built to accommodate medical conditions or physical restrictions, such as wider hallways to accommodate mobility devices. The home also can be outfitted with age-in-place features such as outdoor ramps and lower kitchen cabinets.

Retirees are looking to cut back on home maintenance and repairs, which is why their preferences are straying away from larger, older homes. However, building a custom home can be stressful because of the wide availability of options. Real estate experts recommend researching building plans and contractors carefully to make sure buyers get the type of craftsmanship they seek.

Source: “Retirees Turning to Custom Homes to Get the Right Space,” RISMedia (June 22, 2017)

Homeowners Cash in on Equity in Droves

Homeowners may be reluctant to sell, but they still want to see a piece of that equity in their homes now. They’re cashing out in levels that have not been seen since the financial crisis. Nearly half of borrowers who refinanced their homes during the first quarter did a cash-out option, the highest level since the fourth quarter of 2008, according to Freddie Mac.

While the number of cash-out refis grows, Len Kiefer, Freddie Mac’s deputy chief economist, does not see this as playing out similarly to the run-up to the financial crisis when borrowers were using their homes like ATMs. Borrowers must follower stricter underwriting standards now when they refinance a mortgage or get a loan. Also, there is less money at stake than a decade ago, Kiefer notes.

Source: “Homeowners Are Again Pocketing Cash as They Refinance Properties,” The Wall Street Journal (May 27, 2017)

Foreclosures Plunge to Lowest Level Since 2005

Foreclosure filings—which include default notices, scheduled auctions, and bank repossessions—are down 23 percent from a year ago and have hit their lowest level since November 2005, according to the April 2017 U.S. Foreclosure Market report, released Thursday by ATTOM Data Solutions.

A total of 34,085 properties started the foreclosure process in April, well below the pre-recession average of more than 77,000 foreclosure starts per month between April 2005 and November 2007, according to the report.

More details at ATTOM Data Solutions and source: RealtyTrac

Millennials Finally Flee Parents’ Homes

The pace of young adults leaving their parents’ homes is accelerating significantly, Fannie Mae’s Economic and Strategic Research Group notes in a new analysis.

Young adults aged 24 to 25 in 2013 and 26 to 27 in 2015 residing with their parents dropped by 7.6 percentage points. On the other hand, those who passed through that same age range between 2010 and 2012 saw a decline of only 5.4 percentage points, researchers note.

Millennials in their 20s or early 30s saw their income, adjusted for inflation, grow by at least 23 percent between 2013 and 2015 when compared to 2010 and 2012. Further, their incomes are at least 81 percent greater than between 2008 and 2010.

Also, millennials between 2013 and 2015 were getting married at a markedly faster rate than their predecessors did in that same age range during the recession and the recovery thereafter, Fannie Mae’s report notes.

Source: “Starting to Launch: Millennials Are Leaving Mom and Dad’s Basement,” Fannie Mae’s Housing Insights (2017)

The Housing Market Is Outperforming Forecast

The housing market has been off to a roar this spring. In fact, the market is performing so strongly that the National Association of REALTORS® has upgraded its forecast for the year.

At the start of the year, home sales were expected to match last year’s pace due to higher mortgage rates and diminishing affordability. But the market is hardly slowing down, notes Lawrence Yun, NAR’s chief economist. He now predicts existing-home sales to rise by 3.5 percent, and home prices likely will increase 5 percent this year.

“With no imminent threat of a recession, the housing market’s strong first quarter sets the foundation for continued gains the rest of the year,” Yun writes.

Source: “First Quarter GDP May Be Cool, But Housing Market Downright Balmy,” The Hill (May 1, 2017)

Owners: Be Smart When Financing Renovations

The number of homeowners who are planning to take on home improvement projects or repairs this year is expected to increase 6.7 percent, according to the Joint Center for Housing Studies at Harvard University. As more owners look to remodel, they should be weighing how to fund their renovations.

Homeowners may be using credit cards, even though they intend to pay for the balance as soon as it’s due, because they want the benefits of getting airline miles or other rewards from using the credit card, says Todd Nelson LightStream’s business development officer. But for those who don’t intend to pay the credit card off right away should realize the interest rates are usually in double digits and is not tax-deductable.

An option is a home equity line of credit, the interest may be tax-deductible and there are few upfront frees. Another consideration may be a cash-out refinance is another option, where borrowers refinance for more than what they owe on the property and then take the difference out in cash. However, processing fees and closing costs are involved.

Source: “More Homeowners Pay for Repairs With Credit Cards,” realtor.com® (April 26, 2017)