Category: Real Estate

A Costly Mistake for Mortgage Borrowers? | Realtor Magazine

Consumers could be leaving money on the table by failing to gather quotes from multiple lenders when shopping for a mortgage. In fact, borrowers stand to save an average of $1,500 over the life of a 30-year loan by just getting one additional rate quote when shopping for a mortgage. Multiple quotes could bring bigger savings, according to Freddie Mac’s April Insight report. 

Eighty percent of borrowers who received one additional rate quote while shopping for a mortgage saved between $966 to $2,086 over the life of their loan. Borrowers who gathered five rate quotes saw an average savings of $2,914. Eighty percent of the borrowers who obtained five quotes saved between $2,089 and $3,904, according to Freddie Mac’s report. 

Yet, nearly half of consumers fail to shop for better rates before taking out a mortgage to buy or refinance a home, according to Freddie Mac’s report. 

“By shopping more than one mortgage lender, consumers are more likely to get a better interest rate and save money in both the short and long term,” says Len Kiefer, Freddie Mac’s deputy chief economist. “With lower monthly payments and lower fixed fees, the loan will be more affordable and thus safer, and consumers may have hundreds or thousands of dollars more in their pockets. Not a bad return for a few phone calls or clicks.” 

Mortgage Rates Jump to 4-Year High | Realtor Magazine

After mostly stagnant activity levels in recent weeks, mortgage rates are back on the move. The 30-year fixed-rate mortgage rose to its highest level since January 2014 this week, also seeing its largest weekly increase since February of this year, Freddie Mac reports. 

Average mortgage rates were higher across the board too, posting weekly increases to not only the 30-year fixed-rate mortgage but also to 15-year and 5-year hybrid adjustable-rate mortgages.

Freddie Mac reports the following national averages in mortgage rates for the week ending April 19: 

• 30-year fixed-rate mortgages: averaged 4.47 percent, with an average 0.5 point, rising from last week’s 4.42 percent average. Last year at this time, 30-year rates averaged 3.97 percent. 
• 15-year fixed-rate mortgages: averaged 3.94 percent, with an average 0.4 point, rising from last week’s 3.87 percent average. A year ago, 15-year rates averaged 3.23 percent. 
• 5-year hybrid adjustable-rate mortgages: averaged 3.67 percent, with an average 0.3 point, increasing from last week’s 3.61 percent average. A year ago, 5-year ARMs averaged 3.10 percent. 

Condemned Fremont property gets multiple offers, sells for $1.23M all cash – Story | KTVU

FREMONT, Calif. – If you need  proof the red hot Bay Area real estate market shows no signs of cooling, consider this. In Fremont, a buyer put up over a million dollars to purchase a house that’s been condemned.

The home sits mid-block on Bruce Drive. It was condemned in 2013, and has three-bedrooms, and two-bathrooms. The roof has holes and mildew is eating away the interior. The house Just sold for a whopping $1.23M.

  

“My neighbor told me that. I said ‘Oh.’ In cash. I said, ‘OH!’ I can’t believe it,” said neighbor Yvonne Yen.

 

She has lived next door the past 12 years. Yen bought her home for $750,000. Realtor Larry Gallegos said the price deferential reflects demand, as prospective buyers were burning up his phone from dawn till dusk. After a week, the seller chose one of five all-cash offers.

“We had a couple of offers that were very close. Actually, my client when if first met them wanted a little bit more than that with the price they had In their mind. But they ended up being happy with this one,” said Gallegos from his Fremont office.

He said the sellers are a family unable to come to a consensus on owning, and decided to sell. The buyer designs green homes, and plans to put a four-thousand square foot masterpiece on that large lot. He actually paid 230-thousand dollars over asking price.

“There’s nothing surprising about this. It’s a great example of location, location, location,” said David Stark of the Bay East Association of Realtors.

He said buying a tear-down to build a dream home reflects a 10-year trend. The tony Mission San Jose section of Fremont is desirable, with the average home selling for one-point-three million dollars. He said unlike 2008, today’s sky high prices show no indication a crash is coming..

“People are purchasing homes. They’re purchasing vacant properties like this. The demand is there. The supply isn’t. These prices are sustainable,” said Stark.

Other residents see both the blessing and curse of living in the land of seven figure homes.

“We trying to move, because the property tax is costing me a thousand dollars a month. But we have no place to move,” said Yen.

It’s a paradox that has some owners are suffering under high taxes while others are able to unload their homes, even when they’re unlivable.

Fewer Households Can Afford Homes for Sale | Realtor Magazine

Housing affordability has fallen in the last year and fewer households are able to afford the inventory of homes for sale based on their incomes, according to joint research released Wednesday by the National Association of REALTORS® and realtor.com®. 

Read more: Study: ‘Affordability Crisis’ Is Worsening

The REALTORS® Affordability Distribution Curve and Score examines affordability conditions at different income levels for all active inventory on the market. A score of one or higher suggests a market where homes for sale are more affordable to households in proportion to incomes. 

“The survey confirms that the lack of entry-level supply is putting affordability pressures on too many buyers—especially those at the lower end of the market, where demand is the strongest,” says Lawrence Yun, NAR’s chief economist. “This is why first-time buyers continue to struggle to find affordable properties to buy and are making up less than a third of home sales so far this year.” 

Rising home prices and an increase in mortgage rates caused Affordability Scores to drop nationally between March 2017 and March 2018. 

However, 14 states had better affordability compared to a year earlier, including the District of Columbia, Vermont, Hawaii, and North Dakota. 

“We’ve seen affordability improve as inventory declines have begun to lessen these areas,” says Danielle Hale, realtor.com®’s chief economist. “More balanced supply and demand dynamics have kept listing price growth below the national average, providing some much needed relief for stretched home buyers in these areas.” 

Wages are growing, but prices are increasing at a faster clip, up nearly 6 percent in the first two months of 2018, Yun adds. Yun points to several solutions that could improve these conditions, such as more homeowners selling, investors releasing their portfolio of single-family homes back onto the market, and greater single-family home construction.

The index showed that the metros with the lowest affordability scores were all in California, where households can only afford 3 to 11 percent of the active housing inventory. The metros with the lowest affordability are: Los Angeles-Long Beach, Calif.; San Diego-Carlsbad, Calif.; San Jose-Sunnyvale, Calif.; Oxnard-Thousand Oaks, Calif.; and San Francisco-Oakland, Calif.

Meanwhile, the metros with the highest affordability scores were Youngstown-Warren, Ohio-Pennsylvania; Dayton, Ohio; Toledo, Ohio; Akron, Ohio; and Scranton-Wilkes-Barre, Penn. In these metros, households can afford nearly 75 percent of the homes that are currently for sale. 

Report: U.S. Needs 7.3 Million More Homes | Realtor Magazine

Housing construction has not kept pace with population growth in the U.S. for more than a decade, and in order to stymie shortages across the nation, builders will need to construct 7.3 million more homes, according to a new report. The Up for Growth National Coalition, a group of real estate developers, owners, and builders of affordable housing, finds that since 2000, builders in about 22 states and the District of Columbia have not constructed enough homes to sustain population growth. 

California is the most in need of new housing, having built 3.4 million fewer homes than necessary to support its population during this time period, the report notes. Other states are also grappling with a shortage of buildable lots, labor, and materials. “As we dug into the numbers behind this, at a local market level, we’re seeing a pronounced affordability challenge in places like Arizona,” Mike Kingsella, executive director of the Up for Growth National Coalition, told The Wall Street Journal. While Arizona and Utah are facing housing shortages, the report credits the problem to strong buyer demand among retirees and other growing population groups rather than too few buildable lots. 

Home construction per household is near the lowest level in 60 years, John Rappaport, an economist at the Federal Reserve Bank of Kansas City, told the Journal. But some economists are cautious about the report’s findings, noting that most people who have trouble finding a home will work out different living arrangements, such as doubling up with family members or roommates. They also might decide to move to areas where homes are more abundant, prompting a population shift, the Journal reports. 

Debt-to-Income Ratios Rising Among Buyers | Realtor Magazine

About one in five conventional mortgage loans issued this winter went to borrowers who spent more than 45 percent of their monthly incomes on their mortgage payment and other debts. This is the highest proportion since the housing crisis, according to CoreLogic, a real estate data firm. Further, that is nearly triple the proportion of such loans issued in 2016 and the first half of 2017. 

Real estate professionals told WSJ that they are concerned a growing number of buyers are becoming priced out of the housing market. Besides rising home prices, the average 30-year fixed-rate mortgage has increased to 4.40 percent, compared to 3.95 percent at the beginning of the year, according to Freddie Mac. 

Rising mortgage rates “are working against affordability and that’s why you get the pressure to ease credit standards,” says Doug Duncan, Fannie Mae’s chief economist. That’s leading mortgage financing giants Fannie Mae and Freddie Mac to test programs aimed at making homeownership more affordable. For example, they’re experimenting with backing loans made by lenders who agree to help pay down a buyer’s student loan debt or programs that ease standards so that self-employed borrowers can get a mortgage more easily. Also, last summer, Fannie Mae and Freddie Mac started to back a greater number of loans from borrowers with debt-to-income ratios of up to 50 percent (45 percent was usually the typical limit prior). Fannie’s new policy has added 100,000 new mortgages that wouldn’t have otherwise been made last year and early this year, according to the Urban Institute. 

But housing analysts say that lenders need to be careful in opening the credit box too much, as such actions helped exacerbate the last housing crisis. Still, the share of new buyers with debt-to-income levels in the 46 percent to 50 percent range remains well below the peak of 37 percent in 2007. However, it is nearing the levels of 2004 to 2005, CoreLogic notes. Another differentiating factor is that borrowers today tend to have a better credit history and higher credit scores (700 or more), according to Inside Mortgage Finance. 

More Millennials Turn to Bank of Mom, Dad | Realtor Magazine

Rising home and rental costs are pressing millennials to expect more from their parents. About 17 percent of millennials—those born between 1981 and 1996—expect their parents to help them with their first down payment on a home, according to a report by Apartment List, based on about 13,000 responses. 

The Apartment List survey also showed about 8 percent of millennials who are not students get some form of financial help from their parents to cover monthly rent; one-third of those renters have their rent paid in full by their parents. 

Mike McCann, a real estate professional with Berkshire Hathaway HomeServices Fox & Roach in Philadelphia, says he’s seen an uptick in parental involvement when working with young adults on a home purchase. Often, he says the help is through a gift letter or a documented cash down payment gift that is part of a loan application. 

But research from the National Association of REALTORS® shows the number of young adults needing this type of assistance could be much higher. Nearly a quarter of buyers under the age of 38 used a gift from a friend or a relative to help with a down payment, according to the association’s generational trends study, released last month. 

Jessica Lautz, NAR’s director of survey research and communications, told Philly.com that one of the key indicators that more young people are relying on their parents for financial help is that one in five millennials move directly from their parents’ home into homeownership. That is the highest rate in the last 30 years, according to NAR. 

“Rents are very expensive in many areas of the country, so by skipping having to pay rent and being able to live at home, you’re able to save for a down payment faster,” Lautz says. 

Student loan debt is also an important factor. Eight in 10 student loan borrowers say they weren’t able to save for a down payment on a home purchase because of their loans, according to NAR research. More than half couldn’t qualify for a mortgage because their debt-to-income ratio is too high. 

How to Triumph in a Bidding War | Realtor Magazine

With a record low number of listings this spring, more buyers may be finding themselves in a bidding war for the home they want. CNBC recently highlighted a few tips on how buyers can be successful in a bidding war, including: 

Set the maximum price from the start. Home shoppers should factor in the monthly mortgage payment, property taxes, homeowners insurance, and any homeowner association or condo fees. They’ll want to arrive at a general estimate of maintenance for the home, too, such as lawn care and repairs. When the bidding gets too high, buyers need to be prepared to walk away. 

Pay with cash. An all-cash offer is an advantage in a bidding war. Buyers who come with cash double their chances of winning at a bidding war, according to the real estate brokerage Redfin. Some buyers will even pay all cash to win the home and then take out a mortgage after the deal closes. 

Waive the financing contingency. Buyers who waive a contingency on their loan having to be approved by a lender first may better their chances. But this can be a gamble. Home buyers need to be careful that they don’t end up having to pay in cash if the loan doesn’t go through. Buyers should get a fully underwritten loan preapproved from a lender prior to submitting an offer. They’ll stand to possibly up their chances of winning a bidding war by 58 percent with a preapproval, according to Redfin’s analysis. 

Write a personal letter to the seller. Buyers can try to appeal to sellers’ emotions and let them know that they intend to take good care of their home. Young families may write about how they intend to raise their children in the home and the life they envision there. CNBC suggested not writing about how you intend to remodel the home or do a complete makeover. Read more: This Bidding War Was Won With a Music Video

Another Week of Mostly Flat Mortgage Rates | Realtor Magazine

 

Borrowing costs haven’t budged much in recent weeks, offering some relief from the weekly rate increases that had almost become routine at the start of 2018.

“Mortgage rates have been holding steady over the past two months,” says Len Kiefer, Freddie Mac’s deputy chief economist. “Rates have bounced around 4.4 percent since mid-February. Rates could break out and head higher if inflation continues to firm. … If inflation continues to trend higher, we may see two or three more rate hikes from the Fed this year, and mortgage rates could follow. For now, mortgage rates are still quite low by historical standards, helping to support homebuyer affordability as the spring home buying season ramps up.”

Freddie Mac reports the following national averages with mortgage rates for the week ending April 12:

• 30-year fixed-rate mortgages averaged 4.42 percent, with an average 0.4 point, up from last week’s 4.40 percent average. Last year at this time, 30-year rates averaged 4.08 percent. 
• 15-year fixed-rate mortgages averaged 3.87 percent, with an average 0.4 point, holding the same average as last week. A year ago, 15-year rates averaged 3.34 percent. 
• 5-year hybrid adjustable-rate mortgages averaged 3.61 percent, with an average 0.3 point, dropping from last week’s 3.62 percent average. A year ago, 5-year ARMs averaged 3.18 percent. 

Chinese Investors Unfazed—For Now | Realtor Magazine

President Donald Trump has threatened to impose a tax on steel and aluminum from China and other countries. Both sides have threatened to impose tariffs on multiple products. In reaction, the stock market has been volatile. But will the trade disputes leave Chinese buyers skittish about U.S. real estate? 

“At this point, most Chinese buyers are cautiously optimistic,” Carrie Law, CEO of Juwai.com, a Chinese international real estate website, told RISMedia. “From all sides, you hear that this trade war is not likely to escalate to the point where it is a serious threat to international trade and relations. At this stage, most property investors seem to feel the trade war will amount to no more than a noisy argument between two friends who later will hug and make up.” 

Learn more about working with Chinese buyers.

However, Law acknowledges that a persistent trade dispute between the two sides may cast doubts in consumers’ minds that could then reduce demand for U.S. properties. “The long-term fear is counterbalanced for now by a short-term incentive to purchase before Sino-U.S. relations possibly get worse,” she says. 

Indeed, Law says Chinese buyer demand for U.S. real estate was up 26.2 percent in March month over month, based on buyer inquiries made through Juwai.com. 

In 2017, Chinese buyers made up $31.7 billion of U.S. real estate purchases made by international buyers, up from $12 billion in 2012, according to the National Association of REALTORS®’ Profile of International Activity in U.S. Residential Real Estate.