Fast-Moving Markets’ Demographic Secret?

Though we’re heading into what is traditionally a slowdown in real estate as cooler temperatures and the holiday season looms, some markets are still seeing rapidly-moving sales. According to the® September National Housing Trend Report released today, these markets have an interesting demographic similarity: large populations of engineers and Baby Boomers.

“When we see homes moving quickly in a particular market, we expect the trend to be supported by signs of local health like growth in economic production and employment,” said Jonathan Smoke, chief economist for®. “This month, we also observed more out of the ordinary trends including high proportions of math and science professionals, as well as Baby Boomers in each of the fast moving markets. As the technology industry grows and aging Baby Boomers decide to make housing moves to support their retirement, we’ll continue to see strong housing demand associated with these factors.”

Here are the 12 markets that® listed as the fastest-moving, with average properties spending less than two months on the market:

Oakland, Calif.
San Jose, Calif.
San Francisco, Calif.
Denver, Col.
Washington, DC
Seattle-Bellevue-Everett, Wash.
Houston, Texas
Los Angeles-Long Beach, Calif.
Austin-San Marcos, Texas
Omaha, Neb.
San Diego, Calif.
Melbourne-Titusville-Palm Bay, Fla.

Source: “® Data: Fastest Moving Markets Are Home to High Populations of Engineers and Baby Boomers,” Move, Inc. (Oct. 20, 2014)

Housing Starts Solidly Above Million Mark

The breaking of ground on new homes and apartments increased 6.3 percent in September to reach an annual 1.02 million-unit-pace. That’s the third time this year the rate has reached the one-million mark, which is considered a vital milestone in the homebuilding industry.

Most of the gains, however, were attributed to a surge in multifamily production, which rose 16.7 percent month-over-month, while single-family housing starts had a more modest 1.1 percent increase, according to new figures from the U.S. Census Bureau and U.S. Department of Housing and Urban Development.

Economists say the gain in housing starts and permits in September signals the new-home sector is making a modest recovery and is showing signs of strengthening.

“These numbers show starts returning to levels we saw earlier this summer, where they hovered around one million units,” says Kevin Kelly, chairman of the National Association of Home Builders. “We are hopeful this pattern of modest growth will continue as we close out the year.”

Last month, the Commerce Department reported housing starts tumbled in August by 14 percent. However, “September’s uptick reveals that last month’s dip in production was more of an anomaly than a market reversal,” says NAHB Chief Economist David Crowe. “I expect we will see a continued recovery as job creation grows and consumers gain more confidence in the housing market.”

Combined housing starts rose across the country, with the largest gains posted in the West (up 13.9 percent month-over-month), followed by the Northeast (up 5.3 percent), South (up 4.2 percent), Midwest (up 3.5 percent).

The sector will likely hold onto these gains. Permits, a measurement of future building activity, rose 1.5 percent in September to an annual rate of about 1 million units, led by a 4.8 percent gain in multifamily permits. However, single-family permits fell 0.5 percent to 624,000 units. The Northeast posted a 12.3 percent gain in permits, followed by an 8.2 percent rise in the Midwest and 5.9 percent in the West. The South reported a 4.7 percent decrease in permits in September.

Source: National Association of Home Builders and “U.S. Housing Recovery Rolls On as Groundbreaking Rises,” Reuters (Oct. 17, 2014)

Fannie, Freddie to Loosen Up on Lending

The regulator of mortgage giants Fannie Mae and Freddie Mac is reportedly working on a deal with the financing entities that will loosen up lending standards and make mortgages more affordable for those with less-than-perfect credit. The move is expected to expand home buyers’ access to financing, as tight credit the last few years has kept many sidelined.

The new rules reportedly will include a lower minimum down payment requirement (from 5 percent to 3 percent), in order for lenders to qualify to sell a loan to Fannie Mae and Freddie Mac. That would bring down payment in sync with the Federal Housing Administration, which insures loans made to lower-income borrowers and first-time buyers. Fannie Mae and Freddie Mac guarantee about 59 percent of all mortgages written.

The Federal Housing Finance Agency, which regulates Fannie and Freddie, reportedly will include more safety measures to help lenders protect themselves from making bad loans. Lenders have faced numerous high-dollar settlements after issuing loans that later defaulted. The new agreement would give greater confidence to lenders so they won’t be penalized years after a loan is made, The Wall Street Journal reports.

The potential agreement “would allow credit to flow more freely to lower- and middle-income households,” Mark Zandi, chief economist at Moody’s Analytics, told The Wall Street Journal. “That’s vital to getting the housing recovery moving forward.”

During the financial crisis, the financing giants faced steep losses as home loans defaulted. The spike was blamed on poor underwriting by lenders in ensuring that borrowers could afford their mortgages. In response, the companies, which were seized by the government in 2008, have had banks tighten their credit standards, which some critics say has gone too far and prevented many home buyers from qualifying for a home loan.

The Urban Institute has estimated that 1.2 million more mortgages would have been issued in 2012 alone if lending standards that were commonly used in 2001 were still in place.

“Understandably, after the [financial] crisis the pendulum of mortgage credit standards swung to a far extreme” Paul Leonard, California director of the Center for Responsible Lending, told the Los Angeles Times. “It’s now working its way back to a more moderate position.”

The FHFA is expected to formally announce the plans later this week.

Source: “Fannie Mae, Freddie Mac Reach Deal to Ease Mortgage Lending,” Los Angeles Times (Oct. 17, 2014) and “Mortgage Giants Set to Loosen Lending,” The Wall Street Journal (Oct. 17, 2014)

Outlook on Housing and Finances May Spur Potential Homebuyers to Act

Potential homebuyers may enter the purchase market sooner rather than later  as more Americans expect mortgage rates and home prices to climb, according to  results from Fannie Mae’s June 2013 National Housing Survey. The share of  respondents who say mortgage rates will go up during the next 12 months jumped  11 percentage points to 57 percent, the highest level in the survey’s three-year  history.

Meanwhile, consumers’ home price expectations have stayed strong in the face  of rising mortgage rates. The share of respondents who believe home prices will  go up in the next year also hit a survey high of 57 percent, while those who say  prices will go down stayed steady at 7 percent. Although sentiment toward both  the current home buying and selling environments retreated slightly, it remains  near the survey highs of last month, with 72 percent saying it is a good time to  buy and 36 percent saying it is a good time to sell.

“The spike in mortgage rate expectations this month seems to have had an  impact on a number of the survey’s indicators and may increase housing activity  in the near term by driving urgency to buy,” said Doug Duncan, senior vice  president and chief economist at Fannie Mae. “Consumers may recognize that  today’s still favorable mortgage rates and homeownership affordability levels  will recede over time. Given rising home and rental price expectations and  improving personal financial attitudes, more prospective homebuyers may be  deciding that now is the time to get off the fence.”

Among those surveyed, 56 percent say rental prices will go up during the next  year – an 8 percentage point increase and the highest level since the survey’s  inception – and the average 12-month rental price change expectation jumped 1.2  percent to 4.6 percent. Americans’ outlook on their personal finances also  increased significantly in June. The share who expect their personal financial  situation to improve during the next year climbed to 46 percent, the highest  level since June 2010. The share who say their household income is significantly  higher than it was 12 months ago jumped 6 percentage points to a survey high 26  percent.

Other survey highlights include:

  • At 3.8 percent, the average 12-month home price change expectation fell  slightly from last month’s survey high.
  • The share of people who say home prices will go up in the next 12 months hit  a survey high 57 percent, while those who say home prices will go down held  steady at the survey low 7 percent.
  • The share of respondents who say mortgage rates will go up increased 11  percentage points to 57 percent, the highest level since the survey’s  inception.
  • Forty-seven percent of respondents think it would be easy for them to get a  home mortgage today, a slight increase over last month.The percentage of people  who expect their personal financial situation to get better over the next 12  months jumped to 46 percent, the highest level since June 2010.
  • The share of respondents who say their household income is significantly  higher than it was 12 months ago rose 6 percentage points to a survey high 26  percent.
  • The percentage of respondents who say their household expenses are  significantly higher than they were 12 months ago rose to 36 percent.

850,000 Properties Bounce Back to Positive Equity

Residential property analytic provider CoreLogic® recently released new analysis  showing the market is making big moves, with 850,000 additional residential  properties turning to positive equity during the first quarter of  2013.

In addition, the analysis shows good news for mortgages: the total  number of mortgaged residential properties standing in negative equity is down  by nearly 1 million from the previous quarter, moving from 10.5 million (21.7  percent) at the end of the fourth quarter of 2012, to 9.7 million (19.8 percent)  in the first quarter of 2013.

The national aggregate value of negative  equity decreased more than $50 billion to $580 billion at the end of the first  quarter from $631 billion at the end of the fourth quarter of 2012. This  decrease was driven in large part by an improvement in home prices.

Of  the 39 million residential properties with positive equity, 11.2 million have  less than 20 percent equity. At the end of the first quarter of 2013, 2.1  million residential properties had less than 5 percent equity, referred to as  near-negative equity. Under-equitied mortgages accounted for 23 percent of all  residential properties with a mortgage nationwide in the first quarter of 2013.  The average amount of equity for all properties with a mortgage is 32.8  percent.

“The impressive home price gains of 2012 and the beginning of  2013 have had a big impact on the distribution of residential home equity,” says  Dr. Mark Fleming, chief economist for CoreLogic. “During the past year, 1.7  million borrowers have regained positive equity. We expect the pent-up supply  that falling negative equity releases will moderate price gains in many of the  fast-appreciating markets this spring.”

“The negative equity burden  continues to recede across the country thanks largely to rising home prices,” says Anand Nallathambi, president and CEO of CoreLogic. “We are still far below  peak home price levels, but tight supplies in many areas coupled with continued  demand for single family homes should help us close the gap.”

Highlights  as of Q1 2013:

– Nevada had the highest percentage of mortgaged  properties in negative equity at 45.4 percent, followed by Florida (38.1  percent), Michigan (32 percent), Arizona (31.3 percent) and Georgia (30.5  percent). These top five states combined account for 32.8 percent of negative  equity in the U.S.
– Of the largest 25 metropolitan areas, Tampa-St.  Petersburg-Clearwater, Fla. had the highest percentage of mortgaged properties  in negative equity at 44.1 percent, followed by Miami-Miami Beach-Kendall, Fla.  (40.7 percent), Atlanta-Sandy Springs-Marietta, Ga. (34.5 percent),  Chicago-Joliet-Naperville, Ill. (34.2 percent) and Warren-Troy-Farmington Hills,  Mich. (33.6 percent).
– Of the total $580 billion in negative equity, first  liens without home equity loans accounted for one-half, or $290 billion  aggregate negative equity, while first liens with home equity loans accounted  for the remaining half at $290 billion.
– 6.0 million upside-down borrowers  hold first liens without home equity loans. The average mortgage balance for  this group of borrowers is $211,000. The average underwater amount is  $48,000.
– 3.7 million upside-down borrowers hold both first and second  liens. The average mortgage balance for this group of borrowers is $294,000.The  average underwater amount is $79,000.
– The bulk of home equity for mortgaged  properties is concentrated at the high end of the housing market. For example,  88 percent of homes valued at greater than $200,000 have equity compared with 73  percent of homes valued at less than $200,000.

“As leaders and agents, it  is up to us to get the word out,” said Gary Scott, President of Long &  Foster Real Estate, during RISMedia’s recent Power Broker Forum at NAR Midyear. “There is a huge opportunity for people who had negative equity to come back  into the market. We have to help those sellers. It’s about a grass roots  effort—about taking your sphere of influence and walking them through the  reality of the market.”

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All About Short-Sales

Thinking of Making an Offer on a Short Sale?  What You Need to Know…

Are you looking to buy a new home? Are you thinking that now’s a great time to find bargains? That’s true, but it pays to know a little about the seller’s situation before you make an offer.

If a home is being sold for below what the current seller owes on the property-and the seller does not have other funds to make up the difference at closing-the sale is considered a short sale. Many more home owners are finding themselves in this situation due to a number of factors, including job losses, aggressive borrowing against their home in the days of easy credit, and declining home values in a slower real estate market.

A short sale is different from a foreclosure, which is when the seller’s lender has taken title of the home and is selling it directly. Homeowners often try to accomplish a short sale in order to avoid foreclosure. But a short sale holds many potential pitfalls for buyers. Know the risks before you pursue a short-sale purchase.

You’re a good candidate for a short-sale purchase if:

• You’re very patient. Even after you come to agreement with the seller to buy a short-sale property, the seller’s lender (or lenders, if there is more than one mortgage) has to approve the sale before you can close. When there is only one mortgage, short-sale experts say lender approval typically takes about two months. If there is more than one mortgage with different lenders, it can take four months or longer for the lenders to approve the sale.

• Your financing is in order. Lenders like cash offers. But even if you can’t pay all cash for a short-sale property, it’s important to show you are well qualified and your financing is set. If you’re preapproved, have a large down payment, and can close at any time, your offer will be viewed more favorably than that of a buyer whose financing is less secure.

• You don’t have any contingencies. If you have a home to sell before you can close on the purchase of the short-sale property-or you need to be in your new home by a certain time-a short sale may not be for you. Lenders like no-contingency offers and flexible closing terms.

If you’re serious about purchasing a short-sale property, it’s important for you to have expert assistance. Here are some people you want to work with:

• Experienced real estate attorney. Only about two out of five short sales are approved by lenders. But a good real estate attorney who’s knowledgeable about the short-sale process will increase your chances getting an approved contract. Also, if you want any provisions or very specialized language written into the purchase contract, a real estate attorney is essential throughout the negotiation.

• A qualified real estate professional.* You may have a close friend or relative in real estate, but if that person doesn’t know anything about short sales, working with him or her may hurt your chances of a successful closing. Interview a few practitioners and ask them how many buyers they’ve represented in a short sale and, of those, how many have successfully closed. A qualified real estate professional will be able to show you short-sale homes, help negotiate the purchase when you find the property you want to buy, and smooth communications with the lender. (All MLSs permit, and some now require, special notations to indicate that a listing is a short sale. There also are certain phrases you can watch for, such as “lender approval required.”)

• Title officer. It’s a good idea to have a title officer do an initial title search on a short-sale property to see all the liens attached to the property. If there are multiple lien holders (e.g., second or third mortgage or lines of credit, real estate tax lien, mechanic’s lien, homeowners association lien, etc.), it’s much tougher to get that short sale contract to the closing table. Any of the lien holders could put a kink in the process even after you’ve waited for months for lender approval. If you don’t know a title officer, your real estate attorney or real estate professional should be able to recommend a few.

Some of the other risks faced by buyers of short-sale properties include:

• Potential for rejection. Lenders want to minimize their losses as much as possible. If you make an offer tremendously lower than the fair market value of the home, chances are that your offer will be rejected and you’ll have wasted months. Or the lender could make a counteroffer, which will lengthen the process.

• Bad terms. Even when a lender approves a short sale, it could require that the sellers sign a promissory note to repay the deficient amount of the loan, which may not be acceptable to some financially desperate sellers. In that case, the sellers may refuse to go through with the short sale. Lenders also can change any of the terms of the contract that you’ve already negotiated, which may not be agreeable to you.

• No repairs or repair credits. You will most likely be asked to take the property “as is.” Lenders are already taking a loss on the property and may not agree to requests for repair credits.

The risks of a short sale are considerable. But if you have the time, patience, and iron will to see it through, a short sale can be a win-win for you and the sellers.

For more information regarding Truckee real estate short-sale properties and north Lake Tahoe real estate short-sale properties, please contact me.

* Not all real estate practitioners are REALTORS®. A REALTOR® is a member of the NATIONAL ASSOCIATION OF REALTORS® and is bound by NAR’s strict code of ethics.

Note: This article provides general information only. Information is not provided as advice for a specific matter. Laws vary from state to state. For advice on a specific matter, consult your attorney or CPA.