Yajnesh Rai

30-Year Mortgage Rate Hits New 2017 Low | Realtor Magazine

 

Borrowers applying for a 30-year fixed-rate mortgage this week locked in the lowest rate of the year, as it dropped to its lowest average since November 2016, Freddie Mac reports. Additionally, “the 10-year Treasury yield fell 6 basis points this week amid concerns over lagging inflation,” says Freddie Mac chief economist Sean Becketti.

Freddie Mac reported the following national averages with mortgage rates for the week ending Aug. 24:

• 30-year fixed-rate mortgages: averaged 3.86 percent, with an average 0.5 point, dropping from last week’s 3.89 percent average. Last year at this time, 30-year rates averaged 3.43 percent.
• 15-year fixed-rate mortgages: averaged 3.16 percent, with an average 0.5 point, the same average as last week. A year ago, 15-year rates averaged 2.74 percent.
• 5-year hybrid adjustable-rate mortgages: averaged 3.17 percent, with an average 0.5 point, rising from last week’s 3.16 percent average. A year ago, 5-year ARMs averaged 2.75 percent.

Jumbo Loans Get Less Expensive | Realtor Magazine

The interest rate for jumbo loans—those greater than $421,100—dropped five basis points last week, averaging 3.99 percent for the week. That is now 13 basis points lower than the conforming rate, which is the largest spread between jumbo rates and the conforming rate since March 2016, according to the Mortgage Bankers Association.

“A strong appetite for jumbo loans and a highly competitive jumbo market has led to increased availability and lower pricing,” says Joel Kan, an MBA economist. Sales on the higher end of the market are increasing, which also explains the stronger demand for jumbo loans lately.

Meanwhile, sluggish inventory levels of homes for sale on the lower end are keeping applications down, according to the MBA. Total mortgage application activity—for refinancings and home purchases—inched down by 0.5 percent week over week on a seasonally adjusted basis, the MBA reported. This marks the second consecutive week that applications have barely budged.

Applications for refinancings last week eked out a 0.3 percent increase from the previous week, but remain 38 percent lower than the same week a year ago, when rates were lower. Mortgage applications to purchase a home dropped 2 percent for the week. Still, purchase applications are 9 percent higher than the same week one year ago, the MBA reports.

The 30-year fixed-rate mortgage averaged 4.12 percent last week, the lowest rate since last November.

58% Of Homeowners Think The Housing Market Is Set For A Correction–Are Bubble Fears Founded?

“The market is expensive, competitive and unaffordable, but there is no evidence of a bubble ” notes Nela Richardson, chief economist at Redfin

In each of the six months from December through May, the most recent month for which data is available, national homes prices set new highs. Home price growth has outpaced wage growth and inflation. So perhaps it is not too surprising that a new survey has found that more than half of homeowners expect home prices to decline in the not too distant future. Of 1,079 adults surveyed by Value Insured, a provider of down payment protection, 58% agreed with the notion there will be a “housing bubble and price correction” in the next two years. That’s up from 46% last quarter. Meanwhile, 83% of respondents believe it’s a good time to sell.

Over the past five decades home price cycles have tended to last seven to ten years. The last up-cycle was an exception, running 17 years before home prices crashed spectacularly in 2006 and finally began a sustained rebound in 2012. “Historical precedence is now on the side of those who think a housing market correction is near,” says Ralph McLaughlin, chief economist at home search site Trulia. It is possible, he notes, that the new norm is closer to 17 years. 

Being due for a correction does not necessarily equal a bubble. Corrections “can occur for many reasons that are unrelated to bubbles, such as a slowdown in macroeconomic activity, consumer demand, etc,” explains McLaughlin. “An asset bubble has a very specific meaning: when consumers and/or investors are willing to pay more for an asset just because others are doing it or because they think prices will increase indefinitely.” Think tulips, Beanie Babies and, yes, housing in the previous decade.

Economists see few, if any, signs of history repeating itself now.

“The market is expensive, competitive and unaffordable, but there’s no evidence of a bubble,” notes Nela Richardson, chief economist at (newly public) brokerage Redfin.

A defining factor in a housing market bubble is home price growth that is unsustainable or unsupported. A decade ago, the housing market was fueled by exotic mortgages and lax underwriting that allowed people to take on more debt than they could afford.What we have today is actually a very conservative and equity-driven market. We are seeing buyers in the hottest housing markets making sizable down payments, if not all-cash offers. Thus, unlike in the subprime boom, there’s equity that is supporting price growth along with good local economic drivers like job growth.”

In the most recent release of the monthly S&P CoreLogic Case-Shiller Home Price Indices, Managing Director David Blitzer declared that housing was not in bubble territory, because the amount prices have increased varies from city to city. During the bubble, price growth was nearly universal. Plus, the number of homes sold today is 20% below the pre-crash peak. That does not mean the housing market is without flaws. Mortgages are hard to get without stellar credit. Fewer homes are selling annually. And there’s just a four-month supply of homes available for sale–not nearly enoughto meet growing demand. But all of that is supporting price growth.

 

But perhaps the best evidence that we are not in a housing bubble is that people are talking about it. “It is healthy for buyers to have a little bit of skepticism in the market,” says Danielle Hale, chief economist for Realtor.com.

The biggest contributor to the housing boom and bust last time was speculation. People got in expecting that prices would never fall and builders built expecting that prices would never fall. And everyone turned out to be wrong. The skepticism we are seeing from homeowners this time suggests that attitude that home prices can never come down is definitely not present. So we are getting much more fundamental demand from natural growth in households and builders are building to meet that actual growth in households. It is a much more sustainable situation.”

In their survey ValueInsured found that Millennials, which they define as adults 34 and under and are the main drivers of new demand, are particularly wary of making a bad investment. This is in part because many are uncertain they can remain in a home long enough for their investment to pay off. (Expert typically recommend staying in a home for seven years or more to limit exposure to price volatility.)

“I just caution people against looking at their house as an investment versus as a place to live,” says Svenja Gudell, chief economist at Zillow. “If you have a ton of money and you’re wondering: ‘should I park it in a bunch of homes or should I invest in other ways?’ Our research has proven the returns are higher investing otherwise. But you still have to live somewhere, so it still makes more sense to buy a house that to rent.” 

4 Ways to Cut Kitchen Remodeling Costs | Realtor Magazine

Kitchen remodels don’t come cheap. The average cost to update a 200-square-foot kitchen—including installing new flooring, semicustom wood cabinets, and standard appliances—is a whopping $62,000, according to Remodeling Magazine. Homeowners who want to add in more luxurious touches, such as stone countertops, a commercial-grade cooktop, designer faucets, and top-of-the-line custom cabinets, may pay as much as $123,000.

Before your clients gut their kitchen, advise them to consider more affordable options that can still make a big impact at resale. The New York Times recently spoke with designers to get some of their best budget-friendly tips for remodeling a kitchen.

Try painting or resurfacing cabinets instead of replacing them. “A bold color and modern hardware can breathe new life into old, ordinary cabinetry,” interior designer CeCe Barfield Thompson told the Times. She gave her own 1990s-era kitchen a makeover by painting the cherry wood cabinets a smokestack gray color. She also covered pea-green tile floors with a parquet charcoal laminate surface. She says the renovations cost her $7,050, which included the labor, laminate flooring, paint, and new cabinet handles and drawer pulls.

You can also reface or resurface dated cabinets, keeping the existing cabinet framework and replacing the doors, drawer fronts, and side panels. New York–based designer Carolyn DiCarlo, who used this approach when working on a Manhattan loft, says new cabinets would have cost about $22,000—but the price to reface was just $2,500.

Consider alternative materials for countertops. Instead of choosing high-end items such as quartz or stone, go for less expensive options such as butcher block. This material can be purchased for as low as $99 in standard sizes. “It’s kind of like having a built-in cutting board throughout your kitchen,” says Kimberly Winthrop, an interior designer in Santa Monica, Calif. She says she paid $500 for a 20-foot butcher block to use in a recent kitchen makeover. But it requires some maintenance: Butcher block typically needs to be sanded and oiled twice a year.

Keep the layout intact. “Moving walls, electrical, and plumbing is where installation costs spike,” says Dana Hudson, divisional merchandising manager for kitchens at Home Depot. Mina Fies, a Reston, Va.–based designer and creator of RenovationRoadmap.com, recalls a client who wanted to reconfigure the kitchen walls to allow for more natural light. The layout changes would have required moving plumbing. Fies says she was able to show the client a design that met her needs but did not open up the walls, instead installing recessed lighting, pendant lights, and under-cabinet lighting. The client saved $8,000, Fies says.

New Home Inventory at 20-Year Low | Realtor Magazine

Builders failed to ramp up inventories last month, despite increasing demand from home buyers and calls from the real estate industry. New-home construction dropped 4.8 percent in July to a seasonally adjusted annual rate of 1.16 million units, the U.S. Department of Housing and Urban Development and Commerce Development reported Wednesday.

Single-family production fell 0.5 percent month over month in July to an adjusted annual rate of 856,000. The July reading does follow a strong, upwardly revised June reading, the National Association of Home Builders notes. Single-family starts are 8.6 percent higher than a year ago.

Multifamily starts, meanwhile, plunged 15.3 percent last month to 299,000 units.

“New-home production numbers this month are in line with our forecast for a slow and steady recovery of the housing market,” says Robert Dietz, NAHB’s chief economist. “We saw multifamily production peak in 2015, and this sector should continue to level off as demand remains solid.”

Overall, inventories of homes for sale are at a 20-year low, according to realtor.com® data. Economists have been calling for new-home construction to help make up the shortfall in the market.

“The housing shortage in America will intensify if new construction remains as lackluster as it was in July,” Lawrence Yun, the National Association of REALTORS®’ chief economist, said in a statement. “The softening multifamily housing starts brought down the overall new housing unit additions to the second lowest monthly activity this year. Moreover, the latest 15 percent drop in multifamily housing starts and 0.5 percent drop in single-family starts will hold back economic growth potential. Because of this shortage, expect rents and home prices to rise by at least twice as fast as the broad consumer price index.”

Regionally, combined single-family and multifamily housing production increased only in the South in July, inching up 0.6 percent month over month. Housing starts posted a 15.7 percent month-over-month drop in the Northeast, a 15.2 percent drop in the Midwest and fell by 1.6 percent in the West.

Housing permits, a gauge of future construction, dropped 4.1 percent to a seasonally adjusted annual rate of 1.22 million units. Single-family permits mostly held steady at 811,000 units while multifamily permits dropped 11.2 percent to 412,000.

Report: 1 in 4 Homes Now Equity Rich | Realtor Magazine

Homeowners should be feeling richer. At the end of the second quarter, more than 14 million U.S. properties were considered equity rich. (That means the combined loan amount secured by the property was 50 percent or less of the estimated market value of the property.)

Nearly 320,000 properties joined the “equity rich” category during the second quarter over the first quarter. Further, the number of equity rich properties is now up more than 1.6 million properties compared to a year ago, according to ATTOM Data Solutions’ Q2 2017 U.S. Home Equity & Underwater report.

The number of equity rich properties in the U.S. now represents 24.6 percent of all properties with a mortgage in the country.

“An increasing number of U.S. homeowners are amassing impressive stockpiles of home equity wealth, enjoying the benefits of rapidly rising home prices while staying conservative when it comes to cashing out on their equity—homeowners are staying in their homes nearly twice as long before selling as they were prior to the Great Recession, and the volume of home equity lines of credit are running about one-third of the level they were at during the last housing boom,” says Daren Blomquist, senior vice president at ATTOM Data Solutions. “However, this home equity wealth is unevenly distributed across different geographies, value ranges, occupancy statuses and lengths of ownership, with a disproportionately high equity rich share among high-end properties, investor-owned properties, and properties owned for more than 20 years.”

The states with the highest share of equity rich properties at the end of the second quarter were Hawaii (38.3 percent), California (36.6 percent), New York (34.2 percent), Vermont (33.5 percent), and Oregon (32.2 percent).

On a metro level, the areas with populations of 500,000 or more with the highest share of equity rich properties were San Jose, Calif. (52 percent); San Francisco (47 percent); Los Angeles (40 percent); Honolulu (40 percent); and Portland, Oregon (35 percent).

Buyers Want Bigger Yards Over Bigger Homes | Realtor Magazine

A property that offers a great outdoor space is taking a higher priority among home buyers. In fact, home shoppers recently surveyed said they would be willing to sacrifice some space from a larger house in order to get a bigger yard.

More than half of 1,000 buyers recently surveyed—or 56 percent—said they’d be willing to sacrifice square footage in a home for a great outdoor space. The survey was conducted by Wakefield Research on behalf of Taylor Morrison, a national home builder.

Survey respondents also rated the home’s distance to neighboring homes as the most important exterior feature. Forty-eight percent of millennials and 53 percent of nonmillennials believe the extra buffer is important, even more so than other curb appeal elements like siding, driveway styles, exterior paint colors, and roofing finishes. Women wanted outdoor space more than men (62 percent of women surveyed say they prefer less home square footage for a larger yard, compared to 51 percent of men).

“Demand for more elaborate exterior space continues to rise, and blending indoor-outdoor living to address customer preferences is critical to our success,” says Sheryl Palmer, Taylor Morrison’s CEO. Palmer notes that the findings come at a time when land prices are escalating and local approvals have forced smaller lot sizes.

In response, Taylor Morrison has been ramping up its properties: adding outdoor living rooms, floor-to-ceiling retractable glass walls that open to the backyard, and matching tile flooring that extends from the home’s interior to exterior for a seamless flow to the outdoor space.

Survey respondents were asked what they would spend an extra $10,000 to $15,000 on in their new home. Outdoor living items topped the list, edging out upgraded cabinets and kitchen islands.

“Outdoor living is no longer an afterthought to a home’s construction,” says Charlie Enochs, Taylor Morrison area president for the central region.

Will These Lower Rates Entice Buyers? | Realtor Magazine

Fixed-rate mortgages continued to drop this week, lowering borrowing costs for home buyers.

“Following a mild decline last week, the 10-year Treasury yield rose 1 basis point this week,” says Sean Becketti, Freddie Mac’s chief economist. “The 30-year mortgage rate similarly remained relatively flat, falling just 1 basis point to 3.89 percent. Mortgage rates are continuing to hold at low levels amidst ongoing economic uncertainty.”

Freddie Mac reports the following national averages with mortgage rates for the week ending Aug. 17:

• 30-year fixed rate mortgages: averaged 3.89 percent, with an average 0.4 point, dropping from last week’s 3.90 percent average. Last year at this time, 30-year rates averaged 3.43 percent.
• 15-year fixed-rate mortgages: averaged 3.16 percent, with an average 0.5 point, falling from last week’s 3.18 percent average. A year ago, 15-year rates averaged 2.74 percent.
• 5-year hybrid adjustable-rate mortgages: averaged 3.16 percent, with an average 0.4 point, rising from last week’s 3.14 percent average. A year ago, 5-year ARMs averaged 2.76 percent.

Agents Sell Homes For More Than FSBOS: Study

Contradicting previous research, new study finds FSBOs sell at discount

Key Takeaways

• Agents tend to achieve higher sales prices for properties than comparable FSBO listings, enough to offset their commission fee, according to a recent analysis.

Academic research has often cast doubt on the value of real estate agents, but a new study will come as music to their ears.

It suggests that homeowners will net roughly the same proceeds whether they sell through a real estate agent or take the FSBO (for-sale-by-owner) route.

That’s because agents tend to achieve higher sales prices for properties than comparable FSBO listings — enough to offset their commission fee, according to an analysis released by automated valuation model (AVM) provider Collateral Analytics.

This makes a strong case for hiring an agent, considering that agents allow homeowners to reduce the work, risk, and time of selling a home, said Dr. Michael Sklarz, the CEO of Collateral Analytics and a co-author of the study.

“Overall it is clear that FSBOs have a low probability of selling, and if they do they will likely net the same or less after closing issues, plus they are more likely to screw up on disclosures which may lead to lawsuits after the fact, when buyers discover material facts not disclosed,” added Norman Miller, who produced the study with Sklarz and is a real estate professor at the University of San Diego.

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The study looked at more than 200,000 FSBO sales and one million MLS sales that took place across hundreds of markets in 2016 and 2017.

To control for property attributes, such as home size and location, the authors took what they said was an original approach: they compared sales of MLS listings and sales of FSBO listings to automated valuations of those properties.

They found that on average, FSBO listings sold for about 5.5 percent less than comparable properties sold through the MLS, with FSBO listings tending to sell for a little less than their automated valuations and MLS listings tending to sell for a little more. The valuations were generated by Collateral Analytics’ software.

When they controlled for property characteristics in two other ways, the authors uncovered a similar price differential.

The 5.5 percent differential “is remarkably close to average commission rates,” the authors noted.

The study offered several potential reasons why agents can produce a price premium.

For one, they possess marketing expertise, including knowledge of how to stage a home and the best repairs to make, the study points out.

Second, in contrast to FSBO listings, MLS listings are generally syndicated to broker websites, exposing the home to a “much larger buyer population.”

Lastly, MLS listings may attract more showings (and bids) because they offer compensation to buyer’s brokers for bringing a buyer to a sale — whereas FSBO listings often do not.

“It appears that many sellers [FSBO sellers] are avoiding commissions while netting home prices less than they would with an agent-represented MLS sale,” the authors wrote. “They are avoiding commissions at any price, even one that exceeds the commission rate.”

The possibility that “buyers do make low-ball offers to FSBO sellers deducting the entire commission, not just the seller’s portion” from their offers would explain the study’s results, they added.

Sklarz elaborated on this last point by email.

“If [buyers] assume the [FSBO] list price is fair compared to other homes in the market that are listed primarily on the MLS, then they might also feel that the seller is netting the same thing as they would if they had listed it at the same price with a broker,” he said.

“I’ve heard this logic directly from buyers who took the full commission and deducted it feeling that what the seller really needed was a sale and that the net offer some 6% or so below the asking price was a way to provide the same net.”

The analysis stands apart from related academic research in that it essentially offers a ringing endorsement of agents.

Past studies generally have shown that MLS listings sold more often and sold faster than FSBO listings. But they found virtually no difference between the sales prices of comparable FSBO and MLS listings, undercutting the common claim by agents to sell homes for more.

What could account for the contradiction between the Collateral Analytics study and past research?

The authors said that previous studies often focused on one metro area and used much smaller data samples. They also implied that data from past studies reflected abnormal market conditions.

“[We] think the reason is that they used crude comparison techniques,” Sklarz said by email. “That is, they mostly did aggregate comparisons while here we do a micro level individual property control study, the most detailed ever undertaking.”

“Maybe the academics were trying to show that broker’s were not earning their keep?” he added. “We don’t know, but we had no apriori expectation of a result and it just happened that our results show the opposite.”

The study comes with at least two caveats.

First, the company that produced the study, Collateral Analytics, is a provider of AVM software to real estate brokers, among other customers. That would seem to create a conflict of interest.

Second, the study defines a FSBO listing as a non-MLS listing.

However, many FSBO services now allow homesellers to purchase an MLS listing. (They list the properties as licensed brokers or through third-party brokers and provide limited or no additional service.)

It’s possible that FSBO properties listed in the MLS might sell for higher prices than comparable FSBO listings not in the MLS, Sklarz acknowledged, which would complicate the study’s findings.

Foreign Buyers Spend 30% More on Homes | Realtor Magazine

Foreign buyers continue to outspend domestic buyers in the U.S.

From April 2016 to March 2017, properties purchased by foreign buyers had a median price of $302,290. That is 30 percent more than the median purchase price of $235,792 for all existing homes sold in the U.S. during that period, according to the National Association of REALTORS®’ 2017 Profile of International Activity in U.S. Residential Real Estate.

In a further examination of averages, the average price among foreign buyers is actually closer to $536,900—or double the average price of domestic buyers at $277,700, according to NAR.

Chinese buyers typically buy the priciest properties. They also tend to gravitate toward central cities and suburban areas that tend to have higher property prices, such as in California, New Jersey, and New York.

Foreign buyers are also more likely to pay in cash than use financing for their home purchase. Foreign buyers from Canada and China are the most likely to make all-cash purchases.