Yajnesh Rai

10 Cities With Biggest Housing Recoveries | Realtor Magazine

Real estate markets in many cities are now even stronger than they were before the most recent housing crash. Last year, the national median home price rose to $227,000—even higher than its 2005 peak of $220,400. Home prices nationally have grown 26 percent since hitting bottom in 2011. At the local level, some markets are doing better than others.  

Realtor.com® analyzed the 150 largest metros in the country to find the cities that have rebounded the most through 2016. The site factored in each city’s peak prerecession home prices and their lowest levels during the downturn. Additionally, researchers measured each metro’s recovery according to the amount of new-home construction in each area, foreclosures, unemployment rates, and the household income of its residents in 2016.

Realtor.com® found that the cities with the greatest recoveries tended to have colleges, research centers, a diversified economy, and an educated workforce that helped attract new businesses. Here are the 10 biggest comeback cities:

1. San Jose, Calif.
   Post-crash price growth (since the city’s low in 2011): 57%
2. San Francisco
   Post-crash price growth (since 2011): 53%
3. Portland, Ore.
   Post-crash price growth (since 2011): 43%
4. Grand Rapids, Mich.
   Post-crash price growth (since 2011): 30%
5. Provo, Utah
   Post-crash price growth (since 2009): 38%
6. Colorado Springs, Colo.
   Post-crash price growth (since 2009): 26%
7. North Port, Fla.
   Post-crash price growth (since 2011): 51%
8. Charlotte, N.C.
   Post-crash price growth (since 2009): 33%
9. Boise, Idaho
   Post-crash price growth (since 2011): 48%
10. Reno, Nev.
    Post-crash price growth (since 2011): 77%

5 Reasons to Consider Selling Your Home in Today’s Market | HuffPost

Even for those who avoided economics like the plague in college, there remains one golden rule of markets that nearly anyone can still recite: buy low, sell high. As this relates to the current housing market, homeowners are witnessing unprecedented leverage as buyer demand continues to spike while inventory (e.g. homes for sale) remains historically low.

Across the U.S., this trend of a seller’s market offers great allure to those considering putting their home up for sale, from the prospect of receiving highly coveted cash offers to fetching multiple bids at above asking price.

As for how long this trend will continue, no one can say for certain, but the following five market indicators suggest why potential sellers should consider pulling the trigger sooner rather than later:

1) Higher home prices – According to Real Estate Appreciation Data, homes have appreciated by double-digit percentages in nearly all 50 states over the past five years. While this isn’t too surprising considering that the U.S. was still recovering from the Great Recession in 2012, there are signals that we are closer to the end of an upward-economic cycle than the beginning.

2) Inventory crunch – From northern California to northern New England buyers are highly active with fewer homes available for purchase. For the start of this year’s spring sales season, the number of homes on market in March 2017 is down 13% from the same time last year, and 30% from March 2010.

3) Historically low interest rates, but who knows for how long – at their March 15th meeting, the Federal Reserve raised interest rates by a quarter of a percentage point with market analysts predicting two more rate hikes expected by the end of 2017. While there is no direct correlation between interest rates and mortgage rates, they typically tend to rise in tandem which means the days of 30-year fixed rate mortgages at 4% may be numbered. Experts predict that once these rates hit 5% (potentially in 2018), home prices will begin to drop.

4) Global and domestic influences – There are a number of things happening in the global geopolitical landscape that could affect stock markets and mortgage rates. A win by Marine Le Pen in the May 7th French presidential election could push domestic mortgage rates lower in the short-term, while Donald Trump’s tax plan would potentially drive them up. As Tim Lucas at the Mortgage Reports points out:

Lower taxes → Economic activity → Higher inflation → Rising mortgage rates

This all amounts to uncertainty in the future, bolstering the case for homeowners to act with what we know to be true in today’s market.

5) Low unemployment, higher wages: Based on data from the U.S. Department of Labor and Statistics, the unemployment rate has fallen steadily since February 2010 with the current rate holding steady at 4.5%. This fact coupled with increased wage earnings means that buyers have more discretionary income for big ticket items including homes. Should this trend reverse, there would likely be a slow-down in buyer activity in real estate.

So what does this all mean for potential sellers?

As with all market activity, some homeowners will be better positioned to capitalize on the current seller’s market than others. The fact that selling a home typically requires sellers to become buyers, may be enough of a reason for homeowners to stay put. That said, here are a few examples of situations where it may make most sense to test the waters by listing a home to see what price it could fetch right now:

• Ability to sell and rent: for older couples and retirees who no longer need to chase equity and are willing to sell their home and rent another, the market is ripe to make the move.
• Virtual workers: for people who are tied to their jobs, but aren’t required to commute to the office, it may make sense to sell your home in a major metro market and move to a less-densely populated area where buyer demand and home prices are typically lower.
• Rental properties: If you moved for job, but kept your old house as a rental property and have found yourself less than enthusiastic about being a landlord, this could be the ideal time to cash out and walk away with a sizable profit knowing that appreciation rates may be nearing their peak.
• Mortgage paid off: for the lucky few who have stayed in their homes long enough to pay off their mortgage entirely, you may want to consider selling your current home with the ability to pay cash on your next property.

Bad Credit Can Triple Home Insurance Costs | Realtor Magazine

Homeowners with a bad credit score can expect to pay double—in some cases, even nearly triple—what owners with solid credit pay for their home insurance, according to a new state-by-state study by insuranceQuotes.

Policyholders with fair credit pay an average of 36 percent more than those with excellent credit, the study found. When a consumer’s credit is poor, premiums can more than double, increasing an average of 114 percent.

“Many consumers aren’t even aware that, in most states, credit plays a significant role in determining how much you pay for home insurance,” says Laura Adams, senior insurance analyst of insuranceQuotes. “So, even if you don’t plan on using credit to borrow money, it still affects your finances.”

Consumers in these states saw the greatest spike in home insurance premiums when their credit was poor:

• South Dakota: 288.1%
• Arizona: 268.6%
• Oklahoma: 248%
• Nevada: 235.3%
• Oregon: 234.9%

On the other hand, consumers in these states saw the smallest increase:

• North Carolina: 0.2%
• Florida: 25.7%
• New York: 29.3%
• Wyoming: 43.9%
• Hawaii: 53.1%

The list excludes California, Massachusetts, and Maryland, which prohibit the use of credit scores when setting home insurance rates, the authors note.

First-Time Buyers Aren’t Afraid of Renovation | Realtor Magazine

First-time home buyers are showing a strong desire for taking on remodeling projects. First-time buyer renovators in 2016 spent $33,800, on average, on their projects. That marks a 22 percent increase over 2015, according to the sixth annual Houzz & Home survey of more than 100,000 respondents in the U.S.

Average Investment in Living Spaces

Here is what remodelers spent in renovating their homes in 2016:

• Kitchens: $19,100
• Master bathrooms: $11,700
• Living/family rooms: $5,400
• Master bedroom: $3,400
• Laundry room: $2,800
• Dining rooms: $2,600
• Guest bedrooms: $1,900

Source: “Houzz & Home Survey,” Houzz (May 4, 2017)

“Younger and cash-constrained first-time buyers are responding to the low inventory of affordable homes by purchasing properties that require more than just cosmetic upgrades,” says Nino Sitchinava, Houzz principal economist. “Not surprisingly, we are seeing their spending on home renovations increasing significantly in 2016 and expect this trend to continue through 2017.”

Both first-time and repeat buyers are taking on larger scope projects, such as remodeling up to four rooms at the same time, the Houzz survey shows. Kitchen and bathrooms continue to be the most popular rooms in the house to renovate.

And while “recent home buyers drive a significant share of home renovations today, repeat buyers are investing twice as much in their home as first-time home buyers,” Sitchinava notes.

Baby boomers and earlier generations, who are age 55-plus, continue to spend three time more than millennial homeowners aged 25 to 34.

Overall, homeowners spent $60,400 in 2016 on home renovation projects, up from a $59,800 average in 2015.

Loan Applications to Buy Spring Ahead 5% | Realtor Magazine

Home buyers are returning to the mortgage market, undeterred by rising mortgage rates.

Mortgage applications to buy a home, viewed as a gauge of future home-buying activity, climbed 4 percent last week on a seasonally adjusted basis. Purchase applications are now nearly 5 percent higher than a year ago, the Mortgage Bankers Association reported Wednesday.

“More prospective home buyers returned to the market after two weeks of decreases in purchase activity, which were possibly due to spring break season and Easter,” says Joel Kan, the MBA’s associate vice president of industry surveys and forecasting.

Home buyers were unfazed by higher rates last week. The average 30-year fixed-rate mortgage was 4.23 percent, up from 4.20 percent the week prior, MBA reports.

The higher rates did cause homeowners to back off of refinancing, however. Refinancing applications were down 5 percent last week. That pushed down overall loan applications on the MBA’s activity index by 0.1 percent for the week (which totals purchase and refinancing demand). Total mortgage application volume now is 15 percent lower than the same week a year ago, due to the decrease in refinancing activity. Refinancing volume is 33 percent lower than the same week a year ago, the MBA reports.

Home Prices Grow Twice as Fast as Incomes | Realtor Magazine

Strong buyer demand this spring is pushing home prices up at double the rate of increase in income growth, The Wall Street Journal reports. The median price of an existing home for all housing types was $236,400 in March, up 6.8 percent from a year ago, when it was $221,400, according to the National Association of REALTORS®. Incomes, meanwhile, increased 3 percent in February from a year earlier, according to the Labor Department.

“Bolstered by strong consumer confidence and underlying demand, home sales are up convincingly from a year ago nationally and in all four major regions, despite the fact that buying a home has gotten more expensive over the past year,” says NAR chief economist Lawrence Yun.

Home prices are nearly 40 percent above where they were at the bottom of the housing crash in February 2012, according to the S&P CoreLogic Case-Shiller U.S. National Home Price Index. Some markets are seeing even more increases. In Dallas, home prices have surged nearly 53 percent from their low and are now 35.5 percent above their previous high. In Denver, home prices are 59 percent above their low and are 36.5 percent above their previous high.

“It can’t be sustained,” warns David Berson, chief economist at Nationwide Insurance and a former economist at Fannie Mae. “It can’t go on forever.”

The shortage of homes for sale has led to higher prices, economists say. Inventory in March was 6.6 percent lower than a year ago, according to NAR. Further, the level of home construction relative to the number of U.S. households is at its lowest level since the Census Bureau began tracking such data in 1957, according to the Federal Reserve Bank of Kansas City.

“Sellers are in the driver’s seat this spring as the intense competition for the few homes for sale is forcing many buyers to be aggressive in their offers,” Yun says. “Buyers are showing resiliency given the challenging conditions. However, at some point—and the sooner the better—price growth must ease to a healthier rate. Otherwise, sales could slow if affordability conditions worsen.”

New Households Favoring Homeownership | Realtor Magazine

For the first time in a decade, more new households chose to buy a home rather than rent one in the first quarter of 2017, according to Census Bureau data. About 854,000 new households purchased a home—more than double the 365,000 new households who chose to rent. New homeowners have not outpaced new renters since the third quarter of 2006.

The overall homeownership rate in the first quarter of 2017 was 63.6 percent, down slightly from 63.7 percent in the fourth quarter of 2016. But economists say the increase in new households who purchased could signal a turnaround in the long-term decline of the overall homeownership rate, according to The Wall Street Journal.

In the mid-2000s, the homeownership rate peaked at about 69 percent. In the second-quarter of 2016, it hit a 50-year low of 62.9 percent but has been gradually climbing since then. “People are looking at housing as being a bit more attractive, as memories of the financial crisis fade,” Joseph LaVorgna, chief U.S. economist at Deutsche Bank, told the Journal.

Read This Before You Get a Mortgage — The Motley Fool

Home-buying season is moving into high gear, and would-be homeowners are looking for ways to finance the home of their dreams. But the mortgage market is presenting some challenging conditions right now, as investors anticipate rising interest rates that could make monthly payments more costly. By considering some key facts before you get your mortgage, you’ll be in a better position to get the financing you need to buy the house you really want.

Should you lock in your mortgage rate?

Whenever mortgage rates are rising, mortgage borrowers want to know whether locking in a mortgage rate is a good idea. However, it’s essential to know how your lender approaches rate locks. Typically, you can lock a mortgage rate for 30, 45, or 60 days. That’s often sufficient, but if you anticipate a longer process for whatever reason, it’s worth looking into trying to get a longer lock period. In some areas, that requires additional costs.

More importantly, be sure to understand what — if any — changes you can make to the terms of a mortgage while still preserving the rate lock. In some cases, if you change the kind of loan you want or the amount you want to pay as a down payment, it will open the door to a new mortgage rate, regardless of the lock. Similarly, if your credit score changes or if your home appraises at a different value than expected, some lenders won’t be able to honor the lock. Rate locks can be useful, but you have to know the details to avoid nasty surprises.

 

 

Can you really afford your mortgage?

In today’s financial world, many lenders have to follow strict guidelines with mortgages. Typically, lenders like it when borrowers have enough gross income so that only 25% to 30% of it goes toward housing costs, including mortgage payments, real estate taxes, and homeowners’ insurance. You can often find financing with higher percentages of your income going toward housing costs, but you risk overextending yourself and becoming especially vulnerable to financial problems, like losing your job.

When considering a mortgage, be sure to look at all the demands on your income. Most lenders will look at other formal debts, including auto loans and credit card balances. But if you know that you’re inclined to spend certain amounts on other things, then you’ll want to be careful in considering whether an outsized mortgage payment could force you to cut back on spending in areas you don’t want to sacrifice. Being more conservative can limit your purchase choices, but it’s often the prudent way to cut the risk of a major problem down the road.

 

Is an adjustable rate mortgage a smart move?

Fixed mortgages are popular among homeowners because they’re predictable. Throughout the loan period, you make the same mortgage payment every month. With adjustable rate mortgages, you have to deal with the risk of interest rate resets that can result in higher monthly payments.

However, there are ways to mitigate those risks by using different types of adjustable rate mortgages. A one-year ARM gives you minimal interest rate protection, and payments can rise after just a single year. With a 5/1 ARM, however, your initial rate is locked in for the first five years, with annual adjustments after that. You can even get less frequent subsequent resets if you want. For instance, a 5/5 ARM has an initial adjustment five years in, but then the new rate is locked in for another five years.

Also, look at any limits on annual or lifetime interest rate increases. In some cases, there’s a maximum interest rate applicable to the mortgage, so that no matter how far rates might rise, your mortgage will never go above that level.

The key with adjustable rate mortgages is to look beyond what you can afford now. As long as you’re sure you’d still be able to afford an ARM even if rates go up, then it’s worth considering whether any advantages to ARMs are worth the risk.

Be smart when you’re mortgage shopping

Buying a home is exciting, but it’s also a huge financial commitment. Make sure you get the best mortgage you can, and your home-buying experience will go a lot more smoothly.

 

Is the Homeownership Rate Finally Stabilizing? | Realtor Magazine

The U.S. homeownership rate was 63.6 percent in the first quarter of 2017, barely budging from last quarter’s reading of 63.7 percent, the U.S. Census Bureau reports.

After reaching a cycle low of 62.9 percent in the second quarter of 2016, the homeownership rate appears to be stabilizing. The ownership rate, however, still remains way below the 27-year average rate of 66.1 percent.

The homeownership rate increased among all age groups in the first quarter, albeit slightly. The millennial and Generation X ownership rates increased by 0.1 percent while households aged 45 to 54 years old increased by 0.2 percent, according to the U.S. Census data.

The homeownership vacancy rate remained at 1.7 percent, and the national rental vacancy rate also held at 7 percent in the first quarter—both low by historical standards.

The number of households increased to 118.8 million in the first quarter, up by 1.2 million households from a year ago.

“Growth in household formations will spur rental housing demand first, and ultimately, home sales,” notes the National Association of Home Builders on its Eye on Housing blog.