Yajnesh Rai

Buyers Stretch Budgets to Be More Competitive | Realtor Magazine

Buyer demand is high but the number of homes for sale is low. This is prompting more shoppers to stretch their budgets, put less money down, or turn to adjustable-rate loans to prevail in a bidding war for a home. 

“The frustration with the lack of inventory is, so many of the houses are going in bidding wars, and so you know you really have to step up to the plate and you have to do your homework to be a competitive buyer,” Patrick Clark, a real estate professional with Long & Foster in Philadelphia, told CNBC. 

Higher mortgage rates and escalating home prices are prompting more home buyers to consider adjustable-rate mortgages, which offer lower initial rates for a set time before rising. Borrowers are being tempted on low down payment loan options, such as Fannie Mae- and Freddie Mac-backed 3 percent down payment loans. They’re also being lured to private lenders offering “nonprime loans” (the reimagined subprime loans). Read more: ‘Nonprime’ Loans Expand Mortgage Options

Buyers are feeling confident enough in their own finances to put more at stake to break into homeownership.

“When they’re more confident they are willing to stretch a little further,” says Mike Graff, a mortgage consultant with Prosperity Home Mortgage. “I think that some people realize, look, they’re not going to be in this house for 30 years, so moving to an ARM, when the rate is fixed for a period of time, they’re definitely more comfortable with something like that to lower their payment or to kind of stretch their budget a bit, so we have seen an uptick in that.”

Banks are showing more willingness to take on greater risk in jumbo loans, too.

Mortgage Rates Surge to 4-Year High | Realtor Magazine

 

 

Mortgage rates continued their climb this week, reaching their highest level since 2013. 

“Higher Treasury yields, driven by rising commodity prices, more Treasury issuances, and the steady stream of solid economic news are behind the uptick in rates over the past week,” says Sam Khater, Freddie Mac’s chief economist. “Despite the increase in borrowing costs, demand for home purchase credit remains solid.” The Mortgage Bankers Association reported that mortgage applications were up 11 percent from a year ago. 

Freddie Mac reports the following national averages with mortgage rates for the week ending April 26:

• 30-year fixed-rate mortgages averaged 4.58 percent, with an average 0.5 point, rising from last week’s 4.47 percent average. Last year at this time, 30-year rates averaged 4.03 percent. 
• 15-year fixed-rate mortgages averaged 4.02 percent, with an average 0.4 point, rising from last week’s average of 3.94 percent. A year ago, 15-year fixed-rate mortgages averaged 3.27 percent. 
• 5-year hybrid adjustable-rate mortgages averaged 3.74 percent, with an average 0.3 point, increasing from last week’s 3.67 percent average. A year ago, 5-year ARMs averaged 3.12 percent. 

Housing Costs Up 9% for Entry-Level Buyers | Realtor Magazine

The monthly payment for an entry-level home is on the rise. And the rising costs may be one reason why first-time buyers are making up a lower share of buyers this spring. First-time buyers comprised 30 percent of existing-home sales in March, which is down from 32 percent a year ago, according to data from the National Association of REALTORS®. 

Monthly housing costs for an entry-level buyer increased $136 to $1,641 nationwide, a 9 percent increase from last year, according to data from John Burns Real Estate Consulting. The higher costs means more consumers must be willing to make trade-offs to buy a home, compromising on size, attached versus detached, and location.

 

“First-time buyers continue to make up an underperforming share of the market because there are simply not enough homes for sale in their price range,” NAR President Elizabeth Mendenhall said in a statement. “Supply conditions improve in higher-up price brackets, which means those trading up should see considerable interest in their home, as well as more listings to choose from during their own search.” 

The table below from John Burns Real Estate Consulting shows monthly housing costs for an entry-level home in March 2018 as well as the increase over the last year. 

 

Why, Where Buyers Get Denied Mortgages | Realtor Magazine

Nearly one in 10 borrowers get denied a mortgage, according to a new analysis by LendingTree, based on a review of 10 million mortgage applications. The company found that the top reasons home shoppers face this rejection is poor credit history and credit score, too high a debt-to-income ratio, too low an appraisal, and an incomplete application.

Credit history and debt-to-income ratios are the chief barriers for denial, accounting for 26 percent each of denied loans. The debt barrier is biggest issue for borrowers living in California, according to the analysis. Three California cities—Los Angeles, San Francisco, and San Jose—had the highest share of borrowers who were denied a mortgage because of their debt-to-income ratio. On the other hand, credit histories are proving the biggest obstacle in Louisville, Ky.; Memphis, Tenn.; and Philadelphia. 

“The current housing market is particularly competitive,” says Tendayi Kapfidze, LendingTree’s chief mortgage economist. “The key for home buyers is being well-educated on the homebuying process, enabling them to be well-prepared when they enter the market. Understanding the key reasons mortgages are denied can help borrowers avoid missteps and compete effectively to secure their dream home.”

In some cities, denial rates were as low as 5 percent, while others saw denial rates at more than double that rate, according to LendingTree’s study. Overall, borrowers in Birmingham, Ala., are the most likely in the nation to be denied a mortgage. The denial rate is 13 percent in the metro area, with poor credit histories being the most common culprit. Twelve percent of borrowers in both New Orleans and Memphis, Tenn., are denied mortgages, which took the number two and three spots, respectively, in LendingTree’s rankings.

The following cities have the highest mortgage denial rates:

1. Birmingham, Ala.
2. New Orleans
3. Memphis, Tenn.
4. Oklahoma City
5. Miami
6. Orlando, Fla.
7. Providence, R.I.
8. Tampa, Fla.
9. Houston
10. Hartford, Conn.

On the flip side, these cities have the lowest mortgage denial rates and borrowers there are the least likely to be denied a mortgage:

• Minneapolis
• Salt Lake City
• San Jose, Calif.
• Milwaukee
• Cincinnati
• San Francisco
• Portland, Ore.
• Columbus, Ohio
• Kansas City, Mo.
• Louisville, Ky.

Home Sales Overcome Inventory, Price Woes | Realtor Magazine

Inventory shortages and pressing affordability issues didn’t suppress home sales activity in March. Total sales of existing homes, including single-family homes, townhomes, condos, and co-ops, increased 1.1 percent last month to a seasonally adjusted annual rate of 5.6 million, according to the National Association of REALTORS®. However, home sales are still 1.2 percent below a year ago. 

“Robust gains last month in the Northeast and Midwest—a reversal from the weather-impacted declines seen in February—helped overall sales activity rise to its strongest pace since last November,” says Lawrence Yun, NAR’s chief economist. “The unwelcoming news is that while the healthy economy is generating sustained interest in buying a home this spring, sales are lagging year-ago levels because supply is woefully low, and home prices keep climbing above what some would-be buyers can afford.”

Here’s a closer look at some key indicators from NAR’s latest existing-home sales report for March:

• Home prices: The median price for existing homes of all types was $250,400, up 5.8 percent from a year ago. “Although the strong job market and recent tax cuts are boosting the incomes of many households, speedy price growth is squeezing overall affordability in several markets, especially those out West,” Yun says. 
• Inventories: Total housing inventory rose 5.7 percent to 1.67 million existing homes available for sale, but that’s still 7.2 percent lower than a year ago. Inventories have fallen year over year for 34 consecutive months. At the current sales pace, unsold inventory is at a 3.6-month supply.
• All-cash sales: Cash transactions comprised 20 percent of sales, down from 23 percent a year ago. Individual investors tend to account for the bulk of all-cash sales. They purchased 15 percent of homes on the market last month, down from 18 percent a year ago. 
• Distressed sales: Foreclosures and short sales made up 4 percent of home sales. Broken out, 3 percent of sales were foreclosures and 1 percent were short sales. 
• Days on the market: Fifty percent of homes that sold in March were on the market for less than a month. Properties stayed on the market for an average of 30 days, down from 34 days a year ago. 

“REALTORS® throughout the country are seeing the seasonal ramp-up in buyer demand this spring—but without the commensurate increase in new listings coming onto the market,” Yun says. “As a result, competition is swift, and homes are going under contract in roughly a month, which is four days faster than last year and a remarkable 17 days faster than March 2016.” 

3 Steps for Unmarried Couples Looking to Buy | Realtor Magazine

Homebuying dreams can become real for shoppers in unmarried but committed relationships. According to Jessica Lautz, the National Association of REALTORS®’s director of survey research and communication, a report from NAR found that the highest share of first-time buyers who are unmarried couples was in 2017—the highest on record since 1981. Of course, there are significant risks when buying a home with an unmarried partner. But there are precautionary steps your partnered clients can take to ensure they can deal with the posed risks throughout the home planning and shopping together. A recent article in the Seattle Times gives details on three crucial steps:

1. Sign a prenup for the home. Renee Bergmann, a real estate attorney and owner of Bergmann Law in Westmont, N.J., says couples must have a conversation about potentially breaking up if they want to be co-homeowners. Using help from a legal professional, she says coupled clients should establish a co-ownership contract before closing day. Do not “wait and see what happens”—without a written agreement, Bergmann says, things could get messy very quickly.
2. Choose the right title. Ownership titles are different in various states, but usually these titles include: sole ownership (one person has the full ownership), joint tenancy (a 50-50 split ownership, with one tenant’s share transferring to the other in the case of death), and tenants in common (allows unequal ownership, such as a 75-25 split). All three approaches have pros and cons, but Bergmann says your clients should consider revising the deed to reflect their new legal status, using a “quitclaim deed,” if they decide to get married after buying. 
3. Leave parents out of it. Younger couples often get their parents involved during the stressful homebuying process and final transaction. But doing so may cause more confusion, so it may be best to leave the parents at home, says Danielle Moy, an agent with Coldwell Banker Residential Brokerage in Orland Park, Ill. When parents show uncertainty about the situation, it causes “a bit of an emotional roller coaster when they’re looking at homes,” according to Moy. The chosen home and the final decision will ultimately be left in the clients’ hands, Moy says, so be sure to help your partnered clients become aware of what they can agree on and what they want for their homeowning future.

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.