4 Keys Identified for a Full Housing Recovery

4 Keys Identified for a Full Housing Recovery. Image courtesy of Nutdanai Apikhomboonwaroot / FreeDigitalPhotos.net

In order to have a fully recovered housing market and economic recovery, economists point to the need for four positive indicators:

1. A healthy job market with low stable unemployment;

2. Mortgage delinquencies that have returned to historical averages;

3. Home prices consistent with an affordable mortgage payment–to–income ratio; and

4. Home sales that are in the range of historical norms.

So, is the housing market inching closer?

Freddie Mac’s U.S. Economic and Housing Market Outlook for January takes a look at how the housing market is performing among these four indicators. Economists note that the unemployment rate — while inching down — still remains high at 6.7 percent. Meanwhile, mortgage delinquencies have fallen to 5.88 percent — nearly half of their peak rate but still higher than the national average of about 2 percent, Freddie notes.

Home prices still have some room to grow without outpacing income growth, economists say.

“From 1999–2006, mortgage payments on a hypothetical 30-year fixed-rate mortgage would have increased by 50 percent more than income growth,” Freddie Mac notes in the report. “Currently, payment-to-income ratios are only 60 percent of the level we had in 1999, suggesting room for continued housing growth.”

Finally, home sales have risen over the past two years but remain below levels from a nearly a decade ago. Home sales, historically, average a rate of about 6 percent of the housing stock every year. They dropped to 4 percent during the housing crisis. Economists are predicting a 5.7 percent pace in 2014.

“As we start 2014, the housing recovery continues its steady pace,” Frank Nothaft, Freddie Mac’s chief economist. “House-price gains will likely moderate from last year’s pace but rise about 5 percent in national indexes. Home sales, as well as other key indicators, continue to trend in the right direction, although in some markets we are seeing the sales recovery strengthen while many others remain weak.”

Source: Freddie Mac and “Are We There Yet? Freddie Mac Says Recovery Has a Ways to Go,” Mortgage News Daily (Jan. 16, 2014)

Is Your Listing Offensive?

Is Your Listing Offensive? Image courtesy of Stuart Miles / FreeDigitalPhotos.net

Real estate ads are getting a big dose of political correctness, as real estate professionals are carefully watching their words in listings so as not to offend anyone.

Major home builders in Washington, D.C., reportedly are no longer using the term “master bedroom” in their marketing because, they say, it has racist undertones. Instead, the term is being replaced with “owner’s suite.” Others in the real estate community are also carefully choosing their words to avoid potential conflicts with the Fair Housing Act.

“You can say ‘family room’ but not ‘family home,’” explains Beth Brody, a licensed real estate agent in Marin County, Calif. “We avoid anything gender-specific like ‘his-and-hers’ closets or baths.” Brody says her real estate agency carefully monitors the language used in its agents’ listing ads, adding that the list of potentially offensive words has grown over the years.

Doing so could save a lot of trouble. For example, in August, the 6th U.S. Circuit Court of Appeals reversed a ruling and granted a new trial to the Miami Valley Fair Housing Center in a federal discrimination lawsuit over an Ohio apartment listing that used the phrase “bachelor pad.”

The U.S. Department of Housing and Urban Development has never issued an official list of terms to avoid, but some MLSs have. The Northwest Multiple Listings Service issued a list of “potentially offensive words,” such as “newlyweds,” “country club nearby,” “handyman’s dream,” “safe neighborhood,” “secure,” and “walking distance to.” (After all, one person’s idea of what is nearby may not be someone else’s, and “walking distance” may be prejudicial against someone in a wheel chair, agents note.)

Lesley Walker, associate counsel at the National Association of REALTORS®, says, “Our culture and society are now more in tune with the sensitivities of more groups of people. I think we’re more aware and educated, and so [we are] taking more precautions not to inadvertently or expressly discriminate against a specific class of people.”

Source: “You Can’t Say That … in a Real Estate Ad!” The Examiner (Jan. 15, 2014)

Google-Controlled Homes?

Google-Controlled Homes?

Search-engine giant Google wants to help make homes smarter and more connected, and took another step at that by by announcing its acquisition of connected device maker Nest Labs.

Google announced it will pay $3.2 billion in cash to acquire Nest Labs, a company that develops “smart” home appliances such as thermostats and smoke detectors that can program themselves and be controlled and monitored over smartphones.

“This allows us to accelerate and stay in front of the coming wave of products for what we like to call the ‘conscious home,’” says Nest leader Tony Fadell.

Google’s acquisition follows several previous efforts by Google to get into the connected home business. For example, the company’s Android @Home platform was created to allow users control home appliances from their Android smartphones and tablets. However, the device failed to catch on, CNN reports.

At the International Consumer Electronics Show last week in Las Vegas, the “connected home” garnered a lot of attention as several companies touted new technologies to allow home owners to better monitor and control their homes from anywhere. The market for connected homes is expected to reach $10 billion this year and bloom to $44 billion by 2017, according to GSMA, a wireless industry group.

Source: “Google Buys Nest Labs for $3.2 Billion,” CNNMoney (Jan. 14, 2014)

4 Short-Sale Myths Dispelled

4 Short-Sale Myths Dispelled. Image courtesy of Victor Habbick / FreeDigitalPhotos.net

Several myths persist about short sales. Tracy Mooney, senior vice president at Freddie Mac, dispels some of the following common myths on the mortgage giant’s blog, including:

Myth 1: “A short sale is not an option for me because I’m current on my mortgage payments.”

Freddie Mac Fact: Even if home owners are current on their mortgage payments, they may still qualify for a short sale. They must meet general eligibility requirements, the home must be their primary residence, and their debt-to-income ratio must be more than 55 percent.

Myth 2: “I will be responsible for the entire amount owed on the mortgage.”

Freddie Mac Fact:  Home owners won’t necessarily be responsible for the entire amount owed on the mortgage under the Freddie Mac Standard Short Sale program, Mooney notes. Borrowers who complete a short sale in good faith and are in compliance with all laws and Freddie Mac policies will not be pursued by Freddie Mac for the entire amount owed under the mortgage. However, home owners who have the financial means may be asked to make a one-time payment or sign a new promissory note for a portion of the unpaid balance after the short sale closes, Mooney says.

Myth 3: “I can’t get a short sale on an investment property or second home.”

Freddie Mac Fact: Mooney says that investment properties and second homes are eligible for a Freddie Mac short sale. However, borrowers must meet eligibility requirements.

Myth 4: “A short sale will affect my eligibility for a new mortgage.”

Freddie Mac Fact: Home owners who go through a short sale may be eligible for a new mortgage sooner if the short sale was caused from financial difficulties due to income loss, medical emergencies, or other extenuating circumstances beyond their control. Former home owners in those circumstances may be eligible for a new Freddie Mac mortgage once they’ve established acceptable credit for at least 24 months after completing the short sale. Former home owners who underwent a short sale due to “personal financial mismanagement,” however, will need to re-establish acceptable credit for at least 48 months to become eligible for a mortgage backed by Freddie Mac. “You should start speaking to a lender about a new mortgage two years after your short sale closed,” Mooney notes.

Source: “Short Sales: Dispelling the Myths,” Freddie Mac (Jan. 13, 2014)

White House Still Calling Housing Recovery ‘Fragile’

White House Still Calling Housing Recovery ‘Fragile’. Image courtesy of renjith krishnan / FreeDigitalPhotos.net

The latest Housing Scorecard from the Obama Administration shows progress on several fronts—notably home prices—but continues the familiar cautionary language in describing the recovery.

The scorecard evaluates housing data from December 2013. The majority of such scorecards provided by the administration this year utilize the word “fragile” to describe the market, and this month’s report follows the trend.

“December’s Housing Scorecard shows that we are continuing to make progress helping struggling home owners get back on their feet,” says Edward J. Szymanoski, associate deputy assistant secretary for economic affairs. “Since the beginning of 2012, the number of home owners underwater has declined by 5.7 million and homeowners’ equity has risen by 55 percent to $9.7 trillion. There remains more work to do to address the 6.4 million home owners who remain underwater; nevertheless, these are encouraging signs that the housing market recovery is providing millions of American home owners with more economic security.”

Each month, the report highlights how the Making Home Affordable program is performing. As of December 2013, nearly 1.3 million home owners have received permanent loan modifications through the Home Affordable Modification Program (HAMP). The report also showed that home values are on par with prices in early 2005, according to data from the Federal Housing Finance Agency.

Source: U.S. Department of Housing and Urban Development 

New Mortgage Rules Roll Out – What Will Be the Impact?

New Mortgage Rules Roll Out – What Will Be the Impact? Image courtesy of suphakit73 / FreeDigitalPhotos.net

New mortgage rules take effect Friday that set out to protect borrowers against risky lending practices. One of the biggest changes is that borrowers will likely need to show more proof that they can actually afford the mortgage they’re applying for.

Here are two main terms to know from the new rules:

“Ability-to-repay” rule: Mortgage lenders must ensure borrowers can actually afford their loans over the long term. Applicants’ income, assets, savings, and debt against their monthly house payments will be more closely scrutinized. Borrowers likely will need to produce “even more tax records, pay stubs, and bank and investment account information,” USA Today reports.

Qualified Mortgage: Borrowers who meet the ability-to-repay requirements will likely be eligible for a QM. QM loans must meet at least some of the following guidelines: They cannot contain risky features, such as terms that exceed 30 years or interest-only payments; carry more than 3 percent in upfront points and fees for loans above $100,000; or push a borrowers’ total debt above 43 percent of their monthly income unless the loan qualifies to be backed by Fannie Mae, Freddie Mac, the FHA, or a small lender.

Lenders can still issue loans outside of the QM guidelines, but lenders will have to do so realizing they’ll have less protections against future lawsuits.

The Consumer Financial Protection Bureau estimates that about 92 percent of mortgages currently meet QM requirements.

Still, the real estate and mortgage industry, the CFPB, and others will watch implementation of the new rules closely to determine whether they make it more difficult for borrowers to qualify for mortgages.

The new rules may make it more difficult for borrowers who have fluctuating incomes or self-employed individuals to validate their incomes, according to Goldman Sachs. The 43 percent debt standard also may prove a hurdle for some borrowers who find they can’t qualify for the loan they need to buy the house they want, and some borrowers may find they need larger down payments to keep within that 43 percent rule.

The new rules may also cause some delays in lending, at least initially, says Keith Gumbinger, mortgage expert with HSH Associates.

“It’ll be a muddy mess until the rules settle in,” Gumbinger says.

Source: “New Mortgage Rules Aim to Prevent Risky Loans,” USA Today (Jan. 9, 2014)