Speak Up About VA Loans

Many service members know little about the benefits of VA mortgages or may even hold negative views about them, according to a Spotlight on VA Loans report commissioned by Navy Federal Credit Union and Operation Homefront. The survey was based on responses from about 1,000 active-duty service members and veterans nationwide.

Nearly half of active-duty respondents believe VA loans have higher interest rates than conventional loans—which they don’t, the survey notes. Seventeen percent of veterans and 45% of active-duty soldiers believe a down payment of more than 20% is necessary for a VA loan. In reality, VA loans offer vets and military service members a chance to buy with 0% down.

Bob Goldberg, CEO of the National Association of REALTORS®, pinned a recent editorial at The American Genius that documents how VA loans are helping vets achieve homeownership quicker than they imagined. He shared the story of how a vet who had been honorably discharged in 2006 after knee and back injuries learned of options that sped up his homeownership timeline after his agent connected him to a lender specializing in helping military home buyers. The vet learned that he qualified for the VA Home Loan Guaranty Program, which offers a 0% down payment, and that it would cover high housing costs in his area of Washington, D.C. He also learned that his VA loan would not require private mortgage insurance because of his service-related disability. He and his wife were able to purchase a home much sooner than they ever thought.

Real estate pros can play a big role in helping military members and veterans achieve homeownership by sharing more information about the VA Home Loan Guaranty Program and helping to dispel common myths. To help with that, NAR and the Department of Veterans Affairs released a joint two-part video series earlier this year that examines misconceptions about the program as well as its advantages. The videos help guide REALTORS® and their clients through the process.

The VA Home Loan Guaranty Program has helped some 25 million veterans purchase and maintain homes since it was launched during World War II.

NAR has served as a strong advocate for VA loans. At the end of 2021, NAR President Leslie Rouda Smith testified before Congress about the importance of strengthening the VA Home Loan Guaranty Program, including citing benefits for borrowers and the program’s role in closing the racial homeownership gap. She noted that VA loan delinquency rates tend to be lower than FHA loans and comparable to conventional loans.

“The National Association of REALTORS® has worked from our position as America’s largest trade association to help ensure the VA Home Loan Guaranty Program remains an accessible resource for veterans looking to purchase a home as a benefit for their service,” Goldberg notes in the article at The American Genius.

REALTORS® wanting to expand their work with military members and vets have pursued a Military Relocation Professional (MRP) certification. The program educates NAR members on helping military home buyers, including connecting them to financing resources and learning how vets can take advantage of the benefits available to them.

“As we honor their immense sacrifices, we also look for ways to better recognize and repay the men and women who have survived the horrors of combat and returned home to live out the ideals they risked everything to protect,” Goldberg writes for The American Genius. “Because when they do return, access to a safe, comfortable home should never be in question.”

©National Association of REALTORS®
Reprinted with permission

Home Sales Retreat to Pre-Pandemic Levels

Home sales are falling from their pandemic-fueled highs as home buyers tighten up their budgets. “Home sales have essentially returned to the levels seen in 2019—prior to the pandemic—after two years of gangbuster performance,” says Lawrence Yun, chief economist for the National Association of REALTORS®. Movement in both single-family and condo sales are nearly equal, Yun adds, “possibly implying that the preference toward suburban living over city life that had been present over the past two years is fading, with a return to pre-pandemic conditions.”

Total existing-home sales—completed transactions for single-family homes, townhomes, condos, and co-ops—dropped 3.4% month over month in May, reaching a seasonally adjusted annual rate of 5.41 million, according to NAR’s latest home sales report. Existing-home sales are down 8.6% compared to a year ago.

Fed’s Aggressive Rate Hike May Influence ‘Shrinking Buyer Pool’

“Further sales declines should be expected in the upcoming months given housing affordability challenges from the sharp rise in mortgage rates this year,” Yun says. “Nonetheless, homes priced appropriately are selling quickly, and inventory levels still need to rise substantially—almost double—to cool home price appreciation and provide more options for home buyers.”

Indeed, despite the decreases last month in home sales, prices remain strong. The median existing-home price exceeded $400,000 for the first time on record, reaching $407,600—up 14.8% from a median of $355,000 a year ago, NAR reports. Here are some additional key housing indicators from NAR’s May existing-home sales report.

• Days on the market: Eighty-eight percent of homes sold were on the market for less than a month. Properties typically remained on the market for 16 days, down from 17 days in April.
• Housing inventories: Total housing inventory at the end of May was 1.16 million units, up 12.6% from April but down 4.1% from a year ago. Unsold inventory nationally sits at a 2.6-month supply at the current sales pace.
• First-time buyers: First-time buyers accounted for more than a quarter—27%—of sales, down from 31% a year ago. Higher mortgage rates and home prices continue to press on first-time buyers’ budgets.
• All-cash sales: All-cash transactions accounted for a quarter of sales, up from 23% a year ago. Individual investors and second-home buyers, who tend to make up the bulk of cash sales, comprised 16% of transactions, down slightly from 17% a year earlier.
• Distressed sales: Foreclosures and short sales accounted for less than 1% of sales.

Regional Snapshot

Here’s a closer look at how existing-home sales fared across the country in May:

• Northeast: Rose 1.5%, reaching an annual rate of 680,000. However, sales were down 9.2% from a year ago. Median price: $409,700, a 6.7% uptick from one year ago.
• Midwest: Fell 5.3% and reached an annual rate of 1.24 million. Sales were down 7.5% compared to a year earlier. Median price: $294,500, up 9.5% from a year ago.
• South: Dropped 2.8% in May and reached an annual rate of 2.41 million—down 8.4% from a year ago. Median price: $375,000, a 20.6% increase compared to a year ago.
• West: Fell 5.3% and reached an annual rate of 1.08 million, marking a 10% decline from a year earlier. Median price: $633,800, an increase of 13.3% from a year ago.

©National Association of REALTORS®
Reprinted with permission

Mistakes Buyers Make in Bidding Wars

Multiple offers on a home sale are still common, and buyers may get caught up in the competition and make some mistakes in the process.

One common mistake: buyers who are willing to empty their bank account trying to win.

“I’ve had buyers who want to bid all the money in their budget in order to win a bidding war,” Lily Lei, a real estate professional with RSVP Real Estate, Powered by ERA, in Seattle, told realtor.com®. “I counsel them away from it. The house may require tens of thousands of dollars worth of repairs immediately, like a new roof or new plumbing. They would have no money left to cover these essential repairs.”

The bank’s appraisal may also come in lower than the offered price. The buyer then may be on the hook for a higher down payment to make up the difference.

Lei advises her clients to hold back between 10% to 40% of what they can afford. That may mean they can’t get the house they want, but it doesn’t put them at financial risk, she says.

Another common problem real estate pros report buyers making in bidding wars: bidding with no contingencies. Buyers are waiving home inspections and their ability to walk away when an inspection reveals a major flaw with a home.

“If buyers want to be competitive in this market, they need to compromise on a lot of things,” Jared Blank, a managing partner of The Agency in Denver, told realtor.com®. That said, when a buyer’s offer is accepted on a home that is in need of repairs and falling apart, it’s no win at all, Blank says.

He recommends instead bidding at a comfortable price within the buyer’s budget and looking for compromises on other components of the offer, like the length of the escrow and the down payment.

Source: 

“7 Bidding War Mistakes Today’s Homebuyers Are Making in Droves,” realtor.com® (June 2, 2022)

©National Association of REALTORS®
Reprinted with permission

Shrinking Buyer Pool

The Federal Reserve unleashed another hike to its short-term benchmark rate Wednesday. The increase, the Fed’s largest since 1994, likely will have an impact on the housing market, economists say. The Fed’s key rate often influences mortgage rates, though it doesn’t directly affect them. Rates are moving at a much faster clip than most housing analysts forecast.

On Wednesday, the central bank’s Federal Open Market Committee voted to increase its benchmark funds rate by three-quarters of a percentage point to help tame inflation, which is at a 40-year high. Banks use the Fed’s rate as a benchmark for what they charge one another for short-term borrowing. The Fed’s latest hike sets a “big increase in interest rates and means several more rounds of rate hikes are on the way in upcoming months,” says Lawrence Yun, chief economist of the National Association of REALTORS®.

So far this year, the short-term Fed funds rate has jumped by 175 basis points. The 30-year fixed-rate mortgage has jumped even more—by nearly 300 basis points. For a $300,000 mortgage, the monthly payment has increased from $1,265 in December to $1,800 today, Yun says.

“That’s painful and, consequently, will shrink the buyer pool,” Yun says. “Home sales have recently been trending down toward 2019 figures. Sales could fall even further, with some inventory sitting on the market for more than a month like in pre-pandemic days. Pricing a listed home properly will, therefore, be the key to attracting buyers.” Mortgage rates will stabilize when consumer price inflation starts to fall, Yun adds.

Rising Mortgage Rates

Last week, the 30-year fixed-rate mortgage averaged 5.23%, according to Freddie Mac. A year ago, rates averaged 2.96%. By some measures, mortgage rates were just shy of 6%—at 5.99%—on Wednesday, according to Bankrate.com’s national survey. “Consumers haven’t seen mortgage rates above 6% since 2008,” Greg Schwartz, CEO and founder of mortgage lender Tomo, told Bankrate.com. “The pace of this move is what’s most concerning, as consumers’ buying power evaporated quicker than any time in recent memory. Further, volatility in rates may not decrease anytime soon either.”

Ali Wolf, chief economist at Zonda, offers an example of the impact: Affording a $316,000 home with a mortgage rate of 6% is about equal to paying for a $450,000 home with a 3% rate.

More aspiring home buyers are getting priced out. In response, mortgage applications, a gauge of homebuying demand, have been falling by double-digits. “Mortgage rates going forward will continue to be responsive to changes in expectations around the Fed’s policy path as well as inflation expectations,” says Ruben Gonzalez, chief economist for Keller Williams. “The housing market is still extremely tight, with inventory levels remaining near historic lows, leaving room for the market to absorb falling demand.”

The Fed committee hopes its more aggressive approach will help lessen inflation. “Clearly, today’s 75-basis-point increase is an unusually large one, and I do not expect moves of this size to be common,” Fed Chairman Jerome Powell said at a news conference Wednesday. Still, Powell said he expected the Fed’s July meeting to see another increase of 50 or 75 basis points, but he said decisions will be made “meeting by meeting.”

Nevertheless, the committee still appeared optimistic about the economy. “Overall economic activity appears to have picked up after edging down in the first quarter,” the committee said in a statement. “Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated, reflecting supply-and-demand imbalances related to the pandemic, higher energy prices and broader price pressures.” The committee is forecasting inflation to move significantly lower in 2023.

©National Association of REALTORS®
Reprinted with permission

Protect Your Website From Copyright Claims

Copyright claims are growing in the real estate industry, and many cases end in a judgment against the agent or brokerage accused of violations. Your website or business materials may put you at greater risk for litigation than you think.

You could be held liable for copyright infringement even for photos from the MLS that are provided by a third party but appear on your website through an IDX display. Having a risk management strategy in place can help protect you and your business, says Chloe Hecht, senior counsel at the National Association of REALTORS®, in NAR’s latest “Window to the Law” video.

The Digital Millennium Copyright Act, or DMCA, which was passed in 1998, may offer some protections when posting third-party content—but it’s not a foolproof defense. The DMCA is a federal law that provides a “safe harbor” to avoid some copyright infringement claims, but certain procedures must be met.

Hecht highlights some of those steps in the video, including:

• Designate a copyright agent. This person will be responsible for receiving any takedown notices in case of copyright claims and will need to be listed as a contact and copyright owner on your website, along with their contact information. Also, register the copyright agent with the Copyright Office.
• Comply with the DMCA’s takedown procedure. After receiving any takedown notice due to a copyright allegation, promptly remove the content in question. Then, notify the person filing the complaint of its removal. “If the alleged infringer submits a counternotice, provide a copy of that counternotice to the copyright owner and state that the allegedly infringing content will be restored in 10 business days unless the copyright owner initiates a lawsuit,” Hecht says in the video. “Absent such a lawsuit, you may restore the content to your website.”
• Include a notice at your site. Inform website users of your copyright policy and include it within your website’s terms of use. View an example under the “Digital Millennium Copyright Act (DMCA)” section at nar.realtor/terms-of-use. Also, view the “Termination” section, which informs website users of enforcement for terminating repeat infringers.

Access additional copyright resources at nar.realtor/copyright.

©National Association of REALTORS®
Reprinted with permission