Teardowns Account for More New Homes

Teardowns Account for More New Homes

More than 10 percent of new single-family homes that began construction in 2016 were part of a teardown project, according to new data from the National Association of Home Builders. That’s up from 7.7 percent in 2015. NAHB defines a teardown as a home that is built on a site where a previous structure existed. Nationwide, there were 79,300 single-family teardowns started in 2016, up from 55,200 in 2015, NAHB estimates.

Builders continue to cite lot shortages as a major setback to new-home construction. Home shoppers and builders are now eyeing teardowns because many of the properties are in prime locations. Take a look at the chart below to see the breakdown of teardown starts by region.

Source: “NAHB Estimates 79,000 Single-Family Tear-Down Starts in 2016,” National Association of Home Builder’s Eye on Housing blog (June 19, 2017)

Equity Gains Shut Out Would-Be Buyers

Home Equity

Homeowners nationwide have doubled their equity since 2009. While that’s good news for those who already own, prospective buyers say increases in home values—which lead to higher prices—are making it more difficult for them to break into home ownership.

Challenges to housing affordability will not be solved soon because of low inventory, says Lawrence Yun, chief economist for the National Association of REALTORS®. Yun noted during the National Association of Real Estate Editors conference in Denver last week that there’s a mismatch in many areas between what’s for sale and what households can truly afford. “Aside from feeling shut out of this wealth gain, non owners are facing higher housing costs as rents continue to trend higher—or in some markets, skyrocket,” Yun writes in a recent column at Forbes.com.

Nationwide, rents have jumped 18 percent over the past five years while wage growth has edged up only 12 percent. Home prices have risen 5 percent to 7 percent annually. The silver lining is that mortgage rates have fallen back to around 4 percent, which has helped to somewhat preserve affordability this spring, Yun says.

“A majority of consumers are still indicating that now is a good time to buy a home,” Yun said during the NAREE panel. “Unfortunately, housing supply is too low, and prices keep going higher. These affordability challenges will likely remain into next year as long as inventory fails to pick up.”

Home sales have reached a decade high but could be even higher with more inventory, Yun says. He’s forecasting existing-home sales to be about 5.6 million this year, nearly 3 percent higher than 2016. He predicts that home prices will rise 5 percent this year.

Source: “Highlights From Lawrence Yun’s #NAREE17 Housing Forecast Presentation,” National Association of REALTORS® Economists’ Outlook blog (June 16, 2017) and “The Good and the Bad of Surging House Prices,” Forbes.com (June 12, 2017)

Why Your Clients Are Smart to Buy in Summer

Why Your Clients Are Smart to Buy in Summer

Summertime in the housing market brings countless buying and selling opportunities. But with all the competition out there, would your clients be better off waiting a few months?

Real estate experts say no. They contend home prices peak from June to August and say there are advantages to buying during the market’s busiest season.

But some agents disagree. “A huge myth about the real estate market is that homes sell for more in the summer and less in the winter. This is simply not true,” says Dippy Chhina of Dippy Real Estate.

Other forces play a role in the asking price, such as the amount of homes for sale in an area, interest rates, and the job market, Chhina notes.

“There are more homes on the market in summer than in the winter, and there is also a higher number of sales in the summer than the winter,” Chhina says.

Broader inventory means more choices, making buyers “feel more confident in their search because additional properties hit the market every week,” says Sarah Lilly of Five Star Lakeshore Real Estate. “The large inventory offers significantly more opportunities for purchasers to identify specific floor plans, amenities, and locations.”

With more properties for sale, buyers may have more leverage in negotiating prices. Those who need to sell their current home to purchase another often find it easier to do in the summer months.

“If the client needs to sell a home before buying, the home will be more likely to sell, and potentially at a good price, allowing the client to purchase their new home sooner,” says Joe Lopez of Connect Realty.

Source: “The Heat Is On: 5 Sizzling Reasons to Buy a Home During Housing’s Hottest Season,” realtor.com® (June 15, 2017)

Zero-Down Loans Making a Comeback

Zero-Down Loans Making a Comeback

Your buyers may soon be able to bring less to closing. They were blamed for precipitating the housing crisis years ago, but major lenders are giving no- and low-down payment loans another shot.

Several major lenders are reportedly offering loans with just 1 percent down. Navy Federal, the nation’s largest credit union, offers its members zero-down mortgages in amounts up to $1 million. NASA Federal Credit Union markets zero-down mortgages as well. Quicken Loans, the third highest volume lender, offers 1 percent down payment options, as does United Wholesale Mortgage. And the Department of Veterans Affairs has offered zero-down loans to eligible borrowers for many years.

Also, Movement Mortgage, a large national lender, has introduced a financing option that provides eligible first-time buyers with a non repayable grant of up to 3 percent. As such, applicants can qualify for a 97 percent loan-to-value ratio conventional mortgage, which is basically zero from the buyers and 3 percent from Movement. For example, on a $300,000 home purchase, a borrower could invest zero personal funds with Movement providing $9,000 down. The loan also allows sellers to contribute toward the buyer’s closing costs.

So far, the delinquency rates on these low- to zero-down payment loans have been minimal, according to lenders. Quicken Loans says its 1 percent down loans have a delinquency rate of less than a one-quarter of 1 percent. United Wholesale Mortgages told The Washington Post that it has had zero delinquencies from the borrowers on its 1-percent down loan since debuting it last summer.

For Movement’s new loan product, the lender will originate the loans and then sell them to Fannie Mae, which remains under federal conservatorship. Fannie officials released the following a statement: “(We’re) committed to working with our customers to increase affordable, sustainable lending to creditworthy borrowers. We continue to work with a number of lenders to launch test-and-learn that require 97 percent loan-to-value ratio for all loans we acquire.” They add that there “is no commitment beyond the pilots,” which are “focused on reaching more low- to-moderate income borrowers through responsible yet creative solutions.”

During the housing crisis, zero-down loans were among the biggest losses for lenders, investors, and borrowers. However, housing experts say the latest versions are different from years ago. Applicants must now demonstrate an ability to repay what’s owed. They also must have stellar credit histories and scores, and lenders require a lot more documentation to prove borrowers are in good standing. Also, many of the programs are charging higher interest rates. For example, Movement’s rate for its zero-down payment option in mid-June was 4.5 percent to 4.625 percent, compared with 4 percent for its standard fixed-rate mortgages.

Some critics say that the borrowers who really could benefit from such options aren’t able to qualify for them. Paul Skeens, president of Colonial Mortgage Corp. in Waldorf, Md., told The Washington Post that “it seems like people without excellent credit scores and three months of [bank] reserves don’t qualify.”

Source: “No Down Payment? No Problem, Say Lenders Eager to Finance Home Purchases,” The Washington Post (June 14, 2017)

How Long Does It Take to Get a Mortgage?

How Long Does It Take to Get a Mortgage?

Home shoppers may need to plan for more time than they realize when they’re starting the process of obtaining a mortgage.

“Today’s mortgage process is very involved, particularly with regard to the documentation required, third-party verification, and the independent appraisal process,” says Whitney Fite, president of Angel Oak Home Loans in Atlanta. “All of these moving parts can cause a delay in processing if an issue arises.”

The entire process encompasses getting pre approved, a home appraisal, and getting the actual loan. Typically, the process takes about 30 days, on average, Fite says.

However, in busier times of year, consumers should expect a longer wait. For example, a duration of 45 to 60 days, depending on the lender, may be more of the norm, according to a recent article at realtor.com®.

Consumers may be best off making sure they get an early start to the mortgage process from the moment they even start thinking they may want to purchase a property. Many sellers require buyers now get preapproved for a mortgage before they’ll even accept an offer.

For a pre approval, lenders will check the consumer’s credit rating, debt-to-income ratio, and other financial information. That alone may take a week or even longer, depending on the borrower’s circumstances.

But buyers shouldn’t confuse a pre approval for having an actual mortgage loan. Borrowers still have to apply for the actual loan and also get through the appraisal process. Also, in the underwriting process, lenders will review all of their financial information and ensure the home buyer has not made any false or misleading claims on their application.

Fite says the most common reason for a mortgage-related delay is the borrower not turning in documents in a timely manner.

“The best advice I can give someone buying a home is to prepare to respond very quickly for any and all documentation requests,” Fite says.

Source: “How Long Does it Take to Get a Mortgage? Longer Than You Might Think,” realtor.com® (June 12, 2017)

How to Get Noticed on Social Media

How to Get Noticed on Social Media

Forbes columnist Jayson DeMers offers the following tips to get more visibility from your social media posts, maximize your outreach, and increase your followers.

Leverage influencers: Get people who already have high visibility on social media to share your posts. Target influencers within the industry and offer to collaborate with them on content, or find a way to get them to mention you to their network. Avoid asking for handouts or favors. You need to give them something of value to get them to notice you, DeMers notes.

Try ads: “If you have a social media post you want to make sure gets extra attention, invest a bit of money to promote it to your intended audience,” DeMers says.

Use pictures: Post images to get more attention and shares. “Images dominated by a single color, or those with visually striking features, will stand out in users’ newsfeeds more, giving your post the attention-grabbing features it needs to become popular,” DeMers says.

Target: With social media, you can control who sees your posts. Target the right audience for each post you write. “It may seem counterintuitive to narrow your audience when the end goal is achieving more visibility, but this step will help you get more visibility within the circles that actually matter to your brand,” DeMers says.

Don’t be one-note: Followers will stop listening to you if you offer up the same type of posts and ideas over and over again. Try something different.

Join the conversation: Jump into conversations that are already happening within your social networks. Look for relevant hashtags to your industry. “Involve your brand in the most popular threads you can find,” DeMers suggests.

Source: “10 Secrets to Getting More Visibility on Social Media,” Forbes.com (June 7, 2017)