Credit issues still and issue but home sales are still up.

Credit issues still and issue but home sales are still up. Image courtesy of Stuart Miles / FreeDigitalPhotos.net

Pending home sales inched up slightly in September, and for the first time in 11 months, they were above year-ago levels, according to the National Association of REALTORS®’ Pending Home Sales Index. However, tight credit conditions continue to be a barrier for many borrowers, NAR notes.

The Pending Home Sales Index rose 0.3 percent in September to 105. That’s 1 percent above the September 2013 reading and the second-highest level since that time.

But sales are being held back because of potential buyers who are still unable to qualify for a mortgage. About 15 percent of REALTORS® in September indicated that the main reason for not closing on a deal was because their clients could not obtain financing.

Lawrence Yun, NAR’s chief economist, says the final qualified residential mortgage rule will likely improve access to credit next year.

“The rule provides clarity for lenders and is a win for creditworthy consumers by ensuring they continue to have access to safe and affordable loan products without overly burdensome down payment requirements,” Yun says.

Also, low mortgage rates, moderating price growth, and sustained inventory levels should help more buyers enter the market, Yun says.

“Housing supply for existing homes was up in September by 6 percent from a year ago, which is preventing prices from rising at the accelerated clip seen earlier this year,” Yun notes.

In September, the Pending Home Sales Index rose in the South and Northeast but decreased in the Midwest and West.

Pending home sales were up by the highest percentage in the South — 1.4 percent month-over-month to a reading of 118.5. That was 1.7 percent above September 2013. Pending home sales also rose in the Northeast by 1.2 percent to 87.5 and are 2.9 percent above year-ago levels.

Meanwhile, pending home sales fell 1.2 percent in the Midwest to 101.2 in September and are now 4 percent below year-over-year levels for that region. Pending sales also fell in the West, dropping 0.8 percent last month to 101.3 but are still 3.6 percent above a year ago.

Source: National Association of REALTORS®

Housing’s Big Game Changer: Marriage Delays

Housing’s Big Game Changer: Marriage Delays. Image courtesy of Boykung / FreeDigitalPhotos.net

Marriage and real estate often go hand-in-hand. But a drastic decline in the number of married young adults is emerging as “one of the biggest game changers in the housing industry,” according to John Burns Real Estate Consulting.

The share of 25 to 29 year olds who are married has plunged by nearly 48 percent for men and 43 percent for women since 1970.

“The housing market is unquestionably fueled by life stage changes, particularly the change of marital status and the addition (and subtraction) of children,” John Burns Real Estate Consulting notes in a recent blog post. “These changes significantly affect where consumers want to live and what kind of home and community they will choose.”

For example, according to the firm’s research, singles are more likely to rent and live in more urban locations, near entertainment and employment. Also, though cohabitation is on the rise, unmarried couples are choosing to live together at much lower rates than married couples. Marriage usually prompts a desire to own a home and the addition of children makes owning a home nearly a necessity, given education and space needs, writes Mollie Carmichael, a principal for John Burns Real Estate.

Source: “Delayed Marriage Equals Delayed Home Ownership,” John Burns Real Estate Consulting (Oct. 22, 2014)

Mortgage Rates Haven’t Been This Low Since 2013

Mortgage Rates Haven’t Been This Low Since 2013. Image courtesy of Stuart Miles / FreeDigitalPhotos.net

The 30-year fixed-rate mortgage took another dip this week, staying below the 4 percent threshold and keeping borrowing costs at the lowest rate in more than a year. It marks the fifth consecutive week that mortgage rates decreased.

Freddie Mac reports the following national averages with mortgage rates for the week ending Oct. 23:

• 30-year fixed-rate mortgages: averaged 3.92 percent, with an average 0.5 point, reaching a new low for the year and dropping from last week’s 3.97 percent. Last year at this time, 30-year rates averaged 4.13 percent.
• 15-year fixed-rate mortgages: averaged 3.08 percent, with an average 0.5 point, dropping from last week’s 3.18 percent average. A year ago, 15-year rates averaged 3.24 percent.
• 5-year hybrid adjustable-rate mortgages: averaged 2.91 percent, with an average 0.5 point, dropping from last week’s 2.92 percent average. Last year at this time, 5-year ARMs averaged 3 percent.
• 1-year ARMs: averaged 2.41 percent, with an average 0.4 point, rising from last week’s 2.38 percent average. A year ago, 1-year ARMs averaged 2.60 percent.

Source: Freddie Mac

Housing Is Missing 700K in Sales

Housing Is Missing 700K in Sales. Image courtesy of cooldesign / FreeDigitalPhotos.net

A drop in single-family home sales – both new-homes and existing-homes – over the past few years equates to a real estate market that is at least 700,000 shy in annual home sales, according to estimates by David Crowe, the chief economist for the National Association of Home Builders.

He arrived at that estimate by taking into account historical market averages in the late 1990s and early 2000s, which showed home sales at about 5.6 million per year – made up of 900,000 new-home sales and 4.7 million in existing-home sales.

But the latest loss in sales can largely be attributed a drop in new-home sales, Crowe notes. Single-family new-home sales peaked in 2005 at 1.3 million, but plunged by 77 percent to 300,000 in 2011. It’s slowly been regaining. Meanwhile, existing-home sales – heavily lifted by distressed sales to investors in recent years – dropped 40 percent from peak to trough, Crowe notes.

“As demand for more homes dried up, households lost their owned homes through foreclosure, and the number of newly formed households shrank, the existing supply of homes was more than sufficient to satisfy demand,” Crowe says. “Adding more inventory to a saturated market made little sense” at the time.

First-time buyers will be key to making up for the loss in sales, Crowe says. Sales of existing-homes to first-time buyers are more likely to result in the seller buying a new home, he notes.

“First-time buyers expand the need for more homes even if they aren’t the primary purchasers of those new homes,” Crowe notes. “First-time buying was 40 percent of the existing market and 30 percent of the new-home market in in more stable periods. Those shares, of a smaller market, have dropped to 27 percent and 16 percent, respectively. … First-time home buyers continue to struggle with their own financial limitations but as the economy expands and jobs become more available and better paying, the core 25- to 34-year-old first-time buyers will come back.”

Source: “Where Are the Home Buyers?” BUILDER Online (Oct. 21, 2014)

Buyers Aren’t Budging for Low Rates

Buyers Aren’t Budging for Low Rates. Image courtesy of stockimages / FreeDigitalPhotos.net

Mortgage rates have fallen to their lowest level in nearly 18 months, while mortgage applications for home purchases have fallen 5 percent week-to-week and have dropped about 9 percent from year-ago levels, the Mortgage Bankers Association reports.

The national average on the 30-year fixed-rate mortgage dropped to 4.10 percent last week, reaching the lowest level since May 2013, according to the MBA. Some lenders are reportedly even offering stellar credit borrowers below 4 percent rates.

Overall, the MBA reports that mortgage applications rose 11.6 percent last week, but the rise was entirely driven by refinance applications, not applications for home purchases, which are viewed as a leading gauge of future buying activity. Refinance applications surged 23 percent week-to-week, reaching the highest level since November 2013. Mortgage applications for home purchases continued to fall in the latest week, the MBA reports.

“Mortgage rates have fallen close to 30 basis points over the last four weeks,” says Mike Fratantoni, the MBA’s chief economist.”Continuing concerns about weak economic growth in Europe and a few U.S. economic indicators that came in below expectations caused a flight to quality into U.S. Treasurys last week, leading to sharp drops in interest rates.”

But housing analysts say it’s not mortgage rates sidelining potential buyers but credit availability. Lenders have tightened their credit requirements, requiring higher credit scores and down payments that have prevented many home shoppers from closing.

That may soon change. Mel Watt, director of the Federal Housing Finance Agency, announced Monday that the Fannie Mae and Freddie Mac regulator will soon be releasing rules to help ease overly tight credit standards.

“We have started to move mortgage finance back to a responsible state of normalcy – one that encourages responsible lending to creditworthy borrowers while maintaining safety and soundness of the enterprises,” said Watt during the Mortgage Bankers Association’s annual conference on Monday.

Source: “Slump in Mortgage Rates Fails to Rally Home Buyers,” CNBC (Oct. 22, 2014)

Banks Betting Big on Apartment Projects

Banks Betting Big on Apartment Projects. Image courtesy of mapichai / FreeDigitalPhotos.net

Lenders dished out $172.5 billion in new mortgages for apartment buildings with five or more units in 2013 — a multifamily lending record, according to a new Mortgage Bankers Association report. It’s an 18 percent gain over 2012 levels, and so far, lending for apartments this year looks likely to meet the 2013 pace.

The top five multifamily lenders by dollar volume in 2013 were JPMorgan Chase, Wells Fargo, PNC Real Estate, CBRE Capital Markets Inc., and KeyBank.

“These bigger banks — Wells Fargo, JP Morgan — they are starving for loans, and JPM and Wells Fargo, we’re hearing, are very aggressive on these multifamily projects,” Paul Miller, a banking analyst with FBR, told CNBC.

The surge in multifamily lending has translated into a surge in apartments popping up across the country. Multifamily starts were up 18.5 percent in August, according to U.S. Census data. In September, completions of apartments soared to a 24-year high. The number of new apartment units are on pace to top 368,000 this year.

Still, housing analysts aren’t worried about a bubble brewing from oversupply in the sector. “We view the nation as relatively under-housed,” says David Toti, an analyst with Cantor Fitzgerald. “At some point, the supply-demand ratio could tip into troublesome territory, but I don’t think we’re nearly there yet.”

As of now, rents remain high and vacancies low across the country. “It’s more difficult for Millennials and first-time home buyers to buy homes, so they’re renting for longer,” Miller notes.

Source: “Banks Take Big Bet on Red-Hot Apartments,” CNBC (Oct. 17, 2014)