After years of wild swings, the U.S. housing market is slowly returning to normal.
The latest forecast from Fiserv (FISV) Case-Shiller predicts home prices will increase by an average of 3.3% annually over the five years ending September, 2017.
“2012 was the first year since 1997 that the housing market has resembled something [close to] normal,” said David Stiff, Fiserv’s chief economist. “For the past 15 years, home price changes and sales volumes have either been boosted by a bubble mentality or crushed by crash psychology.”
From 1998 until the housing bubble peaked in 2006, home prices grew by 5% or more a year. But once the bubble burst, home prices plunged, falling 30.5% through the end of September 2012.
It wasn’t until late 2011 that markets started to stabilize, according to Stiff. Between September 2011 and September 2012, average U.S. home prices rose 3.6%. By then, 62% of the 384 metro areas Fiserv tracks reported rising home prices, up from just 12.5% of all markets during the same period a year earlier.
Many of the metro areas hit hardest by the housing bust recorded the biggest price gains during those 12 months. In Phoenix, for example, prices climbed back by nearly 21%; prices in Detroit rose almost 16%; and homes in San Jose, Calif., gained 12.5%.
Values continued to decline on Long Island, N.Y., however, where prices fell 8.1% and where Stiff said the turnaround in median income lagged the rest of the nation by about a year. Brunswick, Ga., also saw declines, down 7.1%, as did Valdosta, Ga, off 6.9%. Both areas saw jumps in foreclosures.
By the end of this year, Fiserv predicts that home prices will be heading higher in almost every metro area it tracks. Medford, Ore., is expected to gain 9.7% in the 12 months through September, the highest of any city. Other big gainers are expected to be Santa Fe, N.M., up 8.1%, Billings, Mont., 5.5% and Syracuse, N.Y., 5%.
Fiserv expects Miami home prices to sustain a 10.7% loss over the same period, the largest drop of any market. Stiff said a steady stream of foreclosures will keep prices soft in the area during that time.
While Stiff said home price gains will be similar to those experienced back in 1997, he noted the similarities stopped there. Currently, millions of homes are either in foreclosure or on the verge of it.
Otherwise, there are many positive trends in today’s market, he said. Prices are extremely affordable and mortgage rates are at or near historic lows. Overall, Fiserv Case-Shiller expects stronger demand for housing, and the sector should, once again, have a positive impact on the economy.
Home selling season isn’t waiting until spring this year
By Kenneth R. Harney – January 20, 2013.
WASHINGTON — Could we be looking at an early spring this year — not in meteorological terms but real estate? Could the chilly December-to-February months, which traditionally see fewer buyers out shopping for houses compared with the warmer months that follow, be more active than usual? And if so, what does this mean to you as a potential home seller or buyer?
There is growing evidence, anecdotal and statistical, that there are more shoppers on the prowl in many parts of the country than is customary for this time of year, more people requesting “preapproval” letters from mortgage companies, more people visiting websites offering homes for sale and more people telling pollsters that they expect home prices to continue rising and that the worst of the housing downturn is long past. There is even data showing that during holiday-distracted December, there was a jump in visits to homes listed for sale.
Coldwell Banker, one of the largest brokerages in the country, says traffic to its listings website was up 38% during the last month, compared with year-earlier levels. ZipRealty, an online brokerage based in Emeryville, Calif., reports that its website has seen an unusual 33% increase in home shoppers in the first half of January compared with December.
Redfin, a Seattle brokerage, found that during the week of Dec. 30, shoppers requesting home tours by agents jumped 26% over the four-week average, and 9% compared with the same week the year before.
Economists at the National Assn. of Realtors report that foot traffic at houses listed for sale in well over half of all markets around the country was higher in December than the year before. Given the strong December reading, says Paul C. Bishop, vice president for research at the association, sales in the coming weeks should be “robust.”
Even in markets that typically hibernate until the snow melts, there are indications of an unusually early start to the 2013 season. Joe Petrowsky, president of Right Trac Financing Group, a mortgage company near Hartford, Conn., says he has received a much higher volume of requests for “preapproval” letters — which tell sellers that a purchaser is qualified for a mortgage loan — compared with what’s typical at this time of year.
“I’m seeing twice as many buyers this January as last January,” Petrowsky said. “People have finally figured out that prices are moving up, interest rates are really low, and they don’t want to miss out on the opportunity.”
In the Washington, D.C., area, Long & Foster Real Estate, the country’s largest independent broker, reports strong “signs that we are going to have an early spring” in terms of home sales. In an unusual occurrence for January, according to Steve Wydler, a Long & Foster agent in Northern Virginia, “multiple offer situations are becoming increasingly common, with prices being escalated above asking price.”
Gretchen Castorina, an agent with brokerage firm Allen Tate in Chapel Hill, N.C., says “spring started last month” in terms of new clients and multiple-bid competitions. Even in the dark final days of December, Castorina says she was busy. “I was showing houses on Dec. 31,” she said, and had written a contract for buyers just before Christmas.
Jo Ann Poole, an agent with Simi Valley Real Estate, says that for a variety of reasons, “in the last 10 days people have figured it out” and are making real estate moves that might have normally been pushed back into the spring months.
Polling by Fannie Mae, the government-backed mortgage investor, may shed some light on what’s motivating buyers. In a survey of 1,002 adults in December, Fannie found the highest share of consumers in the survey’s 21/2-year history who expect home prices to rise during the coming 12 months. Forty-three percent expect mortgage rates to jump, and 49% believe that the cost of renting will increase.
Roll all this together, says Doug Duncan, Fannie’s chief economist, and you can see why consumer sentiment “could incentivize those waiting on the sidelines … to buy a home sooner rather than later” — pushing spring behavior into midwinter.
What’s missing from this equation? More owners listing their homes for sale. Inventories of available homes are down in most markets, mainly because many sellers are under the impression that it’s still a buyer’s market filled with low-ballers who won’t pay them a fair price. In many parts of the country, that is last year’s news. In 2013, it’s simply no longer the case.
Source: Los Angeles Times
Tight inventories and lending may curb 2013 California home sales
By Andrea V. Brambila, Monday, October 8, 2012.
California home sales and prices will likely rise this year and in 2013, though low inventory and restricted lending will continue to curb housing market growth, according to a forecast from the California Association of Realtors.
Sales of existing, single-family homes are up 6.5 percent through August compared to the same period last year. After a slight 1.1 percent increase in 2011, CAR expects sales to jump for the second year in a row this year to 530,300 homes, up 5.1 percent from 2011. CAR anticipates a further 1.3 percent increase in 2013, to 530,000 homes.
“The market has improved moderately over the past year, and we expect that to continue into 2013,” said CAR President LeFrancis Arnold in a statement.
Arnold said sales would be even higher if inventory were less constrained in markets dominated by sales of bank-owned properties, particularly in the Central Valley and Inland Empire, “where there is an extreme shortage of available homes. Sales will be stronger in higher-priced areas, where there are more equity properties and a somewhat greater availability of homes for sale.”
Leslie Appleton-Young, CAR’s vice president and chief economist, said in a conference call that low inventory and “defensive lending” by lenders were “the speed bumps in the California housing highway.”
Lenders “are not lending to hold the mortgage. They’re lending to sell the mortgage on the secondary mortgage market and they want to avoid having to buy that back,” she said.
“The primary constraints on the market and market growth are the inventory situation and the lending situation, which we do not see changing significantly in 2013,” Appleton-Young said.
After a 6.2 percent decline in the statewide median home price in 2011, CAR expects the median to rise nearly 11 percent this year, to $317,000, and 5.7 percent next year, to $335,000. That median will remain 43.7 percent below the $594,530 peak seen in May 2007.
“As I look at the price changes in 2012, a significant amount of those increases are due … to an increased share of equity sales that tend to be in higher-priced areas,” Appleton-Young said. “The Case-Shiller (home price) index has shown appreciation in the low single digits, so there’s some home appreciation when looking at same-home sales.”
The share of California sales where homeowners have some equity in their homes has been rising since early this year and in August stood at 62 percent of overall sales. Real estate-owned (REO) sales fell to 14 percent of sales, down sharply from 60 percent in January 2009. Short sales made up 23 percent of the market in August.
While a six-to-seven month supply of inventory is considered a balanced market, California’s housing supply now stands at 3.2 months, Appleton-Young said. That’s a considerable drop from a more than 16-month supply at the peak of the crisis in 2006, she said.
Inventory varies somewhat when broken down by sale type. Equity sales in August stood at a 3.3 month supply while short sales were at a 3.7 month supply. REOs posted a 1.6 month supply, but in some areas had a less than three-week supply, Appleton-Young said.
Interest rates for 30-year fixed rate mortgages are at 50-year lows, she noted. CAR predicts 30-year fixed-rate loans will average 3.8 percent this year, down from 4.5 percent last year. In 2013, the trade group expects a slight jump to 4 percent — the first increase after six straight years of declines. Appleton-Young doesn’t anticipate the increase will have a significant impact on demand.
“People started to realize the opportunity in the market,” she said, referring to increased buyer demand this year. “It is a once in a generation opportunity in California real estate, if you can qualify. The sellers that had been on the fence for the past four or five years … realized that even though ” values are not going to go back to where they were in 2006, they’re still rising, she said.
The share of home sellers planning to buy another home rose for the second straight year this year, to 40 percent, after six years of decline.
A combination of restricted supply and increased demand has resulted in the highest share of California home sales with multiple offers in at least the last 12 years, CAR said. Nearly six in 10 of surveyed California Realtors said they had been in a multiple offer situation with homes receiving an average of about four offers each.
All-cash deals have made up 30 percent of overall sales this year, the highest level since at least 2005. Among REO buyers, 43.1 percent paid in cash, while 26.7 percent of short sale buyers paid cash.
“It’s a very, very competitive market. I think this is one of the biggest challenges we face about educating consumers about the market,” Appleton-Young said.
“Pent-up demand from first-time buyers will compete with investors and all-cash offers on lower-priced properties, while multiple offers and aggressive bidding will continue to be the norm in mid- to upper-price range homes,” she said in statement.
Appleton-Young said it doesn’t appeal to her to characterize the current California real estate market as “distorted” by low inventory and high shares of cash buyers and investors.
“It certainly is a unique market that’s responding to unusual circumstances. Certainly since I’ve been here we’ve never seen a market like this,” she said.
She pointed to a series of “wildcards” that represented potential risks to the future of the housing market.
“The wildcards for 2013 include federal, monetary and housing policies, state and local government finances, housing supply, and the actions of underwater homeowners — not to mention the strength of the overall economic recovery,” she said.
“The actions of underwater homeowners will play an important role in housing inventory next year, with rising home prices inducing some to stay put and others to list and move forward.”
At the national level, there’s “a tremendous amount of uncertainty” surrounding the fall election, health care reform, the eurozone crisis, and the so-called “fiscal cliff,” Appleton-Young said. The fiscal cliff refers to tax increases and spending cuts that will go into effect starting in 2013 unless Congress acts to prevent or alter them.
“I think the fiscal cliff is clearly one that could be devastating for the economy and send us into a double-dip recession,” she said.
Anything that throws the economy “off-kilter” could affect jobs and therefore the housing market, she said. California’s unemployment rate, which trends higher than the national rate, averaged 11.7 percent in 2011 with job growth at 1.2 percent. CAR predicts the jobless rate will drop to 10.7 percent in 2012 with 1.4 percent job growth, and will decrease even further to 9.9 percent in 2013 with 1.6 percent job growth.
The California labor market is “gradually improving — bouncing along the bottom, if you will — and keeping the economy constrained,” Appleton-Young said.
The trade group forecasts that U.S. gross domestic product growth will clock in at 2 percent in 2012 and 2.3 percent in 2013, up from 1.7 percent in 2011. CAR expects a 1.6 percent increase in real disposable income in both 2012 and 2013 in the U.S., up from 1.3 percent in 2011. The trade group’s forecast assumes the reality of the impending fiscal cliff, but “that we won’t fall off it,” Appleton-Young said.
Source: California Association of Realtors.
U.S. home prices could rise 4% a year, forecast says
By Julie Schmit, USA TODAY
Average U.S. home prices — down by a third since 2006 and still falling — will rise almost 4% a year for the next five years, according to a new forecast.Market watcher Fiserv sees prices stabilizing by summer’s end and then climbing, quickly in some places until gains taper off. The forecast is based on an analysis of leading home price indexes.
Investors will drive much of the momentum, as they are now in cities such as Las Vegas and Phoenix.
First-time and trade-up buyers will eventually follow.
By the time home prices stop falling, they’ll be almost 35% below their 2006 peak, Fiserv says.
Separately, market researcher CoreLogic said Tuesday that U.S. home prices rose 0.6% in March from February, the first month-over-month increase since July.
Good affordability and declining inventories are key factors.
Conventional mortgage payments now account for just 12% of median family incomes vs. a historical norm of 20%, says Fiserv economist David Stiff.
The Fiserv forecast, done with Moody’s Analytics, assumes steady economic growth with no major shocks. Markets hardest hit by foreclosures will show the biggest five-year increases in home appreciation, it adds.
Six of the 10 markets where annualized prices are expected to rise most over the next five years had price drops of more than 50% from their peaks.
Las Vegas, for instance, is 61% off its 2006 peak.
Meanwhile, Realtor.com says Florida has more cities than any other state that show the strongest signs of a housing recovery.
Each quarter, the real estate website assesses housing data, including changes in list prices, inventories of homes for sale and local economies.
Phoenix, Miami and Orlando are the top turnaround cities in its study, based on those markets’ improvements in the first quarter compared with a year earlier.
Asking prices are up more than 20% in Phoenix and Miami, says Realtor.com. Inventories are down more than 40%.
Naples, Fla., and Boise are also climbing in the rankings.
New to the list of top 25 markets are Oakland and San Jose, which are benefiting from growth in the tech industry.
The continued performance of local markets will depend a lot on the economy as well as on how quickly lenders dispose of distressed homes, says Realtor.com CEO Steve Berkowitz.
Source: USA Today
Selling a home: 10 things you need to know
People sell their homes for a variety of reasons, whether it’s because they need more space, they’re downsizing, moving up, leaving the country, or getting a divorce. They all have one thing in common: They want to get the most they can.
Here are 10 things you need to know about selling your house.
1. What’s my house worth?
It doesn’t hurt to get a second opinion at the doctor’s office. Real estate is no different. If you’re interviewing realtors, ask what they think your home will fetch. Agents will look at what else has sold in the neighborhood and make a comparison. But trying to figure out value in a fast moving market can be like pinning a tail on a galloping donkey. What sold last might not be where the market is today. But at least it will give you some baseline numbers.
That ballpark figure is essential to helping you to figure out how much equity you have in the home. That’s the amount of money left after you sell, minus your mortgage and other expenses such as moving and commissions. It gives you an idea of what you can afford for your next property and whether it’s worthwhile selling in the first place.
I know you’ve seen those reality shows where the hoarders have junk packed to the ceilings. I know this isn’t you. But I also know that you don’t always vacuum every day and the house isn’t necessarily as pristine as it could be. Decluttering is the cheapest way to make your house shine to a prospective buyer. You may even find that box of chocolates that your aunt gave you for Christmas.
3. Curb appeal
First impressions count. The front of your home is the first thing buyers see. Some buyers have been known to stop at the front door and walk back to the car if they are turned off. That means making sure your lawn is freshly mowed. A coat of paint outside can’t hurt either. And bury the garden gnomes.
4. You can do it yourself
There are plenty of do-it-your self companies to help you sell. Some will list your home on the Multiple Listing Service for a few hundred dollars. Others will provide services a la carte, depending on what you need.
Or you can do most of the work yourself. That includes your own showings and flyers. But you get to keep most of the savings. An agent will charge a seller roughly 2.5 per cent of the selling price. On a $400,000 home, that works $10,000. With a little sweat equity you could save significantly.
5. If you want an agent…
If you feel more comfortable using an agent, shop around. Just because your cousin just got his license, it doesn’t make him the best choice. Your aunt might be miffed, but this is your money. Ask friends. Get referrals. There are even internet “dating” services out there that have realtors bid on your business. Pick from realtors that offer you the best range of commission and service and most of all knowledge about your neighborhood.
The realtor that suggests the highest price is not necessarily the best for you. Is he just trying to get your business? Find out how he calculated the price and assessed the value. Then compare with your other choices.
And don’t be afraid to negotiate. Realtors work hard for their money. But that doesn’t mean you can’t get a discount. If your agent shaves off just half a percentage point on his or her commission, that would leave $2,000 in your bank account on a $400,000 home. That’s enough for a nice little vacation somewhere.
6. Depersonalize your home
Pictures of your kids and grandkids are cute, but not to all buyers. Buyers want to be able to imagine living in your house. That means visualizing sitting on your comfy couch watching your big screen TV with a huge tub of popcorn. Just like you. So take away anything that will remind them that they’re just visiting. You want them to linger awhile. Don’t spoil the illusion.
7. Maybe hire a fluffer
Home stagers help you rearrange things in the house to make its appearance more attractive It could be worth it, but can also be expensive. But if it’s a slow market, your home has an odd layout, or your furniture is from a tattoo parlour (not that there’s anything wrong with that) a home stager may be the answer.
8. Marketing your home
Posting your home on the Multiple Listing Service, newspaper advertising and flyers are some of the traditional means that many people use. There are also internet sites where you can post your home for sale, depending on whether you are selling it yourself or using an agent.
The easiest and cheapest way starts with a sign on your lawn. Some people don’t like the For Sale sign because of privacy issues, but it’s round the clock billboard advertising.
You can also consider an open house for agents. Many realtors prefer to pre-screen a home before recommending it to their buyers. You can also have a general open house where anyone can drop by. Yes, so will all your nosy neighbors, but they may have friends or relatives who might want to live in the neighborhood.
9. When to sell?
Spring is traditionally the strongest market and prices are typically higher. As summer approaches, families have more time to look around, but most parents want to get settled before school starts.
Come winter, inclement weather keeps people indoors and buyers are thinking about the holidays. Not surprisingly, Christmas tends to be the slowest. But that doesn’t mean you have to shy away from listing. Sometimes less competition can mean good results. And your home is already decorated. Take advantage of the fact that the place already looks great for the holiday season. The tree is up, the fireplace is blazing. Let it snow!
10. Do you really need to sell?
If you need a bigger home, you could explore putting on an addition. If your home is dated, you can think about renovating. If you’ve lost a job and are having trouble making ends meet, think about taking in a tenant. There are options to selling that you can consider. There are also costs to take into account, from moving and storage to commissions that you pay each time you move. Selling isn’t always the best way to go. Your dream home might already be the one you’re in right now.
Tony Wong writes about real estate for The Toronto Star. This article was prepared for Moneyville’s launch and has been revised and updated.
Existing-Home Sales Rise Again in January, Inventory Down
Existing-home sales rose in January, marking three gains in the past four months, while inventories continued to improve, according to the National Association of Realtors®.
Total existing-home sales1, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, increased 4.3 percent to a seasonally adjusted annual rate of 4.57 million in January from a downwardly revised 4.38 million-unit pace in December and are 0.7 percent above a spike to 4.54 million in January 2011.
Lawrence Yun, NAR chief economist, said strong gains in contract activity in recent months show buyers are responding to very favorable market conditions. “The uptrend in home sales is in line with all of the underlying fundamentals – pent-up household formation, record-low mortgage interest rates, bargain home prices, sustained job creation and rising rents.”
Total housing inventory at the end of January fell 0.4 percent to 2.31 million existing homes available for sale, which represents a 6.1-month supply2 at the current sales pace, down from a 6.4-month supply in December.
“The broad inventory condition can be described as moving into a rough balance, not favoring buyers or sellers,” Yun said. “Foreclosure sales are moving swiftly with ready home buyers and investors competing in nearly all markets. A government proposal to turn bank-owned properties into rentals on a large scale does not appear to be needed at this time.”
Total unsold listed inventory has trended down from a record 4.04 million in July 2007, and is 20.6 percent below a year ago.
NAR President Moe Veissi, broker-owner of Veissi & Associates Inc., in Miami, said buying power is enticing more potential home buyers. “Word has been spreading about the record high housing affordability conditions and our members are reporting an increase in foot traffic compared with a year ago,” he said. “With other favorable market factors, these are hopeful indicators leading into the spring home-buying season. We’re cautiously optimistic that an uptrend will continue this year.”
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was a record low 3.92 percent in January, down from 3.96 percent in December; the rate was 4.76 percent in January 2011; recordkeeping began in 1971.
The national median existing-home price3 for all housing types was $154,700 in January, down 2.0 percent from January 2011. Distressed homes4 – foreclosures and short sales which sell at deep discounts – accounted for 35 percent of January sales (22 percent were foreclosures and 13 percent were short sales), up from 32 percent in December; they were 37 percent in January 2011.
“Home buyers over the past three years have had some of the lowest default rates in history,” Yun said. “Entering the market at a low point and buying at discounted prices have greatly helped in that success.”
All-cash sales were unchanged at 31 percent in January; they were 32 percent in January 2011. Investors account for the bulk of cash transactions.
Investors purchased 23 percent of homes in January, up from 21 percent in December; they were 23 percent in January 2011. First-time buyers rose to 33 percent of transactions in January from 31 percent in December; they were 29 percent in January 2011.
Forty-seven percent of NAR members report that contracts settled on time in January; 21 percent had delays and 33 percent experienced contract failures. Contract cancellations are unchanged from December but were only 9 percent in January 2011; they are caused largely by declined mortgage applications and failures in loan underwriting from appraisals coming in below the negotiated price.
Single-family home sales rose 3.8 percent to a seasonally adjusted annual rate of 4.05 million in January from 3.90 million in December, and are 2.3 percent above the 3.96 million-unit pace a year ago. The median existing single-family home price was $154,400 in January, down 2.6 percent from January 2011.
Existing condominium and co-op sales increased 8.3 percent to a seasonally adjusted annual rate of 520,000 in January from 480,000 in December but are 10.3 percent lower than the 580,000-unit level in January 2011. The median existing condo price was $156,600 in January, up 2.0 percent from a year ago.
Regionally, existing-home sales in the Northeast rose 3.4 percent to an annual pace of 600,000 in January and are 7.1 percent above a year ago. The median price in the Northeast was $225,700, which is 4.2 percent below January 2011.
Existing-home sales in the Midwest increased 1.0 percent in January to a level of 980,000 and are 3.2 percent higher than January 2011. The median price in the Midwest was $122,000, down 3.9 percent from a year ago.
In the South, existing-home sales rose 3.5 percent to an annual level of 1.76 million in January but are unchanged from a year ago. The median price in the South was $134,800, which is 0.3 percent below January 2011.
Existing-home sales in the West jumped 8.8 percent to an annual pace of 1.23 million in January but are 3.1 percent below a spike in January 2011. The median price in the West was $187,100, down 1.8 percent from a year ago.
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries.
Source: Walter Molony http://www.realtor.org/
As home prices fall further, is it time to buy?
Nobody wants to catch a falling knife. It is as simple as that. If potential buyers see continued home price erosion, they will stay parked on the sidelines. But as with everything else in this unique and historic housing market, perhaps the usual logic doesn’t apply.
“Housing is one of the great investments right now. I tell people all the time when they come up to me, they say, “What should I do, Mr. Trump?” I say go buy a house,” said Donald Trump recently in an appearance on CNBC.
“It wouldn’t be an obvious mistake to buy a house now,” hedged famed economist Robert Shiller, barely a few hours later.
Perhaps they were just jumping off legendary investor Warren Buffett‘s recent declaration that if he had a way to manage them, he would buy a couple of hundred thousand single family homes and rent them out.
Housing appears to be rated a “buy” these days, especially among investors, who see a ripe and rising rental market and big potential for income.
But is it the right time yet for what I call “organic” buyers to get in? By this, I mean people buying a home to actually live in it, raise a family in it, let the dog run around in the back yard. If prices are still falling, couldn’t an even better deal be waiting down the road a bit?
No. House prices will continue to fall on a national basis at least through 2012, but you have to look past national headlines to your local market, which is likely already recovering nicely. The trouble with the national numbers is that they are heavily weighted toward the lower end of the market and to the distressed end of the market.
Around 73% of homes that sold in January were priced below $250,000, according to the National Association of Realtors. Forty-seven percent of homes sold that same month were considered “distressed,” which is either a foreclosure or a short sale (where the lender allows the borrower to sell for less than the value of the mortgage). With all the activity in these areas, no surprise that prices skew lower.
The $250,000 to $500,000 price range may now be the sweet spot for the market. Sales in January were up in this price range, and if you have good credit, you are within GSE and FHA loan limits in most markets. While FHA just raised its insurance premiums, which may hurt much-needed first-time homebuyer demand, it is still one of the best loan products out there today, especially for those with lower down payments.
You cannot time housing any more than you can time the stock market. True, housing moves far more slowly, but that works to its benefit, as prices don’t rise and fall on daily news or even on major events. Sales have clearly bottomed in housing, and prices always lag sales. They will lag longer this time around, no question, but they will come back.
Supply and demand will eventually win out, even after an historic crash. If you can’t get a good mortgage now, then perhaps it’s not your time, but if you can, waiting may not buy you much.
Source: Diana Olick 3/12/12 www.cnbc.com
Housing Crisis to End in 2012 as Banks Loosen Credit Standards
Capital Economics expects the housing crisis to end this year, according to a report released Tuesday. One of the reasons: loosening credit.
The analytics firm notes the average credit score required to attain a mortgage loan is 700. While this is higher than scores required prior to the crisis, it is constant with requirements one year ago.
Additionally, a Fed Senior Loan Officer Survey found credit requirements in the fourth quarter were consistent with the past three quarters.
However, other market indicators point not just to a stabilization of mortgage lending standards, but also a loosening of credit availability.
Banks are now lending amounts up to 3.5 times borrower earnings. This is up from a low during the crisis of 3.2 times borrower earnings.
Banks are also loosening loan-to-value ratios (LTV), which Capital Economics denotes “the clearest sign yet of an improvement in mortgage credit conditions.”
In contrast to a low of 74 percent reached in mid-2010, banks are now lending at 82 percent LTV.
While credit conditions may have loosened slightly, some potential homebuyers are still struggling with credit requirements. In fact, Capital Economics points out that in November 8 percent of contract cancellations were the result of a potential buyer not qualifying for a loan.
Additionally, Capital Economics says “any improvement in credit conditions won’t be significant enough to generation actual house price gains,” and potential ramifications from the euro-zone pose a threat to future credit availability.
Source: Krista Franks 1/24/12 www.dsnews.com