Housing Market Predictions for 2014

Good news! It is predicted that through 2014, existing-home sales are expected to stay on the up and up! 2013 has been a great year full of healthy gains and that momentum looks like it will continue.

According to the National Association of Realtors (NAR), existing-home sales have show a 20% cumulative increase over the past two years! Home prices have gained 18% too!

“We’ve come off of record high housing affordability conditions in the past year, and are now at a five-year low, but conditions are still the fifth best in the past 40 years,” said Lawrence Yun, chief economist for the NAR. “While the median-income family in many areas will still be well positioned to buy a home in 2014, income is barely budging given growth in consumer prices.”

Other issues include limited housing inventories that make it hard for homeowners to find an affordable place that they love. Once they do find the perfect home, they then have to face unnecessarily strict mortgage lending standards. These restrictive policies stem from Fannie Mae and Freddie Mac's rising fees, higher premiums from the FHA, and the Dodd-Frank banking regulations.  All of these have had a negative impact on community banks. Larger banks are said to be holding on to funds just in case they are sued by the Department of Justice. This takes away from available to mortgage borrowers, thus the tighter qualification requirements.

“Although home sales have recovered over the past two years, mortgage purchase applications have been flat for the past four years, even with rising sales,” Yun said.

2014 may see a dramatic decrease in refinancings because of higher mortgage rates. It may even hit the lowest levels we've seen in 15 years! To counterbalance this collapse, purchase applications will really need to rise.  “This is an incentive for banks to increase mortgage origination, especially considering the low default rates in recent years. But even with cheap mortgages for the past four years, all-cash buyers stayed high, accounting for over 30 percent of sales,” he said.

According to Yun, the only way that higher mortgage interest rates can be tolerated is if there is an increase in job creation as well as a relaxation of restrictive lending standards. And the only way to alleviate housing inventory shortages is to have an increase in housing starts. They need to rise 50% in order to meet the underlying demand!

Right now, the best thing we can do to help the housing market is to consider purchasing a home in 2014. Lock in the lowest rate possible and pay the mortgage every month. The more stability we can individually achieve, the better the whole economy can be in the long run.

If you are in the market for a new home, give us a call at 877-828-8851. We'd love to help you get through the mortgage process and into your dream home!

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Issues the Housing Market is Currently Facing

Recently, a group of realtors pinpointed the biggest issues that are currently impacting the housing market. These are issues that could have consequences for homeowners, realtors and mortgage professionals alike!

Right now, the biggest issue concerns interest rates. Historically, low interest rates have always driven the economy and in turn the real estate markets. Since the rates have increased recently, capitalization rates could also rise. That refers to the ratio between the income produced by an asset and the cost of it. This could lead to investors and homeowners becoming more and more wary of their purchases.

Another concern revolves around healthcare. As the population continues to age, there will eventually be a demand for more senior housing. This will have an affect on available housing inventories and the building industry for both medical facilities and senior housing.

Economists have even started accounting for a future housing boom! Between 1982 and 1995, there were 80 million Americans born. They are calling this an "echo boom".  Those that fall into this age range tend to prefer urban lifestyles that are flexible and active. However, there are also plenty who prefer the suburbs. This could lead to a future need for even more mass transit for those commuting between the suburbs and the city. There will be money pouring into bike paths and public transportation, as well as homes with great locations!

Right now, commercial real estate is doing well. There have been increases in transactions for these properties and plenty of credit is available. Also, the underwriting for commercial real estate is less restricted than in the past and plenty of debt options are in place.  However, the residential market is still seeing tough underwriting rules. But the rates are still relatively low and affordability in general is high!

Extreme weather and the changing climate are another issue. Areas that are continuously affected by storms and hurricanes, like those in the path of hurricanes Katrina and Sandy, are facing changes in code and zoning standards. They are also having to pay much higher insurance premiums. All of this has a strong impact on coastal homes.

An issue that is harder to calculate includes global events like terrorism, war and debt crisis. It is hard to anticipate what could happen but economists agree that the impact of major events can lead to drastic changes. But that goes without saying.

An issue that is a bit easier to analyze concerns the increased natural gas and oil production in the US. This is having an impact on the economy and the environment. On one hand, the increase of these productions have lead to more employment opportunities and reduced America's dependence on foreign oil supply, but climate changes and potential contamination have a big affect. If there are communities in nearby areas, it could really change the value of the homes.

Lastly, technology is changing the world as we know it. Many offices and corporations are choosing to employ people to work from home. This can cause some companies to downsize their office space which has an affect on commercial real estate. With less retail space needed, there will be fewer and smaller stores. Retail demand is down across the country due to an increase in internet sales.

All of these issues have a play at this game of tug-o-war that is balancing the housing market. While the market is recovering overall, trained economists are required to keep an eye on this delicate balance.

There will be many changes in the future. Right now, some of the best advice we can give is to lock in low mortgage rates while they are still low.

If you have any questions or would like more information about how all of these issues can impact your local housing market, give us a call at 877-828-8851.

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Tight Mortgage Requirements Rough on Singles and First-Time Buyers

According to a study by the National Association of Realtors (NAR), there are still some unnecessarily restrictive mortgage lending standards in place that are not allowing some singles and first-time buyers to financially qualify for a home. These tend to have to do with tight credit requirements. Since 1981, NAR has been evaluating the demographics, preferences, motivations and plans of those who have recently bought or sold a home. This data includes only owner-occupants, not investors or vacation homes.

“Single home buyers have been suppressed for the past three years by restrictive mortgage lending standards, which favor dual-income households who are more likely to have higher credit scores,” said Lawrence Yun, NAR chief economist. “Not seen in this survey is the elevated level of investors in recent years. The housing recovery would have been much weaker without investors, who often purchase with cash.”

According to the survey, 66% of buyers are married couples. In 2010 that number was 58%. The survey also saw that 16% of homebuyers are single women but only 9% are single men. Compared to 2010's 20% single women and 12% single men, the data shows that the overall market share of single buyers has declined from 32% in 2010 to 25% in both 2012 and 2013.

“Given that mortgage interest rates are expected to gradually rise, we need greater access to credit for a sounder housing recovery," said Yun. "Affordability conditions remain favorable in much of the country, but consumers need access to safe and sound financing, particularly the 30-year fixed-rate mortgage, and with low downpayment options for first-time buyers."

When looking at the averages that date back to 2981, it shows that 4 out of 10 purchases come from first-time buyers. In 2012, first-timers accounted for a 39% market share, but that number has slipped to 38% this year. This means that there are fewer first-time buyers in today's market than average. It is important to note that first-timers are very important for the housing market's recovery because they are the ones that help existing home owners to sell.

If you are in need of a home soon, we can help! If you are a single and/or first-time buyer, please don't hesitate to call us! We'd love to do everything we can to help you get into a home! Call Crosscountry Mortgage today at (877) 828-8851.

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Impact of the Shutdown on the Mortgage Industry

As the government shutdown is nearing its end and its employees have a chance to get their jobs back, many are wondering about the effects that the shutdown has had on the mortgage industry. Beyond those who were furloughed being unable to make money, many others were unable to purchase homes or get a mortgage due to the IRS being unable to process the 4506-T form. Additionally, USDA loans were on pause during the shutdown as well.

“Outside of the obvious process impacts of submissions, approvals and income there are immediate and lingering tangential impacts to housing and housing finance markets. With over a decade of shenanigans by members of Congress who are not doing their jobs, the consumer and investor uncertainty continues to restrain any meaningful recovery,” said Mark Dangelo, president, MPD Organizations. “Without the extraordinary impacts of the Federal Reserve, the economy would be at zero growth from its 2009 levels and joblessness would have remained at over 8.5 percent.”

Because of the shutdown, it has become a major problem that loans were not making their way to borrowers and that forms were delaying the sale of homes. Everyone who was in the process of buying or selling was essentially put on hold. Specifically, those who needed an IRS verification of income were stopped in their tracks. Mortgages that were beyond that stage and were scheduled to close during the shutdown may have been able to do so but the mortgages in the beginning stages definitely suffered.

Ultimately, even once the shutdown is completely over and everyone is back at work, there will no doubt still be a delay due to the amount of paperwork that has piled up.

“There may be a trickledown effect for anything that may have started the process during the two weeks of shutdown. My guess is now that the shutdown has been ended, they will get back to the way things have been, a relatively positive outlook for housing and lending ... especially purchase transactions,” said  Gregory Teal, president and CEO at Ernst Publishing Company.

Has your mortgage been effected by the shutdown?

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Freddie Mac on the Government Shutdown

Freddie Mac is allowing borrowers who are not being paid as a result of the government shutdown to still have their mortgages delivered to Freddie Mac as long as they meet all the usual requirements and the borrower is expected to return to work after the shutdown ends.

"We're issuing this guidance to help ensure the continued smooth operation of the mortgage market during the temporary shutdown of the federal government. Today's bulletin is intended to give lenders the certainty to continue approving and delivering new mortgages that meet Freddie Mac guidelines to eligible borrowers, such as federal employees and contractors," said Dave Lowman, executive vice president, Single-Family Business at Freddie Mac. "During the temporary shutdown. We are also reminding servicers of our forbearance options to assist qualified homeowners with Freddie Mac mortgages to minimize the shutdown's impact on our nation's families and communities."

Freddie Mac will continue monitoring the current situation and promise to provide guidance if the shutdown lasts for a prolonged period of time. Right now, they have relief policies available to both public and private sector employees who are affected by the shutdown. This allows servicers to provide forbearance to eligible borrowers that must not be reported to credit bureaus. The forbearance can range from 3 to 12 months.

Servicers can also accept a borrower's most recent signed federal tax return even though the IRS is unable to process forms right now. This is helpful when tax information is needed to evaluate a borrow for a loan through Freddie Mac.

As always, Quest Loans is here to answer any questions you may have regarding the mortgage industry during this shutdown. Call us at 888-883-5252 anytime!

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President of MBA Calls for End of Shutdown

The president and CEO of the Mortgage Bankers Association (MBA), David H. Stevens, has recently issued a statement regarding the government shutdown and the affect it is having on the housing market. "The federal government shutdown will have a growing impact on the housing market the longer it continues. If this shutdown is temporary, the ones affected most will be out of work federal employees," he says. "However, the longer it goes, the greater impact it will have on borrowers, the housing market and the national economy."

He continues, "lenders processing loans that need tax transcripts, social security number verification, or FHA home loans face longer delays and reduced functionality from HUD, IRS, and the Social Security Administration. Different loan programs have different requirements, and these disruptions impact lenders in different ways, leading to confusion and fear among borrowers about whether they will be able to close on a home purchase or refinance. There are significant impacts on multifamily lenders, as well. Rental housing properties awaiting FHA financing cannot move forward.

“The furloughs can disrupt time-sensitive mortgage transaction deals by interfering with borrower lock agreements and causing interest rate disparities from the time of closing to the time the loan is securitized.

“For these reasons there must be a resolution so that borrowers and lenders are able to return to business as usual.”

We don't know when the shutdown will end but so far there have already been damaging affects on the housing market. If you have any questions about it, give us a call! 888-883-5252.

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What The Shutdown Means For The Housing Market

Since Tuesday morning, many government services were shut down or cut back. Congress is battling back and forth trying to resolve their issues. This is the first government shutdown in 17 years. "Essential employees" are still allowed to work but as many as 800,000 "non-essentials" are not allowed in government buildings and they don't know when they'll be paid again.

As you may know, the central issue being debated is Obamacare.  According to House Speaker John Boehner (R-OH), "The House has voted to keep the government open, but we also want basic fairness for all Americans under Obamacare."

While 800,000+ employees are on the sidelines, the members of Congress are still working and because of the 27th Amendment, all 533 of them are still being paid.

President Barack Obama has said "the idea of putting the American people's hard-earned progress at risk is the height of irresponsibility, and it doesn't have to happen. Let me repeat this. It does not have to happen."

Congress and the President continue to disagree and have yet to reach a resolution. What does this mean for the housing industry? According to the president of NAMB- The Association of Mortgage Professionals, Don Frommeyer, "the shutdown isn't going to help the U.S. economy continue to grow and interest rates across the board could very well increase, depending on what the bond market does during this time."

As of September 27th, The U.S. Department of Housing & Urban Development (HUD) has indicated that the FHA will continue to endorse single-family loans during the shutdown. Of their 8,709 staff members, only 349 of them are "essential" and continue to work. However, an even more limited number of FHA staff is allowed to do their underwriting and approve new loans. So right now, anyone in the process of purchasing a home may see delays since the shutdown will cause these processes to take much longer than usual.

Those facing foreclosure right now will still have loss mitigations continue but the FHA will not approve any lender applications right now.

If you have any questions about how the shutdown could be affecting your mortgage process, feel free to call your loan officer or give us a call at 888-883-5252 and we will try our best to answer your questions!

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