Fla.’s recent housing success

June 7, 2016

NEW YORK – June 6, 2016 – Clear Capital’s Home Data Index (HDI) Market Report releases recent and granular data each month. The HDI Market Report provides insights into housing price trends and other leading indices for the real estate market at the national and local levels.

Florida’s markets continue to recover from the devastating lows of the housing market crash, and an increase in baby boomers provides key insight into the market’s future, according to Clear Capital.

Survey results

  • Regionally, the West continues to dominate quarterly growth as it hovers around a 1.1 percent quarter-over-quarter price increase, though that’s a downtick of 0.1 percent from last month. Growth rates in the South remain unchanged at 0.7 percent quarter-to-quarter growth, while Northeast and Midwest regional growth continues to lag behind the rest of the nation at 0.1 percent.
  • Nationally, quarterly market performance remains fixed at 0.6 percent with no change month-to-month.
  • The Seattle and Tampa MSAs tied for the top spot on the Highest Performing Major Metro Markets for June, each reporting a quarter-to-quarter price increase of 2.0 percent.
  • Tampa isn’t the only Sunshine State metro area to make the high-performers list. It also includes Orlando (1.7 percent quarterly price growth), Jacksonville (1.7 percent quarterly price growth), and Miami (1.4 percent quarterly price growth).

The most recent quarterly growth figures for the Floridian markets fit into a longer-term pattern of growth and recovery for the state, according to Clear Capital, and each major MSA has “experienced incredible gains since the market lows of 2011, recovering at least 30 percent or more of the individual market value.”

Jacksonville and Orlando home prices have increased 33 percent and 44 percent respectively; Tampa and Miami home prices have skyrocketed by almost 56 percent and 57 percent, respectively.

The baby boomer influence

Clear Capital compared Census Bureau data on baby boomer moves to the price increase from its index, calling the growth in both an “interesting phenomenon that may be contributing to the stellar price growth in the region.”

The most recent data from the U.S. Census Bureau indicates that this segment of the market – homeowners aged 55 to 74 – has increased more than 2.5X the overall population of homeowners in each of the top four Florida markets since 2011. In Miami and Jacksonville, the increase in homeowners of this generation is more than 500 percent greater than the overall increase in the total population of homeowners.

“It’s evident that the baby boomer demand for housing in the (price growth metro areas) is a significant contributing factor in the market’s overall success,” the report concludes. “In Orlando, the trend is quite similar as the ratio of baby boomer homeownership growth to overall homeownership growth is over 400 percent.”

“Florida has traditionally been regarded as prime real estate by those retirees who may be looking to migrate from colder areas of the nation such as the Northeast to a warmer and sunnier alternative for their golden years,” says Alex Villacorta, Ph.D., vice president of research and analytics at Clear Capital.

“As the top Floridian housing markets continue to grow and return impressive price gains – Tampa is currently reporting 12.2 percent annual price growth – it’s no surprise that this generation continues to invest in real estate in the region,” he adds. “The baby boomer share of homeowners is clearly on the rise here, and as more and more of this generation nears retirement age, Florida markets may be in for a boost in performance if tradition continues and retirees demand homes in the region.”

© 2016 Florida Realtors®


Banks rush to offer 3% downpayment loans

June 1, 2016

NEW YORK – May 31, 2016 – As some banks veer from Federal Housing Administration (FHA) loans, they’re offering their own low downpayment mortgages to appeal to home shoppers struggling to save enough to buy a home. Wells Fargo made headlines this week when it debuted its 3 percent downpayment loan.

JPMorgan Chase also announced its offering called the “Standard Agency 97percent” program, a 3 percent down payment loan geared for first-time home buyers and requires a FICO score of 680. Chase also has a loan program called “DreaMaker Mortgage,” which offers a 5 percent down payment – 3 percent of which can come from the borrower as well as flexible funding options for closing costs and reduced mortgage insurance requirements.

Other banks have recently announced their low downpayment offerings.

Earlier this year, Bank of America began offering a 3 percent downpayment loan that did not involve the Federal Housing Administration and does not require mortgage insurance. The bank requires a minimum FICO score of 660.

Wells Fargo’s newly launching lending program, “yourFirstMortgage,” requires a 620 FICO minimum score and minimum downpayment of 3 percent for a fixed-rate conventional mortgage of up to $417,000. Downpayment assistance also can come from gifts and community assistance programs. Customers who complete a homebuyer education course can earn a 1/8 percent interest rate reduction, although the course is not required.

Brad Blackwell, executive vice president and portfolio business manager at Wells Fargo, says the monthly payment for the loan will be less than a government-insured FHA loan.

“We’ve taken all the complexity of the home mortgage lending process, removed it from the front-line consumer, so that it’s easy for them to understand and Wells Fargo is taking care of all the capital markets and other types of complexities behind the scenes,” says Blackwell.

Bank giants have been leery of FHA loans lately, with JPMorgan Chase CEO Jamie Dimon’s calling FHA lending “too costly and too risky” to pursue extensively.

“We have dramatically reduced FHA originations,” Dimon wrote in his yearly letter to shareholders. “Currently, it simply is too costly and too risky to originate these kinds of mortgages. Part of the risk comes from the penalties that the government charges if you make a mistake – and part of the risk is because these types of mortgages default frequently.”

Dimon acknowledges Chase’s new low downpayment lending program also carries some of those risks, but he believes it responds to customers’ needs.

“Mortgages are important to our customers,” Dimon wrote in the letter. “For most of our customers, their home is the single largest purchase they will make in their lifetime. More than that, it is an emotional purchase – it is where they are getting their start, raising a family or maybe spending their retirement years. As a bank that wants to build lifelong relationships with its customers, we want to be there for them at life’s most critical junctures.”

Source: “Wells Fargo Launches 3% Down Payment Mortgage,” CNBC (May 26, 2016) and “Chase Quietly Launches Its Own 3% Down Mortgage Lending Program,” HousingWire (May 26, 2016)

© Copyright 2016 INFORMATION, INC. Bethesda, MD (301) 215-4688


Pending home sales at a 10-year high

May 27, 2016

WASHINGTON – May 26, 2016 – Pending home sales rose for the third consecutive month in April and reached their highest level in over a decade, according to the National Association of Realtors® (NAR).

All major regions saw gains in contract activity last month except for the Midwest, which saw a meager decline.

The Pending Home Sales Index – a forward-looking indicator based on contract signings for homes that have not yet sold – hiked 5.1 percent higher to 116.3 in April from an upwardly revised 110.7 in March. Year-to-year, it’s 4.6 percent above April 2015 (111.2).

After last month’s gain, the index has now increased year-over-year for 20 consecutive months. Vast gains in the South and West propelled April’s pending sales in April to its highest level since February 2006 (117.4), says Lawrence Yun, NAR chief economist.

“The ability to sign a contract on a home is slightly exceeding expectations this spring, even with the affordability stresses and inventory squeezes affecting buyers in a number of markets,” Yun says. “The building momentum from the over 14 million jobs created since 2010 and the prospect of facing higher rents and mortgage rates down the road appear to be bringing more interested buyers into the market.”

Mortgage rates have remained below 4 percent in 16 of the past 17 months, but Yun says it remains to be seen how long they will stay this low. Along with rent growth, rising gas prices – and the fading effects of last year’s cheap oil on consumer prices – could edge up inflation and push rates higher. For now, Yun foresees mortgage rates continuing to hover around 4 percent in coming months, but inflation could potentially surprise the market and cause rates to increase suddenly.

“Even if rates rise soon, sales have legs for further expansion this summer if housing supply increases enough to give buyers an adequate number of affordable choices during their search,” adds. Yun.

Following the housing market’s best first quarter of existing-sales since 2007 (5.66 million) and a decent increase (1.7 percent) in April, Yun expects sales this year to climb above earlier estimates and be around 5.41 million – a 3.0 percent boost from 2015. After accelerating to 6.8 percent a year ago, national median existing-home price growth is forecast to slightly moderate to between 4 and 5 percent.

Pending sales in the Northeast climbed 1.2 percent to 98.2 in April, and are now 10.1 percent above a year ago. In the Midwest, the index declined slightly (0.6 percent) to 112.9 in April, but it’s still 2.0 percent above April 2015.

Pending home sales in the South jumped 6.8 percent to an index of 133.9 in April – 5.1 percent higher than last April. The index in the West soared 11.4 percent in April to 106.2, and it’s now 2.8 percent above a year ago.

© 2016 Florida Realtors®


FHA may be reopening doors to condo financing

May 24, 2016

WASHINGTON – May 23, 2016 – Could the Federal Housing Administration (FHA) finally be opening its doors again to financing more condominium units? If so, that could be excellent news for young, first-time buyers and for seniors who own condo units and need a reverse mortgage to supplement their post-retirement incomes.

Here’s why: FHA financing offers not only 3.5 percent minimum downpayments but is far more lenient than other options on crucial issues such as credit scores and debt-to-income ratios. Plus FHA is the dominant source of insured reverse mortgages – the only game in town for the vast majority of seniors.

But if a condo building is not certified as eligible for financing by FHA, all the individual units in the project are ineligible for mortgage financing as well. Young families can’t buy using FHA loans, sellers can’t sell and seniors can’t tap their equity through a reverse mortgage. It used to be different – for years FHA allowed so-called “spot” loans on individual units – but no more.

But maybe things are about to change. In a speech last week to the National Association of Realtors, Housing and Urban Development secretary Julian Castro said revisions to controversial FHA rules on condos have been completed and only await final Obama administration approval. The changes would simplify controversial certification procedures for condo buildings and amend other rules that have knocked thousands of condominium buildings out of eligibility.

Since adopting highly restrictive qualification rules early in the current administration, FHA – once a major player in the condo field and the go-to source of financing for moderate-income purchasers – has steadily seen its market share shrink. FHA once financed 80,000 to 90,000 condo units a year, but last year volume fell below 23,000. Many condo homeowner associations began losing their eligibility several years ago, and because of what they consider onerous recertification requirements, have never sought to reapply.

Castro provided no details on what changes are coming. But real estate and condo industry sources say they could build upon reforms announced last November that appear to have had at least modest success in encouraging condo homeowner boards to get onboard again.

Two California-based consultants who help associations and community managers work through the certification hoops told me they have seen a jump in activity in recent weeks. Condo boards that had been resistant to the FHA rules “aren’t fighting them as much any more,” said Natalie Stewart, president of FHA Review. “People need to sell their homes, people need to buy” affordable condo units, so some associations grudgingly are returning to the FHA fold.

Jon Eberhardt, president of Condo Approvals, LLC, said “we certainly have seen an uptick” in FHA certification applications. “I wouldn’t call it monumental, simply a steady growth” in the wake of last November’s changes, he added.

Dawn Bauman, senior vice president for government affairs at the Community Associations Institute, a Virginia-based group that represents 33,000-plus condo and homeowner associations and managers, confirmed that she’s also detected “an increase in the number of applicants” for condo certification and that regional FHA offices have been “more flexible” in recent months in evaluating applications.

What will be crucial to continuing the positive trend, industry experts say, is for the upcoming guidelines to make changes beyond simply streamlining condo certifications.

On the list of needed reforms:

  • The return of spot loans. That alone would significantly expand opportunities for millennials, minorities and seniors.
  • An end to FHA’s blanket prohibitions against community-benefit homeowner transfer fees collected by some condo associations when units change hands. In California, this ban alone has led to the loss of thousands of units from FHA financing – a huge problem in areas where affordability is tough and condos are the lowest-cost alternative for many consumers.
  • Relaxation of strict limits on commercial space in residential condo properties. Revenues from commercial leases are important to the financial health of urban condominiums, but current FHA caps render many buildings ineligible.

Copyright © 2016 the Boston Herald, Distributed by Tribune Content Agency, LLC.


Calculating Your Debt-to-Income Ratio

May 13, 2016

Calculating Your Debt-to-Income Ratio in 2 Easy Steps

 

Have you ever sat down and calculated exactly how much money you spend each month on bills? If so, you are already halfway to calculating your DTI. In essence, your debt-to-income ratio is the amount of money you have left over after paying all your monthly expenses. But if you want a bank to fork over hundreds of thousands of dollars on loan to you, you have to get specific.

What Is Your DTI?   What the bank is trying to ascertain is whether you have enough money left over after paying all your debts each month to afford a mortgage payment; the lower your DTI ratio, the better your chances of getting a loan.   Your goal is to have a debt-to-income ratio that is lower than 35%. At 50%, most banks will turn you down because, for all intents and purposes, you are living paycheck to paycheck, and a mortgage payment would be too big of a financial risk to the bank. But at 35%, with debt taking up only around a third of your income, you have more than enough to cover the expense of a mortgage.   How to Calculate Your DTI   Debt is only half of the equation. The other half is how much income you bring in. That number is easy if you have only one source of income. You don’t count bonuses or gifts or any other irregular income.   1. Use all sources of regular income that you receive every month. That includes your salary, retirement income, Social Security, dividends, etc.   2. Next, divide your total monthly payments or debt by your monthly income. So what kinds of expenses or debts do you include? These debts will include amounts that you owe based on a contract, such as your rent, car payment, credit card payments and student loans.   You don’t, however, include expenses like electric, gas and other utilities that vary from month to month. You also don’t include taxes in your DTI calculation, either for your expenses or for your income. Use your total gross income before taxes.

Ways to Improve Your DTI   If you find out that you have a DTI that is 50% or higher, you will have to spend some time eliminating some of your debt and/or increasing your income before you are ready to buy a house. To improve your DTI, try:

  • Paying off debts.
  • Paying down credit cards (closing accounts can hurt your DTI).
  • Pay all bills on time for one year.
  • Refinance your debt (reduce your interest rate).

There are many websites that offer their own debt-to-income ratio calculators. Here are a few from Bankrate, Money Under 30 and Finance Solutions:


Feb. pending home sales up 3.5%

March 29, 2016

WASHINGTON – March 28, 2016 – Pending home sales rose solidly in February to its highest level in seven months, according to the National Association of Realtors® (NAR). Led by a sizeable increase in the Midwest, all major regions except for the Northeast saw an increase in February contract activity.

The Pending Home Sales Index (PHSI), a forward-looking indicator based on contract signings, rose 3.5 percent to 109.1 in February from a downwardly revised 105.4 in January and it’s 0.7 percent higher year-to-year. The index has now increased year-over-year for 18 consecutive months, though last month’s annual gain was the smallest.

“After some volatility this winter, the latest data is encouraging in that a decent number of buyers signed contracts last month, lured by mortgage rates dipping to their lowest levels in nearly a year and a modest, seasonal uptick in inventory,” says Lawrence Yun, NAR chief economist.

“Looking ahead, the key for sustained momentum and more sales than last spring is a continuous stream of new listings quickly replacing what’s being scooped up by a growing pool of buyers,” Yun adds. “Without adequate supply, sales will likely plateau.”

According to Yun, last month’s noticeable slump in existing-home sales had one silver lining: Price appreciation lessened to 4.4 percent, which is still above wage growth but more favorable than the 8.1 percent annual increase in January.

“Any further moderation in prices would be a welcome development this spring, particularly in the West, where it appears a segment of would-be buyers are becoming wary of high asking prices and stiff competition,” adds Yun.

Existing-homes sales this year are forecast to be around 5.38 million, an increase of 2.4 percent from 2015. The national median existing-home price for all 2016 is expected to increase between 4 and 5 percent. In 2015, existing-home sales increased 6.3 percent and prices rose 6.8 percent.

The PHSI in the Northeast declined 0.2 percent to 94.0 in February, but it’s still 12.6 percent above a year ago. In the Midwest, the index shot up 11.4 percent to 112.6 in February, and it’s now 2.5 percent above February 2015.

Pending home sales in the South increased 2.1 percent to an index of 122.4 in February but it’s 0.4 percent lower than last February. The index in the West climbed 0.7 percent in February to 96.4, but it’s now 6.2 percent below a year ago.

© 2016 Florida Realtors®


The annual hot home buying season starts April 1

March 16, 2016

TAMPA, Fla. – March 14, 2016 – Sellers, start your pressure washers. Buyers, hold off on purchasing new furniture for your future abode.

April 1 marks the beginning of sellers’ season for residential real estate, a four-month span during which more than 37 percent of homes for sale in the Tampa Bay region will get new owners.

Right now, it’s a sellers’ market, but that doesn’t mean those putting their homes on the market don’t have to spruce up and make repairs before sticking that sign out front.

“You have buyers coming out of the woodwork after the winter and looking to purchase,” said Daren Blomquist, chief economist for real estate research firm RealtyTrac. And a lot more houses will go on to the market, so there will be competition.

“Homes tend to sell faster in the spring because of the demand,” Blomquist said. Once school starts winding down, people are ready to look for their new locations.

“The first thing sellers need to do is look at their house with a critical eye,” said Barbara Jordan, immediate past president of the Greater Tampa Association of Realtors. “They really need to look at curb appeal, number one. Pressure wash the driveway, make it bright, get rid of the mold from last summer’s humidity and rain.”

Weed out the flower beds and throw down some new mulch, Jordan said. And pressure wash the front door – first impressions matter.

It is also really important to make sure all major systems in the house are functioning, including electrical, plumbing and air conditioning.

“If you have been living with leaking fixtures for months, fix them,” Jordan said.

A roof can be a real show-stopper, she said. “In order to get insurance, a roof must have three years of life left on it. The typical lifetime for a roof is 15 to 17 years. If you are coming up on 12 years, you need to take a critical look at it.”

Realtor.com suggests all homeowners do their own walk-throughs. Look for leaks under sinks and around toilets, water stains on ceilings or near doors and windows, wood rot around outside doorframes or window ledges.

Cracks in walls and floors or doors that don’t shut correctly can be red flags to buyers, Realtor.com warns. Inspect for these things inside and outside the house.

In between all that, get rid of the clutter, Jordan said. “Too much stuff and boxes in corners need to go.

Patio areas, especially in Florida, can sell homes, she said. “Make sure the patio is pressure washed, get rid of the weeds between the pavers and put out some flowers.”

And here’s a critical tip, she said. Get wide-angle professional photos of the house that can be posted on the Internet. That’s where buyers will first find a house they are interested in purchasing.