Survey: Misconceptions Holding Back Homebuying

While nearly seven in 10 Americans agree that now is a good time to become a homeowner, a large number remain reluctant due to their own misguided understanding of the financing process, according to survey results released Monday.

In a poll of more than 2,000 consumers, Wells Fargo found 68 percent feel that now is a good time to buy a home, and 95 percent want to own if they don't already.

The results jibe with Fannie Mae's latest consumer housing survey, in which 64 percent of Americans said now is a good time to buy (matching the survey's record low).

"Although the homebuying process has changed in many ways in recent years ,our survey found Americans still view homeownership as an achievement to be proud of and many believe that now is a good time to buy a home," said Franklin Codel, head of Wells Fargo Home Mortgage Production.

On the other hand, while nearly three-quarters of respondents in Wells Fargo's survey said they "know and understand" the financial process involved in buying a home, large numbers also expressed doubt or misguided notions about homebuying requirements. For example, Wells Fargo reported, 30 percent of respondents expressed belief that only people with high incomes can obtain a mortgage at this point, and 64 percent said they believe only those with a "very good"” credit score can buy a home right now.

While 64 percent of respondents said they have an understanding about how much of a down payment is needed to purchase a home, nearly half said 20 percent is required. Forty-four percent also said they know little or nothing about closing costs.

While most lenders report that lending requirements at the moment are still high as a result of enhanced regulations and reluctance to take risks, Codel says lenders would be well served to work on educating homebuyers about all programs available to them—especially the millennial crowd, most of which pointed to lack of down payment funds as one of their biggest hurdles to homeownership.

"It is important for prospective homebuyers to feel empowered to ask lenders and real estate agents questions about available options, such as down payment assistance or FHA [Federal Housing Administration] or VA [Veterans Affairs] loans for veterans," he said. "Informing prospective homebuyers about their options is the first step toward helping them realize their goals."

On the other hand, the survey also found most Americans are confident in managing their personal finances, with 82 percent saying they know how to save, invest, and work within a budget. In addition, 63 percent said they have a "rainy day fund," including more than half of millennial-aged respondents.

With so many Americans focused on keeping their financial houses in order, Codel says there's a decent opportunity to turn those consumers into responsible homeowners with an educational push.

"[W]e have an opportunity as lenders, nonprofit agencies and real estate agents to better inform Americans about credit ratings, mortgage costs and housing affordability," he said. "This would help demystify the homebuying experience for many consumers."

For more information contact

Jerry Gus,man, The Gusman Group

(888) 213-4208

jerryggroup@aol.com

Fannie Mae Relaxes Waiting Period for Distressed Borrowers

Fannie Mae recently released a report revising the waiting periods for distressed borrowers with a derogatory credit event such as a foreclosure, bankruptcy, short sale, or deed-in-lieu of foreclosure on their credit history to obtain a new loan.

For borrowers with a short sale or deed-in-lieu of foreclosure on their record, Fannie Mae's new mandated minimum waiting period to become eligible for a new loan is four years. The time is shortened to two years if there are extenuating circumstances. According to Fannie Mae, extenuating circumstances are defined as "nonrecurring events that are beyond the borrower’s control that result in a sudden, significant, and prolonged reduction in income or a catastrophic increase in financial obligations."

If a borrower has a foreclosure on his or her credit record, the new minimum waiting period is seven years. Under extenuating circumstances, that period is shortened to three years with some additional requirements for up to seven years.

For those with a bankruptcy (chapter seven or 11), the waiting period is four years (two years with extenuating circumstances). For distressed borrowers with a chapter 13 bankruptcy, the required waiting period is now two years from the discharge date and four years from the dismissal date. If there are extenuating circumstances, the waiting time from the dismissal date is shortened to two years.

If there are multiple bankruptcy filings on a borrower's record, the waiting period for a new loan is five years if there has been more than one filing in the previous seven years.  Under extenuating circumstances, the waiting period is cut to three years from the most recent dismissal or discharge date.

Fannie Mae said in the report that it is "focused on helping lenders to provide access to mortgages for creditworthy borrowers while supporting sustainable homeownership" and that the new policy "provides opportunities for borrowers to obtain a loan to Fannie Mae’s maximum LTV (loan-to-value) sooner after the preforeclosure (short) sale or DIL."

The new policy is effective for loans with application dates on or after August 16, 2014.

Under the previous policy, the standard waiting period for borrowers with a derogatory credit event was two years with a maximum 80 percent LTV ratio; four years with a maximum 90 percent LTV ratio; or borrowers were eligible for a new loan after a standard seven-year waiting period. For borrowers with extenuating circumstances, the previous waiting period was two years with a maximum 90 percent LTV ratio.

For More information contact

Jerry Gusman, The Gusman Group

888-213-4208

jerryggroup@aol.com

Improvements in the labor market in 2014 have not translated to rapid housing market recovery this year, according to the Fannie Mae August 2014 National Housing Survey. Instead, data in the survey indicated that recovery for the housing market will be slow heading into 2015.

The number of people surveyed who said they believe now is a good time to sell a home fell six percentage points to 64 percent, an all-time low since the monthly survey began in June 2010. The number of people who said now is a good time to buy a home also declined to 38 percent.

"The August National Housing Survey results lend support to our forecast that 2015 will likely not be a breakout year for housing," said Doug Duncan, senior vice president and chief economist at Fannie Mae. "The deterioration in consumer attitudes about the current home buying environment reflects a shift away from record home purchase affordability without enough momentum in consumer personal financial sentiment to compensate for it."

The number of respondents surveyed who believe home prices will increase in the next 12 months stayed at 42 percent from July to August, while the percentage of respondents who say they think home prices will go down in the next year increased to 9 percent while the share of those who thought and mortgage rates will go up in the next 12 months fell to 50 percent. The average 12-month home price expectation also took a slight dip from July to August, to 2.1 percent.

The percentage of survey respondents who said they would buy a home if they moved dropped to 64 percent while they number who said they would rent if they moved jumped up to 32 percent. The 32 percent gap between the two is the smallest in more than a year.

As far as attitudes toward the economy, the number of people surveyed who believe the economy is on the wrong track dropped down to 56 percent from July to August. The number of respondents who believe their financial situation will get better in the next 12 months went up to 44 percent, but the percentage who say their household income is significantly higher than it was at this time last year dropped from 28 to 23 percent from July to August.

"To date, this year’s labor market strength has not translated into sufficient income gains to inspire confidence among consumers to purchase a home, even in the current favorable interest rate environment," Duncan said. "Our third quarter Mortgage Lender Sentiment Survey results, to be released later this month, are expected to show whether mortgage demand from the lender perspective is in line with consumer housing sentiment."

Fannie Mae representatives polled 1,000 Americans live via telephone for the results in the August 2014 National Housing Survey.

For more information contact

Jerry Gusman, THe Gusman Group

(888) 213-4208

jerryggroup@aol.com

Southern California home sales plunge in July

Southern California home sales plunged in July and show little signs of rebounding. And
that, economists say, could stunt the region's economic growth.

Buyers scooped up 20,369 new and resale houses and condos in the six-county region last month,
down 12.4% from a year earlier, research firm CoreLogic DataQuick said Wednesday. The sharp
drop follows steady declines since October, as would-be buyers struggled to afford houses after
prices surged last year.

he drop in sales could have economic repercussions. When someone buys a home, they often
splurge on items such as new furniture, fresh paint or new carpeting. Then there are real estate
agents, mortgage brokers and moving companies to pay.
"The housing multiplier effect is very significant, because there are so many things that happen
With home prices sharply higher, there are simply fewer buyers able to afford them. Above, a home for sale in Lake Forest last year. (Patrick T. Fallon / Bloomberg)
9/2/2014 Southern California home sales plunge in July - LA Times
http://www.latimes.com/business/la-fi-home-sales-20140814-story.html 2/4
with a home purchase," said Leslie Appleton-Y oung, chief economist for the California Assn. of
Realtors. "That is dampened when you have lower home sales."
The pain is especially acute for brokers, who depend on a commissions.
"There are a lot of hurting agents right now," said South Bay agent Leo Nordine, who said his
volumes have been roughly flat this year. "There are too many agents and not enough sales."
The steady declines come despite more homes on the market compared with last year. With prices
sharply higher, there are simply fewer buyers able to afford them.
Changing demographics are also playing a role, experts said. Surveys show most young adults still
want to own a home, but significant barriers exist for that large demographic group.
Student debt is high, income growth is meager and many are putting off marriage, which
historically has spurred purchases. And the massive baby boom generation isn't downsizing en
masse, further limiting home sales as its members hold onto their spacious suburban homes,
Appleton-Young said.

"It's clearly a concern," she said of low sales volumes. "And I'm not seeing the way out of it."
Others experts aren't so dour. Sales of previously owned homes, the largest segment of the market,
have an economic impact, but a small one, said Richard Green, director of USC's Lusk Center for
Real Estate. Housing's economic punch comes chiefly from new home construction, which
demands legions of laborers and raw materials, he said.
New home sales fell 1.9% last month, after rising 4.4% in June.
The broad sales drop stems from less demand not only from families but also investors.
Foreclosures, a favorite target of those buyers, flooded the market after the bubble burst,
depressing values and wrecking credit for those forced to leave their homes. With the availability
of those low-priced properties rapidly shrinking, investors have pulled back.
Once distressed sales — foreclosures and short sales — are removed from the data, conventional
sales fell only 2.8% in July.

"This is just all part of getting back to normal," said Bill McBride, who writes the financial blog
Calculated Risk. "We are getting rid of the foreclosures."
Families, however, haven't filled the void created by the investor retreat, even though more homes
are for sale, mortgage rates are near historical lows, and price appreciation is slowing. The
Southland's median home price rose 7.3% to $413,000 in July, the smallest year-over-year gain since June 2012.

"Prices came a long way in a couple of years, and now a lot of would-be buyers just can't stretch
their finances enough to buy in today's more conservative lending environment," CoreLogic
DataQuick analyst Andrew LePage said.
And if demand for homes remains subdued, builders aren't likely to ramp up construction to
historic levels, further blunting housing's economic impact.

Home sales last month were 19.4% below the 26-year average for July, CoreLogic DataQuick said.
"We haven't had an average month in more than eight years, and I don't think we are going to see
one in the next six months," LePage said.

For more information contact
Jerry Gusman
The Gusman Group
(888) 213-4208
Jerryggroup@aol.com

Pittsburgh Best, San Francisco Worst For Home Flipping

Recent data released by RealtyTrac for the second quarter of 2014 indicated that Pittsburgh is the best market in the nation for home flipping, while the San Francisco-Oakland-Fremont market was the worst.

Flipped homes accounted for 3.6 percent of total home sales in Pittsburgh, a increase of 3 percent over the second quarter last year. But while the average gross return on investment for flipped homes in Pittsburgh was 63 percent for Q2 2013, that percentage shot up to 106 percent for Q2 2014, the highest percentage by far for any market in the nation.

Rounding out the top five best markets for flipping homes in Q2 2014, according to average gross ROI, were New Orleans-Metairie-Kenner, Louisiana (76 percent); Baltimore-Towson, Maryland (73 percent); Virginia Beach-Norfolk-Newport News, Virginia (66 percent); and Deltona-Daytona Beach-Ormond Beach, Florida (63 percent). The national average gross ROI for flipped homes was 21 percent, according to RealtyTrac.

San Francisco-Oakland-Fremont turned in an average gross ROI of –9 percent, the lowest in the nation, RealtyTrac reported. Flipped homes made up 5.6 of all home purchases in the Bay Area for Q2 2014, a decrease of 33 percent from the same period last year. The only other market with a negative average gross ROI in Q2 2014 was Las Vegas-Paradise, Nevada (–4 percent). Third worst was Mobile, Alabama (9 percent), while Charlotte-Gastonia-Concord, North Carolina-South Carolina, and Madison, Wisconsin tied for fourth worst with 13 percent each.

According to RealtyTrac in Q2 2014, flippers bought homes at an average of 8 percent discount from their estimated market value (AVM), then re-sold the homes at an average of 6 percent higher than their AVM. All of the 10 best markets for flipping homes except one (Chattanooga), flippers purchased properties at a discount of 24 percent or more from their AVMs, then sold the properties at a premium rate above their AVMs.

For more information contact

Jerry Gusman, The Gusman Grouyp

(888) 213-4208

jerryggroup@aol.com

The country's housing market continued to inch closer to normalcy in June, but the slow rate of progress remains a concern for analysts.

Freddie Mac's Multi-Indicator Market Index (MiMi) rose 0.04 percent from May to June, ending the year's first half at a reading of 73.7, the company reported Wednesday. On a yearly basis, the gauge improved 7.67 percent.

The monthly index tracks housing market stability at the national, state, and metro level, using home purchase applications, payment-to-income ratios, employment, and proportion of on-time mortgage payments as measures of health. As of the June report, Freddie Mac rescaled the MiMi to make it easier to read, though the underlying data was left untouched.

An index value between 80 and 120 is considered stable, with readings outside that range considered too weak or too high to be sustainable. The all-time high for the MiMi was 121.87 in June 2008, while the low was 59.8 in September 2011, when the housing market was at its weakest. The latest reading marks a 23.2 percent rebound from that time.

"As we see the economy slowly normalizing we're starting to see its effects in the housing market as well, albeit very slowly," said Freddie Mac Chief Economist Frank Nothaft. "The good news is the big housing markets, of which some were also the hardest hit, continue to improve."

Nothaft pointed specifically to California, which has recovered 12 percent from this time last year, with all metros seeing improvements.

Florida and Illinois also looked strong compared to last year, picking up 14.8 percent and 12.9 percent, respectively, while states like North Dakota, Montana, Wyoming, Texas, and Louisiana all continue to look healthy.

"In these areas not only are markets producing jobs, but better paying jobs that translate into workers taking out applications to purchase a home and income growth that keeps homebuyer affordability strong," Nothaft said.

Nationwide, 13 states and the District of Columbia all have MiMi values in their own stable range, with North Dakota (96.2), Washington, D.C. (94.3), Wyoming (92.3), Montana (89.7), and Alaska (88.7) ranking highest.

Out of the 50 metros surveyed, only six are in a stable range, half of which are in Texas: San Antonio (92.0), Houston (83.9), and Austin (87.4). The others on the list are New Orleans (84.8), Salt Lake City (84.5), and Los Angeles (82.7).

For more information contact

Jerry Gusman, The Gusman Group

(888) 213-4208

jerryggroup@aol.com

Report: Annual Rate of Home Sales Falling

The nationwide annual rate of the sale of residential properties, which include single family homes, condominiums, and town homes, declined by 3 percent month-over-month and 12 percent year-over-year in July, according to RealtyTrac's July 2014 U.S Residential & Foreclosure Sales Report released on August 29.

RealtyTrac reported residential properties sold at an annual rate of 4,634,513in July 2014, which marked the third straight month in which there was a year-over-year drop in annual home sales volume.

Meanwhile, median prices of homes (both distressed and non-distressed properties) increased from June to July by 3 percent up to $191,000, its highest level since September 2008. The median price rose by 12 percent from June 2013, according to RealtyTrac.

The median price of only distressed sales (sales of properties that are bank-owned or in some stage of foreclosure) stood at $128,000 for July, a 3 percent month-over-month increase and a gain of 11 percent year-over-year, according to RealtyTrac. That price still fell way below the median price of non-distressed properties, which was $204,000.

RealtyTrac reported that the percentage of total residential property sales that were distressed sales and short sales (sales by a distressed borrower for less than the balance of the mortgage) increased month-over-month in July but declined year-over-year. Distressed sales and short sales made up 13.6 percent of all residential home sales in July, which is an increase of 12.8 percent from June but a drop of 15 percent from July 2013.  The market with the highest percentage of combined distressed sales and short sales was Las Vegas, with 40.3 percent.

"As distressed sales continue to decline, the share of sales is tilting toward more expensive homes, boosting the nationwide median sales price," said Daren Blomquist, vice president of RealtyTrac. "The nationwide home price increase, however, masks slowing home price appreciation in the majority of housing markets across the country. This slowing appreciation was expected and provides another sign that the real estate recovery thus far is behaving rationally. Still, the housing market is entering a dicey transition phase where it is becoming much more reliant on first-time homebuyers and move-up buyers to sustain the recovery as investor involvement wanes."

The percentage of total homes sold that were bank-owned (REO) was 8 percent in July, its lowest level since January 2011, according to RealtyTrac. That number marked an 8 percent decline from June and a 9.1 percent drop from July 2013.

Foreclosure auctions made up 1.2 percent of all residential properties sold nationwide in July, according to RealtyTrac. This percentage represented a slight increase from 1.1 percent in June and from 0.8 percent from a year ago.

For more inforamation contact

Jerry Gusman, The Gusman Group

(888) 213-4208

jerryggroup@aol.com

High Negative Equity Among Gen-Xers Causing Housing Gridlock

Much has been said, and even more theorized, about why millennials are not buying homes at the same rate their generational predecessors bought when they were new-generation homebuyers themselves. Zillow, however, may have found a real answer in the fact that generation X and baby boomers are largely underwater.

According to Zillow's latest Negative Equity Report, high negative equity among Gen-X homeowners is causing gridlock in the U.S. housing market.

Nearly 43 percent of homeowners between 35 and 49 are underwater on their mortgages. In contrast, only 15 percent of millennial homeowners (those between 20 and 34 years old) and 31 percent of baby boomers (50 to 64 years old) are underwater.

This storehouse of negative equity among the two older generations limits millennials from homeownership mainly because of the ripple effect created when underwater homeowners have trouble listing their properties for sale: baby boomers may not be able to find move-up buyers for their homes because Gen-Xers are stuck with troubled mortgages, Zillow reported. In turn, millennials can't move into the more affordable starter homes currently occupied by Gen Xers. In other words, the very types of houses young first-time buyers would be most able to afford are not hitting the market, and millennials are increasingly getting priced out.

Zillow found that among all homes with a mortgage nationwide, 28 percent that are valued within the bottom third of home values were underwater in the second quarter. This compares to about 16 percent of homes in the middle tier and 9 percent in the top tier.

All ages combined, more than a third of homeowners with a mortgage are effectively underwater and unable to sell their homes for enough profit to comfortably, meet expenses related to selling, and afford a down payment on a new home, the report stated.

Zillow's chief economist, Stan Humphries, said the recession is largely to blame, having most crippled the homes the majority of Gen-X bought.

"On the surface, the housing recession did not overtly impact millennials' housing wealth to the degree it did Generation X and the Baby Boomers," Humphries said. "Most millennials were likely too young to have purchased a home during the bubble years. But as this huge generation begins to consider buying homes, they're entering a market still very much in recovery and far from anyone's definition of normal."

Because so many homes are stuck in negative equity or are effectively underwater, the inventory of homes for sale is severely constrained, Humphries said. This leads to increased competition for homes and the frank reality that many millennials are simply too young and too new to the workforce to have saved up significant money to compete with more established older buyers.

"The reality is, negative equity is part of the new normal," Humphries said. "Finding creative solutions to keep homes affordable, available, and accessible to [millennials] will be critical going forward."

For more information contact

Jerry Gusman, The Gusman Group

(888) 213-4208

jerryggroup@aol.com

California Holds 5 of Nations Ten Costliest Markets

  

We all know that home-prices have remained flat throughout the year, but the run-ups of 2013 have left the bar at its highest point in years, creating issues of affordability nationwide. This problem is only intensified in California though, as prices remain exceedingly high for a handful of markets throughout the Golden State, putting home ownership out of reach for a growing number of would-be buyers on the west coast.

According to a new report from the National Association of Realtors, which measured the median price of homes sold in the second quarter, five of California’s largest markets are among the top 10 most expensive housing markets in the country.

San Jose, where the median existing single-family price was $899,500, took the first spot in this category, followed closely by San Francisco, Orange County, San Diego and Los Angeles, where median prices reached $769,600, $691,900, $504,200 and $420,300 respectively.

Even the relatively inexpensive Inland Empire sat 21st on the list— pricier than Miami; Austin, Texas; or Chicago — with a median of $274,600.

Prices rose more slowly compared with last year in most U.S. housing markets, the report said. But prices are now well above levels of the last few years. That has put home buying out of reach for growing numbers of households, especially in high-cost markets.

Qualifying for a mortgage on a median-priced home in Orange County with a 20% down payment would require household income of $131,168, the report estimates; with 5% down, it would require $155,762.
In metro Los Angeles, a median-priced home would require $79,679 in household income to qualify at 20% down, and $94,619 at 5% down.

While this may seem reasonable to some, these statistics should raise concern considering the median household income in Orange County is $75,566, according to the Census Bureau. In Los Angeles County it is $56,241.

Do you think this affordability crisis stems from overpriced homes or a lack of household income? What needs to change before affordability eases? We’d love to hear your thoughts!

For more information contact

Jerry Gusman, The Gusman Group

(888) 213-4208

jerryggroup@aol.com

Fannie Mae sees lower home sales in 2014

 

Mortgage giant Fannie Mae forecasts fewer home sales in 2014, citing conservative consumers.

Harsh winter weather hampered housing starts and sales in the first half of the year, but some economists expected a rebound in the second half. Yet Fannie Mae, the government-sponsored mortgage company, says it expects "only minor improvement."

"The outlook for the housing market has deteriorated as housing activity appeared to have lost momentum at the end of the second quarter," the company said in a news release. Although housing still is expected to contribute to economic growth this year and in 2015, "it does not appear likely to be a growing driver of growth going forward."

The company's forecast raises doubts about a sector that was expected to be a key pillar of stronger economic growth.

Fannie said it expects 995,000 housing starts this year, down from its July forecast of 1.05 million and up only modestly from last year's 925,000. It expects 1.2 million starts in 2015, down from its previous estimate of 1.3 million.

The company projects new and existing home sales will total 5.3 million this year, lower than its July forecast of 5.5 million, which was slightly below the 2013 total. Sales next year are expected to total 5.1 million, vs. its previous estimate of 5.2 million.

Average 30-year fixed mortgage rates are 4.12%, below the year-ago average of 4.46% but higher than 3.45% in April 2013. The following month, the Federal Reserve began signaling that it intended to wind down bond purchases that were holding down long-term interest rates, pushing up borrowing costs across the economy.

"Additionally, on the demand side, there appears to be a conservatism among consumers and their willingness to take on big-ticket purchases, such as homes," Fannie said in the release.

The mortage giant, however, raised its 2014 forecast for U.S. economic growth to 1.9% from 1.5%. It said stronger consumer spending and bigger job gains should push economic growth to 3% at an annual rate in the second half of the year from below 2% in the first half.

For more information Contact

Jerry Gusman, The Gusman Group

jerryggroup@aol.com

(888) 213-4208

 16CONNECT 35TWEET 7LINKEDIN 1COMMENTEMAILMORE