Wage growth now matches rental rate growth

WASHINGTON – July 22, 2016 – U.S. renters are seeing their housing costs rise at a much more manageable pace, as new construction has tempered years of runaway increases in rent.
Real estate data firm Zillow says that median rent rose a seasonally adjusted 2.6 percent in June from a year ago, matching the gains in average hourly wages. Rental costs have decelerated after consistently exceeding earnings growth in previous years, a sign that additional building is giving more options.
The median monthly rent nationwide was $1,409. Annual increases in rent surpassed 9 percent in both the Seattle and Portland, Oregon areas, although it has moderated in markets such as San Francisco, where yearly price growth went from double-digit gains to 7.4 percent.
Prices are rising above the national average in New York City and Los Angeles. But they’ve settled at less than 2 percent in Cincinnati and Cleveland, host of the Republican National Convention this week. Still, rental costs are much cheaper in both Ohio metro areas than the national average.
In Philadelphia, where the Democrats will hold their convention, median rent is more expensive and has been rising at a 2.5 percent to $1,582 a month.
Not all indicators show rent as moderating. The government’s consumer price index found that rents had jumped 3.8 per cent from a year ago. Shelter accounts for a third of all consumer expenses, according to the index.
Builders have been adding to the national supply of apartments. They completed 310,300 multi-family buildings last year, a 21.4 percent jump from 2014, according to the Commerce Department. Apartment construction through the first half of this year is running another 5.6 per cent ahead of the 2015 pace.
Copyright © 2016 The Canadian Press, Josh Boak. All rights reserved.

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Things first-time home buyers need to know

 

WOODLAND PARK, N.J. – July 22, 2016 – The economy is improving, interest rates are low and many consumers now find themselves in a great position financially to become a first-time homeowner. There’s a small problem though for some locations around the country – the booming real estate market is resulting in rising home prices and increased competition for the most desirable properties.
The S&P/Case-Shiller national home-price index recently estimated that 2016 prices are within four percent of the peak in 2006. In some areas, low inventories around the country are making the situation even more challenging.
These conditions are introducing first-time buyers to common challenges and frustrations while searching for their dream home. “Don’t get discouraged,” says Travis Peace, executive director of mortgage at USAA Bank. “Buying a home requires some fortitude and the process intimidates many – not just those doing it for the first time.”
As a result, Peace says it’s easy to concentrate too much on home buying “can’ts” rather than “can-dos,” and he offers this advice on how to overcome some common barriers.
“I Can’t” No. 1: I can’t figure out the home-buying process.
Peace notes that it’s essential to do research and to be equipped with basic information, but also be willing to ask for help when needed. For example, an experienced real estate agent can keep a buyer apprised of everything from area sales trends to the latest changes in state and federal laws that could impact a mortgage application.
“This is where experienced, licensed professionals can help,” Peace says. “Real estate agents can be an advocate for the buyer throughout the entire process.”
In addition, free tools like USAA’s Real Estate Rewards Network can connect buyers with an agent and even provide rewards based on the sale price of the home.
“I Can’t” No. 2: I can’t find the perfect home for my family.
Finding the perfect home may not be realistic, but shoppers can find the right home. Personal situations will dictate buyers’ ability to wait for a home in a particular neighborhood or design style to come on the market, but not everything has to be left to chance.
Peace says the key is to set realistic expectations and not fixate on negatives that can be changed. “Whether it’s the number of bedrooms or distance to work or school, it’s alright to have some non-negotiables. However, buyers should be willing to be flexible on things that can be relatively easy to change, like paint colors or landscaping.”
“I Can’t” No. 3: I can’t afford a 20 percent downpayment.
Putting 20 percent down on a home has become more of a guideline than a rule. Today, not being able to put 20 percent down does not mean buying a home is out of reach. Peace notes that depending on a buyer’s financial situation, there may be a responsible way to get into your new home without putting 20 percent down.
Government-sponsored loan programs from the Federal Housing Authority, Fannie Mae and Freddie Mac provide loan options that require downpayments as low as three percent. Veterans Affairs (VA) loans don’t require any downpayment. While those programs are often great options for consumers who qualify, Peace notes that buyers should keep an eye on their potential total monthly payment.
“Some of these loans include fees and private mortgage insurance (PMI) that could significantly impact your overall cost,” Peace says.
Even private lenders are offering more competitive loan options. For example, USAA Bank’s Conventional 97 loan allows borrowers to acquire a mortgage with only three percent down and the bank pays the PMI costs.
Scott McEniry, a USAA member, recently moved into his new home with the help of the Conventional 97 loan. “It felt like a lifeline had been thrown to me as suddenly a house purchase was within reach again,” McEniry says.
Whether a house-hunting novice or seasoned expert, Peace underscores that being informed, getting the right help and having a healthy dose of determination are the best ways to turn a dream home into a reality.
Copyright © 2016 Argus, North Jersey Media Group, Inc. All rights reserved

Gated community homes sell for more

 BOCA RATON, Fla. – July 1, 2016 – Homes in gated communities command significantly higher prices – almost $30,000 on average – compared to similar homes in communities without a gate. However, gated neighborhoods’ additional amenities can also reduce sale prices because they bring maintenance costs that outweigh the benefits of the amenities, according to recent research published by the American Real Estate Society (ARES).

“This study provides clear evidence that homes in gated communities sell at a premium relative to comparable homes in non-gated communities,” says ARES Publication Director Ken Johnson, Ph.D., a real estate economist at Florida Atlantic University’s (FAU) College of Business and co-developer of the Beracha, Hardin and Johnson Buy vs. Rent Index.

The study examined 11 gated communities and a sample of matched non-gated properties, using a data set of housing sales in Shelby County, Tennessee. The researchers found that residential properties in gated communities command a noticeable price premium of approximately $30,000, most likely resulting from actual or perceived benefits associated with additional privacy, homeowner associations’ tighter controls on maintenance, home design and the added assurances against crime and other undesirable activities.

“Additional maintenance costs associated with these amenities often outweigh their benefits, and it appears that while a gate has value, additional neighborhood amenities do not always provide additional value,” says Mark A. Sunderman, Ph.D., University of Memphis.

So, what does all this mean to buyers and sellers?

“The long-held belief that gates add value is supported by the data, as long as the impact of the amenities is properly factored in,” Johnson says. “This should set buyers’ minds to rest as to whether or not they are actually receiving a boost in value when they purchase inside a gated community.”

© 2016 Florida Realtors®

Flipping is out – landlording is in

NEW YORK – May 18, 2016 – When it comes to real estate investing, many Americans think of their favorite house-flipping reality show – demolition and redecorating, with hopes of a juicy payday. But a less glamorous form of real estate investing is coming into favor: becoming a landlord.

One of the biggest reasons more investors are opting to become landlords right now is because they like the income potential, National Association of Realtors chief economist Lawrence Yun says.

“Rents have been rising, hovering near six- or seven-year-high levels, and are seeing close to 3.5 percent growth from 12 months ago,” Yun says. That means not just getting a steady flow of cash from a tenant but also the prospect of an even higher income stream with each passing year.

There’s no instant gratification in the form of knocking down walls or cashing six-figure sales checks. But a reliable and rising stream of income looks pretty darn good to many Americans right now, considering what savings accounts and Treasury bonds pay.

Rental supply is low, and demand is high

The laws of supply and demand are in landlords’ favor right now. On the supply side, there simply aren’t enough available rental units. Vacancy rates were at just 7 percent in the first quarter of 2016, according to the Census Bureau, down significantly from 11.1 percent during the Great Recession and tied for the second-lowest figure since 1993.

On the demand side, a host of factors are driving more Americans to rent. Young professionals are increasingly mobile, with a 2015 survey by Rent.com showing 43 percent of Millennials, ages 18 to 34, have moved from their hometowns in pursuit of work – and 44 percent say they plan to move again in the next 12 months.

And while Millennials typically are seen as representative of all renters, as they don’t have the means or the desire to purchase property, older Americans increasingly are choosing to rent as well. Recent research by the Urban Institute indicates the population of renters 65 and older will hit 12.2 million by 2030 – more than double the level in 2010.

It’s no wonder some areas have seen an explosion in rental rates. In its National Rent Report for May, apartment marketplace Zumper.com identified 10 metro areas, from San Francisco to Miami to New York, where the median rent for a one-bedroom tops $1,700 per month.

All real estate is local, and local markets can vary widely. However, it’s hard to argue that rents will go anywhere but up for in-demand urban areas given these factors.

Should you become a landlord, too?

Besides having the capital needed, there are some other important factors to consider before buying a property:

″ Think local. Yun says successful real estate investors prefer properties within a 30-minute drive of their primary residence – and that’s not just so they can be on-call as a handyman. “It’s about the unknown and a preference for knowing their local market,” Yun says. “Even if all the data and statistics may say the investment property 200 miles away may provide a better return, most people don’t feel comfortable not knowing the real estate market conditions.” This is good news if the rental market in your hometown is robust. But if not, you may be better off investing in other assets.

″ Look into regulations and taxes. As a landlord, you’ll have to report any rental income to the IRS, and you’ll be eligible for certain property-related deductions to offset any taxes. Therefore, understanding the tax requirements (or getting a good accountant) is key.

Also important is understanding local tenant and landlord regulations, says Walter Charnoff, CEO of Investability Real Estate, an online investment property marketplace.

“Tenant rights vary by state and municipality, so a new investor should be prepared to know what they legally can and can’t do as a landlord,” Charnoff says. In a perfect world, you’ll never have to evict a tenant or worry about property damage, but it is better to be safe than sorry.

″ Account for maintenance and vacancy costs. If your mortgage check is $1,200 monthly and the tenant pays you $1,500 monthly, renting may seem like a no-brainer. But it’s not that simple, Charnoff says. “It is common for newer investors to underestimate the operating costs, especially the maintenance and turn costs when a tenant vacates,” he says. And keep in mind that while doing the work yourself can save a few bucks, your time has a value, too – and that may mean nights and weekends playing handyman or screening prospective tenants.

″ Think ahead. Is your rental home in a university town where your children may wind up going to school? Is it in a location where you’d eventually like to retire, or simply a smaller house that will be easier to maintain as you age? If so, there may be an added benefit to owning a rental property beyond simply the short-term goal of making a few bucks.

Thinking long-term about your own financial goals could allow you to rent a property for now before you use it in another way down the road.

Copyright 2014, USATODAY.com, USA TODAY, Jeff Reeves. Jeff Reeves is the executive editor of InvestorPlace.com.

Fla. metros added to federal homebuyer program

WASHINGTON – Nov. 11, 2015 – The Federal Housing Finance Agency (FHFA) announced an expansion of the Neighborhood Stabilization Initiative (NSI) to 18 additional metropolitan areas around the country, including four in Florida: South Florida, the Orlando area, the Tampa area and Jacksonville.
Effective Dec. 1, local community organizations in the metro areas will be able to buy foreclosed properties owned by Fannie Mae or Freddie Mac before the general public has a chance.
FHFA, Fannie Mae and Freddie Mac jointly developed NSI through a partnership with Fannie Mae and Freddie Mac and the National Community Stabilization Trust (NCST). The pilot program launched initially in Detroit and was later extended to the Chicago metro area.
“The number of REO properties that Fannie Mae and Freddie Mac hold continues to decline nationwide, but there are still some communities in which the number of REO properties remains elevated,” says FHFA Director Melvin L. Watt. “Our goal is to take what we learned in Detroit and Chicago and apply it to these additional communities as quickly and efficiently as possible.”
Watt says “giving local community buyers an exclusive opportunity to purchase these properties at a discount, taking into account expenses saved through a quicker sale, is an effective way to give control back to local communities and residents who have a vested interest in stabilizing their neighborhoods.”
The 18 metropolitan areas designated for NSI expansion include:
Akron, Ohio

Atlanta-Sandy Springs-Roswell, Georgia

Baltimore-Columbia-Towson, Maryland

Chicago-Naperville-Elgin, Illinois

Cincinnati, Ohio

Cleveland-Elyria, Ohio

Columbus, Ohio

Dayton, Ohio

Detroit-Warren-Dearborn, Michigan

Jacksonville, Florida

Miami-Fort Lauderdale-West Palm Beach, Florida

New York-Newark-Jersey City, New York-Pennsylvania-New Jersey

Orlando-Kissimmee-Sanford, Florida

Philadelphia-Camden-Wilmington, Pennsylvania-New Jersey-Delaware

Pittsburgh, Pennsylvania

St. Louis, Missouri

Tampa-St. Petersburg-Clearwater, Florida

Toledo, Ohio

Community organizations in South Florida estimate that about 2,000 foreclosed homes could eventually end up in the program, which focuses on homes valued at $175,000 or less.
“It’s very difficult to compete with investors who get distressed properties,” Terri Murray with the nonprofit Neighborhood Renaissance told the Miami Herald. “The investors are profit-driven while we are mission driven. This program evens the playing field for us.”
© 2015 Florida Realtors®  

Too many potential buyers think they won’t qualify 

WASHINGTON – Nov. 4, 2015 – Most people don’t know that they can buy a home with only 3 percent down, Freddie Mac says. To boost homeownership, Freddie is partnering with faith-based organizations as a way to attract more potential borrowers to its 3 percent downpayment mortgage product.
In recent years, many faith-based groups switched their attention from homebuyer outreach programs to foreclosure prevention because the financial crisis took a toll on many existing homeowners. Freddie hopes that some of these groups will again start to focus their efforts on homeownership.
The initiative includes financial education seminars and counseling sessions hosted by faith-based bodies that will use materials provided by Freddie Mac.
The mortgage finance giant has also partnered with Quicken Loans, other lenders and non-profits to promote its 3 percent downpayment program.
Many consumers are qualified to own a home but may not realize that, says Chris Boyle, a senior vice president at Freddie Mac. “We do think there’s a market out there that is not coming to the fore, and millennials is one group,” according to Boyle.
Source: American Banker (11/03/15) Berry, Kate
© Copyright 2015 INFORMATION, INC. Bethesda, MD (301) 215-4688

Fla.’s single-family home sales up 13.4% in Sept.

ORLANDO, Fla. – Oct. 22, 2015 – Florida’s housing sector continued its momentum with more sales, rising median prices and a tight inventory of homes for sale in September, according to the latest housing data released by Florida Realtors®. Closed sales of existing single-family homes statewide totaled 23,574 last month, up 13.4 percent over September 2014.
“Florida’s housing sector continues to show strength with more closed sales and an uptick in new listings,” says 2015 Florida Realtors President Andrew Barbar, a broker with Keller Williams Realty Services in Boca Raton. “September marked the 46th month that statewide median sales prices increased year-over-year for both single-family homes and townhouse-condo properties. Sellers received a higher percentage of their original list price, with single-family homes getting on average 94.3 percent and townhome-condos getting 93.2 percent on average. It also took less time to make the sale in September: a median of 46 days for single-family homes and 53 days for townhouse-condos.
“Sellers should take advantage of the strong market conditions with rising median prices, while would-be buyers can benefit from interest rates that currently remain at historically low levels and greater access to mortgage financing.”

The statewide median sales price for single-family existing homes last month was $199,900, up 11.1 percent from the previous year, according to data from Florida Realtors Industry Data and Analysis department in partnership with local Realtor boards/associations. The statewide median price for townhouse-condo properties in August was $150,000, up 5.1 percent over the year-ago figure. The median is the midpoint; half the homes sold for more, half for less.

According to the National Association of Realtors®(NAR), thenational median sales price for existing single-family homes in August 2015 was $230,200, up 5.1 percent from the previous yearthe national median existing condo price was $217,400.In California, the statewide median sales price for single-family existing homes in August was $493,420; in Massachusetts, it was $365,000; in Maryland, it was $270,956; and in New York, it was $252,500.

Looking at Florida’s townhouse-condo market, statewide closed sales rose last month with a total of 9,348, up 8.4 percent compared to September 2014. The closed sales data reflected fewer short sales in August: Short sales for townhouse-condo properties declined 43 percent while short sales for single-family homes dropped 36 percent. Closed sales typically occur 30 to 90 days after sales contracts are written.

“The Florida real estate market continues to hum along,” says Florida Realtors Chief Economist Dr. John Tuccillo. “We’re seeing increases in both sales and prices in virtually every metropolitan statistical area (MSA) and in both single-family homes and townhouses and condos. Inventory continues to decline and those declines have now reached homes at the $250,000 level.

“However, with pending sales down, mortgage accessibility increasing and interest rates due to rise, we think the market will even out as we go forward into 2016.”

Inventory continues to tighten, with a 4.4-months’ supply in September for single-family homes and a 5.2-months’ supply for townhouse-condo properties, according to Florida Realtors. Most analysts consider a 6-month supply of inventory as the benchmark for a balanced market between buyers and sellers.

According to Freddie Mac, the interest rate for a 30-year fixed-rate mortgage averaged 3.89 percent in September 2015, down from the 4.16 percent average recorded during the same month a year earlier.

To see the full statewide housing activity reports, go to Florida Realtors’ website under “Research.” Association members (login required) also have access to local data specific to their market.  

More buyers qualify for subprime loans

NEW YORK – Oct. 22, 2015 – “Subprime.” The word holds dramatically different meanings.
Before the housing crisis, the term generally referred to mortgages made to borrowers who didn’t have to prove much – if anything – about their income or financial stability.

Now, the “subprime” mortgages, which the credit bureau Equifax recently reported increased 30.5 percent in the first five months of 2015 from the same period a year earlier, are simply defined as loans to borrowers with a credit score below 620 (the FICO score used in mortgage lending ranges from 300 to 850).

Even though the number of subprime loans jumped by about one-third, they represent just a tiny slice of the mortgage market. Of the 3.26 million mortgages Equifax studied, only 4.6 percent were subprime, growing from less than 4 percent.

Still, the increase means “some lenders will work with a low-score borrower,” notes Keith Gumbinger of HSH.com, a mortgage data firm.

Even government-back Federal Housing Administration mortgages, which before the housing crisis were more forgiving, essentially disappeared for the credit-blemished, says Brian Chappelle of mortgage advisory firm Potomac Partners.

Recently, government changes to the FHA aimed to boost loans to those with scores under 640, says Chappelle. Lenders are still leery, though. “Ask a Realtor if they know of lenders, search the Internet, make calls,” says Chappelle.

In many instances, an FHA mortgage will be more economical because lenders don’t charge a higher interest rate for low scores on these, says Gumbinger. Borrowers can browse a list of FHA lenders at hud.gov.

The business is inching toward a “new normal,” notes Chappelle, finding the middle ground between overly liberal and excessively stringent rules. In the meantime, a low-score borrower has to be prepared for rejection.

“Some will say, ‘Thanks for calling, but we can’t help you,'” concludes Gumbinger.

Copyright © 2015 The Hub, Marilyn Kennedy. All rights reserved, CTW Features.  

Changes coming to Fannie’s credit history analysis

WASHINGTON – Oct. 22, 2015 – Fannie Mae is enhancing its automated underwriting system to improve the analysis of credit histories and the use of nontraditional credit.
Loans underwritten on Desktop Underwriter (DU) will require the utilization of trended credit data provided by Equifax and TransUnion.
According to the secondary lender, by using trended data, a more intelligent and thorough analysis of the borrower’s credit history will be enabled.
Fannie announced the planned update on Monday.
The Washington-based company explained that credit reports currently used in mortgage lending only indicate the outstanding balance and whether a borrower has been on time or delinquent in paying existing accounts like credit cards, mortgages or student loans.
But trended data will indicate monthly payments made over time – enabling lenders to determine if revolving credit lines are paid off each month or if a balance is carried from month-to-month while making minimum or other payments.

Trended data requirements will be implemented around the middle of next year, while more details will be provided in the coming months.

DU is also being enhanced to more efficiently address borrowers without a traditional credit history. More information will be available in the coming months, and the functionality is expected to go live sometime next year.

One other change outlined in the announcement is the integration of The Work Number from Equifax into DU. As a result of the enhancement, which will also happen sometime next year, lenders won’t have to provide copies of pay stubs or other documents to verify income.

“In addition to efficiency for borrowers and lenders, this could reduce the frequency of mortgage fraud,” the notice said. “Going forward, Fannie Mae will determine if validation services can be offered for additional borrower data, such as bank statements, and additional income documents, such as tax returns.”

Copyright © 2015 Mortgage Daily. Distributed by Tribune Content Agency, LLC.  

Apartments drive home construction gains in Sept.

WASHINGTON (AP) – Oct. 20, 2015 – Construction companies built more apartment complexes in September, sparking a temporary rise in housing starts for a real estate market that otherwise appears to have crested during the summer.
Housing starts last month rose 6.5 percent to a seasonally adjusted annual rate of 1.21 million homes, the Commerce Department said Tuesday. But a 17 percent surge in multi-family housing – which includes apartments – accounts for almost all of that increase.
New construction and sales of existing homes surged in the first half of the year as more Americans found work and the unemployment rate dipped to a solid 5.1 percent. But tight inventories, rising prices and the absence of meaningful wage growth have capped growth as affordability has become an issue – a problem that new construction can help resolve.
“Builders are stepping up to meet that demand but doing so cautiously,” said Stephen Stanley, chief economist at Amherst Pierpont Securities. “So, for beleaguered buyers who can’t find what they are looking for because of a dearth of listings, there is a bit of help on the way.”
Construction rose last month in the Northeast, South and West, while falling in the Midwest.
Housing starts have soared 12 percent in the first nine months of 2015. But the pace of building retreated from its June apex, in part due to the expiration of tax incentives for developers in New York.
Approved permits fell 5 percent in September to an annual rate of 1.1 million, a sign that construction will likely slow in the coming months.
Sales of existing homes similarly accelerated through the start of the summer, only to decline in August. The tight inventories – just 5.2 months’ supply of homes were listed for sale – have propped up prices, as the median cost to buy a home increased 4.7 percent over the year to $228,700, according to the National Association of Realtors.
A greater share of the country is also choosing to rent. The percentage of Americans owning homes has dipped to 63.4 percent, the lowest level in 48 years. The influx of millennials and downsizing baby boomers into the rental market has caused monthly leases to jump 3.8 percent over the past year, according to the real estate firm Zillow.
But price appreciation has also slowed as many Americans lack the income to spend more on housing. Average hourly earnings have increased just 2.2 percent to $25.09, meaning that home values and rental costs are rising at roughly double the rate of incomes.

There are signs that more Americans are renovating their homes instead of buying new properties. A new index compiled by BuildZoom – which identifies contractors for projects – found that renovations are running 2.8 percent above their 2005 level. Meanwhile, despite the gains of the past year, new home construction remains 57 percent below its 2005 level during the housing bubble.

Still, remodeling activity has been flat during the past year as new home construction has advanced. The gains have left construction firms more optimistic.

The National Association of Home Builders/Wells Fargo builder sentiment index released Monday rose this month to 64. The last time the reading was higher was October 2005 at 68.

Readings above 50 indicate more builders view sales conditions as good rather than poor. The index has been consistently above 50 since July last year.