Nationally: New-Home Construction Surges to Highest Level in Decade

Nationally: New-Home Construction Surges to Highest Level in Decade
National Association of Home Builders | June 20, 2018

House 1052More new homes entered the pipeline in May than any other month since the end of the Great Recession. Total housing starts increased 5 percent in May to a seasonally adjusted annual rate pace of 1.35 million units, the Commerce Department reported Tuesday. That marks the highest housing starts since July 2007.

Broken out, single-family starts rose 3.9 percent to 939,000 units in May—the second-highest reading since the Great Recession. The multifamily sector increased 7.5 percent to 414,000 units. Single-family and multifamily production are now 9.8 percent and 13.6 percent higher, respectively, than a year ago.

“New-home construction activity soared to its highest level in over a decade, which is fantastic news as more housing inventory will be available as the year proceeds,” says Lawrence Yun, chief economist of the National Association of REALTORS®. “Moreover, construction and real estate industry jobs are being created and boosting the economy. [As a result,] GDP growth of 4 percent to 5 percent is possible in the second quarter.”

The Midwest saw the biggest jump in housing production last month, with combined single-family and multifamily housing starts rising 62.2 percent. Meanwhile, starts fell 0.9 percent in the South, by 4.1 percent in the West, and by 15 percent in the Northeast.

“The Midwest region experienced the biggest gain and hence the region will remain more affordable,” Yun notes. “The more unaffordable West region will continue to experience an intense housing shortage, as both housing permits and housing starts fell in that region. For the country as a whole, an additional 20 percent to 25 percent gain in home construction is needed to make the market more balanced.”

Housing starts will likely hit a snag in the coming weeks. Permits—a gauge of future activity—fell 4.6 percent in May to 1.3 million units. The biggest drop in permits was in the multifamily sector, which saw permits tumble 8.7 percent to 457,000. Single-family permits dropped 2.2 percent to 844,000.

“Ongoing job creation, positive demographics, and tight existing home inventory should spur more single-family production in the months ahead,” says Robert Dietz, the National Association of Home Builders’ chief economist. “However, the softening of single-family permits is consistent with our reports showing that builders are concerned over mounting construction costs, including the highly elevated prices of softwood lumber.”

Source: National Association of Home Builders; REALTOR® Mag Online, 062018

Nationally: Home Prices Hit a Record High

Nationally: Home Prices Hit a Record High
National Association of REALTORS® | June 20, 2018

Home buyers can expect to pay more for a home this summer. The median existing-home price for all housing types reached an all-time high in May at $264,800, according to the latest housing report released by the National Association of REALTORS®.

Many markets continue to see a flood of buyers but not enough homes for sale, which is prompting prices to rise and also limiting the number of sales. For the second consecutive month, existing-home sales dropped, even in the midst of a typically busy selling season.

NAR-EHS-May18smTotal existing-home sales—which are completed transactions for single-family homes, townhomes, condos, and co-ops—fell 0.4 percent to a seasonally adjusted annual rate of 5.43 million in May, the National Association of REALTORS® reported Wednesday. Sales are now 3 percent lower than a year ago.

“Inventory coming onto the market during this year’s spring buying season was not even close to being enough to satisfy demand,” says Lawrence Yun, NAR’s chief economist. “That is why home prices keep outpacing incomes and listings are going under contract in less than a month—and much faster—in many parts of the country.”

Closings were down in a majority of the country last month and declined on an annual basis in every major region, Yun says. “Incredibly low supply continues to be the primary impediment to more sales, but there’s no question the combination of higher prices and mortgage rates are pinching the budgets of prospective buyers, and ultimately keeping some from reaching the market,” Yun says.

May’s Housing Stats

Here’s a closer look at some of the key indicators of the housing market from NAR’s latest housing report:

  • Home prices: The median existing-home price for all housing types was $264,800 in May, an all-time high. Home prices were up 4.9 percent from a year ago.
  • Inventory: Total housing inventory at the end of May rose 2.8 percent to 1.85 million existing homes available for sale. Still, the number of homes for sale is 6.1 percent lower than a year ago. Unsold inventory is at a 4.1-month supply at the current sales pace.
  • Days on the market: Properties typically stayed on the market for 26 days in May, down from 27 days a year ago. Fifty-eight percent of homes sold in May were on the market for less than a month.
    First-time home buyers: This segment comprised 31 percent of sales in May, down from 33 percent a year ago.
  • All-cash sales: All-cash sales accounted for 21 percent of transactions in May, down from 22 percent a year ago. Individual investors tend to make up the bulk of cash sales. They purchased 15 percent of homes in May, down from 16 percent a year ago.
  • Distressed sales: Foreclosures and short sales made up 3 percent of sales in May, the lowest reading since NAR began tracking such data in 2008. Distressed sales are down from 5 percent a year ago. In May, 2 percent of sales were foreclosures and 1 percent were short sales.

Source: National Association of REALTORS®; REALTOR® Mag News, 062018

Mortgage Rates Near Highest Averages of Year

Mortgage Rates Near Highest Averages of Year
Freddie Mac article by Daily Real Estate News | June 15, 2018

Mortgage rates were back on the rise this week, increasing to their second highest level this year. The move follows the Federal Reserve’s vote on Wednesday to raise its federal fund rate by 25 basis points.

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The 30-year fixed-rate mortgage followed suit, rising eight basis points to average 4.62 percent during the week, Freddie Mac reports.

“The good news is that the impact on consumer budgets will be smaller than past rate hike cycles,” says Freddie Mac’s Chief Economist Sam Khater. “That is because a much smaller segment of mortgage loans in today’s market are pegged to short-term rate movements. The adjustable rate mortgage share of outstanding loans is a lot smaller now—8 percent versus 31 percent—than during the Fed’s last round of tightening between 2004 and 2006. Still, inflation continues to firm and borrowing costs are inching higher. Although wages are slowly growing, stronger gains would certainly go a long way in helping consumers offset these increases in prices and rates.”

Freddie Mac reports the following national averages with mortgage rates for the week ending June 14:

  • 30-year fixed-rate mortgages: averaged 4.62 percent, with an average 0.4 point, up from last week’s 4.54 percent average. Last year at this time, 30-year rates averaged 3.91 percent.
  • 15-year fixed-rate mortgages: averaged 4.07 percent, with an average 0.4 point, rising from last week’s 4.01 percent average. A year ago, 15-year rates averaged 3.18 percent.
  • 5-year hybrid adjustable-rate mortgages: averaged 3.83 percent, with an average 0.3 point, rising from last week’s 3.74 percent average. A year ago, 5-year ARMs averaged 3.15 percent.

Source: Freddie Mac; REALTOR® Magazine Online, Daily Real Estate News 061518

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Does Consolidating and Refinancing Student Loans Help First-Time Homebuyers?

Does Consolidating and Refinancing Student Loans Help First-Time Homebuyers?
Guest Writer: lendedu.com; Jeff Gitlen

LendEDUcroppedlogoProspective first-time homebuyers today are struggling with a burden not typically experienced by their parents’ generation: overwhelming student debt.

According to a recent survey, 80 percent of people between the ages of 22 and 35 point to their student loans are the direct reason why they haven’t bought a house yet. Only a generation ago, this was never an issue.

There are currently 45 million people in the United States with student loan debt and recent graduates have an average balance of over $27,000.

Monthly student loan payments eat up a substantial amount of income which make banks wary of issuing mortgages to student loan borrowers. Yet, this hasn’t stopped millennials, who carry the most student loan burden, from purchasing homes.

Just how are they convincing banks to approve a mortgage if they also have quite high student loan balances?

Increasingly, first-time homebuyers with student loans are taking advantage of student loan consolidation and refinancing to improve their chances and reduce the associated risks of more debt.

How Your Student Loans Affect Your Home Buying Power

There are a number of factors which influence your eligibility for a mortgage. These include credit score, down payment, and debt-to-income ratio. Your debt-to-income ratio is an indicator of your debt burden on a monthly basis. Essentially, it shows what percentage of your monthly income does it take to pay down your debt.

The allowable debt-to-income ratio for first time home buyers varies from region to region. There are very likely different debt-to-income requirements for someone buying a home in rural Montana than someone looking to purchase in Manhattan. Under most circumstances, mortgage brokers will expect less than a 43 percent ratio. For example, a monthly income of $4,000, and debt repayments of less than $1,720.

If you’ve done a quick mental calculation, and believe you have a higher debt-to-income ratio, there are two options on the table which might help reduce your monthly payments. If paying down your debt isn’t an immediate option, consider one of the following.

Should You Do a Federal Loan Consolidation?

If you have federal loans, consider exploring what federal loan consolidation options are on the table for you. If you carry multiple federal student loans, you may be eligible for federal consolidation.

When you consolidate your federal student loans together with a Direct Consolidation Loan, you will only be responsible for paying one federal loan with an interest rate that is a weighted average of the other loans rounded up to the nearest eighth of a percent. Many borrowers also opt to extend their repayment terms when consolidating their loan with the government – lowering their monthly payments. With lower monthly payments, your debt-to-income ratio will also be reduced which would be a more positive signal to a mortgage lender, so it could help you.

You should be aware that by extending your repayment term, however, you will end up paying more over the life of the loan.

Should You Refinance Your Student Loans?

Student loan refinancing is similar to consolidation in the sense that it pays off multiple loans with one lump sum, except in this case you are consolidating with a private lender.

In most cases, the borrower also benefits from lower interest rates and – depending on the selected term length – lower monthly payments. Just like with a loan consolidation through the federal government, lower monthly payments and longer repayment terms could reduce your debt-to-income ratio. If this can reduce your monthly debt ratio, then it could be a good sign on a mortgage application.

Refinancing is available for both federal and private student loans, but refinancing is only offered by private lenders. As soon as you refinance federal student loans through a private lender you lose eligibility for all the protections and repayment plans that federal student loans come with.

If you think you will need income-driven repayment plans, student loan forgiveness, or deferment and forbearance protections in the future, you should avoid refinancing. You will end up relinquishing these benefits if you decide to refinance. You should also remember that extending your repayment term may cost more in the long run.

Timing Your Student Loan Refinance

If you’ve decided to apply student loan refinancing with a private lender and are also in the market for a mortgage, timing is of utmost importance. Applying for refinancing often requires a hard credit check which your credit score will be temporarily lowered.

As mentioned earlier, credit score is one of the deciding factors for mortgage applications and – although often not as important as the debt-to-income ratio – it still plays a vital role. If you want to refinance your student loans before applying for a mortgage, you may want to do it at least six month in advance so that the hard inquiry does not affect your eligibility or interest rate.

To sum it up, refinancing can help you apply for a mortgage, but it will only be worth it if you can it puts you in a position to more quickly reduce your debt balance. This can be especially handy if you have a high income which would allow you to reduce your debt-to-income ratio sooner rather than later – helping you become buyer-ready.

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Consumer Sentiment Breaks Record—Again

Consumer Sentiment Breaks Record—Again
Fannie Mae   article by Daily Real Estate News | June 11, 2018

House 1049For the second consecutive month, Fannie Mae’s Home Purchase Sentiment Index reached an all-time survey high in May. But as home prices rise, consumer attitudes about buying and selling a home are diverging even more.

The net share of survey respondents who say now is a good to sell rose to 46 percent and is now up 14 percentage points year over year. Meanwhile, the net share who say now is a good time to buy fell to 28 percent and has shown little improvement over the past year, Fannie Mae notes.

The Home Purchase Sentiment Index “edged up to another survey high in May, bolstered in part by a fresh record high in the net share of consumers who say it’s a good time to sell a home,” says Doug Duncan, Fannie Mae’s chief economist. “However, the perception of high home prices that underlies this optimism cuts both ways, boosting not only the good-time-to-sell sentiment but also the view that it’s a bad time to buy, and presents a potential dilemma to repeat buyers.”

Fannie’s Home Purchase Sentiment Index is up 6.1 points compared to last year. In May, it posted a reading of 92.3.

Here’s a closer look at other results in the May survey (based on 1,000 respondents):

  • 49 percent: The net share of Americans who say home prices will rise in the next 12 months, unchanged from the month prior.
  • 78 percent: The net share of Americans who say they are not concerned about losing their job, rising 2 percentage points month over month to reach a new survey high.
  • 21 percent: The net share of Americans who say their household income is significantly higher than it was 12 months ago, up 3 percentage points month over month to reach a new survey high.

Source: Fannie Mae; REALTOR® Magazine Online, Daily Real Estate News 061118