The Foreclosure Fade, and What it Means for the Housing Market
Source: Wall St. Journal
An important factor shaping the housing market dynamic right now is that the foreclosure crisis has faded. While foreclosures are not over, so-called “distressed” sales accounted for just 11 percent of sales in June, down from 15 percent last year, 25 percent in 2012, and 30 percent in 2011. The National Association of REALTORS® (NAR) released new data on existing U.S. home sales that show the market appears to be finding its footing.
Making sense of the story:
• Sales of previously owned homes rose 2.6 percent in June to a seasonally adjusted annual rate of 5.04 million units. That’s the third straight monthly gain and the highest level since last October.
• While total home sales stood 2.3 percent below the June 2013 level, most of that can be attributed to the falling share of foreclosures and other distressed sales.
• Distressed home sales fell by nearly 40 percent in June from last year, while non-distressed property sales rose 2.3 percent.
• As foreclosures fade, it’s great news for the housing market, as it means homeowners don’t have to compete with banks to sell homes–and eventually, builders will have to ramp up construction to satisfy new demand.
• The foreclosure fade also helps explain the eye-popping gains in sales volumes and prices that we witnessed in 2013. These bargains generated frenzied bidding wars, both from investors and owner-occupant buyers, and they’re largely history.
• The housing market is now going to rely more heavily on traditional drivers of growth, including job and wage gains and demographics. Tighter credit standards, higher levels of student debt, and lower incomes for young adults will keep pressure on homeownership.
• NAR Chief Economist Lawrence Yun stated, “New home construction needs to rise by at least 50 percent for a complete return to a balanced market because supply shortages – particularly in the West – are still putting upward pressure on prices.”
In other news …
Debt-to-income ratio can sink mortgage application
Source: LA Times
Debt-to-income ratios (DTIs) proved to be the top answer that credit-risk managers at financial institutions across the country cited when declining to fund a loan request, according to a new survey by credit-score giant FICO. Nearly 60 percent of risk managers in the FICO study rated excessive DTIs as their No. 1 concern factor — five times the percentage who picked the next biggest turnoff. So if you’re in the market for a mortgage, work on your debt-to-come ratio to boost your chances of qualifying.
The Housing Market Is Improving, But There Still Aren’t Enough Affordable Homes to Go Around
Source: The Atlantic
Homeownership may be slipping out of reach not just for lower income Americans, but working and middle class people as well, as there is not enough affordable housing inventory to go around in most of the country’s large metro areas, according to Zillow. This tightness of supply will continue to have an impact on first-time home buyers, as well as anyone trying to buy a low-end home.
Humans make a house for sale feel more like home
A nationwide home staging company is allowing people to apply to become “home managers” of a new home, which entails paying a small fee to live in a luxury home on the market. This “home manager” method is the company’s most effective service, as they argue a home feels more attractive to buyers if someone actually lives in it. Of course, this lifestyle involves a lot of moving since a home might sell after just a few weeks.
Selling my daughter on homeownership
David H. Stevens, president and CEO of the Mortgage Bankers Association, advocates professionally for aspiring homeowners all across the nation by promoting a healthy entry-level housing market. But he cannot convince his own daughter that the time is right for her to buy a home of her own. Stevens argues that one of the best decisions he ever made was buying his first home at the age of 27 in 1984. Pointing to his own daughter, Stevens writes, “We cannot underestimate the impact of this decline in first-time buyers; the health of the housing market relies heavily on them.”
What To Expect From Housing In The Second Half Of 2014
With numbers going up and down and a variety of new headlines each month, the major takeaway for this year so far is that the housing market is steadily on the road back to normal, according to Forbes. Experts predict that the slowdown in prices will continue for the rest of 2014, and inventory will pick up as well. There will continue to be strong demand for apartment rentals as younger Americans delay marriage and the home-buying process.
Standards are Tighter, Sure. But is It Really That Hard to Get A Mortgage?
Source: Wall Street Journal
New economic analysis indicates that mortgage credit is tighter than during the 2000-2002 period, before lenders really relaxed their standard, which could complicate the housing recovery due to its dependence on the availability of mortgage credit. The analysis found that while mortgage credit standards have eased a bit over the last two years, compared to the normal level observed in 2000-2002, “mortgage credit supply is still significantly limited.”
Talking Points …
• Equity home sales posted their highest level since the housing crisis began, reaching more than 90 percent of all home sales. Meanwhile, seasonal factors, combined with shrinking affordability cooled pending home sales in June, according to the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.).
• Equity sales have been rising steadily again since the beginning of this year. June marks a full year that equity sales have been more than 80 percent of total sales and the first time they have risen above 90 percent. Equity sales made up 79.7 percent of sales in June 2013.
• Twenty-three of the 41 reported counties showed a month-to-month decrease in the share of distressed sales, with 17 of the counties recording in the single-digits, including Alameda, Butte, Contra Costa, Marin, San Diego, San Luis Obispo, San Mateo, and Santa Clara counties — all of which registered a share of five percent or less.
Questions? Just give me a call.
David S. Wilfert
RE/MAX R.E.O. – The Wilfert Group
12341 Newport Avenue, Suite A-100, North Tustin, CA 92705
Real Estate Broker – BRE# 01861699
Notary Public – Commission# 1987439
Direct: (714) 963-8000 or Email: David@WilfertGroup.com