Friday, January 24, 2014

Home Sales in 2013 Rise to Strongest Level in 7 Years

The housing market has been experiencing a “healthy recovery” over the past two years, with home sales last year rising to the highest level since 2006, according to the National Association of REALTORS®' latest housing report.

“Existing-home sales have risen nearly 20 percent since 2011, with job growth, record low mortgage interest rates, and a large pent-up demand driving the market,” says Lawrence Yun, NAR’s chief economist. “We lost some momentum toward the end of 2013 from disappointing job growth and limited inventory, but we ended with a year that was close to normal given the size of our population.”

Existing-home sales rose 1 percent in December 2013 compared to November and reached a seasonally adjusted annual rate of 4.87 million.

Existing-home sales for all of 2013 reached 5.02 million sales, 9.1 percent higher than 2012, and the largest rise since 2006 when sales were at 6.48 million at the close of the housing boom, NAR reports.

Home prices were also on the rise in 2013, up 11.5 percent over 2012, with a median existing-home price of $197,100 last year compared to $176,800 in 2012. It was the strongest gain in home prices in a year since 2005, when home prices rose 12.4 percent, NAR reports.

NAR President Steve Brown says that with job growth expected this year, home sales should hold despite rising home prices and higher mortgage rates.

“The only factors holding us back from a stronger recovery are the ongoing issues of restrictive mortgage credit and constrained inventory,” Brown says. “With strict new mortgage rules in place, we will be monitoring the lending environment to ensure that financially qualified buyers can access the credit they need to purchase a home.”

Housing Recovery Regional Snapshot

Here’s a look at how existing-home sales fared in December and for the year across the country:
  • Northeast: Existing-home sales fell 1.5 percent in December but remain 3.2 percent higher than December 2012. Median price: $239,300, up 3.6 percent from year ago levels
  • Midwest: Existing-home sales dropped 4.3 percent in December and are 0.9 percent below year ago levels. Median price: $150,700, 7 percent higher than December 2012.
  • South: Existing-home sales rose 3 percent in December and are 4.6 percent higher than December 2012. Median price: $173,200, up 8.9 percent from a year ago.
  • West: Existing-home sales increased 4.8 percent, but are 10.7 percent below a year ago. Median price: $285,000, up 16.0 percent from December 2012.
By REALTOR® Magazine Daily News

Thursday, January 16, 2014

For Some Borrowers, It's Now Easier to Get a Mortgage

Borrowers may be having an easier time applying for a mortgage compared to a year ago.

The average credit score for approved mortgages dropped to 727 in December, down from 748 one year prior, according to Ellie Mae, a mortgage technology firm. FICO credit scores run on a scale from 300 to 850.

Forty-six percent of mortgages that closed in December had credit scores above 750. One year earlier, 57 percent of mortgages posted credit scores that high. In December, about 31 percent of loans had credit scores below 700. One year earlier, that percentage stood at 21 percent, according to Ellie Mae.

Debt-to-income ratios are growing. The average total monthly debt for borrowers of closed loans in December stood at 39 percent of their incomes. That’s up from 35 percent in June.

“Rising interest rates and home prices could account for some of the increase in debt-to-income ratios,” MSN Real Estate reports.

More lenders may be getting comfortable easing standards since home prices have been rising over the past year. Also, lenders are facing a big drop in refinance business, which may prompt them to get more competitive in trying to nab more borrowers for home purchases, housing experts say.

However, the effect of new mortgage regulations, which took effect last week, have yet to be seen.

Tighter credit standards may be making for better borrowers, according to a new report. Loans originated last year are performing better than any year since tracking began in 1997, according to a report by Black Knight Financial Services.

Source: “Credit scores drop for new mortgages in 2013,” MSN Real Estate (Jan. 15, 2014)

Tuesday, January 14, 2014

4 Short-Sale Myths Dispelled

Several myths persist about short sales. Tracy Mooney, senior vice president at Freddie Mac, dispels some of the following common myths on the mortgage giant’s blog, including:

Myth 1: “A short sale is not an option for me because I’m current on my mortgage payments.”
Freddie Mac Fact: Even if home owners are current on their mortgage payments, they may still qualify for a short sale. They must meet general eligibility requirements, the home must be their primary residence, and their debt-to-income ratio must be more than 55 percent.

Myth 2: “I will be responsible for the entire amount owed on the mortgage.”
Freddie Mac Fact:  Home owners won’t necessarily be responsible for the entire amount owed on the mortgage under the Freddie Mac Standard Short Sale program, Mooney notes. Borrowers who complete a short sale in good faith and are in compliance with all laws and Freddie Mac policies will not be pursued by Freddie Mac for the entire amount owed under the mortgage. However, home owners who have the financial means may be asked to make a one-time payment or sign a new promissory note for a portion of the unpaid balance after the short sale closes, Mooney says.

Myth 3: “I can’t get a short sale on an investment property or second home.”
Freddie Mac Fact: Mooney says that investment properties and second homes are eligible for a Freddie Mac short sale. However, borrowers must meet eligibility requirements.

Myth 4: “A short sale will affect my eligibility for a new mortgage.”
Freddie Mac Fact: Home owners who go through a short sale may be eligible for a new mortgage sooner if the short sale was caused from financial difficulties due to income loss, medical emergencies, or other extenuating circumstances beyond their control. Former home owners in those circumstances may be eligible for a new Freddie Mac mortgage once they’ve established acceptable credit for at least 24 months after completing the short sale. Former home owners who underwent a short sale due to “personal financial mismanagement,” however, will need to re-establish acceptable credit for at least 48 months to become eligible for a mortgage backed by Freddie Mac. “You should start speaking to a lender about a new mortgage two years after your short sale closed,” Mooney notes.

Source: “Short Sales: Dispelling the Myths,” Freddie Mac (Jan. 13, 2014)

Friday, January 10, 2014

New Mortgage Rules Roll-Out, What Will Be The Impact?

New mortgage rules take effect Friday that set out to protect borrowers against risky lending practices. One of the biggest changes is that borrowers will likely need to show more proof that they can actually afford the mortgage they’re applying for.

Here are two main terms to know from the new rules:

“Ability-to-repay” rule: Mortgage lenders must ensure borrowers can actually afford their loans over the long term. Applicants’ income, assets, savings, and debt against their monthly house payments will be more closely scrutinized. Borrowers likely will need to produce “even more tax records, pay stubs, and bank and investment account information,” USA Today reports.

Qualified Mortgage: Borrowers who meet the ability-to-repay requirements will likely be eligible for a QM. QM loans must meet at least some of the following guidelines: They cannot contain risky features, such as terms that exceed 30 years or interest-only payments; carry more than 3 percent in upfront points and fees for loans above $100,000; or push a borrowers’ total debt above 43 percent of their monthly income unless the loan qualifies to be backed by Fannie Mae, Freddie Mac, the FHA, or a small lender.

Lenders can still issue loans outside of the QM guidelines, but lenders will have to do so realizing they’ll have less protections against future lawsuits.

The Consumer Financial Protection Bureau estimates that about 92 percent of mortgages currently meet QM requirements.

Still, the real estate and mortgage industry, the CFPB, and others will watch implementation of the new rules closely to determine whether they make it more difficult for borrowers to qualify for mortgages.

The new rules may make it more difficult for borrowers who have fluctuating incomes or self-employed individuals to validate their incomes, according to Goldman Sachs. The 43 percent debt standard also may prove a hurdle for some borrowers who find they can’t qualify for the loan they need to buy the house they want, and some borrowers may find they need larger down payments to keep within that 43 percent rule.

The new rules may also cause some delays in lending, at least initially, says Keith Gumbinger, mortgage expert with HSH Associates.

"It'll be a muddy mess until the rules settle in," Gumbinger says.

Source: “New Mortgage Rules Aim to Prevent Risky Loans,” USA Today (Jan. 9, 2014)