Monthly Archives: April 2016

Waves in housing market

After the election of President-elect Donald Trump, mortgage rates shot up, and the 30-year fixed-rate mortgage hit nearly 4%, according to the weekly survey from Freddie Mac.

This increase is directly impacting the housing market as buyers begin to see the effect of the changed rates, according to an article by Diana Olick for CNBC.

For some homebuyers, this sudden jump could keep them from closing the deal on the home they want.

From the article:

Mortgage rates are still historically low, but crossing over from the 3% range to the 4% range means more than just a $50-per-month difference in payments. It means some buyers will not qualify for the strict debt-to-income ratios lenders now require. It also means potential buyers are more nervous about taking the plunge at all.

Salem Five Bank vice president Jason Anker gives homebuyers advice on how they should approach the housing market now that rates are increasing.

From the article:

“I tell people, interest rates are 80% psychological and 20% math. I do the math for them and their next reaction is, ‘Oh that’s all?’ Forty dollars a month, $75 a month. They initially think it’s going to be a lot more painful than that,” said Anker, who added he hasn’t lost any deals yet. “I am concerned. My advice to clients right now is to be extremely defensive.”

Home sales increased to highest pace

Existing home sales shot up in October to the highest annualized pace in almost a decade, according to the new report from the National Association of Realtors.

“The existing home sales market continues to show surprising strength, defying expectations for a modest fall and instead delivering the strongest month in almost a decade,” Zillow Chief Economist Svenja Gudell said. “Clearly, the market continues to underestimate just how much demand for homes is out there, even in the face of tight inventory and rising existing home prices that are now the highest on record.”

Existing home sales, completed transactions including single-family homes, townhomes, condominiums and co-ops, increased 2% to a seasonally adjusted annual rate of 5.6 million. This is up from 5.49 million in September, and up 5.9% from last year’s 5.29 million. October passed up June’s peak to hit the highest pace since February 2007.

“October’s strong sales gain was widespread throughout the country and can be attributed to the release of the unrealized pent-up demand that held back many would-be buyers over the summer because of tight supply,” NAR Chief Economist Lawrence Yun said. “Buyers are having more success lately despite low inventory and prices that continue to swiftly rise above incomes.”

“The good news is that the tightening labor market is beginning to push up wages and the economy has lately shown signs of greater expansion,” Yun said. “These two factors and low mortgage rates have kept buyer interest at an elevated level so far this fall.”

Home prices are still rising, increasing 6% annually in October to $232,200, up from $219,100 last year. This marks the 56th consecutive month of annual gains.

Housing inventory declined 0.5% from last month to 2.02 million existing homes available for sales. This is 4.3% below last year’s 2.11 million, and the 17th consecutive annual decrease. Inventory now rests at a 4.3 month supply.

One expert said that President-elect Donald Trump could focus on policies to reverse this lack of housing inventory.

“President-elect Trump could help boost inventory by implementing policies that would encourage investors to sell homes they bought during the foreclosure crisis, many of which are suitable for starter homebuyers,” Trulia Chief Economist Ralph McLaughlin said. “Such policies could include a reduction in capital gains taxes for homes sold by investors to owner-occupiers, an increase in tax rates on rental income, or both.”

Second consecutive month in August

If the cash sales share continues to fall at the same annual rate it did in August 2016, the share should hit 25% by mid-2019. This is a big delay from last month’s prediction, which put cash sales at their pre-crisis level by mid-2018.

Real estate owned sales had the largest share of cash sales in August at 58.6%, followed by resales at 31%, short sales at 29.1% and newly constructed homes at 15.6%.

While REO sales have the highest percentage of cash sales, they make up only 4.6% of the market. Short sales make up 2.7% of the market, putting distressed sales at 7.3% of the market, the lowest share for any month since September 2007.

At their peak in 2009, distressed sales made up 32.4% of the market, and REOs were 27.9% of that. On the other hand, pre-crisis distressed sales levels averaged 2%. If the current year-over-year decrease in the distressed sales share continues, it will reach that “normal” 2% mark in mid-2018.

The state with the largest share of distressed sales was Maryland with 19.1%, followed by Connecticut at 18.5%, Michigan at 17.7%, New Jersey at 15.9% and Illinois at 15.3%.

North Dakota had the smallest share of the market’s distressed sales at 2.6%.

Salem Five Bank vice president Jason Anker gives homebuyers advice on how they should approach the housing market now that rates are increasing.

From the article:

“I tell people, interest rates are 80% psychological and 20% math. I do the math for them and their next reaction is, ‘Oh that’s all?’ Forty dollars a month, $75 a month. They initially think it’s going to be a lot more painful than that,” said Anker, who added he hasn’t lost any deals yet. “I am concerned. My advice to clients right now is to be extremely defensive.”