It’s Tuesday News Day and these are this weeks hot topics concerning the real estate market, the financial market, general market conditions, and interest rates.
HousingWire – Realtors to FHA: Your mortgage insurance rates drive buyers away
The Federal Housing Administration’s (FHA) mortgage insurance requirement is facing criticism from real estate professionals who argue that home purchases are becoming increasingly out of reach for many qualified borrowers who rely on FHA financing but are hindered by mortgage insurance rules. Steve Brown, president of the NATIONAL ASSOCIATION OF REALTORS® (NAR), called on the FHA to relax its mortgage insurance rules due to concerns about high annual mortgage insurance premiums and mortgage insurance required for the life of a loan.
NAR posits as many as 125,000 to 375,000 prospective buyers were priced out of the market in 2013 by the FHA’s high insurance premiums and mortgage insurance requirement.
In 2014, FHA fees make up nearly 25 percent of a monthly mortgage payment.
On a $150,000 loan, at 4.5 percent, the mortgage payment is 13 percent higher today than it was in 2008.
In 2014, the mortgage insurance premium of 1.35 percent is 80 basis points higher than the rate of 0.55 percent in 2010. The 80 additional basis points pushed an estimated 1.45 million to 1.65 million renters over a sustainable debt-to-income level for the purchase of a home in 2013.
Many first-time home buyers, who are priced out of FHA and unable to migrate to private mortgage insurance, are likely under the age of 44. Since 2008, income growth has been slowest among Millennials, ages 33 and younger, and Generation Xers, ages 34-44.
Many of the potential home buyers who are priced out of FHA cannot migrate to private mortgage insurance. Combined with the higher funding cost of roughly 25 basis points for a GSE execution, only borrowers with the highest credit could afford to migrate to GSE financing.
In other news…
Businessweek – Wanted: Employed 25 to 34 Year Olds to Buy Houses
According to statistics from the Bureau of Labor, the number of employed people aged 25 to 34 is lower now than it was in the 1980s, which spells trouble for the housing market since this demographic group will struggle to become prime candidates for buying houses. The economic impact of a lack of first-time buyer sales has caused some experts to describe the market as looking a bit soft.
Wall Street Journal – Home Builders Bidding Up Best Lots, Ignoring Outskirts
Builders are focusing on higher priced lots that are typically close to growing job and transportation centers. At the moment, these centrally located locations are fetching a historically high premium over more affordable areas, which indicates that builders would rather bid up the best lots than move to the outskirts. Undeveloped raw land has put added pressure on home prices.
CNBC – When home improvements offer the most bang for your buck
Remodeling is at its highest level since the spring of 2004, according to the National Association of Home Builders’ Remodeling Market Index. When it comes to upgrades, homeowners can expect the average portion of costs being recouped at 66.1 percent. Entry door improvements and kitchen upgrades offer the most bang for your buck.
Forbes – Mortgage Experts Did Not Predict Housing Crash, They Lost More Than Non-Mortgage Experts
A new report reveals that professionals in the mortgage securitization industry were as aggressively invested in the housing market as comparable professionals during the prime “bubble period.” Overall, the housing portfolios of the securitization professionals saw worse returns than those of equity analysts and lawyers, indicating that many did not anticipate the likelihood of a crash.
LA Times – Report: Vacation home sales jumped in 2013
Sales of vacation homes increased by nearly 30 percent in 2013. According to the NATIONAL ASSOCIATION OF REALTORS®, second-home purchases made up their biggest share of the housing market since 2006.
HousingWire – The top 10 things every renter needs to know
The increase in single-family renting households does not appear to be slowing down anytime soon, as the NATIONAL ASSOCIATION OF REALTORS® reports that in the next 10 years, 5 to 6 million new renter households will be created. Rental vacancy dropped to 4.1 percent in 2013.
LA Times – Zillow to partner with Beijing firm to market U.S. homes abroad
Zillow Inc. has announced it will partner with a Beijing firm to market U.S. homes in China through a co-branded website that offers Zillow’s national home listings, data, and more in Chinese.
Talking Points…
National home prices remained mostly flat over the winter, while distressed saturation over the month of March remained stable at 21.8 percent, according to a Clear Capital home data market report.
Low-tier home price gains in the last quarter have slowed to just 1.2 percent, which is a big difference from 3.7 percent a year ago.
The report states that “The key to overall market progress and stability in 2014 will lie in the transition from investor to traditional home buyer demand […] Should prices remain stable, home buyer confidence will build, supporting a balanced transition.”
If you have any questions about the current real estate market give me a call at (408) 840-3852 or shoot me an email at Thomas.Feng@gmail.com to discuss your situation and how to get the most out of the current real estate housing market.
Because of the many legal and tax situations that can arise through the sale and purchase of real estate ALWAYS consult with your ATTORNEY or ACCOUNTANT before making ANY decisions in ANY transaction
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* THIS ARTICLE WAS POSTED AT Thomas Feng’s Bay Area Connect *