Daily Archives: October 24, 2014

Huge Downward Revision In August New Home Sales | Armonk Real Estate

New home sales were flat in September after a big downward revision to August’s report.

New home sales rose 0.2% to an annualized pace of 467,000 in September, while August’s blowout number was revised down to a pace of 466,000 from a prior report of 504,000.

Expectations were for new home sales to fall 6.8% in September to an annualized selling rate of 470,000, down from August’s 18% increase to an annualized rate of 504,000.

According to the latest report from the Census, the median home sales price in September was $259,000 and the average was $313,200.

The report also showed that the current rate of sales represents 5.3 months supply at the current sales rate.

In a note to clients following the report, Ian Shepherdson at Pantheon Macro wrote, “I n one line: Revisions mean no clear breakout from the range yet.”

Shepherdson added, ”  Given the size and frequency of large revisions to the data, we wonder why the numbers are published so early; they’d be much more reliable if  they were released with a longer delay. Taking the revisions into account, we cannot now say with any conviction that sales have broken definitively above the 400-to-460K trend in place since late 2012, though the rebound in the NAHB survey over the summer suggests it is just a matter of time.”

 

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http://finance.yahoo.com/news/comes-home-sales-133706795.html

Housing is waking up to a new hangover | North Salem Real Estate

 

First came a historic national crash in home prices, then a surprisingly sharp jolt off the bottom. Investors, desperate for yield and fueled by Fed-induced cheap cash, swarmed the most distressed housing markets, buying bargain-basement properties and turning them into rentals. Some markets saw double-digit annual price appreciation. Some analysts started to float the word “bubble,” again.

Now, finally, reality is setting in yet again.

Foreclosures have fallen to new lows since the crisis, and investors, while not selling their homes, are not buying nearly as many. That has taken much of the air out of home prices. In addition, the number of homes for sale is rising, pushing sellers from the driver’s seat to the way, way back.

“What a difference a year makes,” said Stan Humphries, chief economist at Zillow. “At this time last year, we were worrying about a number of frothy markets that looked like they could be on the edge of another housing bubble, places where homes were appreciating at more than 20 percent per year and where buyers’ heads were spinning just trying to keep up.”

Now those markets, while not in the red, are barely in the black. Los Angeles, for example, saw home prices rise over 18 percent in the third quarter of 2013 from the same time in 2012. Now its annual appreciation for the quarter is down to 8 percent, according to Zillow.

“Buyers don’t have the same sense of urgency as they did before. They can be a little bit more discerning,” said Greg Bender, a Los Angeles-area Realtor with Berkshire Hathaway HomeServices.

Bender is seeing homes sit on the market far longer than they did just six months ago. It is no longer a seller’s market.

In Phoenix, hard hit by the housing crash and a favorite among investors in 2012 and 2013, the price deflation is even more dramatic. Last year, prices were up 18 percent annually at this time. Today they are up barely 1 percent. Demand and supply are low.

“Most of the median-price increase over the last 12 months is because a greater percentage of the homes being sold are in the luxury market, not because home values overall are increasing,” Arizona State University’s Mike Orr wrote in a recent report. “We anticipate pricing will move sideways or slightly down over the next few months until supply and demand get back into balance.”

While most housing analysts do not expect home prices to go negative on a national level again, some have floated that possibility. Home prices soared from 2003 to 2007 due to cheap and easy credit. When that went away, prices plummeted nationally for the first time in history.

 

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http://finance.yahoo.com/news/housing-waking-hangover-155830848.html

 

Sources of Financing for New Home Sales Relatively Unchanged for Third Quarter | Mt Kisco Homes

 

The onset of the housing crisis in 2007 led to a decline in the share of new home sales due to conventional mortgage financing and increases in the shares due to mortgages backed by the FHA and the Department of Veteran’s Affairs (VA), as well as cash purchases.

Third quarter data from the Census Bureau’s Quarterly Sales by Price and Financing indicate that count of cash-based new single-family home sales stood at 8,000 for the quarter or about 7% of total sales. During the 2002-2003 period, cash sales made up only 4% of purchases. In contrast, cash purchases constitute a considerably larger share of the existing home market – 24% in September per National Association of Realtors estimates.

It is worth noting that another measure of cash sales for total new construction from CoreLogic shows a higher level of cash sales than the Census: 16% in July 2014.

New home sales due to FHA-backed loans were 12% of the market during the third quarter according to the Census estimates. This is down from 28% in the first quarter of 2010 and is closer to the 10% 2002-2003 average. As the conventional mortgage financing share has risen, the share of new single-family home sales due to FHA-backed mortgages has declined.

VA-backed loans were responsible for about 8% of new home sales during the third quarter of 2014.

These sources of financing serve distinct market segments, which is revealed in part by the median new home price allocable to each. For the third quarter, the median new home price due to FHA financing was $201,500. The median price for VA-backed loans rose to $258,900.

Conventional mortgage financing had a median price of $298,400.

Finally, the median price for cash purchases for the third quarter was $284,300.

Analysis of mortgage markets is important because it suggests the underlying strength of housing demand, particularly for younger buyers with less equity or savings who must use a mortgage to buy a home.

 

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http://eyeonhousing.org/2014/10/sources-of-financing-for-new-home-sales-relatively-unchanged-for-third-quarter/

U.S. new home sales up in September | #Waccabuc Real Estate

 

Sales of new U.S. single-family homes rose to a six-year high in September, but a sharp downward revision to August’s sales pace indicated that the housing recovery remains fragile.

The Commerce Department said on Friday that sales increased 0.2 percent to a seasonally adjusted annual rate of 467,000 units, the highest reading since July 2008. August’s sales pace was revised down to 466,000 units from 504,000 units.

Economists polled by Reuters had forecast new home sales at a 470,000-unit pace last month.

New home sales, which account for about 8 percent of the housing market, tend to be volatile month to month and large

revisions are not unusual. Compared to September last year, sales were up 17 percent.

Housing is slowly regaining its footing after activity stalled in the second half of 2013 as mortgage rates soared.

With the 30-year fixed mortgage rate this week falling to its lowest level since June of last year, sales could pick up.

Slow wage growth, however, remains a constraint. Data this week showed sales of previously-owned homes touched a one-year high in September.

Last month, new home sales fell 8.9 percent in the West, handing back some of August’s 28.1 percent surge. In the

populous South, sales rose 2.0 percent, while they increased 12.3 percent in the Midwest. Sales were flat in the Northeast.

 

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http://finance.yahoo.com/news/u-home-sales-september-august-140503880.html

World faces $650 billion housing problem | Cross River Real Estate

 

A staggering 330 million urban households around the world live in substandard housing or are so financially stretched by housing costs they forgo other basic needs like food and health care, according to McKinsey.

Urban dwellers globally fork out $650 billion more per year on housing than they can afford, or around 1 percent of world gross domestic product (GDP), McKinsey estimated in a new report, highlighting the enormity of the affordability gap.

More than two-thirds of the gap is concentrated in 100 large cities. In several low-income cities such as Lagos and Mumbai, the affordable housing gap can amount to as much as 10 percent of area GDP.

McKinsey’s study looked at the cost of housing as a portion of household income in cities around the world to determine where urban residents were most under financial pressure.

For this study, it defined affordability as housing costs that consume no more than 30 percent of household income.

It’s going to get worse

Based on current trends in urban migration and income growth, the affordable housing gap would grow to 440 million, or 1.6 billion people, within a decade.

This trend will exact an enormous toll on society, the report warned.

“For families lacking decent affordable housing, health outcomes are poorer, children do less well in school and tend to drop out earlier, unemployment and under-employment rates are higher, and financial inclusion is lower,” it said.

Addressing the affordability gap

McKinsey estimates that an investment of $9-$11 trillion would be required to replace today’s substandard housing and build additional units needed by 2025. Including land, the total cost could be $16 trillion.

The belief that major cities no longer have land for affordable housing is a myth, it added. Even in cities such as New York there are many parcels of under-utilized or idle land-including government-owned land-that could support successful housing development, the report said.

The refurbishment of underutilized or old buildings is an important part of the process, alongside the construction of new units.

“Affordable housing is an overlooked opportunity for developers, investors, and financial institutions,” it said. “Well-located, properly maintained, affordable housing can be quite profitable.”

There’s also an economic case for it, McKinsey points out, noting that affordable housing in the right locations boosts the city’s productivity by integrating lower-income populations into the economy.

“It enables labor mobility, opening a path to rising incomes, giving households more to spend on goods and services in their neighborhoods and, over time, enabling them to move up the income pyramid and help drive city GDP growth,” it added.

 

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http://finance.yahoo.com/news/world-faces-650-billion-housing-051803200.html

Housing Fails to Overcome U.S. Home-Loan Rates | South Salem Real Estate

 

Falling U.S. mortgage rates stem from the housing market’s inability to withstand increases last year, according to Michael Hartnett, chief investment strategist at Bank of America Corp.’s Merrill Lynch unit.

The CHART OF THE DAY tracks an index of loan applications to buy homes, as compiled by the Mortgage Bankers Association. Hartnett mentioned the indicator in a report two days ago that described weakness in housing as “the biggest macro story of the year,” outweighing economic slumps inChina and Europe.

This year’s average reading for the home-purchase index would be the lowest for an entire year since 1995. On a weekly basis, the indicator has fallen as much as 30 percent from last year’s peak, reached in the first week of May.

Thirty-year mortgage rates rose 1.11 percentage points from the start of May through the end of June to 4.46 percent, according to data compiled by Freddie Mac. The national average stayed above 4 percent until this month.

“Both the supply of and demand for residential mortgages in the U.S. remains very weak,” wrote Hartnett, based in New York. “Thus, the U.S. mortgage market could not cope with the jump in rates in 2013.”

Rates had to decline this year “to a more stimulating level,” he wrote. This week’s 30-year average, 3.92 percent, was 0.56 point lower than at the end of last year. The fixed rate is headed for its fourth annual drop in five years.

 

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http://www.bloomberg.com/news/2014-10-24/housing-fails-to-overcome-u-s-home-loan-rates-chart-of-the-day.html?cmpid=yhoo

Getting a Mortgage Is Growing Easier | Katonah Real Estate

 

The nation’s largest mortgage firms plan to once again buy loans where the borrowers put as little as 3% down.

Perhaps you thought the days of putting little money down for a home were gone. Well, not so fast. On Monday the CEO of Fannie Mae, Timothy Mayopoulos, announced that the housing giant planned to once again buy loans for which the borrowers put as little as 3% down. Mayopoulos told the crowd gathered at the Mortgage Bankers Association conference in Las Vegas that Fannie, which along with Freddie Mac supports the bulk of the mortgage market today, is working to finalize the details of the offering and gain regulatory approval to proceed. “We want this business,” he said.

So far no details have been announced about what income or credit score requirements borrowers making such small down payments will need to meet the group’s standards. Mayopoulos said more information would be released in the coming weeks. Both Fannie and Freddie previously purchased loans with 3% down but had stopped in recent years. Today the firms usually require at least a 5% down payment on most loans.

Melvin Watt, director of the Federal Housing Finance Authority, which regulates the two government enterprises, said his group was working with them to develop “sensible and responsible guidelines” for the 3% loans, in an effort “to increase access for creditworthy but lower-wealth borrowers.” He cited “compensating factors” in evaluating such borrowers, though he didn’t say what those factors would be.

A 3% down payment is not exactly nonexistent today. The Federal Housing Administration has been offering mortgages with as little as 3.5% down for years. Traditionally, most borrowers were lower income, and the amount they could borrow was capped, but today even higher income folks use FHA loans to buy homes in expensive areas (loan limits vary by state but typically top out at $625,500). In recent years, these mortgages—which come with higher fees than traditional loans, as well as pricey mortgage insurance—have accounted for a larger than normal share of the market.

Now Fannie seems intent to grab some of that business. The low-down-payment loan, Mayopoulos promised, “will also be competitively priced, including against FHA execution.”

In a related move, FHFA’s Watt also announced that the agency is working to provide more details on when the housing giants can force a lender to buy back a loan that goes bad, which he hopes will encourage banks to loosen their lending standards. Over the past few years Fannie and Freddie have required lenders to buy back millions of dollars of bad loans, “sometimes for seemingly minor issues, such as missing a piece of paperwork,” said Keith Gumbinger, vice president at mortgage information publisher HSH.com.

“This clarification might allow lenders to look at riskier borrowers with less fear of having to buy these loans back in the future,” he said. He noted, though, that any changes are likely to be incremental: “It might let a few more borrowers in at the margin, but it won’t be like flipping a light switch where FICO scores down to 640 are now in.”

It’s important to note that Fannie and Freddie can’t force banks to lower their lending standards. In fact, most banks today require tougher standards than the government agencies impose, partially because they are fearful of having to buy back loans that go bad. For example, Fannie and Freddie will buy loans with FICO scores as low as 620, but most banks require at least a 660 or 680, Gumbinger said.

Similarly, lenders could always decide not to offer 3% down loans, even though Fannie and Freddie have agreed to eventually start buying them again. So it remains to be seen whether and how much the rule changes, when they are formally announced in the next few weeks, will ease the way for borrowers.

 

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https://time.com/money/3529857/low-down-payment-mortgage-fannie-mae-freddie-mac/?xid=yahoo_money

London Real-Estate Market Shows Signs of Cooling | Bedford Hills Real Estate

Homes in the U.K. capital have been among the hottest global assets in recent years, but signs continue to suggest the heat is escaping.

Shares in Foxtons Group , a prominent London real-estate agent, plummeted 19% Thursday as it warned its full-year earnings will miss investors’ expectations, with a cooling London market cited as the culprit. Its third-quarter performance “was negatively impacted by a sharp and recent slowing of volumes in London property sales markets following an exceptionally strong nine-month period,” the firm said in a statement.

London has been the focus of a heated national debate on rapidly rising house prices. The Bank of England earlier this month asked the U.K. government for powerful new tools to curb real estate lending across the country, after the bank’s governor, Mark Carney, in June called the entire housing market “the greatest risk to the domestic economy.”

The most recent national statistics show London house prices were up nearly 20% on the year in July.

But over the summer, evidence mounted that a tipping point had been reached in London. Leading real-estate agents in September warned that constrained lending, looming interest rate rises, and political uncertainty were making buyers more cautious.

So far, market prices in high-end neighborhoods—targeted by international investors drawn to the U.K.’s robust property laws, stable currency, and a comparatively simple buying process for overseas capital—have been hardest hit. Last week, data from buying agency Huntly Hooper showed average sale prices for central London homes costing at least £10 million ($16.1 million) fell 7.4% on the year.

Foxtons expects the market “to continue to be constrained for some time due to political and economic uncertainty within the U.K. and Europe, tighter mortgage lending markets, and mismatches between the price expectations of buyers and sellers.”

 

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http://online.wsj.com/articles/london-real-estate-market-shows-signs-of-cooling-1414068378