Sam Khater, Freddie Mac’s chief economist, says, “The Federal Reserve’s concern about the prospects for slowing economic growth caused investor jitters to drive down mortgage rates by the largest amount in over ten years. Despite negative outlooks by some, the economy continues to churn out jobs, which is great for housing demand. We have recently seen home sales start to recover and with this week’s rate drop we expect a continued rise in purchase demand.”
30-year fixed-rate mortgage (FRM) averaged 4.06 percent with an average 0.5 point for the week ending March 28, 2019, down from last week when it averaged 4.28 percent. A year ago at this time, the 30-year FRM averaged 4.40 percent.
15-year FRM this week averaged 3.57 percent with an average 0.4 point, down from last week when it averaged 3.71 percent. A year ago at this time, the 15-year FRM averaged 3.90 percent.
Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage. Visit the following link for the Definitions. Borrowers may still pay closing costs which are not included in the survey.
The property tax rate in New York is high compared to the rest of the country. That’s according to a new report Wednesday from the financial news and opinion site 24/7 Wall St., which reviewed the effective rate — meaning the total amount of property taxes paid each year as a percentage of the total value of all occupied homes — for every state. The data is from the 2015 fiscal year and came from the conservative think tank Tax Foundation.
New York’s effective property tax rate ranked 14th highest in the country, the report found, nestled between Iowa and Kansas. On average, state and local governments across the country bring in about $1,500 a year in property taxes per person. Here are the numbers for New York:
Effective property tax rate: 1.4 percent
Median home value: $314,500
Per capita property taxes: $2,696.90
Median household income: $64,894
If those numbers seem like too much, you might consider moving to Hawaii, where the effective property tax rate was just .29 percent. If that sounds like a dream, consider this — the median Hawaiian home is worth more than $617,000 and the typical household earns about $77,000 a year, so don’t forget to bring a checkbook and perhaps buy a lottery ticket upon arrival. Alabama, Louisiana, West Virginia and Wyoming rounded out the five states with the lowest property tax rates.
On the flip side, residents in the Northeast appear to pay the highest rates, with New Jersey, New Hampshire and Vermont all appearing in the top five. New Jerseyans pay more than anyone else in the country with an effective property tax rate of 2.16 percent, the authors found. Residents pay more than $3,000 per capita and the median household income is just over $80,000 a year. A typical home in the state costs about $335,000.
Here are the 10 states with the highest effective property tax rates:Subscribe
Property taxes are the single largest money-maker for local governments and they’re spent almost entirely on a local level. Generally they are used to fund fire, police, schools, roads, cleaning and repairs.
“As a result, the United States is a patchwork of property tax codes, and depending on where you live, property taxes can be either a trivial expense or a major financial burden,” the report said.
Johanna Lasser had lived in a dozen apartments before she bought her first house two years ago, a rundown Victorian in Ditmas Park, Brooklyn. Ms. Lasser and her husband, Jimm, figured they would fix it up, stay a few years and then move on to a house in the suburbs, or one in a better school district, as many people do.
It didn’t take long for that plan to stop making sense.
“Once you’ve got all that work done, where would we go in the city except to another place that somebody had just fixed up?” said Ms. Lasser, 40, a stay-at-home mother who’s pregnant with her second child. “We’d just be switching apples for apples.”
Ms. and Mr. Lasser, 43, a filmmaker, are not the only homeowners with doubts about moving these days. Americans have been moving less over the years, with only 11 percent changing households in 2017, down from 13 percent in 2007, according to United States census data. Historically, we stayed in our homes for around six years; now we’re now staying for 10, according the National Association of Realtors.
The mood is affecting how we live in our homes and where we spend our money. More than three quarters of the respondents to an October Zillow survey, for example, reported that, given the option, they’d rather spend a lump sum of money renovating their current home than on a down payment for a new one.
What happens, though, when the home you think is your starter house becomes your forever house?
As first-time home buyers, we often cobble together what we have for a down payment with the expectation that in five years (because, face it, we like to believe that life operates on an endless loop of five-year plans) we’ll upgrade to something larger, or in better condition, or in a better neighborhood. Realizing that we may not actually be able to move runs counter to an American ideal that there’s always a better version of our lives a few pay raises away.
“We are restless people, we like to feel like we could move at any time. If you think of your house as your starter home, you know you can just leave,” said Melody Warnick, the author of “This Is Where You Belong: Finding Home Wherever You Are.” “That’s a belief that we cherish because it gives us a sense of freedom.”
But increasingly, the math doesn’t work and we find that we’re not so free to go.
A brew of short- and long-term trends has led us to this moment. Millennials, saddled with student debt, are buying their first homes later in life, and so are less likely to move again. Inventory is tight (largely because homeowners aren’t moving), home prices are high, and interest rates are rising.
Added to that, the 2017 federal tax overhaul capped the mortgage interest deduction at $750,000 and limited sales and local tax deductions to $10,000 a year, making it less desirable for owners in high-tax states like New York to buy a home with a jumbo mortgage or a giant property-tax bill.
In short, if you were lucky enough to lock in a historically low interest rate, whatever you buy today will cost you more than it did just a few months ago. The Lassers, for example, pay roughly $12,000 a year in property taxes for the six-bedroom house that they bought for $1.475 million in 2016. But if they decided to move to the suburbs, their property taxes would likely be higher, and if they bought a house priced at or more than what they paid for their current home, their monthly mortgage payments would be substantially higher at current interest rates.
“With our next purchase, we will have less buying power,” Ms. Lasser said. After the couple finishes bringing the house back to its original glory — a $350,000 project that will involve restoring the original exterior and interior details, gut renovating four of the six bathrooms and renovating the kitchen — she doubts they’ll actually want to leave.
“If you’ve gone through one remodel, I don’t think you ever want to do it again,” she said. “And where would we go?”
Companies such as Fusion Exteriors provide various services all the way from free estimation on all the work to professionals who ensure perfection in every task they perform.
Now, rather than scrolling Zillow listings, the couple is paying closer attention to their neighborhood schools, a detail they had overlooked when they bought the place because they figured they’d be gone by the time their daughter, now 4, was old enough for elementary school. “We were not at all prepared for her being in elementary or middle school in the city,” she said.
There are upsides to abandoning the idea of the next house. People who have lived in one place for a long time report feeling better, healthier and more content, according to Ms. Warnick. “Imagine if you channeled some of that restless energy into building strong relationships with people in your neighborhood or planning the block party?” she said.
But if you bought your home during one life stage, it may not necessarily fit so well with the next one.
Mary Botel, 38, bought a 750-square foot bungalow in Portland, Ore., in 2011 for $100,000, when she was single. At the time, she thought it was a good deal and a great place to live for a few years. Seven years later, she is married and now shares the tiny space with her husband, Blaine Botel, 35, and his teenage son. The quarters are tight, requiring the family to pare down on their possessions and stay organized. “Everything now has to have a place,” she said.
Initially the neighborhood was rough — her car was stolen once and so were her boots, snatched off the front porch in the middle of winter. But as the economy improved, so too did the neighborhood. Now apartments in the rental building next door rent for about $1,400 a month, substantially more than Mrs. Botel’s mortgage payments. “If we were to move today, even if we sold, our money wouldn’t go very far,” said Mrs. Botel, who works for Multnomah County, Ore.
Prospective home buyers often want to get pricing information for various properties without having to always rely on a real estate agent. This is where real estate sites like Zillow.com come in very handy. However, can you really rely on the site’s value estimates? Many have wondered whether Zillow provides accurate data with its Zestimate home price estimates.
Zillow is a business website, established to get eyeballs on a bunch of homes for sale and, in turn, to sell advertising to real estate professionals. It isn’t a real estate company with a group of agents.
Zillow bases many of its value conclusions on opinions formed by using algorithms that process data collected from various sources. No matter how great the algorithm is, opinions are not facts. If Zillow and similar sites truly had their finger on the pulse of the real estate market, any of these sites could’ve predicted the collapse of the housing market, which they did not.
Understanding Zillow’s Zestimate
Zillow acquires data by amalgamating all the information on housing it can gain access to. It mixes and merges data from various sources into one source. Many computerized programs exist that can forecast the value of a home. Even real estate agents use computerized programs, but the difference is real estate agents don’t rely on those programs alone like Zillow relies on the artificial intelligence used to assemble its Zillow Zestimates.
At least for now, Zillow can’t predict how a buyer will feel when she enters a home. Zillow can’t tell you whether the interior has been updated, if the workmanship is superior, whether the materials used are inferior, or whether a school around the corner has decreased the value of homes backing up to the football field or any other number of factors real estate agents and appraisers use when they know the neighborhood and have inspected the home in person.
How Agents Arrive at an Estimate of Value
When agents begin to assess a property, the first thing they typically do is study the home from an overhead, satellite view on Google. They note whether it backs up to a busy street, the proximity to commercial property or freeways, the size of other homes nearby, the vegetation and landscaping, its orientation to the sun and, if available, will view any photos of the exterior plus a street scene.
An agent might then run an automated valuation using specialized real estate software. One is Realist, a company owned by CoreLogic, that is data-centric for all sales, including non-MLS, and will take into consideration surrounding home sales varying 25 percent or less in configuration and type, including other parameters an agent can manually establish.
Another type of automated valuation is based on sales pulled directly from the MLS, and computed based on square footage, including high, low, median and average values of all sold, pending, and active listings. Those two types of automated valuations and the resulting values alone are often very different from each other but, used together, can provide a range of value, generally not more than a 5-percent difference. That process provides a lot of information but still is not nearly enough to establish a strong value conclusion.
Armed with that information, an agent would then inspect the home and look at it through the eyes of a buyer, how an appraiser will view it, and where it would be positioned against the competition to drive traffic to the home. It’s not unusual to enter a home with a prepared listing agreement in hand and end up manually changing the listing price after viewing the home. Automation, such as that used by Zillow, can never take the place of personal assessment.
The Zillow Zestimate of Value Accuracy
Zillow never claims to be 100 percent accurate all the time or even 80 percent accurate most of the time in all areas. If all the homes within a six-block radius are very similar to each other, in a suburban subdivision, filled with homes built around the same year, and about the same size and with identical amenities, a Zillow estimate will be much more accurate, perhaps within 10 percent, because there are not enough specific variances to throw it off. In other cases, such as for older neighborhoods with many homes that have been improved in different ways, it won’t be that close at all.
Real World: Zillow vs. Actual Sale Prices
The following four typical homes were actual home sales, and the price outcome is compared with their Zillow Zestimates at the point of sale, to highlight some of the variations in the two values.
One property is two houses on a lot in Midtown Sacramento, located on a busy street near the railroad tracks and close to freeway noise, across from a commercial property. Zillow estimated the value of that home at $380,733, but it sold at $349,000, after almost 6 months on the market, with plenty of exposure. In this case, the Zillow estimate was about 9 percent too high.
The second home was a custom waterfront property in the Pocket area of Sacramento. Zillow valued that home at $983,097, yet it sold at $1,085,000, which was 10 percent more than the Zillow estimate. If the sellers had relied on the Zillow estimate, they would have lost more than $100,000, which is no small change.
The third home was a reconstructed home in an exclusive area of Davis, California, near the University of California, Davis. Zillow valued that home at $1,230,563, but it sold for $1,495,000, and for cash, with no financing involved. That Zestimate was more than 20 percent too low.
Finally, the fourth home was a lakefront home in Elk Grove, California. Again, the Zillow estimate was too low, at $488,711, and it sold for 16 percent more, which included the buyer’s lender’s appraisal, at $565,500.
The Zestimate is formulated to give website visitors a range of value. It’s not meant to replace an appraisal nor a real estate professional’s opinion of value. Many agents might take a gander at Zillow values before visiting a seller because they know the seller is looking at those values, but not because there is value to the agent as a professional in the estimate. Real estate agents do not use Zillow to price a home.
Zillow as a Backup Value
In some cases, agents will tell their clients to look at a home’s price on Zillow to justify how good of a good deal they are getting when buying a home, providing the Zestimate is much higher than the actual sales price, of course. It’s a selective usage with agents. When the price is to their advantage, they might use it as evidence for their client. Even banks don’t know any better, so in a short sale situation for example, when the offer is more than a Zestimate, a short sale agent might point to the Zestimate when in negotiations with the short-sale bank.
Mortgage applications decreased 1.8 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending September 7, 2018. This week’s results include an adjustment for the Labor Day holiday.
The Market Composite Index, a measure of mortgage loan application volume, decreased 1.8 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 13 percent compared with the previous week. The Refinance Index decreased six percent from the previous week to the lowest level since December 2000. The seasonally adjusted Purchase Index increased one percent from one week earlier. The unadjusted Purchase Index decreased 11 percent compared with the previous week and was four percent higher than the same week one year ago.
The refinance share of mortgage activity decreased to 37.8 percent of total applications from 38.9 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 6.4 percent of total applications.
The FHA share of total applications increased to 10.4 percent from 10.2 percent the week prior. The VA share of total applications increased to 10.5 percent from 10.0 percent the week prior. The USDA share of total applications remained unchanged at 0.8 percent from the week prior.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) increased to 4.84 percent from 4.80 percent, with points increasing to 0.46 from 0.43 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate increased from last week.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $453,100) increased to 4.72 percent from 4.67 percent, with points increasing to 0.47 from 0.30 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 4.84 percent from 4.79 percent, with points decreasing to 0.51 from 0.69 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.
The average contract interest rate for 15-year fixed-rate mortgages increased to 4.28 percent from 4.23 percent, with points increasing to 0.47 from 0.45 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
The Department of Labor announced today it has withdrawn informal guidance that was widely regarded as an Obama Administration crackdown on companies’ use of independent contractors and of workers who in effect are employed by two companies jointly.
Of those, the 2015 guidance on independent subcontractors raised the greatest concerns among remodelers because it could have forced companies to treat those subs as employees and thus pay payroll taxes, unemployment insurance, and related costs on those workers.
“Removal of the administrator interpretations does not change the legal responsibilities of employers under the Fair Labor Standards Act and the Migrant and Seasonal Agricultural Worker Protection Act, as reflected in the department’s long-standing regulations and case law,” the Labor Department’s statement said. “The department will continue to fully and fairly enforce all laws within its jurisdiction, including the Fair Labor Standards Act and the Migrant and Seasonal Agricultural Worker Protection Act.”
The July 15, 2015, administrator’s interpretation by the head of the Wage and Hour Division–which no longer is available on the department’s website–basically declared the government will be looking closer at a subcontractor’s economic independence when deciding whether that sub really ought to be regarded as an independent enterprise. That represented a shift from past practices in which government reviews appeared to focus on whether a company controlled a supposedly independent contractor by setting that person’s hours, providing tools, and requiring the contractor wear the company’s uniform.
“[N]o single factor, including control, should be over-emphasized,” David Weil, administrator of DOL’s Wage and Hour Division, wrote in that now-removed administrator’s interpretation. “Instead, each factor should be considered in light of the ultimate determination of whether the worker is really in business for him or herself (and thus is an independent contractor) or is economically dependent on the employer (and thus is its employee). The factors should be used as guides to answer that ultimate question of economic dependence.”
The interpretation came out three months after the Labor Department announced it had secured consent judgments with 16 defendants in Utah and Arizona who had claimed more than 1,000 of their workers were independent contractors. In that case, which yielded $700,000 in back wages and penalties, the defendants were accused of requiring the workers to become member/owners of limited liability companies. “These construction workers were building houses in Utah and Arizona as employees one day and then the next day were performing the same work on the same job sites for the same companies but without the protection of federal and state wage and safety laws,” DOL’s announcement said. “The companies, in turn, avoided paying hundreds of thousands of dollars in payroll taxes.”
The joint employer rule basically involves whether one company effectively controls all the activities of another company and thus is responsible for what that second company does to its employees. The rule had multiple implications for cases in which contractors used subcontractors and companies related to franchises.
The first quarter of 2017 saw the strongest quarterly home sales pace in a decade, according to the latest quarterly report from the National Association of Realtors.
This increase in home sales put downward pressure on housing inventory levels and caused home prices growth to accelerate its rate of increase in the first quarter, the report states. In fact, metro home prices now accelerated for three consecutive quarters.
The national median home price increased to $232,100, up 6.9% from the first quarter of 2016. This represents the fastest rate of growth since the second quarter of 2015.
“Prospective buyers poured into the market to start the year, and while their increased presence led to a boost in sales, new listings failed to keep up and hovered around record lows all quarter,” NAR Chief Economist Lawrence Yun said. “Those able to successfully buy most likely had to outbid others, especially for those in the starter-home market, which in turn quickened price growth to the fastest quarterly pace in almost two years.”
Single family home prices increased in 85% of markets as 152 of 178 metropolitan statistical areas showed sales prices gains in the first quarter, the report states. However, in 14 MSAs, home prices decreased year-over-year.
“Several metro areas with the healthiest job gains in recent years continue to see a large upswing in buyer demand but lack the commensurate ramp up in new home construction,” Yun said. “This is why many of these areas, in particular several parts of the South and West, are seeing unhealthy price appreciation that far exceeds incomes.”
Total existing home sales, including single-family homes and condos, increased 1.4% in the first quarter to a seasonally adjusted rate of 5.62 million, the highest rate since the first quarter of 2007. This is up from 5.55 million in the fourth quarter of 2016 and from 5.36 million in the first quarter of 2016.
Housing inventory, however, decreased 6.6% from 1.96 million homes for sale in the first quarter last year to 1.83 million this year. This average supply rested at 3.7 months in the first quarter, down from 4.2 months last year.
And while median income is increasing,, hitting a national average of $71,201, higher mortgage rates and home prices weakened affordability.
“Last quarter’s robust pace of sales was especially impressive considering the affordability sting buyers experienced from higher prices and mortgage rates,” Yun said. “High demand is poised to continue heading into the summer as long as job gains continue. However, many metro areas need to see a significant rise in new and existing inventory to meet this demand and cool down price growth.”
Multiple closely watched mortgage rates moved higher today. The average rates on 30-year fixed and 15-year fixed mortgages both rose. The average rate on 5/1 adjustable-rate mortgages, meanwhile, also increased.
Rates for mortgages are constantly changing, but they continue to represent a bargain compared to rates before the Great Recession. If you’re in the market for a mortgage, it may make sense to lock if you see a rate you like. Just make sure you shop around first.
30-year fixed mortgages
The average 30-year fixed-mortgage rate is 3.89 percent, up 4 basis points over the last week. A month ago, the average rate on a 30-year fixed mortgage was higher, at 3.99 percent.
At the current average rate, you’ll pay principal and interest of $471.10 for every $100,000 you borrow. That’s an increase of $2.29 over what you would have paid last week.
15-year fixed mortgages
The average 15-year fixed-mortgage rate is 3.10 percent, up 5 basis points from a week ago.
Monthly payments on a 15-year fixed mortgage at that rate will cost around $695 per $100,000 borrowed. The bigger payment may be a little harder to find room for in your monthly budget than a 30-year mortgage payment would, but it comes with some big advantages: You’ll save thousands of dollars over the life of the loan in total interest paid and build equity much more quickly.
The average rate on a 5/1 ARM is 3.16 percent, up 5 basis points over the last 7 days.
These types of loans are best for those who expect to sell or refinance before the first or second adjustment. Rates could be substantially higher when the loan first adjusts, and thereafter.
Monthly payments on a 5/1 ARM at 3.16 percent would cost about $430 for each $100,000 borrowed over the initial five years, but could increase by hundreds of dollars afterward, depending on the loan’s terms.
With the end of 2016 approaching, NAHB’s Eye on Housing is reviewing the posts that attracted the most readers over the last year. In July, Na Zhao examined typical construction durations for various types of single-family homes and regions.
The 2015 Survey of Construction (SOC) from the Census Bureau shows that the average completion time of a single-family house is around 7 months, which usually includes almost a month from authorization to start and another 6 months to finish the construction. The timeline from authorization to completion, however, is not consistent across the nation, depending on the housing category, the geographic location, and metropolitan status.
Among all the single-family houses completed in 2015, houses built for sale took the shortest time, 6 months to completion after obtaining building permits, while houses built by owners required the longest time, almost a year. Homes built for rent took 9 months from permit to completion, and those built by hired contractors normally needed around 8 months. A large proportion of single-family homes built for sale and on owners’ land built by contractors began construction within the same month after obtaining building authorizations. However, homes built for rent and built by owners had a one-month lag between permits and construction start in 2015.
The average time from authorization to completion also varies across the nation. New England division had the longest time of 10 months, followed by the Middle Atlantic of 9.6 months, East South Central, East North Central, and Pacific of 8 months in 2014. These four divisions all had above average time from permit to completion. The shortest period, 6 months, happened in the Mountain division, which also had the shortest waiting period from permit to construction start.
The metropolitan status indicates how long it takes to build a single-family home. Houses in metropolitan areas, on average, took nearly 7.5 months to completion, which was 2 months shorter than those in non-metropolitan areas. This pattern was quite consistent across the nation, except for the Middle Atlantic division where the average month to completion in metropolitan areas was longer than in non-metropolitan areas in 2015.
The SOC also collects sale information for houses built for sale, including the sale date when buyers sign the sale contracts or make a deposit. In 2015, the share of single-family sold while under construction was 66%, with 32% even sold before construction start and 12% sold during the same month of completion. The percent of single-family houses completed in 2015 stayed unsold at the first quarter of 2016 was only 6%.