The Federal Housing Administration announced plans on Thursday to increase loan limits in 2017, announcing a significant jump in counties set to increase compared to last year.
Due to home price increases, the FHA said that most areas in the country will see a slight increase in loan limits in 2017.
These loan limits are effective for case numbers assigned on or after Jan. 1, 2017, and will remain in effect through the end of the year.
The FHA recalculates its national loan limit on a yearly basis. The limits are based on a percentage calculation of the nation conforming loan limit.
Here are the upcoming changes. In high-cost areas, the FHA national loan limit “ceiling” will increase to $636,150 from $625,500. FHA will also increase its “floor” to $275,665 from $271,050.
Additionally, the maximum claim amount for FHA-insured Home Equity Conversion Mortgages (HECMs), or reverse mortgages, will increase to $636,150.
The FHA noted that this amount is 150% of the national conforming limit of $424,100.
The maximum loan limits for forward mortgages increased in 2,948 counties, which is attributed to changes in housing prices and the resulting change to FHA’s “floor” and “ceiling” limits.
There were no areas with a decrease in the maximum loan limits for forward mortgages though they remain unchanged in 286 counties.
This is compared to last year, which increased the loan limits in 188 counties due to changes in housing prices.
As an added note, FHA’s minimum national loan limit “floor” is set at 65% of the national conforming loan limit of $424,100. The FHA said the floor applies to those areas where 115% of the median home price is less than 65% of the national conforming loan limit.
For any area that doesn’t fit this and the loan limit exceeds the “floor,” it’s considered a high cost area. The maximum FHA loan limit “ceiling” for high-cost areas is 150% of the national conforming limit.
When Shaun Alfreds and his wife decided to build a house for their family of five in Cumberland, Maine, they didn’t know if a high-performance project would be within their budget. “We aren’t wealthy by any stretch of the imagination, but we wanted an energy-efficient home,” says Alfreds, a chief operating officer at HealthInfoNet, a local health information technology company.
After some research, however, the couple realized that they achieve their dream for a nominal additional investment over the cost of a conventional house if they opted for a modular high-performance house. They chose a two-story, Cape Cod–style design from Portland, Maine–based BrightBuilt Home, and moved in last December.
At more than 3,000 square feet, the house is spacious, but its full sun exposure and a 10-kilowatt solar array of 39 photovoltaic (PV) panels should cover its energy consumption year-round. Alfreds says the house cost “almost exactly what other [builders] were bidding” for a standard, code-compliant project that was custom designed. And their small additional investment goes to building equity in the house, rather than to paying utilities.
BrightBuilt, a sister company of local firm Kaplan Thomson Architects (KTA), joins an increasing number of design companies that are expanding the market for high-performance residential projects. While KTA has custom-designed many energy-efficient houses, principal Phil Kaplan, AIA, says the firm also wanted to offer an off-the-shelf product. In 2015, it launched BrightBuilt with nine design templates. Starting at $175 to $180 per square foot, the houses bring net-zero energy to a price more people can afford. “We’re definitely seeing a lot of demand,” Kaplan says.
But some architects and builders have found ways to lower the price of net-zero housing even more.
Marie de Verneil dreamed of building a retirement home on land she owned in central Virginia. “To me, green was very important,” she says. However, her savings from teaching French and international relations at the University of Maryland, Baltimore County, didn’t seem like enough. “It’s kind of discouraging for someone like me,” she says.
Then de Verneil heard about Deltec Homes, in Asheville, N.C. The company—known for its distinctly round, prefabricated, and hurricane-resistant houses—recently launched Renew, a collection of models that use about two-thirds the energy of a conventional house and can include a PV array. De Verneil estimates she spent $250,000 on her 1,600-square-foot house (less than $160 per square foot), which includes a roof-mounted solar array. Her monthly electric bill is $30, the base fee for taxes and distribution. And when she is retired and living on a fixed income, she knows she’ll never have to say, “I can’t put the heat on.”
For those wanting to build a passive or net-zero energy house, right-sizing expectations is a crucial step to meeting one’s budget. And, as Deltec president Steve Linton adds, every project—modular or not—must be tailored to the particular site and climate. The company’s design team also conducts an energy model to evaluate site variables, solar energy capacity, building-shell size, features, and cost trade-offs.
Much of the market for high-performance housing is around single-family units in the suburbs, but the past few years have seen an uptick for multifamily dwellings and affordable housing projects in cities, including Washington, D.C., New York, and Philadelphia.
For low- and middle-income residents, in particular, an energy-efficient house can provide substantial benefits, says Orlando Velez, director of Housing Programs and Community at Habitat for Humanity of Washington, D.C.The organization recently built six passive townhouses last year in the district’s Ivy City neighborhood, whichhas a lot of air pollution. By creating a tight building envelope and filtering outside air, “you’re improving the air quality significantly,” Velez says. “It’s a healthier living environment.”
With savings from the lower utility bills, he says, residents may be able to spend more within the community. The organization plans to study those benefits over time to know whether energy efficiency is the best investment for its limited funds.
Living in a high-performance house can take some adjustment. Residents are often unfamiliar with high-tech HVAC equipment, such as energy recovery ventilators and solar water heaters. A tight building envelope also means that the size of the HVAC system can be decreased (fresh air supply is increased for indoor air quality purposes). The word that many residents use is “comfort”—indoor temperatures stay remarkably consistent across different areas of a house throughout the year.
New homes surged in April, a sign that builders are stepping up as demand for housing remains robust.
Sales soared 16.6% to a seasonally adjusted annual rate of 619,000, the Commerce Department said Tuesday. That was the biggest monthly jump in 24 years and trounced estimates of a 525,000 pace.
The median price also jumped, rising 9.7% from 12 months ago to $321,100.
The big increase in sales took supply sharply lower. At the current pace, it would take 4.7 months to exhaust all inventory.
March numbers were revised up to a 531,000 annual pace. The April figures were 23.8% higher compared to a year ago.
Regional performance was mixed, from a 52.8% surge in the Northeast to a 4.8% decline in the Midwest. The South saw a 15.8% increase, while in the West sales were up 18.8%.
Demand for housing has run much hotter than supply for the past few years, in part because home builders have been reluctant to ramp up to the brisk level of activity they enjoyed before the recession.
In the cold light of winter. concerns about affordability are cooling potential buyers, according to the latest Sentiment Index from Fannie Mae.
Fevers consumers believe this is a “Good Time to Buy”; figures trended down for the year in 2015 and declined an additional 4 percentage points in January. The share of consumers who reported that their income was significantly higher than it was 12 months ago fell 3 percentage points after climbing 9 percentage points on net in December. Altogether, the index decreased 1.7 points to 81.5 in January.
“Housing affordability is being constrained because the pace of growth in real income has not kept up with gains in real home prices as demand has grown faster than supply,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “On the bright side, consumers have been increasingly positive about their ability to get a mortgage, suggesting that credit tightness is not the main issue limiting housing market activity today, a feeling that we also see conveyed by lenders in our Mortgage Lender Sentiment Survey®. We expect further progress in the HPSI to be limited until income growth picks up or supply, particularly in lower-priced homes, expands more rapidly.”
While four of the six HPSI components decreased in January, Good Time to Sell rose by 1 point and Mortgage Rate net expectations stayed the same at negative 52 percent. Overall, the HPSI is down 1.3 points since this time last year.
The net share of respondents who say that it is a good time to buy a house fell 4 percentage points to 31%. An all-time survey low was equaled as only 61% of respondents say it is a good time to buy a house.
The net percentage of respondents who say it is a good time to sell a house rose 1 percentage point to 9%.
The net share of respondents who say that home prices will go up fell 3 percentage points to 37%.
The net share of those who say mortgage interest rates will go down remained at negative 52% this month.
Bigger and more expensive projects, rising new-home prices, curb appeal, and energy efficiency all contributed to a slight gain in remodeling projects’ payback at resale, the 2016 Cost vs. Value report shows.
The average cost and average return at resale for the 30 projects in this year’s report resulted in an average of 64.4% of a project’s investment dollars getting recouped if the home is sold within a year. That’s up from 62% in the 2015 report and the second-highest return in the past eight years.
This year’s 64.4% deserves an asterisk because the 2016 report eliminates eight projects from last year, including some with the weakest returns, while adding two projects, one of which—attic insulation—topped the list. But if you look only at the 17 projects we’ve tracked since 2005, the results are similar.
For those 17, the average value recouped was 63.7%, up from 62.1% in the 2015 report and the second-best year in the past six. When you look at cost alone, regardless of whether you’re talking about the 17 perennials or all 28 projects that were in the 2015 and 2016 reports, the result was the same: The average project cost 4.7% more this year. But when you ask real estate professionals for their view of how much that project boosted a home’s value at resale within a year, the results varied according to which projects you included. For the 28 jobs tracked both years, real estate professionals estimated the average project’s dollar return was 6.7% higher in the latest report than in 2015. For just the 17 perennials, the gain in value was 7.3%.
Those differences give only a first sense of why Cost vs. Value isn’t so much a portrait of America’s remodeling industry as it is a kaleidoscope—one in which the view of our remodeling industry changes every time you turn the data wheel.
Because costs change independently from real estate pros’ assessment of value (and for our 17 perennial projects, they’ve moved in different directions six of the past 10 years), each year the resulting cost-value ratio will have a different reason for why it changed. This ratio expresses resale value as a percentage of construction cost: When cost is higher than value, the ratio is less than 100%; when value is higher than cost, the ratio exceeds 100%. It’s the “bang-for-the-buck” meter.
In last year’s report, the overall cost-value ratio went down from the previous year because valuations were cut on about half of the 36 projects. This time, the average return went up largely because real estate professionals were more optimistic, lowering their estimates of resale value on only five of the 30 projects surveyed.
The number of new homes sold in November increased by 4.3% from a downwardly revised October level to 490,000 on a seasonally adjusted annual basis. On a year to date level, sales are up 14.5% from the eleven month total in 2014. Inventories of new homes also increased to 232,000, the highest since January 2010 even as builders continue to seek workers and lots.
The increases in sales and inventories signifies continued builder optimism and customer demand growth. However, the levels remain disappointing given the amount of pent up demand and the low level of turnover in existing home sales. Most new home sales are to existing home sellers so the weak sales of existing homes and low inventories of existing homes produces fewer potential new home buyers. On the positive side, home equity is up, employment continues to increase and mortgage rates remain low by historic standards. On the negative side, few first time home buyers are in the market as credit standards remain restrictive and young individuals remain living with their parents. Existing home owners are reluctant to sell when the inventory of existing homes remains low, a double-edged retardant to a more robust new and existing home market.
Regionally, Northeast sales dropped 29% but from a high October and within the smallest region. Midwest sales also fell 8.6%. The South and West increased 4.5% and 20.5% respectively. For the year, the same is true: the Northeast is behind last year’s total to date by 12.3% and the Midwest is virtually unchanged from the same 11 month period in 2014. The South and West are ahead of last year’s 11 month sum by 18.8% and 19.5% respectively.
In 2005 five companies controlled about 92 percent of the national market for title insurance. Ten years later, only four title insurers now control 86.9 percent of the title insurance business. In all but five states, only five companies account for 80 percent of more of premiums paid.
Despite the introduction of online insurerers a federal policies encouraging consumers to shop around, the $12 billion a year title industry looks pretty much the same as it did decades ago.
Will TRID centralize control of the title industry even more or will it initiate a disruption of the status quo?
A stinging 2007 study by the General Accountability Office led to an effort to encourage real shopping by consumers, but failed miserably. Beginning in 2010, lenders were required to provide applicants estimates for all closing services costs, including title, when each loan application was received. They were called Good Faith Estimates because lenders are required by law to be “within range” of the final settlement fees.
The idea was to give consumers time to shop for themselves to see if they could find a title company who do as well for less than the one the lender proposed. Consumers got interested when a widely publicized February 2011 survey commissioned by Federal Title & Escrow Co. in Washington, D.C., showed homebuyers could save as much as $1,180 by shopping for title services.
Save 35 percent
About the same time, a new breed of title insurance company entered the market, promising discounts on a type of policy many home buyers don’t even realize they need: title insurance. When it launched its web platform for closing services in 2008, Entitle Direct took a page from the Geico model and offered savings of 35 percent by selling title insurance directly to the consumer and cutting out the commission-based title agent. Other direct insurers include OneTitle is a New-York based company that offers savings of 10% on title insurance and Title Forward, a new entrant from Redfin.
“Many consumers are unaware that they have the right to shop around for a lower insurance premium rate and choose their title insurance company,” said Timothy O’Dwyer, CEO of Entitle Direct at the time. “The Internet provides a good starting point for shopping. Search for title insurance or go to one of the sites designed to help with the process.”
Yet seven years later, Entitle ranks only 14th among the industry’s 27 independent companies who collectively did only 12 percent as much business as the four “families” of companies that dominate the business—Fidelity, First American, Old Republic and Stewart.
After five years, GRE’s seemed to make little difference to the industry or consumers. Why didn’t consumers shop for title services?
“I think it was simply too intimidating for consumers,” said Holden Lewis, assistant managing editor/mortgage analyst at Bankrate. He tells the story of his wife doing the research to find a title insurer. “She actually called the title company and got a quote. But you know, she was in the dark in just making that call and knowing who to ask for. It’s hard. She got it done but it wasn’t easy. It was an intimidating process, so I think that just knowing how to shop is the main roadblock. The consumer is going to say ‘the lender already did this for and whom I to think I can do any better. I don’t know who to call anyway.”
Four days to shop
TRID changes the process. It provides consumers with forms that are easier to understand and an accounting how their closing dollars were actually spent, but it also speeds up the timeline for consumers to act.
The typical size of newly built single-family homes increased at the start of the year. The trend of increasing new home size leveled off in 2014, but new home size increased during the first quarter of 2015 with a decline in the volume of construction. As first-time buyers return to the market, typical home size is expected to trend lower.
According to first quarter 2015 data from the Census Quarterly Starts and Completions by Purpose and Design and NAHB analysis, median single-family square floor area increased from 2,445 in the fourth quarter of last year to 2,521 square feet. Average (mean) square footage for new single-family homes increased from 2,677 to 2,736 for the first three months of the year.
On a less volatile one-year moving average, the recent trend of leveling home size can be see on the graph above, although current sizes remain elevated. Since cycle lows and on a one-year moving average basis, the average size of new single-family homes has increased 13% to 2,678 square feet, while the median size has increased 18% to 2,477 square feet.
After two years of slim pickings for Southern California home buyers, the supply of houses for sale may be starting to open up, at least a bit. And that could power the region’s housing market to a stronger spring.
The fundamentals are good. But affordability is going to stare us right in the face again.
– Selma Hepp, senior economist at C.A.R.
Market watchers and real estate agents say they’re starting to see more sellers as prices remain relatively high, interest rates stay low and fewer borrowers owe more on their houses than they’re worth. The number of homes listed for sale in February climbed 9% in Los Angeles County from a year earlier, according to data from the California Assn. of Realtors, and the time it would take to sell every house on the market was at its highest level in three years.
“Supply is not an issue right now, not like it was,” said Rich Simonin, chief executive of Westcoe Realtors in Riverside. “It’s not a problem.”
That’s a shift from the last few years, when many sellers held their homes off the market and bidding wars were common for the rare well-priced listing. More supply should help keep prices in check, economists say, and coupled with an improving economy could help fuel a broad recovery in the region’s housing market over the next few months.
But so far the housing market has been in a slump.
lRelated Housing starts fall in February as home builders hit the brakes
Housing starts fall in February as home builders hit the brakes
SEE ALL RELATED
Home sales in the six-county Southland fell 2.7% in February from a year earlier, according to figures out Tuesday from CoreLogic DataQuick; it was the 15th time in 17 months that sales have fallen. Although the region’s median sale price of $415,000 was up 8.4% compared with February 2013, it has been basically flat since last summer, when it plateaued as many buyers hit a ceiling for what they could afford.
Selma Hepp, senior economist at C.A.R., says measures of buyer interest — online real estate searches and open-house traffic — have jumped in recent weeks. If that activity translates into sales, it could put a new round of pressure on pricing, she said.