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North Salem NY Real Estate

More buyers priced out of the market with higher rates | North Salem Real Estate

By Na Zhao, Ph.DNAHB Economics and Housing Policy GroupReport available to the public as a courtesy of HousingEconomics.com

This article announces NAHB’s “priced out estimates” for 2019, showing how higher home prices and interest rates affect housing affordability. The 2019 U.S. estimates indicate that a $1,000 increase in the median new home price would price 127,560 U.S. households out of the market. In other words, 127,560 households would qualify for the new home mortgage before the change, but not afterwards. Similarly, 25 basis points added to the current mortgage rate would price out around 1 million households. The article also includes priced out estimates for individual states and more than 300 metropolitan areas.

The Priced Out Methodology and Data

The NAHB Priced Out model uses the ability to qualify a mortgage to measure housing affordability, because most home buyers finance their new home purchase with conventional loans, [1] and because convenient underwriting standards for these loans exist. The standard NAHB adopts for its priced-out estimates is that the sum of the mortgage payment (including the principal amount, loan interest, property tax, homeowners’ property and private mortgage insurance premiums (PITI), is no more than 28 percent of monthly gross household income.

As a result the number of households that qualify for mortgages for a certain priced home depends on the household income distribution in an area and the mortgage interest rate at that time. The most recent detailed household income distributions for all states and metro areas are from the 2017 American Community Survey (ACS). NAHB adjusts the income distributions to reflect the income and population changes that may happen from 2017 to 2019. The income distribution is adjusted for inflation using the 2018 median family income published by the Department of Housing and Urban Development (HUD) for all states and metro areas, and then extrapolated it into 2019. The number of households in 2019 is projected by the growth rate of households from 2016 to 2017.

The assumptions of the priced out calculation include a 10% s down payment and a 30-year fixed rate mortgage, at an interest rate of 4.85%. For a loan with this down payment, private mortgage insurance is required by lenders and also included as part of PITI. The typical private mortgage insurance annual premium is 73 basis points[2], based on the standard assumption of national median credit score of 738[3] and 10% down payment and 30-year fixed mortgage rate. Effective local property tax rates are calculated using data from the 2017 American Community Survey (ACS) summary files. Homeowner’s insurance rates are constructed from the 2016 ACS Public Use Microdata Sample (PUMS).[4] For the U.S. as a whole, the property tax is $12 per $1,000 of property value and the homeowner insurance is $4 per $1,000 property value.

Under these assumptions, 32.7 million of the 122.5 million U.S. households could afford to buy a new median priced home at $355,183 in 2019. A $1,000 home price increase thus would price 127,560 households out of the market for this home. These are the households that can qualify for a mortgage before a $1,000 increase but not afterwards, as shown in Table 1 below.

Table 1. US Households Priced Out of the Market by Increases in House Prices, 2019

State and Local Estimates

The number of priced out households varies across both states and metropolitan areas, largely affected by the sizes of local population and the affordability of new homes. The 2019 priced-out estimates for all states and the District of Columbia are shown in Table 2 (available in the Additional Resources box), which presents the projected 2019 median new home price and the amount of income needed to qualify the mortgage, and the number of households could be priced out if price goes up by $1,000. Among all the states, Texas registered the largest number of households priced out of the market by a $1,000 increase in the median-priced home in the state (11,152), followed by California (9,897), and Ohio (7,341).

Table 3, which is available in the Additional Resources box, shows the 2019 priced-out estimates for 382 metropolitan statistical areas. The metropolitan area with the largest priced out effect, in terms of absolute numbers, is Chicago-Naperville-Elgin, IL-IN-WI, where 4,499 households are squeezed out of the market for a new median-priced home if price increases by $1,000. This is largely because Chicago is a populous metropolitan area with a large number of households; and, compared to the largest metropolitan areas on the East and West costs, the median priced home is more affordable to begin with. Around 27% of households there are capable of buying new median-priced homes. For similar reasons, Houston-The Woodlands-Sugar Land, TX metro area, where nearly 33% of households can afford median-priced new homes.to begin with, registered the second largest number of priced out households (3,546), where nearly 33% of households can afford median-priced new homes. In New York-Newark-Jersey City, NY-NJ-PA, 3,531 households are squeezed out of the housing market for a new median-priced home if price increases by $1,000. Compared to Chicago or Houston, the median-priced new home is affordable to a smaller share of the households in New York, but New York is the largest metro area by population size with over 7 million households.

Interest Rates

The NAHB 2019 priced-out estimates also present how interest rates affect the number of households would be priced out of the new home market. If the mortgage interest rate goes up, the monthly mortgage payments will increase as well and therefore higher household income thresholds to qualify a mortgage loan. Table 4 shows the number of households priced out of the market for a new median priced home at $355,183 by each 25 basis-point increase in interest rate from 2.85% to 10.85%. When interest rates goes up from 2.85% to 3.10%, around 1.26 million households could no longer afford buying median-priced new homes. An increase from 4.85% to 5.10% could price approximately one million households out of the market. However, about 423,000 households would be squeezed out of the market if interest rate goes up to 10.85% from 10.6%. This diminishing effects happen because only a few households at the thinner end of household income distribution will be affected. On the contrary, when interest rates are relatively low, 25 basis-point increase would affect a larger number of households at the thicker part of income distribution.

Table 4. US Households Priced Out of the Market by an Increase in Interest Rates, 2019

Footnotes[1]According to the 2017 American Housing Survey (funded by HUD and conducted by the Census Bureau), 74 percent of the home buyers who moved into their homes in 2016 or 2017 had a regular primary mortgage on the home.[2]Private mortgage insurance premium (PMI) is obtained from the PMI Cost Calculator( https://www.hsh.com/calc-pmionly.html)[3]Median credit score information is shown in the article “Four ways today’s high home prices affect the larger economy” October 2018 Urban Institute https://www.urban.org/urban-wire/four-ways-todays-high-home-prices-affect-larger-economy[4]Producing metro level estimates from the ACS PUMS involves aggregating Public Use Microdata Area (PUMA) level data according to the latest definitions of metropolitan areas. Due to complexity of these procedures and since metro level insurance rates tend to remain stable over time, NAHB revises these estimates only periodically.

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http://www.nahbclassic.org/generic.aspx?genericContentID=265844&_ga=2.145431924.1759393123.1547037557-774800730.1539205172

Pending home sales down 10 months in a row as rates rise | North Salem Real Estate

Pending home sales declined slightly in October in all regions but the Northeast, according to the National Association of Realtors®.

The Pending Home Sales Index,* www.nar.realtor/pending-home-sales, a forward-looking indicator based on contract signings, decreased 2.6 percent to 102.1 in October, down from 104.8 in September. However, year-over-year contract signings dropped 6.7 percent, making this the tenth straight month of annual decreases.

Lawrence Yun, NAR chief economist, said that ten straight months of decline certainly isn’t favorable news for the housing sector. “The recent rise in mortgage rates have reduced the pool of eligible homebuyers,” he said.

Yun notes that a similar period of decline occurred during the 2013 Taper Tantrum when interest rates jumped from 3.5 percent to 4.5 percent. After 11 months – November 2013 to September 2014 – sales finally rebounded when rates decreased. “But this time, interests rates are not going down, in fact, they are probably going to increase even further,” Yun noted.

While the short-term outlook is uncertain, Yun stressed that he is very optimistic about the long-term outlook. The current home sales level matches sales in 2000. “However, mortgage rates are much lower today compared to earlier this century, when mortgage rates averaged 8 percent. Additionally, there are more jobs today than there were two decades ago,” said Yun. “So, while the long-term prospects look solid, we just have to get through this short-term period of uncertainty.”

All four major regions saw a decline when compared to a year ago, with the West seeing the most pronounced drop. Yun said that decline is not at all surprising. “The West region experienced the fastest run-up in home prices in a short time and therefore, has essentially priced out many consumers,” Yun said.

Yun suggests that the Federal Reserve should be less aggressive in raising rates. He cites the collapse in oil prices and the decrease in gasoline prices. “The inflationary pressure is all but disappearing. Given that condition, there is less of a need to aggressively raise interest rates. Looking at the broader economy and keeping in mind that the housing sector is a great contributor to the economy, it would be wise for the Federal Reserve to slow the raising of rates to see how inflation develops.”

Yun pointed to year-over-year increases in active listings from data at realtor.com® to illustrate a potential rise in inventory. Denver-Aurora-Lakewood, Colo., Seattle-Tacoma-Bellevue, Wash., Columbus, Ohio, San Francisco-Oakland-Hayward, Calif. and San Diego-Carlsbad, Calif. saw the largest increase in active listings in October compared to a year ago.

Yun expects existing-home sales this year to decrease 3.1 percent to 5.34 million, and the national median existing-home price to increase 4.7 percent. Looking ahead to next year, existing sales are forecast to decline 0.4 percent and home prices to drop roughly 2.5 percent.

October Pending Home Sales Regional Breakdown

The PHSI in the Northeast rose 0.7 percent to 92.9 in October, and is now 2.9 percent below a year ago. In the Midwest, the index fell 1.8 percent to 100.4 in October and is 4.9 percent lower than October 2017.

Pending home sales in the South fell 1.1 percent to an index of 118.9 in October, which is 4.6 percent lower than a year ago. The index in the West decreased 8.9 percent in October to 84.8 and fell 15.3 percent below a year ago.

The National Association of Realtors® is America’s largest trade association, representing 1.3 million members involved in all aspects of the residential and commercial real estate industries.

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*The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months.

An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined. By coincidence, the volume of existing-home sales in 2001 fell within the range of 5.0 to 5.5 million, which is considered normal for the current U.S. population.

NOTE: NAR’s November Housing Minute video will be released on November 30, Existing-Home Sales for November will be reported December 19, and the next Pending Home Sales Index will be December 28; all release times are 10:00 a.m. ET.

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https://www.nar.realtor/newsroom/pending-home-sales-slip-2-6-percent-in-october

Mortgage rates fall | North Salem Real Estate

So far this year, the 30-year-fixed has averaged 4.53%, compared to 3.99% in 2017

Rates for home loans tumbled as turmoil rocked global financial markets, but any reprieve in rates may come too late for would-be home buyers or refinancers.

The 30-year fixed-rate mortgage averaged 4.81% in the November 21 week, down 13 basis points, mortgage liquidity provider Freddie Mac said Wednesday. That’s the biggest weekly decline since January 2015 and the lowest level for the popular product since early October. The 15-year fixed-rate mortgage averaged 4.24%, down 12 basis points during the week. The 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 4.09%, down from 4.15%.

Those rates don’t include fees associated with obtaining mortgage loans.

Fixed-rate mortgages follow the U.S. 10-year Treasury noteTMUBMUSD10Y, +0.00%  , although with a slight delay. As a global stock sell-off has raged over the past week, bonds have been the best house in a bad neighborhood. The yield on the benchmark 10-year bond touched a six-week low Monday. Bond yields decline as prices rise, and vice versa.

Meanwhile, this week has brought a raft of fresh information on the housing market, little of it cheery.

Sales of already-owned homes perked up in October, but are still lower than the year-ago selling pace by more than 5%. Home builders broke ground on more — but not enough — homes. And one fresh data point bears watching: mortgage applications for newly-constructed houses are plunging, according to the Mortgage Bankers Association. As the chart above shows, they’re now lower than year-ago levels by double digits.

It’s possible more new-home buyers are making their purchases with cash as interest rates rise. But it’s just as likely that the tumble in applications is an early warning sign on new-home sales in the coming months. If so, that would mean trouble for the housing market — and the economy.

Only about 1.86 million Americans now have an “interest rate incentive” to refinance, data provider Black Knight said earlier in November. And refis made up the smallest share of all mortgage applications since December 2000 this past week, the Mortgage Bankers said. Housing market conditions may be easing enough for motivated buyers to catch a break, and there may be brief windows in which some homeowners can grab a refinance. But if Americans aren’t watching, or aren’t ready to pounce, those opportunities may slip by.


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https://www.marketwatch.com/story/mortgage-rates-slide-the-fastest-in-four-years-but-it-may-be-too-late-for-the-housing-market-2018-11-21

Millennials drive homeownership rate increase | North Salem Real Estate

The homeownership rate increased slightly in the third quarter, driven primarily by a jump in first-time homebuyers.

The homeownership rate increased to 64.4% in the third quarter of 2018, according to the latest report from the U.S. Census Bureau. This is up slightly from 64.3% in the second quarter and from 63.9% in the third quarter of 2017.

Click to Enlarge

Homeownership Rate Q3

(Source: U.S. Census Bureau)

This increase was driven primarily by first-time homebuyers as more Millennials opted out of renting and entered into the homeownership market.

“Led by another surge in owner household formation, homeownership rates are up again, but those gains are not driven by those who experienced the housing crash and lived to tell about it,” said Skylar Olsen, Zillow director of economic research and outreach. “First-time home buyers drove the market this year.”

“The homeownership rate of the 45 to 55 age bracket dropped quarter-over-quarter, while the under 35 age bracket continues to rally,” Olsen said. “Their homeownership rate is up a whopping 1.2% since Q3 2017 to 36.8%.”

Homeownership among those under age 35 increased from 35.6% in the third quarter 2017 and 36.5% in the second quarter this year to 36.8% in the third quarter 2018, the report showed.

Meanwhile, those ages 35 to 44 years dropped from 60% in the second quarter to 59.5% in the third quarter. This is still up slightly from 59.3% in the third quarter 2017. Those ages 45 to 54 years also saw a decrease, falling from 70.6% in the second quarter to 69.7% in the third. This is also still up from 69.1% in the third quarter of 2017.

Older generations also saw an increase in their homeownership rate. The rate for those ages 55 to 64 increased from 75.1% the previous quarter and 75% the previous year to 75.6% in the third quarter. Those ages 65 years and older saw an increase from 78% in the second quarter to 78.6% in the third quarter this year, however this is down slightly from 78.9% in the third quarter of 2017.

“Today’s report shows that more people are choosing homeownership over renting, and a large part of that story is the historically large number of first-time homebuyers,” said Tian Liu, Genworth Mortgage Insurance chief economist. “In the past two years, first-time homebuyers have purchased at least 1.9 million homes each year. That is more than the pace of household formation over the same period, meaning that the transition from renting to own is the more powerful driver of housing demand.”

“That has also been an important and often overlooked reason for the rapid rise in home prices, as more buyers came into the market,” Liu said. “Paradoxically, the rise of first-time homebuyers, which has pushed home prices up, also is slowing home sales today. These events caused the homeownership rate and home sales to diverge this quarter.”

The Hispanic homeownership rate saw a quarterly drop as it fell from 46.6% in the second quarter to 46.3% in the third quarter. This was still up slightly from 46.1% in the third quarter of 2017.

Among whites, the homeownership rate increased from 72.5% in the third quarter of 2017 and 72.9% in the second quarter this year to 73.1% in the third quarter of 2018. Blacks also saw an increase from last quarter, rising from 41.6% to 41.7%, however the rate dropped from last year’s 42%.

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https://www.housingwire.com/articles/47259-millennials-drive-homeownership-rate-increase-in-q3?utm_campaign=Newsletter%20-%20HousingWire%20Daily&utm_source=hs_email&utm_medium=email&utm_content=67103596&_hsenc=p2ANqtz-_pUkX9OvEYkaBpJ1jmUzH1E6CDF1CW5tJ2zdACxjVFaOimvN7qzgg3CY5GZ8vTRjO9elaur9WodJE-ofZoDFiWSfnEPA&_hsmi=67103596

Even Warren Buffett overpriced his home | North Salem Real Estate

Homeowners on the West Coast typically won’t have much trouble off-loading their properties in today’s market. Unless, apparently, they’re Warren Buffett.

The iconic investor and Berkshire Hathaway BRK.A, +0.16%   chairman struggled for more than 1.5 years to sell his home in the gated community Emerald Bay, near Laguna Beach, Calif. But he finally did so, The Wall Street Journal reported Friday — for nearly a third less than his original asking price.

Buffett purchased the house, which was built in 1936, for $150,000 in 1971 and put it on the market in February 2017 for $11 million, Bloomberg reported. Last month, he decided to lower the listing price to $7.9 million, after it continued to languish on the market.

The home sold below asking, at just $7.5 million.

The property’s listing agent declined to identify the buyer. “I feel very good about the couple who bought the house and hope their family gets as much enjoyment from it as our family did,” Buffett said in a statement following the sale.

The house has plenty of selling points, including a nearly 3,600-square-feet interior and ocean views. Some ads for the property have even played up the Buffett connection with listing photos that include his beloved Coca-ColaKO, -0.03%  and The Wall Street Journal (a newspaper that’s owned by News Corp., the same company that owns MarketWatch).

So why did it take this long for a buyer to bite? There are lessons for every homeowner:

Buffett priced it too high, even for a fancy property

For starters, it appears that Buffett stumbled on one of the most common pitfalls that can cause a home to linger on the market for much longer than anticipated: He overpriced it. The median price for homes in the same ZIP code as Buffett’s property is roughly $1.88 million, according to data from real estate firm Redfin. And homes in that area stay on the market for a median of 226 days. Homes in Emerald Bay are listed for a median price of $6.5 million, according to Realtor.com (Realtor.com is operated by News Corp NWSA, +0.91%  subsidiary Move Inc.)

So, even at the home’s new listing price of $7.9 million, it is still well above the median price for the area at a time when home prices are starting to waveracross the country.

It’s not unusual for more expensive homes to stay on the market longer because there’s typically a smaller pool of potential buyers out there, said Daren Blomquist, senior vice president of communications at Attom Data Solutions, a real-estate data firm in Irvine, Calif. Still, the sheer length of time Buffett’s home has been up for sale suggests the list price doesn’t fit with buyers’ expectations. And the longer the house remains unsold, the more wary many buyers become.

Interest rates are on their way up, which makes buyers skittish

Other developments in recent months have also worked against high-end home sellers like Buffet though, Blomquist said. “Interest rates have ticked up,” he said. “This can really magnify the amount you’re paying. That’s one of the factors that has started to slow down some of the higher end markets.”

Additionally, the GOP-led tax reform package reduced the mortgage interest deduction and capped the property tax deduction at just $10,000. Property taxes for a multimillion-dollar home in a high-tax state like California could easily exceed that amount — and that could be making buyers more hesitant, Blomquist said.

There’s no shortage of homes for sale in Laguna Beach

Laguna Beach has also seen an increase in the number of homes on the market. Inventory there grew by 3% over the past year as of February. Nationally, home inventory has dropped 14%, according to Redfin. That makes the market more favorable to buyers, especially those in search of a bargain. In January, just 10% of properties in Buffett’s same ZIP code were sold above the list price, compared with 19% of homes nationally, according to Redfin.

If you’re looking to avoid some of Buffett’s mistakes, here’s what else to keep in mind.

Snoop around other homes for sale in the area — they’re your competition

If a home stays on the market too long, that alone could weigh on buyers’ minds. “They’ll think there’s something wrong with it,” Blomquist said. “That psychology builds on itself the longer it sits on the market.”

To avoid overpricing, experts suggest that sellers check what other homes in the area are selling for, and even consider asking a real-estate agent to show you the inside of those homes.

If your home isn’t selling, “Go see what they’ve got that you don’t,” said Mindy Jensen, the author of “How to Sell Your Home” and the community manager at real-estate website BiggerPockets.

In Buffett’s case, his home lacks many of the upgrades and amenities that buyers expect in Laguna Beach, Redfin RDFN, -2.19%  agent Max Black told MarketWatch in March. “At a price tag of $11 million, or just over $3,000 per square foot, luxury buyers will be comparing this property to other non-oceanfront homes with more upgrades that are priced in the $2,200 to $2,400 per square foot range,” Black said.

Don’t expect prospective buyers to have too much imagination

The listing for Buffett’s home shows personal touches that Buffett likes, but non-celebrities shouldn’t stage their homes this way, Jensen said. “Buyers have no imagination,” she said. “If they walk in and see you’ve got a bright green wall, they could say, ‘I hate that, so I won’t buy this house.’” Keep paint and finishes neutral, Jensen said. A few family photos are fine, but subtlety is good.

Some cosmetic changes can also help. Even if an entire kitchen renovation isn’t realistic, smaller improvements like fixing broken door knobs, or replacing outdated hardware on cabinets are good moves.

A fresh paint job is another easy upgrade, Jensen said. For example, homes with blue bathrooms, specifically lighter shades, sold for $5,400 more than expected, according to a paint color analysis from the real estate website ZillowZG, +1.05% “Paint is one of the cheapest things you can do to fix your house,” Jensen said.

Replacing the roof, on the other hand, isn’t likely to up the home’s value very much, relative to how much it will cost the seller.

Try some psychological warfare: Consider underpricing the home

If home sellers want to get their property off the market as quickly as they can, they’ll need to be aggressive with their pricing. And one sure-fire way of doing this is by pricing the property so it’s more affordable than other comparable listings.

Sellers should look for specific, psychological milestones when it comes to prices, Blomquist said. In other words, if the average listing price is $200,000, a seller may see more interest in the property if it’s priced at $190,000.

While this strategy is sure to speed the process along in nearly any market, in a competitive one it could also pay off — literally. “If people will flock to what they see as a bargain, they may bid up the price until it matches the desired sales price,” Blomquist said.

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https://www.marketwatch.com/story/warren-buffett-is-having-trouble-selling-his-home-how-to-avoid-that-same-fate-2018-02-28

Home prices will not fully recover until 2025 | North Salem Real Estate

Check out any one of the many national home price reports, and headlines scream of new peaks and growing gains each month. Home prices are rising faster than inflation, faster than incomes and faster than some potential buyers can bear. Those reports are heavily weighted toward large metropolitan housing markets.

In fact, most of the U.S. housing market has not recovered from the epic crash of the last decade.

Only about one-third of homes have surpassed their pre-recession peak value, according to a new report from Trulia, a real estate listing and analytics company. Price growth in most markets is so slow that it will take about eight years for the national housing market to fully recover — that is, for all home values either reaching or surpassing their previous peaks.

Huge price gains during the last housing boom were juiced almost entirely by an incredibly loose mortgage lending market that no longer exists.

To say that the housing recovery has been uneven is an understatement. Some markets that have seen huge employment and population growth in the last decade, such as Denver, Seattle and San Francisco, lead the news with bubble-worthy headlines.

Not only have home prices there surpassed their recent peaks, they continue to rise at double-digit paces. Nearly all the homes in Denver and San Francisco (98 percent) have exceeded their pre-recession peak, according to Trulia. Other less obvious markets, like Oklahoma City and Nashville, Tennessee, have also seen the prices of most homes surpass their peak.

In areas hit hardest by the foreclosure crisis, fewer than 4 percent of homes have recovered to pre-recession price peaks. These include Las Vegas; Tucson, Arizona; Camden, New Jersey; Fort Lauderdale, Florida; and New Haven, Connecticut.

Rising incomes are the leading cause of home price growth, according to Trulia, which looked at four factors: job growth, income growth, population growth and post-recession housing vacancy rates. Income growth showed the greatest correlation to home price growth.

The intuition here is this: “Housing is what economists call a ‘normal good,’ so when incomes rise, households tend to spend more on housing, which pushes up prices,” wrote Ralph McLaughlin, Trulia’s chief economist, in the report.

Job growth didn’t correlate at all because more jobs don’t necessarily mean higher incomes. Of course job growth does matter tangentially, as more jobs often mean a growing population.

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http://www.cnbc.com/2017/05/03/home-prices-will-not-fully-recover-until-2025.html?__source=newsletter%7Ceveningbrief

Mortgage rates average 4.20% | North Salem Real Estate

 

Freddie Mac (OTCQB: FMCC) today released the results of its Primary Mortgage Market Survey® (PMMS®), showing average fixed mortgage rates moving lower for the first time in ten weeks.

News Facts

  • 30-year fixed-rate mortgage (FRM) averaged 4.20 percent with an average 0.5 point for the week ending January 5, 2017, down from last week when it averaged 4.32 percent. A year ago at this time, the 30-year FRM averaged 3.97 percent.
  • 15-year FRM this week averaged 3.44 percent with an average 0.5 point, down from last week when it averaged 3.55 percent. A year ago at this time, the 15-year FRM averaged 3.26 percent.
  • 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.33 percent this week with an average 0.4 point, up from last week when it averaged 3.30 percent. A year ago, the 5-year ARM averaged 3.09 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.

Quote
Attributed to Sean Becketti, chief economist, Freddie Mac.

“The 30-year mortgage rate fell this week for the first time since the presidential election, dropping 12 basis points to 4.20 percent. This marks the first time since 2014 that mortgage rates opened the year above 4 percent. Despite this week’s breather, the 66-basis point increase in the mortgage rate since November 3 is taking its toll — the MBA’s refinance index plunged 22 percent this week.”

Unmasking the Millennials | North Salem Real Estate

Zillow’s new Zillow Group Report on Consumer Housing Trends, authored by Stan Humphries, Chief Analytics Officer and Chief Economist, is a remarkably valuable 21st Century addition to the body of research profiling the changing face of residential real estate.

Its many jewels of new or intuitive findings regarding the mysterious Millennials, the generation that so far has defied expectations, are worth noting Here are some the brighter gems that might help to unmask the Millennials.

 Market domination. Millennials, ages 18-34, comprise 42 percent of all home buyers today, while an additional 31 percent of buyers are members of Generation X (ages 35-49). Baby Boomers (ages 50-64) and the Silent Generation (ages 65-75) together make up the smallest share of home buyers (26 percent), with only 10 percent of buyers over age 64.

Millennials buy later and buy up market.  Millennials are delaying many life milestones that precede homeownership, such as completing their education, getting married or starting families, and thus are renting deeper into adulthood.  When Millennials do become homeowners, they leapfrog the traditional starter home and jump into the higher end of the market by choosing larger properties with higher prices, similar to homes bought by older buyers. They pay a median price of $217,000 for a home, more than Baby Boomers, and just 11 percent less than Generation X. The Millennial median home size is 1,800 square feet, similar in size to what older generations buy. The modern-day starter home is nearly as large as the median home for move-up buyers and costs about 18 percent less.

 New homes are on the table. Younger buyers (50 percent of Millennials and 54 percent of Generation X) are significantly more likely than Baby Boomers or the Silent Generation (38 percent and 39 percent, respectively) to consider newly built properties. Nearly half (48 percent) of all buyers are considering new homes.

Millennials less likely to use agents. The older the buyer, the more likely that buyer is using an agent.  Baby Boomers and the Silent Generation rely most heavily on an agent or broker for real estate guidance, with 83 percent and 81 percent respectively citing them as a resource in their home search. Seventy-four percent of Generation X buyers report using an agent, followed by 70 percent of Millennials.  When they enlist an agent, they do so earlier in the home-search process, shop for a home faster than most older generations, and are more likely to stay in touch with an agent.

Do a better job of shopping for agents. The average number of agents all buyers consider hiring is 2.2.  Sixty-eight percent of the Silent Generation and 57 percent of Baby Boomers considered only one agent, compared to 44 percent of Generation X and 38 percent of Millennials considering just one agent. Millennials are particularly likely to evaluate an agent online, including reading online reviews (61 percent) and delving into past sales data (57 percent).

In an agent, Millennials want a partner, not a control freak. The process of finding or selling a home is much more collaborative for Millennials than for older generations. They bring all available tools to the process, including their smartphones, social media, and online networks. While older generations rely on real estate agents for information and expertise, Millennials expect real estate agents to become trusted advisers and strategic partners.

Definition of household is changing. Seventeen percent of younger Millennials  (ages 18-24) are shopping for a home with a friend or roommate, with an additional 51 percent shopping with a spouse or partner. Older Millennials (ages 25-34) are more like the average buyer, as 73 percent are shopping with a spouse or partner. Seventeen percent of younger Millennials (ages 18-24) are shopping for a home with a friend or roommate.

Millennial are not sold on buying. Millennial buyers (71 percent) are the most likely to consider renting. As buyers age, their interest in renting declines. Just over half, 54 percent, of all Generation X buyers considered renting compared to about one-third (32 percent) of Baby Boomers.  Only 18 percent of those 65 years and older considering renting as well as buying.

Millennials social support in decision-making.  Millennials rely on their personal networks. They’re the generation most likely to turn to a friend, neighbor, or relative to share the details of their home search (58 percent, versus 52 percent of Generation X buyers, 42 percent of Baby Boomers, and 37 percent of the Silent Generation). Millennials seek input from friends, relatives, and neighbors 58 percent of the time, versus the Silent Generation, who poll friends just 37 percent of the time.

Millennial home buyers are more diverse. Fourteen percent of Millennial buyers are Latino/Hispanic, whereas roughly 11 percent of Gen X, 7 percent of Baby Boomers and 6 percent of Silent Generation buyers are Latino/Hispanic. Some 6 percent of Millennials are black/African-American, a smaller share than Gen X (9 percent) or Boomer (8 percent) buyers who are black/African-American.

They are more suburban than urban animals, and they buy locally.  Nearly half of Millennial homeowners live in the suburbs (47 percent), while one-third settle in an urban setting (33 percent), with eight in 10 adults under 25 living outside an urban core. While only 11 percent of buyers are moving out of state, it’s notable that older buyers are more likely to make these long-distance moves. While just 7 percent of both Millennials and Generation X are moving across state lines, Baby Boomers and the Silent Generation make such moves 20 percent and 29 percent of the time, respectively.

Millennials aren’t just buyers. The biggest group of home sellers belongs to Generation X (38 percent). A quarter of home sellers is Millennials (26

 

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http://www.realestateeconomywatch.com/2016/11/unmasking-the-millennials/

FHA increases loan limits going into 2017 | North Salem Real Estate

house sun

Home prices force loan limits higher

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.

Check here for a complete list of FHA loan limits.

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http://www.housingwire.com/articles/38657-fha-increases-loan-limits-going-into-2017?eid=311691494&bid=1602929

Growing number of firms offering energy-efficient modular design | North Salem Real Estate

The Alfreds' net-zero residence, in Cumberland, Maine, is a modular design by BrightBuilt Home.
James R. SalomonThe Alfreds’ net-zero residence, in Cumberland, Maine, is a modular design by BrightBuilt Home.

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.

De Verneil residence, by Deltec Homes (Ridgeline model)
Marie de VerneilDe Verneil residence, by Deltec Homes (Ridgeline model)

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.

Kitchen, de Verneil residence
Marie de VerneilKitchen, de Verneil residence

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.

Ridgeline model in Deltec Homes' Renew Collection
Spacialists.com courtesy Deltec HomesRidgeline model in Deltec Homes’ Renew Collection
Interior rendering, Ridgeline model
Courtesy Deltec HomesInterior rendering, Ridgeline model

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.

 

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http://www.architectmagazine.com/technology/living-the-dream-of-a-net-zero-house_o