Perhaps you have heard that it’s getting easier to get approved for a mortgage to buy a home. Yet the first-time buyers you work with don’t seem to be doing any better than they did six, 12 or even 24 months ago.

The news reports you’ve been reading are misleading.  They may accurately trends for refi mortgages or mortgages as a whole but not for purchase loans—mortgages to buy houses–which is the focus of most of the public concern about standards.

What’s going on?

Six months ago I published an article titled “Why Lending Standards Won’t Get Better”. ‘’Today’s lending standards were written to protect lenders and federal budgeters, not to help renters become homeowners.  Despite pressure from the public, lending standards probably won’t change much more in the foreseeable future than they already have,’ I wrote at the time.

I’m sorry to say, it looks like I was right.  We are deep into the best market for home sales in nearly a decade and the latest hard data shows that it is just as difficult to qualify for a purchase mortgage in July as it was last March–or even in March 2012.

Reports of that looser standards are making it easier to get a mortgage are of two types:

Some are simply surveys of lenders or experts, like the Federal Reserve’s quarterly Survey of Senior Loan Officers or Pulsenomic’s survey of real estate economists and experts.  Both made headlines in recent months by announcing access to credit has eased, or is easing.  Both are based on perceptions, expectations and attitudes, not on hard data.

Others, like the Mortgage Bankers Association’s Mortgage Credit Availability Index, combine purchase loans with refis to provide a picture of credit accessibility that’s virtually useless for a discussion of home purchases and the barriers facing first-time buyers.  The fact is that standards for refis are indeed significantly lower while standards for purchase loans have been virtually frozen for years. For example, median FICOs for conventional closed refis in July were 727, for conventional closed purchase loans 757—a 30 point difference.  Combining data on the two different uses hides what is really going on to purchases loans.

Standards for refis have loosened much more for refis than for purchase loans. A good way to measure the difference between standards used to make lending decisions is to review and compare the real-life results of those decisions.  Below is an update of a table I included in my May article expanded to include July 2015 and refi data, for comparison purposes. It includes data on closed loans for the two most popular categories of mortgages for home buyers, FHA and conventional loans.  The data come from Ellie Mae, the industry-leading mortgage processing platform which processed approximately 3.7 million loan applications in 2014.

How Lending Standards Differ for Conventional and FHA Refi and Purchase Loans

March 2012-July 2015

Average FICO scores, loan-to-value ratios, and debt-to-income ratios from Ellie Mae Origination Insight Reports

Over the past 16 months, the three critical metrics used to show the impact of lending standards—FICO scores, loan-to-value ratios and debt-to-income ratios have barely while refis have indeed become measurably more accessible to borrowers.

read more…

http://www.realestateeconomywatch.com/2015/09/the-truth-about-lending-standards/

The four-bedroom, 2.5-bath home on Cromwell Bridge Road in Towson listed in June for $324,900. And lingered.

June Piper-Brandon, a real estate agent with Century 21 New Millennium, and the seller, David Walcher, recently reduced the price by about $25,000. Even so, no one showed up at an open house this weekend.

“We keep dropping the price and hoping,” Piper-Brandon said.

The good news and the bad news in Baltimore’s real estate market is the same for both buyers and sellers: Prices aren’t going up.

Nationwide home prices recovered to pre-housing-crash levels in June, rising 6.5 percent year-over-year after months of steady gains, according to the most recent existing home sales data from the National Association of Realtors.

But the median cost of a home in the Baltimore metro area increased just 1.5 percent last month from July 2014, to $259,900, according to a report released Monday by RealEstate Business Intelligence. And so far this year, the median price has fallen about 1.6 percent and remains about 10 percent off the 2007 peak.

The affordability may be fueling demand. More homes sold in Baltimore City and the five surrounding counties last month than in any July since 2005, continuing an eight-month streak of year-over-year, double-digit gains. The 3,623 deals were 23 percent more than a year ago. The number of pending deals also rose nearly 16 percent.

But the disconnect between local and national prices coupled with the increased demand may be causing pricing confusion in the Baltimore market.

“I don’t know too many markets in the country that look like Baltimore,” said John Heithaus, the self-identified “chief evangelist” for RealEstate Business Intelligence, the affiliate of the region’s multiple listing service that produces the monthly housing analysis. “Clearly, yes, for the entire [mid-Atlantic] region, [prices in] the Baltimore metro is certainly lagging, but what we want to see is increases in sales.”

Piper-Brandon said some homeowners have gotten encouraged to sell as more emerge from being underwater. But many prospective buyers are still backing away and opting to rent.

“We’re certainly seeing people going back to work, but they’re not making as much money as they used to make,” she said.

After dropping the price on his home, Walcher, 48, said his family is in no rush — they just found a bigger home with a pool they liked more. They bought the property from a bank after a foreclosure, so there’s some wiggle room.

“I think this may be an opportunity for somebody to take advantage of the situation we’re in and get a good deal that might not be available at other times,” said Walcher, an insurance agent. “If it doesn’t sell, OK, I had planned to live here for 20 years anyway.”

Danielle Hale, the National Association of Realtors director of housing statistics, said price increases nationally reflect pressure created by relatively low inventories and rising demand. However, she said, demand remains lower than expected, given population growth, which some observers chalk up to slowly rising incomes, more renters and fewer people creating new households, among other factors.

Those dynamics are part of the story in Maryland, where job creation and income growth have lagged behind the rest of the country in recent months. The region’s stagnant prices also reflect a continued churn of distressed properties, which drag down prices while feeding supply.

Foreclosures and short sales — with a median price of $118,000 — increased 43.5 percent year-over-year in July, to 673, or 18.5 percent of all transactions.

Many of the distressed properties date to delinquencies that started in the recession, and are just now appearing as the market adjusts to regulatory changes. While the situation is improving, Maryland continues to have one of the three worst delinquent markets in the country, according to a recent RealtyTrac report.

“It’s that lingering overhang,” said Frank Nothaft, a Washington-based senior vice president and chief economist for CoreLogic. “The serious delinquency rate has come down a great deal in the Baltimore market. … It’s still really high.”
The delinquent market continues to weigh especially on Baltimore City, where the median sales price was $135,000, the same as in July 2014. Of the 700 home sales in the city, about 200 — more than 28 percent — were short sales or foreclosures, similar to last year’s share, according to RBI.

But the city in July also saw a 17.1 percent increase in closed sales and 11.4 percent increase in pending sales.

“The city seems to have weathered the potential storm of the civil unrest,” said T. Ross Mackesey, president of the Greater Baltimore Board of Realtors. “We still have a huge distressed-property problem.”

John Kaburopulos, an agent with Keller Williams Flagship of Maryland, listed a recently rehabbed two-bedroom rowhouse on Lehigh Street in Greektown for $165,000 at the end of May, but recently dropped the price to $150,000 to try to attract more interest.

read more….

http://www.baltimoresun.com/business/real-estate/bs-bz-july-home-sales-20150810-story.html