Dec. 6, 2019

Long-Term Mortgage Rates Unchanged at 3.68%

Rates held steady, and while unchanged from last week, they’re still down more than a full percentage point compared to one year earlier.  

WASHINGTON (AP) – U.S. long-term mortgage rates held steady this week amid mixed signs in the housing market. Rates remain at historically low levels as a lure to prospective homebuyers.

Mortgage buyer Freddie Mac said Thursday that the average rate for a 30-year fixed-rate mortgage was unchanged from the previous week at 3.68%. The benchmark rate stood at 4.75% a year ago.

The average rate on a 15-year mortgage ticked down to 3.14% this week from 3.15% last week.

A government report issued this week showed that spending on U.S. construction projects fell 0.8% in October, dragged down by declines in apartment and multifamily homebuilding. But spending on single-family home construction increased 1.6%, helping to offset some of the losses elsewhere in the private construction category.

Freddie Mac surveys lenders across the country between Monday and Wednesday each week to compile its mortgage rate figures. The average doesn’t include extra fees, known as points, which most borrowers must pay to get the lowest rates.

The average fee on 30-year fixed rate mortgages was unchanged this week at 0.5 point. The average fee for the 15-year mortgage fell to 0.4 point from 0.5 point.

The average rate for five-year adjustable-rate mortgages fell to 3.39% from 3.43%. The fee increased to 0.4 point from 0.3 point.

Copyright 2019 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Dec. 5, 2019

Study: Which Tactics Work Best in a Bidding War?

No surprise: Cash offers are the top negotiating tool, and personal letters come in second. However, waiving the inspection contingency didn’t help very much.

SEATTLE – Cash offers are overwhelmingly top way for home shoppers to emerge as a victor in a bidding war. An all-cash offer tends to triple a buyer’s odds of getting an accepted offer when in a competitive buying situation for a home, according to a study from Redfin.

After cash offers, a personal letter from buyer to seller ranked second. They can increase a buyer’s odds by 59%.

Waiving the financing contingency ranked third and can increase a buyer’s chances by 20%, though that’s down considerably from 58% in 2017, the study finds.

Researchers found that two tactics sometimes used in bidding wars have no noticeable affect – have a pre-inspection done or waiving the inspection contingency. Neither one significantly improve a buyer’s chance of coming out on top in a bidding war.

Redfin researchers say they analyzed the most popular bidding war strategies among thousands of offers Redfin agents wrote on behalf of their homebuying customers over the last two years.

“A couple years ago, the market was much more competitive than it is now,” says Daryl Fairweather, Redfin’s chief economist. “Sellers might have had multiple cash bids to choose from, and the offer price more often ended up being the determining factor. Now that bidding wars are less common, an all-cash offer is often enough to make an offer the winning bid. Sometimes, financed offers fall through because the lender decides the buyer can’t afford the purchase or the buyer is too risky a customer. Especially in a less competitive market, sellers value an offer they know isn’t dependent on financing.”

Overall, bidding wars have fallen to a decade low. Redfin says only 13% of its agents offers faced competition from January through September of this year, down from 55% during the same period in 2017.

Source: “All-Cash Offers Triple Homebuyer Odds of Winning a Bidding War,” Redfin (Nov. 19, 2019)

Dec. 3, 2019

How to Avoid the Pitfalls in Homeowners Insurance

CoreLogic: In 2017, about one in four homes was underinsured by at least 20% – and many policies won’t cover replacement costs if it drops below that threshold.

NEW YORK – Whether you’re buying a first home or are a decades-long owner, adequately insuring your home is crucial. Yet, according to real estate data provider CoreLogic, in 2017 about one in four homes was underinsured by at least 20%.

A policy that covers less than 80% of your home’s replacement value is risky. Many policies have an “insurance to value” clause that stipulates coverage must be a minimum amount; 80% is common. If you file a claim and it is determined you’re underinsured by 20%, your claim could be prorated, meaning only paid in part. You don’t want to have to chip in $100,000 to rebuild your $500,000 house.

So, consider these steps.

Focus on the cost to rebuild. You probably know what your home’s current value is. But when it comes to insurance, the market value of your home isn’t what matters. It’s the cost to rebuild. That might be less than market value if land values are high where you live. Or it could be more than the market value if, say, you recently plowed a lot into high-end renovations.

Replacement cost is based on current building costs in your area. (A charming older house may cost more to rebuild.) An insurance agent can provide the local cost to rebuild per square foot. If you know a good local contractor who deals with new construction, ask for estimates. If you have high-end finishes, consider increasing your square-footage cost estimate. Another option is to hire an appraiser. Or try costtobuild.net and dwellingcost.com.

Don’t settle for “actual cash value” coverage. A policy spells out how the insurer will figure out what you’re entitled to in a claim. Actual cash value (ACV) coverage will disappoint. It pays you based on the depreciated value of your home and possessions. So, let’s say a fallen tree puts a big hole in your roof that’s 20 years old. An ACV policy pays to replace a 20-year-old roof. That’s a lot less than what the roofer charges for a new roof.

Replacement value is the way to go. In fact, you should consider extended replacement cost coverage, where your payout can be up to 125% of the policy’s value.

Insure your possessions for replacement value, too. You don’t want a check that only pays to replace a 10-year-old couch.

Policies often limit coverage for possessions at somewhere between 50% and 70% of the policy value. And there are limits on valuables. A standard policy may limit jewelry coverage to $2,000. If, after careful inventory, you decide that’s not enough, consider policy tweaks to increase coverage.

Disaster prep: Do you really want to roll the dice? Damage from floods, high winds and earthquakes isn’t covered by a standard policy, or may come with different terms.

For instance, in some states an insurance policy has a separate deductible for hurricane and wind/hail damage. A standard deductible is typically $500 to $1,000, but hurricane deductibles are typically a percentage of your policy’s value, like 5%, so a $300,000 policy could include a $15,000 deductible for hurricane-related damage. Earthquake deductibles can be 10% to 15%. Separate policies for these events may be required.

Flood insurance is mandatory in clearly defined flood zones, but recent storms make clear that millions more homes are vulnerable. Yet most homeowners don’t have flood coverage.

Some private insurers offer flood insurance. The more common route is to buy through the federal flood insurance program managed by FEMA. Premiums vary, but at the high end the annual cost in 2019 is less than $500.

Consider an umbrella liability policy. A standard homeowner’s policy typically provides up to $100,000 in liability coverage if you are responsible for an accident inside or outside your home. It can also provide coverage if you are sued. You can supplement this with an umbrella policy that buys peace of mind cheaply: $1 million of protection typically costs less than $400 a year.

Shop around. If you own a car, check with your auto insurer. When you bundle policies you can qualify for a premium discount of up to 20%. Do a broader search, too. Not in a DIY mood? An independent insurance agent will shop different insurers. The Independent Insurance Agents & Brokers of America has a free search tool for finding local agents. Or comparison shop at sites such as insure.com. Consumer Reports’ home insurance buying guide has ratings for 15 national insurers.

Reduce your premium, not your coverage. Opting for a higher deductible – say, $1,000 vs. $500 – will reduce your premium. Besides, it’s smart to avoid the temptation to make small claims, as sometimes insurers raise the premiums at renewal for policyholders who make small claims. Ask about other discounts, such as for installing a home security system.

A sparkling credit score can also help. An insurance-based version of credit scores is used by many insurers in setting premiums. (The use of credit information to set homeowner insurance premiums isn’t allowed in California, Maryland and Massachusetts.)

Posted in National News
Dec. 2, 2019

Opportunity Zone Buyers Get More FHA Loan Remodeling Money

HUD says that homebuyers taking out an FHA 203(k) loan, which adds extra money for upgrades, can now get $15K more, or up to $50K rolled into a single mortgage.

WASHINGTON – U.S. Department of Housing and Urban Development (HUD) Secretary Ben Carson announced that the Federal Housing Administration (FHA) will offer a new incentive for borrowers rehabilitating homes in Opportunity Zones.

To make home purchases within Opportunity Zones more attractive, FHA is expanding its Limited 203(k) Rehabilitation Mortgage Insurance Program for Opportunity Zone homes. The loans roll the cost of repairs into a single mortgage and are offered to owner-occupant homebuyers and existing occupant homeowners for the purchase and/or rehabilitation of single family homes.)

The FHA loan upgrade becomes effective on Dec. 16, 2019. After that, qualified borrowers can roll an additional $50,000 into their first mortgage – a $15,000 increase over the current cap.

“Providing this opportunity means that the families seeking affordable homeownership or to improve their homes in distressed neighborhoods – where rehabilitation is needed the most – have a path to financing that makes it realistic to do the repairs and improvements that will uplift the entire community,” says Carson.

Allowable improvements include connecting to public water and sewage systems, repairing or replacing plumbing, heating, air conditioning or electrical systems, and covering lead-based paint stabilization costs.

As of Sept. 30, 2019, FHA had active insurance on over 623,000 mortgages located in Opportunity Zones, or 8% of FHA-insured mortgages nationwide.

The new incentive announced today is limited, however, to the first 15,000 mortgages secured by properties in Qualified Opportunity Zones each calendar year. The incentive expires on Dec. 31, 2028.

Nov. 26, 2019

Study: Lots of Listings Coming as Baby Boomers Age

Boomers own about 1/3 of all U.S. properties and 27% of them will sell their home within the next 20 years – but some metros will feel the impact more than others.

 

SEATTLE – Builders have struggled to overcome land scarcity and rising labor costs and materials. But a flood of homes will come on the market over the next 20 years as baby boomers age – enough to affect local economies in traditional retirement areas.

The boomer generation, once 76 million strong in the U.S., dwarfed the 55 million Gen-Xers and 62 million millennials it preceded. Today, the 60-and-older generation owns about a third of America’s homes, and a new analysis by Zillow attempts to show how their aging will impact the housing market.

The study predicts that a “Silver Tsunami” of sellers will build slowly as the number of adults aged 60 or older pass away each year. However, a rise is expected in the 2020s and 2030s.

In the decade from 2007 to 2017, roughly 730,000 U.S. homes were released into the market each year by seniors aged 60 or older. From 2017 to 2027 and from 2027 to 2037, that number is set to rise to 920,000 and 1.17 million per year, respectively. This means more than 27% of today’s owner-occupied homes will become available by 2037.

While virtually all areas will feel the effects to some degree – between one-fifth and one-third of the current owner-occupied housing stock was impacted in every metro analyzed – the wave won’t hit all at once and won’t strike all markets equally.

Retirement hubs like Florida and Arizona are likely to feel the sharpest impact. If demand erodes because fewer people choose to retire there in the coming years, those areas might end up with excess housing. Also heavily impacted will be regions like the Rust Belt, which saw younger people move away in recent decades, leaving older generations to make up a larger share of the population.

Some regions will be far less affected. These include Salt Lake City, where a much smaller share of homeowners are in their golden years, as well as Atlanta, Austin, Dallas and Houston – all of which are vibrant but relatively inexpensive places that tend to attract younger residents looking for an affordable alternative to expensive coastal cities.

Still, the differences in the share of homes released by seniors among metros are small compared to the differences within them. Palm Springs, for example, will see 45% of its owner-occupied homes vacated by 2037, compared with 23.8% of the combined L.A.-Riverside metro area overall. El Mirage and Sun City figure to see nearly two-third of their homes available, compared with 28.2% of the Phoenix area at-large.

Housing released by the Silver Tsunami – upwards of 20 million homes hitting the market through the mid-2030s – will provide a substantial and sustained boost to supply, comparable to the fluctuations that new home construction experienced in the 2000s boom-bust cycle. Whether this housing is appropriately located, priced and styled to meet future demand, however, will be an important factor in how it pairs with new construction to alleviate today’s housing shortage.

It seems likely, however, that the construction industry  that the construction industry will, over the next 20 years, start to put a greater emphasis on updating existing properties rather than building from the ground up.

Nov. 25, 2019

Real Estate Q&A: I didn’t pull permits. Will that come back to bite me?

A do-it-yourself homeowner made improvements years ago but never pulled a permit. Now he wants to sell. Will these unpermitted changes cause a problem?

 

FORT LAUDERDALE, Fla. – Question: Years ago, I renovated my home doing much of the work myself. Since I was working on my house, all the construction was done far exceeding the minimum building code requirements, and it has held up well. However, I did not pull permits. I am planning on selling my home and concerned about this coming back to haunt me. Please help. – John

Answer: Pulling permits is about more than paying a fee to your municipality. The process involves a qualified official reviewing your plans and inspecting the completed work to ensure it meets code requirements for safety. However, you cannot turn back the clock. The key to protecting yourself from liability to your buyer is full disclosure of all issues regarding your home that are not readily observable.

Your buyer should get an inspection, but even the best inspector cannot find hidden issues, so you are required to disclose these issues, which are called “latent defects.”

In my experience, many sellers are reluctant to do this out of fear that it will scare off potential buyers, but that is rarely the case. Most buyers are more concerned about the neighborhood and the view than the fact that you repaired a roof leak several years ago. More importantly, a buyer cannot hold you accountable for any issue that you disclosed to them, so complete and detailed disclosure is your best protection again future lawsuits if a problem later pops up.

In many areas, the requirement for a permit will sunset after a certain amount of time as long as the work was done correctly. If enough time has not gone by and the missing permit is causing a problem, you can hire a specialized contractor to open a new permit, inspect the work, and then coordinate with your building department to get the permit closed out.

About the writer: Gary M. Singer is a Florida attorney and board-certified as an expert in real estate law by the Florida Bar. He practices real estate, business litigation and contract law from his office in Sunrise, Fla. He is the chairman of the Real Estate Section of the Broward County Bar Association and is a co-host of the weekly radio show Legal News and Review. He frequently consults on general real estate matters and trends in Florida with various companies across the nation.

Nov. 22, 2019

Florida Housing Market: Pending Sales, Median Prices Up in October

Pending inventory also rose statewide year-over-year. Single-family sales rose 5.2%, the median price was up 3.6%, and condo sales eased a bit (-0.5%) but the median price rose 5.8%. 

ORLANDO, Fla. – Florida’s housing market reported more single-family home sales, more pending sales, higher median prices and rising pending inventory in October 2019 compared to a year ago, according to the latest housing data released by Florida Realtors®. Sales of single-family homes statewide totaled 23,440 last month, up 5.2% from October 2018. “Current low mortgage rates are tempting potential homebuyers who have been waiting on the sidelines,” said 2019 Florida Realtors President Eric Sain, a Realtor and district sales manager with Illustrated Properties in Palm Beach. “New pending sales rose 13.3% for single-family existing homes last month and new pending sales for condo-townhouse units increased 4.2%. Meanwhile, pending inventory for single-family homes in October was up 9.5% and pending inventory for condo-townhouse properties rose 3.6%.”

Pending inventory is the number of listed properties that were under contract at the end of the month or data collection period.

Statewide median sales prices for both single-family homes and condo-townhouse properties in October rose year-over-year for 94 months in a row. The statewide median sales price for single-family existing homes was $263,000, up 3.6% from the previous year, according to data from Florida Realtors Research Department in partnership with local Realtor boards/associations. Last month’s statewide median price for condo-townhouse units was $190,500, up 5.8% over the year-ago figure. The median is the midpoint; half the homes sold for more, half for less.

According to the National Association of Realtors® (NAR), the national median sales price for existing single-family homes in September 2019 was $275,100, up 6.1% from the previous year; the national median existing condo price was $248,600. In California, the statewide median sales price for single-family existing homes in September was $605,680; in Massachusetts, it was $410,000; in Maryland, it was $305,000; and in New York, it was $280,000.

Looking at Florida’s condo-townhouse market in October, statewide closed sales totaled 9,226, relatively the same level (down 0.5%) as a year ago. Closed sales may occur from 30- to 90-plus days after sales contracts are written.

“Closed sales of single-family homes were up year-over-year in 20 of Florida’s 22 metropolitan statistical areas in October, although the statewide increase of 5.2% is a little inflated on account of it being the one-year anniversary of Hurricane Michael,” said Florida Realtors Chief Economist Dr. Brad O’Connor. “Because Michael severely disrupted housing markets throughout the Panhandle last October, the Panhandle markets saw very large year-over-year changes in closed sales in this October’s figures. The Panhandle region as a whole saw an increase of 34.5% in closed sales of single-family homes, while the rest of the state recorded an increase of only 2.9%.

“In the condo-townhouse category, closed sales were up by 30.4% in the Panhandle, but this was not enough to put statewide year-over-year growth in positive territory. Statewide, sales in this category were down a half a percent.”

According to Freddie Mac, the interest rate for a 30-year fixed-rate mortgage averaged 3.69% in October 2019, down from the 4.83% averaged during the same month a year earlier.

To see the full statewide housing activity reports, go to Florida Realtors Statistics & Research section on floridarealtors.org. Realtors also have access to local market stats (password protected) on Florida Realtors’ website.

Nov. 20, 2019

October Housing Starts Climbed 3.8%

Single-family housing starts rose 2%, largely because of construction in the West and South, while apartment building construction rose 6.8%.

WASHINGTON (AP) – U.S. home building jumped 3.8% in October, a positive sign for the overall economy as developers anticipate steady demand.

The Commerce Department said Tuesday that housing starts reached a seasonally adjusted annual rate of 1.31 million. Starts for single-family houses were up 2%, largely because of construction in the West and South. Construction of apartment buildings rose 6.8% from the prior month.

Lower mortgage rates and a healthy job market have aided the housing market in recent months, yet housing starts are still down 0.6% year-to-date as a shortage of land and high construction costs have limited building. Affordability is a problem for would-be buyers as increases in home prices have outstripped wage growth.

The average 30-year mortgage has an interest rate of 3.75%, down from 4.94% a year ago, according to mortgage buyer Freddie Mac. Cheaper borrowing costs have fueled greater demand from buyers, but a broader shortage of homes for sale has caused prices to generally rise faster than incomes since 2012 when the market began to recover from the Great Recession.

Building permits, a measure of future construction, rose 5% in October to 1.46 million. The bulk of the gains in permits so far this year has been for apartment complexes, while permits for single-family houses have slumped 1.5%.

Nov. 19, 2019

CoreLogic: Fewer Homebuyers Pay More than Asking Price

In 2Q 2019, about 15% of U.S. homes sold for the asking price while 67% sold for less, as bidding wars and over-asking-price offers continue to slow.

 

NEW YORK – For homebuyers and sellers, the original list price is the conversation starter, yet rarely the final word – only about 15% of homes in the largest metro areas sold for the seller’s original asking price during 2019’s second quarter, according to real estate data firm CoreLogic.

Discounted sale prices occurred on 61% of homes sold, CoreLogic reported, up from 57% in late 2018.

Tight markets subject to bidding wars and sale prices above the ask, of course, get the most attention these days. And those conditions continue, to varying degrees, in San Francisco. Seattle, Minneapolis, Denver, Boston, Los Angeles and Washington D.C., according to CoreLogic data.

But sale prices below the list price were common in Miami (80% of sales below list), Chicago, Houston (70%) and other major markets. Buyers and sellers need to be aware of the new reality.

Another real estate company, Knock.com, which helps people buy and sell with bridge financing, expects discounts to list price to increase in 2019’s fourth quarter. Two in three home sales in the quarter will come in below the list price, and the average discount will be near 4%, Knock estimates.

 

Knock predicts that more than 80% of home sales in Miami will come in under the list price, and the average discount will be near 6%. In Chicago, Houston, New Orleans and Hartford, at least 75% of home sales are expected to be at a final price that is below the original list price. The average discount in those markets is forecast to be about 5%.

The cause isn’t a soft market. Of the aforementioned areas, only Chicago price gains have failed to keep pace with inflation over the past year. Some of the markets where buyers are enjoying strong negotiating leverage are also among the best for first-time homebuyers.

Whether you are a seller setting your list price, or a buyer readying a bid, understanding the current relationship between list price and final sale price in your market – and in your price range – is key to walking away with a deal you feel good about.

This is a basic analysis every agent should provide. Recent home sale prices for “comparable” nearby homes is an important metric, but a good agent will also provide information on how that price compares to the original list price.

As a seller, your must-have price needs to be rooted in current market conditions. What you paid for your home, while intensely important to you, has absolutely no bearing for a buyer.

Yet many home sellers are victims of their own “anchoring” bias. You paid X for the house and won’t sell unless you can get X plus. Or six months ago, your neighbor sold for Y, so you are determined to get at least Y. In reality, what you will get will reflect current market conditions. What is the most recent comparable sale price? How is the local economy? Where are mortgage rates?

As a buyer, knowing the list-to-final price ratio is a valuable piece of negotiating intel. If a home is reasonably priced and 5% discounts are common, you might make a first and final offer with that discount. Or if negotiations typically go another round in your area, an offer at a 7% to 8% discount gives the seller room to negotiate back toward a 5% markdown.

A 2015 academic paper suggests an intriguing pricing strategy for sellers. Once you get close to deciding on your list price, avoid lots of zeros in the actual list price you settle on. In an experiment, researchers found that when a list price was precise rather than rounded (and slightly higher than the rounded price) it triggered the least aggressive offers from buyers.

For example, if you decide $300,000 is the right list price, the research suggests that pricing at a precise number such as $301,750 will get you a higher offer (and ultimate sale price) than if you start the negotiation at the round figure of $300,000.

Of course, if you are planning on buying another home, you can use that intel to your advantage; if the list is a round number, don’t be lulled into making too high an initial offer.

Nov. 18, 2019

Fear the Uptick in Risky Loans? It’s Nothing Like 2008

In 2018, the number of unconventional mortgages was less than 3% of the market; in 2006, they were 39%. And negative-amortization loans have all but disappeared.

NEW YORK – Housing analysts are hoping it’s not a case of déjà vu. Unconventional mortgage lending is on the rise, in 2018 reaching its highest level since the financial crisis of 2008. These mortgages include subprime loans, financing offered to borrowers with blemished credits.

While these riskier loans are on the rise, some economists shrug off the notion that the economy is headed for another mortgage meltdown.

Despite the uptick in these types of loans, the number of unconventional mortgages is still less than 3% of loans made in 2018. In 2006, for comparison, unconventional mortgages made up 39% of the market. Negative amortization lending, in which the balances on the loan grow, have generally vanished from the market.

And today’s unconventional mortgages aren’t quite as unconventional.

Guy Cecala, publisher of Insider Mortgage Finance, told Kiplinger’s Money Power that the unconventional mortgages of today aren’t quite as risky, in part because most lenders must make an effort to determine if a borrower has the “ability to repay” the loan. Lenders also may try to counter some of applicant risks, such as offsetting a high debt-to-income ratio, limited documentation, or interest-only loan with a high credit score and a large down payment.

The largest concentration of nonconventional loans in recent months has been among borrowers with limited or alternative documentation, such as the self-employed, those with debt-to-income ratios above 43%, and those desiring an interest-only loan, according to CoreLogic.

Lenders are also loosening up underwriting in some cases to add more mortgage business and distinguish themselves from competitors, Cecala says.

Source: “Unconventional Mortgages on the Rise,” Kiplinger’s Money Power (Nov. 12, 2019)