Sept. 23, 2020

NAR: Existing-Home Sales Hit Highest Level Since Dec. 2006

U.S. home sales rose for the third straight month in Aug. – up 2.4% compared to July – as historically low interest rates overshadowed many pandemic fears.

WASHINGTON – Existing-home sales continued to climb in August, marking three consecutive months of positive sales gains, according to the National Association of Realtors® (NAR). Each of the four major U.S. regions saw both month-over-month and year-over-year growth, with the Northeast seeing the greatest improvement from the prior month.

Total existing-home sales – completed transactions that include single-family homes, townhomes, condominiums and co-ops – rose 2.4% from July to a seasonally-adjusted annual rate of 6.00 million in August. Sales as a whole rose year-over-year, up 10.5% from a year ago (5.43 million in August 2019).

“Home sales continue to amaze, and there are plenty of buyers in the pipeline ready to enter the market,” says Lawrence Yun, NAR’s chief economist. “Further gains in sales are likely for the remainder of the year, with mortgage rates hovering around 3% and continued job recovery.”

The median existing-home price for all housing types in August was $310,600, up 11.4% from August 2019 ($278,800). August’s national price increase marks 102 straight months of year-over-year gains.

Total housing inventory at the end of August totaled 1.49 million units, a 0.7% drop from July and down 18.6% from one year ago (1.83 million). Unsold inventory sits at a 3.0-months' supply at the current sales pace, down from 3.1 months in July and down from the 4.0 months one year ago.

Scarce inventory has been problematic for the past few years, an issue Yun says has worsened in the past month due to the dramatic surge in lumber prices and the dearth of lumber resulting from California wildfires.

“Over recent months, we have seen lumber prices surge dramatically,” Yun says. “This has already led to an increase in the cost of multifamily housing and an even higher increase for single-family homes.”

Yun says the nation’s need for housing will grow even more, especially in areas that are attractive to people who can work from home. A study released by NAR in August, the 2020 Work From Home Counties report, found remote work opportunities to likely become a growing part of the nation’s workforce culture. Yun believes this will continue even after a coronavirus vaccine is available.

“Housing demand is robust but supply is not, and this imbalance will inevitably harm affordability and hinder ownership opportunities,” Yun says. “To assure broad gains in homeownership, more new homes need to be constructed.”

August home sale details

Properties typically remained on the market for 22 days in August, seasonally equal to the number of days in July and down from 31 days in August 2019. Two out of three homes (69%) sold in August were on the market for less than a month.

One in three August sales went to first-time buyers (33%), down from 34% in July 2020 but up from 31% in August 2019.

Individual investors or second-home buyers, who account for many cash sales, purchased 14% of the homes in August, up slightly from July’s 15% and unchanged year-to-year. All-cash sales accounted for 18% of transactions in August, up from 16% in July 2020 and down from 19% in August 2019.

While the recession has caused some concern about a future uptick in foreclosures, distressed sales – foreclosures and short sales – represented less than 1% of sales in August, unchanged from July but down from 2% in August 2019.

According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage decreased to 2.94% in August, down from 3.02% in July. The average commitment rate across all of 2019 was 3.94%.

Single-family and condo/co-op sales: Single-family home sales sat at a seasonally-adjusted annual rate of 5.37 million in August, up 1.7% from 5.28 million in July, and up 11.0% from one year ago. The median existing single-family home price was $315,000 in August, up 11.7% from August 2019.

Existing condominium and co-op sales were recorded at a seasonally adjusted annual rate of 630,000 units in August, up 8.6% from July and up 6.8% from one year ago. The median existing condo price was $273,300 in August, an increase of 7.8% from a year ago.

Regional breakdown: For three straight months, home sales have climbed in every region month-to-month. Median home prices grew at double-digit rates in each of the four major regions year-to-year.

August 2020 saw sales in the Northeast jump 13.8% at an annual rate of 740,000, a 5.7% increase from a year ago. The median price in the Northeast was $349,500, up 10.4% from August 2019.

Existing-home sales increased 1.4% in the Midwest to an annual rate of 1,410,000 in August, up 9.3% from a year ago. The median price in the Midwest was $246,300, a 10.7% increase year-to-year.

Existing-home sales in the South rose 0.8% to an annual rate of 2.60 million in August, up 13.0% from the same time one year ago. The median price in the South was $269,200, a 12.3% year-to-year increase.

Existing-home sales in the West inched up 0.8% to an annual rate of 1,250,000 in August, a 9.6% increase from a year ago. The median price in the West was $456,100, up 11.8% from August 2019.

Sept. 22, 2020

The real estate market is booming in South Florida. Here are tips for buyers and sellers looking to jump in

South Florida’s housing market is booming through the COVID-19 pandemic as homebuyers flock from cities in the north with a new ability to do their jobs remotely from anywhere.

While it’s sellers who have the advantage right now — demand is high but supply is limited — there are opportunities for buyers to benefit, as well and local real estate agents are weighing in on how to best take advantage.

new report shows that Florida has become a popular destination for home buyers from areas like New York, Chicago and Boston. Even rentals of single family homes are up in South Florida, as some families opt for a safer option until the market stabilizes.

Chuck Luciano with South Florida Luxury Advisors in Boca Raton said he hasn’t seen anything like it in the 21 years he has been in the industry.

“Florida has always been a destination where people plan to move. Covid-19 accelerated that, I believe," Luciano said. “This past four month stretch has been the busiest four months of my career. Most of my buyers are from the big cities trying to get out of the densely populated areas.”The current market with its limited stock of homes has been more beneficial to sellers who haven’t had to lower their prices.

But there are still steps sellers should take to ensure the best price. Jackie Tedesco with United Real Estate Advisors in Weston said the biggest thing sellers can do is get their property appraised by a professional.

 

“It doesn’t matter what type of market it is, price your property at market value and get a professional opinion,”Tedesco said. “You have to compare with other properties in the area.”

Sellers market or not, there are still advantages for potential buyers. Interest rates are lower than before, allowing buyers to purchase more in a house than they would have been able previously, Luciano said.

 

“Interest rates are historically low. Even though prices are rising, interest rates are still low so they can buy more than they did a year ago,” Luciano said.He advises that before starting to hunt for a property, buyers should get pre-approved for a loan, as lending requirements are tightening as banks try to protect themselves. Tedesco also advises potential buyers to shop around for the best possible rate.

Both recommend connecting with a local real estate agent rather than going through the process alone. A local agent can find a home that fits a buyer’s specifications, helping them to get properties in better school districts or finding homes in with the best bars or restaurants for younger couples.

Most importantly, a local real estate agent can also find a property in a location that won’t lose much of its value in a cyclical market, something Luciano stresses.

“Take a look at the areas that have historically maintained their values in up and down markets and if you are going to invest when the market is on the higher side, do so with those parameters in place,” Luciano said. “There will come a time when the market will revert. "

Even though the pandemic has changed the way people interact, there are still safe ways for people to look at potential homes. Tedesco recommends wearing a mask at all times and suggests that sellers offer booties to go over shoes to prevent germs from being brought in from the outside.

“Some sellers also already leave their lights on so no one has to touch anything,” Tedesco added.

Sept. 21, 2020

Contract Prep: Buyers’ Deposits at Risk Due to Lender Delays

Recent calls to Florida Realtors’ Legal Hotline have involved a panicked buyer’s agent who is trying to get an extension on either the buyer’s loan approval period or the closing date due to lenders not being able to get “final clear to close” paperwork together on time.

ORLANDO, Fla. – Many recent calls to the Florida Realtors® Legal Hotline have involved a panicked buyer’s agent who is trying to get an extension on either the buyer’s loan approval period or the closing date – due to lenders not being able to get “final clear to close” paperwork together on time. These delays are the result of a number of factors, including, but not limited to, an increase in refinancing by homeowners and keeping up with normal workflow in the time of COVID-19.

While hopefully sellers who want to sell will be reasonable and grant an extension, it is important for buyers to remember that there is no guarantee that they will get an extension. One way buyers can potentially avoid this issue is to reach out to their lender to ask about the timeline that lender is facing. For example, on average, how long is it taking the lender to close deals? How long is it taking to get loan approvals? In knowing these answers in advance, the buyers can then build the appropriate time into their offer and potentially avoid having to ask for an extension. If you typically represent buyers, you too may want to become familiar with the current practices of the lenders in your area for these same reasons.

On the flip side, it is important for sellers to also be aware of these potential delays. Providing an explanation up front to the sellers, i.e. current lending environment is taking more time, can prepare sellers later in the event they are asked for an extension or may be purchasing other property. As noted before, the sellers do not have to grant an extension. However, it may be more favorable, even if not the preferred choice, to grant a one-week extension to the current buyers than to start all over with a likely-longer time to close with new buyers.

Sept. 17, 2020

Borrowers Who Don’t Think They Can Get a Mortgage, But Can

Many people don’t think they can get a mortgage, but a foreclosure or a limited credit history aren’t deal breakers – even non-U.S. citizens can qualify.

NAPA, Calif. – The American dream of homeownership seems attainable for everyone but you. Maybe you don’t have a large down payment saved up, or you’ve been at your job for less than a year. Perhaps you have dings on your credit report.

Whatever the reason, experts agree that many Americans don’t think they can qualify for a mortgage. The only problem is, most of them are wrong.

“The majority of people assume they can’t get a home loan,” says Ryan Grant, a southern California-based mortgage lender. He cites lack of knowledge as the main reason would-be buyers don’t try to get financing.

“Most people think you can’t change your job and get a mortgage and you absolutely can. Most people think you need to have 20% down and you don’t. Most people think you need to have a lot more money than you do,” Grant says.

A foreclosure or a limited credit history are not deal breakers to qualifying for a loan. Even non-citizens who just moved to the states can get a mortgage.

Here’s what consumers should know before they close the door on homebuying.

Borrowers with foreclosures on their record

Foreclosure can make many would-be borrowers feel as if they’re benched from buying another home for at least seven years. The good news is that although a foreclosure will stay on your FICO report that long, the impact can diminish over time.

Since a foreclosure represents just one event in your entire credit picture, you can counterbalance it with positive factors such as a low debt-to-income ratio and an established credit history. If everything else on your report is in good standing, your FICO score can improve in as few as two years.

There are options available for people who are just a day out of foreclosure, explains Grant. For example, since these borrowers won’t qualify for a traditional loan, they can go with what’s known as a portfolio lender. Because these lenders keep the loan for their own portfolio rather than sell them, they are assuming all the risk and may be more lenient with their underwriting standards. However, the down payment and interest rate are usually higher to compensate for the added risk.

A portfolio lender might make sense if you’re intent on living in a certain area that has little rental housing or you want to lock in a house before prices rise even more.

“One thing you want to do is control your cost of living and not be told where to live and how much to pay or that you have to move or potentially be priced out of the market,” Grant says. “With the expectation of housing prices continuing to climb anywhere from 3 to 8% over the next five years, most people want to get into a home now when it’s a little more affordable. Over time they can refinance down into better terms.”

Another route is an FHA loan, which would likely have better terms than a portfolio lender. Generally, FHA requires that the foreclosure is at least three years old before they grant the borrower a loan, but there are exceptions. In such cases, the applicant’s finances are closely scrutinized to ensure they can and will repay the loan, Brian Sullivan, a HUD spokesperson, says.

“We have a rule that you have to wait three years after such an event to get back into a mortgage, certainly an FHA-insured mortgage. Under certain limited circumstances that could be shorter,” Sullivan says. “The lender would have to be certain you have cured the reasons for your prior default–largely it’s based on employment. They’d have to certify that you’re back. And then that mortgage would have to be manually underwritten.”

It’s wise to speak with a financial counselor before attempting homeownership after a foreclosure, advises Sullivan.

Younger borrowers with limited credit

Younger prospective borrowers often have limited credit and employment history. A typical scenario is a recent college graduate who has just started a career and can afford a mortgage, but their salary history isn’t sufficient to meet most underwriting requirements. They usually don’t have lengthy credit histories which can lower their FICO scores, hurting their ability to get a loan.

If these consumers have a credit union account, then they might be in luck, according to Randy Hopper, Navy Federal Credit Union SVP of mortgage lending. Because many credit unions do manual underwriting, which allows them to skirt the rigid standard imposed by Fannie Mae, borrowers who don’t tick all the required boxes have a shot at getting a mortgage.

“Consumers who are new to credit, such as first-time homebuyers, may believe that a relatively high credit score and a 20% down payment are required for a mortgage to begin house hunting,” Hopper says. “While a high credit score and large down payment are a good way to secure the most favorable terms, they are not necessarily a requirement to buy a home.”

Parents are often a source of help for younger buyers, particularly millennials who now make up the largest demographic group. Parents can come in as loan co-signers or gift their child money for a down payment.

One of the main reasons that millennials need a parent’s help is not because of credit issues, but because their salary history is short, Grant explains.

“A lot of our millennial clients don’t necessarily need a co-signer from a credit perspective because they’ll have a student loan, car payment or a credit card. Typically, they have really good credit scores. Sometimes the issue is that they’re at a new job and they’re earning commission, but we can’t use their commission for an average of two years; so they’re really making that money but we can’t use it,” Grant says.

Non-US citizens

For people who are not U.S. citizens, getting a mortgage might seem impossible. The opposite is true. Depending on their status, non-citizens who live in the U.S. have the same mortgage options as citizens. The exception is foreign nationals whose primary residence is outside of the U.S.

The two types of non-US citizens who are eligible for Fannie Mae-backed loans are: permanent residents with a green card and non-permanent residents with a valid work visa. These folks can also apply for FHA loans.

The one challenge might be proving their creditworthiness, Grant says. If their credit history is based overseas, an underwriter can use an international credit report as well as alternative lines to create a credit profile. Alternative lines include credit that doesn’t show up on a credit report, such as rent and phone bills.

“There are different programs through Fannie Mae, Freddie Mac and FHA that allow for use of alternative credit lines. There are even no credit score options through FHA,” Grant says. “They’re able to be used through manual underwriting so it wouldn’t be a normal automated underwrite, which is the majority of what mortgages are.”

© Copyright © 2020 Napa Valley Register; Natalie Campisi, Bankrate.com. All rights reserved.

Sept. 17, 2020

The Pandemic Hasn’t Stopped Property Values from Rising

In South Florida, for example, records show home values rose from 2019, meaning it could bring higher tax bills as the region deals with financial worries from COVID-19.

FORT LAUDERDALE, Fla. – South Floridians, be prepared to pay more in property taxes this year.

Property appraiser records show home values rose from the year before, meaning it could bring higher tax bills as the region wrangles with financial worries from the COVID-19 pandemic. The rise in values comes as new construction keeps thriving, with many new condos and apartments being built.

Palm Beach County’s property values increased by an average of 5.9%, thanks in part to new construction. There has been a building boom in West Delray and West Boynton. Additionally, The Bristol, a new West Palm Beach condominium, added roughly $300 million in new construction to the tax rolls, Palm Beach County Property Appraiser Dorothy Jacks said.

New buildings also have helped Broward County’s values rise by an average of 6.1%. The top three valued projects came from Fort Lauderdale. The city of West Park had the biggest jump at 10.2%.

Many businesses faced shutdowns during the pandemic, but construction still managed to carry on. As a result, COVID-19’s true impact may not be felt by the construction industry for some time, and South Florida’s property values could keep rising despite the coronavirus crisis.

“If the larger economy slows down, if we see any slowdown to our construction, it won’t be this year or next year, it’ll be a couple years as the investment that starts the construction process slows down,” Jacks said.

Rising values

In the coming weeks, cities will be signing off on their budgets, calculating how much money they’ll collect from homeowners and commercial property owners so they can pay for everything from police services to park maintenance to street repairs.

Many South Florida cities have favored keeping their property tax rates the same while the values have risen.

In Boca Raton, the city’s operating tax rate remains even at 3.68%. However, with average assessed values for single-family homeowners rising from $519,000 to $542,000, taxpayers will pay slightly more this year.

The city also is adding an additional $1.99 in sanitation fees for single-family residences. Like many cities, Boca Raton is forced to make budget cuts due to COVID-19. Among other things, Boca will decrease expenses for travel, recreational/cultural programs and vehicles, a city official said.

While Delray Beach’s operating tax rate decreased slightly from 6.86% to 6.85%, the city’s average assessed value for single-family homes increased by nearly 5 percent, meaning taxpayers also may pay more this year. Delray also is facing financial shortfalls due to COVID-19, leading to proposed cuts in public works and neighborhood and community services, among other things.

Boynton Beach’s tax rate is staying the same at 7.9% while average assessed values for single-family homes increased from $159,000 to $167,000. City Manager Lori LaVerriere said Boynton Beach is down about $1.2 million from state-shared revenue and sales tax revenue. The city plans on dipping into its designated fund balance to help fill the hole, allowing them to avoid any service cuts.

“We fared well considering some of our other neighbors are getting hit with $10 million reductions in losses and looking at laying people off,” LaVerriere said. “We’re not in that position, fortunately.”

The majority of Broward’s 31 cities also have opted to keep their tax rates the same. Three of them – Oakland Park, Southwest Ranches and Wilton Manors – are proposing slightly lower tax rates.

How much the new coronavirus will continue to strain finances remains unknown, especially if property owners, including landlords, can’t pay their bills. “The economic fallout from this pandemic will unfold over the next several months – and even years,” Oakland Park City Manager David Hebert warned.

Oakland Park has started seeking ways to save: All city staff’s hours have been reduced by 10%, excluding firefighters as well as some other exceptions. There also will be some hiring and overtime freezes, a reassignment of staff, as well as the city’s asking vendors to reduce their rates.

Park programs in Tamarac will take a 40% financial hit because of the pandemic, the city manager warned there. People are driving less during the pandemic, so that’ll mean less money for the city from its portion of a regional gas tax. To save money, the city instituted a travel ban and postponed replacing any cars, with the exception of fire department vehicles.

Facing fees

Tax rates are just one piece of the overall bill faced by South Florida homeowners. Everyone with property must pay school district taxes, fees to the hospital districts and water management districts, and the Children’s Services Councils. In Broward, the children’s council will add 48 cents of every $1,000 of taxable value to the bill.

Cities also may levy fees for fire service, which ranges from $129 in Lauderdale-by-the-Sea to $629 in Southwest Ranches. Weston will raise its fire fees from $472 to $549.

A handful of cities have tacked on garbage and stormwater fees to the property tax bills, too.

In addition to the operational tax rate, the majority of Broward’s cities add to the bill any ongoing voter-approved debt to pay for projects. The amount of debt gets added to the city’s operating tax rate to compute a homeowner’s final city tax bill.

That ranges from the lower end of 22 cents for every $1,000 of taxable value in Fort Lauderdale, which is used for the construction of new police headquarters and new fire stations and improvements to parks and recreation facilities. The length of the debt service varies depending on when the bonds were issued and the last one in Fort Lauderdale will end in 2049.

The highest debt among Broward’s cities is in Lauderhill, which collects $1.80 for every $1,000 of taxable value to pay for improvements to parks and roads.

In Wilton Manors, the debt that is added to the tax bills is almost 28 cents for every $1,000 of taxable value. It comes from a 2006 bond to construct the City Hall and police station, and will be paid off in 2028.

There will be some relief with some discounts available.

Cuts to the total bill can be applied for homestead exemptions, disability, widow and senior exemptions, among others. Those who pay quickly also get a discount as high as 4%. Taxes must be paid by March 31.

To look up how much you’ll face paying, visit bcpa.net for the Broward County appraiser’s website, or pbcgov.org/papa for the Palm Beach County appraiser’s website.

Copyright © 2020 the Sun Sentinel (Fort Lauderdale, Fla.), Wells Dusenbury. Distributed by Tribune Content Agency, LLC.

Sept. 11, 2020

Another Record Broken: 30-Year Mortgage Drops to 2.86%

The average rate dropped from last week’s 2.93% and its previous record-low Aug. 13 of 2.88%. It’s also cheaper than the average adjustable-rate loan (3.11%).

WASHINGTON (AP) – U.S. average rates on long-term mortgages fell this week amid signs that the halting economic recovery slowed over the summer. The key 30-year mortgage again marked an all-time low.

Mortgage buyer Freddie Mac reported Thursday that the average rate on the 30-year home loan declined to 2.86% from 2.93% last week. By contrast, the rate averaged 3.56% a year ago.

The average rate on the 15-year fixed-rate mortgage slipped to 2.37% from 2.42% last week. A 5/1-year adjustable rate mortgage averaged 3.11% this week.

Housing demand continues as one of few bright spots in the pandemic-hobbled economy. Spurred by historically low rates, applications for mortgage loans are up 25% from a year ago, according to Freddie Mac. It said the momentum will be difficult to sustain going into the fall because of the lack of available homes for sale.

In the wider economy, the government reported Thursday that the number of Americans applying for unemployment benefits was unchanged last week at 884,000 – a sign that layoffs remain stuck at a historically high level six months after the pandemic flattened the economy. Hiring has slowed since June, and a rising number of laid-off workers now say they regard their job loss as permanent.

Sept. 9, 2020

Real Estate Q&A: Can Pandemic Postpone Construction Contracts?

STUART, Fla. – Question: We are obviously concerned about COVID-19 and the association is about to embark on a construction project that requires contractors to enter the unit. Many owners are concerned about contractors coming in the unit, even with masks. Can we delay the project? – P.R., Delray Beach

Answer: There are two parts of this analysis, the board’s duty to maintain and repair the condominium and the construction contract itself.

Obviously, many associations are sensitive to COVID-19 and implementing various protocols to mitigate the possibility of the virus entering the community. The first issue, however, is whether the project can physically wait. Because the board has a duty to maintain, repair and replace the common elements, a situation where all of the roofs are leaking every time it rains in July is different from a purely cosmetic project. The former may be necessary to proceed and the latter can obviously wait.

The second issue is whether the board has any ability to delay the contract itself. If the contract has already been signed and delivered to the contractor, the association may be in breach of the contract if it tells the contractors to wait. On the other hand, the contractor may be dealing with staffing issues due to COVID-19 and may welcome the flexibility.

Further, the contract may include a provision which excuses performance due to force majeure events, such as hurricanes and labor strikes and may be drafted broadly to include pandemics. If so, this may be an excuse by the association or the contractor to start on time. With such provisions, the specific language is very important and is different from contract to contract.

I would recommend that you have the contract reviewed by a licensed Florida attorney to determine your rights under the contract, and then the board can determine the best course of action depending on whether the work is critical or non-critical.

Question: Our condominium board just approved constructing pickleball courts next to the tennis courts. The cost is roughly $30,000 but the board insists it can do this without a member vote. We are upset because the proposed area is currently a sitting area with mature trees that we enjoy. Can the board do this? – T.D., Stuart

Answer: The answer is, of course, maybe. If you were to analyze this question solely under the Condominium Act, the statute requires the membership to authorize any material alterations to the common elements. A material alteration is broadly defined as a palpable or perceptive change in the use, appearance or function of a common element.

Here, the dirt is currently landscaped and has a sitting area. If the pickleball courts are installed, this area would now be used for an exercise area. This is a material alteration and the statute would require that at least 75% of the voting interests approve the change to pickleball before the board has the authority to approve the alteration.

The wrinkle, however, is that the statute also provides that your specific condominium documents may provide for a different approval threshold, and may also provide that certain alterations are exempt from owner approval altogether. For example, many documents provide that material alterations can be approved with only a majority of the voting interests present and voting at a meeting. Similarly, many documents provide that only material alterations exceeding a specific dollar threshold require approval.

Here, if your documents provide for something different than the statute (and many documents do provide something different) then the pickleball court may be exempt from a vote if the documents allow the board to unilaterally approve alterations up to, for example, $50,000. Thus, the recommendation is that you have your documents and the pickleball proposal reviewed by a licensed Florida attorney to determine if a vote is required. From the board’s perspective, it’s also important that the board confirm whether or not a vote is required before you start construction.

Steven J. Adamczyk Esq., is a shareholder of the law firm Goede, Adamczyk, DeBoest & Cross, PLLC. The information provided herein is for informational purposes only and should not be construed as legal advice. The publication of this article does not create an attorney-client relationship between the reader and Goede, Adamczyk, DeBoest & Cross, or any of our attorneys. Readers should not act or refrain from acting based upon the information contained in this article without first contacting an attorney, if you have questions about any of the issues raised herein. The hiring of an attorney is a decision that should not be based solely on advertisements or this column.

Sept. 4, 2020

Long-Term Mortgage Rates Hover Below 3%

This week’s average 2.93% rate for a 30-year mortgage is only slightly higher than last week’s 2.91%. But the 15-year FRM declined to 2.42% from 2.46%.

WASHINGTON (AP) – U.S. average rates on long-term mortgages changed little this week, remaining at historically low levels that have sparked demand for homes.

Mortgage buyer Freddie Mac reported Thursday that the average rate on the 30-year home loan ticked up to 2.93% from 2.91% last week. By contrast, the rate averaged 3.49% a year ago.

The average rate on the 15-year fixed-rate mortgage declined, however, to 2.42% from 2.46% last week.

Housing demand continues as one of few bright spots in the pandemic-hobbled economy. Sales of new homes soared in July, rising nearly 14% as the market continued to gain traction following the spring downturn caused by pandemic-forced lockdowns.

In the wider economy, the government reported Thursday that the number of laid-off Americans applying for unemployment benefits fell to a still-elevated 881,000 last week – evidence that the pandemic keeps forcing many businesses to slash jobs.

Sept. 3, 2020

Home Prices See Biggest Gains in Two Years

CoreLogic: Exceptionally strong demand, historically low supply and record-low mortgage rates combined to fuel the fastest home price growth since 2018.

NEW YORK – July home prices were 5.5% higher across the country year-to-year, according to CoreLogic – up from the 4.3% annual gain seen in June.

The average rate on the popular 30-year fixed mortgage fell below 3% for the first time ever in July, giving buyers additional purchasing power. Exceptionally strong demand, historically low supply and record-low mortgage rates are combining to fuel the fastest home price growth since 2018.

“Lower-priced homes are sought after and have had faster annual price growth than luxury homes,” says CoreLogic Chief Economist Frank Nothaft. “First-time buyers and investors are actively seeking lower-priced homes, and that segment of the housing market is in particularly short supply.”

The National Association of Realtors® reports that the inventory of homes priced under $100,000 was down 32% year-to-year in July, while the supply of homes priced at $500,000 to $750,000 was down just 9%.

Home buying is gaining significant strength in more affordable suburban and rural areas as buyers seek more space for the new work-and-school-at-home economy. Home prices in San Francisco were less than 1% higher annually, while the Washington, D.C., metro area saw prices up over 5%.

CoreLogic economists predict that homes will stay positive in 2021 but that the gains will weaken as the initial surge of pandemic buying wanes. They say economies that rely heavily on tourism and entertainment, such as Las Vegas and Miami, could suffer the most.

Aug. 31, 2020

Flood Insurance Ends Sept. 30 – What Happens Then?

If a listing is in a flood zone, closings scheduled for early October could be affected if Congress fails once again to extend the national insurance program. NFIP has had a rocky history since 2017 with 15 short-term re-authorizations and four temporary shutdowns.

WASHINGTON – The National Flood Insurance Program (NFIP) is authorized by the National Flood Insurance Act of 1968 and does not contain a single comprehensive expiration, termination, or sunset provision for the whole of the program. Rather, the NFIP has multiple different legal provisions that tie to the expiration of key components of the program.

Since the end of Fiscal Year (FY) 2017, 15 short-term NFIP reauthorizations have been enacted. The NFIP is currently authorized until Sept. 30, 2020.

Authorization of the NFIP was extended from Sept. 30 until Dec. 8, 2017, extended until Dec. 22, 2017, and again until Jan. 19, 2018. The NFIP lapsed between Jan. 20 and Jan. 22, 2018, and received a fourth short-term reauthorization until Feb. 8, 2018. This legislation also authorized FEMA to honor all policy-related transactions accepted during the NFIP lapse.

The NFIP lapsed again for approximately eight hours during a brief government shutdown in the early morning of Feb. 9, 2018, and was then reauthorized until March 23, 2018. The NFIP received a:

  • 6th reauthorization until July 31, 2018
  • 7th until Nov. 30, 2018
  • 8th until Dec. 7, 2018
  • 9th until Dec. 21, 2018
  • 10th until May 31, 2019
  • 11th until June 14, 2019
  • 12th until Sept. 30, 2019
  • 13th until Nov. 21, 2019
  • 14th until Dec. 20, 2019
  • 15th until Sept. 30, 2020

The cancellation of $16 billion of NFIP debt had no effect on the impact of a lapse of NFIP authorization. Unless reauthorized or amended by Congress, the following will occur on Sept. 30, 2020: The authority to provide new flood insurance contracts will expire. Flood insurance contracts entered into before the expiration would continue until the end of their policy term of one year. The authority for NFIP to borrow funds from the Treasury will be reduced from $30.425 billion to $1 billion.

Other activities of the program would technically remain authorized, such as the issuance of Flood Mitigation Assistance Grants. However, the expiration of the key authorities listed above would have potentially significant impacts on the remaining NFIP activities.

The NFIP is the primary source of flood insurance coverage for residential properties in the United States. The NFIP has more than 5 million flood insurance policies providing over $1.3 trillion in coverage, with over 22,400 communities in 56 states and jurisdictions participating.

The program collects about $4 billion in annual premium revenue and fees. If there were to be a lapse in authorization on or after Sept. 30, 2020, and the borrowing authority is reduced to $1 billion, FEMA would continue to adjust and pay claims as premium dollars come into the National Flood Insurance Fund (NFIF) and reserve fund.

If the funds available to pay claims were to be depleted, claims would have to wait until sufficient premiums were received to pay them unless Congress were to appropriate supplemental funds to the NFIP to pay claims or increase the borrowing limit.

The mandatory purchase requirement

The expiration of the NFIP’s authority to provide new flood insurance contracts has potentially significant implications due to the mandatory purchase requirement (MPR).

By law or regulation, federal agencies, federally regulated lending institutions, and government-sponsored enterprises must require certain property owners to purchase flood insurance as a condition of any mortgage that these entities make, guarantee, or purchase.

Property owners, both residential and commercial, are required to purchase flood insurance if their property is identified as being in a Special Flood Hazard Area (SFHA, which is equivalent to having an estimated 1% or greater risk of flooding every year) and is in a community that participates in the NFIP. Without available flood insurance, real estate transactions in an SFHA potentially would be significantly hampered.

In the Biggert-Waters Flood Insurance Reform Act of 2012, Congress explicitly allowed federal agencies to accept private flood insurance to fulfill the MPR if the private flood insurance met the conditions defined in statute.

Although the private flood insurance market is growing, the MPR is still generally met through NFIP coverage. FEMA does not enforce the MPR, but lenders must continue their regulatory requirements during a lapse, including MPR enforcement.

Past lapses of the NFIP

The NFIP lapsed 4 times: March 1 to March 2, 2010; March 29 to April 15, 2010; June 1 to July 2, 2010; and Oct. 1 to Oct. 5, 2011.

In most cases when the NFIP lapsed, Congress reauthorized the NFIP retroactively. During these NFIP lapses, the FDIC issued guidance to lending institutions, and the Federal Reserve also issued informal guidance to lenders. FEMA provided guidance for the Write-Your-Own (WYO) Program, where private insurance companies are paid to write and service NFIP policies.

In past NFIP lapses, borrowers were not able to obtain flood insurance to close, renew, or increase loans secured by property in an SFHA until the NFIP was reauthorized. During the lapse in June 2010, estimates suggest over 1,400 home sale closings were cancelled or delayed each day, representing over 40,000 sales per month.

These figures applied to residential properties, but commercial properties were also affected by the NFIP lapse. In addition, the largest WYO insurer left the NFIP in 2011, reportedly because of the administrative burden associated with very short-term reauthorizations and lapses in authorization. Although no detailed analysis of the NFIP lapses in 2010 and 2011 has been undertaken, the economic impact could have been broader than the reported effects on the domestic real estate market.

Source: This article was published by CRS (PDF)

© 2020 Buzz Future LLC Provided by SyndiGate Media Inc. (Syndigate.info). About the author: Diane P. Horn, analyst in flood insurance and emergency management