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Updated: 1 hour 11 min ago

Modest Improvements in Conventional Loan Limits

Wed, 11/25/2015 - 12:59

The Federal Housing Finance Agency (FHFA) announced the conforming loan limits for 2016 today. Limits will rise in a 39 counties around the country. The national conforming limit remains unchanged, but could rise in the near future.

Every year, the FHFA evaluates home price growth at the national level in order to adjust the national conforming loan limit. That limit currently stands at $417,000 and will not change in 2016 despite several years of strong price growth. However, the loan limit in certain high-cost areas will rise. The high cost limit is defined as the lesser of 1.15 times the local median home price or 1.5 times the national conforming limit or $625,500. Thus, for an area with a median price of $400,000, the conforming limit in that county would be $460,000 as its median times 115 percent is greater than the national conforming limit and below the high-cost limit.

For fiscal year 2016, the FHFA announced an increase in limits for 39 counties, most of which are concentrated in Denver, Boston, Seattle, and Nashville, and four markets in California that include San Diego (see bottom table). No counties will see a decline in their limit.

New Methodology

In 2007, the national conforming loan limit was frozen at $417,000 as the economy entered the great recession. As home prices fell, the limit was held constant until subsequent price growth could justify raising it above the 2007 level. Earlier this year the FHFA requested public comment on which measure of home price growth to use to adjust the national conforming loan limit. A new price index was chosen to adjust the conforming limit, but of significance was the implication that the FHFA was anticipating an imminent increase in the loan limit. Based on the new methodology chosen, the current price level remains roughly 3.7 percent below the seasonally adjusted level from the third quarter of 2007 when the limit was frozen. NAR is currently forecasting quarterly annualized price growth of nearly 4.7 percent for the four-quarter period ending in the 3rd quarter of 2016 suggesting that the conforming limit may rise in 2017 based on the new methodology. As depicted below, the FHFA’s seasonally adjusted purchase index, an alternative measure of price growth comprised only of data from mortgages backed by the GSEs, is 0.3% higher than the 3rd quarter of 2007.

FHFA’s Decision Impacts FHA Borrowers

The conforming loan limit is doubly important as it also defines the maximum loan amount that can be financed through the Federal Housing Administration (FHA). The FHA’s national limit is 65 percent of the conforming limit of $417,000 or $271,050, but it too rises to as much as $625,500 in high cost areas based on the local median price. Given the FHA’s sharp 50 basis point reduction in its annual mortgage insurance premium last January, a higher local limit allows more consumers to access lower cost home financing or to get access at all.

With mortgage rates set to rise in the coming quarters and access to credit for some home buyers limited in the private sector, a change to the conforming and local limits is gaining importance. However, limited supply remains a heavy headwind to entry level home buyers.

Latest New Home Sales (October 2015)

Wed, 11/25/2015 - 11:57
  • There was a big rebound in new home sales in October after a very poor showing in September. Even with the gain, the sales pace of newly constructed homes is only about half of what it should be. Home builders need to get busier.
  • Specifically, the annualized sales pace in October was 495,000, a gain of 11 percent from one month ago and 5 percent from one year ago. The Northeast region made the biggest gain, matching the region’s best performance in 5 years.
  • One reason for the increase is that builders are evidently constructing more affordable smaller-sized homes. The median price of newly constructed homes in October was $281,500, the lowest price in over a year. The price is still considerably higher than the existing home price of $219,600. Because the gap between new and existing home prices has been larger than normal, either builders need to focus on less expensive homes or there will be plenty of room for existing home prices to rise and catch up.
  • Whatever builders build, sell quickly. In the past month it took an average of only 2.8 months to find a buyer, the lowest in at least 25 years. Given the general shortage of inventory, home builders need to greatly ramp up production.
  • For those small home  builders who are still facing difficulty obtaining construction loans from community and local lenders, they should check out the Small Business Administration. There is a SBA program that permits loans to build up to 5 new homes.

Thanksgiving Day: How family and friends can influence the home purchase

Tue, 11/24/2015 - 11:11

This Thanksgiving we look at how recent buyers are choosing their homes, and how their friends and family can influence their decision. While we don’t all get to see our families every day, for many home buyers having the option to do so can impact the home they purchase. Based on data from the recently released 2015 Profile of Home Buyers and Sellers, we can see how multi-generation homes are becoming more common and the importance of living close to friends and family.

  • This year 13 percent of all buyers purchased a multi-generational home, buyers of multi-generational homes were typically 49 years old. Eight-two percent of the multi-generational homes purchased were detached single-family homes.
  • Homes were typically 2,200 square feet and were purchased for $231,000. Multi-generational homes typically had four bedrooms and two bathrooms. Eleven percent of buyers purchased because they desired a larger home.
  • Among all multi-generational buyers, the desire to own a home of their own was the primary reason for purchasing (29 percent). The majority of multi-generational buyers were married couples (69 percent), and single females (13 percent).
  • The main reasons for purchasing a multi-generational home was for the health and caretaking of aging parents (22 percent), cost savings (14 percent), children or relatives over 18 moving back into the house (12 percent), to spend more time with aging parents (eight percent), and children or relatives over 18 that never left home (eight percent).
  • Seven percent of all buyers purchased their home to stay close to friends and family. Single females (nine percent) and married couples (seven percent) recently purchased their homes to be closer to friends and family.
  • The convenience to friends and family for single females (43 percent) and unmarried couples (41 percent) was an influencing factor of their neighborhood choice.

View this year’s Thanksgiving infographic. For more information on home buyers see the 2015 Profile of Home Buyers and Sellers and the Recent Buyer Profiles

Lackluster Home Building Hurts First-Time Buyers

Thu, 11/19/2015 - 06:32

Lawrence Yun for Forbes

What is going on with home builders? Housing starts refuse to rise in any meaningful way, despite the ongoing shortage in the number of homes on the market and falling rental vacancy rates. What is being built is getting quickly sold. Housing starts totaled 1.06 million on a seasonally adjusted annualized rate in October, the Commerce Department reported Wednesday, and the average time to find a buyer was 3.3 months — near record lows. The housing starts figure is the lowest in seven months and is even below the level we saw a year ago. A big negative consequence of the continuing lackluster homebuilding activity is that renters are suffering and are having a hard time converting into ownership.

According to the latest annual survey of home buyers, in the past year the first-time buyer share fell to the lowest point since 1987, nearly 30 years ago. Only 32% of recent homebuyers self-identified as being first-time homeowners compared to the historic average of around 40%. Because there are other measurements of first-time buyers, it is worth briefly noting that this stated first-time figure is out of all buyers purchasing only a primary home and therefore excludes investors and vacation home buyers. Also the government sometimes has a technical definition that does not pass the smell test for everyday common folks, such as classifying an individual as a first-time buyer even though this person was a homeowner in the past (though technically not in the past 3 years) or because someone is buying as a newly single person even though the person had been a homeowner prior to a divorce. It’s no wonder that Americans are ever more wary of Washington, when the city gets stuck in debates over technical definitions rather than applying common sense.

Read the full article on Forbes.com > 

Applications for Purchase Mortgages: TRID Effects?

Wed, 11/18/2015 - 10:42
  • Applications for purchase mortgages surged 11.9 percent for the week ending November 13th after a tepid 0.1 percent gain in the prior week, but the 4-week moving average remains strong.
  • The volume of applications surged in the lead up to the implementation of the new Know Before You Owe (KBYO or TRID) rules on October 3rd, pulling forward many applications that would have registered later in October.  A boom and bust pattern developed in subsequent weeks, which appears to have stabilized and gained traction with a new crop of buyers.

  • The 4-week moving average, a means of smoothing this weekly volatility, sat at 19.7 percent stronger than a year earlier and up from 15.2 percent two weeks earlier, reversing slippage in the weeks following implementation of TRID.
  • The gains were concentrated in the government sector which jumped 15.5% compared to a 10.4% gain in the conventional space.
  • The average contract rate on a 30-year fixed inched 6 basis points higher to 4.18 percent. Though slightly up from last week, it is roughly in line with the 4.17 percent average rate at the same time in 2014. Rising rates tend to have a stronger impact on refinances than on purchase applications, but refinance gained only 2.0 percent lagging the outsized gains in the purchase market.

  • This week’s pattern of stabilization is likely to continue in the weeks ahead, but could remain choppy as originators wrestle with the new regulatory environment. Applications will remain far stronger than the fall of 2014.
  • In the long term, the rule should help to make the process a more transparent process for consumers. Luckily the change was timed for the fall, a slower period, the Consumer financial Protection Bureau has signaled its intention to hold lenders harmless so long as they perform a “best effort” to comply in the near term.
  • Anecdotes suggest a modest degree of confusion with the new rules among lenders and lawyers. Some lenders may be better prepared for the changes than others. Consumers and Realtors should shop a variety of lenders, while consumers can ask their Realtor for her experiences with various lenders in the TRID environment.

Commercial Construction Accelerates in REALTORS®’ Markets in Q3.2015

Wed, 11/18/2015 - 09:27

Commercial space is heavily concentrated in large buildings, but large buildings are a relatively small number of the overall stock of commercial buildings.  Based on Energy Information Administration data approximately 72 percent of commercial buildings are less than 10,000 square feet in size.  An additional 8 percent of commercial buildings are less than 17,000 square feet in size.  In short, the commercial real estate market is bifurcated, with the majority of buildings (81 percent) relatively small (SCRE), but with the bulk of commercial space (71 percent) in the larger buildings (LCRE).

While large buildings in top-tier markets generally receive most of the press coverage, smaller commercial properties tend to be obscured given their relatively smaller size. However, these smaller properties provide the types of commercial space that the average American encounters on a daily basis—e.g., strip shopping centers, warehouses, small offices, supermarkets, etc.  These are the types of buildings that are important in local communities and REALTORS® are active in serving these markets.

NAR’s Commercial Real Estate Market Trends gathers market information for SCRE properties and transactions, and summarizes sales and rental activity based on a quarterly survey of commercial REALTOR® practitioners. Based on the latest report, fundamentals improved during the third quarter 2015. Leasing volume during the second quarter rose 3.8 percent compared with the second quarter 2015. Leasing rates advanced at a steady pace, rising 2.5 percent in the third quarter, compared with the 2.7 percent advance in the previous quarter.

NAR members’ average gross lease volume for the quarter was $567,257, 9.8 percent lower than the previous period. New construction accelerated, posting a 6.6 percent gain from the second quarter of this year, and a marked increase from the 2.7 percent rise recorded in the first quarter 2015.

Tenant demand remained strongest in the 5,000 square feet and below, accounting for 72 percent of leased properties. However, demand for space in the 5,000 – 7,499 square feet more than doubled during the third quarter, comprising 13 percent of total. Lease terms remained steady, with 36-month and 60-month leases capturing 64 percent of the market.

To access the latest Commercial Real Estate Market Trends report, visit: http://www.realtor.org/research-and-statistics/commercial-real-estate-market-survey.


Consumer Price Index: Higher Rates in Sight?

Tue, 11/17/2015 - 12:21
  • Inflation is nonexistent with no changes to the consumer price index from one year ago. Some components are, however, making marked changes. Gasoline prices are 27 percent below one year ago, rents are rising at near 4 percent, and medical care service prices are beginning to firm up after several years of slowing inflation.
  • Rents rose 3.74 percent from one year ago, its highest growth pace since September 2008. Something called owner’s equivalency rent – which is what the homeowner would hypothetically pay in rent to live in their homes – rose by 3.09 percent, essentially matching the fastest growth in just as many years. The housing shortage is leading to this upward trending phenomenon in housing costs.
  • Medical service costs are beginning to rise. After having trended down from 4 percent gains few years ago to less than 2 percent early this year, it rose by 3.1 percent in October. Is this a fluke or the start of an upward trend?
  • Energy and gasoline prices are much lower compared to one year ago, but this deflation will largely vanish by December/January. That means lower energy prices will not neutralize the upward pressures arising from medical fees and housing costs. Expect some inflation in 2016 as a result.
  • Mortgage rates can be impacted more by inflation than by Fed policy. With inflation tame in 2015, mortgage rates have been bouncing along historic lows. But with anticipated higher inflation – probably to around 3 percent in 2016 – mortgage rates will be steadily pushed higher.


Contract Settlement Issues: Financing and Appraisals are Major Issues

Tue, 11/17/2015 - 08:04

In reporting on their last contract that went into settlement or was terminated over the period July-September 2015, REALTORS® reported that 64 percent of contracts were settled on time, 30 percent had delayed settlement, and six percent were terminated, according to the September 2015 REALTORS® Confidence Index Survey Report.

Of all contracts settled/terminated, financing, appraisal, and home inspection issues were the major problems: 18 percent had financing issues, 11 percent had appraisal issues, and 11 percent had home inspection issues.

Among contracts that had a delayed settlement (30 percent), 42 percent of contracts that were delayed had financing issues.

Among contracts that were terminated (six percent), home inspection and financing issues were the major causes, with 28 percent of contracts experiencing both these issues.

REALTORS® have expressed concern about the possible delays in closing arising from the new TILA and RESPA integrated disclosure regulations that took effect on October 3, 2015. About 92 percent of respondents reported taking measures to be ready for the implementation of the new disclosure regulations (that took effect on October 3, 2015) such as attending seminars, coordinating with lenders, advising clients, and revising model contracts in line with the new TILA-RESPA guidelines.

2015 Home Buying Trend: Purchasing Larger Homes

Mon, 11/16/2015 - 10:01

Home buyer demographics change slightly from year to year due to macroeconomic forces from the health of the economy to inflation to the global trade on oil prices. The National Association of REALTORS® recently released its 2015 Profile of Home Buyers and Sellers report and there are some interesting new trends emerging this year.

One of the most fascinating is that in almost every region of the United States, we saw buyers trading up and buying bigger homes than last year. According to the new report, 42 percent of all buyers traded up in the size of their home, up from 40 percent in 2014. In the 2014 report, buyers reported that they were looking for homes similar in size at 31 percent compared to 29 percent in 2015. Regionally, the percentage of buyers looking for larger homes increased across the board.

One reason for this shift in purchasing power is that people finally have more equity from selling their previous homes in order to buy a bigger one. Since the housing downturn in 2010, many homes were worth less than their mortgages. Over the last several years, home prices have been rising. In 2014, 17 percent reported waiting or stalling to sell their home, which dropped to 13 percent in 2015. Sellers also reported that they sold their homes for a median of $40,000 more than they purchased it, up from $30,100 in 2014. The most common reason for selling a home in 2015 was that the home was too small at 16 percent.

The typical seller in 2015 was 54 years old (same as last year) and the median household income was $104,000, up from $96,700 in 2014. Buyers aged 35 to 44 years, or Generation X, was the second largest age group to purchase homes last year at 20 percent, behind Millennials 34 years or young where 28 percent purchased homes. We can speculate that Generation X-ers probably had a child in the last few years and wanted a bigger home to expand their family. Finally, we see the trend where repeat buyers have been able to sell their homes at a higher price in order to trade up and purchase larger homes.


Rising New Construction Adds Pressure on Vacancies in REALTORS® CRE Markets in Q3.2015

Fri, 11/13/2015 - 13:45

Commercial fundamentals in REALTORS® markets continued gaining strength during the third quarter of 2015. Based on NAR’s Commercial Real Estate Market Trends report leasing advanced, followed by higher rents.

However, accelerating commercial construction in smaller markets prompted an increase in vacancy rates, which ranged from a low of 7.4 percent for apartments to a high of 17.5 percent for hotel properties. With rising new supply, apartments experienced availability increases, as the national average rose from 6.1 percent in the third quarter of 2014 to 7.4 percent in the third quarter of this year.

Office vacancies increased 30 basis points to 16.0 percent compared with a year ago.  Industrial availability witnessed a yearly increase of 160 basis points—to 11.5 percent. Retail vacancies declined 80 basis points on a yearly basis, to 13.0 percent.

Lease concessions declined 4.5 percent. Tenant improvement (TI) allowances averaged $30 per square foot per year nationally.

Members indicated that the following areas presented the greatest opportunities:

-          Redevelopment/Repositioning

-          Industrial

-          New Development/Construction

-          Apartments/Multifamily

-          Land

-          Retail

-          Capital Availability/Interest Rates

-          International Investors

-          Small Business

-          Office

-          Regional/Local Growth

-          Agriculture

-          Distressed Properties

-          Senior Housing

-          NNN Properties


To access the latest Commercial Real Estate Market Trends report, visit: http://www.realtor.org/research-and-statistics/commercial-real-estate-market-survey.


Sales to First-Time Buyers: 29 Percent of Sales in September 2015

Fri, 11/13/2015 - 06:57

The share of first-time home buyers has remained essentially unchanged for the last five years. First-time home buyers accounted for 29 percent of existing home sales in September 2015, according to the September 2015 REALTORS® Confidence Index Survey Report.12 REALTOR® respondents reported that tight inventory, increasingly unaffordable prices, weak income, and credit profiles that fail to meet tighter underwriting standards are conditions that continue to work against first-time home buyers.

Buyers age 34 and under, which are typically first-time buyers, accounted for 28 percent of sales reported by the respondents. Nearly half of buyers were in the 35 to 55-year old age group.Slightly more than half of all reported buyers lived in their own homes before making their recent home purchase. These include trade-up or trade-down buyers as well as those who are purchasing a second home or one for investment purpose. Prior renters, many of whom are first-time buyers, accounted for 35 percent of sales, essentially unchanged compared to past months.

12 First-time buyers accounted for about 33 percent of all home buyers based on data from NAR’s 2014 Profile of Home Buyers and Sellers (HBS). The HBS is a survey of primary residence home buyers and does not capture investor purchases but does cover both existing and new home sales. The RCI Survey is a survey of REALTORS® about their transactions and captures purchases for investment purposes and second homes for existing homes.

TRID: A Business Opportunity?

Thu, 11/12/2015 - 09:55

On October 3rd the new closing process and documents known as Know Before You Owe or “TRID” was implemented. These changes could make it harder for lenders to complete closings on time. But they might also present an opportunity for REALTORS® to add value from a Lenders’ perspective and to cement relationships.

When asked what changes REALTORS® could make to help reduce issues under the new Know Before You Owe (TRID) rules, the most frequently cited change was to council buyers on making all changes to their loan earlier in the process. Second was to urge the borrower to provide all documentation sooner. Factors that REALTORS® have the most control over, pre-closing walk-through inspections and providing the sales contract earlier, were the least useful.

A significant share of consumers chooses their REALTOR® based on lender referral. Marshaling your client through what is expected in this new lending environment could aid lenders and pay dividends down the road.


REALTORS® Reported Strong Demand But Weak Supply in September 2015

Wed, 11/11/2015 - 12:58

Local conditions vary, but the number of REALTOR® respondents who reported “strong” buyer traffic outnumbered those who reported “weak” traffic in September 2015, according to the September 2015 REALTORS® Confidence Index Survey Report.[1] The REALTORS® Buyer Traffic Index registered at 53 (60 in August 2015; 44 in September 2014). Buyer traffic was stronger compared to a year ago, but was slower after the strong spring and summer months, as is typically the case.

Inventory remained tight, with more respondents reporting “weak” than “strong” traffic from prospective sellers. The REALTORS® Seller Traffic Index dipped to 41 (45 in August 2015 and 39 in September 2014). While the construction of new privately owned housing units has been improving, reaching 1.2 million units in the second quarter of 2015, roughly 40 percent of recent new construction has been multifamily structures which are typically for rental occupancy. Historically, multifamily structures accounted for only 20 percent of new construction, so the availability of single-units for purchase among recently constructed properties is lower than was historically normal. REALTORS® reported low inventory of properties in the lower price range and for those that are move-in ready.

[1] Respondents were asked “How do you rate the past month’s traffic in the neighborhood(s) or area(s) where you make most of your sales?” for Prospective Buyers and Prospective Sellers.

Veterans Day: Active Military and Veteran Home Buyers

Wed, 11/11/2015 - 10:18

Today we honor those who have served, and those who are actively serving in the military. Looking at data from the recently released 2015 Profile of Home Buyers and Sellers, we can see home buying trends among active military and veteran home buyers.

  • Recent home buyers who were active military or veterans made up 21 percent of all recent home buyers. 28 percent were first-time home buyers.

  • The median age among active military and veteran home buyers was 48 years old. Active military buyers were typically 34 years old, and veteran buyers were 61 years old.
  • Seventy-eight percent of buyers were married couples, nine percent single males, and 6 percent single females.
  • The most commonly purchased home type was a single-family home at 86 percent, five percent purchased townhomes, and two percent purchased apartments or condos.
  • Prior to purchasing, 50 percent of buyers rented an apartment or house.
  • The main reason for their recent purchase was the desire to own a home of their own, 26 percent. Twenty-one percent purchased because of a job related relocation or move.

  • Forty-one percent of recent buyers found virtual home tours to be very useful during the home search process.
  • When searching for their home 85 percent of active military and veteran home buyers bought their home through a real estate agent or broker.

For more information on active military and veteran home buyers view the Veterans Day infographic, and highlights from the 2015 Profile of Home Buyers and Sellers.

In What States Did Properties Sell Quickly in July-September 2015?

Tue, 11/10/2015 - 15:33

In the monthly REALTORS® Confidence Index Survey, NAR asks REALTORS® “For the last house that you closed in the past month, how long was it on the market from listing time to the time the seller accepted the buyer’s offer?” The map below shows the median days on market respondents indicated for their sales from July-September 2015, according to the September 2015 REALTORS® Confidence Index Survey Report.[1]

Properties typically sold within a month in California, Utah, Colorado, South Dakota, Nebraska, Texas, and the District of Columbia. In Vermont, properties were typically on the market for longer than 90 days when sold. All real estate is local. State-level data is provided for REALTORS® who may want to compare local markets against the state and national summary

[1] The median days on market is the value such that half of properties stayed in the market below the median days and half of properties stayed on the market above the median days.


Cap Rates Compress in REALTORS® Commercial Markets During Q3.2015

Tue, 11/10/2015 - 13:12

Commercial real estate transactions span the price spectrum, but tend to be measured and reported based on size. While the majority of buildings (81 percent) are relatively small (SCRE), with the bulk of commercial space (71 percent) concentrated in larger buildings (LCRE), larger buildings account for the majority of sales. CRE deals at the higher end—$2.5 million and above—comprise a large share of investment sales, with transaction data readily available from several sources, including Real Capital Analytics (RCA).

Data for smaller transactions—$2.5 million and below—many of which are handled by REALTORS®, are less widely available. NAR’s Commercial Real Estate Market Trends gathers market information for SCRE properties and transactions.

Based on the latest NAR report on REALTORS® CRE markets, capitalization rates averaged 7.9 percent across all property types, a 26 basis point decline on a yearly basis. Apartments posted the lowest cap rate, at 6.7 percent, followed by retail properties with average cap rates at 7.7 percent. Office and industrial spaces posted identical cap rates of 7.8 percent. Hotel transactions reported the highest comparative cap rates—8.8 percent.

Investors in SCRE markets have been attracted by the yield premiums. Capitalization rates for transactions in LCRE markets averaged 6.9 percent in the third quarter, based on RCA reports. Transactions of office properties in CBD markets recorded the lowest cap rates, at 5.3 percent, followed by apartment, at 5.8 percent. Retail and industrial properties also posted sub-7.0 percent cap rates, while hotel transactions averaged cap rates of 8.2 percent in the third quarter.

The interest rate on 10-year Treasury Notes—a standard measure of risk-free investments—averaged 2.2 percent during the third quarter of 2015, higher than the second quarter. Based on the prevailing rates, the spread between cap rates and 10-year Treasury Notes ranged from 470 basis points in LCRE market to 573 basis points in SCRE markets. The spread denotes that CRE investors are continue to enjoy healthy returns in the rebounding markets.

To access the latest Commercial Real Estate Market Trends report, visit: http://www.realtor.org/research-and-statistics/commercial-real-estate-market-survey.


Selling Your Home Solo to Save Money? You’ll Actually Make Less Than You Think

Mon, 11/09/2015 - 15:48

Some homeowners opt to sell their residence without a real estate agent to get around paying a commission and make more of the profit. Forty-eight percent of people who sell without a real estate agent think that if they sell themselves, they’ll end up doing a little extra work in exchange for not paying a commission or closing fee. According to the research, however, what they actually get is a lot of time spent hustling to make the sale and a final selling price that is less than what the market can bear.

Do you have a lot of extra time to market your home and do all the work to meet and greet properly? Are you versed in local trends on the housing market and know the latest regulations for closing a sale? Do you have a list of potential buyers ready to view your home? Eighty-nine percent of all homes sold in 2015 were sold with the assistance of an experienced real estate professional, according to the 2015 Home Buyers and Sellers Profile. Most leave it to the professionals, yet there is still a small group of people who prefer to do it themselves. Eight percent of home sellers chose to list themselves, known as For-Sale-By-Owners (FSBO) home sales. That number has steadily declined since 2004 where only 82 percent of all home sales were agent-assisted and 14 percent of homes were listed FSBO. FSBO sales are currently at an all-time low since data collection began in 1981.

Let’s break it down further. Thirty-eight percent of all FSBOs—that’s only three percent of the total home sales in 2015—were homes sold to people where the buyer knew the seller selling to a friend, neighbor, or family member. However, 62 percent of FSBO home sales—five percent of total homes sold—were sold by the owner to someone they didn’t know. According to the 2015 Home Buyers and Sellers Profile report, sellers cited creating yard sings, listing their homes online on multiple websites, spreading the news through word of mouth, putting out classified ads, displaying on social media, hosting an open house, and registering with the Multiple Listing Service (MLS) database. That’s a lot of work just on marketing and finding potential buyers.

The time it takes to sell a home on the market was roughly the same for FSBOs and for agent-assisted homes, the median time listed was four weeks for both groups. A third of all homes were sold in less than two weeks last year. Most FSBO homes sales were located in a resort area (16 percent), rural area (15 percent), or a small town (13 percent). Seventy-five percent of FSBO sales were detached single-family homes. Ten percent were mobile or manufactured homes. FSBOs typically had lower incomes than those who worked with an agent. The median income of FSBOs was $84,000 and for those who sold through an agent was $105,600. Those who sell themselves have the perception that they have less money to pay for assistance when selling their home and opt to go it alone.

As it turns out, FSBO make less money on their home sales than buyers who work with a real estate agent. According to the report, the median selling price for all FSBO homes was $210,000 last year. When the buyer knew the seller in FSBO sales, the number plunges to the median selling price of $151,900. For homes sold with the assistance of an agent, the median selling price was $249,000 ̶ almost $40,000 more for the typical home sale. According to NAR’s 2015 Member Profile, sixty-nine percent of all real estate agents get paid by a percentage commission split between two agents representing the buyer and seller.

Talk to an agent and find out what they suggest for the commission and then do the math yourself. The closing price for the agent-assisted seller is likely going to be way above an FSBO. In reality, homes sold by the owner make less money overall. Based on these closing numbers, why not save yourself time and make more money by working with a real estate agent that is excited to sell your home?


FHA Lending Likely to Tighten Modestly

Mon, 11/09/2015 - 10:41

Lenders who responded to the 3rd Quarter Survey of Mortgage Originators indicated that proposed changes by the FHA may cause them to tighten their credit standards modestly. While this change is unfortunate, it would be a mild reversion to what is already a tight credit environment. These changes are not likely to affect the FHA’s profitability, nor will it impact the market as demand is currently strong relative to supply, but it does limit opportunities for first-time, boomerang, and credit impaired homebuyers.

In September, the Federal Housing Administration (FHA) proposed an update to its certification policy. Under current policy lenders must certify that the loans they send for FHA for insurance comply with all standards set forth by the FHA. However, in recent years the FHA has forced some lenders to indemnify the FHA of losses on some loans, while the Department of Justice has pursued lawsuits against lenders under the False Claims Act for discrepancies between what lenders certified and what was actually produced. Lenders have been looking for more clarity from the certification policy as to what errors will trigger a lawsuit or indemnification as well as more variation in the degree of punishment relative to the infraction. To protect themselves, lenders have raised their minimum credit scores to ameliorate potential defaults and to avoid gaining the attention of the FHA and DOJ.

More than half (60.0 percent) of respondents indicated that the new proposal would not have an impact on their lending. 10.0 percent of the lenders in the survey indicated that they would raise their minimum credit requirement, while an additional 20 percent indicated that at least some of their investors had raised their requirements for purchasing loans. Of those raising their minimum credit score, 71.4 percent indicated that the new minimum would be 640, while the remaining 28.6 percent would set the floor at 620.

This reading may give some false comfort as many lenders did not follow the example of Wells Fargo and other lenders who lowered their credit standards in the spring of 2014. Thus, this move suggests a modest reversion toward the same overlays that have dominated the market place for several years. Despite this setback, the FHA’s finances will continue to improve due to advantageous pricing and limited risk on its book of business.

Real Estate Agents: Still Primary Source for Homes

Fri, 11/06/2015 - 15:25

We have been mistakenly focused on the wrong thing about the home search process. It is true, we are in a digital age and when Millennials as first-time buyers begin their home search for the first time, without knowing anything about how to buy a home, they go online as the first step. New NAR data from the 2015 Profile of Home Buyers and Sellers shows that the first step in the buying process is to look online – 42 percent of buyers started here and 13 percent of buyers looked online for information about the home buying process in the effort to educate themselves. Only 14 percent contact a real estate agent right out of the gate.

We also know from the research that the majority of buyers work with a real estate agent to close on a home, nine in 10 buyers signed with the help of an agent in fact. We dug a little further to inquire about the role of the real estate agent in the entire process. Here are some quick facts in response to questions from our survey:

When we factor in the real estate agent’s use of digital technology, their share in introducing buyers to the home they eventually purchased is the overwhelming factor for buyers at 42 percent of the sources. Buyers found their homes 34 percent of the time from a variety of online sources and 17 percent of the time from either from someone they knew or in person.

For buyers that looked online for properties, they visited 10 homes over the course of 10 weeks before they purchased. For buyers that went straight to a real estate agent and did not look online, they visited five homes over only five weeks before they made their purchase. The numbers indicate that working with an agent can save a buyer time and effort. Ninety-one percent said they were satisfied with the home buying process.

Latest Employment Report (October 2015)

Fri, 11/06/2015 - 10:23
  • Big numbers on employment with a whopping 271,000 net new job creation in October. Over the past 12 months the tally comes to an impressive 2.8 million net new jobs. Real estate can therefore expect further expansion.
  • Even better news: wages are breaking higher. The average hourly earnings rose by 2.5 percent over the past 12 months to $25.20, which is the best gain in seven years. Given that rents and home prices are rising faster than income, more gain in income is needed to help on the affordability front. Wages in the construction rose by 2.6 percent to $27.54 per hour.
  • Even though construction jobs pay more, only 5,000 jobs were created in the construction of residential homes and related general contractor work. Today there are a total of 2.5 million working in the residential construction area, which is about one million below the peak employment in the sector a decade ago. Homebuilders constantly mention the worker shortage in hindering the building of more homes.
  • The unemployment rate remained at 5.0 percent, which is reflecting good conditions. But the opposite side of the coin – the employment rate – measuring what percentage of people have jobs still remains low and stuck at 59 percent. Therefore, it is a mix bag still on employment conditions.
  • As to REALTORS®, the overall membership figures have been rising at around 6 percent from one year ago. Some states are experiencing a faster gain such as in Florida, Utah, and South Carolina where the local job market and the local housing market has been doing well. Though the median income is slightly under $50,000 per year, one should keep in mind that the median is derived from 23 percent of members earning $100,000 or more per year and 19 percent of members earning less than $10,000 per year.