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Updated: 46 min 48 sec ago

37 Percent of REALTORS® With Mortage Sales Reported Downpayment of 20+%

Mon, 03/17/2014 - 07:05

Based on data from the January 2014 REALTOR® Confidence Index survey, about 37 percent of respondents who reported a mortgage-financed sale reported a down payment of 20 percent or more. Under more cautious underwriting standards, buyers may have to put down larger downpayments to compensate for their credit score deficiencies.

REALTORS® have reported that buyers who pay cash or put down large downpayments generally win against those offering lower downpayments. See the January REALTORS® Confidence Index Survey for more information.

Top 10 Markets by Equity Appreciation since 4th Quarter 2010

Fri, 03/14/2014 - 10:23

Housing is not an investment like a stock or a bond, but over the long term it can be a great way to build equity. Even in the wake of the worst housing recession in modern history, a majority of homeowners who purchased at the national market’s peak in 2006 have positive equity today in their home. Homeowners who purchased since then and avoided the sharp price declines of the housing recession have fared much better. Interested in how your market has done? For insights on housing equity, price appreciation, employment trends and other local trends, see the 4th quarter 2013 Local Market Reports.

  • The national median home price fell 27.8% from $225,067 in the 4th quarter of 2006 to $162,333 in the 4th quarter of 2011.
  • Buyers who purchased at the 2006 4th quarter peak would have positive equity today in 58% of markets covered.
  • Buyers who purchased in the 4th quarter of 2010 would have positive equity today in 84% of markets covered.

Many of the markets that have experienced the strongest improvement in equity are concentrated in the hardest hit areas, where prices rebounded since 2010. Los Angeles, Riverside, and Sacramento were all hard hit by the market decline, but have experienced sharp improvements since 2010 driven by relatively low prices, low mortgage rates, and investor demand. Notably, a number of other markets in the bottom 10 for 2006 did not experience this same strong appreciation including Reno, Las Vegas and several Florida markets. A number of factors contributed to this difference including employment trends, the judicial process for handling foreclosures, and investor interest.

Several programs including HAMP and HARP exist to help underwater borrowers refinance into more affordable situations by lowering mortgage rates and in some cases, particularly through private lenders, reducing principle. These programs are currently under debate for potential changes, but there are tens of thousands of borrowers outstanding who could still take advantage of these programs while mortgage rates are low.

Housing Related Retail Sales

Fri, 03/14/2014 - 09:15

In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses retail sales.

  • Sales at Furniture, Home Furnishing, and Appliance stores have been soft in recent months as home sales have pulled back. February sales were 5 percent below the peak from October.
  • People are still showing up at Building Material and Supply shops because maintenance and home rehab activity still go on even with fewer home sales.
  • Snowed-in people shopped online. Sales through non-store retailers continued to grow. Such growth raises demand for warehouses and distribution hub cities like Memphis and Louisville. But the demand for commercial retail store spaces is bypassed, which is one reason why the vacancy rates of retail spaces have barely budged lower even with job creations. Web shopping also raises the legitimate fairness question of whether a tax benefit should be provided for online retailers at the expense of brick-and-mortar retail shops.
  • Home sales are expected to slowly turn the corner around second and third quarter and then mostly rise over the next several years from the release of huge pent-up housing demand. With rising home sales, retail sales at housing related stores will also get boosted.

Pent-Up Demand

Thu, 03/13/2014 - 11:30
  • The short-term outlook is weak, with the first quarter existing home sales figures to be down by about 5 to 8 percent from one year before. Severe winter weather, inventory shortage, higher mortgage rates, and tight credit availability are some of the reasons for the setback.
  • The long-term outlook, however, is bright. Simple comparisons of very basic numbers imply current under-performance but suggest the potential for a sizable increase in home sales.
  • The table below compares three time periods:
  1. The year 2000 can be characterized as being very normal and uneventful. There was no discussion of a housing market bubble by economists or in the media. One may say that the housing market was also uneventful or even boring.
  2. The year 2005 was the peak bubble year in terms of eye-popping home sales and home prices induced from essentially no underwriting standards.
  3. The current year 2014 clearly looks to be underperforming, but has huge upside potential. Consider: there are 5 million annualized existing home sales today, which is the same as in 2000. Yet we have 34 million additional people living in the country, 4 million more people with jobs, and much lower mortgage rates. When we’ll get this upside release of pent-up demand, however, is unclear at the moment.

Commercial Leases for Small Spaces Capture 75% of REALTOR® Markets

Thu, 03/13/2014 - 09:14

The economy proved resilient during 2013, despite “sequestration”, government shutdown, regulatory changes and other impacts. Based on BEA’s preliminary estimates, gross domestic product advanced at a 1.9 percent annual rate in 2013, supported by a cautiously optimistic consumer and hedging businesses. The third quarter provided the largest boost, with growth of 4.1 percent, followed by a surprisingly robust fourth quarter, which recorded 3.2 percent annual growth rate.

Commercial leasing in REALTOR® markets posted a positive trend in 2013. However, the pace of activity slowed toward the end of the year. Fourth quarter leasing volume rose 0.4 percent from the prior quarter, pointing to a moderation in demand.

On the supply side, new construction showed a similar moderation toward the tail end of the year, increasing 2.0 percent over the third quarter. Vacancies declined for all property types, except retail properties. Office vacancies declined 2 basis points, to 17.6 percent, while industrial availability declined 5 basis points, to 14.6 percent. Multifamily vacancy reached 6.6 percent, a 7 basis point slide. Retail availability rose 4 basis points to 16.1 percent.

With sliding vacancies, landlords find fewer reasons to provide rent concessions. Rent concessions declined 4.0 percent on a quarterly basis. Rental rates were virtually flat, advancing 0.3 percent during the fourth quarter. In terms of space requirements, tenant demand remained strongest in the 5,000 square feet and below, accounting for 75.0 percent of leased properties. At a more granular level, demand for space under 2,500 feet also increased, driving 43.0 percent of lease agreements. Lease terms remained steady, with 36-month and 60-month leases capturing the bulk of the market.

Commercial REALTORS® rated the direction of commercial business opportunities 5.0 percent higher compared with the third quarter.

For the full report along with respondent comments, please visit http://www.realtor.org/reports/commercial-real-estate-market-survey.

Note: Vacancy rate data in this report comes from a national survey of REALTORS® who identify themselves as commercial practitioners. The data does not match the historical data used to generate NAR’s Commercial Real Estate Outlook, which is sourced from Reis, Inc.

Rates May Rise for Some Borrowers

Wed, 03/12/2014 - 07:52

The qualified mortgage (QM) rule was implemented in January of 2014. It is the first of two rules that came from the Dodd–Frank Wall Street Reform and Consumer Protection Act that will impact the housing market. This law is intended to protect consumers by strengthening underwriting standards, but some have argued that the rules will raise costs and reduce access for consumers. To gain insight on the impact of the new law, NAR Research surveyed a sample of lenders with questions about the impact of the lending on their business and how the rule could in turn impact consumers.

When asked how non-QM status would impact mortgage rates, respondents indicated that mortgage rates would rise for all non-QM borrowers, but that the rate increase would vary based on credit quality. One third of respondents indicated that rates for borrowers with non-QM loans and FICO scores between 640 and 720 as well as those with scores greater than 720 would face rate increases of 50 to 75 basis points, but the distribution of respondents suggested better pricing for prime borrowers as compared to near prime. However, 50% of respondents indicated that borrowers with FICO scores of 640 and below would face rate increases of 150 basis points or more and no respondents indicate the rate increase would be less than 50 to 75 basis points. A significant share indicated that they did not know how much rates would rise for the various degrees of credit quality, but no respondent indicated that rates would not rise for non-QM borrowers.

What does this change mean for REALTORS and consumers? Consumers should expect to have to document their income, employment and resources. If your client has a high debt-to-income ratio, the FHA as well as Fannie Mae and Freddie Mac will be more lenient than private financers. However, if your client falls into the other aspects of the non-QM space or even the rebuttable presumption portion of the QM space (e.g. high fees, subprime, interest only, etc.) your client might require help finding a specialty lender. Consider finding a few lenders who specialize in financing these special cases at affordable rates so that you can meet your client’s needs if the time comes. For the full survey, click here.

REALTOR® Commercial Sales Rise 11 Percent in Fourth Quarter

Tue, 03/11/2014 - 12:34

Mirroring broader trends, commercial transactions in REALTORS® markets registered a positive fourth quarter. On a year-over-year basis, sales increased 11 percent in the last quarter, as prices rose 4 percent. Cap rates continued compressing with a 50 basis point decline, from an average of 9.2 percent in the third quarter to 8.7 percent in the last. Multifamily properties recorded the lowest average cap rates, at 7.7 percent, followed by hotels, at 8.0 percent. Office and retail spaces posted cap rates of 8.6 percent and 8.5 percent, respectively.

The average transaction price moved from $1.3 million to $1.2 million in the fourth quarter. In a noticeable change, commercial REALTORS® reported that the most significant concern was the pricing gap between buyers and sellers. The second major concern was lack of available inventory. After several years of topping the list of concerns, financing dropped to third place, signaling a shift in market conditions.

In keeping with the upward momentum in the markets, REALTORS® rated the direction of commercial business opportunities 5.0 percent higher compared with the third quarter.

For the full report along with respondent comments, please visit http://www.realtor.org/reports/commercial-real-estate-market-survey.

New NAR Generational Trends Study

Tue, 03/11/2014 - 10:35

Young home buyers remain optimistic and see their home as a good investment, while older buyers are more likely to trade down to a smaller property to match changing lifestyles, according to the 2014 National Association of Realtors® Home Buyer and Seller Generational Trends study, which evaluates the generational differences of recent home buyers and sellers.

Eight out of 10 recent buyers considered their home purchase a good financial investment, ranging from 87 percent for buyers age 33 and younger, to 74 percent for buyers 68 and older.

Some more highlights from the 2014 report, released earlier today:

  • Gen Y comprises the largest share of home buyers at 31 percent, followed by Gen X at 30 percent, and both Younger (16 percent) and Older Boomers (14 percent) at 30 percent. The Silent Generation has the smallest share of home buyers at nine percent.
  • Gen Y has the largest share of first-time buyers at 76 percent. The share of first-time buyers declines as age increases. Among the Silent Generation only two percent of buyers are first-time buyers.
  • Among all generations of home buyers the first step in the home buying process is looking online for properties for sale. Gen Y is most likely among generations to also look online for information about the home buying process, while the Silent Generation is most likely to contact a real estate agent.
  • More than half of Gen Y and Gen X buyers used a mobile device during their home search. Among those who did, 26 percent of Gen Y and 22 percent of Gen X found the home they ultimately purchased via a mobile device.
  • Younger buyers were predominately referred to their agent through a friend, neighbor, or relative, while older buyers were more likely to use an agent again that they previously used to buy or sell a home.
  • Overall 88 percent of recent buyers financed their home purchase. Nearly all (97 percent) of Gen Y buyers financed compared to just 55 percent of Silent Generation buyers.
  • Among the generations, Gen X (29 percent) is the largest group who are recent home sellers followed by both Older Boomers (22 percent) and Younger Boomers (21 percent).
  • Younger sellers are more likely to use the same real estate agent or broker for their home purchase than older sellers, as they are typically moving closer to their previous residence.

See more detailed generational breakdowns after the jump:

Latest Diffusion Index of Foot Traffic

Mon, 03/10/2014 - 14:59

Foot traffic as measured by NAR Research’s Diffusion Index bounced back in February following two months of sharp decline. This improvement suggests that the year-over-year decline in existing home sales should stabilize in the months ahead, though at a level sharply lower than the spring of 2013. Slower demand will press up on inventories which are anemic, moderating price growth to a more sustainable pattern to the benefit of consumers.

Every month SentriLock, LLC. provides NAR Research with data on the number of properties shown by a REALTOR®. Lockboxes made by SentriLock, LLC. are used in roughly a third of home showings across the nation. Foot traffic has a strong correlation with future contracts and home sales, so it can be viewed as a peek ahead at sales trends two to three months into the future. For the month of February, the diffusion index for foot traffic rose 7.2 points to 26.2 after declining 32.3 points in the previous three months.

The index is well below the “50” mark which indicates that more than half of the roughly 200 markets in this panel had weaker foot traffic in February of 2014 than the same month a year earlier. This reading does not suggest how much of a decrease in traffic there was, just that the majority of markets experienced less foot traffic in February of 2014 than 12 months earlier.

This upward movement in foot traffic relative to last year is important for the spring market as it alleviates fears of a secular downward drift. Mortgage rates were more than a percentage point lower at this time last year and prices have risen to the detriment of affordability, but consumers’ purchase power remains strong by historical standards. The psychological impact of this change, bidding wars and few options took a toll. A more sustainable market with slower price growth and a moderation of credit overlays would benefit the spring market.

Inflation Outlook

Mon, 03/10/2014 - 11:24

In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses CPI and the outlook in inflation.

  • After a virtually non-existent rise in consumer price index (CPI) in the recent years, inflation looks to kick higher starting in 2015.
  • Inflation in January remained tame, up 1.6 percent over the past year.  But the subcomponents on housing related prices have risen close to 3 percent.  Rents rose at a 2.9 percent clip, while the mysterious and murky homeowner equivalence rent increased by 2.5 percent, the highest pace in nearly 6 years.  The latter is hypothetical and not actual market exchange data of what homeowners would receive in rent if their home was rented out.
  • Both rent and homeowner equivalency rent are bound to increase further since apartment vacancy rates, and the number of homes available for sale/rent, have been falling.   These housing components carry the biggest weight in CPI calculations and therefore will exert upward pressure on the broad inflation figure.
  • Energy prices have also begun to inch higher.  Though gasoline prices are not necessarily moving higher from already new normal levels, natural gas prices are and could even break higher if the situation in Ukraine/Russia does not simmer down.
  • The Federal Reserve prefers the inflation rate to be at between 1 to 2 percent.  It considers 3 percent as the red line not to cross.  However, the line could easily be crossed next year, possibly prompting a quicker tightening in monetary policy and notably higher interest rates.
  • After increasing by only 1.4 percent in 2013, CPI is expected to rise by 2.5 percent this year and then move even higher to 4 percent next year for the reasons state above.  Rising inflation also means higher interest rates.  However, the possibility of a double-digit inflation rate, as occurred during the 1970s, is zero.
  • The purpose of measuring inflation is to check on our standard of living, to see how much of our earnings are getting eaten away by higher prices.  The daylight savings time adjustment means we lost one hour of potential work while needing to pay fixed monthly expenses like rent.  This we know reverses in autumn.  But one time in England, the country decided to switch to the more accurate Pope Gregorian calendar time like the rest of Europe and be done with the clunky Julius Caesar calendar.  This adjustment meant a sudden advancement of 12 days at the flip of a finger from September 2, 1752 to September 14, 1752.  Laborers lost work days, while their monthly rent was quickly coming due.  Riots ensued.

Investor Buyers Still Active

Mon, 03/10/2014 - 10:19

Investor buyers continue to be active in the residential market. About 20 percent of REALTORS® who responded to a monthly survey about their last sale in January 2014 reported that the sale was made to a buyer buying for investment purposes.

See the January REALTORS® Confidence Index Survey report for more information.

February Employment Situation

Fri, 03/07/2014 - 10:03

In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses employment.

  • The economy added 175,000 net new jobs in February, thereby bringing total in the past 12 months to 2.2 million.  Job creations provide the foundation for a new set of homebuyers and for increased demand for commercial real estate.
  • The unemployment rate moved up one notch to 6.7 percent.  At its worst a few years ago, the unemployment rate was 10 percent.  Though this is progress, there is a bit of murkiness in the unemployment figure because of those who dropped out of the labor force and are not counted.  A cleaner measure is the employment rate: the proportion of the working age population with jobs.  The employment rate has remained stuck at 58.8 percent, about the same level for the past five consecutive years.  Before the recession hit, the employment rate had been about 63 percent.  In short, there has been an improvement in the unemployment rate, but absolutely no improvement in the employment rate.
  • Construction related jobs have increased by 152,000 in the past year.  However, the degree of recovery is very weak considering the massive job cuts that occurred in this sector.  Moreover, there appears to be sizable pent-up hiring demand in construction since home building activity has increased by 50 percent from the low of few years ago while the residential construction jobs have increased by only 12 percent.
  • The average hourly earnings are beginning to move up.  It rose to $20.50 per hour for nonsupervisory jobs.  That is up 2.5 percent over the year and the fastest gain since 2010.
  • The number of part-time workers who wish to have full-time jobs remains elevated.  There are 7 million Americans in this status.
  • A total of 91 million Americans are not in the labor force.  Retirees, spouses looking after kids, college students, and the disabled are among those not in the labor force.  Because of rising population, this figure should also rise over time.  However, the pace of increase of the people not working in recent years has been higher than normal.
  • Americans are defined not by birth, but by what they can achieve.  It is said that common sense and hard work are all one needs to succeed in America.  For example, an unschooled drifter named Benjamin Franklin ended up inventing many new things to improve the lives of ordinary people because he was out there working every single day.  Not hindered by his parent’s illiteracy, Abraham Lincoln learned to read and write on his own without formal schooling in another example.  Andrew Carnegie delivered newspapers in Pittsburgh as a teenager to get ahead and eventually became one of the wealthiest, after gladly leaving the old, stuffy world of Downton Abbey.  Harriet Tubman risked her life many times to re-enter slave states in order to help more people gain freedom.  Her words: “Even when you are tired, you keep going.”  Fewer Americans today appear to live by the same enterprising spirit.

A more granular look at home prices

Fri, 03/07/2014 - 08:07
  • Previously, we looked at the FHFA and Case-Shiller release focusing on national data trends. Today, we’ll dig a bit deeper to look at more local data at the regional, state, and city or MSA level.
  • Monthly FHFA releases data at the Census division level and quarterly it releases state and metro area data. Case-Shiller offers data on 20-cities monthly. Both of these sources confirm the trend seen in NAR measures.
  • At the regional level: the most robust home price gains from a year ago were in the West. NAR reported price change of 15.5% in December and 14.6% in January. According to FHFA year over year prices in December 2013 rose 14.9 percent in the Pacific division which includes Hawaii, Alaska, Washington, Oregon, and California and 12.6 percent in the Mountain division which includes Montana, Idaho, Wyoming, Nevada, Utah, Colorado, Arizona, and New Mexico.
  • Likewise, NAR data showed the smallest price gains from a year ago in the Northeast (3.5% for the year ending in December and 6.6% for the year ending in January), and FHFA showed a similar pattern. Prices rose 2.7 percent in New England (Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, Connecticut) and 2.1 percent in the Middle Atlantic states (New York, New Jersey, Pennsylvania) from December one year ago.
  • State by state data, pictured below, shows more detail. Some states in the South had very robust growth: Florida, Georgia, and Texas, but the region as a whole had more moderate growth because of states with more modest home price growth or mild declines such as West Virginia, Arkansas, and Mississippi.
  • Among cities, Case-Shiller reported the biggest year over year gains in Las Vegas, San Francisco, and Los Angeles. Each had more than 20% year over year gains. The smallest gains in Case Shiller’s cities were Cleveland at 4.5 percent and New York at 6.3 percent. While the cities covered differ, NAR saw similar trends with the largest home price gains in the 4th quarter out West in cities such as Sacramento and Las Vegas. NAR also saw substantial home price gains in Atlanta, a city that showed an 18.1 percent year over year gain by Case Shiller’s measure. In the quarterly release, FHFA produced a similar list of the top-20 metro areas. Again, the specific areas covered are different, but many of the top metro areas on FHFA’s list are out West including Modesto (CA), Stockton-Lodi (CA), and Vallejo-Fairfield (CA) as the top 3.

Where Do Buyers and Sellers Find Their Agent?

Thu, 03/06/2014 - 16:31
  • According to data found in NAR’s annual Profile of Home Buyers and Sellers, home buyers and sellers consistently report they truly rely on referrals from friends and family to find an agent or they use an agent they had worked with before.
  • Fifty-four percent of buyers and sixty-four percent of sellers found the agent they worked with either from a personal referral or they used an agent they had worked with before to buy and sell a home.
  • Due to this fact, two-thirds of both buyers and sellers only contact one agent before choosing an agent to work with.

  • Buyers are being assisted by professional real estate agents and brokers with what is often the most important transaction of their life. Their home purchase is not only the roof over their head, the garden they want to plant, but their nest egg for their future.
  • The most importance skills and qualities buyers look for are honesty and integrity. The most important factors to sellers are the agent’s reputation, and that the agent is honest and trustworthy.
  • Annual data in the Member Profile validates what we hear from buyers and sellers on this point.
  • Forty-two percent of member business is from referrals and repeat clients – this increases as the member’s experience in the field of real estate increases, reaching sixty-four percent for those with 16 or more years of experience.
  • While many buyers find the home they purchase online, very few find the agent they end up working with online.

Jobless Claims Normalize

Thu, 03/06/2014 - 09:57

In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses unemployment insurance claims.

  • After a weather-related spike, initial claims for unemployment insurance[1] for the week ending March 1 normalized to 323,000, a decrease of 26,000 from the previous week’s number. As shown in the chart below, jobless claims filed continue to trend downward. Fewer jobless claims means fewer people are being laid off.
  • Although this is positive, the more important issue is whether the economy is producing net new jobs. Job growth has been modest. Yesterday’s report by ADP, a company that tracks payroll employment, showed that the economy generated slightly more jobs in February (139,000) than in January (127,000) in part boosted by new construction jobs. The official employment data for February will be released tomorrow by the U.S. Department of Labor.

[1] Claims filed under the regular state programs, seasonally adjusted

Foreclosure Rates and Changes: Q4 2013 vs. Q4 2012

Thu, 03/06/2014 - 09:12

Rising home values and an improved economy changed the foreclosure picture dramatically over the last two years. The decline in foreclosures and distressed sales resulted in less downward pressure on prices and more buyer confidence. To find out how your market performed, see the 4th quarter 2013 Local Market Reports.

Here are a few highlights from the reports:

  • All 48 of the states in this sample experienced a decline in their foreclosure rates between the 3rd quarter of 2012 and 2013.

  • The states with the largest declines were concentrated in areas hardest hit by the market decline, including Arizona and California.
  • More than a third of markets bettered the U.S. average of a 25.7% drop in the foreclosure rate between the 3rd quarter of 2012 and the 3rd quarter of 2013.

Cash Sales at 33 Percent of Residential Sales

Wed, 03/05/2014 - 13:24

Approximately 33 percent of respondents reported cash sales in January [1]. About 13 percent of reported sales made by a first-time buyer were cash sales compared to about 50 to 70 percent for investors and international buyers. See the January REALTORS® Confidence Index Survey report for more information.

[1] The RCI Survey asks about the most recent sale for the month.

Latest Mortgage Applications Data

Wed, 03/05/2014 - 09:12

In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses the latest mortgage applications data.

  • Seasonally adjusted applications to purchase homes surged 9.4% in the week ending February 28th, reversing four weeks of significant declines. The purchase index is 19.3% lower than the same time in 2013. Purchase applications slid nearly unabated since mid-January.
  • The average rate for a 30-year fixed rate mortgage as reported by the Mortgage Bankers Association eased six basis points from the prior week to 4.47%, and has eased nearly 16 basis points in the last four weeks.
  • Both purchase and refinance applications indexes improved this week by 9% and 10%, respectively. This pattern would suggest that the trend was driven by financial market improvements rather than a shift in consumer tastes or weather.
  • The improvement was nearly uniform between conventional and government financing which improve 9.2% and 10.1%, respectively.
  • Purchase applications improved dramatically this week, the first hint of stabilization following a steady downward trend since January. Rates have eased only modestly and the improvement in applications hints at changes in the financing market. Originators were very concerned about the January 10th implementation of the qualified mortgage rule. Applications for purchase surged 11.5% in the week ending on the 10th. Demand may have been pulled forward ahead of the deadline skewing recent results or lenders may have become more comfortable with the rules and their preparations for it since January 10th. The market will gain more clarity in the weeks ahead.

QM Could Touch Many Borrowers

Mon, 03/03/2014 - 21:30

The qualified mortgage (QM) rule was implemented in January of 2014. It is the first of two rules that came from the Dodd–Frank Wall Street Reform and Consumer Protection Act that will impact the housing market. This law is intended to protect consumers by strengthening underwriting standards, but some have argued that the rules will raise costs and reduce access for consumers. To gain insight on the impact of the new law, NAR Research surveyed a sample of lenders with questions about the impact of the lending on their business and how the rule could in turn impact consumers.

When asked about the extent of the QM rule’s impact, 55% of survey respondents indicated that the QM rule would affect 2.6% to 20% of their originations. However, 20% of originators surveyed indicated that the changes and heightened underwriting in general would impact nearly all of their production.

What does this change mean for REALTOR®s and consumers? Consumers should expect to have to document their income, employment and resources. If your client has a high debt-to-income ratio, the FHA as well as Fannie Mae and Freddie Mac will be more lenient than private financers. However, if your client falls into the other aspects of the non-QM space or even the rebuttable presumption portion of the QM space (e.g. high fees, subprime, interest only, etc.) your client might require help finding a specialty lender. Consider finding a few lenders who specialize in financing these special cases at affordable rates so that you can meet your client’s needs if the time comes. For the full survey, click here.

Latest Construction Spending Data

Mon, 03/03/2014 - 11:32

In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses construction spending.

  • Construction activity rose modestly in January despite the terrible wintry weather conditions. The value of new construction completed was 9.3 percent above one year ago, marking the fastest 12-month gain in nearly 8 years. More construction is needed to relieve the housing inventory shortage, raise commercial real estate business opportunities, and bring good jobs into local communities.
  • There appears to be a sizable pent-up labor demand for construction workers. Spending has risen by 25 percent over the past three years. Yet, construction employment of builders and general contractors has increased by only 9 percent. If employment had followed proportionately with the dollars spent on construction then there would be about 850,000 additional workers in the construction sector. So far more job creation is occurring in residential construction (up 9 percent from one year ago) than in commercial real estate construction (up 3 percent).
  • Construction spending by government has been falling over the past four years. Fortunately, the cutbacks have not occurred in spending on highways and streets. After a brutal winter, additional fresh money will surely be required to upgrade America’s roads and bridges.
  • It is worth recalling that America’s highways were purposely built in the 1950s as an emergency route out of major cities in case of nuclear bomb attack. The traffic jams of today means there will not be a fast getaway. However, the interstate road system does provide us with the everyday pleasures of visiting family and friends in far-away places. Even visiting a college campus where a loved one had studied can bring certain pleasant feelings. The author was immensely happy to have walked around Randolph-Macon College in Lynchburg, Virginia, where Pearl Buck did her studies before heading over to China. Her experience turned into a novel – “The Good Earth” – showing the value everyday people place on land. She won a Nobel Prize in literature for it. It’s a good tie-in to the REALTORS® preamble, which begins with “Under all is the land.”

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