Though Federal Reserve policymakers, worried that global financial market volatility could dampen the U.S. economy, did not raise the interest rates last week, they have begun laying the groundwork for a possible interest rate increase in October.
Two voting members of the Federal Open Market Committee, which sets monetary policy, said they were close to approving a rate hike on Thursday but wanted to take more time to assess the effects of the market turmoil and China’s slowing economy. Both said they expected a hike this year.
“It’s too early to know whether this episode amounts to a bona fide shock to the economy or just a nervous spasm in the markets,” Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, said Monday.
Lockhart, a centrist, is one of the 10 voting members of the policy-setting Federal Open Market Committee. It voted 9-1 on Thursday to hold the central bank’s benchmark short-term rate at near zero percent after a much-anticipated two-day meeting last week.
Lockhart said Monday that he was confident the Fed would do so by the end of the year. The rate has been near zero since late 2008 in an attempt to stimulate the economy. The Fed meets again Oct. 27-28, then Dec. 15-16.
The labor market has healed enough for an interest rate hike, he said, but he remains concerned about inflation continuing to run well below the Fed’s 2% annual target.
“As things settle down, I will be ready for the first policy move on the path to a more normal interest-rate environment,” Lockhart said.
J. Lansner of the O.C. Register compared the market trends of the six counties in Southern California. He considered Orange County #1 in healthy, sustainable growth.
“What defines a healthy housing market? To me, it’s rising prices and growing sales activity backed by solid job growth. After the last boom-to-bust cycle, the durability of the upswing is paramount.
My study found that when it comes to housing, as in other areas of the economy, the closer it is to the ocean, the stronger the business climate.
No. 1 Orange
• Median Price, April: $600,000, up 4.2 percent in a year
• Sales, first four months of 2015 vs. previous seven: Up
• Months to sell inventory, as of May 21: 2 vs. 2.61 a year
• Jobless rate, April: 4.4 percent vs. 5.5 percent a year ago
The region’s healthiest market saw its median selling price reach the highest point since August 2007 – within 7 percent of the old, bubble-inflated peak. No Southern California county is closer to record high pricing.
Home sales in the first four months of the year were up 4 percent vs. 2014; it was the fastest start to a year since 2006; and Orange County posted the biggest sales increase, compared with its seven-year average, of all the Southern California counties.
Sales of old problems in Orange County are minimal. Just 3 percent of listed homes are categorized as “distressed properties,” the smallest share of any county in Southern California.
And powering the surge is the lowest unemployment rate in the region at 4.4 percent.
Yes, Orange County will stretch any house hunter’s wallet with the region’s highest prices and lowest affordability (22 percent).
But an above-average rate of home purchases amid a hiring spree seems very sustainable…”
We’ve moved into a Seller’s market in recent weeks, with exciting mortgage rates enticing more Buyers to investigate home ownership. This is a very good time to re-finance, as well, with interest rates still under 4%. Days on market are decreasing, with savvy Sellers pricing strategically. Redfin reports a 7.6% gain for California sellers in the last year.
It was a busy holiday season, with Buyers making offers on tightening inventory. Prices are proceeding at a steady march towards good equity build-up versus the heady boom of a few years ago.
If you are buying, now is the time to talk to your lender to find out what you can afford, and start shopping. If you are selling, the next few months will reveal the developing market trends, and determine your market strategy.
The NAR’s pending home sales index increased 3.3 percent in July to 105.9, its highest level since August 2013.
Based on contract signings, the increase came in much stronger than expected.
Pending home sales have climbed in four of the past five months.
Lawrence Yun, NAR chief economist, said that favorable housing conditions spurred increased contract activity last month.”Interest rates are lower than they were a year ago, price growth continues to moderate and total housing inventory is at its highest level since August 2012,” he said.
“More importantly, steady job additions to the economy are helping family finances and giving them added confidence to enter the market.”
Home prices grew again in May, but not at last spring’s frenzied pace…there are fewer foreclosures to buy. More home sellers are testing the market, and bidding wars are less frequent.
All of it signals a housing market that’s settling to a more stable, even healthy, pattern, which analysts say is a notable change from the big ups and downs of the last few years.
The market’s not bad. The urgency’s gone. I think that’s a positive thing. – Leslie Appleton-Young, chief economist for the California Assn. of Realtors
The slowdown has been underway for months, but it showed up in home sales numbers out for May, a big month for the key spring real estate season.
The number of sales fell 15.1%, as investors continued to trickle out of the market and the supply of bargain-rate foreclosures dried up.
“We’re bumping along a ceiling. I really can’t see values going up much more,” said Steven Thomas, of ReportsOnHousing.com, which analyzes Southern California housing markets. “Buyers are homing in on trying to pay a fair value. A year ago, everyone was willing to pay extra. Now that bidding up is not happening.”
This year, instead of competing with 20 other offers, Buyers are competing with 4 or 5 others.The inventory of homes for sale has grown, with more traditional sellers joining the market this spring. That’s giving buyers more to choose from, but it means homes that feel overpriced are starting to sit on the market a little longer.
That’s an unpleasant surprise for some sellers, especially those who valued their homes based on the 2013 market where one puts their home on the market and have 15 offers. Agents more often have to play the bad guy with sellers who think their home is worth more than the market will bear. Buyers have become a lot more savvy.
We’re starting to see more price reductions as sellers lower their sights to compete.
No one is expecting home prices to go down overall. There’s still more demand than supply, and well-priced homes are still selling quickly.
Interpreted from 6/11/14 article by email@example.com
There are new factors in the Buyer’s ability to purchase in 2014.
The Federal Housing Administration (FHA), the government’s insurer of home loans, just announced it would be lowering its loan limit in the very highest cost areas from $729,750 to $625,000, starting Jan. 1, 2014.
The FHA has already raised premiums and fees, and the average credit score of its borrowers is far higher than it was during the housing boom.
Then late on Monday 12/9/2013, the Federal Housing Finance Agency (FHFA), overseer of Fannie Mae and Freddie Mac , announced it would again raise the fees it charges lenders, beginning in March. Those fees will likely be passed on to borrowers in higher rates.
“The new pricing continues the gradual progression towards more market-based prices, closer to the pricing one might expect to see if mortgage credit risk was borne solely by private capital,” stated Ed DeMarco, the FHFA’s acting director, in a release. “These changes should encourage further return of private capital to the mortgage market.”
A major new regulation, called the Qualified Mortgage (QM), also goes into effect in the new year, and that could raise borrowing costs even more, especially for borrowers who don’t qualify for the new standards. Qualified Mortgages are designed to protect both borrowers and lenders by limiting risk and providing banks with legal protections. The rules, however, are strict, and while lending can take place outside of QM, it will do so at a far higher cost.
LOS ANGELES (July 17) – Demonstrating the proliferation of mobile technology into nearly every facet of our lives, more than eight out of 10 home buyers are accessing home information on their smart phones and computer tablets, according to the CALIFORNIA ASSOCIATION OF REALTORS®’ (C.A.R.) “2013 Survey of California Home Buyers.”
“With more and more consumers using mobile devices and mobile technology, such as apps and social media platforms, buyers are increasingly using their smartphones and computer tablets to view comparable house prices, search for properties, take photos, and create videos of homes and amenities, as well as research communities and real estate agents,” said C.A.R. President Don Faught. “As a result, home buyers today are more informed and have a greater sense of control over what could be a daunting process.”
The survey found 85 percent of buyers used a mobile device during the home buying process, with the majority of buyers (70 percent) accessing the Internet from their smart phones and 15 percent accessing it from their tablets.
While the majority of buyers (61 percent) found their home through an agent, the percentage who found their home online more than doubled from 16 percent in 2012 to a record high of 37 percent in 2013.
The survey also found that buyers spent nearly six months considering a purchase before contacting an agent, nearly twice as long as last year. They took more time investigating homes and neighborhoods before contacting an agent, spending just over seven months on researching, compared to about 1.5 months last year. Additionally, buyers spent nearly 10 weeks looking for a home with their agent, a week longer than last year. More than eight out of 10 buyers (85 percent) made offers on other homes, and one-third said they settled for the best option given the limited supply of houses.
“The lengthier consideration time and home search illustrates the impact of low housing inventory and increasing home prices,” said Faught. “These factors caused buyers to weigh their options more carefully before making their home purchase.”
-CAR News Release
Many potential buyers are still waiting in the wings, not sure that now is the time to buy a house. They are often afraid of buying before the market has fully recovered, and are concerned that they may lose out if they jump in too early. Here are 5 reasons they should buy NOW and not wait…
1) Mortgage Interest Rates are on the Rise
While no one has a crystal ball, all of the technical, fundamental, and economic indicators point to mortgage rates moving up in 2013. All likelihood is that we have seen the best rates already, and waiting is not going to bring them back.
2) Rents are Continuing to Skyrocket
Recently, Zillow reported that rents increased in the U.S. by 4.2% over the last year. When compared side-by-side, the costs of owning vs. renting a home easily show the benefits of home ownership.
3) Prices are on the Rise
Home prices in most markets are stabilized, and even starting to increase. This will be hampered slightly with the over cautious approach of appraisers and lenders, but the trend is still showing prices beginning to rise.
4) Mortgage Guidelines Will Continue to Tighten
With government intervention added to an already overzealous underwriting standard, we are poised to see it become even more difficult for the average buyer to qualify for a home loan.
5) FHA Loans To Become Much More Expensive
Starting with FHA Case Numbers pulled on or after June 3rd, 2013, FHA will dramatically raise the costs of FHA Mortgage Insurance, making these loans much more expensive for the consumer.
In today’s L.A. Times, L. Sichelman gives hope to former homeowners who lost their home, yet still dream of owning their own place:
“-your ability to qualify for another mortgage may not be as compromised as you think.
It used to be that a bankruptcy, foreclosure or other major black mark on your credit record meant you could not hope to obtain financing to buy another house for seven years. Now, for the most part, the rules say you must wait just three years. Depending on the reason you lost your house, the wait could be even shorter.
You can qualify for a mortgage as soon as 24 months after the fact if your issues were the result of “extenuating circumstances” over which you had no control.
These are “life-changing events that made it impossible” to continue making payments, says Matt Kovach, product development manager at Envoy Mortgage in Houston. Job loss counts as such a circumstance, as does serious illness or the death of a wage earner. But divorce isn’t considered a life event, at least not by lenders. Neither is a business failure or the fact that you were simply overwhelmed by too much credit.
Even if you suffered through a life event, you won’t automatically qualify for a new loan after the required waiting period expires. You also have to demonstrate that you can handle credit and afford the payments.
“You need an extremely clean credit history after a significant derogatory event,” Kovach says. “Poor credit is not a good indication you’ve learned from your mistakes.”
One of the biggest missteps made by people who have had major credit issues is to close all their accounts and trade only in cash. While the idea seems sensible, especially if you fear finding yourself in the same difficulties again, you need to show a good payment history to obtain a mortgage….
Within those parameters, the length of time that rebound buyers have to wait to obtain financing depends on the mortgage they are seeking. Generally, the wait is shorter with government-backed financing.
Take mortgages insured by the Department of Veterans Affairs, for example. Since the VA’s rules do not specifically address short sales, it could be possible to obtain a VA-insured loan immediately after selling your house for less than the amount you owe on it. But as noted, you first will have to reestablish credit and then keep your nose clean.
If you declared bankruptcy under Chapter 13, the minimum wait for VA financing is just 12 months, as long as the bankruptcy trustee approves. If you declared a Chapter 7 bankruptcy, the wait is usually 24 months, but it could be shorter with extenuating circumstances. It’s the same two-year wait if you went through a foreclosure or handed the lender your deed in lieu of a foreclosure.
Since VA loans are only for armed forces veterans and service personnel, most people who have suffered a major financial setback look for loans with low down payments insured by the Federal Housing Administration.
The FHA has essentially the same rules as the VA regarding bankruptcies — at least one year for Chapter 13 and two years (or less) for Chapter 7. However, the wait is at least three years if you went through a short sale or foreclosure, or if you handed the keys back to your lender to avoid a foreclosure. If there were documentable extenuating circumstances, the waits could be shorter.
For example, borrowers who suffered a life event must reestablish credit for 24 months after a short sale, a Freddie Mac spokesman says. If there are no extenuating circumstances, that kicks it up to 48 months.
Here’s what Freddie Mac’s guidelines say when the borrower’s financial issues were due to his mismanagement: An acceptable credit reputation must be reestablished for at least 84 months if he or she was foreclosed upon, 60 months if the borrower filed more than one bankruptcy petition in the last seven years, 48 months after the discharge or dismissal of a Chapter 7 bankruptcy, and 48 months after conveyance of a deed in lieu of foreclosure or a short payoff related to a delinquent mortgage.
The wait also is 48 months for all other significant adverse or derogatory credit information. But it is just 24 months from the discharge date of a Chapter 13 bankruptcy.
If extenuating circumstances can be shown, and if there is evidence on the credit report that the borrower has reestablished an acceptable credit reputation, the wait is 36 months if he or she went through a foreclosure or filed more than one bankruptcy petition in the last seven years.
But the wait is just 24 months if the bankruptcy was discharged or dismissed, if he or she went through a short sale or deed-in-lieu, or if the borrower suffered another significant adverse or derogatory credit event.”
This article was so informative, it was almost entirely quoted from here.