Spring Housing Market Strongest In 3 Years

July housing market data shows that price appreciation and inventory increases during the peak home-buying season helped the market to post the largest spring gains in three years, realtor.com® reports in its National Housing Trend Report.                   housing market

“In July 2012 and 2013, we saw external economic factors overwhelm the healthy gains established in the housing market during the spring home-buying season,” says Jonathan Smoke, chief economist for realtor.com®. “This year, we’re ending the traditional season with high buyer and seller confidence demonstrated by price appreciation, increases in inventory, and quick home sales.”

In July, housing inventories rose 2.3 percent year-over-year, as the median list price posted a 7.5 percent increase year-over-year, realtor.com® reports. The median list price was $214,900 nationwide in July.

“Despite higher prices and more homes in the housing market, buyers are snatching up properties faster than last year,” realtor.com® reports. The median age of inventory in July was 82 days, three days less than 2013.

“This is the first time since the beginning of the recovery that we expect to see positive momentum throughout the second half of the year,” Smoke says. “While seasonal patterns are emerging in July month-to-month comparisons, all other metrics point to fundamental market health and a build-up of momentum.”

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Source: Realtor.com

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Millennial Borrowers Have Lowest Mortgage Delinquency Rate

Millennial Mortgage borrowers under the age of 30 have the lowest mortgage delinquency rate of any other age group, according to a newly released TransUnion mortgage report. However, the age group also makes up the smallest share of all mortgage accounts at 4.16 percent, TransUnion notes.

“It is encouraging to see younger borrowers perform well, since their generation was significantly impacted by the recession and their loans are among the newest,” says Steve Chaouki, head of financial services for TransUnion.             millennial

Overall, the mortgage delinquency rate – the percentage of borrowers 60 days or more delinquent on their mortgages – fell for the 10th consecutive quarter to 3.46 percent in 2014′s second quarter, TransUnion reports. The mortgage delinquency rate has fallen nearly 20 percent in the past year.

The 50–59 age group has the largest share of mortgage accounts, at 27.09 percent. The breakdown by ages as of the second quarter of this year showing mortgage delinquency of 60 days or more are:

  • Under 30: 2.34%
  • 30-39: 3.91%
  • 40-49: 4.43%
  • 50-59: 3.46%
  • 60+: 2.58%

“Mortgage delinquency rates continue to drop and we are seeing this decline across all age groups,” Chaouki says. “Overall, the improvements in the mortgage delinquency rate can be attributed to a number of factors. These include the clearing of severely delinquent accounts through foreclosure as well as a lower rate of new delinquencies from post-recession vintages, which generally are of significantly higher credit quality and have experienced much better performance than mortgages originated before the recession. This dynamic is likely driving the low delinquencies among younger borrowers.”

All 50 states, as well as the District of Columbia, posted declines in the mortgage delinquency rate in the past year. The major markets that saw some of the largest yearly drops in mortgage delinquency rates are:

  • San Francisco: -29.3%
  • Phoenix: -28.7%
  • Miami: -26.7%
  • Los Angeles: -24.1%
  • Chicago: -20.6%

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Source: TransUnion

 

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Security Concerns With Smart Homes

As homes get more connected to technology, security researchers are sounding the alarm on the vulnerabilities smart homes may pose.

The home automation market is expected to soar to $16.4 billion by 2019. But with that surging growth, researchers are asking for more attention to be drawn to the security of these devices to make sure they don’t reveal too much about home owners should they fall into the wrong hands.                                               smart phones

Smart-home devices run the gamut: a garage door that opens automatically as you approach the house; a thermostat automatically adjusting to fit your comfort level; even your oven adjusting its temperature based on the recipe you’re using.

Smart homes promise to offer home owners greater convenience, but security experts are concerned about devices that are able to remotely track you when you’re away from the house, monitor household activity through embedded cameras, and provide keyless entrance, Builder Online reports.

“Looking at the rate at which new products come to the market and the connectivity outside the home, all of a sudden there’s a lot of personal information being transmitted over the Internet,” Hagai Feiner, founder and CEO of Access Networks, told Builder Online. “The more intertwined those devices are into our lives, the more risk is present. It’s becoming a bigger issue as we have more and more devices that are looking at our patterns — and this is where technology is going. The more products we have that are learning and that transmit to the Internet, the more risk we have of those devices being hacked and information being held by rogue identities.”

HP Fortify on Demand created the IoT Top 10, an educational effort to explore the main security problems for internet-connected home devices.

In a recent study, the group tested 10 of the most popular smart-home devices and found that 70 percent of them presented serious vulnerabilities — with an average of 25 vulnerabilities per device — says Daniel Miessler of HP Fortify on Demand. Most of the devices that posed concerns collected personal information that included addresses, health information, and credit card numbers. The data is being transmitted — often unencrypted — over users’ networks and across mobile apps and cloud services, which could open up home owners to a potential data breach.

The study also found that 80 percent of the devices failed to use strong authentication measures and permitted weak passwords such as “1234.”

As researchers continue to raise the discussion of security in smart-home devices, they are urging home owners to also be smart about which products they choose. They encourage home owners to use products that have strong authentication measures and to choose better passwords in keeping their data safe.

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Source: Builder Online 08/13/2014

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Down Payments For Lower Priced Homes Double

Down payments for lower priced homes double: Buyers looking at lower-priced homes are not only facing major inventory hurdles, they’re also finding that they have to bring more money to the closing table.

The median down payment for the cheapest 25 percent of homes was 7.5 percent of the sales price last year, up from a low of 3.1 percent in 2006. That also compares to an average of 4.2 percent from 2001 through 2007, according to research by the real estate brokerage Redfin Corp., which analyzed the 25 largest metros.   down payments

Many younger home buyers, who often seek to break into the housing market by purchasing lower-priced homes, are among those affected by the higher down payments. The median down payment for the cheapest 25 percent of properties sold in 2013 was $9,480, according to Redfin’s analysis.

“The numbers tell the story of why we have millions of potential home owners who are renters or living with their parents,” Susan Wachter, a professor of real estate and finance at the University of Pennsylvania’s Wharton School in Philadelphia, told Bloomberg. “What has changed is the ability to become an owner. And that’s changed through a down payment that’s more than doubled.”

Part of the reason for the increase in down payments among lower-priced properties could be due to the smaller number of first-time home buyers applying for loans backed by the Federal Housing Administration, which requires small down payments of usually 3.5 percent. FHA increased its mortgage insurance premiums this year, which has raised FHA borrowing costs and tightened underwriting standards. It’s part of FHA’s effort to boost cash reserves lost in the aftermath of the housing crisis.

As such, some borrowers who may have applied for an FHA loan are instead using private lenders, who may be demanding higher down payments. In 2013, 39 percent of first-time buyers used FHA loans compared with 56 percent in 2010, according to the National Association of REALTORS®.

“If higher down payments persist, we will have a millennial generation that’s missing in action in home ownership,” says Wachter.

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Source: Bloomberg News 08/14/2014

 

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Millennials Moving To The Burbs For Good Schools

The next generation of home buyers, Millennials,  say they will move to the suburbs if it means they can find quality schools there, according to a newly released survey by realtor.com®.

In fact, millennials – the generation born between 1980 and 2000 – are less likely than other generations to compromise on school districts when in house-hunting mode, the survey revealed. Fifty-two percent of millennials said school districts are a deal-breaker in their home search, compared to 31 percent of all buyers, the survey found.  millennials

“Local schools are clearly more important to specific population segments—such as today’s millennials, who either have or are planning to have children,” says Jonathan Smoke, realtor.com®’s chief economist. “High-ranking schools can have a positive impact on home values over time as new families pay a premium for access to better schools.”

The majority of buyers who are using realtor.com®’s search-by-school web tool to find school information while looking up homes for-sale online are researching elementary schools in particular, according to realtor.com®. “This indicates the majority of people who research good schools either have young children or expect to start a family when they buy their next home,” realtor.com® notes.

The Realtor.com® survey also notes that the 10 cities where people research the most school information on its site are located in affordable, suburban communities, outside of large urban areas. Those top 10 cities in June were:

  • Bethel, N.C.
  • Gadsden, Ala.
  • Agoura, Calif. (near Los Angeles)
  • Kensington, Md. (near Washington, D.C.)
  • Greenwood Village, Colo. (near Denver)
  • Greenacres, Fla. (near West Palm Beach)
  • Watauga, Texas (near Fort Worth)
  • La Crescent, Minn.
  • North Hollywood, Calif. (near Los Angeles)
  • Fairburn, Ga. (near Atlanta)

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Source: Realtor.com 08/14/2014

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High Income Earners Are In These 8 Cities

California tech hubs continue to rank at the top among high income earner areas of the country, but other states are also seeing wages rise. Forbes.com analyzed cities that have the largest share of their populations with household incomes over $100,000. Here are some of the cities that topped its list:                                        high income earners

  1. San Jose-Sunnyvale-Santa Clara, Calif.
    Household income $100,000+: 45.4%
  2. Washington-Arlington-Alexandria, D.C.-Va.-Md.-W.Va.
    Household income $100,000+: 44.1%
  3. Bridgeport-Stamford-Norwalk, Conn.
    Household income $100,000+: 41.8%
  4. San Francisco-Oakland-Fremont, Calif.
    Household income $100,000+: 38.4%
  5. Boston-Cambridge-Quincy, Mass.-N.H.
    Household income $100,000+: 35.3%
  6. Trenton-Ewing, N.J.
    Household income $100,000+: 34.9%
  7. Boulder, Colo.
    Household income $100,000+: 34.4%
  8. Anchorage, Alaska metro area
    Household income $100,000+: 34.2%

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Source: Forbes.com 08/2014.

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First Time Buyers Being Shut Out Of Market

For sale inventories may be at nearly a two-year high, but first time home buyers are still finding themselves shut out of the housing market, being outbid and still not finding enough choices in their price range, Reuters reports.

A decline among inventories for entry-level homes has worsened during the past year as discount foreclosures have faded and investors have continued to buy up low-priced homes and turn them into rentals through all-cash deals. Also hampering the inventory picture, lower-priced properties are more likely to have home owners with underwater mortgages, preventing them from moving on and putting their homes on the market, Reuters reports.                                     first time buyers

“It’s bad news for people looking for a starter home that all the choices are disappearing,” says Lawrence Yun, chief economist at the National Association of REALTORS®. “People shouldn’t expect inventory to show up on the low end. It’s not available.”

The number of homes for sale below $198,000, considered the bottom third of the market, dropped 17 percent in June compared to a year earlier, according to an analysis by the real estate brokerage Redfin, which tracked 31 of the largest U.S. metro markets. On the other hand, inventories rose 3 percent in the middle of the market and soared 15 percent at the top, according to the analysis.

The trend is even more evident in certain markets. For example, in Denver, entry-level listings in June fell 51 percent from a year earlier, while the supply of higher-priced listings was up 4 percent. In Austin, Texas, inventories at entry-level prices dropped 34 percent in June while soaring 14 percent in the top third of the market.

“There is inventory coming on line, albeit slowly,” says Nela Richardson, chief economist for Redfin, a Seattle-based brokerage. “The problem is it’s not equally distributed. There is more turnover at the higher end. At the more affordable end of the spectrum, people are stuck.”

What’s more, due to the high demand and limited choices, average list prices on the lower end are rising, jumping 15 percent in June from a year earlier, Redfin reports.

The limited supply has prompted more first time buyers in the lower-end price range to adjust their expectations, says Sharlene Hensrud, a real estate professional with RE/MAX Results in Plymouth, Minn. For example, she says her recent clients were touring homes in the $140,000 range and was unhappy that would only buy them a one-bedroom, one-bathroom house with no garage. A few years prior, that price would have gotten them a three-bedroom home, Hensrud says.

First-time home buyers are often drawn to the lower-priced homes, and their dwindling numbers in recent years have reflected some of the struggles in finding an affordable home. First-time home buyers accounted for 28 percent of all sales of previously owned homes in June, which is down from a historical average of about 40 percent, according to NAR research.

Home builders say they hope to meet the demand of entry-level homes, but it’s going to take some time until they can play catch-up.

After all, the supply of cheaper new homes “isn’t there because young people are still up against these financial barriers,” says David Crowe, chief economist for the National Association of Homebuilders. “The builders are responding to the customer that is active in the market. It will be at least two years before there is a measurable change in the share of sales going to first-time home buyers.”

Earlier this year, representatives from the nation’s largest home builder, D.R. Horton, said they were moving into capturing more of the entry-level market with its newly launched brand called Express Homes. The properties will be priced between $120,000 and $150,000 and will be concentrated in Texas, Georgia, and Florida.

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Source: Bloomberg News Online 08/12/2014

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Good Rental Payment History Helps Boost Credit Scores

Experian became the first credit reporting agency to add on-time rental payments to its database. It recently conducted an analysis to determine how the added rental information has aided consumers’ credit files.credit scores

The addition of rental payment data to credit files may help more potential renters become home owners.

The study found that subprime and nonprime residents saw the greatest positive score impact by the addition of rental histories. Nineteen percent of the study participants that were considered subprime moved to at least one higher – or less risky – risk segment by the addition, opening them up to more affordable credit and additional credit opportunities, the study noted.

For the previous unscoreable, adding the rental data has now allowed them to have a credit score, with the majority now falling in the least risky prime category too, Experian’s analysis shows.

“Consumer financing rapidly changed during the economic upheaval, and regulatory changes forced lenders to tighten the standards for the underwriting process,” says Genevieve Juillard, president of Experian Consumer Information Services. “This excluded many Americans from the opportunity to attain credit due to a limited or no credit history. Residents who pay their rent on time month after month should be rewarded and not overlooked simply because they rent instead of own the place they call home.”

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Source: Experian

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New FICO Scoring Will Help New Home Buyers

FICO, the nation’s most popular credit-scoring system, announced it is tweaking some of the criteria used in coming up with consumers’ scores, which could help consumers save more money in qualifying for mortgages and other types of loans.

The changes include reducing the toll that overdue medical bills can take on credit scores, as well as removing other past penalties from consumers who have paid off debts that had been assigned to collection agencies. A consumer whose only major delinquency comes from an unpaid medical bill could see their credit score rise by 25 points due to the changes.                     fico

The changes come after a recent Consumer Financial Protection Bureau study, which found that both paid and unpaid medical debts were unfairly penalizing consumers’ credit ratings. An estimated 64 million Americans have a medical collection item on their credit reports, according to Nick Clements of Magnify Money, a personal finance site.

The FICO changes will go into effect this fall, but borrowers may have to wait a year or more until they see the impact of the changes in their scores, lenders say.

The changes may help consumers with blemished past credit histories or high medical debts qualify for mortgages more easily. Consumers with higher scores also might qualify for a lower rate, housing experts say.

“In recent years the [credit score requirement] has been dialed so tightly that only fairly upper-tier consumers were able to qualify for a loan,” says Lawrence Yun, National Association of REALTORS®’ chief economist. “We’re looking at people who are currently being denied potentially being offered a mortgage because of this.”

In June, the average FICO score for a closed mortgage was 728, a drop from 742 a year prior, according to data from Ellie Mae, a company that processes mortgage applications for lenders. FICO scores range from 300 to 850.

Borrowers with higher FICO scores can usually expect to pay less in interest on a loan. A borrower with a FICO score of 675 may nab a 4.75 percent interest rate on a 30-year fixed-rate mortgage, which would be about  $2,086 a month in payments on a $400,000 loan, according to Informa Research Services. In comparison, a borrower with a 700 FICO score may qualify for a rate of 4.212 percent, which could drop the monthly payment to $1,959 and bring a $127 savings.

The credit scoring changes will not remove any unpaid debts from a credit report, so some lenders may still be able to factor that information into their lending decision.

“This move will ultimately make a real difference in the lives of millions of Americans, who have been shut out of the housing market or forced to pay higher mortgage interest rates because of flawed credit scores,” Steve Brown, NAR’s president, said in a statement. “Since the housing crash, overly restrictive lending has been the greatest obstacle to home ownership. NAR will continue to support efforts to broaden access to credit for qualified homebuyers.”

In other news, two of the big national credit bureaus Experian and TransUnion recently reported they’ve  added verified rental payment data into credit files, which will be used to compute a consumers’ score when applying for a mortgage. A recent TransUnion study showed that the inclusion of rental data could raise some consumers’ scores. For example, nearly 20 percent of renters’ scores rose by 10 points or more after just one month.

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Source: Los Angeles Times 08/08/2014

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Strong Finish For Home Sales 2014

Despite hitting a soft spot in the first quarter, home sales are expected to make a strong showing in the second half of 2014, NAR’s Chief Economist Lawrence Yun told brokers at the broker summit in Atlanta Thursday.

Yun called the past few years of economic recovery “difficult but meaningful.” Unit sales are currently down 5 percent year-over-year, but he expects home sales 2014 to end up close to last year’s totals at a little more than 5 million units sold.    home sales

Looking at the economy is a good way to see what will happen in housing, Yun says. Gross domestic product (GDP) was negative in the first quarter, but bounced back in the second. Although Yun would like to see consistent economic growth above 3 percent – it’s currently around 2 percent. “It’s moving in the right direction,” he says. “We’ve recovered all the jobs lost in downturn and new jobs are being created.”

Declining unemplyment is a good sign for housing. However, more people are claiming disability, and rarely do they return to the workforce, Yun says. What’s more, the unemployment statistics are not considering Americans who aren’t collecting unemployment and who have essentially dropped out of the labor force.

Another piece of good news for real estate is that inventory is heading up nationwide, Yun says. The total housing inventory at the end of June rose 2.2 percent to 2.30 million existing homes for sale. Research shows that consumers feel more comfortable visiting 10 to 15 homes before making a purchase decision, Yun says, and as inventories come back, so will buyer confidence and sales.

“For your business planning purposes, you don’t want to grow for growing sake, but you can anticipate there will be more home buying act in the next few years,” he says.

Yun also made the following three forecasts:

Forecast 1: Higher inflation and higher interest rates. The Federal Reserve is planning to end its purchasing of Treasury and mortgage-backed securities in October. Yun expects interest rates to increase in 2015. He also expects Consumer Price Index (CPI), which measures inflation, to increase 3.5 percent in 2015.

Forecast 2: Multi-year housing expansion. The population is on the rise. The U.S. gained 34 million people since 2000, but home sales were 5.2 million in 2000 and 5.1 million in 2013. The pent up demand will eventually equate to additional homes sales over the next few years, Yuns says.

Forecast 3: Continued inequitable wealth distribution. Household net worth is at an all time high, but only for the 10 percent of U.S. population that has investments in the stock market. At the same time, rents are rising and incomes are generally stagnant.

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Source: Realtor Magazine

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