Americans Are Net Worth 40% Poorer Today

The net worth of American families has plunged 40 percent since 2007, right before the financial crisis struck, dipping to an average of $81,400 per household, according to a new report from the Pew Research Center. That’s down from $135,700 in 2007. Pew measures net worth as the difference between the values of a household’s assets, including homes, investments, and liabilities.

“The Great Recession, fueled by the crises in the housing and financial markets, was universally hard on the net worth of American families,” the report says.  net worth

The average weekly wage has mostly stayed stagnant in recent years: $853 last month compared to $833 in November 2013, according to the Bureau of Labor Statistics.

The drop in net worth is particularly acute along racial lines. The gap between blacks and whites has reached its highest point since 1989, with the wealth of white households 13 times greater than that of black households in 2013, according to Pew research. The median net worth of white households was $141,900 in 2013, dropping 26 percent since 2007; for Hispanic households, net worth in that time fell by 42 percent to $13,700, and for African-American households, it dropped 43 percent to $11,000.

The Pew report partially attributes the wealth gap among the races to the fact that white households are more likely to own stocks directly or indirectly through retirement accounts. Financial assets such as stocks have recovered value more quickly than housing since the recession ended, according to Pew.

However, the housing picture has improved and may help lift many household’s finances. Fewer borrowers are underwater, which means they no longer owe more on their mortgage than their home is worth. Eight percent of borrowers, or 4 million, were underwater in October compared to the peak of 35 percent, or 18 million homes, in February 2011, according to data from Black Knight Financial Services, which tracks mortgage performance.

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Source: MarketWatch 12/13/2014

 

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Best Time To Sell: Winter

Best time to sell: The housing market doesn’t hibernate in the winter. Sellers who list and buyers who buy often find the winter season the most advantageous time to make a move in real estate, according to a new study by the real estate brokerage Redfin. The winter season officially takes place between Dec. 21 and March 20, and real estate professionals should be ready for a season that often brings in more focused and active sellers and buyers.

In an update to a two-year analysis it completed last year, Redfin researchers studied nationwide home listings, sales prices, and time-on-market data from 2010 through October 2014.                                              best time to sell

The study found that February is “historically the best month to list, with an average of 66 percent of homes listed then selling within 90 days,” according to Redfin’s research.

Even in cold weather cities – such as Boston and Chicago – researchers found that home sellers were better off listing their homes in the winter than during other seasons.

The winter tends to net sellers’ more than their asking price during the months of December, January, February, and March than listings from June through November. Listing during those four winter months has resulted in higher percentages of above-asking-price sales than listing during any months, other than April and May.

Redfin researchers found that in 2012 December listings were producing the highest percentage of above-asking sales for the entire year at 17 percent.

Researchers say the winter market is less competitive for sellers since many people tend to wait until the spring to list. The smaller inventory of active listings help sellers get more attention from buyers on their properties. Also, many large corporations often transfer employees or hire new ones early in the year, creating opportunities for winter sellers from very motivated purchasers.

Homes that are “priced right and show well can sell any time” of the year, says Nela Richardson, chief economist for Redfin. Winter buyers tend to be “serious buyers… Most people are not window-shopping” in December and January, like they do in the spring months, Richardson adds.

Sellers shouldn’t worry about the holidays hampering their chances either. A 2011 study conducted by R.com found that 60 percent of real estate professionals advise their sellers to list a home during the holidays because they believe it’s an opportune time to sell. Nearly 80 percent of the real estate professionals surveyed said that more serious buyers emerge during the holidays, and 61 percent say less competition from other properties makes it an ideal time to sell.

As for buyers, they may find winter a good time to make a move too. Sellers often are more flexible about negotiations over prices and terms than they would in the spring, real estate professionals say.

“People get more realistic at this time of year,” particularly if their homes hadn’t sold during the summer and fall, says Mary Bayat, a broker in Washington, D.C., and chairwoman-elect of the Northern Virginia Association of REALTORS®.

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Source: Los Angeles Times 12/14/2014

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Median Home Prices Remain 4.9% Below Peak

Since the housing crisis national median home prices have been on the rebound, but still haven’t caught up to the peak reached in the third quarter of 2005. At that point, national median home prices reached $227,633. Flash forward nine years later in the third quarter of 2014 and the national median home price remains 4.9 percent below the peak at $216,367, according to National Association of REALTORS®’ data.  mediam home prices

Still, many local markets already have surged ahead of previous peaks. In fact, 87 of the metro areas NAR tracks saw an increase in median home prices in the nine years since the national market’s price peak.

Most notably North Dakota markets, due to an oil and energy boom in the state, have seen median prices climb. In Bismarck, prices have surged 87.2 percent from the third quarter of 2005.

Many Texas markets also are performing above the 2005 peak for many of the same reasons. For example, the Austin-Round Rock area saw its median price in that timeframe climb 47.2 percent; the Houston-Baytown-Sugar Land area is up 39.6 percent; and Amarillo, Texas, is up 35.6 percent.

Several markets in the Midwest (Des Moines: +21.9% and Springfield, Ill.: +21.7%) and along the East Coast (Elmira, N.Y.: +43.2% and the Charlotte area: +31.6%) saw increases to median home prices since the nationwide peak.

On the other hand, many markets still have a long way to go to catch up to the peak. For example, areas in California, Arizona, Nevada, and Florida that were shaken by big drops during the housing crisis are still on the mend. For example, the Tampa-St. Petersburg-Clearwater, Fla., area still is posting prices down 32.1 percent compared to 2005; the Sacramento area is posting a 29.2 percent decrease; and the Phoenix-Mesa-Scottsdale area of Arizona is showing a 25.2 percent decrease in that timeframe.

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Source: NAR Economist Outlook Blog 12/11/2104

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Fannie, Freddie Gift a Foreclosure Free Holiday

Fannie Mae and Freddie Mac announced they plan to suspend evictions with foreclosure on single-family properties nationwide during the holidays, from Dec. 17, 2014 through Jan. 2, 2015.

Legal and administrative proceedings for evictions may continue, as well as pre-foreclosure activities, but families who are living in foreclosed homes will be allowed to remain in their homes during that time.                   foreclosure

Freddie Mac says that the foreclosure moratorium applies to all foreclosed occupied single-family homes as well as properties with two to four units that have mortgages owned or guaranteed by Freddie Mac.

“Today’s announcement will bring some holiday relief to borrowers who went through foreclosure and were preparing to move,” Chris Bowden, senior vice president of REO at Freddie Mac, said in a statement. “We strongly urge home owners with financial challenges to start the New Year by calling their mortgage servicer to explore one of the Freddie Mac workout solutions that have prevented over 1 million foreclosures since 2009.”

The foreclosure moratorium has become a holiday tradition, which Freddie Mac and Fannie Mae both have extended the past few holidays.

“As in previous years, we believe it is important to extend the timeline of help for struggling borrowers during the holidays,” says Joy Cianci, senior vice president of credit portfolio management for Fannie Mae. “If you are in trouble or facing foreclosure, reach out to Fannie Mae or your servicer today to get help. There are more options than ever before to avoid foreclosure. We want to help struggling borrowers whenever possible.”

Fannie Mae reports that it has completed more than 1.6 million loan workout sessions to help distressed families avoid foreclosure since 2009.

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Source: Freddie Mac, & Fannie Mae

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What Has Happened To Mortgage Demand ?

What Has Happened To Mortgage Demand ? Mortgage application activity surged last week — but that level of activity only helped it play catch-up, as it recovered by the amount it had dropped two weeks prior.                                           mortgage demand

Overall, mortgage applications, reflecting both refinances and home purchases, accelerated 7.3 percent week to week, the Mortgage Bankers Association reports in its weekly mortgage market activity, reflecting the week ending Dec. 5.

The rise was driven by an increase in refinancing applications, which surged 13 percent last week, the same amount it had dropped the previous week. That puts refinancing application volume back where it was two weeks ago, CNBC reports.

Meanwhile, applications for home purchases, viewed as a leading indicator of future home sales, also are mostly in a holding pattern. Home purchase applications ticked up slightly at 1 percent from the previous week, but continue to be 4 percent lower than last year’s rate — just as last week’s report.

“You’re looking at the first time I can ever remember in the last 33 years where you had interest rates fall all year long in a up cycle, and mortgage purchase applications have had a negative year-over-year print every single week,” Logan Mohtashami, a loan officer with AMC Lending Group in Irvine, Calif., told CNBC.

The 30-year fixed-rate mortgage rose to 4.11 percent last week from 4.08 percent, according to the MBA’s report.

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Source: CNBC 12/10/2014

 

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44% of Americans Optimistic Home Prices Will Rise

44 percent of Americans remain optimistic that home prices will rise in the next 12 months, while the share who say home prices will drop is down to 6 percent, the survey found.

The gap between those who say it’s a good time to buy a home and those who say it’s a good time to sell is growing larger. Sixty-eight percent of Americans say now is the time to buy, a month-over-month rise of 3 percentage points, according to Fannie Mae’s November 2014 National Housing Survey of 1,000 respondents. On the other hand, the number of Americans who say it’s a good time to sell fell 5 percentage points to 39 percent.home prices

Fannie’s latest survey results “support the 2014 trend of gradual — but often sporadic and unspectacular — improvement across a range of indicators measuring consumer attitudes toward housing,” says Doug Duncan, Fannie Mae’s chief economist. “This mirrors the uneven recovery in housing activity this year.”

Here’s one of the most encouraging signs for the housing market’s future: Consumers’ personal financial outlook is improving. Forty-six percent of Americans say they expect their personal financial situation to improve over the next 12 months. That’s close to the survey’s all-time high.

“We expect consumer attitudes toward housing to improve as the pickup in the overall economy lifts employment and income prospects,” Duncan says. “However, a sustained improvement in sentiment that could support a robust housing recovery, as policy support is removed, will require meaningful gains in household income. While such gains have so far been elusive, the strength in the November jobs report, which points to faster growth in labor income in the current quarter, marks a good start.”

Also, among the survey’s findings:

  • 45 percent of respondents say they believe mortgage rates will rise in the next 12 months (a drop of 3 percentage points from the previous month);
  • 53 percent say they expect rental prices to rise in the next 12 months (a rise of 4 percentage points from last month);
  • 62 percent say they would buy a home if they were going to move, while the share who say they’d rent rose to 31 percent;
  • 25 percent say their household income is significantly higher than it was 12 months ago (the same as last month);
  • 36 percent say their household expenses are significantly higher than they were 12 months ago (the same as last month).

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Source: Fannie Mae

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Home Ownership Still Viable Way To Wealth

The recent housing crisis has prompted questions over whether home ownership is still a viable way toward greater wealth in this country. Confidence in home ownership was shaken, and many have had to turn to renting (the number of renters has increased nearly 25 percent since the housing crisis). The home ownership rate, in turn, has fallen from a peak of nearly 70 percent in 2004 to a two-decade low of 64.3 percent more recently.

Still, researchers continue to find evidence that home ownership contributes to individual wealth. One example: The Center for Responsible Lending of Federal Reserve Board’s Survey of Consumer Finances recently found that median net worth of home owners in 2013 was $195,400, while at the same time the median net worth for renters was only $5,400.                  Home Ownership

“Home ownership long has been central to Americans’ ability to amass wealth; even with the substantial decline in wealth after the housing bust, the net worth of home owners over time has significantly outpaced that of renters, who tend as a group to accumulate little if any wealth,” according to a recent editorial in The New York Times.

The forced savings involved in home ownership is one big way home owners gather more wealth than renters. Home ownership requires buyers to save for a down payment and then, as owners, continue to save by paying down a portion of their mortgage principal each month. Renters could invest an amount equal to a down payment plus any savings from renting but most do not, according to a study by researchers at Harvard University’s Joint Center for Housing Studies, which recently was published as a chapter in a new JCHS book, “Homeownership Built to Last.”

“Most obviously, owners can accrue substantial wealth through appreciation in home prices, as evidenced by the outsized gains realized among those who first became owners in the 2003 and 2005 … as home prices took off,” the researchers note. “But fluctuations in home prices are a two-edged sword and a significant share of these gains were subsequently lost when the bottom fell out of the market.”

As such, researchers point out that the other mechanism by which owning is associated with increases in wealth is through the large increase in savings that occur when households make the move to owning. For example, those who first bought between 2007 and 2009, despite the ailing housing market, posted gains in net worth of $18,000 – more than triple the amount they held before purchasing a home, researchers found.

“We find that while there is no doubt that home ownership entails real financial risks, there continues to be strong support for the association between owning a home and accumulating wealth,” researchers note. “This relationship held even during the tumultuous period from 1999 to 2009, under less than ideal conditions. Importantly, while home ownership is associated with somewhat lower gains in wealth among minorities and lower-income households, these gains are on average still positive and substantial.”

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Source: The New York Times 11/29/2014

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First Time Buyers Myths

First Time Buyers’ Myths About Mortgages: While realtor.com® predicts 2015 will be the year for first time buyers — a predicted increase in job growth next year should drive Millennials back into the housing market — many of them have some misguided ideas about mortgages. Joel Gurman, vice president of mortgage banking at Quicken Loans, says first-time buyers often mistakenly believe these myths about mortgage lending: First Time Buyers

  • Lending requirements are still too tight.
  • It’s not necessary to check your credit before embarking on the mortgage process.
  • “Preapproved” and “prequalified” are interchangeable terms.
  • You should wait until after choosing a home before talking to a lender.
  • You must have a 20 percent down payment.
  • You should focus your home search solely on your wants.
  • You do not need a home inspection.

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Source: HousingWire 12/02/2014

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Tips To Help Keep Real Estate Negotiations On Track

There are a lot of things that could sink a deal, but during real estate negotiations, there are several factors that are important to keep it from running off course. Jose Perez of real estate services firm PCMS Consulting lists five things that come into play during a successful negotiation.                                 Real Estate Negotiations

  1. Home buyers and sellers should never negotiate directly.
  2. Try to minimize any surprises. Spelling out all of the factors involved in the transaction as early as possible can help get the ball rolling smoothly.
  3. Each party should be able to back up their position with logic and facts. Perez says there should be no late-game requests “just because.”
  4. Transparency is critical because it will avoid distrust and stalled deals.
  5. Don’t let egos get in the way of a deal closing. “When you bring your ego to the table, you’re negotiating against yourself,” Perez says.

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Source: RISMedia 12/01/2014

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The Housing Market 10 Year Review

The housing market has made some strides in recent months, but how has it performed compared to 10 years ago? Has the real estate market really dug itself out of the housing crisis?

The National Association of REALTORS® on its Economists’ Housing Market Outlook blog recently used the latest October housing data to compare existing home sales, median sales prices, and inventory figures to those from 10 years ago. Researchers used the 10-year October average, an average of the data from the past 10 Octobers, to gauge how current market conditions stack up.                                   housing market

Home sales

Leader: October 2014

The number of homes sold was higher in October 2014 than the 10-year October average. That particularly holds true in the Midwest and South. The Northeast and West were the only regions in the country to show current sales below the 10-year October average.

Home prices

Leader: October 2014

The median home price is currently higher than the 10-year October average in all regions except the Northeast. “The median price year-over-year percentage change shows home prices struggling from 2006 to 2011,” NAR economists note on the blog. “Since then home prices began to improve, however, price growth has been decelerating over the last year.” The best price percentage increases occurred in 2005, except in the West, which had its best gains in 2012, NAR economists note. For October 2014, the Midwest had the highest year-over-year price percentage change compared with the other three regions of the United States.

Inventory

Leader: 10-year October average

Home buyers had more options in the past. There was a higher inventory of homes for sale in the 10-year October average than what’s currently available. The nation saw the fastest pace of homes sold relative to inventory in 2004, while 2007 marked the slowest pace, with the months’ supply climbing to 10.6. The 10-year October average months’ supply is 7.2, compared with October 2014, which was at a 5.1 months’ supply.

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Source: NAR 12/02/2014

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