Category: Residential

It’s official: Appraisals are no longer required on some home sales of $400,000 and under

Regulators raise appraisal threshold for first time since 1994.

Beginning Oct. 9, 2019, certain home sales of $400,000 and under will no longer require an appraisal.

Under previous rules that have been in place since 1994, appraisals were not required on all home sales of $250,000 and below, but last year, federal regulators proposed increasing the appraisal threshold for the first time in 25 years.

Last November, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency, and the Board of Governors of the Federal Reserve released a proposal to increase the appraisal requirement from $250,000 to $400,000, citing the home price appreciation that’s taken place since the threshold was last increased in 1994.

Last month, the agencies all approved the rule. And Tuesday, the rule was published in the Federal Register, making the appraisal threshold increase effective the following day, Oct. 9, 2019.

That means that certain home sales of $400,000 and below will no longer require an appraisal as of Oct. 9, 2019.

Now, it’s important to note that the new rules do not apply to loans wholly or partially insured or guaranteed by, or eligible for sale to, a government agency or government-sponsored agency.

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Zillow: Over half of renters blame student debt for delay in buying a home

Almost a third of Gen Z and Millennials are turned down for home financing due to debt

In a paper released at the beginning of this year, the Federal Reserve estimated that about 20% of the decline in homeownership among young adults could be attributed to increased student loan debts since 2005.

Based on the 2019 Zillow Group Report on Consumer Housing Trends released on Monday, that percentage may be a little low.

The report surveyed 13,000 U.S. household decision-makers about their homes, including how they search for them, pay for them and what challenges they encounter along the way. Among these findings, there was a recurrent topic of debt holding back potential buyers. From medical and credit card debt to student loans, an increasing amount of Americans are putting off buying a home.

“More than two-thirds of renters have debt, and about a quarter of renters and homebuyers said their debt caused them to be denied either a rental agreement or a mortgage at some point. That impact was most commonly reported by those with medical debt, which has a unique capacity to bust budgets,” the report stated.

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Borrowers in the Multifamily Sector Are Increasingly Looking for CMBS Loans

CMBS shops are currently offering higher leverage and slightly lower interest rates than agency lenders.

CMBS lenders may be gaining in popularity with multifamily borrowers as Freddie Mac and Fannie Mae slow down in the race to make loans on apartment properties.

“Freddie Mac and Fannie Mae increased the borrower spreads dramatically,” says Mitchell W. Kiffe, co-head of national production for the debt & structured finance group at CBRE Capital Markets. “That creates an opportunity for other lenders.”

Long-term interest rates have dropped sharply in 2019. Economists have begun to seriously worry about a potential slowdown in the global economy. Federal Reserve officials no longer plan to raise their benchmark interest rates in 2019. Instead they have cut rates to give the economy a boost.

Lower interest rates have created a lot of new business for lenders. And the competition to make deals has changed the balance of power between different segments of the market.

“I have members who might be talking to banks who might not have been talking to banks until recently… People have been exploring CMBS,” says Dave Borsos, vice president of capital markets for the National Multifamily Housing Council (NMHC), an industry association.

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How rate sensitive are borrowers? Slight uptick in interest rates leads to decline in mortgage applications

MBA report shows mortgage applications fell in last week

Are mortgage borrowers sensitive to small movements in interest rates? Recent data shows that refinances are on the rise thanks to the low interest rates of the last few weeks, but what happens if mortgage rates start to move back up? Will that demand dry up just as quickly as it appeared, even if rates only pick up by a few basis points?

It appears that may be the case, as new data from the Mortgage Bankers Association shows that mortgage applications fell for the second straight week as mortgage rates increased for the first time in more than a month.

According to the MBA’s Weekly Mortgage Applications Survey for the week ending Aug. 23, 2019, mortgage applications fell by 6.2% on a seasonally adjusted basis from one week earlier.

On an unadjusted basis, the Market Composite Index, a measure of mortgage loan application volume, fell 7% compared with the previous week.

Interestingly, the decline was seen across both purchase and refinance applications, perhaps indicating that borrowers, especially those looking to refinance, are paying close attention to mortgage rates.

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PMI gains as fewer first-time homebuyers use FHA

Most young buyers aren’t waiting to save for a 20% down payment

The share of first-time homebuyers using conventional mortgages that require private mortgage insurance, or PMI, to compensate for low down payments increased in the second quarter while the use of FHA loans fell.

Fannie Mae and Freddie Mac typically require buyers to purchase PMI if they’re using down payments smaller than 20% of a home’s value. While PMI allows buyers to get into a property earlier than if they waited to save for a larger down payment, it can add hundreds of dollars to a monthly mortgage bill. FHA loans also charge a monthly insurance premium which can be lower than PMI, depending on a borrower’s credit score.

The share of first timers using conventional mortgages with low down payments requiring PMI rose 6% from a year earlier, while the share using FHA mortgages fell 5%, according to a report from Genworth, one of the nation’s largest providers of PMI.

Overall, purchases of single-family homes by first-time buyers dropped 4% to 559,000 in the second quarter, the report said. The total share of first timers using some form of low down payment mortgages was about 80%, Genworth said.

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Capital Economics: Expect home prices to increase as mortgage rates drop

Forecasts a 3% increase in prices by end of year

For the last two weeks Freddie Mac reported 30-year, fixed-rate mortgages averaging 3.6%, a three-year low.

For reference, the 2018 average from this time last year sat at 4.53%. These low rates, combined with a low housing inventory will lead to an increase in home prices, Capital Economics said in a report on Monday. The report predicts a 3% increase.

“As with any other asset, lower interest rates will act to boost home values,” Capital Economics reported. “Other things equal, with a given income and debt-to-income (DTI) ratio, a lower interest rate raises the amount a household can spend on a home.”

At the beginning of the year, Capital Economics originally predicted a rise in prices of 2% over 2019. The economic research consultancy admits it did not forsee the 30-year rate dropping below 4% this year. With the magnitude of the drop, Capital Economics is now edging home prices up a percentage point from its original forecast.

The report goes on to state that there are many more factors that play into home prices, and concedes that the previous relationship between house price growth and changes in interest rates is weak.

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Build to Rent Still Booming

As homeownership continues to fall, the single-family rental market is picking up steam.

Traditionally, single-family homes were just that: residences for homeowners. But times are changing. Tour a single-family development and you may discover that all the occupants are renters. What’s afoot?

Changes in the tax code have made owning less advantageous, and consumers are no longer buying into the American dream of homeownership. Those two trends are fueling the growth of what’s known as build-to-rent (B2R). Today B2R is one of the fastest-growing sectors of the U.S. housing market, and demand from renters and investors is exceeding supply.

A popular new real estate asset class, B2R is attracting niche players and such high-profile operators as Toll Brothers and Lennar, which recently announced new investments in the space.

Statistics Tell The Story

· More than one-third (39%) of all U.S. rental properties are single-family homes – the highest percentage since 1965 – while homeownership is at an all-time low.
· About 16 million rental properties today are single-family homes, and another 13 million rental households are expected to be formed by 2030, the Urban Institute reports.

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Fannie Mae: One-third of homebuyers didn’t shop around for a mortgage

Borrowers are “leaving money on the table,” Fannie’s Duncan says

More than a third of 2018 homebuyers say they did not shop around before selecting their mortgage lender, according to Doug Duncan, chief economist of Fannie Mae.

“Although homebuyers who received only one quote didn’t usually express regret, most still reported trying to negotiate mortgage terms with somewhat less success than those who did shop around,” Duncan said. “By not shopping around to give themselves leverage when negotiating their mortgage, some homebuyers are leaving money on the table.”

The biggest reason people gave for not shopping around was a pre-existing relationship with a lender, he said.

“Many recent homebuyers who received only one quote reported doing so because they were more comfortable with that particular lender,” Duncan said. “Non-shoppers also reported much less concern with competitive terms when selecting a lender, citing other non-financial priorities, such as customer service/responsiveness and having a preexisting account with a lending institution.”

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Millennials want to buy homes, but their wallets are saying no

First-time homebuyers made up 42% of spring’s home-shoppers

As summertime heats up, it’s safe to say that spring has officially come to an end. But while its cooler days may be behind us, data says its uptick in home buying interest is here to stay.

According to a survey from Realtor.com, this spring was filled with home-buying interest, especially from the nation’s first-time buyers.

This group of homebuyers, who often tend to be Millennials, made up 42% of spring’s home-shoppers.

“Based on our user responses, just under half of all home shoppers this spring were searching for their first home, and many of them were aging Millennials likely driven by life events such as moving in with a partner, getting married or starting a family,” Realtor.com writes. “It may come as a surprise to some people that Millennials are looking to small towns or suburbs, but when it comes to buying a home, Millennials aren’t that different than other generations.”

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U.S. Pending Home Sales Increase by Most in Three Months

The index for pending home sales rose by 2.8 percent month-over-month in June.

Bloomberg)—Contract signings to purchase previously owned U.S. homes rose in June by the most in three months, indicating demand may pick up with the help of lower mortgage rates and steady job growth.

The index of pending home sales increased 2.8% from the previous month, exceeding the most optimistic forecast in a Bloomberg survey of economists, data out Tuesday from the National Association of Realtors in Washington showed. Still, contract signings were down 0.6% from June of last year on an unadjusted basis.

Key Insights
The gain in contract signings is a welcome sign for the housing market as it struggles to accelerate despite a recent dip in mortgage rates. Still, elevated prices and limited supply may constrain growth even as the Federal Reserve is expected to lower borrowing costs for the first time in a decade.

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