Wednesday, October 15, 2014

Where to Find the Biggest, Priciest New Homes

Depending on where you live, new single-family homes vary drastically on price, design features, building materials, and even financing, reveals a study from the National Association of Home Builders, using 2013 Census Bureau Survey of Construction data.
The priciest homes built for sale can be found in New England, where the median sales price of newly built single-family homes is $400,000. On the other hand, the least expensive new single-family homes can be found in the East South Central (which includes Alabama and Mississippi) and West South Central (Texas and Oklahoma) divisions, where median sales prices of new-homes are $221,000 and $223,000, respectively.
The price of the home doesn’t always correlate to its size. While New England had the priciest new homes, the median size of new homes in the region was fairly small, at 2,240 square feet.
The largest homes can be found in the South Atlantic division (Georgia and Florida), which has a median size of 2,596 square feet. Nationwide, the median square footage for a new home is 2,469 square feet.
"This recent analysis really illustrates the many different types of homes built throughout the country," says NAHB Chairman Kevin Kelly, a home builder. "It is fascinating to see how newly built homes can vary significantly not only in design features and building materials, but also in terms of lot size, home prices, and financing methods used, simply based on where a home is built."
Here are some additional findings from the report:
  • Outdoor features: Porches ranked as the most popular outdoor feature nationwide, dominating new-home construction in the West South Central and in the West. Decks are declining in popularity nationwide, but remain the most popular choice for single-family homes built in New England, where 63 percent of new-homes include one.
  • Prices per square foot: Per square foot, new homes are most affordable in the South, where the median sales price per square foot (excluding lot value) are $73 in the West South Central division and $84 per square foot in the South Atlantic division.
  • Siding preferences: Vinyl is the most commonly used primary siding material nationwide, with nearly 31 percent of new single-family homes started in 2013 using it, followed by brick (nearly 24 percent). Regionally, vinyl was the most popular in the Northeast and Midwest; brick most commonly used in the South; and stucco the most popular in the West.
  • Foundations and number of stories: Most homes in colder climates, like the Northeast and Midwest, have basements, unlike homes in the South that are usually built on a slab. Fifty-eight percent of new homes nationwide had two or more stories. The majority of homes in the Northeast are two stories; more than half of the homes started in 2013 in the West also have two or more stories. In the Midwest, however, more than half of new homes started have only one story.
  • Lot sizes: The New England region has some of the largest and priciest lots nationwide. The median lot size in New England is 22,863 square feet – more than three times larger than the national median of 8,712 square feet. The lots are also the priciest there, with the median lot value at $100,000 compared to the $40,000 nationwide median for spec-built homes. On the other hand, the East South Central division has the second-largest lots with a median size of 14,520 square feet, as well as the lowest median value at $30,000 per lot.
  • Financing: The majority of single-family homes nationwide are purchased using conventional loans, but regionally, there are differences among various financing options. Cash purchases are the most common in New England, while FHA-insured loans are the most prevalent in the West and South. VA-guaranteed loans are most common in the South Atlantic and Mountain divisions.
Source: National Association of Home Builders

Lower Rates Revive Refinancing Boom

As interest rates tumble, home owners are rushing to take advantage of the lowest rates of the year. Overall, mortgage applications rose 5.6 percent on a seasonally adjusted basis during the week ending Oct. 10, led by an 11 percent week-to-week surge in refinance applications, the Mortgage Bankers Association reports.
"Growing concerns about weak economic growth in Europe caused a flight to quality into U.S. assets last week, leading to sharp drops in interest rates,” says Mike Fratantoni, the MBA’s chief economist. “Mortgage rates for most loan products fell to their lowest level since June 2013. Refinance application volume reached the highest level since June 2014 as a result."
The 30-year fixed-rate mortgage dropped to a nationwide average of 4.20 percent last week, from 4.30 percent the week earlier, the MBA reports. However, average mortgage rates reportedly have dropped even more this week, with many lenders reporting a 4 percent average as of Tuesday and some even offering 3.875 percent to creditworthy borrowers, according to Mortgage News Daily.
Low rates, however, aren’t spurring greater homebuying activity. Mortgage applications for home purchases, viewed as a gauge of future home buying, dropped 1 percent last week. Purchase applications are 4 percent lower than they were for the same week one year ago, the MBA reports.
"Purchase application volume continues to run behind last year's level, but to a lesser degree,” Fratantoni says. “We continue to expect that the strengthening job market should lead to an increase in purchase activity next year.”
Source: “Mortgage Rate Drop Sparks Refinancing Boomlet,” CNBC (Oct. 15, 2014)

Despite Price Gains, Affordability Still In Play

Despite the jump in the latest median single-family home price — $220,600, up from around $160,000 just a few years ago, according to the National Association of REALTORS® — the large price gains are not denting affordability.
Even with home prices climbing, home ownership remains affordable because low mortgage rates have helped to offset the price gains, writes Lawrence Yun, NAR’s chief economist, at NAR’s Economists’ Outlook blog. Also, incomes have risen slightly as the unemployment rate has fallen, which also has helped to improve the affordability picture.
A home buyer buying a median-priced home at the current mortgage rate and having a 20 percent down payment would make a monthly payment of about $867. That is 15.9 percent of monthly gross family income, compared to an average of 21.3 percent over the past 30 years, Yun notes.
Source: “Affordability in Monthly Mortgage Payments,” National Association of REALTORS® Economists’ Outlook blog (Oct. 14, 2014)

Saturday, October 11, 2014

30-Year Mortgage Falls Back to Yearly Lows

Borrowing costs were down once again this week, giving home buyers another opportunity to lock in some of the lowest rates of the year.
Freddie Mac reported the following national mortgage rate averages for the week ending Oct. 9:
  • 30-year fixed-rate mortgages: averaged 4.12 percent, with an average 0.5 point, dropping from last week’s 4.19 percent average. Last year at this time, 30-year rates averaged 4.23 percent.
  • 15-year fixed-rate mortgages: averaged 3.30 percent, with an average 0.5 pont, dropping from last week’s 3.36 percent average. Last year at this time, 15-year rates averaged 3.31 percent.
  • 5-year hybrid adjustable-rate mortgages: averaged 3.05 percent, with an average 0.5 point, dropping from last week’s 3.06 percent average. A year ago, 5-year ARMs averaged 3.05 percent.
  • 1-year ARMs: averaged 2.42 percent, with an average 0.4 point, holding the same average as last week. A year ago, 1-year ARMs averaged 2.64 percent.
Source: Freddie Mac

Builders: Tight Credit Caused 18,700 Lost Sales

Tight mortgage lending standards continue to drastically curtail new-home sales and are causing a growing number of deals to be lost, according to a survey by the National Association of Home Builders.
"While housing has seen some positive growth throughout the year, there is no denying that tight credit conditions are hindering a full, healthy housing recovery," says NAHB Chief Economist David Crowe. "These persistently tight mortgage credit standards continue to limit the number of creditworthy borrowers, particularly younger families and first-time home buyers, from entering the housing market."
Eighty-three percent of builders say they have lost sales over the last six months due to buyers not qualifying for a mortgage. The NAHB estimates that those sales losses translate to about 18,700 new-home sales lost because buyers were unable to qualify for mortgages.
"We’ve seen banks and regulators swing the pendulum too far and create an environment where lending standards are too restrictive," says Kevin Kelly, NAHB chair. "We want a return to reasonable lending standards where qualified borrowers are able to obtain a mortgage and create the American dream for themselves."
Last week, media outlets reported that former Federal Reserve Chair Ben S. Bernanke, who has a net worth of at least $1.1 million, said that he couldn’t refinance his home in Washington due to the restrictive mortgage standards. Because of his recent job switch from chairman of the Federal Reserve to a fellow at the Brookings Institution, lenders may have deemed him as a credit risk .
Mortgage standards are at their toughest levels since at least 1998, according to a new index by CoreLogic. Credit availability for all home loans as of May was about half of what it was in the late 1990s, when the housing market was in recovery-mode similar to it is today, according to CoreLogic’s Housing Credit Index.
“It is clear that credit is quite tight relative to normal,” says Mark Fleming, CoreLogic’s chief economist. Fleming says that banks shouldn’t revert to the overly loose credit standards from the housing bubble, but he believes more lenders could expand credit like they did in the late 1990s, while still being cautious with their lending.
Source: National Association of Home Builders and “Tightest Credit Market in 16 Years Rejects Bernanke’s Bid,” Bloomberg (Oct. 8, 2014)

3 Industry Trends to Watch This Fall

The housing market is expected to heat up this fall, despite buyers showing greater signs of being conservative in their home purchases.
Bankrate.com recently highlighted some of the following trends to watch this fall in the nation’s real estate market:
1. An overall pick up in housing activity. Low inventories of homes for sale in many markets have been blamed for cooling the summer months more than expected. However, more inventories are hitting U.S. markets, which could unleash some pent-up demand among buyers.
At the end of August, housing inventory was at 2.31 million existing homes available for sale, which represents a 5.5-month supply of homes, according to the National Association of REALTORS®. That's 4.5 percent higher than a year ago.
When buyers have greater options in their home shopping, they may be more likely to finally jump off the sidelines, says Jonathan Corr, president and chief operating officer for Ellie Mae. "The housing market is going to be a function of the economy," Corr says. "I think we are going to see steady growth in the coming months."
2. Buyers are more cautious. In what most housing experts describe as a “seller’s market,” buyers are showing signs of getting more conservative with their spending, Pava Leyrer, director of training for Northern Mortgage Services in Grandville, Mich., told Bankrate.com. “They are sticking to their budgets,” she says.
The past housing crisis has prompted buyers – particularly the younger generation -- to be more cautious, as they’ve learned that home prices don’t always appreciate. The younger generation views a house as a place to live and not the great investment that their parents once considered, says Daren Blomquist, vice president at RealtyTrac. Forty percent of the millennial generation believe buying a home is a safe investment with great potential, compared to about 50 percent of boomers, according to a survey by Fannie Mae National Housing Survey.
3. Mortgage rates will climb – really. Housing experts warned that mortgage rates would rise this year, but those forecasts have largely been wrong to this point. However, the Mortgage Bankers Association expects the 30-year fixed-rate mortgage to start its climb to 4.5 percent by the fourth quarter, and continue to gradually climb and reach 5 percent by mid-2015. That’s prompted some lenders and real estate professionals to urge their buyers to lock in a mortgage rate now, while they are still at yearly lows.
View Bankrate.com’s full list of housing trends.
Source: “5 Housing Trends for Fall 2014,” Bankrate.com (October 2014)

Saturday, October 4, 2014

30-Year Mortgage Sinks to 4.19% This Week

Mortgage rates are falling, despite the cuts to the Federal Reserve's monthly bond purchases that were expected to send long-term rates higher. The 30-year fixed-rate mortgage, the most popular choice among home buyers, averaged 4.19 percent this week, down from a 4.53 percent average at the start of the year, Freddie Mac reports in its weekly mortgage market survey.
Freddie Mac reports the following national averages with mortgage rates for the week ending Oct. 2:
  • 30-year fixed-rate mortgages: averaged 4.19 percent, with an average 0.4 point, dropping from last week’s 4.20 percent average. Last year at this time, 30-year rates averaged 4.22 percent.
  • 15-year fixed-rate mortgages: averaged 3.36 percent, with an average 0.5 point, holding the same average as last week. A year ago, 15-year rates averaged 3.29 percent.
  • 5-year hybrid adjustable-rate mortgages: averaged 3.06 percent, with an average 0.5 point, dropping from last week’s 3.08 percent average. Last year at this time, 5-year ARMs averaged 3.05 percent.
  • 1-year ARMs: averaged 2.42 percent, with an average 0.4 point, dropping from last week’s 2.43 percent average. A year ago, 1-year ARMs averaged 2.64 percent.
Source: Freddie Mac (Oct. 2, 2014)