Monthly Archives: December 2016

Peering into the Future of Housing: Predictions for 2017

Source: RISMedia

WalletHub recently announced its 10 financial predictions for 2017, forecasting several economic to-bes in the coming year. Many have implications for housing, including:

Two Rate Hikes
WalletHub is seeing double in 2017, pegging the Federal Reserve to raise the key rate twice—a quarter point each—to bring the target rate to 1.00-1.25 percent. Interest rates, including for mortgages, will follow suit. (Case in point: credit card interest rates went up 24 basis points in the beginning of 2016, after the Fed raised the key rate 25 basis points in December 2015.)

…but Higher Home Sales
WalletHub forecasts existing-home sales to hit 6 million next year, fueled by—wait for it—rising rates.

“If interest rates rise slowly, we may see a nice bump in home sales and mortgage availability as buyers see low interest rates slowly fading and banks have higher rates to buffer against risk,” Dr. Robert Eyler, director of the Center for Regional Economic Analysis at Sonoma State University, told WalletHub.

WalletHub’s estimate is more optimistic than the 5.52 million offered by the National Association of REALTORS® (NAR).

More Time for the CFPB
WalletHub senses the Consumer Financial Protection Bureau (CFPB), which was ruled unconstitutional by a federal appeals court this fall, won’t get the boot, even with the “You’re fired” administration taking office.

“[The CFPB’s] good work will be undercut by some politicians, even further than it already has been,” Jeffrey Frankel, professor at the Belfer Center for Science and International Affairs at Harvard University, told WalletHub. “I hope and guess that it will not be abolished outright.”

…and for Credit Scores to Improve
WalletHub has a sunny outlook for credit scores, anticipating the average score to rise to 675 from 668 next year. The reason? Millions of homeowners will see foreclosures and short sales—black marks from the crash—drop off their credit reports, helping their case for a new mortgage.

To learn what else WalletHub sees in its crystal ball, click here.

Source: WalletHub

For the latest real estate news and trends, bookmark RISMedia.com.

A Non-Effect? Would-Be Homebuyers Unshaken by Election

Source: RISMedia

Our real estate needs are just as they were prior to the election—the demand’s there, even with the uncertainty of what’s to come.

That’s according to a just-released report by realtor.com®, which surveyed its homebuyer users’ perceptions toward housing in the wake of the election. Seventy-nine percent of those surveyed said the election had “no impact” on their plans to buy a home, and, in fact, 10 percent said they were more likely to buy a home now that the new administration has been determined—distributed primarily among those aged 45-64, men and those in red states. The opposite (those under 45, women and those in blue states) said they were less likely to buy, with millennials posting the highest percentage.

The non-effect of the election is also reflected in the traffic patterns on realtor.com—according to the report, listing views on the site have tracked back up to 15 percent since the election, in line with the growth experienced over the summer. Listing views tend to lead demand.

Traffic from certain areas abroad, as well—which reflects international demand—fell post-election, notably traffic from Hong Kong, which dropped 23.5 percent year-over-year, India, 21.0 percent, and the UK, 7.7 percent. International traffic picked up, though, from Russia (81.7 percent), Colombia (72.1 percent) and Spain (61.6 percent).

The more impactful post-election effect—the spike in mortgage rates—could diminish buying power. According to the report, mortgage payments have increased by 7 percent since the election, totaling $750 more in interest each year for a median-priced home.

The takeaway? Would-be homebuyers are forging ahead with their plans to purchase, unshaken by the outcome of the election.

For more information, please visit www.realtor.com.

For the latest real estate news and trends, bookmark RISMedia.com.

What Will a Trump Administration Mean to the Housing Finance Industry?

Source: RISMedia

After Donald Trump’s stunning victory on Election Day, many of us are wondering what his election might mean to the residential mortgage industry, especially considering the Trump team provided few details on housing during the campaign. The following are some perspectives:

Reduced Regulations
This is the one area where the Trump campaign did provide some indication of what the president-elect would do. Trump’s transition team has recently indicated that it would like to see a full repeal of the Dodd-Frank law, which would include the abolishment of the CFPB.  Many people think this is unlikely, but most in the mortgage industry would welcome a broad rollback of regulations. Reduced regulation would provide a number of things, some good and some not so good, depending on where you work and where you stand on issues such as subprime lending.

First, reducing or eliminating the detrimental usage of enforcement tools such as the False Claims Act could lure large lenders back to the FHA program. It would also cause many lenders to reduce underwriting overlays and open the credit box, which is needed. Secondly, reducing regulation could reverse the trend of swelling loan manufacturing costs by lowering mortgage origination expenditures associated with compliance. In theory, this would improve pricing for consumers. Finally, reducing regulations could spur a resurgence of subprime and Alt-A lending. This could be good or bad, depending on who you ask.

Subprime lending has all but vanished from the mortgage market, leaving consumers with less-than-stellar credit with few options. The reemergence of subprime lending would definitely increase overall mortgage volumes, but it could also lead to increased foreclosures and larger and more frequent real estate bubbles. Large lenders, who will be unlikely to move towards subprime, will probably counter by creating products that leverage their ability to hold certain proprietary loans on their balance sheets. This would obviously favor larger depository institutions that have the capacity to hold loans on their books. In terms of marketshare, reduced regulations will also favor big banks.

Higher Interest Rates
Higher interest rates were already in motion before Trump was elected, but the upward trend accelerated in the days following, although it’s not yet clear why. Economists generally believe that most of Trump’s stated ideas on immigration, trade, infrastructure, and tax rates will lead to bigger deficits and higher inflation. While a deficit-hating Congress could keep some of this in check, inflation and deficits equate to sharply higher interest rates.

This obviously would not be good for mortgage originations and could lead to further consolidations in the industry. Higher interest rates also favor big money-center banks, which have diversified income streams and mortgage servicing units that will see their MSR values increase. Lenders with deep pockets are in the best position to weather any downturn.

GSE Reform
This, in my view, is the biggest wild card. Some believe that Rep. Jeb Hensarling, R-Texas, chairman of the House Financial Services Committee, finally has an ally in the White House who will support his desire to dismantle Fannie Mae and Freddie Mac and eliminate any further government guarantees of conventional mortgage loans. This would be catastrophic for mortgage lending in America, causing thousands of independent lenders to go out of business and making mortgage loans available only to a relatively miniscule segment of our population. But others believe the GSEs provide billions of dollars to the Treasury each year and that Congress would never support a policy that would harm homeowners and turn off the spigot of free cash to the government.

It is difficult to anticipate how this one will play out. If Fannie Mae and/or Freddie Mac need to take a draw from the Treasury, which is likely to happen at some point, some members of Congress might see that as an indicator that it is time for the government to get out of the mortgage business. Let’s hope that cooler heads will prevail. Reforming the GSEs and creating a permanent source of liquidity for the mortgage lending industry would be good for everyone, especially independent lenders. Trump is a real estate man; he may see homeownership as a way to build communities and support our economy. He’s not someone who believes that most of us should be renters.

There is no doubt that there are a lot of questions that will remain unanswered in the coming weeks and months. What will be Trump’s position on affordable lending or FHA reform? Will he take a page from the Bush Administration and see homeownership as a vehicle to engage with minority and other underserved communities? His appointments to key housing positions at HUD and inside the White House will begin to give us some indication of what is likely to occur.

Gary Acosta is the CEO of the National Association of Hispanic Real Estate Professionals (NAHREP) and co-founder of The Mortgage Collaborative.

For more information, please visit www.nahrep.org.

For the latest real estate news, trends and marketing, be sure to bookmark rismedia.com.

Equity Stacked: Homeowner Wealth on the Rise

Source: RISMedia

Homes in markets across the nation have regained value since the recession, affording homeowners the ability, once again, to accumulate wealth through equity—or become, as I like to call it, “equity stacked.”

Two recent reports confirm the trend: one, from S&P/CoreLogic; the other by ATTOM Data Solutions, owner of RealtyTrac.

Homeowner wealth, according to S&P, has more than doubled since 2011, expanding on a national scale to $12.7 trillion from $6.1 trillion, in tandem with the 40 percent boost in the value of single-family housing. For the Average Joe next door, $12.7 trillion breaks down to an average $11,000—or $30,000 if he lives in California, Oregon or Washington (West Coast…shocking!) The upward momentum in equity, S&P cites, has positive economic implications, as well: more than $100 billion in consumer spending, which includes dropping stacks (see what I did there?) on home improvements.

The distribution of homeowners who are “equity rich,” as ATTOM defines—those with a loan-to-value ratio of 50 percent or less—has grown, in addition, to 13.1 million, or roughly one-quarter of the homeowner population in the U.S. The distribution of homeowners who are “seriously underwater,” at the same time, has gone down to 6 million—a far cry from the 2012 peak of 12.8 million.

Why are more homeowners joining the “1 percent” of equity rich? They’re extending their stay, says Daren Blomquist, senior vice president at ATTOM.

“Close to one in every five U.S. homeowners with a mortgage is now equity rich thanks to a combination of rising home prices and lengthening homeownership tenures,” Blomquist says. “Median home prices increased on a year-over-year basis for the 18th consecutive quarter in Q3 2016, and homeowners who sold in the third quarter had owned their home an average of 7.94 years—a new high in our data and substantially higher than the average homeownership tenure of 4.26 years pre-recession. As homeowners stay in their homes longer before moving up, they are amassing more home equity wealth.”

The equity rich, according to ATTOM’s report, are concentrated on—hold your breath—the West Coast, in Honolulu (39.3 percent), San Francisco (49.8 percent) and San Jose (55.7 percent). In San Fran and San Jose, the amount of equity rich residents has gone up over 10 percent in the last year.

Dual forces, as indicated in both the S&P and ATTOM reports, are at work here. The ongoing trend toward recovering prices, and activity in the market to match, is turning more homeowners into equity stackers, flush with wealth for the future—and adding more to the “1 percent.” Stack on!

Suzanne De Vita is RISMedia’s online news editor. Email her your real estate news ideas atsdevita@rismedia.com.