CoreLogic recently released their 2015 2nd Quarter Equity Report which revealed that 759,000 properties had regained equity in the last quarter. That means that 91% of all mortgaged properties (approximately 45.9 million) are now in a positive equity position. Anand Nallathambi, president and CEO of CoreLogic, reported:
“For much of the country, the negative equity epidemic is lifting. The biggest reason for this improvement has been the relentless rise in home prices over the past three years which reflects increasing money flows into housing and a lack of housing stock in many markets.”
Obviously, this is great news for the financial situation of many homeowners.
But, do they realize their equity position has changed?
A recent study by Fannie Mae suggests that many homeowners are unaware that their equity position has changed…in some cases dramatically. For example, their study showed that 23% of Americans still believe their home is in a negative equity position when, in actuality, only 9% of homes are in that position. The study also revealed that, though 69% of homes had “significant equity” (greater than 20%), only 37% of Americans realize it. This means that 32% of Americans with a mortgage fail to realize the opportune situation they are in. With a sizeable equity position, many homeowners could easily move into a housing situation that better meets their current needs (moving to a larger home or downsizing). Fannie Mae spoke out on this issue in their report:
“Homeowners who underestimate their homes’ values not only underestimate their home equity, they also likely underestimate 1) how large a down payment they could make with their home equity, 2) their chances of qualifying for mortgages, and, therefore, 3) their opportunities for selling their current homes and for buying different homes.”
Every homeowner should be aware of the true equity in their house and also realize the opportunities that go along with it. If you are unsure of the savings you currently have built up in your home, contact a real estate professional to help ascertain that number. You may be surprised.
Effective Oct. 3, regulations aim to protect consumers, but they prompt concerns in industry
Mortgage lenders and real-estate agents are bracing for the Oct. 3 implementation of a five-year-old law that has forced them to overhaul the way they process sales.
The changes, prompted by the 2010 Dodd-Frank financial law, are meant to help consumers better understand the terms of their mortgages before they sign the dotted line.
But some in the real-estate industry worry that the rest of the year could be marked by delayed closings, frustrated borrowers and confused real-estate professionals as they adjust to the new rules.
At heart, the changes simplify forms long required by the federal government that disclose loan terms, such as a mortgage’s interest rate and prepayment penalties. The rules also require that consumers see the final terms at least three business days before closing, a change meant to ensure they have time to understand what they’re agreeing to.
The reform is meant to prevent what occurred during the housing boom, when some borrowers agreed to loan terms they later found they didn’t understand, such as low initial interest rates known as teasers, loan balances that could increase over time and balloon payments due after a certain number of years.
Few lenders now make loans with the most exotic loan terms, but the Consumer Financial Protection Bureau, which is enforcing the changes, says the new forms will ensure borrowers have a chance to understand what they’re getting into before they sign.
Lenders have spent billions of dollars in technology-system changes and training to get ready for the changeover, said David Stevens, president of the Mortgage Bankers Association, a lender trade group.
“It is without question the single largest implementation challenge that the broad industry has faced since Dodd-Frank,” said Mr. Stevens. “It’s massive. It involves every real-estate agent, settlement-service provider, every consumer, mortgage originator, everyone.”
Quicken Loans Inc., the third-largest U.S. mortgage lender by volume according to Inside Mortgage Finance, has had about 350 employees working for 17 months to change over to the new federally mandated processes and forms, said Chief Executive Bill Emerson.
“Clearly if we weren’t doing that, we’d have folks deployed on other projects, maybe things that would be innovative. But there’s no choice. You have to do it,” said Mr. Emerson, who said Quicken is prepared for the change.
Despite having a long time to prepare, some in the real-estate industry are worried that technology snafus could crop up in the days after implementation. The National Association of Realtors is advising real-estate agents to extend contracts by around 15 days in anticipation of delays in some home closings.
Some changes to the closing terms—such as if a home buyer wanted to change from a fixed-rate mortgage to one with an adjustable rate—cause the three-day period to reset.
Since home transactions often are made together, as home buyers sell their old homes, a delay in one home closing can cause a ripple effect.
The National Association of Realtors has hosted dozens of webinars, conference calls and training sessions with real-estate agents to get them ready for the changes, said NAR President Chris Polychron. “Are there going to be some blips? Yeah. Are there going to be some delays? Absolutely,” Mr. Polychron said.
Bert Bevis, a real-estate agent in Tallahassee, Fla., said he has taken a few classes to prepare for the changes but is still worried some agents or vendors he works with might not be prepared. He said borrowers, accustomed to being able to make last-minute changes to a transaction, might get frustrated at closing delays.
“If they dillydally, they’re going to get their closing delayed. That’s the missing link. Nobody’s educating the consumer yet,” Mr. Bevis said.
Mortgage companies have known for years the change is coming. The CFPB began designing the new rules and forms in February 2011, months after the Dodd-Frank reform was passed, and issued the final rules nearly two years ago. It intended to implement the rules on Aug. 1, but some lenders and others in the real-estate industry thought they weren’t ready and were worried that the changes could disrupt transactions during the summer home selling season. A bipartisan group of congressmen also urged the CFPB to postpone the date, and the CFPB delayed the implementation date to October.
Now, the CFPB says it will use discretion in not bringing penalties against lenders as long as it believes the lender is making a good-faith effort to comply with the new rules.
Kevin Leibowitz, president of mortgage broker Grayton Mortgage Inc. in New York, said he is still planning to keep his 30-day timeline for getting mortgages closed, but mentally is going to build in an extra week to deal with expected snafus.
“If I’m planning to get a loan closed by Nov. 5, I’m going to pretend closing day is Oct. 28,” Mr. Leibowitz said. “I’m not expecting problems, but you don’t know what you don’t know.”
By JOE LIGHT, wsj.com
If you are debating purchasing a home right now, you are surely getting a lot of advice. Though your friends and family will have your best interest at heart, they may not be fully aware of your needs and what is currently happening in real estate. Let’s look at whether or not now is actually a good time for you to buy a home.
There are 3 questions you should ask before purchasing in today’s market:
1. Why am I buying a home in the first place?
This truly is the most important question to answer. Forget the finances for a minute. Why did you even begin to consider purchasing a home? For most, the reason has nothing to do with finances. A study by the Joint Center for Housing Studies at Harvard University reveals that the four major reasons people buy a home have nothing to do with money:
- A good place to raise children and for them to get a good education
- A place where you and your family feel safe
- More space for you and your family
- Control of that space
What non-financial benefits will you and your family derive from owning a home? The answer to that question should be the biggest reason you decide to purchase or not.
2. Where are home values headed?
When looking at future housing values, Home Price Expectation Survey provides a fair assessment. Every quarter,Pulsenomics surveys a nationwide panel of over 100 economists, real estate experts and investment & market strategists about where prices are headed over the next five years. They then average the projections of all 100+ experts into a single number. Here is what the experts projected in the latest survey:
- Home values will appreciate by 4.1% in 2015.
- The cumulative appreciation will be 18.1% by 2019.
- Even the experts making up the most bearish quartile of the survey still are projecting a cumulative appreciation of over 10.5% by 2019.
So what does that really mean for you and your family?
The chart below was made using the Home Price Expectation Survey’s predictions: If the experts are right and you were to purchase a home by January 2016 for $250,000, that home would appreciate by over $34,000 over the next four years! As we have reported before, homeownership is one of the best ways to build your family’s wealth.
3. Where are mortgage interest rates headed?
A buyer must be concerned about more than just prices. The ‘long term cost’ of a home can be dramatically impacted by an increase in mortgage rates. The Mortgage Bankers Association (MBA), the National Association of Realtors and Freddie Mac have all projected that mortgage interest rates will increase by approximately one full percentage over the next twelve months as you can see in the chart below:
Only you and your family will know for certain if now is the right time to purchase a home. Answering these questions will help you make that decision.
Solid 7% gain in refis aid flagging housing market
Mortgage applications increased 3.6% from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending Aug. 14, 2015.
The Market Composite Index, a measure of mortgage loan application volume, increased 3.6% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 3% compared with the previous week.
The Refinance Index increased 7% from the previous week to its highest level since May 2015. The seasonally adjusted Purchase Index decreased 1% from one week earlier to its lowest level since March 2015. The unadjusted Purchase Index decreased 3% compared with the previous week and was 19% higher than the same week one year ago.
“Concerns about the Chinese economy pushed interest rates down last week, resulting in a two basis point decline in thirty year fixed interest rate, bringing the rate down to its lowest since May 2015,” said Lynn Fisher, MBA’s Vice President of Research and Economics. “The pick-up in refinance activity was led by larger loan sizes on average, as continued investor interest drove jumbo interest rates down even further, by five basis points.”
The refinance share of mortgage activity increased to 55.5% of total applications from 53.1% the previous week. The adjustable-rate mortgage share of activity increased to 6.9% of total applications.
The FHA share of total applications decreased to 12.9% from 13.3% the week prior. The VA share of total applications decreased to 11.1% from 11.3% the week prior. The USDA share of total applications increased to 0.8% from 0.7% the week prior.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.11%, its lowest level since May 2015, from 4.13%, with points increasing to 0.37 from 0.31 (including the origination fee) for 80% loan-to-value ratio loans. The effective rate decreased from last week.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,000) decreased to 4.03%, its lowest level since May 2015, from 4.08%, with points decreasing to 0.29 from 0.34 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.88%, its lowest level since May 2015, from 3.94%, with points decreasing to 0.17 from 0.22 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week.
The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.37%, its lowest level since July 2015, from 3.39%, with points decreasing to 0.36 from 0.38 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week.
The average contract interest rate for 5/1 ARMs decreased to 2.98%, its lowest level since May 2015, from 3.11%, with points increasing to 0.40 from 0.32 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week.
Today, many real estate conversations center on housing prices and where they may be headed. That is why we like the Home Price Expectation Survey. Every quarter, Pulsenomics surveys a nationwide panel of over one hundred economists, real estate experts and investment & market strategists about where prices are headed over the next five years. They then average the projections of all 100+ experts into a single number.
The results of their latest survey
- Home values will appreciate by 4.1% in 2015.
- The cumulative appreciation will be 18.1% by 2019.
- That means the average annual appreciation will be 3.4% over the next 5 years.
- Even the experts making up the most bearish quartile of the survey still are projecting a cumulative appreciation of 10.5% by 2019.
Individual opinions make headlines. We believe the survey is a fairer depiction of future values.