The Mortgage Bankers Association sent a letter to the Federal Housing Finance Agency, outlining its objections to a proposal that would reduce the maximum size of loans that Fannie Mae and Freddie Mac could purchase. The letter to FHFA Director Mel Watt said the agency’s proposal to reduce the maximum conforming and high-cost loan purchase limits for Fannie Mae/Freddie Mac purchases from $417,000 to $400,000 (and from $625,500 to $600,000 for high-cost areas) as early as Oct. 1 could have a “deleterious” effect on government housing finance and should only be considered as part of a more comprehensive housing finance reform effort. “Housing markets remain fragile and moving forward with this option risks further constricting access to credit and reversing progress made in the housing recovery without achieving a meaningful return of private capital,” MBA said. “Many potential homeowners remain on the sidelines unable to purchase a home or refinance their home loan due to rising rates, tight housing inventory and restrictive credit standards. In key housing markets, the proposed loan limit changes could exacerbate the problem.” MBA President and CEO David Stevens said MBA believes better options are currently available to FHFA to increase private capital participation without harmful effects. These options include expanding the GSEs’ successful use of risk sharing, which began during 2013, as well as offering lenders the option to arrange for deeper private mortgage insurance coverage in exchange for a reduced guarantee fee from the GSEs. “MBA believes these alternatives will not only increase private capital’s role in housing finance, but also produce tangible savings that can be passed on directly to borrowers,” Stevens wrote.
More potential buyers are out trolling the nation’s neighborhoods for their dream homes. Unfortunately, they are finding little to look at and, even worse, they are finding higher prices than they expected.
Home prices are up 12.2 percent from a year ago, according to the latest February reading from CoreLogic. Meanwhile, wages are up just 2.1 percent from a year ago, according to Friday’s report from the Bureau of Labor Statistics. Investors, laden with cash, are buying fewer homes this spring, which leaves regular, mortgage-dependent buyers to pick up the slack.
While home prices are still well off their peak of the housing boom in 2006, it still costs the average homebuyer considerably more to buy a home today than it did then. That is because mortgage lenders require larger down payments and higher incomes to support the debt. Despite the fact that the rate on the 30-year fixed mortgage is slightly lower than it was in 2006, it is now a far more popular product in the market because all those “creative” mortgage products of the past are either gone or illegal. Rising mortgage rates and costs, tighter credit conditions, higher home prices. Add it all up, and affordability shrinks.
Home builders, who raised prices dramatically in the past year, are seeing the worst of it; they are reporting higher buyer traffic, but far less pull-through on sales than normal. Some are now offering incentives, like free upgrades in the home. It is tougher for them to lower prices now, because they are still faced with higher costs for land, labor and materials.
But despite weakening affordability, home price growth is still historically strong. That is because there is so little supply on the market for sale nationwide. With rates expected to continue their general upward trend as the economy improves, any possible savings due to potential “mini” corrections in the housing market could be offset by these increasing rates. It’s difficult to determine the absolute best time to buy, but if you find the right home then now may be the time to move forward.
The Fed, frustrated with the slow recovery from the 2007-2009 recession, has kept rates near zero for more than five years. It has said it will keep them there for a considerable time even after it ends a bond-buying program, which is to be wound down later this year.
The “scars from the Great Recession remain, and reaching our goals will take time,” Janet Yellen told about 1,100 people gathered at a downtown convention center here. “The recovery still feels like a recession to many Americans, and it also looks that way in some economic statistics.”
The U.S. unemployment rate has dropped from a post-recession high of 10 percent in 2009 to 6.7 percent last month, and has fallen more quickly than the Fed expected. Yet that drop is due in part to the droves of Americans who have given up the search for work, setting up a debate over whether the Fed should keep up its stimulus in hopes that they will ever return again.
While some economists and more hawkish Fed officials believe there remains little so-called slack in the labor market, and that inflation will soon rise, Yellen gave a series of reasons why she does not believe that to be the case. For one, she said, there is not yet evidence of worker compensation rising. And she pointed to the unexpectedly large proportion of part-time workers and long-term unemployed as reason to believe that further improvement in the labor market could draw people back into jobs, or into better jobs.
A 5 unit neighborhood of 1630 sq ft RSI Homes is being built right now near Placentia and 19th Street in Costa Mesa, CA. These are the most precision-built SFR’s in the world with the construction process usually being completed within 60 days from the start of foundation. The pictures you see here are on day 7 of the “vertical” portion of the process with only a 12 man crew assembling these homes on-site with minimal waste and neighborhood impact.
Having personally worked closely with RSI Homes for the last 9 months, Woodside Mortgage (the preferred lending-partner of RSI Homes) has developed a Trade-Up financing program which will allow the opportunity for neighbors in the surrounding area to sell their home to RSI and use the proceeds from that separate sale as a down payment on the new house, allowing them to move right in shortly after close of escrow.
The Trade-Up program allows customers to avoid interim housing worries with no sale commissions paid, no listings and no reports or repairs with an all-cash non-contingent buyer (RSI)… along with dozens of other substantial benefits. Then the builder, upon acquisition, demolishes the customer’s old house, possibly subdivides the property, and starts the streamlined process all over.
The Trade-Up financing provided by Woodside Mortgage will include all agency & government products, as well as jumbo financing at the most competitive rates delivered to the customer in the most streamlined and efficient way possible.
Stay tuned as we are looking forward to a large scale kick-off event with RSI Homes once this development is complete, along with a concurrent co-marketing campaign that will receive much press and industry interest!
Up a little, down a little, so go rates. If the employment data from Friday is any indication of the strength of the U.S. economy, maybe rates won’t be in a big hurry to head higher. Employers added far fewer jobs (113k) than expected in January with the prior month barely revised up. In an interesting twist, construction added the largest increase in jobs in almost seven years indicating the recent storm may not be as impactful as previously thought, and the private sector accounted for all the hiring as government payrolls fell 20,000. The unemployment rate (6.6%) is now at a five-year low as market participation increased to 63 percent. Additionally, policy makers have made it clear that they will not be raising rates anytime soon even if the unemployment benchmark is met.
Despite the steep rise in rates in 2013, the average rate for the entire year of 4.25% is the second lowest on record next to 2012′s 3.75%. The previous 3 years were each roughly 0.25% higher and 2008 was roughly a full 1.0% higher than that. To make this easier to understand here is a breakdown of the average rates over the last 6 years:
2008 – 6.0%
2009 – 5.0%
2010 – 4.75%
2011 – 4.5%
2012 – 3.75%
2013 – 4.25%
A mixed outlook for housing in 2014; recent forecasts from NAR, the MBA and others have been calling for a slowing in sales next year but new construction of homes is expected to improve. Continued increases in mortgage rates are more than likely in 2014 with the Fed reducing its monthly bond and mortgage purchases, but according to Zillow and Zelman Assoc. new construction is expected to increase along with the value of homes in 2014. Prices however are not expected to increase as rapidly as this year according to Zillow; it is projecting an increase of 3.0% in prices in 2014 versus the 5.2% increase this year. Zillow’s forecast is less than 110 economists the company surveyed, their average increase was 4.3%. If we had to choose between Zillow’s forecast and economists’’ forecasts we would line up behind Zillow; economists generally don’t do well with forecasts. 2014 will see less n re-finances as rates increase; foreclosures and short sales also declining. There is a little hope that underwriting may be less restrictive in 2014 but we don’t see much relaxation. More regulations and continued legal suits and massive settlements that banks are paying for the home market crash will keep credit tight and hamper the market’s potential improvements.