Credit Restrictions to Ease in the New Year/Longer Timeframes for Real Estate Transactions

Mortgage lenders expect to further relax credit standards in the coming year, which could help some first-time buyers who have been shut out of the market finally get a foot in the door.

Fannie Mae’s fourth-quarter 2015 Mortgage Lender Sentiment Survey found that 16 percent of lenders plan to ease credits standards for GSE-eligible loans in the next three months compared with 2 percent that expect to tighten them. In a statement accompanying the report, Fannie Mae Senior Vice President and Chief Economist Doug Duncan noted that loosening standards could spur an uptick in first-timer buyers, who have been hampered by limited inventory, rising mortgage rates, and home prices that are growing faster than incomes.

“Thoughtful easing will help mitigate some of the affordability decline moving into 2016,” he said.

On the other hand, new mortgage regulations implemented by the Consumer Financial Protection Bureau are responsible for longer closing periods and for the substantial November drop in U.S. existing-home sales, which fell to their lowest level in a year and a half.

According to a report from the National Association of Realtors, there were 4.76 million existing-home sales in November, a decline of 10.5 percent from October and the fewest since April 2014. NAR Chief Economist Lawrence Yun explained that because signed sales contract have remained steady over the past few months, the decrease may be more of aberration as the industry adapts to the new mortgage regulations.  Nearly half of all respondents to a NAR survey reported longer closing time frames in November compared with 37 percent in the previous month.

“It’s possible the longer timeframes pushed a latter portion of would-be November transactions into December,” Yun said. “As long as closing timeframes don’t rise even further, it’s likely more sales will register to this month’s total, and November’s large dip will be more of an outlier.”



Source: Pacific Union Blog


Average U.S. Credit Score Reaches Record High

The average consumer credit score has reached an all-time high, enabling more Americans to leverage today’s low mortgage rates and save big bucks over the life of their home loans.fico

According to recent numbers from credit-data company Fair Isaac Corp., the average U.S. credit score was 695 in April of this year, the highest since the company began tracking the metric in 2005. FICO says that while the national credit score has been steadily rising for the past two years, it appears to be leveling off.

Nearly one in five Americans – 19.9 percent – now has a credit score of 800 or higher, which the company deems “exceptional.” The number of consumers with top-notch credit has climbed each year since the depths of the recession in October 2010, when 17.9 percent of Americans had 800-plus credit scores.

Further encouraging, FICO says, is that fewer consumers are scoring less than 550, which indicates that more of them are managing their credit responsibly. In October 2010, 9.0 percent of Americans had credit scores between 500 and 549, compared with 7.6 percent in April 2015.

Serious delinquencies – defined as total accounts more than 90 days past due — have also been falling over the past few years, from 19.4 percent in October 2013 to 18.2 percent as of April. However, FICO points out that the overall decline has been primarily driven by the real estate sector, where delinquencies have dropped from 6.8 percent in 2013 to 5.1 percent in April.

“This suggests that we are getting further and further from the worst of the housing downturn,” FICO researchers wrote. “By contrast, the auto and bankcard industries show relatively little, if any, drop in delinquency over the past few years.”

The 20 percent of Americans who have excellent credit will be rewarded for their fiscal responsibility with lower mortgage rates, resulting in substantial long-term savings on a home purchase. In a recent blog post, FICO says consumers with a credit score of more than 760 could qualify for a 3.57 percent interest rate on a 30-year, fixed-rate, $300,000 home loan. That translates to a monthly payment of $1,359 and $189,259 in total interest paid over the life of the loan. On the other end of the spectrum, homebuyers with scores between 620 and 639 would likely get a mortgage rate of 5.16 percent for that same home purchase, which equates to $1,640 in monthly payments and $290,374 in interest paid over the life of the loan.

FICO offers tips for consumers hoping to better their credit score, including paying down high-interest accounts first and prioritizing smaller debts over larger ones.

(Photo: Flickr/Simon Cunningham)

Source: Pacific Union blog

Down payment -Still Difficult for First- Time Home Buyers

Hundred dollar billsFor many people, the biggest obstacle to buying a home is the down payment — especially  in the high-priced Bay Area, where 20 percent down can amount to a small fortune. And the challenge is compounded for first-time buyers.

In a recent survey by TD Bank, nearly two-thirds of would-be homebuyers (62 percent) said that they would like to provide a sizable down payment of 20 percent or more, but most were unable to do so. In fact, by an almost equal margin (64 percent), respondents said that needing to save money for a down payment was the biggest deterrent to buying a home. The second biggest obstacle (45 percent) was needing to pay down personal debt.

Homeownership was even tougher for millennials, with 70 percent of respondents saying they needed to save for a down payment and 52 percent needing to pay off debt.

“Buyers today may find it difficult to save for a large down payment, especially young adults who are saddled with substantial student loan debt,” said Scott Haymore, head of pricing and secondary markets at TD Bank. “The great news is, today many lenders are offering home affordability and down payment assistance programs, so it’s important to shop around for a mortgage and learn more about the options available.”

A separate survey, meanwhile, found that 65 percent of respondents between the ages of 24 and 34 were willing to give up modern conveniences such as a cell phone, Internet access, cable TV, or Starbucks in order to save for a down payment. Curiously, the poll, by business-advisory firm The Collingwood Group, found that older generations — respondents between the ages of 35 and 75 — were less motivated: Only 60 percent said they were willing to forego such conveniences.

The Collingwood Group survey also found that 75 percent of millennials would rather apply for a home loan with a traditional bank than an alternative lender or nonbank institution. Other generations were more open to new options, with 68 percent of those ages 35 to 75 stating a preference for a traditional bank.


Source: Pacific Union

(Photo: Flickr/Ervins Strauhmanis)

A college degree- an almost must-have to buy a home in Coastal California

A college degree is almost a must-have for millennials who hope to eventually own a home in major Golden State coastal urban centers, but even with a diploma, young Bay Area buyers can expect to save for more than 15 years to meet the traditional down payment amount.grads

In a new study, Trulia examines how student loans affect millennials’ abilities to amass a 20 percent down payment and the length of time needed to do so. The company found that student debt does indeed temporarily impede the ability to save for a down payment and that a diploma is a necessity in expensive housing markets like the Bay Area.

California cities dominate Trulia’s list of the 10 markets where saving for a down payment takes the most years, regardless of whether the hopeful young buyer holds a college degree. San Francisco tops the list for longest savings period, with the average college-educated millennial requiring more than 29 years to squirrel away the $560,590 down payment. If that sounds like a long time, consider that San Franciscans without a college degree will never earn enough to put 20 percent down on a home in the city.

Trulia ranks the San Jose market No. 5 for longest savings period, with the average 25-30-year-old household requiring nearly 18 years to save the $289,072 down payment. San Jose residents without a degree can expect to wait nearly half a century — 45.4 years — to amass a 20 percent down payment.

In Oakland, which ranked No. 7 on Trulia’s list, buyers with a diploma can enter the market nearly twice as fast — 15.6 years to save $193,453 — as those without, who will take 27.3 years to save 20 percent of a home’s price. Other California markets that ranked among the top 10 for longest savings periods for college-educated millennials were Los Angeles (18.8 years), Orange County (18.5 years), San Diego (17.7 years), and Ventura County (15.5 years).

However, Bay Area buyers without college degrees can substantially shorten the savings cycle by cutting the down payment in half. A San Francisco resident who puts down 10 percent of the purchase price goes from never being able to own a home to being able to save the down payment in just under three decades. A 10 percent down payment in San Jose and Oakland can help those without a degree save for a home about three times faster: 15.4 years and 11.3 years, respectively.

A final — and likely far less attractive — option for California buyers without a degree who don’t want to wait a decade to save for a home is to consider relocating to Detroit or Dayton, Ohio, where it takes just over five years to sock away a 20 percent down payment.

(Photo: Flickr/State Farm)

Bay Area Housing Markets Highly Unaffordable for Low-Down-Payment Buyers

Although nine out of 10 U.S. homes are more affordable than their historic averages for buyers using low-down-payment programs, that’s not the case here in the Bay Area, according to a recent report.twenties

In a study conducted with Down Payment Resource, RealtyTrac analyzed 370 U.S. counties for affordability and accessibility to buyers making down payments of 3 percent. Typically, buyers who leverage programs like the ones introduced by Freddie Mac and Fannie Mae late last year include first-time buyers and boomerang buyers – those who underwent foreclosure during the housing bust and want to purchase property again.

The report says that 90 percent of those counties were more affordable for low-down-payment homebuyers in April when compared with their historic averages, based on the percentage of income necessary to purchase a median-priced home with 3 percent down. San Diego ranked as the No. 1 U.S. county where homes were the most affordable compared with their historic averages, with the average low-down-payment homeowner spending 52.7 percent of their income on mortgage payments. Southern California’s Riverside County placed No. 2 for best low-down-payment affordability, with 39.3 percent of income earmarked for housing costs.

Here in Northern California, it was a completely different story, with four Bay Area counties ranking among the country’s 10 least affordable for first-time and boomerang buyers when compared with historic numbers. Perhaps not surprisingly, San Francisco was the least affordable U.S. market for low-down-payment buyers. A San Francisco homebuyer who placed a 3 percent down payment would actually need to pay more than they earn to afford a mortgage: 113.97 percent of income, compared with the county’s historical affordability of 83.48 percent.

San Mateo County was the nation’s fourth least affordable down-payment market, requiring 87.17 percent of income to purchase a home compared with the historic average 69.98 percent. Marin County followed in the No. 5 spot, with the average owner spending 71.78 percent on housing compared with 66.5 percent historically.Santa Clara County was the nation’s seventh least affordable low-down-payment market, with 62.37 percent of income necessary to make mortgage payments, compared with a historical average of 52.36 percent.

ReatlyTrac says that the average U.S. down-payment assistance benefit was $10,443 in April. San Francisco buyers using such a program can expect to receive $51,713 in funds, the most of any county in the nation. Homebuyers in Lake Tahoe‘s Placer County had the nation’s fourth highest levels of down-payment help at $35,475.

In a statement accompanying the report, Down Payment Resource CEO Rob Crane said that low-down-payment buyers likely have options in most U.S. metro areas, even those that rank among the least affordable. Still, as RealtyTrac Vice President Daren Blomquist cautioned, some first-time and boomerang buyers hoping to realize or regain their homeownership dreams might have to trade short commutes for down-payment assistance.

“This analysis demonstrates that low-down-payment borrowers can find affordable housing and good accessibility to down payment help in a wide variety of markets nationwide,” he said. “However, within many major metro areas the most affordable and accessible markets for low down payment buyers are often those furthest from jobs and other amenities that many buyers want.”

(Photo: Flickr/The Comedian)

30-Year Mortgage Tops 4%

Here’s a look at recent news of interest to homebuyers, home sellers, and the home-curious.

Fixed-rate mortgages last week reached new highs for 2015, with the average 30-year mortgage rising above 4 percent average for the first time in nearly a year, Freddie Mac reported.

Image of arrows pointing upThirty-year fixed-rate mortgages averaged 4.04 percent, up from 3.87 percent last week, and 15-year fixed-rate mortgages averaged 3.25 percent, up from 3.08 percent. One-year adjustable-rate mortgages averaged 2.53 percent, dropping from last week’s 2.59 percent average.

Last year at this time, 30-year rates averaged 4.20 percent, 15-year rates were at 3.31 percent, and one-year ARMs averaged 2.40 percent.

“Markets are responding to strong employment data,” said Freddie Mac economist Len Kiefer, in a statement accompanying the weekly interest rate report. “In May, the U.S. economy added 280,000 jobs. Moreover, job openings surged to 5.4 million in April, up over 20 percent from a year ago.”

The U.S. real estate market continues to improve and is on track for its best year since the peak of the housing bubble in 2006, according to an analysis by

“This time, though, it’s no bubble,” said chief economist Jonathan Smoke. “Job growth is powering the surge in demand for homes. More than 3 million jobs have been created in the past 12 months. And more than 1 million jobs have been created for 25- to 34-year-olds, the age range in which most Americans buy their first home.”

Rising rental rates, meanwhile, are outpacing ring home prices. Record numbers of renting households have driven down apartment vacancies and sent rents soaring, Smoke said. It is now cheaper to buy rather than rent in 80 percent of U.S. counties.

The number of homeowners who owe more than their home is worth continues to fall, with the San Jose and San Francisco metro areas leading the way, according to a new report from Zillow. But there are still plenty of mortgage holders who face a steep climb before their homes are no longer underwater.

The U.S. rate of negative equity among mortgaged homeowners 15.4 percent in the first quarter of 2015, down from 16.9 percent in the fourth quarter on 2014. San Jose, however, reported to lowest negative equity rate, 3.8 percent, followed by San Francisco at 6.1 percent.

The rate of negative equity improved in all of the 35 largest housing markets in the first quarter. But of those homeowners who are still underwater, more than half still owe 20 percent more than the value of their home, making it difficult for them to get out from under their mortgage.

“The depth of negative equity remains incredibly worrisome,” Zillow concluded. “Millions of Americans are so far underwater, it’s likely they may not regain equity for up to a decade or more at this pace.”


Source: Pacific Union blog

(Illustration: Flickr/FutUndBeidl)

Buying a Home Can Be Stressful

It’s no secret that buying a home can be stressful. Just how stressful was made clear in a recent survey that found that people are more anxious about the homebuying process (70 percent) than they are about getting a root canal (64 percent)!

Retro image of new homeowners

JPMorgan Chase’s national survey of potential homebuyers also found that one-third of homebuying couples have bickered over the process (we were, frankly, expecting a higher percentage), with men more likely than women to go beyond their agreed-upon budget limit to get the home they want.

“It’s understandable why first-time homebuyers are anxious about the process, but preparation is the best defense,” Cecelia Barbieri, senior vice president of marketing for Chase Mortgage Banking, said in a statement accompanying the survey. That’s a sentiment shared by Pacific Union’s real estate professionals, who work to bring down stress levels by helping buyers become familiar with the homebuying process and planning ahead to get the home they want.

The Chase survey also found that a solid majority of potential buyers (62 percent) believe now is a better time to buy a home than it was last year, and 30 percent plan to purchase a property in the next 18 months.

Rising rental costs and historically low interest rates are among the top reasons buyers are eager to close a deal in the coming months. Interest rates on 30-year mortgages averaged 3.80 percent this past week, according to Freddie Mac, and are expected to rise appreciably by 2016.

While potential homebuyers are optimistic that now is a good time to buy, they expect challenges along the way. Buyers are concerned about finding a home that fits within their budget (56 percent) and is located in a good neighborhood (56 percent).

Seventy-five percent worry that their offer will be outbid by others, and 60 percent anticipate that they may need to compromise and buy a smaller home, or consider other neighborhoods outside their top choices, due to rising prices.

“Buyers are clearly concerned about housing inventory and rising prices, especially during the competitive spring buying season,” Barbieri said. “But the research shows that interested buyers are optimistic and ready to act on their goals. In fact, 73 percent said they’d give up things like eating out and taking vacations in order to buy their dream home.”


Source: Pacific Union blog, May 8, 2015

Illustration: Flickr/Blush Printables)