A large portion of Florida's housing market is driven by people who don't really need to buy, such as retirees who could stay where they are in other parts of the country and second-home buyers who could wait if conditions aren't right. That makes them more fickle than people who must move for a job or growing family. As a result, Florida home prices tend to swing to extremes.
Wednesday, August 21, 2013
Tuesday, August 6, 2013
Home Prices Are Climbing At The Fastest Pace Since 1977
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Home prices (including distressed sales) climbed 11.9% year-over-year in June, according to CoreLogic's latest home price report. This is the sixteenth straight monthly rise in home prices. Prices were up 1.9% month-over-month.
Ex-distressed sales (short sales and REO transactions), home prices were up 11% on the year, and 1.8% MoM.
Meanwhile, in the first half of the year, home prices were up 10%. "This trend in home price gains is moving at the fastest pace since 1977," said CoreLogic's chief economist, Mark Fleming in a press release.
Here are some details from the report:
- Including distressed sales home prices rose the most in Nevada, up 26.5% and fell the most in Mississippi, down 2.1%.
- Ex-distressed sales home prices climbed the most in Nevada, up 23.6%, and no state saw home prices fall.
- The peak-to-current decline in home prices, from April 2006 to June 2013, was 19%.
- The CoreLogic Pending home price index suggests that home prices will rise 12.5% on a YoY basis in July, and 1.8% on the month.
Here's a look at the trajectory of home prices from 2002 on:
Monday, July 29, 2013
What you need to know before you get a mortgage
You're looking into buying your first home or refinancing your existing loan to a lower interest rate - congrats! But while you probably know the basics of the mortgage process, did you know there are a whole lot of nitty-gritty details that can go into getting the best deal on your mortgage?
In fact, there is a lot of information that could save you hundreds or even thousands of dollars in what may be the biggest financial decision of your life.
If you think you may have missed the boat on getting a lower mortgage rate, you may think it's too late to refinance - especially when you see interest rates rising every week.
In fact, according to the Mortgage Bankers Association (MBA), on July 5, 2013, the average interest rate for a 30-year fixed-rate mortgage increased to 4.68 - an increase of .10 percent from June 28th. This is the highest rate since March 2012.
Though this news may dishearten homeowners who didn't jump at the chance to refinance when rates were at rock bottom, our experts say not to give up on the idea of refinancing just yet.
What kind of rate trends do experts predict for the rest of 2013?
Predicting mortgage interest rates is always tricky business. While our experts have different thoughts on the future of interest rates throughout the rest of 2013, neither of them see rates going down in the near future.
We're already starting to see rates rise in 2013, and we expect to see that continue.
That's why we spoke to three experts in the mortgage field who told it like it is.
Truth #1: Prequalification Doesn't Mean Much
If you receive a letter saying you're prequalified for a mortgage, don't start celebrating just yet. That's because when it comes to a mortgage, getting prequalified could mean nothing at all.
Here's why: Anyone can say they make a certain amount and their credit is great and get "prequalified," But that's merely based on words, without any hard evidence.
"So you can pretty much pre-qualify for anything you want, but that's very different than actually filling out a loan application and verifying what's on the loan application," . This process of actually filling out the loan application leads to a preapproval - which is what really counts.
"Preapproval means the loan originator has obtained documentation to support claims that, for example, the borrower makes a certain amount of dollars per month, or the borrower has good credit," .
The moral here? Documentation and approval - which, again, is different than qualifying - is the only assurance that you'll actually get a mortgage.
Truth #2: Not Everyone Gets Approved for the Lowest Rates Advertised
Remember the old adage, "If something's too good to be true, it probably is"? Well, keep that in mind when shopping mortgage rates, or seeing ads that advertise rock-bottom mortgage interest rates.
One problem with these ads, is that often the rates advertised are for adjustable rate mortgages (ARMs), or even 10-year mortgages - which are not usually the loans desired by consumers.
"Most people want 30-year mortgages," . But those rates are higher. "It's the classic bait and switch" .
Further, even if the rate is indeed for a 30-year mortgage, usually only a select few borrowers qualify for the lowest rates advertised.
While there are many elements that go into determining your mortgage interest rate, one of the biggest factors is your credit score, which can run from 300 to 850. And the higher your score, the better interest rate you'll get.
Truth #3: "No Cost" Loans May Not Be Exactly What They Seem
The mortgage business is in fact a business. So just as you wouldn't expect your mattress salesman or auto mechanic to give you products or services for free, don't expect your mortgage lender to either.
When you refinance with no points or fees, what you're really doing is adding those costs onto your loan balance. No closing costs basically means, 'we'll lend you the closing costs.
In other words, they'll build the fees and costs into the amount you are financing so there is no money due up front. This way, you're not only paying the fees and costs, but you're also paying interest on them for up to 30 years. For example, if you have a $300,000 loan with $10,000 in closing costs, your loan amount would be $310,000 instead.
Another scenario is that the lender will actually not charge fees at all, but charge you a higher interest rate to make up for it.
What they're doing is selling the borrower a higher rate. And so the borrower does pay. They pay in the form of a slightly higher payment every month.
To be fair, there are times when these types of mortgages could make financial sense, if, for example, you are lowering your current mortgage interest rate by enough.
But the point remains: check the fine print and get the whole truth about your mortgage.
Truth #4: You Should Not Feel Pressured to Lock Your Loan
If you are refinancing your current mortgage or getting a new one for a home you are buying, there will come a time when your mortgage broker or lender will ask you if you want to "lock" the loan. This means that you accept the terms of the mortgage, including the interest rate. After you lock, that is your rate, whether interest rates go up or down in the mortgage market.
And here's the thing: that can be a stressful time, especially if your loan originator is pressuring you to lock, it should not be.
Consumers should never feel under pressure at any time by their loan originator to commit. That's used car salesman tactics. The reason the consumer is being pressured is because the deal that's being offered is not that good. Therefore, the lender wants them to lock so they don't go and shop rates from other lenders.
Thursday, June 13, 2013
Flipping homes? Check out the top 5 cities right now.
The best city for home flippers had one of America's worst foreclosure rates over the past five years.
The rebounding U.S. real estate market is leading to a renaissance in "home flipping" -- the investment strategy in which you buy distressed houses, make minor upgrades and resell the properties a few months later for quick gains.
"Right now is an ideal [time] for flipping, because we're seeing home prices bounce off of the bottom," saysDaren Blomquist of RealtyTrac.com, which recently named the 25 Top U.S. Markets for Flipping Homes -- including some that offer more than 50% gross returns.
Made popular by reality-TV shows such as "Flip This House," home flipping looked easy during the housing boom when prices kept rising. The strategy became decidedly harder during the real estate bust that followed.
Now, flipping is enjoying a comeback because home prices have bottomed out in many U.S. locales and begun to rebound.
Blomquist says today's best markets for flippers soared during the boom and collapsed during the bust. Many are also in the so-called "Sand States" of Arizona, Florida and Nevada, which suffered through some of the nation's highest foreclosure rates in recent years.
"These markets all crashed pretty hard, so they've got lots of available distressed properties," Blomquist says. "But they're also perpetually popular with consumers because they're located in the warmer climates that many people want to move to."
Here's a look at the five metro areas that RealtyTrac believes offer today's best opportunities for home flips (defined as buying and selling the same property within six months).
The site ranked each city based on how much gross profit local home flippers enjoyed in percentage terms on the average 2012 single-family sale, excluding renovations and other expenses beyond what investors initially paid for properties. All cities also had at least 500 home flips during 2012, as well as 9% or higher average annual home-price appreciation during 2013's first quarter.
Fifth-best U.S. city for home flippers: Memphis, Tenn. Average gross profit on 2012 deals: 42%
Memphis is unusual among the markets at the top of RealtyTrac's list that it's not in a Sand State, nor did it have the massive housing boom and bust other cities saw in recent years.
Still, Blomquist says the 1.3-million-person metro area is hot among flippers because it's got lots of older houses that cost little to buy and lend themselves to quick fix-ups and resales.
RealtyTrac found that the average Memphis home flipper paid just $68,318 per house last year (the lowest price among the top five cities in the rundown), but resold properties for $96,870. That's a 42% gross gain.
Another plus: The average Memphis home price rose at a 13% annual rate in 2013's first quarter.
Fourth-best U.S. city for home flippers: Tampa, Fla.
The U.S. housing bust and foreclosure crisis slammed Tampa, but Blomquist says that means the 2.9-million metro area has lots of distressed properties for flippers to choose from.
The Cigar City also has an aging housing stock that's ripe for renovation, plus a warm climate that's popular with consumers -- all of which add up to great potential for home flips.
RealtyTrac found that the average Tampa property flipper enjoyed a 43% gross return in 2012, paying $79,538 for a house but selling for $113,676. Average Tampa home prices also rose at a 9% annual rate during the three months ended March 31.
Average gross profit on 2012 deals: 44%
Like the phoenix of Greek mythology, the Phoenix housing market is rising from its own ashes.
One of the U.S. cities hardest hit by the housing bust, Arizona's capital has recently seen real estate rebound sharply. Average Phoenix-area home prices soared 33% between 2012's first quarter and 2013's opening three months -- the strongest appreciation of any city atop RealtyTrac's rankings.
All told, the typical 2012 Phoenix home flip generated a 44% gross return, with investors paying $146,528 on average per property but selling for $210,290.
Still, Blomquist warns that Phoenix home values are rising so fast that he sees "the biggest red flags among any of the top five cities on our list. The market there might be overheating and a new bubble forming."
Average gross profit on 2012 deals: 53%
Las Vegas had America's highest foreclosure rate for 60 straight months between mid-2007 and mid-2012, but Sin City's housing market is rebounding faster than you can say "hit me."
Average home prices in the 2-million-population metro area rose at a 24% annual clip during the first quarter, while the typical local flipper paid $133,198 per home in 2012 but sold for $203,945. That works out to a 53% gross return.
"Las Vegas had a very dramatic boom-and-bust cycle over the past seven years, but prices probably overcorrected," Blomquist says. "Investors finally realized that prices got too low, so it's made sense to them to jump back in.
Average gross profit on 2012 deals: 63%
Walt Disney World's hometown has become a real Magic Kingdom for home flippers.
Blomquist says that while Orlando had one of America's worst foreclosure rates over the past five years, average local home prices rebounded at a 12% annual rate during 2013's first three months.
RealtyTrac also found that flippers paid a modest $103,701 on average per property in 2012 but sold for $168,677 -- a 63% gross return.
Blomquist says Orlando homes have historically enjoyed strong resale demand from retirees and warm-weather lovers. He adds that if you can't successfully flip a home, you can usually turn it into a vacation rental -- "a good, solid fallback plan."
Thursday, April 25, 2013
Housing Come Back is Here !!!
U.S. home resales edged downward in March, a pause in the housing market recovery that has helped boost the economy
Nationwide, the median price for a home resale rose to $184,300 in March, up 11.8 percent from a year earlier, the biggest increase since November 2005. The limited supply of available properties is pushing up home values.
First, this isn't a "pause in the housing market recovery". The housing recovery is based on residential investment, and only the commission on existing home sales is included in residential investment (the main contributors are new home sales and home improvement). A decline in the headline number for existing home sales due to fewer distressed sales, is a positive, not a negative!
Second, the median price is a poor measure of overall market prices since this reflects changes in the mix in addition to changes in prices (the repeat sales indexes are a better measure of price changes). Note: Lawler used the median over the weekend to show that investors are buying at a higher price point - an appropriate use of the median price.
The NAR reported total sales were up 10.3% from March 2012, but conventional sales are probably up over 20% from March 2012, and distressed sales down. The NAR reported (from a survey):
Second, the median price is a poor measure of overall market prices since this reflects changes in the mix in addition to changes in prices (the repeat sales indexes are a better measure of price changes). Note: Lawler used the median over the weekend to show that investors are buying at a higher price point - an appropriate use of the median price.
The NAR reported total sales were up 10.3% from March 2012, but conventional sales are probably up over 20% from March 2012, and distressed sales down. The NAR reported (from a survey):
Distressed homes - foreclosures and short sales - accounted for 21 percent of March sales, down from 25 percent in February and 29 percent in March 2012.
Although this survey isn't perfect, if total sales were up 10.3% from March 2012, and distressed sales declined from 29% of total sales to 21%, this suggests conventional sales were up sharply year-over-year - a good sign. However some of this increase is investor buying, although the NAR is reporting investors are buying about the same percentage as a year ago:
Individual investors, who account for most cash sales, purchased 19 percent of homes in March, down from 22 percent in February; they were 21 percent in March 2012.
Other data suggests investor buying has increased, see Housing: Some thoughts on Investor Buying, Inventory and recent Price Increases and from the WaPo: Wall Street betting billions on single-family homes in distressed markets
Of course inventory is the key number in the NAR report. The NAR reported inventory increased to 1.93 million units in March, up from 1.90 million in February. Some of this increase was seasonal, and this is still a very low level of inventory. And inventory is still down sharply year-over-year; down 16.8% from March 2012. But this is the smallest year-over-year decline since 2011.
Important: The NAR reports active listings, and although there is some variability across the country in what is considered active, most "contingent short sales" are not included. "Contingent short sales" are strange listings since the listings were frequently NEVER on the market (they were listed as contingent), and they hang around for a long time - they are probably more closely related to shadow inventory than active inventory. However when we compare inventory to 2005, we need to remember there were no "short sale contingent" listings in 2005. In the areas I track, the number of "short sale contingent" listings is also down sharply year-over-year.
The following graph shows existing home sales Not Seasonally Adjusted (NSA).
Of course inventory is the key number in the NAR report. The NAR reported inventory increased to 1.93 million units in March, up from 1.90 million in February. Some of this increase was seasonal, and this is still a very low level of inventory. And inventory is still down sharply year-over-year; down 16.8% from March 2012. But this is the smallest year-over-year decline since 2011.
Important: The NAR reports active listings, and although there is some variability across the country in what is considered active, most "contingent short sales" are not included. "Contingent short sales" are strange listings since the listings were frequently NEVER on the market (they were listed as contingent), and they hang around for a long time - they are probably more closely related to shadow inventory than active inventory. However when we compare inventory to 2005, we need to remember there were no "short sale contingent" listings in 2005. In the areas I track, the number of "short sale contingent" listings is also down sharply year-over-year.
The following graph shows existing home sales Not Seasonally Adjusted (NSA).
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Click on graph for larger image.
Sales NSA in March (red column) are above the sales for for 2008 through 2012, but below the bubble years of 2005 and 2006.
The bottom line is this was a solid report. Conventional sales have increased sharply, although some of this is investor buying. And inventory is low, but the year-over-year decline in inventory is decreasing.
Sales NSA in March (red column) are above the sales for for 2008 through 2012, but below the bubble years of 2005 and 2006.
The bottom line is this was a solid report. Conventional sales have increased sharply, although some of this is investor buying. And inventory is low, but the year-over-year decline in inventory is decreasing.
Thursday, April 18, 2013
Housing affordability is based entirely on low mortgage rates
Homes are more affordable now than they have been in decades, but that could turn more quickly than expected, because the affordability is based entirely on mortgage rates.
Home prices are actually rising faster than expected, but the gains are being masked for buyers by historically low rates. These rates allowed U.S. homeowners to pay almost 37 percent less in monthly mortgage payments at the end of last year than pre-housing–bubble norms, according to a new report from online real estate portal, Zillow. This as homes today cost 14.5 percent more compared to historic averages, relative to median incomes.The average rate on the 30-year fixed mortgage dropped to 3.68 percent last week, according to the Mortgage Bankers Association. From 1985 through 1999, rates ranged from 6 to 13 percent. Present low rates have allowed buyers to purchase more expensive homes, and the mortgage payment is taking less out of their monthly paychecks.
Back in the mid-eighties and nineties, Americans spent nearly 20 percent of their median monthly incomes on their home loans—compared to just 12.5 percent today, according to Zillow.
[Click to compare rates from multiple lenders now.]
The trouble is that wages have either stagnated or dropped at the same time that home values are rising. Pre-bubble, U.S. homebuyers spent 2.6 times their median annual incomes on the purchase price of a typical home, but now they are spending three times their incomes—meaning homes are 14.5 percent more expensive relative to income, according to Zillow. That is all made possible by government-subsidized, record low rates.
"The days of historically high levels of housing affordability are numbered," said Zillow Chief Economist Stan Humphries. "Current affordability is almost entirely dependent on low interest rates, and there's no doubt that rates will begin to rise in the next few years."
Rates will rise because the Federal Reserve will inevitably have to get out of the business of buying agency mortgage-backed securities, which currently drives down rates. This won't happen immediately, but it will in the next two to three years.
That will directly affect home buying demand, because without dramatic income growth, potential first-time buyers will see monthly payments as too big of a chunk to pay. Meanwhile potential move-up buyers will not want to let go of their fixed low rates, and that will be a disincentive to move.
Homeowners in 24 of the 30 largest metros covered by Zillow were paying more for homes at the end of 2012 relative to their region's median income than they were from 1985 through 1999. That is a clear red flag that should rates rise, even a few percentage points, home purchases and purchasing power, will fall.
Wednesday, March 6, 2013
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