Teachers Can Afford Only 17% of Calif. Homes

Housing affordability for teachers is in particularly dire straits in the Golden State, according to a new study by real estate brokerage Redfin. The study found that 83 percent of homes in California are unaffordable on a teacher's salary. Redfin analyzed average teacher salaries in markets in California and compared them with the median home price. 

Only 17 percent of all homes for sale in the state are affordable to teachers. In some cities, the problem is even worse. In San Francisco, there isn't one house on the market that teachers can afford on their average salary, the study showed. 

According to Redfin's data, the median list price in California is $485,000. The state's 300,000 elementary, middle, and high school teachers have an average annual salary of $69,300. Using a general guideline that a monthly home payment should not exceed 28 percent of your gross monthly income, Redfin says that a teacher would likely not want to pay more than about $1,600 a month for a home.

"Given current interest rates, property taxes, home insurance, and home owners association expenses, a teacher can afford a $260,000 single-family home or condo," Redfin says in its report. "Of the 50,559 for sale in California, just 17.4 percent are listed below $260,000."

Redfin says that tight housing inventories are causing home affordability to slip in California. Its report breaks down what teachers can afford by county.

Source: "83 Percent of California Homes Unaffordable on a Teacher's Salary," Redfin Research Center (Feb. 25, 2014)

Mortgage Applications Off Historical Trend

Mortgage applications for home purchases fell nearly 4 percent in the week ending Feb. 21 from the week prior, hitting their lowest level since 1995, the Mortgage Bankers Association reports. Last week's purchase applications, which are viewed as a strong determinant of future home sales, were down about 15 percent from the same week in 2013, according to MBA. 

"This is the time of year we would expect a significant pickup in purchase activity, and we are not yet seeing it," says Mike Fratantoni, MBA's chief economist. 

Overall, MBA's index of mortgage application activity — including home purchases and refinances — dropped 8.5 percent last week. MBA's Refinancing Index dropped 11.4 percent last week, with refinance applications down 3 percent last week from the week prior. 

MBA also reports that average 30-year fixed-rate mortgage rates rose to 4.53 percent last week from 4.5 percent the week before. That's the highest reading since the week ending Jan. 17.

Source: "Mortgage Purchase Apps Not Living Up to Historical Standards," Mortgage News Daily (Feb. 25, 2014) and "U.S. Mortgage Applications Slip in Latest Week: MBA," Reuters (Feb. 26, 2014)

Energy-Efficient Mortgages Gain Popularity

More home buyers and current home owners are weighing the merits of a "green" mortgage, according to U.S. News & World Report. Energy-efficient mortgages allow home owners to finance "green" home improvements, such as solar panels, geothermal heating, tank-less water heaters, and newer, more energy-efficient heaters or air-conditioning systems. 

Fannie Mae, the Federal Housing Administration, and the Veterans Administration offer loan programs that include energy-efficient mortgages. On FHA loans, the cost of improvements usually can't exceed 5 percent of the property’s value, but is capped at $8,000. With VA loans, veterans can usually add up to $6,000 in energy-efficiency improvements, according to U.S. News & World Report. On conventional loans, funding for energy improvements often is capped at 10 percent of the appraised value of the completed property. 

Lending experts warn that borrowers need to be careful in making sure they're comfortable with the higher monthly mortgage payments that often result from taking out these loans. But over the long-term, the decrease in the home's energy costs may make up the difference. Indeed, many lenders won’t even process an energy-efficient mortgage unless it will result in a net cost savings. 

The average home owner spends about $2,200 annually on energy bills, according to the Department of Energy’s Energy Star Program. The Environmental Protection Agency says that adding insulation and improving the sealing of a home has the potential to curb total energy costs by 10 percent. According to Energy Star, programmable thermostats can save home owners $180 annually; replacing single-pane windows can offer a $500 annual savings; solar water heaters offer a $140 savings; and energy-efficient HVAC systems can offer $200 or more in savings. 

Source: “How an Energy Efficient Mortgage Can Save You Money,” U.S. News & World Report (Feb. 10, 2014)

No Spring Slowdown for New-Home Sales?

Single-family new-home sales surged in January to a five-and-a-half-year high, giving the industry new hope that the new-home sector isn't heading for a slowdown this spring after all.

New-home sales rose 9.6 percent to a seasonally adjusted annual rate of 468,000 units in January, the highest level since July 2008, the Commerce Department reports.

Regionally, new-home sales in the Northeast jumped 73.7 percent in January; 10.4 percent in the South; and 11 percent in the West. In the Midwest, however, a cold snap was blamed for causing new-home sales to slip 17.2 percent. 

"The fact that the cold weather that hit much of the country didn't stop home buyers from going out and purchasing a piece of the American dream is a great sign," says Kevin Kelly, chairman of the National Association of Home Builders. "However, the very low supply of new homes on the market and the continued concern of available buildable lots still have builders cautious about getting ahead of themselves." 

The inventory of new homes for sale held mostly steady in January, remaining at a tight 4.7-month supply at the current sales pace. Last month, housing starts had posted their largest decline in nearly three years, sparking concern that the new-home sector was headed for a downward spiral with rising mortgage rates and home prices. 

But in January, new-home sales increased 2.2 percent from a year ago, and the median price of a new home rose 3.4 percent to $260,100 compared to year-ago levels. The pace of home-price rises has slowed in recent months, the Commerce Department notes. 

Source: National Association of Home Builders and "New Home Sales Surge Nearly 10% in January," Reuters (Feb. 26, 2014)

How to Tell When a Neighborhood Will Be Hot

1. An up-and-coming neighborhood often is characterized by retail or residential construction that is already in progress. 
2. They also often are found where trendy establishments, such as wine bars or farm-to-table restaurants, are opening. 
3. Buyers also should look for neighborhoods adjacent to big cities or those where crime is on the decline.
4. Public building projects are on the rise.
5. Renovated homes are going on the market.

Source: "5 Signs a Neighborhood Is About to Take Off," Fox News (Feb. 26, 2014)

Copyright © 2014 Information Inc.

Wells Fargo Cuts More Mortgage Workers

Wells Fargo, the nation’s largest originator of residential loans, has cut its home-lending workforce by nearly 12 percent since last year, as the refinance boom draws to an end, the Los Angeles Times reports. Wells Fargo announced this week that it would be cutting 700 more jobs from its mortgage business, bringing total staff reductions to about 7,000 in that timeframe. 

Rising mortgage rates have prompted an end to the refinance boom. 

“We currently expect mortgage origination volume to decline in the first quarter, reflecting seasonality in the purchase market and lower refi volumes,” says Tom Goyda, spokesman for Wells Fargo Home Mortgage. “But we expect the rate of decline to slow from the levels that we saw in the third and fourth quarters of last year.”

In 2006, the mortgage industry’s employment peaked at 505,000, according to the Mortgage Bankers Association. At the end of last year, employment had shrunk to 292,000. 

Source: “Wells Fargo Cuts 700 More Mortgage Jobs, Bringing Total Cuts Near 7,000,” Los Angeles Times (Feb. 27, 2014)

Developers' Confidence in Multifamily Slipping

Developer sentiment about current conditions in the apartment and condo markets showed signs of weakening in the fourth quarter of 2013, according to the National Association of Home Builders' Multifamily Production Index. 

The index measures developer sentiment on a scale of 0 to 100. A number above 50 indicates conditions as improving, while below 50 indicates conditions are worsening. In the fourth quarter of 2013, the index declined four points to 50, but the reading has been at 50 or above for the past eight readings. 

A component on the index that tracks builder and developer perceptions of market-rate rental properties has been performing the strongest, remaining above 50 for 13 consecutive quarters, according to NAHB. That component, however, did fall four points to 60 in the fourth quarter of 2013.

An index measuring the multifamily housing industry’s perception of vacancies fell two points to 38. A lower number indicates there are fewer vacancies. After peaking at 70 in the second quarter of 2009, the vacancy measure steadily improved through 2010. It’s remained fairly stable since 2011, NAHB notes. 

NAHB has forecasted an uptick in the production of new apartments in 2014, but at a slower pace than last year. 

Source: “Developer Confidence in Multifamily Market Shows Slight Decline in Fourth Quarter,” National Association of Home Builders (Feb. 27, 2014)