10 Neighborhoods to Watch in 2014

What are the hottest neighborhoods in the country? They tend to have highly ranked schools, scenic community parks, and short commutes and are all at an affordable price, according to an analysis by Redfin, which ranked 105 neighborhoods across 21 cities to find the places with the most growth in popularity. 

"After a year in which prices popped 13 percent, Americans are checking out still close-in but often overlooked neighborhoods in search of affordability, even if means less-fashionable restaurants or a home that needs a little more work," said Redfin CEO Glenn Kelman. "Like the actress who was nominated for 18 Emmys before finally winning, these are the Susan Luccis of neighborhoods, finally getting their due. The buyers who have made these alternative spots so hot aren't like the ones we saw in the last boom, who just borrowed more and paid up. Our clients in 2014 have settled on a price range, and they're sticking to it."

The brokerage evaluated neighborhood popularity growth by measuring Redfin.com home listing pageviews and homes web visitors labeled as “favorites” to monitor for price changes or sales, comparing it from 2012 to 2013 numbers. 

Here are the brokerage’s 10 hottest neighborhoods: 

1. Bernal Heights North Slope (San Francisco)
2013 median sales price: $982,500

2. Eagle Rock (Los Angeles, Calif.)
2013 median sales price: $539,000

3. Morningside-Lenox Park (Atlanta)
2013 median sales price: $540,375

4. Upper Chevy Chase (Washington, D.C.)
2013 median sales price: $873,000

5. Desert Shores (Las Vegas)
2013 median sales price: $179,525

6. Barrington Oaks (Austin, Texas)
2013 median sales price: $303,750

7. Phinney Ridge (Seattle)
2013 median sales price: $502,625

8. Concordia (Portland, Ore.)
2013 median sales price: $355,000

9. City Park (Denver)
2013 median sales price: $394,500

10. Humboldt Park (Chicago)
2013 median sales price: $189,450

70% of HOAs Are Underfunded

A growing number of homeowners associations do not have enough money stowed away in reserves to pay for repairs and replacements in neighborhoods over time, housing experts say. 

About 70 percent of association-governed communities are underfunded, a 12.5 percent increase compared to 10 years ago, according to Association Reserves. Homeowners associations are increasingly going after home owners who fail to pay their dues. Beyond fines and notices, they are foreclosing on delinquent home owners. 

Homeowners associations usually have the right to place liens on homes where the owners are delinquent on their dues. They have the ability to foreclose on houses, even if it’s to collect a few hundred dollars of unpaid debt. Prior to 2008, foreclosures by homeowners associations were rare. But HOAs now say they are becoming more common as associations look to respond to their shrinking dues. 

“It’s a community, but it has to be run like a business,” says Frank Rathbun, spokesman for the Community Associations Institute, an advocacy group for homeowners associations. 

About 63 million Americans nationwide live in communities governed by homeowners associations, compared to only 2.1 million in 1970. What’s more, four out of five buyers of new homes wind up in a community with an HOA.

Source: “Homeowners Associations in Crisis as 70% Are Underfunded,” Reuters (Jan. 15, 2014)

For Some Borrowers, It's Now Easier to Get a Mortgage

Borrowers may be having an easier time applying for a mortgage compared to a year ago. 

The average credit score for approved mortgages dropped to 727 in December, down from 748 one year prior, according to Ellie Mae, a mortgage technology firm. FICO credit scores run on a scale from 300 to 850. 

Forty-six percent of mortgages that closed in December had credit scores above 750. One year earlier, 57 percent of mortgages posted credit scores that high. In December, about 31 percent of loans had credit scores below 700. One year earlier, that percentage stood at 21 percent, according to Ellie Mae. 

Debt-to-income ratios are growing. The average total monthly debt for borrowers of closed loans in December stood at 39 percent of their incomes. That’s up from 35 percent in June. 

“Rising interest rates and home prices could account for some of the increase in debt-to-income ratios,” MSN Real Estate reports. 

More lenders may be getting comfortable easing standards since home prices have been rising over the past year. Also, lenders are facing a big drop in refinance business, which may prompt them to get more competitive in trying to nab more borrowers for home purchases, housing experts say. 

However, the effect of new mortgage regulations, which took effect last week, have yet to be seen.

Tighter credit standards may be making for better borrowers, according to a new report. Loans originated last year are performing better than any year since tracking began in 1997, according to a report by Black Knight Financial Services. 

Source: “Credit scores drop for new mortgages in 2013,” MSN Real Estate (Jan. 15, 2014)

Weaker Economic Data Pushes Mortgage Rates Lower

The average for fixed-rate mortgages fell this week on signs of a softening economy, Freddie Mac reports in its weekly mortgage market report. 

Frank Nothaft, Freddie Mac’s chief economist, attributes the lower rates to a sluggish economy that added 74,000 jobs in December, which was less than the market consensus forecast. The unemployment rate remains high at 6.7 percent -- but still it’s at its lowest level since October 2008, he notes. 

Freddie Mac reports the following national averages on mortgage rates for the week ending Jan. 16: 

• 30-year fixed-rate mortgages: averaged 4.41 percent, with an average 0.7 point, dropping from last week’s 4.51 percent average. Last year at this time, 30-year rates averaged 3.38 percent. 
• 15-year fixed-rate mortgages: averaged 3.45 percent, with an average 0.7 point, dropping from last week’s 3.56 percent average. A year ago, 15-year rates averaged 2.66 percent. 
• 5-year hybrid adjustable-rate mortgages: averaged 3.10 percent, with an average 0.5 point, falling from last week’s 3.15 percent average. Last year at this time, 5-year ARMs averaged 2.67 percent. 
• 1-year ARMs: averaged 2.56 percent, with an average 0.5 point, holding the same as last week’s average. A year ago, 1-year ARMs averaged 2.57 percent. 

Source: Freddie Mac

Possible Relief From Flood Insurance Hikes

Congress may delay flood insurance hikes for thousands of homes along the Gulf Coast and other areas that are facing steep premium increases, The Wall Street Journal reports. A $1.012 trillion spending bill to fund the government includes a measure that would temporarily continue flood-insurance subsidies for some properties located in flood zones.

The 2012 Biggert-Waters law sets out to gradually phase out flood insurance subsidies. The subsidies are being phased out due to the national flood insurance program being $24 billion in debt. That means home owners who have long received discounts to pay for flood insurance are now being faced with large increases — anywhere from a few thousand dollars to tens of thousands of dollars extra a year. Home owners affected say the increases will hurt their home values and make their homes more difficult to sell. 

The provision included in the spending bill would prevent FEMA from updating “grandfathered” rates when new flood maps are issued for nine months. It would not apply to increases triggered by a property’s sale that FEMA implemented last October.

Steve Brown, president of the National Association of REALTORS®, says the bill “does not go far enough to support the millions who are impacted by the exponential price increases.” 

Sen. Mary Landrieu, D-La., is pressing for separate broader flood-insurance legislation in the Senate that would delay price increases for more home owners nationwide for up to four years.

Correction: An earlier version of this story mischaracterized how the provision of the spending bill that calls for delays in flood insurance hikes would be applied.

Source: “Congress May Delay Flood Insurance Rate Increases,” The Wall Street Journal (Jan. 14, 2014)

Home Remodeling Expected to Post Strong Year

Home remodeling is projected to continue the strong growth it started in the second quarter of 2013 into the first half of 2014, according to LIRA, the Leading Indicator of Remodeling Activity, at Harvard University’s Joint Center for Housing Studies. 

Double-digit gains in spending are expected through the first half of this year with remodeling. In the third quarter, however, growth is expected to level off to just under 10 percent, LIRA projects. 

"The ongoing growth that we've seen in home prices, housing starts, and existing home sales is also being reflected in home improvement activity," says Eric S. Belsky, managing director of the Joint Center.  "As owners gain more confidence in the housing market, they are likely to undertake home improvements that they have deferred."

Still, the strong growth in the remodeling market may start to recede around mid-year, says Kermit Baker, director of the Remodeling Futures Program at the Joint Center.  "By that time, we'll be approaching the pre-recessionary levels of spending, and with borrowing costs starting to creep back up, growth rates are likely to slow some,” Baker notes. 

Source: “Home Remodeling Will be Strong into 2014,” Mortgage News Daily (Jan. 16, 2014)

2013 Year-End Foreclosure Report: Filings Fall 26%

Last year, the foreclosure crisis began dissipating. Foreclosure filings -- including default notices, scheduled auctions, and bank repossessions -- were down 26 percent in 2013 compared to 2012, and were down 53 percent from the peak in 2010, according to RealtyTrac’s Year-End 2013 Foreclosure Market report.

The 1.4 million properties with foreclosure filings in 2013 marked the lowest amount since 2007. 

During the year, one in every 96 homes -- or about 1.04 percent of U.S. housing units -- received a foreclosure filing. That’s down from a peak of 2.23 percent of housing units in 2010. 

The following states had the highest foreclosure filing rates in 2013: 

• Florida: 3.01% of all housing units received a foreclosure filing
• Nevada: 2.16%
• Illinois: 1.89%
• Maryland: 1.57%
• Ohio: 1.53%

The average estimated value of a property receiving a foreclosure filing in 2013 was $191,693 at the time of the foreclosure filing -- a 1 percent increase from the average value in 2012, according to the RealtyTrac report. What’s more, the average estimated value of properties that received foreclosure filings in 2013 rose 10 percent since the foreclosure notice was filed. 

The national average time to complete a foreclosure rose 3 percent in the fourth quarter of 2013 to a record high of 564 days. The states that face the longest times to foreclose are New York (1,029 days), New Jersey (999 days), and Florida (944 days), according to the RealtyTrac report. 

“Millions of home owners are still living in the shadow of the massive foreclosure crisis that the country experienced over the past eight years since the housing price bubble burst — both in the form of homes lost to directly to foreclosure as well as home equity lost as a result of a flood of discounted distressed sales,” says Daren Blomquist, vice president at RealtyTrac. “But the shadow cast by the foreclosure crisis is shrinking as fewer distressed properties enter foreclosure and properties already in foreclosure are poised to exit in greater numbers in 2014 given the greater numbers of scheduled foreclosure auctions in 2013 in judicial states — which account for the bulk of U.S. foreclosure inventory.”

Source: RealtyTrac

4 Keys Identified for a Full Housing Recovery

In order to have a fully recovered housing market and economic recovery, economists point to the need for four positive indicators: 

1. A healthy job market with low stable unemployment; 

2. Mortgage delinquencies that have returned to historical averages; 

3. Home prices consistent with an affordable mortgage payment–to–income ratio; and 

4. Home sales that are in the range of historical norms. 

So, is the housing market inching closer? 

Freddie Mac’s U.S. Economic and Housing Market Outlook for January takes a look at how the housing market is performing among these four indicators. Economists note that the unemployment rate -- while inching down -- still remains high at 6.7 percent. Meanwhile, mortgage delinquencies have fallen to 5.88 percent -- nearly half of their peak rate but still higher than the national average of about 2 percent, Freddie notes. 

Home prices still have some room to grow without outpacing income growth, economists say. 

“From 1999–2006, mortgage payments on a hypothetical 30-year fixed-rate mortgage would have increased by 50 percent more than income growth,” Freddie Mac notes in the report. “Currently, payment-to-income ratios are only 60 percent of the level we had in 1999, suggesting room for continued housing growth.” 

Finally, home sales have risen over the past two years but remain below levels from a nearly a decade ago. Home sales, historically, average a rate of about 6 percent of the housing stock every year. They dropped to 4 percent during the housing crisis. Economists are predicting a 5.7 percent pace in 2014. 

"As we start 2014, the housing recovery continues its steady pace,” Frank Nothaft, Freddie Mac’s chief economist. “House-price gains will likely moderate from last year's pace but rise about 5 percent in national indexes. Home sales, as well as other key indicators, continue to trend in the right direction, although in some markets we are seeing the sales recovery strengthen while many others remain weak."

Bitcoin More Than a Fad for Real Estate?

Bitcoin has been in real estate news a lot lately. Is it a flash in the pan, or is it something you should consider for your business?

“We’re way past the fad stage,” says Alan Silbert, founder and CEO of BitPremier, a website that lists luxury products for sale using the digital currency and acts as an intermediary for transactions. Silbert addressed a group of real estate professionals and others at Inman Connect in New York on Thursday.

BOND New York recently announced it will be using bitcoin, and Silbert predicts that more businesses are going in that direction. Not only are these companies getting a fair amount of media attention, but Silbert says accepting bitcoin could also bring to a brokerage clients who are younger and more tech-savvy and who have above-average wealth.

“There’s a lot of press value,” he says, but “you’re opening yourself up to another buyer base.”

Digital currencies are not backed by any central banking or governmental authority, which makes many nervous. But Silbert says the technology behind bitcoin is supported by “military-grade cryptography,” and he expects the government to get involved this year.

“The regulators are feeling bitcoin out,” Silbert says. He adds that the U.S. Senate held a largely positive hearing on bitcoin last year, and he predicts “the IRS will probably come out with some guidance this year.”

So how do you go about converting bitcoins to “real” money? Silbert says there are companies out there that can help you minimize the risk.

“The scariest thing right now is the volatility,” he says. “Bitpay and Coinbase can exchange bitcoins to your local currency on a daily basis.”

Even if you’re not ready to start accepting bitcoin, you owe it to your business to know about it.

“Virtual currencies are here to stay,” he says. “At the absolute least, I would implore you to educate yourself [about] bitcoin, because you’re going to have customers wanting to use it.”

—By Meg White, REALTOR® Magazine

As Home Prices Rebound, Lenders Rush to Unload REOs

The recovery in home prices this year is prompting banks to sell off their REO inventory at a brisker pace. Sales of bank-owned homes made up 10 percent of residential sales in November, the third consecutive month for increases in REO sales, RealtyTrac reports. 

"Lenders are taking advantage of this environment to unload more of their bank-owned inventory and in-foreclosure inventory at the foreclosure auction," says RealtyTrac's Daren Blomquist. "But as the backlog of distressed inventory available dries up in many of the markets with the most efficient foreclosure processes — namely California, Arizona, and Nevada, with Georgia not far behind — overall sales volume is declining and will continue to do so until more nondistressed sellers enter the market."

Rick Sharga, executive vice president at Auction.com, says his company is “seeing more properties sold at trustee sales, and we are seeing more properties that are coming from servicers priced to sell at trustee sales.” 

Previously, mortgage servicers would put foreclosed homes up for sale at the full value of the loan, CNBC reports. However, those homes would often land back at the bank as investors sought larger discounts. “Ironically, as prices are rising, servicers are discounting the homes more,” CNBC reports. 

Source: “Sales of bank-owned homes surge,” CNBC (Dec. 20, 2013)

Could Interest Rates Get Buyers Off the Fence?

Though borrowing costs are increasing as interest rates have lifted from their historical lows, some real estate professionals believe the rise may boost home sales. 

“It will get people sitting on the fence to decide, ‘We better do something or it’s going to cost us money,’” says Margaret Dixon, a real estate sales associate with Crye-Leike in Tennessee.

At the end of 2012, 30-year fixed-rate mortgages averaged 3.52 percent. Last week, Freddie Mac reported that 30-year rates averaged 4.47 percent. 

“A 1 percent increase usually lands around $30,000 in buying power,” says Todd Reynolds, a real estate professional with Goodall Homes. “That’s the difference between a starter home and a bigger home — or a bonus room.”

Higher interest rates, along with higher home prices, may prompt more home buyers to act quickly before costs rise any more. 

“They realize the house of their dreams may never be cheaper than it is today,” says Reynolds. “It creates a sense of urgency.”

Economists are predicting that mortgage rates will likely rise to 5 percent or 5.5 percent in 2014. 

“Most people realize the [3 percent-range interest rates] are gone, and they’d better be glad to get 4.5 percent,” Jay Bradshaw, an agent in Cumberland, Tenn., told The Tennessean. 

Source: “Rising interest rates may boost real estate market,” The Tennessean (Dec. 24, 2013)

Fannie, Freddie Fee Hikes Delayed for Review

The incoming director of the Federal Housing Finance Agency says that he will delay Fannie Mae and Freddie Mac's planned increases on mortgage fees until he has time to review the reasoning behind it. 

The move by Mel Watt, D-N.C., who was confirmed by the Senate earlier this month, comes after FHFA's current acting director Edward J. DeMarco announced the hikes.

Fannie Mae and Freddie Mac said earlier this month that they intend to charge more to lenders who guarantee loans for borrowers with mid-range-or-below credit scores, as well as borrowers who don't meet certain down payment guidelines. The fee increases, which lenders likely would have passed down to borrowers, could have cost a borrower with a $200,000 30-year mortgage about $4,000 extra over the life of the loan — or about $11.11 extra per month.

The fees were set to take effect in March and April. Critics in the mortgage and housing industry had argued that the fees were too high and that fee hikes on lenders are usually passed on to borrowers via higher interest rates. 

“I felt it was important to announce my intentions now because of the prospect that some lenders could start to price the proposed changes into the market well before the effective dates,” Watt wrote in an email to reporters.

Watt will be sworn in as FHFA’s new director on Jan. 6. 

Watt also said he would delay fee hikes planned for states with long foreclosure timelines. The hikes would likely have meant higher fees specifically for four states with the longest foreclosure process: New York, New Jersey, Connecticut, and Florida.

Fannie and Freddie back about 60 percent of all U.S. mortgages. 

Source: “New FHFA director stops rate hikes short,” HousingWire (Dec. 23, 2013) and “Fannie Mae Fee Increases to be Delayed by FHFA Under Watt,” Bloomberg (Dec. 21, 2013)

Study: Staging Doesn't Influence Selling Price

While effective home staging can influence first impressions of a property, new research concludes that the strategy by itself may not convince buyers to pay more. 

College of William and Mary real estate and finance professor Michael Seiler led the study, called "The Impact of Staging Conditions on Residential Real Estate Demand."  He and his co-authors used professional rendering software to create six virtual home tours with varying degrees of attractive or neutral design and furnishings, ugly furniture and design elements, or no furniture at all.  More than 800 home buyers were exposed to one of the tours, after which they reported how much they would be willing to pay for the listing.  Regardless of the paint color or quality of the furnishings, study participants all said they would pay about the same for all six of the homes: $204,000. 

Still, Seiler warns that the study may not represent the last word on staging: "All we could test is how much the home would sell for. What we don't know is whether a well-staged home will sell faster. It may sell quicker."

Despite the findings, many real estate agents still believe staging works—especially when buyer emotions come into play.  If the staging is favorable, they say, buyers will be willing to up the purchase price; but if it is unfavorable, it may be the element that causes them to walk away.

Source: "Home Staging Effect? Not Much." Wall Street Journal (Dec. 27, 2013)

Copyright 2013 Information Inc.

Mortgage Rates to Enter New Year Mostly Flat

Fixed-rate mortgages changed little this week heading into the end of the year, Freddie Mac reports in its weekly mortgage market survey.  

Freddie Mac reports the following national averages with mortgage rates for the week ending Dec. 26: 

• 30-year fixed-rate mortgages averaged 4.48 percent, with an average 0.7 point, rising from last week’s 4.47 percent average. Last year at this time, 30-year fixed-rate mortgages averaged 3.35 percent. 
• 15-year fixed-rate mortgages averaged 3.52 percent, with an average 0.7 point, increasing slightly from last week’s 3.51 percent average. Last year at this time, 15-year rates averaged 2.65 percent. 
• 5-year hybrid adjustable-rate mortgages (ARMs) averaged 3 percent, with an average 0.4 point, rising from last week’s 2.96 percent average. A year ago, 5-year ARMs averaged 2.7 percent. 
• 1-year ARMs averaged 2.56 percent, with an average 0.5 point, dropping slightly from last week’s 2.57 percent average. A year ago, 1-year ARMs averaged the exact same as today's percentage. 

Source: Freddie Mac

Buyers Facing Fewer Bidding Wars

With bidding wars easing in many markets, buyers may face less competition in their attempts to snag a home this winter. That's according to the latest Bidding War Report by the real estate brokerage Redfin.

According to the report, competition for homes hit its lowest point since 2011 last month. About 51 percent of Redfin agents nationwide reported facing bidding wars in November, down from 63.6 percent a year earlier. The home-buying competition rate has dropped for eight straight months, after peaking in March at 75.3 percent. 

Still, the brokerage’s report does show demand growing stronger than expected at the end of the year. “Home buyers who failed to get an offer accepted early in the year have been stockpiling down payment money all year long,” says Amber Hancock, manager of Redfin’s San Francisco East Bay market. “They’re jumping back in this time as better qualified, more confident competitors, taking advantage of the easing late-fall market.”

Buyers are still using competitive strategies to get the house they want—with the use of all-cash offers, waived financing and inspection contingencies, and personal cover letters becoming more common in November, Redfin reports. 

The two markets that saw the largest month-over-month decreases in competition were Seattle and Orange County, Calif. Meanwhile, bidding wars heated up in November in Washington, D.C., San Diego, Baltimore, and Los Angeles. 

Investors Likely to Curb Buying in 2014

Institutional investors who have been buying up thousands of foreclosed single-family homes will likely take a “more restrained” approach in 2014, according to a new report by RealtyTrac and Pintar Investment Co., a single-family rental investment company. 

Over the past two years, institutional investors have been scooping up thousands of single-family homes to turn into rentals. But as the number of distressed homes in many markets falls, investors’ presence is expected to slip too. RealtyTrac defines institutional investors as firms that purchase at least 10 single family homes within a calendar year. From January 2011 to November 2013, institutional investors purchased a combined total of 366,206 single-family homes.

“Investors will expand their holdings now and into 2014, but this expansion is likely to be decidedly more restrained than the binge of the past 18 months,” according to the RealtyTrac/Pintar report, “Back to Reality with Buy and Rent."

Markets such as Memphis, Fresno, Charlotte, Atlanta, and Phoenix had seen a large spike in institutional investors in 2012, but a limited distressed inventory is prompting more investors to move on to other markets. According to the report, investors will most likely seek to acquire more homes in secondary markets. Many of those markets are expected to be in the southeast, in places such as Jacksonville, Fla.; Winston-Salem, N.C.; Tampa, Fla.; Lakeland, Fla.; and Macon, Ga. 

Also in the new year, institutional investors will likely focus more on managing their geographically diverse, existing portfolios. Some investors are facing the realities that yields that may have looked good on paper aren’t always so favorable when it comes to often-overlooked factors such as rent delinquency and collection issues as well as unforeseen maintenance, according to the report. 

Source: “Back to Reality with Buy and Rent,” Realty Trac/Pintar (December 2013) and “Higher REO Prices May Slow Investor Buying in 2014,” National Mortgage News (Dec. 24, 2013)

The Most Desirable Celebrity Neighbors

Americans chose late-night TV host Jimmy Fallon as the most desirable celebrity neighbor for 2014, according to the recently-released seventh annual Zillow Celebrity Neighbor Survey. 

Fallon nabbed 11 percent of the vote, dethroning last year’s “most desirable neighbor” duo—Miranda Lambert and Blake Shelton. In order to be Fallon's neighbor, you’d have to move to Sagaonack, N.Y., where Fallon owns an nineteenth-century farmhouse that sits on more than two acres.

After Fallon, the survey found the following most desirable celebrity neighbors are:

• Miranda Lambert and Blake Shelton
• Jennifer Lawrence
• Sofia Vergara
• Robin Roberts
• Lebron James

On the other hand, topping the list as worst neighbors for this year: Reality star Kim Kardashian and singer Kanye West, according to the survey. The couple beat out the cast of “Here Comes Honey Boo Boo,” Justin Bieber, Miley Cyrus, Lady Gaga, and Alex Rodriguez as worst neighbors. 

However, “what remains clear is that many people don’t want to live next to any celebrity, regardless of why they are famous,” says Amy Bohutinsky, Zillow’s chief marketing officer. Indeed, the survey found that more than one-third of Americans say they prefer a non-celebrity neighbor. 

Source: “Jimmy Fallon Named Most Desirable Celebrity Neighbor for 2014,” Zillow Blog (Dec. 27, 2013)\

Bank Giant Accused of Discriminatory Lending

The Consumer Financial Protection Bureau and Department of Justice have filed a joint discriminatory lending complaint against National City Bank. The bank is being accused by the two government agencies of charging African-American and Hispanic borrowers different prices on their mortgages when compared to white borrowers with similar credit histories.

The violations allegedly occurred between 2002 and 2008. The government claims that more than 76,000 minority borrowers faced higher costs on their mortgages from the bank.

Since 2012, the CFPB and DOJ have been partnering up to pursue fair lending cases. The agencies want National City Bank—through PNC, which acquired the bank in 2008—to pay $35 million in fines to minority borrowers who were allegedly affected.

Source: “CFPB, DOJ file discriminatory lending complaint against National City Bank,” HousingWire (Dec. 23, 2013)

As Mortgage Rates Climb, Home Sales Slip

Rising mortgage rates are biting into home sales. The Wall Street Journal reports that this will likely continue as interest rates readjust in the new year and as the Federal Reserve winds down its bond-buying stimulus program.

The relationship between rates and home sales is most evident so far with new homes: As interest rates have risen, demand for new homes has also fallen. When mortgage rates began rising in May, the seasonally-adjusted annual rate of new-home sales fell by 4 percent from the prior month, according to the Commerce Department. Meanwhile, in October, mortgage rates fell by three-tenths of a percentage point, and new home sales then soared 18 percent. 

“If we see a pretty quick rise [in mortgage rates]—maybe a half a percentage point to percentage point rise—it’ll make for some bumpy demand in 2014,” says Ellen Haberle, an economist at Redfin.

While mortgage rates are still at historical lows, 30-year fixed-rate mortgages have risen nearly a full percentage point since May. The 30-year fixed-rate mortgage averaged 4.48 percent last week—the highest level since mid-September, according to Freddie Mac. The interest rate on U.S. Treasury bills is rising, which also could signal higher interest rates on the horizon.

Source: “Mortgage Rate Swings May Mean “Bumpy” 2014 Housing Market,” The Wall Street Journal (Dec. 27, 2013)

Buyers Get Extended Offer Period on REOs

Mortgage giants Fannie Mae and Freddie Mac announced an extension of their “first look” programs, granting buyers seeking a primary residence a full 20 days to submit offers on REO properties ahead of investor competition. 

Previously, the First Look period was 15 days long. Freddie Mac’s program operates under HomeSteps First Look initiative and Fannie Mae’s version operates under the HomePath system. The expanded 20-day program took effect for HomeStep listings on or after Dec. 17. Fannie Mae’s First Look HomePath program is effective for properties listed on or after Jan. 2, 2014. 

The programs are designed to promote owner-occupancy in communities, which the mortgage giants believe contributes to neighborhood stabilization. Some second home purchases are also eligible for HomeSteps First Look program. However, purchases of investments or rental properties are not eligible. 

“This is especially important for buyers competing for opportunities in markets where home inventories are shrinking,” says Chris Bowden, senior vice president of HomeSteps. “Expanding the HomeSteps First Look Initiative underscores our commitment to managing HomeSteps' REO inventory in a way that's good for taxpayers, homebuyers, neighborhoods, and Freddie Mac."

Freddie Mac and Fannie Mae offer a 30-day bidding window for buyers in Nevada, a state that has one of the highest foreclosure rates in the country. 

Source: Fannie Mae and Freddie Mac

Housing's Best Buys for 2014

Home prices and mortgage rates are on the rise, and some investors are retreating from the market. However, Forbes believes there are still plenty of housing deals left for home buyers in the new year, and with possibly less competition. 

Forbes recently released a list of cities where prices are still low but offer the potential of large growth in 2014. To compile its list, Forbes partnered with Local Market Monitor, which tracks home prices and local economic factors in more than 300 housing markets. Cities were ranked based on housing markets still considered “undervalued” in prices and that offer some of the largest job growth in their economies. 

The following metros topped Forbes’ list for Best Buy Cities for 2014: 

1. Fort Worth-Arlington, Texas
   • Median home price: $168,383
   • 3-year growth forecast: 25% (3-year growth forecast is prediction for cumulative rise in home prices over the next three years)
   • Prices are considered 20 percent below their actual value
2. Dallas-Plano-Irving, Texas
   • Median home price: $180,645
   • 3-year growth forecast: 29%
   • Prices are considered 12 percent below their actual value
3. Charlotte-Gastonia-Concord, N.C.-S.C.
   • Median home price: $201,855
   • 3-year growth forecast: 24%
   • Prices are considered 15 percent undervalued
4. Nashville-Davidson-Murfreesboro-Franklin, Tenn.
   • Median home price: $199,506
   • 3-year growth forecast: 23%
   • Prices are considered 16 percent undervalued
5. Houston-Sugar Land-Baytown, Texas
   • Median home price: $191,279
   • 3-year growth forecast: 24%
   • Prices are considered 13 percent undervalued
6. Atlanta-Sandy Springs-Marietta, Ga.
   • Median home price: $170,701
   • 3-year growth forecast: 26%
   • Prices are considered 26 percent undervalued
7. Oklahoma City, Okla.
   • Median home price: $159,713
   • 3-year growth forecast: 16%
   • Prices are considered 17 percent undervalued
8. Orlando-Kissimmee, Fla.
   • Median home price: $172,609
   • 3-year growth forecast: 35%
   • Prices are considered 17 percent undervalued

13 Stories You Loved in 2013

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When you look back on 2013, what do you remember most? We hope at least some of these stories make it on your list. Here are 13 of REALTOR® Magazine’s most popular posts of 2013:

1. Key West Association Wins Federal Copyright Case
   Home-design firm Robert Allen was ordered to pay $2.7 million to the Key West Association of REALTORS® after a court ruled that the company had no authority to use images of MLS listings in its advertising.
2. How the Words You Say May Be Costing You Business
   Watch your mouth. Some everyday language that seems perfectly innocent to you could be subconsciously stopping your clients from making a move. Guess what some of the most common words are that you should never utter again.
3. The Worst Colors to Use in a Home
   What’s the most offensive color to the eyes? Hint: It’s something you should only be squeezing into a drink.
4. Make the First Impression Count: Update Your Home’s Exterior
   2013′s Cost vs. Value Report showed that updates to the outside of a home pay off big. For the most cost-effective remodeling projects, outdoor home improvements dominated the list. Here’s how much the most popular ones will cost and how much ROI you can expect to see.
5. Spring Home Improvements: Repair, Replace, Enjoy!
   Spring 2014 is already not too far off, so this list is something you’d be wise to share with your clients again soon.
6. 10 Safest Places to Live in the U.S.Are you sure your neighborhood is safe? In these cities, you can feel a little more free to walk alone at night.
7. Big Predictions for Housing for Next 2 YearsIf you thought things went well in 2013 with the bump in home prices and sales, just wait until you get a load of what’s predicted for 2014!
8. Helping a Client Through Buyer’s RemorseA small amount of buyer’s remorse can be natural, but how do you help clients whose fears get the best of them? These four tips may offer solace.
9. Best Practices for Your Real Estate Website Home PageYou know about the importance of first impressions. Here are eight ways to make people who land on your home page want to keep clicking through.
10. When It Comes to Wood Floors, Choose Wisely
    There are as many fashions for wood flooring as there are for women’s clothing. Consider these things when choosing one that has staying power.
11. Health Care Reform: A Guide to Your Coverage OptionsYou still have until March 31 to elect your health plan under the federal open enrollment period. Do you know what types of plans are available to you?
12. How Much Does It (Really) Cost to Decorate?Many surveys can tell you what a remodeling job will cost — but the expenses don’t stop there. How much more should you be spending to make the room homey after construction is done?
13. Relationship Management: Get EmotionalStudies show higher emotional intelligence can boost sales results. Learn how you can be a more emotionally intelligent salesperson.

Rising Flood Insurance Rates Sinking Sales in Florida

A big hike in flood insurance rates has forced home buyers to recede from the market in some areas, drastically hampering home sales, according to reports. 

"The market dried up — it died," says Shirley Davis, a home owner in St. Petersburg, Fla., who has been trying to sell her $175,000 ranch-style home. The now-nearly-$4,000 in annual premiums for flood insurance on her property has caused buyers to flee. "Now, [buyers] call and the first question is, 'Is it in a flood zone?'”

The Biggert-Waters Flood Insurance Reform Act rate hikes took effect Oct. 1, leaving many home owners in flood-zone neighborhoods facing a big raise in premiums. The law nixes subsidies on millions of older homes nationwide. Florida leads the nation in the number of subsidized policies. 

The rise in premiums is to help offset the National Flood Insurance Program’s $24 billion debt. 

But since Oct. 1, sales in flood-zone areas such as Shore Acres, the Pinellas beaches and inland St. Petersburg, all in Florida, have dropped to some of the slowest pace in years. 

"We're getting nailed big time," said RE/MAX managing broker Bonnie Davis. "The real estate market here had come back so strong. … Now, sales have almost come to a complete standstill."

Several homeowners’ insurance rates, when taken off the subsidy, could increase by about 20 percent a year. For a home buyer, however, the subsidies could be removed all at once and rates could go up anywhere from $2,000 to even $10,000, the Tampa Bay Times reports. 

"There's so much uncertainty floating around and misinformation, and it's affecting people's thought processes," says Brandon Rimes, a RE/MAX real estate professional in Florida. "When people start getting scared, they go into stalemate."

The insurance panic has led some real estate professionals to take other steps to get a home sold. For example, a few agents have reportedly turned to investors and international buyers, who often pay with cash and can “self-insure” to avoid high insurance rates. Some real estate professionals have also packaged flood homes to sell in bulk to investors.

“In some cases, agents have agreed to sell a coveted non-flood home only if the investor agrees to buy a home in a flood zone, too,” the Tampa Bay Times reports. 

Low-End Home Prices a Predictor of Overall Market Activity?

Home prices in different tiers can fluctuate greatly, but the real estate industry should look more closely at the low-end market for keys of where the overall market may be heading, according to CoreLogic's MarketPulse.

Sam Khater, CoreLogic's deputy chief economist, says that changes in low-end home prices lead changes in the high-end market by six months to a year. Prices at the low end are much more volatile than those at the high end, he notes.  

Low-end home prices hit bottom in March 2011, nearly a full year earlier than high-end properties and for prices overall.

“Not only can turning points be different, so can the momentum in low-end versus high-end price changes,” Khater says. Currently, low-end home prices are dropping, particularly in the Southwest. “The magnitude of the declines presages lower growth for prices overall."

Khater says that when prices bottomed out in early 2012 on the low end, they were still 14 percentage points above those on the high end. Currently, the difference is 22 percentage points, which is the largest gap in 20 years, he says. 

“This indicates that the low-end price correction is over and overall price growth will be markedly slower heading into 2014,” Khater predicts. 

NAR: Housing Market Is Stabilizing

Contracts to buy new homes leveled off in November, ticking up slightly by 0.2 percent, the National Association of REALTORS® reports. Pending home sales — which reflect contracts and not closings — were 1.6 percent below year-ago levels. 

“We may have reached a cyclical low because the positive fundamentals of job creation and household formation are likely to foster a fairly stable level of contract activity in 2014,” says Lawrence Yun, NAR’s chief economist. “Although the final months of 2013 are finishing on a soft note, the year as a whole will end with the best sales total in seven years.” 

Pending home sales in November posted the largest gains in the South and West, rising 2.3 percent and 1.8 percent month-over-month, respectively. The increases helped to offset declines in pending home sales in the Northeast (down by 2.7 percent in November) and the Midwest (down by 3.1 percent). 

Total existing-home sales are expected to end the year with nearly a 10 percent gain over 2012. However, Yun says that existing-home sales will likely remain at around 5.1 million in 2014. A rise to 5.3 million in existing-home sales is expected for 2015. 

Existing-home prices for 2013 are expected to be about 12 percent higher than year-ago levels, averaging $197,300. NAR predicts that home prices will grow modestly in 2014 at a pace of 5 to 5.5 percent, and values will increase another 4 percent in 2015. 

— By Melissa Dittmann Tracey

October Pending Home Sales Down Again, but Expected to Level Out

WASHINGTON (November 25, 2013) – Although conditions were mixed across the country, pending home sales continued to move lower in October, marking the fifth consecutive monthly decline, according to theNational Association of Realtors®.

The Pending Home Sales Index,* a forward-looking indicator based on contract signings, slipped 0.6 percent to 102.1 in October from an upwardly revised 102.7 in September, and is 1.6 percent below October 2012 when it was 103.8. The index is at the lowest level since December 2012 when it was 101.3; the data reflect contracts but not closings.

Lawrence Yun, NAR chief economist, said weaker activity was expected. “The government shutdown in the first half of last month sidelined some potential buyers. In a survey, 17 percent of Realtors® reported delays in October, mostly from waiting for IRS income verification for mortgage approval,” he said.

“We could rebound a bit from this level, but still face the headwinds of limited inventory and falling affordability conditions. Job creation and a slight dialing down from current stringent mortgage underwriting standards going into 2014 can help offset the headwind factors,” Yun said.

Modest gains in the Northeast and Midwest were offset by declines in the South and West. Yun notes there was a greater impact in the high-cost region of the West, where tight inventory also is holding back contract offers. He expects generally flat home sales going into 2014, but continued growth in home prices from limited inventory conditions.

The PHSI in the Northeast rose 2.8 percent to 85.8 in October, and is 8.1 percent above a year ago. In the Midwest the index increased 1.2 percent to 104.1 in October, and is 3.2 percent higher than October 2012. Pending home sales in the South slipped 0.8 percent to an index of 114.5 in October, and are 1.5 percent below a year ago. The index in the West fell 4.1 percent in October to 93.3, and is 12.1 percent lower than October 2012.

Yun said there are concerns heading into 2014. “New mortgage rules in January could delay the approval process, and another government shutdown would harm both housing and the economy,” he said.

Annual existing-home sales should be nearly 10 percent higher this year than in 2012, totaling just above 5.1 million, with a comparable volume expected in 2014. The national median existing-home price for 2013 is projected to be 11 percent above last year, and then cool to a 5.0 to 5.5 percent increase in 2014.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries. For additional commentary and consumer information, visitwww.houselogic.com and http://retradio.com.

# # #

*The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months.

An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined. By coincidence, the volume of existing-home sales in 2001 fell within the range of 5.0 to 5.5 million, which is considered normal for the current U.S. population.

NOTE:  Existing-home sales for November will be reported December 19 and the next Pending Home Sales Index will be on December 30; release times are 10:00 a.m. EST.

NAR Praises Positive Federal Housing Administration Actuarial Review

WASHINGTON (December 13, 2013) – The following is a statement by National Association of Realtors® President Steve Brown:

“NAR is a strong supporter of the Federal Housing Administration and its vital role in the mortgage marketplace.

“The 2013 Actuarial Review released today shows that FHA is on a positive trajectory to rebuild its capital reserve fund and meet the congressionally required 2 percent excess reserve amount by 2015. These promising gains are the result of strong leadership and a commitment to policies that balance risk with FHA’s mission of making mortgage insurance available to qualified homebuyers.

“In light of this report, NAR believes that Congress should not dramatically change the FHA or redefine its purpose. We will continue our work with FHA to help make the dream of homeownership a reality for millions more Americans.”

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries.

Existing-Home Sales Decline in November, but Strong Price Gains Continue

WASHINGTON (December 19, 2013) – Existing-home sales fell in November, although median prices continue to show strong year-over-year growth, according to the National Association of Realtors®.

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, dropped 4.3 percent to a seasonally adjusted annual rate of 4.90 million in November from 5.12 million in October, and are 1.2 percent below the 4.96 million-unit pace in November 2012.  This is the first time in 29 months that sales were below year-ago levels.

Lawrence Yun, NAR chief economist, said the market is being squeezed. “Home sales are hurt by higher mortgage interest rates, constrained inventory and continuing tight credit,” he said. “There is a pent-up demand for both rental and owner-occupied housing as household formation will inevitably burst out, but the bottleneck is in limited housing supply, due to the slow recovery in new home construction. As such, rents are rising at the fastest pace in five years, while annual home prices are rising at the highest rate in eight years.”

The national median existing-home price for all housing types was $196,300 in November, up 9.4 percent from November 2012. Distressed homes – foreclosures and short sales – accounted for 14 percent of November sales, unchanged from October; they were 22 percent in November 2012. A smaller share of distressed sales is contributing to price growth.

Nine percent of November sales were foreclosures, and 5 percent were short sales. Foreclosures sold for an average discount of 17 percent below market value in November, while short sales were discounted 13 percent.

Total housing inventory at the end of November declined 0.9 percent to 2.09 million existing homes available for sale, which represents a 5.1-month supply at the current sales pace, compared with 4.9 months in October. Unsold inventory is 5.0 percent above a year ago, when there was a 4.8-month supply.

The median time on market for all homes was 56 days in November, up from 54 days in October, but well below the 70 days on market in November 2012. Short sales were on the market for a median of 120 days, while foreclosures typically sold in 59 days, and non-distressed homes took 55 days. Thirty-five percent of homes sold in November were on the market for less than a month.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 4.26 percent in November from 4.19 percent in October; the rate was 3.35 percent in November 2012.

NAR President Steve Brown, co-owner of Irongate, Inc., Realtors® in Dayton, Ohio, noted that new rules defining the Qualified Mortgage will be going into effect soon.  “New underwriting rules to protect borrowers, effective in January, will prohibit many loan features, set tighter limits on the amount of debt a borrower can have and still get a mortgage, and require that lenders accurately measure a borrower’s ability to repay,” he said.

“This means that qualified borrowers are getting a loan that they are very likely to be able to repay, but some borrowers may wind up paying much more for their mortgage, or not get a loan at all due to the tougher standards,” Brown said. “The new rules may tighten credit too much, but we’re hopeful regulators will make adjustments if this proves to be true.”

First-time buyers accounted for 28 percent of purchases in November, unchanged from October; they were 30 percent in November 2012.

All-cash sales comprised 32 percent of transactions in November, up from 31 percent in October and 30 percent in November 2012. Individual investors, who account for many cash sales, purchased 19 percent of homes in November, unchanged from October and from November 2012. Last month, seven out of 10 investors paid cash.

Single-family home sales fell 3.8 percent to a seasonally adjusted annual rate of 4.32 million in November from 4.49 million in October, and are 0.9 percent below the 4.36 million-unit level in November 2012. The median existing single-family home price was $196,200 in November, which is 9.4 percent above a year ago.

Existing condominium and co-op sales dropped 7.9 percent to an annual rate of 580,000 units in November from 630,000 units in October, and are 3.3 percent lower than the 600,000-unit pace a year ago. The median existing condo price was $197,400 in November, up 10.0 percent from November 2012.

Regionally, existing-home sales in the Northeast declined 3.0 percent to an annual rate of 650,000 in November, but are 6.6 percent above November 2012. The median price in the Northeast was $242,900, up 5.7 percent from a year ago.

Existing-home sales in the Midwest fell 4.1 percent in November to a pace of 1.17 million, but are unchanged from a year ago. The median price in the Midwest was $151,100, which is 6.7 percent higher than November 2012.

In the South, existing-home sales declined 2.4 percent to an annual level of 2.01 million in November, but are 1.0 percent above November 2012. The median price in the South was $168,700, up 7.7 percent from a year ago.

Existing-home sales in the West dropped 8.5 percent to a pace of 1.07 million in November, and are 10.1 percent below a year ago, in part from constrained inventory conditions. The median price in the West was $284,400, up 16.5 percent from November 2012.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries. For additional commentary and consumer information, visitwww.houselogic.com and http://retradio.com.