Foreclosed Owners Get Second Chance Sooner

Those who lost their home due to financial hardships may get another shot at being home owners again soon. The Federal Housing Administration recently announced that they would shorten the waiting period for qualified borrowers who’ve had a bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale who want to buy a home again. Under the FHA's Back-to-Work program, home owners must show that they have their finances back in order and they must receive counseling from a HUD-approved agency. Those who meet the requirements can apply to buy a property in as little as a year.

“The Back to Work program is a great opportunity for us to help those impacted by the recent housing crisis,” Heather Shanahan, a representative with a HUD-approved housing counseling agency called Springboard, told HousingWire. "Our goal in our counseling sessions is to enable the borrower to better understand their loan options and the obligations.”

Counselors provide borrowers with a customized action plan that reflects household budgets and shows borrowers how they can meet their financial obligations to prevent default again in the future.

The Back-to-Work program is also helping borrowers purchase their first homes, in some cases.

Advice for First-Time Home Buyers

Movoto Real Estate, an online real estate brokerage based in San Mateo, Calif., asked its agents for advice that they would give clients looking to purchase a home for the first time. These tips can help guide your clients through every step of the process.

Starting the Search

There is no such thing as the perfect home, but there is a home that is perfect for you.
—Sheena Weatherly

Take the time to search for a home that suits you and meets your personal/financial needs.
—Carlos Armas

The market is shifting, so you have to be aggressive with your home search because properties are selling quicker with multiple offers.
—Alice Green

Money Matters

Figure out your personal budget to determine how much you can truly afford, then get pre-qualified and compare the amounts. Use the lowest of the two.
—Jorge Fernandez

When considering your price point, start with the amount of rent you are paying now, not necessarily what the bank/mortgage company says they will loan you.
—Debra Grog

Do not look for a home for the amount you are qualified to buy with your mortgage agent. Ask him to tell you how much you can buy based on the mortgage amount you are comfortable paying every month.
—Charles Miltenberger

Working With a REALTOR®

Choose an agent based on their knowledge, experience, and work ethic. Then allow them to guide you.
—Nick Boland

Make sure that whoever you are working with is someone you can trust and that will put your interests in front of their own. If they care enough, they will ask you lots of questions!
—Steven Pagano

Markets vary from one another and a good agent can give you local information based on experience.
—Fredy Gonzalez

Trouble Ahead on Home Equity Loans?

Mortgage delinquencies are on the rise for home equity lines of credit that were taken out during the housing bubble, as well as others that are reaching the 10-year mark, Equifax data shows.

In most cases, after these loans hit the 10-year mark, borrowers must start paying not only the interest but also the principal on these loans. For many, that could mean their monthly payments could more than triple. For example, a consumer with a $30,000 home equity line of credit with a 3.25 percent initial interest rate could see their monthly payments go from $81.25 to $293.16, according to Fitch Ratings analysts. 

The number of home owners missing their payments is growing, Equifax reports. Amy Crews Cutts, the chief economist of Equifax, has called the pending increase in payments on home equity lines as a “wave of disaster.”

“More than $221 billion of these loans at the largest banks will hit this mark over the next four years, about 40 percent of the home equity lines of credit now outstanding,” Reuters reports. The delinquencies will mean banks stand to lose 90 cents on the dollar for every loan that goes bad.

Analysts say that home owners who are facing a big jump in their payments may be able to refinance their main mortgage and home equity lines of credit into a new, single fixed-rate loan. Or some borrowers may find that selling their home and taking advantage of rising home prices is another way to repay their loan, analysts note. 

Home Ownership is Key for Returning Troops

For 75 percent of military families, owning a home is one of the most important things to accomplish upon returning from service, according to a Century 21 survey. Harris Interactive conducted the study of more than 400 responses of military members or spouses.

“Home ownership is a top priority for many, but is especially significant to those returning from a tour of duty,” says Rick Davidson, president and CEO of Century 21 Real Estate.

Eighty-eight percent of veterans said that owning a home makes them feel safer. Vets also say they have a strong desire for home ownership because they want to own their own residence (73 percent), establish a household (43 percent), and have financial security (36 percent). 

However, only 33 percent of military families say they look for a home within a year of returning from active duty. The biggest obstacles reported were the price of homes, the inability to come up with a down payment, and personal savings.  

For those who do a begin a home search, vets and their families report space—in terms of number of bedrooms and bathrooms—is more important than other specific features in finding the perfect home. Storage space, amount of square footage, outdoor space, and an updated kitchen were cited as the most important amenities. 

Some real estate professionals have made a niche out of helping to meet the relocation needs of military members and their families. The Center for Specialized REALTOR® Education recently launched a Military Relocation Professional certification, a one-day program for NAR members to gain the knowledge and skills to better serve military members and their families in relocations. 

Falling New-Home Sales Spark Worry

Dropping sales volumes in new-home construction has home builders worried about a possibly dismal spring looming in 2014. 

“There’s some nervousness about the spring selling season,” says Jody Kahn, a senior vice president at John Burns Real Estate Consulting. “That’s partly because they’re worried [that] the lack of urgency from their prospects will continue.”

A survey of builders by John Burns Real Estate Consulting showed the second consecutive month in year-over-year declines in sales volumes for new home construction, the first decreases reported since early 2011. In October, sales of new homes fell by 8 percent year-over-year and posted a 6 percent drop in September year-over-year. 

Earlier this year, the new-home market saw a rapid run-up in prices. But now, the percentage of homebuilders who are raising prices is declining, falling to 28 percent in October compared to 32 percent in September. In July, 64 percent of homebuilders had said they were raising prices. 

“October was basically a crummy month for a lot of builders,” Kahn says. “Their frustration is about the government shutdown and how it probably trumped any seasonal [sales] lift that builders were hoping to see. Most did not have very good sales.”

While new-home purchases tend to drop in the fourth quarter, builders are worried that lawmakers’ indecisiveness over the federal budget and debt, as well as the fragile economy, will hamper the spring selling season early next year. 

Markets where home-price appreciation is outpacing job growth and income gains are the most worrisome, analysts note. Some builders are already responding. For example, The Olson Co., a builder based in Seal Beach, Calif., has shifted the company to building less expensive housing, such as townhomes. 

“I think this [slowdown] is a good wakeup call for the industry,” says Scott Laurie, chief executive of The Olson Co. “You can’t just raise prices 2 percent a month. That doesn’t work. What works is affordability.”

Report: Singles and First-Timers Squeezed Out

The latest research on home buyers from the National Association of REALTORS® shows the effects of tight mortgage lending standards on the market. The association says that these conditions are keeping qualified buyers, especially singles and first-time buyers, from reaching their dreams.

The NAR's 2013 Profile of Home Buyers and Sellers is the latest release in a long-running series that dates back to 1981. Results are representative of owner-occupants and do not include investors or vacation homes. The overall market share of single buyers declined from 32 percent in 2010 to 25 percent in both 2012 and 2013. First-time home buyers slipped to a 38 percent market share in the past year from 39 percent in the 2012 study.

“Single home buyers have been suppressed for the past three years by restrictive mortgage lending standards, which favor dual-income households who are more likely to have higher credit scores,” says Lawrence Yun, NAR chief economist. He added that “historically, first-time buyers are instrumental in housing recoveries because they help existing home owners sell and make a trade.”

While many potential buyers were still absent, the report did reveal some bright spots for those emerging from housing crises.

“Interestingly, 6 percent of all buyers had previously sold a foreclosure or short sale, showing that sellers of distressed property are beginning to recover financially,” Yun said.

NAR mailed a 122-question survey in July 2013 to a national sample of 148,011 home buyers and sellers who purchased their homes between July 2012 and June 2013, using a random sample of county records. Sixty-six percent of respondents were married couples, 16 percent were single women, 9 percent single men, and 7 percent unmarried couples. Fourteen percent of all survey respondents were multi-generational households, including adult children, parents and/or grandparents. The full report can be ordered online or by calling 800-874-6500.

Source: NAR

College Grads Face Home Ownership Delays

The home ownership rate among college graduates is less than non-grads for the first time on record, according to the New York Federal Reserve. 

College graduates are facing increasing obstacles to home ownership, mostly due to high debt levels and weak job prospects. The delay in Millennials entering into home ownership could be a drag on the housing industry for years to come, CNNMoney reports. 

The average student loan debt has climbed to $27,500, according to data from the Project on Student Debt. Lenders factor in debt—including student loan debt—when calculating how much mortgage they’ll give a person to buy a home. What’s more, if young professionals miss a payment on their student loans, that can damage their credit scores and further hamper their chances for qualifying for a mortgage. 

However, renting a domicile is also an important stepping stone to home ownership. Thirty-six percent of young graduates are living with their parents, according to a Pew survey. That has prevented them from building credit histories, which they also need to get a mortgage. 

Some of the effect has already been seen in the shrinking number of first-time home buyers. The National Association of REALTORS®  reported in their September housing numbers that first-time buyers accounted for 28 percent of existing-home purchases, down from 32 percent in September 2012. 

Source: “Young and Smart, but Millennials Face Homebuying Hurdles,” CNNMoney (Oct. 31, 2013)