For Real Estate Predictions, Go West

Housing analysts are closely watching the Western region’s housing market for signs of what may be to come for the rest of the country. After all, the West was the first region to crash in the mid-2000s, and the first region to start recovering. 

Therefore, some in the industry are alarmed that sales of existing homes fell by the most in the West in October, dropping 7 percent. The West was the only region in the U.S. that saw year-over-year declines in home sales, according to data from the National Association of REALTORS®. 

Existing-home sales nationwide dropped 3.2 percent in October. But the drop in sales in the West was largely due to a shortage of homes for sale. 

"In the West region, there is a significant shortage of inventory, so you have buyers who are looking for the right home unable to find it and unwilling to commit," says Lawrence Yun, NAR’s chief economist. "But because of the inventory shortage, one is still seeing strong price increases in the West." 

The median price for a California home was $357,000 in October, up more than 25 percent from year-ago levels, according to DataQuick research. 

“The rest of the nation did not see the same dramatic swings as most Western markets, but the supply, demand, and pricing dynamics are similar,” CNBC reports. “Prices are up over 12 percent nationally, and inventories are down across the nation. For those predicting the national housing market over the next six months, watching the West is a good idea.” 

Source: “Watch Out! Worrisome Housing Signs Appear in West,” CNBC (Nov. 20, 2013)

Survey: Americans Still Thankful for Home Ownership

The recession hasn’t shaken Americans’ confidence in home ownership, according to a new survey of 1,000 adults nationwide by NeighborWorks America.

About two-thirds of survey respondents say their opinion on home ownership has not changed over the past five years. Eighty-eight percent say owning a home is an important element of their “American Dream.” 

“Although the housing market took one of the largest hits ever, with home prices falling nationally and foreclosures rising to more than one million homes annually, home ownership remains a goal many want to achieve,” says Eileen Fitzgerald, CEO of NeighborWorks America. “But it’s important to also note that the poll also underscores that we need to have quality and affordable rental homes available for those people who simply prefer to rent.”

The majority of renters and home owners surveyed say they believe the home buying process is complicated. They attribute the major obstacles to personal finance issues, such as lack of job security or not having enough money for a down payment. One in four surveyed say they have no familiarity with the mortgage products available. 

Still, about half of those surveyed say they feel more prepared today than five years ago to buy a home. Forty percent, though, say they are less prepared. 

“These results tell us that most consumers believe that they know when the time is right for them to buy a home — and feel strongly that home ownership is important — but that their personal situation may have been affected in the past five years and is holding them back from pursuing home ownership,” Fitzgerald says.

Source: “Consumers’ View on Homeownership Remains Optimistic,” National Mortgage News (Nov. 22, 2013)

Lenders Add Green Tints to Mortgages

The Senate is considering bipartisan legislation that would require Fannie Mae, Freddie Mac, the FHA, and other federal mortgage entities to revamp their rules to reward energy savings.

Supporters of energy efficiency want lenders to take the net savings from energy improvements into consideration when they underwrite and impose mortgage fees, and they also want appraisers to take into account the value of these retrofits.

More than 125 multiple listing services nationwide provide "green fields" in online listing information displays so that energy improvements and certifications for Energy Star–qualified appliances, solar power, and other features can be described. Moreover, the Appraisal Institute is offering green valuation training for appraisers and has established a comprehensive "green addendum" that could result in higher property valuations.

On top of all this, Genworth Mortgage Insurance plans to offer green rewards to U.S. borrowers like it already does in Canada -- where borrowers receive a 10 percent refund on mortgage insurance premiums, online discounts for common household items, and even a break on their debt-to-income ratio for underwriting purposes if the home meets national or provincial energy efficiency guidelines.

Meanwhile, a study of 71,000 home loans by University of North Carolina researchers reveals that mortgages on energy-efficient properties are 32 percent less likely to default -- even after controlling for the borrower's income, credit scores, home values, and local utility costs.

Source: "The Nation's Housing: Seeing Green Over Mortgages," New London Day (CT) (11/22/13)

Chinese Buyers Are Coming to America

Chinese buyers are increasingly looking to U.S. real estate -- and California in particular -- as they pay all cash for homes and plan to use their homes as a “safe haven for their wealth,” CNBC reports.

Some are buying multiple homes as investments, while others are finding homes to move their families to the United States. 

"They see the market here still has room for appreciation," says Kinney Yong with RE/MAX Premier Realty in Irvine, Calif. "What's driving them over here is that they have this cash, and they want to park it somewhere or invest somewhere."

Education is a big attraction for Chinese buyers eyeing American real estate too, real estate professionals say. 

"We are seeing a lot of Asians who are buying as an investment, but their kids are going to school here, so kids live in the home. They are looking at it more as an investment in education," says Emile Haddad, CEO of Fivepoint Communities, developer of the Great Park Neighborhood.

Chinese and Canadian buyers are the fastest-growing sources of foreign buyers of U.S. properties in recent years, according to the National Association of REALTORS®’ 2013 Profile of International Home Buying Activity. Chinese buyers tend to purchase property in the upper price ranges, with a median price of $425,000, and typically in California, according to the report. 

Builders are taking notice of the large influx of Asian buyers and are tailoring new homes to the demand of Asian buyers, such as incorporating multigenerational floor plans and designs that incorporate the philosophies of feng shui. 

Source: “Chinese buying up California housing,” HousingWire (Nov. 25, 2013)

Loan Demand Slips in Latest Week

Mortgage applications fell for the fourth consecutive week as mortgage rates edged up slightly, the Mortgage Bankers Association reported Wednesday. 

Mortgage application activity, which includes both refinancings and home purchase loans, dropped 0.3 percent in the week ending Nov. 22, according to the MBA’s index. That marks a 7 percent drop in mortgage applications in the past four months. 

Refinancing applications, which make up the biggest bulk of applications, ticked up slightly at 0.1 percent. Purchase applications, viewed as a leading indicator of future home sales, dropped 0.2 percent. 

The MBA reports that the 30-year fixed-rate mortgage rose 2 basis points and averaged 4.48 percent in the latest week. 

The MBA’s index reflects more than 75 percent of U.S. mortgage applications.

New-Home Market Posts Big Gains as Permits Surge

Housing permits for home construction reached a five-and-a-half-year high in October, signaling a strong uprise in new-home construction, the Census Bureau reports. 

Led by a big jump in multifamily permits, overall building permits surged 6.2 percent in October to a seasonally adjusted annual rate of 1.03 million units. That marks the highest level since June 2008. Permits typically lead housing starts by at least a month. 

Housing permits are up 13.9 percent from year ago levels. 

Permits for multifamily homes -- buildings with five units or more -- posted a double-digit increase in October of 15.3 percent in October,  following a 20.1 percent increase in September too. 

Single-family home permits -- which make up the largest part of the market -- rose 0.8 percent, following a 1.9 percent drop in September. 

Housing permits in the West and South posted some of the strongest gains with permits rising to the highest levels in those regions since January 2008. Permits fell in the Midwest and stayed flat in the Northeast.

"Permits are often a harbinger of future housing activity and the strong showing in the multifamily sector along with stable numbers on the single-family side bode well for a continuing, gradual upturn in housing over the coming months," says Robert Denk, a senior economist with the National Association of Home Builders. "But consumer and builder confidence could be seriously undermined unless policymakers make progress over looming budget, tax and economic policy issues in the weeks and months ahead."

Short Sales Lose Favor With Lenders

As home prices rise, lenders are showing less willingness to grant short sales, RealtyTrac reports. 

The number of short sales has been gradually dropping the last few months. Short sales represented 5.3 percent of all sales in October, down from 6.3 percent the previous month and down from 11.2 percent last October, according to RealtyTrac data.

The National Association of REALTORS® recently reported in its October existing-home sales report that short sales tend to sell at an average discount of 14 percent below market value.

“After a surge in short sales in late 2011 and early 2012, the favored disposition method for distressed properties is shifting back toward the more traditional foreclosure auction sales and bank-owned sales,” says Daren Blomquist,vice president at RealtyTrac. “The combination of rapidly rising home prices — along with strong demand from institutional investors and other cash buyers able to buy at the public foreclosure auction or an as-is REO home — means short sales are becoming less favorable for lenders.”

Foreclosure auction sales to third parties accounted for 2.5 percent of all sales, nearly double what it was a year ago when at 1.3 percent, RealtyTrac reports. Sales of REO homes repossessed by banks made up 9.6 percent of sales in October, about the same percentage from a year ago. 

In some states, short sales still remain a high proportion of sales. RealtyTrac notes that the states with the highest percentages of short sales in October were: Nevada (14.2%); Florida (13.6%); Maryland (8.2%); Michigan (6.7%) and Illinois (6.2%).