Discussing affordability, why waiting to buy could be costly, household debt, appraiser and home owner opinions of home values plus much more!
If You Don’t Mention It, It Still Exists
Americans’ concerns about the U.S. economy are, by one measure, the lowest in 18 years. Fifteen percent of Americans mention an economic issue when asked to name the most important problem facing the country. The percentage mentioning the economy has been lower only once in Gallup’s 25-year trend — 13% in 1999 during the dot-com boom. It was similar, at 16%, in late 2006 and early 2007, before the recession and during the Iraq War.
As Americans continue to shift their attention away from economic matters, their opinions about the most important problem facing the U.S. increasingly center on non-economic issues, chiefly what they perceive as poor government. Twenty-three percent now mention dissatisfaction with government, significantly more than mention any other issue.
Interesting that dissatisfaction with the government is the number one concern. Sadly we have no one but ourselves to blame if we are unhappy with our elected officials…
Housing Affordability Down
At the national level, housing affordability is up from last month but down from a year ago. Mortgage rates increased to 4.15 percent this September, up compared to 3.78 percent a year ago.
Housing affordability declined from a year ago in September moving the index down 5.4 percent from 169.8 to 160.7. The median sales price for a single family home sold in September in the US was $246,800 up 4.2 percent from a year ago.
While this is talking about the entire country, there is some wisdom in it for anyone thinking about buying a home. No matter where you are, mortgage rates have risen over the past year and this will change what you can afford.
If you are serious about buying a home, I suggest that you get the ball rolling by by talking to a lender ASAP. Waiting could prove to be costly…
Why Waiting to Buy a Home Could Be Costly
Anyone that reads this blog already knows that mortgage interest rates have increased lately. Plus Freddie Mac, Fannie Mae, the MBA and the NAR are all predicting that mortgage rates will keep increasing in the coming year.
But the thing to remember is that mortgage rates are still historically low. Check out this chart that shows the average mortgage rate in the past several decades:
You might not get the lowest mortgage rate ever BUT you might still get a lower rate than you could in the past!
Household Debt Increases
From NY Fed:
The Federal Reserve Bank of New York’s Center for Microeconomic Data today issued its Quarterly Report on Household Debt and Credit, which reported that total household debt increased by $116 billion (0.9%) to $12.96 trillion in the third quarter of 2017. There were increases in mortgage, student, auto and credit card debt (increasing by 0.6%, 1.0%, 1.9% and 3.1% respectively) and a modest decline in home equity lines of credit (HELOC) balances (decreasing by 0.9%).
Mortgage balances and originations increased, and the median credit scores of borrowers for new mortgages increased slightly. The share of mortgage balances that were 90 or more days delinquent continued to improve, printing at 1.4% in the third quarter, down from 1.7% at the beginning of 2017, and substantially improved from the 8.9% high reached in 2010.
The decrease in delinquent mortgages and the increase in mortgage originations is very good news. The increase in mortgage balances is probably due to the way home prices are increasing.
Higher home prices means higher mortgage balances. Higher mortgage balances means more debt…
Being in debt isn’t good but the advantages of home ownership can outweigh the negatives of the mortgage. You just have to remember to not let your ego decide how much you can afford…
Gap Between Appraiser and Home Owner Opinion of Home Values Narrows
From Quicken Loans:
Opinions of home values from appraisers and homeowners continue to converge, with the gap between the two viewpoints narrowing for a fifth-straight month. Appraisals were an average of 0.99 percent lower than the homeowners thought they would be on a national scale, according to the Quicken Loans Home Price Perception Index (HPPI).
Despite the differing opinions, appraisal values continue to rise. Nationally, home values increased an average of 0.71 percent in October and rose 4.76 percent as compared to this time the previous year.
It is good to see home owners being more realistic about the value of their homes. When you are selling a home, it is very important that you do list your home too high!
Even in the rare case that you find a buyer willing to overpay, the home will still need to appraise for the contract price if the buyer is using a mortgage.
How Many Will Be Affected By a Change In the Mortgage Interest Deduction
One of the key elements of the tax reform is the proposed capping of the mortgage interest deduction at $500K. Under the current tax framework, taxpayers who own a home are able to reduce their taxable income by the amount of interest paid on the loan, which is secured by their principal residence. Interest is deductible on only the first $1 million of debt used for acquiring, constructing, or substantially improving the residence ($500,000 for single individuals if filing separately), or the first $100,000 of home equity debt regardless of the purpose or use of the loan. The new tax reform legislation allows homeowners to take the deduction on their first $500,000 of mortgage debt, half of the current threshold. The new threshold will affect only mortgages on purchases made after the law is in force (but will not include refinancing).
NAR estimates that 15% of US homes will be affected. Looking locally, there were 2,349 Anderson County SC homes reported sold in the WUAR MLS during 2016. There were only 33 homes reported sold over $500,000 and 8 of these homes sold for cash.
In other words if we look at the homes sold during 2016, only 25 out of 2349 homes would be affected by this possible change. So while this may have a dramatic effect on some real estate markets, it may not hurt Anderson County as bad as other areas.
We don’t know for sure IF the tax change will happen. And much of what I have read lately makes it sound like everything about the proposed tax reform will benefit the rich more than the average American.
79% of Home Owners Think Now Is a Good Time to Sell
From Value Insured:
It’s a seller’s market thanks to low inventory, but according to ValueInsured’s latest quarterly Modern Homebuyer Survey, many would-be sellers are hesitating to sell because of the high price they’d have to pay for their next home.
The survey, released today, found that 79 percent of homeowners believe now is a good time to sell a home. Two-thirds of homeowners are interested in actually selling their home “in the near future,” up 8 percentage points from last quarter.
Sounds great but whats the catch?
63% say it is a good time for them to sell but not to buy.
The important thing to remember is that right now is a good time to buy since mortgage rates are still low. And that is just one reason to sell your home now…
Why Sell Your Home Now
Every year, lots of home owners wait until spring to list their homes because they think that they can get a better price. The reality is that now could be the ideal time to put your home on the market!
Think about the concept of supply & demand. Supply and demand shows us that best price for an item happens when the supply is low and the demand is high.
If we apply the concept of supply and demand to the housing market, we will see why now is a great time to have your home on the market!
We all know about the problem of limited inventory of homes for sale. A balanced housing market has 6 months of inventory. According to the NAR, there is only a 4.2 month supply of homes for sale across the US. When you narrow your search to a specific area and price range, such as home under $100,000 in Anderson, you will see the supply is very limited!
NAR recently reported that there are more buyers right now than at any other time in the last twelve months. Plus, they said there are more home buyers searching right now compared to any time during last year’s spring market.
In years past, waiting until Spring to list your home was the way to go. But change is constant and when it comes to selling a home, now is the time!
Did Banks Try to Manipulate the Dodd-Frank Debate by Delaying Foreclosures?
From Pro Market:
The global financial crisis of 2008 led to a sharp rise in mortgage foreclosures. As a highly visible symbol of the crisis, foreclosures attracted considerable attention from politicians, regulators, and the public at large.
In the aftermath of the crisis, the Financial Services Committee was also asking tough questions about the origins of the crisis, how it propagated through the financial system, who were the main players in causing it (banks, borrowers, regulators, rating agencies, etc.), and what new regulations might help avoid future banking crises. The process of new regulatory changes started on June 17, 2009, in the House and Senate Financial Services Committees and resulted in the Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law on July 21, 2010, by President Obama. Dodd-Frank considerably reshaped the financial sector and the ability of banks to engage in lending practices they had used before the crisis. Specifically, 2 of the 15 Dodd-Frank provisions with direct implications for mortgage lending were the creation of the Consumer Financial Protection Bureau (Title X) and the Mortgage Reform and Anti-Predatory Lending Act (Title XIV).
It was therefore natural that banks would have political concerns about these exact provisions and how this could impact their profitability and shareholder value. If they wanted to try to reshape and water down the Dodd-Frank Act, they would have to do so while the bill was being debated in Congress. One potential mechanism to do so would be through lowering the number of foreclosures initiated in the districts of Dodd-Frank committee members so that the committee members wouldn’t hear complaints from their constituents about the hardship of the mortgage crisis and would be more lenient during the debate on the bill.
Interesting and a must read. I am not sure if this is a case of causation and correlation.
That is all I have time for today. Be sure to check back tomorrow as I still have lots to discuss such as mortgage rates and the latest new construction numbers!