Discussing how many homes that renters can afford to buy today, it is getting easier to get a mortgage today and if lending standards are getting too loose, common home buying myths, Wells Fargo in trouble again, home price growth, small business optimism, jobs openings and more…
How Many Homes Can Renters Afford to Buy Today?
From First American:
With unadjusted house prices recently eclipsing their 2006 housing boom peak, housing affordability is a concern in the industry and for potential home buyers. Existing home owners, by definition, can afford one so, when we are speaking about housing affordability, it is really a conversation about first-time home buyers.
Viewing housing affordability through the eyes of people that currently rent provides fresh insights on affordability. Overall consumer house-buying power, or how much one can buy based on household income and the 30-year, fixed mortgage rate, is up 55 percent since 2006. However, looking at the percent of current homes for sale that the median renter can afford to purchase, tells a different story.
In 2017, the median renter household could afford to buy 64 percent of all the homes sold, a level of affordability only exceeded by 2012.
But sadly, some may be misinformed or scared to take the first step of talking to a lender to determine what is possible for them. Plus…
It’s Getting Easier to Get a Mortgage
According to the July 2018 Senior Loan Officer Opinion Survey on Bank Lending Practices, it is getting easier to get a mortgage:
Banks reportedly kept residential mortgage lending standards little changed on balance. However, a moderate net share of banks reportedly eased standards on GSE (government-sponsored enterprise)-eligible residential mortgages, and modest net fractions of banks reported easing standards on government and non-qualified (non-QM) jumbo mortgages. A modest net fraction of banks reportedly eased standards on home equity lines of credit (HELOCs).
I know some may see an easing of lending standards as a repeat of the mistakes of the past. Way back in 2006, Federal Reserve Chairman Alan Greenspan warned everyone about loosening lending standards and risky types of mortgages.
Greenspan was right as too loose lending standards and risky mortgages helped to cause the housing market to crash. This was NOT the only cause of the Great Recessions and housing market crash but it does make us wonder about easing mortgage standards.
Mortgage lending may be getting easier but it is not anything like it was before the housing market crash. The Urban Institute’s Housing Finance Policy Center issues a monthly index which measures the percentage of home purchase loans that are likely to default.
Their July Housing Credit Availability Index revealed credit availability rose to 5.9%. They said that if the current default risk was doubled across all channels, risk would still be well within the pre-crisis standard of 12.5 percent from 2001 to 2003 for the whole mortgage market.
Here is a chart showing their findings:
As you can see, it is easier to get a mortgage BUT lending standards are not anything like they were before the housing market crashed. If anything, mortgage lending today may be still a little restrictive.
Mortgage lending is NOT a one-size-fits-all business so anyone interested in buying a home needs to sit down with a real live mortgage lender to discuss their options. Remember that it is the consumer’s choice on which lender to use but that not all mortgage lenders are the same.
As I said, some people may be misinformed about buying a home today…
Common Home Buying Myths
There are plenty of misconceptions or myths about buying a home that can prevent people from becoming a home owner. You do not need perfect credit or a 20% down payment to buy a home!
Check out some of the home buying myths:
The average down payment for first time home buyers is still only 6% and mortgage rates are still at historically low levels. It is still possible to buy a home and have an affordable monthly payment!
Oops! Sorry About Stealing Your Home
Government agencies are examining how Wells Fargo negotiated and purchased “certain federal low-income housing tax credits in connection with the financing of low-income housing developments.” The San Francisco-based bank didn’t identify the agencies in the filing.
Separately, the bank said an internal review found it failed to grant about 625 customers modifications to mortgages even though they qualified for relief — and that it ultimately carried out foreclosures on 400. The bank said it erred when calculating attorney fees for changes between 2010 and 2015, deeming some applicants ineligible. It set aside $8 million to make customers whole.
Once again Well Fargo is accused of being evil. Wells Fargo said the foreclosures were because of a “computer glitch”.
Which does not help much if your life and finances have been destroyed…
Something to think about if you are getting a mortgage is the history of the lender since YOU could be forced to pay for their mistakes…
Home Price Growth Slows
Home price appreciation slowed each month from March through May, the first three-month slide in nearly four years. Though every state saw prices increase in May – typically one of the strongest months for home price appreciation – the average home gained just 0.93 percent in value, the lowest growth rate for any May in the last four years.
Ben Graboske, executive vice president of Black Knight’s Data & Analytics division said:
In May – typically one of the strongest months of the year for home price growth – every state in the nation saw home prices increase. However, the average monthly gain in value of less than one percent was the lowest for any May in the last four years. In addition, the annual rate of appreciation declined each month from March through May, the first three-month slowdown in almost four years.
Thirty-two states, as well as 33 of the 50 largest metropolitan areas, have experienced slowdowns in appreciation over the same period. All that said, the annual rate of home price growth is still historically high at 6.3 percent, some 2.5 percentage points above long-term norms. For more than six years, we’ve been riding a wave of home price appreciation above the 25-year average.
I must caution you that this is a national report and does not tell you what is happening in every local market.If you have questions about home prices in the Anderson SC area, you can email your questions to me!
Also, they are saying that the rate that home prices are increasing is slowing NOT that home prices are decreasing.
Zillow Getting Into Mortgage Business
From Tech Crunch:
Zillow, the publicly traded real estate portal and lead generation service, has acquired Mortgage Lenders of America. This is Zillow’s first move into originating mortgages. Until now, the company’s focus in this space was on providing home buyers with quotes from a variety of third-party lenders.
Mortgage Lenders of America (MLoA) is a privately held online lender based in Kansas. It will continue to operate as usual and will continue to appear in Zillow’s existing mortgage marketplace, which isn’t going away either. “Owning a mortgage lender will allow Zillow Group to develop new tools and partnership opportunities, including for real estate brokers with existing in-house mortgage operations or mortgage affiliates,” the company says in today’s announcement.
Not too long ago, Zillow added being one of those “We Buy Houses” type of companies in addition to advertising real estate listings and inaccurate home values. I think they should have focused on getting their Zestimates to be accurate and ensuring that only homes that are actually for sale are on their website…
And it appears that Zillow could be biting off more than they can chew. Their shares dropped 17% in value after they reported that their earnings were below forecasts.
Small Business Optimism Hits Record High
U.S. small-business owners are more optimistic now than at any point in the 15-year history of the Wells Fargo/Gallup Small Business Index. In the latest quarterly survey, which measures small-business owners’ attitudes about a wide variety of factors affecting their businesses, the overall index score is +118. This is higher than prior 2018 measures — with Quarter 2, 2018, at +106 and Quarter 1 at +107. The index now sits just above the record-high +114 from 2006.
26% of owners say the number of jobs at their company increased over the past 12 months, up slightly from 24% last quarter and the highest in the history of the index. Meanwhile, only 8% of owners say the number of jobs at their business decreased over the past year, standing in sharp contrast to the high point of 35% who reported decreasing employment in the first quarter of 2010.
Further, 35% of owners expect that the number of jobs at their business will increase over the next year, the second-highest reading on this measure in the history of the index. This optimistic anticipation of new hires helps explain why many owners report that being able to find and hire good workers is their top challenge.
Great news, especially about the possibility of more jobs. Hopefully the competition for employees will lead to increased incomes.
Speaking of more jobs…
Jobs Openings at Record High
The number of job openings was little changed at 6.7 million on the last business day of June, the U.S. Bureau of Labor Statistics reported today. Over the month, hires and separations were little changed at 5.7 million and 5.5 million, respectively. Within separations, the quits rate was unchanged at 2.3 percent and the layoffs and discharges rate was little changed at 1.2 percent.
Over the 12 months ending in June, hires totaled 66.6 million and separations totaled 64.1 million, yielding a net employment gain of 2.5 million.
While job openings are at a record high, the number of hires decreases slightly. This could be a sign of a tight labor market which might lead to faster wage growth as I said above.
This is the 3rd consecutive month of more job openings than unemployed workers. Also the number of quits ‘ the number of people that quit their job – is still close to a record high.
The only downside to strong economic news such as this is that it means the Fed is even more likely to raise their benchmark rate in September. This does NOT mean that mortgage rates will increase since the Fed does NOT directly set mortgage rates…
But it does increase the possibility that home buyers may see higher mortgage rates this Fall!
That is all I have time for today! As always, if you have any questions about real estate in the Anderson area, please email me!