Pending Home Sales Rise Again in March

March saw another increase in pending home sales, with contract activity rising unevenly in six of the past nine months, according to the National Association of Realtors®.

The Pending Home Sales Index,* a forward-looking indicator based on contract signings, rose 5.1 percent to 94.1 in March from a downwardly revised 89.5 in February. The index is 11.4 percent below 106.2 in March 2010; however, activity was at elevated levels in March and April of 2010 to meet the contract deadline for the home buyer tax credit.

The data reflects contracts but not closings, which normally occur with a lag time of one or two months.

Lawrence Yun, NAR chief economist, said home sales activity has shown an uneven but notable improvement. “Since reaching a cyclical bottom last June, pending home sales have posted an overall gain of 24 percent and demonstrate the market is recovering on its own,” he said. “The index means modest near-term gains in existing-home sales are likely, which would be even stronger if tight mortgage lending criteria returned to normal, safe standards.”

 

The PHSI in the Northeast fell 3.2 percent to 63.4 in March and is 18.4 percent below March 2010. In the Midwest the index rose 3.0 percent in March to 83.5 but is 16.6 percent below a year ago. Pending home sales in the South jumped 10.3 percent to an index of 110.2 but are 10.5 percent below March 2010. In the West the index increased 3.1 percent to 103.7 but is 4.1 percent below a year ago.

“Based on the current uptrend with very favorable affordability conditions, rising apartment rents and ongoing job creation, existing-home sales should rise around 5 to 10 percent this year with sales growth of lower priced homes likely to outperform high-end homes. That means the price trend will reflect more homes sold in the lower price ranges,” Yun said.

“The good news is that recent home buyers are staying well within budget, leading to exceptionally low loan default rates among home buyers over the past two years,” Yun added.

 

 

What Buyers and Sellers Have in Common

Emotional Stake

Both buyers and sellers have an emotional stake in their property. Sellers are having a hard time parting themselves from the memories their home holds, while buyers can get attached to a property quickly. Just one aspect of a home, such as a wrap-around porch or picket fence can immediately make a buyer want to purchase a home.

Best Value

Both buyers and sellers want to get the most value for their money. Buyers want to get a house for as little money as possible, while sellers want to get the most money they can for a property. Both are relying heavily on their real estate brokers to help them get the best value.

Closing Costs

In negotiations, neither side wants to pay closing costs. However, a home-seller can use this to their advantage by not lowering the price of a home, but offering to pay the closing costs. This way the buyer will think they won the battle, but in reality both sides are winning.

By having a better understanding of both sides of the home buying/selling process, it will help you be a more knowledgeable participant. So, whether you are looking for Wilmington, NC new homes or looking to sell your Wilmington, NC home, you know what to expect.

Looking for a real estate agent to help you through the process? Contact Alpha Mortgage today for a referral to a great local Realtor®!

Existing-Home Sales Rise in March

Sales of existing-home sales rose in March, continuing an uneven recovery that began after sales bottomed last July, according to the National Association of Realtors®.

Existing-home sales1, which are completed transactions that include single-family, townhomes, condominiums and co-ops, increased 3.7 percent to a seasonally adjusted annual rate of 5.10 million in March from an upwardly revised 4.92 million in February, but are 6.3 percent below the 5.44 million pace in March 2010. Sales were at elevated levels from March through June of 2010 in response to the home buyer tax credit.

Lawrence Yun, NAR chief economist, expects the improving sales pattern to continue. “Existing-home sales have risen in six of the past eight months, so we’re clearly on a recovery path,” he said. “With rising jobs and excellent affordability conditions, we project moderate improvements into 2012, but not every month will show a gain – primarily because some buyers are finding it too difficult to obtain a mortgage. For those fortunate enough to qualify for financing, monthly mortgage payments as a percent of income have been at record lows.”

NAR’s housing affordability index shows the typical monthly mortgage principal and interest payment for the purchase of a median-priced existing home is only 13 percent of gross household income, the lowest since records began in 1970.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 4.84 percent in March, down from 4.95 percent in February; the rate was 4.97 percent in March 2010.

Data from Freddie Mac and Fannie Mae show requirements to obtain conventional mortgages have been tightened, with the average credit score rising to about 760 in the current market from nearly 720 in 2007; for FHA loans the average credit score is around 700, up from just over 630 in 2007.

“Although home sales are coming back without a federal stimulus, sales would be notably stronger if mortgage lending would return to the normal, safe standards that were in place a decade ago – before the loose lending practices that created the unprecedented boom and bust cycle,” Yun explained.

“Given that FHA and VA government-backed loan programs turned a modest profit over to the U.S. Treasury last year, and have never required a taxpayer bailout, we believe low-downpayment loans should continue to be available for those consumers who have demonstrated financial responsibility and are willing to stay well within their budget. Raising the downpayment requirement would unnecessarily deny credit to many worthy middle-class families and veterans,” Yun said.

A parallel NAR practitioner survey2 shows first-time buyers purchased 33 percent of homes in March, compared with 34 percent of homes in February; they were 44 percent in March 2010.

All-cash sales were at a record market share of 35 percent in March, up from 33 percent in February; they were 27 percent in March 2010. Investors accounted for 22 percent of sales activity in March, up from 19 percent in February; they were 19 percent in March 2010. The balance of sales were to repeat buyers.

The national median existing-home price3 for all housing types was $159,600 in March, down 5.9 percent from March 2010. Distressed homes – typically sold at discounts in the vicinity of 20 percent – accounted for a 40 percent market share in March, up from 39 percent in February and 35 percent in March 2010.

NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I., said some renters are looking to home ownership as a hedge against inflation. “The typical buyer today plans to stay in a home for 10 years, while rents are projected to rise at faster rates over the next few years,” he said. “As buyers gain more financial security, the advantages of home ownership become more obvious. Rents will continue to trend up, especially in comparison with a fixed-rate loan which provides financial stability and gradual accumulation of equity over time.”

Total housing inventory at the end of March rose 1.5 percent to 3.55 million existing homes available for sale, which represents an 8.4-month supply4 at the current sales pace, compared with a 8.5-month supply in February.

Single-family home sales rose 4.0 percent to a seasonally adjusted annual rate of 4.45 million in March from 4.28 million in February, but are 6.5 percent below the 4.76 million level in March 2010. The median existing single-family home price was $160,500 in March, down 5.3 percent from a year ago.

Existing condominium and co-op sales increased 1.6 percent to a seasonally adjusted annual rate of 650,000 in March from 640,000 in February, but are 4.1 percent below the 678,000-unit pace one year ago. The median existing condo price5 was $153,100 in March, which is 10.1 percent below March 2010.

Regionally, existing-home sales in the Northeast rose 3.9 percent to an annual level of 800,000 in March but are 12.1 percent below March 2010. The median price in the Northeast was $232,900, down 3.0 percent from a year ago.

Existing-home sales in the Midwest increased 1.0 percent in March to a pace of 1.06 million but are 13.1 percent lower than a year ago. The median price in the Midwest was $126,100, which is 7.1 percent below March 2010.

In the South, existing-home sales rose 8.2 percent to an annual level of 1.99 million in March but are 1.0 percent below March 2010. The median price in the South was $138,200, down 6.6 percent from a year ago.

Existing-home sales in the West slipped 0.8 percent to an annual pace of 1.25 million in March and are 3.1 percent below a year ago. The median price in the West was $192,100, which is 11.2 percent lower than March 2010.

 

Original Article

April 18th Moorings

Hello and welcome to this week’s edition of Moorings. First let’s take a look at rates and see where the market is at. For a thirty year fixed conventional loan a borrower should expect to obtain an interest rate of approximately 5% or 4.875% for an FHA loan with a 1% discount point. The difference being that an FHA loan can be up to 96.5% LTV as opposed to 95% LTV with a conventional loan. FHA also allows lower credit scores. The one drawback is with FHA there is an up-front fee of 1% as well as an annual mortgage insurance rate of 1.15% which is usually higher than private mortgage insurance needed on a conventional loan of greater than 80% loan-to-value. While both of these programs are popular for different reasons, they both have positive and negative guidelines with which your loan officer will be aware.

Another great option that we see being used more and more is a USDA loan. The United Stated Department of Agriculture will guarantee a loan up to 100% loan-to-value in areas it deems to be rural.  Locally that includes most of Brunswick and Pender Counties and a few sections of New Hanover County. The major limitation for these loans other than the home’s location is the limit on income. A one to four person household cannot make more than $74,050 and a five to eight person household cannot make more than $97,750. With a USDA loan you can receive a rate as low as 4.875% with a 1% discount point and there is only a 3.50% onetime up-front mortgage insurance cost which can be financed into the total loan amount or paid by the seller. This means that many clients who choose this option have to bring very little or even no money to the closing. For first time homebuyers or any clients looking in Leland or Hampstead, this is an extraordinary opportunity to own a new home at a payment that is probably less than rent.

Last but not least, I thought I might also share some rates and information on programs that I don’t normally talk about, namely second-home and investment properties. With a second-home, rates are actually comparable to primary residence rates, hovering at around 5%. The main difference is that at least 10% down payment is going to be required on the purchase of a second home. For an investment property, a minimum of 15% down payment will be required (often this will be 20%) and the rate will likely go up to 5.875%. Investment properties are obviously more of a risk to an investor, therefore that risk is reflected in the rate. With all of the above scenarios that I quote, a 740 plus credit score is required and of course adequate income, credit history, employment and assets are all needed to qualify. Guidelines and rates change daily and knowing your product is paramount, so make sure you pick a loan office with the experience and knowledge to guide you in the right financial direction.

On a personal note, I competed in the NC State Bodybuilding Contest in High Point this weekend, and won 1st place in 50 Masters Division as well as 1st in the Lightweight Division against all age groups.  Well that’s it for this week, until next, Be Blessed and Numbers 6:24-26 be on you.

April 11th Moorings

Hello and welcome to this week’s edition of Moorings. To say it has been a tumultuous past week in both the mortgage world and the political world would be an understatement.  Between a possible government shutdown and the Dodd Frank Act, we in the mortgage business have been kept on our toes. However, before we get into all of that, let’s take a look at rates. Currently a borrower looking to purchase a home could expect to obtain a mortgage at 5% for a thirty year fixed rate, assuming adequate credit, income, etc… Another option for a qualifying customer with less than perfect credit is an FHA loan which would be available at 4.875%, but does come with limitations such as the amount of the loan and value of the house. Take a good look at the incredibly great rates on 5 and 7 year Adjustable Loans, which are fixed for 5 or 7 years and then adjust over the remaining term. Very little risk for substantial savings.

Moving on to the big story of the past week, the possibility of a government shutdown definitely impacted the financial markets. A partial shutdown was avoided late Friday night when Democrats and Republicans agreed on a budget deal and a short-term funding extension, less than an hour before the deadline, but it only lasts until April 15th…tax day.  All of this uncertainty throughout the week caused Bonds and home loan rates to worsen through the week. In addition, the dollar is rather weak at the moment which helps the stock market with investors moving money into it, but this takes money away from the bond market which hurts interest rates.

In other news, the Dodd Frank Wall Street Reform and Consumer Protection Act was schedule to go into effect on April 1st, but an appellate court stay held off the implementation of this new bill until the 6th, when it became law. As I have stated in a previous article, this bill is quite complex, but the immediate effect to mortgage industry is the compensation of loan officers, with them receiving the same compensation on every loan and loan type, with the only variable being the loan amount.   One of the likely side effects of this bill is that over time, rates will most likely equalize across mortgage companies and customer service will become the main factor for choosing a mortgage provider. If and when this happens, be sure to look for certain things from your mortgage company such as: they should be a mortgage bank and not a broker, use of local appraisers, in-house underwriting and processing, and long term experience is always a plus.

With all that said and done, interest rates are still at incredibly low levels in comparison to historical averages. Anyone who lived through the 1980’s knows that rates well into the teens were not uncommon and even the 1990’s saw rates that were nowhere near as favorable as current levels. Too many clients look for the lowest possible rate and will often wait and wait until they have missed out on the savings they would have had with a rate that is lower than their current mortgage. You can always refinance if a year from now you want to, but that savings can never be recovered. Well that’s it for this week, until next, Be Blessed and Numbers 6:24-26 be on you.