U.S. Households Make Long-Awaited Gains in Housing Recovery

 

hudson-yards

 

Middle-class families are starting to see their biggest housing challenges ease.

Housing affordability is finally improving after years during which the struggle to pay rent swelled to crisis levels for many poor and middle-class Americans, according to an analysis of American Community Survey data released Thursday.

Jed Kolko, chief economist at job-site Indeed and senior fellow at the Terner Center for Housing Innovation at the University of California, Berkeley, said just over 49% of renters were cost-burdened in 2015, meaning they spent more than 30% of their incomes in rent, compared with about 50% a year earlier—the lowest level since 2008.

Indeed, across the board, there are signs that affordability challenges are beginning to ease. Some 33.6% of households were cost-burdened in 2015, meaning they spent more than 30% of their incomes on housing costs, down from 34.6% a year earlier, the fifth straight year of declines.

Much of the reason for the improvement in affordability for homeowners was low mortgage rates. Renters also appear finally to be seeing income gains that are outpacing rent growth.

There was also a surprising decline in the popularity of single-family rentals, which until now have seen the strongest gains of all housing stock coming out of the recession, with a 34% jump between 2006 and 2015. That trend may finally be starting to reverse as 16.8% of single-family homes were rented in 2015, down from 17% a year earlier–the first decline since 2006, according to Mr. Kolko’s analysis.

This is likely due to the fact that families who lost their homes during the foreclosure crisis and were forced to rent instead are once again becoming eligible to get mortgages and returning to homeownership.

Single-family home ownership had the biggest increase since 2007, jumping to 65.7 million owner-occupied single-family homes in 2015, from 65.2 million a year earlier.

“While the overall decline in homeownership may turn out to be a longer-term shift to a lower level than what we saw during the bubble, the spike in single-family rentals was in part cyclical,” Mr. Kolko said, and thus appears to be easing as the recovery progresses.

Other indicators, however, suggest there is less reason for optimism. The number of occupied rental apartments saw the biggest jump of all housing types, with a 1.7% increase in 2015 compared with 2014.

Moreover, the homeownership rate overall continued declining, hitting 63% in 2015, down from 63.1% a year earlier. And just 949,000 new households were created in 2015, a slight decline from 2014 and below normal levels of 1.2 million, according to Mr. Kolko.

By: Laura Kusisto

Realtor.com

 

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Mortgage Declined? Here’s What to Do

Loan Denied stamp

No one likes to be told “no.” (Rejection hurts—we get it.) And having your application for a mortgage declined is particularly devastating, because it throws your entire dream of homeownership into doubt. Still, just because one lender rejects your mortgage application doesn’t mean you’ll never be able to buy a home.

So if you’ve been denied a home loan, the first step is to ask the lender why you had your mortgage declined, to know what you’re up against. Todd Sheinin, mortgage lender and chief operating officer at New America Financial in Gaithersburg, MD, says there are three main reasons why people get rejected.

“It’s usually either a credit issue, an income issue, or the applicant doesn’t have enough cash to make a down payment.”

Once you know what the problem is, try the steps below to turn your home loan luck around.

Mortgage declined because of your credit score?

If you’ve racked up a lot of charges on your credit card, you’re not alone: The average U.S. household has $15,762 in credit card debt.

Most mortgage lenders will look at your credit score to gauge your financial responsibility and worthiness for a home loan. A perfect score is 850, but research suggests that only about 0.5% of consumers hit that coveted mark. To qualify for a conventional loan, you’ll need at least a 620 credit score. (Borrowers with 740 credit scores or above typically get the best rates.) FHA loans require only a 580 credit score, but not everyone qualifies.

If a lender says your credit score is too low, check your credit report for errors. One in four Americans said they spotted errors on their reports, according to a 2013 Federal Trade Commission survey. You’re entitled to a free copy of your report once a year from each of the three major credit-reporting agencies at AnnualCreditReport.com.

If you find errors on your credit reportRichard Redmond, mortgage broker at All California Mortgage in Larkspur and author of “Mortgages: The Insider’s Guide,” says it could take 30 days or more to get them removed—unless you let your lender take care of the legwork.

“Lenders are able to do what’s known as a rapid rescore, which can get errors removed within five to seven business days,” Redmond says.

Unfortunately, if you’ve driven your credit into the ground all by yourself, you’ll need to take steps to repair it. The best way to raise your score is to pay off your credit card bills on time each month, says Bill Hardekopf, a credit expert at LowCards.com.

Also, keep your account balances low throughout the month, since your debt-to-credit utilization—the amount of debt you’ve accumulated on your credit cards divided by the credit limit on the sum of your accounts—comprises 30% of your FICO score, according to myFICO.com. Altogether, it may take you several months to nurse your credit back to health.

Mortgage declined because of your debt-to-income ratio?

If a lender says your loan application was denied because of your debt-to-income ratio, that just means your income from your job isn’t high enough to offset your debts—from college loans, credit cards, or elsewhere. As such, lenders may fear that you’ll struggle if you take on more debt in the form of a home loan, and might default as a result. So, they decide it’s not worth the risk.

Sure, you could take on a second (or third) job to raise your income or pay off your debts, but these options are easier said than done. Here’s a third option: Apply for a mortgage with another lender—or three.

“It’s very common to be turned down by one lender and then be able to get approved by several others,” says Redmond. “Different lenders have different debt-to-income requirements.” For instance, credit unions are often more flexible than big banks.

In general, most lenders will allow a maximum debt-to-income ratio of 43% with some allowing up to 50%, says Redmond. Moreover, what a lender considers “income” can vary. “Some lenders will factor in your bonus history, in addition to your gross income, while others won’t,” says Redmond.

All that said, you should always stick to a reasonable budget when buying a home. “I would never advise a client to go to the maximum debt-to-income ratio,” says Redmond.

Mortgage declined because of your down payment?

Granted, most lenders like to see home buyers make a 20% down payment. But that percentage is just ideal—it’s by no means required. The Federal Housing Administration lets buyers make down payments as low as 3.5%. If you’ve served in the military, the Department of Veterans Affairs  loans require nothing down at all. If you’re eligible for only a conventional loan, you will likely need at least a 10% down payment, says Sheinin. Select lenders will take 5%, but watch out—you’re going to get hit with a significantly higher interest rate.

The bottom line: There are ways to put down far less than 20% on a home. There are also many ways to scrounge up a bigger down payment fast. For instance, you can tap intoretirement accounts such as your 401(k) or IRA, although you should do so only in certain circumstances and exercise caution. Or, you can inquire into down payment assistance programs or get gifts from family or friends. If you have the patience to amass your own down payment, you can get the ball rolling by automating contributions from your paycheck to a dedicated savings account. Before you know it, you’ll have a sizable chunk of change that will improve your mortgage application prospects big-time.

Realtor.com

By
Daniel Bortz

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How to Write an Offer Letter That Will Win the House

offer letter sealed with wax, feather quill

You love the house sooo much. The problem is, lots of other people probably do, too. How can you stand out in a competitive environment? Try writing an offer letter that knocks the seller’s socks off.

“Making the highest offer is typically the best way to win a bid, but when a seller is faced with two very similar offers, a letter can oftentimes tip the scales toward yours,” says Realtor® Mindy Jensen of Longmont, CO.

So how do you use writing to woo a seller to your side? Check out these snippets from winning offer letters, then learn how you can follow in the footsteps of these real-life buyers.

A winning game plan

The words that wooed: After seeing a number of properties that have not “spoken” to us in a significant way, we were delighted to discover your home, with its mixture of charm and warmth. We envision family gatherings within its open living area and drinking coffee while watching our children play in the pool. As basketball is in the family blood (Steve is a former employee of the National Basketball Association), I’m sure there will be plenty of pick-up games for everyone.

Why it worked: “My clients were up against a better offer from a builder, but the seller couldn’t bear the idea of their house being torn down,” explains Anne West, a Realtor with Coldwell Banker Residential Brokerage in Winnetka, IL. “They wanted to sell their home to someone who would raise their family there and who would love it as much as they had, and my clients were able to articulate that they were just that family.”

How to do it yourself: Find out some backstory about the owners or other bidders if you can. The tidbit about the builder, for example, was crucial knowledge. But for any property, most sellers who have taken good care of their homes want to make sure they will be loved by the next owner, too, so let your enthusiasm shine to gain the edge over pricier offers.

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Must love dogs

The words that wooed: My husband and I have been searching for our first home, and we believe your house will be the perfect place to raise our growing family. Our son is due in September, and I know he will be so happy playing in the fabulous backyard with our two dogs.

Why it worked: “The seller appreciated her praising specific things that were obviously installed by the homeowners,” says Mindy Jensen, a Realtor in Longmont, CO. “But the tipping point was when she included a picture of her dog with the letter. The seller specifically allowed her to match the highest offer, based solely on her dog.”

How to do it yourself: Make yourself relatable. Take a cue from the lovingly tended roses or, in this case, a dog, and try to glean what the seller values. It could be kids, a dog, or even a love of gardening. If you share those same interests, offer them up. You never know what phrases may spur the seller to choose your offer over another.

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This way to Easy Street

The words that wooed: We are not looking for a bargain, just a fair price for something nice. This would be a cash sale, and we could close quickly or at a convenient time for you. 

Why it worked: “This was a no-brainer for the seller, because you can tell these folks are clued in, and money talks,” says Bruce Ailion, a real estate agent with Re/Max Atlanta. “This letter makes it clear that this is going to be an easy transaction: cash sale, market price, close quickly or on your timetable.”

How to do it yourself: Get your ducks in a row before you make an offer. Even if you’re not doing an all-cash offer, have a pre-approval in hand. Especially in a seller’s market, make it clear that you are going to be easy to work with and that the seller can call the shots.

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Sentiment sells

The words that wooed: We grew up in the city and our parents live very close by; one of them is living very close to your home. It’s important to find a home close to our family, so that when we start our family, our children will be close to their grandparents.”

Why it worked: “If the seller has raised their own family there, they have an emotional connection to the house,” says David Feldberg, broker/owner of Coastal Real Estate Group in Newport Beach, CA. “Talking about several generations plucks those heart strings.”

How to do it yourself: Include details about your family and connection to the area. And always include a photo. When the seller is considering multiple offers, the photo makes your offer stand out from the pack.

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Flattery can get you everywhere

The words that wooed: From the moment I walked in, I knew this place felt like home. (Well if I am being honest, I fell in love with the wallpaper in the bathroom first!! ha-ha.) I also really appreciate the attention to detail in the upgrades you made: the stain on the floors, the wall colors and the charming lights, and I absolutely love your furniture selection.

Why it worked: “My client clearly admired the seller’s decor decisions,” says John Michael Grafft with Berkshire Hathaway Koenig Rubloff in Chicago. “It turned out she was an interior designer. Everyone appreciates a sincere compliment.”

How to do it yourself: Find details that you love about the home and mention them so it’s clear you’re not sending a generic letter to every potential property seller. The seller chose those design elements, so find something you love that you can mention sincerely. Even if you are planning to change everything about a place you consider a fixer-upper, compliment the fact that the seller took great care of the home.

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Short and sweet

The words that wooed: Semper fi.

Why it worked: “The rest of the letter was great, but in all honesty, that phrase at the end of his letter sealed the deal. He and the seller were both Marines,” says Mindy Jensen, a Realtor in Longmont, CO.

How to do it yourself: Common interests can make all the difference, but don’t lie. That goes for military service, of course, but also other details. Don’t tell the seller that you want to raise your children there, if you don’t have any. Instead, if you hope to eventually have a family, you can say, “I hope to someday be able to raise my children in this beautiful home.”

Realtor.com

By- Cathie Ericson

 

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Mortgage Rates Hover Near All-Time Low

Fixed-rate mortgages this week dropped to their lowest averages of the year, which analysts attribute to the fallout from last week’s “Brexit” vote. The 30-year fixed-rate mortgage averaged 3.48 percent this week, only 17 basis points from its all-time record low of 3.31 percent in November 2012, Freddie Mac reports.

Read more: ‘Brexit’ Could Give U.S. Real Estate Brief Boost

“In the wake of the Brexit vote, the yield on the 10-year U.S. Treasury bond plummeted 24 basis points,” says Sean Becketti, Freddie Mac’s chief economist. “This extremely low mortgage rate should support solid home sales and refinancing volume this summer.”

Freddie Mac reports the following national averages for the week ending June 30:

  • 30-year fixed-rate mortgages: averaged 3.48 percent, with an average 0.5 point, falling from last week’s 3.56 percent average. Last year at this time, 30-year rates averaged 4.08 percent.
  • 15-year fixed-rate mortgages: averaged 2.78 percent, with an average 0.4 point, dropping from last week’s 2.83 percent average. Last year at this time, 15-year rates averaged 3.24 percent.
  • 5-year hybrid adjustable-rate mortgages: averaged 2.70 percent, with an average 0.5 point, falling from last week’s 2.74 percent average. A year ago, 5-year ARMs averaged 2.99 percent.

Source: Freddie Mac

 

Daily Real Estate News

How’s the Real Estate business?

How’s The Real estate business? You will be surprised at my answer.

 

Tough question to answer. But I’m going to tell you some things most agents will not. The market is slow, there are more price decreases on the MLS every day as sellers try to chase a falling demand, Volume is half what it was a year ago, and while there are pockets of the market that are doing well, in general the market has slowed. The rental market is “Saturday night pistol” hot with vacancies below 2%. Investors are wise to buy and hold, sellers are urged to get realistic with their prices, and buyers are being rewarded with patience.

 

My advice to sellers is to not try to “lead the market”. Know your competition and price according to what is selling. Stand out from your competition. Make sure the home you are selling has no excuse for a buyer not to buy.

 

My advice to buyers is that if you see a home or investment that is right for you, examine all your alternatives and then make you move, quickly.  Inventory of suitably priced properties are scarce. If you don’t buy someone else will. (I know this sounds like a contradiction, but this is what makes this market so crazy.)

 

My advice to investors: Don’t count on short term appreciation. Invest for income. (See my comment about the rental market.)

 

What am I doing? I’m investing in an apartment building. I’m getting back to basics and working my listings hard.  Getting creative with terms and making sure there are no excuses not to buy what I am selling.  I’m trying to be better than the next agent. I’m focusing on distinct geographical and buyer markets and trying to give sound advice.

 

I do not think the less than stable market will last long, but to be honest I believe a slowly appreciating market is what we should hope for. We have not had a “normal” market here, so I’m not sure we would recognize one.

 

Here is the inventory, by month, for the last twelve months (Data courtesy of Southwest Florida MLS). This indicates how many months it will take to sell the current level of inventory at the current rate of sales.

photo 1

Below we see the sales volume, by month, for the last twelve months. We are now at less than half of what it was a year ago.

photo 2

Rental apartments are full/. On average there is a 1. % vacancy rate. Here are the numbers for 1 bedroom units, for example.

photo 3

 

If you have questions or comments, I’d love to hear from you. If you are buying, selling, or investing, I can help.

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