New Home Purchase Down by 9 Percent

Sold Home For Sale Sign & New HouseThe Mortgage Bankers Association (MBA) Builder Application Survey (BAS) data for August 2014 shows mortgage applications for new home purchases decreased by 9 percent relative to the previous month. This change does not include any adjustment for typical seasonal patterns.

By product type, conventional loans composed 68.9 percent of loan applications, FHA loans composed 15.7 percent, RHS/USDA loans composed 1.0 percent and VA loans composed 14.3 percent. The average loan size of new homes increased from $297,253 in July to $300,443 in August.

The MBA estimates new single-family home sales were running at a seasonally adjusted annual rate of 424,000 units in August 2014, based on data from the BAS. The new home sales estimate is derived using mortgage application information from the BAS, as well as assumptions regarding market coverage and other factors.

The seasonally adjusted estimate for August is a decrease of 2.1 percent from the July pace of 433,000 units. On an unadjusted basis, the MBA estimates that there were 34,000 new home sales in August 2014, a decrease of 8.1 percent from 37,000 new home sales in July. Compared to last year, the MBA estimate of unadjusted new home sales are down 2.9 percent from 35,000 new home sales in August 2013.

MBA’s Builder Application Survey tracks application volume from mortgage subsidiaries of home builders across the country. Utilizing this data, as well as data from other sources, MBA is able to provide an early estimate of new home sales volumes at the national, state, and metro level. This data also provides information regarding the types of loans used by new home buyers. Official new home sales estimates are conducted by the Census Bureau on a monthly basis. In that data, new home sales are recorded at contract signing, which is typically coincident with the mortgage application.

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Move Over Millennials: Home-buying Dreams of Gen Z Teens Revealed

teenagers_Gen_ZToday’s teens will likely never wait for transportation for more than two minutes, can buy nearly anything with the click of a button and have it delivered in 24 hours, and can instantly consult a cast of 1,000 of their closest friends on any decision large or small. These once far-fetched notions are the reality of a generation of teens 21 million strong. You may think traditional dreams wouldn’t fit into their modern world—but you’d be wrong. In the first study of its kind, national findings released today by Better Homes and Gardens® Real Estate reveal this generation of teens ages 13-17, part of Generation Z, is very traditional in their views toward homeownership and is willing to give up modern luxuries for the mainstream definition of the American Dream.

Four out of five (82 percent) of Gen Z teens surveyed indicate that homeownership is the most important factor in achieving the American Dream. For 89 percent of respondents, owning a home is part of their interpretation of the American Dream, followed by graduating from college (78 percent), getting married (71 percent) and having children (68 percent). How much does this dream really mean to today’s teens? Findings show that 97 percent believe they will own a home, and they are overwhelmingly willing to make sacrifices now if it means getting their ideal home in the future. Remarkably, 53 percent would be willing to give up social media for a year (tied with doing twice as much homework every night), 42 percent would go to school seven days a week and 39 percent would take their mom or dad to prom.

“We have a clear view of tomorrow through our millennial consumer research—now it’s time to look at the day after tomorrow,” says Sherry Chris, president and CEO of Better Homes and Gardens Real Estate. “Today’s teens are fiscally literate and realistic when it comes to their future. It’s quite profound that a generation that has never known a world without social media is willing to give up such a staple in their modern lives to achieve their dream home. With such mature insights at such a young age, Gen Z could very well be primed to be the next great generation.”

Not surprisingly, 95 percent of these Gen Z future homeowners believe they will take key steps in the home-buying process online. Viewing home listings and taking virtual tours reign supreme, however, 29 percent expect to video chat with real estate agents. While this generation has been navigating the mobile and online space for years, a 59 percent majority believe they will undertake the search process for their future home with help from a real estate agent. When it comes to buying, a mere 19 percent believe they are likely to purchase a home online, while 81 percent will use more traditional methods such as working with a real estate agent.

“For a generation living in an online world and knowing no limits to online commerce, seeing the overwhelming response from today’s teens on the value of working with real estate sales associates reinforces the importance of relationships and the human element in such a sophisticated and important transaction,” says Chris.

The Teen Home-Buying Scene

A Million Dollar Question: They are still young, but Gen Z is already considered one of the most entrepreneurial generations. However, when asked what they’d rather have in the future, 77 percent chose owning a home over owning a business. And while teen years are filled with aspirations and dreams, 54 percent do not believe they will achieve millionaire status in their lifetime.

Time to Buy: These savvy savers aren’t wasting any time. They aim to own their first home by age 28—three years earlier than the median age of first-time homeowners, according to the National Association of REALTORS®. They do however, expect to progress through certain traditional milestones before they purchase their first home like earning an advanced college degree (60 percent), getting married (59 percent), owning a pet (58 percent), and having children (21 percent). Seventy-six percent believe they are most likely to live with their significant other when purchasing a home versus living alone (15 percent) or living with a friend (8 percent).

Realistic Values: Gen Z teens understand the value of a home—literally. Of the 97 percent who believe they will own their own home, respondents estimate paying on average $274,323 to purchase their first home. According to the latest U.S. Census data, the median cost of a home today is $273,500, so they are right on track and already well-informed.

Parental Guidance: It appears the lessons of the Great Recession have not been wasted on this generation. In fact, 51 percent of Gen Z believe they know more about saving money compared to their parents at the same age. Of that group, 65 percent attribute this belief to discussions they’ve had with their parents about saving and 41 percent give credit to learning about the economic recession in school. Sixty-one percent believe they are more knowledgeable since they have already begun saving money. This generation may be getting more than just advice from their parents. Fifty-seven percent believe their Mom and Dad are likely to help them buy their first home.

Prime Location: While city living tends to appeal to young generations looking for a variety of career, entertainment and social opportunities, nearly half (47 percent) of respondents says their future home will most likely be located in a suburban neighborhood, followed by a city (23 percent), country or rural areas (20 percent) and destination locations (10 percent). Gen Z teens want to stay fairly close to where they grew up, but only 17 percent believe their ideal home would be located in the same town. Thirty-nine percent plan to stay within the region—like the Northeast or Midwest—and 36 percent plan to stay in the same state.

Grounded: Teenagers tend to be on a constant quest for the next best thing, but once they find their future home, they plan to stay put for a bit. On average, this generation plans to own just two homes in their lifetime. When it comes to prioritizing square footage versus amenities, it’s nearly a 50/50 split.

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Eye on the Exonomy: Existing Home Sales Improving

Existing home sales increased 2.4 percent in July, tallying the fourth consecutive month of increase. While the pace of existing home sales remains 4.3 percent below the July 2013 rate, the steady improvement for resales is positive news for the new home market because prospective repeat homebuyers must sell their existing home before buying a newly built residence.

The National Association of Realtors (NAR) reported July total existing home sales at a seasonally adjusted rate of 5.15 million units combined for single-family homes, townhomes, condominiums and co-ops, up from a downwardly revised 5.03 million units in June.

Although the first-time buyer share increased for the third consecutive month to 29 percent in July, the share continues to lag far behind the historical average first-time buyer share of about 40 percent. Housing market improvements caused the distressed sales share to fall below 10 percent for the first time since NAR began tracking the series in October 2008.

The outlook for existing sales is positive due to a number of improving factors. The NAR pending home sales increased 3.3 percent in July, climbing four of the last five months. Consumer confidence increased in August for the fourth consecutive month. Second quarter GDP growth was revised up to a strong 4.2 percent expansion rate. And while the growth rate is slowing, home prices (according to the Case Shiller index) rose 6 percent on a year-over-year basis for the August report.

In contrast to existing sales, numbers from the Census Bureau and HUD indicated that new home sales fell 2.4 percent in July to an annual rate of 412,000, down 10,000 from an upwardly revised June figure of 422,000. The last three months of sales averaged the same as the annual figure for 2013—429,000. This is a slower pace than the first two months of the year that averaged 445,000 and the last quarter of 2013 that averaged 446,000. Most of the July drop was concentrated in the West, which declined 16,000 sales on an annual basis.

New home sales conditions remain positive however as interest rates remain low. Federal Housing Finance Agency (FHFA) data indicate the average effective contract interest rate for new home sales was 4.25 percent in July. In addition, the recent decline in new home sales stands in opposition to other trends, including a rise in the NAHB/Wells Fargo Housing Market Index of builder confidence in August. New home starts were up 8.3 percent in July as well.

Individual submarket conditions varied during the second quarter. The market share and count of custom home building (homes built on an owner’s lot) both increased during the second quarter. The townhouse market was relatively flat for the quarter, as the first-time buyer continues to be underrepresented. The single-family built-for-rent sector remains off cycle highs, as the rest of the single-family construction market expands.

On the other hand, the multifamily built-for-rent (94 percent of multifamily construction) submarket reached new market share highs as the condo market continues to lag. This situation is holding down the size of the typical newly built multifamily unit as well. Developers continue to report positive market conditions for multifamily. The NAHB Multifamily Production Index posted a gain of five points to a reading of 58 for the second quarter, marking the 10th straight quarter with a reading of 50 or above. Any number over 50 indicates that more respondents report conditions are improving than report conditions are getting worse.

NAHB and FDIC survey data indicate that one industry headwind—acquisition, development and construction (AD&C) loans—continues to improve, albeit slowly. In the second quarter of 2014, the NAHB AD&C survey indicated ongoing easing conditions. A similar Federal Reserve survey also exhibited easing conditions for overall business-related real estate lending.

Mirroring the survey, FDIC data revealed 5.4 percent growth for the second quarter of the stock of outstanding residential AD&C loans. The current stock is 16 percent higher than a year ago, indicating an expansion of credit but one occurring slower than the growth in home building.

The lending gap is being made up from other, nontraditional sources of business capital.

In analysis news, NAHB economists recently explored the declining trend in new home median lot sizes, which fell to 8,720 square feet for 2013, among the lowest on record. NAHB also detailed a Federal Reserve Survey that examined household economic conditions. The data reveal that despite the home price gains of the last few years, a significant share (46 percent) of households thought the value of their home was lower than the value in 2008. Finally, NAHB examined recently published Fair Market Rent (FMR) estimates (used for the Housing Choice Voucher program) from the Department of Housing and Urban Development. Of the 2,557 U.S. areas on the list, FMRs increased in 1,718, declined in 822, and were unchanged in 17.

View this original post on NAHB’s blog, Eye on Housing.

REPOST: Fannie Mae Relaxes Waiting Period for Distressed Borrowers

Fannie Mae released a report revising the waiting periods for distressed borrowers with a derogatory credit event such as a foreclosure, bankruptcy, short sale, or deed-in-lieu of foreclosure on their credit history to obtain a new loan.

For borrowers with a short sale or deed-in-lieu of foreclosure on their record, Fannie Mae’s new mandated minimum waiting period to become eligible for a new loan is four years. The time is shortened to two years if there are extenuating circumstances. According to Fannie Mae, extenuating circumstances are defined as “nonrecurring events that are beyond the borrower’s control that result in a sudden, significant, and prolonged reduction in income or a catastrophic increase in financial obligations.”

If a borrower has a foreclosure on his or her credit record, the new minimum waiting period is seven years. Under extenuating circumstances, that period is shortened to three years with some additional requirements for up to seven years.

For those with a bankruptcy (chapter seven or 11), the waiting period is four years (two years with extenuating circumstances). For distressed borrowers with a chapter 13 bankruptcy, the required waiting period is now two years from the discharge date and four years from the dismissal date. If there are extenuating circumstances, the waiting time from the dismissal date is shortened to two years.

If there are multiple bankruptcy filings on a borrower’s record, the waiting period for a new loan is five years if there has been more than one filing in the previous seven years.  Under extenuating circumstances, the waiting period is cut to three years from the most recent dismissal or discharge date.

Fannie Mae said in the report that it is “focused on helping lenders to provide access to mortgages for creditworthy borrowers while supporting sustainable homeownership” and that the new policy “provides opportunities for borrowers to obtain a loan to Fannie Mae’s maximum LTV (loan-to-value) sooner after the preforeclosure (short) sale or DIL.”

The new policy is effective for loans with application dates on or after August 16, 2014.

Under the previous policy, the standard waiting period for borrowers with a derogatory credit event was two years with a maximum 80 percent LTV ratio; four years with a maximum 90 percent LTV ratio; or borrowers were eligible for a new loan after a standard seven-year waiting period. For borrowers with extenuating circumstances, the previous waiting period was two years with a maximum 90 percent LTV ratio.

REPOST: Spike in Foreclosures Puts New Jersey Among Nation’s Top Five

Foreclosure activity skyrocketed in New Jersey for the month of August, giving the Garden State the fourth highest foreclosure rate in the nation, according to RealtyTrac‘s monthly U.S. Foreclosure Market Report for August 2014 released September 11.

According to RealtyTrac, foreclosure starts increased year-over-year in New Jersey by 115 percent in August, reaching their highest level since January 2014. Scheduled foreclosure auctions increased by 71 percent year-over-year in August, pushing them to their highest point since July 2010.

The huge upward turns of both foreclosure starts and scheduled auctions combined to place New Jersey fourth among states with the highest foreclosure rate for August, RealtyTrac reported. New Jersey had one filing for every 553 housing units in August, behind only Florida (1:400), Nevada (1:524), and Maryland (1:532). Georgia was fifth with one in every 582 housing units. The national average was one filing for every 1,126 properties.

Among metro areas with a population of more than 200,000, Atlantic City had the second highest rate in the nation, RealtyTrac reported. The city nicknamed “America’s Playground” had one foreclosure for every 292 properties in August, which is about four times the national average and second among large metro areas behind only Macon, Georgia, which had one in every 154. August was the 28th out of the last 30 months in which foreclosure activity in Atlantic City increased year-over-year.

RealtyTrac reported that nationwide, scheduled foreclosure auctions ticked up by 1 percent year-over-year for August after 44 consecutive months of annual declines. The last time auctions increased was in November 2010. In all, filings jumped 7 percent from July to August but dropped 9 percent from August 2013, according to RealtyTrac.