The article, NAR Economic and Forecast Update (July 1, 2015), from www.realtor.org, reports on NAR and their chief economist Lawerence Yun’s take on the economy and housing market at the mid-year point. Here are some of the highlights:
- Buyers are coming back in force. One factor for the recent surge could have been due to the rising mortgage rates. As nearly always happens, the initial phase of rising rates nudges people to make decision now rather than wait later when the rates could be higher still.
- The first-time buyers are scooping up properties with 32 percent of all buyers being as such compared to only 27 percent one year ago. A lower fee on FHA mortgages is helping.
- Investors are slowly stepping out. The high home prices are making the rate of return numbers less attractive.
- The first-time buyers are scooping up properties with 32 percent of all buyers being as such compared to only 27 percent one year ago. A lower fee on FHA mortgages is helping.
- Builders will construct more homes. By 1.1 million in 2015 and 1.4 million in 2016. New home sales will follow this trend. This rising trend will steadily relieve housing shortage.
- Housing affordability is falling. Home prices rising too fast are one reason. The other reason is due to rising mortgage rates. Cash-buys have been coming down so rates will count for more in the future.
- The Federal Reserve will be raising short-term rates soon. September is a maybe, but it’s more likely to be in October. The Fed will also signal the continual raising of rates over the next two years. This sentiment has already pushed up mortgage rates. They are bound to rise further, particularly if inflation surprises on the upside.
- Mortgage rates at 4.3% to 4.5% by the year end and easily surpassing 5% by the year end of 2016.
- The rising mortgage rates initially rush buyers to decide but a sustained rise will choke off as to who can qualify for a mortgage. Fortunately, there are few compensating factors to rising rates.
- Credit scores are not properly aligned with expected default rate. New scoring methodology is being tested and will be implemented. In short, credit scores will get boosted for many individuals after the new change.
- FHA mortgage premium has come down a notch thereby saving money for consumers. By the end of the year, FHA program will show healthier finances. That means, there could be additional reduction to premiums in 2016. Not certain, but plausible.
- Fannie and Freddie are owned by the taxpayers. And they are raking-in huge profits as mortgages have not been defaulting over the past several years. The very high profit is partly reflecting too-tight credit with no risk taking. There is a possibility to back a greater number of lower down payment mortgages to credit worthy borrowers without taking on much risk. In short, mortgage approvals should modestly improve next year.
- Credit scores are not properly aligned with expected default rate. New scoring methodology is being tested and will be implemented. In short, credit scores will get boosted for many individuals after the new change.
- All in all, existing and new home sales will be rising. Combined, there will be 5.8 million home sales in 2015, up 7 percent from last year. Note the sales total will still be 25 percent below the decade ago level during the bubble year. Home prices will be rising at 7 percent. For the industry, the business revenue will be rising by 14 percent in 2015. The revenue growth in 2016 will be additional 7 to 10 percent. Here is the link to the entire article:http://economistsoutlook.blogs.realtor.org/2015/07/01/economic-and-forecast-update-july-1-2015/
The article, Home Prices Starting To Gain Ground, Buyers Are Gaining Confidence On Real Estate Again, fromwww.realtytoday.com, reports that the United States Housing Market has finally clawed its way to recovery as consumers are gaining confidence that can be translated into more sales in the coming days, says Realtor. According to the United States National Housing Price Index, which is responsible for tracking home prices across the US, there was an annual gain of 4.2% in April 2015 and the 20 city composites increased by 4.9% while the 10 city composites showed a 4.6% increase which is a very good sign in for the realty industry. Realtor's chief economist Jonathan Smoke said that all the sales data points in May are strong; in fact the best and healthiest since the peak of the real estate boom back in 2006. The economist added that the data represents February to April, which is still under the effects of the wicked winter. He also said that the number is a sign of a steady and above average price appreciation. Another expert in the industry, Lynn Franco, said that consumers are in considerably better spirits and they have renewed optimism will lead into a greater willingness to spend in the near term. Franco also said that the rising prices give the consumer the logic that what you will buy today will not be worth less tomorrow. Here is the link to the entire article: http://www.realtytoday.com/articles/18272/20150701/home-prices-starting-to-gain-ground-buyers-are-gaining-confidence-on-real-estate-again.htm
