Is the monthly payment more important than the total price of a home? from CNBC.

Is the monthly payment more important than the total price of a home?
Mark Fleming of First American says rising mortgage rates, home price appreciation and lack of new homes may be combining to put the squeeze on affordability.
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A recent 2018 Bank of the West study dealing with the buying habits of millennials indicates the equity-shy demographic is now turning to real estate as the cornerstone of their investment portfolio. Homeownership is emerging as the most popular ingredient of their American Dream (56%), followed by debt pay-off, and the goal of a comfortable, early retirement (49%) as the second and third most critical components.


The study shows how millennials’ desire to own a home is pushing some to risk their other goals by taking on mortgages, with one in four say that they are willing to withdraw or borrow against retirement funds to finance down payments for a home.


Builder Magazine quoted Ryan Bailey, who heads up Bank of the West’s Retail Banking Group. “Millennials are so eager to become homeowners that some may be inadvertently cutting off their nose to spite their face. The fact that nearly one in three millennials who already own their homes have dipped into their retirement nest eggs to finance their down payment is alarming.”


The study suggests millennial homeowners may be rushing into a home buying decision without asking all the right questions, citing 68% having reported buyer’s remorse regarding ill-prepared going into the purchase and 44% have issues with space itself. Many feel that soon after they closed escrow, they felt stuck in one place with a house that either had unnoticed damage or didn’t work for their family. A full 41% cited financial regrets, saying they felt stretched too thin financially, either dealing with home maintenance expenses or not having waited long enough to save up for a larger down payment.


“A white picket fence can certainly be a smart investment. To help avoid buyer’s remorse, millennials should consider covering their bases and kick the proverbial tires—reflecting on their physical and financial wishes for their home before they sign on the dotted line,” said Bailey.


According to the Builder article, timing has worked against millennials when it comes to home-buying. Most weren’t ready to close on a home when housing prices were at their lowest, and interest rates hovered just above zero. For those who may feel ready to buy now, the new Tax Cuts and Jobs Act eliminates some of the homeownership tax breaks (deducting state and local property taxes from federal tax bills) their parents enjoyed.


Despite these setbacks, 4 in 10 millennials in the study are already homeowners, while the rest remains interested in someday owning a home (92%). Despite the housing crisis when homes values fell like rocks, 59 percent still believe it is a good investment or say it makes more financial sense to own than rent.


According to the article, 69% of millennials in the study believe debt-free status is the ultimate dream. 58% say they pay off their credit card balances in full each month, while they try to avoid credit cards in general and are most likely to use cash, checks, or debit cards (59%).


Bailey goes on to say that debt doesn’t have to be a dirty word. “By responsibly borrowing the amount that is just right for their financial situation, millennials can fund their homeownership dreams, while freeing up capital to invest in the markets today when they still have a long time-horizon on their side.”



Source:, TBWS

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When we think of new home designs, we generally don’t think of what apartments look like or live like inside. Two different animals, right? But the truth of it is, although single-family and multifamily builders are not so much siblings as second cousins, there is a lot that is similar about them, according to a recent article in, the website for Builder Magazine.


“Both sets of builders have to buy land, get approvals, and build housing. But then things diverge. Single-family builders sell a house and walk away, while in most cases multifamily builders hold a property and have an ongoing relationship with consumers,” writes Frank Anton in his article Modernizing How We Build.


While that may add up to a big difference between the two, what new homebuilders (who have been experiencing a bit of a boom lately but fall WAY short when it comes to affordable housing) don’t seem to focus on is that multifamily builders have seen starts quadruple since they bottomed out in 2009, while single-family starts haven’t even doubled since hitting bottom in 2010.


“Multifamily builders have done the better job of reaching 25- to 36-year-olds. Yes, they have advantages. Renters don’t have to come up with a big down payment nor do they have to qualify for a mortgage, and single people are naturally more likely to rent than buy.” says Anton.


Think for a moment about how student debt is like an albatross around the necks of 45 million young people, a third of which have yet to form an independent household and end up staying longer than ever in Mom and Dad’s basement. The article cites how for the first time in 40 years (according to the University of Michigan’s consumer sentiment survey) that younger Americans are more pessimistic than older Americans. And pessimists are more reluctant to buy than rent, even if they might qualify for a mortgage.


While those negative factors affect the multifamily market as well, it’s still outperforming the for-sale market for one simple reason, according to Anton: “Multifamily builders are doing a better job of satisfying younger Americans’ housing needs.”


He goes on to outline a case in point where a young multifamily developer was describing the success of his most recent development, a 200-unit project in pricey San Francisco, practically offering a blueprint for how single-family builders can crack the first-time buyer market. The builder he describes put up a development in downtown San Francisco, where many young people want to live, but it’s not a stretch to believe the concept would work in city-close residential areas. His building has no parking, but if a developer were to put up a similar single-family development in nearby Daly City or San Bruno, perhaps it would offer houses with a one-car garage “or—heaven forbid—no garage,” says Anton.


What also attracted buyers was the SF project’s design – thoroughly contemporary, which is what the younger demographic prefers. The apartments are minuscule (the smallest unit is only 160 square feet), but homebuilders paying attention to the idea that anyone would be willing to pay a high rent for a closet-sized apartment might want to sit up and take notice of how they might design, perhaps, a 1,200-square-foot house in a suburb within commuting distance and call it good.


Younger renters, as well as buyers, are not like the rest of us, he points out. Harkening back to their college roots, they may be willing to share a compact common area in order to save money, as evidenced by this multi-family builder’s design for the larger units in the building.


“The only generous space in the building is a first-floor common area that brings residents together,” says Anton. “Single-family builders routinely build clubhouses in retirement communities, so why not clubhouses for first-time buyers?”


Who’d a thunk it would be a study in marketing and design for single-family homebuilders to visit successful multi-family projects to get clues on what younger buyers want? Someone did.



Source:, TBWS

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Big demand. Small inventory. Spring homebuyers are pounding the pavement at a furious pace, but the pickings are getting ever slimmer, according to news reports.


Spring is traditionally the busiest time of year to buy a home, but this year listings are getting snapped with lightning speed as bidding wars have become par for the course. According to an article in NBC News, home prices have now surpassed their last peak, and at the entry level, where demand is highest, sellers are firmly in the driver’s seat.


The article cites a Realtor in Burbank, CA, who says, ”I’ve been selling real estate for 25 years and this is the strongest seller’s market I have ever seen in my entire real estate career. A lot of our sellers are optimistically pricing their homes in today’s market, and I have to say in most cases we’re getting the home sold anyway.”


As an example, NBC News reported how a three-bedroom, two-bathroom, 1,240-square-foot home in Burbank offered for $789,000 (considered an entry-level home in the LA market) had three offers before the first open house Sunday, drawing more than 100 potential but weary buyers.


As is customary in crazy markets like this, most of the listings are intentionally listed a bit low to garner attention. Then the bidding frenzy ensues, often getting a dozen or more offers on one property. According to the article, more homes came on the market in March, but fierce demand made “sold” signs go up quickly. “At the end of the month, the supply of homes for sale nationally was down 6.6 percent compared with a year ago, according to the National Association of Realtors. Unsold inventory is a slim 3.8-month supply. A balanced market between buyers and sellers has a five-to-six-month supply. Properties sold in March were on the market for an average 34 days, down from 45 in February and 47 in March 2016.”


All cash offers and contingency removals are common trends because, in such a hot market, homes are appraising well below the sale price, making it even harder for first-time, mortgage-dependent buyers to succeed.


All this has caused home prices to hit new peaks each month, with prices nationally up 5.7 percent in February year over year, according to Black Knight Financial Services. Washington, Oregon, and Colorado are seeing the biggest price gains, as buyers flee high prices in California.


Big cities are the all-hat-no-cattle losers, however. Real estate brokerage Redfin studied which markets had the most people searching for homes outside their city. San Francisco, Los Angeles, and New York were the biggest losers. “Fast-growing coastal cities may be generating the high-paying jobs, but they haven’t created enough budget-friendly housing to keep pace,” said Nela Richardson, Redfin’s chief economist. “The price of real estate and desire for homeownership is compelling many to uproot and seek housing in more affordable communities.”



Source: NBC News, Redfin, TBWS

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Although the Nasdaq Composite Index set a new all-time high last Wednesday, the three major stock indexes finished the week lower amid escalating trade tensions primarily between the U.S. and China and the U.S. and the European Union.  The Trump Administration wants to level the playing field when it comes to trade and tariffs by negotiating better deals to protect American workers and the economy.  U.S. tariffs are among the lowest in the world and in our nation’s history.  U.S. trade policy has long favored lower tariffs and fewer restrictions on the movement of goods and services across international borders while our trading partners have been more restrictive.  The U.S. is currently running the following trade deficits:


China – $636 billion traded with a $375 billion deficit.

Mexico – $557 billion traded with a $71 billion deficit.

Japan – $204 billion traded with a $69 billion deficit.

Germany – $171 billion traded with a $65 billion deficit.

Canada – $582 billion traded with an $18 billion deficit.


In response to all of the tariff and trade war talk, longer-term bond yields slipped marginally lower resulting in relatively stable mortgage rates.


There were several housing-related reports released this past week.  Last Monday, the National Association of Home Builders/Wells Fargo Housing Market Index (NAHB) measuring home builder sentiment was reported to have slipped two points to 68 in June.  A reading above 50 is considered to indicate positive sentiment.


Yet, June’s decline was attributed to soaring lumber prices that have added almost $9,000 to the average price of a new single-family home since January 2017.  Robert Dietz, NAHB chief economist, commented “Improved economic growth, continued job creation and solid housing demand should spur additional single-family construction in the months ahead.  However, builders do need access to lumber and other construction materials at reasonable costs in order to provide homes at competitive price points, particularly for the entry-level market where inventory is most needed.”



Tuesday, the U.S. Census Bureau and the Department of Housing and Urban Development reported Housing Starts increased 5.0% month-over-month in May to a seasonally adjusted annual rate of 1.350 million, exceeding the consensus forecast of 1.323 million.  However, Building Permits declined 4.6% to 1.301 million falling below the consensus estimate of 1.343 million.  Permits are a leading indicator of housing market strength and were lower in May for both single-family units (-2.2%) and multi-unit dwellings (-8.8%).  This suggests we may see some weakness in the June Housing Starts report.


Wednesday, the National Association of Realtors reported sales of Existing Homes declined 0.4% month-over-month in May to a seasonally adjusted annual rate of 5.43 million.  This was slightly below the consensus forecast of 5.55 million.  The median existing home price for all housing types jumped 4.9% to an all-time high of $264,800 – the 75th straight month of year-over-year gains.  Existing home inventory for sale at the end of May rose 2.8% to 1.85 million, but this is 6.1% lower than the same period a year ago.  Unsold inventory is currently at a 4.1-month supply at the current sales rate compared to a usual 6.0-month supply associated with a more balanced market.  The song remains the same…limited home inventory coupled with rising prices and mortgage rates is hampering affordability, especially for first-time home buyers.


Wednesday, the latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey showed an increase in mortgage applications.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) rose 5.1% during the week ended June 15, 2018.  The seasonally adjusted Purchase Index increased 4.0% from the week prior while the Refinance Index increased by 6.0% from a week earlier.


Overall, the refinance portion of mortgage activity increased to 36.8% from 35.6% of total applications from the prior week.  The adjustable-rate mortgage share of activity increased to 7.0% from 6.8% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance remained unchanged at 4.83% with points decreasing to 0.48 from 0.53.


For the week, the FNMA 4.0% coupon bond gained 9.3 basis points to close at $101.734 while the 10-year Treasury yield decreased 2.36 basis points to end at 2.9004%.  The Dow Jones Industrial Average lost 509.59 points to close at 24,580.89.  The NASDAQ Composite Index fell 53.56 points to close at 7,692.82.  The S&P 500 Index dropped 24.78 points to close at 2,754.88.  Year to date on a total return basis, the Dow Jones Industrial Average has lost 0.56%, the NASDAQ Composite Index has gained 11.44%, and the S&P 500 Index has advanced 3.04%.


This past week, the national average 30-year mortgage rate increased to 4.70% from 4.65%; the 15-year mortgage rate rose to 4.15% from 4.11%; the 5/1 ARM mortgage rate increased to 3.99% from 3.95% while the FHA 30-year rate rose to 4.42% from 4.38%.  Jumbo 30-year rates increased to 4.73% from 4.68%.


Economic Calendar – for the Week of June 25, 2018


Economic reports having the greatest potential impact on the financial markets are highlighted in bold.




Mortgage Rate Forecast with Chart – FNMA 30-Year 4.0% Coupon Bond


The FNMA 30-year 4.0% coupon bond ($101.734, +9.3 bp) traded within a far narrower 28.1 basis point range between a weekly intraday high of 101.859 on Tuesday and a weekly intraday low of $101.578 on Thursday before closing the week at $101.734 on Friday.


The bond traded along a convergence between the 25-day and 50-day moving averages (MAs).  These MAs act as both short-term support and resistance.  Should the 25-day MA cross above the 50-day MA, it would signal market strength and a buy signal likely resulting in a slight improvement in mortgage rates.  However, technical resistance is also found at the 76.4% Fibonacci retracement level at $101.988 so any upward move will have to contend with this layer of resistance plus that from the 100-day MA at $102.087.  These levels may temper any upward move resulting in stable rates.


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There are few more interesting real estate investments than home flipping — seeing an older or run-down piece of property find a fairy godmother to make it beautiful again and then being sold in several months’ time. According to a report in, home flipping activity is increasing across the country, as more investors look to capitalize on the run-up in home prices.


There’s limited opportunity to flip houses now: Sidney Torres from CNBC.


On par with the highest home-flipping rate since the first quarter of 2012, nearly 50,000 single-family homes and condos were flipped in the first quarter of this year, comprising 6.9 percent of all home sales, according to ATTOM Data Solutions’ Q1 2018 U.S. Home Flipping Report.


Even profits were up. with flips in the first quarter of this year selling at an average gross profit of $69,500, up from $66,287 a year ago, the highest average gross profit for flips since ATTOM began tracking such data in 2000. A flip is defined as a property that has been sold more than once in a 12-month period.


The data company’s senior VP Daren Blomquist is cited in the report saying, “The 2018 housing market is a double-edged sword for home flippers. Rapidly rising home prices boosted by low inventory of homes for sale or for rent are padding profits at the back end when flippers sell. But those same market realities are eroding flipping returns at the front end by forcing flippers to pay more to acquire homes to flip.”


Memphis, TN won the prize for the highest flip rate of the 136 metros with 15.1 percent, followed by Albany, Ore. (11.7 percent); East Stroudsburg, Pa. (11.4 percent); York, Pa. (10.4 percent); and Merced, Calif. (10.3 percent).



Source: NAR, TBWS

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Thursday is the best day to list a home, find out what time from CNBC.

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If the adage about rising tides lifting all boats is true, then it comes as no surprise that rising incomes have been helping to offset recent increases in mortgage rates, offering a boost to housing affordability in the first quarter of this year, the National Association of Home Builders/Wells Fargo Housing Opportunity Index shows.


With an increase of 59.6 percent of homes sold that were affordable to median income earners, the index showed that 61.6 percent of new and existing homes sold between the beginning of January and the end of March were affordable to families earning the U.S. median income of $71,900. That median income mark reflects an increase of 5.7 percent in 2018. According to a news article in Realtor Magazine, the NAHB chief economist Robert Dietz reports that this wage growth has helped to boost housing affordability. He goes on to say that a growing economy, along with tight inventories and increasing household formations, will lift housing production in the year ahead. This prediction is dependent, of course, on the fate of mortgage rates as the year progresses.


According to the article, of the 237 metro areas analyzed in the first quarter, the index showed 167 markets experiencing an increase in affordability compared to the fourth quarter of 2017.


While we aren’t expecting you to scramble to an area based solely on affordability, if you’re looking for the nation’s most affordable major housing market, look no further than Youngstown-Warren-Boardman, OH-PA metro area, where 90.9 percent of all new and existing homes sold in the first quarter were affordable to families earning the area’s median income of $60,100. Other affordable major housing markets (in order) were Indianapolis-Carmel-Anderson, Ind.; Scranton-Wilkes Barre-Hazleton, PA.; Toledo, OH; and Harrisburg-Carlisle, PA.


If you prefer small-town living, the most affordable small market is Cumberland, Md.-W.Va., where 98.5 percent of the homes sold in the first quarter are affordable to families earning the median income of $55,500.


The most unaffordable place to live if you fall in the median income slot? It’s still San Francisco, CA, which remains the most costly major housing market, and where only 9.2 percent of homes sold in the first quarter of 2018 were affordable to families earning the area’s median income of $119,600. California continues to dominate the least affordable markets, with Los Angeles-Long Beach-Glendale; Anaheim-Santa Ana-Irvine; San Jose-Sunnyvale-Santa Clara; and San Diego-Carlsbad falling closely behind them.



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Never underestimate the power of words. Sellers evidently care about who they sell their homes to. According to an article in the Wall Street Journal, using data provided by Seattle-based brokerage Redfin, one of the most effective ways to win a bidding war is to write the seller a letter.


Other factors can up your game as well. Unsurprisingly, all-cash offers can double your chances of winning the bid. And waiving a financing contingency (agreeing to forfeit your deposit if you can’t get a mortgage) can boost a buyer’s odds by 57.9%, according to the data. Escalation clauses (including verbiage that should another offer be higher, you would automatically pay a designated figure over that amount — kind of like eBay). But escalation clauses can also be a turn-off in some markets, so they must be used wisely.


Using articulate writing skills came in a close third in the study, however, increasing a buyer’s odds by 52.2%. Numbers vary according to market demographics — the higher the price, the higher the percentages.


Redfin’s data are based on about 14,000 offers in 2016 and 2017 that involved competing bids. It’s logical to assume that rational sellers would choose the highest bid. But risk aversion can often trump high offers. To avoid the pain of a deal going dead, sellers often choose the sure thing, such as a quick close or all cash (especially both)—even if it means accepting less money.


But back to the letter idea. Evidently, in addition to flattering a seller’s ego—or assuring him or her the home will be cared for—a letter can also signal serious intent on the part of the buyer — something that makes the seller believe that no matter what the hurdles, the buyers will make it work. The confidence gained by putting a face and a story to the transaction is like verifying that your doctor wears a clean white lab coat and has a great bedside manner.


Some buyers tell tales of their dilemmas in these letters, such as their years-long quest for a home that is situated in the kind of neighborhood they always wanted for their children or living near family. Others praise the homeowners for keeping the vintage touches of their home intact, pledging to preserve the home’s charm if their bid is accepted.


Sometimes knowing the provenance of a home or a neighborhood can push an owner over the edge. The article tells of how the buyer found out that the seller was not only an active local volunteer but also had custom-built the home years earlier. In a letter, the buyer described his desire to part of the community as well as maintain the house, rather than tear it down. In the end, he beat out a higher offer.


So next time you speak ill of your high school English teacher who pounded into you the importance of a 5-paragraph essay, know that those skills, including the art of story-telling, can tug at a homeowner’s heartstrings when the going gets tough.


Source: TBWS

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f you’re already a homeowner, do you wonder why you keep getting unsolicited snail mail asking if you have any interest in selling your home? Wonder no more. The gains in home prices are getting bigger as the supply of homes for sale gets leaner, and buyers and their agents are hoping-hoping-hoping you’ll consider selling now instead of later.


According to real estate broker Redfin, the median price of a home sold in March surged 8.9 percent compared with March 2017 —the biggest annual increase in four years. Redfin tracks prices in 174 local markets and calculated the median home price at $297,000.


Like sports cars built in limited supply, low-low home inventories are pushing prices higher. Housing supply was down 11.9 percent in March compared with a year ago. As a result, sales fell 3.7 percent. The number of new listings in March dropped 5.6 percent annually.


Redfin credits this to sellers being slow to list and new construction failing even to come close to closing the gap. If this does not change, inventory will be a persistent drag on sales for the remainder of the year.


Single-family home construction fell 3.7 percent in March, and building permits, an indicator of future construction, declined 5.5 percent, barely 2 percent higher compared with a year ago. Multifamily construction is one of the few bright spots in all this having increased considerably. Builders are banking on continued, strong demand for rental apartments as homebuyers struggle to find affordable homes.


Despite higher prices, buyer demand is still strong. Sellers, however, are slow to sell because of concerns about finding anything else they like or can afford as well as losing their low fixed mortgage interest rates. With multiple offers being the rule and not the exception to it throughout most larger urban areas, the average home went under contract in 43 days in March, more than a week faster compared with a year ago and a March record. Nearly a quarter of the homes sold for more than their list prices.


Large metropolitan markets in California, Seattle, and Denver continue to see big price gains, but some unexpected markets are seeing inflation as well. Markets like Allentown, PA (21.8 percent), Detroit, MI (20.6 percent) and Las Vegas, NV (16.5 percent) are not far behind.


The supply situation is most acute in Washington, D.C., where inventory fell 22 percent in March annually, according to expert sourced. It would take just 1.8 months at the current sales pace to exhaust the supply. A balanced market supply is considered to be about six months.


With the Feds expected to raise mortgage rates several more times in 2018, current homeowners will have even less incentive to sell. Sales have been dropping as a result of the tight supply, and prices usually lag sales by a few months. That does not appear to be the case, however, in this cycle, as demand is outweighing everything else.



Source: CNBC. TBWS

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