Housing Market Musings: A Double-Dip?

Housing Market Musings: A Double-Dip?

We’ve been predicting a double-dip slump for housing ever since rosy reports about the economy began circulating through the media. Here are some of the indicators that I watch. Shadow inventory – This is housing inventory on the sidelines waiting for a good time to enter the market. As this inventory is put on the market, prices will be suppressed. Unemployment No Alt-A market for self-employed borrowers with good credit – Large swath of the potential borrower pool is unable to refinance or purchase. 20%+ of homeowners have negative equity. Interest rate increases loom. A 1% rise in interest rates will deflate any momentum gained. We have a long road ahead. 20% of Mortgages Underwater in December Unfortunately, “the accelerating share of negative equity, combined with deteriorating economic conditions, means that mortgage risk will continue to increase until home prices and the economy begin to stabilize,” said Mark Fleming, chief economist of First American CoreLogic, in a news release.” Borrowers […]

Demographic Profiles for 2010 Homebuyers of Second Homes & Investment Properties

The National Association of Realtors conducted a survey last year to collect demographic profiles of Investment & Vacation home buyers. While Summit County medians are higher, the statistics do provide some insight into what the national picture looks like for this market segment. Vacation Home Buyers Median age: 46 Median income: $87,500 Median distance from primary residence: 348 miles Median sale price in 2009: $276,000 Vacation homebuyers were most likely to purchase property in a rural area, small town or resort.  They plan to keep the property for an average of 16 years. Investment Property Buyers Median age: 45 Median income $87,200 Median distance from primary residence: 24 miles Median sale price in 2009: $105,000 Investment buyers were most likely to purchase proeprty in metropolitan areas. They plan to hold it for 12 years. Source:  2010 National Association of Realtors Investment and Vacation Home Buyer Survey.

Pending Homes Sales Go Up Again

Buoyed by a generous tax credit, affordable homes, and low mortgage rates, the Pending Home Sales Index posted its seventh consecutive monthly gain in August. It’s the longest winning streak in the index’s history and the highest reading in 2-1/2 years. It’s also another signal that the housing market is in recovery. “Pending home sales” are a forward-looking indicator, measuring the number homes under contract to sell, but not yet closed. Historically, 80% of homes under contract close within 60 days. Most others close within 120 days. It’s no wonder home values are rising in so many markets. Home buyers — take note.  If you’re plan to purchase a home between now and the New Year, expect that the recent run in pending sales will turn into run of closed sales which, in turn, should pump prices up and drop home inventory. With mortgage rates hovering near 4-month lows, the best way to find a value in housing may be to act sooner […]

Case-Shiller Index Shows Home Values Still Rising

For the second month in a row, 18 of the 20 Case-Shiller real estate markets posted higher home values.  It’s the 6th consecutive strong showing for the benchmark private-sector housing index. Combined with falling home supplies and rising sales figures, this month’s Case-Shiller Index suggests that housing may have bottomed sometime earlier this year. It’s cause for optimism. Even Case-Shiller respresentatives seem excited. In its press release, the publishers singled out the index’s winning streak, commenting on the recent “stabilization in national real estate values”. But, in that statement, we see the Case-Shiller Index’s biggest flaw.  The index ipurports itself to be a national real estate metric but, in reality, there is no such thing as a national real estate market. All real estate is local. The Case-Shiller Index reports home values for 20 U.S. cities.  Each of those cities, however, is comprised of smaller neighborhoods, each with its own character, desirability, and price points.  Case-Shiller attempts to lump it all together — an impossibility. As an example, […]

Fannie Mae Passes Tougher Mortgage Guidelines

Getting approved for a mortgage is about to get harder.  For the second time in less than 3 months, Fannie Mae announced changes to its mortgage guidelines.  In its official announcement, Fannie Mae details the updates, meant to reduce the mortgage firm’s overall risk. The first major change is with respect to credit scoring.  All Fannie Mae loans — whether underwritten electronically or manually — require a 620 credit score minimum.  There are very few exceptions. A second change relates to loans with private mortgage insurance.  Homeowners whose loan-to-value exceeds 80 percent now have a choice: Accept higher mortgage insurance premiums month-after-month Accept a one-time fee paid at closing to compensate for higher risk Both options pass higher costs to consumers. Then, a third change relates to maximum debt-to-income ratio.  As announced in a separate document, Fannie Mae will no longer approve expense ratios exceeding 45 percent except with very strong assets and credit to back it up.  In no case can expense […]