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Many Americans Still Leery About Housing Market

Despite many months of positive trends, including rising home prices, declining mortgage loan delinquency, and increased home sales, a surprising number of Americans are still not convinced that the housing crisis is over. This is according to a survey conducted by the MacArthur Foundation.

This survey, conducted between April 8th and April 14th of this year, polled a nationally representative sample of 1,355 Americans. Of the surveyed population, a full 70% stated that they believed that the nation was still in the middle of a housing crisis, including a 19% who exhibited a belief that the worst was yet to come. This represents a slight improvement over the previous year, when 77% of respondents believed we were still in a housing crisis. Approximately one in four people said that they believed the crisis was over, representing an improvement from the one in five from 2013.

It would appear that this same attitude is serving to discourage many non-owners from buying their first home. While the survey demonstrated that 70% of non-owners still aspire to one day own their own home, two thirds of respondents do not believe that building equity and wealth through homeownership is still a viable option. With that in mind, 51% of respondents said that renting is more appealing that it was in past decades, while 54% said that buying a home was less appealing than it used to be.

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Job Creation Index Hits a New High

One of the most important factors in the health of the real estate market is the job market. After all, people can only achieve their dreams of homeownership when they are reliably and gainfully employed. Therefore, as a mortgage loan company, we are heartened to see the recent trends in employment.

According to Gallup’s US Job Creation Index, job creation is at an all-time high since the index began in 2008. In May of 2014, the index came in at +27, beating out the prior high of +26 from all the way back in January of 2008 when the country was just starting to fall into recession.

This number is based on a survey of the American workforce, where the percentage of people who reported that their workplace was reducing the size of its workforce is subtracted from the number of people who reported that their workplace was expanding the size of its workforce. In May, it was found that 40% of employees reported that their company was hiring new workers, while only 13% were experiencing a staff reduction. Another 41% reported no change in staffing.

This new high was strongest in the private sector, with an index of +29 for non-government jobs and only +14 for government jobs. However, both sectors appear to be showing improvement, with the government sector only two points shy of its previous high in 2008. All in all, it’s a very positive outlook for the recovering economy.

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4 Questions to Ask Before Buying

A lot of renters are eager to buy their first homes, but don’t want to make the same mistakes that so many first-time buyers made prior to the housing crisis. Indeed, deciding whether or not you could benefit from trading in your monthly rent for mortgage loan payments is a difficult decision to make. This is why the American Bankers Association (ABA) has come up with the following questions that every consumer should ask themselves when determining whether they should be renting or buying:

• How Much Do You Have in Savings? Ideally, you should have between three and six months of living expenses stored away for an emergency. Calculate what your emergency funds should be, and then calculate what you can afford in the way of a down payment on a home or a deposit on a rental property.
• How Much Will You Pay Every Month? Add together all of your financial obligations and calculate your monthly payments, then make a hypothetical budget for the home you wish to rent or buy. What do utilities cost in the area? Do you have to pay for trash pickup? What about renter’s insurance? You’re going to want to make sure that you can reasonably take on your monthly rent or mortgage loan payments.
• What is Your Credit Score? Whether you’re renting or buying, you’re probably going to have someone look at your credit score. The lower this score is, the less eligible you will be for desirable homes or rental properties. If you have a low score, you may want to put off your move in favor of bringing your score up a few points.
• How Long Do You Plan to Stay in the Home? Buying is generally only a good decision if you plan to live in the same place for an extended period of time. This allows you to build equity and avoid the extra grief and expenses that come with selling your home. If you think you may wish to move in the near future, you may prefer the flexibility and lower maintenance costs of renting.

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Home Price Increases Slow in May

For a long while now, our mortgage loan company has been observing great jumps in home asking prices. This was due in a large part to the torrential release of demand, pent up from years of recession, which overwhelmed the supply of homes on the market and put strains on the construction industry. Finally, however, it would seem that the market is beginning to correct itself and restoring some measure of stability for consumers.

According to the Trulia Price Monitor, asking prices in May showed a distinct slowing trend. With a year-over-year increase of only 8.0%, prices increased at their lowest rate in the past thirteen months. May’s rate is still well above the long-term historical norm, but it tells of a market that is more balanced and sustainable.

Though prices are slowing down across the country, the biggest slowdowns have been occurring in the Western United States. In the previous year, it was the West that saw the greatest increases in home prices. Today, of the top ten markets with the biggest price gains, over half were outside the West. All in all, this is good news for consumers who are looking for a little more stability in the housing market.

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The Rise of Ginnie Mae

Though most people know the names Freddie Mac and Fannie Mae, fewer are familiar with the group known as Ginnie Mae. This is because Ginnie Mae, or the Government National Mortgage Association (GNMA) has for a long time taken a distant third place within the world of single-family mortgage loan securitization platforms. However, in the wake of the financial crisis, it’s been Ginnie Mae that has been largely boosting the recovery of the market, and now this group is poised to overcome Freddie Mac.

Back in 2007, Ginnie Mae’s book of business came in at $445 billion, far behind the approximately 1.5 trillion of Freddie Mac and the 2 trillion of Fannie Mae. Today, Ginnie Mae’s business has more than tripled, bringing it up to 1.5 trillion. At its continuing rate of growth, compared to the plateaued performance of Freddie Mac, it is projected to overtake the mortgage giant within the next year.

So, what is the secret of Ginnie’s success? What sets it apart from Fannie Mae and Freddie Mac is that it offers less of a risk for investors. Ginnie Mae securities feature only government loans, which are reliably insured with an explicit government backing. It is then able to guarantee investors that principal and interest payments will be made in a timely fashion, even if the borrower defaults. The company effectively puts itself into a fourth loss position, behind a borrower, a government insurance provider, and a servicer. By contrast, the other mortgage giants act as both insurers and securitizers, putting themselves in a second loss position that represents a greater risk.

In the time of uncertainty that followed the financial crisis, Ginnie Mae’s credit guarantee proved to be a powerful stabilizer for the mortgage market. As it rides the wave of its recent success, we can likely expect it to play a much bigger role in real estate from now on.

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Home Builder Confidence Returns to Positive Territory

Every month, the National Association of Home Builders conducts a survey of new home builders to gauge their confidence in the current real estate market. This month, the outlook was positive for the first time since it crashed early this year. Should this trend continue, it represents good news for mortgage loan brokers throughout the country.

This survey is based on three measures. Firstly, respondents are asked to identify the current market for new home sales and their projections for the next six months as “good”, “fair”, or “poor”. They are then asked to rank their perception of current buyer traffic as “high to very high”, “average”, or “low to very low”. Of these three measures, two showed significant improvement; the index for current sales conditions jumped by four points to 57, and the index for the next six months jumped by six points to 64. Though the index for current buyer traffic remains below the crucial 50 mark, it has still showed improvement in the form of a three point jump to 39.

Improvement was seen across all four regions, with particularly strong gains in the West. The West showed a five point gain to 52, while the South rose two points to 51, the Northeast rose by one point to 35, and the Midwest jumped two points to 48. All in all, it’s an encouraging outlook for the continued recovery of the US housing market.

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