Lack of Distressed Properties Brings Real Estate Sales Down

Mortgage loan officers in Lynnwood and across the country have been noticing a trend in declining home sales lately. In February, thirty-one states experienced a decrease in home sales over January, and six states saw a drop from the same time last year. Nationwide, the median sales price for residential properties was $164,667 in February, which represents a decline of one percent from January.

A big part of this trend appears to be related to the dwindling inventory of distressed homes. With many foreclosed properties going on the market over the past years, the housing market had come to depend upon this inventory. However, as demand increases and fewer houses are going into foreclosure, these homes are rapidly drying up. Meanwhile, this dearth of homes is not being adequately compensated for in non-distressed sales or new construction.

Distressed properties still represent a significant part of real estate sales, though. In February, 5.7 percent of sales were short sales and an additional 11.2 percent represented sales of homes owned by banks. This makes for a combined percentage of distressed sales of 16.9 percent, which represents an increase from January’s 16.1 percent but a decline from the 19.1 percent we saw in February of last year.

Source: http://www.mortgagenewsdaily.com/03272014_realtytrac_home_sales.asp

Does Freddie Mac Still Have Something to Offer?

With the mortgage market going through dynamic transformations and the federal efforts to phase out the long-standing mortgage giants, the question needs to be asked: is Freddie Mac still bringing something to the table?

As the first quarter of 2014 came to an end, Freddie Mac’s CEO came forward with a fairly positive outlook on how the group strengthens the real estate market. In addition to their strong financial results, he provided the following list of services that the group has been providing the country with:

  • Funding Housing: In the first quarter of 2014, Freddie Mac helped nearly 250,000 families purchase or refinance a home. It also funded over 50,000 multifamily properties, most of which were made affordable for renters at or below the median income for the area.
  • Helping Struggling Homeowners: Another 65,000 homeowners struggling with their mortgage loans received aid via the group’s Home Affordable Refinance Program. This represents a smaller number compared to earlier quarters, but the group is reporting fewer delinquent loans.
  • Shifting Credit Risk: In an effort to spare taxpayers from the burden of Freddie Mac’s risky balance sheet, the group has eliminated a substantial amount of credit risk on $165 billion worth of mortgages and sold off $19 billion of securities throughout the past five quarters.
  • Increasing Efficiency and Effectiveness: Freddie Mac reports that it is currently prioritizing improving their operation so as to better serve the country and help mortgage lenders likewise do their own jobs better.

June Sees Rise in Home Sales, Drop in Mortgages

Last month, mortgage lenders experienced a decline in applications for new home purchase mortgages. According to a survey conducted among mortgage subsidiaries of US builders by the the Mortgage Bankers Association (MBA), mortgage applications in June were down five percent from May. This represents the second month in a row of drops in mortgage activity, with an estimated eight percent decline between April and May.

Conventional loans in June represented the bulk of loan applications, with a total of 67.2% of the market. FHA made up 17%, VA loans made up 14.6%, and 1.2% represented loans from the Rural Housing Service and USDA. Among new home loans, the average loan size was $296,078, representing a slight decline from May’s average of $296,427.

Despite this drop in mortgage activity, it is estimated that new home sales rose in June. Based on their survey data and assumptions regarding the market coverage, MBA places June home sales at 386,000 units. This represents a 3.2% increase over the 374,000 units purchased in May.

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Is a Pocket Listing Right for Me?

Though home prices are easing up throughout the country, it’s still very much a seller’s market. Indeed, even with a new influx of inventory, demand is high enough such that the average number of days a house spends on the market dropped to only forty-five in June. This is due in part to the increase in rental rates, which makes the price of a mortgage loan look all the more appealing. However, another big factor that is defeating the greater number of available homes on the market is something realtors call “pocket listings”.

A pocket listing is not widely advertised. A realtor takes a pocket listing only to his or her own buyer clients, or only to clients within his or her company. This greatly decreases the number of homes that are made visible to individual homebuyers, virtually reducing the available inventory.

Pocket listings are not illegal, though they can be somewhat bothersome. Some realtors prefer pocket listings only because it allows them to earn both the buyer’s and seller’s commission, instead of having to share with another realtor. They are not, however, entirely without merit, and sellers should explore the concept with their realtor in order to determine whether or not a pocket listing is right for their specific circumstances.

First of all, a pocket listing is probably going to work only in a high-demand market. In a climate such as this one, you may not need to advertise to many people in order to get a seller quickly. You may lose some potential to start up a bidding war on your house, but there is also money to be saved in not having to go through the hassle or expense of advertising to and dealing with a large number of potential buyers.

If your home is in bad condition, like if it suffered a fire, flood damage, or significant mold, it may be a good idea to do a pocket listing. The property may not be the safest place to take potential buyers to before significant repairs can be done. Therefore, it is impractical to present it to a large number of people, and more favorable to focus on a small group.

Should your realtor suggest a pocket listing, be sure to ask for a reason. Though it is possible that this would be the best move for your own situation, it is also possible that you would simply be losing the benefits of transparency in favor of lining the realtor’s pockets.

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Mortgage Rates Brought Back Under Control

As July gave way to August, the mortgage market saw a bit of recovery after the significant rise in rates.

The bad news is that this recovery in mortgage rates can be largely attributed to the recent Employment Situation Report, which showed less job creation than was initially anticipated. All the same, this recover represents an important development for consumers in that it prevents what was promising to be a great surge upward. Meanwhile, recent activity in the European markets gives us good reason to believe that this trend is here to stay.

In the last week of July, European borrowing rates reached an all-time low. This applies downward pressure to American mortgage rates. Since Europe will likely have to make a significant recovery in order to reverse this trend, it may be safe to assume that the US mortgage market will continue to be kept in check for a while.

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What to Expect in the End of 2015

We’re going into the final week of 2015, which means that there are only four more days to close loans this year. With fears about what to expect in the coming year, including fines, unsaleable loans, and UDAAP violations, many people are having to make tough decisions as to whether to lock in now or wait until after the start of 2016. So, what’s the best choice?

Fortunately, both Christmas and New Year’s Day fall on a Friday this year. This makes it easier to predict market activity. At the moment, the momentum continues to be fairly flat. For the next few days, we’re looking forward to the 5 year Treasury Auction, the 7 year Treasury Auction, the Case Shiller Home Prices, and Consumer Confidence reports. Any of these could have a powerful effect on mortgage rate activity, up until the markets close early on Thursday and remain closed throughout the New Year celebration. However, we’re not expecting much activity from this cycle of auctions. All things considered, the current flat trend may very well continue into 2016.

Volatile Movement in the Holiday Season

Mortgage rates were already near 2015 highs going into the Christmas holiday. On the 23rd, activity in mortgage-backed-securities only made this problem worse. Though the movement in MBS was a relatively small one, and one that would usually translate to a very slight change in mortgage rates, rates moved up to their highest level in the past five months.

This unusual fluctuation can be attributed to the volatile nature of the holiday season. Lenders are considerably more conservative about adjusting their rate sheets when market activity dies down during the holidays. The previous day was a far weaker one for MBS activity, but many mortgage lenders were not adjusting their rate quotes as much as they may otherwise have. Therefore, the 23rd started off on a much weaker foot than rate sheets indicated.

If you are trying to decide whether to float or lock, it would seem that the odds are in your favor. Should MBS prices linger where they are, mortgage rates could experience a significant improvement as we head into 2016.

Mortgage Fraud Risk on the Rise

Back in the period between 2005 and 2008, instances of mortgage fraud were at a peak. Fortunately, increases in regulation and lending standards led to a strong reversal of this trend, and we have seen very little in the way of fraud in the past few years. However, according to Bret Fortenberry of CoreLogic’s Insights blog, there is reason to believe that mortgage fraud is once again on the rise.

CoreLogic has been tracking mortgage fraud risk since 2010. Risk has moved up and down significantly, dipping into a deep valley early this year, but the overall trend still seems to be moving gradually upward. Low interest rates and rising home prices, which give unscrupulous individuals an opportunity to misrepresent down payments, can be attributed to much of this risk. Moving forward, the group expects these trends to continue, placing us at the bottom of a peak that should reach its highest level at some point in the second quarter. According to projections, this could be the highest level of fraud risk since CoreLogic first started tracking.

Jobs Report Shines, Rates Go Up

Last week ended with the release of the jobs report, which represents the most influential piece of economic data in the world. Though many were expecting a lackluster report, and hoping that it would inspire the Fed to postpone the rate hike they scheduled for December, the report exceeded expectations across the board. Employers added more jobs than they have in any month since December of 2014, with a total of 271,000. The unemployment rate dipped down to 5%. Meanwhile, hourly earnings went up by 0.4.

The main takeaway is that the Fed is now almost certain to raise rates next month. With this revelation, mortgage rates jumped significantly higher today. Most lenders are offering their highest rates since July. This may result in some of the pressure being released, and it is not impossible that we may see this trend reverse throughout the coming days. However, floating remains a risky prospect, outweighing the potential rewards for most people looking to secure a loan in the near future.

November Opens With Increased Volatility

Last week, October ended with one-month highs in mortgage rates. As we go into November, rates are inching up even further. Much of this activity can be attributed to the recent Fed Announcement, which promised to tighten policy. This serves to push up US Treasuries, which influences the mortgage-backed securities that directly influence mortgage rates.

The good news is that, as this represents the market correcting itself in anticipation of the Fed’s policy rate hike, we can likely expect it not to be affected any further by the time the hike goes into effect. In the meantime, though, the market will be under all the more pressure. The more it looks like the planned hike will happen in December, the more we can expect rates to move upward. This week in particular has a high potential for volatility, with the upcoming jobs report on Friday morning marking the time of highest risk. Unless you can afford to take risks, you would be well-advised to lock into current rates by Thursday.

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