The data is in for new home sales in September, and it’s looking a little flat. Based on the number of mortgage loan applications filed for the purposes of buying a new home, it would seem that buying activity was essentially unchanged from August. This information is coming to us from the Mortgage Bankers Association’s Builder Application Survey, released on the ninth.
The data shows that new single-family homes were selling at a seasonally adjusted annual rate of about 425,000 last month, representing an 0.2 percent increase over the estimate of 424,000 made in August. Conversely, the unadjusted data shows us a total of about 32,000 homes sold in September, representing a 5.9 percent shortfall of the 34,000 new homes that were sold in August. The MBA’s chief economist said of this, “Earlier this summer, and again last month, the first estimates from Census were significantly higher than the estimates implied from the applications data. However, the revised data from Census resulted in a much closer match to MBA’s estimates, and we anticipate that will be the case going forward, given the high rate of coverage in our survey.”
Of the mortgage loan applications submitted in September, 67.6 percent were conventional loans, 16.7 percent were FHA loans, 14.5 percent were VA loans, and 1.2 percent were USDA Rural Housing Service loans. The size of the average loan dropped from August’s $300,443 to $298,274.
Planning for your retirement is all about investing, and, if you’re like most people, your biggest investments are in real estate. Your golden years should be marked by a fully paid-off mortgage loan on your primary residence, and possibly a few additional properties to generate income. Unfortunately, many people make some fairly costly mistakes when planning their real estate nest eggs. Here are a few of the bigger pitfalls you should avoid:
- Think Twice Before Buying Multiple Homes: Some people like to purchase a second property with the idea that they are going to retire to it at some future point. They are frequently motivated by the economy, reasoning that they can save money by buying at today’s prices. All too often, though, these savings dry up quickly in the form of property taxes and maintenance costs.
- Don’t Wait Too Long to Downsize: Maybe you started out with a large home to bring up your family, and then planned to sell it for a smaller home later on. This is a good way to cash in some equity. Don’t wait longer than you need to, though; the longer you stay in the larger property, the more you’re losing in increased property taxes, increased maintenance bills, and costlier utilities.
- Invest Your Downsizing Money Wisely: It’s easy to fall into the trap of taking the money you make off of relocating to a smaller home and thinking of it as “found money”. When you do this, you are parted from this money quickly. Instead, consider living off of these funds so that you can leave your retirement accounts untouched for a little while longer.
- Try to Avoid Taking Out a New Mortgage: If you retire at 55, you could very well be paying off your house when you’re 85.
The financial crisis saw many unfortunate homeowners go underwater with their mortgage loans. With the economy improving, though, and the Fed working to save these imperiled homes, negative equity is dropping across the country. According to RealtyTrac, as of the third quarter of 2014, the percentage of American homes with underwater mortgage loans dropped to fifteen percent.
These new figures represent the lowest result RealtyTrac has reported since it began tracking underwater mortgages in the beginning of 2012. At this time, underwater home loans in America were dancing dangerously close to the thirty percent range. The number peaked in the second quarter of 2012 with twenty-nine percent. Meanwhile, equity-rich homes are slowly rising as well, representing roughly twenty percent of all home loans. We can therefore see that significant progress has been made.
Unfortunately, we still have some way to go. Negative equity in this country still exceeds one trillion dollars. Further, RealtyTrac says that an additional sixteen percent of mortgages are in danger of falling underwater. The real estate market therefore looks to the future for further recovery.
The importance of planning for your retirement in your real estate investments has been discussed at length in the past. As you grow old, it’s often a good idea to downsize to a smaller home in order to eliminate any remaining mortgage loans for the rest of your golden years. However, according to a survey from the Demand Institute, a surprising number of Baby Boomers are going against conventional wisdom.
The survey found that many retired people are content to stay put in the homes they spent their lives in, even if they are too big or ill equipped to fit their needs. A full sixty-three percent of Baby Boomers have no plans to move from their homes, most of them having lived in their current homes for more than the past ten years. Though some of these people need to stay in place due to financial hardship or other situations out of their control, eighty-five percent are choosing to remain where they are.
Meanwhile, of the Boomers who do plan to move, many are declining to downsize. About fifty-eight percent of the Boomer population surveyed said that they want to have at least as much home as they currently have, if not more. A full forty-six percent of people apparently intend to upsize their homes into something better when they move.
Unfortunately, this is all adding up to an increase in debt. Baby Boomers are more burdened by debt than previous generations at the same stage of life. Since 1992, the balance of their mortgage loans has risen 142%. Boomers are therefore advised to carefully consider their finances going into retirement, and just how much they need out of a home in their golden years.
Mortgage rates have been edging slowly downward this month, enough to bring the average rate to one of the year’s lowest levels. As of December 10th, the most prevalently-quoted 30-year fixed-rate mortgage was down to 3.875. Aside from some fleeting instances of particularly low rates that were seen during the turbulent morning of October 15th, these are the lowest rates we have seen for over half a year.
The strength in the current mortgage market can be attributed to weak activity in oil and the stock market. Though neither of these are directly connected to the housing market, there does tend to be a correlation between low stock activity and low mortgage rates. Generally speaking, when the stock market lags, the bond market picks up a bit. The bond market then sees some improvement, which raises prices and pushes rates lower.
During the Iraq war, many reservists and members of the National Guard were called into action, forcing them to walk away from full-time jobs in favor of their military commitments. Unfortunately, this would frequently mean taking a significant pay cut. By the time they were done with their duties abroad, they would often come home with severe financial hardships, frequently struggling to keep up payments on their mortgage loans.
In response to this problem, many people have been pushing to grant additional foreclosure protection to current and past members of the military. Currently, such homeowners are protected by the Servicemembers’ Civil Relief Act, which was incorporated in 2008. This legislation forbids banks from foreclosing on a military member for a period following his or her return from active duty, provided that the mortgage loan in question was issued before said duty. Originally, this period was nine months. In 2012 it was lengthened to a full year.
Since this act was scheduled to expire at the end of this year, there has recently been a movement in Congress to put an extension on this protection. On December 11th, the Senate passed this extension by a unanimous vote. The bill now moves to the House of Representatives, who have yet to act.
With 2015 well underway, the National Association of Home Builders is looking forward at the coming year. Strong employment, low interest rates, and the greater availability of mortgage loans are making for a very good outlook for the real estate world, as pent-up demand continues to be released across the country.
Though the Millennial generation continues to be hampered by poor wage growth and crippling student debt, this generation is starting to reach the low 30’s. More and more of this key demographic are getting ready to get comfortable and invest in real estate, which should fuel the housing market in the coming years.
With this in mind, NAHB is expecting a rise in homebuilding for 2015. Their forecast shows single-family home production rising 26% to 804,000 units. In terms of multifamily projects, the anticipation is 358,000 building starts, representing a 2% increase over 2014. Sales of new homes for single families is expected to reach 564,000, a 29.3% gain over last year, while residential remodeling is expected to rise by 3%.
Mortgage rates have been following their recent trend of minor changes as of Tuesday, with different lenders moving in different directions but remaining more or less unchanged. However, more lenders were seeing improvements on Tuesday.
This improvement can be attributed to the economic data released on Tuesday morning. The Durable Goods report was weaker than anticipated, and weak economic data has a tendency to be beneficial to bond markets and detrimental to stocks. Meanwhile, with Wednesday bringing the Fed’s policy announcement, we can expect further unified developments in the mortgage loan market. The Fed always has a strong impact on trading levels, and there is a lot of potential for great volatility in the coming days.
As February kicked off, mortgage rates moved upwards more quickly than they have so far in 2015. However, rates are remaining among the best seen in the past twenty-one months. The upfront costs associated with them may be higher.
This volatile activity can be attributed to the broader global financial market. A big part of this comes in the form of tension in the Greek market. The ECB is cutting Greece off, effective 2/11, due to the uncertainty surrounding the country’s austerity program. It now falls upon Greece to decide whether to exit the Eurozone or make serious changes. Depending on what Greek officials decide upon, we could see some dramatic moves in terms of bonds, stocks, and mortgage rates in the coming weeks.
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