Real Estate News 1/7/19

 Higher rates prices have led to high anxiety among many buyers about whether they can afford the home of their dreams. But many house hunters aren’t aware of a plethora of low down-payment loans that can clear their path to homeownership. Lending experts say the combination of loan programs designed to reduce up-front costs and technology that speeds the loan process can save consumers significant cash. “We’re seeing an increasing number of people choose low down-payment loans and take advantage of down-payment assistance programs,” said Michael Fratantoni, chief economist for Mortgage Bankers Association. “Lenders are trying to streamline the process for using gift funds for down payments, too, although they’re still being very careful to document the source of the money.” These days, many buyers can choose from an array of programs offering down payments as low as zero percent (VA and Rural Housing Loans). The “Home Possible” and "Home Ready" programs from Freddie Mae and Fannie Mae allow first-time buyers with an income at or below the median for their area to buy with a down payment of three percent. The down payment funds can be a gift from a relative or an employer, or come through a down-payment assistance program. Both Fannie Mae and Freddie Mac also have guidelines for loan programs with a three percent down payment that are available to all first-time buyers, regardless of their income. Joe Tyrrell, executive vice president of corporate strategy for Ellie Mae, a mortgage software company, said that’s because would-be borrowers are self-selecting themselves out of the housing market. “People still have the misunderstanding that they need a FICO score above 720 and more cash for a down payment, so they don’t apply for loans because they assume they’ll be denied,” Tyrrell said. “The minimum FICO score we require to insure a loan with a three percent down payment is 620. Just a few years ago, we required a minimum score of 680 and wouldn’t insure loans with a down payment of less than five percent.” said Claudia Merkle, President of National Mortgage Insurance Company. Source: The Washington Post

Rates for home loans have spent the past decade or so doing anything but what’s expected of them. Every year, it seems, the general consensus is that in the coming months, financial conditions will finally get back to “normal,” taking rates with them. And every year something has brought that “normalization” to a screeching halt. In 2015, for example, shock-and-awe bond-buying by the European Central Bank helped push bond yields into negative territory in Europe and behind. In early 2016, markets were rocked so badly by concerns about earnings that there were fears of another recession – and then rocked again by the upset Brexit vote. The year 2017 started off with concerns about surging bond yields under a pro-growth, anti-tax president, but instead saw many months of a slump when tax reform took a while to materialize. Rates on home loans in 2018 may be the closest thing to “normal” we’ve seen in a long time, with the full-year average of approximately 4.54% for 30-year fixed-rates. That will be the highest since 2010. And for 2019? Given all the variables in both financial markets and housing, forecasting rates on home loans is for the “intrepid,” in the words of Mark Zandi, chief economist for Moody’s Analytics, and a long-time housing watcher. With that in mind, here are some thoughts from a few of those “intrepid” souls? The full year average forecasts for 30-year fixed rates range from 4.8% (Doug Duncan, Fannie Mae) to 5.3% (Danelle Hale, -- with economists from Moody's Analytics, Wells Fargo Economics Group, the MBA and Freddie Mac in-between. Source: Market Watch

If the average renter is feeling a greater sense of claustrophobia coupled by fewer dollars in his or her wallet, that’s because their residential spaces are shrinking while their rents are increasing. According to a data analysis of the top 100 cities with the largest rental stock, the average apartment has seen a 52-square-foot reduction over the last 10 years. Today, an average apartment measures 941 square feet. and renters are getting less bang for their buck: rents in newly-built apartments have increased by 28 percent, but their size is five percent smaller compared to 2008. Source: RENTCafé 

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