Economic Momentum is Strengthening Home Buyer Demand:

The housing market has been steadily growing and now has the potential to grow even more as mortgage rates remain low and have just ticked upward off of their one-year lows and credit is starting to loosen.

But what is ultimately driving demand is the strength in the labor market and related improvements in consumer attitudes.

Jobless claims in October remained beneath 300,000: The last month that averaged under 300,000 weekly claims was June 2000 (almost a 40 year low). Continuing claims were last this low at the height of the housing boom.

Consumer confidence and consumer sentiment are both now at seven-year highs.

The first estimate of the third quarter GDP indicated the economy expanded 3.5% as all sectors including government spending contributed to growth. The condition of the U.S. economy is clearly improving.

In every year of this recovery we’ve seen growth fade as we reached the fourth quarter.  But this time it may be different as almost all the fundamentals are much healthier. Jonathan Smoke, Realtor. com's chief economist, expects to see solid employment numbers for October this week and more positive momentum to carry the housing market through the winter.

Is Your Home Ready to Keep you Warm?

The crisp snap of autumn weather is a reminder that even colder days lie ahead. Get ready for them by performing a few simple chores now that will keep you toasty all winter long.

Install weatherstripping
Weatherstripping can save you up to 20 percent on heating bills — especially if you have drafty windows or doors. Plus, it’s quick and easy, and doesn’t cost a lot of money. Place weatherstripping along doorjambs and in the gaps between windows and sashes to keep chilly breezes out and heat in.

Fix drafty doors
If your doors need extra draft protection, add a door sweep along the bottom. These flexible rubber strips seal the gap at the bottom of the door to keep howling winds at bay. If cold air is still getting in, buy or DIY a door snake — a tube of fabric filled with sand, rice, or other material — to lay on the floor and plug the gap.

Add insulation
The attic and basement are two spots where you can lose a lot of heat. By insulating your basement ceiling and attic floor, you can prevent warm air from escaping the house. Also check around the exterior of your house for cracked foundation, gaps or cable holes, and seal them or fill them with spray foam insulation.

Check your furnace
Like any piece of machinery, your furnace works better if it’s properly maintained. Some utility companies offer a free annual checkup for your furnace, but if yours doesn’t, it may be worth paying a technician to ensure that your furnace is in top condition. But you can also improve your furnace’s performance with simple maintenance that you can do yourself, like replacing filters and cleaning registers.

Swap your thermostat
Standard thermostats can lead to wasted energy. If you opt for a smart thermostat like the Nest, you could cut down on your energy use — and your utility bills. Among other features, these smart thermostats can sense when you’re away and automatically adjust the temperature to save you money.

Seal ducts
If you have forced-air heat, leaks in your ducts could be costing you hundreds of dollars. Seal them with specially designed metal tape and keep your ducts — and your wallet — more secure.

Embrace fabrics
While a cool tile floor might feel nice underfoot in summer, it’s not so appealing when it’s sub-zero outside Cover your floors in throw rugs and runners for the winter months. You can also hang heavy insulating drapes in front of your windows to keep warm air in and the cold out where it belongs.

A New Group of First Time Homebuyers is on the Horizon:

The American dream is still alive as Teens overwhelmingly think that they will own their home.

A new survey found that American teens overwhelmingly think that they will be home owners—a far cry from millennials who were much less sanguine about their fortunes in an earlier study.

The study, conducted for real estate service Better Homes and Gardens Real Estate, found that 97 percent of those ages 13-17 believe they will own a home in the future. Compared with the 40 percent of millennials who said in an earlier Better Homes study that they expected to buy a home in the near term, these new figures prove that the younger generation may be more attached to the notion of home ownership.

This means that the next generation to reach adulthood will bring about 21 million hopeful home buyers to the market. For reference, just over 5 million existing homes were sold in 2013, according to the National Association of Realtors.

Lest anyone suggest that the survey's respondents are unaware of what it takes to be a homeowner, the study also found that the average teen has an impressively accurate understanding of the price of a home: Of the 97 percent who said they would own a home, they estimate paying on average $274,323 for their first one. The median cost of a new home in June was $273,500, according to the U.S. Census Bureau.

Not only are teens significantly optimistic about their home buying, but 82 percent also said home ownership is the most important part of the American Dream, according to the survey. Way to go teens!

Housing Could Rise Even Further This Fall:

Autumn is historically the start of the slow season for home sales, but after a good spring and summer, wrought with still-tight supply and higher costs, the stage may be set for another small pick up in U.S. housing this fall, at least according to a new report.

More sellers are lowering their price expectations, because the number of homes that sold above list price in July was down nearly 26 percent from a year ago, noted in the report. That is the biggest drop of the year. Lower prices, still-low mortgage rates and increasing supply could push sales higher.

Twenty-seven percent of homes sold above their list price a year ago, compared with 20 percent this July. Home prices rose 7.4 percent nationally in July from a year ago, according to CoreLogic, but the gains have been shrinking steadily. That includes sales of distressed homes, which are slowly becoming a smaller share of the market. It is the 29th straight year-over-year gain in prices. 

With Consumer Confidence increasing, interest rates very low and more supply of homes entering the market at more realistic prices - the stage is set for more units across the U.S. to move.

Underwater Homeowners Actually Helping Home Values:

One of the biggest barriers to an even more robust recovery in the housing market is a lack of supply. There are simply not enough homes listed for sale to meet the demand—and part of that is because a growing number of home buyers are not selling their previous homes.  Lack of inventory and steady demand have kept home prices moving upward.

"As people are starting to move, they're also turning into landlords by choice. And that is definitely having a dent in the inventory numbers," said Nela Richardson, chief economist at Redfin, a real estate brokerage. "Our agents are seeing people come through their door with the cash in hand to buy that next place. A lot of them obviously don't need that equity in their former home, or they're able to tap some of it out and then use it to buy the next place."

It's a strange new irony in housing. Lack of supply is driving prices higher, which is pricing some demand out and driving up rental demand.

For others, however, the rise in home prices is providing useful equity to buy another home while still holding on to their old home, which is then providing lucrative rental income.

There are no hard numbers as to how many buyers are holding on to their previous properties, but there is plenty of anecdotal evidence, especially as rental demand and rent rates continue to surge.

So, instead of underwater homes hurting the housing market they are driving up rental rates and home prices.

Un-advertised Listings Distort Housing Inventory:

The number of homes listed for sale nationally is finally beginning to rise, but ask anyone looking to buy a home and the majority will complain there is nothing out there. Neighborhood to neighborhood, market to market, supply still seems tight, despite a 6.5 percent increase in listings from a year ago, according to the National Association of Realtors. 

"Statistically it appears that we are getting back to very balanced market conditions," said Lawrence Yun, chief economist for the Realtors. "However, the sentiment out there is that we still have a shortage of inventory, and I think that is due to the prevalence of pocket listings in some markets."

A so-called pocket listing is when the real estate agent signs a listing agreement with a seller but does not advertise it widely or put it in a multiple listing service, where other agents and buyers can see it. Instead, they circulate the listing only among their own buyer clients or within their own brokerage. That way they can potentially get commissions on both buyer and seller sides, and would not have to split commissions with other selling agents.

No hard numbers exist on pocket listings so their rise and fall comes anecdotally from Realtors. Pocket listings are not illegal.

The incentive for a seller to do a pocket listing could be that they need to sell the home quickly and don't want to go through a wide marketing plan with multiple showings and open houses. The agent is promising the seller that they know of enough potential buyers personally that they can get a deal done fast. This usually happens when the market is very tight, and buyers are willing to make larger offers up front to negate the risk of a bidding war. 

Millennials Key To Next Wave of Purchases:

Just 36% of Americans under the age of 35 own a home, according to the Census Bureau. That's down from 42% in 2007 and the lowest level since 1982, when the agency began tracking homeownership by age.

It's not all their fault. Millennials want to buy homes -- 90% prefer owning over renting, according to a recent survey from Fannie Mae.

But student loan debt, tight lending standards and stiff competition have made it next to impossible for many of these younger Americans to make the leap.

"When we surveyed Millennials they cited several barriers to homeownership, especially access to financing," said Steve Deggendorf, a senior director for Fannie Mae. Many Millennials simply can't come up with the hefty 20% down payments. Others don't have good enough credit to qualify for loans.

There is a ray of hope for young wanna be homeowners, said Fannie Mae's Deggendorf. "Mortgage lending is getting a little less tight, with lenders approving buyers with a little lower credit score and who have less of a downpayment," he said. 

Home Prices Continue to Rise:

We have yet another positive housing report that shows continued growth in home prices.  Data provider CoreLogic says home prices increased 8.8% in May compared to a year earlier.  So, that means that the average homeowner enjoyed an 8.8% appreciation rate over the past 12 months.

On a month-to-month basis, prices rose 1.2 percent from April to May. But CoreLogic's monthly figures aren't adjusted for seasonal patterns, such as warmer weather, which can affect sales.

Prices increased the most in Western states, including Hawaii, California and Nevada.

Last week, we reported that Pending Home Sales shot up 6.1% and the continued gains in housing are helping more and more homeowners climb back into positive equity territory.  This new release supports pricing gains from other reports such as the Case-Shiller Home Price Index (+10.8% on a yearly basis) and the FHFA Home Price Index which showed a yearly gain of +6.6%.  Regardless of which reading is the most accurate, consumers are now starting to understand that the likelihood that they will loose money after purchasing their next home has diminished greatly.

Existing Home Sales and Prices Jump:

The National Association of Realtors reported today that May sales of homes that have been previously occupied (the largest segment of homes) jumped 4.9% from April.  Existing Home Sales came in at an annualized rate of 4.89 million units which handily beat the market expectations of 4.73 million units.

The median price rose to  $213,400 which is a 5.1% increase over the past year (May 2013 to May 2014).

The reason for the spike in sales?  Is it interest rates?  Nope, its inventory. Home Sales had been suppressed even while fixed mortgage rates hit their lowest levels for 2014 due to a very tight supply of homes available for sale.  Since home prices have been increasing at a moderate pace, many homes that were "under water" are now back into positive equity and these homeowners are now finally able to put their homes on the market.

Household Net Worth Creeps to Record High:

U.S. household net worth nudged up 2 percent to a record high $81.8 trillion in the first quarter as the stock market continued its upward climb and property values rose, data from the Federal Reserve.

The S&P 500 rose 1.4 percent in the first quarter as the Fed continued with a highly accommodative monetary policy for a recovering U.S. economy. For the year to date, the S&P is up 5 percent, and hit a new intraday record high on last week.

How consumers feel about their financial net worth has a direct impact on consumer spending and demand for homeownership, so this is more good news for the housing market.

Insurance Coverage for Summer Storm Damage

“If my home is damaged by a summer storm, will my insurance cover repairs?”

By Sandra Block, Kiplinger.com

Where water-related damage is concerned, the answer depends on whether the water came from above or below. In general, if the damage was caused by wind-driven rain that came in through your roof, windows or doors, your insurance will cover the cost of repairs.

But if the damage is caused by flooding, a far more common problem during storm season, your homeowners insurance will not cover it. The only way to protect yourself from flood-related damage is to buy flood insurance from the federal National Flood Insurance Program. Premiums range from about $200 a year to more than $2,000, depending on your area’s risk of flooding.

Never assume you don’t need flood insurance just because you don’t live in a coastal area. In 2011, torrential rainfall from Hurricane Irene caused widespread flooding throughout the Northeast. Vermont was hard hit, and many of the victims didn’t have flood insurance. “A lot of Vermont residents never thought they’d be involved in major flooding,” says Richard McGrath, chief executive of McGrath Insurance Group, in Sturbridge, Mass.
You can purchase federal flood insurance through a local insurance agent. Don’t wait until storm clouds gather to buy a policy; typically, there’s a 30-day waiting period before premiums take effect. For price quotes, go to FloodSmart.gov.

Sewage backup. If heavy rains overwhelm your storm-water system, sewage could back up into your house—an expensive and unpleasant mess. Most standard homeowners policies don’t include sewage-backup coverage, but you can purchase a rider that will pay for $10,000 to $20,000 of damages for about $50 to $75 a year, McGrath says.

Damage from trees. Old-growth trees lose their charm in a hurry when lightning, wind or heavy rain knocks them down. If the tree hits your house, garage or other insured structure, the damage is usually covered by your homeowners insurance, says Jeanne Salvatore, spokeswoman for the Insurance Information Institute.

Damage from a neighbor’s tree—or even from one a block away that was uprooted in a windstorm—is also usually covered. If your insurer believes your neighbor contributed to the problem by failing to take care of the tree, it may try to collect against your neighbor’s policy, Salvatore says. In that case, you could get a break on all or part of your deductible. But it works both ways: If your tree damages your neighbor’s property, you could be held responsible. Your insurer could refuse to cover damage to your property if it believes you were negligent.
Most policies won’t pay to remove a tree that falls in your yard but doesn’t hit anything—although you may be eligible for some coverage if the fallen tree blocks your driveway or prevents you from getting into your house.

Get a tax break? You may be able to recover some of the costs your insurance doesn’t reimburse when you file your taxes.

Losses from hurricanes, floods and other disasters that aren’t covered by your policy are deductible, if you itemize your deductions. You won’t be able to deduct the entire amount of your losses, however. First, you’ll have to reduce the amount of your loss by $100. Then, you can deduct only the amount that exceeds 10% of your adjusted gross income. For example, if you suffered $20,000 in unreimbursed losses and your AGI is $100,000, you would subtract $100, then subtract $10,000 (10% of your AGI) from the $19,900 balance, bringing your deduction to $9,900.

Reprinted with permission. All Contents ©2014 The Kiplinger Washington Editors. Kiplinger.com.

In 2009, rates jumped about .250% leading into Memorial Day and then they jumped an additional .500% the week of Memorial Day. Last year rates jumped from 3.5ish in May to 4.00% in June and then 4.50% in July. OK so we have skated through most of May and rates have held in so I am happy! Today, rates are exactly where they were on Friday. An FHA 30 Year fixed rate with no points is at 3.750% (5.690APR) and a conventional loan with 20% down and no points is currently at 4.125% (4.198APR) assuming your buyer has a 740 credit score.

We touched a little on Capital Gains last week and I wanted to go a little more into depth on this. I will start with some basic stuff and work my way into the more complicated information a little later. If a person purchases a property and then sells it for a profit this could constitute a capital gain. If they lived in that house for two of the past 5 years and the gain was less than $250,000.00 for a single person or $500,000.00 for a couple then they would be exempt from taxes. Pretty simple stuff. The end!! Not so fast! About 80% of our clients will fit into that mold. While 20% will make over the exemption, or sell before the two years. So let's look at those clients a little more carefully and how can they get out of their house before two years and minimize the gains.

• So if a client buys for $400K and sells for 500K is the gain $100K? The answer to that is no.
• We need to ask what their expenses were going in? Closing costs, escrow title, loan fees...
• What was the cost of the improvements they did? Kitchen, bath, roof, landscape...
• What are the selling costs to sell the property?

Depending on improvements, those fees may or may not add up to 100K, but all of the money they spent will be deducted from their profits and they would only pay taxes on the remaining profit. We always have our clients consult with their tax person when they are looking to sell. It is imperative that they know what the real cost is to sell a property before they sell it.
Please let me know if you have any questions or if you have any clients that have any questions on loans or anything to do with Real Estate.
Thank you for your time and remember to always align yourself with the best in the business! That will make your business the best!

Sincerely,

Mike Meena

Augusta Financial

Regulators Seek to Ease Housing Credit:

Both the new regulator for Fannie Mae and Freddie Mac, as well as the secretary of Housing and Urban Development, announced they would shift strategies by making credit more available to homeowners. 

Federal Housing Finance Agency (FHFA) Director Mel Watt, who recently took over the job of regulator for the mortgage giants, said in his first public comments that he would not lower the maximum loan limits for Fannie Mae and Freddie Mac, which currently stand at $417,000 in most markets. Watt's predecessor, Edward DeMarco, had contemplated the move as a way to shrink Fannie and Freddie's footprint in the mortgage market.

Watt, a former North Carolina congressman, also said he would try to alleviate some of the uncertainty banks face in dealing with Fannie and Freddie.

"I know that repurchase risk remains a top concern for the mortgage industry. Lenders believe that too much uncertainty still exists in this area for them to ease their credit overlays. Ultimately, this undermines the goal of improving access to mortgage credit for creditworthy borrowers," he said.

In another move to open up credit to first-time homebuyers specifically, HUD Secretary Shaun Donovan announced a new four-year pilot program at the Federal Housing Administration (FHA) starting this fall. The FHA is the government mortgage insurer for low down payment loans.

Under the program, first-time homebuyers who commit to credit counseling will qualify for reduced FHA insurance premiums on their loans. For the average FHA loan balance of $180,000—these reductions, according to Donovan, can add up to roughly $10,000 in savings over the life of the loan. 

Buying Beats Renting After Just Two Years in Half of Metro Areas:

Prospective homeowners face a pleasing condition: In half of U.S. metropolitan areas, buying now beats renting after a mere two years.

"Rents keep rising, and mortgage rates remain very low, which is helping to skew the rent vs. buy decision toward buying for those who can afford it," said Stan Humphries, chief economist for Zillow.com, the housing and mortgage firm behind a rent-versus-own study,

Two years is a surprisingly short time to make a home purchase pay off. For many years, the rule of thumb was that you must own a home for four or five years to break even . It takes that long for the home's rising value to offset the various costs, including title insurance and realtor's commission, incurred in the purchase and sale. Renting makes more sense for anyone who does not expect to stay in the home beyond the break-even period.

But prospective buyers benefit from the lower prices. And low mortgage rates allow them to keep their monthly costs down. At the same time, high demand has pushed rents up very fast in many communities. The higher the rent, the sooner owning pays off. Finally, low-interest earnings on safe savings such as bank accounts reduce the gains renters can enjoy on cash that is saved instead of being put into a down payment on a home.

"Among the 35 largest metro areas analyzed by Zillow in the first quarter, those with the shortest breakeven horizon were Riverside (less than 1 year), Orlando (1 year), Tampa (1.1 years) and Miami-Fort Lauderdale (1.2 years)," Zillow said, referring to locations in California and Florida. "Large metros with the longest breakeven horizon included Washington, D.C. (4.2 years), Boston (4 years), Phoenix (3.3 years), San Diego (3.2 years), Minneapolis and Baltimore (both 3.1 years)."

Zillow cautions that break-even periods can vary considerably within any given city. 

Both Pending and Existing Home Sales Beat Forecasts:

U.S. home buyers signed more contracts to buy existing homes in March, as weather in much of the country warmed and as more listings came onto the market. An index of so-called "pending" home sales from the National Association of Realtors rose 3.4 percent from February, the first gain in nine months.

"After a dismal winter, more buyers got an opportunity to look at homes last month and are beginning to make contract offers," Lawrence Yun, chief economist for the Realtors. "Sales activity is expected to steadily pick up as more inventory reaches the market, and from ongoing job creation in the economy."

The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

In a separate report last week, The National Association of Realtors said on Tuesday Existing Home Sales came in at an annualized rate of 4.59 million units, the market forecasts were only expecting a reading of 4.55 million units.

So, we have two reports that show the housing market slowly moving forward despite higher home prices and tighter credit which is a good sign for the Spring season. 

U.S. Housing Starts Climb in March:

The Commerce Department reported that groundbreaking increased 2.8 percent to a seasonally adjusted annual rate of 946,000.

Plus, February's data was actually better than first released. As February's starts were revised to show a 1.9 percent rise rather than the previously reported 0.2 percent fall.

Gaines in home building has been difficult as a brutally cold winter weighed on home building in December and January.  Activity has also been hampered by shortages of building lots and skilled labor as well as rising prices for materials.

Groundbreaking for single-family homes, the largest segment of the market, surged 6.0 percent to a 635,000-unit pace last month. Starts for the volatile multi-family homes segment fell 3.1 percent to a 311,000-unit rate. 

Survey: Consumer Confidence in Housing Hot This Spring

DAILY REAL ESTATE NEWS | TUESDAY, APRIL 08, 2014

Consumer attitudes are reflecting greater optimism in the housing market heading into real estate's traditionally strong spring selling season, according to Fannie Mae's March 2014 National Housing Survey.

In the poll of 1,000 people, 38 percent say it's a good time to sell a home, up from 26 percent a year ago. The poll also shows that 69 percent of those surveyed say it's a good time to buy, and 52 percent say it's easier today to get financing for a home.

Americans also feel more confident about their personal finances: An all-time survey high of 40 percent say their personal financial situation has improved during the past year.

"The housing recovery continues to proceed in fits and starts," says Doug Duncan, Fannie Mae’s chief economist. "Rising mortgage rates and a lack of supply have dampened housing market momentum. However, we see several positive signs going into this year's spring home-buying season, compared with last year. For example, consumers are less pessimistic about their personal finances and more optimistic about the current selling environment and their ability to get a mortgage. Still, those who are pessimistic about buying or selling a home today tend to point to economic conditions as the primary issue, and most consumers continue to say the economy is on the wrong track. Looking forward, we expect to see a pickup in economic growth later in the year, and this may boost the confidence of prospective buyers and sellers."

However, consumers' home-price expectations softened a bit in the latest survey. The average 12-month home-price-change expectation fell from last month, reaching 2.7 percent, the survey shows. Also, slightly fewer respondents — 48 percent — said they thought home prices would rise in the next 12 months.

Source: Fannie Mae

Internet Traffic Points to Strong Spring:

Visits to real estate sites from desktop computers surged 15 percent in March compared to the month before, indicating the spring homebuying season has gotten off to a hot start.

Consumers recorded about 362 million visits to real estate sites from desktop computers last month, a good chunk more than February’s 316 million visitors, according to Experian Marketing Services.

Zillow maintained its sizable Web market lead in the real estate category in March — capturing 16.46 percent of visits to real estate sites from desktop computers for the month, according to Experian, which measures total hits and not unique site visitors.

Zillow’s two chief competitors — Trulia, with 8.91 percent market share, and realtor.com, with 7.49 percent market share — closed in slightly on Zillow’s lead over the course of the month. Compared to their February positions, Trulia and realtor.com closed their gaps with Zillow by 0.32 percentage points and 0.3 percentage points, respectively, for the month.

By capturing 0.86 percent of March’s real estate traffic from desktop computers, Re/Max jumped to No. 18, joining Century 21 Real Estate — which ranked No. 16 with 0.99 percent Web market share in March — as the only other real estate franchisor website in the top 20. 

Fannie Extends Closing Cost Incentive to Buyers

Due to strong buyer response, Fannie Mae has announced it will extend the deadline for an incentive program that allows home buyers to receive up to 3.5 percent in closing cost assistance on purchases of its HomePath foreclosed properties.

Home buyers now have until April 30 to submit offers on the REO homes, and transactions must close by June 30 to be eligible. Originally, the incentive applied for offers submitted by March 31 and transactions that closed before May 31.

The incentive offers qualified buyers up to 3.5 percent of the final sales price to pay closing costs. In some cases, buyers may opt to use the savings to buy down their interest rate through upfront points, Fannie Mae notes.

The incentive, offered in 27 states, is part of Fannie Mae HomePath’s FirstLook program, which offers potential owner-occupants or public entity buyers the first 20 days after a property is listed for sale to submit offers without facing competition from investors.

“We have received a strong response from the incentive since it went into effect on February 14, and we are happy to extend the offer to even more home buyers,” says Jay Ryan, vice president of REO sales. “With the unusually cold and extended winter season ending, we want to give people more opportunity to use the incentive to buy properties that they will call home.”

The states eligible for the homebuyer incentives are: Arizona, Maryland, New Mexico, California, Massachusetts, Ohio, Florida, Michigan, Oregon, Idaho, Minnesota, Puerto Rico, Illinois, Missouri, Tennessee, Indiana, Nebraska, Virginia, Iowa, Nevada, Washington, Kansas, New Hampshire, West Virginia, Maine, New Jersey, and Wisconsin.

DAILY REAL ESTATE NEWS | FRIDAY, MARCH 28, 2014

First-Time Buyers Show Interest; Face Tough Market

Source: DSNews Author: Colin Robins

More than 4 million first-time buyers want to enter the market, but they face some tough issues as market conditions aren’t exactly favorable to new buyers. This conclusion came from the Zillow Housing Confidence Index (ZHCI), a new calculation released by Zillow and Pulsenomics. The ZHCI is a measure of consumer sentiment; anything over 50 indicates a positive sentiment. The current national index is 63.7. Of the 20 metros surveyed, 11 had individual confidence levels above the national average.

In 19 of the 20 large metros surveyed, more than 5.0 percent indicated they wanted to buy a home in the next year. The report notes, "Among current renters, homeownership aspirations were particularly strong, with about 10 percent of all renters nationwide saying they would like to buy within the next 12 months." A vast majority of respondents said they were "confident or somewhat confident" they could afford a home in 2014. If every respondent who indicated they wanted to buy a home actually purchased one, first-time home sales would total more than 4.2 million for 2014, more than double the roughly 2.1 million first-time buyers in 2013.

 While this optimistic total from Zillow suggests interest is high, actually purchasing a home should prove to be a challenge in the upcoming year. Market conditions are mixed: inventory, up 11 percent from a year ago, is still well below optimal levels, and has fallen year-over-year in 8 of 20 metros measured by the ZHCI. Mortgage rates, once a record low 3.3 percent in 2013, have risen to 4.2 percent, according to the Zillow Mortgage Marketplace. A dearth of inventory coupled with rising mortgage rates could push homes out of a homebuyer's price range, particularly for first-time buyers. "For the housing market to continue its recovery, it is critical that homes are both available and remain affordable to meet the strong demand these survey results are predicting, particularly from first-time homebuyers," said Zillow Chief Economist, Dr. Stan Humphries. "Even after a wrenching housing recession, this data shows that the dream of homeownership remains very much alive and well, even in those areas that were hardest hit."

He added, "But these aspirations must also contend with the current reality, and in many areas, conditions remain difficult for buyers. The market is moving toward more balance between buyers and sellers, but it is a slow and uneven process." Areas indicated by the ZHCI with the highest interest in purchasing a new home come from metros that were hit hardest by the housing recession: Miami (67.5), Atlanta (62.9), and Las Vegas (64.1). Each were near or above the national index of 63.7 for "Overall Housing Confidence.

Why Education Will Keep Housing Crisis at Bay

Arming today’s youth with greater financial knowledge is the key to making sure there is no repeat of the housing and economic crisis, Richard Cordray, director of the Consumer Financial Protection Bureau, said at a meeting Monday of the President’s Advisory Council for Financial Capability for Young Americans. “Now more than ever, as we emerge from the deepest financial and economic crisis of our lifetimes, people need the know-how to manage the ways and means of their lives,” Cordray said. “The choices they face in the financial marketplace, with instruments like mortgages, credit cards, auto loans, student loans, credit reporting, and more, are increasingly complex.” Cordray said that childhood education is crucial to shaping housing’s future and should include: Financial education: Cordray said that financial education needs to begin at a young age, with the benefits of compound interest being taught in math classes; economic costs and risks in social studies classes; and overall curriculum involving how to use and protect money. Experimental learning: Cordray said that financial management should be practiced through experimental learning, whether that’s through simulating a banking experience or a computer game that teaches financial skills. Integration into standardized tests: Financial education concepts should be integrated into standardized tests, which would then make it more of an incentive for more teachers to teach such concepts, Cordray said. Parent involvement: “Parents help set expectations, and research has shown that if parents engage their children by establishing a savings account for them, these children are seven times more likely to attend college than those without a savings account,” Cordray said. Source: “5 Ways Children Hold the Key to Housing’s Future,” HousingWire (March 10, 2014

Net Worth of U.S. Households Sets Record:

Household net worth jumped nearly $3 trillion during last year's fourth quarter to $80.7 trillion. Stock and mutual fund portfolios gained nearly $1.7 trillion, or 9 percent, according to a Thursday report by the Federal Reserve. The value of Americans' homes rose just over $400 billion, a 2 percent gain. And checking account balances, pensions plan assets and retirement savings, such as 401(k)s, also increased. Strong wealth gains tend to trigger more consumer spending, a critical fuel for economic growth. Higher household net worth is one reason economists have forecast that the U.S. economy will accelerate later this year. Household wealth, or net worth, reflects the value of homes, stocks, bank accounts and other assets minus mortgages, credit cards and other debts. Rising home prices are helping people rebuild ownership stakes in their homes. The equity that Americans as a whole have in their homes has reached 51.7 percent, the highest point since before the recession began. That's up from a record low of 36.5 percent in the first three months of 2009.

For Some Borrowers, It's Now Easier to Get a Mortgage

DAILY REAL ESTATE NEWS | THURSDAY, JANUARY 16, 2014 Borrowers may be having an easier time applying for a mortgage compared to a year ago. The average credit score for approved mortgages dropped to 727 in December, down from 748 one year prior, according to Ellie Mae, a mortgage technology firm. FICO credit scores run on a scale from 300 to 850. Forty-six percent of mortgages that closed in December had credit scores above 750. One year earlier, 57 percent of mortgages posted credit scores that high. In December, about 31 percent of loans had credit scores below 700. One year earlier, that percentage stood at 21 percent, according to Ellie Mae. Debt-to-income ratios are growing. The average total monthly debt for borrowers of closed loans in December stood at 39 percent of their incomes. That’s up from 35 percent in June. “Rising interest rates and home prices could account for some of the increase in debt-to-income ratios,” MSN Real Estate reports. More lenders may be getting comfortable easing standards since home prices have been rising over the past year. Also, lenders are facing a big drop in refinance business, which may prompt them to get more competitive in trying to nab more borrowers for home purchases, housing experts say. However, the effect of new mortgage regulations, which took effect last week, have yet to be seen. Tighter credit standards may be making for better borrowers, according to a new report. Loans originated last year are performing better than any year since tracking began in 1997, according to a report by Black Knight Financial Services.

4 Keys Identified for a Full Housing Recovery

DAILY REAL ESTATE NEWS | FRIDAY, JANUARY 17, 2014 In order to have a fully recovered housing market and economic recovery, economists point to the need for four positive indicators: 1. A healthy job market with low stable unemployment; 2. Mortgage delinquencies that have returned to historical averages; 3. Home prices consistent with an affordable mortgage payment–to–income ratio; and 4. Home sales that are in the range of historical norms. So, is the housing market inching closer? Freddie Mac’s U.S. Economic and Housing Market Outlook for January takes a look at how the housing market is performing among these four indicators. Economists note that the unemployment rate -- while inching down -- still remains high at 6.7 percent. Meanwhile, mortgage delinquencies have fallen to 5.88 percent -- nearly half of their peak rate but still higher than the national average of about 2 percent, Freddie notes. Home prices still have some room to grow without outpacing income growth, economists say. “From 1999–2006, mortgage payments on a hypothetical 30-year fixed-rate mortgage would have increased by 50 percent more than income growth,” Freddie Mac notes in the report. “Currently, payment-to-income ratios are only 60 percent of the level we had in 1999, suggesting room for continued housing growth.” Finally, home sales have risen over the past two years but remain below levels from a nearly a decade ago. Home sales, historically, average a rate of about 6 percent of the housing stock every year. They dropped to 4 percent during the housing crisis. Economists are predicting a 5.7 percent pace in 2014. "As we start 2014, the housing recovery continues its steady pace,” Frank Nothaft, Freddie Mac’s chief economist. “House-price gains will likely moderate from last year's pace but rise about 5 percent in national indexes. Home sales, as well as other key indicators, continue to trend in the right direction, although in some markets we are seeing the sales recovery strengthen while many others remain weak.

Small Lenders Hesitate Over New Rules DAILY REAL ESTATE NEWS | MONDAY, JANUARY 13, 2014 New mortgage rules that took effect last week could further hamper small lenders’ ability to issue loans, The Wall Street Journal reports. Under the new rules, lenders must ensure that borrowers can pay back their loans. Loans that meet “qualified mortgage” standards will provide a safe harbor to lenders from future lawsuits, while loans issued outside of QM standards will carry more legal risk. The Consumer Financial Protection Bureau defines “qualified mortgages” as loans that meet the ability-to-repay rule and in which borrowers spend no more than 43 percent of their income on debt. Furthermore, fees and other charges may make up no more than 3 percent of the loan. Small lenders reportedly will tread cautiously in the new lending environment because they are worried about the legal risk of making loans that don’t meet new standards, according to The Wall Street Journal. “We’re going to be very conservative just to make sure that we’re in compliance and don’t get into trouble,” says Mark Walker, chief executive of Michigan Mutual Inc., a lender with 300 employees based in Port Huron, Mich. “There are going to be loans that we did in 2013 that we are not going to be able to do in 2014.” Any lender who falls outside of the new rules may be unable to sell the loan to investors such as Fannie Mae and Freddie Mac. Large lenders—such as Wells Fargo and Bank of America—already have said they plan to continue issuing loans outside of CFPB’s Qualified Mortgage standards and will hold those loans on their own books. But smaller lenders will likely think twice. Non-bank lenders will be particularly cautious since they often don’t use their own investment portfolios to hold the loans on their books, The Wall Street Journal reports. For example, Linda Sweet, president and CEO of Big Valley Federal Credit Union in Sacramento, Calif., says her credit union will mostly stop making mortgage loans in 2014. Her credit union made about 30 mortgage loans in 2013. “The burden of trying to comply with the regulation is just overwhelmingly costly for a small financial institution,” Sweet says. CFPB announced it is monitoring the new rule’s impact closely on loan availability to see if any tweaks need to be made. “I think we got the rule right,” says Peter Carroll, CFPB’s assistant director for mortgage markets. But he adds that “we don’t want to see credit get unduly cut for people, where there are responsible loans being made.”

Banks Aim to Clear Foreclosure Backlogs

DAILY REAL ESTATE NEWS | MONDAY, JANUARY 06, 2014 Banks are trying to capitalize on rising home prices by selling seized homes more quickly. States with some of the largest backlogs of foreclosures are seeing an upswing in properties that are moving to auction for quicker sales since last July, according to RealtyTrac. “Lenders know there’s now a much better chance they can get those properties sold, so they’re moving to do that,” says Daren Blomquist, vice president at RealtyTrac. The number of new foreclosures entering the pipeline is slowing. However, the number of foreclosures going to auction is seeing an uptick in 19 states, particularly in Oregon, Massachusetts, Utah, Connecticut, Delaware, and New York. In New York, the average foreclosure can take 1,037 days to process, and in Florida, the process averages 929 days. Back when buyers were on the sidelines and prices were still falling, lenders' had little incentive to speed up the foreclosure process. Doing so would only add to the large amount of empty houses that needed to be maintained. But now that prices are rising in most markets, the backlog of bank-owned homes is being trimmed quickly. With tight inventories of homes for-sale in many cities, banks are seeing opportunity in getting repossessed homes back on the market faster for a quick sale, analysts say.