For years we have gone through a tepid recovery from a very deep recession. And all along we have indicated that we don’t recover from such an event if Americans are not working. Year after year we waited and waited. Well, the wait is over. The recovery in jobs is more than underway, it has arrived. The average of 220,000 jobs added each month thus far this year — and the unemployment rate dropping below 6.0% — is just what the doctor ordered in this regard. This is not to say that we are all the way back. Many of the jobs created have been lower paying jobs, which has held back the pace of personal income growth. In addition, the low labor participation rate tells us that if jobs keep getting created, we will have to absorb many returning to the labor market.
On the other hand, the progress we have made will cause a ripple effect throughout the economy. We are on pace to add almost 3 million jobs this year and this will increase consumer spending which will create more jobs. And some of this spending will make the real estate market stronger — whether it is the purchase of new homes or major renovation projects for existing homes. Already we are seeing the strength in car sales and home improvement projects. But the one area we have not seen strength in this year is within the real estate sector.
More recently, we have seen renewed confidence by builders as new home sales have been ramping up. The bottom line is that we can’t have a recovery without the creation of jobs and it is the creation of jobs that will bring us a complete real estate recovery. Yes, we still have a long way to go, but if we keep creating jobs at this rate, the road will become a lot shorter. From there, the only question won’t be if interest rates will rise — but when will they rise and how fast. Right now we have the best of both worlds: more hiring and very attractive interest rates.
The Markets. Fixed rates fell to near their low for the year in the past week. Freddie Mac announced that for the week ending October 9, 30-year fixed rates fell to 4.12% from 4.19% the week before. The average for 15-year loans decreased to 3.30%. Adjustables were mixed but stable, with the average for one-year adjustables remaining at 2.42% and five-year adjustables decreasing slightly to 3.05%. A year ago, 30-year fixed rates were at 4.23%, higher than today’s levels. Attributed to Frank Nothaft, vice president and chief economist, Freddie Mac — “Rates on home loans were down on a week filled with bleak forward projections from the Federal Reserve and concern over growth in Europe. Despite gloomy vernacular from the Fed, home loan purchase applications were up 2 percent on the week and the labor market added 248,000 jobs, beating expectations and lowering the unemployment rate to 5.9 percent.” Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.
Current Indices For Adjustable Rate Mortgages
Updated October 10, 2014
|Daily Value||Monthly Value|
|6-month Treasury Security||0.05%||0.04%|
|1-year Treasury Security||0.10%||0.11%|
|3-year Treasury Security||0.91%||1.05%|
|5-year Treasury Security||1.58%||1.77%|
|10-year Treasury Security||2.34%||2.53%|
|12-month LIBOR||0.578% (Sept)|
|12-month MTA||0.115% (Sept)|
|11th District Cost of Funds||0.667% (Aug)|
Now that the worst of the foreclosure crisis is in the rearview mirror, former home owners who lost their homes to a short sale or foreclosure are re-entering the housing market. They’ve spent the last few years rebuilding their credit — and they’re ready to buy again. “We’re about three years past the peak of the foreclosures, and that’s about the time when most people would qualify for another loan,” says Daren Blomquist, spokesman for RealtyTrac. “The market really needs boomerang buyers to maintain the current recovery.” Some boomerang buyers heading back to the housing market may find they have to make down payments of at least 20 percent to qualify for a loan, but others are finding opportunities to put down as little as 3.5 percent or 5 percent. The wait times for qualifying for a loan can vary depending on the former home owners’ circumstances. Typically, the wait times following a short sale or foreclosure are as follows:
- Seven-year wait for home owners with a previous foreclosure before they can qualify for a new loan through mortgage giants Fannie Mae and Freddie Mac. If the foreclosure was included in a bankruptcy, the borrower has to wait only four years.
- Two-year wait for home owners who underwent a short sale before they’re eligible for another Freddie Mac and Fannie Mae loan.
- Three-year wait for home owners seeking a Federal Housing Administration loan after a foreclosure or short sale. Some home owners who underwent a foreclosure because of at least a 20 percent cut in their pay may be able to qualify for a new loan after just a year through FHA’s Back to Work program. Source: Sun Sentinel
Note: Every situation is different in this regard and certain lenders may follow different guidelines depending upon the type of transaction. It is always best to check with a lender and get pre-approved before you submit an offer to purchase a home.
Builder confidence in the new-home market rose to its highest reading in nearly 9 years, according to the latest reading from the National Association of Home Builders/Wells Fargo Housing Market Index. September marked the fourth consecutive month that builder confidence has been on the rise. “Since early summer, builders in many markets across the nation have been reporting that buyer interest and traffic have picked up, which is a positive sign that the housing market is moving in the right direction,” says NAHB Chairman Kevin Kelly. For the new-home market, builder confidence rose to a level of 59 in September, according to the index. Any reading above 50 indicates that more builders view conditions as “good” than “poor.” The seasonally adjusted index measures builder perceptions of the single-family new-home market on home sales and sales expectations for the next six months, as well as builders’ perceptions of buyer traffic. All three of the index components in September posted gains, with current sales conditions and traffic of prospective buyers rising to 63 and 47, respectively. Expectations for future sales also rose two points to 67. Source: National Association of Home Builders
Some home buyers are making an unusual request: They’re asking to spend the night at a home before they make an offer on it. HGTV’s “Sleep On It,” which follows potential buyers as they stay overnight in two homes with the sellers’ approval before deciding which one to buy, hasn’t seemed to spark a national trend. But it has prompted such proposals to surface more often, real estate professionals say. The sleep-overs can help buyers gain a better perspective on what it actually would feel like to live at the home, whether the kitchen is the right size, the noisy neighbors are too distracting, or the water pressure just isn’t right. Corlie Ohl, a real estate professional at Citi Habitats in New York City, recalls a client who requested to take a shower in an $865,000 apartment he was considering purchasing. He wanted to make sure the place had adequate water pressure. “It’s the strangest request I’ve ever experienced in my life for someone who wanted to purchase an apartment,” Ohl says. “The seller said, ‘Yeah, I guess, as long as he brings his own towel.” Contracts are a good idea for any buyer sleep-overs to protect both parties from liabilities, such as loss of personal belongings, say real estate professionals. A couple in Boulder, Colo., were staying at a condo when they decided to check out the condo’s parking area at night. But, “as they exited the elevator, they were abruptly confronted by two police officers, weapons drawn,” says real estate professional Bob Gordon. The neighbors had thought they were burglars. But the incident prompted the couple to put in an offer immediately on the home, “knowing the neighbors would be concerned enough to call police,” Gordon says. Source: US News and World Report