Tax Break for Short Sellers at Risk:

What is it and why is it important to the overall health of our housing market?

A short sale is when you sell your home for less than market value and the lender holding your mortgage accepts less that what you owe them.  The IRS considers this a taxable gain...the forgiveness of a portion of your debt.  But, President Bush and Congress passed a provision back in 2007 that gave homeowners an exemption on having to pay taxes on this type of transaction as a way to help the housing market emerge from the slump at that time.

So the above is the "What" and now we address why its important.  The number one headwind for the housing market are not mortgage rates (which are very, very low), its not employment (which is tight and stable), its available inventory.  There simply aren't enough single family homes available for sale.  Part of that reason is that a lot of homes are tied up in a "shadow" inventory held by banks as a result of defaulted mortgages.  Part of the reason is that many are still "under water" on their  homes...owing more than it is worth.  Short sales are a way of getting those under water homes back on the market and providing the much needed new inventory.

Although eight years have passed since the housing crisis began, some 13.4% of homeowners remain underwater, meaning they owe more than their homes are worth, according to Zillow, a real-estate information company.

Technically, the tax break expired at the end of 2014, leaving homeowners in limbo for 2015. Although it is widely expected to pass, if it weren’t renewed, homeowners who received some relief this year could now take a hit when they file their taxes next year. 

How Long it Takes to Save for a Down Payment:

Which age groups are financially fit to buy homes the fastest? Hanley Wood’s Data Studio recently used Metrostudy and Census data to find out how long it would take each generation to save up a 10 percent down payment on a home based on the median household income and median home price for each age group.

Millennials and retirees tend to save for the longest amount of time in order to put a 10 percent down on a home, according to the study. More specifically, younger millennials aged 18 to 24 – who are usually recent college graduates – will have to save the longest at an average of 8.77 years in order to save enough for a 10 percent down payment on a home costing $221,600.

Retirees aged 65 and over will take, on average, about 7.37 years to save up for a down payment on a $291,000 home.

Americans aged 45 to 54 years old – who tend to be at their top earnings power -- take the least amount of time to save up for a down payment. Still, it takes more than three-and-a-half years to save for that age group.

Here’s a breakdown of the years to save up for a down payment based on age:

• 18-24: 8.77 years (average monthly mortgage payment: $597)
• 25-34: 7.34 years (average monthly mortgage payment: $950)
• 35-44: 5.45 years (average monthly mortgage payment: $1,073)
• 45-54: 3.54 years (average monthly mortgage payment: $891)
• 55-64: 3.72 years (average monthly mortgage payment: $766)

65 and over: 7.37 years (average monthly mortgage payment: $532) 

Home Equity Returns in a Big Way:

Nearly a million U.S. homeowners came up from underwater on their home loans in the third quarter, finally owing less than their homes are worth. The nation's overall negative home equity rate fell to 13.4 percent of homeowners with a mortgage, down a full percentage point from the second quarter and from 16.9 percent a year ago, according to Zillow, the Seattle-based real estate firm. Historically, the typical negative equity rate is lower than 5 percent.

Fast-rising home prices are behind the gains. Home value gains widened in October, up 6.8 percent from October 2014. The gains had been contracting in the first half of this year. Recent price gains have reduced negative equity by a collective $60 billion in just three months. While the increase in home equity is sizable and the improvement since the worst of the housing crash dramatic, the negative equity crisis is far from over. More borrowers will now be able to refinance, but an inordinately large number are still stuck in place.

This is still one of the key reasons why inventory levels are so tight.

Housing markets with higher rates of negative equity will have fewer homes for sale, as homeowners are stuck in place. Negative equity is concentrated in lower-priced homes, so this especially hurts the first-time buyer looking to purchase those homes. The supply of homes for sale is very tight nationwide, but it is especially tight at the entry level. 

Pending Home Sales Rise:

In a housing market equipped with very low mortgage rates, Unemployment at 5% and steady appreciation.....there is just one thing missing: Inventory.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, inched 0.2 percent to 107.7 in October from an upwardly revised 107.5 in September and is now 3.9 percent above October 2014 (103.7). The index has increased year-over-year for 14 consecutive months.e largest segment of the housing market continues to hold on.  Year-over-year, existing home sales rose 3.8% and is on track to record their best annual sales in eight years.

Although further expansion in existing-sales is expected next year, ongoing inventory shortages and affordability pressures from rising prices and mortgage rates will likely temper sales growth to around 3 percent (5.45 million) in 2016. Home prices are expected to slightly moderate from a 6 percent increase in 2015 to 5 percent next year.

"Unless size-able supply gains occur for new and existing homes, prices and rents will continue to exceed wages into next year and hamstring a large pool of potential buyers trying to buy a home," says NAR Chief Economist, Lawrence Yun.

Desire to own a home continues to increase:

First-time home buyers are just 32 percent of all purchases, according to the National Association of Realtors, but more are on their way as sentiment among that group towards owning a home is improving.

The share of buyers saying their primary reason for buying was the simple desire to own a home rose overall and most dramatically among first-time purchasers.

"There are several reasons why there should be more first-time buyers reaching the market, including persistently low mortgage rates, healthy job prospects for those college-educated, and the fact that renting is becoming more unaffordable in many areas," said Lawrence Yun, the Realtors' chief economist. "Unfortunately, there are just as many high hurdles slowing first-time buyers down. Increasing rents and home prices are impeding their ability to save for a down payment, there's scarce inventory for new and existing-homes in their price range, and it's still too difficult for some to get a mortgage."
Debt was the primary reason cited by first-time buyers for the delay in home ownership. They said debt kept them from saving for a down payment for at least three years. More than half of those citing debt pointed to student-loan debt as the main culprit.

While debt continues to stall younger buyers, their attitude toward home ownership appears to be making a dramatic move. Sixty-four percent of first-time buyers surveyed said their primary reason for purchasing was the "desire to own." That is up from 53 percent just one year ago. For repeat buyers, ownership tied with the desire for a larger home. The view of home ownership as a good investment also moved slightly higher to 80 percent; 43 percent of those surveyed said they see housing as a better investment than stocks. 

A few things that have not changed in housing — the median age of buyers (31), sellers (54), and the share of multi generational households buying (13 percent), according to the Realtors survey. Builders have been focused on what they see as growing multi generational housing demand, adding separate entrances and second kitchens.

Today's buyers are using the websites and mobile apps at an ever-increasing pace to find their potential purchases. They are also moving faster, buying in an average 10 weeks compared with 12 between 2009 and 2013. The median time on the market for recently sold homes stayed at four weeks for the second-straight year. This is far less time than historical norms and is due to the still very low inventory of homes for sale that plagues most of the country. 

INFO THAT HITS US WHERE WE LIVE

We should probably be grateful that those who forecast the economic future aren't the people responsible for creating it. Economists have been forecasting a decline in home price appreciation for some time now. And while price gains have slowed a bit, they're still pretty good. 
A global real estate information provider reported U.S. home prices nationwide were up 6.4% year-over-year in September. Annual gains in fact have been ranging between 4.8% and 6.5% for the last 15 months, which sounds like pretty stable appreciation. The firm projects a 4.7% price gain by September 2016, but cautions the increase may dip from September to October.

Another real estate information company reports that the third quarter was the most profitable time to sell a home in 8 years. Homeowners who sold this past July, August, and September made more than during any other quarter since 2007: an average price gain of $40,658, or 17%, over the purchase price of their property. 
Sellers owned their homes for 6.72 years, on average, at the time of sale. Finally, an annual survey by the National Association of Realtors (NAR) revealed that the share of first-time buyers declined for the third year in a row, from 33% to 32%, the second lowest read since 1987's 30% level. Historically, first timers should make up nearly 40% of primary purchases.

A rising tide lifts all boats:

Strong home price gains this spring, summer and fall have given drowning homeowners a new supply of air. While the number of borrowers in a negative-equity position on their mortgages is still high, at just over 14 million, that number is falling fast, especially for those most seriously underwater. There were 6.9 million U.S. homes seriously underwater at the end of the third quarter of this year, according to RealtyTrac, a foreclosure sales and analytic company. It defines "seriously underwater" as owing at least 25 percent more on the mortgage than the home is currently worth. The tally represents 12.7 percent of all properties with a mortgage. The number is down from 7.4 million at the end of the second quarter and is the lowest level since RealtyTrac began looking at underwater data in 2012. "After a lull late last year and early this year, home sales volume and average sales prices picked up dramatically again in the second and third quarters of this year, resulting in a substantial drop in seriously underwater homeowners," said Daren Blomquist, vice president at RealtyTrac. More than 10 million properties today are considered "equity rich," where the borrower owns at least half the home outright. That is 19 percent of all properties with a loan, according to RealtyTrac.But in this case we are not the walking undead but abandoned homes in some state of foreclosure but not yet repossessed by banks and put up for sale which can be a real eye-sore in the neighborhood. All the improvements in home equity would seem to bode well for future home sales, but several barriers still stand in the way. First and foremost is the short supply of homes for sale in general, both new and existing. Homeowners don't want to sell if they're not sure they can't find something better. Second is the fact that home prices are rising more than historical norms right now, and some sellers think they can do better if they wait longer.

Home Buyers say rates are not their biggest concern:

A recent Harris Poll on behalf of Trulia showed that of all the concerns that potential home buyers have, a mortgage rate is third on the list.

Their biggest concern is the ability to just get a mortgage at all (regardless of rate), the next biggest concern is the ability to find a home that they like (this is certainly reflected in the very low inventory numbers) and then rounding out the top three is the interest rate.

While no one wants a monthly mortgage payment that is higher than what they were quoted a month ago, the fluctuations of rates have meant only small differences in their mortgage payments.

Forty-two percent said they expect mortgage rates to increase over the next six months, while 20 percent think rates will stay the same. Of their biggest worry, 26 percent named ability to qualify for a home loan compared with 24 percent who pointed to rising rates. Millennials, ages 18-34, are even more concerned about their access to credit than about their rate. Thirty-six percent of millennials polled said access was their primary concern versus 26 percent indicating rising rates.

Nearly two-thirds of the consumers polled said the maximum price they would pay for their first or next home was $250,000. With 20 percent down, the rate increase could mean some buyers would qualify for less on a mortgage, but it would not turn those buyers away.

Pending Home Sales gain for 12th straight month:

The August Pending Home Sales report was just released this morning by the National Association of Realtors (NAR) and it showed a year-over-year gain of 6.2% and marks the 12th consecutive month of year-over-year gains.

Lawrence Yun, NAR chief economist, says even with the modest decline in contract signings, demand continues to outpace housing supply and elevate price growth in numerous markets. "Pending sales have leveled off since mid–summer, with buyers being bounded by rising prices and few available and affordable properties within their budget," he said. "Even with existing–housing supply barely budging all summer and no relief coming from new construction, contract activity is still higher than earlier this year and a year ago."

According to Yun, sales in the coming months should be able to roughly maintain their current pace.

The national median existing–home price is expected to increase 5.8 percent in 2015 to $220,300. Yun forecasts total existing–home sales this year to increase 7.0 percent to around 5.28 million, about 25 percent below the prior peak set in 2005 (7.08 million).

The bottom line is that the overall housing market is still trending very strongly, hampered only by a shortage of quality inventory in the specific price points.

Home Sales strong but hindered by inventory:

The August Existing Home Sales report was just released this morning by the National Association of Realtors and its clear that there are some bright spots and some headwinds in the largest segment of the housing market.

Total existing–home sales for August, which are completed transactions that include single–family homes, townhomes, condominiums and co–ops, have risen year–over–year for 11 consecutive months and are 6.2 percent above a year ago (5.00 million).

The median existing–home price for all housing types in August was $228,700, which is 4.7 percent above August 2014 ($218,400). August's price increase marks the 42^nd consecutive month of year–over–year gains.

Ok..things are looking good...so where are the headwinds?  Here they are - inventory.  While we have 11 straight months of year-over-year gains in sales and 42 straight months of home price increases, the August data compared to July actually fell -4.8%.  Why?  Inventory.  There simply isn't enough homes available for sale in the most popular price points for buyers to purchase. Total housing inventory at the end of August rose 1.3 percent to 2.29 million existing homes available for sale, but is 1.7 percent lower than a year ago (2.33 million). Unsold inventory is at a 5.2–month supply at the current sales pace, up from 4.9 months in July.  But anything below 6 months of supply is very constrictive to our housing market.

 Lawrence Yun, NAR chief economist, says home sales in August lost some momentum to close out the summer. "Sales activity was down in many parts of the country last month — especially in the South and West — as the persistent summer theme of tight inventory levels likely deterred some buyers," he said. "The good news for the housing market is that price appreciation the last two months has started to moderate from the unhealthier rate of growth seen earlier this year."

"With sales and overall demand higher than a year ago and supply mostly unchanged, low inventories will likely continue to limit options for those looking to buy this fall even with the overall pool of buyers shrinking because of seasonal factors," adds Yun. 


Source:
Brian Woolley
Prospect Mortgage

THINGS ARE MOVING FORWARD IN SANTA CLARITA TRULIA REPORTS:

Average price per square foot for Santa Clarita CA was $263, an increase of 5.2% compared to the same period last year. The median sales price for homes in Santa Clarita CA for Jun 15 to Sep 15 was $435,000 based on 701 home sales. Compared to the same period one year ago, the median home sales price increased 3.6%, or $15,000, and the number of home sales increased 8.7%.

There are currently 161 resale and new homes in Santa Clarita on Trulia, including 2 open houses, as well as 419 homes in the pre-foreclosure, auction, or bank-owned stages of the foreclosure process. The average listing price for homes for sale in Santa Clarita CA was $523,166 for the week ending Sep 09, which represents an increase of 2%, or $10,308, compared to the prior week.

The Real Estate market is definitely moving ahead in the Santa Clarita Valley with the Sellers market really starting to come in strong. With consistent improvements in market value month after month it looks like we can expect to see this trend continue possibly through to the end of the year!


Source:
Gene Bleecker
First American Title

Your Major Could Determine How Much House You Can Afford:

Is your major at the top of this list?   It’s the classic college-age query: “What’s your major?” But maybe the real question should be: What kind of house do you want to live in? Here’s a non shocker: Not all college majors are created equal, especially when you consider those four years of tuition as an investment in future earnings. A few years down the road, when you’re ready to settle down and purchase a home, your specific college concentration may very well have a lot to do with how much you can afford. This, it turns out, is very good news for engineers. But it’s not so great, sadly, for horticulturists. Despite the controversy around rising tuition and student debt that make some doubt whether a college degree is still worth it, a 2014 analysis by the Federal Reserve Bank of New York shows the average value of a college degree has remained near its all-time high since 1970. According to Pay Scale, a mid career employee with a bachelor’s degree earns a median salary of $77,006, meaning he or she can afford a house costing up to $341,000. That’s about 60% more than a high school graduate. Out of all 300-plus majors, petroleum engineering came out on top: With a mid career salary of $168,000, these grads can afford to buy as high as $744,000, more than three times the national median list price. Even those fresh out of college land impressive starting salaries of $101,000. Unsurprisingly, other engineering branches (e.g., chemical engineering, computer science engineering) are also more likely to earn six-figure salaries with a few years’ experience. At the bottom of the list: liberal arts and education majors. Early-childhood education brings up the rear with a mid career salary of $38,000—barely enough to buy a house priced at $168,000 (not even the national median). Social work, another popular major for an awfully good cause, is also among the lowest paid, with a mid career salary of just $45,700. Don’t be too discouraged, however! Those numbers don’t factor in geographic differences. Teaching jobs are up for grabs all over the country, but engineering positions are concentrated in a few technology hubs where the booming economy has driven housing prices up significantly.  Source: Brian Woolley

New labor laws could cripple new construction:

Just when New Home Sales, Building Permits and Housing Starts are all trending in the right direction, leave it to the government to detail it.

Home builders are balking at a new labor law ruling that puts them on the hook for issues involving millions of subcontractors. Roofers, plumbers, electricians, framers are just some of the 25 categories of subcontractors used to build a home. The National Labor Relations Board (NLRB) could, in some cases, now deem them "joint employees" of the home builders.

"The home building industry, which is primarily made up of small businesses who rely greatly on the work of subcontractors would overwhelmingly be harmed by the new standard," said Tom Woods, chairman of the National Association of Home Builders (NAHB) in a release. "It will cripple small businesses across the country, including the home building industry as it is in its fragile recovery."

The vast majority of home construction is carried out by subcontractors. While the larger, public home builders have more specialty workers on staff, they still contract a significant amount of their work out to subs.

The NLRB's ruling was based on a case in another industry, so it remains to be seen exactly how it would apply to the builders.

"It obviously depends on the facts of each case, but in the construction industry in particular, these kinds of relationships have been in place for decades, and so even before the test tightened in the 1980s not every contracting relationship in the building industry was considered a joint employer," said Wilma Liebman, a former chairman of the NLRB.

Builders say they stand ready to fight the ruling as soon as a case arises, which they clearly expect will happen soon. "If it is applied to the home builder sector ... it is impossible to comply with and use the same business model that has been working successfully for 200 years," said Jerry Howard, CEO of the NAHB. 

Source:

Brian Woolley

Prospect Mortgage

Pending Home Sales Rise Again:

U.S. home buyer demand remained steady in July, an index of pending home sales from the National Association of Realtors, which represents signed contracts, not closings, rose 0.5 percent from an upwardly revised June reading.

The index is now up 7.4 percent from one year ago. The index has increased year-over-year for 11 consecutive months and is the third highest reading of 2015.

Just about every metric showed a very vibrant housing market that is constrained only by the lack of good quality available inventory.  If there were more of it...it would be snapped up.

"Contract activity in most of the country held steady last month, which bodes well for existing-sales to maintain their recent elevated pace to close out the summer," said Lawrence Yun, chief economist for the NAR in a release. "While demand and sales continue to be stronger than earlier this year, Realtors have reported since the spring that available listings in affordable price ranges remain elusive for some buyers trying to reach the market and are likely holding back sales from being more robust."

Looking ahead, with inventory shortages likely to persist into the fall, Yun expects the national median existing-home price to increase 6.3 percent in 2015 to $221,400. Yun forecasts total existing-home sales this year to increase 7.1 percent to around 5.29 million, about 25 percent below the prior peak set in 2005 (7.08 million). 



Source: Brian Woolley
Prospect Mortgage

More Solid Growth in Existing Home Sales:

With low interest rates and a labor market that is steadily growing its only a lack of inventory that keeping home sales from rising even more.

Existing-home sales steadily increased for the third consecutive month in July, while stubbornly low inventory levels and rising prices are likely to blame for sales to first-time buyers falling to their lowest share since January, according to the National Association of Realtors®.

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, increased 2.0 percent to a seasonally adjusted annual rate of 5.59 million in July from 5.48 million in June. Sales in July remained at the highest pace since February 2007 (5.79 million), have now increased year-over-year for ten consecutive months and are 10.3 percent above a year ago (5.07 million).

The median existing-home price for all housing types in July was $234,000, which is 5.6 percent above July 2014. July's price increase marks the 41^st consecutive month of year-over-year gains.

Total housing inventory at the end of July declined 0.4 percent to 2.24 million existing homes available for sale, and is now 4.7 percent lower than a year ago (2.35 million). Unsold inventory is at a 4.8-month supply at the current sales pace, down from 4.9 months in June.

Lawrence Yun, NAR chief economist, says the increase in sales in July solidifies what has been an impressive growth in activity during this year's peak buying season. "The creation of jobs added at a steady clip and the prospect of higher mortgage rates and home prices down the road is encouraging more households to buy now," he said. "As a result, current homeowners are using their increasing housing equity towards the down payment on their next purchase." 


Source:
Brian Woolly
Prospect Mortgage

Builder Confidence Highest Since 2005:

A monthly sentiment index from the National Association of Home Builders rose 1 point to 61, the highest level since November 2005. Any reading above 50 is considered positive. The index stood at 55 one year ago.

"Today's report is consistent with our forecast for a gradual strengthening of the single-family housing sector in 2015," said NAHB Chief Economist David Crowe. "Job and economic gains should keep the market moving forward at a modest pace throughout the rest of the year."

Of the index's three components, buyer traffic increased 2 points to 45—the only component still in negative territory. Current sales conditions rose 1 point to 66, while sales expectations in the next six months held steady at 70.

Regionally, based on a three-month moving average, homebuilder confidence in the West and Midwest each rose 3 points to 63 and 58, respectively. The South gained 2 points to 63 and the Northeast held steady at 46. The Northeast has the smallest share of home construction nationally.

Source: 
Brian Woolley
Prospect Mortgage

How the American house has changed:

The single-family home in America has evolved in one particularly remarkable way: It has gotten bigger and bigger and bigger. New homes built today are about a thousand square feet larger than single-family homes completed just 40 years ago.

All that space is a sign of our times -- of the relative wealth to afford it, the government policies that incentivize it, the tastes we now have for third bathrooms and fourth bedrooms (even though the size of the typical American household has actually been shrinking).

In fact, in many ways -- most of them more subtle -- the American single-family home has changed with time in ways that say much about us and how we live. Vertical town houses built in the 1800s gave way a century later to horizontal homes, 3,000 square feet on a single floor. Compact ways of living that made sense when we got around on foot faded with time in favor of the spacious homes made possible by ubiquitous cars. And the popularity of cars changed the very design of our homes, too, as we created places to park them indoors.

We've gone over time from the row house to the ranch home to the McMansion, with myriad variations along the way determined by the climate (a New Orleans shotgun house demands a front porch for cooling off) and the culture (prairie-style homes mimic a favorite Midwestern son, Frank Lloyd Wright). Our homes have been reshaped, reformatted, and re-imagined depending on the availability of land and the materials on offer and the earlier styles that have come back in vogue.

Source:
Brian Woolley
Prospect Mortgage

Mortgage Market Update:

This week brings us the release of five pieces of monthly economic data in addition to two Treasury auctions that have the potential to affect mortgage rates. Some of the data is considered to be highly important, meaning we could see noticeable changes to mortgage rates multiple days. Following Friday’s boring Employment report, the markets will likely react heavily to any surprising data.

There is nothing of relevance scheduled to be posted or take place tomorrow, so look for the stock markets to heavily influence bond trading and mortgage pricing as the week starts. Employee Productivity and Costs data for the second quarter will be released early Tuesday morning. It will give us an indication of employee output per hour. High levels of productivity are believed to allow the economy to grow without fears of inflation. I don't see this being a big mover of mortgage rates either, but it may influence rates slightly during morning trading. Analysts have predicted a 1.4% rise in productivity during the second quarter and a 0.1% decline in labor costs. A sizable increase in productivity and a larger than expected drop in costs could help improve bonds, contributing to lower mortgage rates Tuesday.

There are two Treasury auctions this week that also have the potential to influence mortgage rates. The first is Wednesday's 10-year Treasury Note auction, which will be followed by a 30-year Bond auction Thursday. It is fairly common to see some weakness in bonds before these sales as investors prepare for them. If the sales are met with a decent demand from investors, indicating that interest in longer-term securities such as mortgage-related bonds is good, the earlier losses are usually recovered after the results are announced. Results of sales will be posted at 1:00 PM ET of each auction day. If demand was strong, particularly from international investors, we should see mortgage rates improve during afternoon trading those days. However, weak levels of interest could lead to broader selling in the bond market that could push mortgage rates higher.

July's Retail Sales data will be posted at 8:30 AM ET Thursday. This report comes from the Commerce Department and will give us a very important measurement of consumer spending. Consumer level spending figures are extremely relevant to the markets because it makes up over two-thirds of the U.S. economy. Current forecasts are calling for a 0.5% increase in sales. Analysts are also calling for a 0.5% rise in sales if more volatile auto transactions are excluded. Larger than expected increases would be considered bad news for bonds and likely lead to an increase in mortgage pricing since it would indicate stronger economic growth.

The three remaining reports are all set for Friday morning. The first will be July's Producer Price Index (PPI) from the Labor Department at 8:30 AM ET, giving us an important measurement of inflationary pressures at the producer level of the economy. There are two readings that analysts follow in this release. They are the overall index and the core data reading. The core data is the more important of the two since it excludes more volatile food and energy prices. Analysts are predicting a 0.1% increase in the overall index and a rise of 0.1% in the core data. Stronger than expected readings may raise inflation concerns in the bond market and help guarantee a Fed rate hike sooner than later. That would be bad news for bonds and mortgage rates because inflation is the number one nemesis of the bond market as it erodes the value of a bond's future fixed interest payments. As inflation becomes more of a concern in the markets, bonds become less appealing to investors, leading to falling prices, rising yields and higher mortgage rates.

July's Industrial Production report is scheduled to be posted at 9:15 AM ET Friday. This report measures manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is expected to show a 0.3% increase from June's level. A decline would be considered favorable news for bonds and mortgage rates because it would indicate manufacturing sector weakness and broader economic growth would be more difficult if manufacturing activity is slipping.

The last release of the week will be posted by the University of Michigan late Friday morning. Their Index of Consumer Sentiment will give us an indication of consumer confidence, which projects consumer willingness to spend. If a consumer's confidence in their own financial situation is rising, they are more apt to make large purchases in the near future. But, if they are growing more concerned about their job security or finances, they probably will delay making that large purchase. This influences future consumer spending data and therefore, impacts the financial markets. It is expected to show a reading of 93.9 that would mean confidence was stronger than July's level of 93.1. That would be considered slightly favorable news for bonds and mortgage rates. Good news for mortgage shoppers would be a sizable decline in the index.


Overall, Friday is the best candidate to be labeled most important day with most of the week's economic data scheduled, but we could see noticeable movement in rates Thursday since it has the single most important release in Retail Sales. Wednesday afternoon could be active also due to the 10-year Note auction. I strongly recommend maintaining contact with your mortgage professional this week if still floating an interest rate and closing in the near future.

Source:
Jamie Steigerwald
GotMortgage

New Fannie Mae Selling Guide Announcement.

On June 30^th, Fannie Mae published an updated Selling Guide that includes a number of key policy changes that will simplify our requirements and result in less documentation from your borrowers.

Below are some of the key changes:

Removal of conversion of principal residence policy: Fannie Mae removed the  additional reserves and rental income overlays that were required when  borrowers are selling or renting out their previous home. The 30% equity in the  departing residence is no longer required to use rental income to qualify.

·     

     Verification of stocks, bonds, and mutual funds: Borrowers using verified  stocks, bonds and mutual funds to complete a transaction no longer need to document that the assets were liquidated when the verified amount is at least 20% more than is needed for the transaction. In addition, borrowers can now get 100% credit for the value of these accounts toward reserves (up from 70%), which means more assets can be factored into qualifying the borrower.

     Unreimbursed employee business expenses: No documentation or deduction of  2106 expenses from monthly income is required for salary, bonus, overtime, or commission income of less than 25% of the monthly income. This mirrors the existing Prospect Mortgage Policy.

Home Sales Hit 8 Year High:

Mortgage backed securities (FNMA 3.50 MBS) gained +35 basis points (BPS) from last Friday's close which caused fixed mortgage rates to improve slightly.

It was a week of very slow gains as our domestic data weighed on pricing but international events provided terrific support and even some upper momentum.

Domestically, we had a very light economic calendar and no major Treasury auctions.  Existing Home Sales were much stronger than expected and reached an eight year high.  Weekly Jobless Claims fell to their lowest level since 1973.  And  the Leading Economic Indicators were  three times stronger than market expectations.  This wave of positive economic news provided pressure on pricing  but this was more than offset by international events.

International Flavor: While the Chinese stock market continues to be a huge concern, we also go news that their PMI (manufacturing data) just hit a 15 month low.  Greece remained front and center as two more votes were passed and they used their new bridge loan to make some payments back to the ECB and IMF.  "hair cut" creditors would have to take on Greek debt has the market worried that Germany will scuttle the deal and it is this fear that caused the upward movement in pricing for the week. 

New Construction Hampered by Labor Shortage:

Existing Home Sales have been on a tear, and would be even higher if it were not for inventory shortages.  New Homes are also facing headwinds from a shortage - a labor shortage.

Builders claim there is good demand, but they complain they're handcuffed by a lack of skilled labor to build new homes. The builders' industry trade group calls the incidence of labor shortages nationwide "surprisingly high."

"In fact, the 9-trade shortage is now substantially higher than it was at the peak of the 2004-2005 boom, when annual starts were averaging around 2 million, compared to current rates of about one million," economist Paul Emrath of the National Association of Home Builders wrote in a recent report. Nine-trade refers to the various skills required for home building, such as concrete pouring and carpentry.

"The last time builder-reported labor shortages were as widespread as now was just before 2001 during a prolonged period of strong GDP growth with overall unemployment as low as 4 percent," he added.

Unemployment in the construction industry fell in June to the lowest level since 2001, according to an analysis by the Associated General Contractors of America. That's because contractors are having a hard time finding enough qualified workers to meet growing demand, association officials said.

"Expanding job opportunities throughout the economy make it increasingly difficult for contractors to find experienced construction workers," said Ken Simonson, the association's chief economist. "This scarcity shows up in record workweeks for craft workers and flattening of employment totals despite higher construction spending." 

Distressed Sales Drop to Lowest Level Since 2007:

In yet another sign of strength in our housing market, sales of distressed homes (REO real estate owned by banks) has dropped to their lowest level since April 2007.

The most recent readings from CoreLogic show that distressed home sales made up just 11.1% of total home sales in April, down 3 percentage points from April 2014 and down 1.5 percentage points from March.

Broken up, REO sales accounted for 7.4% and short sales made up 3.7% of total home sales in April. Additionally, the short sales percentage fell below 4% in mid-2014 and has remained stable since then.

At its peak in January 2009, distressed sales totaled 32.4% of all sales, with REO sales representing 27.9% of that share.

“The ongoing shift away from REO sales is a driver of improving home prices since bank-owned properties typically sell at a larger discount than short sales. There will always be some level of distress in the housing market, and by comparison, the pre-crisis share of distressed sales was traditionally about 2%,” the CoreLogic report said.

“If the current year-over-year decrease in distressed sales share continues, the distressed sales share would reach that ‘normal’ 2-percent mark in mid-2017,” it continued. 

What is the new "must have" room in your house?

With mobile technology, it’s easy to work in any room of a house. And yet, according to designers and home builders, the home office is becoming one of a home’s must-have features.

Dedicated office space might not always be a full room. In fact, it might be a nook with desk space on the landing of a staircase or a corner of a bedroom or family room. But as people do more work away from the office and kids do more work outside of the library, the home office is growing in importance.

“That office or desk space is becoming as essential as the family room,” said Mollie Carmichael, who leads the consumer research team at John Burns Real Estate Consulting, based in Irvine, Calif. And that’s true no matter how large of a home it is, from a small apartment to a large single-family home, she added.

In fact, 77% of people surveyed by John Burns said that any additional rooms not dedicated as bedrooms would be used as an office in their next home — the most popular response. (Fifty-six percent said they’d use the extra space as a guest room, 25% said multipurpose room.)

There’s also some evidence that home offices can make a home more attractive to buyers. According to Remodeling Magazine’s 2014 Cost versus Value report, you can recover an average 48.9% of the cost of a home office remodel at resale, up from 43.6% in 2013 and 42.9% in 2012. A mid range office remodel, as defined by the report, is a $28,000 investment that involves installing custom cabinets that include 20 feet of laminate desktop, a computer workstation and wall cabinet storage, along with rewiring of the room for computer, fax machine, cable and telephone lines. 

New Fannie Mae Selling Guide Announcement

On June 30^th, Fannie Mae published an updated Selling Guide that includes a number of key policy changes that will simplify our requirements and result in less documentation from your borrowers.

Below are some of the key changes:

·         Removal of conversion of principal residence policy:  Fannie Mae removed the additional reserves and rental income overlays that were required when borrowers are selling or renting out their previous home. The 30% equity in the departing residence is no longer required to use rental income to qualify.

·         Verification of stocks, bonds, and mutual funds:  Borrowers using verified stocks, bonds and mutual funds to complete a transaction no longer need to document that the assets were liquidated when the verified amount is at least 20% more than is needed for the transaction. In addition, borrowers can now get 100% credit for the value of these accounts toward reserves (up from 70%), which means more assets can be factored into qualifying the borrower. 

·         Unreimbursed employee business expenses:  No documentation or deduction of 2106 expenses from monthly income is required for salary, bonus, overtime, or commission income of less than 25% of the monthly income.  This mirrors the existing Prospect Mortgage Policy.   

These changes are effective immediately and will be implemented in DU the weekend of August 15, 2015.

As a reminder, these changes apply to Fannie Mae loans only

Existing Home Sales Spike:

Sales of homes that have been previously occupied (the largest segment of the housing market) jumped up to 5.35 million units in May, easily topping the consensus estimates of 5.25 million.  This was a 5.1% gain over April's data.

The median home price jumped up 7.9% from the same period last year.  The median price was $228,700 and marks the 39th consecutive month of gains.

Lawrence Yun, NAR chief economist, says May home sales are now at their highest pace since November 2009 (5.44 million). "Solid sales gains were seen throughout the country in May as more homeowners listed their home for sale and therefore provided greater choices for buyers," he said. "However, overall supply still remains tight, homes are selling fast and price growth in many markets continues to teeter at or near double-digit appreciation. Without solid gains in new home construction, prices will likely stay elevated — even with higher mortgage rates above 4 percent."

Looks like the seller's market will continue for this summer.

Buyers get creative in Sellers market:

MADISON, Wis. - As a blossoming housing market continues to grow in Madison, home buyers are coming up with more creative ways to get their foot in the door.

"If you're waiting to find them on an Internet portal, you're probably 24 hours too late," Restaino realtor Michelle Ames said.

Ames said the housing demand far outweighs the supply, which requires home buyers to try nontraditional ways of securing a new home.

Ames has taken to the mailboxes to help out her clients. She sends out hundreds of personalized letters that detail why her family would be the perfect fit for that particular home. The letters are sent to houses that may or may not be for sale but fit the family's needs.

Betsy and Brian Hood had Ames send out letters to help them find a home. The premise of their plea was their 11-month-old daughter, Britton.

"This could be the place she takes her first steps, say her first words. It might even be the place she's picked up for her first date," the letter reads. "This home is where Britton and her mommy could create a lifetime of memories."

The Hoods were skeptical at first, but they eventually decided the letter personalizes their home-buying experience.

"We don't want to just be pushed aside with different offers," Betsy said. "We want them to know who we are and why we really like this house."

Letters are just one way realtors are reaching out to potential sellers who haven't put their house on the market yet. Some are using postcards, personal ads and even door-to-door pleas to persuade owners their home might be perfect for someone else.

Prices Rise Strongly in April:

New U.S. single-family home sales rose more than expected in April and the median price surged, suggesting the housing market recovery was continuing to gain traction.

With housing supply still tight, the median price for a new home rose 8.3 percent from a year ago to $297,300. While higher home prices could reduce affordability, they boost household equity, which could boost consumer spending.

The Commerce Department said on Tuesday sales increased 6.8 percent to a seasonally adjusted annual rate of 517,000 units. March's sales pace was revised up to 484,000 units from the previously reported 481,000 units.

The upbeat report added to housing starts data in indicating that housing was gaining momentum after treading water for much of last year. Economists believe housing will take the baton from a lethargic manufacturing sector and help to drive economic growth this year.

Housing is being buoyed by a strengthening jobs market, which is encouraging young adults to set up their own households.

New homes sales jumped 36.8 percent in the Midwest to a seven-year high and increased 5.8 percent in the South. Sales fell 5.6 percent in the Northeast and slipped 2.3 percent in the West.

The stock of new houses available on the market rose 0.5 percent last month to 205,000. Supply still remains less than half of what it was at the height of the housing boom, good news for home builders who will need to ramp up construction.

At April sales pace it would take 4.8 months to clear the supply of houses on the market, down from 5.1 months in March

House Flippers Seeing Record Returns:

House flipping may not be as popular as it was just a year ago, but for those willing to risk it, there are now record rewards. Four percent of home sales in the first quarter of this year were flips, according to RealtyTrac, which defines a flip as a home that is bought and sold again within a 12-month period. That comes to just 17,309 flips, which is the lowest share since the middle of 2011.

The average gross profit on a flip, however, soared to $72,450, up from $61,684 in the first quarter of 2014. That is the highest profit since this survey started in the beginning of 2011, and is attributable to tight supply in the housing market, which is pushing prices higher faster.

"The strong returns for home flippers in the first quarter demonstrates that there is still a need in this recovering real estate market for move-in ready homes rehabbed to more modern tastes, particularly given the dearth of new homes being built," said Daren Blomquist, vice president at RealtyTrac.

Flips are now giving investors an average gross return of 35 percent, but with prices higher, investors are discovering it's increasingly difficult to find properties that will make good flips. Certain markets are offering much better odds.

Witness the strong flip returns as reported by RealtyTrac: Tampa, Florida (57.2 percent), Pittsburgh (55.2 percent), Memphis, Tennessee (54.8 percent), Chicago (52.9 percent), Seattle (49.0 percent), New York (47.1 percent), Washington, D.C. (44.2 percent) and Boston (44.0 percent).

Another change in the landscape is house flippers increasingly are selling their homes to other investors or to second home buyers. This may be due to the very strong single-family rental market and large-scale institutional investors who have now established management structures and are looking for turnkey homes to rent.

10 Signs You Are Ready to Invest in Real Estate

When it comes to property investment, timing is everything. Ultimately, choosing the right time to enter the market will have a significant impact on the long-term success of your investment.
But how can you as an investor know whether the timing is right? Global property portal Lamudi has compiled a list of 10 tell-tale signs that now is the time to start building your investment portfolio.
1. You are financially ready. You have saved enough for the down payment and you have also established your emergency fund. You have taken into account home maintenance expenses. Your credit history is good and you are able to meet all the financial obligations.
2. You have set your long-term goals. You have a clear picture in your mind of the purpose of your investment and you are flexible enough to adjust to changing circumstances. You are not hesitant and when the timing is right, you are able to adapt to the market needs and the development of technologies.
3. You have done your research. You know the neighborhood of your future property well enough to foresee the coming trends and the possible changes in the community. You have researched all the schools in the area as well as the best commuting means and you are able to predict the next homebuyers needs.
4. You have chosen a stable economy. The area is financially stable, economic trends are promising and equities are surging. No demographic fluctuation or no irregular variation of population have been recorded in the area.
5. You understand the country’s policies regarding real estate. The policies of the region promote and encourage a positive, innovative environment as well as drive further economic growth. The tax policy in the country is positive for homeowners. Global innovation index is rising in the area.
6. Infrastructure projects are underway and likely to lead to an increase in property values. The infrastructure of the area is being developed with a focus on: transport, energy, solid waste and water management developments.
7. The region is moving toward sustainable development.The region’s awareness of global and local environmental issues is increasing, the demand for eco-friendly homes as well as for sustainable rural and urban development is rising. As more and more people head toward sustainable living, investing in sustainable property will increase its value in the future.
8. The location draws a lot of interest. Whether it is the best travel destination or the hot jobs spot, the location is always on the top of the search engine. It has become a successful startup hub already or is planning to do so in the coming years, driving a lot of job seekers into the area. The number of enrolled students is increasing every year, the area draws interest of international students.
9. You have found a reliable real estate agent. If you are an overseas buyer, it is particularly crucial to make sure you have a good representative on the ground. Your real estate agent is trustworthy and knows the local market well enough to be able to help you make the choice.
10. You have researched local differences in the property market. Whether you plan to invest in a residential property and turn it into a rental or an office space, you are fully aware of all cultural differences that might occur when you deal with a property seller.

Pending Home Sales Spike to Best Level Since June 2013:

Last week we reported that Existing-home sales jumped in March to their highest annual rate in 18 months but that is a backward looking report.

Pending Home Sales are for contracts that are signed but not yet closed and is more of a leading indicator of where housing is headed. And Pending Home Sales delivered more good news as it rose for the third straight month and hit their best levels since June of 2013.

Lawrence Yun, NAR chief economist, says contract signings picked up in March as more buyers than usual entered this year's competitive spring market."Demand appears to be stronger in several parts of the country, especially in metro areas that have seen solid job gains and firmer economic growth over the past year," he said. "While contract activity being up convincingly compared to a year ago is certainly good news, the increased number of traditional buyers who appear to be replacing investors paying in cash is even better news. It indicates this year's activity is being driven by more long-term homeowners."

"Demand in many markets is far exceeding supply, and properties in March sold at a faster rate than any month since last summer," he said."This in turn has pushed home prices to unhealthy levels - nearly four or more times above the pace of wage growth in some parts of the country. Simply put, housing inventory for new and existing homes needs to improve measurably to improve affordability."

6 Safeguards That Stop Phone Fraudsters

 "Premium rate service fraud" happens when hackers lease premium rate phone numbers (typically used for psychic and adult chat lines)from a Web-based service. (U.S. premium rate numbers have 1-900 prefixes, but ones from other countries can be different.) The premium rate service charges dialers more than $1 per minute and gives lessees a cut.

After hackers lease the premium rate number, they break into a business phone system and start making calls to it, usually when nobody's around. Auto-dialing software makes hundreds of calls simultaneously, running up more than 200 minutes of charges each minute to the premium rate line. The service sends a bill to the phone company, who bills the business, and the hackers get their cut.

This hack has become popular as more small businesses switch to Voice Over IP (VOIP) Internet phone companies to save money. But like anything connected to the Web, these Internet phone networks are wide open to attack. VOIP providers tend to be smaller carriers without the sophisticated antifraud systems or the resources to cover fraudulent phone charges, which they are NOT required by law to cover anyway!

Here are six tips from the experts on how to stop phone fraudsters: Ask the provider what kind of fraud protection they use.

• Also ask them to put your PBX behind a firewall. If these capabilities aren't offered, move on. 
• Review your carrier contract.Make sure you don't have services you don't need, like international calling. Many premium rate calls go overseas. 
• Just to be sure, tell the provider to switch off international phone calls.Use your personal phone for any legitimate overseas calls and have the business reimburse you. 
• Place limits with your carrier on the dollar amount you spend each day on long distance calls.With VOIP, these calls cost pennies, so a cap can be as little as $40 to $50 a day. 
• Give your provider a white list of IP addresses permitted to make phone calls.If an unknown IP address tries to make calls, the system will shut down. 
• Require everyone in your business to use a complex password-up to 16 letters and numbers. Also put tight administrative controls on the network and only allow a few people access to master passwords and controls. 

The Communications Fraud Control Association says there was about $5 billion in premium rate service fraud in 2013, with some small businesses on the hook for more than $100,000 in fraudulent charges.Please use these tips to help lock down your phone system. Here's to your continued success, as you keep putting together your best year ever.

Job Gains Fall Short

The economic data released this week again fell below the consensus forecasts. Since slower economic growth reduces expectations for future inflation, this was good news for mortgage rates. As a result, mortgage rates ended the week lower, falling to the best levels since early February. Over the past year, the economy has added an average of 266K jobs per month. Against a consensus forecast of 250K, the economy added just 126K jobs in March, the lowest reading since December 2013. In addition, downward revisions to prior months subtracted 69K jobs. A number of factors likely converged to cause the shortfall.Lower oil prices hurt the energy sector, the stronger dollar affected the manufacturing sector, and bad weather had a negative influence, particularly in the retail and construction sectors. The March Employment data followed a series of big misses in other major reports over the past couple of weeks. Retail Sales,Durable Orders, and ISM Manufacturing all suggested a slower pace of improvement for the economy during the first quarter. There is little doubt that bad weather was a major factor, however. The big question is how much economic activity will bounce back later in the year. One bright spot in this week's data was found in the housing sector. February Pending Home Sales rose 3% from January, to the highest level since June 2013. They were 12% higher than one year ago. Pending Home Sales are a leading indicator of future housing market activity.