Housing Market Archives - Page 2 of 25 - Real Estate News and Commentary

October 4, 2022October 4, 2022

Report mortgage fraud

The real estate industry, like other financial industries, has its issues with scammers and fraud. The appearance of new scams and new versions of old scams make mortgage fraud a continuing problem for the industry.

It’s not a victimless crime. You might think of those who are involved in a mortgage fraud scams as cheaters and criminals. However, it is not uncommon for innocent consumers to get caught up in a mortgage fraud scam. In the past, home flipping schemes ensnared unwitting consumers. During the great recession, mortgage modification and foreclosure rescue scams targeted unknowing homeowners.

The Federal Bureau of Investigation (fbi.gov) wants you to report mortgage fraud. The FBI describes mortgage fraud occurring “when someone lies to influence a bank’s mortgage decision or if a distressed homeowner is the victim of a fraud.” There are two types of mortgage fraud, fraud for profit (such as home flipping schemes), and fraud for housing (such as mortgage application fraud).

Application fraud is likely the most common mortgage fraud, as it can occur by any material misstatement, misrepresentation, or omission in relation to getting a loan. “Occupancy fraud” is when a borrower lies to get a better interest rate by stating they will occupy the property when it’s intended to be a rental property. “Employment fraud” is when a borrower lists an employer they don’t work for. “Income fraud” is when a borrower misrepresents their income to improve their profile for underwriters.

Among the many types of mortgage fraud, one takes advantage of seniors with home equity conversion mortgages (also known as reverse annuity mortgage). The FHA underwrites a HECM for borrowers who qualify when they become 62 years old. The HECM provides homeowners access to home equity without payment until the borrower moves or dies. Scammers obtain a HECM in the name of a recruited homeowner to convert equity in the homes into cash. The scammers keep the cash and pay a fee to the senior citizen or sometimes just take the full payout. Sometimes, appraisals are inflated. This type of fraud is more difficult to detect because the lender usually doesn’t discover something is wrong until the home owner dies.

The FBI works with partners to investigate mortgage and financial institution fraud cases. Report mortgage fraud to the FBI (https://www.fbi.gov/investigate/white-collar-crime).

By Dan Krell
Copyright © 2022

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

September 20, 2022September 20, 2022

Mortgage rates are on the move

This week’s Freddie Mac press release headline “Mortgage Rates Exceed Six Percent for the First Time Since 2008” grabbed everyone’s attention. Indeed, mortgage rates are on the move and what does that mean for you and the housing market?

According to Freddie Mac’s Chief Economist Sam Khater, “Mortgage rates continued to rise alongside hotter-than-expected inflation numbers this week, exceeding six percent for the first time since late 2008. Although the increase in rates will continue to dampen demand and put downward pressure on home prices, inventory remains inadequate. This indicates that while home price declines will likely continue, they should not be large.”

In her blog post, Nadia Evangelou, Senior Economist and Director of Forecasting for the National Association of Realtors, points out that the change in mortgage rates increased monthly payments about 60% compared to the same time last year. She also calls attention to the fact that the pace of rising rents is at a forty-year high! Regardless if you are renting or buying a home, housing affordability is declining. Using a little math, she underscores how increasing rents outpace a fixed-rate mortgage on the purchase of a home.

Yes, mortgage rates are increasing. But a little history will put things in perspective. We all know that mortgage rates reached its peak in the early 1981 as a result of the deep recession of the late 1970’s. Shortly afterward, average mortgage rates dropped of the next several decades (albeit the occasional peak).

However, after the peak housing market of 2007, average mortgage rates dropped slightly in 2008 as a reaction to the market crashes and a decimated housing market. It wasn’t until five years later and average mortgage rates hovering in 3 percent range, that the housing market once again became broadly attractive to owner occupants (as opposed to investors). Mortgage rates have been averaging below 4 percent since then, with the exception of 2018 when rates rose above 4 percent.

Mortgage rates are on the move. Average mortgage rates are now above 6 percent, and there may be a silver lining. Many are hoping that the rising interest rates will reduce home prices (although that remains to be seen). However, after the brief rate shock is over, increased mortgage rates will likely incentivize banks to lend which could increase the pool of home buyers

By Dan Krell
Copyright © 2022

August 29, 2022August 29, 2022

Reading the housing stats

There has been lots of speculation about the economy and the housing market. Reading the housing stats, there are a few similarities in today’s housing market compared to that of 2006-2007. However, there are also many differences.

Of course, many of you reading the housing stats and bring up that this is as an indication of impending implosion. For example, the National Association of Realtors August 24^th press release report on pending home sales indicated that pending home sales “…dropped slightly by 1.0% from June. It was the second straight monthly decline and the eighth in the last nine months.” There are however, regional differences, “Pending sales fell in three of four major regions, with the West posting a small increase. Compared to the prior year, contract signings declined by double digits in each region, with pending sales in the West down 30%.” Pending home sales is a measure of how many homes went under contract during a specified period of time.

Existing-home sales (resale homes) also declined according to the National Association of Realtors. The NAR August 18th press release reported that existing-home sales “…fell for the sixth consecutive month to a seasonally adjusted annual rate of 4.81 million. Sales were down 5.9% from June and 20.2% from one year ago.”

Although the contracts and sales are evening out, home prices continue to climb. As reported by the NAR, the median home sale price increased 10.8 percent from the same time last year. According to National Association of Realtors Chief Economist, Lawrence Yun, “Home prices are still rising by double-digit percentages year-over-year, but annual price appreciation should moderate to the typical rate of 5% by the end of this year and into 2023. With mortgage rates expected to stabilize near 6% alongside steady job creation, home sales should start to rise by early next year…The ongoing sales decline reflects the impact of the mortgage rate peak of 6% in early June. Home sales may soon stabilize since mortgage rates have fallen to near 5%, thereby giving an additional boost of purchasing power to home buyers.”

And for those of you who are interested in distressed sales, distressed sales (foreclosures and short sales) have been essentially unchanged over the last year. July sales comprised about 1% of distressed sales.

By Dan Krell
Copyright © 2022

August 14, 2022August 14, 2022

The changing housing market is still viable

There are a number of ways to determine a changing housing market. An obvious indicator of a changing housing market is a swelling home sale inventory. According to the National Association of Realtors July 20^th press release, “inventory of unsold existing homes rose to 1.26 million by the end of June, or the equivalent of 3.0 months at the current monthly sales pace.” As a matter of comparison, home sale inventory rose 9.6 percent from the previous month, and 2.4 percent from the same time last year.

Another indicator of a changing housing market is remodeling activity. Believe it or not, there is an index for this. The Leading Indicator of Remodeling Activity (LIRA) is a product of the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University. The LIRA projects that investments in home remodeling will “decelerate” from 2022’s 17.4 percent to 10.1 percent by the second quarter of 2023.

In a July 19^th press release, Project Director of the Remodeling Futures Program at the Center, Carlos Martín, stated: “Slowing sales of existing homes, rising mortgage interest rates, and moderating house price appreciation are expected to dampen owners’ investments in home improvements and maintenance over the coming year. Steep slowdowns in homebuilding, retail sales of building materials, and renovation permits all also point to a cooling environment for residential remodeling”

Although a changing market sounds ominous, it’s still a viable market. Abbe Will, Associate Project Director of the Remodeling Futures Program, stated: “While beginning to soften, growth in spending for home improvements and repairs is expected to remain well above the market’s historical average of 5 percent. In the first half of 2023, annual remodeling expenditures are still set to expand to nearly $450 billion.”

Other signs the market is still viable, is that first time home buyers are still a large part of the market, and all-cash transactions continue to be a factor as well. As indicated in NAR’s press release, first-time home buyers accounted for 30 percent of the home sales in June, which is an increase from May, but slightly down from the 31 percent the same time last year. Additionally, buyers paying all cash accounted for 25 percent of home sales, which is an increase from 23 percent the same time last year.

A final note on the health of the housing market, NAR reported that distressed, foreclosure and short sales accounted for less than 1 percent of home sales during June, which is basically unchanged from the previous year.

By Dan Krell
Copyright © 2022

July 1, 2022July 1, 2022

Local housing market changing

Lately, the housing market is definitely making noise and grabbing everyone’s attention, and not in a good way. However, we won’t actually know how it plays out until it’s over. As the idiom says “hindsight is 20/20.” Nevertheless, if you’re currently in the market to sell or buy a home, pay attention to current local housing market conditions as they are critical to your decision making.

Here we go…

The S&P CoreLogic Case-Shiller Home Price Index (spglobal.com) reported in a June 28 press release that average April 2022 home prices increased 20.4 percent from April 2021. Tampa, Miami, and Phoenix led metro areas with 35.8 percent, 33.3 percent and 31.3 percent gains respectively.

We won’t really know if rising interest rates have any effect on home prices for several months. Home pricing and sales data is reported in hindsight (data is reported three to four months behind). The Case-Shiller release points out that mortgage rates just began to increase when these stats were being compiled (April). However, the recent S&P CoreLogic Case-Shiller Home Price Index is already showing home price moderation (even before rising mortgage rates). The Year-to Date S&P CoreLogic Case-Shiller Home Price Index for the US only shows an increase of 7.95 percent, while the 3-month index increased 6.66 percent and 1-month only increased 2.08 percent.

Rising mortgage interest rates is only part of the economic story that is developing. It was likely that home prices were already moderating as a reaction to the year and a half of sharp increases. As I wrote last week, we are in the beginning of the shifting housing cycle. Mixing in other economic factors, such as mortgage rates etc., can either make the housing market more sever or temperate. And as I mentioned, we won’t know for sure until it has happened.

Bottom line

If you’re currently in the market to buy and/or sell a home, focus on the short-term local trends. Speculation of future national home prices and home sales may be interesting, however is meaningless in the here and now. You should hire a seasoned professional to help understand your neighborhood’s trend, as well as being informed about your potential competition and the local housing market inventory.

If you’re buying a home, work with a seasoned real estate agent who can provide valid comps and analysis before you make an offer. Also, consider having a thorough home inspection. In the last year and half, home buyers felt forced to forgo the inspection to make their offer competitive. However, in the changing market, home inspections will return.

If you’re selling a home, be aware that home pricing strategies that were lucrative last year won’t work to your advantage this year. It’s nice to think that your home could sell for a peak price much like other neighborhood homes that sold twelve to twenty-four months ago. However, in a changing market, overpricing your home sale could be counterproductive, driving potential home buyers to competing homes.

By Dan Krell
Copyright © 2022