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Mortgage Rates Hold Steady at Long-Time Lows, Good News for Borrowers

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FROM MARKETWATCH.COM: Rates for home loans were little-changed during a choppy week for financial markets, but hovered near their lowest in about two years, giving a boost to home shoppers.

The 30-year fixed-rate mortgage averaged 3.75% in the July 11 week, unchanged compared to a week ago, Freddie Mac said Thursday. More than halfway through the year, the popular product has managed only eight weekly increases.

The 15-year fixed-rate mortgage averaged 3.22%, up four basis points. The 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.46%, up from 3.45%.
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Fixed-rate mortgages track the yield on the 10-year U.S. Treasury note, which has moved higher in early July as investors pause to consider the massive rally of the past few weeks. Bond yields rise as prices fall, and vice versa.

Investors snatched up bonds in May and June as concerns about slowing global growth and an intensifying trade war made riskier investments like stocks less attractive. In unsettled times, investors prefer the certainty of safer, fixed-income assets.

Also fueling investor interest for bonds: the Federal Reserve. Policymakers at the central bank have been rattled enough by those cross-currents that they seem certain to cut interest rates at an upcoming meeting. The Fed doesn’t directly control the 10-year Treasury note, but its overall sense of caution can set the tone for financial markets.

The fixed-income streams bonds pay out would be less valuable if interest rates or inflation were rising, but neither looks to be the case now. After the jump of the past week, rates – including those for mortgages – look set to decline again, good news for anyone on the hunt for a home.

Written By Andrea Riquier For MarketWatch.com

6 Things Every Home Buyer, Seller, and Owner Need to Know About Today’s Housing Market

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FROM REALTOR.COM : It doesn’t matter if you’re owning or renting, buying or selling, or still sitting on the sidelines waiting to join the game. Just about everyone wants to know what’s going on in the housing market.

Because it’s a moving target. While plummeting prices can be a boon for buyers, they can throw sellers into a panic—and, in a worst-case scenario, plunge the world into a recession, as we saw when the housing bubble burst a decade ago. Meanwhile, a lack of new housing coming onto the market can lead to price spikes for both buyers and renters.

That current dearth of new construction is exacerbating a national housing shortage and leading to an increase in prices, according to the recently released annual State of the Nation’s Housing report from the Harvard University’s Joint Center for Housing Studies.

“The major takeaway is that the housing market is strong,” says Daniel McCue, senior research associate at the center. But “there’s a housing shortage brought on by several years of low levels of homebuilding. It’s led to increased competition, which has driven up home prices. And it’s led to [a lack of] housing affordability.”

Here are six key findings from the report.

1. Homeownership rate is rising again

Over the past two years, homeownership has been rising again, hitting 64.4% of U.S. households in 2018. The rate rose 0.5% from the previous year, resulting in an additional 1.6 million households who closed on properties.

That’s fantastic news. The homeownership rate had plummeted during the financial crisis as scores of foreclosures swept through the country. Now it’s back up to what it was from about 1985 through 1995, according to McCue.
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“Homeownership had declined a lot,” he says. “So [for many buyers] it was finally having the money and the income to make this happen.”

The bump was primarily thanks to more millennials and young Gen Xers flooding the market. An additional 1.1 million of them closed on properties from 2016 to 2018.

“You have a bigger group of young adults getting older and reaching the ages where they are getting married, having children, and reaching the prime first-time home buyer [point],” McCue says.

The boost in homeownership was in spite of record-high home prices in many parts of the country and rising mortgage interest rates.

In 2012, the monthly median home payment was only $1,176, after adjusting for inflation, according to the report. But just six years later, it had jumped almost 51%, to $1,775 a month.

“The fact that homeownership is rising despite all of the affordability challenges that buyers are facing reflects how important homeownership is to the American dream,” says Chief Economist Danielle Hale of realtor.com®.

2. Fewer folks are renting

Simple math: If the number of homeowners is rising, it means that the number of renters is falling. The number of households renting the roofs over their heads fell by 110,000, to 43.2 million, from 2017 through 2018. That’s in stark contrast to the previous 12 years, when the number of tenants grew by nearly 850,000 households annually.

Increasing rents, going up 3.6% annually in 2018 compared with 3.8% in 2017, may have something to do with it.

“Rents are high and rising,” says Hale. But homeownership tends to be more of a fixed cost as folks know what their monthly mortgage will be. “Renters tend to pay more of their income toward housing than homeowners do.”
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But here’s another shift: Renters are becoming wealthier. About a quarter of them now have household incomes of $75,000 or more. That means many are choosing not to become homeowners even though they could afford to do so.

But more middle-class renters, earning between $45,000 and $75,000 a year, are becoming cost-burdened. The percentage of these folks spending more than 30% of their income (which is considered the max folks should pay for housing) shot up from 13% in 2001 to 25% in 2018, according to McCue.

3. The rate of new home construction is slowing

Even with record demand from prospective buyers, the rate of home construction slowed in 2018. Yes, the number of new, completed homes was up 2.8%, to 1.18 million units, from 2017 to 2018, but that growth rate is actually the lowest since 2012, when the recovery from the Great Recession kicked in.

“We’re eight years into the recovery, and we’re still only 75% back to normal rates of home building,” says McCue.

He blames the lack of building to increasing land prices, cumbersome local regulations, and a construction labor shortage that make building more difficult and expensive.

Still, building was more prevalent in some parts of the country than others. For example, home construction starts were up 7% in the West, where the population is growing, and 5% in the South, where land is more plentiful and cheap. But they fell just under 1% in the expensive Northeast, where there’s not as much land available to build on, and dropped 4% in the Midwest.

“Some of that is simply a reflection where people are moving,” says Hale.
people building structure during daytime

4. Homes are getting bigger and less affordable

Most first-time buyers don’t want—and can’t afford—a megamansion. They’re seeking smaller, more affordable single-family houses. But builders aren’t putting them up.

Just 22% of single-family homes clocked in at under 1,800 square feet, according to the report. That’s compared with 32% from 1999 through 2011.

That’s because it’s simply more profitable to put up bigger, more luxurious abodes and sell them for higher prices.

“It’s difficult for builders to build modest-sized, more affordable homes,” says McCue. But “there’s plenty of demand out there for these [homes].”

5. Home sales are slipping

The lack of homes, the rising prices, and the crazy competition may be why the number of home sales is falling. After years of a white-hot, frenzied real estate market, 5.3 million existing (i.e., previously lived-in) residences were sold in 2018. That’s compared with 5.5 million in 2017.

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“Home sales declined mainly at the end of 2018, when mortgage interest rates increased,” says McCue. Even the slightest interest rate increase can add quite a bit to a monthly mortgage payment.

But there are now more homes available for sale, even though they tend to be on the more expensive side. The number of homes for sale priced at under $200,000 has dropped, while more properties going for $750,000 or more are coming onto the market, says Hale.

“The biggest increase in inventory is in expensive homes for sale, where demand is the weakest,” she says.

6. Home price growth is also slowing

Buyers shouldn’t get too excited. Home prices aren’t coming down—they’re just not increasing at such a fast pace. Home price appreciation went from 6.5% at the beginning of 2018 to just 4.6% at the end of the year, according to the S&P/Case-Shiller National Home Price Index.

The median home list price is $310,000, according to realtor.com.

“Home prices have gotten so high in so many areas that it was just unsustainable to keep rising at the rates that they had,” says McCue. “Home prices have far outpaced rises in income over the last five years.” 
  
 WRITTEN FOR REALTOR.COM BY CRAIG TRAPASSO

HOW TO: Quickly Raise Your Credit Score Before Applying For A Mortgage

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Though you can buy a house with bad credit, the process is a whole lot easier when your credit score is in good shape. And if you’re teetering between fair and good credit, it could mean a difference of thousands of dollars in interest over the life of your loan. (FROM HUFFPOST).
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So before you start your mortgage application, it’s a good idea to boost your score as much as possible. Fortunately, there are several ways to improve your credit score in a matter of weeks.

What credit score is needed for a mortgage?

The credit score you need to qualify for a mortgage depends on the type of loan you’re after. FHA loans, for example, only require a credit score of 500 to qualify, though you need to put down at least 10% as a down payment and pay private mortgage insurance. To put down just 3.5%, a credit score of 580 is required.

“FHA loans come with additional costs such as mortgage insurance premium, so you will want to make sure that even if you are approved for a loan it is still a wise decision,” said Brian Walsh, manager of financial planning at SoFi.

But for conventional mortgages, he said, the minimum credit score needed is in the mid-600s. An analysis of Credit Karma members shows the average credit score for first-time homebuyers in the U.S. is 684, though the number varies by location, according to Dana Marineau, vice president at Credit Karma.

Even so, that’s probably not good enough to qualify for the best interest rates. To get the best loan terms, you’ll likely need a score of 720 or better.

Ways to increase your credit score quickly

So what can you do to bump up your score within a reasonable amount of time? Though building good credit takes years of maintaining good habits, there are a few things you can do to give your score a boost before applying for a mortgage.

1. Dispute credit report errors.

“You should start by getting a copy of your credit report and looking for any mistakes,” Walsh said. “There may be errors on your credit report that could negatively impact your score.” In fact, one report by the Federal Trade Commission found that one in five consumers had an error on at least one of their credit reports.

To review your credit reports for errors, start by visiting annualcreditreport.com. This is the only website that’s federally authorized to provide free credit reports. Look through each report for mistakes such as incorrect name or address, credit lines that don’t belong to you, duplicate entries, incorrect account status and other errors that could lead to a lower score.

Since each credit bureau collects and reports credit information independently, you’ll need to check all three reports. If you find a mistake, you’ll also need to dispute it with each bureau. Each one has a slightly different process for disputing errors, but instructions can easily be found on their websites.

2. Pay down some debt.

Once you’re sure that your credit reports are up-to-date and accurate, look for ways to reduce the amount of debt you owe.
One of the major deciding factors in applying for a mortgage is your debt-to-income ratio. This number measures how much of your monthly income goes toward paying back debts.

“If you can pay off a loan, that loan’s monthly payment goes away, improving your debt-to-income ratio,” said Justin Pritchard, a certified financial planner and owner of Approach Financial in Montrose, Colorado. “Lenders prefer that your total debt payments take up a relatively small portion of your total monthly income. Eliminating a payment may help you qualify for a loan.”

Most mortgage lenders require a back-end DTI (the total amount of income allocated toward debt, including your potential mortgage payment) of no more than 43%. So by paying down a credit card balance or paying off your car loan, you will immediately lower your DTI and increase your odds of approval.

And though DTI doesn’t directly affect your credit score, paying down outstanding debt does. That’s because “amounts owed,” also known as your credit utilization ratio, makes up 30% of your FICO score. The more of your available credit you borrow against, the more it can negatively affect your score. So again, by reducing how much debt you have to your name, you become a much more attractive borrower.

3. Ask for a credit limit increase.

In addition to paying down debt, another easy way to improve your score instantly is by getting a credit limit increase. While this won’t change your debt-to-income ratio, it will lower your credit utilization since your outstanding debt remains the same while your available credit increases.

Often, you can request an increase and get approved instantly through your card company’s website. Sometimes, however, you’ll need to call and ask.
Keep in mind that credit card issuers will sometimes run a credit check before granting a credit limit increase. Doing so results in a hard inquiry on your credit report, though just one inquiry will have a negligible impact. And if your credit has taken a hit since you first opened your credit card account, your issuer might actually lower your limit instead.

4. Get added as an authorized user.

Another way to instantly improve your credit is by piggybacking on someone else’s. If you have a family member or a close friend with excellent credit, you could ask them to add you as an authorized user on one of their credit cards.

When someone adds an authorized user to a credit card, that account’s information is reported on both people’s credit reports. If you’re added to an account with a long, clean history, it can bump your score a bit higher. The best part is, you don’t actually need to use the credit card or even know the card’s information. The primary account holder’s activity will automatically transfer to you, too.

Credit bureaus don’t give as much weight to authorized user status as they do primary cardholder status. Still, every little bit helps. Just keep in mind that you’ll need to share both the good and the bad of that account. If the primary holder misses a payment or maxes out the card, you’ll suffer the consequences as well.

5. Consider a credit-builder loan.

If you have limited experience with different types of credit, a credit-builder loan might help you diversify your credit mix — which accounts for 15% of your FICO score — and bump up your score a bit.

“These small loans, which are typically less than $1,000, aren’t really loans at all ― at least not in the traditional sense,” said Marineau, the vice president at Credit Karma. “The financial institution deposits the loan amount into a locked savings account you can’t access, and over the next six to 24 months, you pay off the loan just as you would with any other loan. Once the loan is fully paid off, the accumulated money is returned to you in total.” 

If you’re worried about adding another credit inquiry to your reports, the good news is that many lenders offering these loans (typically credit unions) don’t require a traditional credit check to qualify. Instead, they might evaluate your banking history through the consumer reporting agency ChexSystems, according to Experian.

6. Request a rapid rescore.

Once you’ve done all the hard work of cleaning up your credit, you’ll want your credit scores to reflect that. That’s where rapid rescoring can help.

“You might be able to use rapid rescoring to get your credit reports updated quickly (within a week or so) and receive a more favorable score,” Pritchard said. This is much faster than the weeks or months it can take for credit changes to be reflected in your score normally. “Not every lender offers that, but if it’s available and it helps, go ahead and use it.”

Other tips to keep your credit in good shape

While you’re working to improve your credit before buying a house, there are a few mistakes you should avoid so your progress isn’t undone.

Don’t miss any payments: The single worst thing you can do for your credit is pay a bill late. Payment history makes up 35% of your FICO score ― the most heavily weighted factor.

Don’t apply for new credit: Until you’ve locked in your mortgage, avoid chasing attractive sign-up bonuses and rewards offers. If a lender sees several credit inquiries leading up to your mortgage application, it will be a red flag that you’re too reliant on credit.

Do your rate shopping over a two-week period: That said, you’ll need to shop around and get rate quotes from different mortgage lenders. Fortunately, credit bureaus recognize that rate shopping is a natural part of the mortgage process. “Just make sure you shop around within a short period of time, since inquiries made within a certain window are grouped together,” said Walsh, the financial planning manager at SoFi. “That window is between 14 and 45 days depending on the model used, so plan on shopping around within two weeks to be safe.”

Keep credit card balances as low as possible: Even if you plan to pay the entire balance when your bill comes, there’s a good chance your balance is reported to the credit bureaus mid-month, making it seem like you’re using a lot of credit. “Even if you pay off your credit cards every month, you need to keep your balances especially low when applying for a mortgage,” Pritchard said. “When they pull your credit, they get a snapshot of your account balances, and that might be from the day before you pay off your balance.” A good rule of thumb is to keep your balance below 30% of your credit limit, though the lower, the better. “If that means paying off your credit card every week while you’re in the application process, it’s probably worth it,” he said.

Don’t close accounts: It might seem counterintuitive, but you should avoid closing any revolving credit accounts like credit cards, even if you aren’t using them. Closing an account immediately reduces your available credit. If you have outstanding debt, this will cause your credit utilization ratio to jump up. Your best bet is to avoid making any major changes until you sign your mortgage contract.

WRITTEN BY CASEY BOND FOR HUFFINGTONPOST.COM

U.S. home values reach a record high of $26.1 trillion, Fed says

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Home equity rises to the highest level since 2002. 

The value of all U.S. owner-occupied homes increased to a record $26.1 trillion in the first quarter, according to a Federal Reserve report released Thursday known as the Flow of Funds. (From www.HousingWire.com).

That was a gain of 4.3% from a year earlier, the slowest annualized increase since 2012. The collective value of U.S. homes is now 15% higher than the bubble peak reached in 2006. Once that bubble popped, it was a decade before values recovered to the same level.

As home values rose in the first quarter, so did homeowner equity, meaning the worth of a home compared to its mortgage. Americans owned 60.4% of their homes in the first quarter, the highest level of equity since 2002.

Mortgage rates have tumbled more than a percentage point in the last six months as the American economy showed signs of slowing and investors worried about the fallout from trade wars. The average U.S. rate for a 30-year fixed mortgage is 3.82% this week, the lowest since mid-2017, Freddie Mac said in a report on Thursday.

Lower mortgage rates support continued gains in home prices, because cheaper financing means people shopping for homes qualify for higher-balance mortgages and can bid more for properties they want. 

“Existing home sales have benefited from low mortgage rates and a healthy job market,” Freddie Mac said in its May forecast. “We expect stronger home sales and housing starts in the coming months.”

An increase in home equity traditionally has been a support to the U.S. economy as Americans either refinance their first-lien mortgages at higher balances, known as cash-out refis, or get home equity loans in a junior lien position. That supports consumer spending, which accounts for 70% of the U.S. economy. Cashed-out equity typically is used either for renovations, college tuition, or to pay off credit card debt, according to Fed economists.

Americans converted $19 billion of their home equity into cash in the first quarter, the largest amount since the year-earlier quarter when it was $22.7 billion, according to a Freddie Mac estimate. Most was through cash-out refis, at $16.7 billion, while home equity loans accounted for $2.3 billion.

Today’s level of equity cash-outs pales in comparison to the amount seen during the peak of the housing bubble. For example, in 2006’s first quarter, Americans turned $80.7 billion of equity into cash using either refis or home equity loans, according to Freddie Mac data. 

WRITTEN BY KATHLEEN HOWLEY FOR HOUSINGWIRE.COM

10 features that will make your home sell faster

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FROM MoneyTalkNews.com : Sales of existing homes in March 2019 were down 4.9% from the previous month, and all home sales were down 5.4% from a year ago, according to data from the National Association of Realtors. While parts of the Midwest and California still have plenty of strong real estate markets, it’s a different story in much of the Southeast.

So how do you make your house stand out in a crowd?
You could start by making sure your property has all the features homebuyers want most. For its 2019 What Home Buyers Really Want report, the National Association of Home Builders (NAHB) surveyed recent and prospective homebuyers to pinpoint features they deemed essential or desirable.

Based upon their report, here are the top 10 features that many homebuyers want to see at your open house, from good features to those most desirable of all.

10. Energy Star certification

Buyers who want it: 81%

The Energy Star Residential New Construction Program certifies that a home or an apartment meets updated energy efficiency standards. Homebuyers are willing to pay an extra $8,728, on average, for a home that saves them $1,000 a year in utility bills, according to the NAHB report. In fact, more than a third of those surveyed said they’d spend more than $10,000 for those energy savings.

If you have an older home to sell, making it more energy efficient, even without certification, may help encourage a faster sale. Most (69%) of the 6,000 real estate agents surveyed recently by the National Association of Realtors said that promoting a home’s energy efficiency features in its listing is very or somewhat valuable.

9. Double kitchen sink

Buyers who want it: 81%

If you think dishwashers have made double kitchen sinks a thing of the past, think again.
There are plenty of benefits to a double sink, including easier meal prep, better access to garbage disposals and convenient hand washing of items that don’t go into a dishwasher.Those may be some of the reasons why 81% of homebuyers told the NAHB researchers that a double kitchen sink was either “essential” or “desirable.”
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8. Hardwood floors

Buyers who want it: 83%

Plenty of vinyl and laminate flooring options replicate hardwood, but most homebuyers want the real thing. Hardwood flooring has a reputation for being durable and environmentally friendly as well as for maintaining value.
Other surveys underscore the desirability of hardwood flooring in a home purchase:

7. Walk-in pantry

Buyers who want it: 83%

A solid majority of homebuyers say a walk-in pantry is either “desirable” or a “must-have” feature.
If you can swing the cost, find space to build one into your home before listing it. Buyers may reward you.

6. Exterior lighting

Buyers who want it: 85%

Good exterior lighting is high on homebuyers’ lists of desires. It serves many functions. For example, it can:

  • Enhance the landscaping around a home.
  • Create an inviting atmosphere.
  • Promote safety.

5. Garage storage

Buyers who want it: 85%

If you don’t already have a storage system installed in your garage, you may want to give it some thought before placing the home on the market.
Nearly half of homebuyers surveyed by the NAHB called garage storage “desirable,” and 36% declared it “essential.”

4. Energy Star rated appliances

Buyers who want it: 86%

Energy Star rated appliances should add to a home’s attractiveness in the market, the NAHB survey findings suggest.

By installing these highly efficient appliances, not only would you enjoy energy savings now, but the investment may help a home sell faster when listed.

Energy Star appliances are the most cited must-have green feature on the list, with 40% of survey respondents telling the NAHB that Energy Star rated appliances are “essential” and 46% of respondents calling them “desirable.”

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3. Patio

Buyers who want it: 87%

A patio can extend a home’s living space. It also may add curb appeal and possibly increase a home’s value.

The NAHB found that buyers were looking for patio living space. The National Association of Realtors’ 2018 Remodeling Impact Report: Outdoor Features also did, listing patios among top features for buyer appeal. The NAR, noting that a patio addition can return 69% of an investment at resale, ranks it fourth among outdoor projects that add value.

2. Energy Star rated windows

Buyers who want it: 89%

Energy Star rated windows are the top green feature sought by homebuyers, according to the NAHB survey.

Nearly 9 in 10 buyers want these highly efficient windows, with 38% of survey respondents saying they are “essential” and 51% classifying them as “desirable.”
That’s not surprising. Energy Star windows can save up to $465 a year compared with single-pane windows, according to the U.S. Department of Energy.

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1. Laundry room

Buyers who want it: 91%

If you don’t have a laundry room in a home you intend to sell, it’s a good idea to figure out how to create one.
A laundry room is the number one feature sought by homebuyers, with 91% calling it “essential” or “desirable.”

 Written by Maryalene LaPonsie for MoneyTalkNews.com

 

 

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