FHA: More Expensive Than Expected

The 3.5% down paym

ent on FHA loans could be more expensive for buyers than expected. Beginning April 1, 2013, the mortgage insurance premium will go up by .1% to 1.35% which may not even be noticeable to most would-be homeowners.

The staggering increase will occur on 6/3/2013 when FHA’s policy on the duration of the required mortgage insurance will be increased for the life of the mortgage. It basically doubles the amount of total MIP if the loan is paid to term.

Below is an example with a purchase price of $175,000 with 3.5% down payment at 4% mortgage rate on 30 year term.



(Regarding the current MIP duration: When the unpaid balance reaches 78% LTV of original purchase, the MIP can be released. In any event though, the minimum time must be five years.)

Currently, the MIP is required for approximately 9 years 9 months with normal amortization. The new program would require the MIP for the life of the loan. In this example, the initial monthly MIP is $196.88 which decreases based on amortization.

There are buyers that qualify on income and credit who may not have the necessary additional down payment required for 80% and 90% conventional loans. The 3.5% FHA program has provided a great vehicle to get into a home with a minimum amount of cash.

For homeowners that expect to stay in their home for ten years or less, the new changes might not have much financial impact. Homeowners who expect to be in their home long term can refinance with a conventional loan without mortgage insurance once the equity has increased due to amortization and appreciation.

For buyers to avoid these increases, they will need to act now to get the FHA commitment issued prior to these change dates.

 

Thinking of Buying Your Dream Home? DO IT NOW!

A recent survey showed that 3 out of 4 future home buyers (who are not first time buyers) plan to move up to some form of a ‘better’ home. The breakdown:

• Move to a significantly bigger home (49%)


• Move to a nicer home (17.5%)


• Move to a nicer part of town (8.6%)

If you or your family falls into any one of these categories, you should strongly consider making the move sooner than later. The ‘cost’ of your new dream house will be determined by two factors: the price of the house and the mortgage interest rate. Both are projected to increase this year.

Prices Set to Increase

In the recent Home Price Expectation Survey, 105 leading housing analysts called for a 3.1% increase in home values by the end of 2013.

Mortgage Interest Rates Projected to Increase

According to the Mortgage Bankers Association, after reaching record lows in 2012, the 30 year mortgage rates are expectedto creep up slowly in 2013 to 4.4%.

Now is a great time to buy the home you always dreamt of owning. However, the longer you wait, the more it will cost.

 

WOW, that is one pink room!

I was showing a older farm house that sets out on about 5 acres southwest of Nampa. In the basement I turned on the light and wowser! That was one pink room, I had to take a couple photos, although they do not really do it justice.



I am surprised they did not paint the floor pink as well!

January Market Report – Sales Down…Prices Up…told you it was coming

by Marc Lebowitz, RCE, CAE ACAR Executive Director Single family home sales in January 2013 were 361 in Ada County, a decrease of 7.7% compared to January 2012...first time I've had to say that in a over a year. Dollar volume for January was up 27% to $777 Mil. New homes sold in January increased 17% over new homes sold in January of 2012.  However…sales of existing homes were down 12.6% in January.  This becomes more worrisome as inventory continues to try to find a new low number. Historically, January sales decrease by 28% from December. January 2013 sales decreased by 28% from December 2012. Of our total sales in January… 25% were distressed (90 total sales)….unchanged from December 2012. In January 2012, 53% of our sales were distressed.  In January 48% of distressed properties were REOs and 52% were short sales.  In December 2012 the ratio was 76% short sales (91 total sales) and 24% REOs (29 total sales). This is ten consecutive months with short sales being the larger percentage of distressed properties sold. In January RealtyTrac rated Boise one of the five worst places to try to buy a foreclosed property. Pending sales at the end of January were 780; down 1% from December. In general pending sales in May are the highest of the year; and June the second highest.  The percentage of pending sales in distress was unchanged from December, totaling 29% overall. There has been very little fluctuation in this number since May 2012 when we first went below 30%. A year ago we were averaging close to 50% of pendings in distress; but have decreased steadily since January 2012.  Of Pending sales in distress, short sales outnumbered REO’s 1.6 to 1. At the end of January, we had 9% fewer sales pending than at the end of January 2012. January median home price was $185,909; up 35% from January 2012. Median home price is above $170,000 for nine months running.  We continue to outpace our national recovery; according to NAR’s most recent report. New Homes median price for January was $242,900; up 21% from January 2012. Existing homes median price outpaced that finishing January at $170,000; up 31% over January 2012. The number of houses available at the end of January held steady from the end of December at 1,751. At the end of December our total active inventory was 1,750 homes; the lowest since February 2001 (when sales were 450 houses and median price was $131,000). This is 11% less than last year at this time. At the same time, the percentage of distressed active listings held steady at 24%. This reverses the trend of the last two months in which the percentage rose from 23% to 26%. We have been hovering between 33% and 36% for the last year. We remain well below the 40% levels set last spring….when we were on the increase. With an inventory increasing and the percentage of distressed inventory holding steady; median home price will continue to strengthen well into 2013. Of our Distressed Inventory 88% is Short Sales (369 homes) and only 12% is REO (50 homes); unchanged from the last two months. Available inventory declined in all price points; except for a net gain of eleven houses in the $160,000 to $200,000 price range and a gain of sixteen homes in the $250,000 to $300,000 price range. In Ada County we now have less than 4 months of inventory on hand. The price category in shortest supply is <$159,999 where we have 2.9 months. All price points up to $400,000 have a 4 month’s supply. We have benefited for nearly two years from inventory levels much lower than national average. Multiple offers are much more prevalent; now becoming the norm. Based on January sold data, our most desirable price point is $120,000 to $160,000 which was 25% of total sales. The next largest price point sold is $160,000 to $200,000 at 17% of all sales. Coming in a strong third is sales in the range of $200,000 to $250,000 at 16% of all sales. 2013 is going to be a good solid year, but nothing like what we enjoyed in 2012.  Moving forward we’re comparing “recovery” numbers against “recovery” numbers, overcoming our critical shortage of available housing and starting to see some federal policies come into being that are going to make our jobs harder still. Stay tuned….

 

House Prices: When Will 2006 Values Return?

There is a lot of optimism regarding house prices. The most recent Home Price Expectation Survey projects a 3% -3.5% increase in values for each of the next 5 years. We concur that most parts of the country will see varying levels of appreciation over that time. However, we must realize that we will not see 2006 values any time soon.

Barclays’ U.S. residential credit strategy team recently predicted that 2006 values would return in 2021. From an article inDSNews:

“While the floor appears to have materialized, they stress that home prices are likely to recover slowly over the next 4 to 5 years.

“We expect on average a 3-4 percent annual increase in home prices [nationally] in coming years,” they said in an updated market outlook.

At that rate, Barclays’ analysts explained, home prices will be slightly below their 2006 peaks even in 2020, finally returning to pre-crisis peak levels in June 2021.

In an article for CNNMoney, the analytics firm Fiserv projected that 2006 prices would not return until 2023:

“Fiserv forecasts prices will bounce back an average of 3.7% a year for the next five years — a rate that would still leave prices 20% below the peak. At that forecasted growth rate, the national average high of $238,000 would not be hit again until 2023.”

If you are waiting for 2006 values to return before selling your house, realize it will take years.

 

Are lower interest rates coming back?

We still have EXCELLENT rates, but when we have seen lower lately the question becomes: "Will rates get lower again?"

From the Real Estate News courtesy of REALTORS magazine.

Mortgage interest rates have been on the rise for the past month off the all-time record lows set just a few weeks ago.

“I do think that perhaps the all-time low is behind us,” says Frank Nothaft, Freddie Mac’s chief economist.

The record low for the 30-year fixed-rate averaged 3.31 percent in November, according to Freddie Mac’s weekly mortgage market survey. For the week ending Jan. 31, Freddie Mac reported a national average of 3.53 percent for the 30-year fixed-rate mortgage.

Nothaft expects rates to gradually increase, possibly ending 2013 at about 3.75 percent. By 2014, he expects rates to average above 4 percent.

"If the economy is getting better, slightly higher interest rates are a natural occurrence," Keith Gumbinger, vice president of HSH.com, a mortgage tracker, told USA Today. "But there's no reason to believe that rates are headed upward in a straight line."

While higher rates will likely curtail refinancing, since that tends to be more interest-rate driven, some housing experts don’t expect the slight rise in rates to affect home purchases, which are more driven by jobs and lifestyle changes. Plus, while mortgage rates are up, they are still near historical lows.

Rates will likely still low based on historical averages too for sometime. The Federal Reserve has vowed to buy $40 billion a month in mortgage-backed securities to keep rates low until employment improves.

"Until the economy strengthens and the job market picks up, we won't see rapidly rising interest rates," says Doug Lebda, CEO of LendingTree, an online lender exchange.

 

 

 

Are Idaho home prices rising too fast?

After seeing the prices increase in our boom, then falling in our bust, I think it is a valid question.  I am printing below a nationally themed article.  Although this steep of rise in prices can cause me some concern, I do believe the increase is currently sustainable. I would really not want to see it continue at this rate for too long however.

Yesterday's post showed a year over year increase in Idaho of 14.6%, third highest in the nation.

DAILY REAL ESTATE NEWS | WEDNESDAY, FEBRUARY 06, 2013

In a historical context, home prices typically increase about 3 to 4 percent a year.

But in the years preceding the housing crash, prices in 2002 started soaring 7 percent a year, then 8 percent in 2004, and 12 percent by 2005, CNBC.com reports.

A “new bubble” may be forming, CNBC columnist Diana Olick writes. CoreLogic’s latest housing data shows home prices rose 8 percent in December year-over-year, the largest gain in more than six years. In some places, home prices are up by double digits from a year ago, like Phoenix where prices are up 26 percent year-over-year.

Inventories of for-sale homes are very tight and many are attributing the tight inventories as helping to drive up home prices. Inventories were at their lowest supply since May 2005, according to the National Association of REALTORS®.

"The greatest concern in the market is the inventory situation," says Lawrence Yun, chief economist for NAR. "Even if we see an increase in the spring and summer, if home sales hold at the [current] level or even a 5- to 6-month supply, price increases are guaranteed. We don't want to see rapid appreciation in prices faster than income."

CNBC reporter Diana Olick notes that “healthy housing market gains are historically driven by increasing employment and income, not by lack of supply; the latter leads to price bubbles.”

But another part driving recent gains are the flood of investors in some markets. Investors are cashing in on once hard-hit markets by the foreclosure crisis, like in California, Las Vegas, and Phoenix. Many of these investors are hedge funds turning single-family homes into rentals, but as prices increase they may be inclined to take their profits sooner rather than later, Olick writes.

“What we had thought were safer, long term buys, may now turn into flips of the last decade,” Olick writes. “The question will be if there are enough non-investor buyers out there to support those sales?”

But the price gains may be sustainable, some say. Consumer confidence is increasing, employment is improving, and price gains may soon allow more home owners who are seeing equity once again trade-up, Olick writes.

 

Idaho 3rd in Nation for Price Increase!!!

CoreLogic: Home Prices Post Largest Gain in 6 Years

DAILY REAL ESTATE NEWS | WEDNESDAY, FEBRUARY 06, 2013

Home prices, including distressed properties, soared by the largest gain since May 2006, rising 8.3 percent in December on a year-over-year basis, according to the latest housing figures from CoreLogic. This is the tenth consecutive month for increases in nationwide home prices, according to CoreLogic.

When foreclosures and short sales are excluded from the mix, home prices rose 7.5 percent year-over-year, according to CoreLogic.

Nearly every state posted gains in December, except for Pennsylvania, New Jersey, Illinois, and Delaware.

The following states posted the highest gains in December in prices, when including distressed sales:

1. Arizona: 20%


2. Nevada: 15.3%


3. Idaho: 14.6%


4. California: 12.6%


5. Hawaii: 12.5%

“We are heading into 2013 with home prices on the rebound,” says Anand Nallathambi, CoreLogic president. "All signals point to a continued improvement in the fundamentals underpinning the U.S. housing market recovery."