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Economics

Why 2015 will be the “year of real estate” [video]

Real estate has suffered tremendously since the 2008 crash, but in recent years has been recovering – will 2015 be the year we go back to a pre-crash normal?

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2015 housing trends

After years of industry struggle, housing has been making a comeback, but one economist is willing to call 2015 the “year of real estate,” outlining dozens of reasons that all signs point to a recovery. That economist is realtor.com’s Jonathan Smoke who was brought on just seven months ago as realtor.com’s first Chief Economist.

Smoke studied Economics at Rhodes College and went on to earn his MBA from the McCombs School of Business at The University of Texas (UT). Right out of the gates, he planted his roots in the real estate industry and has been pouring over endless data points since the late 90s. He spent time at Beazer Homes, then launched his own housing research company, and was recruited by industry heavyweight Hanley Wood, where he rose in the ranks for five years before being named one of the nation’s top economists in his position at realtor.com.

We recently did a video interview with Smoke about his forecast for 2015, but before the camera went on, we learned that he isn’t your average economic nerd who is awkward and dry, no, he did “Sheldon Cooper” faces when testing camera angles, and both being UT grads, we mocked teams that oppose our own. Unlike some economists we’ve spent time with, he can pull a ridiculous amount of numbers out of his brain and present them in a way that’s approachable to all, and he doesn’t take himself too seriously.

Breaking 2015 down: things are looking up

Smoke is humble about his high level of intelligence and deep industry insight, and in just one hour, he was able to unravel the industry complexities to help consumers and practitioners understand the moving parts that will make 2015 the “year of real estate.” Check out our time together below, and after the video, we’ll include the highlights:

Highlights from Smoke’s talk

Smoke notes that there are several factors at play in 2015 being a better year for real estate:

  1. Lending is becoming less restrictive, and programs are launching that set the stage for more home buyers to qualify. The volume of home buyers has diminished because of tight lending, but Smoke says they’re about to make a healthy comeback.
  2. New home construction (one of the hardest hit sectors of the economy) is rebounding, and even though lot availability is limited and labor and material shortages are a challenge, he expects single family starts to grow 21 percent.
  3. Contrary to his and other analysts’ projections, mortgage rates remained at historic lows in 2014. Because of moving pieces at the federal level, they aren’t likely to stay down, and Smoke projects they’ll reach 5.0 percent by the end of 2015.
  4. Smoke forecasts that home prices will continue to rise, increasing 4.0-5.0 percent in 2015.
  5. Millennials will play a bigger impact in the housing market, as they’re finally benefiting from a recovering jobs market and moving out of their parents’ homes. Gen X will sit tight, and Boomers will continue to downsize as their lifestyles dictate.

Although 2015 year is poised to be the year of real estate, challenges remain.

Smoke notes that inventory levels will remain tight, and although it is loosening, lending won’t be a cakewalk. Further, mortgage rates will rise, so buyers entering the market will see increasing monthly payment amounts. Most other factors are projected to improve the market.

Lani is the Chief Operating Officer at The Real Daily and sister news outlet, The American Genius, and has been named in the Inman 100 Most Influential Real Estate Leaders several times, co-authored a book, co-founded BASHH and Austin Digital Jobs, and is a seasoned business writer and editorialist with a penchant for the irreverent.

Economics

Why it’s about to get more expensive to get a mortgage

(FINANCE) Borrowing money is getting more expensive, especially for those looking to get a mortgage. But why?

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bonds and mortgages

Although there have been some blips, bonds have grown substantially in value since the 1980s. They’ve performed extremely well for a number of reasons, not least of which is the big slowdown in inflation over that time period.

The result, for investors, has been that anything “bond-lik,e” i.e. capable of paying a regular income – like a high-dividend stock or even a property like your home – has shot up in value. A reversal of bond prices would mean less support for such investments.

That’s what the economy is currently experiencing. According to Financial Times, American worker wage growth is hastening the sell-off of bonds by the US government, which is decreasing the overall price of bonds. As bond prices go down, the interest rates that they offer new investors go up. That rate jumped to 2.85 percent last Friday, the highest level since 2014.

Since the rates at which banks lend their money are largely based on the interest rates offered by bonds, regular folks looking to take out a mortgage or a loan are facing higher costs.

How does this work?

If we’re talkin’ bond prices, we’re talkin’ yield. When the price of a bond goes up, the yield of that bond goes down! Let’s say you’re getting paid $5 each year. If you pay $50 for that right, then you’re making a 10% “yield” (5/50 = 10%). But if you pay $100 for that right, then you’re making a 5% “yield” (5/100 = 5%).

It’s the same thing with the price of a bond because the amount a bond investor gets paid (usually) is fixed. And so, when the bond goes up in value, the “yield” goes down – and vice versa.

For realtors, its important to help clients shop for the best rates to improve their confidence in this market. Leveraging the right online and local financing resources can help potential buyers get the best deal. Explaining broader market context is also critical. Historically, a three percent interest rate is still very low.

According to Investopedia, mortgage rates averaged 7.81% in 1996 and 10.19% in 1986. Instilling confidence with information will put buyers and sellers in the right place to make moves.

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Economics

How does this soft jobs report impact the housing market?

(REAL ESTATE NEWS) When we see a soft jobs report, does that hurt or help the housing market? We talk to two economists about it.

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In a year of political uncertainty, the release of any jobs report is polarizing. Political figures and armchair policy wonks will read into the data as they wish, but not housing economists.

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That’s who we look to in these times, because we all know that jobs is the cure-all for a recovering economy, but payroll growth slumped in September as the U.S. Labor Department reports that employers added only 156,000 jobs.

This fell short of the 172,000 originally projected by economists surveyed by Bloomberg.

Hidden positives in the report

Dr. Ralph McLaughlin, Chief Economist at Trulia said, “While the September jobs report came in below expectations, the continued addition of jobs to the US economy will help buoy demand for homes, both on the for-sale and rental side of the market.”

He observed another positive hidden in the Labor Department result. “In addition, wage growth kicked up again, which will help bolster the savings of first-time homebuyers trying to scrape together a downpayment.”

Real estate remains unchanged

“Given no major surprise in the data, the national outlook for real estate market remains essentially unchanged, with home sales expected to squeak out slight gains in 2016 and 2017 while commercial building vacancy rates should continue to fall,” said NAR Chief Economist, Dr. Lawrence Yun.

Yun adds that “we should note that men have been underperforming as 68.4% of adults have jobs, down from historic norm of around 75%. Meanwhile, 55.8% of women have jobs, roughly matching the historic norms.”

Pointing out that the data is being “digested” through the perspective of the upcoming election, Dr. Yun notes that, “among men, those with a college degree 72% of adults are working while only 54% of those with only a high school degree are working.”

Dr. Yun observes, “There will surely be a big divergent voting patterns among men versus women and among those with college education and those without in November.”

#jobsVhousing

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Economics

Mortgage companies hiring time travelers to uncover missing documents?

(MORTGAGE NEWS) – Mortgage companies are hiring for an interesting new position that may speak to their role in the economic crash of 2008.

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During the Great Recession of 2008, it’s been estimated that around seven million Americans lost their home. Many of the homes that went into foreclosure did so because people lost their jobs, and just gave up on their home. In some, people got kicked out based on false documentation, faulty paperwork or just downright illegal mortgage servicing. Numerous lawsuits have been filed and won by homeowners who were wrongfully evicted.

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In California, in Yvanova v. New Century Mortgage Corporation, the California Supreme Court ruled that plaintiffs held the right to contest foreclosures when documentation (in this case, a mortgage transfer that was allegedly void) was not handled correctly. The Court didn’t determine validity of the document in Yvanova’s case, just that she had the right to contest the foreclosure.

New jobs in mortgage documentation

According to David Dayen, who wrote Chain of Title, this phenomenon has brought new jobs to the market. Career Builder lists a job for a “Default Breach Specialist” posted by a recruiting firm in Jacksonville, Florida. The primary characteristics for this position:

“The Default Breach Specialist responsibilities include ensuring all breach letters are issued as required by investors, insurers and/or State Law.  Responsible for ordering title, reviewing title and all security documents to identify missing assignments needed to complete the chain of title prior to foreclosure referral.”

Seeking time travelers

According to Dayen, all the assignments of mortgage should have been prepared and recorded at the time of the sale or transfer. He questions why any mortgage company would need to order these documents.

In Yvanova’s case, it’s alleged that the mortgage was not converted into the trust in a legal fashion. In many of the cases involving foreclosure, third parties were hired to produce the paperwork that conveyed a mortgage into the trust. Dayen alleges that many of these companies “mocked up” documentation.

Although it is possible that the mortgage company is simply looking for someone to make sure everything is in the case file, it’s also possible (some would say highly likely) that some documents may never be found because they don’t exist.

The failure to follow the law as it pertains to property records is so bad that companies are now hiring chain of title specialists to manage the problem. This does not put the real estate industry in the best light.

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