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Economics

Home prices to rise 6.0% in the next year after spiking 8.8% this year

According to CoreLogic, although the home price increases are slowing down, the next year should still see a rise of roughly 6.0 percent in home values.

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National home prices are expected to rise another 6.0 percent from May 2014 to May 2015 after increasing 8.8 percent in the previous year, according to the May CoreLogic Home Price Index report.

The most recent annual change represents 27 months of consecutive year-over-year increases in home prices, while monthly (including distressed sales), home prices rose 1.4 percent.

“Home prices are continuing to climb across most of the country which has both positive and negative implications for the housing market,” said Anand Nallathambi, president and CEO of CoreLogic. “While the rapid rise in prices over the past two years has lifted many homeowners out of negative equity, it has also become a negative factor in buying decisions for prospective purchasers weighing affordability concerns. As we move ahead, a moderation in home price increases over the next twelve months should help cool things down a bit and keep the housing recovery going.”

Regional home prices varied

Although no states posted a depreciation in May 2014, 25 states and D.C. were at or within 10 percent of their peak home price appreciation. In this period, ten states reached new home prices highs, including Alaska, Louisiana, Oklahoma, Nebraska, Iowa, South Dakota, North Dakota, Colorado, Texas and New York. The strongest appreciation was in the Western United States, led by Hawaii, California, and Nevada.

Excluding distressed sales, home prices nationally increased 8.1 percent in May 2014 compared to May 2013 and 1.2 percent month over month compared to April 2014. Also excluding distressed sales, all 50 states and the District of Columbia showed year-over-year home price appreciation in May.

  • Including distressed sales, the five states with the highest home price appreciation were: Hawaii (+13.2 percent), California (+13.1 percent), Nevada (+12.6 percent), Michigan (+11.8 percent) and New York (+11.0 percent).
  • Excluding distressed sales, the five states with the highest home price appreciation were: New York (+12.2 percent), Hawaii (+11.6 percent), Nevada (+10.6 percent), California (+10.4 percent) and Florida (+9.6 percent).
  • Including distressed transactions, the peak-to-current change in the national HPI (from April 2006 to May 2014) was -13.5 percent. Excluding distressed transactions, the peak-to-current change in the HPI for the same period was -9.3 percent.
  • Including distressed sales, the U.S. has experienced 27 consecutive months of year-over-year increases; however, the national average is no longer posting double-digit increases.
  • The five states with the largest peak-to-current declines, including distressed transactions, were: Nevada (-38.1 percent), Florida (-34.3 percent), Arizona (-29.2 percent), Rhode Island (-28.7 percent) and New Jersey (-23.0 percent).
  • Ninety-four of the top 100 Core Based Statistical Areas (CBSAs) measured by population showed year-over-year increases in May 2014. The six CBSAs that did not show an increase were: Worcester, Mass.-Conn.; Hartford-West Hartford-East Hartford, Conn.; New Haven-Milford, Conn.; Little Rock-North Little Rock-Conway, Ark.; Rochester, N.Y. and Winston-Salem, N.C.

“The pace of home price appreciation is cooling off quickly as the weather warms up,” said Mark Fleming, chief economist for CoreLogic. “May’s 8.8 percent year-over-year growth rate is down almost three percentage points from just three months ago. The influences of modestly rising inventory and less-than-expected demand are causing price growth to moderate toward our forecasted expectations.”

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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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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