The FortuneBuilders Market Insider

Monthly Newsletter – February 2015

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Last month we heard a lot of predictions, and the market is already proving some of those to be accurate. Home sales jumped 14.4 percent in December. The National Association of Realtors released some interesting housing expectations for 2015. Also, find out why Obama chose not to speak about the housing market during his State of the Union Address. Ever consider buying in Northern Texas? We’ll tell you why you should. Then, find out if the latest efforts by the FHA will boost first-time homebuyer action.

Home Sales Climb as Predicted

Despite a rather typical slowdown around the holiday season, home sales jumped 14.4 percent in the month of December, according to a recent RE/MAX report.

This jump was quite a turn of events from November when we saw a sharp 22.5 percent drop in percentage. “After a sluggish start, it’s nice to see the year end on a positive note. Even though we’re well into the winter months, homebuyers felt confident enough to enter the market in greater numbers than just one month ago,” said Dave Liniger, CEO, chair, and co-founder of RE/MAX.

Out of 53 metro markets surveyed last month, 42 reported higher sales on a year-over-year comparison, with 12 posting double-digit increases, according to RE/MAX

Barringer, Tony, DS News, “Home Sales Reverse November Decline, Jump 14.4 Percent in December.” 21, January 2015, 26, January 2015

DeSanctis, Adam, National Association of Realtors, “Stronger Economy, Solid Job Growth Expected to Boost Home Sales in 2015.” 7, January 2015. 26, January 2015

A CLOSER LOOK AT HOUSING EXPECTATIONS

The National Association of Realtors (NAR) announced their housing expectations for 2015, as represented in the infographic to the right. This information comes from a video of NAR Chief Economist Lawrence Yun talking about his 2015 housing market expectations. He expects existing-home sales to rise about 7 percent in 2015 behind a strengthening economy, solid job gains and a healthy increase in home prices.

“Home prices have risen for the past three years cumulatively about 25 percent, which boosts confidence in the market and traditionally gives current homeowners the ability to use their equity buildup as a down payment towards their next home purchase,” Yun said. “Furthermore, first-time buyers are expected to slowly return as the economy improves and new mortgage products are made available in the marketplace with low down payments and private mortgage insurance.”

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Why Obama Snubbed Housing in the State of the Union

Did you notice anything missing from the president’s most recent State of the Union Address? President Barack Obama did not mention housing policy. In fact, President Obama mentioned the word “housing” just once and “mortgage” just twice.

With all of the recent action regarding the housing market, some are wondering, why the omission?

Trulia chief economist Jed Kolko suggested three reasons why housing policy was omitted from the address: the urgency has faded; the most pressing housing challenges are local, not national; and the best housing policy is economic policy.

“Housing policy has taken a back seat on the national agenda,” says Kolko. “Remember the battles over principal reduction, replacing Fannie and Freddie, capping itemized deductions and the qualified mortgage rules? No housing policy proposals on that scale are part of the public debate now.”

Hot Market Alert: North Texas

North Texas is still heating up after one of the hottest years since the 1980’s, according to Mike Pannell owner of NuHomeSource.com.

A surge in job growth has increased the population, which seems to be what is improving the property market for the area.

The news of Toyota moving their North American Headquarters to the area has been a game changer for the property markets in Collin County located along the Dallas North Tollway, says Pannell. Toyota announced that they were going to be moving around 4,000 jobs to the new $350 million campus located in the Legacy business park starting in the late part of 2016.

Furthermore, homeowners are seeing the price of their homes rise by nearly 15 percent since the recession. Analysts are cautioning that costs may be overheated, but most of the reports show that there will be additional gains in value during the next year.

Fottrell, Quentin. MarketWatch, “Why Obama Ignored Housing in the State of the Union.” 21 January, 2015. 26, January 2015

Manz K., Naeem. Realty Times, “Real Estate Boom Hitting North Texas. 20, January 2015. 26, January 2015

What This Means For You

Wow, if ever there was a time to buy rental investment homes it’s now. FortuneBuilder’s very own Passive Income club saw this as a hot market years ago and currently offers single-family rental investments in the Dallas area. It is definitely worth sitting down with them now vs. later and gobbling up a few cash cows.

-Professor Moore

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Freddie to Auction Off Second Round of Delinquent Mortgage Loans

Freddie Mac has announced that it will begin its second sale of “deeply delinquent” mortgage loans in three pools worth approximately $410 million.

The Federal Housing Finance Agency (FHFA) is requiring both Freddie Mac and Fannie Mae to reduce the number of delinquent loans in their portfolios. Fannie Mae has yet to sell off any of its delinquent loans in mass quantities.

“This transaction is consistent with Freddie Mac’s continued goal of reducing illiquid assets from its investment portfolio,” Freddie Mac spokesman Thomas Fitzgerald said. “The loans involved in this transaction are deeply delinquent, including a large share that are more than two years delinquent. The sales process is a one round competitive auction.”

The loans are scheduled for three auction pools with unpaid principal balances of $160 million, $141 million, and $109million, totaling about $410 million. Offers are due for the delinquent loans on February 4.

Foreclosure Rate Plunges to 7-Year Low

Foreclosure completions are at the lowest level since 2008, according to president and CEO of Corelogic, Anand Nallathambi.

“This month’s figure of 41,000 foreclosures is in line levels experienced in the second half of 2007, which was the very beginning of the housing crisis,” Nallathambi said. “At current foreclosure rates, we expect to see the foreclosure inventory in the U.S. to drop below 500,000 homes sometime in the first quarter of 2015 which would be another milestone in the healing of the housing market.”

Foreclosure inventory declined by double-digit percentages year-over-year in all 50 states in November 2014 (not including the District of Columbia). In 35 states, foreclosure inventory declined year-over-year by 30 percent or more in November, led by Utah (48.9 percent) and Florida (48.1 percent).

“The foreclosure rate fell in every state, with only the District of Columbia seeing a small increase,” said Molly Boesel, senior economist for CoreLogic. “However, some states still have foreclosure rates of more than twice the national rate. While the national level of foreclosures may normalize in the next two years, there will always be the potential for some pockets of distress in the mortgage market.”

Honea, Brian, DS News, “Freddie Mac to Auction $410 Million Worth In Delinquent Mortgage Loans.” 24, January 2015. 26, January 2015

Honea, Brian, DS News, “Foreclosure Rate Falls to Lowest Level Since ‘08.” 14, January 2015. 27, January 2015

What This Means For You

The current housing outlook is much more stable than what we’ve seen in the last five years. This is creating a little bit of a seller’s market in many areas. It’s important you learn the saturation rate of your local area and the median price point for homes sold. Determine which direction your market is heading and use that knowledge to maximize your profits in 2015.

-Professor Moore

Freddie Mac sold its first bundle of delinquent loans for $659 million last July. The GSE owns or backs approximately $1.9 trillion worth of housing debt and held about $161 billion in mortgages as of November 30, 2014, according to Freddie Mac’s November 2014 Monthly Volume Summary.

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FHA Mortgage Insurance Cut Now Effective

The Federal Housing Administration, or FHA, is a dream for first-time homebuyers. Whereas a conventional mortgage requires a 20 percent down payment, FHA mortgages have a 3.5 percent down payment requirement.

The FHA raised its annual premiums 140 percent during the housing crash, pricing thousands of borrowers out of the market. As of January 26, 2015, the premium falls by half a percentage point, from 1.35 percent of the loan balance to 0.85 percent of the loan. The move should save borrowers an average of $900 annually.

Will This Finally Boost First-Time Home Buying? Whether or not this new shift will boost first-time homebuyers is still up for debate. “Housing costs – both rents and home prices – continue to outpace wages and are burdensome for potential buyers trying to save for a down payment while looking for available homes in their price range,” said Lawrence Yun, NAR’s chief economist. Less than 30 percent of existing home sales in December and for the entire year were first-time homebuyer purchases.

First-time homebuyers, particularly Millennials, have been shut out of the market with home prices rising faster than incomes. “I think the big jump for first time home buying is still a little bit into the future,” says Jed Kolko, Chief Economist at Trulia. “Right now a lot of young adults are still living with their parents. When they move out, they will rent first before they buy.”

Sources: Marketwatch; CNBC; Yahoo Finance

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