Let’s Be Real About Being Optimistic: 2015-2020 and the market ahead

Arizona hard money

Very recently, construction has increased six percent, which is already showing up as a strong 2013 trend. Of course, we aren’t doing as well as we did in the 1990s or the early 00s, it is still a nice surge and may see us back around 2005 levels in the year 2016. For people with capital under 50, the market will be a strong opportunity to capture market share and grow your business. If you are a little older, say are 56 or 57, maybe that means it is time to get in touch with your inner 40-year-old. It is time even for beginners to the market to think aggressively to take advantage of this opportunity.

That being said, new housing sales will take several years to reach peak levels to over one million units where it plunged in 2010 to a just 250,000 units. This drop in units was devastating to the economy and paralyzed families financially as well as leaving many builders to either go out of business or to consolidate. But now, new housing is seeing a rise of 5.7 percent from August and once again optimism is spreading across all housing market segments. We project that 2015 will be bright and that foreclosed property numbers will go down and result in a recovery market, creating a more, well, normal kind of normal.

What is the new normal? Let us break it down for you in a a production forecast report issued by Fannie Mae in January of 2013, that reflects the Mortgage Industry and the Housing Market.

The new normal means:

►Continued contraction in refinances—approximately 25 percent in 2013 and another 10 percent to 15 percent in 2014.

►Modest growth in new purchase production—expect this to fully rebound in 2017-2020 to 2006 levels. The main indicator here are new construction starts which is covered below as well.

►Competition for production will become fierce.

►Mortgage consolidation will continue–Another 30 percent of the existing approximately 3,000 mortgage banks will go out of business, be assimilated or be acquired by 2014. Mortgage brokers will suffer given the Qualified Residential Mortgage (QRM) and the three-point rule on compensation beginning in January of 2014. This is expected to further contract brokers by another 30 percent-plus. These two efforts will drive the consolidation further, while the larger and better capitalized firms will grow significantly.

►Non-depository mortgage banks, with a net worth of $15 million-plus will be the real winners in the forecast below.

Arizona Hard Money

Level 4 Funding LLC

23335 N 18th Drive Suite 120

Phoenix AZ 85027

623-582-4444

Recovery, Consolidation and Mortgage Production Forecasts for 2015

Arizona hard money

The housing market makes up approximately 15 percent of the U.S. GDP. As you might have seen, how well the housing market does directly reflects how well the economy is. We all know that the lack of growth in the housing market means that there is significant drag on the economy. A lagging house market means that economy will lag, too, and the unemployment rate will remain between 7.5 percent to 8 percent. So, while politicians play economic roulette we are trying to support consumers as they attempt to refinance their home or move.

The 2013 real estate housing forecast for next year, remains cautiously optimistic. We will find out in a year if we were overly optimistic. However, it should be noted that a rapid expansion of this market segment isn’t likely until after 2015. Credit qualifying requirements for consumers remain very challenging to say the least and with a slow economy, it will take several years– well into 2015 until we even experience meaningful growth according to experts such as economists–Kenneth Rosen of U.C. Berkeley and Bill Witte of Indiana University’s Kelley School of Business to name just two. These experts are optimistic but offer only “lukewarm” optimism for 2013. They throw around terms like ‘underachieve,’ ‘unambitious’ and ‘unfortunate’ while they talk about 2013, as if to say, don’t get too hopeful. One must admit, given what the housing market has gone through since 2009 however, this is still all good news. The market will continue to grow, albeit very slowly, but it will continue to grow out of the recessionary malaise the market has been under given the excess inventory, price of oil, instability in Europe (and now the Middle East) and not to mention the economy that continues to frustrate those looking for employment. And that’s something to be happy about.

Arizona Hard Money

Level 4 Funding LLC

23335 N 18th Drive Suite 120

Phoenix AZ 85027

623-582-4444

Housing Market Recovery: Let’s be Optimistic

Arizona hard money

Focusing on the growing economy, which has strong private sector growth, can show you that the housing market will most likely quickly grow right along side of it. Except more in the coming year, says expects. And be optimistic.

While the high unemployment rate and the challenges with qualifying credit standards will keep the housing market, a renting market for most Americans. In fact, in a survey from the Census Bureau Housing Vacancy Survey (2013), it was stated that renters dominate new household formation. Why, you might ask. This is actually in part due to the inability for borrowers to be approved for a mortgage or, a lack of confidence that if approved, given the lagging economy, their ability to keep paying their mortgage.  As you can see, the American consumer is in a bit of a fiscal crisis.

However, home prices are said to start a steady increases through 2016 starting this year, this according to a quarterly survey of more than 100 economists, real estate experts and investment strategists.

The survey, was conducted by research and consulting firm Pulsenomics LLC on behalf of real estate search, Zillow, between Aug. 30-Sept. 14, 2012 and involved asking 113 participants to project the path of the S&P/Case-Shiller U.S. National Home Price Index over the next five years.

The latest S&P/Case-Shiller Home Price Indices, that includes data through June, show national home prices up 1.2 percent from a year ago during the second quarter. In fact, all of the markets in the S&P/Case-Shiller 20-city composite posted annual gains for the second month in a row, and all but two—Charlotte and Dallas—posted better annual returns in June compared to May.

These results were optimistic. Economists now forecast home prices will rise 4.7 percent in 2013, eight percent in 2014, 11.4 percent in 2015, and 15.2 percent in 2016. Wouldn’t that be fantastic? That's an expected annual growth rate of 2.9 percent between 2012 and 2016. While it is slightly under the 3.6 percent annual growth rate experienced in the pre-bubble years between 1987 and 1999, it’s still very exciting.

Arizona Hard Money

Level 4 Funding LLC

23335 N 18th Drive Suite 120

Phoenix AZ 85027

623-582-4444

Are You Paying Too Much for My License Bonds?

Arizona hard money

You might be paying too much for your license bonds if you are paying a premium of more than $5 per thousand (or 0.50 percent) of the bond amount. However, the premium you pay is certainly dependent on various underwriting factors: 1. Do you have decent credit? Not great. Just decent. You probably do or you wouldn’t be licensed. 2. Do you have any skeletons in your past? Bankruptcies, felonies, prior bond claims, etc. You probably don’t or you wouldn’t be licensed.

But how much bonding do you really need? There is a level of bonding that is based primarily on underwriting the an owner personally. Above that level, business and personal financial statements are considered as the primary focus of the underwriting.

Meanwhile, some bond carriers are simply better than others at this particular line of business. Some carriers view mortgage bonds as more risky than other types of bonds so their pricing and underwriting process is very relative to that perception of risk. It may not be for you.

Similarly, the broker you use is your path to the surety market. Use their knowledge of and access to bond carriers because that has a direct relationship with what the price and process is for your bond.

However, it should be noted that the variable that obviously has the biggest impact on your bond pricing is your broker. That’s your access to the market.

Remember that the mortgage bond market has changed significantly over the past few years. Carriers began becoming increasingly nervous about what would happen when the industry bubble eventually popped. Some proactively began to increase prices, tighten underwriting, raise qualifications and limit exposures. Once the bubble burst, others reactively did the same and some even stopped writing mortgage bonds entirely.

A few years ago, the average surety pricing was at a widely-available rate of $7.50 per thousand. However, it quickly moved up to $10 per thousand after the big pop. A few carriers positioned themselves at even higher rates in order to absorb the flurry of claims and uncertainty brought on by the industry’s implosion and increased regulation. Those carriers that had been writing mortgage bonds for years and had large exposures were suddenly faced with game-changing events and conditions that forced them to endure financial losses and realign their perspective of risk. It is worth it to find the right one for you.

Arizona Hard Money

Level 4 Funding LLC

23335 N 18th Drive Suite 120

Phoenix AZ 85027

623-582-4444

In April, Permanent Loan Mods Cross the 6.39 Million Mark

Arizona hard money

The April 2013 loan modification data released by HOPE NOW has determined that an estimated 70,000 homeowners received permanent, affordable loan modifications from mortgage servicers during the month. This total includes modifications completed under both proprietary programs and the government’s Home Affordable Modification Program (HAMP). The April total of approximately 70,000 loan modifications brings the total overall number of permanent loan modifications to 6.39 million.

Meanwhile, for the month of April 2013, there were approximately 59,000 foreclosure sales completed. Compare that to 52,000 completed in March and that’s increase of 14 percent. Foreclosure starts were approximately 115,000 for the month of April. That’s relatively flat compared to the previous month’s total of approximately 116,000. Short sales for April were approximately 27,000. This is very similar, though a little lower, to March’s total of 28,000.

Delinquencies of 60 days or more were at 2.17 million for the month of April, compared to 2.38 million in March. This is a decline of approximately 9 percent in just a month. Delinquency data is extrapolated from data received by the Mortgage Bankers Association for the first quarter of 2013.

Additionally, we are happy to report that loan modifications completed via proprietary programs once again showed characteristics of sustainability and affordability for homeowners. For the month of April, we saw proprietary loan modifications that included fixed interest rates of five years or more accounted for 93 percent (54,000) of the total. Moreover, proprietary loan modifications with reduced principal and interest monthly payments accounted for 83 percent (48,000) of the total and proprietary loan modifications with reduced principal and interest payments of more than 10% accounted for 76 percent (44,000) of the total.

HOPE NOW is a trusted source when it comes to numbers. They are proud of the efforts its members have made on behalf of the nation’s homeowners. While there is still work to be done in the housing market, significant progress has been made via loan modifications, short sales and other solutions.

Level 4 Funding LLC

23335 N 18th Drive Suite 120

Phoenix AZ 85027

623-582-4444

Distressed home: Foreclosures, and Short Sales: A Numbers Game

Arizona hard money

In May 2013, distressed homes, that’s to say, foreclosures and short sales accounted for 18 percent of May sales. This is unchanged from April. Fewer distressed homes, which generally sell at a discount, account for some of the price gain.

When you boil down the numbers, 11 percent of May sales were foreclosures, and 7 percent were short sales. The foreclosures sold for an average discount of 15 percent below market value in May, while short sales were discounted 12 percent.

Freddie Mac’s numbers show that the national average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 3.54 percent in May from 3.45 percent in April; it was 3.80 percent in May 2012.

Most homes were on the market for 41 days, that the median time, which is down from 46 days in April, and still this is 43 percent faster than the 72 days on market in May 2012. Meanwhile, short sales were on the market for a median of 79 days, while foreclosures typically sold in 43 days and non-distressed homes took 39 days.

In May, 45 percent of all homes sold were on the market for less than a month. This median time on the market is the shortest since monthly tracking began in May 2011. Of these homes, first-time buyers accounted for 28 percent of purchases in May, compared with a slightly higher 29 percent in April and 34 percent in May 2012.

All-cash sales were 33 percent of transactions completed in May. This is up from 32 percent in April and 28 percent in May 2012. Individual investors, who account for many cash sales, purchased 18 percent of homes in May; they were 19 percent in April and 17 percent in May 2012.

Additionally, single-family home sales rose five percent, making a seasonally adjusted annual rate of 4.60 million in May from 4.38 million in April, both of which are 12.7 percent higher than the 4.08 million-unit pace in May 2012. The median existing single-family home price was $208,700 in May, up 15.8 percent above a year ago, the strongest increase since October 2005 when it jumped 16.9 percent from a year earlier.

Existing condominium and co-op sales have slipped 1.7 percent to an annualized rate of 580,000 units in May from 590,000 just a month earlier in April, but are 13.7 percent above the 510,000-unit level just a year ago. The median existing condo price was $202,100 in May, which is 11.8 percent above a year ago.

Let’s talk regions. In the Northeast, existing-home sales rose 1.6 percent to an annual rate of 650,000 in May; that’s 8.3 percent above May 2012. The median price in the Northeast was $269,600, which is up 12.3 percent from a year ago. Existing-home sales in the Midwest also jumped: they’re up eight percent in May to a pace of 1.21 million, and are 16.3 percent higher than a year ago. The median price in the Midwest was $159,800, up 8.2 percent from May 2012.

Meanwhile, down in the South, existing-home sales rose four percent to an annual level of 2.09 million in May and are 16.1 percent above May 2012. The median price in the South was $183,300, which is 15.0 percent above a year ago.

Existing-home sales in the West increased 2.5 percent to a pace of 1.23 million in May and are seven percent above a year ago. With the tightest regional supply, the median price in the West was $276,400, up 19.9 percent from May 2012.

Big Daddy Dennis Hard Money Lender

Level 4 Funding LLC

23335 N 18th Drive Suite 120

Phoenix AZ 85027

623-582-4444

Improvement in May, Existing Home Sales Rise 4.2 percent

Arizona Hard Money

According to the National Association of Realtors, in May, there was happy celebration as existing-home sales improved and these numbers remain solidly above a year ago, while the median price continued to rise by double-digit rates from a year earlier. Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 4.2 percent to a seasonally adjusted annual rate of 5.18 million in May from 4.97 million in April, and is 12.9 percent above the 4.59 million-unit pace in May 2012. With housing numbers positive and expected to rise, you might, but that may not be the case. Despite this gain, don’t expect the number of homes available to gain unless new home construction also begins to grow. However, this could moderate the price of new homes in the future.

Right now, existing-home sales are at the highest level they’ve been since November 2009. That’s when we saw the market jumped to 5.44 million as buyers took advantage of tax stimulus. Sales have stayed above year-ago levels for 23 months, while the national median price shows 15 consecutive months of year-over-year increases. Fantastic, right?

Want some more numbers? The total housing inventory at the end of May rose 3.3 percent to 2.22 million existing homes available for sale. That represents a 5.1-month supply at the current sales pace, which is down from 5.2 months in April. The listed inventory is 10.1 percent below a year ago, when there was a 6.5-month supply. The national median existing-home price for all housing types was $208,000 in May, up 15.4 percent from May 2012. This is a brilliant six straight months of double-digit increases; the strongest price gain since October 2005, when numbers jumped a record 16.6 percent from a year earlier, 2004. The last time there were 15 consecutive months of year-over-year price increases was from March 2005 to May 2006.

Let’s hope this keeps up!

Big Daddy Dennis Arizona Hard Money Lender

Level 4 Funding LLC

23335 N 18th Drive Suite 120

Phoenix AZ 85027

623-582-4444