Month: August 2023

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Last week, the National Association of Realtors (NAR) argued that higher mortgage insurance premiums at the FHA have priced out scores of renters nationwide.

Long story short, FHA financing is generally the cheapest option around for those with little set aside for down payment, so the increase in premiums is shutting the only door to financing for this bunch.

And it’s not a small group of people – per the REALTORS® Confidence Index survey, 60% of first-time home buyers made a down payment of six percent or less as of February 2014.

The Average Renter Only Has $12,568 in Savings

Today, NAR followed up their argument with a nifty chart that details how much money a renter would need to save to buy a median-priced home.

It basically points to FHA financing as the only viable option for most would-be buyers.

According to the chart, the average renter only had $12,568 in savings last year. Unfortunately, the median-priced home in 2013 was $197,400.

When you throw in another three percent for closing costs, a renter’s median household savings only allow for FHA financing with the minimum 3.5% down.

That would set a renter back about $12,624, which slightly exceeds their total savings. But it’s a lot closer than any other option.

A five percent down payment plus closing costs requires $15,496, a 10% down payment + CC calls for $25,070, and the classic 20% down requires a whopping $44,218.

Note that home prices have risen steadily since 2013, so the numbers are probably even worse today, effectively eliminating conventional financing as an option.

However, it is possible to receive a gift for the down payment and/or closing costs, or to accept a higher mortgage rate in exchange for a lender credit to cover closing costs.

But this chart illustrates the “down payment challenge” that continues to hinder home buying for many Americans.

Most just don’t have enough money set aside to purchase a home, especially without FHA financing. This is further exacerbated by the fact that mortgage insurance premiums on FHA loans have surged in recent years.

The extinction of the 3% down payment mortgage (Conventional 97 loan) didn’t help either.

So Only Well-to-Do Renters Can Buy Homes Nowadays?

In areas where supply is low and demand is strong, it’s pretty tough for a renter with limited assets to purchase a home.

If they must rely upon FHA financing, there’s a good chance they’ll get outbid by another buyer who has more assets socked away.

After all, is the seller going to go with the 20% down buyer or the 3.5% down buyer who will exhaust his or her savings in the process?

Even if low-down payment mortgage financing is still widely available, it doesn’t make for a strong case, especially if there’s another prospective buyer in the mix.

So even if the FHA lowered premiums and raised loan limits, another area NAR and others are currently working on, it won’t do much good in many multi-bid situations.

But it is clear that down payment continues to be a roadblock to homeownership, with the only real solution lower home prices or higher wages.

Or a return to 100% financing, which we all know isn’t tenable just years after one of the worst housing bubbles in history.

Update: Congresswoman Joyce Beatty (OH-03) has introduced legislation that would lower upfront mortgage insurance premiums by 25 basis points (0.25%) for first-time home buyers who complete a HUD-certified housing counseling program.

Source: thetruthaboutmortgage.com

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Independent mortgage banks (IMB) reported an average net loss of $534 on each loan originated from April to June, down from $1,972 per loan in the first quarter of 2023, according to the Mortgage Bankers Association (MBA). The average pre-tax production loss was 18 basis points in Q2. 

Including both the production and servicing business lines, 58% of retail mortgage companies were profitable in Q2, up from 32% in the first quarter of 2023.

“There were signs of improvement in the second quarter of 2023. Production losses were less severe than the previous two quarters and net servicing financial income was strong,” Marina Walsh, the MBA’s vice president of industry analysis, said in a statement. “Additionally, the majority of mortgage companies in our survey managed to squeeze out an overall profit during one of the toughest times for the mortgage industry.”

The average production volume was $502 million per IMB in the second quarter, up from $398 million per company in the first quarter of 2023. The volume by count per IMB averaged 1,553 loans in Q2, an increase from 1,264 loans in Q1.  

However, production revenue was 328 bps in the second quarter, down from 358 bps in the previous quarter. It includes fee income, net secondary marketing income and warehouse spread. 

Meanwhile, according to Walsh, after 11 consecutive quarters of increases, origination costs declined by over $2,000 per loan during the second quarter of 2023. 

“Volume picked up during the spring homebuying season and additional personnel were shed. However, the substantial cost savings per loan was not enough to put the average net production income in the black,” Walsh said. 

Loan production expenses averaged $11,044 per loan in the second quarter of 2023, down from a study-high of $13,171 per loan in Q1. The average number of production employees per company also declined to 366 between April and June from 372 in the previous quarter. 

Servicing operating income — which excludes MSR amortization, gains or loss in the valuation of servicing rights net of hedging gains or losses, and gains or losses on the bulk sale of MSRs — was $105 per loan in the second quarter, up from the previous quarter’s $102. 

The sale of MSRs does not directly impact earnings as a revenue stream, but the conversion of MSRs into cash via sales deals bolsters a lender’s cash flow and overall liquidity.

The MBA expects mortgage origination volume for one- to four-family homes to post $468 billion in Q3, a rise from $463 billion in Q2 2023, according to its latest forecast.

The MBA also projected the 30-year fixed mortgage rate to trend up to an average of 6.6% in the second quarter, ultimately declining to 5.9% by the fourth quarter of 2023.

Source: housingwire.com

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The investing information provided on this page is for educational purposes only. NerdWallet, Inc. does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments.

Some people collect luxury goods such as investment pieces. Think of a Birkin bag, art by the legendary Jean-Michel Basquiat or a Rolex. Anything considered timeless or high-quality and that appreciates in value can be called an investment piece.

The luxury market tends to be more resilient than other sectors during economic instability because of high demand, among other factors. That said, is this inflationary period a good time to invest in luxury goods?

Buying luxury goods amid inflation

The U.S. Federal Reserve has raised interest rates 11 times since March 2022 in an attempt to cool inflation. Interest rates are the highest they’ve been in 22 years, and consequently, we’ve seen the cost of borrowing increase and spending on nonessential goods decrease.

While Americans have cut back on spending, the demand for luxury goods is still strong. Research by J.P. Morgan shows a 7% year-over-year increase in the luxury goods market in the fourth quarter of 2022, despite significant price hikes.

Luxury brands raised the prices of their products by almost 17% in 2020 and early 2021 in response to lower sales during COVID-19, according to a 2022 study by KPMG International. This change is significant considering typical price increases are 5% to 10%. These price increases didn’t only benefit luxury brands; people who invested in these goods in prior years may have also seen gains.

Gloria H. Gill, a retiree who we spoke to on Facebook Messenger, said the value of her large classic Chanel bag has more than doubled in about seven years. Gill purchased the bag for $4,800 in Paris in 2016. It now has a market value of around $10,000.

“I have sold bags before, but I doubt I’ll sell this one,” Gill said. “It’s listed in my will, and my sons are aware of its high value.”

Luxury goods can sometimes hedge against inflation when they appreciate in value, says William Huston, founder of Bay Street Capital Holdings, which has offices in Los Angeles, New York and Fremont, California.

“These luxury goods, they do protect against inflation, but they don’t outperform the general stock market,” he says.

As with any investment, there are risks. As Huston points out, your money could potentially earn a higher rate of return elsewhere. Also, your item could get lost or destroyed, or it may be difficult to resell.

Assess your financial foundation first

Before investing in anything, assess your financial situation. For instance, is your emergency fund well stocked? Keep in mind that possessions are considered “illiquid assets” — not quickly convertible to cash if you need it in a pinch.

Also, saving for retirement comes before investing in luxury goods, says Dora Meyer, a certified financial planner at WellAcre Global Wealth Advisors in Santa Monica, California.

“Make sure you are taking advantage of any tax-advantaged accounts, so your 401(k), your Roth IRAs, before you look at investing in something like this. [And] your HSA,” she says.

Meyer also advises, “Be careful [with] buying on credit, especially in this environment when interest rates are a little bit higher.” And she recommends buying from a reputable source to avoid knockoffs.

Investing in timeless pieces

Valerie Schwank owns the Fashionista Consignment Boutique in Coconut Grove, Florida, where she buys and sells luxury goods. Schwank has seen a significant boom in her business since the pandemic began and is an advocate for investing in luxury pieces. She recommends buying timeless and high-quality pieces, as they tend to hold their value.

“I always recommend that you buy a staple,” she says. And by staple, Schwank means “the Chanel classic double flap, no-nonsense handbag, which has been around forever.”

Think about factors like the color and materials of items, too. That often differentiates timeless luxury goods from ones that won’t hold as much value over time. Keeping your items in good shape, especially if you plan to resell, is also important, Schwank says.

Calculating your potential returns

Research how an item has historically performed before purchasing to ensure it’s a worthwhile investment. You can go to luxury resale sites such as Vestiaire Collective, The RealReal and Rebag and check how pieces have appreciated over time.

Huston advises having a financial plan before making a luxury investment. “With the financial plan, you’d be able to see, ‘I’m 30 years old, I’m gonna save $300 a month,’” he says, as an example. That plan can give you context to decide, “’That’s a meaningful amount of money to me and I can afford that $300, and it’s better for me to save $300 in my 401(k) than to buy a watch,’” he says.

You can also improve your investment returns by negotiating when it comes to items like art, he adds.

“A lot of this luxury stuff is negotiable because again, it’s illiquid” and not easily converted to cash, he says. “So if you find the right person selling the right thing at the right time, you can get it for a really good value because they just want to get some of their money back.”

This article was written by NerdWallet and was originally published by The Associated Press.

Source: nerdwallet.com

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The concept of “buyer’s remorse” is fairly well known, but those who think they can save a few bucks by selling their home without the aid of a real estate agent could well find themselves experiencing an alternative feeling – seller’s regret.

That’s according to the National Association of Realtors, which published data from its 2017 Profile of Home Buyers and Sellers survey this week which shows that homes sold without the aid of a real estate pro often sell for considerably less money. According to the study, for sale by owner transactions earn an average of $60,000 to $90,000 less than those that involved a real estate agent.

The NAR says that agent-assisted home sales pull in an average of $250,000, which is the national median selling price. FSBO homes however, pull in just $190,000 on average, and it gets even worse when the seller knows the buyer personally, with the average price falling to just $160,300.

The NAR says the discrepancy should cause sellers to question the wisdom of going it alone, without a real estate agent. Sellers usually think they can save money on agent commissions, but the NAR says this is a small price to pay if it means getting a better price on their home.

“Talk to an agent and find out what they suggest for the commission, and then do the math yourself,” researchers wrote on the NAR’s Economists’ Outlook blog. “The closing price for the agent-assisted seller is likely going to be way above a FSBO. [But] in reality, homes sold by the owner make less money overall.”

The NAR seems to be getting its message across, as just 8 percent of sales last year were FSBO, a new all-time low, the researchers said.

We should of course note that the data comes from the NAR itself, which has a clear interest in protecting its members by convincing consumers to use the services of an agent.

Mike Wheatley is the senior editor at Realty Biz News. Got a real estate related news article you wish to share, contact Mike at [email protected].
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Source: realtybiznews.com

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The collection features handmade items by Niven and Leuschen. Photo courtesy of The Bouwerie

By Abby Tegnelia

When Fernanda Niven and Alexia Leuschen launched their home decor business, they were passionate about finding beautiful, timeless pieces. After two years as a pop-up in Bridgehampton’s gourmet market L’Épicuriste, they’ve hit their stride. “We wanted to sell things that we loved and thought were special and unique,” says Niven, whose fashion background includes a stint with Vera Wang, designing handbags and her own line of sun-protective clothing. “We never wanted people to buy our things just to have them. We wanted them to buy what they love because they’d have those pieces for a long time.”

The Bouwerie’s popular LED lamps and shades. Photo courtesy of The Bouwerie.

Shoppers can swing by The Bouwerie after procuring global delicacies for their next dinner party at L’Épicuriste, and pick up items needed to make the soiree really pop. Niven says this summer’s must-haves include little LED lamps that have become popular for both indoor and outdoor at-home dining—The Bouwerie sells them along with fashionable shades, in green, white and neutral. “This summer we have wonderful napkins that we just cannot keep in stock,” Niven says. “They have a pretty fringe, and come in blue-and-white gingham, a bold green and white floral pattern. They make your table come to life.”

The Bouwerie founders present finds from their world travels.  Photo courtesy of The Bouwerie

Niven and partner Leuschen, a decorator, make some of their own items, such as fireplace screens named after streets in Southampton. The women have been friends for about a decade, and enjoy perusing the internet for unique items to sell, and doing some buying on the road—they both love to travel. “That’s how this business came about,” Nevin says. “We both love finding these little special things around the world.”

When it came to choosing their company’s moniker, the businesswomen liked the Old World spelling of “Bouwerie,” the name of a once-beautiful, now long-gone house in Southampton. To bring it back full circle, they happen to know the grandchildren of the house’s owners.
thebouwerie.com

Source: thepuristonline.com

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Market research company iEmergent expects the FHA to be a major player in the mortgage market this year, according to their 2009 forecast released today.

The company currently forecasts 1.4 million owner-occupied FHA purchase mortgages in 2009, representing total purchase volume of $245.9 billion.

When you factor in refinance transactions, that number could be as high as $400 billion.

Part of the popularity in FHA lending can be attributed to the demise of unconventional lending, such as subprime, which has all but been phased out.

The loan limits for FHA loans also increased at the beginning of the year, rising to $625,500 in high cost areas of the nation, up from a previous cap of just $362,790.

“The rapid expansion of FHA loan volumes in the United States has been accompanied by an equally rapid shift in the distribution of FHA lending across local mortgage markets,” said Dennis Hedlund, president of iEmergent.

“While greater access to the FHA loan program is a positive for borrowers, especially first-time home buyers, its quick expansion and rapidly changing distribution patterns might be cause for alarm to some lenders.”

“History has shown that whenever any loan product’s popularity grows by a magnitude of five to eight times its normal trend in a short period of time, prudent oversight efforts – such as increased FHA training, the close tracking of loan package submission and documentation quality, and the constant evaluation of loan data integrity – is necessary.”

In recent months, FHA lending has grabbed a huge share of the market, accounting for 12.55 percent of all single-family loan origination volume in fiscal year 2008, up from 4.12 percent a year earlier.

And as of September 2008, market share had climbed to a whopping 21.13 percent, up from 6.35 percent in October 2007.

At the same time, defaults are rising, with about 6.5 percent of FHA loans in arrears, putting the agency’s health into question and prompting talk of reform.

“An increase in early FHA default levels would undoubtedly cause FHA to contract the program at a time when the FHA product is critical to stabilizing struggling housing markets,” added Hedlund.

The FHA has never relied on appropriations, but with its increasingly expanded role in the troubled mortgage market, it could be the next big failure.

Source: thetruthaboutmortgage.com

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Two words: Buyer’s remorse. Not a big deal when buying lunch, but a pretty huge deal when purchasing a home you don’t like.

A new survey from Redfin and Harris Poll revealed that a good chunk of Americans aren’t too thrilled about owning their current homes.

In fact, one in four surveyed (2,027 adults total) said they wouldn’t buy their home again if they were given the chance to go back in time.

Redfin CEO Glenn Kelman said they included that question in the survey because of all the bidding wars, flash sales, price hikes, and the overall lack of inventory.

Put another way, a lot of people might be rushing into buying homes just to “get in,” as opposed to actually thinking the whole thing through.

Midwest Homeowners the Most Bitter

However, it was those in the Midwest that were the most bitter about buying homes, an area that doesn’t really come to mind upon hearing the phrase “bidding war.”

There, a whopping 28% indicated that they had buyer’s remorse, beating out the Northeast slightly (27%), along with the South (25%) and West (20%).

On the age front, the oldest homeowners seemed the least concerned about their home purchase. In the 65+ cohort, a solid 85% said they’d buy their home again if they had the opportunity.

That compares to just 72% in the all-encompassing 18 to 64-year old category. I guess people really are more content once they get older…

In terms of gender, women were more likely to dislike their homes, with 27% feeling the remorse. Households with children 18 and younger were also 28% bummed.

Interestingly, those with higher household incomes were more stoked about owning, with HHIs of $100,000+ expressing satisfaction 86% of the time, compared to just 70% for those under $100k.

Same goes for college-educated homeowners – 82% satisfied versus just 70% for those with “some” college education.

Optimism for Rising Home Values Hits Highest Point Since 2007

Meanwhile, another poll from Gallup revealed that optimism about the housing market hit its highest point since 2007.

When asked if home prices would increase, stay the same, or decrease over the next year, 56% said, “increase.”

That’s up from 33% two years ago and well above the low of 21% in January 2011. However, it has yet to surpass the 60%-70% readings that preceded the housing bubble.

That’s probably a good thing – it buys us a little time before we’re back in another crisis.

After all, it’s euphoria that usually gets us all into a lot of trouble. As long as there is still some doubt about housing, we’ll probably continue to snag more upside gains.

Gallup also asked homeowners if their home was worth more than what they bought it for.

A healthy 74% said “yes,” which is up markedly from 53% two years ago, but nowhere close to the 90%+ levels seen back in 2006 and 2007.

In those days I don’t even think that was much of a concern, seeing that home prices only moved in one direction.

Lastly, they asked if now was a good time to buy a home. The large majority (74%) said it was indeed a good time, a number that has risen year after year since 2011.

It was as high as 81% back in 2003, and we all know what happened a few short years later. Perhaps if these numbers get bloated again, it could be a good indicator to SELL.

(photo: Benjamí Villoslada Gil)

Source: thetruthaboutmortgage.com