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The National Association of Realtor’s chief economist is optimistic that the real estate sector will continue to see stable growth, amid a strong economy.

Lawrence Yun’s remarks came during a talk at the Realtors Conference & Expo in Boston last week, where he added that in his opinion another recession seems unlikely in the short term due to the country’s sound economic fundamentals.

Yun also forecast around six million new and existing home sales by the end of this year, and slightly more in the next couple of years. The economist also believes home prices will continue to grow at a modest rate, around 4.7 percent in 2018, 3.1 percent in 2019 and 2.7 percent in 2020.

However Yun said these positive trends would only occur if homebuilders are able to keep up with demand by adding new inventory to the market. New homes are being added to the market at a rate of around 1.2 million per year, but that’s below the historical average and well off the 1.9 million homes that were built in 2004.

There are no signs of a housing bubble at least, Yun added. He said that even though home prices have been outpacing income for several years now, the overall economy in the U.S. is still fundamentally sound, that mortgage quality is high, and that due to the persisting inventory shortages in many markets, there is no danger of the overbuilding that preceded the Great Recession.

Some risks do exist though. Yun said the threat of a full scale trade war between the U.S. would hamper economic growth, and lead to higher interest rates for long-term debt instruments. If that happened, it’s likely a recession would occur, Yun said.

One piece of good news is that Realtors themselves can help do their bit by reminding their clients that the economy is still healthy and that all signs point towards positive home price increases. Yun said there’s little chance of a recession happening as inflation remains under control, and so any interest rate increases by the Federal Reserve will likely be moderate.

In other words, it’s a good time to buy a home, Yun said.

“All indications are prices will keep moving higher, and buyers who wait risk missing out on wealth gains,” he said.

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

Apache is functioning normally

Rising housing affordability concerns are causing a slowdown in new home construction, according to a U.S. Commerce Department report published last week.

The report noted that single-family housing starts fell by 1.8 percent in October compared to the previous month.

“This month’s decrease in single-family starts isn’t a surprise given the drop in our builder confidence index,” said Randy Noel, chairman of the National Association of Home Builders. “Builders are showing caution as mounting housing affordability concerns are forcing some consumers to delay making a home purchase.”

Homes are getting more expensive because mortgage rates and home prices are rising faster than disposable incomes, according to UBS analysts.

“Housing affordability has dropped notably since peaking in 2012,” UBS said in a recent report.

Still, on an historic basis, housing remains fairly affordable, experts say. The current strong economy means that analysts are unsure of the exact reasons why housing is slowing down. Nonetheless, most are predicting that real estate markets will remain weaker in the first half of 2019.

“If you’re looking for a new, single-family home, the news this morning wasn’t good,” Robert Frick, corporate economist with the Navy Federal Credit Union, told HousingWire about the latest new-home numbers. “Builders are seeing a turn in the market for new homes and are less likely to build.”

Single-family housing starts began the year strong but weakened over the summer and are remaining soft, Robert Dietz, the NAHB’s chief economist, wrote in a blog post. “Despite this softness, 2018 construction volume is set to be the best since the downturn,” Dietz says. “A growing economy and positive demographic tailwinds are supporting housing demand as interest rates rise. However, policymakers should take note of the November decline in builder confidence as a sign that housing affordability conditions will weigh on the housing market going forward.”

Overall, construction in the new-home market did eke out a 1.5 percent increase in October, due to an uptick in multifamily housing starts, which include apartment buildings and condos. Multifamily starts rose 10.3 percent month over month in October. As such, housing starts were 5.6 percent higher than a year ago.

But builders remained concerned. Permits, a gauge of future housing production, registered a 0.6 percent drop in October to 1.26 million. Single-family permits dropped 0.6 percent, while multifamily permits decreased 0.5 percent.

Regionally, combined single-family and multifamily housing starts were strongest in October in the West, rising 13.5 percent month over month, and by 5.5 percent in the South, the Commerce Department reports. However, housing starts dropped 0.6 percent in the Midwest and by 4.8 percent in the Northeast last month.

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

Apache is functioning normally

[Editor’s note: Originally published on Linkedin.]

COVID has demonstrated how fragile and interdependent many of the systems are that we know as “daily life.” Not unlike a Jenga tower, if one piece is removed, the entire structure can crumble. In this brief, I will make a radically practical policy suggestion for how we can assure that one critical piece in the tower, housing, can be stabilized through federal policy so that it does not contribute to structural collapse.

The housing finance system has vast complexity to it, but it can be boiled down to the following basic sequential transactions that sustain it: renters and homeowners with mortgages pay landlords and lenders monthly, who in turn pay their investors and creditors.

When enough renters and owners can’t or don’t pay their obligations in a relatively short time period disrupting the flow of payments further down the pipeline, then the whole system faces jeopardy. This is the scenario we are currently facing.

In 2009, the federal government response to the housing market collapse can be characterized as a “save the institutions” approach. Although there were consumer-oriented programs such as the Home Affordable Refinance Program (HARP), they were generally too little, too late, and too complex to navigate. Millions of Americans lost their single-family homes, and millions more suffered as rental housing became less and less affordable in many markets during the recovery of 2010-2019. Government poured billions of dollars into the private institutions that finance housing, while millions of homeowners were displaced and the market was “cleansed,” allowing many that participated in the financial collapse to re-enter the market and reap billions in profits refinancing with different owners the very same properties that had been previously leveraged. This was not our best effort at policymaking that supports a sense of the American Dream that we often reference when it comes to housing in this country.

In 2020, we need a major “save the citizen” approach that also will benefit a healthy and robust housing finance system. I am proposing a relief program that is targeted at the foundation of the housing value chain: the renter and mortgage payee. If our goal is to stabilize people’s housing not just for their own financial security and well-being, but also so we can assure that the most number of people can properly socially isolate themselves until we return to an all-clear mode, then we need to provide immediate financial assistance to pay rent and mortgages that will keep renters and homeowners in compliance with their financial obligations, and therefore housed. Landlords and mortgagors will continue to receive their full payments and their investors and creditors will continue to receive whatever is due them. Americans remain housed, the housing finance system remains intact, and it buys us time to get to a more permanent solution.

One-time payments of $1,200 on a means-tested basis are not going to do the trick. Aside from being too little and too late for many, this money is likely not enough to cover the housing payment even if it was fully dedicated to that, and secondly it is likely to be used for other immediate needs such as food and medicine.

Under a proposal I am calling the Housing Emergency Loan Program (HELP), the federal government will provide every American with access to a low-interest loan for up to 12 months of their housing costs (monthly rent or mortgage payment) that they do not need to pay back until the end of a 10-year term (sufficient time to pay back small amounts over time). In order to assure that the money is used to keep people housed, the payments will go directly to landlords or mortgagors and, to keep it relatively simple, the loans will be made on a quarterly basis, thereby covering three months of housing payments. Furthermore, this loan program should be available to anyone who applies regardless of income. Means testing creates two distinct problems. First, it greatly slows down administration and increases costs (someone has to do the verification and compliance). Second, we are currently in a crisis that has put many families whose incomes previously may have put them squarely in the middle or even upper income quartiles on shaky ground. If suddenly a family loses both its earners and there is no immediate income then why would we want to punish them for their prior economic success as they face financial ruin and possible eviction moving forward?

HELP is designed to be effective, simple, and executable. Because it is a loan, the government can expect to receive this money back in 10 years. Rather than a giveaway, a loan with a very modest interest rate of 50 bps is likely to diminish fraud and abuse. Since the Fed has indicated its willingness to print money to keep the credit markets afloat, let’s use that same spirit (and magical printing press) to provide renters and mortgagees with credit that can save the system from the bottom up, at least until we get through this very uncertain period. Borrowers would self-certify their rent or mortgage payment amounts. They would be less likely to inflate these because it is a loan that must eventually be repaid. Plus, since the money does not come to them but rather their landlord, there is little incentive to cheat.

In order to make this work, the program would require an online process that enables efficiency and accountability. Fortunately, we have the information technology systems that can make this work. A borrower would apply for the loan (again, minimum of 3 months of their housing payment) and identify their landlord using the landlord/mortgagor’s EIN number, which the government would require those entities to provide to their tenants/mortgagees (they are public record anyway). The borrower would be assigned a unique account number. That account number would then be shared with the landlord by the tenant and the landlord could then claim the proceeds in the account, at which point funds would be transferred to the landlord/mortgagor electronically. If a tenant sets up an account then a lender/mortgagor would not be allowed to refuse the money or take action to remove the renter/mortgagee for the period covered by the loan proceeds. All of this can be set up relatively quickly using off-the-shelf technology that would not require a vast bureaucracy.

What would all of this cost the government? Well, since it is a loan, in theory, nothing. But in terms of near-term outlays, let’s assume that half of all mortgagees and renters avail themselves of the HELP program for 6 months’ worth of housing costs. Assuming 40 million renters paying an average monthly rent of $1,500 ($180 billion in loans) and 50 million mortgagees with average monthly payments of $1,100 ($165 billion), that’s a total of $345 billion. Further assuming that the program costs $1 billion to operate over 10 years, the compounded repaid interest of $17 billion would accommodate a default rate in the 3-4% range for the program to break even.

The HELP program would take tremendous pressure off the housing system while we work to find longer-term solutions for a more stable and rational housing market that is not so vulnerable to COVID-like events. Most importantly, it would keep millions of Americans in their homes during this tumultuous period and contribute to the nation’s general welfare, which requires people to stay at home – but only if they have one.

Whatever the governmental response is to keep people housed, I hope it incorporates the following principles: 1) keep people in their homes (both rental and homeownership) without disruption AND ensure the solvency of their landlords and mortgagors, protecting both citizens and the housing finance system equally; 2) provide resources that are quick and easy to access with minimal administrative requirements that are not overloaded with fear of fraud provisions; and 3) use technology to provide expediency, transparency, and accountability.

Source: geekestateblog.com

Apache is functioning normally

After failing to achieve its goal of remaining adjusted EBITDA positive in 2022, analysts were unsure if Compass would make good on its most recent financial goal of becoming free cash flow positive in the second quarter of 2023. But the Robert Reffkin-helmed brokerage has proved the naysayers wrong, at least for now.

During the second quarter of 2023, Compass recorded a free cash flow of $51 million, compared to a free cash flow loss of $59 million the prior quarter. Kalani Reelitz, the firm’s chief financial officer, also noted that Compass repaid the remaining $150 million draw it had taken out form its revolving credit facility in July.

“I am pleased to share that in the second quarter we grew market share, grew agent count and grew margin while delivering positive free cash flow and strengthening our cash position,” Reffkin told investors and analysts listening to Compass’ second quarter earnings call Monday evening. “We achieved strong financial results that were inline with guidance in the midst of a quarter that was impacted by mortgage rates increasing 100 basis points to 7%.”

Executives attributed this success to Compass’ commitment to cutting operating expenses, which came in at $1.54 billion for the quarter. A year ago, its Q2 operating expenses were $2.11 billion.

Compass’ free cash flow win came despite a 26% annual drop in revenue to $1.5 billion, which the brokerage attributed to a 19% year-over-year decrease in transaction sides to 54,207, combined with a decrease in the average home sale price, as the brokerage’s gross transaction value dropped 26% year over year to $56.8 billion.

While Compass may have been free cash flow positive for the quarter, the brokerage still reported a net loss of $46.9 million. However, this is an improvement compared to the $101 million net loss reported a year ago.

Compass executives were also pleased that the firm’s free cash flow success came alongside its third consecutive quarter of market share growth, which came in at 4.6% for the quarter, up 13 basis points from Q1 2023. In addition, Compass also reported an increase of 429 principal agents compared to a year ago and a retention rate of over 90%.

“We are seeing competitors reduce the financial incentives they were using in attempt to recruit Compass agents and a race to the bottom environment where many traditional brokerages that historically competed on value-add and support services,” Reffkin said. “We are now seeing these firms cut back on these areas and many cases are adding themselves to the already crowded low cost, low value brokerage services landscape. Compass is going the other direction. We are trying to widen our competitive advantage as the high value brokerage space is becoming much less crowded.”

Reffkin said that it would not surprise him that in the years to come, Compass being “the only major national brokerage competing to serve agents high value products and services.”

Greg Hart, Compass’ chief operating officer, added: “We continue to grow our principal agent count since we eliminated cash and equity sign on incentives last summer. The vast majority of agents tell us the Compass platform is the number one reason for coming to Compass.”

Compass will continue looking for expansion opportunities through strategic mergers and acquisitions, executives said.

The brokerage’s next goal is to remain free cash flow positive for the full year 2023. Executives said they’ll continue to focus on Compass’ technology offerings, as well as expanding its title and escrow business integration, which recently launched in San Diego.

By the end of 2023, Compass plans to expand this integration into all markets where it offers title and escrow including Philadelphia, Washington, D.C., Maryland and Virginia.

“We are very strong and we are still investing in growth in the platform,” Reffkin said. “We are excellently positioned for the cyclical upturn that will come when the market normalizes.”  

Source: housingwire.com

Apache is functioning normally

My friend Lynn works for a major U.S. insurance company. I recently asked her for tips to help people save money on auto insurance. I expected maybe a few quick ideas, but she went above-and-beyond with the following detailed list. If you own a car, you should read these tips. For readability’s sake, I haven’t blockquoted this, but it’s all Lynn.

Note that every insurance company is different — not all of these ideas work everywhere. The first thing you can do to save money on auto insurance is to self-insure as much as you can afford. Do this in the following ways:

  • High deductibles. Everyone preaches this, yes, but it’s usually the easiest way to cut costs. Usually. (If your car is over ten years old, the savings may be minimal.)
  • Remove towing. Good maintenance and planning can save you money. Don’t run out of gas. Don’t lock your keys in your car. Make sure you have a spare and know how to change it. Sometimes your car will break down, but if your car is well-maintained, it won’t happen often. You pay $10 – $30 a year over the life of your policy and one tow costs $100. Note that in the event of an accident, towing is almost always covered under collision.
  • Remove car rental. Small economy cars cost about $20 – $25 per day to rent. Car rental is $20 – $40 per year. Play the odds. If you rent a car on vacation, your insurance will cover you while driving that car. Don’t pay for the extra coverage. The only things it offers are:
    1. Zero deductibles. You go all year long with your deductibles, why change now? Also, if you pay for the car with a credit card, they may pay for any out of pocket in the even of an accident.
    2. Downtime coverage. Downtime means that while the rental car you wrecked is in the shop being repaired, it can’t be rented out to other customers and they can ding you for the daily fee. This may be an issue if they can show that all other cars were rented out and they lost money because of you — Hawaii is notorious for charging this. But, again, it’s a risk you might decide to self insure rather than pay $21 a day for the insurance.

Aside from self-insuring, there are other steps you can take to save on car insurance.

  • Shop ahead. Before you buy your next car, check on insurance. Many people assume that SUVs are expensive and Neons are cheap. This is not necessarily true. Some companies will increase your liability based on the cost of damages your type of vehicle may inflict — big trucks cause big damage. However, they also rate the autos based on how likely they are to be damaged in an accident, how often they are stolen, and how badly driver/passengers are injured. That Neon (or Jetta or Honda) is going to be a lot more expensive than you think. Many companies will have websites that will give you lists of safe and lower priced cars. (Saturn is a low insurance car because it has dent-resistant doors.)
  • Think twice about after-market gizmos. If your vehicle is totaled or stolen, the insurance company will determine a fair market or actual cash value. They will look at your vehicle as a “whole package.” Even if you paid for $3,000 in after market items (wheels, spoilers, stereos, exhaust, etc.) they may only add $1,000 in value to your vehicle. It’s not dollar for dollar.
  • Have all of your insurance in one place. Often, the more types of policies you have, the more you save in discounts.
  • Find out if your insurance company offers any low-mileage breaks that you qualify for.
  • Can you take a safety-driving course? Some companies offer a discount for this.
  • Do NOT pay monthly. Your carrier will charge anywhere from $3 to $5 per month for this type of billing. Pay every six months if possible. If you must pay monthly, do an auto pay — the charges are less because they only send a bill if the amount changes.
  • This might not be a money saving tip, but insurance companies are state regulated. They must file their rates with the state and be able to justify any increases these are public record as are any types of complaints or fines. For example, if you’re in Oregon, you can check out your company and/or agent at http://insurance.oregon.gov/.
  • Most companies now use aspects of your credit to determine your rate. It is illegal for them to do this mid-term — as long as your policy is continuous without any lapses, they can’t use external info to change your rate. They can only use claim and ticket info. However, all newly added vehicles can be affected by credit. If you have good credit, this may be to your advantage. You are allowed to request that they re-check your score once per year. However, whatever the score is, you’re stuck with it. If it comes back bad and it raises your rate: too bad. But, if you have a policy that was written when your credit wasn’t so great, request that they check it again after things look better.

Save Money on Your Auto Insurance

These are fantastic tips, full of great ways to save money on auto insurance. Thanks to Lynn for the advice!

Source: getrichslowly.org

Apache is functioning normally

My wife isn’t one of those women who can buy hundreds of dollars of groceries for $12.93. She is, however, a frugal shopper, and can often trim an $80 bill to a $60 bill. Here are some of her top tips:

    1. Don’t shop for groceries if you’re hungry. You’ve probably heard this before, but it’s true. Studies show that folks who shop when they’re hungry buy more. It’s true for me: If I go to the store for milk on a Sunday morning without eating breakfast, I’m likely to come home with donuts and orange juice and Lucky Charms, too.
    2. Shop with a list. Make a list and stick to it. The list represents your grocery needs: the staples you’re out of, and the food you need for upcoming meals. When you stray from the list, you’re buying on impulse, and that’s how shopping trips get out of control. Sure, a magazine only costs $5, but if you spend an extra $5 every time you make a trip to the supermarket, you waste a lot of money.
    3. Choose a grocery store and learn its prices. As I mentioned yesterday, supermarkets monkey with prices. You can’t be sure a sale price is really a deal unless you know what the store usually charges. Once you learn the prices at one store, you can save even more by adding another supermarket to the mix. Learn its prices, too, and note how they compare to the first. Your goal should be to recognize bargains. You want to know when those Lucky Charms are really on sale.
    4. Buy in bulk, when possible. You can save a lot of money by taking advantage of economies of scale. But there are times you shouldn’t buy in bulk, too: if the larger bundle is actually more expensive per serving, if you don’t have room to store larger packages, if you won’t actually use more of the product before it spoils. You don’t want stale Lucky Charms.
    5. Stock up on non-perishables, if you have space. Investing in five tubes of sale toothpaste is better than buying one on sale now and four later at the regular price. If a favorite product goes on sale, buy as much as you will use before it goes bad. Again: be certain that the sale price is really a bargain. Great items to hoard include: dried pasta, canned foods, toiletries, baking supplies, cereal, and cleaning supplies.
    6. If you do seasonal baking, stock up year round. Dried fruit and nuts will keep in the fridge or freezer. Decorating supplies can be stored in a cupboard or cellar. By planning ahead, you can purchase seasonal goods when they’re cheapest rather than when you need them.
    7. Know when to shop at big box stores. Costco and Sam’s Club don’t always have the best prices, and their selection is limited. However, they do have great deals on many items, including vitamins, toiletries, baking supplies, pet supplies, and paper products.
    8. Compare unit pricing. The biggest package isn’t always the cheapest. Stores know that consumers want to buy in bulk, and so they mix it up: sometimes the bulk item is cheaper, sometimes it’s more expensive. The only way you can be sure is to take a calculator. (Mapgirl says she uses the calculator on her cell phone.) Our grocery store posts unit pricing for most items, which makes comparisons easy.
    9. Check your receipt. Make sure your prices are scanned correctly. Make sure your coupons are scanned correctly. Sale items, especially, have a tendency to be in the computer wrong, and yet few people ever challenge the price at the register. You don’t need to hold up the line: simply watch the price of each item as it’s scanned. If you suspect an error, step to the side and check the receipt as the clerk begins the next order. If there’s a problem, politely point it out. It’s your money. Ask for it.
    10. Use coupons, but only to buy things you actually need (or want to try). Gather coupons from your Sunday newspaper, from weekly circulars, from in-store booklets, or from online sources. Ask friends and family to save them for you. Sort through them while you’re doing something mindless — watching television, talking on the telephone, riding the bus. Clip coupons for products you use (or cheap alternates), or for products you’d like to try.
    11. Use coupons for staple foods and ingredients, not highly-processed foods.

Highly-processed foods have enormous markups. “You shouldn’t even buy processed foods because the markups are so high,” my wife advises. Coupon savings barely make a dent in the price. If you must buy processed foods, wait for a good sale and then add the coupon so that you can get them at an excellent price.

  1. Take advantage of special coupons whenever possible. Double coupons are great. My wife’s likes the “get $10 if you spend $50 or more” variety. Coupons for produce are rare — seasonal produce is often the cheapest and freshest. These special coupons can yield big savings.
  2. For maximum savings, combine coupons with in-store sales. What happens when you combine a steep in-store discount on Lucky Charms with a 50-cents-off coupon and a double coupon? You get very cheap Lucky Charms, that’s what.
  3. Plan your meals around what’s on sale. Every week, before making a shopping list or planning what to eat, go through your flyers and coupons. Check the calendar to see if there are any big events approaching for which you’ll need food. If you like meat, plan your menu based on the sale cuts.
  4. Examine sale flyers carefully. On the front page are the things that the store really wants you to buy. Be wary of these. Note any special bargains. This week, for example, our store had many items on sale at ten for ten dollars, including dried pasta.
  5. Take advantage of “buy one, get one free” offers. Split with a friend, if needed. You many not need two pot roasts, but it’s the same as getting one for half price if you find a friend to split the expense. (Alternately, pay the normal price and give the second away as a gift. Who wouldn’t love a free pot roast?)
  6. My wife’s final piece of advice? “Let your husband come with you for the company, but don’t let him put anything in the cart.” The experts agree.

Note: this entry started as a response to Punny Money‘s grand coupon experiment. Nick is convinced that he can’t save any money with coupons. I went to my wife for a rebuttal, but I didn’t get one. “Coupons are usually for things you don’t need,” she told me. “Sales are the same as coupons — you have to lump them together in your head. It’s all just finding bargains.”

Source: getrichslowly.org

Apache is functioning normally

While some may argue about what season is the best for real estate transactions, there’s no debating that some serious home buying buzz gets created every spring.

So if you’re a potential home buyer looking to get in on the action, read on and find out how to maximize your chances of moving into your dream home by summer.

Spring 2017: A Seller’s Market

One of the trends this spring is a lack of inventory. There’s almost always a flood of buyers in spring, which creates competition, but with a relative scarcity of new homes for sale the competition is compounded.

Spring 2017 is definitely a sellers market, so buyers need to act accordingly in order to optimize their chances of getting the home they want at a satisfactory price. Here are a few things to keep in mind:

1. Be decisive

Just because it’s a sellers market doesn’t mean that they want to wait all day until they get the offer of their lives. Few homeowners like cleaning for showings and holding open houses for strangers to come and inspect every corner of their home.

That means if you show up to view homes right as they hit the market and proceed to swiftly make offers, you will probably be better off than buyers who are going to showings late in the weekend and hesitating to make offers.

As the saying goes: fortune favors the bold.

2. Prepare yourself for disappointment

Not to be a downer, but a competitive market means it’s likely that there will be several offers on the home.

A bidding war is riddled with uncertainty, as you never know who you’re going up against. Unless you’re planning on putting in an offer that’s well-above asking price, you face the very real possibility of losing the house to another buyer. It’s a fact of the home buying process, and it can be extremely frustrating.

One way to lessen the blow is to accept beforehand that it might happen.

It can be tough when you’re falling in love with a newly renovated bathroom or kitchen, but trying to stay emotionally unattached during the process can help mitigate stress, and will ultimately make for a more enjoyable home buying experience.

3. Make a strong offer

To build off of the previous tip, you’re definitely not doing yourself any benefit by tossing out low-ball offers in a seller’s market. With multiple offers on the table, sellers are less inclined to play games with buyers.

Everyone always wants to get the best deal on anything they’re buying, so it’s natural to want to see if you can haggle your way into a sale below asking price. And that might even work during other times of the year when there are less buyers, but it’s not a smart strategy in a seller’s market.

So take your time, think about things, and come in with a strong opening offer.

4. Give yourself some room to bid

It’s been established that there’s a very real possibility of getting into a bidding war. And while making a firm first offer is a step in the right direction, chances are you will have to go higher.

That’s why you should search for homes that are below the top-end of your budget. This way you can make a strong initial bid and still have room left to run, if need be. Looking at homes that are all at the limit of your budget can leave you feeling frustrated and dejected when you can’t compete with other bidders.

5. Get Pre-Approved

Sellers want to know that the buyers they are dealing with are for real. They are living in a world of unknowns, and have no idea about your income, credit score, or debt to income ratio.

That’s why you need to get pre-approved: so they know for sure that you are a qualified and capable buyer.

With so many buyers on the market it’s virtually guaranteed that you will be competing with borrowers who are pre-approved. And when it comes down to filtering out prospective buyers, anyone with a pre-approval has a much higher chance of making the cut.

Not only will it show that you are pre-approved at a certain loan amount, but it tells sellers that you are a serious house-hunter who isn’t going to delay the transaction.

Bottom Line

Spring is kicking into gear and that means many buyers and sellers are getting ready to make a deal. Buying a home this spring might be a challenge for some house-hunters, but if you follow the tips outlined above, the only thing you’ll have to worry about when summer comes are your tan lines.

Carter Wessman

Carter Wessman is originally from the charming town of Norfolk, Massachusetts. When he isn’t busy writing about mortgage related topics, you can find him playing table tennis, or jamming on his bass guitar.

Source: totalmortgage.com

Apache is functioning normally

With elevated interest rates, securing a mortgage to buy a house can be challenging. But what could be more surprising is how the numbers actually work once you start making mortgage payments.

“New mortgage math is brutal,” Austen Allred, co-founder and CEO of online coding bootcamp Bloom Institute of Technology, wrote in a recent tweet.

Allred explained that if you purchase a $1 million house with a $200,000 down payment and get an $800,000 mortgage at a 7% interest rate, in the first three years you’ll be paying $193,000.

But because of the high-interest rate, a significant portion of your payments would go toward interest, leaving a substantial amount still owed on the principal.

“After those $193,000 of payments your $800,000 mortgage is now at $774.5,000,” he said. “You paid $166,000 in interest, $25.5,000 in principal.”

The tweet has since received 7.7 million views and more than 31,000 likes.

In a follow-up tweet, Allred pointed out that his example assumes “a lot down and perfect credit.”

“I have no idea how younger generations will make it work,” he added.

While it’s difficult for new homebuyers to enter the market, there are ways to invest in real estate without buying a house. Here’s a look at three of them.

Trending: Elon Musk has reportedly bought 6,000 acres of land just outside of Austin. Here’s how to invest in the city’s growth before he floods it with new tech workers.

Real Estate Investment Trusts

You can think of real estate investment trusts (REITs) as giant landlords — they own income-producing real estate and collect rent from tenants.

REITs are required by law to distribute at least 90% of their taxable income to shareholders as dividends. This requirement makes them appealing to investors looking to earn a passive income.

These days, there are plenty of REITs trading in the stock market. So it’s easy to invest in them. You can purchase shares of a REIT much like you would buy stocks of a company.

REITs can center their investment strategies around various kinds of real estate. Some may concentrate their portfolio on residential properties while others might hold assets such as shopping malls or office buildings.

Like any investment, REITs come with their own risks. So always conduct comprehensive research and due diligence before diving in.

Exchange-Traded Funds

Exchange-traded funds (ETFs) have been a popular choice for investors seeking a convenient gateway to specific sectors or indices.

You can use ETFs to tap into real estate, too.

Real estate ETFs usually hold a diversified portfolio of REITs, which in turn own the underlying real estate properties. By purchasing shares of a real estate ETF, investors can gain broad exposure to the sector with a single purchase.

ETFs charge a fee for providing that convenience. So make sure to check their expense ratio before taking the plunge.

The largest ETF focusing on the real estate sector today is the Vanguard Real Estate Index Fund ETF (NYSE:VNQ). It holds 165 stocks and has an expense ratio of 0.12%.

Crowdfunding Platforms

Crowdfunding refers to the practice of funding a project by raising small amounts of money from a large number of people. And it can be an excellent match for real estate investing.

Real estate crowdfunding platforms provide opportunities for people to invest in a wide array of properties across different geographical locations and property types. They typically have lower minimum investment requirements compared to traditional real estate investments. This means people can gain access to properties and portfolios that are typically off limits to retail investors.

Other than making the sector more accessible to the general public, some platforms also allow investors to select specific properties and projects to invest in.
For instance, if you are interested in single-family rentals, there are options to invest in rental properties with as little as $100 while staying completely hands-off.

Check out:

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This article ‘You Paid $166K In Interest, $25.5K In Principal’: Tech CEO Explains The ‘Brutal’ Math Behind New Mortgages — Here Are 3 Ways To Invest In Real Estate Without Buying A House originally appeared on Benzinga.com

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© 2023 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

Source: finance.yahoo.com

Apache is functioning normally

Home prices are going up across the country after slowing for more than a year, according to a new report from data and analytics company Black Knight.

The report found that nationally, home prices in June rose by 0.67% month-over-month on a seasonally adjusted basis. Meanwhile, the annual home price increase was 0.8% in June, up from just 0.2% in May. 

Calling the June price increase an inflection point, Black Knight Vice President of Enterprise Research Andy Walden said the rate of home price increases would have a “lagging, but significant impact on the annual rate of appreciation.” 

Month-over-month, home prices increased in more than 60% of markets, with notable exceptions in Austin and San Antonio, where prices declined month to month in June on a seasonally adjusted basis. The strongest price growth was in Hartford (+1.2%), Seattle (+1.2%) and San Jose (+1.2%). 

“At the national level, home prices have now fully erased their 2022 corrections hitting new all-time highs in June on both seasonally adjusted and non-seasonally adjusted bases,” the report said.

Annual growth was strongest in the Midwest and Northeast markets, while West Coast and pandemic boom markets continue to see prices run below last year’s levels. Milwaukee (+6.4%), Cincinnati (+5.7%), and Philadelphia (+5.6%) are more than 5% above last year’s price peaks, with a handful of Midwest and Northeast markets, including Kansas City, Virginia Beach, Richmond, Baltimore, Providence, St. Louis and Chicago up more than 4%.

Rising home prices also boosted homeowner equity levels. The average mortgage holder now has $199,000 in equity, up from $185,000 in the first quarter, but down from $207,000 at the same time last year. Strong equity positions are one element of today’s historically strong mortgage performance, the report said.

The June report also quantifies the savings during the last big wave of refinance activity. Existing homeowners who have benefitted from $42 billion in cumulative savings through refinancing in the past three years are now also benefiting from strong income growth, according to Black Knight. Existing homeowners need 21% of the median household income to make the average monthly principal and interest payment, compared to more than 36% for prospective homebuyers in today’s market. 

Low interest rates locked in during the pandemic are keeping payments down for existing homeowners and contributing to low delinquency levels. Meanwhile, owing to high interest rates, affordability for prospective homebuyers is at near 37-year lows. 

For existing homeowners, the relatively low share of income required to meet mortgage obligations along with the strong credit quality are contributing to a 16-year low in seriously delinquent mortgages, the report said.

Source: housingwire.com

Apache is functioning normally

I am going to be controversial here. The GSEs have become more aggressive in their levels of buybacks with lenders. I say this without the benefit of the specific data, and I would love to see some from Fannie Mae and Freddie Mac, or the FHFA, but in the absence of that, I have interviewed a wide variety of lenders, all IMBs, and the feedback is consistent.

Lenders are mad. They feel like the GSEs are not being consistent with commitments made in recent years about materiality and options for remediation. And they fear retribution if they make these points, so instead they simply engage with their respective GSE each month to try to get them to take back the repurchase requirement on this loan or that loan. It’s a loan-by-loan drudgery that takes staff time and adds costs to a lender’s bottom line.

At a time when the customers of Fannie Mae and Freddie Mac are losing money, or barely breaking even, the GSEs are having a heyday. As was reported last week in Inside Mortgage Finance for example, “Freddie Mac racked up $2.94 billion in net income in the second quarter, up 41.0% from the first quarter and 20.0% from the same period last year. This marks the enterprise’s fourth consecutive quarter of increasing profits, which reached their highest level since the first quarter of 2022.”

When considering the buyback frustration, it is unsettling when it is stated in the earnings press coverage that, “The resulting increase in homeowner equity allowed Freddie to release $537 million in loss reserves in 2Q23. That’s compared to a $395 million provision for credit losses in the prior quarter and a $307 million provision a year ago.” In other words, the portfolio is stronger but they are kicking back more loans to lenders — more than has been seen in many years.

In speaking to lenders, the feedback was consistent. They believe that both GSEs changed their sampling methodology for quality control review earlier this year with specific focus on nonbank originators. Why would the GSEs focus on IMBs? It’s rumored that this more aggressive posture is because they are concerned about potential failures of some of their customers during these tough times and therefore they would lose their counterparty to warranty defects on loans should they go to default.

Banks, in their view, are less risky and therefore the need to force buybacks on them is less. In fact, it is rumored that some banks are given options to simply indemnify defective loans found in the QC process, where for nonbanks the only option is repurchase.

If true, the unfairness of this entire scheme is disconcerting. The GSEs are posting ever-increasing profits in the billions of dollars while their customers are struggling to make it through this higher-rate environment. That environment was driven entirely by actions of the federal government by first overstimulating the economy during the COVID crisis and then correcting for it, or perhaps over-correcting, in the current time frame.

What’s even more incredible is that approximately 80% of loans being sold to the GSEs, which are driving their massive profit surge, is coming from the IMB community. But by their own actions the GSEs are only contributing to the financial burden that these companies face.

Nonbanks that try to re-sell the repurchased loans are faced with massive discounted pricing as the loans are not only “scratch and dent” but most are at far discounted rates compared to today’s market. This is like a king in a castle robbing the farmers who toil the soil to bring them food and taxes. At face value, it appears aggressive.

Years ago, the MBA, lenders, and other groups reached terms with the GSEs and FHFA about the rep and warrant challenges. It was agreed that lenders that intentionally commit fraud or misrepresentation should not be spared. It added that “fat finger” defects, mistakes that seem to happen over and over again regardless of intent, would also not be forgiven. Even violations of materiality, meaning the loan would never have been made if these defects had been disclosed, might cause repurchase.

But there was also an acceptance of what the lender knew or could have known at time of origination. There were alternatives to repurchase for less egregious defects other than repurchase. But all of this seems to have been forgotten.

Lenders tell me they are seeing repurchase demands for appraisal errors, for miscalculation of income (usually self-employed or variable income over time) and more. But whatever the reason there is one common reality: The volume of repurchase demands is up and this is adding financial stress and increasing counterparty risk to the GSEs at a time when their earnings say that credit risk is declining, in fact it was the key contributor to Q2 earnings.

Jaret Seiberg of TD Cowen released a report this week that leads with, “Housing: could Washington trigger a mortgage credit crunch?” Never was there a more timely report from Seiberg. His opening statement says it all, “Our worry is that Washington policy changes could contribute to a mortgage credit crunch in the coming years as banks face capital challenges and a tougher economic environment, while the government appears unlikely to take key steps to ensure non-banks will remain key providers of mortgage credit.”

In his report he calls for expansion of Federal Home Loan Bank (FHLB) access for IMBs, which would improve their liquidity.

The irony here is extraordinary. The GSEs, with the assumed support of FHFA, is increasing risk to their IMB customers by implementing what appears to be a far more non-negotiable buyback policy while at the same time reaping massive profits in the billions — billions — from these same customers.

The irony continues in that a key contributor to earnings was reducing loan loss reserves due to higher equity and loan quality, yet they are saddling lenders — their customers — with repurchase demands.

Finally, as Seiberg points out, the GSEs and FHFA may be unintentionally piling onto the credit contraction that may get worse due to the list of items in his report combined with the lack of solutions such as FHLB membership modifications.

I come at this issue with the benefit of having run the single family business at Freddie Mac, being on the President’s Housing Team during the Great Recession where we looked at GSE policies that could help or hurt the market, and as the former CEO of the MBA.

I have interviewed a large number of customers of the GSEs who want to remain nameless as they fear retribution from these critically important companies. And while I am certain that groups like the MBA and others are approaching this with the usual decorum that helps them succeed on key policy issues, I think there is a time when voices of dissent are critically needed.

We are literally squeezing the life out of many institutions who are needed to keep the housing market functioning. More importantly perhaps, the trust deficit between this power duopoly of Fannie Mae and Freddie Mac, each reaping billions in profits in a market where almost all others are struggling, is only widening. Saddling the IMBs with ever-increasing financial risk, unless the defects are intentional, material, or repeated consistently, appears to violate the integrity of all the great work done between industry and the GSEs years ago.

This is at least a time to consider the implications and fairness here. I would hope these companies and their regulator listen to the voices of concern.

David Stevens has held various positions in real estate finance, including serving as senior vice president of single family at Freddie Mac, executive vice president at Wells Fargo Home Mortgage, assistant secretary of Housing and FHA Commissioner, and CEO of the Mortgage Bankers Association.

This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.

To contact the author of this story:
Dave Stevens at [email protected]

To contact the editor responsible for this story:
Sarah Wheeler at [email protected]

Source: housingwire.com