JULY 2015

In This Issue

Home Ownership Rates Drop to 64.3%; Lowest Since 1967




The U.S. homeownership rate fell to 63.4 percent in the second quarter of 2015, according to the U.S. Census. That is down from 63.7 percent in the first quarter and from 64.7 percent in the same quarter of 2014. It marks the lowest homeownership rate since 1967.


Homeownership peaked at 69.2 percent at the end of 2004, when the housing market was in the midst of an epic boom. The 50-year average is 65.3 percent. 


"It is now just five-tenths from the record low seen in 1965 in data going back also to 1965," noted Peter Boockvar, an analyst with The Lindsey Group. "All the governmental attempts (certainly aided and abetted by many players in the private sector) at boosting homeownership has gotten us to this point in time with all the havoc it wreaked over the past 10 years. It's just another governmental lesson never learned, of don't mess with the free market and human nature."


Household formation, however, is rising. The number of occupied housing units grew, but all on the renter side. The number of owner-occupied units fell from a year ago. No wonder both rents and occupancies continue to soar.


"Our results for the second quarter and year to date exceeded our original outlook," noted Tim Naughton, chairman and CEO of AvalonBay, one of the nation's largest apartment REITs, in the company's second-quarter earnings release out Monday. "For the balance of the year, we expect accelerating apartment demand to support stronger performance across our business."


Multifamily apartment starts soared 55 percent in June from June of 2014, according to the U.S. Census. This, as single-family housing starts rose 15 percent. Apartment supply is still far lower than demand. Annual rent growth hit 5 percent in the second quarter of this year, according to Axiometrics, a real estate analytics company. Apartment occupancy hit 95.2 percent, a near record high.


Home sales have been increasing modestly this year, but first-time buyers are still playing a historically small part in the market. Still-rising home prices and tight lending standards are keeping these buyers on the sidelines. Home prices in some markets are hitting new highs and prices are gaining the most on the low end of the market, where first-time buyers mostly start.


Chinese Buyers Feed New Energy into Texas Real Estate



With investors nervously watching the Shanghai stock market, Chinese are the now biggest foreign buyers of American real estate, and they are setting their sights on the biggest state in the Lower 48.


Texas is seeing a huge influx of Chinese buyers, both investors and owner occupants, thanks to more affordable housing. And recent turbulence in China's stock market is likely to boost demand for U.S. property, not hurt it.

"My schedule is very full. Sometimes I cannot handle more," said Shirley Mei Qing, a real estate agent with Keller Williams in Houston, adding that she's seen a 30 percent increase in Chinese clients in the past year. "The main reason is the house market here-comparably, the price is better than the East and West Coasts."


Chinese buyers have poured $28.6 billion into U.S. real estate in the past year, more than double the amount spent by Canadians, the second most active buyers, according to the National Association of Realtors.


California is still a Chinese favorite, but high prices there are cutting into demand. While Texas ranks third for all international home buyer demand, behind Florida and California, it is favored by Chinese buyers, thanks to its strong employment and education opportunities. Chinese accounted for 31 percent of international sales in Texas in the past year, second only to Latin American/Mexican buyers.



The serious volatility in China's domestic stock market-shares in Shanghai plunged 8.5 percent on Monday and lost more ground overnight-is seen as increasing demand for U.S. real estate, not hindering it.


"While investors in the Chinese stock market have certainly experienced a negative hit to their net asset positions in recent weeks, since the Chinese yuan is essentially pegged (within a narrow floating band) to the U.S. dollar, any pass-through effect to the exchange rate is not visible," said Svenja Gudell, director of economic research at real estate site Zillow. "Investors in Chinese equity markets will flee to safe assets, and few assets offer the combination of relatively modest risk and high returns as U.S. real estate. It is very plausible that China's stock market volatility could push more Chinese investors to buy homes in the U.S."


Not only are Chinese buyers of U.S. real estate looking for a safe haven for their money, they also want to live here, work here and educate their children here.


"About 10 percent of my business, on either side of any transaction, is Chinese," said Michele Marano, a real estate agent with Champions Real Estate Group in Houston. "I get students. Rice [University] is a big influential school with the Chinese. I get the energy clients, a lot of engineers. The ones I'm involved with are typically under 40."


Marano said that because there's already a large Chinese population in Houston, it's becoming more familiar to family and friends in China. Home prices in Texas are soaring, with Dallas, Houston, San Antonio and Austin all reaching new peaks in May, according to Black Knight Financial Services.


And Chinese are willing to spend more. The average price of a home purchased by a Chinese buyer in the last year was $831,800, according to the Realtors association. That is four times the national median home price and far higher than any other international cohort's average purchase price.


Texas ranks number one in new home construction in the United States, and Chinese have long favored new over existing homes. Witness a massive development in Irvine, California, that continues to be fueled overwhelmingly by Chinese demand. Texas is about twice as large as California in total home production, according to the National Association of Home Builders.


U.S. homebuilders have been designing more multigenerational homes with an eye toward larger, immigrant families. Some have adopted Feng Shui floor plans to attract Asian buyers.



4 Things Your Bank Won't Tell You When You Get a Mortgage
by Yahoo Finance

As the Consumer Financial Protection Bureau strives to create more transparency within the mortgage industry, there are crucial homebuying truths that endure - and knowing what they are can help you to be better informed as a homebuyer. But don't expect to hear them from your bank.

1. You Can Get a Better Deal Elsewhere

Fannie Mae and Freddie Mac publish mortgagee guidelines that banks use to originate loans. In addition, individual banks may place additional credit requirements on these guidelines to minimize their risk. Let's say that Fannie Mae has a maximum debt-to-income ratio of 45%, but the bank that you're applying with has a maximum debt ratio of 43%, conforming to the CFPB's definition of a 'qualified mortgage.' Your bank will likely never tell you can get a better deal elsewhere, even though you probably can. When you work with a bank, you are limited to their programs and their products. Direct lenders, brokers and some smaller banks have access to more credit, which ultimately dictates whether or not your loan will move forward.


Caveat: A better loan offer elsewhere is not a better offer if it won't close because you are unable to meet the loan guidelines. So make sure that you can meet the requirements of that "better deal" before you go for it.

2. Time Is Not Your Friend

Once you've locked in your interest rate, the clock is running - and time is now indeed money. Let's say you're nearing the end of your 30-day interest-rate lock, and you need an additional 15 days. Your lender might charge you as much as 0.25% of the loan amount - on a $300,000 loan, that's $750 more in fees because you took an additional week to get your financial documentation back to the lender. Lock fees vary, as do rate lock policies among banks. Be informed, ask upfront. After you have chosen to lock your rate, get your financial documentation back to the lender in 24-48 hours as needed in the process. While this is recognizably an inconvenience, it will ensure that your loan closes in the timeframe in which the interest rate is locked.


FYI: The reason why interest rate lock extensions cost you is because if interest rates go up and you're locked in at lower rate, your loan is less profitable, and therefore less desirable, to the end investor.


3. You'd Better Have a Ton of Equity

Equity is a crucial factor when applying for a mortgage. If you intend to get the absolute lowest possible interest rate the market will bear you're going to need a minimum of 30% equity in your home - ideally more. Mortgage pricing adjusters (factors that drive mortgage costs) - like occupancy, credit score and loan-to-value - begin after a loan to value of 65%, or 35% equity. That means if you have 35% equity to finance a loan for an owner-occupied home, the pricing is going to be quite a bit better than if you have 25% down, for example. Loan officers will normally tell the borrower the minimum amount they need to get a mortgage, but not necessarily the minimum amount they need to get a mortgage with the best possible combination of rate and fees.


Here's a nifty calculator you can use if you want to see how much home you can afford. Your credit score has a big impact on that number, so you can see where you stand by getting your free credit scores once a month on Credit.com.


4. Appraisers Hold All the Cards

Mortgage professionals who work in a non-banking capacity will be more likely to tell you that appraisers do hold all the cards. Loan professionals who work for a bank have more rules and requirements for originating than non-bank loan officers. Additionally, many bigger banks own the appraisal companies, subsequently getting a piece of the appraisal revenue. The Home Valuation Code of Conduct that arose in the aftermath of the financial collapse took away the ability for loan officers to have any direct access to appraisers, including the ordering and scheduling of the appraisal. Currently, the entire appraisal process is automated to meet federal compliance regulations.


Now, you may qualify for a mortgage on paper with your credit score, income, credit and debt, but the appraiser's opinion of your home's value can kill your mortgage, even though a different appraiser's opinion of value may give you a green light. Even a $5,000 difference in value is enough to throw a loan off-course. Should your appraised value not meet expectations, you do have recourse. Ask a real estate agent friend to pull comps identifying neighboring houses not included in the appraisal report. Next, ask your bank to have a "re-consideration of value" performed with the new information. In most cases, it's a 50/50 shot, as the loan industry has been forced to give appraisers absolute power.


The more clarity and understanding consumers have about the loan process, pricing and general guidelines, the more information they will have to make an educated choice. Always best to continually ask questions - and then some - throughout the transaction.

4 Reasons to Sell Your House Now
 by Daily Finance

The real estate market has been booming in recent years, but the market never heads in a straight line. If you're looking to sell your home or your vacation property, now may be an ideal time to cash out.

Let's go over a few of the reasons it makes sense to sell your home now.

1. Mortgage rates are likely heading higher. The Federal Reserve has made it clear that interest rates will be moving higher. Fed chief Janet Yellen recently said that rates will move higher later this year after seven years of central bank easing that helped the battered real estate market bounce back following the subprime lending crisis.

We're already seeing market sentiment starting to factor in the inevitable hike. After bottoming out at 3.77 percent in April, rates for 30-year mortgages have crept up to 4.26 percent.


This should be alarming if you have a house to sell. It means that potential buyers are getting less bang for their borrowed buck, and that could drive home prices lower to balance things out. With cash buyers peaking last year, the market's now at the mercy of mortgage-seeking buyers. Higher rates won't help.

2. You may as well get out while the getting is good. Last month was great for sellers. Existing homes sold at the fastest pace since early 2007. The National Association of Realtors is reporting that home sales rose 3.2 percent in June, pushing the seasonally adjusted annual rate to 5.49 million homes changing keys.

Even the real estate agency is conceding that the strength in turnover is likely tied to fears that rates will move higher in the near future. Median sale prices have risen 6.5 percent over the past year -- to a new record of $236,400 -- but that momentum will be challenged in the new normal of rising mortgage rates.

3. Locking in today's low rates. A common gripe during the housing boom is that if someone sells a home, they still need to find a new place to live. This could be an ideal time to consider trading down, moving to a more affordable housing market, or possibly even renting. However, if selling now results in buying now, it's probably a good idea to do it sooner rather than later to lock in today's rates.

 Waiting for rates to move higher may result in better prices as a buyer, but is that a chance you want to take? You don't want to be priced out of your next address.

4. Your home will stand out. There were 2.3 million existing homes on the market at the end of June, according to the National Association of Realtors. Given the recent spike in buying we can divide that by the 5.49 million annual rate of seasonally adjusted sales to see that we have just a five-month supply of homes in the market. That's the lowest that it's been in years, making it easier for your own property to stand out if it's put on the market.

Home prices have posted year-over-year gains for 40 consecutive months. No streak lasts forever, and the climate is right now to consider moving on if it's something that you were planning on doing anyway.



4 Sneaky New Credit Card Fees You Need to Know About

Life in plastic? Not always fantastic.


New research shows that credit card providers are going the way of airlines and slamming customers with more fees.


In an analysis of 100 U.S. credit cards, CreditCards.com found that the average card now charges six fees-though some tip the scales at double that number.


They include some of the usual suspects, such as late payment and cash advance fees (charged by 99% and 98% of credit card providers, respectively).


But others might surprise you. For instance, some providers hit credit card holders with annual fees for adding an authorized user to an account, while others are guilty of charging customers for copies of monthly statements.


The survey even found one provider that charges a $25 reopening fee to clients who have second thoughts about closing their accounts.


And as mobile payments grow increasingly popular, watch out for alternative payment method fees-which might fine you for making a plastic-free payment.


Avoiding paying by phone will let you bypass that particular fee, but it's harder to escape others, like a one-time processing fee. In some cases, a consumer has to fork over $95 before even swiping a card for the first time.


These research findings are a reminder to use credit with caution, and there are some general best practices that can still help you minimize fees.


Setting up automatic payments or calendar reminders to pay your bill can save you from late fees, while resolving to make your cash withdrawals with a debit card frees you from worrying about cash advance charges.


And if you're in the market for a new card, shop around for products with no annual fee.