homesmillbrae.com » Rockville Maryland

More Homes Are Above Water, But Some Sellers Still Suffer

Thu, 13 Sep 2012 04:56:08 +0000

As home sale prices rise, overall home equity rises, and consequently more and more mortgages are no longer “under water.”

1.3 million homes that were previously worth less than the mortgages on them came back into positive territory in the first half of this year, according to CoreLogic.

Billions of dollars in home equity are returning, but what exactly are homeowners doing with this new found cash? Not much.

They certainly aren’t taking it out of their homes the way they used to. In fact, they are actually putting more cash in during refinances, according Freddie Mac. Lenders say it is becoming nearly the norm.

“I continue to see large cash infusions at closing to pay down to conforming [loan] limits, as well as increases in monthly payments to obtain lower rates on shorter amortizations, both of which are very atypical traditionally, but more and more common in this latest refi market,” said Craig Strent, CEO of Rockville, Maryland-based Apex Home Loans.

As for home sales, the reason so many people cannot move isn’t entirely negative equity, but what’s called “near negative equity,” or having less than 5 percent equity in your home. 10.8 million or 22.3 percent of all residential properties with a mortgage were in a negative equity position at the end of the second quarter of 2012, according to CoreLogic, but an additional 2.3 million borrowers had less than 5 percent equity. (Read More: Pending Home Sales Beat Expectations in July.)

The bottom line is that most move-up buyers, the ones desperately needed for a real robust housing recovery, cannot move if they can’t make enough in the sale not only to cover the mortgage but to cover real estate agent fees, closing fees and of course a down payment on a new home.

Much of the recovery in the housing market of late has been thanks to investors, who are often all-cash buyers and who do not have to sell a home in order to buy another. All that activity on the very low/distressed end of the market is pushing overall prices higher. (Read More: How Investors Are Skewing Home Price Recovery.)

Many Realtors with whom I’ve spoken have said yes, the low end is still on fire, and even the very high end is doing well because high end buyers don’t rely so much on credit. It’s the middle that is still suffering.

But wait! According to CoreLogic’s report, negative equity is concentrated on the low end of the housing market: “For example, for low-to-mid value homes (less than $200,000) the negative equity share is 32 percent, almost twice the 17 percent of borrowers with home values greater than $200,000.”

So with less negative equity in the middle, why is the low end moving and the middle not? (Read More: Where Are the Move-Up Home Buyers?)

Because the low end activity is largely in short sales (when the home is sold for less than the value of the mortgage) and foreclosure sales. That’s also where we’re seeing investors do all the bulk deals. Witness Fannie Mae’s sale of 699 properties earlier this week to Pacifica Group, a real estate investment company. The homes in that deal averaged around $111,000.

The middle of the market is still struggling with near negative equity, not to mention tighter credit the higher the loan value is. The more expensive the home, the bigger down payment you’re going to need to meet today’s tough standards. Home prices are going to have to come back a whole lot more strongly before the middle of the market is able to move again.

—By CNBC’s Diana Olick

Questions? Comments? And follow me on Twitter @Diana_Olick

Article source: http://www.cnbc.com/id/49005248?__source=RSS*blog*&par=RSS

More Homes Are Above Water, But Some Sellers Still Suffer

Thu, 13 Sep 2012 04:56:08 +0000

As home sale prices rise, overall home equity rises, and consequently more and more mortgages are no longer “under water.”

1.3 million homes that were previously worth less than the mortgages on them came back into positive territory in the first half of this year, according to CoreLogic.

Billions of dollars in home equity are returning, but what exactly are homeowners doing with this new found cash? Not much.

They certainly aren’t taking it out of their homes the way they used to. In fact, they are actually putting more cash in during refinances, according Freddie Mac. Lenders say it is becoming nearly the norm.

“I continue to see large cash infusions at closing to pay down to conforming [loan] limits, as well as increases in monthly payments to obtain lower rates on shorter amortizations, both of which are very atypical traditionally, but more and more common in this latest refi market,” said Craig Strent, CEO of Rockville, Maryland-based Apex Home Loans.

As for home sales, the reason so many people cannot move isn’t entirely negative equity, but what’s called “near negative equity,” or having less than 5 percent equity in your home. 10.8 million or 22.3 percent of all residential properties with a mortgage were in a negative equity position at the end of the second quarter of 2012, according to CoreLogic, but an additional 2.3 million borrowers had less than 5 percent equity. (Read More: Pending Home Sales Beat Expectations in July.)

The bottom line is that most move-up buyers, the ones desperately needed for a real robust housing recovery, cannot move if they can’t make enough in the sale not only to cover the mortgage but to cover real estate agent fees, closing fees and of course a down payment on a new home.

Much of the recovery in the housing market of late has been thanks to investors, who are often all-cash buyers and who do not have to sell a home in order to buy another. All that activity on the very low/distressed end of the market is pushing overall prices higher. (Read More: How Investors Are Skewing Home Price Recovery.)

Many Realtors with whom I’ve spoken have said yes, the low end is still on fire, and even the very high end is doing well because high end buyers don’t rely so much on credit. It’s the middle that is still suffering.

But wait! According to CoreLogic’s report, negative equity is concentrated on the low end of the housing market: “For example, for low-to-mid value homes (less than $200,000) the negative equity share is 32 percent, almost twice the 17 percent of borrowers with home values greater than $200,000.”

So with less negative equity in the middle, why is the low end moving and the middle not? (Read More: Where Are the Move-Up Home Buyers?)

Because the low end activity is largely in short sales (when the home is sold for less than the value of the mortgage) and foreclosure sales. That’s also where we’re seeing investors do all the bulk deals. Witness Fannie Mae’s sale of 699 properties earlier this week to Pacifica Group, a real estate investment company. The homes in that deal averaged around $111,000.

The middle of the market is still struggling with near negative equity, not to mention tighter credit the higher the loan value is. The more expensive the home, the bigger down payment you’re going to need to meet today’s tough standards. Home prices are going to have to come back a whole lot more strongly before the middle of the market is able to move again.

—By CNBC’s Diana Olick

Questions? Comments? And follow me on Twitter @Diana_Olick

Article source: http://www.cnbc.com/id/49005248?__source=RSS*blog*&par=RSS

Is the 30 Year Fixed Headed to 3 Percent?

Mon, 23 Jul 2012 22:45:28 +0000

Mortgage interest rates hit a new record low last week, and they appear to be on the same trajectory this week.

The yield on the ten-year Treasury note touched a new low Monday, 1.396 percent, before coming up slightly, and mortgage rates track that yield. Money flooded into Treasuries amid new concern surrounding debt in Greece and Spain.

“Now it’s like 1.4 [percent] is commonplace, and we’re probably going to see one and a quarter before too long,” said Holly Liss, ABN Amro’s Global Future’s Director in an interview on CNBC’s “Squawk on the Street.”

Mortgage rates are a full percentage point below where they were one year ago, and that recently sparked yet another spike in mortgage refinance applications, according to the Mortgage Bankers Association. It did not, however, do the same for applications to purchase a home.

“If the 30 year fixed were to drop to 3 percent, that would open up yet another wave of refi’s, perhaps more than the industry can handle,” says mortgage lender Craig Strent of Rockville, Maryland-based Apex Home Loans. “Certainly a 3 percent 30-year fixed would make home buying more affordable for some people that may not qualify at 3.5 percent, but if people are not entering the market at 3.5 percent, which is already insanely low, then they may not enter at 3 percent, as they may simply prefer to rent or may not have the down payment needed to buy.”

Strent is reluctant to predict where the 30-year fixed will end up, but Dan Green, loan officer and mortgage blogger with Waterstone Mortgage in Cincinnati expects the rate to hit 3 percent.

“There’s a case for them to be at 3 percent now. It’s just that lenders are overworked with new applications, so there’s little reason to get price competitive,” says Green. He agrees that 3 percent would just push more borrowers to refinance, even if they already did so recently.

Despite a spring surge in home buying this year, especially in new construction, these lower rates should make the surge bigger and continue it throughout the summer, but that does not appear to be the case. The National Association of Realtors reported a surprise drop in home sales in June, due to low inventory on the low end of the market, which is not as dependent on mortgage rates.

While the housing market needs more home purchases, the overall economy would get a boost from a new surge in refinances, giving more Americans more spending power. Remember, however, those rock-bottom rates don’t apply to homeowners cashing equity out of their homes.

Questions? Comments? And follow me on Twitter @Diana_Olick

Article source: http://www.cnbc.com/id/48289486?__source=RSS*blog*&par=RSS