Spring is just around the corner, right?! This winter has been a brutal one. Many of our AARC members have been on the road throughout the Northeast and Midwest recruiting retirees to more temperate climates in the South. Do you really want another year of snow blowing, scraping windshields, and wearing layer upon layer of clothing? Isn’t it time to simplify and lighten your load?
Check out AARC’s Seal of Approval communities and explore your options for the retirement destination that fits your lifestyle. AARC is your source for the best in retirement destinations. Whether it’s a planned retirement community or just a great town that welcomes retirees, AARC has already done the research for you! I hope you’ll take to time to learn about our Seal of Approval communities here.
Jeff Fleming Chair, The AARC
Same Story, Different Day: New-Home Sales Are Up, Inventory Remains Low
February 25, 2015 – By Chrystal Caruthers, Relator.com
Here’s a measure of the weirdness of the American housing market circa early 2015: Today the Census Bureau and the Department of Housing and Urban Development reported that sales of new homes in January were pretty much the same as in December, down by just 0.2%—and that’s considered good news. Analysts had expected sales to dip by a full 2%, but the rate remained essentially unchanged, with 481,000 new single-family homes going into contract, up 5.3% from a year ago. Hooray!
Hooray! This doesn’t change the overall portrait of the market much. Prices are way up—the median price is now $294,300, according to the report, up from $218,000 last January—and there’s only a 5.4-month supply of new homes to feed buyer demand at the current sales rate. In a normal market, there would be six months of inventory available.
“New-home sales started 2015 not losing ground to gains at end of 2014, but at this level they are still about 40% off what would be a normal volume,” said Jonathan Smoke, our chief economist here at realtor.com®. “The issue is affordability. Builders have traded higher prices and margins and steady demand for opportunity of higher volumes. Supply isn’t growing, and it isn’t helping the lack of supply on existing-home side, so we will continue to see home shoppers report that they can’t find homes to fit their needs and/or budget.”
Limited access to credit for smaller builders, rising construction costs, labor shortages, and fear that the entry-level buyer is too debt-ridden to return to the market have driven most builders to go after the luxury market or the move-up buyer. This has left the housing market with a distinct lack of available, affordable homes for first-time buyers. (The millions of you who read realtor.com obsessively will recall we’ve said similar things quite often in recent days.)
“A persistent lag in new home construction will lead to faster home price growth, which will negatively impact housing affordability,” said Lawrence Yun, chief economist at the National Association of Realtors®.
According to the NAR, there is a new construction housing shortage in 32 states and the District of Columbia.
NAR analyzed jobs created in every state and the District of Columbia for three years. It found that Florida, Utah, California, Montana, and Indiana, where job creation has been particularly strong, had the greatest disparity in new-home construction levels. Yun cautioned that these states could face persistent housing shortages and affordability issues unless housing starts increase to match local job gains.
Builders, however, say the market is affordable. According to the latest National Association of Home Builders/Wells Fargo Housing Opportunity Index, nearly 63% of new and existing homes sold in the fourth quarter of 2014 were affordable to families earning the U.S. median income of $63,900.
“Affordable home prices, historically low mortgage rates, and an improving job market will release pent-up demand and help keep the housing market moving forward in the year ahead,” said David Crowe, chief economist at the NAHB.
Jumbo Borrowers Get the Red-Carpet Treatment
By Anya Martin, Real Estate News, The Wall Street Journal
Some highlights from 2014:
• For a five-week stretch between August and September, jumbo rates were lower than those for comparable conforming mortgages.
• Many banks and credit unions began offering more jumbo options, some with down payments less than 20% and no private mortgage insurance requirements.
• Competitive housing markets in some areas fueled a rise in first-time homebuyers who took out jumbo mortgages.
A growing economy and stock market meant the more affluent had money and confidence to take on debt not just for primary residences but also second homes, says Tom Wind, executive vice president of mortgage operations of Jacksonville, Fla.-based EverBank. “The jumbo share of the market was much more purchase-driven in 2014,” he adds.
In 2014, the jumbo share of the market grew to 19% from 14.4% in 2013, its highest percentage increase since 2002, according to Inside Mortgage Finance, a publication that tracks the industry. Mortgage lending overall decreased 34.4% year over year, but jumbo lending was only down 12.5%, with a total volume of $238 billion compared with $272 billion in 2013, according to the publication.
Jumbo mortgages have loan amounts higher than the limits for government-backed loans, which are $417,000 in most areas and $625,500 in some high-priced places.
The top areas for high-paid professionals were also the places with the highest priced homes, such as the San Francisco Bay Area/Silicon Valley and Los Angeles in California, metropolitan New York City, Washington, D.C., and Boston, says John Schleck, centralized and online sales executive at Bank of America Home Loans.
Tight high-priced housing markets also helped fuel a 3% increase last year from 33% to 36% in first-time homebuyers with nonconforming loans at Bank of America, Mr. Schleck says. The average age of the bank’s jumbo borrower decreased from age 46 in 2013 to 44 in 2014, he adds.
Low interest rates are spurring more older affluent Americans to consider a mortgage.
Wells Fargo Home Mortgage also saw growth in its share of first-time jumbo buyers in Texas and Florida, where there are concentrations of high-priced homes, says Brad Blackwell, executive vice president at Wells Fargo Home Mortgage, the nation’s largest jumbo loan provider. “Texas is the second largest jumbo mortgage market [after California] because in Dallas, Houston and Austin, there is a lot of jumbo opportunity,” he adds.
New lower down payment jumbo products also have played a role in allowing more first-time homebuyers to qualify for loans, Mr. Blackwell says. Wells Fargo introduced an 89.9% loan-to-value jumbo product in midsummer 2014, and many other banks and credit unions now offer jumbo loans with down payments less than 20%—an industry standard post-recession. These loans have higher interest rates but don’t require private mortgage insurance like their government-backed counterparts.
Still, most jumbo borrowers must meet tight standards. For example, EverBank’s jumbo client profile remained roughly consistent with the 2013—average balance of $802,000, loan-to-value ratio of less than 70% and FICO score of 767 in the fourth quarter of 2014, Mr. Wind says.
Low interest rates are spurring more older affluent Americans to consider a mortgage, says Guy D. Cecala, CEO and publisher of Inside Mortgage Finance. “I am hearing anecdotally about more people in their 60s buying a new home or a second home who are getting sizable mortgages for the tax deduction and to keep more in investments,” he adds.
The average interest rate for a 30-year fixed-rate jumbo mortgage started at 4.59% in January 2014, but stayed below 4.25% from July through December, according to HSH.com, a real estate financing website. Adjustable-rate mortgages, popular with jumbo borrowers, also had low monthly average rates, with the five-year ARM staying around 3%, HSH.com data showed.
Fewer jumbo borrowers refinanced in 2014—many had already done so in 2013, and interest rates last year, while low, weren’t low enough to trigger another frenzy, says Mike Fratantoni, chief economist for the Mortgage Bankers Association.
As 2015 began, the average interest rate for a 30-year fixed jumbo mortgage dropped below 4% and was at a historic low of 3.92% on the week ending Jan. 30, according to HSH.com. On the week ending Jan. 9, refinance volume had rocketed to 71% of total applications, its highest level since July 2013, according to the MBA. “[Wells Fargo] is seeing a lot of strong refinance application activity, and a lot of that is coming from the jumbo sector,” Mr. Blackwell says.