Why Did Home Sales Drop So Dramatically Last Month?

Recently, the National Association of Realtors (NAR) released their latest Existing Home Sales Report which covered sales in November. The report revealed that sales: “…fell 10.5 percent to a seasonally adjusted annual rate of 4.76 million in November (lowest since April 2014 at 4.75 million)…” That revelation gave birth to a series of industry articles, some of which quoted pundits questioning whether the housing market was slowing. In actually, there is one rather simple explanation to much of the falloff in sales last month is likely the implementation of the “Know Before You Owe” mortgage rule, commonly known as the TILA-RESPA Integrated Disclosure (TRID) rule, which went into effect on October 3.. These regulations caused house closings to be delayed by an extra three days in November as shown in the graph below. Three days might sound like a minimal difference. However, since there are only approximately 20 days in a month that a closing would normally take place (Mondays through Fridays), losing three days constitutes well over 10% of all closings. These sales are not lost. They are just moved into the next month’s numbers. In a DS News article on the subject yesterday, Auction.com EVP Rick Sharga explained: “The most likely cause for the weak sales numbers is a delay in processing loans due to the new TRID mortgage requirements imposed by the CFPB. This is the biggest change in mortgage document processing in many years, and there have been numerous reports within the industry of problems implementing the process and the new documentation that comes with it.” So how is the housing market actually doing? A better way to look at how well the housing market is doing is to look at the Foot Traffic Report from NAR which quantifies the number of prospective buyers that are actively looking for a home at the current time: We can see immediately that demand to buy single family homes is increasing over the last few months - not decreasing. Bottom Line No matter what last month’s sales numbers show, the housing market is still doing well as demand remains strong. Looking to Buy, Sell, or Invest? Contact: David Demangos 858.232.8410 Locally Known, Globally Connected Luxury Home Marketing Specialist Global Property Specialist David@AwesomeSanDiegoRealEstate.com www.AwesomeSanDiegoRealEstate.com Our Team Goes to Extremes to Fulfill Your Real Estate Dreams!

Millennials: What FICO Score is Needed to Buy a Home?

In a recent article by the Wharton School of Business at the University of Pennsylvania, it was revealed that some Millennials are not looking to purchase a home simply because they don’t believe they can qualify for a mortgage. The article quoted Jessica Lautz, the National Association of Realtors’ Managing Director of Survey Research, as saying that there is a significant population that does not think they will be approved for a mortgage and doesn’t even try. The article also quoted Fannie Mae CEO Tim Mayopoulos : “I do think that there’s a sense out there in the marketplace among borrowers that credit may not be available, especially for people with lower credit scores.”  So what credit score is necessary? A recent survey reported that two-thirds of the respondents believe they need a very good credit score to buy a home, with 45 percent thinking a “good credit score” is over 780. In actually, the FICO score on closed loans (as reported by Ellie Mae) is much lower and has been dropping over the last several months. Bottom Line Millennials who are considering a home purchase should get advice from a local real estate or mortgage professional now. They may be surprised how much the requirements for a mortgage have eased. Looking to Buy, Sell, or Invest? Contact: David Demangos 858.232.8410 Locally Known, Globally Connected Luxury Home Marketing Specialist Global Property Specialist David@AwesomeSanDiegoRealEstate.com www.AwesomeSanDiegoRealEstate.com Our Team Goes to Extremes to Fulfill Your Real Estate Dreams!

The Importance of Home Equity to a Family

There has been much written about how dramatically home values have increased over the last several years. With the increase in values, comes an increase in the equity each home owning family now has. The Joint Center of Housing Studies at Harvard University recently reported that, after taking inflation into account, aggregate home equity has increased 60% since 2010. Home equity is the major component of most family’s overall wealth. Why is this so important? Throughout history, families have tapped into their homes for many important reasons. Perhaps it was to get seed capital to start a new business; perhaps to help finance their children’s college education; perhaps to get needed medical attention not covered by insurance. Up to ten years ago, families were able to use the equity in their homes to better the living situation for themselves and their family. More small businesses were created. College students weren’t forced to take on massive student debt. People could get needed medical care. This hasn’t been the case over the last ten years as families found themselves in a position of having zero equity or, even worse, negative equity post the housing collapse. However, that is about to change. Using your home as an ATM is not a good idea. We realize that there are inherent risks to tapping into the equity in your home especially if you do it for the wrong reasons. Back in 2005-2007, homeowners were using their homes as their own personal ATM machine to buy depreciating assets like cars, boats and jet skis. This reckless behavior should never be repeated. However, using your equity (aka family wealth) to invest in yourself, your children or other family members that could use help still makes sense. And the good news is that more and more families can do this as home values continue to increase. Bottom Line Home equity gives families an additional financial option when money is needed. The proper use of this family wealth can be used to grow generational wealth. As Julián Castro, U.S. Secretary of HUD, recently explained: “Generation after generation, the primary vehicle to create wealth in our country has been through homeownership. In the U.S., homeownership has provided an opportunity for one generation to hand over to the next that opportunity and that wealth.” Looking to Buy, Sell, or Invest? Contact: David Demangos 858.232.8410 Locally Known, Globally Connected Luxury Home Marketing Specialist Global Property Specialist David@AwesomeSanDiegoRealEstate.com www.AwesomeSanDiegoRealEstate.com Our Team Goes to Extremes to Fulfill Your Real Estate Dreams!

NAR Reports Reveal Two Reasons to Sell This Winter

We all realize that the best time to sell anything is when demand is high and the supply of that item is limited. The last two major reports issued by the National Association of Realtors (NAR) revealed information that suggests that now is a great time to sell your house. Let’s look at the data covered by the latest Pending Home Sales Report and Existing Home Sales Report. THE PENDING HOME SALES REPORT The report announced that pending home sales (homes going into contract) are up 3.9% over last year, and have increased year-over-year now for 14 consecutive Lawrence Yun, NAR’s Chief Economist, expects demand to remain stable through the final two months of the year, and “forecasts existing-home sales to finish 2015 at a pace of 5.30 million – the highest since 2006.”  Takeaway: Demand for housing will continue throughout the end of 2015 and into 2016. The seasonal slowdown often felt in the winter months hasn’t started and shows little signs of being near. THE EXISTING HOME SALES REPORT The most important data point revealed in the report was not sales but instead the inventory of homes on the market (supply). The report explained: - Total housing inventory decreased 2.3% to 2.14 million homes available for sale - That represents a 4.8-month supply at the current sales pace - Unsold inventory is 4.5% lower than a year ago There were two more interesting comments made by Yun in the report: 1. "New and existing-home supply has struggled to improve, leading to few choices for buyers and no easement of the ongoing affordability concerns still prevalent in some markets." In real estate, there is a guideline that often applies. When there is less than 6 months inventory available, we are in a sellers’ market and we will see appreciation. Between 6-7 months is a neutral market where prices will increase at the rate of inflation. More than 7 months inventory means we are in a buyers’ market and should expect depreciation in home values. As Yun notes, we are currently in a sellers’ market (prices still increasing). 2. "Unless sizeable supply gains occur for new and existing homes, prices and rents will continue to exceed wages into next year and hamstring a large pool of potential buyers trying to buy a home.” As rents and prices increase, potential buyers will not able to save as much for a down payment and many may become priced out of the market.  Takeaway: Inventory of homes for sale is still well below the 6 months needed for a normal market. Prices will continue to rise if a ‘sizeable’ supply does not enter the market. Take advantage of the ready willing and able buyers that are still out looking for your house.   Bottom Line If you are going to sell, now may be the time. Looking to Buy, Sell, or Invest? Contact: David Demangos 858.232.8410 Locally Known, Globally Connected Luxury Home Marketing Specialist Global Property Specialist David@AwesomeSanDiegoRealEstate.com www.AwesomeSanDiegoRealEstate.com Our Team Goes to Extremes to Fulfill Your Real Estate Dreams!

What You Really Need To Qualify For A Mortgage

A recent survey by Ipsos found that the American public is still somewhat confused about what is actually necessary to qualify for a home mortgage loan in today’s housing market. The study pointed out two major misconceptions that we want to address today. 1. Down Payment The survey revealed that consumers overestimate the down payment funds needed to qualify for a home loan. According to the report, 36% think a 20% down payment is always required. In actuality, there are many loans written with a down payment of 5% or less. Below are the results of a Digital Risk survey done on Millennials who recently purchased a home. 2. FICO Scores The Ipsos survey also reported that two-thirds of the respondents believe they need a very good credit score to buy a home, with 45 percent thinking a “good credit score” is over 780. In actuality, the average FICO scores of approved conventional and FHA mortgages are much lower. Below are the numbers from the latest Ellie Mae report. Bottom Line If you are a prospective purchaser who is ‘ready’ and ‘willing’ to buy but not sure if you are also ‘able,’ sit down with someone who can help you understand your true options. Looking to Buy, Sell, or Invest? Contact: David Demangos 858.232.8410 Locally Known, Globally Connected Luxury Home Marketing Specialist Global Property Specialist David@AwesomeSanDiegoRealEstate.com www.AwesomeSanDiegoRealEstate.com Our Team Goes to Extremes to Fulfill Your Real Estate Dreams!