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7.3 Million Boomerang Buyers Poised to Recover Homeownership in Next Eight Years

In 2015, the first wave of 7.3 million homeowners who lost their home to foreclosure or short sale during the foreclosure crisis will pass the seven-year window they conservatively need to repair their credit and qualify to buy a home. More waves of these potential boomerang buyers will be moving past that seven-year window over the next eight years corresponding to the eight years of above historically normal foreclosure activity from 2007 to 2014, according to an analysis by RealtyTrac.

While millennials have gotten a lot of attention lately as the generation whose below-normal homeownership rates are changing the landscape of the U.S. real estate market, the boomerang buyers — who are primarily Generation Xers or Baby Boomers — represent a massive wave of potential pent-up demand that could shape the housing market in the short term even more dramatically.

U.S. Census data shows homeownership rates for those ages 35 to 44 — roughly Generation X — were 11 percent below historical averages in the third quarter of 2014, while home ownership rates for the below age 35 cohort — roughly the Millennial generation — were 10 percent below historical averages.

RealtyTrac analyzed foreclosure, affordability, and demographic data to provide predictions of when and where these boomerang buyers are most likely to materialize. Nearly 7.3 million potential boomerang buyers nationwide will be in a position to buy again from a credit repair perspective over the next eight years.
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Housing Recovery Expected to Press On Despite Recent Volatility in Consumer Attitudes

Americans’ outlook on housing and the economy has fluctuated somewhat during the past few months, but the trend for most indicators remains positive overall, according to Fannie Mae’s February 2014 National Housing Survey results.

Highlights from the survey include:

  • The average 12-month home price change expectation increased from last month, to 3.2 percent.
  • The share of people who say home prices will go up in the next 12 months increased 7 percentage points to 50 percent, while the share who say home prices will stay the same decreased by seven percentage points to 38 percent.
  • The share of respondents who say mortgage rates will go up in the next 12 months increased 1 percentage point, to 56 percent.
  • Those who say it is a good time to buy a house increased from last month, up 3 percentage points to 68 percent.
  • The average 12-month rental price change expectation increased from last month to 4.3 percent.
  • Fifty-one percent of those surveyed said home rental prices will go up in the next 12 months, an increase of 3 percentage points from last month.
  • Forty-five percent of respondents thought it would be easy for them to get a home mortgage today, a 7 percentage point decrease from last month.
  •  The share who say they would buy if they were going to move fell 4 percentage points to 66 percent, and those who say they would rent increased to 30 percent.

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Sellers Losing Their Grip on Housing Market

A survey by Redfin found that 72 percent of its agents described current market conditions as “a good time to sell,” down from 86 percent from the second quarter. Meanwhile, 55 percent said it is “a good time to buy,” up from 46 percent in the first quarter.

The survey also revealed that limited inventory (87 percent) and bidding wars (79 percent) remain the biggest challenges for buyers. The agents also reported that sellers also are facing challenges, with 62 percent reporting that sellers have unrealistic expectations about the value of their homes and 30 percent saying that sellers are having difficulties getting their home to appraise for the contract purchase amount.

Nearly 70 percent of the agents surveyed believe home prices will rise in the coming months, versus 97 percent in the first quarter. Only five percent expect home prices to “rise a lot,” down from 44 percent in the first quarter.

More than half believe the market has become less competitive over the last three months, and only 22 percent believe it has become more competitive.
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CalPATH – California State Teachers Retirement System (CalSTRS)

CalPATH is a program available exclusively to Mountain West Financial clients and is designed to benefit those that serve our local communities.

To qualify, you must be a member of one of the following:

  • California State Teachers Retirement System (CalSTRS)
  • California Public Employees Retirement System (CalPERS)
  • Legislators Retirement System (LRS)
  • Judges Retirement System (JRS)

With no additional qualifying, benefits of the a CalPATH home loan include:

  • Reduced processing and underwriting fees
  • FHA or Conventional loan options available
  • Can be used with other downpayment assistance programs
  • Available for high balance loans
  • 15 or 30 year terms available
  • No additional qualifying follows FHA & Conventional standard guidelines
  • One free float down during the first 30 days after the rate is locked, if rates become lower you can “float down” to that new lower rate

Wells Fargo and NeighborWorks America Help 1,600 Successfully Buy Homes with Down Payment Assistance

Wells Fargo, one of America’s leading financial services companies, and NeighborWorks America, a national non-profit organization which creates opportunities for people to live in affordable homes and improve their lives, today marked the one-year anniversary of their NeighborhoodLIFTSM and CityLIFTSM programs by announcing the efforts have helped 1,624 moderate income buyers purchase homes with the help of homebuyer education training and $27 million of down payment assistance grants. In addition, 460 applicants have a contract to purchase a home through the programs with the help of nearly $8 million for down payment assistance. More than $64 million remains available for down payment assistance grants through LIFT programs in participating housing markets.
The $170 million initiative created by Wells Fargo and NeighborWorks America has sought to keep the dream of homeownership within reach for prospective homebuyers facing down payment challenges in cities deeply affected by the housing crisis. The programs – first launched in February 2012 in Los Angeles and Atlanta – have made down payment assistance grants ranging from $15,000 to $30,000 per homebuyer depending on the housing market.
Pre-qualified applicants must meet certain criteria including annual income not exceeding 120 percent of the median income for the area; complete required homebuyer education training administered by HUD-approved housing counselors such as NeighborWorks America affiliates; and earn their down payment assistance grants when they buy and reside in an eligible home for five years. Mortgages available through the program are not exclusively offered through Wells Fargo, America’s largest mortgage lender, and the down payment grants, while funded byWells Fargo, are administered by NeighborWorks America’s network of non-profit affiliates.
“NeighborWorks America and Wells Fargo have reached an important milestone in helping more than 1,600 families achieve the dream of homeownership through the LIFT programs,” said NeighborWorks America CEO Eileen Fitzgerald. “These programs contribute to community stabilization because they promote successful, sustainable homeownership that’s grounded in making responsible buying choices.”
“At Wells Fargo, we believe in programs like LIFT because they provide community-based solutions that deliver real help to families,” said Jon Campbell, Wells Fargo’s executive vice president and head of Government and Community Relations. “These programs encourage the kind of collaboration that needs to keep happening between the private sector, the non-profit sector and elected and public officials.”
Since the inception of the programs, more than 14,000 potential home buyers have attended NeighborhoodLIFTSM and CityLIFTSM events in the following cities: Los Angeles, Atlanta, Phoenix, Las Vegas, Houston, Miami, Tampa, Orlando, Jacksonville, Minneapolis/St. Paul, Philadelphia, Washington, DC, Chicago, Sacramento, and Oakland. The next CityLIFTSM program homebuyer event is scheduled April 5-6 in Baltimore. Visitwww.nhsbaltimore.org for more information about the CityLIFTSM program in Baltimore.
For more information about LIFT programs, go to www.neighborhoodlift.org. For more information about NeighborWorks America, go to nw.org.
About NeighborhoodLIFTSM 
The NeighborhoodLIFTSM program is collaboration between Wells Fargo Bank, N.A., the Wells Fargo Foundation, NeighborWorks America, an independent non-profit organization, and local non-profit organizations. The NeighborhoodLIFTSM program is designed to provide sustainable homeownership initiatives in cities affected by the housing crisis. A video about the NeighborhoodLIFTSM program is posted atwww.youtube.com/wellsfargo.
About CityLIFTSM 
The CityLIFTSM program is designed to provide down payment assistance and homebuyer education programs in areas most impacted by the financial crisis. The program was developed in connection with the 2012 settlement with the U.S. Department of Justice, and is a collaboration between Wells Fargo Bank N.A. and NeighborWorks America.
About NeighborWorks America 
For 35 years, NeighborWorks America has created opportunities for people to improve their lives and strengthen their communities by providing access to homeownership and to safe and affordable rental housing. In the last five years, NeighborWorks organizations have generated more than $19.5 billion in reinvestment in these communities. NeighborWorks America is the nation’s leading trainer of community development and affordable housing professionals.

Why you missed the boat on record-low mortgage rates

Source: CNNMoney/AOL Real EstateBorrowers who didn’t take advantage of the historically low interest rates likely have missed the opportunity to purchase or refinance using an ultra-low mortgage rate. In the past month, rates have been on the rise and are expected to continue to climb. Fannie Mae’s chief economist doesn’t believe mortgage rates will ever be that low again.

Making sense of the story

  • According to the economist, the Fed is going to stop bolstering the housing market, which has kept rates at rock-bottom levels by buying up to $85 billion a month of Treasury bonds and mortgage-backed securities. That has enabled lenders to sell mortgage loans at low interest rates and recoup their money immediately – plus profits.
  • If the Fed stops purchasing the securities, private investors will have to pick up the slack. For investors to do that, the loans will have to offer a better payoff, and that would mean raising rates for borrowers.
  • Low mortgage rates generally are a result of an economy in distress. But now, the market believes the economy is getting stronger. Job gains have picked up, and the fact that that hiring is advancing rather than retreating is good news for the economy. Any positive future reports are expected to push rates higher.
  • Today’s rates are unprecedented. The ever-popular 30-year, fixed-rate mortgage hit a 37-year low in 2003 at 5.23 percent. It is likely that any return to normal conditions will be accompanied by higher mortgage rates.
  • Borrowers should keep in mind that even if rates go up a percentage point or two, mortgages will still be relatively low. Historically, 30-year loans are usually 5.5 percent or higher. For clues in the direction of mortgage rates, experts recommend borrowers look at the daily movements in 10-year Treasury bond yields. Mortgage rates track Treasury yields with the difference between them holding fairly constant.

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Talking Points

  • Real estate agents marketing a property for which they have obtained a listing generally will place that listing on the Multiple Listing Service (MLS). At times, however, listings are not placed into the MLS. These listings are commonly referred to as off-MLS or pocket listings.
  • While not a new concept, pocket listings are growing in number – as many as 10 percent to 15 percent of homes offered for sale today are “off-MLS” listings, according to one MLS.
  • Sellers should strongly urge their agent to place their home on the MLS. A property that is listed on the MLS has the advantage of being marketed to every real estate agent who belongs to the MLS and, through those agents, to their vast network of potential buyers.
  • Active marketing on the MLS usually includes open houses, broker tours, and inclusion of the seller’s property in the MLS’ download to various real estate Internet sites commonly used by the public to search for properties.
  • A pocket listing generally is marketed by a single agent to one or a select few potential buyers. The marketing pool can be so small that in some cases, other agents within the same brokerage or brokerage office may not even be aware that a fellow agent has the listing.
  • While pocket listings sometimes are requested by sellers who wish to maintain their privacy, the downsides to off-MLS listings outweigh the advantages. Primarily, the pool of real estate agents and potential home buyers who will know the property is for sale and make an offer to purchase may be limited. With fewer offers, sellers may not receive the best possible price for their home.

Home Buyers More Concerned about Affordability than Lack of Homes for Sale

For the first time since early 2012, home buyers said that affordability is a bigger concern for them than a lack of homes for sale, according to the most-recent Redfin Real-Time Buyer Survey. Although inventory was down 1.5 percent in November from last year, 32.6 percent of home buyers who responded to survey indicated that “affordability in the area I want to buy” was the biggest obstacle to a home purchase. Just 11.3 percent said the biggest obstacle was “not enough homes for sale.”

The good news for home buyers is that the supply of homes under $300,000 is likely to increase next year as more homeowners have enough equity to sell. This year, prices for homes in the low to mid-range (generally below $310,000) increased by 12 percent, double the price increases for more expensive homes. Those increases have helped homeowners: Redfin estimates that, in 2015, 90 percent of homeowners will owe less than 80 percent of their mortgage, which makes listing much more attractive and could result in a 5 to 7 percent increase in affordable homes for sale.

Redfin predicts that home prices will slowly rise in 2015, increasing 3 percent throughout the year. The majority of respondents agreed; 58.9 percent of buyers said that home prices will “rise a little” in 2015.
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Obama offers help for younger, first-time home buyers

President Barack Obama has announced plans to cut mortgage-insurance premiums charged by the Federal Housing Administration (FHA) in order to expand homeownership among lower-income buyers. “We do not see first-time buyers getting into the marketplace. They don’t have a chance to get onto that first rung of housing,” said Chris Kutzkey, president of the CALIFORNIA ASSOCIATION OF REALTORS®.

Making sense of the story

  • The annual fees the Federal Housing Administration charges to guarantee mortgages will be cut by 0.5 percentage point, to 0.85 percent of the loan balance.
  • Under the new premium structure, FHA estimates that 2 million borrowers will be able to save an average of $900 annually over the next three years.
  • In response, Julian Castro, secretary of the Department of Housing and Urban Development, commented, “We believe this is striking a very good balance between being fiscally responsible and also enhancing homeownership opportunities.”
  • The FHA has been increasing premiums since 2011 to offset losses caused by defaults on mortgages it backed after the housing bubble burst. Critics say such increases are detrimental to middle income Americans.
  • The FHA estimates that 250,000 first-time homebuyers will enter the market after the premium reductions.
  • Democrats and housing groups say reducing FHA fees will the agency’s bottom line because it will boost the volume of lending, which declined when home buyers had to pay more to obtain loans.
  • In addition to its annual premiums, the FHA also charges borrowers an upfront fee, which is currently set at 1.75 percent of the loan balance and is not slated to change.

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Source: Sacramento Bee

Talking Points …

  • As the wealthiest generation and the first to drive the housing market, baby boomers will continue to be a pillar of the housing market, according to a 2014 CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) survey of California baby boomers (born between 1946 and 1964).
  • While nearly half (46 percent) of baby boomer renters who previously owned a home sold it primarily due to financial reasons, the vast majority still have a strong desire to purchase a home. The survey found that 63 percent of boomer renters would be motivated to buy a home if they saw an improvement in their finances, affordable home prices, or other reasons.
  • Also, 22 percent said they expect to buy a home in the next five years. Baby boomer renters who previously owned a home are also in a better financial position to purchase a home, having a higher average annual household income ($78,570) than those boomers who have never owned a home ($39,825).

Why millennials aren’t rushing to buy homes

As the economy continues to recover, the millennial generation is still feeling the longer-term effects of the recession due to underemployment and low salaries combined with high student debt and uncertainty about the future. These factors have affected the housing market, and the renter status of this generation was examined in a new survey by LendingTree.

Making sense of the story

  • Only 43.4 percent of college-educated millennials ages 24 to 35 own a home. When asked “What would allow you to consider purchasing your first home?” 67.4 percent said they’d need more income.
  • Roughly a third want to move somewhere they like better before buying, 28.7 percent want to pay off student loans before becoming homeowners, and 25.7 percent want to put off owning a home until they’ve traveled or invested.
  • However, only 4.4 percent of non-homeowner millennials have no interest in ever owning a home, thereby showing that homeownership remains an aspiration.
  • Many millennials are ignoring financial issues. For example, 21.2 percent of millennials said they do not know their current credit score, and another 11 percent said they have never even checked it.
  • The survey found that 4.8 percent of millennials have less than $5,000 in savings, short of the three to six months of living expenses that financial institutions advise.
  • Roughly 9.5 percent of millennials cited said they do not have or maintain a savings account, which perhaps reflects their distrust of banks following the recession.
  • Median household income in the U.S. hit roughly $52,000 last year, according to the Census Bureau, which is well below the $56,400 those households were making in pre-recession 2007 and similarly distant from the all-time high of $57,000 last seen in 1997.

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Source: CBS Money Watch

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