The Real Cost of Homeownership


Anyone who’s owned a home before knows their expense extends beyond insurance and a mortgage. How much, really, does homeownership cost?
 
According to the U.S. Census Bureau’s American Housing Survey (AHS), recently released with data from 2015, the real cost of homeownership factors in not only financing a home, but also maintaining and living in it. Spotlight stats from the survey include:

  • Eighteen percent (the majority) of households that built or purchased a home in 2015 did so with a down payment of 11-20 percent. Less (15.2 percent) put down 21 percent or more. Even less (12.9 percent) put down 6-10 percent. 
     
  • Ninety-five percent had only one mortgage; 5 percent had two mortgages. Of the nearly 40 percent who refinanced their one mortgage, 71.2 percent refinanced for a lower interest rate. 
     
  • Households (owned) paid a median $133 per month for fuel oil, $117 per month for electricity, $53 per month for piped gas, and $46 per month for water. 
     
  • Households (owned) paid a median $500 on routine maintenance (e.g., painting, fixing leaks). 
     
  • Households (owned) paid a median $1,200 on home improvement projects (e.g., aging-in-place accessibility, energy-efficient upgrades). Just over 3 percent completed at least one project to prepare their home for sale. 

Source: U.S. Census Bureau

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Improving Housing Markets Continue to Solidify


Indianapolis, Ind., and Columbus, Ohio, have entered their historic benchmark levels of housing activity, according to Freddie Mac's recent Multi-Indicator Market Index® (MiMi®).

The national MiMi value stands at 85.1, largely unchanged from last month, indicating a housing market that's on the outer range of its historic benchmark level of housing activity with a +0.14 percent improvement from June to July and a three-month improvement of +1.24 percent. On a year-over-year basis, the national MiMi value improved +4.70 percent. Since its all-time low in October 2010, the national MiMi has rebounded 43 percent, but remains significantly off its high of 121.7. 

"Nationally, MiMi in July was largely unchanged for the third consecutive month at 85.1, yet marking a 4.7 percent year-over-year increase,” says Freddie Mac Deputy Chief Economist Len Kiefer. “Despite rising house prices, the majority of housing markets have sustained their momentum due in large part to low mortgage rates. For example, purchase applications, as measured by MiMi, were up more than 17 percent year-over-year in July and remaining at their highest level since December 2007."
 
Thirty-eight of the 50 states plus the District of Columbia have MiMi values within range of their benchmark averages, with Utah (97.5), Hawaii (96.6), Montana (96.5), Colorado (96) and Oregon (95.8) ranking in the top five with scores closest to their historical benchmark index levels of 100.

Seventy-nine of the 100 metro areas have MiMi values within range, with Los Angeles, Calif. (99.5), Salt Lake City, Utah (100.6), Provo, Utah (98.9), Honolulu, HI (98.7) and Nashville, Tenn. (101.6) ranking in the top five with scores closest to their historical benchmark index levels of 100.

The most improving states month-over-month were Illinois (+1.72 percent), Nevada (+1.36 percent), Florida (+1.20 percent), Alabama (+1.14 percent) and South Carolina (+1 percent). On a year-over-year basis, the most improving states were Florida (+10.03 percent), Oregon (+9.49 percent), Colorado (+9.09 percent), New Jersey (+8.64 percent) and Tennessee (+8.54 percent).

The most improving metro areas month-over-month were Lakeland, Fla. (+2.13 percent), Youngstown, Ohio (+1.92 percent), Chicago, Ill. (+1.73 percent), Orlando, Fla. (+1.63 percent) and Las Vegas, Nev. (+1.61 percent). On a year-over-year basis, the most improving metro areas were Orlando, Fla. (+16.20 percent), Tampa, Fla. (+13.03 percent), Lakeland, Fla. (+13.02 percent), Chattanooga, Tenn. (+12.89 percent) and Palm Bay, Fla. (+12.47).

In July, 32 of the 50 states and 75 of the top 100 metros were showing an improving three-month trend. The same time last year, all 50 states and the top 100 metro areas were showing an improving three-month trend.

For more information, visit www.FreddieMac.com/mimi.  

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Mortgage Rates Trickle Down


Average fixed mortgage rates have dropped slightly from last week's post-Brexit high, according to Freddie Mac's recently released Primary Mortgage Market Survey® (PMMS®).
 
"The 10-year Treasury yield declined after last week's post-Brexit high in anticipation of the Fed's September policy meeting,” says Sean Becketti, chief economist, Freddie Mac. “The 30-year fixed-rate mortgage followed Treasury yields, falling 2 basis points and settling at 3.48 percent. Despite the decrease in rates, the Refinance Index plunged 8 percent to its lowest level since June.”

The 15-year FRM this week averaged 2.76 percent with an average 0.5 point, down from last week when it averaged 2.77 percent. A year ago at this time, the 15-year FRM averaged 3.08 percent. 

The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.80 percent this week with an average 0.5 point, down from last week when it averaged 2.82 percent. A year ago, the 5-year ARM averaged 2.91 percent.
 
For more information, visit www.freddiemac.com

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Home Purchase Sentiment Index Reaches New High


As the market makes bold moves, Fannie Mae’s Home Purchase Sentiment Index® (HPSI) increased 3.3 points to 86.5 in July, reaching a new all-time survey high and indicating a more positive outlook in the housing market-specific HPSI components. Each of the six HPSI components increased in July. The largest increases were seen in the net share of consumers who expect home prices to go up over the next 12 months, which rose 8 percentage points after a drop in June, and the net share of consumers who expect mortgage interest rates to go down over the next 12 months, which rose 5 percentage points. The Household Income component also rebounded after dropping in June, rising 3 percentage points to 11 percent. Notably, the share of consumers who said they would buy if they were going to move increased to 67 percent, while the share of consumers who said they would rent moved down to 26 percent, equaling an all-time National Housing Survey® low.
 
“The HPSI reached a new survey high in July, but enthusiasm should be tempered because the increase only returns the index to a very gradual upward trend,” says Doug Duncan, senior vice president and chief economist at Fannie Mae. “One interesting potential bright note for housing in the July survey is that younger households may finally be shifting toward buying rather than renting in greater numbers. Whether the shift in sentiment in July toward buying rather than renting on their next move holds up or is a temporary reaction to their view that rents are on the rise and mortgage rates will be lower, we will see. However, we are getting set to release some additional research in early August showing evidence of a broader move by older millennials in the direction of ownership.”
 
Continuing the increase from June, the net share of Americans who say it is a good time to buy a house rose by 1 percentage point to 33 percent. The net percentage of those who say it is a good time to sell a house rose 2 percentage points in July to 20 percent – reaching a new survey high for the second consecutive month. A survey high and low were reached for those who think it is a good time and bad time to sell, respectively.

The net share of Americans who say that home prices will go up recovered from a drop in June, rising 8 percentage points to 41 percent. The net share of those who say mortgage rates will go down over the next twelve months rose 5 percentage points to negative 36 percent, continuing the overall upward trend since the start of 2016.

The net share of Americans who say they are not concerned with losing their job rose 1 percentage point to 69 percent. The net share of Americans who say their household income is significantly higher than it was 12 months ago rose 3 percentage points to 11 percent after June’s sharp decline.
 
For more information, visit www.fanniemae.com

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Mortgage Applications Drop 11 Percent


Mortgage applications decreased 11.2 percent from one week earlier, according to data from the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey for the week ending July 22, 2016.

The Market Composite Index, a measure of mortgage loan application volume, decreased 11.2 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 11 percent compared with the previous week. The Refinance Index decreased 15 percent from the previous week. The seasonally adjusted Purchase Index decreased 3 percent from one week earlier to the lowest level since February 2016. The unadjusted Purchase Index decreased 3 percent compared with the previous week and was 12 percent higher than the same week one year ago.

The refinance share of mortgage activity decreased to 61.1 percent of total applications from 64.2 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 4.7 percent of total applications.

The FHA share of total applications increased to 10.1 percent from 9.9 percent the week prior. The VA share of total applications increased to 11.9 percent from 11.2 percent the week prior. The USDA share of total applications increased to 0.6 percent from 0.5 percent the week prior.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 3.69 percent from 3.65 percent, with points unchanged at 0.36 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate increased from last week.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,000) increased to 3.67 percent from 3.66 percent, with points unchanged at 0.32 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 3.56 percent from 3.53 percent, with points increasing to 0.35 from 0.30 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.

The average contract interest rate for 15-year fixed-rate mortgages increased to 2.94 percent from 2.90 percent, with points increasing to 0.32 from 0.31 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.

The average contract interest rate for 5/1 ARMs increased to 2.96 percent from 2.86 percent, with points increasing to 0.30 from 0.29 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.

For more information, visit www.mba.org

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Mortgage Volume Rises in Q1 2016


Total mortgage volume increased in Q1 2016 when compared to opening quarters in previous years, according to Equifax Inc.'s May 2016 National Consumer Credit Trends Report.

Total new accounts and year-over-year increases for the first quarter of 2016 include:

  • Home equity installment loans: 182,400, an increase of 23.5 percent and an eight-year high for an opening quarter;
  • First mortgages: 1.86 million, an increase of 10.3 percent; and
  • Home equity lines of credit (HELOC): 314,400, an increase of 10.2 percent.

Similarly, the latest data shows that lending to borrowers with subprime credit scores (consumers with an Equifax Risk Score™ of 620 or below) – as a share of total lending – has remained consistent for the third consecutive year. New first mortgage accounts to subprime borrowers during Q1 of 2015-2016 have increased on a consistent basis alongside that of prime lending, with approximately 95 percent accounting for prime loans and 5 percent accounting for subprime loans.

“The first quarter of 2016 was a strong one for mortgage lending and underwriting practices appear to have maintained their rigour over the last three years,” says Amy Crews Cutts, chief economist for Equifax. “We anticipate that the second quarter of 2016 will maintain this trend. And later this year, the much-anticipated addition of trended credit data to the mortgage underwriting process will help to strengthen the marketplace further by helping to statistically separate lower risk borrowers from those presenting higher risk.”

First Mortgages

The total dollar amount of first mortgage originations in Q1 2016 is $450.5 billion, a year-over-year increase of 12.3 percent, realizing the highest amount for a first quarter total since 2013. The total balance of new mortgages originated for borrowers with subprime credit scores in that same time was $16.2 billion, a year-over-year increase of 38.7 percent.

Home Equity Installment Loans

The total balance of new loans originated for borrowers with subprime credit scores in Q1 2016 was $454.9 million, an increase of 28 percent; in that same time, the total origination balance on all loans was $5.87 billion, an increase of 14.1 percent.

The average loan amount on new subprime home equity instalment loans increased 9.6 percent from Q1 2015-2016, while in that same time the average loan amount on all home equity instalment loans increased 1.7 percent.

Home Equity Lines of Credit (HELOC)

The total credit limits of new loans originated in Q1 2016 was $35.2 billion, a year-over-year increase of 14 percent and an eight-year high. Total originations and credit limits represent an eight-year high for an opening quarter. The total credit limits on new subprime loans in Q1 2016 was $169.6 million, an increase of 10.7 percent over Q1 2015.

For more information, visit www.equifax.com.

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Foreclosed Homes Boomerang in Value


Homes that were foreclosed during the housing crisis have gained almost twice as much value as other homes, according to a new Zillow® analysis. But the original owners of those homes have not benefited from that recovery.

Since low-end homes were much more likely to be foreclosed, the new analysis shows how the housing crisis worsened the gap between rich and poor in the U.S.

During the run-up to the housing bubble, many low-income earners bought homes, and the homeownership rate rose from about 65 percent in the mid-1990s to almost 70 percent in 2006. When home values crashed in 2007, millions of homeowners had to walk away – abandoning their initial investment and missing the opportunity to gain equity as home values recovered.

Here are some key points from the report, which can be found at Zillow Research:

  • The rich-poor divide is growing in the U.S. In 2000, high-income households made an average of six times as much income as the lowest third of households. In 2015, the top third made nearly seven times as much as the lowest third.
  • During the run-up to the housing bubble, many low-income earners bought homes, and the homeownership rate rose from about 65 percent in the mid-1990s to almost 70 percent in 2006.
  • Of all foreclosed homes, 46.7 percent were among the least expensive third of homes. Only 16.6 percent were among the most expensive third.
  • Foreclosed homes gained value faster than other homes, and in many markets, are more valuable now than they've ever been. Since the lowest point in the housing bust, the average U.S. home has risen 22 percent in value, while the average foreclosed home has risen 39 percent in value.
  • In many cases, investors bought foreclosed homes and converted them into rental properties, benefiting from the recovery as home values bounced back. The percentage of single-family homes being rented out has risen from 13 to 19 percent over the past decade.

"Income inequality is an important topic in the U.S. right now, because the gap between the richest and poorest Americans is growing," says Zillow Chief Economist Dr. Svenja Gudell. "Many lower-income Americans lost their homes during the foreclosure crisis, forcing them to pay ever-increasing rents and locking them out of the benefits of the housing market recovery."
 
For more information, visit www.zillow.com

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