Here comes the next worry for homeowners?

The New york times reported this month on another looming shock to the home market - resetting of the home equity market payments.  Check this link out.

DAILY REAL ESTATE NEWS | MONDAY, JULY 16, 2012

While the housing market is showing signs of picking up across the country, housing experts warn of a new concern for home owners: resetting home equity lines of credit. 

Home equity lines of credit often require low payments in the initial years as home owners only pay the interest on these loans at the onset. But later on, these loans reset with higher payments when home owners have to start paying down the principal. 

About 44 percent of home owners with home equity lines of credit through Wells Fargo have paid only the minimum amount due on these loans, reports The New York Times. 

Many borrowers may soon see their home equity lines of credit reset with higher payments and those higher payments may be too much for some borrowers. 

The Office of the Comptroller of the Currency recently warned of the danger these resetting payments could pose for many home owners across the country. The OCC warned that nearly 60 percent of all home equity line balances would require payments of both principal and interest between 2014 and 2017. 

The report highlights three main threats home equity borrowers face: Rising payments as they begin to pay back the principal and not just the interest on these loans; the risk of rising interest rates (many of these loans have adjustable rates); and refinancing challenges “because collateral values have declined significantly since these loans originated.” 

Many of the home owners have seen their property values decrease since they first took out the home equity loans.

“These are among the riskiest loans in any bank’s portfolio,” The New York Times reports. “As borrowers are pressed to pay principal and interest, write-offs are almost certain to rise.”

Source: “Here Comes the Catch in Home Equity Loans,” The New York Times (July 14, 2012)

Great opportunity for Spartanburg small businesses

I have enjoyed my membership in this organization, and I believe you will as well.  Can't beat the cost and the events are well thought out!  Whether or not you can attend the meeting, see the link to memberships.

MainStreetChamber - Spartanburg

Join us Wednesday, August 1st 8:30 -10:00

New Member OrientationWhere: Plaza on Main                174 E Main St, Spartanburg When: Wednesday, August 1st 8:30am - 10:00am A light breakfast will be provided for you.  This informative meeting will introduce you to MainStreetChamber-Spartanburg and the benefits of your FREE membership.  All memberswho have recently joined the Chamber are encouraged to attend. Bring a guest! This is an exciting opportunity to learn more about the future of the Chamber, how you can get involved and how you can promote your business to other members and the Spartanburg Community. All events are FREE to attend and a great networking opportunity!  Anyone who attends a meeting will have the opportunity to become a VIP Card member and save $10.  New members who invite another small business member can purchase 2 VIP cards for the price of one!   Not a member yet? Join for FREE now or come to the meeting and find out what all of the buzz is about! Click this link to join MainStreetChamber!   Click this link to RSVP!

What is killing the deals in real estate now?

This recent update from Real Estate news highlights the issues that still remain in the housing market, all of which are relevant in our communities in the Upstate.  One of these is around emotion, one is around value and one is around risk, and they are all interrelated.

Because of uncertainty, people have fears in making the decision to sell and accept the hit from the current market pricing.  There is a great set of interest rates out there right now that are more difficult to obtain than ever.  Makes me wonder if there is a reluctance to lock their funds and those of the secondary market in long term loans at these rates.  Finally, those who want to buy up, are still saddled with their current homes who are still on the market.  Those buyers who are out there are seeking deals, so a seller looking to turn equity from one house to another is particularly at risk of the lowball offer being a tough issue.

Wish I knew the answer.  Any thoughts?

3 Top Home Buyer Deal Killers

DAILY REAL ESTATE NEWS | MONDAY, JULY 16, 2012

Recent surveys have shown that more Americans have a thirst for buying real estate, with home affordability at record highs and mortgage rates at record lows. In fact, real estate buyer agents report a 59 percent increase in buyer inquiries this year compared to last year, according to a recent survey conducted by the Real Estate Buyer’s Agent Council.

So what’s preventing some buyers from making it all the way to the closing table? 

REBAC surveyed its buyer agent members to determine the top issues preventing home buyers in their local markets from completing a home purchase. The top three obstacles identified in its 2012 survey are: 

1. Economic insecurity
2. Difficulties in obtaining financing
3. Problems selling current home

The number of home buyers citing difficulties obtaining financing has fallen markedly in the last few years. In 2011, 65 percent of home buyers cited this as a big hurdle to purchasing, and 61 percent cited it in 2010. This year that number has dropped to 49 percent, as economic insecurity overtakes it in having the biggest effect on stalling home sales, according to the survey. 

In 2011, the top three issues cited by buyers were difficulties obtaining financing, problems selling a current home, and holding out for lower prices, according to the survey. 

Source: “Trend-Spotting for Real Estate Agents: Where Do We Stand Today?” RISMedia (July 7, 2012)

Could a Millennial be your home buyer?

The article below paints a positive view of the potential for the Millennial generation to be the next wave of first time home buyers.  The thought is that with low interest rates and access to money, and with home prices at historic lows, they may make the decision to enter the buying market even though they have been putting off marriage, (a good sign of a home buyer) until later.  If you own a home that could be considered entry level, you might want to take a look at your finances and decide if this is a good time to try and list your property.

By Katherine Tarbox, Senior Editor, REALTOR® Magazine

In 1993, the term “Generation Y” first appeared in Ad Age, to describe the age group who was about to embark on their teen years. While generations usually don’t have strict years to confine a group, most put the start of Generation Y — also known as the Millennial Generation, Generation Next, and the Echo Boomers — at the year of 1982 and the end at 2000. This year the first Millennials will begin to turn 30, a sign that this generation is growing up. It’s also a good sign for the housing market.

The Millennials are primarily the offspring of the Baby Boomers (those born from 1946 to 1964) and older Gen Xers. During the ‘50s and ‘60s, the average births per year in the U.S. went from 2.8 to 3.4 million per year and reached 4 million in 1964. While birthing rates dipped in the late ‘60s and ‘70s, in 1982 they began to spike up near that 4 million mark (hence, the nickname “Echo Boomers”), which again created a boom the in population. And this growing population is ready to enter the housing market.

There are some things working against this generation, though. They remain the most underemployed age bracket, with some economists putting their employment-to-population ratio at 45 percent, the lowest it’s been in 60 years. It’s hard to peg the employment rate for this group as many have been forced to take part-time jobs when they are qualified for higher work.

In addition, a study released by the Pew Research Center last month shows that Millennials are waiting a while to take those wedding vows: Just 20 percent of those aged 18 to 29 are married. That’s a crucial driver of home ownership: According to an August 2011 study by the University of Chicago study conducted by Jonas D. M. Fisher and Martin Gervais, single people are more likely to rent.

The positive news: With low interest rates and low prices, this generation is eager to buy, according to a study conducted by the University of Michigan’s Survey of Consumer Attitudes, which polled 6,000 households. First-time buyers are critical to housing, as they allow other sellers to move to the upper ranges of the market. The study also said that the recession has done little to affect Americans’ overall attitude toward buying a home.

Of course, many Millennials are looking to rent. As NAR Chief Economist Lawrence Yunpoints out in his November 2011 column, a stronger rental market will lead to a stronger housing market. As rents increase, more will consider the cost of owning vs. renting, and may tip some to buying. Also as investors enter the market to buy rental units, they are helping to drive prices up, such as in the Miami market, which finally saw prices rise last year. Yun estimates that Miami could see 10 to 12 percent appreciation in 2012, and other markets could follow.

Eventually, though, members of this generation will settle down, and when they do, they’ll need housing. And if the economy continues to improve, 2012 might be the year they start to do just that.

Echo boomer impact on the home buying market

So the question becomes, why is this so?  I believe is is the easier access to borrowing.  Our parents, and my generation were much more likely to save up to buy, than to purchase a home with very little downpayment.  The relaxed lending standards have helped get more people in homes, but at the same time, with house prices so at risk to market swings, the echo boomers have much more to lose in a downturn,a nd perhaps in many ways may be contributing to the current low pricing in the market?

Report: Pay Attention to the Echo Boomers

DAILY REAL ESTATE NEWS | FRIDAY, JULY 13, 2012

The echo boomers — those born between the late 1970s and early 1990s — are expected to help drive a housing market recovery in the coming years, according to a new report by Harvard University’s Joint Center for Housing Studies. 

Already, this generation is outpacing the number of baby boomers who at the same age were home owners. Studies show that about 900,000 households are made up of echo-boomer home owners, which compares to 500,000 baby boomers who owned homes at the same point in their lives. 

About 31 percent of echo boomers have already made a recent home purchase, according to data from the National Association of REALTORS®. 

That number is expected to grow, according to housing analysts. About 5 million echo boomers turn 21 every year. According to KCM, a market and real estate commentator, echo boomers will likely add 1 million new households per year over the next decade. 

Source: “Echo Boomers Are Becoming a Contributing Factor to Housing Recovery,” Business Insider (July 11, 2012)

Will hiring that requires relocation pick up with news like this?

I was reading through the daily real estate news yesterday and this article caught my eye.  Having been in the job market for quite a while, I was told several times, even by John Tesh, that companies were looking to hire people already working, rather than those unemployed currently.  Because these employees are often found in other parts of the country, the ability to recruit and hire them has been hampered by the barriers related to the sale of the current home.

This is a major impediment, the cost of relocating, with so many homeowners underwater due to lower initial down payment requirements.  However, if homeowners get a renewed sense of optimism, we could see a greater willingness to move, impacting the jobs market with the subsequent trickle down impact on unemployment.  This would possibly be due to the unshackling of the homeowner from his or her perception of loss.  In the real estate world, there is still a reluctance by many people to take less than they paid for their homes.  This is actually one factor impacting the rise in home sale prices.  So many of those whose houses who lost value are holding on, while those in more profitable areas of the country are selling.  Higher end homes are also selling.

The real questions still remain unanswered, but there are some words coming out of the real estate business that says the market has hit bottom, and is on the way up.  This, combined with record low mortgage rates may create a situation where the average days on market will decrease.  Mitigating this somewhat is the fact that many of the backlogged foreclosures have begun processing, meaning a possible glut of these homes by early next year.

What does this mean for you as an employer seeking to bring in the best talent from outside?  Well, first, I would recommend using as many analytic tools and good interviewing techniques as possible to assure yourself of a desirable candidate.  Then, you might consider a guarantee on the sale of their home.  Give them the money to pay six months of mortgage or rent payments in the new city, then agree to purchase their home at market value after the time is up.  Make this arrangement prior to their signing with a real estate agent, so that you would not have to pay the commission if their six months with the agent expires. My company can assist you with this plan should you be interested.

Bottom line, if ever there was a time to make a riskier offer to hire from afar this might be it.

DAILY REAL ESTATE NEWS | FRIDAY, JULY 13, 2012
Rebounding home prices are lowering the number of home owners who are considered “underwater” on their mortgage, according to a new report by CoreLogic.

More than 700,000 home owners are no longer considered “underwater,” owing more on their mortgage than their home is currently worth.

At the end of March, 23.7 percent — or 11.4 million — of home owners with mortgages were considered underwater on their mortgage, according to CoreLogic’s latest report. Three months prior, that percentage was 25.2 percent, or 12.1 million home owners.

Mark Fleming, CoreLogic’s chief economist, attributes the decrease to recent gains in home prices, a drop in for-sale inventory, and fewer distressed sales, which are all helping more home owners see the values of their houses increase.

About 1.9 million home owners were 5 percent underwater during the first quarter. If prices continue to inch upward, these owners are expected to climb out of underwater territory, according to CoreLogic.

"While the overall stagnating economic recovery will likely slow [the] housing market recovery in the second half of this year, reducing the number of underwater households is an important step toward reducing future mortgage default risk," Fleming says.

Source: “700,000 Home Owners no Longer Underwater on Mortgages,” CNNMoney (July 12, 2012)

What does the foreclosure risk mean about home sales timing?

Recent wire reports indicate that Banks have finally caught up with the mess they created around foreclosure activity a year ago.  Because of paperwork mistakes and carelessness, many homes that could and should have been foreclosed on in 2011 held out into this year.  The banks have begun preparing to place a new wave of these foreclosed houses on the market, probably by early next year.  In June, the number of houses entering the foreclosure process increased on an annual basis for the second month in a row.

A glut of foreclosed houses added to the market will likely exert downward pressure again on home prices, making the purchasing of a house even more cost effective, but importantly, bought to live in long term, not as an investment.  There is no indication of a rapid rise in home prices that would make adding a foreclosed home an investment diamond.

Now, for those of you who are considering selling your home in the next year or so, you should think about a couple of things.  First, if you have enough equity to get through the sales process, there should be some very good value homes on the market entering next year.  Secondly, if you wait until the early part of next year to sell, you may be faced with a lower market price than if you sell before the foreclosed homes hit.  Third, if you have the patience to wait, begin adding $50 per month to your house payment to increase the equity in your home.  Accelerate the pay-down of any second mortgages, with a plan to get them off your books within 18 to 24 months if possible.  Then, when it becomes clear that the real estate market is cycling back up, you will be in a much better position to sell with equity available for your next purchase.

At least that is my opinion.  What do you think?

If you would like a free competitive market analysis, to get an idea of what your home is worth right now, let me know and I will arrange for you to have this done.