One Word That Comes Up More Than Any Other
It’s Friday desk clearing time for this blogger. “Changes in the mortgage industry are afoot, with the goal of loosening some of the strict standards established after the subprime crisis — rules some blame for impeding sales. Government-controlled mortgage giants Fannie Mae and Freddie Mac are paving the way by rolling out new programs to encourage home ownership. Also, lenders are moving to relax some standards partly because they fear losing business as home prices and mortgage rates rise, said Guy Cecala, publisher of Inside Mortgage Finance. ‘If your business is going to drop 20 percent,’ he said, ‘you need to come up with ways to offset that.’”
“The trend started in late 2014 when Fannie Mae and Freddie Mac announced new programs that allowed loans with as little as 3 percent down. But many large banks still reeling from the housing bust that cost them billions were skeptical. Bank of America Chief Executive Brian Moynihan said his company was unlikely to participate. But less than two years later, the bank started offering 3 percent down loans through a partnership with Freddie Mac. Wells Fargo, the nation’s largest mortgage lender, also jumped in last year, partnering with Fannie Mae. JPMorgan Chase now offers 3 percent down loans as well.”
“The 3 percent down loans through Fannie or Freddie are capped at $424,100 in most of the country. ‘We are seeing more and more lenders adopting it every day,’ said Danny Gardner, Freddie Mac’s vice president of affordable lending and access to credit.”
“Pilot programs with Guild Mortgage of San Diego and United Wholesale Mortgage of Michigan require the borrower to put down 1 percent of their own money. A pilot through Movement Mortgage allows a borrower to put down nothing. David Battany, Guild’s executive vice president of capital markets, said it launched its 1 percent down program to ‘address the down payment challenge, especially in California,’ where real estate prices are particularly high. It was also struggling to compete with lenders that had previously launched very low down payment options. ‘We were losing business,’ Battany said.”
“If there’s one word that comes up more than any other in the Seattle-area housing market, it’s probably ‘bubble.’ A new survey found 71 percent of Washington adults think a housing bubble is coming. New York, Florida and California residents were the next most likely to fear a housing bubble. George Moorhead, owner of Bentley Properties in Bothell, said the b-word comes up with just about every buyer he represents. ‘They’re getting very wary about a bubble,’ Moorhead said. ‘It is very much a huge concern. The perception is: how long can this go?’”
“It may not be good for his business, but Joshua Hunt, the CEO of local real estate brokerage Trelora, says that for a significant number of people in Denver, including many of those who’ve just moved to the Mile High City, renting makes more sense than buying. ‘We’re already seeing rents drop at higher-end apartments because of the massive increase of available units that have hit the market in the last ninety days or so — and that will continue over the next sixty to ninety days,’ he maintains. Waiting to purchase could be particularly key now, given the boom-and-bust history of Denver’s housing market. ‘Over the past 21 years, I’ve seen it happen twice, and a third time is coming,’ Hunt says.”
“Those woried about chronically stalled luxury property sales at the high end of the Westchester residential market finally have a reason to exhale, thanks to Douglas Elliman’s second-quarter report. Of course, all this movement does come at a price. TRD’s ranking of active listings with the biggest price cuts indicates that brokers are slashing asking amounts by as much as nearly 80 percent in the hopes of luring luxury buyers. ‘Buyers are looking for good value, particularly at the upper end of the luxury market, where we have a larger proportion of inventory,’ said Jim Gricar, general sales manager for Houlihan Lawrence, headquartered in Rye Brook. ‘That proportion of inventory has increased relatively dramatically in the last couple of years.’”
“Toronto in mid-August feels like a city waiting with bated breath. Sales of existing houses in the Greater Toronto Area plunged 40 per cent in July compared with the same month last year, with detached houses leading the decline. ‘Sensing a top, sellers have flooded the previously parched landscape with listings, shifting the market balance toward buyers,’ says Sal Guatieri, senior economist with Bank of Montreal.”
“After months of decline in the London housing market, largely due to prime properties in the center of the city, prices in England’s southeast had their worst performance since 2011, the Royal Institution of Chartered Surveyors said in a survey. ‘Sales activity in the housing market has been slipping in the recent months and the most worrying aspect of the latest survey is the suggestion that this could continue for some time to come,’ said Simon Rubinsohn, RICS chief economist.”
“It was only four years ago that Africa’s richest square mile became the destination of choice for SA’s major financial firms, sparking the largest commercial property development boom of the decade. However, the story is different today. High-end developers are not reaping rewards, as sales of apartments in Sandton have slowed amid falling demand from prospective buyers and investors. ‘Things have changed dramatically. Savvy investors are sitting on their hands at the moment,’ said Kent Gush, MD of Kent Gush Properties.”
“Another problem for high-end developers is faltering off-plan apartment sales. Marc Wachsberger, MD at The Capital Hotel Group, which manages hotel and luxury apartment buildings The Capital 20 West and Empire in Sandton, said off-plan apartment sales have ‘ground to a halt.’”
“The cost of buying property in Sydney has never been higher, but for foreign buyers the sums involved are even more exorbitant with a recently introduced extra 4 per cent stamp duty surcharge and additional land tax. Adding insult to the mounting costs is the the 1 per cent Foreign Investment Review Board application fee introduced in July 2016 that has hit the rarefied trophy market of the eastern suburbs, according to Bill Malouf, of LJ Hooker Double Bay.”
“McGrath’s Michael Coombs said while foreign buyer demand remains strong, he had two deals in the $10 million to $20 million range fall over in recent weeks after the buyers calculated the extra costs of buying in Australia. ‘In both cases they’re reassessing if they want to buy in Australia or take their money elsewhere,’ he said.”
“Has the crash finally started? Barfoot and Thompson’s July sales report showed the average sale price for an Auckland Eastern suburbs home was $1.117 million in July, compared to $1.193m in July last year. In the North Shore the average price was down from $1.3m to $1.06m. In South Auckland, it was down from $824,069 to $708,069. Is China’s crackdown on money leaving the People’s Republic causing the crunch? Are anti-money laundering laws finally working? Have the Reserve Bank’s high deposit-for-investor rules knocked them out of the game?”
“Whatever the reasons, some people who bought recently now own homes worth less than they paid for them. A tragic few may even be in negative equity, when the value of their home minus the cost of selling it (real estate fees, advertising, lawyers, etc) is less than is needed to repay the mortgage. Large numbers of Britons have had to learn to live with negative equity after a boom was followed by a lasting bust. If prices keep falling some Aucklanders may find themselves in a similar boat.”
“Negative equity is depressing for a homeowner. It means they have gone backwards. In the short term, negative equity only really becomes a problem for a homeowner if they have to sell, remortgage, or want to borrow more. Banks don’t want new borrowers with negative equity. Even people with less than 20 per cent equity aren’t prime borrower to a bank. And (economists shudder) small business loans are secured against home equity.”
“Long-term negative equity is a personal nightmare for homeowners. It traps them, and is a rankling symbol of how they are a victim of failed markets, failed government policies, and other people’s profiteering. Ironically, that’s exactly how many renters feel.”
