Financing-home loans, Real Estate, The Market

Optimism in the housing market

Fannie Mae headquarters
Image by via Flickr

Optimism on the Horizon

by: Tim McLaughlin, Weichert Financial

Last week, Fannie Mae released their National Housing Survey for 4Q10. This comprehensive report and survey showed that the majority of Americans surveyed were upbeat and optimistic about the housing sector as compared to where we were 12 to 24 months ago.

The survey showed that Americans are more confident about the stability of home prices than they were at the beginning of 2010, even though there are some lingering concerns about the acceleration of the economy. If fact, over three-quarters of the respondents (78 percent) believe housing prices will hold steady or increase over the next twelve months.

Other takeaways:

Younger Americans are generally more positive about owning a home than the general population. 59 percent of Generation Y (ages 18-34) believes buying a home has a lot of potential as an investment.

As stated above, 26% of the general population thinks housing prices will increase over the next 12 months, with an additional 52% thinking that housing prices will remain about the same.

On average, members of the survey anticipate home prices to increase 0.4% over the next 12 months, while the same subset expects rental prices to increase 2.8% over the same time period. The expectation that rental increases will far outpace home price increases was prevalent with surveyors over the next five years, in fact.

One in four Americans said they would probably buy a home in the next three years (both current homeowners and non-homeowners), and one in three Hispanics and African Americans were of this thought process.

One interesting (and probably obvious) fact: poor credit is the number one stumbling block keeping potential borrowers from owning a home.

Financing-home loans, Real Estate

Affordability…and “Housing Finance”

Silent Flight, Sleeping Dawn | 181.365
Image by Stephan Geyer via Flickr

Written By : Tim McLaughlin, Weichert Financial

First, on affordability, that was the housing tagline from Moody’s earlier this week. Moody’s came out with an analysis that spoke to the fact that home affordability returned to pre- bubble levels in a growing number of U.S. markets over the past year.

Data provided by Moody’s Analytics tracks the ratio of median home prices to annual household incomes in 74 markets. By that measure, housing affordability at the end of September 2010 had returned to or surpassed the average reached between 1989-2003 in 47 of those markets (64% – most economists believe the housing boom took off in 2003).

During the boom, lax lending and speculation pushed house price inflation far beyond the modest rise in household income. Nationally, the ratio of home prices to annual household income reached a peak of 2.3 in late 2005. But by last September 2010, it had fallen to 1.6, matching the lowest level in the 35 years the data have been collected and well below the historical average of 1.9 between 1989 and 2003.

“Based on income, this is as affordable as it gets,” said Mark Zandi, chief economist at Moody’s Analytics. “If you can get a loan, these are pretty good times to buy.”


Regarding “Housing Reform”, the Treasury Department released its well anticipated “Reforming America’s Mortgage Finance Market” report to Congress earlier today. The report touches on the future of housing finance and outlines three options with various levels of Government support. However, the final plan will take years to develop, and the outcome will shape the future of the mortgage markets, including liquidity and home affordability.


Financing-home loans, House and Home, Real Estate

Lower price vs. lower interest rates

Interest Rates are at historic lows hovering around 4.25%. If you are still on the fence, it may be time to seriously consider the advantages of locking in this low of a rate for 30 years.  Additionally, the increase in your buying power is significant. If the rates increase just .5-1%, you will actually end up paying more per month than if you had bought at a slightly higher priced home with a lower rate.  This may also mean that you can afford more home than you would have been able to if the rates had been higher.  This is in the favor of sellers at the same time because they now have an increased buyer pool.

Here is an example:

Homes Decline 5% Homes Increase 5%
1% Rate Increase 1% Rate Increase
HOME PRICE $500,000.00 $475,000.00 $525,000.00
LOAN AMOUNT $482,500.00 $458,375.00 $506,625.00
INTEREST RATE 4.500% 5.500% 5.500%
MONTHLY PAYMENT $2,444.76 $2,602.60 $2,876.56
Savings – Monthly $157.85 $431.80
Savings – Life of Loan $56,826.00 $155,448.00