August 2015 – Cool Tools News Spool

Fannie housing survey results say “buy now”

Aug 252015

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

by G. Steven Bray

The latest Fannie Mae housing survey holds some cautionary results for those in the real estate industry. Both the share of respondents who believe now is a good time to sell and now is a good time to buy fell last month, with the latter hitting an all-time survey low at 61%.

Fannie economists suspect the results are shaded by global economic headlines, particularly the Greek default and Chinese stock market plunge. Year-over-year, the indicators measured in the survey are as strong as or stronger than a year ago.

If you chalk up these disconcerting results to headline weariness, it’s easy to find some positive news in the numbers.

– Consumers still expect home prices and rents to rise, and they expect rents to rise 50% faster than home prices. Thus, potential homebuyers have an incentive to act sooner rather than later, especially if they’re currently renting.

– An increasing percentage, now 51%, also thinks mortgage rates are going to rise in the next year, providing more incentive to buy now.

– The share of respondents who say their next move will be a home purchase ticked up to 65%.

– Finally, the survey hasn’t shown an appreciable change in consumers’ attitudes about their own finances in the last 12 months. This lends further credence to the analysis suggesting the results may be skewed by world headlines.

Fannie’s housing survey reflects the attitudes of 1000 consumers about the housing market and the economy. Fannie has conducted the survey each month since June 2010. Click here to see the full survey results.

USDA up-front fee increasing; reason unclear

Loan Programs, Residential Mortgage Comments Off

Aug 112015

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

by G. Steven Bray

USDA is raising its guarantee fee for the Rural Development home loan program on Oct 1st. The Rural Development program is one of the few no-money-down loan programs. It’s only available in areas USDA considers rural in nature, but that definition includes a lot of exurbs of major TX cities.

The guarantee fee is up-front mortgage insurance due at loan closing. Most borrowers choose to roll the fee into the loan amount rather than pay it at closing.

The fee is rising from 2% to 2.75% of the initial loan amount. On a $150k home, that will raise the monthly payment by about $5.50 at today’s interest rate.

The reason for the change is puzzling. USDA claims the increase is to cover old loan losses. However, we’ve been told USDA has a low default rate, and in 2011 it claimed loan losses were declining. USDA recently testified to Congress that the guaranteed loan program has a negative subsidy, meaning that it’s charging more money than it needs to cover losses. Thus, it sounds like the increase really is just another way the administration has found to raise money for the general fund, and this time the tax falls on rural homebuyers.

USDA is not changing its monthly mortgage insurance rate, called the annual fee, which remains 0.5% of the loan balance.

Please note that USDA will apply the change based on the date it commits to the loan, not the date the borrower applies. In order to beat the change, a homebuyer really needs to find a home this month as it generally takes about 30 days from contract signing to USDA loan approval.

Freddie Mac housing index shows recovery continues

Real Estate Market Comments Off

Aug 052015

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

by G. Steven Bray

Freddie Mac’s MiMi index, or Multi Indicator Market Index, continues to point to a recovering housing market. The latest index covers the spring buying season, and shows the nationwide index increased to 79.2. While this value still indicates a borderline weak housing market, it is a sizable improvement from last year and from the previous month. By comparison, the index high was 121.16 in 2006.

More than half the states have MiMi values in the stable range of 80 to 120. Texas ranks 7th nationwide with a MiMi value of 87.6. This represents a 5% improvement over last year.

Of Texas metros, Austin leads the pack and remains in the top 5 nationally with a value of 92.8. Values for other TX metros include DFW at 83.9, El Paso at 84.9, Houston at 86.7, The Valley at 89.1, and San Antonio at 86.5.

The biggest drag on MiMi values for TX metros is the number of purchase applications. This probably is more indicative of tight supply than market weakness. Thus, I think it’s safe to say the housing markets may be stronger than indicated by their MiMi scores.