Friday, September 28, 2018

This and That

FED raises interest rates

Just announced the Federal Reserve raised short-term interest rates by a quarter percentage point. This will drive up credit card percentages, car loans and many short-term obligations It will also increase the rate for adjustable rate mortgages. This is the eighth move higher since 2015 and talk is it won’t be the last.

Longer term mortgage rates will likely remain unaffected unless the inflation rate begins climbing. The yield of the domestic 10-year treasury note is what affects longer term mortgages rather than short-term interest rates.

However, something that is affected by the higher interest rate is a cooling of the housing market. The fear of an uptick in interest rates often keeps buyers from making the commitment on a home purchase. But other goods news out there like employees earning higher wages should help to off set these fears.

Good thing is if you are a saver then your savings account, retirement accounts and bonds will all start earning more interest. Money market accounts and CD rates will increase with the uptick of the prime rate. Conversely, if you have a credit card, now may be the time to get it paid off.

The Chief Economist for Fannie Mae, Doug Duncan expects this week’s Fed raise to have no affect on the real estate market as a whole. He does expect interest rates to drift from 3.9 percent to 4.1 percent which would boost the monthly cost of a $225,000 mortgage by $26 to $1,454. This may not be enough to deter most ready buyers. More a driving factor will be low inventory which continues to drive home values higher.

Construction spending is up 10.7 percent this year as hotel, manufacturing and office building takes off. Raising borrower costs on these projects is not likely to affect their funding which would have been in the pipeline before this recent Fed hike.

On another note, CoreLogic is reporting that mortgage fraud is up and has continued to rise since Quarter 2 2017 by 12 percent. False credit report disputes and income misrepresentation are the top issues. Frauders are attempting to get items off their credit report by claiming identity theft. Lenders end up using limited resources to investigate the claim. Also, borrowers attempting fraud are misrepresenting their income. They are attempting to get mortgages when they have been in their jobs less than a year so their true income is not showing up on IRS tax returns. We are turning into a society that wants to see what they can get no matter who they must lie to or falsify.
“Achieving our goals is not just about drive or ability; it’s also about knowing our weaknesses – and addressing them.”
And remember if you, a friend or family member need assistance with selling or buying a home I can help. Referrals and people needing relocation assistance are welcome! Search Single Family homes in Greenville. Search Condos and Townhomes in Greenville.

Monday, September 24, 2018

Homeowner Equity Gains

homeowner equity gains
After the fall of 2007 where the real estate market ballooned and then the bottom fell out, a lot of homeowners who bought during the boom time were left with little to no equity on their homes for several years after. These types of homeowners are often referred to as being “underwater” or “upside down” on their mortgages because they owe a lot more than their homes are worth.

CoreLogic has released their report on Homeowner Equity Insights for the second quarter of 2018. Nationally, homeowners with mortgages have seen an equity increase of around $981 billion since the second quarter of 2017*. This is an increase of 12.3 percent between 2017 and 2018. Conversely, homeowners are emerging from the negative equity trap. As of the second quarter of 2018, the total number of negative equity mortgage residential properties decreased by 9 percent from the first quarter of 2017. When we compare the second quarter of 2017 to now, negative equity decreased 20.1 percent on all mortgage properties. 
Home Equity Wealth - $16.2K - Average gain in home equity wealth this quarter

CoreLogic Chief Economist Frank Nothaft stated, “Homeowner properties continued to increase in value this quarter with homeowners gaining an average of $16,200 in home equity wealth. When aggregated across all homeowners, that totals almost $1 trillion in gains in home equity wealth. This wealth gain will support additional consumption spending and home improvement expenditures in coming years.”

Negative equity peaked at 26 percent of mortgaged residential properties in the fourth quarter of 2009 reported CoreLogic who started tracking negative equity in the third quarter of 2009. South Carolina fares well with a 3.28 percent negative equity share compared nationally. Our sister state, North Carolina sits higher at 3.3 percent and our southern border Georgia is also higher at 3.8 percent. The average equity gain for South Carolina homeowners is a bit over $10K. If inventory continues to stay low, this average equity gain will only increase. It will be interesting to see where 2018 ends.
Homeowner Equity - Negative equity levels continue to drop
CoreLogic President and CEO Frank Martell states, “Negative equity levels continue to drop across the U.S. with the biggest declines in areas with strong price appreciation. Further, the relatively low level of shadow inventory contributes to the chronic shortage of housing supply and price increases in many markets.”

Nationally, the average homeowner gained about $16,200 in equity during the past year. California homeowners the highest gainers at a year-over-year increase of $48,000. However, three states did decrease; Connecticut, Louisiana and North Dakota. The closest metro area to us which is Washington, D.C. sits at 5.6 percent negative equity share and Miami to the south is at 11.4 percent. Miami has had a harder time recovering their equity than any other metro mentioned in the report. During the boom, home prices skyrocketed in Miami which will be a challenge to overcome. Homeowners in Miami who wish to sell may end up selling at a loss just to get out from under their high mortgages.

And remember if you, a friend or family member need assistance with selling or buying a home I can help. Referrals and people needing relocation assistance are welcome! Search Single Family homes in Greenville. Search Condos and Townhomes in Greenville.

*Homeownership mortgage source: 2016 American Community Survey.

Wednesday, September 19, 2018

Natural Disasters can be Disastrous for Homeowners

Natural Disasters can be Disastrous for Homeowners
Hurricane Florence will wreak havoc on the neighborhoods hit hard by flooding and wind damage. Natural disasters such as wildfires, earthquakes, floods, volcanoes and even hurricanes destroy and consume as they move or roll across the landscape. These occurrences displace people, destroy property and lately are adding to the already impacted real estate market by lowering already tight inventory across the affected areas.

The lives of people in these areas is disrupted, employment is hindered, income drops, and bills go unpaid for lengthy amounts of time. These disasters lead to higher levels of default on mortgages in the affected areas. For example, when a trio of hurricanes hit last year, Houston and Cape Coral experience tripled delinquency rates on mortgages while San Juan quadrupled. In Santa Rosa, CA, the Tubbs wildfire caused delinquency rates to spike by 50 percent.

Dave Ramsey talks about getting yourself out of debt by using his strategies. He talks about his seven baby steps. Step one talks about saving $1,000 as an emergency fund and Step three talks about saving three to six months of expenses for emergencies. If you live in an area where natural disasters are more common, it might be a good strategy to follow his advice. That way if something happens to your home you can at least make mortgage payments until the insurance company finishes your claim. Most insurance companies will put an extra effort in neighborhoods where disaster has struck to help lessen stress and get claims paid out faster.

Another pressure in areas where disasters hit is the demand that is put on rental property in the affected areas. Single-family rents in these areas tend to rise at a double-digit pace. Lots of competition in the market often results in higher prices as we have learned through economics.

Make a pact with yourself today to get yourself set up for success by putting aside an emergency fund so you can protect yourself and your property against the next natural disaster that will hit not might hit in your area.

And remember if you, a friend or family member need assistance with selling or buying a home I can help. Referrals and people needing relocation assistance are welcome! Search Single Family homes in Greenville. Search Condos and Townhomes in Greenville.

Friday, September 7, 2018

Sellers’ Market…hmmmm

Just reviewed CoreLogic’s Home Price Insights monthly report for July 2018. They have made a determination based on their numbers that home prices were up in July by 6.2 percent over July 2017. But they also make a statement that existing homeowners feel they are in a “sellers” market and are staying put for higher returns on their home sale.

CoreLogic’s Chief Economist Frank Nothaft has stated, “With increased interest rates and home prices, the CoreLogic Home Price Index is rising at a slower rate than it was earlier this year. While markets in the western part of the country continue to experience rapid home-price growth, many of those metros are over-valued, and will likely experience a slowdown soon.”
Home Price Index rising at a slower rate than a year ago
So, it sounds like the rapid home buying pace we had when interest rates were lower may begin to cool off now that the Fed has been raising interest rates in the effort to slow the economy down, so we don’t have a run-away economy like the 80’s. This could be a good thing for younger first-time home buyers who are trying to get into their beginner homes and who are being priced out of most markets.

The CoreLogic Market Condition Indicators: July Findings
The study assessed attitudes toward homeownership and the drivers of the home buying or renting decision process. The data reveals that 50 percent of the top 50 markets are considered overvalued. However, residents in many of these high-price growth markets have expectations that might be at odds with this realty. The graph below shows that 62 percent of residents in these markets expect their homes will be worth more in three years than they are today. Meanwhile, 55 percent of resident in no/negative growth markets believe their home will be worth either the same or less in three years then they are today. Additionally, 47 percent of residents in high-price growth markets and 31 percent in lower growth markets feel they are in a “sellers” market.


President and CEO of CoreLogic Frank Martell states that, “Many consumers see their homes as good investments. Our consumer research indicates homeowners, especially those in high-price growth markets, are confident that by waiting to sell, they will receive a greater return on investment than they would today. In other words, sellers are largely staying put. With fewer homes on the market, price pressure will continued to rise.”

Consumer Research - Sellers are largely staying put

As for South Carolina, the change in home value between July 2017 and July 2018 was 5.1 percent. The projection for July 2019 is 5.6 percent higher. Month over month percent increase is showing an actual of.1 percent and projected 0.4 percent.

Our closest Top U.S. Metro area, Washington, D.C. is now showing a 2.6 percent home price index change over the same time last year.

The latest market conditions indicators Metro area maps for July 2018 is showing Greenville-Anderson-Mauldin as overvalued and that trend will continue into July 2023. Our neighboring metro area to the north Spartanburg is showing normal valuation which will continue into July 2023. Columbia metro area continues to be undervalued. While the coastal areas of Charleston, North Charleston, Hilton Head Island, Bluffton and Beaufort continue to be overvalued.

So, the impact of this report is that home sellers are choosing to stay put believing that their home will be worth more if they sell it three years from now. But before you make this decision take some factors into account. What will the Fed be doing with interest rates over the next three years, will new home building increase as builders become more confident that they will have buyers and with a change in inventory will home prices really rise that much more than they are today? Obviously, if you are a homeowner it is your decision on when to sell but why not contact me, your local expert, and let’s have a conversation about what the market is doing here in Greenville and if the market indicators will change that much here locally. CoreLogic provides numbers nationwide and concentrate their efforts on the larger metro areas. Greenville, although large, may not “feel” the same results as Washington, D.C.

And remember if you, a friend or family member need assistance with selling or buying a home I can help. Referrals and people needing relocation assistance are welcome! Search Single Family homes in Greenville. Search Condos and Townhomes in Greenville.

Thursday, September 6, 2018

Rising Rate Market - Refinancing

So, I found this interesting. In the state of North Carolina your $100 will get you $110.01 worth of goods. The U.S. Bureau of Economic Analysis recently released a report on the value of goods that $100 would buy in each state compared to a national average. The Tax Foundation created the chart below to illustrate the impact of that report.

Rising Rate Market - Refinancing

States with the most bang for your $100 dollars are Mississippi and Alabama which ranked #1 and #2 on the map above. States that ranked last were New York and California where you would only get $86.51 and $87.41, respectively. Hawaii, ranked at #50, turned out to be the worst state.

Reflecting, the cost of living in these states is higher but wages and income tend to be higher also. Employers pay a compensating differential which they hope will make up for low purchasing power.

In North Carolina, our rank is #17 which is far below 50 percent. Our sister state South Carolina comes in even lower at #12. So, it is probably a fare judgment that our wages are outpacing our purchasing power just a bit. Translate this to real estate and the blogs I have written about home values and it is fair to say that North Carolinians are in a good economic position in relation to purchasing a home. Land is not a finite resource here in North Carolina, so our real estate prices have not been “bid up,” at least not yet.

The Bureau of Economic Analysis also put together a chart which shows growth in personal income for all states. Here North Carolina ranks high with 2.3 percent change between 2015 and 2016. Mississippi and Alabama were low in percentage at 0.6 and 1.0 percent, respectively with Hawaii being -1.8.

Overall after looking at these charts I would venture to say North Carolina is in a good place right now with a nice balance between personal income growth and how much goods their $100 will buy. With our economy growing stronger every day, it is a good bet that these numbers will change. Hopefully, your income will rise faster than your cost of living.

And remember if you, a friend or family member need assistance with selling or buying a home I can help. Referrals and people needing relocation assistance are welcome! Search Single Family homes in Greenville. Search Condos and Townhomes in Greenville.