Sixty-five percent of home owners with private mortgage insurance say that the additional cost of PMI prompted them to pay a higher monthly mortgage payment than they had originally expected, according to a survey released by TD Bank of more than 2,000 Americans who purchased a home in the past 10 years.
"PMI has had a definitive impact on many home buyers – including making them rethink or delay the purchase of a home in light of not being able to meet monthly mortgage payments," says Michael Copley, executive vice president of retail lending at TD Bank.
Borrowers are required to get PMI if the loan exceeds 80 percent of the home’s value. The insurance protects the lender in case the borrower defaults on their loan.
Many buyers say that PMI has an impact on their home purchasing decisions. For example, 35 percent of people who purchased a home in the past two years said that PMI influenced their decision of which house to buy. Also, 53 percent reported facing a negative impact due to the additional cost of PMI. About 40 percent of those surveyed said that having to pay PMI forced them to curtail small and daily purchases or larger household purchases.
The survey showed that PMI is fairly common: 37 percent of those who purchased a home in the past 10 years said they were required to have PMI, and 43 percent in the past two years. Forty-five percent of home owners aged 18 to 34 years old have PMI; 37 percent of home buyers aged 35 to 54 have it; and 23 percent of people older than 55 had required mortgage insurance on their loans over the past decade, the TD Bank study found.
On average, home owners reported that PMI cost about $100 extra a month, according to the study.
source: TD Bank and Credit.com
Freddie Mac launched Home Possible Advantage, a conventional mortgage with a 3 percent down-payment requirement geared to low- and moderate-income borrowers. It's a conforming conventional mortgage with a maximum loan-to-value ratio of 97 percent. To qualify, first-time home buyers are required to participate in a borrower education program.
With Fannie Mae's 3 percent down-payment offering, borrowers must still meet standard eligibility requirements, including underwriting, income documentation, and risk management standards. Any buyer can take advantage of Fannie's loans as long as at least one co-borrower is a first-time buyer. The loans will require private mortgage insurance.
"Our goal is to help additional qualified borrowers gain access to mortgages," says Andrew Bon Salle, Fannie Mae executive vice president for single-family underwriting, pricing, and capital markets. "This option alone will not solve all the challenges around access to credit. Our new 97 percent LTV offering is simply one way we are working to remove barriers for creditworthy borrowers to get a mortgage."
The National Association of REALTORS® applauds the move by the Federal Housing Finance Agency, which oversees Fannie and Freddie.
NAR said in a statement that the action by FHFA demonstrates its "commitment to home ownership by serving creditworthy borrowers who lack the resources for substantial down payments, plus closing costs, with a new 3 percent down-payment program that mitigates risk with strong underwriting. The new program ensures that responsible home buyers will have access to safe, affordable mortgage credit."
"It's no secret that for the last several years, consumers have felt more strapped financially, particularly renters," says David Brickman, executive vice president of Freddie Mac Multifamily. "Many renters are not buying homes because of a perceived lack of ability to afford the down payment or mortgage, as well as poor credit history. But there also is a segment of renters who simply do not want the responsibilities of owning a home."
The majority of renters say they're living paycheck to paycheck. Forty-five percent of renters say they have just enough money to get by, and 17 percent say they do not have enough money to pay for basics, such as food and housing, until their next payday. On the other hand, only 38 percent of home owners indicate similar financial struggles.
Still, nearly 40 percent of renters say they hope to purchase a home in the next three years, most of whom are ages 25 to 44, the survey found. Also, if a renter hasn't owned a home by age 45, he or she will likely continue to rent throughout their lifetime, the survey noted.
For now, renters say the top three things about renting are: no responsibility for home maintenance; greater flexibility to move; and protection against any home-price declines, the survey found.
However, renters say the top three things pushing them toward home ownership are: owning something they'd be "proud" of; passing the home on to their children one day; and more flexibility to design the home the way they want it.
source: Freddie Mac
Black segregation in American cities has reached its lowest point in more than a century, according to a Manhattan Institute report. However, the report cautions that doesn’t mean segregation has disappeared completely from neighborhoods across the country.
But the report suggests the country has made strides in making neighborhoods more inclusive. “All-white neighborhoods are effectively extinct,” the report says, adding that none of the housing markets among the 85 studied had a level of black isolation as high as the national average 40 years ago.
"This shift does not mean that segregation has disappeared," the report says. "The typical urban African American lives in a housing market where more than half the black population would need to move in order to achieve complete integration."
Researchers point to black suburbanization, access to credit, fair housing laws, and immigration has helping to decline black segregation in the country.
"America is now more racially integrated than anytime in the past century," says Jacob Vigdor, a professor with Duke University, and co-author of the research. "There's been black suburbanization and the elimination of lily-white neighborhoods."
But other experts say that the country still has a long way to go. "We're nowhere near the end of segregation," Brown University sociologist John Logan told USA Today. Logan was not involved in the study. "There are still no signs of whites moving into what were previously all-minority neighborhoods, and there is still considerable white abandonment of mixed areas."
source: USA Today
The tone of this past week’s few U.S. economic releases was positive, but analysts were more focused on this week's Federal Reserve policy meeting and press conference. Observers are keenly looking for signals about the timing of a possible interest rate increase.
Late on Thursday, the U.S. House of Representatives passed a $1.1
trillion spending bill that funds most of the federal government through
September 2015. A government shutdown was averted when both the House
and Senate agreed to a two-day stop-gap bill, giving the Senate time to
deliberate on long-term funding.
Retail sales grew more than expected
Retail sales in November increased 0.7% from upwardly revised October results, beating expectations. Auto sales led the growth. Even excluding cars, sales rose 0.5%. And although lower gasoline prices at the pump held down the growth in total sales, core sales excluding both autos and gas were up a healthy 0.6%. Compared with November 2013, sales rose 5.1%, the best showing in more than a year.
A variety of factors signal an upbeat outlook for retail sales in the short term. "Falling gasoline prices, improving labor market conditions, and gradually increasing wages are all reasons to expect retail sales to experience strong near-term growth," said Vanguard economic analyst Ravi Tolani.
Business inventories rose 0.2% in October from September, in line with expectations. The growth was led by wholesale inventory buildup at a 0.4% pace. Business sales overall moved in the opposite direction, down 0.1%, as manufacturing sales fell 0.8% while wholesale and retail sales increased. These ups and downs left the ratio of total inventory to sales unchanged at 1.3. Compared with year-ago levels, inventories were up almost 5% and sales were more than 3% higher, with a similar inventory to sales ratio.
Amid falling energy costs, the producer price index (PPI) was down 0.2% in November from October, the third monthly decline in the last four months. The gasoline price index decreased more than 6%. Excluding food and energy costs, prices for goods and services were flat. Compared with a year ago, the PPI rose a modest 1.4%.
Economic reports scheduled for release this coming week include new residential construction on Tuesday, the Federal Open Market Committee's monetary policy statement on Wednesday, and the Conference Board’s Leading Indicators on Thursday.
source: Vanguard Group
The Federal Reserve has ended its' bond-buying stimulus program.
The Fed had been purchasing $85 billion per month in Treasury and mortgage-backed securities. In the last year, the Fed has purchased more than $1 trillion in Treasury and mortgage-backed securities. Fed officials have said the purchases have helped to reduce borrowing costs, and it credits the program for helping to contribute to an improving housing market.
The Fed said that it plans to hold short-term interest rates near zero, and any rises likely would not come until the the end of 2015.
Both policies are aimed at holding down borrowing costs.
source: New York Times
Marketing multimillion-dollar mansions may require stepping outside-the-box and getting fancy in luring potential buyers, from hosting mini-circuses, raffling off Botox treatments, to having models lining the properties, and more.
"Price is key, but it's the presentation that will sell the property," Lisa Sorrentino, a real estate agent in Calabasas, Calif., told The Los Angeles Times. Sorrentino held a mini-circus in the back yard of her $8 million listing, complete with a juggler, contortionist who floated in the pool in a plastic bubble, and a stilt walker.
“Competition for qualified buyers is fierce, leading to a game of one-upmanship by agents looking for any edge,” a Los Angeles Times article notes. Real estate instructor Paul Habibi with the UCLA Anderson Graduate School of Management even refers to it as “shock and awe” marketing.
"Years ago you simply posted the listing on the Multiple Listing Service or hung a sign out, and pretty soon you'd have it sold," Habibi told The Los Angeles Times. "Now sellers are reverting to other tactics to tap into buyers and get them on the hook."
And open houses are getting fancy. For example, one agent offered horsebacking riding to show off a 6-acre estate of the home he was listing while a Malibu agent lured buyers to an open house by raffling off Botox treatments and Thai foot massages. In listing another luxury home, one agent had models line the front of a new condo project and serve free drinks with the theme “it’s always cocktail hour” at these condos.
source: Los Angeles Times
While investors are reportedly dwindling in numbers lately, some single-family rental markets are still garnering a great deal of investor interest.
Some investors are finding it’s the little-known areas that may offer some of the highest returns due to less competition.
“Buying single-family homes as rentals still yields solid returns in many markets across the nation, but it is difficult for individual investors and even small-to medium-sized institutional investors to find reasonably priced inventory in markets dominated by the 800-pound gorillas in the single-family rental space,” says Daren Blomquist, vice president at RealtyTrac.
RealtyTrac and RentRage released a list of the following top “Hidden Gem” single-family rental markets nationwide, based on gross rental yield (the expected return on investment before taxes, maintenance fees, and other costs).
1. Wichita County, TX.
Median market value: $84,000
Median rent value: $938
Gross yield: 13.4%
2. Lubbock County, TX.
Median market value: $111,000
Median rent value: $1,089
Gross yield: 11.8%
3. Canadian, OK.
Median market value: $131,000
Median rent value: $1,176
Gross yield: 10.8%
4. Williamson, TX.
Median market value: $158,000
Median rent value: $1,403
Gross yield: 10.70%
5. Monroe, N.Y.
Median market value: $121,000
Median rent value: $1,043
Gross yield: 10.30%
6. Davidson, TN.
Median market value: $149,000
Median rent value: $1,263
Gross yield: 10.20%
7. Alachua, FL.
Median market value: $139,000
Median rent value: $1,175
Gross yield: 10.10%
8. Schenectady, N.Y.
Median market value: $153,000
Median rent value: $1,278
Gross yield: 10%
9. Jefferson, LA.
Median market value: $153,000
Median rent value: $1,260
Gross yield: 9.90%
10. Allegheny, PA.
Median market value: $126,000
Median rent value: $1,034
Gross yield: 9.80%