Some Markets Reaching ‘Crisis’ Level

“With new and existing supply failing to catch up with demand, several markets this summer will continue to see homes going under contract at this remarkably fast pace of under a month,” Yun says. The metro areas where listings stayed on the market the shortest amount of time in May, according to inventory data , were:

• Seattle-Tacoma-Bellevue, Wash.: 20 days
• San Francisco-Oakland-Hayward, Calif.: 24 days
• San Jose-Sunnyvale-Santa Clara, Calif.: 25 days
• Salt Lake City: 26 days
• Ogden-Clearfield, Utah: 26 days.

With the median sales price for existing homes reaching a new high last “crisis” in some areas of the country, says Lawrence Yun, chief economist for the National Association of REALTORS®. Higher-priced homes now make up the majority of available inventory—which is the lowest it’s been in decades—making it harder for home buyers to achieve homeownership.

“There is a housing shortage everywhere and a housing crisis in some markets,” Yun says. Here's how sales in different price ranges fared in May:

• Under $100,000: Down 7 percent year over year
• $100,000-$250,000: Up 2 percent
• $500,000-$1 million: Up 20 percent
• Above $1 million: Up 30 percent
• The National Association of Realtors reports that the median price of an existing home is $252,800, a 5.8 percent increase from the price reported in May 2016.

“Because of the run-up in home prices, it’s making it more difficult for renters to convert into homeownership,” Yun says. However, the surge in home prices is working out well for current homeowners, who are enjoying rising equity. The share of existing homes purchased by first-time buyers dropped to 33 percent in May, down a percentage point from April, NAR reports. However, first-time buyers comprise more of the market than a year ago, when they made up 30 percent of sales.

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Rate Rises Again in Second of 3 Expected Hikes

The Federal Reserve voted on Wednesday to raise the key interest rate one-quarter percentage point, ticking off the second of three hikes slated for this year. Analysts largely predicted the outcome, even as lagging inflation gave cause for concern.

“In view of realized and expected labor market conditions and inflation, the [Federal Open Market] Committee decided to raise the target range for the federal funds rate to 1 to 1-1/4 percent,” according to a statement by the Fed. “The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained return to 2 percent inflation.”

News Facts

• 30-year fixed-rate mortgage (FRM) averaged 3.91 percent with an average 0.5 point for the week ending June 15, 2017, up from last week when it averaged 3.89 percent. A year ago at this time, the 30-year FRM averaged 3.54 percent. 
• 15-year FRM this week averaged 3.18 percent with an average 0.5 point, up from last week when it averaged 3.16 percent. A year ago at this time, the 15-year FRM averaged 2.81 percent. 
• 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.15 percent this week with an average 0.5 point, up from last week when it averaged 3.11 percent. A year ago at this time, the 5-year ARM averaged 2.74 percent.

Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage. Visit the following link for the Definitions. Borrowers may still pay closing costs which are not included in the survey.

The key rate, though not directly tied to mortgage rates, exerts influence in housing. The majority of both homeowners and prospective homeowners recently surveyed.  HomeServices reported rising rates are “a challenge facing the real estate market today.” Fifty-five percent of millennials—the current generation of first-time homebuyers—reported disheartened feelings about buying a home as a result of rising rates, while 68 percent reported pressured feelings about buying a home ahead of future growth.

The Fed stepped up policy late last year, voting to carry out the first and only hike of the year, while signaling three hikes in 2017, in December. The Fed began to make good on its promise in March. Mortgage rates have remained in flux since then, dipping back below 4 percent in April for the first time since the presidential election, and, more recently, in a falling pattern.

“While the increase in rates by the Fed has been well anticipated we anticipate they will move forward cautiously in the second half of the year given the asymmetric nature of policy available to counteract an economic slowdown versus a nascent acceleration in inflation.”

Stay tuned to for more developments.

Debt-to-Income Ceiling from 45 percent to 50 percent on July 29

Fannie to Loosen Mortgage Requirements

Government-sponsored financing giant Fannie Mae will ease its requirements next month, raising its debt-to-income ceiling from 45 percent to 50 percent on July 29. The move could pave the way for a larger number of new buyers to qualify for a mortgage, particularly millennials who may be saddled with student loan debt.

The debt-to-income ratio compares a person’s gross monthly income with his or her monthly payment on all debt accounts, including auto loans, credit cards, and student loans. It also factors in the projected payments on the new mortgage. Lenders see applicants with lower debt-to-income ratios as less at risk of defaulting.

Fannie Mae, Freddie Mac, and the Federal Housing Administration have exemptions that allow them to buy or insure loans with higher ratios than the federal rules, which are set at a maximum of 43 percent. The FHA allows debt-to-income ratios of more than 50 percent in some cases.

In a recent study, Fannie Mae researchers looked at more than a decade and a half of data from borrowers with debt-to-income ratios in the 45 percent to 50 percent range. They found that a significant number of these borrowers had good credit and were not prone to default.

“We feel very comfortable” with the increased debt-to-income ratio ceiling, says Steve Holden, Fannie Mae’s vice president of single-family analytics. “What we’re seeing is that a lot of borrowers have other factors” in their credit profiles that reduce the risks associated with slightly higher debt-to-income ratios. For example, these borrowers may make higher down payments or have cash reserves of 12 months or more.

Many lenders say they’re happy to see Fannie loosen up their debt-to-income guidelines a bit. Joe Petrowsky, owner of Right Trac Financial Group in Hartford, Conn, calls the move "a big deal" for potential buyers who are currently being rejected for mortgages: “There are so many clients that end up above the 45 percent debt ratio threshold.”

But that doesn’t mean that anyone with a debt-to-income ratio of below 50 percent will be approved. Borrowers will still be closely vetted by Fannie’s underwriting system to examine their complete application, including income, down payment, credit scores, and more.

Source“Fannie Mae Will Ease Financial Standards for Mortgage Applicants Next Month