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It's Becoming Easier to Get a Mortgage

by Melissa Dierks

Lenders are showing signs of loosening up when it comes to home buyers seeking a mortgage. The Mortgage Bankers Association's Mortgage Credit Availability Index ticked up slight in April, following an increase the previous month too. Increases in the index are indicative of an overall loosening of credit.

Opening the Credit Box

3% Down Payments May Be Game Changer

Smaller Down Payments Lure More Buyers

FHA Lowers Its Mortgage Costs

MBA's index shows that mortgage credit availability has increased consistently over the last several months, coinciding with recent announcements from the federal government of programs that have been designed to open the credit box. Fannie Mae and Freddie Mac's move to back 3 percent down payment loans as well as the Federal Housing Administration’s action to reduce its mortgage insurance premiums have helped ease credit, MBA Chief Mike Fratantoni says.

Other government offerings also helped to ease credit even more in the latest report, reflecting April data, MBA notes.

"Mortgage credit availability increased on net in April," Fratantoni says. "The increase was driven by new offerings of FHA's 203K home improvement program, new VA offerings, and new jumbo products. The increase was partially offset by some investors tightening underwriting criteria on conventional cash out offerings."

REALTORS® surveyed have pinpointed tight credit conditions, significant lender overlays, and loan processing delay as a major hurdle facing their buyers the past few years, but REALTORS® are also reporting gradual improvements, according to the latest REALTORS® Confidence Index, a survey of real estate professionals.

REALTORS® point to the trend of lenders showing more willingness to accept slightly lower FICO scores – moving from the high range of 740-plus to now the mid-range of 620-740. Also, REALTORS® note an increase in the number of their clients securing a loan while making zero to 6 percent down payments. FHA's reduction in the mortgage insurance premium and the GSE-backed 3 percent down payment loans are helping buyers to come with less money to the table.

But while mortgage credit availability is showing definite signs of easing, credit continues to still be far less available than it was during the housing boom days, according to MBA.

Source: "MBA: It Keeps Getting Easier to Get a Mortgage," HousingWire (May 12, 2015) and "REALTORS® Confidence Index," National Association of REALTORS® (April 2015)

What Millennials Want in a Home

by Melissa Dierks

Millennials make up the largest share of home buyers at 32 percent, according to a recentgenerational trends report by the National Association of REALTORS®. While older generations sought out homes with luxury amenities and rooms with one specific purpose, younger buyers are seeking affordable, efficient homes that can be customized to suit their changing needs.

Generation Y Trends

Millennials to Drive Down Home Sizes

Millennials Prefer Practical Homes

5 Must-Haves of Millennial Buyers

"When it comes to homes today, millennials want something creative, something different," says James Roche, CEO ofHouseplans.com. "They want something that better suits the times. For example, fine china and living rooms that nobody ever sets foot in are considered desires of the past. Dining rooms are being converted into home offices. Family rooms are being transformed into media centers. And, homeowners are now leveraging smartphones and tablets to adjust the temperature, or turn on outdoor lights and security systems."

These are the top five millennial home desires, according to Boyce Thompson, former editor of Builder Magazine:

  1. Affordability. Many millennials want a home that is affordable, yet "move-in ready," with all the bells and whistles, including an updated kitchen, high-tech amenities, and open, versatile spaces with an indoor-outdoor flow.
  2. Efficiency. Millennials tend to be conscious of not being wasteful, and will do what it takes to save on the use of electricity and water. "One [Florida] home I worked on featured one of the earliest disappearing window walls in production housing," says Thompson. "You walked through a short entry vestibule to the main living area, and you looked right through the home, to the pool deck, and out into the Orlando night. The architect, Mike Woodley, and I sat on a couch in the family room and watched the delighted expression of visitors as they entered the space and discovered that a corner of the roof was suspended on a post in the pool."
  3. Flexibility. Since millennials see their homes as an extension of the rest of their lives, not just as a refuge from work, they prefer casual, flexible spaces. They want home offices that can convert to a game room and large attic spaces that could eventually be transformed as a play space. Customization of the home is important, even if it means spending extra money. "An ideal floor plan might include an "away" room, especially if you needed to 'get away'  to do yoga, practice the guitar, or, even if you want to isolate your child’s latest Lego creation," says Thompson. "Then, later on, this space could eventually be converted into a bedroom."
  4. Going Green. A recent study from NAR revealed that 10% of millennials seek out new-home construction for green/energy efficient reasons. As a group, young buyers prefer green building and homes that use sustainable, recycled materials. They want housing that's smaller and energy-efficient (think LED lighting), and they appreciate good engineering.
  5. Entertaining. It should be no surprise that the younger generation wants a home that they can show off to their neighbors and friends and use as an entertainment space – from fire pits to open floor plans to game rooms. They also have a deep appreciation for versatile outdoor spaces that extend living space.

Source: "Houseplans.com," (May 21, 2015)

Housing Flips Slip to Lowest Level in Years

by Melissa Dierks

Four percent of all U.S. single-family home sales in the first quarter were flips, sold for a second time within a 12-month period, according to RealtyTrac's first quarter 2015 U.S. Home Flipping Report. It marked the lowest number of homes flipped since the second quarter of 2011, when just 3.4 percent of all single-family home sales were considered flips.

Read moreHousing Flips May Start to Flop

In the first quarter, the average gross profit – the difference between the purchase price and the flipped price – for completed flips was $72,450, according to RealtyTrac’s report. That represents an increase from $65,290 in the previous quarter and is the highest level since the first quarter of 2011.

"The strong returns for home flippers in the first quarter demonstrates that there is still a need in this recovering real estate market for move-in ready homes rehabbed to more modern tastes, particularly given the dearth of new homes being built," says Daren Blomquist, vice president at RealtyTrac. "The challenge for flippers in 2015 will be finding inventory to flip. Flippers ideally want to buy distressed homes that provide them with an opportunity to add value in markets where there is good affordability and ample demand from buyers for the finished flip product — whether those buyers are millennials becoming first-time homebuyers, baby boomers purchasing their present or future retirement home, or buy-and-hold real estate investors looking for turnkey rental properties that cash flow."

According to RealtyTrac's report, investors saw some of the largest returns on housing flips in the first quarter in Baltimore; Deltona-Daytona Beach-Ormond Beach, Fla.; Ocala, Fla.; Lakeland, Fla.; Detroit; Tampa; Pittsburgh; Memphis, Tenn.; and Chicago.

Meanwhile, the following markets are where flips accounted for the highest percentage of all home sales in the first quarter:

  • Memphis, Tenn.: 10.6%
  • Ocala, Fla.: 8%
  • Miami: 7.9%
  • Tampa, Fla.: 7.4%
  • Sarasota, Fla.: 7.2%
  • Los Angeles: 6.6%
  • Detroit: 6.5%
  • Las Vegas: 6.3%
  • San Diego: 6.1%
  • Virginia Beach, Va.: 5.9%
  • Jacksonville, Fla.: 5.9%

Source: RealtyTrac

FAA Widens Study on Drone Uses

by Melissa Dierks

The Federal Aviation Administration announced Wednesday that it will expand its tests on the use of UAVs – Unmanned Aerial Vehicles systems or commonly referred to as "drones" -- for commercial purposes. FAA's studies will include tests over the safety of flights taking place over urban areas and over distances farther than the pilot can see.

FAA's latest announcement has been viewed by industry advocates, who have been awaiting to use UAVs, as a possible sign of greater openness by the FAA in permitting commercial use of drones.

The National Association of REALTORS® released a statement calling FAA's latest UAV announcement and initiatives "good for real estate" and it’s move could pave the way for greater use of UAVs in the future by real estate professionals in capture aerial photos and videos of their listings.

Access NAR's resource page at REALTOR.org for the latest UAV usage in real estate.

"REALTORS® believe that images gathered by unmanned aerial vehicles, or UAVs, can enhance the experience of buying and selling real estate," Chris Polychron, NAR's president, said in a statement. "The FAA's intention to study the safety of UAV flights that go beyond the line of sight of the operator could lead to important benefits in the real estate industry, particularly for agents who wish to market rural and large commercial properties."

However, for now, NAR continues to caution its members against the use of UAVs to capture aerial photos and videos of listings until the FAA issues its long-awaited final guidelines on flight permissions.  

Drones in Real Estate

FAA Takes Big Step Toward Allowing Drones

NAR Takes a Seat in FAA's Drone Talks

FAA Issues Drone Warning Again to Real Estate

The FAA's latest announcement to expand its research into UAVs follows more than 4,500 public comments it fielded in response to proposed guidelines on UAVs that came out in February. In February, the FAA proposed rules on the use of UAVs, such as limiting its use to those who receive certification for flying as well as providing guidance on the speed, height, and times of day which they can fly. The FAA's guidelines on UAVs aren't expected to be final until late 2016.

Industry critics have been urging the FAA to expand its permissions' scope for flights, such as permitting flights that are farther distances out of sight of pilots, flights at night, longer range flights in busier areas, as well as flights under automated instructions.

"Integrating unmanned aircraft into our airspace is a big job, but it's one the FAA is determined to get right," agency administrator Michael Huerta told the Unmanned Systems 2015 conference in Atlanta sponsored by the Association of Unmanned Vehicle Systems International. "We anticipate receiving valuable data from each of these trials that could result in FAA-approved operations in the new few years."

NAR has developed a resource page at REALTOR.org that covers the latest UAV usage in real estate. NAR has been serving on an ongoing workgroup with FAA to address to the use of UAVs.

"NAR continues to advocate for federal regulations that allow for the real estate industry's safe commercial use of UAV technology while also protecting privacy rights," Polychron says.

Source: "FAA Studies Drones Flying Over Urban Areas," USA Today (May 6, 2015) and "FAA Works with CNN, BNSF to Study Drone Flights," The Wall Street Journal (May 6, 2015)

More Buyers Than Usual Enter Spring Market

by Melissa Dierks

An unusually high volume of home-buyer demand is flooding the spring market, as pending home sales rose in March for the third consecutive month and hit the highest level since June 2013, according to the National Association of REALTORS®.

Pending sales rose 1.1 percent month-over-month in March and are 11.1 percent above year-ago levels, according to NAR's Pending Home Sales Index, a forward-looking indicator based on contract signings.

Springing Up

Realtor.com®: 'This Is No Housing Bubble'

REALTORS® More Confident for the Spring

5 Tips for Helping Agents in the Spring Market

"Demand appears to be stronger in several parts of the country, especially in metro areas that have seen solid job gains and firmer economic growth over the past year," says Lawrence Yun, NAR's chief economist. "While contract activity being up convincingly compared to a year ago is certainly good news, the increased number of traditional buyers who appear to be replacing investors paying in cash is even better news. It indicates this year's activity is being driven by more long-term home owners."

However, Yun cautions that insufficient inventory and accelerating home prices could be a drawback to sales reaching their full potential.

"Demand in many markets is far exceeding supply, and properties in March sold at a faster rate than any month since last summer," Yun says. "This, in turn, has pushed home prices to unhealthy levels — nearly four or more times above the pace of wage growth in some parts of the country. Simply put, housing inventory for new and existing homes needs to improve measurably to improve affordability."

Regional Outlook

Here's a closer look at the Pending Home Sales Index across the country:

  • South: Contract signings rose 4 percent in March and are 12.4 percent above year-ago levels.
  • West: Contract signings increased 1.7 percent in March and are 15.6 percent higher than March 2014.
  • Northeast: Contract signings fell 1.5 percent for the fourth consecutive month but remain 0.6 percent above a year ago.
  • Midwest: Contract signings decreased 2.5 percent in March but are 11.3 percent above year-ago levels.

Source: National Association of REALTORS®

6 Often-Overlooked Costs of Home Ownership

by Melissa Dierks

Many home owners don't think beyond the mortgage when it comes to purchasing property, forgetting about all the other expenses associated with maintaining a home that can really add up.

Inform Your Clients

Majority of Buyers Unaware of True Costs of Home Ownership

Help Buyers Add Up Extra Costs of Home Ownership

10 Ways to Prepare for Home Ownership

Thirty-eight percent of home owners tend to go over their household budget for home-related expenses, according to a 2014 survey by Houzz, a remodeling and design website. That's why home owners would be wise to create an emergency fund equal to three months' worth of living expenses to prepare for the cost of home ownership, says Holly Perez, consumer financial expert for Mint, a money management tool.

Here are a few of the most overlooked costs of home ownership:

  1. Homeowners insurance: The cost varies, but in general, home owners pay around $35 a month for every $100,000 of home value. Don't forget, though, that homeowners insurance typically covers structures and possessions — not the cost to fix the item that caused the damage.
  2. Natural disasters: Many homeowners insurance policies cover basic natural disasters, such as hail storms and fires, but they do not usually cover floods and earthquakes. Often, separate coverage must be purchased for those types of events.
  3. Insurance deductible: Home owners will likely still have to pay a deductible for any damages before insurance kicks in. The deductible is the amount of money a policyholder must pay before the insurance company will cover the remainder of the expenses. That deductible could amount to $1,000 or more of out-of-pocket expenses.
  4. Preventative maintenance: Home owners should budget for maintenance of appliances and other systems in the house. Air conditioning units, refrigerators, and washing machines, for example, often can benefit from preventative maintenance. Homeowners insurance does not cover the cost of replacing broken appliances or faulty plumbing, so ongoing repairs and maintenance is important in preventing potentially higher expenses later on.
  5. Homeowners association fees and property taxes: When comparing homes to purchase, buyers often look at the list price but fail to consider the property taxes and homeowners association costs — which could be a couple hundred dollars a month. Inquire about the association's dues over the past 10 years to determine how often they rise and what they cover. Also, be aware that renovations to a home, while increasing its value, can also increase the property taxes.
  6. Waste collection: Home owners also should factor in the charges for garbage and recycling services. Typically, these costs average around $150 to $400, according to HomeAdvisor.

Source: “10 Hidden Homeownership Costs to Budget For,” Mashable (April 27, 2015)

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Melissa Dierks
The Regal Team of RE/MAX Professionals
7111 W Bell Road, Suite 101,
Glendale AZ 85308
Direct: (623)229-0154
Office: (623)643-1092
Fax: (623)201-7562

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