Falling Oil Prices Weigh On Boomtowns

Emerging from the recession, energy markets saw a robust real estate recovery as high oil prices ignited exploration and production investment in places like the Eagle Ford Shale in southern Texas and the Bakken in the Northern plains.

Now oil’s price plunge threatens to cap the recovery, particularly in cities like Houston, Oklahoma City and Williston, N.D.

However, housing analysts such as the National Association of Realtors’ Danielle Hale and Trulia’s Jed Kolko expect potential slumps in home sales, prices and construction to be confined to energy markets.

Largely based on expectations that a strong job market will induce millennials to become first-time homebuyers, the NAR projects that existing-home sales will climb 8% in 2015 and home prices 4% to 5%. It predicts that single-family home starts will jump 21%, and new-home sales 25%.

“While uncertainty will have an effect on areas where the overall economy and jobs market are very tied to oil, there are enough areas that will benefit from lower oil prices,” Hale said. “So we’re expecting the effect to be a wash nationally.

Outplacement firm Challenger Gray Christmas said Thursday that 38% of the nearly 104,000 U.S. job cuts in January and February were directly tied to oil, the price of which has dropped by about half since July. Halliburton (HAL), Schlumberger (SLB) and Weatherford International (WFT) alone have all announced layoffs totaling thousands of workers in the last several weeks.

The 1,267 drilling rigs operating nationwide at the end of February represented a 28% drop from a year earlier, according to oil service firm Baker Hughes (BHI), which is being acquired by Halliburton.

“I’m bullish about every sector of the national economy that’s not in oil and gas,” said Mark Dotzour, chief economist for the Real Estate Center at Texas AM University. “I’m not bullish about the oil and gas impact on Houston, Oklahoma City and Williston.

Housing demand in energy markets has yet to crater, and weakness likely won’t surface until late 2015 or in 2016, according to a recent report on energy markets by Trulia, recently acquired by Zillow (NASDAQ:Z).

In Oklahoma City, some 20,500 homes sold in 2014, a 6.7% rise over 2013, according to the Oklahoma City Area Association of Realtors, which lumps together single-family homes with half-duplexes, condos and patio homes. The median price at year-end was $150,000, about $6,000 higher than a year earlier. In Houston, single-family home sales increased 2.8% in 2014 and the median home price surged 10.6% to $199,000, according to the Houston Association of Realtors.

Waiting For The Wave

Still, executives at homebuilders Lennar (LEN), Beazer Homes USA (BZH) and D.R. Horton (DHI), which are active in Houston, anticipate some softness in the market, according to comments made during their respective earnings calls in January.

Houston-based apartment developer Camden Property Trust (CPT) also projects a slowdown, particularly with 20,000 new apartments slated to open in Houston this year.

Even so, its same-store annual revenue growth has averaged 8% over the past four years in the market, and executives expect it to fall only to the 20-year average of 3.4%, according to remarks on the company’s earnings call in January. Unlike the oil bust in the 1980s, when Houston was more dependent on the energy industry, the area now boasts strong health care and port sectors, as well as significant refining and petrochemical industries, Dotzour says. He adds that potential homebuyers in careers that are tied to the energy industry, including attorneys and accountants, are in a “wait-and-see mode.

“I think the unknown right now is, how will the people outside the oil and gas industry respond to the uncertainty in the energy business?” Dotzour said. “Will a cardiologist choose to delay buying a home just because three or four oil executives own homes in the neighborhood?

Falling oil prices failed to keep Houston office landlords from lifting rents 3.6% to $27.35 a square foot in 2014, even with 16.6 million square feet under construction, according to commercial property brokerage Transwestern.

Between layoffs and firms looking to sublet unused office space, the area’s average vacancy rate has likely ticked up 90 basis points from 10.2% at the end of 2014, says Kevin Roberts, president of Transwestern’s Southwest operations.

Transwestern predicts that Houston’s vacancy rate will climb above 12% over the next two years. Office tenants and buyers are already starting to push for better deals, he says, but landlords are hardly panicking.

“Everybody is looking for 2015 to be a little bouncy,” he said. “The good news is that the real estate is not financially impaired — tenants are pretty healthy and paying rent, and occupancies are still high.

Building Homes In The Bakken

In northwest North Dakota, Williston is ground zero for the Bakken oil formation and is in the midst of a severe housing shortage. The number of residents more than doubled to 29,595 from 2010 to 2014, and a 2014 Williston Economic Development report projected the city’s population to approach 40,000 in 2017. Observers remain upbeat, given the steady environment.

“Demand has tempered a bit, but for the most part it’s still going strong,” said Terry Metzler, operations manager for Casper, Wyo.-based Granite Peak Development, a land developer that entered the market in 2011.

He acknowledges that apartment rents started to decline in the area, but he attributes most of it to an increase in supply.

Developers applied for 422 single-family, multifamily and commercial property building permits valued at $435 million in 2014, up from 276 permits totaling $291 million in 2013, according to the Williston Area Home Builders Association.

Among other projects, private equity firm KKR Co. (KKR) and Denver-based Continuum Partners are developing the Ridge, a community of 1,537 single-family homes, apartments and town houses.

Like real estate observers in other energy markets, Metzler hopes the oil price dip is temporary. He notes that as drilling has slowed, work at producing wells continues.

“I don’t think you’re going to see the amount of apartments being built slow down that much,” he added. “If we see an extremely prolonged period of very low oil prices, we might see things change.”

4 ways to brand yourself to attract more real estate business

Pepsi or Coke? It’s one of the greatest rivalries in beverage history! Whichever side of the aisle you occupy, you’re not likely to cross over without some serious convincing. That’s because most of us are brand-loyal shoppers. Whether it’s soft drinks, shampoo or clothing, we all have our favorite brands, and we stick to them.

According to “Retention Science,” brand loyalty “has very little to do with prices or money, but has everything to do with how your brand is perceived by the consumer, whether through promotional activities, reputation or their previous experiences with your company.”

Keeping that in mind, the same feelings of loyalty that a consumer feels toward a company can be manifested in loyalty toward a person — like the consumer’s doctor, lawyer … or real estate agent. That’s why it’s crucial as an agent to build a strong brand for yourself in order to attract and retain more business.

Differentiate yourself and define a niche market

One of the best ways to build your brand in real estate is to differentiate yourself. As of last year, there were more than 1 million real estate agents holding membership with the National Association of Realtors. That means there are a lot of people to turn to for help when it comes to buying and selling a home or property. How do you stand out?

Think about what you’ve done to make yourself unique. There’s a pretty high-profile broker/agent who’s been affectionately called the “Condo King” since back in the 1980s. And he has reaped the rewards of the title. For years, his agency, Allan Domb Real Estate, has handled the majority of condo business in Philadelphia. His branding as the Condo King is a persona that defines him and has followed him all the way to becoming president of the Greater Philadelphia Association of Realtors.

Another way to differentiate yourself is to define a niche market. The best way to do this is through the communities you serve. Establishing yourself as the go-to expert on one particular neighborhood, type of sale, or type of community is a huge deal and a major differentiator.

You could aim to be known as the agent who has an “in” with the exclusive neighborhood where inventory is really tight. How can you do this? Make it a point to know the profile of the people who live in that neighborhood and why they choose to live there — for example, find out how long the typical commute to work is or if there’s an opportunity to rent out space as a vacation property. You should know who’s more likely to sell, what properties have pending status and what houses are coming on the market soon, so your clients can get in earlier than the general public searching online. Doing this will make you the go-to agent for that particular area, and as you grow as an agent, you can expand your area of reach depending on your business goals.

Weave technology into your offerings

Many agents are in the midst of growing their use of technology. That’s crucial, because it’s a way of life for so many would-be buyers and sellers, particularly those who are “Generation Y” millennials — the largest group of homebuyers, at 31 percent. The National Association of Realtors’ generational trend report indicates that “Generation Y” homebuyers are doing their home searching online or through a mobile device prior to reaching out to an agent. Once they’ve chosen an agent, younger buyers also base much of their satisfaction on their agent’s ability to communicate — especially through email or text. When you weave technology into your offerings, you’re building a brand that resonates with the fast-growing group of millennial homebuyers who are likely to refer you to their friends.

But technology use goes beyond just younger buyers and sellers. Leveraging technology in the right way can help you attract both clients and potentially additional talented team members. Our friends at Coldwell Banker Howard Perry and Walston do this through their initiative to be the “most wired” real estate company in North Carolina. They provide each of their agents with an iPad and access to the company’s proprietary mobile app, which allows them to conduct business anywhere, anytime. This not only attracts buyer and seller clients to work with them, but attracts more tech-savvy agent peers, providing you more opportunities to leverage their knowledge and learn.

Build a unique online presence

As an agent, you need to have an online brand that resonates with your consumers. It’s not enough to just be online; you have to have an online presence. A major part of that online presence includes an updated and well-maintained website. Creating a subpar website and then letting it sit untouched will actually do you a disservice and may make you look unprofessional. Be sure that your website looks modern and includes updated data. You should also include testimonials from happy clients. I like a service called Placester, which helps you build your website with quick setup, lead capture and mobile-ready designs. Potential buyers want to see that you’re knowledgeable and have previous experience successfully helping others just like them.

The other part of your online presence is built around social media. Check out my colleague, Leighton Dees, CEO of Better Homes and Gardens Real Estate Generations, as an example. Dees has developed his Facebook, Twitter and Instagram pages to be personally and professionally acceptable. You can do the same by walking that fine line between being too open and not being open enough — always keep your audience in mind. Using social media is just as much about listening and engaging in other conversations as it is about posting your own.

Social media is one of the most underutilized tools when it comes to marketing a piece of property. If you have a strong online presence, which includes social media, you can build your brand there as a way to stand out.

Be consistent

Whether you’re online or offline, the most important thing to keep in mind when building a brand is consistency. You have to be the same across all mediums— be relevant, be true and be genuine to who you are. People can spot a phony from a mile away, which doesn’t bode well when you’re dealing with most people’s largest investment. So, be consistent in who you are, and also in the experience clients can expect.

The client experience should be seamless and consistent from search to post-close follow-up. Part of creating and maintaining that consistency is developing a team of people whom you work with regularly, and who are part of your trusted brand. People who are loyal to a brand (you) are more likely to try out other services from that brand (your colleagues). Those colleagues might include mortgage brokers, attorneys or moving companies who can also participate in the seamlessness of the transaction. Developing your brand to include these service providers ensures not only that your client is well taken care of today, but also will be in the future when they decide to return for round two.

The No. 1 referral source is still word of mouth. Friends and colleagues will ask each other, “Do you know a good agent?” You want them to say yes and then mention your name. Just as quickly as you make your choice between Pepsi and Coke based on their branding (and, OK, their taste, too), you want potential buyers and sellers to choose you based on the experience they can expect with a brand they can trust.

Joelle Senter is the vice president of marketing development at dotloop.

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Realtors tout benefits of home staging

Most homeowners know it is important to keep a home clean, bright and free from clutter while it is on the market for sale. But sometimes, Realtors say, taking the extra step to stage a home can make a difference in how a buyer values it and the price a seller might get for it, according to the National Association of Realtors2015 Profile of Home Staging.

“Realtorsknow how important it is to have a home in the best shape possible when showing it to prospective buyers,” said NAR President Chris Polychron, executive broker with 1st Choice Realty in Hot Springs, Ark. “At a minimum, homeowners should conduct a thorough cleaning, haul out clutter, make sure the home is well-lit and fix any major aesthetic issues. Another option is staging a home, which Realtorsoften suggest to sellers to help prospective buyers better visualize themselves in the home and could modestly increase the home’s value for both the buyer and seller.”

The report, the first of its kind from NAR, found that 49 percent of surveyed Realtorswho work with buyers believe staging usually has an effect on the buyer’s view of the home. Another 47 percent believe that staging only sometimes has an impact on a buyer’s view of the home only. Only 4 percent of Realtorssaid staging has no impact on buyer perceptions.

Realtorson the buyer side believe that staging makes an impact in several ways; 81 percent said staging helps buyers visualize the property as a future home, while 46 percent said it makes prospective buyers more willing to walk through a home they saw online. Forty-five percent said a home decorated to a buyer’s tastes positively impacts its value; however, 10 percent of Realtorssaid a home decorated against a buyer’s tastes could negatively impact the home’s value.

From the seller side, a majority of Realtors use staging as a tool in at least some instances. Just over a third of Realtors(34 percent) utilize staging on all homes, while 13 percent tend to stage only those homes difficult to sell, and another 4 percent will do so only for higher priced homes. The median cost spent on staging a home is $675. Sixty-two percent of Realtorsrepresenting sellers say they offer home staging service to sellers, while 39 percent say the seller pays before listing the home.

Realtorsrepresenting both the buyer and seller agreed on two major points in the report – which rooms should be staged and the change in dollar value a buyer is willing to offer for a staged home compared to a similar not-staged home. Realtorsranked the living room as the No. 1 room to stage, followed by a kitchen. Rounding out the top five rooms were the master bedroom, dining room and the bathroom.

Realtorsbelieve that buyers most often offer a 1 to 5 percent increase on the value of a staged home (37 percent from Realtors representing sellers and 32 percent from Realtors representing buyers). Additionally, 22 percent of Realtors representing sellers and 16 percent of Realtors representing buyers said the increase is closer to 6 to 10 percent.

“Working with a Realtorgives buyers, sellers and investors the advantage they need to succeed in today’s market, as they know what buyers want and how to best market and stage a home for sale,” Polychron said. “While many factors play into what a home is worth and what buyers are willing to pay for it, staging is an excellent tool that can be used to give a home a little extra push for sellers. Staging isn’t used by every Realtor in every situation, but the impact it may have and the value it can bring is clear to both home buyers and sellers.”

The National Association of Realtors, “The Voice for Real Estate,” is America’s largest trade association, representing one million members involved in all aspects of the residential and commercial real estate industries.

NAR Pending Home Sales Rise To 18-Month High

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several key developments late last year that will likely result in more first-time buyers and other house hunters in the market in 2015

Chicago, IL (PRWEB) March 04, 2015

Despite concerns that harsh weather could lower buyer demand, pending home sales in January reached their highest level since August 2013, the National Association of Realtors reported. The NAR’s pending home index pointed to upward growth in contract signings, increasing 1.7 percent to 104.2 in January from the previous month. The Federal Savings Bank was pleased to read that not only did growth in pending home sales continue in 2015, it’s a huge improvement from the same period last year, jumping 8.4 percent from January 2014.

NAR Chief Economist Lawrence Yun noted several key determinants, such as lending restrictions that could open up the housing market to more buyers in 2015, that contributed to this rise from last year, such as lenders loosening restrictions for certain buyers, which could open the housing market to more buyers in 2015.

“Contract activity is convincingly up compared to a year ago despite comparable inventory levels,” Yun said. “The difference this year is the positive factors supporting stronger sales, such as slightly improving credit conditions, more jobs and slower price growth.”

Changes in lending could boost housing sales

While buyers in 2014 may have faced low inventory, which increased home prices and closed some buyers out of the market, there were several key developments late last year that will likely result in more first-time buyers and other house hunters in the market in 2015. In December 2014, Fannie Mae and Freddie Mac announced they would accept down payments as low as 3 percent on mortgages, CNN Money reported. This figure is lower than the 3.5 percent the U.S. Federal Housing Administration accepts.

Fannie Mae began accepting fixed-rate loans with lower down payments Dec. 13, according to CNN Money. Freddie Mac will begin these loans also with the reduced down payment requirement by March 23. To qualify for the more affordable mortgage, buyers will have to purchase private mortgage insurance as well as fulfill certain credit requirements, including achieving a credit score of 620 and up. As the job market adds positions and workers’ wages increase, consumers will be more likely to afford these loans.

Housing affordability to improve in 2015

As a result of more job and financial security, housing affordability is also becoming less of a concern for buyers in 2015, as it has become less costly to borrow from lenders. The FHA said it will reduce its mortgage insurance premiums, which lower borrowing costs for buyers and could save them thousands each year, USA Today reported.

In addition to the smaller borrowing costs, interest rates are still near historical lows, which also lower borrowing costs over the life of the loan. As consumers work to increase their credit scores through making payments on time and handling their credit obligations responsibility, they can improve their chances of mortgage approval. Home buyers with excellent credit have the opportunity to lower their monthly payments if they buy homes this year and lock in one of the lowest mortgage rates now.

First-time home buyers and people looking to sell their homes can contact the Federal Savings Bank, a veteran owned bank, to learn more about mortgages.

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Start preparing for Chinese homebuyers, investors

The United States attracts more Chinese real estate buyers than any other country. Chinese investors are buying U.S. property in order to diversify their assets outside of China, for investment purposes, for immigration reasons or because they have a child studying in the U.S.

According to the National Association of Realtors (NAR), Chinese buyers spent an estimated $22 billion on U.S. properties last year. Of these purchases, NAR noted that 51 percent were completed in California, Washington and New York, and 76 percent of all transactions were cash purchases.

Realtors across the country have seen the great potential that these overseas Chinese real estate buyers bring. As a result, many Realtors have actively been trying to understand these prospective buyers better.

Where are they buying?

My company, East-West Property Advisors, is a U.S. real estate advisory firm in China that is connecting Chinese buyers with U.S. agents. One of our recent surveys shows that overseas buyers from China show most interest in the San Francisco Bay Area (34 percent), followed by New York City (22 percent), Los Angeles (17 percent) and San Diego (13 percent). Although the popularity of coastal cities makes them top choices for Chinese investors, other cities are also seeing increasing interest from Chinese investors. For example, cities such as Houston, Philadelphia, Cleveland, Chicago and Memphis are noticing growing interest from Chinese investors.

Many factors can affect the popularity of a city for Chinese investors. Recently, Seattle has become a key city, which is often credited to the popularity of a Chinese film, “From Beijing to Seattle.” In this drama, a Chinese woman moves to Seattle, where she falls in love. Another example is Miami, especially because of the development activities of Hong Kong developer Swire Properties. Swire has injected billions of dollars into developing the Brickell area and Miami’s downtown neighborhood. These high-profile developments have created significant interest from Hong Kong investors who are already familiar with Swire.

There are three main reasons why Chinese buyers are looking at properties in the U.S.: investment, education and immigration. Each of these factors will drive the location of the real estate acquisition and affect how a Realtor needs to handle these buyers.


We have noticed that most of our mainland Chinese investors are interested in capital growth. The focus on appreciation often outweighs a need to achieve high rental yields. These types of investors will be drawn to established markets such as New York, San Francisco and Los Angeles because of the potential for strong appreciation in those cities.

This is often different from our Hong Kong clients. Hong Kong clients tend to be more open to investing in second- and third-tier cities where they can achieve higher rental yields. For example, many of them are drawn to cities in the Midwest, where rental yields of 20 percent could be achieved.


Each year the number of Chinese students arriving in the U.S. increases. Last year, close to 270,000 Chinese students came to the U.S. to study. Up to 70 percent of these Chinese students plan to make this country their long-term home. Because of this, many families will choose to buy a home near the school that the student will attend. They then use this home as housing for the student or as a home for the family when they visit.

Although the primary focus of these buyers is a home near a particular school or university, many of these buyers are also interested in homes that will have high resale value as they plan to sell and buy a new home when the student graduates and moves to a different city.


As the air quality worsens and the overall situation in China is often dubious, many Chinese plan to emigrate to foreign countries. Of these countries, the U.S. remains the top location for Chinese moving abroad. EB-5, a process for obtaining a green card in the U.S. via investment, is a well-known acronym in China, and each EB-5 seminar typically attracts hundreds of people. As a result, over the past five years, 85 percent of EB-5 green cards were issued to Chinese citizens.

Chinese citizens who are looking to emigrate have a different set of requirements than those looking for investments. Realtors should realize that easy access to good schools and good communities are key for these buyers.

What are Chinese buying?

Chinese immigrants are drawn to single-family houses. For many of them, the idea of a U.S. home is a single-family house with a yard and private garage. These homes are rare in China and are often reserved for the ultrawealthy. Naturally, our clients are excited to see houses in Los Angeles or Houston, which are much larger and cheaper than those available in Shanghai or Beijing.

Many Chinese immigrants are also interested in new condo apartments in large metropolitan cities. Schools and safety are among their top concerns when making decisions about which neighborhood to call home.

How should you prepare for buyers from China?

With the influx of overseas Chinese buyers expected to increase significantly, U.S. Realtors can prepare to achieve a higher success rate in one of the following ways:

1. Engage Chinese-speaking staff members.

Many Chinese buyers don’t speak English, which makes communication difficult for a U.S. real estate agent. It is important to work with staff or partners who can relate to and communicate with the Chinese client.

2. Improve coordination across time zones.

The clients are living in China, which means it is hard to communicate, as these clients are living 12 to 15 hours ahead of a Realtor in the U.S. In order to assure the highest probability of a sale, it is important to build a relationship before they come for a visit. Email communications will often take 24 hours to be answered on both ends, and setting up calls can be difficult. Coordination is key.

3. Be aware that Chinese clients often use different Realtors.

Initially, Chinese clients will check all the information you provide, and they often will be working with more than one agent. It is important to build trust and a relationship with the client rather than simply selling them a property. Agents who can gain their trust first will be more successful. Furthermore, Chinese citizens always work with different agents when they are looking to buy a property in their home country because centralized multiple listing service (MLS) systems are not common. As such, agents in China will each have access to different listings, so clients must use different agents to find a suitable home.

Real estate agents in the U.S. should communicate to Chinese buyers about their access to the MLS systems and listings, and as a result, why there is no advantage for a client to use different Realtors.

4. Be patient and use data.

Often, Chinese clients will want to make sure the property is the best option available. Sometimes, this makes it difficult for Realtors — especially those who work in seller’s markets. In markets like San Francisco, where properties are currently being sold at prices much more than the asking price in a matter of days, the client may not have time to react and make a quick decision. Or the Chinese buyer might not feel the need to put an aggressive offer in due to fear that the agent is trying to maximize his or her commission.

In order to help the client, it is important to show data — why you recommend the amount they should consider offering for the property. Data that provides an overview of the recent closed sales (showing the closing price higher than asking price) will help assure the client that you are on their side.

There is no denying that Chinese interest in the U.S. real estate market is growing each year. Many believe that this is the beginning of a much larger wave — another reason for Realtors to start understanding this group of overseas buyers.

Sam Van Horebeek is a director at East-West Property Advisors, a real estate advisory firm based in China.

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Hidden costs of buying a vacation home

4. Understand tax implications

© Sam Edwards/Getty Images
A couple working out financial details. .

Be sure you’re familiar with the vacation home tax rules, too, before making a purchase. The property will still qualify for the mortgage interest deduction, assuming the combined mortgages on both your homes don’t exceed $1.1 million. And property taxes are fully deductible.

Things get trickier, taxwise, when you use the vacation home as a rental property. “If you rent out your vacation home for more than 14 days a year, you will have to report rental income,” says Jared Callister, a tax attorney in Fresno, Calif. “But you will also be able to deduct rental expenses, like repairs and depreciation.”

What you can deduct depends on how much you use the place personally versus renting it out. Also, most states expect you to pay sales taxes on rental income.

Some cities and counties impose such taxes, too; they may go by other names, such as lodging, accommodations, hotel, bed, tourist or transient occupancy taxes. Be sure to find out whether you’d owe them so you’re not hit with a nasty surprise after you become a vacation-home owner.

Craig Venezia is a real estate writer for the San Francisco Chronicle and author of “Buying a Second Home: Income, Getaway or Retirement.” He and his wife own a second home in the San Francisco Bay Area.

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6 Steps to Get the Best Mortgage Rates This Spring

If you’ve got the itch to ditch your landlord and take the leap to homeownership, mortgage rates are still low by historical standards. But beware because they are expected to begin creeping higher throughout the year.

“The cost of renting is really high right now. Rents have been rising and rising,” says Lawrence Yun, chief economist at the National Association of Realtors. “Renters are getting squeezed, and some want to convert to ownership.”.

The NAR expects 30-year, fixed-rate mortgages to average 3.80 percent in the first quarter. However, mortgage rates are forecast to start inching higher throughout the year. The NAR forecasts an average 4 percent rate in the second quarter, 4.3 percent in the third quarter and 4.7 percent in the fourth quarter.

Economic forces, including an improving U.S. labor market and faster economic growth, are conspiring to push mortgage rates higher this year. “The Federal Reserve is likely to raise short-term interest rates in the summer, which will be a signal for the rest of the market for rates to go higher,” Yun says.

“There’s a window of opportunity for buying and refinancing at crazy-low rates, but it’s closing,” says Gina Pogol, loan expert at Charlotte, North Carolina-based LendingTree.

If this is the year you want to sign on the dotted line and become a homeowner, experts have several suggestions to help you move quickly through the mortgage approval process.

The overall lending environment remains stringent, and the best mortgage rates will be awarded to those with higher credit scores. Your credit score is a three-digit number generated using information on your credit report, and generally, the higher it is, the better. Here’s what you need to do to get the best rates.

Mind your credit score. “Minimum credit scores required by lenders have steadily dropped, and mortgage insurers’ underwriting guidelines have also loosened a bit, but it’s still a little tough,” Pogol says. “Average FICOs of applicants approved for home loans continue to come down, but they’re still hovering around the 700 mark. Unfortunately, three-fourths of U.S. consumers have scores lower than 700.”

What’s an ideal credit score? “To get the best rate, strive for above 740. That is the benchmark for A-plus lending,” says Jeannie Meronk, assistant vice president and mortgage loan officer at First State Bank of Illinois.

Visit your lender before you hit the open houses. Create a game plan that makes sense for your budget. It pays to talk to a lender about what you can afford and qualify for before you fall in love with a home outside your price range.

“It is really important from a budget standpoint to be shopping in the right price range,” Meronk says.

Just because you qualify for a certain loan amount doesn’t mean that is what you should spend. Consider your monthly budget, and determine what level of monthly payment feels comfortable. Remember that there will be other costs relating to homeownership, including property taxes, maintenance and unexpected repairs.

Also know that most sellers won’t take an offer seriously unless you have been preapproved for a loan. “Preapproval means actually applying for a loan, having your credit checked and your income documented. Preapproved means that as long as the property meets the lender’s requirements, you can close,” Pogol says.

Don’t make any changes to your financial picture. Once you’ve been preapproved, this is not the time to open new credit cards, change jobs, transfer large sums of money or make big-ticket purchases using credit. “Once you are preapproved, don’t apply for any new credit. If you go ahead and finance furniture, it can mess up the amount that you were preapproved for,” Meronk says.

If you are fortunate enough to have a parent, in-law or relative who is willing to gift you some or all of your intended down payment, be sure to talk with your lender about this. You will need to document this properly with a letter for your lender.

If you are thinking of buying a rental property, however, gift money can’t be used toward a down payment. It only can be used for a primary residence, according to Meronk.

If you are self-employed, expect to jump through more hoops. Be prepared to provide two years’ worth of tax returns. If your income fluctuated from one year to the next, underwriters will average the income from the two years. Also, underwriters will look at your income after your business deductions have been taken.

“It often comes as a surprise to self-employed applicants that their gross income isn’t counted by underwriters. It’s their taxable income that’s used. So if you write off every meal and every vacation as a business expense, that comes off the top of your income,” Pogol says.

Organize your financial paperwork and keep it up to date. If you are shopping for a home, keep a file and drop in new documents as you receive them, including your most recent pay stub and all pages of your bank statement.

“Many times applications sit on mortgage processors’ desks because the borrowers have not supplied everything necessary to get the file into underwriting. If an underwriter needs additional information or documents, get that in as quickly as possible. In a busy office, every time your application needs something else, it may be moved to the bottom of a pile and not resurface for days,” Pogol says.

Call your insurance company. Before you close, you will need to procure a home insurance policy. “You need to call your insurance agent and tell them you are buying a house. You need to secure a first year’s home insurance policy before closing. Until I get your homeowners insurance amount, I can’t tell you the exact amount of your payment,” Meronk says.

NAr pending home sales data is worthless and misleading

NAr revises previously reported data by 25% to 30% but claims their analysis based on faulty data was still good. They have no shame.

I write a monthly housing market report each month, so I understand the need to provide timely and accurate data and reporting. It’s a big task, and it requires attention to detail, but beyond that, reporting data accurately requires the desire to do so, something the NAr completely lacks.liar_syrup

The National Association of realtors is dedicated to advancing the interests of listing agents who dominate the organization. Their primary focus is to generate real estate sales and commissions that provide income for its members. realtors don’t care if the data their organization publishes is accurate; their concern is how data can be conveyed in a way that generates urgency to buy a house.

Back in early 2011, I reported the National Association of realtors caught lying about home sales. Later, Reuter’s reported Existing home sales to be revised down from 2007, and ZeroHedge noted US Housing Market Was Artificially Inflated By 14% In 2007-2010 NAR Reports. The NAr would like everyone to believe these were “honest” mistakes.

Did the NAr intended to provide accurate data but merely made a small mistake? I don’t think so. I believe this corrupt trade organization displays a deeply pathological flaw that renders it incapable of telling the truth. I exposed that problem in The real reason the NAr affordability index is completely worthless.

realtors want to pass themselves off as experts on real estate whose advice can be relied upon by market participants. However, realtors have no interest in whether or not it truly is a good time to buy or sell because for them, it’s always a good time to generate a commission. This conflict of interest causes realtors to be self-serving liars who line their own pockets at the expense of the people they ostensibly serve.

I detailed this phenomenon in the 2010 post Urgency Versus Reality: realtors Win, Buyers Lose.

realtor Mind ®™

I recently attended a realtor marketing seminar, and it was fascinating to watch the realtor mind at work. The presentation included many “reasons to buy” realtors could use in their own consultations manipulations with customers. There was little or no regard for the veracity of the claims, it only mattered that realtors have something, anything to create urgency in buyers.

Many realtors see their job as presenting buyers with reasons to buy, any reason, and hope the buyer is gullible enough to believe them. They feel no responsibility for buyer outcomes; whocouldanode, right? What other explanation is there?

realtor Mind is Everywhere

How widespread is realtor mind? Am I unfairly labeling a large group based on a few isolated incidents among unscrupulous practitioners?

Back at the peak of the housing bubble, the National Association of realtors produced the “Suzanne Researched This” commercial. The scene is set with a couple discussing a home purchase in their kitchen with a realtor voyeuristically listening on the phone. In stereotypical fashion the commercial shows women how to browbeat their spineless husbands into submission, and it shows men how to acquiesce gracefully and pretend you got something out of the deal.

realtors will say whatever they believe they need to say in order to generate a commission and make money. It is what it is.

This self-serving need bleeds into decisions both big and small at every level of their organization. It renders them incapable of telling the truth, and worse than that, their pathology makes them indifferent to the truth. To them, data is only a useful tool if it can be made to serve their purposes, mostly manipulating buyers into action whether it’s good for them or not.

Lawler on Pending Home Sales: NAR “Fixes’ Bad Data for West Region

by Bill McBride on 2/27/2015

From housing economist Tom Lawler:

… There were significant revisions in historical data – not just seasonally adjusted data but unadjusted data – with all of the unadjusted revisions coming in the West region. … the NAR’s Pending Home Sales Index for the West had previously made no sense either in terms of the pattern of pending sales vs. closed sales in that region, or in terms of pending sales reports from realtors/MLS in the region. … the PHSI for the West was revised massively in today’s report …


The magnitude of these errors is astonishing, ranging from -24.4% to +31.5%.


Most reports this year show declining home sales, both resale and new, and declining purchase mortgage originations, yet the NAr is telling us the pending home sales index is rising for the fifth month in a row — and reporters are dutifully spinning the data as if the housing market is strong.

Pending Home Sales Rose 1.7% in January

National Association of realtors index points to firming demand

By Ben Leubsdorf, Updated Feb. 27, 2015

WASHINGTON—A forward-looking gauge of U.S. home purchases rose in January to its highest level in nearly a year and a half, a sign of firming demand in the housing market.

Better buy now or be priced out forever, right?

“Through the volatility, the trend in home sales is up probably up modestly at least,” High Frequency Economics chief U.S. economist Jim O’Sullivan said in a note to clients.

LOL! The trend is probably up, we can’t be certain because the data is complete bullshit, but we think it’s probably up.Lawrence_Yun_liar

That’s something to base a buying decision on, isn’t it?

“All indications point to modest sales gains as we head into the spring buying season,” Mr. Yun said.

I don’t see any such indications; in fact, we all know there are no such indications but Lawrence Yun is hired to say there are anyway.

The U.S. housing market entered 2015 on uncertain footing after a generally lackluster 2014.Sales of previously owned homes, which make up about 90% of the U.S. market, fell roughly 3% in 2014 from the prior year. In January, existing-home sales declined 4.9% from the prior month to their slowest pace since last spring, the NAR said Monday. …

Signs of a robust recovery… not.

Home-building activity dipped in January. Housing starts fell a seasonally adjusted 2% from the prior month, and single-family housing starts declined 6.7% from December, according to Commerce Department data.

More signs of strength… not.

Mortgage rates remain low but have ticked up in recent weeks. The average interest rate on a 30-year fixed-rate mortgage was 3.80%, Freddie Mac said Thursday, up from 3.67% last month but down from 4.30% in February 2014.

Purchase originations remain near record lows despite low rates.


And despite all these reports, we get this from the NAr:

According to Friday’s report, pending sales of existing homes rose 3.2% in the South last month from December, and climbed 2.2% in the West. Pending sales ticked up 0.1% in the Northeast and fell 0.7% in the Midwest.

Seriously, do you believe a word of it?


The National Association of Realtors on Friday also released seasonal-adjustment revisions for pending home sales data from 2012 through 2014, and revised data for the West region going back to 2001. “Most revisions are minor with no impact on previous characterizations of the overall market based on the headline seasonally adjusted index,” the trade group said in a statement.

Most revisions are minor? I don’t consider changes of 25% to 30% minor, do you? And it infuriates me that they have the temerity to state these revisions have no impact on the spin they offered previously.


Actually, when I reflect more deeply on it, perhaps they are right. Since they have absolutely no credibility, their revisions have no impact because nobody believed them when the data was originally reported. Their market characterizations (spin) have no basis in reality, so it’s probably an accurate statement that the revisions have no impact — they would have made up some ridiculous bullshit either way.



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el O
03-03-2015, 06:54

Great post! Misleading indeed, but NOT totally worthless; ie.,

monthly pendings (along with median price and MLS sell price) data reported does have value for spin, speculation, trading utility, and to paid MSM analysts.


Irvine Renter
03-03-2015, 07:56

BBVA Compass launches zero-percent down mortgage program

offer less than meets the eye

For some borrowers, saving up 3% for a down payment is still a hurdle they can’t quite clear. However, a new program from BBVA Compass (BBVA) will allow borrowers to put down even less for a down payment, in fact.

BBVA Compass announced the launch of a new program, called Home Ownership Made Easier or HOME for short, designed to help low- and moderate-income borrowers become homeowners by helping to overcome one of the “most significant barriers” to homeownership, the down payment.

In the HOME program, qualifying borrowers will be eligible to finance 100% of the home’s value. In addition to offering 100% LTV loans, BBVA will also contribute up to $4,500 toward “certain closing costs” associated with obtaining a home loan.

“We’ve built a comprehensive program that will help many people across our footprint realize the dream of homeownership — something that may have seemed unattainable to them in the past,” said Eduardo Castaneda, executive director of real estate lending for BBVA Compass. “The financing and closing cost assistance, and the essential homebuyer education, will help ensure they enjoy the benefits of their new home for years to come.”

But not every potential borrower is eligible for the HOME program. According to BBVA Compass, the subject property must either be located in a low-to-moderate income census tract (as determined by the Federal Financial Institutions Examination Council) or the loan applicants cannot have an income greater than 80% of the median income for the area, per the guidelines from the U.S. Department of Housing and Urban Development.

According to BBVA Compass, other benefits of the HOME program include:

Borrowers can move into a new residence with as little as $500 of their own funds

Seller funds and cash gifts can be used to pay remaining closing costs and so-called “prepaids” — expenses such as taxes and insurance that must be paid at closing before they are technically due

The program offers flexible fixed-rate mortgage terms, with 30-, 25-, 20-, 15- and 10-year options available

The HOME mortgage is also available to borrowers with higher incomes if they’re financing properties in low- or moderate-income census tracts

“In some cases, clients participating in the bank’s HOME program will pay a monthly mortgage payment that is less than what they currently pay as renters,” Castaneda said. “And that’s an important point: This program will be helping people who’ve already proven their ability to make that monthly payment.”


Mr. Long Beach
03-03-2015, 14:15

Yikes – a zero down mortgage that you only qualify for if you DON’T make too much money???? Sounds like a real winner……


Irvine Renter
03-03-2015, 07:58

Clear Capital: San Francisco facing bubble 2.0?

A new report from Clear Capital says that while four of the California Bay Area’s nine counties are near or exceeding their pre-meltdown valuation highs, local market forces will keep bubble-like behavior at bay for the rest of the state and throughout the nation.

“Healthy buyer demand and strong job markets in the California Bay Area are factors helping to push home prices up. Our most recent data through February 2015 shows the Marin, San Francisco, San Mateo, and Santa Clara counties approaching or exceeding their peak levels over the last 18 months,” they write. “San Francisco and San Mateo counties have exceeded peak levels on an all property tier level (low, mid, and top tiers). San Francisco is now 16% above former peak levels, while San Mateo County is 8% above.”

The report says that the West, still 22% below peak pre-recessionary levels, and the State of California, 27% below peak as a whole, douse concern of a bubble nationwide.

“The fact that we are now seeing quarterly declines in arguably one of the hottest markets in the country should be a stark reminder that the state of the overall housing market continues to be tenuous,” says Alex Villacorta, vice president of research and analytics at Clear Capital. “Buyers may have finally reached their limits in response to red-hot price increases, and as such are pulling out of the demand pool. If waning buyer demand continues through the first part of the year, we could see inventory increase, and in response falling home prices well into the second quarter.”


03-03-2015, 08:00

For me the key tip-off that realtors are liars (in aggregate, there are plenty of honest, hard-working agents out there) is the phrase “It’s a great time to buy or sell a home”. How can this possibly be true?

If it is a great time to buy, prices are depressed, therefore it is a bad time to sell and vice versa. Do they have that little respect for their customers.

If there were a realtor in the film “Liar, Liar” I suppose the add would say “It’s a great time to initiate real estate transactions to generate realtor commissions”.


Mr. Long Beach
03-03-2015, 10:29

If there were ever a time that both could be true, I guess now would be that time, thanks to absurdly low interest rates, and the relative affordability of financing a monthly payment.

That said, if interest rates were to skyrocket to 8%, it would logically follow that it would be a bad time to buy AND a bad time to sell.


03-03-2015, 10:34

It would be a bad time to sell if you had already spent your appreciation via heloc.

It would be a neutral time to buy with credit and a great time to buy with cash or a very large down payment.


03-03-2015, 10:43

I’m not sure it’s that great a time to buy. Sure you can save money relative to rent but I think you’re taking an out-sized risk buying now. A few years ago IR wrote a great post called something like “Your Buyer’s Loan Terms”. The takeaway was that you have to take into consideration what your buyers will be able to pay. Even if you plan on staying in your home, things change, jobs gets lost, etc and you may need to sell. If you buy an expensive house now at a low rate you’re going to take a price hit when you sell later at higher rates.

I think 2010/11 was a great time to buy, a poor time to sell. It’s complicated now, but I’m not convinced it is a great time to buy. It might be in hindsight if all goes well but what if you get laid off when rates are 6%? You might take a serious haircut to get out of the property.


03-03-2015, 12:11

Actually just the opposite is true. From a purely financial standpoint it is best to buy real property when interest rates are peaking and best to sell when interest rates are bottoming. That may seem counterintuitive, but successful speculation usually is.


Russ Wetherill
03-03-2015, 12:29

Sure. And it’s best to buy Apple stock when it’s $1/share. But not everyone gets that opportunity. The last time rates were at their zenith was 1982. Thirty-three years ago. If we are now at the nadir, then we are looking at a 60 year cycle.

Now, I’m a patient man, but a lifetime of waiting is too much for me.

Low rate loan
Pros: low interest rate, high amortization,
Cons: higher property tax, lower appreciation

High rate loan
Pros: lower price, higher appreciation, higher MID (but capped by AMT?)
Cons: low amortization, higher interest paid over life of loan

Pick your poison. “If you choose not to decide, you still have made a choice.” – Rush.


03-03-2015, 13:54

You will.


03-03-2015, 13:53

“Now, I’m a patient man, but a lifetime of waiting is too much for me.” Waiting for what? Buying a home? To live in? Or to speculate with? Or both?

My statement above specified buying a home from a purely financial standpoint. And it said nothing about incurring a mortgage.

Interest rates for speculative purposes are relative. We bought a home in the fall of 2011, when interest rates were low. We had absolutely no interest in appreciation and did not factor interest rates or possible appreciation in with decision to buy. If want to own instead of rent, I don’t know if speculating on home prices a great idea for most people. As it turns out, interest rates have fallen lower, ( I think ), and home prices have appreciated. When we were buying I thought the home we were buying would depreciate a bit more. Go figure.

If you are speculating on home price appreciation and doing so with a mortgage, you are gambling, with leverage. Not saying one can not be financially successful by speculating with leverage, but most will lose with such a plan.


Mellow Ruse
03-03-2015, 14:36

Long term interest rates:

1963 – 4%
1981 – 14%

Median US price:

1963 – 17,200
1981 – 67,600

Gain: 293%
Long term interest rates:

1981 – 14%
2010 – 4%

Median US price:

1981 – 67,600
2010 – 218,200

Gain: 223%



Based purely on the data, awgee’s contention that the best financial decision is to buy when rates are peaking appears to be nothing more than a myth. I’d like to see any data to the contrary.

Not only that, but people shunning this advice and buying when rates were near the low got to enjoy both the appreciation caused by runaway inflation AND they got to finance it with ultra cheap debt that was ultimately devalued by that inflation.


Mellow Ruse
03-03-2015, 15:33

Cumulative inflation:

Jan 1963 to Jan 1981 – 186%
Jan 1981 to Jan 2010 – 149%

Home gains adjusted for inflation:

Jan 1963 to Jan 1981 | 293% gains – 186% inflation = 107% real gain
Jan 1981 to Jan 2010 | 223% gains – 149% inflation = 74% real gain

awgee’s contention still doesn’t hold water adjusted for inflation, at least based on official historical numbers.



Irvine Renter
03-03-2015, 16:04

Try adjusting the dates slightly.

January 1963 to January 1982 (a 19-year period) = 210%.

That’s an average of about 11% per year.

January 1982 to January 2010 (a 28-year period) = 130%.

That’s an average of about 4.6% per year.

The numbers get more balanced that way.

As Russ points out, some of the gains in the 1970s were due to the change in the market from a single wage-earning family to a dual wage-earning family, whereas the gains in the 90s and 00s was largely due to declining rates.

We will never again get a boost from adding wage earners to the equation, but we will get a boost from declining mortgage rates at some point in the far distant future.


Russ Wetherill
03-03-2015, 15:08

I like the data.

There were other macroeconomic trends in the two periods that no doubt influenced appreciation (rise of the two income family, pre-81; and loss of real earning power to global wage arbitrage, post-81).

But the trend is the trend. The rise and fall in rates perhaps responded to the macroeconomic conditions, but home prices climbed steadily regardless.


el O
03-03-2015, 16:59

Uh… hate to rain on your inflation parade here muchacho, but from Jan 1981 to Jan 2010, total reserve balances increased from 27.2bil to 1,141bil = +393%

median(LOL) home prices only increased +233% during the same time span.

That’s an ongoing crash in real terms.


Russ Wetherill
03-03-2015, 14:52

A lifetime of waiting for rates to be at their peak in order to maximize appreciation (given your scenario where the property is bought at the lowest price, in cash, and then later sold to maximize the capital gain resulting from the fall in rates).

Since rates are now at their low point, the highest rates may be 30 years from now. At that point, you could buy, and later sell 60 years from now to maximize the gains from falling rates.

If you’re buying as a personal residence, then paying in cash may not be the best return given the MID.

If you’re buying an investment property, tying up your capital in cash when rates are low, and tenants are paying the mortgage limits the number of properties you can buy.

There are ways to make money in any stable interest rate environment. The problem is when the amount of credit changes suddenly and dramatically. That is when people lose their shirts. Contrast NINJA Option ARMs with current loan application proctology exams.


Russ Wetherill
03-03-2015, 11:12

You can’t expect someone to know something when not knowing it puts food on their table. The commission based compensation system creates these inherent conflict of interest. In all fairness to realtors …shudder… they don’t get paid until the sale closes. They have no guarantee that the dozen Saturdays they spent showing houses to whiny, recalcitrant, buyers will result in anything other than a high fuel bill. If you want to change the realtor mindset, you have to change how they get paid.


03-03-2015, 12:14

Why change the realtor mindset? Better to change the homebuying public’s mindset so they realize they don’t need a realtor and buying and selling a home is much less complicated with as few real estate agents involved as possible.


Russ Wetherill
03-03-2015, 12:43

But the average home buyer does need a realtor, just as the average home seller needs one. Like it or not, realtors do provide a service. Many buyers and sellers do not want to take the time to learn the intricacies of buying/selling real estate. They just don’t.

Realtors literally and figuratively hold the keys to the castle. Via the MLS monopoly, they are able to limit access to the best properties. Contacting sellers directly is only possible on a limited basis. If every buyer were to try to arrange six tours every Saturday, there would be chaos. Some entertainment value perhaps, but few sellers would see it through.

But I agree with you that buyers need to be the one’s demanding different fee arrangements. Once buyers realize that they are paying the 6%, and not the sellers, then they may be more motivated to demand direct fee agreements.


03-03-2015, 14:26

point by point:

“But the average home buyer does need a realtor, just as the average home seller needs one.”

Why? I am fairly average, well actually above average in looks and a bit below average in intelligence, and I don’t need a realtor, any more than I need a car salesman, or a Solar City salesperson bothering me at Lowes.

“Like it or not, realtors do provide a service.”

Yeah, realtors provide a service, but IMNSHO, most provide lousy service and do more harm than good in a real estate transaction.

“Many buyers and sellers do not want to take the time to learn the intricacies of buying/selling real estate. They just don’t.”

Absolutely true. (And they say that opinions are not fact. In this case, they are.) There are way less intricacies than most think. Buy a book and follow the directions. If I can do it, just about anybody can do it, and they can do it better than the agent they are paying.

“Realtors literally and figuratively hold the keys to the castle.”

When making an offer on our present home, the agent said I had to sign an agreement that he would represent both parties. He said he could not present our offer without the agreement. I said, “OK”!, (with enthusiasm), and said I would make the offer directly to the sellers myself. He changed his mind.

“Contacting sellers directly is only possible on a limited basis.”

This one just confuses me. As far as I know, I, or you, can walk up to any house and ring the bell. My dad once got an offer on a property from a friend of a friend, and neither were real estate agents.

“If every buyer were to try to arrange six tours every Saturday, there would be chaos.”

Why would there be chaos? How is arranging my own six viewings any more chaotic than a real estate agent arranging six viewings? It seems to me that having a real estate agent involved just puts one more person’s schedule into the arrangement. It is easy enough to call the listing agent for a viewing if the house is listed, and even easier to ring a doorbell if the house is not listed.

“But I agree with you that buyers need to be the one’s demanding different fee arrangements. Once buyers realize that they are paying the 6%, and not the sellers, then they may be more motivated to demand direct fee agreements.”

Yes, the buyers are paying the 6%, or the sellers are, or they are paying it together. I have no real opinion as to who is really paying the commission, but for sure there is an extra 6% or 5% added onto the price, on which property taxes are paid, and interest may be paid, yada-yada. But, you aren’t agreeing with me, “that buyers need to be the one’s demanding different fee arrangements.” I never said that, nor would I. The commission is specified in the listing contract between the seller and the seller’s agent and is none of the buyer’s business, and personally I don’t care one iota what commissions are paid when I am buying a property.


Irvine Renter
03-03-2015, 13:03

Why change the realtor mindset? Better to change the homebuying public’s mindset…

I’ve tried to do my part…


Irvine Renter
03-03-2015, 08:09

Remember the chart on the impact of interest rates I’ve posted dozens of times?


Well, John Burns is publicizing this fact to the MSM. As mortgage rates begin to rise, expect to the the MSM finally pick up on the discussion about the impact this will have on housing.

Low Interest Rates Create 12 Percent Home Price Appreciation

Lower interest rates have a powerful impact on home price appreciation, according to a report released by John Burns Real Estate Consulting. Home prices have increased 29 percent faster than incomes in the past 15 years largely due to falling mortgage rates.

Each 1 percent drop in interest rates in the last 15 years has allowed home sellers to raise prices 12 percent. According to the report, a typical family earning $60,000 per year can afford a mortgage payment of $1,800 per month, and would have qualified for a $245,000 mortgage in the year 2000 when mortgage rates were 8 percent. This same family qualifies for a home priced at $377,000 when rates are 4.0 percent.

Burns said sellers have to realize one of the reasons why their home is worth more money is because of mortgage rates have been falling for the past 30 years. Rates have fallen 0.7 percent since last March, which has stimulating home prices by 9 percent. He said this, “means that historical price appreciation is probably higher than future price appreciation.”


Russ Wetherill
03-03-2015, 10:52

Any effect of rising (or falling) rates is fleeting. Every buyer has a limited amount of income or wealth with which to affect their home purchase. The better neighborhoods will be limited to those with either the current wealth, or the prospective wealth, to afford them. There are neighborhoods for minimum wage earners, CEOs, and everyone in between. Taking rates out of the equation and looking at who actually lives in these communities and what they do for a living — and it quickly becomes clear which homes are affordable.
Whether rates are high or low, the same people are buying in the same neighborhoods. A sudden drop in rates does create an opportunity to own in these neighborhoods. At least until prices rise to the new equilibrium. A sudden rise in rates, however, will only translate into increasing affordability if prices fall from a significant rise in distressed inventory. As the FED has repeatedly stated: rates will rise in 2015 only if the economy is “less distressed” which means a FALL in distressed inventory.
Any rise in rates has to be sustained to really matter. We saw a premature rise in rates in 2013. The economy wasn’t ready to support higher borrowing costs at that time, so rates fell back down to sustainable levels.
I think there is a necessary order: Jobs recovery (2014); wage recovery (2015), home sales recovery (2016), home price/rate recovery (2017). The problem is that we already got the price recovery in 2012/13, thanks to the artificially low rates. So now we are playing catch up with wages and sales. I think rates and prices are more or less in balance at this point; and until wages rise, rates won’t rise much either. Prices aren’t likely to go anywhere (up or down) for the foreseeable future. Any small uptick in wage growth will be offset by attendant rate changes by the FED.
Prices have been manipulated to their optimal level by the banks (to relieve solvency issues). Higher prices from here don’t help the banks sell new loans at higher rates, which is traditionally the bread and butter of lending. Banks would prefer to sell two $500k loans at 10% than one $1M loan at 5%, and if they can due-on-sale all their 3.5% loans, substituting them with 7% loans, their profits will soar (at least until deposit rates adjust upwards).


Irvine Renter
03-03-2015, 08:14

In response to a story full of hopeful anecdotes about a resurgence of Millennial buying, I wrote the post Are Millennial first-time homebuyers finally active? While the following study is not exhaustive, it’s a big step forward from hopeful realtor anecdotes.

Survey Shows Millennials Not Entering Housing Market

The millennial generation isn’t adding much volume to the current housing market, according to a survey released today in the March 2015 Mortgage Industry Outlook Report by The Collingwood Group and The Five Star Institute. Approximately 61 percent of respondents said they see no evidence of the new volume coming from the millennial generation.

Student loan debt, a slow lag in finding employment, and wage stagnation were cited as some of the reasons why millennials have yet to enter the housing market in record numbers. About 70 percent of students walked away with loan debt in 2013 and the average student racks up almost $30,000 in debt by graduation, according to an annual report on loan debt released by the Institute for College Access and Success.

The millennial population is also starting households and getting married much later than previous generations, which delays their need to buy. However, unemployment rates among millennials may be the biggest reason why this generation is slow to enter the housing market. Unemployment rates are still low for recent college graduates, hovering around 11 percent for 20- to 24-year-olds as of November. Older millennials are seeing a healthier job market and only about 5.9 percent of those ages 24 to 35 remain unemployed.

However, the many respondents believe millennials will enter the market in the near future and research shows millenials are still interested in becoming homeowners one day. According to a Zillow survey, respondents ages 18 to 34 believe more strongly that owning a home is necessary to being a respected member of society, living a good life, and obtaining the American dream than previous generations.

“It is a matter of time (perhaps 10 years) before the millennials become homeowners,” one participant in the Mortgage Industry Outlook Report said. “To a certain extent, the industry should just be patient.”


03-03-2015, 09:06

“According to a Zillow survey, respondents ages 18 to 34 believe more strongly that owning a home is necessary to being a respected member of society, living a good life, and obtaining the American dream than previous generations.”

I am curious how those survey questions were phrased to come up with those conclusions. I was under the impression other survey’s show they care less about home ownership.


03-03-2015, 10:49

Again, desire does not equal demand. I believe the millenials “want” to own a home, but that doesn’t mean they can buy one. Wanting does not equal having.


Irvine Renter
03-03-2015, 08:22

State Supreme Court overturns sex offender housing rules in San Diego; law could affect Orange County, beyond

Setting up possible legal battles in Orange County and other urban areas, the California Supreme Court on Monday struck down sex offender living restrictions in San Diego County.

Approved by voters statewide in 2006, the restrictions aimed to create “predator free zones” by banning sex offenders from living within 2,000 feet of schools and parks.

Four San Diego parolees challenged the constitutionality of the restrictions, arguing the zones effectively walled off most housing options and undermined public safety by forcing offenders into homelessness.

More than 97 percent of rental housing in San Diego County became unavailable to the offenders, and law enforcement officials logged a rise in offenders registered as “transient,” according to court documents.

Ruling unanimously in favor of the parolees, the Supreme Court said the restrictions in San Diego were “harsh and severe” and produced “conditions that hamper, rather than foster, efforts to monitor, supervise and rehabilitate these persons.”

“It bears no rational relationship to advancing the state’s legitimate goal of protecting children from sexual predators, and has infringed the affected parolees’ basic constitutional right to be free of official action that is unreasonable, arbitrary, and oppressive,” the written opinion by Justice Marvin R. Baxter said.

State parole and Orange County probation officials, who monitor hundreds of local sex offenders, said they were reviewing the court ruling and were unable to comment Monday.

Baxter’s written opinion focused heavily on the circumstances in San Diego County and did not expressly address sex offender housing restrictions statewide. But legal experts and proponents of the housing restrictions said the ruling could have broad consequences.

Parks and schools are often sprinkled throughout urban neighborhoods, leaving little room for sex offenders to live outside restricted zones. Entire cities in Orange County fall within the zone.

“It substantially weakens the housing restrictions,” UC Irvine Law School Dean Erwin Chemerinsky said of the ruling. “What the California Supreme Court says is a local government can’t have a sex offender ordinance that leaves sex offenders with no place to live. Blanket bans are unconstitutional.”

However, the court left open applying the restrictions in San Diego County on a case-by-case basis, Chemerinsky said.

Former state Sen. George Runner, who co-authored the 2006 ballot initiative known as Jessica’s Law, said the ruling was a win for “sex offenders and child molesters.”

“I’m less concerned with the liberties and freedoms of a sex offender than I am of an innocent child,” Runner said. “No one is ever going to convince me that Californians think it is OK for a child molester to live across from a school.”

Runner said the next step for Jessica’s Law proponents may be loosening the restrictions, so local governments can create their own distances rather than rely on the blanket 2,000-foot zone.

Jessica’s Law became a lightning rod of criticism in Orange County last year following the arrests of two homeless sex offenders under state and federal supervision. Prosecutors say the men kidnapped, raped and murdered four sex workers in a string of attacks; they’ve pleaded not guilty.


Irvine Renter
03-03-2015, 08:23

Homeownership Continues to Drop

Homeownership rates for the fourth quarter in 2014 were the lowest they have been in six years according to information released by the U.S. Census Bureau. About 64 percent of homes were owned by occupants as of the fourth quarter in 2014, a drop from the third quarter rate of 64.4. This is the lowest rate for any quarter since at least 1995, the first year listed in the Bureau’s statistics.

Homeownership rates were highest in the Midwest at 68.3 percent and lowest in the West at 58.6 percent. The Northeast rate was 61.9 percent and the South rate was 65.5 percent. The Midwest, Northeast, and South all had rates lower than the 2013 fourth quarter numbers.

Age matters when it comes to ownership. Older residents are more likely to own their own home. Households owned by residents 65 or older had the highest percentage of ownership rates at 79.5 percent, while residents under 35 scored lowest at 35.3 percent. The rate of homeownership can change drastically by age. While the numbers of homeowners age 35 to 44 was 58.8 percent that number jumps to 75.8 percent for owners age 55 to 64. The rates for householders under 35, 35 to 44, 55 to 64 and 65 years and over were lower than the fourth quarter 2013 rates.


el O
03-03-2015, 09:12

Looks like the QE era ‘players’ who thought they were holding a great hand(green light to lever-up, rates are at record lows), have been played…



03-03-2015, 09:39

Dramatic graph, but without explanation, it’s meaningless.


el O
03-03-2015, 10:21

Lots of fascinating reads @Armstrong.

Meantime.. perhaps OCHN’s resident ‘cycles’ afficionado MellowRuse can chime-in on the RE business cycle, 76 year cyclical wave and the 26 year contraction that commenced in 2007.15.


Mellow Ruse
03-03-2015, 11:13

The great irony of el O using Martin Armstrong as a source, is that he has acted completely opposite to what Armstrong was predicting.

Did el O go bullish on stocks in ’09? Nope.
Did el O go bullish on real estate in ’09? Nope.
Did el O go bearish on gold in 2012? Double nope.

Basically, el O has ignored every major prediction of Martin Armstrong that would have led to easy profits over the past six years, but now we are supposed to believe that our resident Obfuscator-in-Chief holds Armstrong in the highest regard. By extension, we are to believe in the coming 18 year bear market that is being predicted.


03-03-2015, 12:10

Supply and scarcity must always must be considered as well, as pointed out by Reformed Broker


“Scarcity is driving so much of what’s happening right now. Ten thousand Baby Boomers will turn 65 years old today. Another ten thousand will turn 65 tomorrow and then every single day after that for the next fifteen years. I’m not exaggerating. They’re living way longer than their parents did and way longer than they’d originally expected to. 25 percent of them will make it into their nineties. What do they need more than anything? It sounds crazy, but they need stocks. Bonds aren’t going to cut it for a thirty year retirement, unless you include some supplemental income from Wal-Mart greeting or running retirement home affinity scams.

And stocks are scarce. The good ones anyway. There aren’t ten Disneys, there’s just one. There aren’t two Apples, there’s one. Buybacks have shrunk the quantity of SP 500 company shares. Zero-percent interest rates have ballooned the demand for dividend-paying blue chips.

The stock market won’t go down because too many people need it to. It’s not rocket science.”


Mellow Ruse
03-03-2015, 12:30

I’m sorry but those last two paragraphs come off as Kool-Aid to me.

Stocks are simply ownership in a company and there is no shortage of companies to invest in. If there were, more people would take their companies public to cash in on the over inflated prices being paid, just as they did during the tech bubble. If there were no companies left to take public, then people would start more companies to cash in.


03-03-2015, 13:34

As of 2013, the median retirement account balance among all households ages 55 to 64 was only $14,500.

15.4% of those 60 and older have no retirement savings or pension.

They may need stocks more than anything, but it does not follow that they have the means to buy stocks or will. Does need have anything to do with ability to pay?


el O
03-03-2015, 12:22

..only to be outdone by THE real obsfucator-deflector-in-chief’s irony… that being MellowRuse babbling-on about things he knows absolutely NOTHING about.

Does MR have access to my trade/position transactions log, 2009 onward? NOPE!

Do I know MR outside of the blogosphere? NOPE!

Looks like it’s back to the drawing board for MR

Sad really.


Mellow Ruse
03-03-2015, 12:43

All I have is eight years worth of blog comments and trades that you’ve posted for everybody to see. As such:

Did el O go bullish on stocks in ’09? Nope.
Did el O go bullish on real estate in ’09? Nope.
Did el O go bearish on gold in 2012? Double nope.


Irvine Renter
03-03-2015, 13:10

DOJ fines JPMorgan Chase $50 million for robo-signing

$1,000 per instance is slap on wrist

JPMorgan Chase (JPM) admitted to misfiling more than 50,000 payment change notices in bankruptcy courts that were “improperly signed, under penalty of perjury, by persons who had not reviewed the accuracy of the notices,” and will pay more than $50 million to homeowners as part of a settlement with the U.S. Department of Justice over its mortgage practices.

The DOJ announced Tuesday that it reached a settlement agreement with Chase, under which Chase admits that more than 25,000 of the 50,000 fraudulent notices were signed in the names of former employees or of employees who had nothing to do with reviewing the accuracy of the filings.

The rest of the notices were signed by individuals employed by a third party vendor on matters unrelated to checking the accuracy of the filings, the DOJ also said.

“It is shocking that the conduct admitted to by Chase in this settlement, including the filing of tens of thousands of documents in court that never had been reviewed by the people who attested to their accuracy, continued as long as it did,” said Acting Associate Attorney General Stuart Delery.

“Such unlawful and abusive banking practices can deprive American homeowners of a fair chance in the bankruptcy system, and we will not tolerate them.”


03-03-2015, 15:51

Only 1000 dollars per count of felony fraud…totally unacceptable. Whoever signed on the dotted line should be getting a year in prison for each signature.


NAR SURVEY: Majority of Realtors Feel Safe on the Job

Some of the most common circumstances that resulted in fearful situations were open houses, showing vacant and model homes, working with properties that were unlocked or unsecured and showing homes in remote areas.

“When I became NAR president last year, I pledged to make Realtor  safety a priority and develop new education and resources for the industry,” said NAR President Chris Polychron, executive broker with 1st Choice Realty in Hot Springs, Ark. “It is important to know how safe or unsafe our members feel, what causes them to feel unsafe, and what steps they are taking to keep themselves out of harm’s way, so that we can respond and provide the best tools tailored to our members’ personal safety needs.”

The survey asked members how safe they feel while on the job and nearly 3,000 Realtors® from across the U.S. answered questions about their personal experiences, and the safety procedures and materials provided by their brokerage.

The survey found that one-third of surveyed members carry a self-defense weapon. Female Realtors  are more likely to carry pepper spray, while male Realtors  more commonly carry a firearm. Many agents, 38 percent, have participated in self-defense classes as a proactive safety measure, and 13 percent use a smart phone safety application to track their whereabouts or alert colleagues of an emergency. Also, before showing a property, the typical Realtor  meets about half of their prospective buyers, whom they haven’t previously met, in a real estate office or other neutral location.

Many Realtor  associations, real estate brokerages and offices also make safety resources available to agents. Eighteen percent of members have participated in safety courses provided by their Realtor  association. Forty-six percent of respondents said their brokerage has standard procedures for agent safety in place; however, 54 percent said their brokerage either had no safety measures in place or they were not aware of them.

The safety of its members is a top priority for NAR, and the association will continue to expand its Realtor Safety Program in 2015 by unveiling new materials and applications for members and associations throughout the year.
NAR established the Realtor  Safety Program to empower and inform members of the potential risks they face in this profession and how to navigate them safely. Webinars, safety materials and tips are all made available through the program, with the entire month of September dedicated to bringing more awareness to Realtor® safety among members.

January Pending Home Sales Hit Highest Level In 18 Months, Says NAR

The number of contracts signed to buy previously-owned homes in January marked the highest level in 18 months, the National Association of Realtors said Friday.

NAR’s Pending Home Sales Index, which tracks contract signings (as opposed to closed sales), rose 1.7% in January to 104.2, from an upwardly revised December level of 102.5. (An index of 100 represents an average level of contract activity.) That level was 8.4% higher than in January 2014, when the index stood at 96.1, and marks the fifth straight month of year-over-year gains. December’s figures beat expectations of economists surveyed by Bloomberg ahead of the release.

“Contract activity is convincingly up compared to a year ago despite comparable inventory levels,” said Lawrence Yun, NAR’s chief economist. “The difference this year is the positive factors supporting stronger sales, such as slightly improving credit conditions, more jobs and slower price growth.”

Yun pointed out that January buyers were able to buy despite a tight supply of homes for sale, a data point he says underscores pent-up demand. Unsold inventory in January stood at a 4.7-month supply at the current sales pace, up from the 4.4-month supply for December but well short of the 6-month figure considered to a marker of a healthy housing market. Inventory levels are about the same as they were last January, but the sales level was higher. Data suggests that the buyers are regular people rather than investors, since all-cash sales and investor purchases are both down compared to a year ago. January’s very low interest rates may have also pushed some buyers to sign contracts.

January’s numbers continue a change in the market that began in September. Before that month, contract signings had been down on a year-over-year basis since September 2013, as quickly escalating prices slowed the pace at which Americans were purchasing homes. As price gains slowed down and investors exited the market, contract-signings have crept up.

“All indications point to modest sales gains as we head into the spring buying season,” says Yun. “However, the pace will greatly depend on how much upward pressure the impact of low inventory will have on home prices. Appreciation anywhere near double-digits isn’t healthy or sustainable in the current economic environment.”

Compared to housing reports released in the past weeks, Friday’s news is more optimistic about the housing market overall. Construction starts on new homes fell 2% in January, according to Commerce. A separate report Monday showed sales of previously-owned homes falling 4.9% in January. But home sales price growth was up just slightly in December, after 11 straight months of year-over-year slowdowns. Further, today’s report is considered a more timely measure of the market than the former reports, because it is based on contracts signed rather than closed transactions. Closings generally come one to two months after a contract is signed.

The national median sales price for existing, or previously-owned, homes for 2014 rose 5.7% to $208,100. That level of price appreciation is much steadier than the rapid, 11.5% gain for 2013. In 2015, NAR expects the national median existing-home prices to rise between about 5%.

Total Total existing-home sales for 2015 are forecast to be around 5.26 million, or about 6.4% above 2014. Last year sales finished 2.9% below 2013 levels (5.1 million) at 4.94 million.

All regions increased activity in January with the exception of the Midwest. Pending contracts for existing homes rose from December to January in the Northeast (by 0.1%), South (by 3.2%), West (by 2.2%), while falling in the Midwest (by 0.7%).  All regions of the United States increased contract-signings in January on a year-over-year basis: the Northeast by 6.9%, South by 9.7%, West by 11.4%, Midwest by 4.2%