Adjustable rate mortgages are mortgages where the interest rate changes during the life of the loan. The most popular structure consists of a short period where the rate is fixed and attractively low−sometimes much as a full percentage point below comparable fixed-rate mortgages. At a date in the future − usually five to ten years − the interest rate resets. Often rates are linked to an index, like the prime rate, or the S&P 500, and after the reset, rates are usually significantly higher.
Adjustable-rate mortgages, or ARMs, were popular during the housing boom twelve years ago. Lenders created a variety of ARM structures to meet the demands of a buying public that had [...]
The three greatest barriers keeping renters from becoming homeowners are financial: saving for a down payment, finding an affordable house, and qualifying for a mortgage loan.
The down payment problem is less pressing since nearly 3,000 state and local governments offer low down payments as well as FHA, Fannie Mae and Freddie Mac. Some conventional lenders are offering mortgages with down payments as low as 1 percent for buyers with good credit. Hopefully, the supply of affordable homes for sale will improve this year as more new homes are built and the improving economy helps move-up buyers buy larger homes and put their old ones up for sale. Getting approved for a mortgage [...]
Virtually every real estate market in the nation has experienced buyers’ markets over the past three years. Since 2014, the median home price has risen 11 percent, and 5.8 percent in 2017 alone. With that kind of momentum, will the best sellers’ market since the housing boom continue through 2018? Or will this be the year that demand sags and conditions favor buyers?
In the first half of 2017, competitively priced homes attracted multiple offers quickly. In many markets, buyers battled each other in bidding wars to win contracts on homes that were on the market only a few days. However, during the last two quarters of the year, demand slowed and for several months [...]
With top economists like Freddie Mac’s Leonard Kiefer calling 2017 “the best housing market in a decade,” how can 2018 compete?
While 2017 exceeded expectations in the two most important categories, sales and prices, it has its weaknesses. Now that the results are in, here’s a quick review of 2017’s accomplishments and disappointments.2017: Great for sellers, not so great for buyers
Home sales increased by 1.1 percent in 2017 to a 5.51 million sales pace and surpassed 2016 (5.45 million) as the highest since 2006 (6.48 million). NAR’s chief economist Lawrence Yun noted that market conditions were far from perfect and sales would have [...]
The dawn of a new year brings with it the new chairperson of the Federal Reserve, Jerome Powell. In one of Janet Yellen’s final acts before leaving office in early February, she presided over the Fed’s decision not to raise mortgage interest rates during the first quarter of the year.
Powell is expected to continue the Federal Reserve’s conservative policy of raising rates gradually if the economy remains strong. Should inflation increase, we can expect the Fed to act more aggressively and raise rates faster. During the current economic boom, inflation has been low but may increase as the economy grows.
Other factors besides the Federal Reserve’s [...]
Big changes for homeowners take effect this year as a result of the tax reform legislation enacted in December and it’s not too early to plan for changes that affect homeowners on their 2018 tax returns. The biggest issue may not be chances for specific deductions and exemptions, but the cumulative impact on individual taxpayers when they decide whether to itemize or take the standard deduction. Income levels, the state they live in, and whether or not they own a vacation home are some of the issues that arise with individual taxpayers’ tax liability. Many people may alter their behavior or their lifestyles to achieve lower taxes in April 2018.
Below is a brief [...]
With top economists like Freddie Mac’s Leonard Kiefer calling the past year “the best housing market in a decade,” how can 2018 compete?
While 2017 exceeded expectations in the two most important categories, sales and prices, it had its weaknesses. Now that the results are in, here’s a quick review of 2017’s accomplishments and disappointments.2017: Great for sellers, not so great for buyers
Home sales increased by 1.1 percent in 2017 to a 5.51 million sales pace and surpassed 2016 (5.45 million) as the highest since 2006 (6.48 million). NAR’s chief economist Lawrence Yun noted that market conditions were far from perfect and sales [...]
Until very recently, a growing number of retiring homeowners have downsized by selling their family home and have either bought or rented something smaller. Downsizing can make their golden years easier and more enjoyable by making upkeep more manageable and reducing the costs of utilities and taxes. For retirees suddenly living on a fixed income, their houses may provide the financial cushion they need to enjoy their retirement.
Now that baby boomers, a generation second only to millennials in size, are reaching their late sixties and seventies, they are not doing as expected. Demographer Arthur C. Nelson, professor of Urban Planning and Real Estate Development at the [...]
The soaring costs of getting an undergraduate or graduate degree has driven thousands of college graduates into debt for years after they cross the stage. Ironically, those who worked hard for their degrees and are on their way to well-paying careers can’t get approved for a mortgage: they are too deeply in debt, and the problem is worsening. Graduates in 2015 with student loans left school with about $34,000 of debt, up from $20,000 ten years ago. A recent study by the National Association of Realtors and American Student Assistance found that 83 percent of prospective buyers cite student loan debt as the most important factor delaying them from buying a home. The average [...]
The lack of affordable housing is keeping many first-time buyers from becoming homeowners. Increasing demands and shrinking inventories of homes for sale are driving prices up, making them too expensive for young families seeking to buy their first home. Shortages have inflated prices by 48 percent since 2011, limiting choices for buyers and making homeownership too expensive for thousands of first-time and middle to lower income families. During 2017, inventory shortages reduced sales by about 1 percent.
One of the reasons for the persistence of the shortages is the inability of home builders to fill the gap. Many builders were devastated by the housing shortage. Recovery [...]
As 2017 draws to a close, Congress is considering important changes in federal income taxes. Several of these have significant implications for homeowners, especially changes in the deductibility of mortgage interest and property taxes. However, most of the changes under consideration in Congress will impact 2018 taxes, not 2017 taxes. So for 2017 taxes, homeowners should plan to comply with the tax code in effect before the reform.
It’s a good idea to review where you stand on your 2017 taxes before the year ends, especially provisions that impact homeowners. Take some time to make sure your documentation is in order. There are issues in the existing tax code that are [...]
If you’re thinking of buying or selling a home in 2018, you should know what to expect the housing markets will look like next spring.
Not long ago, before the housing boom and bust, forecasting housing markets was a relatively easy matter for most economists. Real estate prices were a matter of supply and demand. As supplies increase, prices decline. As demand increases, prices rise. Mortgage interest rates, income levels and demographic factors all impact housing demand, and economists can forecast it. Lately, that formula hasn’t worked very well. The healthier economy is providing better incomes, and millennials are ready to buy their first homes. Mortgage [...]