Hood Canal Real Estate, Mortgage, and the Economy - www.hoodcanalliving.com
Interest Rates Move Slightly Off One Year Lows: Whenever a market traded asset moves to levels not seen in a long period, they tend to move back the other direction. This is because of how traders tend to behave. This is exactly what we saw last week. Interest rate pricing moved slightly higher but is still close to recent low points we had last week. At the heart of the recent drop in rates seems to bets that the stock markets are overbought and due for a large move lower. History of market rallys and a lack luster economy support that bet. There are more investors shorting ( buying positions that will pay off if the market moves down) now than we have seen in the last 8 years. It is a large number. Employment numbers are improving but most of the new hires are in lower wave positions. This is not suggesting a strong recovery that would tend to move rates higher. For now it seems the market is supporting these lower rates with a possibility of lower rates if the stock market does falter.
"The spotlight's hitting something that's been known to change the weather." Elton John. The Jobs Report always has the power to change the "weather" for the markets and home loan rates. Read on to learn what May's report revealed.
The Labor Department reported that 217,000 new jobs were created in May. This was in line with expectations, though a decrease from the 282,000 job creations that were reported in April. The Unemployment Rate remained steady at 6.3 percent, the lowest level since September 2008.
However, digging further, it's important to note that many low paying jobs dominated the new hires in healthcare, bars and restaurants. In addition, the Labor Force Participation Rate (LFPR) was unchanged at 62.8 percent, matching a 35-year low. The LFPR measures the proportion of working-age Americans who have a job or are looking for one, and it should be moving higher in a recovery. All in all, the Jobs Report for May was a decent one, but nothing that will push the nation into full employment.
In housing news, research firm CoreLogic reported that home prices, including distressed sales, rose by 10.5 percent from April 2013 to April 2014. April marks the twenty-sixth consecutive month of year-over-year home price gains. However, as CoreLogic noted, "The weakness in home sales that began a few months ago is clearly signaling a slowdown in price appreciation. The 10.5 percent increase in April, compared to a year earlier, was the slowest rate of appreciation in 14 months."
What does this mean for home loan rates? Mortgage Bonds continue to remain at some of their best levels of the year, thanks to the weakened Euro, the Fed's Bond-buying program and the tepid economy. Since home loan rates are tied to Mortgage Bonds, as Bonds improve, rates improve. In recent weeks, home loan rates have hit their best levels this year!
The bottom line is that home loan rates remain attractive compared to historical levels, and now remains a great time to consider a home purchase or refinance. Let me know if I can answer any questions at all for you or your clients.
Real Estate Miscellaneous Stats
By Daniel Goldstein
1. The house is fine, but I could make it look bad.
As the housing market recovers, more buyers and sellers are getting reintroduced to one of the most nerve-racking rituals in real estate: the home inspection.
An inspection, which usually occurs after a buyer has made an offer, is meant to be an objective analysis of a home's condition. Twenty years ago, 75% of purchased homes were inspected; today, it's 95%, according to Bill Loden, president of the American Society of Home Inspectors, a Des Plaines, Ill.-based industry trade group.
Inspections aren't a big financial burden: A review of a 2,000 square foot home typically costs around $450, with the buyer footing the bill. But what can make an inspection so stressful is that a long list of trouble signs, without proper explanation, can sabotage a deal. And real estate pros complain that some of the inspectors themselves are overzealous. Many of the nation's 25,000 inspectors used to work in construction, or still do, and their expertise can lead them to bombard buyers with encyclopedic lists of minor problems.
A thorough pro will look at the foundation and the framing to make sure nothing is cracked, warped or rotting, and examine the roof for problems with shingles and gutters. Inspectors should also look for plumbing leaks and make sure the water heater, wiring, heating systems and fireplaces are safe.
So what constitutes going too far? A less helpful inspector might dwell on things like surface mold, chipped paint or other superficial problems, or present buyers with a long litany of issues, with no context about their relative importance and no estimate of the cost of fixing them.
The trick is finding an inspector who can relay the critical information and put it in context, says Dave Moersen, of HomeCheck Home Inspectors in Gaithersburg, Md., who's a veteran of more than 4,500 home inspections. "I used to think this job was 95% technical knowledge and 5% communication, but now I think it's the other way around," says Moersen. "Homeowners just want answers."
Bohdan Mastykaz, a Redfin real-estate agent in Miami, says the best inspectors take pictures and include them in their report to the buyer: "Pictures make everything black and white, and it's far less subjective that way."
2. Get the house, not the inspection.
Most realtors and real estate lawyers recommend including inspection contingencies in purchase contracts. But in most cases the law doesn't actually require an inspection. And in hotter markets, some buyers are opting to skip them. In a competitive bid situation "an offer for $880,000 with no inspection contingency will likely win over a $900,000 offer with an inspection contingency," says Mark Colwell, a real-estate agent with Redfin in San Francisco.
Of course, skipping an inspection can leave you in a different kind of hot water. If an inspection turns up a home defect, the seller will be under pressure to either drop their price or fix the problem. If the buyers waive that option, and find a defect afterward, they're on their own when it comes to repairs.
(One other note: If you live in a hurricane- or flood-prone part of the country, you may not be able to get a mortgage without submitting to a home inspection.)
3. Qualifications? I may not have any...
Only about two-thirds of the states have laws regulating home inspectors, according to ASHI, and even where regulations exist, the range of rules is wide. In Maryland, for example, home inspectors are regulated by the Department of Labor, Licensing and Regulation; they have to take a 72-hour pre-licensing class and have a license renewal every two years. In New York, home inspectors need a 140 hour pre-licensing course. But in California, there's no license needed and no classes are required; and in Virginia, there are no field training or experience requirements.
States that do have regulations on the books typically require home inspectors to take part in as many as 250 home inspections, as observers, before they apply for a license. But those "inspections" just can be a variation of "following Joe around," and there's no guarantee your home inspector is getting the knowledge needed to do a good job when flying solo.
If a not-so-sharp inspector misses a defect that eventually costs you, you could sue. But there's no national requirement that inspectors carry any standard of liability or errors-and-omissions insurance, and insurance rules vary by state. In practice, even an inspector who is found liable for damages may not have to ever pay up.
You may be able to rest a little easier if your inspector be a member of ASHI or the National Association of Home Inspectors (NAHI); those organizations require their members to meet certain standards of practice and ethics to remain in good standing. While hiring a certified home inspector may not protect you from a bad inspector, at least it gives you a place to complain.
4....and my credentials are pretty easy to obtain.
"Certified" membership in ASHI requires a minimum of 250 professional fee-paid inspections, as does the same status in NAHI. But you can be a noncertified ASHI member or a standard NAHI member with just 75 inspections under your belt.
Both organizations require some of their higher-level members to pass the National Home Inspector Examination, but neither organization verifies each candidate's inspections, typically just selecting a handful at random to audit.
ASHI's Loden says while his group can't police every one of its members, they've removed several from their organization for violations of ethics rules or concealing criminal convictions "When we find people violating our membership standards we try to take care of it, and in states where inspectors are licensed we refer them to the regulatory agency and the real estate board so agents know not to use them," he says. NAHI did not respond to requests for comment.
5. I'll cut corners to keep the agents happy.
The inspector ideally should work only for the client. But home inspectors also try to build relationships with agents and brokers to get more business, and that can give them an incentive to play down any problems with a house.
Sometimes, the buyer's agent tries to lean on the home inspector so as not to blow a deal, says HomeCheck's Moersen. "I've had calls from buyers agent's the day before my inspection telling me to lay off the HVAC system or the electrical system." Some agents have gone so far as to "weed out" inspectors who they say cause them the most aggravation, he adds: "If you kill a deal, you'll still hear from the agent, but if you kill more than two, you won't hear from them again."
Experts say homeowners should be wary if an agent or broker recommends just one inspector to them, of if an agent tries to discuss the inspection directly with the inspector and cut out the client.
ASHI has developed what it calls a "Client Bill of Rights," which requires, among other things, that home inspectors' future referrals from a broker or agent not be contingent on their report findings.
-Daniel Goldstein; 415-439-6400; AskNewswires@dowjones.com
6. Feel free to watch.
It happens: Some home inspectors are so thorough they can scare a client out of a deal. One way for a buyer to avoid that fate is to accompany the home inspector room-to-room during the actual inspection, says Paul Reid, a real-estate agent in California's Inland Empire region.
You'll learn a lot about the home that way, and you won't be surprised when the home inspector comes up with a long list of fixes. "A lot of times buyers will say, 'Do I need to be there for three hours?' and I tell them 'Yes,'" Reid says.
Of course, you may have to nag to be allowed to tag along. Mike Tebeau, of National Property Inspections in Frederick, Md., said that some inspectors don't like it when homeowners follow them around the house because it gets them off their routine. But he says that he actually prefers it. "More than likely they've been in the house before and they can point out things that they want me to look at. They're really a second set of eyes."
7. You should bring me in earlier.
Traditionally, inspections don't happen until after the buyer has made an offer: the practice is so standard that most inspectors don't think to question it. But having a home inspected before submitting an offer is a relatively frequent practice in San Francisco and Seattle, and some real-estate agents think it's a practice worth adopting more widely.
Researchers at the real estate group Redfin in San Francisco say that offers paired with pre-inspections were successful 21 % more often than other offers, and that San Francisco home buyers whose offers included a pre-inspection were more than twice as likely to win a bidding war as those without one.
"It tells the seller that you already know what's wrong with the home, you still want to buy it, and you're not going to ask them to pay for repairs later," says Colwell, the Redfin agent. Of course, doing the inspection early also means the buyer will have less leverage to get the seller to either fix a problem or drop the price.
8. To find a serious problem, you may need someone else.
Inspectors admit that there are some problems they aren't in a good position to detect. "An inspector can look at the exterior of an addition or a recently-remodeled basement, but without pulling the permits, there's no way of knowing what's behind the walls," said Moersen.
Lack of First Time Buyer’s Holds Back A Strong Housing Recovery: Economists and analysts continue to ask why housing is not leading us in to a stronger recovery with so much support from the Fed and time since the turn down. Even Fed Chairperson, Yellen, has made note that housing is not recovering as strong as hoped and they have really spent all their bullets. A recent Wall Street Journal article points out that first time buyers are purchasing at 88% of the average level over the last 10 years. There are many head winds facing first time buyers in the current environment. Recent data points out that income fell most for the age group of 25-34 from 2007 to 2012. Recent appreciation has made homes less affordable, many have credit issues to resolve, inventory is tight in most markets, many have high student loan debt and much tighter credit requirements are all factors. First time buyers are currently 16% of all transactions while they were 22-25% during the 2001 to 2007 period. The good news is we seem to be at the bottom and heading up. NAR chief economist, Lawrence Yun, suggests the market is improving but it may take a few years to get back to normal.
Negative Equity Still A Major Factor Affecting Markets: A recently released report by Corelogic shows a much improving situation overall with more homeowners recovering usable equity in their homes. While over 300000 homeowners returned to positive equity in the first quarter, only one in five homeowners have sufficient equity to sell and purchase another home. Currently 12.7% of all homes with mortgages are underwater. That improved from the same time last year which was at 13.4%. At current appreciation rates another 1.2 million homes are expected to emerge from negative equity over the next year. Another interesting reading from their report is another 10 million homes have less than 20% equity. Most of the total equity is concentrated in the higher end part of the market. Washington ranked #30 out of all 50 states but about #30-#20 states all were at very similar levels.
Hood Canal Real Estate, Mortgage, and the Economy - www.hoodcanalliving.com