Real Estate Roundup: Bay Area Rental Home Investors Can Score Nice Winter Bargains

Here’s a look at recent news of interest to homebuyers, home sellers, and the home-curious.

A WINTER WINDOW OF OPPORTUNITY FOR SAN FRANCISCO REAL ESTATE INVESTORS
With the holiday season waiting in the wings, many Bay Area home shoppers typically call off their searches until the new year. But for investors in the market for a rental property, the upcoming weeks could be the ideal time to buy.

That’s according to a new study by HomeUnion, which ranks U.S. real estate markets based on those that offer the best seasonal bargains for investors. Nationwide, single-family rental investors typically pay 7.2 percent less per square foot during the winter than they do in spring and summer and also see a slightly higher cap rate. Real estate activity drops in the winter in some cold-weather cities while rent losses are marginal, and investors also face less competition from families seeking to buy homes in a favorable school districts.

Relatively mild winter temperatures aside, San Francisco ranks as the nation’s second best seasonal market for rental investors, with cap rates increasing by 21.8 percent during the winter months. San Francisco landlords who buy a property over the next few months can expect to pay a median price of $920,000 compared with $1,200,000 this past summer.

Investors in San Jose and Oakland also see cap-rate increases in the winter, a respective 11.1 and 9.4 percent. Single-family rentals are selling for $308,000 less than they did in San Jose this summer and $117,000 less in Oakland.

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CALIFORNIA: HOME TO THE NATION’S MOST EQUITY-RICH HOMEOWNERS
Rising home prices continue to restore equity to more U.S. homeowners, with Californians doing particularly well in that respect.

ATTOM Data Solutions’ most recent Home Equity and Underwater Report says that there were more than 13 million equity-rich homeowners across the country at the end of the third quarter, representing 23.4 percent of mortgage holders. The company defines equity-rich homeowners as those that have at least 50 percent equity in their homes.

Four of the country’s five most populous states — California, Texas, Florida, and New York — were also in the top five for the number of equity-rich homeowners. The Golden State has more than 2.9 million equity-rich homeowners, a 7 percent gain from the third quarter of last year. California ranks second only to Hawaii for the number of equity-rich homeowners, at 35.7 percent.

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MORTGAGE RATES SOAR AS THE DUST SETTLES FROM THE ELECTION
Mortgage rates ballooned last week in the wake of the U.S. presidential election, which could make for a flurry of activity followed by a slowdown.

According to Freddie Mac data, 30-year, fixed-rate mortgages average 3.94 percent for the week ended Nov. 17, up from 3.57 percent a week earlier. In a statement accompanying the report, Freddie Mac Chief Economist Sean Becketti said that he expects a final blitz of home sales and refinances as buyers try to beat intrest-rate hikes, then a pronounced cooling in the market.

At last week’s Pacific Union Real Estate and Economic Forecast to 2019, company CEO Mark A. McLaughlin demonstrated how rising interest rates could impact affordability in the Bay Area. Assuming a 4 percent fixed interest rate on a 30-year mortgage, about 25 percent of Bay Area households can afford a $1 million mortgage. If interest rates rise to 5 percent, the number of households who can afford that $1 million mortgage drops to 20 percent; if rates rise to 6 percent, affordability further erodes to 16 percent of the population.

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UNEMPLOYMENT-BENEFIT CLAIMS AT LOWEST LEVEL SINCE THE 1970S
Amidst a U.S. economy that is still booming despite the political uncertainty that surrounds elections, the number of people receiving unemployment benefits has dropped to its lowest levels in 40 years.

In a press release, The U.S. Department of Labor says that there were 235,000 initial unemployment benefit claims for the week ended Nov. 12, the lowest level since November 1973. Claims have been below 300,000 for 89 consecutive months, the longest such streak since 1970.

The U.S. economy added 161,000 new jobs in October, with the unemployment rate declining to 4.9 percent. According to the latest numbers from the California Employment Development Department, the state’s unemployment rate remained at 5.5 percent on a seasonally adjusted basis for the fourth consecutive month in October.

(Photo: Flickr/thefuturistics)

Article and images sourced from http://blog.pacificunion.com/real-estate-roundup-bay-area-home-investors-can-score-nice-seasonal-bargains/

Real Estate Roundup: Mortgage Rates Keep Dropping in the New Year

Here’s a look at recent news of interest to homebuyers, home sellers, and the home-curious.

MORTGAGE RATES DIP TO 3-MONTH LOW

Mortgage rates have declined every week so far in 2016 and are currently at their lowest levels since the fall, a fact that could help motivate hesitant homebuyers who have been sitting on the fence.
That’s according to the most recent numbers from Freddie Mac, which said that 30-year, fixed-rate mortgages fell to 3.81 percent for the week ended Jan. 21, down from 3.92 percent from a week earlier and up from 3.63 percent a year ago. Fifteen-year mortgage rates displayed a similar pattern, dropping from 3.19 percent to 3.10 percent on a weekly basis but up from 2.93 percent year over year.
In a statement accompanying the report, Freddie Mac Chief Economist Sean Becketti attributed the declines to weak inflation in 2015 and global economic turmoil, which is driving investors to treasuries.

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HOW MUCH YOU NEED TO EARN TO OWN A BAY AREA HOME
California residents must earn more than those in any other state in order to purchase a home, with Bay Area homebuyers requiring the biggest paychecks in the nation.
In a recent analysis, consumer financial-services comparison website Finder.com examined how large of a salary residents of 78 metro areas needed to earn in order to comfortably afford a home, assuming a 20 percent down payment, the ability to cover per-person expenditures, and the ability to pay off debt not related to the mortgage. By those criteria, San Francisco area households need to pull in more than $180,000 per year to afford the average home costing $1,119,500, the highest in the U.S. San Jose was the second priciest market in this regard, with a salary of $129,864 necessary to buy a home valued at $805,000.
Los Angeles and San Diego also made the top five for biggest salary requirements. Finder.com notes that those four California metro areas were among just six in the country where the salary required to obtain a mortgage is higher than the salary needed to pay for mortgage payments, average debts, and average expenditures.

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SUPER BOWL TRAFFIC, TRANSIT MAYHEM PROJECTED FOR SAN FRANCISCO
Although Super Bowl 50 at Levi’s Stadium in Santa Clara is still almost two weeks away, its impact is already being felt in downtown San Francisco, as streets close and havoc is predicted to befall strained public-transportation systems.
Curbed SF reports that the construction of Super Bowl City began over the weekend at the Embarcadero. The extravaganza will disrupt 19 Muni bus lines and close an entrance to the Embarcadero BART and Muni stations for most days. BART trains themselves are expected to be packed to capacity, though the agency plans to add extra trains to the rotation.
Worse still, predicts Curbed, will be the traffic that the detours create. Although the city is only closing a compact grid of streets right around the site of the festivities, the San Francisco Municipal Transportation Agency is directing drivers traversing the streets to major northbound/southbound corridors such as Van Ness Avenue and Gough Street, which could potentially clog up traffic several miles west of the event.

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1 IN 3 REAL ESTATE DEALS FACES DELAY
About one-third of real estate transactions encounter a delay before closing, but savvy buyers can take steps to ensure smooth sailing.
Citing data from the National Association of Realtors, an article in The Washington Post says that 32 percent of real estate sales encountered a delay over the past three months. Of the deals that were delayed, financing issues were the most common culprit, affecting almost half of those buyers.
In order to keep one’s financial ducks in a row while closing a loan, homebuyers should not make any major purchases that could affect their credit score. The article also recommends that buyers be completely transparent with their loan officer, disclosing all financial obligations and changes in employment.
(Photo: Flickr/401(K) 2012)

Article and images sourced from http://blog.pacificunion.com/real-estate-roundup-mortgage-rates-keep-dropping-in-the-new-year/

Benchmark Mortgage Rate Dips on China’s Market Chaos

With China’s stock market rout rattling the markets near and far, and a subsequent flight to quality driving the 10-year Treasury yield down, the average rate for a benchmark 30-year mortgage slipped back below 4 percent over the past week.

At 3.97 percent, the current 30-year rate is 24 basis points above the 3.73 percent rate recorded at the same time last year, according to Freddie Mac’s mortgage survey.

And with the markets spooked, the probability of a second rate hike by the Fed in March has dropped from 56 percent at the end of 2015 to 44 percent today.

Article and images sourced from http://www.socketsite.com/archives/2016/01/benchmark-mortgage-rate-dips-on-chinas-market-chaos.html

Most Renters Unable to Afford a Home Purchase

Financial hardships are preventing most renters from entering the real estate market, a recent Freddie Mac survey found, but new low-down-payment programs could help some of them unlock purchasing power and become first-time homebuyers.

According to poll results, 45 percent of U.S. renters said they live from paycheck to paycheck, while another 17 percent reported an inability to pay for basic necessities. And although 91 percent of renters believe that homeownership is a source of pride, just 39 percent said that they expect to purchase a home over the next three years.

Renters who plan to get in the game tend to be younger, with 47 percent of those in the 25-to-34 age bracket foreseeing a purchase by 2017. Generation Xers seemed even more certain that homeownership is in their future, with 58 percent of those aged 35 to 44 responding that they expect to buy a property within the next three years. Renters who haven’t bought a home by the age of 45 were unlikely to do so, Freddie Mac noted.

In a statement accompanying the survey results, Freddie Mac Multifamily Executive Vice President David Brickman said that an inability to afford a down payment is preventing some renters from buying, but the California Association of Realtors believes that new lending programs could help turn the tide.

Last week, both Freddie Mac and Fannie Mae unveiled programs that would allow qualified first-time buyers to obtain a loan with as little as a 3 percent down payment.

“Our goal is to help additional qualified borrowers gain access to mortgages,” Andrew Bon Salle, Fannie Mae Executive Vice President for Single Family Underwriting, Pricing and Capital Markets, said in a statement.

CAR commended the programs, saying that increased access to credit would greatly benefit the state’s first-time buyers.

“Saving enough money for a down payment is the biggest hurdle for most first-time home buyers, but this program will help remove that barrier, and at the same time, lenders can be assured they are providing a safe, affordable loan to creditworthy borrowers,”CAR President Chris Kutzkey said in a press release.

Still, not all renters want the responsibilities and commitments that come with homeownership, according to Freddie Mac. Freedom from home-maintenance chores and expenses is the main advantage of renting, 78 percent of respondents answered, while 68 percent said that renting allows for greater flexibility in terms of location.

And the country’s recent recession and housing collapse is still very much top of mind, with 66 percent of those polled responding that continuing to rent would protect them against future home price declines.

(Photo: Flickr/NoHo Damon)

California, Bay Area Housing Markets Nearly Stable, Says Freddie Mac

Over the past year, the U.S. real estate market has continued to stabilize, a Freddie Mac index says. That’s also true here in California and the Bay Area, with several of our local markets recovering faster than the nation.
Freddie Mac’s Multi-Indicator Market Index (MiMi) gauges housing stability by assessing four factors: home-purchase applications, payment-to-income ratios, the number of owners who are current on their mortgage payments, and employment rates. The MiMi then classifies a market as weak, stable, or elevated based on those criteria.

The latest MiMi data, which covers activity through July, gives the national housing market an index value of 73.4, still shy of the stable range of 80 to 120. The U.S. market  trended up over the previous year, with a gain of 5.4 percent on the MiMi scale. According to the index’s historical data, the U.S. housing market was last in the stable range in November 2008.

The MiMi gives California’s real estate market an index value of 77.5, up 9.1 percent from a year ago. The statewide market was last in MiMi’s stable range in August 2008. Freddie Mac’s statistics show that payment-to-income ratios and employment levels have both stabilized in California, with respective index values of 98.3 and 95.3.

Freddie Mac’s index also breaks out data for the 50 largest metro areas in the U.S., including San Francisco-Oakland-Fremont and San Jose-Sunnyvale-Santa Clara.

With an index value of 78.4, San Francisco is the closest of the California regions still in the index’s weak range to achieving stability. Currently, the only California region that Freddie Mac deems stable is Los Angeles.

San Francisco’s index value increased 7.8 percent on an annual basis. As is true across the state, San Francisco received stable scores for payment-to-income ratios (100.5) and employment rates (96.8). However, purchase applications were a weak spot, with an index value of 38.9, much lower than the national average.

The San Jose housing market is also headed toward firmer ground, with an index value of 75.5, up 6.5 percent from a year earlier. San Jose ranked as stable for payment-to-income levels (84.3),  current mortgage payments (80.4), and jobs (99), but still has a weak amount of purchase applications (38.3).

The MiMi says that San Francisco and San Jose real estate markets were last in the stable range in August 2008.


(Photo: Flickr/Horla Varlan)