Home Auctions Popularizing, But Aren't Right for All Sellers

Auctions are taking a new turn in the real estate market, and are becoming less associated with short sales and million-dollar home sales. Many home sellers at a middle ground are using auctions to minimize home showings and ease the process of negotiation. Chicago Tribune recently shared some of the benefits and disadvantages of selling a home via auction, stating that “the different route to a property purchase doesn’t mean there isn’t still a bit of give-and-take between the seller and the buyer.”

CF Funding is aware that the homebuying process is not always easy. The mortgage lender has financed homes since 2000, and CF Funding loan specialists have seen a variety of homebuying and selling scenarios. However, there are only a select few situations where the lender suggests selling at an auction. As mentioned before, repossessed homes may benefit from auctions, if a quick sale is required. Properties that are of high value may also see benefits from selling by auction, as less unqualified buyers will be viewing the property. Another scenario where auctions may be beneficial is when a property is highly in demand, such as a single-family home in North Park. Buyers may feel that they could miss out on something special, and therefore are willing to place higher bets. Other areas where homes are in high demand in Chicago are Avondale, Edgewater, West Town, and North Center.

Properties that are in bad condition may also benefit from an auction, as auctions are highly populated with investors. Investors may be more interested in remodeling a property in less-than-perfect condition than other buyers. They are also more likely to have the funds available to do so.

So what are the disadvantages of selling via auction? Unfortunately for the seller, there is still a lot of privacy invasion leading up to the auction, where home viewings leading up to the auction can become overwhelming. The sale of the home is not guaranteed, and once the price is set, there is no further negotiation (even if the sale is much lower than expected). Luckily, the buyer has the ability to set a reserve price to avoid a less-than-ideal selling price. There are many fees associated with auctions that are required whether or not the property is sold, such as solicitor fees. If the home is sold, the seller may be in a rush to leave the property, as many auctions require the homeowner to vacate the property within 28 days of the sale.

Every home sale is different, and the best solution varies based on many factors. For flexible solutions to fit your homebuying needs, visit CF Funding Corporation at www.cffunding.com.

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Builder Confidence Rises in June as Housing Market Recovers

CF Funding is glad to see that builder confidence is rising again, as the NAHB/Wells Fargo Housing Market Index rose 4 points this month to a score of 49. A score of 50 or higher means more builders than not feel confident about the state of the housing industry. Limited availability of labor and other factors contributed to scores in the lower 40’s over the past few months, but Kevin Kelly says “a four-point uptick in builder sentiment is a welcome sign and shows some renewed confidence in the industry.”

As CF Funding has mentioned previously on the lender’s blog, the HMI results measure factors such as current sales, sales expected over the next 6 months, and traffic of prospective buyers. Builders’ responses from the survey are used to calculate a score from 1 to 100. The survey has now been conducted for 30 years.

All three indexes showed positive results in June, with current sales conditions increasing by 6 points to a score of 54. Expected sales conditions over the next 6 months rose 3 points to a score of 59. Buyer traffic increased 3 points to a score of 36. Although CF Funding is disappointed to see the buyer traffic score and overall score under 50 points, the lender is looking forward to further gains in builder confidence and expects all three indexes to rise in the coming months.

Regional HMI scores are also calculated, with the Midwest showing similar results as the overall survey, an increase of 4 points to reach 49 this month. The Northeast currently holds the lowest regional score of 33, and the West holds the highest regional score at 53.  On a 3-month average, the South and Northeast rose 1 point to 49 and 34. The west was unchanged at a score of 47. The Midwest fell 1 point to a score of 46.  NAHB Chief Economist David Crowe explained in a press release that “Consumers are still hesitant, and are waiting for clear signals of full-fledged economic recovery before making a home purchase… builders are reacting accordingly, and are moving cautiously in adding inventory.” Unfortunately for buyers, lower inventory usually means higher home prices due to less competition from other sellers.

Luckily, interest rates remain at historic lows, with slight decreases seen today in both 30-year and 15-year fixed-rate mortgages, as well as JUMBO and ARMs. CF Funding will keep readers updated on interest rate changes and the state of the housing industry on the lender’s Twitter page at www.twitter.com/CF_Funding.

Purchase and Refinance Applications Increase

CF Funding shares positive news for the housing market today, as both refinance and purchase applications have increased for the week ending June 6. The Market Composite Index by the MBA reported yesterday that mortgage applications increased by 10.3 percent last week, which is a 22 percent increase from the previous week (on a seasonally adjusted basis). Readers should note that Memorial Day fell on the previous week, however, data was adjusted to reflect the holiday.  

The refinance index saw an increase of 11 percent from the previous week, and the purchase index saw an increase of 9 percent from the previous week, on a seasonally adjusted basis. The purchase index increased by 19 percent compared to the previous week on an unadjusted basis. However, unadjusted purchases were still 13 percent lower than the same week last year. CF Funding is confident that both purchase and refinance indexes will continue to rise as the housing market improves this year.

Refinances are still representing a large percent of mortgage activity, as the refinance share increased to 54 percent on the index last week, from 53 percent the previous week. Adjustable-rate mortgages were unchanged, representing 8 percent of total applications on the index. Interest rates increased slightly last week, as the reported 30-year fixed contract interest rate (for loans $417,000 or less) was 4.34 percent, up from the previous week’s 4.26 percent. Jumbo 30-year fixed rates also increased, at 4.27 percent last week in comparison to the previous week’s 4.22 percent.

The average interest rate reported for 30-year FHA loans increased slightly, from 3.99 percent to 4.06 percent. 15-year fixed-rate mortgage interest rates also increased from 3.39 to 3.43 percent. CF Funding is pleased to see that the increase in interest rates has not slowed down applications, as rates are still historically low and home affordability is rising. As seen in the graph, current rates near 4.5 percent are much lower than rates seen 5 years ago near 5.5 percent.

Today, rates saw a slight decrease with the best-execution 30 year fixed rate mortgage near 4.21 percent, in comparison to yesterday’s 4.25 percent. The 52-week low is about 3.97 percent, according to Mortgage News Daily, and the 52 week high is about 4.85 percent. Those interested in mortgage rate updates may find up-to-date information through the CF Funding website at www.cffunding.com/index.php/mortgage-rates.

Mortgage Credit More Available, Rates Remain Low

CF Funding is pleased to share that mortgage credit is becoming more available, according to the Mortgage Credit Availability Index (MCAI). In the month of May, mortgage credit availability increased by about 1.4 percent, from 113.8 in April to 115.1. Some investors have lowered credit score requirements for FHA loans, which had an effect on the score. JUMBO loans also become slightly more available in May. 

As seen in the graph, the index benchmarked to 100 in March 2012. The Mortgage Credit Availability Index did not exist during the housing boom, but an expanded historical chart has been released which reveals credit availability scores as high as 850 in 2006. Scores quickly dropped from October 2006 to October 2008 to levels near 100, and have remained close to 100 for the past six years. CF Funding is happy to see credit availability increase, although the pace is slow.

The MCAI uses several factors to calculate credit availability, including credit scores, loan types, LTV ratios, and other factors. Underwriting data from over 85 lenders and investors are used to create the index.

In other mortgage news today, interest rates were relatively unchanged in response to the Employment Situation Report. Total nonfarm payroll employment increased by 217,000 in May, but the unemployment rate remained at 6.3 percent. Most major worker groups (adult men, adult women, whites, blacks, and Hispanics) showed little to no change in unemployment in May.  The number of long-term unemployed was nearly unchanged as well. As a response, the most prevalently quoted conforming 30-year fixed rate remained at about 4.125 to 4.25 percent, according to Mortgage News Daily. Best-execution rates for FHA/VA today are near 3.75 percent, and 15 year fixed rates are near 3.375 percent. Interest rates for a 5-year adjustable rate mortgage are about 3 to 3.5 percent, depending on the lender. These rates are calculated based on an ideal scenario and may vary based on credit scores and other factors.

Although interest rates have risen since last year, rates are still considerably low in comparison to previous years. Over the past 20 years, the rate for a 30-year fixed rate mortgage reached as high as 8.5 percent (in 2000) and 8.8 percent in 1995.

CF Funding regularly reports mortgage interest rates on the lender’s website at www.cffunding.com/index.php/mortgage-rates. Those looking to refinance and take advantage of historically low rates may contact the lender by calling 888-344-4080.

Why Homeowners Should Sell Now

Many homeowners have considered selling this spring, but were hesitant to list their homes after hearing of the winter slump, which produced lower-than-expected home sales. However, many economists believe the harsh weather had a major effect on home sales, and as the weather improved, so did the market. Last week, CF Funding reported that new residential home sales were up 6.4 percent in April from the revised March estimate, reaching a total of 433,000. Median home prices in April reached over $275,000. The lender also shared that rental prices are rising at the fastest pace since the recession, while home prices and interest rates are still relatively low.  

It is a well known fact among real estate professionals that Spring is considered the busiest time for home sales. About 60 percent of home sales occur between the months of May and August each year, on average. Those who list a home sooner than later during this time period are more likely to see results. Luckily for homebuyers, the National Association of Home Builders recently reported that housing affordability has increased to an average score of 65.5 in the first quarter of 2014, with some areas as high as 93.7. As homes become more affordable, more buyers feel comfortable searching for a new home, which increases demand. Home prices are expected to rise over the next few years, so many buyers are searching now rather than later.

Considering the low inventory on the market now, there is less competition when selling your home this Spring. However, inventory is expected to increase as the housing industry further improves. As home prices increase, many homeowners will return to positive equity, allowing them to sell homes they previously could not.

For those looking to buy a home, credit could be easier to obtain now than in the coming years, as interest rates are expected to rise slowly. The average interest rate for a 30-year fixed rate mortgage in April 2014 was about 4.3 percent. While this is a slight increase from last year’s rates, 4.3 percent is incredibly low when compared to the 1980’s and 1990’s, where interest rates reached over 16 percent. Those with low credit scores may be surprised to learn that CF Funding Corporation has many mortgage programs available, for all credit types, with down payments as low as only 5 percent. According to the Las Vegas Sun, “Mortgage lenders are opening their vaults again, with banks expected to lend $723 billion this year for home purchases. That’s up 9 percent from 2013.”

It is undeniable that now is a great time to buy or sell a home. For more information about CF Funding’s free preapproval process, contact the lender at 888-344-4080.