Home Sales Increase in March, Rates Continue to Rise

Originally posted on www.cffunding.com/index.php/news/ on April 22, 2014

In a recent post on the Insights blog, Corelogic Senior Economist Molly Boesel shared that home prices have increased by 10 percent year-over-year as of March 2014. CF Funding is glad to see positive equity return to homeowners as home prices rise. The sales pace is now 5.17 million, which is 31.5 percent higher than February’s pace of 3.93 million. This is to be expected as home sales rise in the Spring as weather improves. In comparison to previous years, however, the jump was high, as the average increase from February to March is 27 percent.

As CF Funding shared last week on their website, single-family home starts grew in February, and the Insights Blog confirms this trend as “improvement in March home sales were led by newly constructed homes which increased by 24 percent, followed by re-sales which increased by 19 percent.” Improvements in the amount of distressed sales were also evident, as last year’s 20.4 percent is now reduced to 13.7 percent. REO sales and short sales were also down, with short sales accounting for only 3.8 percent of total sales in March. According to Boesel, “REOs typically sell at a larger discount compared to healthy sales than do short sales… the more recent shift away from REO sales is a driver of improving home prices.” She emphasizes that distressed sales will never reach a level of 0, but ideally could return to pre-crisis lows of about 2 percent.

The state with the largest amount of distressed sales was Michigan, at 29.7 percent. Illinois was second with 25.9 percent, followed by Nevada, Florida, and Georgia. CF Funding is happy to share that California saw a large decrease in distressed sales in March, with a 17.4 percent drop. Unfortunately CF Funding’s hometown of Chicago-Naperville-Arlington Heights was reported with the highest amount of distressed sales in March of 25 Core Based Statistical Areas (based on population).

In other mortgage news today, mortgage rates continue to rise, as Mortgage News Daily reported that “rates pushed into their 2-week highs yesterday, but are still well under the levels seen in the first week of April.” The most frequently quoted rate for a 30 year fixed mortgage was about 4.5 percent, making today’s rates about .02 percent higher. These rates can be compared to 2014’s lows of about 4.25 percent and highs of about 4.625 percent.

For more information about home price and interest rates, follow CF Funding Corporation on Facebook at www.facebook.com/cffundingcorp or contact a loan specialist today at (888)344-4080.

Americans are Buying Second Homes As Market Recovers

According to Fannie Mae’s report released Monday, titled “Second Homes: Recovery Post Financial Crisis,” the second home mortgage market is recovering after the housing market crash, and is expected to continue to grow. CF Funding is happy to share this sign of economic recovery. The Housing Insights report shared that second home mortgage origination has averaged about 4.6 percent of the total purchase market since 1998, and it has grown in the past few years. Fannie Mae and Freddie Mac have acquired about 64 percent of these second home purchase mortgages.

The National Association of Realtors’ survey of second home buyers, which was released last week, is used in the report to share general characteristics of second home buyers vs. those of primary residence buyers (those who have only one home). The typical second home buyer was profiled as about 47 years old, as opposed to a primary home buyer’s average age of 38. A second home buyer usually comes from a two-earner household and has a median household income of $90,660, whereas the primary homebuyer has a median household income of $74,580. The average second home buyer finances the purchase of their home about 61 percent of the time and usually puts down a larger down payment on their home than a primary homebuyer.

The increase in second home buying correlates with CF Funding’s April 2 article titled “Vacation Sales Rise Strongly in NAR Survey,” as the lender observed that more high-net-worth households gained enough confidence in the housing market to buy a recreational property last year. Fannie Mae also mentioned that “34 percent of all second home mortgages have been originated on properties located in Florida, California, and Arizona,” which makes sense as these states are located in warmer climates where many purchase vacation homes. Read the full CF Funding article here.

Fannie Mae also shared a history of the second home mortgage market, as the second home share of PMM has more than tripled from the late 90’s through about 2006, then declined through 2009. This is relatively consistent with the cycle of the real estate market. Since 2009, the second home mortgages share of all purchases has increased, as “private lenders are increasingly more willing to lend to second home borrowers.” During the housing peak (around March 2006), the share of second home mortgages peaked at more than 15 times its share compared to 1998 volumes, while other purchase mortgages were at less than 4 times their 1998 mortgages.

Although the population aged 45-64, who are most likely to buy a second home, is expected to grow more slowly than the rest of the adult population through 2060, it is still predicted that second homes will occupy a large part of real estate and mortgage business in the years to come. CF Funding looks forward to assisting second home buyers in financing their new home purchase. 

For more updates on daily mortgage news, follow CF Funding on Twitter at www.twitter.com/CF_Funding or visit our daily news feed at www.cffunding.com/index.php/news/ .