Weekly Real Estate Report

Still Work To Be Done
As the euphoria wears off in the aftermath of our stellar June employment release, we realize that there is still work to be done in order to fully recover from the financial crisis and deep recession. The recovery has been going on for five long-years, but it is still not fully mature. For example, while we have recovered all jobs lost during the recession, we have not added enough jobs to accommodate the population growth that has occurred during and since the recession. Even at today's increased pace of job growth, this void will not be filled for two years or longer.
Furthermore, while the unemployment rate has dropped to 6.1% -- which was the lowest in almost six years, the "underemployment" rate still stands at 12.1%. The underemployment rate includes those who are working part-time because they can't find full time jobs. The labor participation rate stands at 62.8% which is a 36-year low. It is true that the baby boomer generation is reaching retirement age and this contributes to the labor participation statistic. On the other hand, it is not merely how many jobs are created -- it is also what type of jobs are created. America needs more high paying full-time jobs.

So before we celebrate the end of bad times, we must understand that there is truly more work to accomplish. The fact that we have more room to grow is actually good news for right now because this gives the Federal Reserve Board latitude to keep interest rates lower for a longer period of time and not worry about the economy overheating. The markets will cause rates to rise as we witness the start of the cycle of better times. If this surge in job hiring spreads to the real estate markets, we will start making up ground in a hurry instead of the snail's pace of the past five years. If that happens, expect the Fed to act much more quickly.

Many consumers are overestimating the down payment they need in order to purchase a home, according to Christina Boyle, vice president and head of single-family sales at Freddie Mac. Consumers believe they need 11 percent to 15 percent in order for lenders to approve them for a loan, according to a survey of renters and non-home-owners conducted by Zelman & Associates in New York. Thirty-nine percent say they need at least 15 percent of the purchase price in order to qualify for financing. Only 28 percent of respondents say they would even qualify for a home loan. But in reality, home buyers often can qualify for a conforming, conventional home loan with a down payment of as little as 5 percent — and sometimes even 3 percent — Boyle writes. Between 2009 and 2013, Freddie Mac’s purchases of home loans with down payments of less than 10 percent more than quadrupled. So far in 2014, more than one in five borrowers who took out conforming, conventional loans put down 10 percent or less. “Letting more consumers know how down payments are determined could bring more qualified borrowers off the sidelines,” Boyle writes. “Depending on their credit history and other factors, many borrowers can expect to make a down payment of about 5 percent or 10 percent.” However, Boyle notes that any borrower who puts down less than 20 percent will be required to buy mortgage insurance. Boyle says that buyers should also be encouraged by the abundant down-payment assistance programs that exist to help break into home ownership. Source: Freddie Mac
Access to high-speed Internet, nearby grocery stores, and hospital/medical centers were the top three community features desired by Baby Boomers in a recent survey. Philips and the Global Social Enterprise Initiative (GSEI) at Georgetown University’s McDonough School of Business asked 1,000 consumers age 50-80 about the use of technology to stay independent as they age. In addition to high-speed Internet, 58 percent of respondents said they would be interested in stovetops or ovens that automatically shut off to help them live at home as they get older. Respondents also said they’re interested in a single remote control to manage everything in the home (46 percent), and driverless cars (41 percent). When it comes to home design, 58 percent said they’re want a low-maintenance exterior, 54 percent desire master bedrooms and baths on the first floor, and 54 percent also said they want effective lighting throughout the house. “The long-term, intergenerational benefits to universal design and early technology adoption extend beyond the aging population. For example, structural and technological updates can help injured individuals of all ages move with ease,” said Bill Novelli, GSEI founder and Georgetown McDonough professor. Overwhelmingly, 91 percent of survey participants said they plan to live in their own home or apartment, and 96 percent said it's important to be as independent as possible as they age. Source: Georgetown University’s McDonough School of Business

Title defects have become a major cause for concern within the real estate market in recent years, “which some feel cause wrongful foreclosures and others feel contribute to stagnation of what would otherwise be a smooth transition of assets within the secondary market,” according to executives at Nationwide Title Clearing Inc. NTC says several title-related issues are jeopardizing transactions. For example, NTC notes problems such as simple issues with wording in the document that does not comply with real estate standards for the area and failure to include the signature of a party that is necessary to the transaction, such as a spouse. Other common problems surfacing are previous liens and other encumbrances that have not been removed; the title needs to be free of encumbrances to be marketable, according to NTC. “Property records hold the key to ensuring a clear title conveyance and reducing the risk of buyback or inability to foreclose,” according to NTC. To help combat potential title hang-ups, NTC says it’s added online ordering for property records to its website. The reports include tax status, current owner information, and assignment verification services. “Our property report services are based on research conducted from actual land records and are accessible for any residential property nationwide,” says NTC CEO John Hillman. Source: Nationwide Title Clearing

Laura Glass with Landmark Bank Mortgage