It’s Tuesday News Day and these are this weeks hot topics concerning the real estate market, the financial market, general market conditions, and interest rates.Wall St. Journal – Consumers Are Back to Paying Mortgages Ahead of Credit Cards
Americans are reversing an unusual pattern that had developed after the housing bust: They are putting their mortgages ahead of their credit cards when they pay the bills. Lenders expected mortgages to be paid first when home values plunged during the downturn, but consumers began to default on their mortgages while continuing to make credit card payments.
- Research reportedly found that in all 50 states, those who experienced greater home-price declines and higher unemployment rates saw more borrowers miss payments on mortgages while staying current on their credit cards.
- While people are now paying their mortgages again ahead of their bank card, TransUnion posits that the payment relationship hasn’t returned entirely to pre-crisis levels.
- The reversal in consumer behavior, i.e. normal payment hierarchy, returned at the end of last year, following around two years of rising home values.
- Notably, before, during and after the crisis, Americans are most likely to make their car payments first.
- As an example, in Los Angeles, where home prices declined 42 percent from 2006 through 2011, the spread between mortgage and credit-card delinquencies widened sharply. Home prices rebounded strongly beginning in 2012, and the payment spread, which was inverted for six years, has nearly disappeared.
- Borrowers were more willing to default on their mortgages because they’d lost all of the equity in their homes and foreclosure wasn’t immediate.
- As home prices rise, borrowers may act more predictably going forward, which could give lenders greater confidence to extend credit.
In other news…
HousingWire – Obama: “All-star” Julián Castro to lead HUD
San Antonio Mayor Julián Castro has been nominated by President Obama to lead the U.S. Department of Housing and Urban Development. Shaun Donovan, the current HUD secretary, has been nominated for the post of Director of the Office of Management and Budget. Castro is a three-term mayor of San Antonio and rose to national prominence following a speech at the 2012 Democratic National Convention.
The Washington Post – Foreign investors are making housing more expensive. Should we tax them for it?
Real estate markets across North America have become increasingly international, which has allowed homeowners to see the value of their own properties rise with the influx of foreign investment. However, there are concerns that absentee foreign homeowners can price out people who are actually living in the area, and if foreign investors leave properties empty, the costs of occupied housing can increase, thereby creating a disconnect between residents and the local real estate market.
LA Times – Condos are becoming FHA no-lending zones
Due to policy changes at the federal level and decisions by condominium boards of directors, many condos have become prohibited lending zones for the Federal Housing Administration in the last several years. The FHA will insure mortgages only on units in condo projects that have passed a certification process, which critics argue has led to a significant drop in the number of condo developments approved for FHA financing. For moderate-income buyers, the lack of lending for condos can be a deterrent to homeownership.
New York Times – Is It Better to Rent or Buy? The Math Is Changing
The Times has created an online calculator that enables prospective buyers and renters to analyze whether buying a home remains a bargain, since analysis from the newspaper finds that in the country’s most expensive places – including New York, the San Francisco Bay Area and Los Angeles – buying a home requires serious consideration as an investment, based on the relationship between their prices and rents or incomes.
TIME – The House Shows Boom: How the Real Estate Market Is Reflected on TV
Why are home-improvement shows so popular, and do these shows really correspond with what viewers are likely to be doing with their homes? It seems there are some patterns between the number of home shows on air during a given calendar year and real-world housing statistics. TIME notes that “As the housing market has begun to recover from that bubble, the number of home-related shows has also increased, though not to the extent that was seen before the bubble.”
Wall St. Journal – Signs of a Suburban Comeback
The land of lawns and malls has experienced two years of solid growth, as more Americans are moving again to suburbs. Many of the nation’s fast-growing cities are slowing down, while suburbs and areas beyond suburbs are seeing an uptick in growth after expanding more slowly during the recession and its aftermath.
- Mortgage applications fell a seasonally adjusted 1.2 percent last week, despite lower rates and expectations of stronger home sales in May, according to the Mortgage Bankers Association (MBA).
- Total mortgage applications for refinances and home purchases are down 48 percent on year.
- The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.31 percent, the lowest level since June 2013, from 4.33 percent.
If you have any questions about the current real estate market give me a call at (408) 840-3852 or shoot me an email at Thomas.Feng@gmail.com to discuss your situation and how to get the most out of the current real estate housing market.
Because of the many legal and tax situations that can arise through the sale and purchase of real estateALWAYS consult with your ATTORNEY or ACCOUNTANT before making ANY decisions in ANY transaction
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* THIS ARTICLE WAS POSTED AT Thomas Feng’s Bay Area Connect *