South Florida Real Estate News

Dec. 16, 2016

The Fed hike: Mortgage rates mostly flat, but for how long?

Future increases mean it’s a good time to lock in low rates

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As expected, the Fed raised interest rates for the first and only time this year at their December meeting, but it had little immediate effect on mortgage rates. However, in a hawkish move, the Fed also altered its forecast for next year to include three rate hikes instead of two, citing “realized and expected labor market conditions and inflation” as justification for the move. This surprising announcement and the volatility of a new U.S. presidency means that 2016’s historically low mortgage rates will probably fade into memory within 2017.

Mortgage rates were up slightly from pre-announcement levels, with the 30-year fixed rate industry average moving from 4.34% to 4.45%. The fact that mortgage rates mostly resisted reaction to the big news isn’t a big surprise, since the .25% hike had been anticipated for much of last year and was already baked into valuation prior to the Federal Open Market Committee meeting.

If there are three more Fed interest rate hikes next year, mortgage rates will also probably increase. And though Fed Chairperson Janet Yellen did not expound on the influences and effects of a new president in the White House, markets in general will act unpredictably until the transition is complete and new economic policies are firmly in place. Prospective homebuyers and those looking to refinance can still lock in mortgage rates that are near historic lows, but the time to act is now.

Please visit www.FederalReserve.gov for more information.

Posted in News
Dec. 14, 2016

Zillow gives 6 predictions for housing in 2017

Immigration, Millennials, new homes and more

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This year is nearly over, and 2017 will being in just a few short weeks. As the year comes to a close, predictions for next year are pouring in.

 

It’s hard to say what the new year will bring with the newly-elected President-elect Donald Trump. Zillow points out in its predictions how some of his policies could affect housing next year.

 

Here are Zillow’s six predictions for 2017:

 

1. Cities will focus on denser development of smaller homes close to public transit and urban centers.

 

2. More millennials will become homeowners, driving up the homeownership rate. Millennials are also more racially diverse, so more homeowners will be people of color, reflecting the changing demographics of the United States.

 

3. Rental affordability will improve as incomes rise and growth in rents slows.

 

4. Buyers of new homes will have to spend more as builders cover the cost of rising construction wages, driven even higher in 2017 by continued labor shortages, which could be worsened by tougher immigration policies under President-elect Trump.

 

5. The percentage of people who drive to work will rise for the first time in a decade as homeowners move further into the suburbs seeking affordable housing — putting them further from adequate public transit options.

 

6. Home values will grow 3.6 percent in 2017, according to more than 100 economic and housing experts surveyed in the latest Zillow Home Price Expectations Survey. National home values have risen 4.8 percent so far in 2016.

 

Other predictions for next year include this one from Redfin, predicting the fastest real estate market ever, this one from Kroll Bond Rating Agency, this one from Realtor.com and this one from Bank of America.

Posted in News
Dec. 5, 2016

The Week Ahead: Home Price Gains Creates Wealth for Homeowners

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Home prices in September were up more than 6 percent compared to a year ago and look to be up another 5 percent by this time next year, according to the September CoreLogic U.S. Home Price Report—and a corresponding rise in home equity has been a boon to homeowners.

“Home equity wealth has doubled during the last five years to $13 trillion, largely because of the recovery in home prices,” said Frank Nothaft, Chief Economist for CoreLogic. “Nationwide during the past year, the average gain in housing wealth was about $11,000 per homeowner, but with wide geographic variation.”

Anand Nallathambi, President and CEO of CoreLogic, shared a similar sentiment saying, “Home price growth creates wealth for owners with home equity. A 5 percent rise in home values over the next year would create another $1 trillion in home equity wealth for homeowners.”

Compared to August, September’s home prices nationally were up about 1 percent. CoreLogic expects October’s prices to inch upwards by 0.3 percent.

What will the latest CoreLogic Home Price Index hold, set to release on Tuesday, December 6th?

Posted in News
Dec. 5, 2016

Nationwide Bankruptcy Filings Drop

Nationwide bankruptcy filings were 7 percent lower in November 2016 compared with a year earlier, falling even lower than last month’s reported decrease, according to November 2016 AACER bankruptcy data reported by Epiq Systems.

Bankruptcy filings totaled 59,300 in November, which was a decrease from October’s total of 63,055, and a decline from November 2015’s total of 65,562 (an decrease of 6,262).  Year-to-date, there have been 715,460 bankruptcy filings nationwide for the past eleven months of 2016 (about 65,042 per month), down from 2015’s year-to-date total through the end of November of 765,583 (about 69,598 per month).

The average number of filings per day in November 2016 was 2,965 over 20 days, which is an increase from October’s daily average of 3,153 over 20 days. November experienced 188 fewer filings than in the month prior. Bankruptcy filings have averaged 3,111 for the past eleven months of 2016 over a period of 230 filing days.

November’s total of 59,300 bankruptcy filings was less than half of the peak total of 135,771 recorded in September of 2010.

Click HERE to View the Entire Report

The state with the most cumulative filings for the past nine months of 2016 was again California with 66,669. As has been the trend, Illinois was second in year-to-date filings with 48,956. The next three states with the most cumulative filings were Georgia (42,726) Florida (40,726), and Ohio (33,648).

Tennessee and Alabama continued to rank first and second among states in bankruptcy filings per capita for November with 5.65 and 5.52 for every 10,000 people, respectively. Those numbers were virtually the same as October’s numbers. The national average of filings per capita in November 2016 decreased slightly over-the-month at 2.51, though it has increased by about 50 basis points since January 2016’s average of 2.02 percent.

Epiq Systems is a leading global provider of technology-enabled solutions for electronic discovery, bankruptcy and class action administration. Top legal professionals depend on us for deep subject-matter expertise and years of firsthand experience working on many of the largest, most high-profile and complex client engagements. Epiq Systems, Inc. has locations in the United States, Europe and Asia.

Posted in News
Dec. 5, 2016

Blackstone Group’s Invitation Homes Plans on Going Public

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According to recent reports from The Wall Street Journal and Reuters, Blackstone Group LP’s single-family home rental platform Invitation Homes has “filed confidentially for an initial public offering.”

Earlier this year, Bloomberg reported that, “Blackstone Group LP expects to take its Invitation Homes unit public in the first half of next year, capitalizing on a rally in U.S. single-family rental landlords to list the biggest company in the industry, according to two people familiar with the matter.”

Invitation Homes manages the largest pool of rental homes across 14 of the nation’s metropolitan markets. Blackstone states on their website that the platform creates jobs and provides high quality, affordable housing for families nationwide.

The Wall Street Journal reports that sources close to the matter state that Invitation Homes plans to sell $1.5 billion worth of stock. “Based upon the portion of a company that is typically sold in an IPO, Invitation Homes could be worth around $7.5 billion,” adds The Wall Street Journal.

“Invitation Homes filed with the Securities and Exchange Commission under the U.S. Jumpstart Our Business Startups Act,” says the Reuters report. “Companies with less than $1 billion in revenue can secretly file for an IPO, allowing them to quietly test investor appetite while keeping financials confidential.”

Today the single-family rental market represents 15,000,000 investor-owned properties and is projected to double in the next five years. Investors, both domestic and foreign, with this Invitation Homes offering will be able to continue engaging in this ever-developing space.

“The news of Blackstone filing for public offering is yet another indication of the growth of the single-family rental market and the potential investors will find in this space in 2017,” said Ed Delgado President and CEO of The Five Star Institute.

To fosters growth across the real estate industry, The Single-Family Rental Association (SFRA), a Five Star Institute member organization, focuses on responding to business opportunity and industry betterment in the evolving real estate landscape through leadership, networking, info, education, and training.

For more information on SFRA, click HERE.

Posted in News
Dec. 5, 2016

Does the Latest Jobs Data Pose Challenges to Homeowners?

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The positives in the BLS November 2016 Employment Situation released Friday prompted one analyst to declare that the economy is “running largely at full steam” and another called the economy “stable and strengthening. One analyst commented that the report was a “mixed bag” while another called it “unremarkable.” Still another said the economy “appears to be stable and strengthening.”

Job gains totaled 178,000 for November and the unemployment rate fell by 30 basis points down to 4.6 percent, its lowest level since August 2007. Still, the report had its low points—namely, a 3-cent decline in wage growth over-the-month (down to $25.89) after gaining 18 cents over the previous two months, and a labor force participation rate (62.7 percent) stagnating near a four-decade low.

Nearly all of them agreed, however, that the report did nothing to discourage a rate hike by the Fed later this month.

“November was a bit of a mixed bag as far as jobs were concerned. While the headline figure for job growth is a positive, both labor force participation and wage growth declined,” said Curt Long, Chief Economist with the National Association of Federal Credit Unions. “Still, the report provided no impediments for a rate hike from the Fed later this month, and a quarter-point increase is now a certainty.”

An increase in the federal funds target rate may not mean good news for the housing market, however. Mortgage rates have already spiked by 51 basis points since the presidential election and are at their highest level in 16 months.

“The good news: the economy appears to be stable and strengthening,” realtor.com Chief Economist Jonathan Smoke said. “The bad news: rising rates could pose a challenge to many homebuyers, especially first-time buyers who now represent more than half of the potential buying pool. The key question for the months ahead is whether the demand created by more jobs and wage growth will be enough to offset the affordability and qualification challenge posed by higher rates. Mortgage rates have already moved in that direction, surging higher than we have seen in two years.”

Fannie Mae Chief Economist Doug Duncan stated, “Today’s Labor Department employment report was unremarkable, suggesting a small Federal Reserve rate hike will occur—as the market expected—in December. Some attention will be paid to the drop in the unemployment rate to 4.6 percent, but that is driven by the combination of jobs added and a decline in workforce participation, the latter of which was disappointing. The income growth number dropped back, thus easing Fed concerns about compensation as a driver of inflation through tight labor markets. Professional services showed broad-based employment growth, and state government employment made a healthy contribution. Manufacturing employment, currently featured in many headlines, showed a fourth consecutive month of minor employment declines, but housing more than offset that with a third consecutive month of healthy job growth. Housing supply growth continues to grind upward adding to economic growth. In sum, there’s no reason to believe that the pace of future rate hikes will pick up based on this release.”

Zillow Chief Economist Svenja Gudell noted that “the report shows an economy running largely at full steam, with the unemployment rate—already low—falling to its lowest level since August 2007,” and that some of the largest job gains occurred among residential constructors and developers, which could bode well for housing.

“Residential construction employment rose 4.9 percent from a year ago, continuing recent strength, though some of the bump is likely attributable to re-building efforts in the Southeast after Hurricane Matthew,” Gudell said. “Over the past three months, the construction industry overall has added 59,000 jobs, largely in residential construction. Continued hiring in this sector could be a good sign for home buyers struggling with incredibly tight inventory, and a continued ramp up in home construction activity will only help alleviate the problem as we move past the holidays and into 2017.”

Click here to view the full November 2016 Employment Summary.

Posted in News
Dec. 5, 2016

New Fannie Mae CAS Deal in the Works

In an effort to reduce the risk of taxpayers and increase private capital in the mortgage market, Fannie Mae will settle a credit risk sharing transaction under its Connecticut Avenue Securities program on December 8. Designated CAS Series 2016-C07, the transaction is worth $701.7 million in notes.

Since the CAS program’s inception in 2013, Fannie Mae has closed 16 deals valued at $19.8 billion in notes. The credit risk on approximately $834 billion in single-family mortgages has been transferred from the GSE to private investors in that time period.

The December 8 transaction marks the seventh for the CAS program this year, and is comprised of more than 96,000 single-family mortgage loans, totaling an approximated $22.5 billion in outstanding, unpaid balances. Loan-to-value ratios on these loans, which were acquired January through April of this year, fall between 80 and 97 percent. For the most part, they are fixed-rate, fully amortized, 30-year loans.

“We are pleased to successfully bring our seventh and final transaction of the year to market,” said Laurel Davis, VP of Credit Risk Transfer, Fannie Mae. “Throughout 2016, we continued to drive innovation in credit risk management, increase transparency of our data and tools, and deliver consistent CAS offerings that were met with robust and growing investor demand. We look forward to continued CAS transactions in 2017 and we expect to be in the market within our next scheduled issuance window in January, subject to market conditions.”

The CAS program is not Fannie Mae’s only offering aimed at lowering taxpayer risk in the mortgage market. The GSE also offers a reinsurance program called Credit Insurance Risk Transfer, or CIRT.

For information on this CAS deal, as well as others in the works, Fannie Mae recently launched the new Data Dynamics tool, which allows users to analyze ongoing CAS transactions as well as historical loan data from the GSE. Interested parties can also view the schedule of upcoming 2017 CAS deals on the Fannie Mae website.

Posted in News
Dec. 2, 2016

FHA increases loan limits going into 2017

Home prices force loan limits higher

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The Federal Housing Administration announced plans on Thursday to increase loan limits in 2017, announcing a significant jump in counties set to increase compared to last year.

Due to home price increases, the FHA said that most areas in the country will see a slight increase in loan limits in 2017.

These loan limits are effective for case numbers assigned on or after Jan. 1, 2017, and will remain in effect through the end of the year.

The FHA recalculates its national loan limit on a yearly basis. The limits are based on a percentage calculation of the nation conforming loan limit.

Here are the upcoming changes. In high-cost areas, the FHA national loan limit “ceiling” will increase to $636,150 from $625,500.  FHA will also increase its “floor” to $275,665 from $271,050. 

Additionally, the maximum claim amount for FHA-insured Home Equity Conversion Mortgages (HECMs), or reverse mortgages, will increase to $636,150. 

The FHA noted that this amount is 150% of the national conforming limit of $424,100.

The maximum loan limits for forward mortgages increased in 2,948 counties, which is attributed to changes in housing prices and the resulting change to FHA’s “floor” and “ceiling” limits.

There were no areas with a decrease in the maximum loan limits for forward mortgages though they remain unchanged in 286 counties.

This is compared to last year, which increased the loan limits in 188 counties due to changes in housing prices.

As an added note, FHA’s minimum national loan limit “floor” is set at 65% of the national conforming loan limit of $424,100. The FHA said the floor applies to those areas where 115% of the median home price is less than 65% of the national conforming loan limit.

For any area that doesn’t fit this and the loan limit exceeds the “floor,” it’s considered a high cost area. The maximum FHA loan limit “ceiling” for high-cost areas is 150% of the national conforming limit. 

Check here for a complete list of FHA loan limits.

The news follows Federal Housing Finance Agency’s recent announcement that it plans to increase the maximum conforming loan limits for mortgages to be acquired by Fannie Mae and Freddie Mac in 2017.

Posted in News
Dec. 1, 2016

New Treasury Secretary Pick Outlines Plans for Dodd-Frank

Hedge fund manager and former Goldman Sachs partner Steven Mnuchin confirmed to CNBC on Wednesday morning that President-elect Donald Trump has nominated him for the position of Secretary of the U.S. Department of the Treasury.

Trump’s choice of Mnuchin, 53, who served as the President-elect’s national finance chairman during his campaign, is considered controversial because Mnuchin has never worked in government and his roots in Wall Street would seem to conflict with Trump’s anti-financial industry sentiment during his campaign.

One area where he does agree with Trump, however, is the need for reduced regulation. Mnuchin laid out a number of his initiatives on CNBC’s Squawk Box, should the U.S. Senate confirm him as the 77th Treasury Secretary. One of those is to roll back the Dodd-Frank Wall Street Reform and Consumer Protection Act, which passed in 2010 and is considered by the Obama Administration to be one of its greatest achievements. In various speeches and interviews throughout his campaign and since his election, Trump has vowed to overhaul the controversial financial reform law.

“We (Mnuchin and Trump’s choice for head of the U.S. Department of Commerce, Wilbur Ross, also announced on Wednesday) have been in the business of regional banking, and we understand what it is to make loans,” Mnuchin told CNBC. “That’s the engine of growth to small- and medium-sized businesses. The number one problem with Dodd-Frank is it’s way too complicated and it cuts back lending. So we want to strip back parts of Dodd-Frank that prevent banks from lending, and that’ll be the number one priority on the regulatory side.”

Mnuchin told CNBC that the U.S. economy can sustain a growth level of between 3 and 4 percent. In fact, he called sustained economic growth “our most important priority.”

“It is absolutely critical for the country,” Mnuchin said. “We absolutely can have sustained growth at that level. To get there, our number one priority is tax reform. This will be the largest tax change since Reagan. We’ve talked about this during the campaign. Wilbur and I have worked very closely together on the campaign. We’re going to cut corporate taxes, which will bring huge amounts of jobs back to the United States. We’re going to get to 15 percent, and we’re going to bring a lot of cash back into the U.S.”

In an interview with Fox Business after the announcement of his nomination, Mnuchin said he believes that the controversial government conservatorship of Fannie Mae and Freddie Mac should end and that the private market should have more of a share in the mortgage market.

“We will make sure that when they are restructured, they are absolutely safe and don’t get taken over again. But we’ve got to get them out of government control,” Mnuchin said, according to Bloomberg.

"A resolution of the conservatorship of Fannie and Freddie appears likely with Mnuchin as Treasury secretary," says Tim Rood, Chairman of The Collingwood Group“His experiences at Dune Capital, particularly the IndyMac/OneWest purchase and turn around, will most certainly influence his decision-making calculus.”

Five Star Institute President and CEO Ed Delgado said of the nomination of Mnuchin for Treasury Secretary: “I anticipate that with this new appointment, Treasury will continue to promote the department’s mission by encouraging a strong economy and creating economic growth and stability. As the economy further recovers from the Great Recession it is imperative that the housing industry and Treasury work in hand and hand to ensure housing and economic prosperity.”

Mnuchin left Goldman Sachs in 2002 after 17 years with the global investment banking firm to become vice chairman of hedge fund ESL, and he later became CEO of another hedge fund, SFM Capital Management. In 2009, Mnuchin and a group of investors purchased the failed Pasadena-based IndyMac bank from the FDIC for $1.5 billion after the mortgage meltdown and renamed the bank OneWest. In the years immediately following the crisis, OneWest's foreclosure practices generated considerable controversy, particularly in California.

Mnuchin’s hedge fund, Dune Capital Management, of which he currently serves as CEO, became involved in Hollywood motion pictures years ago, financing such box office hits as “X-Men” and “Avatar.”

“If he gets the post, Mnuchin will bring a lot of mortgage expertise to the Treasury Department,” says Rick Roque, President of Menlo. “He bought Indymac, renamed it OneWest and then sold that company to CIT Group in 2015. That kind of experience, in addition to his experience in sub-prime origination, retail origination, and correspondent channels will prove to be very valuable to the non-depository mortgage banking market.”

Click here to view the full transcript of Wednesday’s CNBC interview with Mnuchin and Ross.

Posted in News
Nov. 30, 2016

Housing Market Health Exemplified by Low Foreclosures and Delinquencies

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Mortgage servicing professionals are looking at the lowest foreclosure numbers in more than a decade. Foreclosure starts from October 2016 have fallen to their lowest level since January 2005, according to the month-end mortgage performance report curated by Black Knight Financial Services, Inc.

National mortgage numbers experienced a staggering change from September to October. According to Black Knight, there were approximately 56,500 foreclosure starts in October, the lowest one-month total in nearly 12 years. The low number of foreclosure starts represented an 8 percent decline from September and a 22 percent decline from the previous October.

Ben Graboske, EVP of Data & Analytics at Black Knight, attributes the low number of foreclosure starts to home price appreciation and employment gains.

“At a high level, the current low in foreclosure starts reflects the continuation of a trend of recovery from the great recession,” he said. “Both U.S. housing and the overall economy are very healthy. In particular, home price appreciation and employment strength are two of the largest contributors to this continued trend.”

A large number of missed mortgage payments had a significant impact on October’s performance numbers. The report discusses loan delinquency,  or the number of mortgage loans payments that are 30 or more days past due, but not in foreclosure. Statistics show that the U.S. loan delinquency rate is at 4.35 percent, which is a 1.84 percent month-over-month increase from September. The national delinquency rate is still down 9 percent from October 2015. The five states with the highest percentage of loans 90 or more days delinquent are Mississippi (3.43), Louisiana (3.05), Alabama (2.37), Arkansas (2.06), and Tennessee (1.95).

Graboske states that rising ARM lending rates, increasing interest rates, and the job market will play pivotal roles in the mortgage outlook for 2017.

“Increasing interest rates tend to reduce the refinance share of the market, specifically in higher credit segments, which typically outperform their purchase mortgage counterparts,” Graboske said. “We also typically see a rise in ARM lending as rates rise, which could in turn have a dampening effect on mortgage performance. That being said, we would still expect the overall trend of declining delinquencies and reduction in foreclosure inventory to continue throughout 2017 barring some unforeseen macroeconomic impacts. Significant job losses could slow or reverse this healthy trend, and such a scenario would be further exacerbated should substantial home price depreciation set in. At this point, neither of those factors seem likely to occur in 2017.”

To view the full report, click here.

Posted in News