Ellie Mae Says Interest Rates Rose for First Time in 2019

BY  ON DECEMBER 24, 2019

According to EllieMae’s latest Origination Insight Report, interest rates rose for the first time in 2019, increasing to 3.97%, up from 3.94% in October.  In addition, the percentage of adjustable rate mortgages also increased for the first time in 2019, rising from 5.0% in October to 5.3%  in November. The percentage of refinances dropped back below 50%, falling from 51% in October to 49% in November.

“Interest rates rose for the first time in 2019, and as expected we are seeing the percentage of adjustable rate mortgages rise and the percentage of refinances taper off,” said Jonathan Corr, President and CEO of Ellie Mae. “Simultaneously, closing rates have reached the highest point in 2019 at 78.6 percent…”

Click here to read the full release at EllieMae.com.

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Relationship Between Public School Enrollment and Housing Prices

BY  ON DECEMBER 24, 2019

One of the key drivers of a home’s sale price is the quality of the local school system.  Interestingly, recent analysis from the National Association of Realtors illustrates the positive relationship between public school enrollment and rising house prices.  They say that over the last 7 years, counties with increased public school enrollment  experienced higher price appreciation, than those that did not.  The graph below shows the positive relationship between public school enrollment and housing prices.  Indeed…

“Across the country, hallways and classrooms are full of activity. More than three-fourths of the school-aged population, 48.2 million students, were enrolled in a public elementary and secondary school in 2018.”

Click on the graph to make it interactive

Click here to read the full report at the National Association of Realtors.

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Existing-Home Sales Down 1.7% in November

BY  ON DECEMBER 23, 2019

The National Association of Realtors is reporting that existing home sales were down 1.7% in November, however both the Northeast and Midwest regions both reported growth.  The median existing-home price for all housing types was $271,300, up 6.2% from November, 2018 – marking 93 straight months of year-over-year gains.  Total inventory at the end of November was 1.64 million units, down approximately 7.3% from October and down 5.7% from one year ago.  Total unsold inventory was at a 3.7-month supply at the current sales pace. Properties remained on the market for around 38 days in November.

Lawrence Yun, NAR’s chief economist, said the decline in sales for November is not a cause for worry. “Sales will be choppy when inventory levels are low, but the economy is otherwise performing very well with more than 2 million job gains in the past year,” said Yun.

Click here to read the full release at the National Association of Realtors.

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SECURE Act Signed into Law

BY  ON DECEMBER 23, 2019

Just before slipping (slithering?) out of town for their annual Christmas break, Congress passed (and subsequently signed by the President) the $1.4 trillion Further Consolidated Appropriations Act that will fund the federal government for the rest of FY 2020.  However, sneakily tucked into that measure was something that will cause investors to take notice:  the SECURE Act (Setting Every Community Up for Retirement Enhancement).   The bill had already passed the House back in April, 2019 but had been languishing in the Senate until it was amended into this fast-tracked funding bill. National REIA partner Equity Trust pointed out that “the bill will affect IRA Required Minimum Distributions and inherited IRAs, among other aspects.”

Indeed…Yahoo Finance has pointed out some key provisions:

  • Your RMDs Will Start age Age 72, not 70 ½
  • You Can Contribute to Your Traditional IRA After Age 70 ½
  • You’ll Have to Pay Taxes on Inherited IRAs Sooner (eliminates stretch IRAs)
  • You May See a New Annuity Option in Your 401(k)

Click here to read the full story on Yahoo Finance.

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Housing Starts & Building Permits Up in November

BY  ON DECEMBER 23, 2019

The U.S. government is reporting that privately‐owned housing starts in November were at a seasonally adjusted annual rate of 1,365,000.  This figure is 3.2% above October’s revised estimate of and is 13.6% higher than November.  Single‐family housing starts in November were at a rate of 938k, which is 2.4% higher than October’s revised figure.  November’s rate for units in buildings with five units or more was 404k.  Privately‐owned housing units authorized by building permits in November were at a seasonally adjusted annual rate of 1,482,000.  This figure is 1.4% higher than October’s revised rate and is 11.1% higher than November, 2018.  Single‐family authorizations in November were at a rate of 918k, which is 0.8% higher than October’s revised number. Authorizations of units in buildings with five units or more were at a rate of 524k in November.

Click here to read the full report at the U.S. Census Bureau.

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ABODO Says One-Bedroom Rents Rise at Year-End

BY  ON DECEMBER 4, 2019

National apartment listing site ABODO recently reported that the median nationwide rent price for one-bedroom units in November was $1,078 and $1,343 for two-bedrooms.   ABODO uses over 1 million listings across the United States to calculate the median 1-bedroom rent price by city, state, and nation and then track the month-over-month percentage change. To avoid small sample sizes, they restrict their analysis to cities meeting minimum population and property count thresholds. Be sure to check out their extensive city list.

Click here to read the full report at ABODO.com.

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Zumper's National Rent Report for December '19

BY  ON DECEMBER 3, 2019

Rental information site Zumper recently released their National Rent Report for December, 2019 showing that the median national rent for 1-bedroom apartment was $1,230 (down 0.9%) and the median two-bedroom rent was $1,465 (down 1%).  Year to date, one bedroom prices are up 1.8% and two bedroom prices are up 1.7%.  Zumper analyzes rental data from over 1 million active listings across the United States. Data is aggregated on a monthly basis to calculate median asking rents for the top 100 metro areas by population, providing a comprehensive view of the current state of the market. The report is based on all data available in the month prior to publication…..be sure to check out their entire list of 100 cities.

Click on the graphic to make it interactive

Click here to read the full report at Zumper.com.

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A Buyer's Market is Coming- What Do we Do!!?

BY  ON DECEMBER 12, 2019

The front page of the Mecklenburg Times recently carried the headline “U.S. will become a buyers market in 2020, according to experts.”  I knew it was coming, real estate is cyclical.  The “experts” guess as to when is undoubtedly better than mine, I just know that it’s coming.  We need only look to the past to see that Buyer’s Markets follow Seller’s Markets as inevitably as night follows day.

However,  history is no simple mirror with which to gaze upon past events, but it is an instructor of great sagacity as regards what the future may hold.  From a Buyer’s market we have come, and to a Buyer’s market we shall return.  Is that the time to get out of real estate investing?

For a lot of people the answer is yes, but it needn’t be so.  As Abraham Maslow said, “when the only tool you have is a hammer, every problem looks like a nail.”  When the “bottom falls out”, I would not recommend strategies that I see in abundance today, such as overpaying, overimproving, and riding the wave of appreciation to profit.  Remember the game “hot potato” some of us played as children, or even “musical chairs”?  When the music stops, you do not want to be the last one standing.

But history has taught us a myriad of ways to profit from a market in which housing prices are flat or even moving downward, for those of us savvy enough to listen.  One of the largest factors that will turn a strong real estate market, where houses “fly off the shelf”, to a weak one, where houses literally have birthdays on the market, is the cost and availability of mortgage funds.  The vast majority of homeowners do not buy houses with cash, they shop for a payment they can afford.  One of the government’s favorite tools to curb inflation (which we have seen quite a bit of in recent years) is to raise interest rates.  Thus, Harry Homebuyer’s income will dictate that he buy a less expensive house, exerting a downward pressure on housing prices.  When mortgage criteria (credit score, etc . . . ) become more stringent, less people can qualify.  This is a massive opportunity for Investors.  If interest rates are at 12%, why not take over a 5% loan “subject-to”, and sell it with owner financing for 10%?  You’ve created a “spread” with the interest rates, and are normally able to command a larger down payment because you can offer better terms than a bank can, and to many people to whom a bank would offer nothing.  Where there’s a will, there’s a way!

 

Lou Gimbutis, owner of Property Solutions, LLC, www.soldcarolina.com, has been buying and selling houses full-time since 2004, first in Michigan, then after moving to NC in 2007.  He serves as Director of Education for the Metrolina Real Estate Investor’s Association.

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New Homes Built w/Wells & Septic Systems

BY  ON DECEMBER 10, 2019

While not exactly a sexy subject, this is interesting from a data & public health perspective.  According to research from the NAHB’s Economics analysis of the Survey of Construction (SOC), about 9% of new single-family homes started in 2018 across America were served by individual wells and more than 16% have private septic systems.  The SOC classifies community or shared water supply/wells as public water rather than individual wells.

Click here to read the full report at the NAHB’s Eye on Housing.

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Rent Control's Potential and Devastating Effects

BY  ON DECEMBER 9, 2019

We’ve covered this issue quite a bit over the past couple years.  Now comes a new report from the National Apartment Association (NAA) that illustrates rent control’s potentially devastating effects on four major U.S. cities (Chicago, Denver, Portland Oregon, and Seattle).  The NAA’s analysis hows  these policies decrease housing supply, harm the condition of existing housing stock and lower property values (lowering tax revenues), limiting job growth and having a negative impact on local economies.  Indeed…

“Each of these effects represent inefficient outcomes relative to allowing the market price to adjust according to supply and demand. By not allowing the market for dwellings to function properly, rent control changes the allocation of housing investment across space. Under normal conditions, rising rent levels would be met with increased building in an area, curbing long-term growth in rents. However, rent control blunts the price mechanism, causing a misallocation of housing investment both within and across metropolitan areas.”

Click here to read the full report at the National Apartments Association.

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