Economic Commentary Consumer & Realtor Corner This news is designed to assist you by providing information that will be helpful to your existing and previous clients as well as other industry related contacts. Feel free to forward this to your database, post on blogs, websites and more. Sense of Urgency For VA Purchases The Federal Housing Finance Agency has announced the maximum conforming loan limits for home loans to be acquired by Fannie Mae and Freddie Mac in 2015. For much of the country, the conforming loan limit for a one-unit property will remain at $417,000 for 2015 with the limit at $625,500 in the highest cost areas. In 46 counties the limit will rise because those counties experienced increases in local home values. According to the FHFA, in the Boston-area, the conforming loan limit will rise from $470,350 to $517,500. In Ventura County, California, the conforming loan limit will rise from $598,000 to $603,750. In Napa County, California, the conforming loan limit will rise from $592,250 to $615,250. In Boulder County, Colorado, the conforming loan limit will rise from $417,000 to $456,550. In Baltimore, Maryland, the limit will rise to $517,500 from $494,500. Both FHA and VA also announced their loan limits for 2015 and these agencies generally follow the conforming limits. However, under the Veterans Benefit Improvement Act of 2008, VA had allowed higher loan limits in some high cost areas. Because the Act expired in 2014, these limits must now be the same as conforming limits as well, unless Congress extends the law. VA will honor the higher loan limit after January 1, 2015 only if the sales contract and loan application are completely ratified before that date. Meanwhile, Congress has acted on the expired Mortgage Debt Forgiveness Act retroactively for 2014, extending the tax exemption for short sales, as well as the deduction for mortgage insurance. Sources: FHFA, FHA and VA Note: If you are thinking about using your VA eligibility to purchase a home in a high cost area, there is still time to get in under the wire before the end of the year. Oil Prices and Interest Rates It was a very interesting time for a meeting of the Federal Reserve Boards Open Market Committee. As we discussed the past few weeks, the increased pace of job growth will cause the economy to expand more quickly and this will make it easier for the Fed to make a decision to raise rates more quickly. On the other hand, there are other factors in play. For example, many world economies are slowing significantly. Our economy is intertwined with the global economy and the Fed must worry whether this slowdown might affect our strengthening recovery. Oil prices represent another wild card. The magnitude of the drop in the price of oil has been absolutely stunning. The move from $110 per barrel in August of 2013 to less than $60 per barrel by the middle of December represents a decrease of around 50% in a little over a year. Lower oil prices are also good for the economy because of the potential for reduced consumer inflation. This reduced inflationary pressure enables the Fed to be less inclined to raise interest rates. Not all of the effects of lower priced oil are positive. The energy sector is a significant industry and if the price of oil stays too low, we could lose jobs within this sector. For example, the jobs created in the oil shale industry may be lost if it is not cost effective to extract oil from shale. And going back to the global focus, major nations such as Russia depend upon revenues from oil and their situation is potentially much graver than ours. Of course, the oil factor also influences the thinking of the Fed with regard to rates and when the announcement was made on Wednesday, there was a sense that the Fed wanted to calm the markets somewhat with the use of words such as patience. If that means continued low rates with low oil prices, we say Happy Holiday! The Markets Fixed rates on home loans fell to their lowest levels of the year in the past week. Freddie Mac announced that for the week ending December 18, 30-year fixed rates fell to 3.80% from 3.93% the week before. The average for 15-year loans decreased to 3.09%. Adjustables were also lower, with the average for one-year adjustables decreasing to 2.38% and five-year adjustables falling to 2.95%. A year ago, 30-year fixed rates were at 4.47%, which is over 0.5% higher than todays levels. Attributed to Frank Nothaft, vice president and chief economist, Freddie Mac -- The 30-year fixed rates on home loans dropped to its lowest point of 2014 this week. Rates fell along with 10-year Treasury yields, which closed at their lowest level since May 2013. November housing starts came in at a seasonally adjusted annual rate of 1.028 million starts, down 1.6 percent from an upwardly-revised October value. Housing starts for the calendar year will likely come in around 1.0 million, above the 2013 pace, but lower than forecasters had expected at the start of 2014. Consumer prices declined more than expected in November, with the Consumer Price Index contracting 0.3 percent. Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes. Real Estate News Breaking News. In a vote on December 16, the Senate passed an extension of the Mortgage Debt Forgiveness Act by a vote of 76-16. The extension applies to any short sale conducted in 2014. The Mortgage Debt Forgiveness Act also passed by a wide margin in the House of Representatives two weeks earlier. If Congress had failed to act on the renewal of the tax breaks, any forgiveness on a home loan achieved in a short sale would have been counted as income for homeowners whom banks allowed to sell their homes for less than the amount of their mortgage. The average short sale has a forgiveness of about $75,000. And according to a recent estimate from RealtyTrac, there have been more than 170,000 short sales in the first three quarters of 2014, with a total debt forgiveness of approximately $8.1 billion. The National Association of Realtors celebrated the vote. “NAR applauds Congressional leaders in both chambers for their effort to pass this legislation before adjournment,” NAR President Chris Polychron said. “Realtors strongly supported the bipartisan Mortgage Forgiveness Tax Relief Act, which was included in the package to prevent underwater borrowers from paying taxes on any mortgage debt forgiven or cancelled by a lender in a workout or after their home was sold for less money than was owed,” Polychron added. The Mortgage Debt Forgiveness Act now heads to President Obama, who is expected to sign the bill into law. Source: HousingWire Department of Veterans Affairs loan limits in excess of $1 million for some high-cost areas could become a thing of the past. The higher limits were temporarily enacted as part of Public Law 110-389, the Veterans Benefits Improvement Act of 2008. For calendar-year 2014, single-family loan limits in the highest-cost counties of the country were as high as $1,094,625. But the law is set to expire at the end of this month, according to Circular 26-14-39 issued by the agency. Unless Congress extends the act, then the higher limits will expire and VA loan limits will be indexed to the conforming loan limits established by the Federal Housing Finance Agency. Last month, FHFA released the 2015 conforming loan limits -- which remained at $417,000 and went as high as $625,500 in high-cost areas. County loan limits dont apply to Interest Rate Reduction Refinancing Loans. VA will guarantee 25 percent of the principal balance on an IRRRL, regardless of whether the loan exceeds the limit for the particular county, the bulletin stated. Lenders can make loans in excess of the VA limit. However, the borrower-veteran will be required to make a down payment equal to 25 percent of the amount above VAs limit. In counties where the limit is decreasing for 2015, VA will honor the previous higher limit on a purchase loan as long as the sales contract is ratified by all parties and the Uniform Residential Loan Application is signed all parties prior to Jan. 1, 2015. Source: Mortgage Daily Click Here for information on VA loan limits For most of this year, the economic news relating to Millennials has been discouraging, ranging from an absurdly high student loan debt burden, to a painfully low prospect of decent-paying employment opportunities, to a conspicuous lack of aggressive participation in the housing market. However, Zillow is boldly predicting a significant turnaround for the 18-to-35-year-old demographic, with a statement that Millennials will overtake Generation X (the 35-to-50-year-olds) as the largest group of homebuyers in 2015. “Roughly 42 percent of Millennials say they want to buy a home in the next one to five years, compared to just 31 percent of Generation X, and by the end of 2015, Millennials will become the largest home-buying age group,” said Dr. Stan Humphries, Zillow chief economist. “The lack of home-buying activity from Millennials thus far is decidedly not because this generation isnt interested in homeownership, but instead because younger Americans have been delaying getting married and having children, two key drivers in the decision to buy that first home. As this generation matures, they will become a home-buying force to be reckoned with.” Zillow’s Dr. Humphries predicted that rising rents in 2015 will also play a role in reconfiguring the housing market’s demographic blocs. Home value appreciation will continue to cool down, from roughly six percent now to around 2.5 percent by the end of 2015,” he said. “But rents will see no such slowdown, and will continue to grow around 3.5 percent annually throughout 2015. As renters costs keep going up, I expect the allure of fixed home loan payments and a more stable housing market will entice many more otherwise content renters into the housing market.” Source: National Mortgage Professional Daily & Raoul Badde
Posted on: Tue, 23 Dec 2014 16:19:22 +0000