What’s In and Out in 2024 Home Design

What’s In and Out in 2024 Home Design

Gen Zers Outpace Others in Homeownership

Gen Zers Outpace Others in Homeownership

Making an Offer: 5 Mistakes to Avoid

DAILY REAL ESTATE NEWS | WEDNESDAY, MAY 10, 2017

In competitive housing markets across the country, making an offer that sticks has become increasingly difficult. Ensure your client doesn’t make the process even tougher by succumbing to one of these common mistakes.

Delaying

“Time kills deals,” says Andrew Sandholm of BOND New York Properties in New York. “Dragging your feet means you could wind up paying more in a bidding war situation or missing out on the property altogether.” Buyers need to be ready with their paperwork, such as bank statements, a preapproval letter, and documents supporting proof of funds, from the day they begin house-hunting mode. That way they can pounce quickly with an offer when they do find a home they like.

Making an offer for their preapproved amount

Smart buyers are getting preapproved to show a seller they’re financially able to purchase a home. However, Chuck Silverston, principal at Unlimited Sotheby’s International Realty in Brookline, Mass., warns buyers against using that document to come up with an offer amount.

“Many buyers come in with a preapproval for the exact offer price, but when you’re competing against other offers, including cash offers, you want to show financial strength,” Silverston says. “An exact preapproval could make a listing agent nervous because not only does the buyer not have any wiggle room to negotiate, but they might no longer qualify if interest rates rise.”

Submitting a lowball offer

Lowballing a seller often backfires, particularly in a seller’s market. “A lowball offer that isn't backed up with math or comparable sales data is disrespectful and could turn off the seller and possibly mean you will miss out on the property completely,” Sandholm says.

Waiving inspection contingencies

“I don't care whether it’s new construction or even your mom’s house you’re buying from her – get it inspected,” urges Joshua Jarvis of Jarvis Team Realty in Duluth, Ga. Further, if you waive the inspection contingency in your offer, you may lose the earnest money if you later back out of the deal.

Not presenting yourself well enough

In a seller’s market, buyers need to take steps to make sure they look good in the eyes of the seller. “In today’s highly competitive environment, the listing agent is trying to determine which buyer will be the easiest to deal with,” Silverston says. Buyers may want to avoid pointing out every defect, making nitpicky queries, or questioning the seller’s tastes.

“Basically buyers who act less than enthusiastic will see themselves at a competitive disadvantage when sellers are comparing multiple offers,” he says.

Source: “In It to Win It: Land Your Dream Home By Avoiding These 7 Mistakes on Your Offer,” realtor.com® (May 10, 2017)

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5 Things Renters Should Know About Owning

DAILY REAL ESTATE NEWS | THURSDAY, AUGUST 11, 2016

For renters who aspire to be home owners, transitioning from an apartment to a house requires a shift in their thinking that they may not be prepared to make. The financial changes that come with owning, the need to consider planting longer-term roots in a neighborhood, and new neighborhood rules are things renters may not be thinking about enough.

Read more: Where Buying Beats Out Renting the Most

As their real estate agent, it’s important for you to be there for your clients when they’re embarking on a life-changing event such as buying a home.

Moving can already be one of the most stressful times in a person’s life, but it may be doubly so for a new home owner. In order to be their most reliable resource, using your knowledge and experience to provide them with guidance, share these helpful nuggets of information with your clients so their transition from renter to owner can be as smooth as possible.

They need to understand how their financial investment is changing. Renters may see an increase in their monthly rent every lease term, but they don’t see exactly where it goes — toward property taxes and insurance, even “luxuries” such as trash pickup. As home owners, they don’t have a landlord who handles all those details, so they need to be ready to juggle the financial responsibilities of home ownership. Have an open conversation with your clients about these changes and the importance of budgeting to make sure they make smart financial decisions during this process.

They need to be happy with their location for the long-term. As a renter, you can bounce around from home to home every year if you want. But when you own a home, you have to stay put — unless you plan on renting it out, which most home owners don’t. Impress upon your client that location is going to play a much more significant role in their future, so they should think about evaluating school districts, access to amenities, and commute time now as they search for their next home.

They may need to abide by new rules. Renters don’t think about possible homeowner association rules they may be governed by, such as trash pickup rules or any curfews or rules pertaining to animals. Make sure to get all the information on neighborhood rules and associations to help your client understand what their new obligations will be.

They’ll need to get into the mindset of an owner. Life as your client knows it is about to change. Once your client purchases a new home, they will no longer have a landlord to tend to their many needs, including lawn care and plumbing. The best way you can help them as their real estate agent is to provide them with contact information for local industry experts. They will eventually need certified specialists ranging from HVAC companies to carpenters to electricians. Let them know they don’t have to do everything themselves.

They should know their neighbors can affect their value. Renters don’t care who their neighbors are as long as they’re quiet (enough). But your client is now going to want to know whether their new neighbors are renters or home owners. This knowledge can help your clients gauge current and future home value in the neighborhood. If the neighborhood consists mostly of rental properties, it is likely a home owner will lose money on their house in the future. Renters do not always feel responsible for maintaining their properties the way home owners do. Property value comes down to curb appeal. Less-appealing neighborhoods often have more-appealing prices, which is not always good for buyers and home owners.

Source: Rob Rimeris is owner of EverSafe Moving Co. in Philadelphia. EverSafe is a five-star, full-service company that offers affordable moving and storage services.

A tough yet honest conversation with a seller

I recently went on a listing appointment where I needed to have a tough conversation with the prospective Seller's.  Their home is fairly new and is in a lovely sub-division.  The area has continued to show positive appreciation and substantial growth.

 

As I toured their absolutely lovely home and was given a spreadsheet of the many, many upgrades to the home, I knew that a tough conversation was looming.  Although the home was stunning, the amount of upgrades to the home were way more than they could ever hope to recover right now based on the market report for their neighborhood.  It is one of those sick feelings that you dread having.

 

The price per square foot Sold average in this particular neighborhood is about $100 s.f.  With their upgrade list which exceeded the actual purchase price of the home, they were hoping to see it listed at $135 s.f.  It pained me to see the love and care that they had put into this home but at this time the market could not bear at that price per s.f.

 

I explained to them that even if we listed the home at their desired price and received an offer, if it didn't appraise then they would be re-visiting the price at some point.  Even if a cash offer came in, most buyers are savvy and would still not desire to pay way over market value in any neighborhood.

 

I encouraged them to go ahead and have an appraisal done prior to listing the home.  Hopefully they will see the writing on the wall from a third party.

 

The lessons here are:

• Unless you plan to stay in your home forever, consider your upgrades before you do them as you may not get back what you put into them if you decide to sell.
• Know what the current market value is for your home.  If you put in upgrades that you feel bump your value up way over what the neighborhood can bear, understand that you most likely will not see this investment returned.
• Realize that situations do change in our lives and what we planned on doing may very well have to change quickly.  

Upgrades are a good thing but only if they are consistent with keeping your home valued with the current market rate.  Have a licensed agent who knows your area consult with you prior to putting in some hefty upgrades.  You may decide to re-think some of them.

Having a tough conversation with a Seller is necessary when you are being honest, know the market and don't want to leave them with false hope.  The conversation is necessary and hopefully the homeowners will take the time to get an appraisal and then to re-think if they even desire to sell.  

A Case of Cognitive Dissonance?

Keeping you updated on the market for the week of September 22, 2014

MARKET RECAP A Case of Cognitive Dissonance? Home builders are feeling as perky as they have in nearly a decade. Indeed, the National Home Builders Sentiment Index posted at 59 this month. That's a number last seen in 2005 when the housing market was in full-bore mode. Of course, real estate markets are local markets, and some home builders are feeling more perky than others. Home builders in the South, Mid-West, and West are more optimistic than the national 59 reading would lead you to believe, while builders in the Northeast are feeling less optimistic, if not dour. (The Northeast reading posted at 44.) Home builders when aggregated are obviously anticipating a brighter future, even if the immediate past offers scant reason to break out the bubbly. Housing starts drooped 14.4% in August to an annualized rate of 956, 000 units. The consensus estimate was for 1.03 million units. The mitigating takeaway was that most of the droop was seen in the volatile multifamily component, which fell 31.7% month over month. The more important single-family component was down a more modest 2.4%, which follows an 11.1% surge in July. When we step back to view the big picture, we see housing starts are up 8% year over year. And if we step back even further and remove volatility by looking at the five-month moving average, we see a strong uptrend and significant improvement over the past five years. The long-term trend in housing starts is good news for the economy in full. So many ancillary businesses are dependent on starts – home improvement companies, finance providers, commodity producers, retail merchants, and on and on. The uptrend in starts is nothing but a positive that is worth highlighting because of its importance to overall economic health. Now, we'd like to see an uptrend established in mortgage purchase activity. CoreLogic reports that cash sales have dropped to 33% of total home sales, down from 36.3% a year ago. To be sure, a large percentage of the drop is the result of fewer REO sales and short sales – many of which were cash transactions. Prior to the bursting of the housing bubble, 25% of sales were cash transactions. So, we expect a further reduction in cash transactions in the future. Therefore, to keep sales volume growing, mortgage financing will need to play a bigger role. On that front, the Mortgage Bankers Association purchase index rose 5% last week. Could this be the beginning of a positive financing trend? We hope so, but we're not holding our breath. We've been disappointed too many times in the past to do that.

 

Economic Indicator	Release Date and Time	Consensus Estimate	Analysis
Exiting Home Sales (August)	Mon., Sept. 22, 10:00 am, ET	5.22 Million (Annualized)	Important. Given recent positive pricing and supply trends, an upward trend in sales appears sustainable.
Mortgage Applications	Wed., Sept. 24, 7:00 am, ET	None	Important. Purchase activity is showing some life, but the trend toward more activity remains elusive.
New Home Sales (August)	Wed., Sept. 24, 10:00 am, ET	435,000 (Annualized)	Important. Rising home builder optimism points to rising new-home sales.
Gross Domestic Product (2nd quarter 2014 revised)	Fri., Sept. 26, 8:30 am, ET	4.7% (Annualized Growth)	Important. GDP growth is expected to be revised higher, which points to stronger economic growth through 2014.

 

The Fed Speaks, Everyone Listens On Wednesday, the Federal Reserve released the long-awaited minutes of the latest meeting of the Fed governors. The minutes revealed what we expected they would reveal: The Fed will wrap up quantitative easing next month, so it will cease new purchases of Treasury notes and bonds and mortgage-backed securities (MBS). (The Fed will maintain its existing policy of reinvesting principal payments in MBS and rolling over existing Treasury debt.) The minutes also revealed that the Fed intends to wait "a considerable time" before raising the influential federal funds rate (the rate banks lend to each other). The idea is that the Fed wants interest rates to remain low until “structural” issues related to the job market are rectified. In other words, the Fed would like to see more job growth in better-paying jobs before raising the federal funds rate. If maintaining the low rates that materialized in the past month is what the Fed wanted, that's not what it got. After we learned the federal funds rates (which is at zero) is unlikely to rise until next year, the rate on the influential 10-year Treasury note rose nearly 10 basis points. Mortgage rates, unsurprisingly, also moved higher. In short, rates on the longer end of the yield curve rose. We doubt this is what the Fed was anticipating. We're not predicting a steady rise in long-term interest rates – including mortgage rates. But it's worth keeping in mind that even if the Fed wants something, there is no guarantee it will get it. Markets are powerful and unpredictable forces. Mortgage rates might hang low for another six months, or even another year, but there are no guarantees.

Article Courtesy of Patti Wilson, American Momentum Bank

Keeping you updated on the market for the week of June 16, 2014

MARKET RECAP Finally, The Trend We've Been Waiting For We've been keeping a close on employment numbers since the 2009 recession. Many times in these pages we've noted that as job growth goes, so goes the economy... and, of course, so goes housing. Job growth is finally going the way we want. The economy added 217,000 new jobs in May, with the private sector by far leading the increase, adding 216,000 new jobs. The gains in May come on top the 282,000 new jobs in April and the 203,000 in March. This is good news, because we haven't seen monthly job growth continually exceed 200,000 each month until recently. To sustain a recovery, the economy needs to add 200,000-or-more jobs each month. With the recent gains, total employment is now 98,000 above the pre-recession peak and at an all-time high. (Though it's worth noting that the population continues to grow as well: 10 years ago there 290 million of us; today there are 317 million). Interestedly, another month of strong job growth hasn't had much impact on mortgage rates. Rates moved up this past week, but only slightly. Looking at the national averages, Bankrate.com's survey shows the 30-year fixed-rate mortgage averaged 4.34%, which is two basis points higher than the previous week. Freddie Mac's survey shows the 30-year loan averaged 4.20%, a six-basis-point increase. Rates are still very reasonable. More borrowers took advantage of low mortgages last week. The Mortgage Bankers Association (MBA) reports that application activity for the week ending June 6 was up strongly. Week over week, refinances were up 11%, while purchase applications were up 9%. This is one of the strongest weekly gains in months. Our enthusiasm is somewhat tempered, though. Too many times we've seen purchase applications string together two or three weeks of gains only to reverse course. But with institutional buyers (the cash buyers) pulling back, we are cautiously optimistic the individual buyer – using mortgage financing – will pick up the slack. Recent job growth is behind our optimism. Given recent job data, we wouldn't be surprised to see mortgage-purchase activity trend higher. More people working is obviously a plus. At the same time, mortgage credit continues to avail itself to more people. The MBA, which produces the Mortgage Credit Availability Index (MCAI), reports that the MCAI rose in May to 115.1, from 113.8 in April. So, yes, underwriting standards are easing, and actually have been easing over the past two years when you consider the MCAI base was 100 when it was introduced in March 2012. This isn't a surprised. As the economy improves (which it has), lenders become more willing to extend loans, and to extend loans to lower-rated borrowers. This is another positive trend we've seen developing in the past two years, as evinced by the MCAI. The trends we see in job growth and mortgage lending bode well for housing, which is why we remain bullish on housing.

 

Economic Indicator	Release Date and Time	Consensus Estimate	Analysis
Home Builder Index (June)	Mon., June 16, 10:00 am, ET	47 Index	Important. Sentiment has been stuck in neutral in recent months. But given recent strong economic data, we could see an upside surprise.
Consumer Price Index (May)	Tues., June 17, 8:30 am, ET	All Goods: 0.2% (Increase) Core: 0.2% (Increase)	Moderately Important. Low consumer-price inflation points to low future interest rates.
Housing Starts (May)	Tues., June 17, 8:30 am, ET	1.03 Million (Annualized Rate)	Important. Starts are now averaging above one million annually, but they are still well below the 1.5-million historical average.
Mortgage Applications	Wed., June 18, 7:00 am, ET	None	Important. Another strong rise in purchase activity could raise the outlook on housing.

 

A Lot of Room for Improvement, and That's Good News Investment is just as important as consumption in driving growth. Indeed, investment sets the stage for consumption. You invest to produce, and what is produced is consumed. This brings us to residential real estate investment, which has been on the upswing since mid-2010, but it still has a long way to go. In 1999, the housing sector was investing over $600 billion annually. Today, that figure is less than $500 billion. This suggests that there is plenty of room for more growth and overall housing improvement. The peak that was achieved in late 2005 has been offset by a decade of low investment. We think housing is well-positioned to increase investment, which will increase housing supply, housing consumption, and overall housing activity. We say that because we think demand will pick up in the second half of 2014 and continue into 2015. As we note, job growth is on the upswing, which points to an upswing in the overall economy. In other words, the positive trend in the labor market, and even that in the mortgage market, will eventually set housing on its own positive trend.

Is it really true what they say about home prices??? June 2, 2014

MARKET RECAP Is it Really True What They Say About Home Prices? It might be true; then again, it might not, at least as they pertain to us. First, the big national numbers: Home-price appreciation appears to be gaining pace, according to the S&P/Case-Shiller Home Price Index . Case-Shiller's latest price report, for March, shows home prices were up a stout 1.2% month over month in its 20-city index. This actually reverses a trend of slowing price appreciation that began in late 2013. Is it possible that home prices are set to resume the rate of increase we saw early last year? We don't think so. We need to keep in mind that all real estate markets are local. A person who owns a share of Microsoft stock and lives in San Diego owns the exact same asset as the Microsoft investor who lives in San Antonio. On the other hand, if they both own a home, they most assuredly don't own the same asset. Housing is heterogeneous and local. The point to emphasize is that the data can be skewed by outliers: A big gain in one city – in this case, San Francisco, which posted an improbable 2.4% monthly gain – can skew the national average. (Think of 10 people in a room, and two of them are Bill Gates and Warren Buffett. The average wealth in the room is $7 billion per person. Gates and Buffett step out. Now the average is drastically less.) We still expect price appreciation to slow in more local markets; especially in those markets that have strung together a few years of double-digit year-over-over gains. Such price appreciation is simply unsustainable. New-home prices are proof alone that you can't keep galloping along at a double-digit clip in perpetuity. In April, the median price of a new home dropped 2.1% to $275,800. Year over year, the median price is at a minus 1.3%. This isn't necessarily bad news: Lower prices keep sales activity brisk. New-home sales at the national level are running at 433,000 units on an annualized rate. This is roughly 100,000 units higher compared to the year-ago rate. Lower prices lead to more sales – a universal economic law applicable to every business. As we note, housing markets are local markets. Freddie Mac took a look at 50 metropolitan markets, and its findings were surprisingly weak. Freddie Mac's data – in its new Multi-Indicator Market Index – show that only two of five local markets are improving. This time last year more than 90% of these markets were improving. We are somewhat ambivalent to what this actually means. We suspect we're looking at a bifurcated market: Where price gains have been strong, they'll remain strong; where they've been weak, they'll remain weak. San Francisco will continue to price people out of the market; Atlanta will become more affordable. Combining the trends will produce data meaningless to both markets. Bottom line: We like housing, but we like it more in some markets compared to others.

 

Economic Indicator	Release Date and Time	Consensus Estimate	Analysis
Construction Spending (April)	Mon., June 2, 10:00 am, ET	0.9% (Increase)	Important. New-home construction continues to gain momentum and drive overall construction spending.
Mortgage Applications	Wed., June 4, 7:00 am, ET	None	Important. Both purchase and refinance activity should pick up on new low rates.
Employment Situation (May)	Fri., June 6, 8:30 am, ET	Unemployment Rate: 6.4% Payroll: 224,000 (Increase)	Very Important. Another upside surprise in payrolls will lift interest rates higher.
Consumer Credit (April)	Fri, June 6, 3:00 pm, ET	$15 Billion (Increase)	Important. Rising student-loan borrowing is becoming a concern for the entry-level housing market.

 

Mortgage Rates Fell, Purchase Applications Fell, Refinances Fell: What's Going On? Mortgage rates continue to fall. Indeed, the rate on the 30-year fixed-rate loan is fast approaching 4%. Though rates have dropped perceptibly, activity has dropped perceptibly as well. The Mortgage Bankers Association reports both purchases and refinances were down 1% last week. Activity likely tapered because many potential borrowers are still bottom fishing. We don't want to cry “wolf” too often, but this is a dangerous game. Yes, rates have dropped in recent weeks, but there hasn't been any major event to account for the drop. This suggests to us that credit markets will be very sensitive to any meaningful data or event that hits the market. Specifically, we're referring to next Friday's employment situation. Unanticipated employment numbers move credit rates. Another surprise to the upside in payrolls could easily end the mortgage-rate rally. Therefore, anyone within 15 days of funding should think long and hard (and quick) about locking. For that matter, the same goes for anyone within 30 days. But even if rates go lower, it's important to remember that a 30-year fixed-rate loan near 4% means the borrower is still sitting in some pretty high cotton.

This is Terrific News.......Sort of. Keeping you updated on the market for the week of May 13, 2014.

MARKET RECAP This is Terrific News... Sort of We've been pounding the table for job growth since, well, it's been quite a while now. The good news is that it appears our demands are being addressed. The economy is finally showing signs of trending higher. We say that because April payrolls increased 288,000 , far exceeding economists' estimates. This 200,000-plus gain comes on top of the 203,000 jobs added in March and the 222,000 added in February. We've noted frequently in the past that the economy needs to continually add 200,000-or-more jobs each month to sustain economic growth. April's payroll report is surely welcomed news. The April job gains were sufficient to drop the unemployment rate to 6.3%. This means the Federal Reserve will very likely continue with its planned tapering of quantitative easing (further removing support for mortgage rates). With the economy improving, QE is less needed. With that said, a few clouds still linger on the horizon – labor participation being the grayest. Ninety-two million people are out of the labor force and 9.8 million are still officially unemployed, according to the Bureau of Labor Statistics . These are high numbers, to be sure, but there is at least one mitigating factor: more baby boomers are retiring, thus leaving the work force for good. Still, the unemployment rate among younger adults remains elevated, and these people are key drivers of the entry-level housing market. Interestingly, mortgage rates across most product offerings eased since the latest job numbers were released last Friday. Usually such bullish economic news pressures rates to rise. That didn't occur. A subsequent speech by Federal Reserve Chair Janet Yellen was key to rates remaining subdued. Basically, Ms Yellen said the Fed will continue to maintain an “accommodating” monetary policy for the foreseeable future. Today, mortgage rates are not only subdued, they're positively languid, residing at levels we haven't seen in six months. These lower rates haven't exactly ignited a refinance flurry, but at least purchase activity is showing some real signs of life. Indeed, purchase applications surged 9% in the May 2 week, lifting the percentage of purchase activity to 51% of all activity. This marks the first time since 2009 that purchases have exceeded refinances. Lest our enthusiasm run too wild, we need to keep in mind that purchase applications are still 16% lower than they were a year ago. Then again, it's also worth keeping in mind that the Mortgage Bankers Association tends to understate purchase activity because small lenders are underrepresented in the MBA's purchase index. The bottom line is that we like the way things are trending, and we're looking forward to more home sales and rising purchase-mortgage activity in coming months.

 

Economic Indicator	Release Date and Time	Consensus Estimate	Analysis
Mortgage Applications	Wed., May 14, 7:00 am, ET	None	Important. A strong surge in purchase activity bodes will for the housing outlook.
Consumer Price Index (April)	Thurs., May 15, 8:30 am, ET	0.2% (Increase)	Moderately Important. Consumer-price inflation won't move interest rates.
Homebuilder Index (May)	Thurs., May 15, 10:00 am, ET	49 Index	Important. Optimism should continue to rise on improving activity.
Housing Starts (April)	Fri., May 16, 8:30 am, ET	985,000 (Annualized)	Important. The important single-family segment is expected to drive overall growth.

 

Why the Housing Market Is in Better Shape Than We Think We have to confess to being a little dour over the past couple months. Perhaps we were influenced by the surfeit of hand-wringing articles lamenting the problems with housing. Yes, existing home sales are down and inventory is tight, but a chief reason sales are down is the decline in distressed sales – and that's a good thing. Fewer short sales and fewer foreclosures will keep prices moving on an upward trajectory, which, in turn, will lift the number of owners with positive equity. At the same time, we've seen tight credit standards gradually become somewhat less tight. Competition, which is always a good thing, is forcing lenders to rethink underwriting policies. This is good for the market. Credit might still be tight, but it can only go in one direction – toward more accommodation, and that's where we are trending. Demographics also favor more housing and lending activity. The fact is the population continues to grow, so demand for housing will have to rise. At the same time, housing starts – below 1 million annually – continue to trail the historical average of 1.5 million. We mentioned last week that we remain unconvinced that we're destined to become a nation of home renters. In our travels and experiences, we continually find that people want pride of ownership, stable housing payments (rents continually rise), an appreciating asset, and eventual freedom from monthly payments. They also want mobility, which more of them will regain as the housing recovery moves along. In other words, yeah, we like where things are going, and we are eager to get there.

When Will We Pull Out of the Doldrums?

Keeping you Updated on the Market for the week of April 21, 2014

MARKET RECAP When Will We Pull Out of the Doldrums? Last week, we referenced the movie Groundhog Day, because things continually feel the same. We're not moving backward, but we're not moving noticeably forward either. Much of the recent economic data support our contention. The Federal Reserve's “beige book,” a compendium of data and Fed officials' interpretation of the data, points to tepid economic growth. Words like “modest” and “moderate” show up frequently in the text released this past week. Home builders also continue to feel rather “moderate.” The NAHB/Wells Fargo Home Builder Sentiment Index posted at 47 for April. Fifty is considered breakeven, the point where sentiment tilts either positively or negatively. Right now it's tilting negatively. At least housing starts picked up in March. Starts rose 2.8% to a 946,000 annual rate, lead by single-family starts, which jumped 6%. Unfortunately, the increase failed to live up to expectations. The consensus estimate was for starts to increase to 970,000 on an annualized rate. The positive takeaway is that single-family starts are gaining momentum. We expect to see starts ramp up going forward. Weather in the first three months of 2014 had been atypically lousy. Indeed, the Federal Reserve referred to weather no fewer than 103 times in the beige book. With weather a less influential factor, perhaps we'll see a pick up in housing activity. As for interest rates, they continue to be priced for sluggish economic activity. On the mortgage front, rates were down again this past week. Bankrate.com's survey has the 30-year fixed-rate loan priced at 4.43%; Freddie Mac has it priced at 4.27%, which is a six-week low. The upside is that lower rates have reignited activity: The Mortgage Bankers Association reports refinances were up 7% for its most recent reported week. Just as important, purchase applications were up 1%. Purchase activity has been up every week for the past month. Gains in purchase activity have been incremental, to be sure, but it appears a budding trend is taking hold. Ellie Mae's Origination Insight Report states that 40% of mortgage loans closed in March were originated for refinancing, while 60% were for home purchases. In February, the split was 43% for refinances and 57% for purchases. FICO scores were another telling data point. Ellie Mae's numbers point to easing credit standards, a trend we've seen, and one that goes under-reported and under-appreciated. We've mentioned a few times over the past couple months that the perception of getting a mortgage loan differs from the reality. The perception is that it's difficult; the reality is that's not really so. With any luck, the trends we see in the credit market will portend a step-up in economic growth. Credit generally becomes easier to come by when the economy is improving. Let's hope that's the case.

 

Economic Indicator	Release Date and Time	Consensus Estimate	Analysis
FHFA Home Price Index (February)	Tues., April 22, 9:00 am, ET	0.5% (Increase)	Moderately Important. Prices will likely show slowing appreciation.
Existing Home Sales (March)	Tues., April 22, 10:00 am, ET	4.5 Million (Annualized)	Important. Sales continue to languish on low inventory and sluggish job growth.
Mortgage Applications	Wed., April 23, 7:00 am, ET	None	Important. Rising purchase activity points to rising home sales.
New Home Sales (March)	Wed., April 23, 10:00 am, ET	460,000 (Annualized)	Important. Sales are expected to climb through spring and early summer.

 

How to Become a World-Class Decision Maker To make good decisions, one must be grounded in reality. Unfortunately, most people aren't grounded in reality. The problem centers on the past. People anchor to sunk costs, which are past costs. We've seen this with home prices and mortgage rates. People will automatically assume that past prices and past rates have to reappear in the future. That's not necessarily true. Just because a home sold for $400,000 in 2006 and sells for $350,000 today doesn't mean $400,000 will reappear. The same goes for the 3.5% 30-year fixed-rate loan. It was here once, but that doesn't mean it will be here again. The focus should be on where things are going from here forward. Making good decisions requires thinking on the margin. For example, if you had a $50 ticket to a football game and lost that ticket, would you still attend the game? Many people wouldn't attend because they view the ticket as now costing $100 instead of $50 – the cost of the lost ticket and the cost of the ticket that would need to be purchased. But that's the irrational way of looking at it. The rational way is to ask, “Am I willing to spend $50 to attend the game?” The first ticket is a gone, so it shouldn't factor in the decision. For most people, it does. Similarly, we see people anchor to home prices or mortgage rates that no longer exist. It's always important to let our clients know that the prices that prevailed in the past shouldn't influence today's decision. What matters is what today's data lead us to believe for the future. This sounds like a simple concept, but it's one few people grasp.