Mortgage rates sink to three-year low, thanks largely to Brexit

The stock market’s plunge following the Brexit vote was bad for most people’s retirement accounts but good for those looking to refinance their mortgage. Even as the market has started to recover its losses and the flight to bonds’ safety has eased, home loan rates remain down.

Despite the low rates, growing pessimism over the direction of the economy is spilling over into home-purchase sentiment. Pending home sales – those deals that are under contract but have not closed – declined in May, marking their first annual drop in nearly two years. Rates may be low, but not many people are rushing out to make a big purchase such as a home with so much economic uncertainty. The group most likely to benefit from low rates are homeowners seeking to refinance.

Bankrate.com, which puts out a weekly mortgage rate trend index, found that almost half of the experts it surveyed believe rates will remain relatively unchanged in the coming week while a third believe they will fall further.

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According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average plunged to 3.48 percent with an average 0.5 point. (Points are fees paid to a lender equal to 1 percent of the loan amount.) It was 3.56 percent a week ago and 4.08 percent a year ago. Since the beginning of the year, the 30-year fixed rate has plummeted nearly 50 basis points. (A basis point is 0.01 percentage point.) It has fallen 18 basis points in the past month alone.

The 15-year fixed-rate average sank to 2.78 percent with an average 0.4 point. It was 2.83 percent a week ago and 3.24 percent a year ago.

The five-year adjustable rate average dropped to 2.70 percent with an average 0.5 point. It was 2.74 percent a week ago and 2.99 percent a year ago.

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“In the wake of the Brexit vote, the yield on the 10-year U.S. Treasury bond plummeted 24 basis points,” Sean Becketti, Freddie Mac chief economist, said in a statement. “This week’s survey rate is the lowest since May 2013 and only 17 basis points above the all-time low recorded in November 2012. This extremely low mortgage rate should support solid home sales and refinancing volume this summer.”  Meanwhile, mortgage applications declined this week, according to the latest data from the Mortgage Bankers Association.

The market composite index — a measure of total loan application volume — fell 2.6 percent from the previous week. The refinance index slipped 2 percent, while the purchase index dropped 3 percent.

The refinance share of mortgage activity accounted for 58.1 percent of all applications.

“In light of the Brexit vote and other recent economic news, MBA now predicts that the Fed will hike only once this year, likely in December,” said Lynn Fisher, Mortgage Bankers Association vice president of research and economics. “If the financial market disruption from Brexit persists, the likelihood of even a December hike would be reduced.”

By Kathy Orton

The Washington Post: https://www.washingtonpost.com/news/where-we-live/wp/2016/06/30/mortgage-rates-havent-been-this-low-in-three-years-2/

‘Brexit’ Could Give U.S. Real Estate Brief Boost

Britain's vote to exit the European Union will likely have a long-term impact on the world economy, but in the short-term, U.S. real estate could be flooded with investors flocking to the U.S. as a safe haven, pushing up the dollar and sending down mortgage rates.

Read more: Why the Economy Is Slowing

"Demand for U.S. real estate could rise," says NAR Chief Economist Lawrence Yun.

On the commercial side, global corporations could show additional interest in U.S. real restate as they come to see the U.K. as a less certain place to set up or maintain their businesses, Yun says, "especially in London, as it becomes a less attractive place to conduct global business."

While a rise in the dollar could hurt U.S. exports, it's also expected to put downward pressure on long-term mortgage interest rates. "Mortgage rates will tumble," says Greg McBride, chief financial analyst at Bankrate.com, "possibly hitting new record lows. If you're a borrower, don't wait to lock in your rate, as this opportunity may not last long."

However, Fannie Mae Chief Economist Doug Duncan says low rates because of economic uncertainty could last for a while. "The Fed will very likely be on hold for some time as it observes the impact on U.S. and global financial markets and economic activity," he says.

If mortgage rates — already at historic lows — drop even further, that could help drive up sales of all types of U.S. real estate, including on the residential side. Foreign households who might have otherwise looked to London to buy might turn to U.S. residential real estate, although U.K. citizens, who historically are among the top buyers of investment and vacation homes in the U.S., could pull back. "The British economy will be disrupted, and hence we should expect fewer Brits able to buy in the U.S.," Yun says.

Steve Rick, chief economist at CUNA Mutual Group, was quoted in a Bankrate.com article saying a further drop in mortgage interest rates could give new life to home-mortgage refinancing, which started to cool early this year after several years of big growth. "This would create another mini refinance mortgage boom at financial institutions, as homeowners rush to lock in near-historic low interest rates," he said.

In the long run, though, the uncertainty stemming from the vote could cause broad global weakening, which would hurt jobs, income, and consumer confidence. That would be a net-negative for U.S. real estate, even if it sees gains in the short-term.   

—Robert Freedman, REALTOR® Magazine

This Summer, Homes Are Selling Faster

Homes for sale in June are selling 2 percent more quickly than last year as prices soar to record highs, according to new data on inventory and user activity on realtor.com®.

The median age of inventory nationwide for June is projected to be 65 days, which is 2 percent less than a year ago. One-third of the 300 medium to large markets surveyed posted a month-over-month drop in days that homes spent on the market. Some markets even posted a double-digit drop.

“Continuing this spring’s trend, pent-up demand from buyers who weren’t able to purchase a home last year, combined with low inventory, pushed up prices and got homes to sell quickly,” realtor.com®’s report notes.

For-sale inventory typically increases this time of season, however, total inventory still remains lower than last year at this time. An estimated 525,000 new listings are expected to come onto the market by the end of the month. Still, compared with June 2015, listing inventory dropped 5 percent.

NAR's latest report: Existing-Home Sales at Highest Pace in 9 Years

The low inventories are pushing up home prices. The median home list price was $252,000 in June – 8 percent higher than a year ago, realtor.com® reports.

“However, much of the effect of higher prices is being offset by mortgage rates that are the lowest we’ve seen in three years,” Smoke notes.

Source: “America’s 20 Hottest Real Estate Markets for June 2016,” realtor.com® (June 23, 2016)

8 Critical Trends in Real Estate

DAILY REAL ESTATE NEWS | THURSDAY, JUNE 23, 2016

Every year, the Counselors of Real Estate, a group of real estate professionals who hold the CRE designation and seek to offer unbiased guidance on real estate topics, offers a list of major issues that they feel could affect the industry.

Learn what the implications of these potential shifts could be for your business. 

1. Shifts in the World Economy

In response to economic and political uncertainties, the International Monetary Fund amended GDP growth to spiral downward for much of the globe in 2016 and 2017.

Implications for real estate: The CRE sees China as the primary competition in this sector, having capped a five-year real estate investment total to more than $110 billion. They caution that economic deceleration could lead to lower investment in infrastructure worldwide.

2. Lending Issues

CRE is predicting lending for commercial projects will decrease as many insurance companies, bank lenders, and debt markets reach allocation limits. Further, the group sees no legislative action on the horizon to change retention rules set to go into effect this summer.

Implications for real estate: With more restrictions on risky commercial real estate lending, CRE predicts it’ll be tough to finance projects. But the group also sees this as an opportunity for “other, less regulated lenders to enter the market,” including crowdfunding.

3. Demographics

The millennial population is growing as approximately 10,000 baby boomers as retire each day, according to The CRE. The group finds an increasing number of buyers from every generation want homes in the same places.

Implications for real estate: CRE predicts continued strength in multifamily, and growth in boomer-focused housing offering medical, assisted living, and memory care services. In retail, expect more “experiential” shopping/dining/entertainment destinations, but nothing too luxurious as wages continue to stagnate.

4. Increased Urbanization

To cater to the demands of urbanization, a thriving live-work-play rental market will see higher migrations of residents and businesses seeking densely populated areas, according to CRE research.

Implications for real estate: Suburbs will see increased pressure to urbanize, and “high density mixed-use centers” that offer transit, luxury living spaces, retail, work space, and entertainment will continue to be popular. Watch out for specialized spaces centered around “innovation” and “education” hubs.

5. Unattainable Affordability

The CRE says affordable homes and flexible credit have grown more unattainable, which challenges both the rental and homeownership markets. The lack of housing inventory is another contributing factor.

Implications for real estate: As buyers flock to purchase starter homes, micro homes may provide affordable alternatives for millennials.

6. Energy Affecting Development

The instability in the oil industry has not only been a threat to global economic security, it also has led to the restriction of commercial real estate debt in some areas.

Implications for real estate: According to the CRE, oil instability—currently at its highest level in 50 years—stunts economic growth and job opportunities in areas where production is prevalent. Demand from China could turn this around, but it remains a volatile market that could affect development.

7. The Sharing Economy

Airbnb and Uber, companies that operate outside traditional regulations and offer alternatives for employment are two examples that show how the sharing economy is becoming more firmly established.

Implications for real estate: Just as Uber caused taxi revenue to decrease, shared and virtual office spaces could negatively impact commercial real estate values.

8. Online Retail

According to the CRE, traditional retail is beginning to thrive in an e-friendly cyberspace, expanding its reach and adhering to downsizing trends.

Implications for real estate: With product purchases shifting to online, a shift from large chains to neighborhood shops is key to attracting consumers while building profit, according to the CRE. Many customers today visit retail locations for the experience alone.

Source: “The CRE 2016-2017 Top Ten Issues Affecting Real Estate,” The Counselors of Real Estate (June 8, 2016).

The Best Choices for Pet-Friendly Flooring

DAILY REAL ESTATE NEWS | MONDAY, JUNE 20, 2016

If you're looking for pet-friendly flooring, you can't go wrong with porcelain tile. A recent article from This Old House points out that not only is porcelain tile moisture-proof, it's also not prone to scratches.

Concrete can also be a good flooring choice. Epoxy grout (tile) or an epoxy finish (concrete) can help minimize the upkeep further.

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Hardwood flooring – particularly oak, hickory, or Brazilian cherry – can also be a good options for pets. “Prefinished wood floors with a factory-applied aluminum oxide top coat resist scratches and dings best,” This Old House notes. “A matte penetrating-oil finish can disguise scuffs and is less slipper – just touch up nicks with a stain pen or putty.”

Vinyl and linoleum also can be a good low-maintenance option. However, frequent pet accidents eventually can become an issue with these flooring types since they are glued-down.

Some of the worst options are laminate (it can be prone to moisture damage and noisy with pet feet) and carpets and rugs (prone to staining).

Source: “Ground Rules for Dog-Friendly Flooring,” This Old House (June 2016)

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Mortgage Rates Dip After Bad Jobs Report

DAILY REAL ESTATE NEWS | FRIDAY, JUNE 10, 2016

On the heels of this week's negative jobs report, long-term U.S. mortgage rates dropped for the first time in three weeks.

According to Freddie Mac, this drop marks the 10th consecutive week the 30-year mortgage rate averaged under 3.7 percent, which is allowing buyers an extended chance to lock in low rates during housing's busiest time of year.

"Growing optimism about the state of the economy was quickly erased with May's employment report," says Sean Becketti, Freddie Mac’s chief economist. "The disappointing release caused an immediate flight to quality resulting in the 10-year Treasury yield dropping 10 basis points on Friday."

Freddie Mac reports the following national mortgage rate averages for the week:

• 30-year fixed-rate mortgages: averaged 3.60 percent with an average 0.5 point this week, down from its average of 3.66 percent last week. A year ago rates averaged 4.04 percent. 
• 15-year fixed-rate mortgages: this week averaged 2.87 percent with an average 0.5 point, down from last week when it averaged 2.92 percent. A year ago rates averaged 3.25 percent. 
• 5-year hybrid adjustable-rate mortgages: averaged 2.82 percent this week with an average 0.5 point, down from last week when it averaged 2.88 percent. A year ago, the 5-year ARM averaged 3.01 percent.

Source: Freddie Mac

Marijuana Clauses Your Lease Should Include

As more states consider legalizing some form of pot, landlords and property managers need to know how to address its use in their buildings.

Marijuana laws are rapidly changing, with at least 20 states considering ballot measures this year to legalize pot in some way. Twenty-three states and the District of Columbia have already legalized medical marijuana. Four of those states — Alaska, Colorado, Oregon, and Washington — along with D.C. have also legalized recreational pot use. Although cannabis remains illegal under federal law, the U.S. Drug Enforcement Agency — which made marijuana a primary target in its “war on drugs” — is considering reclassifying it as a Schedule II drug, which could open the door to decriminalizing pot on a federal level.

As a result, many more landlords and property managers could face new considerations when it comes to how marijuana laws affect their lease agreements. There are a number of scenarios related to marijuana legalization you could find yourself in, but if you stay informed, you can take steps to address any changes in the legal landscape. 

If Your State Legalizes Recreational or Medical Marijuana…

Landlords and property managers are not required to accommodate recreational put use under state laws, but they may choose to make some exceptions for tenants who use marijuana for medical purposes. Still, that doesn’t mean you have no control over how it’s used inside your building. And unless federal law is changed, you may still prohibit marijuana use in any form.

One of the first things you need to decide is whether you want to allow smoking of any kind in the building. Tobacco, for example, is a legal substance nationwide, but most property and business owners — restaurants, bars, apartment buildings — have the right to ban smoking cigarettes inside. The case for marijuana is no different.

You can easily add a few sentences to your lease agreement prohibiting smoking or using tobacco or cannabis on the property. However, there are other ways to use medical marijuana besides smoking it, such as using a vaporizer, eating THC-infused edibles, or using cannabis tonics and extracts. You could choose to specify which types of usage are allowed onsite, as long as you include this clause in the lease agreement.

Here are some marijuana addendum clauses that can be included in a lease to specify the approved cannabis use:

1. The use of tobacco and cannabis in accordance with state law is allowed on the Premises. Prior written consent of the Landlord is required before medical cannabis may be grown on the Premises.
2. This is a nonsmoking residence. No smoking, including medical marijuana, inside the home or on the Premise is permitted. However, consuming medical marijuana with a vaporizer or in cannabis edibles, tonics, or concentrates is permitted.
3. No recreational or medical marijuana may be grown or consumed on the Premises by the Tenant(s) or guest(s) without the prior written consent of the Landlord. 

If No Form of Marijuana Is Legal in Your State…

Then you don’t specifically need to address cannabis in your lease agreement because it automatically falls into the category of illegal activity. But — and this is a big but — with legal attitudes toward marijuana changing as fast as they are, your opportunity for recourse may become more complicated if you don’t explicitly address its use. You should include an anti-drug policy in your lease agreement, and make sure to include a marijuana addendum specifically outlining its prohibited use. Here’s an example:

“Usage of cannabis and any other federally prohibited drug is not allowed on the premises. Further, tenant and their guest(s) may not engage in any illegal drug-related activity, including but not limited to medical cannabis on or near the premises. Landlord may terminate this agreement if tenant and/or guests engage in such activities. If this provision is violated, tenants will be subject to charges, damages, and eviction. Tenant forfeits their security deposit if there is any evidence of cannabis use on the premises.”

Can You Evict a Tenant for Using Marijuana?

In states where marijuana is banned, issuing an eviction notice to a tenant who violates your anti-drug policy or anti-marijuana clause is fairly straightforward. But even in states where recreational and medical marijuana have been legalized, you have the right to evict tenants who violate the terms of your lease, which would be an eviction for engaging in federally illegal activity. If you ban smoking marijuana — but not other forms of consumption of the drug — and a tenant continually violates that term, you can evict. This is why it is so important for a landlord to clearly state the rules concerning marijuana use in their lease agreements.

APRIL 2016 | BY KYLE KIVETT

Kyle Kivett

Kyle Kivett is an editor at LegalTemplates.net, a website that aims to equip people with the right tools to be their own legal advocates.

Asking Prices Zoom to Record Highs

DAILY REAL ESTATE NEWS | TUESDAY, MAY 31, 2016

A robust spring market is causing sellers to up their asking prices, according to a preliminary analysis of May data from realtor.com®.

Read more: The 20 Hottest Housing Markets for May 2016

“The past three months have set new records,” says Jonathan Smoke, realtor.com®’s chief economist. “Prior to that, the highest median list price was July last year.”

The median list price in May is $250,000 – 9 percent higher than a year ago. That also marks the highest median list price since realtor.com® began collecting such data in 2013.

“This spring real estate market is coming in strong, just as we expected,” Smoke says. “Pent-up demand and low mortgage rates are driving consumers into the market with urgency. However, the recurring issue of limited supply is leading to higher prices.”

In May, homes likely will have spent a median of 65 days on the market, which is three days faster than April but about the same length of time as a year ago.

Inventories are increasing, up 4 percent from a month ago. More than 550,000 listings have been added to the market so far in May. Yet, that still is 4 percent lower than it was a year ago.

Realtor.com®’s site traffic this month posted a 30 percent growth in searches for homes for sale compared to a year ago.

Source: “America’s 20 Hottest Real Estate Markets for May 2016,” realtor.com® (May 26, 2016)

Help on the Way for Younger Buyers

Attendees of the 2016 REALTORS® Legislative Meetings & Trade Expo learned issues surrounding condo financing and student loan debt may see real progress soon.

MAY 2016 | BY ROBERT FREEDMAN

Young people come out of the gate facing two hurdles to home ownership — high student loan debt and tough rules for using FHA financing for condominiums, which are often the most affordable homes on the market. However, progress is being made on both fronts, according to speakers at the 2016 REALTORS® Legislative Meetings & Trade Expo in Washington.

On the condo front, U.S. Department of Housing and Urban Development Secretary Julián Castro used the meetings as an opportunity to announce progress on a rule implementing improvements to FHA condo financing.

The rule is under review at the Office of Management and Budget — typically a last step before finalization — and Castro said it would help make condo financing easier to obtain. “HUD’s rule is out the door,” he told REALTORS® yesterday. 

The rule will be open for public comment after it makes it through OMB review and is published as a proposed rule. NAR’s priorities include easing owner-occupancy and commercial-space ratios, and making it easier for condo boards to get certified by the federal government each year.

Student loan debt remains a large problem, and it’s grown rapidly in the last decade. Today 42 million Americans have an average of $29,000 in federally backed student loans outstanding, according to Rohit Chopra, an advisor to the U.S. Department of Education who was also on hand at the meetings. Of these borrowers, 7 million are in default, and each day 3,700 additional borrowers go into default. “We have a lot of work to do,” Chopra told REALTORS®. 

It’s not just millennials who are racking up the debt; baby boomers, either because they’re taking out loans on behalf of their children or they’re going back to school themselves, hold a significant portion of it, said Meta Brown, a senior economist at the Federal Reserve Bank of New York who joined Castro and Chopra at a session titled "The Impact of Student Debt on Housing Choices: Regulatory Issues Forum" on Tuesday.

The debt load, along with affordability challenges that only grow as home prices rise, could be playing a role in the drop in first-time home buyers. Jessica Lautz, NAR's director of member and consumer survey research, says 32 percent of home buyers last year were first-time buyers, a 10 percent drop from historical norms.

To help pave the way for home buyers, Castro said in his portion of the session, the FHA is reducing the amount of deferred student debt, from 2 percent to 1 percent, that counts against a borrower’s debt-to-income (DTI) ratio. That means someone with $10,000 in deferred student loan debt would have a $100-per-month repayment obligation in calculating DTI, rather than $200.

Looking to the longer term, legislation is in the works to address the issue. Among the bills, the “Empowering Students Through Enhanced Financial Counseling Act,” H.R. 3179, would help ensure students are better prepared to handle debt, and the “Access to Fair Financial Options for Repaying Debt Act,” S. 1948, would provide more repayment options.

Mabel Guzman, chair of a working group on student loan debt NAR launched in 2014, said the group is making policy recommendations to the Board of Directors this week to help position the association on the issue.

Pending Sales Soar to Highest Level in Decade

DAILY REAL ESTATE NEWS | THURSDAY, MAY 26, 2016

Contract signings for home purchases rose for the third consecutive month, with upticks in the South and West regions of the country providing the bulk of the increase, according to the latest NAR’s latest Pending Home Sales Index.

Read more: New-Home Sales Surge to Post-Recession High

Overall, the index climbed 5.1 percent month-over-month in April to a 116.3 reading. The index is now 4.6 percent higher than a year ago.

“The ability to sign a contract on a home is slightly exceeding expectations this spring even with the affordability stresses and inventory squeezes affecting buyers in a number of markets,” says Lawrence Yun, NAR’s chief economist. “The building momentum from the over 14 million jobs created since 2010 and the prospect of facing higher rents and mortgage rates down the road appear to be bringing more interested buyers into the market.” 

Mortgage rates have remained below 4 percent in 16 of the past 17 months, a boon to home buyers. Yun predicts that rates for home purchases will continue to hover around 4 percent in the coming months, but he cautions inflation could potentially cause rates to jump suddenly.

“Even if rates rise soon, sales have legs for further expansion this summer if housing supply increases enough to give buyers an adequate number of affordable choices during their search,” Yun says.

The Midwest was the only major region of the country to see contract activity slip in April, albeit slightly. Here’s a closer look at how pending home sales fared across the country last month:

• Northeast: pending home sales rose 1.2 percent to 98.2 in April, and are now 10.1 percent above a year ago.
• Midwest: pending home sales dropped slightly by 0.6 percent to 112.9 in April, but are still 2 percent above April 2015.
• South: pending home sales increased 6.8 percent to an index of 133.9 in April, and are 5.1 percent higher than last April.
• West: pending home sales rose 11.4 percent in April to 106.2, and are now 2.8 percent above a year ago.

Source: National Association of REALTORS®