Guardian Residential Lending Industry News, June 13-20, 2019

Guardian Residential Lending Industry News, June 6-13, 2019
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In the Know: A Roundup of This Week’s Local and National Real Estate Stories 

Moderating home prices; fixer-upper mortgages  and biometric technology in homes…

Moderating Home Prices Stoke ‘Time to Sell’ Sentiment (Mortgage News Daily, June 19)

Seventy-three percent of respondents said it was a good time to sell, up from 65 percent in the Q1 survey and those with a strong opinion increased from 37 to 46 percent.



Freddie Mac announces fixer-upper mortgage (HW, June 19)

Funds can be used to buy fixer-uppers or renovate homes

Freddie Mac is launching a new mortgage product that allows borrowers to buy a fixer-upper and finance the renovation all with one loan. Existing homeowners can use it to repair or improve their properties.

The government-sponsored enterprise announced its new CHOICERenovation loan product on Wednesday, saying it’s available immediately to all approved lenders. Lenders have two paths for delivering the loan to Freddie. They can either wait until the renovations are complete, or, for approved lenders, they can deliver the loan while work is ongoing if they’re providing oversight for the projects.

“Given the increasing age of existing housing stock, the growing number of millennials and other first-time homebuyers looking for more affordable homebuying options, and the increase in retirees opting to age in place, the Freddie Mac CHOICERenovation mortgage is a flexible solution to finance or refinance these fixer-uppers,” Danny Gardner, a Freddie Mac senior vice president, said in the announcement.



Older homeowners are spending big on home improvements (HW, June 13)

Harvard study says aging homeowners will drive this market

Home improvement spending continues to trend upward, with the latest data from Harvard’s Joint Center for Housing Studies putting the aggregate total at a new high of $424 billion. The home improvement sector can thank the Baby Boomers for that, as research shows older homeowners are spending big on home renovations and aren’t expected to slow down anytime soon.

How are they financing these renovations?

Cash from savings remains the most common source of financing, followed by home equity loans, lines of credit and cash-out refinancing.

The researchers note homeowners are more likely to tap into their home equity to finance costlier projects, and when equity is tapped, they often end up spending more.



Rents are still going up in Portland (Rentcafe)

As of this month, average rent in Portland is $1476 for an average of 758 square feet of space.



Federal Reserve expresses concern about U.S. economy and signals interest rate cuts are likely coming (Washington Post, June 19)

The Federal Reserve did not change interest rates Wednesday but strongly signaled a willingness to cut soon to prevent the economy from slowing further. President Trump has urged the central bank to cut rates for months to boost growth.

Business investment is slowing, uncertainty has increased, and the U.S. economy is growing at a “moderate” pace, the Fed said Wednesday, a notable downgrade from last month when the central bank characterized the economy as “solid.”

The Fed indicated it would take action if the economy shows any more signs of decline.



Homeowners are more realistic about their home’s value (HW, June 17)

In May, the average home appraisal was 0.79% lower than the homeowner’s estimate, reflecting a narrowing gap after six months of widening. According to the report, none of the cities evaluated had an appraised value that was 2% lower than what owners expected.



Cities start to question an American ideal: A house with a yard on every lot. (NYT, June 18)

Single-family zoning is practically gospel in America, embraced by homeowners and local governments to protect neighborhoods of tidy houses from denser development nearby.

But a number of officials across the country are starting to make seemingly heretical moves. The Oregon legislature this month will consider a law that would end zoning exclusively for single-family homes in most of the state. California lawmakers have drafted a bill that would effectively do the same. In December, the Minneapolis City Council voted to end single-family zoning citywide. The Democratic presidential candidates Elizabeth Warren, Cory Booker and Julián Castro have taken up the cause, too.

A reckoning with single-family zoning is necessary, they say, amid mounting crises over housing affordability, racial inequality and climate change. But take these laws away, many homeowners fear, and their property values and quality of life will suffer. The changes, opponents in Minneapolis have warned, amount to nothing less than an effort to “bulldoze” their neighborhoods.

Today the effect of single-family zoning is far-reaching: It is illegal on 75 percent of the residential land in many American cities to build anything other than a detached single-family home. In Portland, that number is 77 percent.

Oregon’s bill would allow options as dense as fourplexes across cities larger than 25,000 people and within metropolitan Portland, and it would permit duplexes in towns of at least 10,000. Portland has spent several years planning its own zoning changes to single-family neighborhoods, amid opposition by homeowners.



Gloomier Economic Outlook Brightens Housing Outlook (Mortgage News Daily, June 17)

Freddie Mac’s forecast for June sees more dark clouds than usual, but few of those are on the housing front. The company’s Economic and Housing Research Group notes that some of those gathering clouds, concerns about global growth and the lingering trade problems, have pushed long-term interest rates to their lowest level since the fall of 2017, 3.82 percent as of the first week of June. That is good news for the industry and consumers.

The downturn is not viewed as a flash-in-the-pan and Freddie’s economists have revised downward some of their earlier Treasury rate forecasts.  The 10-year note yield is expected to decline to 2.4 percent and 2.5 percent in 2019 and 2020, respectively. They also lowered the 1-year Treasury rate forecast to 2.2 percent this year before increasing to 2.3 percent in 2020.  Mortgage rates should follow suit, with the 30-year fixed-rate mortgage averaging 4.1 percent in 2019, before increasing modestly to 4.2 percent in 2020.



Mortgage rates stabilize at two-year low after the U.S. avoids a trade war with Mexico (HW, June 13)

This week, mortgage rates held at a two-year low after the U.S. government avoided a trade war with its neighbors to the south, according to the latest Freddie Mac Primary Mortgage Market Survey.

The 30-year fixed-rate mortgage held steady from last week’s average, coming in at  3.82% for the week ending June 13, 2019. A year ago, the rate sat much higher at 4.62%.



Global Real Estate: post-crisis boom draws to a close (PBJ / London Financial Times, June 19)

The global real estate boom is drawing to a close after a decade of cheap money that followed the financial crisis. Stores are shutting on New York’s Fifth Avenue as the retail sector suffers in the face of the relentless rise of ecommerce. In China, a frenzy of real estate speculation has led to millions of empty new-build apartments and to street protests over price drops. Listed real estate securities worldwide are trading at steep discounts to the book value of their assets, a phenomenon that in the past has heralded downturns.

Other parts of the market, such as offices in major cities, have remained healthy. But some respected figures are preparing for a broader fall.



Just For Fun

Home Is Where They Know Your Name (and Face, Hands and Fingerprints) (WSJ, June 20)

Biometric technology is expanding to every corner of the home, using body identifiers to open the door, say hello, unlock the wine cellar and reveal the screening room.

Biometric technologies such as fingerprint locks and facial-recognition systems have made the leap from spy movies and high-security institutions to the home. Beyond the sci-fi cool, biometric design features offer the promise of a frictionless lifestyle where you need never fumble for house keys or even a smartphone app.

The technology behind these systems is based on algorithms that create a unique code for each user based on their bioidentifiers—mapping the ridges and whorls of a fingertip or counting the pixels between a set of eyes. That code can then be matched against the real thing in a split second when the user touches a scanner, looks at a digital camera or waves a hand.



Thanks for reading!