Archive for June 7th, 2017

Source: Dow Jones

Credit scores among U.S. consumers surged to a record high this spring. Further, the share of borrowers considered among the riskiest borrowers hit a record low. The higher credit scores could be a boon for the mortgage market: A good credit score can help borrowers snag a better mortgage rate and better their chances of qualifying for financing.

In April, the average credit score nationwide reached 700, which is up one point from last fall, according to the Fair Isaac Corp. That is the highest average since FICO began tracking such data in 2005.

The share of consumers considered to be the riskiest — with scores below 600 — hit a record low of about 40 million, or 20 percent of U.S. consumers who have FICO scores, according to Fair Isaac. That is down from a 25.5 percent peak in 2010.

Rising credit scores will likely prompt banks to make more credit available to consumers and at a cheaper cost, finance experts say.


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The supply of listings in April fell 9 percent compared with a year ago.
Unfortunately for buyers, the cheapest segment of the market is where supplies are lowest.

Home prices continue to rise at a fast clip, faster than incomes and faster than new employment, but it is still cheaper to own a home than to rent. So why are home sales falling? Because there are crazy few affordable homes for sale.

The supply of listings in April fell 9 percent compared with a year ago, and, in turn, the number of days it took to sell the average home dropped to just 29, the lowest since the National Association of Realtors began tracking that in 2011. There was a big increase in the number of listings that came on the market this spring, but they were swept up so quickly that supplies were still lower.

“One thing we added this month to our Realtors confidence index is analyzing data on realtors’ comments,” said Danielle Hale, managing director of housing research at NAR. “The two biggest phrases in the comments this month were ‘low inventory’ and ‘multiple offers.'”

Unfortunately for buyers, the cheapest segment of the market is where supplies are lowest. Sales of homes priced below $100,000 fell 17 percent in April compared with 2016, and in the under-$250,000 segment they fell more than 6 percent. That is where the highest demand is from younger buyers.

How much more it costs to own vs. rent in your state How much more it costs to own vs. rent in your state
Thursday, 6 Apr 2017 | 3:27 PM ET | 01:23
So when you combine that with new numbers claiming that it is cheaper to buy than rent in all of the nation’s 100 biggest metro markets, which came in a new report from Trulia, you have to remember that the equation only matters if you can find an affordable home. For certain markets, the math works better because the bulk of homes are cheaper. In Baton Rouge, Louisiana, for example, it is more than 50 percent cheaper to buy than rent (based on a 20 percent down payment and a 30-year fixed mortgage), but in San Jose, California, it is only 3.5 percent cheaper.

And in fact the advantage of buying versus renting is narrowing across the board. Rents are easing, as more and more new apartment units are completed, and home prices are rising. That makes the math more difficult.

“In some places, for some households, the decision to rent or buy a home may be too close to call,” according to the Trulia report.

If it’s a close call, then other factors like flexibility and low risk tend to tip the balance toward renting. If rents continue to ease further, and homebuilders don’t ramp up production, home prices will continue to burn, and the decision not to buy will get easier.

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Are Agents Sabotaging Themselves?

Silly as it may sound, lots of real estate agents — even in buyer’s markets where little is selling — take overpriced listings. I see it every day. These agents who continually write ridiculously priced listings gain questionable reputations among their peers. I know because I talk with other agents when I tour new listings, and they tell me.

So, you might think, “Hey, who cares?” but an agent’s reputation is important, especially in tight-knit communities.

When buyers and sellers sign a purchase contract, their respective agents enter into a 30- to 45-day relationship; respect for each other and cooperation is crucial. So why do agents sabotage themselves? Or do they?

Sometimes It’s a Deliberate Lie.
As a seller interviews each agent, often the estimate of value creeps upward. Maybe the first agent knows there will be two other agents competing for the listing, so the first agent names an astronomical figure. The second agent, upon hearing the first agent’s price, beats it. The third agent comes in higher yet.
A seller who chooses an agent based on which estimate is highest is the ultimate loser.

Yet almost every seller operates in this manner. It’s a shame because so few agents take the time to educate sellers that other factors such as marketing plans and the agent’s negotiation abilities are far more important than estimate of value. The comps speak loudly if anybody looks at them. Ultimately, the market place establishes value.

Sometimes the Seller has Unreasonable Expectations.
This still doesn’t excuse the agent from explaining how appraisers determine value. A home came on the market on a storybook street in a desirable area of Sacramento, but it was priced $100,000 too high. When asked why, the agent replied, “I know it’s overpriced, but I would have lost the listing to somebody else if I didn’t agree to that price.” Turns out a home two doors down sold for a high figure, but that home had been meticulously maintained, and it boasted a newly remodeled kitchen with top-of-the-line appliances. By comparison, this home was a fixer, but the seller insisted he could get the same price as his neighbor.

Free Advertising for the Agent
Every “For Sale” sign advertises the agent’s company and the agent. Many signs contain the agent’s Web site and cell phone number. Some even sport a large color photograph of the real estate agent.

Think of it like a giant billboard for the agent.

If the home is located on a major thoroughfare, all the better. Probably thousands of drivers pass the sign each day and will see that agent’s name. And after the sign post is in the ground, it’s not costing that agent one thin dime to leave it there.

Agents Find Buyers Through Listings
Sign Calls
If a buyer wants to find out the price of a home, typically they will call the agent’s cell phone number and ask. Agents who are on the ball will try to recruit that buyer to work with them, providing the buyer is not already working with another agent.
Open Houses
Moreover, agents can hold an open house and find buyers that way as well. If the buyer is not interested in the home — and once they find out the price they won’t be — the agent is then free to show the buyer other homes.
Newspaper Ads
An agent with an overpriced listing often won’t put the address in the paper but will list the details along with the price. That way, buyers who can afford to pay that amount will call to inquire. Now, all an agent has to do is suggest other homes in that particular price range that are worth what the seller is asking and she’s off and running into escrow on another transaction. Not yours.

Real Estate Agents Hope for a Price Reduction
Even if an agent knows she is taking an overpriced listing, she might be telling herself that when the home doesn’t sell within a few weeks, she can persuade the seller to lower the price and then earn a commission when it sells. So she justifies her actions and accepts the listing. Except that studies show that interest in a home typically wanes after a few weeks, so there are fewer buyers for that home when the price falls. Buyers also think there is something wrong with a home that doesn’t sell right away or they worry the seller dropped the price because a major defect was discovered. Price reductions hurt. They hurt the seller, and they often make a buyer wonder how much lower the price could drop. So, a buyer will often offer even less after a price reduction.

Conclusion: Choose your agent based on honesty, ethics, experience, competence and marketing, and don’t chase after those tossing around pie-in-the-sky numbers.

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