Consumers’ attitudes stabilize in February

 

Americans’ concerns about key economic and housing issues are beginning to subside, according to results from Fannie Mae’s February 2012 National Housing Survey. Consumers’ attitudes have stabilized across most indicators – including personal finances, housing, and employment – demonstrating their sense that downside risks have abated somewhat compared with late summer and fall of 2011.

Highlights of the survey include:

• The rise in confidence in the economy’s direction continued in February, with 35 percent responding that they think the economy is on the right track, a 5 percentage point increase from January. The percentage of respondents who say the economy is on the wrong track dropped to 57 percent, a decline of 6 percentage points.

• On average, Americans expect home prices to increase by 0.8 percent over the next 12 months (down slightly since last month).

• Twenty-eight percent of respondents expect home prices to increase over the next 12 months (consistent with last month), while 15 percent say they expect home prices to decline (down 1 percentage point since last month). Fifty-three percent say prices will stay the same.

• The percentage of respondents who say it is a good time to sell rose by 3 percentage points to 13 percent, the highest level in more than a year, while the percentage of respondents who say it is a good time to buy dropped 1 percentage point to 70 percent this month.

• Sixty-five percent of respondents say they would buy their next home if they were going to move, up 1 percentage point since last month, while 29 percent say they would rent, down 1 percentage point versus last month.

 

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The “New American Home” Continues Shrinking

The nation’s average home size, which peaked at 2,500 square feet in 2007, is expected to shrink to 2,152 square feet by 2015, according to the National Association of Home Builders.

The “New American Home” is shrinking.

Every year at its convention, the National Association of Home Builders highlights the New American Home, a high-end model designed and built to capture emerging trends in residential building and the shifting lifestyles of Americans.

This year’s showpiece, which measures 4,181 square feet and is one of the smallest in the popular program’s 29-year history, shows that the love affair with McMansions seems to be waning.

Indeed, last year’s featured home sprawled over 6,800 square feet. The nation’s average home size, which peaked just above 2,500 square feet in 2007, is expected to shrink to 2,152 square feet by 2015.

Of course, even the downsized New American Home remains above average. It was built in an infill Orlando location within walking distance of shops and restaurants. Many Americans, builders have learned, are fed up with pricey gas and lengthy commutes.

The showpiece, described as a modern take on the classic “boxes” of the 1960s and ’70s, has two bedrooms, and features additional rooms that could house parents or boomerang kids — those moving back home because of the weak economy. It also boasts energy-efficient features such solar panels to run the HVAC system and to heat hot water.

This year’s New American Home will be displayed between Feb. 8 and 11, when thousands of builders and suppliers head to the International Builders’ Show, the nation’s largest gathering of such professionals. (The NAHB, the builders’ main trade group, declined to give attendance projections.) The home is usually the site of several soirees and receives lots of press. The caterer might want to stock extra bubbly – industry watchers say the hard-hit sector has finally struck the long-awaited bottom.

But being chosen for this honor doesn’t guarantee success. Two years ago, the 6,800-square-foot, five bedroom Las Vegas showpiece fell into foreclosure after a private investor pulled out.

Last year, foreclosure wasn’t an issue because the Orlando home, measuring 9,689 square feet with three bedrooms and an in-law suite, was sold before the show started. (View previous New American homes.)

This year’s builder decided to keep the house as a showcase for clients, said Tucker Bernard, who helps oversee the New American Home program for the NAHB.

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A Reprieve for Unemployed Borrowers

Fannie Mae and Freddie Mac recently extended their foreclosure forbearance programs to give short-term aid to unemployed homeowners, but housing counselors warn that these borrowers will need to look at longer-term solutions.

Making sense of the story

• In a forbearance program, a lender agrees not to foreclose on a property and gives the borrower several months’ grace from or reduction in monthly mortgage payments. The programs work best for temporary setbacks, like job loss, health problems, or natural disasters.
• There are drawbacks to the forbearances though. The most-significant drawback is a larger total debt from the smaller payments. The unpaid balance continues to increase during this time.
• The new temporary mortgage payment is often set to 31 percent of the household income; in some cases lenders agree to accept no payments. Fannie Mae’s extended unemployment program, first offered in the fall of 2010, limits any nonpayment or other forbearance plans to one year, with the second six months requiring approval by both Fannie Mae and the lender.
• However, even with the program in place, the lender could still report a mortgage as delinquent, which could adversely affect the borrower’s credit score.
• Because some agreements add onerous term and conditions, homeowners should also consult with a housing counselor certified by the Dept. of Housing and Urban Development.

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Mortgage Rates on the Rise

I wanted to make sure all of you are aware of the changes coming, actually happening, to mortgage interests rates in the coming days and weeks.

As many of you are aware the Government has mandated the increase in Fannie Mae and Freddie Mac Guarantee Fees (G-Fees) in order to finance the extension of the temporary payroll tax cuts. Therefore FNMA and FHLMAC have increased the guarantee fee charged for all mortgages by 10 basis points for Securities starting April 1, 2012. The issue is a 10 basis point change in guaranty fee is equivalent to approximately 50 basis points in price. Deliveries for conventional product under the “old guarantee fee” will end as of March.

So what does this mean for you and your clients:

First, on any loans being locked for 45 days or longer, the rate will have an extra 50 basis points (half a point) in fees baked into the rate. So, the cost to the borrower for a given rate has gone up by half a point. For most, this is started in 45 day locks today!

Second, this same 50 basis point increase in cost for a given rate will start being reflected in the interest rates being offered to customers wanting to lock for 30 days starting either tomorrow or Friday depending on the lender.

Lastly, and I think could cause the most headache, are loans that do not close on time and need to be extended. On any extension where the new lock expiration is after February 9^th, there will be an additional 50 bps fee on top of the extension fee. So, if your borrower’s lock is set to expire, for whatever reason, and needs to be extended past February 9^th, they will have to pay the new 50 basis point fee plus the normal cost of the extension.

This has all been put together quickly and haphazardly by Congress, the Federal Housing Finance Agency, and now clarified last minute by the major servicers. I wish I could have gotten this out sooner, but we just did not know when or how the big servicers were going to react.

If you have any questions or if I can be of any assistance, please never hesitate to call me!

 

Thanks Roger Martin for letting me know this important news!

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