Did Mortgages Just Get Easier to Obtain?

Fannie Mae and Freddie Mac's new lending guidelines went into effect Monday, which are expected to help loosen up the tight credit standards that home buyers and refinancers have faced in recent years.

The guidelines clarify when lenders will be penalized for making mistakes on mortgages they sell to the mortgage financing giants. Following the financial crisis, Fannie and Freddie forced banks to repurchase tens of billions of dollars in loans that they say did not meet their standards. It caused many lenders to tighten their lending, except to the most creditworthy borrowers with the highest credit scores. Lenders have blamed the lack of clarity from Fannie and Freddie on the tight credit conditions that have made it difficult for home buyers to qualify for a mortgage.

Fannie and Freddie's latest lender guidance is "going to be big, but it's going to take time" to see the full impact of the changes, Laurie Goodman, director of the Housing Finance Policy Center at the Urban Institute, told The Wall Street Journal. Earlier this year, the Urban Institute estimated that up to 1.2 million additional home loans would be made annually if mortgage availability was at "normal" levels. 

Lending giants such as Wells Fargo and SunTrust Banks Inc. have said borrowers will likely see faster turnaround times on mortgage applications in the next few weeks. Some lenders also say they expect to broaden the range of borrowers they'll accept by reducing credit-score requirements and making exceptions for consumers who faced a one-time financial event, such as a job loss or large medical bill.

"It's providing greater certainty for all the parties so that you can lend more confidently and make the whole judgment process much easier and more clear cut," Mike Heid, president of Wells Fargo Home Mortgage, told the Journal.

However, some banks still are treading cautiously and aren't ready to relax their underwriting rules quite yet.

"You won't see us start to expand our criteria much past what we've done," says Brian Moynihan, Bank of America chief executive.

U.S. Bank CEO Richard Davis says his bank also isn't prepared to make any changes yet.

"Unless we are convinced that the rules are going to be permanent and there is not going to be a look back or a reach back in future times … we are simply going to stay on the sidelines in the concerns of both compliance risks and other uncertainties," Davis told the Journal.

SOURCE: DAILY REAL ESTATE NEWS

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Sellers Settle Into 'Waiting Game'

Sellers are starting to get the message that the market is no longer tilting in their favor.

The number of Americans who say now is a good time to sell plunged 17 percentage points from the previous quarter, according to the latest Real-Time Seller Survey, which polls 295 current and potential sellers in 30 of the country's large real estate markets.

Some would-be sellers say they're holding out for higher prices before selling; 59% of respondents say they want to wait for the maximum price on their home. 

"Sellers hoping for higher prices will face reality soon, as all signs point to lower price growth and less competition among buyers in coming months," says Chief Economist Nela Richardson. "Buyer demand is there, but only at the right price."

Some potential sellers — 36% — are waiting to list their homes because of low inventories, believing that the small pool of homes for sale reflects a sluggish market, Richardson says.

"The lack of homes for sale creates a vortex of short supply that can only be relieved when potential sellers find homes they want to buy and then list their own homes," according to research. Several markets are reporting that inventory levels are starting to climb over last year's numbers, but supplies remain tight in many areas.

For the sellers who are willing to list, they're coming to terms with the fact that they may not be able to price their home as aggressively as they thought. The double-digit home-price gains of last year have mostly vanished across the country.

"While some sellers are disappointed that they can no longer expect double-digit price gains, increasing inventory and stabilizing prices provide relief for everyone — buyers and sellers — that we are moving toward a much more balanced market," says Shawn Flynn, a real estate professional in Boston.

SOURCE:  Daily Real Estate News


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Buyers Grow Resistant to Higher Home Prices

Buyers are pushing back against higher home prices, according to the latest Credit Suisse monthly survey of real estate professionals. Overall, agents in 37 of the 40 markets surveyed in September reported lower-than-expected buyer traffic, up from 31 markets in August.

“Many buyers have shifted from a negotiation mindset toward a willingness to sit on the sidelines and wait for lower prices,” according to the survey.  “The resistance of buyers to higher home prices was broad-based with comments from agents suggesting that affordability and the future trajectory of home prices was a particularly large part of conversations with buyers.”

The median price of existing-homes has risen by 25 percent in the past five years to $219,800 in August. The median price of new homes has increased even more, up 33 percent, to $275,600 during that time period.

Real estate professionals in several of the largest housing markets are complaining about lackluster growth heading into the fall. For example, the Credit Suisse report showed that in Phoenix, Ariz., many real estate professionals report that housing demand is being challenged by sluggish job growth. They say many sellers have over-priced their homes and are unwilling to negotiate. In Atlanta, real estate professionals blamed dropping buyer traffic on the lack of quality inventory.

“To purchase a house you have to have confidence in the future and the buyers are very uncertain about the future,” the Atlanta agents surveyed said in the report.

Even in Dallas, where the housing market is strong and more buyer traffic has been reported since the spring, real estate professionals say low inventories are hampering growth. Dallas real estate professionals are “relying on new builds much of the time but even that inventory remains low,” according to the survey.

In Houston, another strong market, agents reported that relocation activity has slowed in September, but the market there is returning to normal levels after more than three years of price increases and high home sales.

SOURCE:  Daily Real Estate News


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