U.S. Housing-Global

U.S. Housing, A Global Marketplace

 

The housing market is rapidly becoming an international marketplace with an increasing number of transactions representing global sales.

According to the National Association of Realtors®2014 Profile of International Home Buying Activity, for the period April 2013 through March 2014, total international sales are estimated at $92.2B, an increase from the previous period’s level of $68.2B.

Favorable exchange rates, affordable home prices and rising affluence abroad continue to drive international buyers to the U.S. to purchase properties and make real estate investments.

While international buyers are purchasing homes throughout the country, the four states accounting for 55% of the total reported purchases are – Florida (23%), California (14%), Arizona (6%), and Texas (12%). According to realtor.com®, the top five cities searched online by international buyers in 2014 were Los Angeles, Miami, Las Vegas, Orlando and New York City.

Twenty-eight percent of Realtors® reported working with international clients this year. International sales are becoming a specialty among real estate professionals.

– International buyers are more likely to make all-cash purchases when compared to domestic buyers. In 2014, nearly 60% of reported international transactions were all cash, compared to only 33% of domestic purchases.

– Most homes purchased by foreign buyers, about 42%, are used as a primary residence. Non-resident foreigners are limited to 6-month stays in the U.S., so these buyers largely use the property for vacation or rental purposes or as an investment.

– Approximately 65% of purchases involved a single-family home. Nearly half of international clients preferred properties in a suburban area, about a quarter preferred a central city or urban area, and about 13% choose to purchase in a resort area.

International buyers come from all over the globe, but Canada, China (The People’s Republic of China, Hong Kong and Taiwan), Mexico, India and the U.K. accounted for approximately 54% of all reported international transactions. China held the lead in dollar volume, purchasing an estimated $22B with an average sale cost of $590,826. China was also the fastest growing source of transactions, now accounting for 16% of all purchases, up 4% from last year. Mexico ranked third with 9% of sales and India and the U.K. both accounted for 5%.

Chinese buyers are now the biggest international players in the U.S. housing market and some states are seeing billions of dollars in real estate deals as a result.

California is particularly attractive because it’s so close to the homeland, and its major cities have large Chinese-American populations and attractive climates and lifestyles. The influx of Chinese buyers has helped push home prices higher in places like the Bay Area.

According to NAR, nearly 40% of the Chinese buyers will live in their U.S. homes full-time. But nearly half the purchases made by Chinese nationals are strictly for investment with buyers not intending to live in them at all.

Key Economic Reports Released This Week

RELEASE DATE	ECONOMIC INDICATORS	RELEASED BY	CONSENSUS	Wt.	INFLUENCE ON INTEREST RATES
Mon 07/28 10:00 am et	Pending Home Sales for June ’14	National Association of Realtors (NAR)	0.3%	**	If strong demand  If weak demand
Mon 07/28 1:00 pm et	Weekly Bill Auction	Dept. of the Treasury	N/A offering	**	If strong demand  If weak demand
Tue 07/29 9:00 am et	S&P / Case-Shiller HPI for May ’14 y/y	S&P / Case-Shiller HPI	9.9%	**	If strong demand  If weak demand
Tue 07/29 10:00 am et	Consumer Confidence for July ’14	Conference Board	85.5%	**	If above consensus  If below consensus
Wed 07/30 7:00 am et	MBA Mtg Apps Survey for week ending 07/25	Mortgage Bankers Association of America	N/A	*	Undetermined
Wed 07/30 8:15 am et	ADP Employment Report for July ’14	Automated Data Proc & Macromeconomic Adv	235k	**	If strong demand  If weak demand
Wed 07/30 2:00 pm et	Gross Domestic Prod (GDP) Q2 ‘134 advance	Bur. of Econ. Analysis Dept. of Commerce	3.1%	****	If above consensus  If below consensus
Wed 07/30 2:00 pm et	FOMC Statement Fed Open Market Committee	Federal Reserve Board Open Market Committee	No rate change Neutral Bias	****	Determines Policy
Thu 0/31 8:30 am et	Jobless Claims for week ending 07/26	Bur. of Labor Statistics Department of Labor	305k	*	If above consensus  If below consensus
Thu 0/31 8:30 am et	Employment Cost Index for Q2 ’14	Bur. of Labor Statistics Department of Labor	0.5%	****	If above consensus  If below consensus
Thu 0/31 9:45 am et	Chicago PMI for July ’14	Chicago Purchasing Managers Association	63.0%	**	If above consensus  If below consensus
Fri 08/01 TBA	Motor Vehicle Sales for July ’14	Automobile Manufacturers	Vehiciles 16.7M	**	Undetermined
Fri 08/01 8:30 am et	Employment Situation for July ’14	Bur. of Labor Statistics Department of Labor	Payrolls 228k Unemp 6.1%	****	If above consensus  If below consensus
Fri 08/01 8:30 am et	Personal Income & Outlays for June ’14	Bur. of Econ. Analysis Dept. of Commerce	Income 0.4% Outlays 0.4%	***	If above consensus  If below consensus
Fri 08/01 9:55 am et	Consumer Sentiment for July ’14	Reuter’s/ University of Michigan	81.5%	*	If above consensus  If below consensus
Fri 08/01 10:00 am et	ISM (NAPM) Index for June ’14	National Association of Purchasing Mgt.	55.9%	**	If above consensus  If below consensus
Fri 08/01 10:00 am et	Construction Spending for June ‘ 14	Bureau of the Census Dept. of Commerce	0.5%	**	If above consensus  If below consensus

* Low Importance

** Moderate Importance

*** Important

**** Very Important

Reference Economic Focus Inc 

5 Common Credit Score Myths

5 Common Credit Score Myths
Myths and misinformation abound in the world of credit scoring. Here are some of the most common credit scoring myths, and the truth of the matter.

1: Credit scoring used for pre-employment screening
Truth: Credit scores are not and have never been used by employers for employment screening purposes. Employers don’t even have access to credit scores.
Credit reports, which are different than credit scores, can be used for employment screening purposes, but only if you provide your overt permission for the report to be accessed.
The idea that credit scores are used by employers stems from the fact that the terms credit report and credit score are often used interchangeably. However, the terms are not interchangeable whatsoever since credit scores and credit reports represent two entirely different products.
Equifax, Trans Union, Experian, and even the credit bureau’s trade association have gone on the record over and over again stating that credit scores are never provided to employers.
There is no doubt that credit scores do wield a lot of power. They can affect your insurance premiums, determine your eligibility for loans, and impact your interest rates on loans. However, credit scores cannot influence an employer’s decision to offer you a job.

2. Spread balances to increase credit score
Truth: Spreading out credit card balances over multiple credit cards can actually have a negative impact upon credit scores. Credit scoring models like FICO and VantageScore use a variety of factors to determine scores.
The second most important metric in credit scoring is debt load, or the amount and type of debt on your credit obligations.
Having a credit card with a balance under 30% of the designated limit is also very likely to have a positive impact upon your credit scores since cards with low balances have a low debt-to-limit ratio. The debt-to-limit ratio is a term used to describe the relationship between your credit card balances and your credit card limits.
When it comes to credit card debt the best strategy is to never revolve balances from month to month. However, if you are already in over your head in the credit card debt department then it is best to find an effective way to pay down your credit cards rather than spread out the balances.
If you cannot afford to pay off your credit cards, a consolidation loan might be worth considering, as long as you have the discipline not to charge your credit card balances back up once you have paid them off.

 

3. You only have 3 credit scores
Truth: Despite what you may have heard or read you have significantly more than three credit scores. You actually have closer to 80 credit scores when you consider all of the different
“Understanding Todays Credit and How to Make IT WORK FOR YOU!”
Premier Credit Restoration LLC
FICO and VantageScore credit scoring models that are commonly used by lender.
FICO alone has some 65 different credit scoring models commercially available from the three credit reporting agencies.
Credit scores exist to predict borrower risk, and different “flavors” of credit scoring models are built to help predict different types of risk. For example, insurance companies rely upon scores to help predict the risk of someone filing a claim. Lenders use credit risk scores to predict the likelihood of a consumer becoming 90 days past due on any account within the next two years. These models can change depending on the lenders needs and direction. A consumer can have a 725 credit score one day and the next a completely different one if that lender changed their model and product.
There are also scoring models that predict the likelihood of a consumer filing bankruptcy, if a consumer will respond to a credit card offer, and the likelihood that you’ll be a profitable borrower. No one has just three credit scores.

 

4. Value of account age lost when a card is closed
Truth: Closing a credit card account does not cause you to lose the value for the age of the account.
Credit scoring models will still consider the age of closed accounts when calculating your credit score as long as they’re still on your credit report. Closed credit cards even continue to age after they have been closed.
It is certainly possible that closing a credit card will have a negative impact upon your credit scores, but not because closing the card has any effect on the age of the account.
The real reason closing a credit card account might lower your credit scores is because closing the account could possibly increase your debt-to-limit ratio.
The debt-to-limit ratio is the relationship between the balances on your credit cards relative to the credit limits on your open (as in “not closed”) credit cards. When you close a credit card the credit limit on that card will no longer be used to calculate your debt-to-limit ratio. Therefore, when you close a credit card your scores could go down because your debt-to-limit ratio will likely go up. That’s why it’s best to keep your credit card accounts open.
5. Credit scores reward you for debt
Truth: Credit scores significantly reward consumers who have very little debt, especially consumers with low credit card debt. And, credit scoring models punish consumers who have too much debt or consumers who use too much of their available credit. The rule of thumb is under 30% of you card limit.
The idea that you need to carry a lot of debt to have good credit scores is completely false and is perpetrated by those who either don’t understand credit scoring systems or have a bone to pick with them.
This particular credit myth has become a very popular one due to the fact that many self-proclaimed “financial gurus” on TV and radio like to spread the false idea that you have to be in debt in order to have higher credit scores.
A whopping 30% of the points in FICO and VantageScore credit scores are driven from the amount of debt on credit reports. The fewer accounts you have with high balances, the better it will be for your credit scores. The more debt you have and the more accounts with high balances, the lower your scores will be. Remember it’s about how well you use your credit and manage it.

Reference: Premiere Credit Restoration

First Time Homebuyers key to housing rebound

First-time homebuyers are key to the housing rebound The typical first-time homebuyer is about 30 years old, and income gains for younger households have been weaker than average. Median household income was flat from 2008 to 2012 for households aged 25 to 34 years. Growth in the median income for all households was weak but did advance by 0.8% per year. Job and income growth will accelerate and help first-time homebuyers overcome rising house prices and enter the market.

Moreover, access to mortgage credit will improve, making it easier to finance a home purchase. Credit remains tight, but mortgage lenders are expected to ease lending standards in coming months. With refinancing activity dormant given the increase in mortgage rates, lenders are eager to originate more home purchase loans. Better mortgage credit quality should also encourage more aggressive lending, as should the decline in lenders’ battles with Fannie and Freddie over representations and warranties. Lenders should also soon feel more comfortable with the recently implemented qualified mortgage rule.

Ahead: Conditions will improve for first-time buyers and their presence is necessary to compensate for waning investor demand. Reference Economic Focus

What is a CPL in lending terms

CPLs protect lenders from the unauthorized actions of settlement agents.

When you secure a mortgage to purchase a home or other piece of real estate, your lender will require that you purchase title insurance to protect the loan. This title insurance premium will be paid one time during the escrow/settlement period of the real estate transaction, and the coverage will last until the loan is settled — paid, refinanced or foreclosed. When the title insurance company agrees to insure the loan, they often send a closing protection letter, or CPL, to the lender.

Overview

A closing protection letter is essentially an agreement from a title insurance company to a lender that indemnifies the lender against any issues arising from a closing agent’s errors, fraud or negligence. For instance, if a closing agent misappropriates loan funds, the title insurance company agrees to make any necessary financial remediation.

History

Now title-industry approved forms, closing protection letters have been used widely in real estate transactions since the 1960s. Upon their inception, lenders requested CPLs because they were concerned about their lack of protection against the fraudulent action — or failure to comply with the lender’s closing instructions — of closing agents or attorneys contracted by the title insurance company. Now, CPLs are common in most real estate transactions.

 

U S Housing Outlook

One of the foremost economists covering the housing market is Celia Chen with Economy.com. Over the next three issues we will be covering her latest U.S. Housing Outlook, just released.

Here is a summary of her key projections:

• As employment conditions improve, pent-up housing demand will be released. • Home sales will remain at 5.5 million this year and accelerate to 6.4 million in 2015. • Credit remains tight, but mortgage lenders are expected to ease in coming months. • A smooth recovery depends on the Federal Reserve’s ability to manage interest rates higher. • The U.S. housing market will rebound in the second half of this year and will strengthen further in 2015. • Demand will pick up, and a slender inventory of desirable homes for sale and tightening rental markets will jump-start residential construction. Strong demand will keep house prices appreciating. • A healthy housing market has substantial positive downstream effects on the broader economy. • Homebuilding drives job growth, while homebuying and growing housing wealth drive consumer spending. • Rising house prices also benefit credit quality. Gains in sales and property tax revenues help fill state and local government coffers. • These forces will boost overall economic growth, which will in turn fuel stronger demand for housing.

Rising Rates, Harsh Winter “U.S. housing looked disappointing through early spring, as rising mortgage interest rates and then a harsh winter dampened demand. The pace of new- and existing-home sales tumbled from an annualized 5.7 million units in July to 5 million at the beginning of this year. Sales have been flat since January, with the April numbers offering scant signs of acceleration.”

“The retreat of institutional investors who had propped up home sales for several years also weighs on home sales. RealtyTrac reports that the institutional investor share of home sales dropped to 5.6% in the first quarter, the lowest level since the first quarter of 2012. Rising house prices and the shrinking inventory of distressed homes slowed investor sales.”

“Concurrently, first-time homebuyers failed to enter the market in expected numbers. The National Association of Realtors reports that first-time buyers purchased 29% of existing homes last year, compared with 40% prior to the housing correction.”

“Employment growth has picked up, with the economy adding well above 200,000 jobs per month on average in the last five months, a pace comparable to that in past expansions. Increased employment will enable more people to form their own households.”

Next issue of Economic Focus will feature Part II, covering cover Young Adults and First-time Buyers.

Reference economic focus