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Will mortgage rates keep rising? Bay Area experts read the tea leaves

Will mortgage rates keep rising? Bay Area experts read the tea leaves – Silicon Valley

After the Fed’s interest rate hike this week, Bay Area real estate agents said they expect buyers will want to lock in historically low mortgage rates while they still can.


PUBLISHED: December 16, 2016 at 12:42 pm | UPDATED: December 16, 2016 at 6:23 pm

Now that the Federal Reserve has pushed up interest rates for just the second time in a decade, what does it mean for mortgage rates and the housing market?

It depends on who’s reading the tea leaves.

Some Bay Area brokers anticipate the rate hike will spur prospective homebuyers to lock in historically low mortgage rates ahead of more Fed boosts in 2017 — even though mortgages aren’t directly linked to the Fed’s benchmark rate. But rising rates could make owners with already low rates wary of selling.

Real estate agents and brokers are hoping the Fed’s rate hike this week will be a catalyst for buyers’ fear of missing out, soon driving them into the market.

“It’s going to stimulate the market” in the coming months, said William Doerlich, president-elect of the Bay East Association of Realtors. “Buyers who’ve been sitting on the fence, going, `Is it time? Is it time?’ — this is going to be the little kick in the butt that says, `Hey rates are starting to go up. We better get ahead of the curve, we better get out there or we’re going to lose some of our buying power.’”

SJM-RATEHIKE-1216-90 But one economist said it’s impossible to predict the psychology of buyers and sellers in this new environment: “It could be that people who are locked in to low mortgage rates are going to be reluctant to sell,” said Alexander Field, professor of economics at Santa Clara University’s Leavey School of Business. “Because they’ll lose the benefits of those low rates” when it’s time to go looking for a new house.”

It can be notoriously tough to forecast trends in mortgage rates with precision, but the smart-money investors may have already placed their bets.

Field pointed out that the mortgage market already had responded to the Fed’s anticipated adjustment of the nation’s benchmark rate before it happened. Astute buyers, he said, would have been off the fence prior to Wednesday’s announcement, which raised the nation’s benchmark interest rate by a quarter of a percentage point. “It would have been smart in retrospect to buy that house in October.”

Especially in the Bay Area, where the median price of a single-family home is often painful: $499,000 in Contra Costa County; $702,500 in Alameda County; $940,000 in Santa Clara County; and $1.268 million in San Mateo County, according to a report last month by the CoreLogic real estate information service.

After bottoming out at 3.47 percent in late October, the average rate on 30-year fixed-rate mortgage loans ticked up to 4.13 percent last week. That could prove to be the motivation for potential buyers that Doerlich anticipates.

But the increase is still a relatively modest one. Even amid speculation about what the incoming Trump Administration’s economic policies might be, mortgage rates have simply returned to approximately where they were before the Fed’s previous increase in 2015. (That was its first increase since 2006.)

Mortgage rates don’t necessarily rise and fall with the Fed. In fact, they are more closely tied to the rates on long-range bonds, including 10-year Treasury bonds, which are widely regarded as safe investments when international markets rumble. After the Fed raised its marker in 2015, mortgage rates rose a bit, but then fell – and fell some more, post-Brexit, as shaken investors stowed their money in Treasury bonds.

The Fed, which is expected to raise the benchmark rate two or three more times in 2017, is trying to “preemptively nip the possibility of a resurgence of inflation — nip it in the bud,” Field said.

This leaves mortgage lenders in an unenviable spot: “If they don’t correctly forecast the inflation rate and the inflation rate turns out to be higher, then the lenders lose and the borrowers win,” he said.

Should lenders continue to raise mortgage rates, then homebuyers, of course, will be faced with bigger monthly payments, as will owners who hold adjustable loans.

That could dampen the demand for homes — though Field said demand could remain steady, “if the economy remains reasonably strong and the unemployment rate remains low and people are reasonably sure of their jobs. And then if Trump starts big deficit spending with infrastructure projects and tax cuts to stimulate the economy — that could counteract the negative effect of rising mortgage rates on the demand for housing.”

Chris Trapani, founder and CEO of the Sereno Group residential real estate sales firm, said he believes the housing market will be sparked in the short term by the Fed’s move and the recent mortgage rate increases.

After living for years with low interest rates, he said, “people just kind of came to expect that rates would be at 3 or 4 percent forever, and I think that kind of lulled some buyers to sleep, in a way. Because they didn’t feel any urgency to get a loan. Now they’re thinking, `Well, wait a minute, I’d better get out there and lock it in.’”


California: New laws target housing shortage

California: New laws target housing shortage

RICHMOND — Local and state officials on Friday highlighted a set of new laws aimed at helping ease California’s affordable housing crisis, including legislation that will allow owners of single-family homes to convert a portion of their home to a separate unit that can be rented out without going through expensive upgrades.

Accessory dwelling units, such as a master bedroom converted to a separate living unit with its own outside door, or a former garage that can now be rented as a studio, are a way to help ease the shortage of housing and give cities flexibility when it comes to creating new structures, housing officials and local politicians said, speaking at a news conference at Richmond’s City Hall.

“It instantly creates an opportunity to expand the supply of housing at low rent levels,” said Richmond Mayor Tom Butt. “Everything else we try to do to impact lack of housing takes years. This is something you could do in a weekend.”

Richmond was one of the first cities in California to pass a junior accessory dwelling unit ordinance, which also went into effect this week. Previously, homeowners who tried to convert a portion of their residence into a separate living unit were often stymied by requirements that the units have their own sewer and electricity meters, Butt said. Separate fire sprinkler systems will also not be required if the main house does not have them. Units can vary between 150 and 500 square feet and have partial kitchens and bathrooms.

Mayor Butt was joined at Friday’s news conference by Assemblyman Tony Thurmond, D-Richmond, California Housing and Community Development Director Ben Metcalf and Rachel Ginis, the executive director of Lilypad Homes, a nonprofit organization that helped sponsor legislation on accessory dwelling units.

“The way we are living in our homes is changing as more and more people are combining their resources to stay in their home and turning their home as a resource to generate additional income,” Ginis said. “In-law apartments are the hottest amenity in the real estate market right now.”

Over the past 50 years, home sizes have increased by more than 30 percent, while households have actually decreased, to an average of just 2.3 people, according to Thurmond. Today, only one-third of the state’s population has two adults and a child living in a home. Instead, the majority of households are single-parent families, couples without children, empty nesters and young professionals.

The new laws surrounding accessory dwelling units include AB 2406, AB 59 and AB 45.

Karina Ioffee Karina Ioffee covers the city of Richmond and West Contra Costa County. She has been a reporter for 15 years and has won numerous awards for her work, including from the Overseas Press Club. She speaks Spanish and Russian and is a former competitive gymnast. When not working, she likes to do yoga, cycle and dance.





The Most Fulfilling Careers Have These 5 Things in Common: The Most Fulfilling Careers Have These 5 Things in Common – Real estate agents took second place

The Most Fulfilling Careers Have These 5 Things in Common

"Real estate agents took second place as far as job satisfaction, with 75% saying they were fulfilled."

Sunday may be a fun day, at least according to The Bangles, but by the time the evening rolls around, most Americans aren’t feeling too cheerful. Three-quarters of people in the U.S. report experiencing “really bad” Sunday night blues, according to a 2015 survey by Anxiety or depression about the coming work week runs high among workers, which isn’t surprising when you consider that many people aren’t too happy with their jobs.

Only half of employees in the U.S. reported being satisfied with their jobs in 2016, according to the Conference Board’s annual job satisfaction survey. That’s an improvement over recent years, but it still means that 50% of people are less than thrilled about dragging themselves to work in the morning.

What’s the secret of the half of Americans who are happy at work? A recent LinkedIn survey offers some insight. The professional networking site asked more than 1,000 workers in the U.S. about their overall level of job satisfaction. They also asked about the factors that contributed to them feeling happy at work.

The most fulfilled workers lived in Charlotte, North Carolina, followed by Boston, Indianapolis, New York City, and Denver. Chefs were the most satisfied in their career choice, with 84% saying they felt completely or very fulfilled at work. Real estate agents took second place as far as job satisfaction, with 75% saying they were fulfilled. Doctor, IT consultant, and architect rounded out the top five list of fulfilling careers.

LinkedIn’s Work Satisfaction Survey also probed what specific factors influenced a person’s overall feeling of job fulfillment. Whether you’re a chef or an architect, the most fulfilling careers share the following five characteristics.

1. Pays a good salary

Money may not buy happiness, but it can make for a more fulfilling work experience, according to LinkedIn’s survey. The professional networking site isn’t alone in spotting a link between salary and job satisfaction. When job search site Glassdoor looked at 221,000 employee reviews and salary reports, they found that higher pay was associated with higher job satisfaction, with an employee’s happiness increasing about 1% for every extra $1,000 she earned, a small but significant increase. Overall, compensation and benefits accounted for about 12% of an employee’s overall satisfaction.

2. Friendly colleagues

People who reported being fulfilled at work tended to have positive, friendly relationships with their co-workers. That’s in line with research on how relationships between colleagues affect the workplace. People who have close work friendships are more satisfied than those who don’t gel with their colleagues, a Gallup poll found. Working with rude or difficult colleagues, meanwhile, can lower your motivation and impede creativity, other research has found.

Being able to do work that had a positive impact played a big role in overall job satisfaction. Workers who are purpose-oriented tend to be more satisfied in their jobs, LinkedIn’s 2016 Purpose at Work report found. They’re also more likely to be in leadership positions and to actively sing the praises of their employer. While large numbers of people of all ages want to find meaningful work, baby boomers are actually more focused on whether their career is making a positive impact than Gen Xers or millennials.

4. Encourages work-life balance

Giving your life to your job rarely leads to a feeling of fulfillment, at least according to LinkedIn’s survey. An “always-on” work mentality can lead to burnout and stress as you get used to responding to emails on the weekends and checking your messages just before you go to bed every night. Though work-life balance means different things to different people, having a job that allows you to disconnect and spend time doing other things that matter to you boosts your overall feeling of fulfillment.

5. Is challenging

You may be able to do your job with your eyes closed, but that’s not necessarily a good thing. Feeling challenged at work contributes to your overall sense of career fulfillment, the LinkedIn survey found. It could also have some pretty serious long-term benefits. People who had challenging jobs – ones that involved interpreting or evaluating information, developing strategies, or analyzing data – has slower rates of cognitive decline than people whose day-to-day work was less intense, a study published in the journal Neurology found. “Today’s challenging work conditions may also promote positive health effects,” the study’s authors wrote.


Property price fall in San Jose could be start of cooling markets in the US

Property price fall in San Jose could be start of cooling markets in the US - PropertyWire

The first interest rate rise in the United States for a year could hit the housing market in California where there are already signs of the real estate sector cooling, new research suggests.

The property market in California have been regarded as overheating for a while with house prices falling in some locations such as San Jose which has seen values fall for the first time since 2011.

According to the latest analysis report from real estate firm Clear Capital San Jose, one of the nation’s previously top performing housing markets, is reporting negative quarterly price growth for the first time in five years.

And there could be further cooling as, although it is only the second interest rate rise since the downturn in 2008, the US Federal Reserve has indicated that three more rate rises can be expected in 2017, meaning home loans are set to become more expensive.

According to Clear Capital home prices have fallen 0.3% over the last quarter, the lowest current quarterly growth rate in the country and a far cry from this market’s peak growth rate of just under 6% quarter on quarter during its recovery in late 2013.

Additionally, there are other Californian markets teetering on the edge and exhibiting a similarly bubble like behaviour to San Jose, which the report suggest makes it likely that more markets in the state could turn negative in the very near future.

For example, San Francisco, Los Angeles, and Bakersfield are currently reporting 1% growth quarter on quarter or less, each underperforming quarterly growth from this time last year by at least 0.7%.

If the market climate of San Jose is any indication of what is in store for other high priced Californian markets, more cities may dip into the red during 2017, according to Alex Villacorta, Clear Capital vice president of research and analytics.

Nationally, quarterly home price growth is holding steady at 0.9%, while national annual price growth has risen slightly to 5.6%, a rise of 0.1% since last month. Additionally, as market conditions across the county continue to improve, the national average distressed saturation rate decreased by 0.4% to 12.8%, a level which has fallen just over 2.5% in the last year.

Regional quarter on quarter price growth remains largely unchanged since the previous Clear Capital report. The West, Midwest, and South all continue to hover closely around the 1% quarter on quarter growth mark. Quarterly growth in the Northeast, however, has increased 0.2% to 0.5%, the highest reported quarterly growth rate for the relatively lethargic region since February of this year.

‘San Jose going negative over the last quarter is a huge deal, although no surprise given that growth in this market, and the Bay Area region as a whole, has greatly slowed over the last couple of years,’ said Villacorta.

‘Rapid price growth combined with lagging, sticky income levels quickly pushed home prices out of the affordable range for a majority of home buyers, which is a key factor in this market’s recent downturn in performance. For this metro, turn times have slowed for both performing and distressed properties as demand has begun to slack, finally pulling the area into the red during this real estate slow season,’ he explained.

‘While the San Jose market is the only major metro area in the nation reporting negative price growth, an increasingly likely interest rate hike by the Feds this month could just be the shock to the system that pulls other over heated markets even outside California and the West into the negatives, too. We’re keeping an eye on the situation in San Jose and markets nationwide as we begin to put together our 2017 housing market performance forecast,’ he added.



The impact of a $1,000 home price increase on housing affordability

The impact of a $1,000 home price increase on housing affordability | Construction Dive


Dive Brief:

  • A $1,000 jump in the median price of a newly built home – which could be spurred by factors such as increased regulations – stands to make buying a home unaffordable for 152,903 households, according to the National Association of Home Builders' latest study of the impact of government regulations on house prices and interest rates.

  • California had the largest number of potential homeowners – 15,328 -- likely priced out of the market by a $1,000 increase. Texas followed at 13,674 and Pennsylvania at 9,374.

  • The NAHB also forecast that a 25-basis-point increase in mortgage interest rates from 4% to 4.25% would eliminate 965,000 households from homeownership, based on affordability for a median-priced new home.


Dive Insight:

The rise of new home prices due to a supply shortage amid a slow recovery in construction activity has largely dominated the industry in 2016 as many potential buyers, particularly first timers, continue to be frozen out of the market.

The NAHB's forecast highlights how vulnerable the market is to continued rate rises, albeit coming off historical lows. Rising prices have been compounding shortages as existing homeowners are reluctant to sell their homes for fear of not being able to find or afford a new property in time.

The Federal Reserve reported last week that real estate continued to surge in the third quarter, with values rising $554 billion. That followed a 1.1% increase in home prices from September to October, up 6.7% on the year-ago period, according to CoreLogic’s latest Home Price Index.

Home prices are expected to continue their upward movement next year, flagging slightly from 2017, as more new construction inventory is added. The National Association of Realtors is forecasting a tapering in home price increases nationally to 3.9% in 2017 compared to 4.9% in 2016. Meanwhile, concerns linger over a possible hike in interest rates by the Fed before the end of 2016.



Bay Area suddenly heats up again

Bay Area suddenly heats up again | 2016-12-09 | HousingWire

Home sales increased substantially in the Bay Area this November, according to data from the California Association of Realtors.

California home sales and home prices had been the hottest market in the U.S. until July when home prices tumbled back down to earth. Since then, California homeowners have struggled to sell their home, and numbers slipped back down to 2008 levels.However, home sales in the Bay Area increased in November by 10% from last year. While they still decreased 6% from October to November, this is compared to the four-year average decrease of 16% during that time.

Sales of homes priced between $2 million and $3 million saw substantial growth of 38% from last year. Home sales of those priced between $1 million and $2 million saw the second-highest jump of 26% annually.

However, the median home price of $785,000 in the Bay Area remained unchanged from last month, but did increase 8% from last year. Some counties, Napa, Marin and San Francisco, saw annual decreases of 4%, 5% and 1% respectively. However, Napa’s home prices peaked in November 2015, which is part of the reason for the annual decline.

November also reversed the downward spiral of the number of listings sold above asking price with an increase of four percentage points in some areas. Homes priced above $3 million saw the most increase in homes sold over asking price with an increase of 10 percentage points from last month.

However, this increase does not seem to be permanent, but rather, a reaction to higher interest rates.

“The spike in activity was in large part due to increasing mortgage rates following the election and anticipation over further hikes — particularly in light of the belief that the Fed is going to raise interest rates at its December meeting,” Selma Hepp, Pacific Union chief economist and vice president of business intelligence, said in her analysis. “Buyers may continue to feel pressure to take advantage of current rates ahead of future increases.”


8 Experts Predict What The 2017 Housing Market Has In Store

8 Experts Predict What The 2017 Housing Market Has In Store

  • Mortgage rates are likely to continue to increase throughout 2017.
  • There will not be any easing in inventory, and affordability will still be a challenge in big markets.
  • The potential is there for a large number of first-time buyers to enter the buying market, but they will face new challenges.

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It’s been one unprecedented 2016, between the Brexit vote, the continued persistence of low mortgage interest rates and an election that seemed to temporarily throw markets for a loop.

What will the 12 months encompassing 2017 hold in store for housing?

Inman asked eight different experts to give their take:

  • Steve Cook, editor of Real Estate Economy Watch
  • Doug Duncan, senior vice president and chief economist at Fannie Mae
  • Mark Fleming, chief economist at First American
  • Matthew Gardner, chief economist at Windermere
  • Svenja Gudell, chief economist at Zillow
  • Ralph McLaughlin, chief economist at Trulia
  • Rodney Ramcharan, director of research at University of Southern California’s Lusk for Real Estate
  • Jonathan Smoke, chief economist at

Here’s what they told us.

Mortgage rates

Steve Cook

Steve Cook

We’ve been spoiled with historically low interest rates, which haven’t risen despite threats to do just that over the past few years. No more.

“The kind of rates we were getting earlier this year, down to 3.5 percent — those days are over,” said Cook.

Where will they go?

“We will likely still see volatility in mortgage rates over the next two, three, four months as [President-elect Donald] Trump unveils cabinet members and specific policies he wants,” said McLaughlin.

Svenja Gudell

Svenja Gudell

And the Federal Reserve is due to hike rates, too, which often puts pressure on mortgage rates one way or another. “I think in December we’ll see the Fed raising rates and we’ll see more Fed hikes in 2017, and with that, I wouldn’t be surprised if the 30-year fixed mortgage rate hits 4.75 percent,” said Gudell.

“I don’t believe we’ll see any pullback until after the inauguration, but even the best-case scenario suggests that the historically low rates that have been in place for the last few years are firmly in the rear-view mirror,” said Gardner. “My forecast is for the 30-year fixed rate to rise above 4.5 percent by year’s end, and worst case scenario, knock on the door of 5 percent.”

What does it mean?

Doug Duncan

Doug Duncan

Whether or not the rate increase will affect homebuyers(and especially first-time homebuyers) remains to be seen, but Duncan believes it’s at least partially contingent on income growth.

“If income growth picks up, then the rise in interest rates will affect refinancing, but not the home purchase activity. If incomes start to grow more strongly, it probably won’t affect buying as much as refinancing,” he said.

Rodney Ramcharan

Rodney Ramcharan

“Just looking at the pricing data in terms of interest rates, the spike in interest rates should definitely slow things down,” said Ramcharan.

Fleming said that if mortgage rates get closer to 5 percent by the end of 2017, he would expect home sales to decline by about 4 percent from First American’s original projection — or by about 200,000 sales.

At what point would rising mortgage rates start to significantly dampen buyer demand?

“When I’ve looked at this topic historically in the past, what you tended to see was an absolute level that the market reacted to, and in years past that absolute level was closer to 6.5 and 7 percent,” said Smoke.

“But there are plenty of people who believe that because we’ve had a decade of historically low rates that the new threshold for that might be in the mid 5’s or even as low as 5 percent. So if we see them jump more than we’re anticipating, getting into the 5s, then we start to run into that issue.”

A headshot of Jonathan Smoke

Jonathan Smoke

However, Smoke thinks that in the meantime, there’s a lot that buyers can do to mitigate the effects of rising rates, including looking for lower-priced homes, putting more money down or changing term lengths on a mortgage’s fixed-rate component.

“If Trump goes ahead with his infrastructure plan, which is probably a smart thing to do and a no-brainer as far as Congress is concerned, it will stimulate the economy and probably increase pressure on rates,” added Cook.


Housing inventory — or the lack thereof — was a big deal in 2016, and it will continue to be a problem next year, experts believe.

“Historically, you’d want to be much closer to a million homes built or sold, and we’re roughly at half of that, so I don’t think builders are going to have an easy time magically ramping up,” said Gudell.

Inventory will likely fluctuate by market and price point, too. “For people at high ends and expensive properties you may very well see a surge, and the expectation is that tax cuts will come,” said Ramcharan. “Prior to Trump being President-elect, there was a slowdown at the top end.”

How mortgage rates will influence inventory

Because most housing inventory comes from the existing market (as opposed to new construction), what potential sellers decide do in 2017 will have an impact on the market as a whole — and rising mortgage rates might not be great for sales.

Mark Fleming

Mark Fleming

“We’ve had effectively a 30-year tailwind run of declining mortgage rates,” said Fleming. “At this point in time, maybe they go up or down a little bit, but the long-term trend over the past 30 years has been lower and lower and lower mortgage rates.”

Consequently, existing homeowners with low mortgage interest rates might not be able to afford to move into a bigger house if it also comes with a higher rate.

“How do we address the fact that the existing homeowner, the largest single source of housing supply, has a built-in financial disincentive to make that supply move?” asked Fleming. “You’re making that decision to supply as a function of what you can afford to buy, but all else held equal, because you lose that low rate and have to get a new mortgage at a higher rate, you might not be able to buy your own home back from yourself without an increased monthly payment.”

Where’s the entry-level housing?

“The thing that’s missing is entry-level housing available for sale, but also, all of the apartment-building that is going on is all class A properties, which is the most expensive — no one is building class C properties,” said Duncan.

Sellers unwilling to budge

“Household psychology has affected people; they’re willing to take less risk than they were in the past,” said Duncan. “You can see that in the remodeling data. People are staying in place and remodeling their existing homes with a higher probability than in the past.”

“The median tenure in homes is at an all-time high,” noted Jonathan Smoke. “Part of [that] is … the reasons people are purchasing tie into life events.

“Where this can be particularly important is with retiring baby boomers,” he added. “There’s a cohort of baby boomers who might think it’s in their best interest to stay put and make improvements so they can age in place.”


A basic economics lesson: When inventory (supply) is thin on the ground, and demand is unchanged, you can expect prices to go up.

“Home construction is at full tilt and it’s still not filling the bill, particularly affordable housing,” noted Cook. “The average price of a new home is increasing still; we’re not serving the mid to lower-tier market with new home construction. So you’re not going to see much relief in affordability.”

Mortgage rates and ability to buy

“If you’re located in San Francisco, Los Angeles, Seattle, New York or Miami, rising mortgage rates might very well have an impact on you because you’re already stretching your budget as it is to get into a home that you can barely afford at historically low mortgage rates,” Gudell added. “In these places where affordability is already an issue, seeing these small bumps will already have a slight dampening effect, and we’ll see that effect not on all buyers but specifically first-time homebuyers or lower income folks.

“People who are repeat buyers or buying higher-end homes won’t feel it so much.”

The big picture

Headshot of Ralph McLaughlin

Ralph McLaughlin

“We still think affordability is going to be a challenge in some of the largest markets in the U.S. — L.A., the San Francisco Bay Area, the Pacific Northwest — but that said, the U.S. is still a very affordable place to buy a home,” said McLaughlin.

“Outside the big metros, things look pretty rosy for homebuyers. In many places, buyers wouldn’t have to spend more than 20 percent of their income to buy a home.

“In some of the unaffordable markets, we may see pressures alleviate somewhat, but at the same time, nationally we are starting to see wages pick up, and we think that benefits those on the lower income distribution more than middle or upper income.”

Still, “we are going to have to see many months or even years of solid wage gains to make up for price gains,” he added.

“In general, home values will slow their climb next year,” said Gudell. “Currently we’re looking at 6-percent-ish annual appreciation; next year it’ll probably be half that, so a little bit of relaxation there, which will also feed into being more of a buyer’s market by the time we reached 2018.”

Millennial and first-time buyer trends

The biggest pool of potential homebuyers didn’t make huge strides toward homeownership in 2016 — so what will millennials be doing in 2017?

“Our surveys of the prime first-time homebuying age people suggests a very high, 90 percent-plus, want to eventually own a home,” said Duncan.

“What has tended to be the case is that they’re saying ‘just not right now,’ and that’s driven by the fact that their incomes haven’t risen as far as they need to and they’ve delayed getting married and having a baby relative to prior groups at this age point.”

Duncan added that he thinks we might be at the bottom of the decline in the homeownership rate.

“Builders are seeing millennials, whose first home they are purchasing used to be the first move-up home, sort of leapfrogging that entry-level, and part of that may be there simply isn’t sufficient supply of the starter homes; they’ve just delayed buying until they could get the house that they wanted, the more midsized or first move-up house.”

A headshot of Matthew Gardner

Matthew Gardner

And Gardner thinks there is big potential for first-time buyers in 2017.

“Although we have seen modest improvement in this buyer sector, I believe that the possibility of continued interest rate increases, in concert with a tightening labor market, will get many would-be buyers off the fence and into homeownership.”

Wild cards

What else should agents and brokers be on the lookout for in 2017?

“You’re not going to see any new government incentives to first-time buyers,” said Cook. “You’re not going to see an additional reduction in the mortgage insurance premium for FHA loans. That’s not the kind of thing the new administration wants to do.

“On the other hand, a reduction in regulation is going to make it easier for lenders to be more creative; you’ll probably see more innovation in mortgage lending. I think nonbanks will thrive in this environment,” he added.

Interest from first-time buyers and changes in mortgage rates mean that agents and brokers might have to deal with some new challenges, too.

“The potential is there for the market to have the most first-time buyers, certainly on an absolute volume basis but also on a shared transactions perspective,” said Smoke.

“For the industry, this is the biggest shift we need to be able to contend with because it likely means elongated length of time that people are spending in that journey, especially the first-time buyer, but it potentially also means higher cancellation rates and lower conversion rates.

“You’re going to have more challenges with people contending with needing to qualify for and buy a home in the environment we’re in now instead of in the environment we were in the last two years,” he concluded.

“I see prices at the median perhaps not growing as fast but prices at the top end are likely to boom,” said Ramcharan. “If a Trump Presidency entails greater inflation or risk, high-end homes are a great hedge against inflation and risk, so for people at the top end, I see that there’s a natural tendency now to shift the wealth away from equity markets into high-end homes.”

Who’s able to buy a home is also going to change (slightly), as is where they are looking. “The homeownership rate will grow, and they’ll be less white and a little younger,” said Gudell. “Unfortunately, I think all of us will be spending more time in the car as more people have to look for more housing outside the city center as homes become much more expensive in the urban area,” she added.

And how big is the threat of reliving another 2008-like slump?

“It’s been close to seven years since we had a recession,” noted McLaughlin, “and they tend to move in 7-to-10 year cycles; if it’s not next year then the chances go up. There aren’t any signs yet that that is imminent; there are a lot of signs that suggest otherwise, but there are a lot of wild cards at this point that both buyers, sellers and agents need to be aware of.”

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Study Shows Real Estate Leaders’ Outlook for Housing, Economy Softens for 2017 – EIN News

Study Shows Real Estate Leaders' Outlook for Housing, Economy Softens for 2017 - EIN News

BELLEVUE, WA--(Marketwired - Dec 7, 2016) - Top real estate executives' confidence in the U.S. economy and housing market for 2017 has softened compared to two years ago, and 42% have grown less confident in the world economy since January, according to the latest Imprev Thought Leader Real Estate Confidence study.

"Real Estate leaders are clearly less bullish about the coming year than they were two years ago," says Renwick Congdon, Chief Executive Officer of Imprev, a top provider of automated marketing services for real estate. "In fact, confidence for 2017 is lower across nearly all questions related to housing and the economy."

"When we compare past studies, an interesting trend emerges: Executives and broker-owners are less confident in the global economy and far more confident in their local economies at the end of each year than they were at the beginning. In fact, their confidence grows stronger the closer the economy is to home," Congdon explains. "This year, while only 4% of leaders say their confidence in the world economy has grown this year, 35% say their confidence in their own local economy has grown; while 13% have gained confidence in the U.S. economy, 26% have more confidence in their own state's economy."

[Chart 1]

Respondents included nearly 240 broker-owners and top executives at leading franchises and independent brokerage firms, making Imprev's study one of the most comprehensive in real estate. This group was responsible for more than half of all U.S. residential real estate transactions last year.

Study key findings:

  • 2015 vs. 2017 U.S. Economic Outlook - Real estate leaders are split in their view of the economic outlook for 2017: 30% think it will improve and 23% think it will deteriorate. 44% think the U.S. economy will stay the same, while 2% think it will "improve significantly" and 1% believe it will "deteriorate significantly." One Midwest broker owner noted he's most concerned with "keeping agents productive no matter what the economy does." Looking back at Imprev's 2014 study responses, this year's outlook is less hopeful. In 2014, 45% of study participants said they thought the U.S. economy would improve (compared to this year's 30%). This year, the number of executives who believe the U.S. economy will deteriorate next year more than doubled, moving from 9% in 2014 to 23%. One Southwestern broker owner shared his negative view bluntly: "It's the economy, stupid," he commented.

  • 2015 vs. 2017 Housing Demand Outlook: Leaders are less bullish on housing next year compared to their outlook for 2015. Nearly half (47%) of study participants thought housing demand would improve in 2015, and now just over one-third (35%) think housing demand will improve in 2017. The number of those who think housing demand will deteriorate in 2017 has doubled to 13% from 6% for the outlook for housing demand in 2015.
  • 2015 vs. 2017 Housing Market Confidence: Overall, the vast majority (74%) of real estate executives and broker-owners are "somewhat confident" in the housing market for 2017. That's down from 79% from the Imprev study two years ago. While 5% of leaders are "not at all confident" in the housing market in 2017 -- up from 3% in 2015 -- 21% are "very confident" in the housing market for next year, and that's also up from 18% in 2015. A broker owner of a major franchise office pointed to three reasons for his tempered enthusiasm: "Low inventory, slow development and a lack of new home construction."
  • 2015 vs. 2017 Brokerage Profitability Confidence: Two years ago, 43% of real estate leaders responded that they were "very confident" that their brokerage business would be more profitable in 2015. But the percentage of those who are very confident in greater profitability has fallen to 39% for 2017. A larger regional broker owner, who runs an office of more than 1,000 agents, identifies rising costs as a major concern. "It's about expenses versus shrinking profits," she said. Moreover, 12% of real estate leaders said they are "not at all confident" that their brokerage business will be more profitable next year, more than double the percentage -- 5% -- from two years ago. 
  • Agents may be getting younger, but leadership average age is getting older: Despite the agent population getting younger (average age of a Realtor is 53 years old in the latest NAR study, down from 57 years old in 2014), the leadership population in real estate is getting older: In the 2014 Imprev study, 88% of broker-owners and executives were over 40 years old. In this new study, 92% are over 40 years old, while more than 36% are over the age of 60 (up from 2014's 32%). A move towards younger agents is creating other challenges for brokerages. A Minneapolis and St. Paul broker owner wrote, "While recruiting younger, less experienced agents has improved for us this year, we've noticed increased difficulty in recruiting the top talent." The owner of a boutique brokerage in Southern California added her biggest challenge in 2017 is "developing managerial depth."

The annual Imprev Thought Leader Real Estate Confidence Survey, which debuted in 2012, was developed by Imprev to provide insight on key business challenges top executives face, encouraging an exchange of ideas and solutions among industry thought leaders.

The study was conducted from October 18 to November 1, 2016. 15% of the respondents represented firms with more than 1,000 agents; 17% represent firms with 501 to 1,000 agents; 42% represent firms with 101 to 500 agents; and 26% represent firms with 100 agents or fewer.

Demographically, 69% of the participants are male, 31% are female. More than one-third (36%) are 61 years old or older, 32% are ages 51 to 60, 23% are ages 41 to 50, 8% are ages 31 to 40, and 1% are under the age of 30.

About Imprev
Imprev, Inc. powers Automated Marketing Services, including Marketing Centers and Listing Automation, for many of the largest brands in real estate, enabling them to deliver powerful marketing technologies and services to their agent communities. Built for brokers and designed for agents, Imprev products empower agents to effortlessly market their listings, their brokerages, and themselves by providing custom digital, print, and social media marketing -- in one consolidated platform. Established in 2000, Imprev is headquartered in Bellevue, Washington. Discover more at

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How Fed rate changes affect home buyers

How Fed rate changes affect home buyers - The Boston Globe

All signs point to an interest rate hike by the Federal Reserve, and soon, so how will that affect a buyer’s chances of getting a loan?

The Federal Reserve, “the Fed,” is the central bank of the United States. Founded in 1913, the Fed’s responsibilities fall into four general areas:

 Supervising banks and financial institutions to ensure the safety of the nation’s banking and financial system;

 Influencing the nation’s monetary policy by setting short-term interest rates based on recent economic data;

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 Maintaining the stability of the financial system and containing risk that may arise in financial markets;


 Providing certain financial services to the US government and financial institutions and foreign official institutions and playing a major role in operating and overseeing our nation’s payment systems.

The decision-making arm of the Fed is the Federal Open Market Committee. The committee consists of 12 members. They meet eight times a year to review current market conditions and decide to lower or raise short-term interest rates, buy or sell Treasury securities, or provide cash to banks in a financial crisis. All of these can affect interest rates and credit conditions.


Buying, selling Treasury bonds


One process the Fed uses to influence rates is called “open-market operations,” or the buying and selling of US Treasury bonds. Treasury bonds are how the nation borrows cash to fund government operations. When the Fed buys these Treasury bonds from individual banks, it increases the banks’ excess cash reserves.

Excess reserves are a waste — the money is just sitting there, not earning interest — so banks are incentivized to lend it. That means less expensive borrowing and lower interest rates for everyone. Specifically, the interest rate affected most immediately is the federal funds rate, charged when banks lend to one another.

On any given day, some banks may need to raise money on a short-term basis — if, for example, they have fallen below their cash-reserve requirement or need to raise money to make a loan to a corporate customer. So one bank will lend money to another bank, charging the federal funds rate, and that rate will be higher or lower depending on how much excess reserves are in the system.


Federal funds rate, mortgage rates


The federal funds rate has less of a direct effect on mortgage rates, which are longer term and driven more by supply and demand in the mortgage market. But the Fed’s interest rate decisions and other actions can move mortgage rates. Mortgages are often packaged into securities that are bought by investors. The Fed can influence demand in that market by purchasing those securities. However, a number of increases in the federal funds rate could send mortgage and other longer-term rates higher. This is important because the rate that banks charge one another is their “cost of funds”; when their cost of funds is low, the interest rates they can charge consumers are lower.

Generally, the interest rate on a home loan follows the rate of 10-year Treasury bonds. The Fed had been buying these bonds since 2007, when they introduced the “Quantitative Easing” effort, which involved purchasing hundreds of billions of dollars in mortgage-backed securities and Treasury bonds. That helped to bring down mortgage rates after the housing crisis.

When the Fed or any investor buys more bonds then expected or available, then demand is high and the price is low. This drives down the cost of the bonds. The Fed can drive short-term interest rates down through cost of funds and long-term rates through buying Treasuries. The price of Treasury bonds is driven by the market’s inflation expectations. If investors believe inflation will increase, then the price of Treasury bonds will rise. On the other hand, if they believe inflation will decrease, then the price of Treasury bonds will fall. If the rate on Treasury bonds moves up or down, you will generally see interest rates on home loans follow.


How does this affect you?


High interest rates make borrowing more expensive, so you end up paying more for home and car loans. On the other hand, your savings and money market accounts will earn higher interest. When interest rates are kept low, the opposite occurs. People earn lower interest on savings, but they can more easily borrow money.

Rates can and do change every day. Luckily for you, there are financial mechanisms in place that allow home loan officers to quote you a rate and honor it when it comes time for you to close. If you are thinking of buying a home, you should check with your local licensed lending officer to lock it in while the rates are still low.


Freddie Mac: Market response to higher rates will be negative

Freddie Mac: Market response to higher rates will be negative | 2016-12-02 | HousingWire

November’s sudden spike in interest rates could have negative consequences for the housing market in 2017, according to Freddie Mac’s monthly Outlook.

If President-elect Donald Trump passes a fiscal stimulus plan in early 2017 which includes infrastructure spending and tax cuts, it could bring higher real economic growth. The downside, however, will be that this growth could be partially offset by a rise in interest rates, according to the report.

“Much like in 2013, we expect housing markets to respond negatively to higher mortgage rates -- they will drive down homebuyer affordability, dampen demand and weaken home sales, soften house price growth, and slow the growth in new home construction,” Freddie Mac Chief Economist Sean Becketti said. “And mortgage market activity will be significantly reduced by higher mortgage rates, especially refinance originations, which are likely to be cut in half.”

However, the economy is still expected to have a better year in 2017 with growth of 1.9% year-over-year. Freddie Mac expects 2017 to end with unemployment at 4.7%, and says this year’s slower hiring rate is due to the market being at full employment.

At this point, the market is 100% sure that it will see a rate hike in December, and experts speculate over how many rate hikes will occur next year. Freddie Mac estimates that the 30-year fixed rate mortgage will hover at just over 4% at the end of 2017.

However, it stated that this increased interest rate could slow the pace of housing starts to about 1.26 million, and will decrease total home sales by 220,000 units. Through all of this, Freddie Mac predicts that home prices will continue to increase, hitting a pace of 4.7% in 2017.