RE/MAX co-founder and chairman Dave Liniger says he expects the national housing market’s rebound in 2012 to not only continue into 2013, but he also thinks the year could be the best the industry has seen in a very long time.
And, as the market heals, it’s not just one factor that is restoring the industry, but several that are playing a role.
“Although interest rates have been at historic lows, they have not been the driving force behind this recovery,” Liniger said. “There’s no single factor driving this market; it’s been a combination of low prices, low inventory, improving consumer confidence and a huge pent-up demand. That was true throughout 2012 and will continue to be true in 2013.”
Liniger, however, warned that the recovery will be “slow and steady,” adding “it is not completely on solid ground just yet.”
Liniger noted concerns regarding government regulations, strict lending standards, and the overall economy.
“But if housing can stay on the road to recovery, it’s possible that it can pull the rest of the economy along with it,” he concluded.
Liniger also offered his top 10 predictions for the year in a video presentation. According to the RE/MAX research team, Liniger’s predictions for 2012 were 85 percent accurate.
Liniger’s Top 10 Real Estate Predictions for 2013
1. With more pent up demand, more homebuyers and sellers are expected to enter the market.
2. Homes sales will rise by 6-7 percent, and prices will rise by 3-4 percent.
3. The inventory of homes for sale will hit a bottom. More homes will be on the market from homeowners whose equity has increased and from lenders who are foreclosing more efficiently.
4. Higher priced homes will begin to sell.
5. Distressed property numbers will bottom out. “We will be dealing with a significant number of distressed properties for a few more years, but the numbers should start retreating to more traiditonal levels in 2013,” Liniger said.
6. Shadow inventory will continue to fall. Liniger explained shadow inventory has already fallen 12 percent from 2011.
7. The number of short sale closings will rise to a peak.
8. Record low mortgage rates will rise slightly by year-end. Although they will remain near their historic lows, Liniger says rates may start to inch up towards the end of year.
9. Lending will remain tight was Liniger’s one negative prediction. “Due to increased government regulation and the soon to be established provisions of Dodd-Frank, lenders will be compelled to keep standards tight,” he said.
10. Home affordability will remain the best in years, bringing more buyers into the market.
Its official Fareway President announcing Fareway opening. Summer 2013.
ust into the New Year, here’s my take on what’s in and what’s out — financially — in 2013:
In: Credit cards
Granted, some Americans are beginning to use cash instead of credit, but most of us are still relying on plastic. Balances and delinquency rates are up (90 days past due), and this trend is expected to continue this year, according to a forecast by credit reporting agency TransUnion. Why? In part because credit has loosened, and risky borrowers are getting cards.
In: Contract/freelance work
Out: Full-time employment
According to some labor experts, the number of U.S. workers who are “contingent” (meaning they work as freelancers/contractors, take on projects, etc.) is currently at about 30 percent, and this number is expected to rise. Companies have grown accustomed to the flexibility, and you’re paying the price: no job security, no benefits, nah dah.
In: Credit unions
Out: Big banks
Credit unions have been growing in popularity in part because of consumers’ growing disillusionment with big banks. We’re annoyed with all the fees (especially the monthly maintenance fees), and the nickel-and-diming. Furthermore, we don’t like or trust big banks, and that has us looking for alternatives such as credit unions, which offer not only higher rates on deposits and lower rates on loans, but a kinder, gentler experience overall.
Given that homes are more affordable than ever and mortgage rates are still at record lows, and given that rents keep rising (Zillow’s data shows nationally rents are up 4.5 percent this past year) it makes more financial sense to buy in most markets today than it does to rent, according to Zillow’s Breakeven Horizon analysis. In some markets — such as Miami, Tampa, Orlando, Phoenix, Las Vegas and others — you can break even in under two years.
One caveat: Remember, all real estate is local, and in major markets such as NYC and San Francisco, renting continues to make more sense than buying. Check out Zillow’s analysis to see how your market fares in the rent vs. buy debate.
In: Buying local
Out: ‘Made in China’
Granted, most of us still shop at the big-box chains, but some local businesses — whether selling homegrown food, gifts or specialty items — have seen a surge in interest in keeping business dollars at home/putting the money back into the local economy and going for that quality, personalized shopping experience. The “buy local” campaigns have helped drive this awareness/interest.
Vera Gibbons is a financial journalist based in New York City and is a contributor to Zillow Blog. Connect with her at http://veragibbons.com/.
After many long months of waiting, the Consumer Financial Protection Bureau (CFPB) has finally issued its finalized qualified mortgage (QM) rule designed to protect both consumers and responsible lenders.
One of the biggest provisions of the QM rule is the newly set Ability-to-Repay rule, which demands that all new mortgages comply with basic requirements to protect consumers from taking on loans they can’t repay.
The rule does away with so-called “no doc” and “low doc” mortgages, requiring that all of a borrower’s pertinent financial information must be supplied and verified, including: employment status, income and assets, current debt obligations, credit history, and monthly payments on the mortgage, among other information. Based on that information, the lender must be able to make a fair judgment on whether or not the borrower can really take on more debt.
The Ability-to-Repay rule also stipulates that lenders base their evaluation of a consumer’s ability to pay on long-term views, discounting “teaser” or “starter” rates typically used in the introductory period.
CFPB director Richard Cordray explained the Ability-to-Repay rule is a common-sense answer to curb the borrowing and lending behavior that led to the financial crash.
“When consumers sit down at the closing table, they shouldn’t be set up to fail with mortgages they can’t afford,” Cordray said. “Our Ability-to-Repay rule protects borrowers from the kinds of risky lending practices that resulted in so many families losing their homes. This common-sense rule ensures responsible borrowers get responsible loans.”
The rule will go into effect January 2014, according to the CFPB. Exceptions to the rule would apply for consumers trying to refinance from a risky mortgage to a more stable loan.
The CFPB also announced it is considering proposed amendments to the Ability-to-Repay rule. These amendments would, among other things, exempt certain nonprofit creditors that work with low- and moderate-income consumers. They would also provide QM status for certain loans made and held in portfolio by small creditors such as community banks and credit unions. If adopted, the proposed amendments would be finalized this spring and would go into effect at the same time as the Ability-to-Repay rule.
The bureau also announced other features of a QM beyond the Ability-to-Repay criteria. In order to meet QM requirements, a mortgage loan must limit points and fees (including those used to compensate originators) and have no toxic or risky loan features, such as interest-only payments or terms that exceed 30 years.
There is also a 43 percent cap on the acceptable debt-to-income ratio, though there will be a transitional period during which non-qualifying loans that meet other affordability standards will be considered QMs.
In addition, the CFPB explained there are two kinds of QMs that have different protective features for consumers and legal consequences for lenders.
The first kind, QMs with a rebuttable presumption, are higher-priced loans given to consumers with insufficient or weak credit history. Legally speaking, the lenders who give these are presumed to have determined that the borrower has the ability to repay. Consumers can challenge the presumption by proving that they did not actually have the income to repay the mortgage and other living expenses.
The second type of QMs are those that have a safe harbor status—generally lower-priced prime loans given to low-risk consumers. They offer lenders the greatest legal certainty that they are complying with the Ability-to-Repay rule, and consumers can only legally challenge their lender if they believe the loan does not fit the criteria of a QM.
While QM status does not grant a lender complete immunity from borrower challenges, Cordray said in prepared remarks he believes the CFPB has “limited the opportunities for unnecessary litigation” by setting up clear guidelines.
Mike Calhoun, president of the Center for Responsible Lending, said in a response that the new rules “strike a balanced, reasonable approach to mortgage lending—for the most part.”
“But the rules also leave a pivotal issue unresolved: How the fees that lenders pay to mortgage brokers will be counted when it comes to defining a qualified mortgage. The CFPB should not create a loophole that allows high-fee loans to count as a qualified mortgage under Dodd-Frank,” Calhoun said. “If the broker payment issue is appropriately resolved, the rules will be—all in all—good for consumers, investors and the economy.”
Debra Still, chairman of the Mortgage Bankers Association, expressed her own reservations, but said the organization applauds the approach and effort given.
“This is a very complex rule. We remain concerned that certain aspects of it could curb competition, increase costs and tighten credit availability for borrowers. In particular, the 3 percent cap on points and fees appears to be overly inclusive as it relates to compensation and affiliates,” Still said.
“Additionally, we will be looking carefully at whether the interest rate threshold for the safe harbor, which is set at 150 basis points above the benchmark rate, will adversely impact too many borrowers,” she continued. “Ultimately, the final verdict on this rule will be made by the market.”