The FortuneBuilders Market Insider

Monthly Newsletter – January 2015

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This month, home sales are likely to have a big year in 2015. Then we look at a recent announcement allowing down payments to drop to just three percent for qualified first-time homebuyers. Also, millennials could finally be making their moves and creating a splash in the market. Then, did you hear about the nationwide telemarketing fraud caused hundreds of real estate investors to lose money? Find out about what happened and what else is going on in the market in this month’s insider!

Home Sales Expected to Have a Big Year in 2015

In a recent report, Freddie Mac predicts that 2015 will see the highest level of home sales in the U.S. since 2007.

The report notes a predicted 4 percent jump in home sales, up to 5.6 million in 2015.”The recent drop in oil prices has been an unexpected boon for consumers’ pocketbooks and most businesses,” said Frank Nothaft, Freddie Mac vice president and chief economist.

“Economic growth has picked up over the final nine months of 2014 and lower energy costs are expected to support growth of about 3 percent for the U.S. in 2015. Therefore we expect the housing market to continue to strengthen with home sales rising to their best sales pace in eight years, national house price indexes up, and rental markets continuing to display low vacancy rates and the highest level of new apartment completions in 25 years.”

Down Payments Lowered to 3 Percent For First-Time Homebuyers

Qualified first-time homebuyers will now be able to buy a home with just a 3 percent down payment, according to a recent announcement by Fannie Mae and Freddie Mac.

The hope is that the lower down payment will welcome more homeownership, particularly for those who can afford a monthly mortgage, but don’t quite have the resources to throw down 20 percent right away.

Fannie Mae is now offering mortgage loans with a maximum 97 percent LTV ratio to qualifying first-time homebuyers. Such a mortgage can be obtained through Fannie Mae with a 3 percent down payment under Fannie Mae’s standard offering or its My Community Mortgage Product if one of the co-borrowers is a first-time homebuyer.

Honea, Brian, “Freddie Mac Predicts Biggest Year for Home Sales Since ‘07.” DS News,16 December 2014. 19, December 2014

Dosberg, Callie, “Fannie Mae Announces 97 Percent LTV Option For First-Time Homebuyers.” Fanniemae.com, 8, December 2014, 22, December 2014

What This Means For You

Anytime you see a new lending program being released there’s marketing and media that follow. That rage will undoubtedly increase buying in the first half of 2015. If you renovate, buy buy buy as soon as you can to list in the spring and summer.

-Professor Moore

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Millenials Predicted to Jump Into the Market in 2015

While most millennials have continued to drag their feet when it comes to home buying, experts predict a shift in 2015.

In a 2015 forecast by Zillow’s chief economist, D. Stan Humphries, millennials are predicted take over as the largest group of homebuyers.

“Roughly 42 percent of millennials say they want to buy a home in the next one to five years, compared to just 31 percent of generation X,” Humphries said. “The lack of home-buying activity from millennials thus far is decidedly not because this generation isn’t interested in homeownership, but instead because younger Americans have been delaying getting married and having children, two key drivers in the decision to buy that first home. As this generation matures, they will become a home-buying force to be reckoned with.”

The shift is also in part because of the rising costs of renting, and cheaper homes narrowing the price gap.

Four Million Left in Underwater Mortgages

While reports indicate the lowest nationwide mortgage delinquency level since November 2007, about four million borrowers remain underwater on their mortgage, according to Black Knight Financial Services.

“Over the past two-and-a-half years, there has been sustained and continual improvement in the number of underwater borrowers in this country,” said Trey Barnes, Black Knight’s SVP of Loan Data Products. “From 33.5 percent of borrowers being in negative equity positions in January 2012, we’re now looking at less than eight percent of borrowers underwater. However, there are still four million borrowers who owe more on their mortgages than their homes are worth, despite more than two years of relatively steady home price appreciation.”

Barringer, Tony “Economist Predicts Millennials Will Greatly Increase Presence in Home Market in 2015.” DS News. 2, December 2014. 22, December 2014

Honea, Brian “Underwater Borrowers Still Total Four Million.” DS News. 4, December 2014. 22, December 2014

FHA Announces Waiver Extension

FHA is extending the availability of the temporary waiver of its regulation that prohibits the use of FHA financing to purchase single-family properties that are being resold within 90 days of the previous acquisition, until December 31, 2014.

What is the waiver? Through the regulatory waiver, FHA encourages investors that specialize in acquiring and renovating properties to renovate foreclosed and abandoned homes, with the objective of increasing the availability of affordable homes for first-time and other purchasers, helping to stabilize real estate prices as well as neighborhoods and communities where foreclosure activity has been high. The waiver is applicable to all single-family properties being resold within the 90- day period after prior acquisition, and is not limited to foreclosed properties.

Source: www.gpo.gov

What This Means For YouI think these will slowly trickle out in our foreclosure system over time. I don’t see too much relevance to the number to be honest. I’m more focused on the folks that short-sold 3-5 years ago that can buy again.

-Professor Moore

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Sixteen Charged in Flipping Scandal

A telemarketing scheme lead to the charge of sixteen individuals trying to sell houses to investors in most of the U.S., according to a joint announcement by U.S. Attorney for the Eastern District of Michigan Barbara McQuade and Special Agent in charge of the FBI Detroit Field Office, Paul Abbate.

The scheme resulted in more than $20 million in losses to 290 victims, according to the announcement. Detroit was one of the areas most affected by the scam, but there were victims in 45 other states and Canada as well.

The telemarketers made unsolicited calls to potential investors offering to sell them houses in the Detroit area. Victims were told that the homes were bank-owned and worth more than their sales prices. The homes were purchased for as low as $500 and quickly sold to victims for $7,500-$15,000.

After an investor agreed to purchase one home, the telemarketers caused the investor to believe that it was quickly resold to a hedge fund or foreign buyer for a substantial profit. In reality, the property was transferred to a shell company controlled by the telemarketers for no consideration and there were no profits.

Based on these sham transactions, numerous investors purchased multiple additional homes from the telemarketers. After purchasing a substantial number of homes, the investors had difficulty contacting the telemarketers and eventually all communication ceased. The telemarketers utilized aliases and frequently changed the name of their company to avoid disgruntled investors and law enforcement.

New Homes Predicted to Hit the Market in 2015

A new home comeback is predicted for the next year, according to Fitch Ratings.

With the economy on the rise, the ratings firm predicts an increase in both supply and demand for these homes. “The likelihood of higher home deliveries could position housing revenue to jump by 20–25 percent next year,” said Bob Curran, managing director at Fitch.

The agency’s forecast echoes predictions in a recent survey of economists conducted by the Wall Street Journal. The panel of experts called for housing starts to jump to 1.22 million in 2015, a leap from the expected 1.05 million new units started this year.

Barringer, Tony “Analysts Predict Comeback for New Homes in 2015” DS News, 12, December 2014. 21, December 2014

Honea, Brian, “Sixteen Charged in Nationwide House Flipping Telemarketing Scam” DS News, 1, December 2014. 19, December 2014

“This nationwide telemarketing fraud not only caused millions of dollars in losses to victims of the scheme, but it also contributed to blight in Detroit neighborhoods,” McQuade said. “Thousands of homes were left to fall into decay as a result of these individuals using Detroit real estate as a commodity to accomplish their fraud.”

Housing A Major Disappointment in 2014?

Instead of housing starts jumping 20% this year to an annual rate of 1.11 million, as forecasters expected in January, it now looks as if starts will total 1.05 million. The shortfall in housing is one reason why the U.S. economy will probably grow just 2.2% over the four quarters of 2014, instead of the robust 2.8% forecasters expected last January. Experts look to 2015 for a comeback. Source: Wall Street Journal

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