A Look at New Homes: Onward and Upward in 2017

© 2017 Florida Realtors — Fueled by a growing economy, solid employment gains and rising household formations, single-family housing production will continue a gradual, upward trajectory in 2017, according to economists speaking at the National Association of Home Builders (NAHB) International Builders’ Show in Orlando, Fla.

“While positive developments on the demand side will support solid growth in the single-family housing sector in 2017, builders in many markets continue to face supply-side constraints led by the three ‘Ls’ – lots, labor and lending,” said NAHB Chief Economist Robert Dietz.

He said that 64 percent of builders nationwide report low or very-low lot supplies; the rate of unfilled jobs in the construction sector is now higher; and acquisition, development and construction loans for builders – while on the rise – needs to grow faster to meet demand.

“The industry needs to recruit more workers and get more land in the pipeline, but it will take time,” Dietz said.

However, supply-side challenges are more than offset by continued economic growth, ongoing job creation, rising wages and favorable demographics. Moreover, builder confidence is higher because builders expect the incoming Trump administration to help to lower regulatory costs.

“Regulatory requirements make up nearly 25 percent of the cost of a new home,” said Dietz. “Given those constraints, it is hard to build a $200,000 entry-level house.”

In a sign that more millennials are getting off the sidelines and jumping into the market, Dietz noted that townhome construction, which can be a useful bridge for millennials to transition to homeownership, is showing impressive growth and now constitutes 12 percent of all single-family starts.

Solid outlook

• NAHB expects mortgage interest rates to average 4.5 percent in 2017 and 5.3 percent in 2018.
• NAHB projects 1.16 million total housing starts in 2016, up 4.9 percent from the previous year’s total of 1.11 million units.
• Single-family production is expected to rise 10 percent in 2017 to 855,000 units and increase an additional 12 percent to 961,000 next year.
• Using the 2000-2003 period as a benchmark for normal housing activity when single-family production averaged 1.3 million units annually, single-family starts are expected to steadily rise from 56 percent of “a typical market” in third quarter 2016 to 75 percent of normal by fourth quarter 2018.
• On the multifamily front, NAHB expects multifamily starts to hold steady in 2017 at 384,000 units, which would be 1,000 units above last year’s pace. While this level is slightly above trend, Dietz said the pace is sustainable due to demographics and a balance between supply and demand.
• Residential remodeling activity is expected to register a 1 percent gain this year over 2016.

Affordability and demographics

CoreLogic Chief Economist Frank Nothaft expects mortgage rates to rise and home prices to moderate in the coming year.

“We anticipate that a stronger economy will translate into higher mortgage rates,” said Nothaft. “Meanwhile, we expect moderation in 2017 for rent and home price growth, but it will still be higher than inflation (thanks to) tight inventory in the housing market.” He said home purchase originations should rise 5.7 percent in 2017, and credit risk for home loans is substantially lower than 10-15 years ago.

The biggest housing issue in 2017 will be affordability, Nothaft said. “Mortgage rates are up three-quarters of a point since last summer and house prices are up. That starts to pinch a household budget.”

On the flip side, demographics will be very positive for housing and home sales going forward. “As millennials age from 25-to-30, that is a big potential base to expand the home buyer market,” said Nothaft.

Supply and demand

David Berson, chief economist for Nationwide Mutual Insurance Co., also expects mortgage rates to rise in the coming year, but he said it shouldn’t have a negative impact on housing demand.

“Higher mortgage rates will be offset by stronger wage gains and job growth, which suggests that housing demand will increase this year,” said Berson. “The question is, how much will supply go up?” He said most U.S. metro areas are relatively healthy, marked by solid job growth, mortgage delinquencies down to near-normal levels and strong, but not excessive house price gains.

A major concern going into 2017, he said, is that demand will exceed supply, which puts upward pressure on home prices.

“If there aren’t enough homes on the market, that will be a problem,” said Berson. “Price gains need to moderate. We can’t have six, seven or eight percent gains. That is not sustainable.” That situation could downgrade many markets from “healthy” to “neutral.”

© 2017 Florida Realtors

New Rules, New Forms, New Closing and Disclosure Procedures

Terrific Synopsis of the New Mortgage Disclosure Rules by Margy Grant, Florida Association of Realtors vice president and general counsel,  as she reviews the changes and their direct impact on your role in the transaction.

This is something All Realtors, lenders and real estate professionals need to get their arms around.

If you wish any training or further information, I suggest you contact Barbi Bozich at Title Security… she has been out in front of these changes for the past 9 months — 727-866-6600.

You May Be Ready for TRID, But Are Your Clients?

Source: Inman – Amy Swinderman

Takeaways:

• Are your clients aware of how the TRID regulation affects the closing process?
• If this is not their first rodeo, you will need to explain the new process and consumer disclosure forms and establish expectations.
• Encourage your clients to think through mortgage choices, apply for loan estimates through multiple lenders and indicate intent to proceed; you’ll need to find out who’s responsible for the Closing Disclosure and be the source of accurate information.

So you’ve spent the last 23 months preparing to comply with the Consumer Financial Protection Bureau’s new TILA-RESPA Integrated Disclosures rule, or TRID, which takes effect Oct. 3.

Or you’ve spent at least a few months on it, anyway — for your sake, let’s hope so.

But what about your clients? Are they aware of how the regulation affects the closing process? If they are purchasing their first home, the changes will be new only to you. But if this is not their first rodeo, you will need to explain the new process and consumer disclosure forms and establish expectations for how the mortgage transaction will proceed.

Here are the CFPB’s five recommendations for what to focus on to facilitate the best experience for your clients:

1. Encourage your clients to think through mortgage choices first.

Engaged homebuyers are more likely to select a mortgage loan that meets their needs and presents few surprises during underwriting, the CFPB says. The preapplication time frame is critical, and gives clients a chance to decide on a loan type and down payment amount before they are focused on a closing date.

Agents should make their clients feel comfortable that they can afford the home and receive a mortgage loan approval. They should encourage prospective homebuyers to review their credit reports early in the process so they can find and correct errors to potentially raise their credit score and reduce their cost of borrowing, the CFPB advises.

2. Once a property has been identified, encourage your clients to apply for Loan Estimates from multiple lenders.

Loan Estimates no longer require written documentation, so agents should encourage clients to compare offers from several lenders to avoid second-guessing whether they got the best deal. Loan Estimates show rates and loan terms in an easy-to-compare format, customized based on clients’ credit and the details of their request. Loan Estimates are most useful when your clients define the requested mortgage type and compare “apples-to-apples” Loan Estimates, according to the CFPB.

3. Make sure your clients indicate their intent to proceed.

Clients may request a Loan Estimate and then feel like they’re done — but Loan Estimates expire after 10 business days. If clients do not complete the steps required by the lender to express their intent to proceed, their applications could be closed as incomplete. If this happens, your clients will likely need to start over with a new application.

Lenders will have different policies about what your clients need to do to successfully move an application forward from the Loan Estimate stage into active processing, when the appraisal and other verifications typically begin. Talk to your lender partners to learn about those policies and discuss lender requirements with your clients to be confident that your clients have an active mortgage application underway, the CFPB advises.

4. Be the source of accurate and timely information about the property and transaction.

Because TRID makes lenders responsible for overseeing compliance from everyone involved in the closing, lenders are now at the center of all transactions. But real estate agents will still play an important part in making sure that clients have all the information they need to experience a smooth closing.

The CFPB advises agents to make sure clients have detailed information they can share with their lender about property taxes, homeowners association (HOA) fees, condominium association fees and the estimated cost for homeowners insurance; communicate any transaction changes to everyone involved and confirm that any revised information has been received; and confirm that the lender and closing agent have the buyer’s and the seller’s broker information so it appears correctly on the Closing Disclosure.

5. Find out who provides the Closing Disclosure.

Who will prepare the Closing Disclosure? Some lenders have already said they will be the only party with access to it. Other lenders may allow title insurance or settlement agents to do it.

When and how your client receives this form will vary from lender to lender and state to state — so communication, early and often, with your partners will be key.

Method of delivery may vary, too. Closing Disclosures may be sent via mail, delivered in person or electronically.

Keep in mind that no matter who prepares or provides the Closing Disclosure, the lender is still accountable for its accuracy and approves the final version, the CFPB says.

For more information and guidance on how to handle mortgage transactions after Oct. 3, visit the CFPB’s resource page.

Source: Inman – Amy Swinderman