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Archives for October 2018

Case-Shiller: Home Price Growth Slows to 20-Month Low

October 31, 2018 by Joel and Jodi Redmond

Case-Shiller Home Price Growth Slows to 20-Month LowHome price growth slowed to its lowest rate in 20 months according to the 20-City Home Price Index issued by Case-Shiller. After years of dismal readings, Las Vegas, Nevada led the cities included in the index.

Top three cities for August included Las Vegas, Nevada where year-over-year home prices grew by 13.90 percent. San Francisco, California saw home prices increase by 10.60 percent year-over-year and Seattle, Washington home prices rose by 9.60 percent year-over-year. August’s 20-City Home Price Index overall reading fell below six percent for the first time in a year.

Cooling Home Price Growth Helps Balance Housing Markets

Cooling home prices have been forecast for months, but August’s reading indicated that home prices have peaked and that current home price growth rates may ease pressure on overheated real estate markets, where high home prices, limited inventories of homes for sale and rising mortgage rates have limited buying opportunities. Home price growth remained above current rates of wage growth and inflation, but slower appreciation of home values will help balance the housing market from an extreme sellers’ market to more moderate market conditions.

Rising Mortgage Rates Not Sole Cause of Easing Home Prices

Dallas Federal Reserve President Robert Kaplan recently said that rising mortgage rates were not the only cause of slowing growth of home prices. Mr. Kaplan said that multiple factors including rising building costs, labor shortages and rising mortgage rates combined to ease record demand for home; Mr. Kaplan said that the Fed is closely monitoring the economy and housing markets and mentioned that he had previously forecast slower housing markets as 2019 approaches.

Recent stock market sell-offs boosted the 10-year Treasury note price, but this momentum appears to be settling. Fixed mortgage rates are connected to yields on 10-year Treasury notes. Yields rise as note prices decline. Mortgage rates rise as the 10-year Treasury yield rises. While nothing is set in stone, this situation indicates that mortgage rates could continue to rise.

Rising mortgage rates and strict mortgage lending requirements have barred home buyers concerned with affordability and less than perfect credit profiles. As prospective home buyers abandon their home searches, demand for homes should ease and may further reduce gains in home prices.

If you are in the market for a new home or interested in refinancing your current property, be sure to contact your trusted mortgage professional to discuss current financing options.

Real Estate Tagged: Home Sales, Market Trends, Real Estate

Real Estate Crowdfunding Investment Is Trending

October 30, 2018 by Joel and Jodi Redmond

Real Estate Crowdfunding Investment Is TrendingAlthough the real estate market is currently booming, the last housing bubble burst remains relatively fresh in investors’ minds and that has many taking a long look at crowdfunding.

One of the lessons that came out of the burst and ensuing Great Recession was that investors were blind to where their money went. If you watched the Academy Award-winning film “The Big Short,” then you at least understand Hollywood’s hyperbolic explanation of the subprime mortgage crisis. You may be asking: what does this have to do with real estate crowdfunding real investing? Well, everything.

Among the key reasons that the financial collapse occurred was the fact that investors had no clue what was in the AAA collateralized debt obligations (CDOs). Most people didn’t know what was in them and others simply did not care. At the end of the day, Americans lost massive amounts of wealth because they were not hands-on about investing.

That’s a primary reason why real estate crowdfunding platforms are trending. Crowdfunded real estate investments tend to be more of an open book. Consider the transparency differences between crowdfunding and a real estate investment trust (REIT).

Transparency: Crowdfunding Or REIT

Let’s assume that you are not particularly keen on buying an investment property and becoming a landlord. Although renting yourself has its benefits, it can also be labor intensive at times. That being said, wealth-building alternatives such as REITs and crowdfunding present opportunities that require less effort.

REITs tend to be the more hands-off than crowdfunding. That’s because REITs are generally traded funds. Dating back to 1971, the FTSE Nareit REIT index reportedly yielded a return of 9.72 percent. Some REIT investments do quite well in specific sectors such as self-storage and office space among others.

But REITs can be widely diversified, and some have non-real estate assets embedded in them. An REIT with hundreds of moving parts can be onerous to track. That makes them feel a lot like the CDOs. This is not to imply that REITs are a scam like those CDOs. It’s just that crowdfunding investments are more clear.

When investors opt for crowdfunded real estate investments, it falls on their shoulders to select specific properties for their portfolio. Unlike an REIT in which you just buy in and someone else manages the entire fund, crowdfund investors pick real estate options one at a time. In many ways, it is like becoming a landlord, just with someone else doing the legwork. At the end of the day, there’s less need for transparency because you picked all the assets yourself.

Why Consider Real Estate Crowdfunding?

Besides not having to do the heavy lifting, real estate crowdfunding generally avoids much of the volatility of the market-driven REITs and stocks. Everyday people are not investing the market per se, just the select properties you feel confident about. Also, the IRS reportedly allows investors to deduct depreciation.

But what makes real estate crowdfunding increasingly popular is that it allows people to invest directly into tangible properties without having to take on landlord responsibilities. Simply put, you know what you are buying.   

Checking your credit and becoming pre-approved are important first steps for most home purchases. It is important to discuss other factors, including seasoning of funds, when considering options like crowdfunding. These are all steps your trusted home mortgage professional can help you navigate. 

Mortgage Tagged: Crowdfunding, Mortgage, Real Estate

What’s Ahead For Mortgage Rates This Week – October 29th, 2018

October 29, 2018 by Joel and Jodi Redmond

What's Ahead For Mortgage Rates This Week - October 29th, 2018Last week’s economic news included readings on sales of new homes and pending home sales. A reading on consumer sentiment was also released along with weekly reports on mortgage rates and new jobless claims.

Sales of New Homes Slide to Near 2 – Year Low

According to Commerce Department readings on new home sales, the pace of sales slipped close to a two-year low in September; new homes sold at a seasonally-adjusted annual pace of 553,000 sales.

September’s reading was 5.50 percent lower than for August and was 13.20 percent lower year-over-year. Analysts expected a reading of 620,000 sales; August’s reading showed an annual pace of 585,000 new homes sold.

Real estate pros reported a 7.10-month supply of available homes, which was a six-year high. A six-month supply of homes for sale is considered a normal inventory in many markets.

Home prices had a median of $320,000 in September, which was 3.50 percent lower year-over-year. Strong demand for homes coupled with limited supplies have caused home prices to rise and buyers to compete with cash-buyers and ever escalating home prices. Rising mortgage rates and few choices of available homes have sidelined moderate and first-time buyers.

Pending Home Sales Rise in September

The National Association of Realtors® reported rising pending home sales, which provided hope for lagging home sales. Pending sales are sales for which a purchase contract is signed but the sale has not yet closed. Pending home sales had an index reading of 104.6 in September as compared to 104.1 in August. No change from August’s reading was expected in September. The pending sales index pending home sales index was one percent lower year-over-year.

Pending sales rose 4.40 percent in the West; The Midwest posted a gain of 1.20 percent and the South posted a negative reading of – 0.40 percent. The South posted a negative reading of -1.40 percent in pending home sales.

Pending home sales are considered a predictor of completed sales and new mortgages.

Mortgage Rates, New Jobless Claims Rise

Freddie Mac reported higher average mortgage rates last week. Rates for a 30-year fixed rate mortgage rose one basis point to 4.86 percent; the average rate for a 15-year fixed rate mortgage rose three basis points to 4.29 percent and the average rate for 5/1 adjustable rate mortgages was four basis points higher at 4.14 percent. Discount points averaged 0.50 percent for 30-year fixed rate mortgages, 0.40 percent for 15-year fixed rate mortgages and 0.30 percent for 5/1 adjustable rate mortgages.

First-time jobless claims rose last week to 215,000 new claims filed. Analysts expected no change from the prior week’s reading of 210,000 new claims filed. The University of Michigan reported a dip in its consumer sentiment index for October. September’s reading was adjusted from and index reading of 99 to 100.1. October’s reading was 99.  Lower consumer sentiment was based on stagnant wage growth according to analysts.

What‘s Ahead

This week’s scheduled economic news includes readings from Case-Shiller on home prices, Labor sector reports on private and public sector employment and the national unemployment rate.

Financial Reports Tagged: Financial Reports, Interest Rates, Mortgage Rates

Could Fed Interest Rate Hike Help Home Buyers?

October 26, 2018 by Joel and Jodi Redmond

Could Fed Interest Rate Hike Help Home BuyersNews of the Federal Reserve hiking interest rates appears to have caused unnecessary panic among people poised to purchase a first home or a larger one for a growing family.

Headlines and news reports that talk about interest rates being at their highest since 2014 can be alarming. Announcements from the Fed that rates would increase four times in 2018 and again in 2019 seems downright scary. After all, isn’t it logical that increased interest rates mean that monthly mortgage payment could be substantially higher?

As it turns out, neither the click-bait headlines about dramatic rate increases or higher monthly premiums are real-life concerns. A thoughtful look at interest rates and rational thinking about homeownership indicates that today’s market could be an excellent time to buy.

Interest Rates Are Not Frighteningly High

Americans have largely come to recognize that the media thrives on scare tactics to get you to tune in or click a link. Stating that interest rates are the highest since 2014 is a fair statement, on its face. But the reality behind the numbers is entirely different if you take a long look at historical rates.

Homebuyers that stepped into the market as the economy began to surge in 2017 did a fine job of positioning themselves. That’s because they took full advantage of tremendously low rates while moving into a stable jobs environment. It’s important to keep in mind that low Fed standards of 1.5 percent had already increased from the historic low.25 percent set in 2008 to stimulate the horrific economy.

As the Great Recession hit, unemployment started its climb to 10 percent in 2009 and things were generally bad. Wonderfully low interest rates were of little use when people were out of work and those who were employed lacked job stability. The Fed’s goal was to gradually increase rates as the economy steadily recovered. The common wisdom was to raise rates to 3 percent by 2020.

But if you look back over rate data from the 1970s until the Great Recession, rates tended to be at 5 percent or higher. The Fed’s reported intentions would likely leave potential homebuyers in a better position than most over the 40-50 years. That’s because the country is in the midst of an economic surge that appears to have legs.

Fed’s Hike Won’t Deter Many Buyers

The Chicken Little’s of the housing sector may be crying the sky is falling, but nothing could be further from the truth. The modest increases planned by the Fed do not substantially change a potential homeowner’s buying power.

For those with a specific monthly mortgage payment window, the rate increase could slightly change the listing price options moving forward. On the other side of the coin, rate hikes tend to flatten or at least slow asking prices. While buyers cull together a down payment, home prices may be slowing. That could prove very beneficial in terms of securing a dream home.

The basic point about the Federal Reserve raising rates is that this should not necessarily be viewed as a negative. The Fed reportedly had a long-term plan that followed alongside our economic recovery. If you compare the current rates against wage increases, low unemployment, and a juggernaut economy, home buyers are in the driver’s seat right now.

Whether you are interested in buying a new property or refinancing your current property, contact your trusted mortgage professional to find out about the current financing options available.

Real Estate Tagged: Federal Reserve, Market Conditions, Real Estate

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