RISMEDIA, Saturday, September 29, 2018— The foot on the gas is letting up.

The explosive growth in home prices is slowing, according to the latest S&P CoreLogic/Case-Shiller Indices, which found July prices rose 6 percent year-over-year—an easing from 6.2 percent in June, and a March peak of 6.5 percent.

“Rising homes prices are beginning to catch up with housing,” says David M. Blitzer, chairman and managing director of the Index Committee at S&P Dow Jones Indices. “Year-over-year gains and monthly seasonally adjusted increases both slowed in July for the S&P CoreLogic Case-Shiller National Index, and the 10- and 20-City Composite indices.

“The slowing is widespread,” Blitzer says. “Fifteen of 20 cities saw smaller monthly increases in July 2018 than in July 2017. Sales of existing single-family homes have dropped each month for the last six months, and are now at the level of July 2016. Housing starts rose in August due to strong gains in multifamily construction. The index of housing affordability has worsened substantially since the start of the year.”

In July, existing-home sales slid 0.7 percent, according to the National Association of REALTORS® (NAR); in August, they evened out, with no gain or loss. In both months, ground-breaking increased.

The Case-Shiller 10-City Composite, which is an average of 10 metros (Boston, Chicago, Denver, Las Vegas, Los Angeles, Miami, New York, San Diego, San Francisco and Washington, D.C.), in July rose 5.5 percent year-over-year, a decrease from 6 percent in June. The 20-City Composite—which is an average of the 10 metros in the 10-City Composite, plus Atlanta, Charlotte, Cleveland, Dallas, Detroit, Minneapolis, Phoenix, Portland, Seattle and Tampa—rose 5.9 percent year-over-year, also a decrease, from 6.4 percent in June. Month-over-month, both the 10-City Composite and the 20-City Composite rose, 0.2 percent and 0.3 percent, respectively.

“Since home prices bottomed in 2012, 12 of the 20 cities tracked by the S&P CoreLogic/Case-Shiller Indices have reached new highs before adjusting for inflation. The eight that remain underwater include the four cities which led the home price boom: Las Vegas, Miami, Phoenix and Tampa. All are enjoying rising prices, especially Las Vegas, which currently has the largest year-over-year increases of all 20 cities. The other cities where prices are still not over their earlier peaks are Washington, D.C., Chicago, New York and Atlanta.”

The complete data for the 20 markets measured by S&P:

Atlanta, Ga.
Month-Over-Month (MoM): 0.5%
Year-Over-Year (YoY): 5.8%

Boston, Mass.
MoM: 0.1%
YoY: 6%

Charlotte, N.C.
MoM: 0.1%
YoY: 5.6%

Chicago, Ill.
MoM: 0.3%
YoY: 3%

Cleveland, Ohio
MoM: 1.4%
YoY: 5.7%

Dallas, Texas
MoM: 0.2%
YoY: 5%

Denver, Colo.
MoM: 0.3%
YoY: 8%

Detroit, Mich.
MoM: 0.4%
YoY: 6.2%

Las Vegas, Nev.
MoM: 1.4%
YoY: 13.7%

Los Angeles, Calif.
MoM: 0.1%
YoY: 6.4%

Miami, Fla.
MoM: 0.4%
YoY: 5%

Minneapolis, Minn.
MoM: 0.4%
YoY: 6%

New York, N.Y.
MoM: 0.1%
YoY: 3.4%

Phoenix, Ariz.
MoM: 0.7%
YoY: 7.5%

Portland, Ore.
MoM: 0.5%
YoY: 5.6%

San Diego, Calif.
MoM: 0%
YoY: 6.2%

San Francisco, Calif.
MoM: 0.6%
YoY: 10.8%

Seattle, Wash.
MoM: 0%
YoY: 12.1%

Tampa, Fla.
MoM: 0.6%
YoY: 6.8%

Washington, D.C.
MoM: 0.2%

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We are beginning to see reports that more housing inventory is coming to the market and that buyer demand may not be increasing at the same pace it did earlier this year. The result will be many headlines written to address the impact that these two situations will have on home values.

Many of these headline writers will confuse “softening home prices” with “falling home prices,” but there is a major difference between the two.

The data will begin to show that home values are not appreciating at the same levels as they had over the last several years (softening prices). This does NOT mean that prices are depreciating (falling prices).

Here is an example: Over the last several years, national home values increased by more than 6% annually. If you had a home worth $300,000 at the beginning of the year, it would be worth $318,000 by year’s end. If the appreciation rate “falls” to 4%, that $300,000 house would be worth $312,000 at the end of next year – a $6,000 difference.

The price of the home did not fall. It just didn’t increase at the level it had the previous year.

Appreciation rates are projected to end this year at approximately 5%, and then drop to somewhere between 4-5% next year. This drop in appreciation rate will cause home price increases to soften.

Again, this does not mean that home prices will depreciate, but instead that they will appreciate more slowly.

Bottom Line

Be careful when reading headlines that discuss home values. Some headline writers will be legitimately confused and will use the word falling in place of softening. Others will realize that the headline “Home Prices are Falling!” will get more clicks than “Home Prices are Softening” and will intentionally write the more compelling headline. Read the article. If the word depreciation is not mentioned, home values are not falling.

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Home appraisals

To help you better understand and get ready for a home appraisal, we talked with Brian Quinlan, chief appraiser for Prosperity Home Mortgage, LLC.

Here are three things that buyers and sellers need to know about appraisals.

The sellers’ agent can provide helpful information directly to the appraiser.

For home sellers, your real estate agent serves as your advocate during the appraisal, and the information they present to the appraiser at this time is critical to your success. Quinlan recommends that sellers work with their agents so they are equipped to provide the appraiser with the following items:

• Detailed list of home improvements and renovations, including the associated costs and dates completed
• A copy of the plat or site plan, noting unique or desirable features
• Nearby sales and listings that were examined when pricing the property for sale, noting any outliers
• Be mindful to the term “comps” – remember it stands for comparable and it is the appraiser’s job to determine which sales and listing are comparable for their report.
• Specific transaction details, including whether there were multiple offers or special concessions

Armed with that knowledge, as well as information about the area’s market conditions and buyer demand, your Realtor can reinforce the value of your home to the appraiser. “That’s the real power of a real estate agent—they know things about the property and the market itself that the appraiser may not,” Quinlan said.

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#1) Thou shalt NOT change jobs, become self-employed or quit your job. The reason that this is so important is if you would happen to change your job there is usually a certain amount of time that you would have to wait before you would be able to close. FHA for instance requires that you have been at your current job for 1 month prior to closing. If you happen to quit your job and become self- employed then in order to be able to use your income we would at least need 1 year of personal tax returns with your new position and most loan programs require two years. If you decide to quit your job before closing and the lender will be using your income for qualifying it may cause your loan to be denied. Before any of this takes place please contact your mortgage consultant and explain to them what you are planning on doing when it comes to your job.

#2) Thou shalt NOT co-sign a loan for ANYONE. During the loan process, any changes to your credit report or status could negatively affect your ability to close your loan on time or at all. Co-signing any type of car loan, students loans, or other loans would result in inquires into your credit and additional financial responsibilities. All of these could result in loan closing delays or denials. If this situation applies to you, please contact your Mortgage Planner.

#3) Thou shalt NOT buy a Vehicle (or you may be living in it)! Applying for credit to purchase a vehicle will be recorded as an inquiry into your credit by credit bureaus. This may decrease your credit score or decrease the amount of money that you may qualify for when purchasing a home. It is very important to avoid applying for these types of loan throughout the loan process. If this situation applies to you, please contact your Mortgage Planner.

#4) Thou shall NOT use charge cards excessively or make late payments on ANY of your accounts. Excessive use of credit cards can have 2 negative affects on your credit rating. One, inquires will be recorded by credit bureaus and could decrease your credit score. Two, balances on credit cards exceeding 35% will affect your debt to income ratio and could decrease your credit score. Also, late payments of any sort can decrease your credit score, increase your home loan interest rate, delay loan closing, or cause loan denial. If this situation applies to you, please contact your Mortgage Planner.

#5) Thou shalt NOT spend money you have set aside for closing. Most conventional loans require 2 months of reserve money to be verified in your available financial accounts. Once it has been verified for use at close, spending these reserve funds may result in loan closing delays or even loan denial. If this situation applies to you, please contact your Mortgage Planner.

#6) Thou shalt NOT omit debts or liabilities from loan application. Please be very honest and clear about ALL of your debts or liabilities early in the loan application process. Having the right information will allow your Mortgage Planner to provide you the best qualifying loan value. Unrecorded debts or liabilities that are found later in the process may affect the amount of money you qualify for in addition to causing delays or even denials of your home loan. If this situation applies to you, please contact your Mortgage Planner.

#7) Thou shalt NOT buy furniture, appliances, or household items before closing. Although many people are anxious to furnish their new home, during the loan process is NOT the right time. Large purchases causing deductions in your banking accounts or additional debt on credit cards can negatively affect your loan process resulting delays or even denials. If this situation applies to you, please contact your Mortgage Planner.

#8) Thou shalt NOT originate any inquires into your credit. As mentioned before, multiple inquires into your credit may result in decreasing your credit score. As this applies to vehicles, furniture, appliances, and household items; it also applies to ANY credit checks. Applying for additional lines of could negatively affect your ability to qualify for a home loan. If this situation applies to you, please contact your Mortgage Planner.

#9) Thou shalt NOT make large deposits without first checking with your mortgage consultant. Abnormal deposits or large deposits into checking, savings, or any financial account beyond normal payroll deposits must have money sources verified by Underwriting. Making these deposits could result in loan processing delays or even denials. If this situation applies to you, please contact your mortgage planner.

#10) Thou shalt NOT change bank accounts. Because the loan process requires a 2 month history of reserve funds, opening new financial accounts near a closing date may void the history. New bank accounts will not have the 2 month history available and cannot be used. This may result in loan closing delays or denials. If this situation applies to you, please contact your Mortgage Planner.

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7401 Nevis Road,  Bethesda, MD 20817

The word ‘stunning’ doesn’t begin to describe this fully customized new contemporary home on a huge, private 1.27 acre lot! The traditional yet open floor plan flows beautifully throughout the main level, making it ideal for full-scale entertaining as well as comfortable family living. The center hall entry foyer instantly reveals the dramatic interior spaces with views of the light-filled living room and dining room all the way through to the family room with its walls of windows …. all featuring gorgeous ebony-stained white oak 5” plank floors, tray ceilings and high-end lighting fixtures. The breath-taking gourmet kitchen could be found in the finest architectural magazines with the high-end Miralis contemporary cabinetry, LG Viatera custom countertops and white Thassos marble glass floors plus professional stainless appliances including a Miele coffee center. The adjoining family room and library features a double-sided contemporary fireplace wired for flat-panel TVs in each room. The two upper levels host five bedrooms and four baths including a luxurious master bedroom suite with an exquisite bath highlighted by LG Viatera custom countertops and Danze Parma modern fixtures and hardware. There is also a finished lower level complete with expansive recreation/game room, an additional guest bedroom, and separate exercise/media room. Additional features include a whole-house gas-powered generator plus a 12-zone whole-house Lync12 music system including  2 rooms w/surround sound. Some rooms have been virtually staged to help portray the amazing design possibilities!

VIRTUAL TOUR      VIDEO TOUR       LISTING FACTS       MAP       REQUEST A SHOWING       

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There are two very good reasons that the loan process is much more onerous on today’s buyer than perhaps any time in history.

1. The government has set new guidelines that now demand that the bank provebeyond any doubt that you are indeed capable of affording the mortgage. During the run-up in the housing market, many people ‘qualified’ for mortgages that they could never pay back. This led to millions of families losing their home. The government wants to make sure this can’t happen again
2. The banks don’t want to be in the real estate business. Over the last seven years, banks were forced to take on the responsibility of liquidating millions of foreclosures and also negotiating another million plus short sales. Just like the government, they don’t want more foreclosures. For that reason, they need to double (maybe even triple) check everything on the application.

However, there is some good news in the situation. The housing crash that mandated that banks be extremely strict on paperwork requirements also allowed you to get a mortgage interest rate probably below 5%.

The friends and family who bought homes ten or twenty ago experienced a simpler mortgage application process but also paid a higher interest rate (the average 30 year fixed rate mortgage was 8.12% in the 1990’s and 6.29% in the 2000’s). If you went to the bank and offered to pay 7% instead of <5%, they would probably bend over backwards to make the process much easier.

Bottom Line

Instead of concentrating on the additional paperwork required, let’s be thankful that we are able to buy a home at historically low rates.

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Being in the real estate business, we know how important it is to have your credit score be as high as possible.  You won’t be condemned to Hades for committing these seven deadly credit sins, but you’ll likely see your credit score fall. A good credit history and a high score can reduce the interest rate you pay on mortgages, credit cards and car loans.

How many consumers find errors when they check their credit reports? About 20 percent, according to a study by the Federal Trade Commission.

Have you committed any of these seven credit transgressions?

1. Paying late: You might think paying 30 days late isn’t a big deal. However, creditors and service companies report you as late when your payment is 30 days late. Although a single late payment won’t completely ruin your credit report, repeated 30 day late payments can stay on the report as a red flag for many years.

2. Collections: If a creditor refers your account to a collections agency that’s going to show up on your credit report. Even if you pay the collections company, this mistake can stay on your credit report for several years.

3. Public Recordings: Tax liens, judgments and bankruptcy have the potential to kill a credit rating. Judgments are valid for seven years whether they’re paid or not. Chapter 13 bankruptcy stays on your report for seven years, while a Chapter 7 bankruptcy lasts 10 years. An unpaid tax lien stays on your report for 15 years, a paid lien stays for seven years.

4. Charge Offs: At some point, most lenders who are not owed a significant amount of money may decide to charge off the debt if they feel they won’t be able to collect. Although the debt is listed as charged off, it will remain on a credit report for seven years.

5. Foreclosure: If you lose your home to foreclosure (or you sign a deed-in-lieu of foreclosure) the incident will remain on your credit report for seven years. If you can show there were special circumstances behind your foreclosure (like illness or job loss), you may be able to get another mortgage in three years.

6. Repossession: If your car is repossessed by your auto lender, you may still have a financial obligation. If the bank sells your car at auction for less than what you owe on the loan, you could owe the difference. Repossession leaves a negative mark on your credit report for seven years.

7. Settlements: Although settling a debt is one way of taking care of it, it’s not the most optimal way in the eyes of a creditor. If you owe a creditor $1,000 and you repay $500 in a settlement, the settlement will still leave a negative impact on your credit report and serve as a red flag to future potential creditors.

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Money Magazine says its time to Buy Now … not Later

In fact, it could be that now is the best time to buy … AND sell?  You might find this confusing but it is actually quite logical.  The cost of borrowing is going to go up as interest rates rise  I don’t know of a single financial or real estate expert who doesn’t agree on this.   So buyers will have to spend more for the same house or buy at a lower price.   As the affordability index goes down, sellers will likely have a more challenging time selling.  Potential home buyers must consider rising interest rates when thinking about the true cost of a home which is the price and the mortgage rate. The longer a buyer waits, the higher the mortgage payment will be if rates continue to increase (as is projected by Fannie Mae, Freddie Mac, the National Association of Realtors and the Mortgage Bankers Association).

Money Magazine, in its latest issue, agreed with this analysis as they also warned their readership of the same ramification if they waited to buy a home.  Here is what was stated in their article…

“BE MINDFUL OF RATES. The average interest rate on a 30-year fixed loan is predicted to climb from the current 4.4% to 5.3% by the 2015 spring buying season, according to Freddie Mac. For a $250,000 loan, that means that a borrower who waits would pay $136 more per month and an additional $49,090 in interest over the life of the loan. Will you need a big loan? Better to act soon before rates tick up.”

And the monthly increase Money mentioned did not take into consideration that prices are also projected to increase over the next year. Here is what the additional cost would be if prices rise by the 4.5% projected by the latest Home Price Expectation Survey AND interest rates go to 5.3%.   This projection is based on a $250,000 purchase which is very rare in the DC metro area, so the additional monthly costs of approximately $200/month would rise to $800/month on a $1 million purchase, or $1,600/month for a $2 million purchase.

However, the question is whether prices will increase as interest rates rise.  It is quite feasible that home values will stall as the interest rate level rises.   One thing is certain … today in the DC metro area, there is pent-up demand among buyers.   Selling a home in this market will more than likely get a very positive result and the future is and will always be … uncertain.

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Dodd-Frank’s effect on the mortgage industry

At this point, the industry is about 60 days into the new financing world, and there have been numerous challenges for both lenders and borrowers. Below are a few of the most notable issues:

• Lenders of all sizes face increased costs for the technology, people and other solutions necessary to comply with the regulations, especially if they had to update or install entirely new systems.
• Smaller banks felt the impact on their bottom-line, and many expect to either leave the residential lending business altogether or merge with a larger bank in the coming years, according to a recent survey, the Mercatus Center of George Mason University. Mortgage investors are stricter than ever with how their money is spent, which has created further difficulties in the mortgage originations market and made it harder to secure a loan.

How Long and Foster is Helping Mitigate the Impact

Fortunately, Long & Foster foresaw potential issues in the industry as a result of the Dodd-Frank Act coming into fruition and planned aggressively to minimize the impact on both their customers and their mortgage company, Prosperity Home Mortgage. In doing so, they are now able to more easily navigate the challenges presented by the new regulations, building technology systems and a corporate structure to address the complex requirements both today and in the future.

• With in-house processing, underwriting and closing, as well as company-managed appraisals, Prosperity has more control over the loan process, so it can better ensure that their clients get the best products for their needs.
• That control also means they have a better handle on all compliance efforts. In fact, of the three standard investor audits Prosperity has undergone to check compliance and credit, they have passed all three with a best-in-class result.
• Prosperity’s Capital Markets team has direct agency relationships and prices optimally to ensure its offerings are among the most competitive in the market today. For example, more than 60 loan products are available through Prosperity today, including the Advantage 55 Home Loan, a jumbo loan that takes advantage of lower Adjustable Rate Mortgage (ARM) rates with the stability of a fixed mortgage.

Unlike others in the industry, Prosperity has approached the new regulations head-on and is off to a brisk & steady start this year, funding more than 300 loans in February alone.

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More than 100 million people have moved within the past five years, according to data from the U.S. Census Bureau, and 48% of unemployed individuals have picked up their roots in search of a job over that timeframe. In fact, 2014 is expected to be a strong year for hiring, with 27% of employers planning to hire, according to the National Association for Business Economics, and a projected 8% bump in the number of recent college graduates who land jobs, per the National Association for Colleges and Employers. Many of these jobs will be here in the DC metro area which attracts more and more young people to our area.

As an advocate for the health of consumers’ wallets, WalletHub analyzed the relative employment opportunities in the 60 largest U.S. cities in order to give people a sense of where on the map the strongest job markets and greatest prospects for long-term financial security can be found. They used 13 unique metrics, ranging from job openings per capita and industry variety to cost of living and the prevalence of employer-provided health benefits. Here is what they found.

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