2015 Housing Market Watch

Home Buying Predictions

We are over four months into the New Year, and the future of the housing market is looking bright. 2014 was the best year for the US economy since the recession of 2009. With the increase of jobs and average income, the forecast for this year looks good for homeowners as well as potential home buyers. We have some predictions for what’s in store for the housing market in the near future.

Millennials Will Buy Homes

Not all folks born between 1981 and 2000 are living with family as they struggle to pay off student loans. As the job market improves, many millennials are settling down and planning for their future. Millennials ages 25-34, make up 65% of first-time home buyers and are at the age when many marry and have families. This generation is larger than the baby boomer generation, and soon the market will begin to feel its impact.

Mortgage Rates Will Rise

Not all the effects from the improving economy will have potential home buyers beaming from ear to ear. On the other side of the coin is that mortgage rates will climb again. As banks no longer have to entice borrowers with low rates, be prepared for reasonable, yet higher rates. By the end of 2015, 30 year fixed mortgage rates should reach 5%. We predict that adjustable and hybrid mortgages will be much more in demand than fixed rate mortgages. If you are looking for the best rates, contact a professional mortgage expert today.

Credit- The Biggest Factor for a Home Loan

Many would-be home owners are stifled by strict qualification guidelines for bank loans. Many younger borrowers, and those with little or no savings will continue to have trouble getting loans. Access to credit has long been a major factor in procuring a loan. Contact the mortgage experts at MIG to learn more about credit and home loans. New policies by the Federal Housing Administration and top lenders Fannie Mae and Freddie Mac have loosened guidelines. If these new policies don’t make a big difference, it will become increasingly obvious that credit is still one of the biggest factors in qualifying for a home loan.

Foreclosure Crisis Ending

In 2014, there has been a major decrease in foreclosures across the country. It’s been seven long years since the foreclosures skyrocketed, but in 2015, we will see that come to an end. As we see numbers projecting good things to come for the housing market, housing is still a local business. Conditions are different for every neighborhood, each with unique trends and data.

The Home Buying Frenzy Will Lessen

Fading inventory and the decrease of investors in the housing market will slow down the buying frenzy of years past. Rising prices of homes will be less attractive for investors and they will slowly exit the market. Bidding wars and all-cash offers from these investors leaving the market will allow for a more balanced market.

Low Down Money Down Mortgages

Low Down Payments are Making a Comeback

One of the biggest hurdles for many first-time-homebuyers, is coming up with the down payment. Recently, lenders have been making it easier for borrowers with less savings, to buy homes. Requirements for down payments are relaxing again as mortgage backers and federal government programs are attracting new home buyers.

FHA Insurance Costs Drop

The Federal Housing Administration has long ensured loans for home owners with low credit scores, offering low down payments. Yet, until 2015 there have also been strict insurance requirements. Insurance premiums for FHA loan have dropped considerably. These premiums have dropped from 1.35%, all the way down to .85%. Many believe that hefty insurance premiums were backlash from attitudes that stemmed from the housing crisis of 2008-2009. Now lenders are offering more reasonable insurance premiums for those who previously had high payments.

Easier Credit Requirements

Some politicians and analysts have criticized the loosening of credit requirement, warning that easy credit loans with small down payments were the cause of the housing crisis. But new rules for mortgage loans and more careful underwriting by the lenders will help protect the market.

Fannie Mae and Freddie Mac Mortgages

Freddie Mac and Fannie Mae back more than 50% of the country’s mortgages. At the end of 2014, both companies announced that they were cutting minimum down payments from 5% to 3%. Freddie Mac will begin distributing this mortgage product in March, while Fannie May has already put these loans into effect. These loans are for first-time buyers or homeowners looking to refinance their mortgage. The Freddie Mac program that kicks off in March, will be for low income home buyers with restricted income.

VA and USDA Rural Loans

Both of these types of loans give borrowers low down payments. USDA rural loans are backed by the US Department of Agriculture. USDA rural are not just for farmers, in fact, many of these loans are given to borrowers in areas that are barely considered rural. To obtain one of these loans, you need good credit, and a dependable source of income, and meet property and income requirements.

VA loans are selling like hotcakes, quickly approaching the number of FHA loans given annually. VA mortgage backing gives veterans and surviving spouses to buy homes with no money down, low insurance costs, and reduced closing costs. Credit and income requirements for VA loans are more flexible than traditional home loans.

Easy Ways to Be Energy Efficient

Energy Efficient Home Improvements 

Finding ways to cut down on energy can save you money and add value to your house. The federal government’s guidelines for energy efficiency are regulated by the Energy Star Program. This program offers rewards for qualifying home buyers and gives more buying power to homeowners who adopt energy efficient solutions. There are many ways to lower your utility bills and increase your equity. In the spirit of The Housing Hour's series on Energy Efficiency in Homes, this article will focus on some simple energy solutions that can save you money.

Home Energy Rating System 

A home’s energy rating is based on the Home Energy Rating System Index, which is the national standard for analyzing the energy efficiency of a home. 

Besides loans and government grants, there are many cost-effective ways to lower your energy consumption and get a better home energy rating. Following are few simple ways to reduce your energy consumption. These easy improvements can make your home more efficient and even inspire you towards more ambitious energy saving projects.

The Housing Hour's very own energy expert Scott Higgins can also come out and audit your home and help you determine what your rating is and how to improve it. Here is our show on energy efficiency in the home and my personal testimony on Scott's service and what I learned from it.

Compact Fluorescent Bulbs 

Fluorescent light bulbs will last up to ten times longer than regular light bulbs. According to Energy Star, you can save an average of six dollars a year on your energy bill. It may not seem like much, but as things like that begin to add up, you can make a significant dent in your energy expenses.

Low Flow Fixtures

With low-flow fixtures for your shower or water pipes, you can save more than just a few bucks each year. Using low-flow fixtures can decrease the amount of water you consume by half. This means you can save over $100 a year. Consider getting low-flow shower-heads or faucets for a quick, inexpensive fix.

Home Insulation 

Proper insulation keeps your house warm during cold seasons and cool during warmer seasons. Insulation can reduce heating costs to by twenty percent. Insulation is cheap and can also be used to prevent water pipes from freezing.

Weather Stripping

Energy Star states that homes without weather stripping lose at least one third of all cooling and heating from air leakage. Weather stripping can cost less than a happy meal and can save you big time. It may surprise you how much sealing those small drafts can make a big difference in heating and cooling.

Programmable Thermostat

According to Energy Star, programmable thermostats are more accurate than standard thermostats, and can save homeowners up to $150 annually.

Tankless Water Heater

If you purchase a tankless water heater, you can receive a federal rebate. Tankless water heaters last much longer than regular water heaters and can save home owners 30 percent on their water bill.

To learn more about energy efficiency in your home, feel free to stream or download the following episode of The Housing Hour, where we discuss our Energy Efficiency in Homes series.

USDA Rural Loans

USDA Rural Development Offers Grants and Loans for Energy Efficiency

The Rural Energy for America Program, or REAP, gives guaranteed loan financing and grant funding to producers of agriculture and small rural businesses. REAP was created by the USDA with the intentions of helping Americans afford renewable energy systems, and help make energy efficient improvements. This program furthers American energy independence by increasing the supply of sustainable energy, and encouraging the use of efficient energy systems. This way, America can depend less on foreign oil, and promote a clean environment.

REAP provides grants of up to $100,000 for companies or individuals that conduct energy audits and help provide information on renewable energy sources. As time goes on, these investments in energy for the private sector, will lower the costs of energy for business and producers of agriculture.

How has REAP helped?

The REAP program was created as part of the 2002 US Farm Bill. There was so much success since the program began, that it was reauthorized by Congress in 2014 with a minimum guarantee of $50,000,000 in yearly funding for 5 years. Successful projects funded by REAP are helping rural American design renewable energy systems, and put wealth back into their communities.

The USDA has given out $545 million, for over 9,000 REAP projects since 2009. The majority of these grants and loans went to projects that focused on renewable energy systems. Annually, these projects are expected to generate over 6 billion hours of electricity! To learn more about USDA rural housing loans stream or download the following episode of The Housing Hour.

Who Qualifies for REAP?

To qualify for REAP, you must be an agricultural producer with at least 50% of your gross income coming from agriculture. Small businesses in rural areas may also receive money from REAP. To get a grant or loan, you must have no credit problems or outstanding debts. If you don’t think you will qualify for REAP but still want to look into USDA loans, visit MIG online to learn more about USDA rural home loans.

Elligible Projects for USDA Loans

The USDA offers grants for up to 25% of the total project costs, and guarantees loans for up to 75% of the total costs. Recently the USDA announced that it will expand the application deadline, by accepting loan and grant applications all year long.

Projects that are eligible to receive funding must use commercially available technology. This means energy from solar panels, hydro power, hydrogen, renewable biomass, wind and more. Improvement projects that are eligible for REAP include:

• Heating
• Lighting
• Insulation
• Ventilation
• Fans
• Automated Controls
• Reduced Consumption of Energy

Tips for First-Time Homebuyers

Home Buying Tips

Buying a home can be an exciting and stressful endeavor. Especially for a first time buyer who isn’t sure how to navigate their way through the real estate market. According to a recent study by the National Association of Realtors that 33% of home buyers in 2014 were first-time home buyers around the age of 30. The market is filled with first-time buyers, and there are steps you can take to stay prepared and ahead of the curve. Visit The Housing Hour to learn more about all things home and mortgage related, there you’ll find a wealth of information and helpful tips. 

Know Your Credit Score

Make sure you are on in control of your credit score and your monthly budget so you know what can spend. Lenders will use your credit history and potential to decide the terms of your mortgage. You can get a free credit assessment and any other advice by contacting a loan officer. 

Find Out How Much You Can Afford on a House

Calculate the maximum amount you can afford. Add up all your monthly debt so you can see how much of your income goes toward covering those costs. This is known as the back end ratio. Most lenders look for a back end ratio that is under 43%. Lenders will also want to see if you have a steady source of income and how much debt you have before determining the loan amount. If you want to speed up the process, think about getting pre-approved for a loan. This process is very involved, but it definitely speeds up the approval of your loan. Click Here for some great tools to assist you calculate costs. 

Understand the home buying process

Buying a home is one of the most important decisions you can make, so you’ll want to know what’s involved from start to finish. Your broker real estate agent can explain all the specific details about shopping for a home, but it’s good to have a basic idea of how it works. Here’s a basic example of the events involved in buying a home from start to finish. 

1. Get pre-qualified
2. Find a Home. Search through listings, find an agent, or through networking. Then make an offer on the home. This can involve some negotiation, and then you will make a deposit to go into escrow. This is called earnest money normally because you are promising to buy the house unless there are any serious complications. Once you have placed the earnest money the house is off the market for the most part.  Have the home inspected to make sure everything is on the up and up.  If there are any major problems, you may cancel your offer at this time or renegotiate.  
3. The Mortgage Process...You need a trusted company and advisor to walk you through this.  Many things will occur during this time. (Credit qualifying, appraisal etc...)
4. Close. Closing is the last step to owning a home. Get out a pen, because you’ll be signing a lot of papers, and that’s it.  

Build Up Your Savings

This goes without saying, but saving up your money can be very beneficial during the home-building process. You can make a larger down payment, fund improvement projects or repairs, or to pad your financial profile. To learn more about the world of mortgage lending and real estate stream or download The Housing Hour’s episode on The Liquidity Factor.