30 Mar Real Estate News: Buyers & Sellers Good News For All
Recent real estate news coming from DSnews.com and Housingwire.com is finally bringing some good news to both buyers and sellers. One of the most frustrating aspects of the current housing crisis has been the fact that although mortgage rates had dropped drastically and stayed low, which normally would spur home buying, during the same time, banks had tighten up their credits requirements beyond all reason. Even home buyers with good credit have been refused with banks doyling out credit only to those with tip top credit ratings. Buyers couldn’t get a break and sellers, whose house prices continued to drop, lost offer after offer when interested buyers couldn’t get a bank to give them credit. Well, to both sides, the following stories should offer some hope.
Housing Crisis to End in 2012 as Banks Loosen Credit Standards
Capital Economics expects the housing crisis to end this year, according to a report released Tuesday. One of the reasons: loosening credit.
Banks are also loosening loan-to-value ratios (LTV), which Capital Economics denotes “the clearest sign yet of an improvement in mortgage credit conditions.” In contrast to a low of 74 percent reached in mid-2010, banks are now lending at 82 percent LTV.
While credit conditions may have loosened slightly, some potential homebuyers are still struggling with credit requirements. In fact, Capital Economics points out that in November 8 percent of contract cancellations were the result of a potential buyer not qualifying for a loan.Additionally, Capital Economics says “any improvement in credit conditions won’t be significant enough to generate actual house price gains,” and potential ramifications from the euro-zone pose a threat to future credit availability. [DSnews.com]
Buying cheaper than renting in nearly 100 major U.S. markets: Trulia
Buying is more affordable than renting in 98 out of the nation’s 100 largest metropolitan areas — even in New York, Los Angeles and Boston, according to real estate company Trulia‘s rent vs. buy index. The index is based on asking prices for rental units and homes for sale on the company’s website between Dec. 1, 2011, and Feb. 29.
“As rents rise and prices stagnate, homeownership is becoming even more affordable, but rising rents create a dilemma for people who can’t afford to buy yet,” says Jed Kolko, Trulia’s chief economist. “Rising rents make it harder for people to save for a down payment, which is the biggest barrier to buying a home that aspiring homeowners face.”
Homeowners are choosing, or being forced, to rent rather than buy even though the latter is cheaper in key markets Trulia reviewed. But as they turn to renting, the influx of demand squeezes the nation’s rental supply, pushing monthly rents higher. The nation’s median rent stands at $712 per month — well above the average monthly mortgage cost of $647, Paul Dales, senior economist at Capital Economics,recently found. He estimated decreased vacancies in the home-rental market will push average rental rates up as much as 5% by early 2013, compared to 2.4% in January.
As a consequence of less willingness and ability to buy a home, households in rentals will rise by at least 850,000 a year over the next few years, Dales said. He expects rents to rise at an annual rate of 3% this year and remain at that level in 2013. “Assuming that the economic recovery gains firmer footing, in future years there is scope for rents to rise by around 4% a year,” Dales said.
Only in Honolulu and San Francisco is renting often a better deal than buying. However, Trulia points out that buying a home in these markets might make sense for people who plan to stay in their next home for at least five years and can benefit from the mortgage-interest tax deduction.
“Metros where homeownership is expensive tend to have stronger long-term economic growth and little room to build new homes, like Boston and the San Francisco Bay Area, where people expect home prices to increase over time,” Kolko says. “Buying is much cheaper than renting in slow-growing places with high vacancy rates and land to spare, like Detroit and Cleveland, where prices are unlikely to improve much in the future,” he says.
Top 10 metros in which to buy versus renting, according to Trulia: