Real Estate Report: Financing in 2014

 

21 12월, 04:06www.eveningsun.com

 

As 2013 comes to a close, we look back to see what has transpired and look forward to what may and what will occur. As for this year, we saw record low rates in the first half, and refinancing activity at high levels. In June, speculators drove up rates almost a point on fears of Fed tapering. Rates recovered, but never got back below four percent on 30-year fixed.

 

 Home buying continued to grow along with home values. The bump in rates added some strain to the housing market and the major banks started massive layoffs in their mortgage divisions. Some lenders focused entirely on refinancing and when rates shot up, they were ill prepared, with many closing their doors.

 

 Delmont: Real Estate Report

 

 Foreclosures have dwindled as have distressed sales, such as short sales, etc. and homeowners are moving into positive equity territory. The Fed surprised everyone by not tapering in September (I was on of the few that predicted correctly), and surprised most again with a December tapering announcement (I was wrong on this one, thinking it would be in the first quarter).

 

 As we head into The New Year, we have several knowns and many unknowns. We know that The Fed will try to steer the economy back to "normalcy" by tapering the amount of bonds it purchases. All indications are that The Fed will still purchase MBS (Mortgage Backed Securities) while it reduces the amount of bonds purchased.

 

 This should help mortgage rates. As for The Federal Funds Rate, most do not expect changes there until 2015, so loans based on The Prime Rate should remain status quo. Just remember what I warned about a couple of months ago regarding Home Equity Loans maturing in the coming months since that will precede and rise in The Prime Rate.

 

 Starting in April, Fannie has increased the cost of loans. However, most lenders will price in the bump in January to hedge for delivery by January. While this will add to the positive growth in Fannie's balance sheet, it will hit homebuyers in the pocket. While many feel that the timing is poor given housing's recovery, the primary goal is to attract new investors into the lending market so Fannie, Freddie, FHA and VA are not the only game in town.

 

 Another concern from lenders is the advent of QM (Qualified Mortgage). There are still varying opinions on what fees are included and excluded and the regulators are quietly stating that they may be lenient given the ambiguity. For consumers, it means that you may get different answers when calling different lenders.

 

 Sadly, the above rules will affect the people least ready to handle the higher fees and stricter rules. Those with credit scores below 740 will feel the increases by Fannie loans and those borrowers buying under $150,000 will feel the effects from QM. The good news is that if the economy does recover, incomes should rise, thus negating some of the effect.

 

 In the next column, I will review my predictions for 2013 to see how I fared and offer my predictions for 2014. Until then, have a prosperous, healthy and happy New Year!

 

 Carl Delmont has been in the lending and financial markets since 1987. To submit questions or topics, email Carl@freedmont.com.