BTC Newsletter - October 2014

To: Realtors AND Loan Officers            

From: John M. Brennan, Attorney - President, Brennan Title Company

 

 

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AS I WRITE THIS NEWSLETTER, I am mindful of the volatility in the Stock and Bond market last week and the immediate reaction of the Bond Market which, temporarily, dropped interest rates. What is clear by this movement is that the BIAS on interest rates continues to be toward sustained lower rates in light of continuing uncertainties over "real employment numbers", the sluggish international economies and the slower than expected housing market which at this date is below the number of sales reached to date in 2013. In the October 17th issue of the Washington Business Journal, it reported that in September, the number of sales in the Greater Washington, D.C. area decreased by 1.4% driven by a large (5.2%) drop in sales in Northern Virginia. At the same time sales in suburban Maryland "increased" by 3.7% while sales in Washington, D.C. increased by 0.7%. Prices were almost identical to 2013 at the average of $364,616 in '13 and $364,944 in '14.  

YOU ARE PROBABLY HEARING LESS ABOUT the lack of inventory as a result of the trends stated in the preceding paragraph. The number of active listings on the market has increased by a whopping 31% in the Washington area housing market! A recent article in The Sunday Capital (now owned by the Baltimore Sun), dated October 12th 2014, stated that "Maryland has just recorded the largest influx of "real estate owned (REO)" properties in its history with 2,859 lender purchases thru April and June according to the state Department of Housing and Community Development". While there is no breakdown as to the location of these properties, historical experience would indicate that the largest number of homes will be in Baltimore City and Prince Georges County!

ON TUESDAY OF THIS WEEK (October 21dst) Federal Regulators "took a big step toward easing post crisis lending rules, agreeing to drop a proposed requirement that borrowers make a 20% down payment in order to get a high quality mortgage." (Wall Street Journal, October 22, 2014) Mel Watt, director of the Federal Housing Finance Agency announced that Fannie Mae and Freddie Mac will underwrite loans with as little as 3% down payment!!! A little recognized part of this announcement is that the regulators have reached agreement with lenders regarding what kind of mistakes would require lenders to repurchase mortgages. This may be the most significant factor of the announcement in light of prior statements by the major lenders that they were cutting back on lending until some limitation of liability was given. Of note is the report in the article by the Wall Street Journal that these concessions may be in response to a belief in (current Obama) administration circles that the "post crisis attempts to limit credit may have gone too far" Also, there has been a modification of credit scoring standards which are supposed to lessen the impact of "bad medical debts and ignore old unpaid debts. You should be aware, however, that there is no current information that mortgage underwriters will adopt this new scoring method or that underwriting standards have changed. Nonetheless, given time and some political pressure, it seems likely that these new standards will find their way into mortgage credit scoring.

homeowner-couple.jpg THE MARYLAND DEPARTMENT OF HOUSING and Community Development has just released a Special Report on Maryland Housing. Here is an interesting statistic supporting the value of homeownership over Renting. They report that..."rental housing costs have escalated substantially...housing costs in comparison favor owning over renting in that housing costs accounted for 32.9% of the median renters income compared to only 22.1% ...income of a homeowner" Moreover, the report goes on to state that increases in rental costs are up 3.4% for renters while increases in homeowner costs have gone up a mere .8%. Since the largest segment of renters are in the 25 to 54 age group make up 65% of all renters, this presents a pool of potential, future homeowners, especially in light of the continuing increase in housing affordability index (now at 140%). A level of 100% indicates homeowners have more than enough to qualify for a mortgage on a median priced home. Also, good news for the inventory of new homes is that housing starts increased in Maryland by 30.5% to 1903 new starts, the highest volume in 10 months.

FORGIVENESS OF DEBT TAX LIABILITY EXEMPTION (only available thru 12/13 at present) is not always available to a borrower who refinances his home but does not use the money to improve the residence. If the property is, later, foreclosed upon and there is forgiveness of debt, the taxpayer/owner may not be exempt from paying tax on the forgiven debt!! The exemption rule only applies to mortgage debt used to acquire or improve the same residence!!

NOTWITHSTANDING THE EARLIER COMMENTS on the slow increase in values of single family homes, the Washington D.C. "Condominium" market has seen an amazing price increase for NEW units, up thru September of this year by 11.9 % over the comparable period in 2013! The increase of newer condo units, built less than two years ago, is contributing to the average value of condo's overall as these units offer more modern amenities!

WE HAVE SEEN AN INCREASE OF NEW APARTMENT CONSTRUCTION for rent in our area over the past five years even while rent rates continue to increase-the good news for the real estate market is that with continuing low interest rates the difference between renting and buying is favoring ownership, creating a buying opportunity for renters who are not able to deduct taxes and interest from their incomes!! Those of us who can recall the apartment boom of the 60's and 70's remember that these apartments became condo's as soon as the buying market demand picket up and became listing and sale inventory!

THERE IS MUCH WRITTEN ABOUT THE CONTRACTION OF the Greater Washington gross regional product in comparison with 2013, however, keep in mind that last fall we had Sequestration (contribution to a decline in Government Employment), a 16 day Federal Shut Down, the Federal Reserve talking about raising interest rates and a horrible winter weather season! While contractions in our area are rare and unusual, worthy of note is that during this period, the median sale price for the Washington Area Housing Market was up 1.3% to over $386,000( September 12th 2014 issue of the Washington Business Journal). Average days on the market, while up are still a healthy 50 days and, contradicting the belief that there is no inventory, there are over 21,000 active listings in this housing Market!! Moreover, in the period from July 0f 2013 to July 2014, the Washington area ADDED almost 20,000 jobs even while the Federal Government job sector suffered a 8.1%decline!!! Not Bad!!
HERE ARE SOME INTERESTING DEMOGRAPHIC TRENDS regarding the number of Marylanders over age 60 moving into the various counties! Anne Arundel, Carroll, Hartford and Howard are ALL expected to have over 50% increase in population of this age group over the next 26 years! This group is a large homebuyer segment and will, in all probability, be looking for smaller homes with little or no maintenance, recreational services and nearby medical facilities! Many will be all cash buyers, having sold a large home with little or no mortgage!! Loan Officers, will note that this will provide a growing opportunity for lenders who do Reverse Mortgages!
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WANT TO KNOW WHERE THE MONEY IS?? In the Baltimore Region, eight of the top ten wealthiest zip codes were in Howard County (judging by Median household income), with zip codes in Baltimore City and Anne Arundel Counties placing in the ninth and tenth positions!

In the Washington D.C. Region, Great Falls, Virginia is the wealthiest. Northern Virginia and Montgomery County share the 10 ten spots. (Baltimore and Washington Business Journal August issue).
LOOKING FORWARD TO THIS YEAR END and the first quarter of next year, we are in so much better economic and political climate that it seems likely we will experience a smooth market thru these periods. Possibly, the upcoming November Election may cause a pause in activity, but, economists are predicting an increase in holiday sales and seem to believe that the American Consumer is in a much more positive mood !!
WE HERE AT BRENNAN TITLE COMPANY, welcome your questions and suggestions. We have been following and adjusting for the upcoming changes to the Closing Disclosure and Closing Estimate as well as the more stringent rules regarding consumer privacy, encryption and consumer protection mandates which will take effect in August of 2015!

OF NOTE, WE WILL BE OFFERING SEMINARS for education credit about such topics as foreclosure, short sales and the upcoming Consumer Finance Protection Bureau mandates to lenders and service providers! If you would like to attend any of our seminars please send me an e-mail and we will be sure to invite you to each seminar as they are scheduled!! I look forward to serving you in any of our offices in Maryland, Washington, D.C. Northern Virginia, Delaware and West Virginia!  

 

Please feel free to contact me at any time by e-mail or phone at jbrennan@brennantitle.com or 301-261-8177-my direct line. 

 

 

John M. Brennan

 

Attorney

 

 
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