NEW TRENDS IN HOME BUYING, FINANCING
December, 2001 by Jim Woodard Some interesting trends are emerging in actions taken by persons who seek information about home buying, selling and financing via real estate sites on the Internet.
An increasing number of those Internet-surfers are interested in long-distance moves, as opposed to seeking information about real estate in their local market. Most of them are not yet working with a real estate broker, and most need assistance in lining up mortgage financing in addition to finding and purchasing a home.
These and other findings were revealed in a survey of about 4,640 people who were searching online for real estate and mortgage information. The survey was conducted by the Gooder Group, a real estate research and consulting firm.
“Although local Internet users still out-number long-distance users, the gap appears to be closing,” a Gooder report stated. “Internet users accessing information about real estate in their local area dropped from 63 percent of all users in 1998 to 44 percent this year.”
Conversely, the proportion of long-distance Internet users planning to move somewhere other than their home area increased nearly twofold – from 11 percent in 1998 to 21 percent this year, the survey revealed.
“These results reflect a more sophisticated prospective buyer of property who is comfortable with search engines,” said Dan Gooder, president of the Gooder Group.
Surprisingly, most Internet users seeking real estate information on Web sites are not yet working with a broker, according to the survey. Of total respondents, 84 percent indicated they had not yet chosen an agent. This represents a 14 percent increase over survey results in 1998.
About 36 percent of respondents indicated they planned to move within one to three months, while 29 percent planned to move in four to six months.
Most of the respondents said they needed mortgage assistance as well as information about a property purchase and relocation. Less than one-third of the survey respondents (29 percent) said they had been pre-qualified for a home loan. About 71 percent had not yet contacted a lender to become pre-qualified for a loan.
Finally, the survey revealed that more of those going to Web sites for real estate and mortgage information are homeowners, as opposed to renters. More than half (55 percent) reported they currently owned a home. That reflects a six percent increase since the 1998 survey. * * * There are some early signs that the economy may be improving, according to a report from The Meyers Group, a real estate research and consulting firm. Those signs might very well bring the “soft landing” everyone wants.
However, an improving economy may translate into higher mortgage rates, and that would create a new set of challenges for homebuyers and builders.
The historically low mortgage rates spurred home buying activity in November, as the sales volume of existing homes rose and unsold inventory levels dropped, the report noted. The median home price (nationally) decreased rather significantly, evidencing the fact that an increasing percentage of activity is for lower priced homes. * * * The two largest buyers of existing home mortgage loans in the nation – Fannie Mae and Freddie Mac – have announced an upcoming increase the size of loans they will purchase. This will directly affect decisions made by primary lenders and will make mortgage loans accessible to many more consumers.
Loan limits will be raised from $275,000 to $300,700 in 2002.
Fannie Mae and Freddie Mac also announced new limits for multi-unit loans for next year. For two-family residence loans, the limit will be $384,900; three-family loans will increase to $465,20; and four-family loans to $578,150. * * * Like a strong foundation that holds up a house, today’s historically low mortgage rates are holding up the home sales and refinance market. Those low rates are making it possible for an increasing number of prospective buyers to qualify for their needed mortgage loan.
It’s also creating a boom in the home refinance market. And, considering the very low rate of inflation, those interest rates may drop even lower in coming months.
There has never been a better time to qualify for a mortgage, according to a report from the Meyers Group, a real estate research and consulting firm. For the first time, today’s borrowers can qualify for a mortgage equal to almost four times their income.
Over the last 30 years, the average mortgage qualification ratio has been three times income. During the 1980s, the average ratio was only 2.4 times income. Not since 1972 has a borrower been able to qualify for a mortgage equal to 3.5 times income.
A household with $60,000 per year income can now typically afford to pay a $1,500 per month mortgage payment. Today, that $1,500 will pay the monthly payments of a $237,000 fixed-rate, 30-year mortgage.
Just last year, that same household could only qualify for a $203,000 mortgage. In 1982, it required $60,000 per year income to qualify for only a $111,000 mortgage. Those low mortgage rates are allowing thousands of additional families to enjoy the benefits of homeownership.
Consumer inflation (CPI) is remaining near historic lows, it was noted in the Meyers Group report. That will help the Federal Reserve push short-term rates even lower. The Fed’s primary concern regarding dropping rates is fueling inflation. Thus their fears have so far been unfounded.
More good news for home buyers: Freddie Mac, a congressionally chartered company and a major buyer of existing mortgages, now plans to extend its lowest mortgage interest rate pricing to more home buyers – including those who may have blemishes on their credit records.
This will have a significant impact on the home selling market. It will make lower interest rates and fees available to about 250,000 more loan applicants over the next four years, it was estimated. And it will save a large sum of money for families who take advantage of these loans – thousands of dollars over the term of a mortgage loan. |
