During the fourth quarter of 2018, 14.2% of the homeowners in St Louis with a mortgage, were underwater on their mortgage, meaning they were in a negative-equity postion, according to data just released by ATTOM Data Research. As the table below shows, this is the lowest rate since the 4th quarter of 2017 when the St Louis undertwater homeowner rate was at 13.8%. On a national level, just 8.8% of homeowners with a mortgage are underwater which puts the St Louis rate at 161.5% of the US rate.
There were 37,721 homes sold in the St Louis metropolitan area during the past 12 months as reported byMORE, REALTORS. Of those, as the chart below illustrates, conventional financing made up the lion’s share of the sales. Conventional mortgages accounted for 18,967 home sales (50.3%), followed by cash transactions with no financing that accounted for 7,109 sales (18.9%), then 6,353 (16.8%) sales with FHAloans, 2,333 (6.2%) with VA loans, and 770 (2.0%) sales financed with USDA financing. The remaining 5.8% of the home sales were financed with one of roughly 30 other lessor popular financing methods.
The overall mortgage delinquency rate in the U.S. fell in August to the lowest level in over 12 years, according to a report just released by CoreLogic. According to the report, 4.2% of all St Louis home mortgages were 30+ days delinquent in August 2018, a decline of over 14% from a year ago when the rate was 4.9%. During the same period, seriously delinquent mortgages, those that are 90+ days late, in St Louis dropped from 1.8% a year ago to 1.4% in August 2018, according to the report.
According to a report just released by ATTOM Data Solutions, 16.9% of the homeowners in St Louis with a mortgage are “equity-rich”, meaning their loan balance is 50% or less of their home’s estimated value. As the table below illustrates, this is an increase from 15.8% during the 2nd quarter as well as the 1st quarter of this year.
St Louis increase in equity surpassed the U.S. average but fell behind Kansas City and Chicago…
As the table below shows, during the past 2 years, the percentage of equity-rich homeowners in St Louis increased from 16.0% to 16.9%, an increase of nearly 6%. However, in Kansas City, the rate went from 12.0% to 21.0%, an increase of 75% and in Chicago from 15.0% to 16.8% for an increase of 12%. Nationally, however, the rate increase just 1% during the same period, from 23.4% to 25.7%.
During the 3rd quarter of this year, 14.4% of the homeowners in St Louis with a mortgage were “seriously underwater”, meaning they owe at least 25 percent more than the estimated value of their home, according to a report just released by ATTOM Data Solutions. This is the lowest rate this year, down from 15.6% in the 2nd quarter and down from 14.7% in the first quarter of 2018. For the last quarter of 2017, St Louis homeowners that were seriously underwater had fallen to 13.8%.
Kansas City and Chicago have fared better over the past 5 years…
As the table below illustrates, our neighbors to the west and northeast, Kansas City, MO and Chicago, IL, have both seen a greater margin of improvement in their underwater homeowners over the past 5 years. Kansas City went from 23.1% of their homeowners with a mortgage being seriously underwater in the 3rd quarter of 2013 to 9.8% during the 3rd quarter of this year, a reduction of 58% in the rate of underwater homeowners. Chicago, during the same period, went from 35.8% to 13.2%, a reduction of 68%. Meanwhile, here in St Louis, the rate went from 25.4% to 14.4%, a reduction of 40%.
St Louis Seriously Underwater Homeowners – 3rd Quarter 2018
Will technology send real estate agents into near extinction like it did with travel agents and may be doing with taxi-cab drivers today? This is a topic of frequent conversation in our industry, especially with dozens of new, well-funded startups, many with new and different business models, all gunning for a piece of the residential real estate industry.
I don’t like Kool-Aid® and don’t drink it..
Before I start, for the naysayers out there that may think since I’ve spent my entire adult life in real estate that, of course, I’m going to come to the conclusion that real estate agents are critical and you can’t live without one. Well, to quash those fears, just read some of the articles I’ve written here over the past 10 years, you’ll know I don’t drink the Kool-Aid®. I do not recite the chant of REALTOR® cheerleaders or anyone else unless I completely believe what I’m saying and feel qualified to speak on the topic. In fact, there have been many times my opinion on a topic, such as on the mortgage interest deduction, was in direct contrast to that of the National Association of REALTORS®.
Real Estate Agents serve as “The Goldilocks Zone” for consumers….
Forgive me for dragging a science lesson into this real estate conversation, however, it makes for a good illustration of one of the first areas of significance of a real estate agent I want to discuss. In astronomy and astrobiology, there is an area around the sun that is habitable, by not being too close to the sun, nor too far from the sun, that is referred to as the circumstellar habitable zone (CHZ), or by it’s “street name”, The Goldilocks Zone.
I think this is a good metaphor for a real estate transaction. Think of the sun as the buyer and the seller as earth. The seller needs the buyer however, they really need to keep their distance from one another otherwise it will most likely not end with a successful tranasction. The reason I say this is homeowners often have an emotional attachment to their home and, believe it or not, often think their home is worth worth more than it actually is. The buyer, on the other hand, has zero emotional attachment to the home, sees flaws and imperfections in it that are invisible to the current homeowner and, in most cases, thinks it is worth less than the seller. So, with this in mind, if the buyer and seller, with their diametrically different thoughts on the home are put together in one room to negotiate a sale, odds are it won’t end well.
There is a better way! Real estate agents operate in the “Goldilocks Zone“, that safe place that is close enough to each party to the transaction to be effective, but not so close so as to hinder the negotiation process. When a buyer and seller are both represented by real estate agents, they (the buyer and seller) normally do not have any direct contact with each other no do any negotiation between them, but instead allow their respective agents to handle those things. This keeps the emotion out of the picture and also filters what is said through a professional that will filter the message removing anything that wouldn’t be in their clients benefit. An experienced agent, without an emotional attachment to the transcation, will be able to think and act much more objectively, than their client typically and their experience will help them know when and how is the best manner and method to convey offers, negotiate, etc.
There are many more reasons while agents are critical to a successful real estate transaction, some of which I’ll cover in future articles over the next few weeks, but here’s the first one:
Because real estate agents can operate in the “Goldilocks Zone” which is a critical zone to be in for a real estate transaction to have a successful outcome.
The Mortgage Bankers Association (MBA), in their Mortgage Finance Forecast released this week predicted that interest rates on home mortgages will continue to rise this year and will hit 5% early next year. According to the report, the interest rate on a 30-year fixed rate mortgage is expected to come in at an average of 4.6% for the 3rd quarter, which just ended and then rise to an average of 4.9% during the last quarter of this year. Interest rates are then forecast to hit 5.0% during the 1st quarter of 2019, rise to 5.1% by the second quarter, then stay around 5.1% through the end of 2020, according to the report.
One of the nice things about St Louis has always been that it’s an affordable place to live and an affordable place to own a home. However, as St Louis home prices, and mortgage interest rates, continue to increase, home affordability in St Louis has declined.
As the table below, which is based on data from ATTOM Data Research, shows, all of the counties reported on in the State of Missouri saw home affordability decline during the 3rd quarter with the exception of Jackson County (Kansas City). All of the counties had a decline in home affordability from a year ago with St Louis County seeing the biggest decline at 11%.
St Louis Home Affordability – 3rd Quarter 2018
St Charles Homeowners spend the largest percentage of income on a home…
In St Charles County, home buyers spend, on average, 41.3% of their income to buy a home, the highest percentage of the reported counties in Missouri. In the city of St Louis, the percentage of income spent on housing was just 21.9%.
Percentage of Annualized Wages Necessary to Buy A Home
Mortgage delinquency rates, the precursor to foreclosures, continue to fall as the real estate market continues to perform well. The 30-plus day mortgage delinquency rate for June 2018 fell to 4.3% of all outstanding mortgages down from 4.6% a year ago, according to a report just released by CoreLogic. Frank Nothaft, the Chief Economist for CoreLogic, attributed the good news to “A solid labor market” going on to say that June’s national unemployment rate of 4% was “the lowest for June in 18 years“.
St Louis distressed home sales falling quickly…
With the economy and real estate market doing so well, distressed home sales (short-sales and foreclosures) continue to decline. As our chart below shows, the 12-month trend line for distressed home sales in the 5-County core St Louis market (city of St Louis and the counties of St Louis, St Charles, Jefferson, and Franklin) fell to 1,137 sales for the 12-month period ending August 2018. This is a decline of 30% in distressed home sales in St Louis, from a year ago when there were 1,632 distressed home sales during the prior 12-month period.
House flipping, something that has become quite popular among investors over the past few years and has even spawned several reality TV shows, continues to decline in terms of the number of flips. This is certainly not due to a lack of interest but instead a lack of opportunities. Many flipping opportunities are the result of foreclosures and with the mortgage delinquency rates continuing to improve resulting in declining foreclosure rates, the end result is few opportunities for investors to flip homes.
In St Louis, during the 2nd quarter of 2018, there were 835 homes flipped in the St Louis metro area, a decline of 23.0% from the quarter before and a 4.7% decline from a year ago. This is down 32.5% from the peak during the 3rd quarter of 2005 when there were 1,237 homes flipped in St Louis.
The table below shows the 2nd quarter house flipping data for St Louis, from ATTOM Data Services and includes the median size and age of the homes flipped, as well as median time to flip, prices and profits.
Today, Freddie Mac, through their Primary Mortgage Market Survey® revealed that for the current average interest rate on a 30-year fixed-rate mortgage is at 4.52%. which is just a slight decline from a week ago when the rate was 4.53% and the same as the week before that. After 30-year fixed-rate mortgages hit 4.66%, the highest rate in 7-years, back in late May, they have been trending downward a little, which is good news for the real estate market!
30 Year Fixed Rate Mortgage Average – 2000 – Present
Mortgage interest rates have been on the rise and hit their highest level in seven years toward the end of May, however, the higher rates don’t appear to be having an effect on the number of people in St Louis obtaining home loans yet. The table below is based upon the latest data from ATTOM Data Research, just released yesterday, and shows that there were 6,830 home purchase mortgage loans obtained in the St Louis metro area during the 1st quarter of this year. This represents an increase of nearly 10% from the number of home purchase mortgage loans that were obtained in St Louis a year ago. Even if we go back to the first quarter of 2016, when the average 30-year fixed rate mortgage rate was below 4%, there were just 6,093 home purchase loan originations, 12.1% fewer than the most recent quarter.
The number of St Louis homeowners refinancing their home mortgages during the first quarter of this year dropped over 10% from a year ago and was down over 15% from the first quarter of 2016.
During the first quarter of this year, there were 600 home “flips” in St Louis or about 8.6% of the homes sold in St Louis, according to data just released by ATTOM Data Research. This rate of flipped homes is up 5% from the prior quarter, however, is down 7% from a year ago. The decline certainly doesn’t have anything to do with a lack of interest by investors in flipping, it has more to do with a low inventory and declining mortgage delinquency and foreclosure rates reducing the opportunities.
What is a “flipped” home?
In the report issued by ATTOM Data Research, any home or condo that was sold during the first quarter of this year in an arms-length sale that had previously had an arms-length sale within the prior 12 months as well, was considered a “flip”. Since homeowners don’t tend to buy a home only to turn around and resell it within a year, when this does occur it is typically the result of an investor buying a property, renovating it, then reselling it.
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Freddie Mac has been tracking average mortgage rates since 1971 through their Primary Mortgage Market Survey® and yesterday it revealed that, as the chart below shows, the average interest rate on a 30-year fixed-rate mortgage was at 4.6%, the highest rate in over 7 years. The last time mortgage interest rates were this high was back on May 5, 2011 when the 30-year rate hit 4.71%.
Even with the recent increase, mortgage interest rates are still reasonably low from a historical perspective. As the second chart below illustrates, 20 years ago the rates were around 8 percent. Mortgage interest rates then spent nearly a decade around the 5% – 6% range before beginning the descent after the housing bubble burst in 2008.
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According to a report just released by HSH, St Louis is the 8th most affordable metro area to buy a home in and one of just 17 metro areas where an income of less than $50,000 per year will buy a median-priced home. The report is based upon data from the 1st quarter of this year when the median-priced home in the St Louis MSA was $162,400 (a 4.84% increase from a year ago) and the average mortgage interest rate was 4.41% (an increase of 0.36% from the previous quarter) resulting in a house payment (principal and interest portion only) of $933.44. Depending upon the loan type and credit-worthiness of buyer, it will vary, but under typical circumstances, a person with an annual salary of about $40,000 would qualify for the house payment on a median-priced home in St Louis.
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The percentage of homeowners with a mortgage in the St Louis MSA that were seriously underwater in the last quarter of 2017 was 13.8%, about half the rate from 4 years earlier, according to data just released by ATTOM Data Solutions. For this report, a homeowner is considered “seriously underwater” when the total of their home mortgage(s) is equal to, or greater than, 125% of their home’s current value.
Also shown on the table below is the percentage of equity-rich homewners in the St Louis MSA. An “equity-rich” homeowner is at the other end of the spectrum from an underwater homeowner with their mortgage total being 50% of less than the current value of their home.
You can click the table below to go to the complete information showing the data for the 5-counties that make up the St Louis core market.
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St Louis MSA Underwater Homeowners & Equity-Rich Homeowners
(Click on the table to be taken to the complete report by county)
There is little doubt that lower-income individuals and, subsequently, lower-income neighborhoods, were impacted more negatively by the housing market bubble burst in 2008 than other areas. This resulted in extremely high mortgage delinquency rates, high foreclosure rates, and declining home values. Afterward, citing “loose” lending standards, sub-prime mortgages, etc, the mortgage market tightened the reins on mortgage lending making it more difficult for everyone to get a loan, but particularly, those folks in the lower income brackets.
As time has passed, home loan requirements have eased and it is now easier to obtain a home loan. Some of the requirements that have eased are minimum credit scores, down-payment requirements as well as rules affecting seller paid closing costs, gifts, etc, which has, in particular, helped lower and moderate-income home buyers. The Consumer Financial Protection Bureau (CFPB), the government “watch-dog” of all things financial, tracks and reports data related to home mortgages which reveal that, in fact, home mortgage lending has increased to the highest levels in over a decade in low and moderate-income areas. The CFPB charts below reveal:
Home loan volume in low-income areas topped $3.8 Billion in November 2016, the highest level since the CFPB began tracking this data in January 2009. The CFPB forecast, predicts that, once the data is in, a record $4 Billion in home loans will be reported for August 2017.
Home loan volume in moderate-income areas hit $21.7 Billion in October 2016, also the highest level since the CFPB began tracking this data in January 2009. The CFPB forecast, predicts that, once the data is in, a record of $23+ Billion in home loans will be reported for July 2017.
The middle-income areas have fared well also with home-loan volume hitting a record $76.8 Billion in October 2016. Unlike the low and moderate income area forecasts, the CFPB is forecasting a slight cooling in the middle-income areas with home loan volume dropping to $73.5 Billion for June 2017 and then slightly lower in July once the data is in.
High-income areas are trailing the other areas in terms of home loan volume having peaked at $116 Billion over 4-years ago, in January 2013. The CFPB is predicting lending data will show $90.5 Billion in home loans in high-income areas for June 2017.
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As of the end of September, in thecity of St Louis, 7,265 of the 104,288 residential properties in the city were vacant, giving the city a vacant property rate of 6.97 percent, the 2nd highest of all the counties in the U.S., according to a newly released report by ATTOM Data Solutions. The number of vacant properties in the city of St Louis increased 4.4% from the same time last year. Baltimore Maryland had the highest vacant property rate at 8.14 percent.
As the table below shows, St Clair County, Illinois was the next St Louis area county on the list coming in at number 11, followed by Madison County, Illinois at #42, St Louis County at #47.
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St Louis Area Vacant Property Rate By County- 3rd Quarter 2017
More Than 100 Zombies In The St Louis Area!
“Zombie” is the name that has been given to vacant property which delinquent mortgages and destined for foreclosure, not but in foreclosure yet. These properties are in a “no man’s land” so to speak, and often become an eyesore and a burden on the neighborhood as well as city located in. As the table below shows (compiled from the ATTOM Data report), St Clair County, IL has the highest number of “Zombies” at 99 and also has the highest Zombie foreclosure rate at 14.39%.
St Louis Area Zombie Foreclosures By County- 3rd Quarter 2017
On a national level, according to a report released by Corelogic, the foreclosure rate is at a 10-year low and, for the most part, mortgage delinquency rates continue to fall as real estate markets around the country continue to improve.
The state of Missouri, as well as it’s two big metro areas, St Louis and Kansas City, are following suit with improvements in mortgage delinquency and foreclosure rates.
State of Missouri- Mortgage Delinquency/Foreclosure Rates:
30+ day mortgage delinquency rate improved from 5.3% of all mortgage loans a year ago to 4.5% for July 2017;
90+ day mortgage delinquency rate improved from 2.0% a year ago to 1.5% in July 2017;
Foreclosure rate improved from 0.5% a year ago to just 0.3% in July 2017
St Louis Metro Area- Mortgage Delinquency/Foreclosure Rates:
30+ day mortgage delinquency rate improved from 8.1% of all mortgage loans a year ago to 6.8% for July 2017;
90+ day mortgage delinquency rate improved from 3.7% a year ago to 3.0% in July, 2017;
Foreclosure rate improved from 1.7% a year ago to just 1.2% in July 2017
Kansas City Metro Area- Mortgage Delinquency/Foreclosure Rates:
30+ day mortgage delinquency rate improved from 5.0% of all mortgage loans a year ago to 4.1% for July 2017;
90+ day mortgage delinquency rate improved from 1.9% a year ago to 1.4% in July, 2017;
Foreclosure rate improved from 0.5% a year ago to just 0.3% in July 2017
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Ok, it’s not quite like that but, if you are a home buyer, odds are you have been bought and sold whether you know it or not! Does this sound surprising to you? I’m guessing it probably does as I don’t think most home buyers realize that, just like the homes they are shopping for, there is a market for home buyers (and sellers, of course) as well. I’m talking about “real estate leads”.
How home buyers are bought and sold…
Before I go further, or, especially if you are a real estate agent reading this, before you start hating on me thinking I’m bashing the idea of leads, I should explain that I have no issue with “leads”. Most every real estate agent I know is always looking for leads or that next opportunity to do business with someone. That is normal. In fact, especially for new, or newer real estate agents, that have not yet established a large referral base, leads are critical to their survival in this business. To go one step further and in the interest of full disclosure, my company, MORE, REALTORS®, is known to be one of the best companies in the St Louis area for generating leads or opportunities for our agents.
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Google search for “St Louis Favorite Real Estate Search Site” performed on 9-15-2017
So, back to how buyers are bought and sold and where my rub comes in. You’ve probably heard of Zillow® and even though St Louis’ favorite real estate search site is our local site, St Louis Real Estate Search (don’t take my word for it, Google it), many, many potential home buyers go to sites like Zillow®, as well as many other large national sites, to search for homes for sale. What a lot of people don’t realize, or never give a thought to is those types of websites are not operated by real estate companies but instead are operated by companies which depend on, among other things, the sale of buyer leads to produce revenue.
I’m not bashing Zillow® here, or anyone else, just simply pointing out the difference between a website such as that one and a local one, such as StLouisRealEstateSearch.com that is operated by local real estate professionals.
How does Zillow® sell the buyers that use their site? Although there may be other ways, what seems to be the most popular way is their Premier Agent® agent program whereby agents pay to be featured next to listings for a particular zip code or many zip codes. What’s wrong with this? Nothing, from the standpoint of Zillow® or the agent buying the leads. From the consumer standpoint though, I’m a strong advocate for informed consumers and, as such, think home buyers should realize that when an agent calls in response to their inquiry on Zillow® that the only real “vetting” for the agent that got the lead was, for the most part, they are paying for leads in that zip code. I have to say again, I’m not criticizing those agents or saying they are bad, in fact, many of them are very good. However, I’m suggesting that you, as a home buyer, be informed and understand how and why they are the one calling you.
So how is this different from the way our company handles leads, or other local real estate companies? Well, while I can’t speak for all companies, I can share how we do it at MORE…For starters, as I mentioned before, our site, StLouisRealEstateSearch.com, is owned and operated by a St Louis real estate company, MORE, REALTORS. At MORE, only agents of good character, that conduct themselves in an honest and ethical manner and are true professionals in every sense are invited to join our firm. Next, we don’t sell our home buyer leads to any agent that pays the price. Instead, when a home buyer makes an inquiry on StLouisRealEstateSearch.com, we match them up with one of our agents that is knowledgeable and experienced in the area, property type, etc that the home buyer is interested in and have that agent follow up. This way we can ensure that a home buyer on our site is going to get the information they want from a local, real estate professional who obtained the lead by being qualified to properly serve the needs of the home buyer.
A final word, and where I do have a problem with Zillow® leads…
I would be remiss if I ended this article without sharing the fact that it has become very common for mortgage lenders, to pay forZillow® leads for an agent. The issue here is, the loan officer paying for the leads, naturally, expects the agent to refer any buyers that come off the leads back to them for their mortgage. While on the surface this may not seem like a problem, real estate transactions are governed, in part, by the Real Estate Settlement Procedures Act (RESPA) which prohibits kickbacks. In other words, a loan officer can’t pay for leads for an agent and expect the agent to refer the lead back to them for their loan without being in possible violation of RESPA. You can reach more about this in an article I did previously about Zillow coming under fire by the CFPB over this issue here.
I don’t believe the loan officers paying for Zillow® leads for agents are bad. Many of them are very good. I just think it is good for consumers to know how it works, so if you make an inquiry on Zillow, just realize how and why the agent that called you got your info. Then, later, if that agent makes a lender recommendation to you, realize that the lender he or she recommended may have been selected by them based upon that lender “paying for you” rather than simply based upon merit or qualifications of the loan officer. Granted, the lender chosen by the agent to have pay for their leads may very well be the lender that the agent likes doing business with because of their skill and qualifications, but under RESPA the type of arrangement I described appears to be problematic.
My advice…
To home buyers:
Use a great real estate search site, such as StLouisRealEstateSearch.com, that is backed by local, real estate professionals ready, and qualified, to properly serve you.
Whether an agent contacts you from our site, Zillow®, or any other site, do your homework on the agent and have the agent share their qualifications and experience with you before deciding whether or not to have that agent represent you.
When you get a lender recommendation from your agent ask if the agent has any sort of financial relationship with that lender for starters, then check out the lender just like you did the agent. By the way, if there is any sort of financial or business relationship between the agent and lender, that should be disclosed to you without asking.
To real estate agents:
Before you allow a lender, title company or another party to your real estate transactions to pay for leads for you, or provide services or gifts in exchange for business, get up to speed on RESPA.
Seek out a company like MORE, REALTORS, which produces enough leads, as well as has the tools, resources and coaching for agents to produce their own leads, thereby eliminating the need to enter into agreements with lenders that may put them at risk.
To loan officers:
Don’t buy into the “everyone’s doing it so it must be ok” mentality. Pay close attention to the news coming out from Inman and other credible sources about the Zillow investigation by the CFPB as well as reports by the CFPB of fines being levied against loan officers and agents.
If your company is participating in buying leads for your agents, and particularly if they are telling you it’s ok to do, have them write the check to Zillow® instead of having you do it and then reimbursing you as part of your “expense reimbursement”.
Find ways to support agents and build your agent network that will not conflict with RESPA. Contact me and I’ll share some ideas.
(Zillow® and Premier Agent® are registered trademarks of Zillow® – REALTOR® is a registered trademark of the National Association of REALTORS®)
Unfortunately today, when we see a headline such as the one in this article, we almost immediately think something bad…its’ hard not too. Considering everything we witness in life and see in the media day in and day out, it’s become normal to think “what have they done?..what are you going to tell me that is bad about them? What’s the dirt?”.
Well, I’m happy to say, I don’t have anything bad to say, I don’t have any dirt on them nor scandalous information but, please don’t stop reading because of that.:)
In fact I’m going to praise Movement Mortgage and it’s CEO Casey Crawford, not for the job they do with providing home buyers mortgages, nor the service they provide their customers, although both are great, but for what they do to give back to their community. I know there are a lot of great companies out there that give back, but I must applaud Movement Mortgage for not only doing so but doing so in a manner that is sustainable, will change for the good a neighborhood and, most importantly, have a positive impact on thousands of kids in the coming years. So, I”m going to answer the question why I think you would do business with Movement Mortgage.
What I’m talking about is something I heard about the other day, not from Movement but from a mortgage industry blog, The National Real Estate Post (NRP). On this blog, Brian Stevens of NRP interviewed Casey Crawford, the CEO of Movement Mortgage discussing a variety of topics including interest rates, Zillow leads, etc, however, later in the interview Brian asked Casey about “Movement School”. This is where I learned that Movement Mortgage had contributed $13 Million to buy an old K-Mart shopping center and build a new public charter school in a neglected part of Charlotte, South Carolina, the city where Movement’s National headquarters is located.
Please take a few minutes and watch this short excerpt from the interview to learn more about the school including an approach to “giving back” that, done in this manner, is sustainable for generations to come and could perhaps be a model for others.
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In the interest of full disclosure, my firm, MORE, REALTORS, has an advertising agreement with Movement Mortgage. The reason we choose to do this is because the way they operate their business, treat their customers, employees and community in a way that is consistent with our philosophy and how we try to operate our business. This article is an editorial by me, based upon my opinions and not an advertisement, nor am I or my firm receiving any compensation for it. In fact, while I did ask Casey Crawford for permission to use his video interview, he had no idea what I intended to write and will have the opportunity to see this article for the first time when I published it, just like you.
The housing bubble that led to the housing bubble burst in 2008 started a decline in the value of homes, including those in St Louis, for the following 3 to 4 years. This resulted in a much larger number of homeowners facing financial struggles including late payments, foreclosures, short sales, bankruptcy and the like, than was the historic norm. As a result, while maybe not a new concept but certainly one that had been more obscure in the past, credit repair, became a lucrative and growing business as consumers sought to repair the damage done and position themselves to buy a home.
In St Louis, there are many companies offering credit repair services, with many making some pretty enticing sounding claims with regard to removal of negative items from your credit, improving your credit score in a short time period and so on. While there are reputable companies out there doing a good job for St Louis homebuyers looking to improve their credit no doubt, there are also some that are probably not doing much more for the consumer than they could easily do on their own or, worse yet, perhaps very little at all for the fee paid.
How do you find a good credit repair company in St Louis?
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According to a report just released by Corelogic, the 30-59 day mortgage delinquency rate in March (the most recent month reported) fell to just 1.7%, the lowest level since January 2000. The “seriously delinquency” rate (30+ days late) fell to 4.4% in March, the lowest level sine November 2007, according to Corelogic.
In addition, the “transition rates” all improved as well from a year ago. Transition rates show which way the borrowers are moving, from slightly delinquent to more delinquent, or from slightly delinquent to current for example. Below are the transition rates for March 2017, according to the Corelogic report:
Borrowers going from current to 30 days late – 0.6% for March 2017, down from 0.7% in March 2016
Borrowers going from 30 days late to 60 days late – 11.6% for March 2017, down from 13.2% in March 2016
Borrowers going from 60 days late to 90 days late – 20.8% for March 2017, down from 23.1% in March 2016
All of this is good news for the real estate industry as the trends are positive and are is a good “leading indicator” of what is to come. As mortgage delinquencies decrease, foreclosures, short sales and other distressed home sales decline, putting less downward pricing pressure on the housing market and providing sustainability to the improving housing market.
Speaking of mortgages, if you are considering refinancing, want to know what current rates and terms are, or would like to get pre-approved for a mortgage, I would highly recommend speaking with Ryan Derryberry, a mortgage loan professional with Movement Mortgage. Ryan is a great guy, is honest and knows his stuff. Movement is a great company, founded and operated on great principals and offer some mortgage products you won’t find anywhere else….More information on Ryan, including his contact info, can be found here.
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Zillow, the behemoth real estate search site, revealed in it’s Form 10-Q filed with the Securities and Exchange Commission earlier this month for first quarter 2017, that the Consumer Finance Protection Bureau (CFPB) is investigating some practices by Zillow. According to the filing, what is under review is their co-marketing program in which the CFPB is alleging that Zillow violated parts of both RESPA as well as the Consumer Financial Protection Act. The complete Form 10-Q can be viewed here. On page 40 (outlined in red by me) is the section where Zillow makes this disclosure, and I have pasted that section of the report below as well (the emphasis and color have been done by me).
Excerpt from Zillow’s 10-Q – “In April 2017, we received a Civil Investigative Demand from the Consumer Financial Protection Bureau (“CFPB”) requesting information related to our March 2017 response to the CFPB’s February 2017 Notice and Opportunity to Respond and Advise (“NORA”) letter. The NORA letter notified us that the CFPB’s Office of Enforcement is considering whether to recommend that the CFPB take legal action against us, alleging that we violated Section 8 of the Real Estate Settlement Procedures Act (“RESPA”) and Section 1036 of the Consumer Financial Protection Act. The purpose of a NORA letter is to provide a party being investigated an opportunity to present its position to the CFPB before an enforcement action may be recommended or commenced. This notice stems from an inquiry that commenced in 2015 when we received and responded to an initial Civil Investigative Demand from the CFPB containing a broad request for information. We believe our response to the NORA letter addresses the CFPB’s concerns related to our co-marketing program under which a lender pays us to appear in advertising alongside a real estate agent. We are continuing to cooperate with the CFPB in connection with their most recent request for information. We continue to believe that our acts and practices are lawful and that our co-marketing program allows lenders and agents to comply with RESPA. Should the CFPB commence an action against us, it may seek restitution, civil monetary penalties, injunctive relief or other corrective action. We cannot provide assurance that the CFPB will not ultimately commence a legal action against us in this matter, nor are we able to predict the likely outcome of the investigation into this matter. We have not recorded an accrual related to this matter as of March 31, 2017 or December 31, 2016, as we do not believe a loss is probable. There is a reasonable possibility that a loss may be incurred; however, the possible loss or range of loss is not estimable.”
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The foreclosure rate in Missouri continues to decline with the foreclosure rate for February 2017 coming in a 0.4 percent, according to a report just released by CoreLogic. The rate for February is down slightly from a year ago when the Missouri foreclosure rate was 0.5 percent. Based upon the mortgage serious delinquency rate (90 days or more) as well as delinquency rate (30 days or more), both lead-indicators or predictors of things to come with regard to foreclosures, the foreclosure rate will continue to decline in the near term. The mortgage delinquency rate for February 2017 was 4.9%, down from 5.1% in February 2016 and the serious delinquency rate was 1.8% during February 2017, down from 2.2% a year ago.
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It seems almost crazy to even throw out the idea of an adjustment in St Louis home prices or, perhaps even, any sort of slow down in the rate of home price appreciation given that the inventory of homes for sale is so low in so many parts of the St Louis area, however, maybe it’s something to look at. For anyone that has been reading what I have written here over the past 8+ years, you will hopefully know that I am not a “gloom and doom” guy at at all, but I do share my honest outlook on the market. Having said that, I do feel home prices are something worth taking a look at.
What is causing the concern about home prices?
For starters, new housing affordability information was just released yesterday by ATTOM Data Solutions which shows home affordability in the St Louis area has eroded somewhat. The table below, based upon the ATTOM data, shows what percentage of the average wages for the area are needed to make monthly house payments on a median-priced home with a 30-year fixed rate mortgage and a minimal downpayment of 3%. It also shows how much, on a year over year basis, income has risen in that county versus how much home prices have increased. As the table shows, it takes a pretty big chunk of pay to pay for the typical median priced home today and, in most cases, home prices are rising at higher rates than income is rising. Even if the year over year income/home price increase looks ok, home prices have been on the rise here for several years so if we look at a 5 year period home price growth is outpacing income growth.
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This morning the National Mortgage News published an article titled “Lenders Fear Congress May Neuter Mortgage Interest Deduction” in which they caution the mortgage interest deduction (MID), referred to as “a pillar of U.S. housing policy” in the article, may be effectively rendered pointless if Congress makes the significant changes to it that they appear ready to consider. The article blames the House Republican Blueprint (announced on June 24, 2016) which “calls for doubling the standard deduction that tax payers receive, which would mean that most people would have no need to take the mortgage interest deduction.”
First, for clarification, lets clarify what the blueprint says. If you turn to page 19 of it (see below) you will see it states “The Tax Reform Blueprint will consolidate the basic standard deduction, the additional standard deduction, and the personal exemptions for families and individuals. The new larger standard deduction will be $24,000 for married individuals filing jointly, $18,000 for single individuals with a child in the household, and $12,000 for other individuals. These amounts will be adjusted annually for inflation.” So, what is proposed is taking the current standard deduction of $12,600 for a married couple and the personal exemptions ($4,000 per person in 2015) and rolling those two things into one standard deduction of $24,000 for a married couple. So, for people without kids, or perhaps only one, they will come out ahead, for people with several kids they will be losing some of their current deduction. For sake of this article, lets look at a family of four. Currently, that family would have a standard deduction of $12,600 plus $4,000 personal exemption for each of the 4 in the family, $16,000, so their total deduction between the two would be $26,600. Under the new blueprint, they would get a flat $24,000 deduction. In addition, the tax rates would be reduced.
House Republican Blueprint, nor even elimination of the Mortgage Interest Deduction, will hurt the St Louis Housing Market..
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Mortgage Delinquency rates, borrowers that are 60 or more days past due, are projected to be 2.21 percent for the 4th quarter of 2016, down from 2.46% the quarter before and marking the 13th consecutive quarter mortgage delinquency rates have fallen, according to a report just released by TransUnion. According to the report, mortgage delinquency rates peaked at 7.21 percent during the 1st quarter of 2010 and have declined for 23 of the last 26 quarters since. TransUnion considers the current mortgage delinquency rate to be normal and is projecting the delinquency rate will fall even further next year down to 2.11% by the end of 2017.
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According to the Freddie Mac Primary Mortgage Market Survey (PMMS) released yesterday for the past week, interest rates on a 30-year fixed rate mortgage increased 5 basis points (1/20th of 1%) to 4.13 percent , the highest rate they have been at during 2016. Last year at this time the PMMS showed average interest rates at 3.95 percent so, while rates have increased over the past year, the amount has been fairly small.
However, mortgage interest rates are being forecasted by many economists and industry guru’s to hit 4.5% – 5.0% during 2017. While we’ve seen predictions like that for a couple of years in a row now, I think it’s going to come true this time therefore, if you have been thinking about buying, you may want to start looking now!
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New mortgage applications for a home purchase declined last week 7.0 percent from the prior week, according to a report just released by the Mortgage Banker’s Association (MBA). The MBA’s Market Composite Index, which is how they track the volume of loan applications, fell to it’s lowest level for home loans for a purchase since January 2016.
Interest rates decline as well…
While the number of loan applications declined, so did the interest rate on home mortgages, according to the MBA report:
30 year fix rate conventional mortgages decreased to 3.71 percent from 3.73 the week before,
30 year fixed rate jumbo loans (larger than $417,000) decreased to 3.71 percent from 3.72 percent the week before,
FHA loans bucked the trend with interest rates increasing to 3.56 percent from 3.54 percent the week before,
5/1 ARMS decreased to 2.93 percent from 2.97 percent.
St Louis home sales increase 5 percent during the same period:
The tables below reflect St Louis home sales for the same one-week period, compared with prior week, as in the MBA’s report and illustrate that St Louis perhaps appears to be bucking the trend. St Louis saw an increase in home sales during the most recent week, which, theoretically, should translate into an increase in home mortgage applications, contrary to what we see in the MBA report on a national basis.
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Before I start, for the naysayers out there that may think since I’ve spent my entire adult life in real estate that, of course, I’m going to come to the conclusion that real estate agents are critical and you can’t live without one. Well, to quash those fears, just read some of the articles I’ve written here over the past 10 years, you’ll know I don’t drink the Kool-Aid®. I do not recite the chant of REALTOR® cheerleaders or anyone else unless I completely believe what I’m saying and feel qualified to speak on the topic. In fact, there have been many times my opinion on a topic, such as on the 
Forgive me for dragging a science lesson into this real estate conversation, however, it makes for a good illustration of one of the first areas of significance of a real estate agent I want to discuss. In astronomy and astrobiology, there is an area around the sun that is habitable, by not being too close to the sun, nor too far from the sun, that is referred to as the circumstellar habitable zone (CHZ), or by it’s “street name”, The Goldilocks Zone.
