Lawrence Yun, Senior Vice President of the National Association of Realtors (NAR) was on C-SPAN this morning discussing the housing market. They invited him as a guest in response to a Wall Street Joural article that said, basically, the housing market is getting better.
Mr. Yun reminded them, "all real estate is local." He said that in the Rocky Mountain states, Texas, Oklahoma, and particularly Phoenix the recovery has been very fast, but in the New England states the housing market is expected to recover slower. The good news, he said, is that over five million houses sold in 2013, and the median home price rose by 9.4%. Additionally, there are now one-half fewer people who are underwater in their mortgage. There still are some foreclosures coming up that are mainly left over from 2006, but the total filings for foreclosures are down.
He said that it is difficult, however, to get a mortgage right now, because of the stringent conditions. Consequently, one third of all the buyers are cash buyers. Rentals are rising and there are less people owning homes, which affects the solidness of the middle class.
The house prices rising is a mixed blessing, in that it does help the wealth of the homeowners, but now houses are less affordable. the house prices are not expected to rise much next year, but the mortgage interest rate is expected to rise to 5.4%
Yun answered in response to one caller that there were many contributors to the housing bubble and bust, but now we are over-correcting for it, making lending very tight. And, new mortgage rules are coming in January. It's expected that the new rules will make any small mistakes made by the lenders more easily open to lawsuits.
He repeated many times that we need more new home construction, and it's difficult to get a construction loan, right now.
Eight to 90% of renters want to become home owners, but Yun warns that purchasers should stay within their budget when buying a house.
We are not in a bubble now, and we are staying within the fundamentals of home prices in relation to rents, he says.
There was some discussion on the show about mortgage-backed securities and the fact that it's difficult to know who holds the note on the mortgage, anymore. He said that about one third of the loans are in-house and held in the bank's portfolio, while a majority are in the securities industry. However, this model brings in a global capital and keeps the mortgage rates lower, so it's sort of a mixed bag.
On law the NAR is working to try to get passed is to prevent the government from taxing debt forgiveness for those who had to sell their house and take a loss on it.
One caller asked about the baby boomers, and if he thought the baby boomers would become renters in the future. He does not think they will. Yun believes that they will downsize, but the majority of baby boomers will stay in their homes. Many will buy a condo or a townhouse.
Yun reminded one caller that it is not the government that sets ousing prices. Prices are determined by the buyers and sellers, only.
After the interview, I was thinking how great it would be to have a money-making home like this 2,600+ square foot, 4 bedroom, 2 1/2 bath house in Oak Ridge, TN. It already has a fully licensed, staffed, and populated daycare, attached but separate for the living space of the house. It brings in a significant net income, according to the owner.