Seeing positive signs

The mortgage crisis started the “great recession” in 2008 from which we are still recovering. But according to Jim Hanrahan of Westport Mortgage, we are seeing the light at the end of the tunnel.

Mr. Hanrahan reports the following positive changes:

Property values are on the rise. In Greenwich the median price of homes increased slightly or, to be exact, by 1.9% in May when compared to May of last year. Also, the average length of time on the market for a home in Greenwich decreased from 223 days in May 2013  to 155 days in May 2014, according to the GMLS.

Existing-home sales increased 4.9% in May, according to the National Association of Realtors. This was the largest increase since October. However, something to keep an eye on is that this may not continue should interest rates rise.

Contracts to sell newly constructed homes in May were up 18.6% from April and are up 16.9% from this time last year. This gain may represent builders or developers catching up earlier this year due to poor weather. This was the largest one-month increase since January 1992, according to the United States Commerce Department and some analysts believe it is due to the improvement in consumer confidence.

Unemployment is also moving in the right direction. The Connecticut unemployment rate was estimated at 6.9% for May 2014.

This is unchanged from April, but is down nine-tenths of a percentage point from May 2013 when the unemployment rate was 7.8%, according to the Department of Labor.

Meanwhile, mortgage guidelines are loosening and there is less of a down payment required. For example, if a buyer is purchasing in the $2-million range, they may only be required to put down 20%. In some cases, as in lower price ranges, if the home qualifies for FHA financing, a buyer may be required to put down as little as 3.5%.

Banks are accepting credit scores lower than 700.

Fannie Mae has joined the ranks of FHA loans in allowing 100% of the down payment be gift funds. Previously, banks required a certain percentage of the buyer’s own funds be the down payment.

Prior to the economic downturn, borrowers took out first and second mortgages to avoid mortgage insurance, also known as 80/10/10. Home-equity loans were practically eliminated during the mortgage crisis.

A borrower was required to either put down 20% or pay costly mortgage insurance. Today lenders have begun offering home-equity lines of credit so borrowers don’t have to pay mortgage insurance.

Asset depletion was another casualty of the mortgage crisis. This involves the depleting of a borrower’s assets, on a monthly basis, to use as income to qualify for a mortgage.

Asset-based jumbos were also a casualty of the mortgage crisis and have become available again. This is a reduced documentation loan for the self-employed borrower whose tax returns tend to be rather complex.

In closing, mortgage rates remain low and with guidelines loosening they will enable more people to qualify for a mortgage and purchase properties. It is anticipated the Federal Reserve will not raise rates until the fourth quarter of 2015.

 

Mary Ann Clark is a Realtor with Coldwell Banker at 177 West Putnam Avenue in Greenwich. Questions or comments may be emailed to [email protected]

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