Morning Briefing: Realtors react to new conforming loan limits for 2017

by Steve Randall25 Nov 2016
Realtors react to new conforming loan limits for 2017
The announcement by the FHFA that it’s increasing the 2017 conforming loan limits for mortgages acquired by Fannie Mae and Freddie Mac has been welcomed by real estate agents.

The new limits of $424,100 on one-unit properties and a cap of $636,150 in high-cost areas are up from $417,000 and $625,500 respectively.

California Association of Realtors’ president Geoff McIntosh says that the raised limits will benefit thousands of Californians the chance to become homeowners and give stability to the market.

“The FHFA recognizes that home prices have recovered, not just in California but also across the nation. Many higher-priced areas of the state will benefit greatly from the higher limit,” McIntosh said.
 
New home sales down 1.9 per cent
Sales of newly-built single-family homes dropped 1.9 per cent in October to a seasonally adjusted annual rate of 563,000 unit, the U.S. Department of Housing and Urban Development and the U.S. Census Bureau data reveals.

“Though slightly down from last month, new home sales have been on an upward trend since last year,” said Ed Brady, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Bloomington, Ill.

Inventory increased to 246,000, a 5.2 month supply at current pace. Median sales price was $304,500.
 
Chicago is world’s most exciting city, no wonder inventory is tight
Time Out magazine has just named the twenty most exciting cities in the world and Chicago tops the list in many key factors, outpacing New York (ranked 4th), Los Angeles (8th) and Miami (12th). 

The Windy City beat international peers such as London, Melbourne, Madrid and Paris and ranks highly for bars and restaurants, neighborhoods, work-life balance and dating.

It is also highly-scored for affordability but tight inventory is starting to change that.

RE/MAX says that metro Chicago sales were down in October due to a lack of supply with 10 per cent fewer homes for sale compared to a year earlier. Detached home sales slipped in five of the metro’s seven counties and were down overall by 5 per cent.

“This is an outstanding market for those with a home to sell,” emphasized Jack Kreider, executive vice president and regional director of RE/MAX Northern Illinois. “An average market time of under 90 days puts upward pressure on prices, and we certainly saw that play out in October.”

The median sales price was 9.5 per cent higher than a year earlier, reaching $219,000.

“The increase in mortgage interest rates since the presidential election will serve to reinforce the urgency homebuyers already feel, so we expect an active market right through the holiday season and into 2017,” added Kreider.

COMMENTS

  • by Disgruntled Loan Officers | 11/25/2016 9:07:35 AM

    Fannie/Freddie numbers should be closer to $500,000, not a lousy $9,000 increase. Keeping out of Jumbo pricing is the purpose of this. With interest rates rising it would've made sense to increase even more.

  • by Jim Long | 11/25/2016 10:51:35 AM

    I know my comments are a little off topic, but they do relate to the escalating cost of homes without adding value, which affects all of us in the industry.

    My company is a custom builder, building in what are considered "hot" markets.

    I have watched the cost of materials steadily increase over the past years with absolutely no reason other than greed by the manufactures and others in the supply chain. Pick anything used to construct a home from 2x6 studs to house wrap and explain why these items are increasing in price. The stud is in all probability purchased finished in central Europe at cost that have if anything dropped over the past five years, transported using fuels that cost sometimes one half what they were five years ago. Yet by the time this stud reaches the construction site we are being told by out materials suppliers that they are having to increase cost because their suppliers are increasing prices to them. An even better example would be products like house wrap a petrochemical intense product to produce. Yet the cost of this product increases even though virtually all items used in its production are at least half what they were five years ago.

    We as builders cannot continue to push these increases onto our buyers. Where the tipping point is I do not know, but there is certainly one. It may be time for contractors to work through their HBA's and purchase their dimensional lumber products through cooperatives. Large material suppliers will tell you that this is impossible. Our company was one of a few contractors that worked with the DOD in 2001 thru 2008 to convert government owned housing to new privately owned housing, these contracts well above 100M in value, so we were purchasing enormous quantities of materials.

    The volume purchasing we were quoted by some of the largest materials suppliers were escalating almost monthly. Our company sent a representative to Romania to source dimensional materials, and by doing so we reduced out lumber cost more than 50% FOB US ports. It is all about quantity and geography, if you are located less than 400 miles from and international port, and all purchases can be containerized, the savings are enormous.

    Of course there are a lot more logistics involved, but not as difficult as the national materials suppliers want you to believe. Ask yourself, can I use three containers of building materials a quarter, if so builders should get a discussion going to explore the possibility of purchasing dimensional lumber first, and then look at other items that could be sourced at a 50% discount.

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