The Columbia SC mortgage lending market experienced something unusual in the past sixty days. The Federal Reserve raised the interest rate back in December 2015. Since that time, mortgage interest rates have dropped to their lowest level in three years! Most economists and mortgage lenders pointed out at the time that an increase in the Fed Funds rate wouldn’t necessarily translate to an increase in mortgage rates. However, few saw the resulting lowering of mortgage rates in their crystal balls.
Columbia SC Mortgage Rates: Time to Refinance?
Mortgage interest rates usually drop when volatility fueled by uncertainty in the stock market makes investors sell their higher-risk stocks in favor of buying safer bonds. When bond prices move higher as a result of the brisk buying, the yield on those bonds go down. A quick look at the stock market over the first 45-50 days of this year shows exactly what’s happened. Investments in U.S. Treasury bonds and mortgage bonds have been strong – for the time being.
In December 2015, fixed rates on 30-year conventional conforming loans were roughly 4%. Due to increasing bond trades, interest rates on this and other mortgage products have dropped as much as .5%. To better put that in perspective, a half-point interest rate reduction can significantly reduce monthly payments. It results in an $85 savings per month on a $300,000 Columbia SC mortgage, $170 per month on a $600,000 mortgage and a $900,000 mortgage payment will be reduced by $253.
As if these savings weren’t reason enough to consider refinancing, according to some analysts it’s possible that rates could fall even lower over the next several months. But there’s more to refinances than just interest rates. Other factors come into play like income and assets, property eligibility, and home equity. In the past, specifically in other post-housing crisis interest rate drops, some homeowners were unable to refinance. Many people were underwater with their mortgages – they owed more than their home was worth. In addition, other problems contributed to their inability to refinance such as income instability, slow credit and changing lending policies and guidelines.
In today’s Columbia SC mortgage environment, refinances are more prevalent. Home prices have either leveled off or are still increasing, unemployment has dropped and income growth is on the upswing. In addition, cheap oil prices have helped keep inflation low, and mortgage lending guidelines are more flexible than during any previous post-crisis rate reduction. All these reasons and more make it easier, more conducive and a smarter move to refinance than perhaps ever before.
Let’s take a look at the reasons home owners refinance. First and foremost, of course, is to lower their interest rate, which lowers the monthly mortgage payment. However, there are other reasons to take into consideration when you’re contemplating refinancing.
Reduction of loan payoff term.
Borrowers looking to reduce the length of time they have to pay on their mortgage should consider refinancing a 30-year loan to a 15-year loan. Naturally, a shorter term loan carries with it higher payments – though the interest rate is usually lower. With today’s even lower interest rates, it may be surprising at how affordable a 15-year loan term can be.
Cash accessibility.
As your home equity builds over time and as a result of higher home values, the nest egg your home represents can be substantial. A “cash out” refinance can give you access to your home’s equity to do with it as you wish. Many homeowners refinance their Columbia SC mortgages to make investments, purchase additional real estate, pay for college expenses for their children, or make home improvements.
Debt consolidation.
For qualified borrowers, non-housing related debt can be included into a home refinance. These debts could include auto loans, credit card debt, student loans and other consumer debt. Debt consolidation can help improve a credit score by showing that certain accounts have been paid in full. In addition, by rolling existing debt into a mortgage the borrower is able to deduct that additional interest, converting non-tax-deductible debt into tax-deductible debt.
Elimination of mortgage insurance or cancellation of a second mortgage.
Homeowners who purchased homes with a mortgage with less than a 20% down payment were probably required to carry mortgage insurance. Mortgage insurance protects the lender from the borrower defaulting on the mortgage loan payments. If the home’s value has appreciated enough to where the loan-to-value ratio (LTV) is 80% or less, a borrower can refinance the mortgage and eliminate the mortgage insurance requirement. For borrowers who have a second mortgage on their homes, refinancing is an excellent way to combine both the first and second mortgages into a new first mortgage.
Now that you know the reasons homeowners typically refinance, let’s examine the steps in the actual process itself.
Decide on a Columbia SC mortgage lender.
While your existing lender may be a good place to start, there are a variety of lenders offering similar interest rates and refinancing options. Choose the one that best fits your needs. Most rate quotes are based on a refinance being closed within 30-45 days. If you need to lock in your interest rate for a longer time period before you close, you can expect the rate to be slightly higher. Therefore, it’s important to get your lender the needed documentation and paperwork as soon as possible.
Assemble the documentation.
When it comes to documentation, a refinance is really no different than a purchase money mortgage. Federal lending regulations require that mortgage lenders have current employment and income verification, asset and liability statements and an updated credit report.
Appraise your home.
There are two parts to the refinance equation: one is the borrower, the other is the collateral on which the mortgage is made. Of course, the borrower must qualify, but the home has to, too. Your Columbia SC mortgage lender will require an appraisal to determine the value of your home. They then use that appraisal amount to decide whether the loan amount you’re seeking is within their guidelines concerning the LTV ratios for refinances.
Closing costs.
Refinancing is always an exercise in comparing the total payment savings against the costs of closing the loan. While closing costs vary according to loan size and lending market, they typically range from $2,500-$4,000. If you paid to refinance and rates dropped lower you’d risk losing money. Enter the no-cost refinance.
A no-cost refinance carries with it a rate that is slightly higher. If rates dropped, however, you wouldn’t be wasting money if you elected to refinance at the new lower rate. Discuss this option with your lender and see if it’s right for you.
Lock in your interest rate.
Work with a lender that will pre-approve you for the refinance. That way, you can be assured you’re being locked into a program and a timeline your lender can meet. Plus, once pre-approved, it’s easier to lock in a rate when they may fluctuate day to day.
Because rates change almost daily, if rates drop after you agree to your rate lock, most lenders have policies allowing you to renegotiate to the lower rate prior to closing.
We have a lot more Columbia SC mortgage information for you in our Columbia SC Mortgage Info section of articles to your right just below our Columbia SC Real Estate Categories. We also update the mortgage situation constantly on Twitter and Facebook. Check us out there as well.
The Columbia SC economy received a minor setback as new home sales fell in January. The Commerce Department released their month-end performance report showing that new home sales dropped from a 10-month high. Sales decreased 9.2% to an annual rate of 494,000 units (adjusted seasonally.) December's sales results were 544,000 units. Economists say, however, the overall housing market recovery remains on course.
Columbia SC Economy: Facing Challenges
A survey of economists regularly polled by Reuters had originally forecast new home sales at an estimated 520,00 units. New home sales typically account for roughly 8.3% of the housing market.
As always, there were wide variations in the number of new home sales in parts of the U.S. The drop in January reflected the lowest level of home sales since July 2014.
The Columbia SC economy experienced a slowdown in new home construction during January. The result will likely be a continuing shortage of inventory in what has been described as a "tighter than normal" supply by economists. The decline was the largest decrease in nearly six years.
To add to the new construction concerns, builder sentiment – a survey measurement of home builder outlooks and opinions – fell 3% from an upwardly revised January poll conducted by the National Association of Home Builders (NAHB.) Builder sentiment is rated on a numerical score, or index, and now stands at 58. The builder sentiment forecast had been for a continuation of last month's index of 60. Economists regard an index of 50 or above as a positive builder sentiment. The index one year ago was at 55.
A monthly measure of builder sentiment fell three points from an upwardly revised January reading. The National Association of Home Builders/Wells Fargo Housing Market Index (HMI) now stands at 58. The expectation had been for sentiment to remain flat at 60. Anything above 50 is considered positive sentiment. The index stood at 55 in February of 2015.
Home builders cite a variety of factors that have slowed new home construction growth. Among them are higher costs for land and labor.
"Though builders report the dip in confidence this month is partly attributable to the high cost and lack of availability of lots and labor, they are still positive about the housing market," said NAHB Chairman Ed Brady, "Of note, they expressed optimism that sales will pick up in the coming months."
However, some home builders are not quite as optimistic. Over 75% of builders surveyed by the NAHB said they anticipate the skilled labor shortage to get worse before it gets better. In fact, the high cost of labor is ranked as the primary concern among those surveyed. The number of unfilled construction jobs rose in December, despite the fact that overall unemployment decreased. According to the Bureau of Labor Statistics there were approximately 207,000 unfilled jobs in the construction sector at the end of December. That number eclipses the previous mark of 168,000 in March 2015. The total is the highest in nearly nine years.
As this news begins to impact the Columbia SC economy and affects the housing industry, NAHB officials cite land and labor issues as major obstacles. However, more alarming is the report of buyer demand for new homes. The recent survey results show the index that measures current sales falling 3% to 65, with buyer traffic dropping 5%. The lone bright spot was that sales expectations – an optimistic outlook – rose 1% to the 65 level.
While demand for recently constructed homes is rising slightly, most of the demand is the result of a record low supply of existing homes on the market. The Columbia SC economy continues to experience that, as well. With the spring selling season just around the corner, real estate experts are concerned that the normal increase in supply – fueled by sellers putting their homes on the market for the spring – will fall far short of meeting the demand. New home supply fell in December and January.
Buyer demand in the Columbia SC economy is stronger, but has been dampened as a result of the wild fluctuations in financial markets – both domestic and overseas. Homebuyer sentiment, as gauged by another monthly index survey, dropped in January as fewer households reported growth in income.
The housing market is expected to shore up the overall economy in spite of the challenges ahead. Contending with a strong U.S. dollar, increased spending cuts by energy firms impacted by lower oil prices and a slowdown in global demand, the economy still shows slight gains. The economy grew at an annual rate of just under 1% during the fourth quarter of 2015. And growth projections for the first quarter of this year are slightly above 2%.
Another bright spot on the Columbia SC economy: in January, the new home inventory increased 2.1% to right at 238,000 units. That's the highest level in over six years. Still, at January's pace of sales economists say it would take 5.8 months to sell the supply of new homes on the market. That's up from 5.1 months back in December. In addition, the median sales price of a newly constructed home nationwide dropped 4.5% from a year ago. The median sales price nationwide is $278,800.
See more articles pertaining to the Columbia SC economy in the Columbia SC Economy section of our site below Columbia SC Real Estate Categories in the column to your right. You can find information here on a variety of topics ranging from home buying and home selling tips to home improvements, home inspections, mortgage financing, homeowner's insurance and of course, all the latest Columbia SC real estate news that affects all of these categories.
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The Columbia SC real estate market has begun the year with existing home sales at the highest annual rate in six months. In a recently-released report by the National Association of Realtors (NAR) total existing home sales (by transactions) increased by .4% adjusted seasonally for an annual rate of 5.47 million in January. December's transactions were 5.45 million. Total existing-home sales are defined as the sales of single-family residences, condominiums, townhomes and co-ops.
Columbia SC Real Estate Sales: Good So Far
The recent report reinforced the latest sales numbers that show sales 11% higher than this time a year ago. The totals represents the largest year-over-year increase since July 2013 when year-over-year sales reached 16.3%.
The slight increase in transactions is partly due to the spike in sales attributed to loan closing delays in November 2015. The delays were the result of implementation of the new Consumer Financial Protection Bureau's TILA-RESPA Integrated Disclosures regulations in October. The new disclosures are designed for lenders to be more transparent in their dealings with borrowers. In addition, the regulations were intended to simplify and streamline some of the consumer disclosure documents to make it easier for borrowers to understand various lending programs. Among other documents, the new guidelines include cost estimates that must approved by the borrower in writing before the application process can continue. This disclosure must be given to the borrower within three business days of the loan closing. If the borrower wants to make any changes during the three-day window, the three days start over. As expected, coupled with the additional paperwork, software implementation and training challenges, the new disclosure rules caused closing delays in the Columbia SC real estate market.
Despite the strong start to 2016 in the Columbia SC real estate market, economists warn the biggest obstacle for continued growth is a lack of inventory. Simply stated, supply and demand need to mirror each other in a good real estate market. When demand exceeds supply – in this case where there are more buyers that homes on the market – a seller's market is created, often driving sales prices even higher.
Lawrence Yun, chief economist for the NAR had this to say about the increase in existing-home sales. "The housing market has shown promising resilience in recent months, but home prices are still rising too fast because of ongoing supply constraints," Yun said. "Despite the global economic slowdown, the housing sector continues to recover and will likely help the U.S. economy avoid a recession."
With spring and the official start of the "home buying season" just around the corner, housing supply isn't meeting market demand. Inventory of available homes on the market reached 1.82 million in January, increasing 3.4%. The inventory is 2.2% lower than it was in January 2015. Unsold inventory or MOI (months of inventory) is also tracked as part of the NAR report. Currently the MOI is at a 4-month supply and represents a slight uptick from 3.9 months at the end of 2015. What that means is if buyer demand remained the same and no new single-family housing units were added to the market, they all would be sold in four months.
"The spring buying season is (nearing) and current supply levels aren't even close to what's needed to accommodate the subsequent growth in housing demand," says Yun. "Home prices ascending near or above double-digit appreciation aren't healthy – especially considering the fact that household income and wages are barely rising."
For all types of housing analyzed in January, the median existing-home sales price was $213,000. That's an increase of 8.2% compared to January 2015. In addition, the price increase in January was the biggest since April 2015. The increase marked the 47th consecutive month with year-over-year price gains. Real estate analysts say this trend is likely to continue, given the tight supply and steady demand – a combination that usually bodes well for sales price increases.
In other Columbia SC real estate news, the percentage of first-time home buyers remained stagnant at 32% in January. That percentage was unchanged from December, but is up 4% from 28% a year ago. For the year ending 2015, first-time buyers comprised 30% of all buyers, a slight increase from 29% in 2014 and 2013.
Purchases paid in cash made up 26% of all transactions in January, an increase of 2% over the previous month. All-cash sales were 27% of all transactions this time last year. Individual real estate investors – who account for a large number of all-cash sales – bought 17% of the homes in January. The 17% investment share matched the highest level since January 2015. Economists and real estate analysts attribute some of this activity to investors disillusioned with the stock market and seeking real estate as a means of growing capital as prices continue to rise steadily.
So, what does all this mean for the coming months? Most economists say more of the same. With interest rates near all-time lows and good mortgage availability, home buyers who find a home to their liking will probably continue to buy. And prices will probably remain at or near their current levels. The big question looming is two-fold. Will existing inventory satisfy demand long enough for new housing starts to kick in? And what about economists who say 2016 will suffer a mild recession? Those answers remain to be seen. In the meantime, the Columbia SC real estate market is enjoying the good start. Only time will tell if it will continue.
See more articles pertaining to Columbia SC real estate news in the Columbia SC Real Estate News section of our site below Columbia SC Real Estate Categories in the column to your right. As always, you can find information here on a variety of topics ranging from home buying and home selling tips to home improvements, home inspections, mortgage financing, homeowner's insurance and of course, all the latest Columbia SC real estate news that affects all of these categories.
Remember, we also post tips daily on Twitter and Facebook. Check us out there too.
The Columbia SC economy is full of them –– older Americans who collectively have more debt than ever before. Baby boomers who've lived in the generation of rising housing prices, more expensive cars, and the staggering cost of higher education, now find themselves nearing retirement owing money. Recent data released by the Federal Reserve Bank of New York says the average borrower aged 65 has 47% more mortgage debt and 29% more auto debt than the same age borrower in 2003 (after adjusting for inflation).
Columbia SC Economy and Baby Boomer Debt
Less than ten years ago student debt was unheard of to most people 65 or older. Today it's one of the largest debt categories, though not as large as mortgage debt, auto loan debt and credit cards. Of course, there are more people aged 65 than ever. This phenomenon has resulted in a change in the make-up of household debt in the U.S. Before the housing crash, younger households assumed greater debts that became unaffordable when the economy worsened. According to one New York Fed economist, "The shift represents a reallocation of debt from young people, with historically weak repayment to retirement-aged consumers, with historically strong repayment."
Statistically, older borrowers have been careful not to default on their loans and are more diligent at lowering their overall debt. However, more borrowing by the older generation could signal problems if they enter retirement with unmanageable debt. For now that doesn't seem to be happening in the Columbia SC economy. Still, it's worth watching – especially as a larger number of Americans will retire without pensions and limited 401(k) assets. In addition, economists warn that retirees who have Social Security as their sole source of income could struggle with existing debt.
The recent data in the New York Fed's quarterly report on household debt was the result of millions of credit reports compiled by Equifax, a leading credit-reporting agency. The report first began in 2010 to track debt behavior trends of U.S. households in the wake of the financial crisis and the housing crash.
Household debt has risen slowly over the past two years according to the report. However, it has stayed well below the 2008 levels. Overall household debt is estimated at slightly over $12 trillion. Auto debt, student loans and credit cards have increased. Mortgage debt remained largely unchanged.
The percentage of household debt that is delinquent has gradually dropped. The report showed only 2.2% of the mortgage debt was delinquent, the lowest percentage in nine years. Analysts attribute much of the improvement to older borrowers. Most older households with debt have higher credit scores and higher net worths than in the past. They're better equipped to manage their debt in the wake of the financial crisis. Plus, they are better able to take on new debt following the crisis.
For more articles on the Columbia SC economy just click on the Columbia SC Economy section of articles below Columbia SC Real Estate Categories to your right. We also post information on Facebook and Twitter. Be sure to find us there as well.
Your Columbia SC home buying dream is within reach. You've found a home you really like, but suddenly something's just not right. What do you do? That depends, of course, on what the issue is – and just how badly you want the home. Here are five potential problems worth thinking about before you make a mistake.
Columbia SC Home Buying: When to Walk Away
The real estate appraisal is lower than the sales price.
In a seller's market, it's not uncommon for a home's appraisal to come in below the contract price. When that happens you have several options. 1) The buyer has to come up with additional money to make up the difference between what the bank will lend and the sales price. 2) The buyer can attempt to negotiate the sales price down. 3) The buyer can opt to seek a mortgage from another lender in the hopes that another appraisal will be higher. If you can't make any of these options work, and the seller isn't open to negotiate, it may be time to walk away. Why pay more for a house than what it's worth?
The home inspection reveals too many shortcomings.
Most buyers don't have the time, patience or knowledge to complete a laundry list of repairs needed to be made on a house they want to buy. While some people aren't turned off by fixer-uppers, depending on what issues the home inspector uncovers, you could find yourself spending more time and money than you had planned. If you like the idea of moving in with few repairs or replacements, shortcomings found in a home inspection may mean it's time to keep on looking.
You start second-guessing compromises you made.
When you start the Columbia SC home buying search you have a list of features in your head that you're looking for. Ultimately price determines how it all shakes out. Often you find yourself making compromises – electing to do without some things or settle for less on others. Here's an important rule of thumb to consider: If you second-guess yourself and try to justify crossing things off your list that you had your heart set on, it's time to reevaluate. Trust your feelings.
You're at the limit of your original price range.
Let's say you begin your home search at the top end of your intended price range. If it's a seller's market with little available inventory or if you find a house on which there will be multiple offers, you may be tempted to push yourself over the limit. Later, you may have wished you'd left yourself and your family a little more breathing room. You set limits for a reason. If you're concerned about the payments, the additional cash outlay or depleting reserves designed for repairs, new furniture or emergencies, you may regret your decision.
If you purchase a home with another person and you don't see eye to eye.
Nothing strains a relationship – personal or business – like spending money when both parties aren't on the same page. Here's an important Columbia SC home buying tip: Before you start the process, discuss what you both want and expect. Anticipate problems and try come up with solutions before they occur. It will make them seem less imposing when and if the time comes. Make a pact that if either of you are uncomfortable, you'll walk away and keep looking – for a house, not a new partner!
If you can't sleep.
It's normal to be a little anxious about the largest purchase most of us will ever make. But if it constantly nags at you or if you're obsessed with making the wrong decision, it could be time to find peace of mind – and walk away from the deal. Life's too short for regret. Don't enter into any purchase you can't relax and smile about.
See more articles pertaining to Columbia SC home buying in the Columbia SC Home Buying Tips section of our site below Columbia SC Real Estate Categories in the column to your right.
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