Housing Market Taking Positive Steps Sans Stimulus

Without any government stimulus, the Twin Cities housing market continued to take small yet noticeable strides toward recovery in September. Sellers listed 5,562 new homes on the market, down 16.8 percent from last year. Buyers entered into 3,752 purchase agreements, up 37.4 percent over September 2010 levels. That's the fifth consecutive month of double-digit, year-over-year gains in buyer demand—primarily driven by slowed activity at this time in 2010.

 

With less product entering the market and relatively strong sales, inventory levels dropped 20.7 percent to 22,476 active listings. That marks the largest inventory decline in more than seven years. A leaner inventory count combined with stronger purchase demand has moved the market toward balance. There are now 6.8 months supply of inventory, just outside of the ideal five- to six-month range, down from 8.7 months last September and the lowest September figure since 2005. The median sales price was down 6.9 percent from September 2010 to $155,500. Traditional prices fell 12.0 percent to $188,000; foreclosure prices dropped 8.2 percent to $102,825; short sale prices were down 7.5 percent to $129,500.

 

Sellers are starting to see more of their asking price for the second consecutive month – up to 91.1 percent. On the foreclosure front, 39.7 percent of all closings were either foreclosures or short sales while 32.8 percent of new listings fell into the distressed category.

Top 6 Reasons Mortgage Applications Are Rejected

Mortgage lenders have become increasingly restrictive in terms of their lending guidelines since the housing market crash. Here are the top six reasons mortgage lenders reject applications.

 

1.  Income issues. Most failed applications simply have income too low for the mortgage amount they are seeking. The challenges in the U.S. the job market are also causing this issue, as people who have changed their line of work or have changed from salaried employee to freelancer over the last couple of years can also have their home loan applications rejected based on income.

 

2. Too much debt – not enough salary. If the mortgage for which you're applying plus your monthly payments on credit card, car and student loan debts will comprise more than 45 percent of your total income, you could have problems qualifying for a home loan. You might also run into problems if you rely too heavily on bonuses, overtime, cash wages or rental income - banks want a “sure thing.”

 

3. Credit issues. Today, the mortgage-qualifying FICO score cutoff falls somewhere between 620 and 660, depending on which lender and which loan type you seek. It’s estimated more than one-third of Americans have credit scores too low to qualify for a home loan. Even if your credit score is over 660, any late mortgage payments, a short sale, a foreclosure or a bankruptcy in the last two years, could make loan qualifying difficult to impossible.

 

4. Property didn't appraise. Appraisal guidelines have tightened up -- some would say, even more than overall mortgage guidelines. So, it is increasingly common to have the property appraise for a price lower than the sale price negotiated between the buyer and seller.

 

5. Condition problems. With all the distressed properties on the market, and with most non-distressed sellers barely breaking even, more home-sale transactions than ever are falling apart due to condition problems with the property. Many lenders (especially FHA & DVA) will not extend financing on homes where the appraiser points out problems like cracked or broken windows, missing kitchen appliances, electrical problems, or wood rot.

 

6. Technical difficulties with application. The days when lenders just took your word for it are long, long gone.

Applications with incomplete or unverifiable information are doomed. If you are facing any of these challenges, it's critical that you contact me and I’ll engage one of our mortgage professionals to help you determine what course of action to take.

Real Estate Quote of the Month

“The sooner that vacant home that’s in foreclosure is purchased and capital is back into the marketplace, the sooner you start seeing a housing recovery,” Realogy’s CEO Richard Smith bemoaning the fed’s pressuring of mortgage bankers to hold back their inventory of foreclosures.