NAR’s Research Economist George Ratiu and Research Marketing and Communications Manager TJ Doyle give an update on the latest positive signs in the commercial market, as well as some of the challenges still facing the market.
Archives for June 2013
Come to NAIOP Breakfast About New City Ordinance
July 11, 2013
7:30 – 9:00 a.m.
Participate in this NAIOP event, which CARNM is co-hosting. Learn what the ordinance requires and what it will cost you in the short and long term. Speakers are from the real estate industry as well as the City of Albuquerque.
7:30 – 9:00 a.m.
Participate in this NAIOP event, which CARNM is co-hosting. Learn what the ordinance requires and what it will cost you in the short and long term. Speakers are from the real estate industry as well as the City of Albuquerque.
Location: Albuquerque Marriott (I-40 & Louisiana)
Cost: $25
Register: www.naiopnm.org or (505)345-6976
See Flyer
Information about the ordinance:
On August 5th the ABQ City Council will vote on a new drainage ordinance for new construction and remodels. It was developed to be in compliance with the City’s new MS4 permit from the EPA. MS4 is a federal permit that requires a storm water management plan which reduces pollution to rivers, etc.
It is the industry’s belief that the City’s MS4 permit, which was mandated by the EPA, exceeds the Clean Water Act, so we have been working to develop a drainage ordinance that is not overly costly nor require excessive regulation. However, not many eyes have been on this final version, and we need you to look this over or have your technical people review it. This is our opportunity to make changes and/or ask questions.
Impact of Rising Mortgage Rates on Home Sales
Mortgage rates will continue to rise. They will probably be near 5 percent by this time next year, compared to the 3.5 percent average of the past 12 months. The rates will be even higher in 2015 and 2016. Certainly, rising rates are bad news for buyers and some potential homebuyers will be pushed out of the market. For example, the number of renter households that have sufficient income to buy a $177,000 home at a 3.5 percent mortgage rate is 17.8 million. The number drops to 14.9 million at a 5.0 percent mortgage rate, which is a decline in percentage terms of 16 percent.
| Mortgage Rate | 3.5% | 4.0% | 4.5% | 5.0% |
| Home Price | $177,000 | $177,000 | $177,000 | $177,000 |
| Needed Income | $36,000 | $38,400 | $40,800 | $43,200 |
| Renters with Higher Income than Above | 17.8 million | 16.9 million | 15.9 million | 14.9 million |
But there is one major compensating factor that can easily neutralize the negative impact of rising rates. As REALTORS® well know, there are many good potential buyers who have been denied a mortgage that in past normal years would have easily qualified. The comparison is with normal years and not the bubble years of no standards whatsoever. The Federal Reserve has also often commented about the excessively tight underwriting standards in today’s mortgage market. At the same time, banks have been reporting a strong profit growth from mortgage originations due to exceptionally low default rates on recently originated mortgages, particularly since 2010. Such well-performing recent mortgages should not be surprising since defaults do not happen in an environment with rising home prices. It appears then more loan originations, at least at the margin, will bring more profits for the lenders and correspondingly bring more buyers out into the marketplace. My estimation says there would be an additional 15 to 20 percent more homebuyers who qualify by returning to normal underwriting standards from the current very tight conditions. The table below shows the average credit score of those who obtained mortgage approvals in recent years. The credit scores are much higher now than in past normal times. So, for example, someone with a credit score of 730 would have had no trouble obtaining a Fannie-backed mortgage in the past, but is currently getting denied today.
Read full article.
On June 3, 2013, in Economist Commentaries, by Lawrence Yun, Chief Economist
Sponsor the CARNM Golf Tournament
July 25, 2013
8:30 a.m. shotgun start
Paa-Ko Ridge Golf Club
Register online or Print flyer
CARNM invites you to attend the 2013 CARNM Golf Tournament, which will benefit ¡Explora! Science Center and Children’s Museum.
