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2014 Predictions

by Stephanie Sims

Foreclosures

Last month, only 14.2 percent of purchase transactions were REOs across the nation. This is the lowest percentage since 2007.

Are foreclosures, REOs and short sales a thing of the past?

• “In Chicagoland, we’ll see a strong spring market, without as many short sales. The national trend with foreclosures and short sales remains positive. We’ve seen Fannie, Freddie and the large banks liquidate significant portions of their distressed inventory over the past few years. As markets stabilize, appraisers have an easier time finding comps, which means more consistent valuations. Locally, while Illinois was still among the top five most active states in the country for new foreclosures, the trend has improved dramatically, with new foreclosures down almost 40 percent from a year ago. That bodes well for Chicagoland in 2014.” –Barton Pitts, Wintrust Mortgage

Lending

On the appraisal front, there doesn’t seem to be many anticipated changes. In fact, according to many on our expert panel, appraisals have vastly improved during the last half of 2013, thanks to rising home sales. In the beginning of the spring market of this year, the appraisal issues stemmed from not many properties selling, and therefore, there were no comparables for appraisers to work with.

Now, the market is seeing more sales, and appraisers have more to work with to get accurate values. As far as values are concerned next year, the spring market will be busy – even with more sellers coming to the market, buyer confidence has increased, and Kelly Demers, national mortgage banker and VA specialist with Bridgeview Bank Mortgage, foresees more multiple offer situations and inventory selling fast when priced well. This leads to even more comps for appraisers to use; the more comps available, the easier it is for agents and their clients to see what values are, so there is no guessing game.

The other big question on everyone’s mind is: will interest rates have a big effect on the market? Will low interest rates continue to drive the market, even if they increase by a small percentage next year?

Normally, the market seems to take off around the Superbowl, but many experts on our panel are predicting it will get hot before then. Home prices are stabilizing and trending up, and while interest rates will increase next year, they are still at historic lows. The fact that interest rates will eventually increase will help make next spring’s market one of the hottest yet.

• “My feeling is that the Fed will continue to control interest rates over the next year – with the highest increase to just above 5 percent. Of course, in a tight lending market, that small increase could push some people out of the homebuying market. That is why we stress to our customers to try and find some down payment assistance programs out there to help offset the costs of getting people into their new home.” –Russ Bergeron, Midwest Real Estate Data, LLC.

What other lending changes should agents expect next year?

• ”One thing agents and loan officers should be mindful of is the Dodd-Frank changes coming in Jan. 2014. These changes require lenders to send the final version of all appraisals used in a transaction to the borrower at least three days before closing. That means that contract changes need to be updated on the appraisal. For example, seller credits and sales price changes may have to be negotiated earlier on in the process in order to avoid closing delays. The CFPB has a lot of good information on all of the 2014 Dodd-Frank changes on its website (www.consumerfinance.gov/regulatory-implementation).” –Barton Pitts, Wintrust Mortgage

• “It will be interesting to see if the new lending policies will have a major effect on the market dependent on the conforming rates. The lower jumbo rates have had a positive effect on the high-end market, which continues to have higher inventory. As this continues, I think we will see continued sales in the luxury market.” –Honore Frumentino, Prudential Rubloff

• A bigger factor when it comes to luxury market interest rates is the Qualified Mortgage rule changes, but these will only affect less than 10 percent of loans nationwide. “The other main thing to keep in mind with Qualified Mortgage is if you’re self-employed or want to do a high-cost mortgage – but that can’t happen here in Chicagoland because the limit is no more than $417,000 – then that’s where it will be more challenging. I’d emphasize that agents will need to stay positive, because there will be lots of paperwork involved, and all parties need to be patient when getting this type of loan approved. But in reality, this won’t affect many people.” –Kelly Demers, Bridgeview Bank Mortgage

• “You are going to see new portfolio lenders buying up the market again, and loans are not going to only be sold to Fannie Mae and Freddie Mac. Our company has a variety of products because we are a credit union service provider and have many different outlets than what the large banks have.” –Neena Vlamis, A and N Mortgage Services, Inc.

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