Loans and Appraisals
Q: What factors will affect loans next year, and why?
Anthony Marinaccio: The No. 1 challenge is when sellers read good news about housing, and are therefore reluctant to negotiate, while buyers read the bad news, and are hesitant to pay slightly more than their wants/goals. As a collective, we need to meet in the middle!
Carol Prieto: Interest rates, obviously. We’re at a real all-time low, even though sometimes it ticks up a little higher. Historically, if you look at loans, we haven’t been like this in a long, long time. If the Fed doesn’t really increase their rates, it’s going to be a positive effect on the loan rates, which will encourage homebuying.
Victor Ciardelli: All of the macroeconomic factors will play a role: jobs, housing starts, inventory, regulatory changes and interest rates. But I believe one overlooked factor is the increasing influence of technology – consumers and real estate agents alike are demanding a technology solution to the lengthy, paper-based mortgage process, which is why Guaranteed Rate has been working towards the first fully digital mortgage.
Q: What other lending changes should agents expect next year?
Anthony Marinaccio: A potential Fed law for a finalized (no changes allowed) HUD1 three days before closing. This will tremendously help the process of closing; however, it will have massive short-term delays amongst all professionals who do not prepare now, regardless of the pending law approval or not (it’s eventually coming). This will also have a massive affect on short sales and foreclosures as some selling banks do not sign off on HUD1s until the buyers have fully executed all closing docs, and occasionally a day after on closings.
Q: What do you see happening with interest rates in 2015? Will low interest rates continue to drive the market, even if they increase by a small percentage next year?
Colleen Bara: At this time last year, a lot of people thought that the 30-year mortgage rate would be at or near 5 percent by now, so I stay away from predictions. However, I think we’ll see rates inch up next year. Even small upticks affect affordability, so I recommend that anyone who is thinking about buying a home should start now.
Victor Ciardelli: Predicting interest rates is a tricky game – look at how many people predicted last year at this time that we were going to see rates over 5 percent by this past summer, and we’ve stayed well below that threshold. At Guaranteed Rate, we have always been focused on improving the home purchase mortgage process for real estate agents by being the easiest mortgage company to work with, and not being influenced by swings in rates. That said, if rates drop, that will always impact the refinancing market, as we saw in October where a rate drop spurred a spike in refi activity.
Jeff Gregory: While low interest rates do impact the market, more interesting to me is that a small percentage increase in interest rates will likely motivate those who have stayed out of the market to finally get in “before it’s too late.” I think that most people understand that there will be a point when interest rates go up more than just a little bit, in a more permanent move upward. So once the rates move upward in any substantive way, I expect the market to benefit for the short-term.
Q: Will appraisals give home sellers issues in 2015?
Victor Ciardelli: Home values are forecast to continue rising, but at a more normal rate than the rocket-like rise in prices we’ve seen the past couple of years. That should help homeowners have more certainty entering into their appraisal process moving forward.
Teresa Ryan: With stabilized home pricing, there is more data for appraisers to access, which is resulting in more consistent and accurate appraisals. I think that this will continue to improve in 2015.
Q: Are foreclosures, REOs and short sales a thing of the past?
Colleen Bara: There’s no question that mortgage delinquencies have fallen to the lowest levels since 2007. A recent report from the Mortgage Bankers Association noted that delinquency rates have fallen for six straight quarters, and the share of mortgages in the foreclosure process is also the lowest since late 2007. These are positive developments across the industry.
Victor Ciardelli: Certainly, they are a much smaller segment of the market than they were during the teeth of the financial crisis – less than 10 percent now, compared to more than 40 percent in 2009, according to NAR. There will always be a small number of these as a share of the market, depending upon where you live, but yes, their days as a significant segment of the market appear to be behind us.