Jobs and the Economy

Q: What do you think will happen with the U.S. economy over the next 12 months?

Jessica Jakulski, BankSouth Mortgage: I think the US economy will continue to grow, all be it slightly, because job growth remains positive and the unemployment rate continues to decrease. The Fed has hinted that it will push the federal Funds rate from Zero mid to late 2015 but it shouldn’t be drastic enough to keep people from continuing to buy so the housing demand should continue to increase as it did in 2014.

Marsha Sell, Coldwell Banker Residential Brokerage: I sat in on a webinar recently that said stats are good, interest rates are projected to go up but not more than a percent or so. Statistics are showing that as long as there is optimism with jobs, this will help the housing market, like it always does. I think based on this, the economy will be good next year.

Q: What do you see happening with the job market, and how will that affect loans/housing?

Holly Walther, Heritage Bank Mortgage: Jobs will grow along with housing demand which is great for the real estate and mortgage industry.

Lane Jones, Harry Norman Real Estate: When the majority of jobs are those at a minimum wage level or part-time, not much can be expected. This environment is not conducive to domestic job growth, too many firms find it easier to outsource than to hire domestically. Many economists point to the tax and regulatory burdens placed on companies as squelching growth. Whatever the cause, the result remains consistent – people that lack confidence in their economic stability tend to stay on the sidelines.

Loans and Appraisals

Q: What factors will affect loans next year, and why?

Holly Walther: Consumer demand driven by pent up needs, confidence, and flight to safety will all be significant factors. Tangible real property will be increasingly viewed as a safer asset both in the US and the world.

Jenny Wagner, Tristone Financial: From what we know right now, given the training and everything we’ve been through so far, the new Good Faith Estimate, which is scheduled to come online in August 2015, which is going to combine some things with the TIL. I don’t see any dramatic changes coming to conventional or FHA right now. Loan levels are supposed to stay in the same little area and guidelines are still pretty reasonable. There will be a lightening in some areas. Things may progress a little once we get past the first of the year. I think they’re starting to swing back to being a little more functional and not so rigid, but you never know what’s going to arrive until they arrive because there hasn’t been much talk.

Q: What other lending changes should agents expect next year?

Holly Walther: Loan guidelines are always adapting. Only the GSEs would be able to provide that guidance.

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?

Holly Walther: QE 1-3 will ensure rates rise due to the inflation is creates. The timing is the unknown factor. More than likely rates will modestly rise; however, no worries for the consumer given wages rise also creating a relatively neutral environment.

Jessica Jakulski: When rates are at historic lows, they will generally push higher as the US economy improves. Normal checks and balances with Economic reports should keep rates in a narrow trading range between 4-5 percent.  Historically low rates may hurry some borrowers to purchase before rates increase but we shouldn’t see a rush either way. Even the increased rate that we might see later this year will still be lower than what we have seen in the last 10 years. Rent costs are also increasing so buying vs renting is more cost effective in some cases which should create more demand.

Jenny Wagner: I think that interest rates will stay low for 2015. I think that they will hover where they are right now until there’s a trend of real strong economic growth and along with it some measurable inflation. As a stronger economy comes on, we’ll see inflation pick up and along with that rates will start to trend upward.

Q: Will appraisals give home sellers issues in 2015?

Holly Walther: No, due to demand and inflation home values have to increase. 2015 should be another great year to own real estate.

Jenny Wagner: I don’t think so, if people use their common sense and do their due diligence prior to listing their homes for sale. I think that the double digit increases we’ve seen in earlier years are definitely gone. Last year it dropped approximately 5 percent, which is good in the fact that it’s more sustainable than double digit increases which led to this bursting of the housing bubble.

I think agents are a lot more knowledgeable right now and take their time with helping to list a home to do it at the right price so it sells in a quick time frame.

Q: New mortgage rules promise lower down payment options and a more clear understanding of put-backs. Do you think these changes will be enough to encourage any significant amount of new origination, why or why not?

Holly Walther: New origination will occur from demand driven by confidence and job/wage growth. The mortgage product was originally built around a 20 percent product and evolved past its prudent bounds to create the 2008-2009 issue. I believe there will always be a 5 percent or 3 percent version; however, the consumer will pay for less equity in the home due to private mortgage insurance, PMI, to hedge lender’s risk. My advice put money down and avoid PMI if you can.

Q: The Mortgage Forgiveness Debt Relief Act is set to expire at the end of the year. If it’s not renewed, what impact could it have on the market and current homeowners, especially considering that in some areas of the country, serious delinquency rates (i.e. homes approaching foreclosure) are high?

Jessica Jakulski: If it is not renewed, the homeowner could have a huge tax liability which would put them in further debt, which may encourage them to file bankruptcy. This would put them out of the home buying market for many years.

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

Holly Walther: They are definitely running their course, and we are seeing fewer of them.

Marsha Sell: There are very little foreclosures in good areas, but still more than 30 percent in Atlanta. When you get into the better school districts and locations, there aren’t as many. Next year, there will still be some, but not a huge part of the market as they continue to die down.