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10 Ways To Get Out of the Rent Cycle And Into Home Ownership

Homeownership has its perks, among them tax advantages (the mortgage interest deduction and capital gains exclusion), as well as equity-building opportunities. With the homeownership rate at 64%, clearly Americans value having a stake in where they live.

But home prices are going up each year, often outpacing wage gains, making it increasingly difficult for people to accumulate a down payment for a home. That keeps them renters rather than homeowners.

“The rent cycle has been a very difficult thing to break out of in the last 10 years because of the appreciating home market,” says Joseph Polakovic, president at Castle West Financial in San Diego. “As renters save their money for a down payment, the price of the home they were saving for is simultaneously going up in value and requiring more money for a down payment and banking reserves (usually six to 12 months of mortgage payments).”

So how do renters, who are facing rising home prices and high student loan debt as well as other living expenses, make the leap to owning? The answer is as varied as the circumstances of each would-be homebuyer. For many people, the down payment is the main barrier to homeownership, while others struggle with credit issues and some face a lack of affordable housing in their area.

Here’s some expert advice on what hopeful homebuyers can do to escape the rent cycle.

SPEAK WITH A PRO

If you’re a first-timer, navigating the home buying process can be intimidating. Buying a home is a huge undertaking that comes with big price tags and often long-term ramifications.

If you’ve never bought a house, then you don’t know what you don’t know. It’s a good idea to begin your journey with an expert who can work with you to put a plan in place that aligns with your finances and goals.

“An accountant, mortgage broker or other financial professional can help with budgeting potential costs and what you can realistically expect from your income and available funds,” says Leslie Tayne, founder and attorney at New York-based Tayne Law Group. “You’d be surprised how people make mistakes that can negatively impact the buying process, such as taking money from family without written designations or buying more things on credit or even deferring student loans.”

WHIP YOUR CREDIT INTO SHAPE

Like your SAT score or batting average, your credit score is a number you’re either proud of something you won’t be bragging about at Thanksgiving dinner. If it’s the latter, you might be stressing way too much.

Unlike natural intelligence or raw hitting talent, you have total control over your credit score (absent any fraud or identity theft). And this is an important piece of the homebuying puzzle because it’s the key to getting the best interest rate.

“I help a lot of homeowners get out of this very cycle. My first piece of advice to potential first-time homeowners is to work on their credit,” says Donovan Reynolds, a real estate agent at Coldwell Banker Residential Brokerage in Atlanta. “They need to have at least a 580 credit score; so paying down credit card debt and keeping a low debt-to-income ratio is crucial.”

START SAVING NOW

There are a few good reasons for having a sizable house down payment. The big one is to avoid private mortgage insurance, or PMI. This is a fee lenders tack on loans for buyers who put less than 20% down, and it can add hundreds to your monthly mortgage payment. You can learn more about it here.

A larger down payment also means a lower loan-to-value ratio, or LTV, which helps offset a lender’s risk, so they are willing to offer you a better interest rate to attract your business. It also shrinks your principal balance faster, which affects how much you pay in interest and how much equity you have in your house.

“The best advice for future homebuyers is to start saving as early as possible. If you consistently set aside a part of your paycheck, you can build a down payment that will be there when you are ready to buy a home,” says Judith Corprew, executive vice president, chief compliance & risk officer at Patriot Bank, N.A.

It’s important to cut back on your expenses, Tayne adds. She recommends downsizing wherever possible, including switching to a smaller cable package or cellphone plan and squirreling that money away in a down payment savings account.

“Freeing up some funds can allow you to save more for a down payment. This can also include taking on an extra job to increase cash in the bank, so you qualify for loans more easily and with lower costs,” Tayne says.

HOME LOANS WITH LOW OR NO DOWN PAYMENT

What happens if you can’t save up (much) for a down payment, but you’d rather convert your monthly rent check to a monthly mortgage check? The answer: low or no down-payment home loans. This is not a silver-bullet solution as you’ll likely pay PMI and incur a higher interest rate, but it can help get you in a house faster.

There are several private and government-backed lenders that offer loans to people who don’t have a big down-payment. Big banks, like Bank of America and Wells Fargo, offer 3% down payment mortgages.

Additionally, there are several government programs that offer less stringent credit requirements and lower down-payment loans than traditional lenders.

“We help people buy homes in rural and some suburban areas with zero down using U.S. Department of Agriculture home loans. There are some income limits, but they can be surprisingly generous,” says Adam Spigelman, vice president at Planet Home Lending.

Mortgages with no down payment or a small one:

Department of Veterans Affairs

Navy Federal Credit Union

USDA

Federal Housing Administration

RENT OUT A PORTION OF YOUR HOUSE FOR INCOME

Becoming a landlord might be the perfect second job to help you afford a home. That is, buy a duplex or a house with an extra room and rent it out to help pay your mortgage. This is a tactic some buyers use to offset housing costs.

“From a cash flow standpoint, if you’re paying $1,200 a month for a tiny apartment, often you can buy a small home or duplex and have a similar payment. Even if your payment to own is as high as $1,600 the strategy still works great,” says David Young, CEO at Paragon Wealth Management. “Charge your renter around $1,000 a month and now your cost to own is only $200 to $600. Worst case, you have cut your rent cost in half.”

CONSIDER A 401(K) LOAN

Tapping your 401(k) is usually not recommended outside of emergencies, but some experts think it can be a useful tool in some circumstances.

A 401(k) loan is different from getting an early withdrawal, in that you won’t pay a penalty. Instead 401(k) borrowers will pay interest — which can be on par with personal loans. The good news is that the interest goes back into your account, so essentially you’re paying yourself to borrow your money.

It gets dicey if you leave or get terminated from your job before you repay the loan. Under the Tax Cuts and Jobs Act of 2017, you must repay the loan by the due date of your tax return for the year when you leave your job or you’ll have to pay taxes and a penalty (if you’re younger than age 59.5) on the outstanding amount.

“I work with a lot of federal employees who contribute to the Thrift Savings Plan. One of the best features of the TSP is the TSP loan where you can take as much as $50,000 and pay the interest rate of short-term U.S. Treasurys, which is currently around 2%.

Better still, that interest that you pay gets credited to your account. It’s a wonderful tool,” Polakovic says.

USE A MONETARY GIFT

Honeyfund, the popular honeymoon registry where people can donate cash for a postnuptial vacation, also offers a mortgage registry called Homebuilder. This tool is one way to crowdsource a down payment. More traditional cash infusions include good ol’ monetary gifts from family members.

“Many parents or family members are giving their grown children an inheritance now so they can see them enjoy it,” says Martin Eiden, real estate broker at Compass in Manhattan. “Lenders are amenable to this as long as the person gifting will state in writing that it is not a loan and does not need to be paid back.”

BUY A HOUSE WITH A FRIEND

There are some friends you wouldn’t share a Netflix account with much less a mortgage. But, there are those rare people who have proven their trustworthiness over the years and can be responsible enough to get into a long-term loan with. Friends who fall in the latter category might be good candidates with whom you can co-buy a house.

“Buying a home with a friend is not just an option for married couples, but it does require a lot of trust as you both are intertwining your financial futures together,” Polakovic says. “I recommend having a strong side agreement with the other person that clearly lays out the exit strategy.”

Before you go this route, it’s a good idea to sit down with a real estate attorney to understand the laws and your rights as a co-signer on the mortgage. Questions you should ask are: What happens if one of you wants to sell and the other doesn’t? What if one of you wants to invite a partner to move in — how would mortgage payments and rent be split up? What if one person loses their job and can no longer afford the mortgage?

RESEARCH FIRST-TIME HOMEBUYER PROGRAMS

There are many homebuying programs for people who have never owned a home or haven’t owned one in at least three years. Across the U.S., there are more than 2,500 grants and loan programs to make homeownership more accessible, according to a report by the Urban Institute.

“Down payment assistance programs may be a soft second mortgage, where the organization can provide a certain amount to assist you that can be used towards the down payment or closing costs. These programs may have income requirements or require you to be a first-time homebuyer,” Tayne says.

Start by contacting a local lender, they likely have program information to point you in the right direction.

Housing Deficit

CONSIDER LESS-EXPENSIVE HOUSING

The words “starter house” might summon images of run-down fixer uppers or homes in neighborhoods far from where you work or your kids go to school, but they might be your springboard to homeownership.

Starter homes can be effective ways to build equity which you can later use for a down payment on a bigger, better home — closer to prime neighborhoods.

Options for starter homes might include condos, duplexes or manufactured housing (as long as you own the land). In fact, a recent report by Urban Institute showed that manufactured homes appreciate at nearly the same rate as stick-built homes, making them viable candidates for buyers on a budget.

“Manufactured housing can be less expensive than a traditional new home. You can buy certain manufactured homes with just 3% down, using a Fannie Mae MH Advantage home loan. These aren’t your grandparents’ mobile homes, they have features like pitched roofs, garages, and drywall throughout,” Spigelman says.

As you can see, there’s no one path to homeownership. And not all options will work for everyone. Keep in mind that everyone is dealing with different financial and personal circumstances, so be sure to speak with an adviser about what’s best for you.

Source: nny360

Olowookere Resigns as Omoluabi Mortgage’s MD/CEO, as Aworonke Gets Appointed

Omoluabi Mortgage Bank Plc has appointed Olaitan Aworonke as an acting Managing Director/Chief Executive Officer, after the resignation of its former CEO, Ayodele Olowookere.

Olowookere’s tenure as the CEO of Omoluabi Mortgage Bank was much appreciated by the company’s Board of Directors. The board praised him for his contributions towards ensuring the growth and visibility of the companyHe had been on the board of the bank since 2015 and served on a number of board committees.

Overview of Olaitan Aworonke: According to the statement submitted to the Nigerian Stock Exchange (NSE) by Omoluabi Mortgage Bank, Aworonke’s appointment took effect on October 31, 2019.

“Aworonke has over 16 years of working experience within the Nigerian banking sector. Prior to her appointment, Aworonke was formerly an executive director and also worked in the capacity of the group head, banking operations and business development in Omoluabi. 

“She is a fellow of Institute of Chartered Accountants of Nigeria (ICAN), Institute of Chartered Economist of Nigeria (ICEN) and member, Chartered Institute of taxation of NIgeria (CITRN). She had also worked in various capacities in different banks before joining the bank.”

About Omoluabi Mortgage Bank Plc: Omoluabi Mortgage Bank offers residential and commercial mortgage financing services. The company provides mortgage products which include national housing fund mortgage loans, commercial mortgages, property acquisition loans, and other financial services. Omoluabi Mortgage Bank serves customers in Nigeria and has its oifice located in Ejigbo, Lagos/.

What you should know: Omoluabi Mortgage Bank’s corporate banking products include overdraft facilities and property development financing and trading. The company which was formerly known as Omoluabi Savings and Loans Plc, changed its name to Omoluabi Mortgage Bank Plc in 2016. Its major shareholders are Osun State Government and two major institutional investors.

Source: nairametrics

How Cooperative Societies Can Benefit from NHF Scheme by FMBN

In a response to complaints that the National Housing Fund (NHF) by the Federal Mortgage Bank of Nigeria (FMBN) is solely designed to provide affordable mortgage loans to workers in the formal sector, the Managing Director and Chief Executive Officer of FMBN, Ahmed Dangiwa has said that the NHF is capable of helping all categories of Nigerians access the home ownership opportunities provided by the fund.

While speaking exclusively to Housing TV on their One on One Segment in Abuja on Friday, he said that they have recently developed the cooperative window to enable home seekers, especially those in the informal sector come through their cooperative societies to access the FMBN loan offered through the NHF.

‘’We received a lot of complaints from those in the informal sector that only government workers are benefitting from the NHF scheme, but this is not so. Once you have a cooperative society either from the formal or informal sector and have your plot of land and C of O, get a donor which can also be your developer, then get your own design that suits you, arrive at the cost that your members can afford, you can approach us.

He said the bank will provide mortgage loans called Cooperative Housing Development Loan to any cooperative society that meets these criteria to build estates for their members.

Once these houses are constructed, he said, they create mortgages for the members of the cooperative society who are interested in these houses and can afford them.

‘’Once mortgages are created, the loans are transferred from the cooperative society to the offtakers who are members of that cooperative society and they start paying over a period of time,’’ said.

FMBN Building Affordable Housing Projects in Over 20 States – Dangiwa

The Managing Director and Chief Executive Officer of Federal Mortgage Bank of Nigeria (FMBN), Ahmed Dangiwa has said that the bank is currently financing the development of multiple affordable housing projects in at least 20 states of the federation.

While speaking on Friday to Housing Tv’s  on one on one segment in Abuja, Dangiwa said that in partnership with NECA, Trade Union Congress and Nigeria Labour Congress they have acquired free plots of lands from state governments across the country and for which they have provided designs and funding, and handed them to developers to build homes that are affordable for the beneficiaries.

He said, ‘’currently in the north central, we have developed such houses in Nasarawa and Kogi and are being packaged for the end users. In the North West we have in Sokoto and Jigawa. In the North East, we have in Borno and Adamawa. In the South East we have in Abia and Enugu. In South West we have in Ondo and Osun. We also have in Lagos and Abuja.’’

According to him, a total of about 13 sites that are about to be commissioned in the next few months and handed over to beneficiaries.

 

Real Reasons Home Seekers Can’t Access Mortgage Loans Amid Liquidity in Market

A worrying situation in the Nigerian mortgage market at the moment is that despite the liquidity in the market, home seekers cannot get loans to buy, build or renovate existing houses.

This means that  home seekers’ inability to get loans from mortgage lending institutions is not necessarily because there is no liquidity in the system or because they are not in paid employment which is a major principle of mortgage lending and borrowing.

The primary mortgage banks (PMBs), for instance, are not giving out loans despite all the funds at their disposal from the refinancing of their loans by the Nigerian Mortgage Refinance Company (NMRC). Borrowers are not getting loans from these banks because they have chosen to operate in a narrow, limited market.

“I don’t think the problem of the PMBs is capital. Most of them would tell you they won’t lend to borrowers outside Lagos, Abuja and Port Harcourt where you have more credible customers and understandable landlords. So, you see their market is very limited and narrow,” explained Kola Ashiru-Balogun, managing director, Mixta Nigeria.

He noted that, even in those markets, not many companies are there that their employees can comfortably take up mortgage at 21 percent per annum and be able to pay back.

The companies that can do that, according to him, are very few. “If you take out the oil and gas, and telecoms, nothing is left. Even banks employees cannot afford such loans because the banks are not doing well at the moment. They really need to do something like consolidation in that industry,” he said.

A good number of the PMBs had their loans totaling 1,045 refinanced by NMRC which said it refinanced these banks to the tune of N18 billion as at December 2018. “NMRC has refinanced 1,045 loans so far with the N18 billion they raised between 2015 and 2018,” a board member told BusinessDay.

Kehinde Ogundimu, the Managing Director and Chief Executive Officer of NMRC  confirmed this in a statement that “NMRC has refinanced mortgage loans totalling N18 billion as at December 2018.”

He said the refinancing of the PMBs was in line with the company’s mandate to promote affordable home ownership in the country by leveraging funding from the capital market to deepen liquidity in the primary and secondary mortgage markets.

Primary mortgage operators also confirmed to BusinessDay that their loans had been refinanced by NMRC. “We have been refinanced by NMRC but the funds really grew in 2018,”Aderemi Apatira, Head Corporate Communications and Brand at Infinity Trust Mortgage Bank , said.

In the same vein,  Adeniyi Akinlusi, president of Mortgage Bankers Association of Nigeria (MBAN) and CEO, Trustbond Mortgage Bank, affirmed that NMRC had been refinancing primary mortgage banks.

“I am aware they are refinancing primary mortgage banks but the total amount that has been used for refinancing so far, I do not know,” Akinlusi said.  Asked  if the PMBs were using the finance from NMRC Akinlusi  answered,  “yes we are;  we are creating mortgages.”

It is clear from the foregoing that the problem of the PMBs is not really liquidity as the banking public are made to believe.  Their problem, instead, is a matter of choice which they have made.

This explains why Nigeria remains one of a very small group of economies where  home seekers fund their home purchase from own savings whereas, in most other economies, people buy homes through mortgage loans advanced to them by mortgage-lending institutions.

“The mortgage industry here is fragmented. I am hearing of some recapitalization going on for them which is very positive because we expect to see a stronger mortgage institutions in the country. But one thing is sure. The business is difficult,” Ashiru Balogun said.

He noted that, though the mortgage banks get their funds from NMRC and even if they get those funds at 14 percent, there is no way a borrower can get a loan from them at 10 percent because they must still survive and make profit for their shareholders.

He is of the view that Nigeria should  understand that housing is critical and  has capacity to drive the economy. If that is done, he argued, the country should find a way to drop the interest rate below 10 percent in order to make it attractive and even accessible.

“If you are able to drop that rate by way of investing what is used in building housing inefficiently, you would have done a lot of services to the people. You will be surprised at the number of mortgages that could be created for the people.

When that is done, mortgage becomes not only available, but also affordable. When that is done too, there will be more housing supply because more developers will build knowing that more people will be able to buy through mortgage.

Source: businessdayng

FMBN rent-to-own in 23 States

The Federal Mortgage Bank of Nigeria’s (FMBN)-rent-to-own housing loans have funded estates across 23 states.

The scheme,  still at its pilot stage, was introduced to reduce the housing deficit in the country.

FMBN Managing Director Ahmed Dangiwa, who disclosed this, said the bank also granted construction finance to cooperative societies and housing corporations at 10 per cent to increase housing stock.

He spoke in Abuja during a visit by Brekete Family Sites and Services Ltd.

“We are glad to hear the formation of Brekete Family Sites & Services Limited and the Brekete Family Smart City whose purpose is to help in closing the housing deficit gabs in Abuja and environments.

“As you are aware, the FMBN was established to provide affordable mortgages to drive home ownership among workers, particularly low and medium income earners. This is being done through the National Housing Fund scheme, into which workers both in the public and private sectors contribute 2.5 per cent of their monthly income.

“Through the scheme, the bank has continued to provide affordable mortgages to workers and construction for housing development. Our National Housing Fund (NHF) individual mortgage loans, granted at six per cent, is the most affordable in the country,’’ he said.

Source: thenationonlineng

Complementing Functional Mortgage With Flexible Land Administration System For Growth

For Nigeria to have a mature housing market as it obtains in advanced economies like UK and the US, it must have a well developed and functional mortgage system which must be complemented by a good and flexible land administration system.

Almost always, the slow growth in the Nigerian mortgage system, which has become worrisome, is attributed to the country’s land administration system where the anachronistic Land Use Act has been oppressing the housing sector since it was enacted.

The place of this functional mortgage system without a good and flexible land administration system in the housing sector is quite critical and it has been observed that no housing market can be said to be mature as those of UK and the US without them.

In Nigeria, both of these are lacking. The growth of the mortgage system in the country has been greatly hampered by very rigid, non-flexible and primitive land laws encapsulated as the Land Use Act.

Passed by a decree in 1978 and inserted into the 1979 national constitution, the provisions of the Act can only be changed through a constitutional amendment, requiring a two-thirds majority of both the federal and state legislatures. This is not going to happen any time soon.

But developers have to produce houses and mortgage operators have to continue in business. So, “it has become clear that we must create an enabling environment in which a sustainable mortgage market can thrive, and one of the most important drivers of this is a well established land administration process”, says Adedeji Adesemoye, head, Project Administration Team, Nigeria Housing Finance Programme.

Adesemoye, who is also deputy director, Other Financial Institutions Services Department (OFISD) at Central Bank of Nigeria (CBN), highlighted the unintended consequences of the 1978 Land Use Act’ at a forum in Abuja, pointing out that various efforts, including the setting up of the Nigeria Housing Finance Programme (NHFP) and the Model, Mortgage & Foreclosure Law (MMFL) were being put in place to grow the housing and mortgage markets.

NHFP is being implemented by the Federal Government through its relevant ministries, departments and agencies (MDAs) and this is supported by the World Bank International Development Association (IDA). The objective of the programme, Adesemoye explained, was to increase access to housing finance by deepening primary and secondary mortgage markets.

The MMFL is a draft bill designed to make delinquency in mortgage repayment unattractive to mortgagors and reduce losses from mortgage loans. It is expected to create a more attractive and vibrant environment, thereby attracting investors providing long term, low cost and more available capital to the market. Its main strategy is to encourage the use of administrative procedures to address some of the most negative provisions of the Act.

This is a good development for both property developers and investors. But in addition to these, developers also owe it as a duty to themselves to be creative in managing the limited impact of the Land Use Act.

Developers should de-emphasise the traditional way of raising development finance, explaining that they should go to the capital market to raise funds at much cheaper rates and longer tenor.

To also address the problem of mortgage market growth, the CBN has come up with the idea of a guarantee mortgage programme. This is a mortgage given to a borrower by a lender where an identified third party will take responsibility for the loan if the borrower defaults.

Expectation here is that this will push up housing affordability because, with the new programme, once a borrower defaults, the third party receives a claim from the lender, pays the lender off, and assumes responsibility for the mortgage.

A quality mortgage guarantee programme is used to provide credit loss protection to lenders in case of borrower default. The products incentivise lenders to accept loans with lower down-payments, thus increasing affordability. The implication of this is that borrowers who, ordinarily, would not have qualified for mortgage loan by reason of their low income, can now obtain loans which enhances their affordability.

Experts in the housing sector say one of the surest ways of making housing affordable and growing the sector is by industrialising development through emphasis on locally produced building materials.

Industrialising the sector, in their opinion, would not only drag down the cost of construction, material wise, but also create jobs for those involved in the housing value chain, including input manufacturers, professionals and artisans.

But the experts insist that government should provide infrastructure and come up with a policy framework in the financial sector that will make mortgage accessible and affordable through a significant reduction in interest rate.

Normally, the housing market behaves in a particular way. It gravitates where there is effective demand. Government should recognise that the weakest demand comes from the low end market and so should direct regulatory systems towards that end with a policy to address that problem.

Government should also adopt the zoning system through which it would discover areas where housing need is highest and the type of housing that they need just as it should impose heavy tax on houses that are unoccupied to discourage further development there.

Source: Businessdayng

It Will Take More Than Lower Mortgage Rates for a Housing Rally

The Federal Reserve is hoping that its latest interest-rate cut will help keep the economy safely at cruising altitude. But don’t expect it to provide much of a lift to the housing market.

Housing is one of the pathways by which Fed policy produces results. When the central bank cuts interest rates, it encourages people to buy houses (since mortgages are cheaper) and builders to ramp up construction (since demand is strong and borrowing is easier). Those decisions then ripple through the economy, as people buy furniture, builders hire workers and brokers cash their commission checks.

But housing isn’t the engine it once was. The sector is a smaller part of the economy than before the financial crisis, and a smaller share of Americans are homeowners. And with rates already low, it isn’t clear that a further cut by the Fed will do much for housing — if it lowers mortgage rates at all. (More about that in a minute.)

Interest rates still matter for housing. The Fed’s first two rate cuts this year helped stabilize the housing market, which had been heading for a major slump. On Wednesday, the Commerce Department said that construction added to gross domestic product in the third quarter after six quarters of contraction. And lower rates could give another jolt to a refinancing boom that has injected billions of dollars into the economy in recent months.

But few economists expect the housing market to take off in response to this week’s rate cut, because rates aren’t what was holding back housing in the first place. Instead, they point to other factors.

Interest rates don’t matter if no one will give you a loan in the first place. And a lot of would-be buyers are in that situation.

After the housing bubble burst over a decade ago, banks and other financial institutions became far more cautious in their lending, partly because of new federal rules meant to discourage risky loans. No one wants a return of the bubble-era “liar loans,” for which borrowers were allowed to state their income without verification. But some argue that the pendulum has swung too far the other way.

The typical home buyer today has a FICO credit score of 741, compared with 700 before the housing crisis, according to data from the Urban Institute. Hardly any buyers have a score below 650. Other measures of affordability likewise show that lending standards have loosened a bit in recent years but remain tighter than in the early 2000s, before the subprime lending boom.

“There are a lot of people that have the income to afford their payments, they could be responsible homeowners, but they may have a lower FICO score, they may have a smaller down payment, and that really holds them back,” said Melissa Stegman, a lawyer at the Center for Responsible Lending, an advocacy group.

Jewell Handy has a steady income as a teacher, money for a down payment and even a history of successful homeownership. But when she decided to buy a house for herself and her mother in Houston this summer, she discovered that she couldn’t get a conventional mortgage. The reason: a credit score in the mid-600s because of an old issue with a student loan.

Ms. Handy eventually got approval for a more expensive loan through the Federal Housing Administration. But with a week left before the sale is scheduled to close, she is still fielding paperwork requests from her lender, and she isn’t sure the loan will go through.

“They’re somehow not confident in my finances, but I don’t really understand why,” she said.

Tight lending standards disproportionately affect African-Americans like Ms. Handy. Black workers earn less on average than white workers, and they are less likely to have well-to-do family members who can help with a down payment. The homeownership rate among black Americans tumbled during the housing market’s collapse and has barely recovered, even as whites and other racial groups have made progress.

Glenn Kelman, chief executive of the online brokerage Redfin, said the combination of low interest rates and tight lending standards was exacerbating existing economic divides.

“Right now, money’s really cheap, but you have to have a good credit score to be able to access it,” he said. “It’s been a bonanza for one group of people, the people who have always been able to get credit.”

Housing prices have risen faster than wages in much of the country in recent years. And many cities, particularly on the coasts, are in the midst of a full-blown affordability crisis. In cities like San Francisco, Seattle and Boston, the median price of a home listed for sale is well over half a million dollars, according to the real estate site Zillow, and even starter homes can top $300,000 — if there are any available.

At those prices, a modest dip in interest rates will hardly make a difference, said Susan M. Wachter, a professor of real estate at the University of Pennsylvania.

“This interest-rate decline will not do it — it will not turn these potential owners into buyers,” she said. “Lower interest-rate costs are not effectively overcoming these affordability barriers.”

The escalation in prices is a particular challenge for first-time home buyers, who must struggle to come up with an ever-larger down payment. And while price appreciation has slowed somewhat over the past year in many markets, that isn’t true for entry-level homes, which are still seeing low inventories and rapid price growth.

“The few entry-level homes that are on the market are getting snapped up so quickly that it perpetuates the increasing home values in some of these markets,” said Matt Speakman, an economist at Zillow.

Interest rates on conventional mortgages have fallen sharply since late last year, in part because of the Fed’s rate cuts. That has encouraged borrowing: Lenders extended $700 billion in mortgage loans in the third quarter, the most since the financial crisis. Most of that surge came in refinancing, but there has been an increase in home buying as well.

But with rates near record lows, it’s unlikely that many would-be buyers are on the sidelines awaiting a further cut. And if they are waiting, they might be disappointed — many economists say financial markets have already “priced in” Wednesday’s rate cut.

“I’m skeptical that rate cuts are going to have any noticeable impact on housing in the short-run,” said Ralph McLaughlin, deputy chief economist for CoreLogic, a real estate data provider.

There’s another catch: Mortgage rates are tied not to short-term rates, which the Fed directly controls, but instead to long-term rates, which partly reflect market expectations about the economy’s direction — long-term rates tend to rise when investors are more optimistic. So if the Fed’s policy achieves its broader aim, it can lead to higher mortgage rates.

That has already begun to happen. Mortgage rates have edged upward since September as fears about an imminent recession eased. Michael Fratantoni, chief economist of the Mortgage Bankers’ Association, said he expected rates to continue to rise gradually.

Source: TheNewYorkTimes

JPMorgan Says Saudi Business Is Fastest Growing Globally

JPMorgan Chase & Co said on Tuesday its business in Saudi Arabia is growing faster than any other region in the world, helped by the stock exchange’s inclusion in MSCI’s main emerging markets index.

“We at JPMorgan believe that Saudi will become the main hub in the region, as well as one of the main hubs globally,” Carlos Hernandez, head of global banking at the New York-based firm, said on the opening day of the Future Investment Initiative summit in Riyadh.

Global investment firms are clamoring to do business with the kingdom, where low oil prices have forced officials to tap international debt markets and seek foreign capital.

Advisers hired for the imminent IPO of Saudi Aramco are set to split a fee pool of as much as $450 million, Bloomberg News has reported. JPMorgan is one of nine joint global coordinators on the deal.

The bank “made the decision to go onshore in Saudi about eight years ago, open our custody, and our business is growing at the fastest pace than any other region in the world,” Hernandez said.

Source: arabianbusiness

McVey Boosts Role For Pre-Fab Homes

Housing minister Esther McVey has pledged £38.2m towards building 2,000 new homes using techniques like off-site factory construction as part of what she is calling a “housing green revolution”.

Speaking to industry leaders in Sheffield today, McVey will say that the north of England, which she has dubbed “the construction corridor”, has the potential to become a world leader in modern methods of construction (MMC).

The government housing agency, Homes England, will split the £38.2m funding between six local authorities to speed up the construction of 2,072 homes across the country.

The use of modern methods increases construction speeds by an average of 40 per cent, according to the agency.

The funding has been awarded from the £350m Local Authority Accelerated Construction programme.

McVey will say: “Some modular homes can be built in a factory over a week. And assembled on site in a day.

“Industry has told us some homes built using modern methods can have 80 per cent fewer defects and heating bills up to 70 per cent lower.

“Homes built using modern methods can be of higher quality, greener and built to last.

“I want to see a housing green revolution. In the north of England where the first industrial revolution began.”

She will say that if the UK can lead the way in this sector, the industry could be worth £40bn.

McVey is calling for developers to link up with academics to advance share expertise.

Homes England chief executive Nick Walkley says: “[We see] enormous benefits to MMC – from allowing high-quality homes to be built more quickly to addressing labour and skills shortages and improving energy efficiency – so it’s vital that there is continued investment in it.”

MMC Working Group chair Mark Farmer says: “The UK has a fantastic opportunity to become a true world leader in the advanced manufacturing of new homes.

“We urgently need to better assure building safety, improve quality, reduce carbon and offer much more consumer choice and protections.

“These improvements will only be achieved if we fundamentally readdress the way we design and deliver new homes.”

Source: mortgagestrategy

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