February Newsletter

February Newsletter

Much of that decline is attributable to a steep rise in mortgage rates, which have more than doubled over the past year. As borrowing costs rose, many potential homebuyers stepped away from the market. As demand eased up, home prices (and their estimated values) began to fall. Here are the cities where home values fell the most from November to December, according to new data from Zillow. The data is based on Zillow’s Home Value Index, which uses the company’s data to measure how much a typical home is worth. Dallas, Texas: -1.47% / San Antonio, Texas: -1.33% / Austin, Texas: -1.30%

Great news! FHA announced this week that they will be reducing the Monthly MI premium from .85% down to .55%. A borrower with a mortgage of $300,000 will save $900 per year! This is great for first time homebuyers and will help a bit with affordability and combat the higher interest rates. This will go in effect for case numbers on or after March 20th. Good opportunity to reach out to your clients and maybe some who were just a little high on the dti to qualify. Let me know if you have any questions.

 February Residential Market Insights:  Please click on the logo to learn more.

As spring market approaches, Houston buyers are getting more for their money – by Liz Hughes  February 14, 2023

With the spring housing market just around the corner, homebuyers are getting more for their money as their mortgage payments are stretching further than they have in recent months, according to a new report from Zillow.

Last October, a $3,000 mortgage afforded a buyer a $560,000 home, down from an $865,000 home in January 2022. That double-digit jump in mortgage prices made a huge impact on what homes were actually within reach for buyers. Zillow found that today, a $3,000 mortgage payment buys you a home that’s 140 square feet smaller than one you could have purchased last year.  Now, as mortgage rates are falling from their 7% peak, buyers are finding they can get more home for their money. According to Zillow, “the typical home value associated with a $3,000 mortgage payment is up about $60,000 since October, and home size has recovered by 84 square feet.” In January, a Houston home with a median $3,000 monthly mortgage payment had a median square footage of 3,395, a 412 square-foot change year over year. Since October, with the change in mortgage rates, that square footage increased by 213. “Mortgage rates have a huge impact on the types of homes buyers are able to afford,” said Anushna Prakash, economic data analyst at Zillow. “Rates that doubled over the past year carved an extra bedroom or office space off of homes at the national level, though the sting has lessened in recent weeks. Buyers in more affordable hot markets are still getting solid bang for their buck, despite losing a lot of purchasing power.” Zillow noted that the annual decline is more noticeable in some markets like Hartford which had the largest drop losing 1,200 square feet last year, while both Indianapolis and Cleveland lost more than 1,000 square feet. As expected, homes in less-expensive markets had more of a drop as higher costs had more buyers competing for those properties. However, Zillow also noted in the more expensive markets, a monthly $3,000 mortgage payment always bought you less space.

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February Residential Real Estate Highlights: Courtesy of HAR. Please click on the logo to learn more.

An upswing in new listings and further pricing moderation bode well for homebuyers in the months ahead

HOUSTON — (February 8, 2023) — January was an expectedly slow month for home sales across the Houston area coming out of the holidays and easing back into the more familiar pre-pandemic trending of the start of a new year. While sales were down, there were positive indicators for consumers considering reviving their homebuying quests this year, including more robust inventory and moderating prices. According to the Houston Association of Realtors’ (HAR) January 2023 Market Update, single-family home sales fell 29.9 percent, with 4,549 units sold compared to 6,492 in January 2022. That marks the tenth consecutive monthly decline. However, when compared to the last January before the pandemic – January of 2020, with sales volume of 4,772 units – sales were down just 4.6 percent. All housing segments experienced declines in January. By contrast, single-family home rentals had another solid gain, demonstrating that prospective buyers continue to pivot to the rental market until mortgage rates ease and other inflationary concerns dissipate. HAR will report on rental trends in the January 2023 Rental Home Update, to be released next Wednesday, February 15. “January was a continuation of the slowdown that began last year with an onslaught of challenging economic conditions,” said HAR Chair Cathy Treviño with Side, Inc. “I think what’s happening now reflects more of a return to seasonal home sales trending – slower volume during the holidays and new year – than a market in distress. Certainly consumers want assurances that inflation is subsiding, so if mortgage rates stabilize and homes continue hitting the market at more affordable price points, we could expect an upswing in sales later this year.” Single family home prices rose at the slowest pace since before the pandemic. The average price increased just 1.5 percent to $381,983. The median price rose just 1.6 percent to $315,000. Those are the lowest price increases since October 2019.

February Commercial Real Estate Highlights: Courtesy of BISNOW. Please click on the logo to learn more.

Own It: XSpace Founder Hopes To Make Commercial Condos Real Estate’s Next Buzzword

February 21, 2023 Maddy McCarty, Bisnow Houston    

Byron Smith was sitting at a Tex-Mex restaurant in Houston when it struck him. Looking out of the window, he could see a church, a school and a strip club: This city doesn’t have zoning laws.That’s why, after previously deeming his vision for a chain of what he calls “commercial condos” an unviable concept in Los Angeles or New York City, he decided to launch his second XSpace development in the city. After opening the first XSpace in Austin last year, its second location, at 7022 Old Katy Road inside the 610 loop in northwest Houston, is slated to open in Q1 2024. “I said, ‘Does anyone care that there’s a school right there?’ And they’re like, ‘Ah, no. No zoning,’” Smith said. “I was like OK, fair enough. That gave me the idea [that] I think we should be in Texas.” XSpace is a place for “anyone who’s cool, interesting, successful,” to buy a space to use as an office, a garage, a man cave or whatever they want, save for a home, he said.

It’s also a relatively rare asset class at the intersection of storage and coworking — so rare that Smith was at a loss for what to call it. Commercial condo might not fully cover it, he said, describing it as similar to coworking space, but with drive-up access to all units and a 4K SF community lounge, almost like a “quasi town center.” “It’s a commercial building, and we put a condominium regime over it, which is basically just a legal thing,” Smith said. “It’s commercial, but it’s a condo, so you can do everything but sleep in it, basically.”

February Mortgage News & Education: Courtesy of Housing Wire. Please click on the logo to learn more.

FHA Commissioner Julia Gordon talks MIP cut – High level of capital reserves guided decision to ease affordability challenges

February 22, 2023, 3:34 pm By Flávia Furlan Nunesing

More than two years after mortgage industry trade groups began openly calling on the Federal Housing Administration (FHA) to cut annual premiums on mortgages the agency insures, the Biden administration and the FHA have done just that. They’ve cut the annual premium to 55 basis points from 85 bps. In doing so, the White House claims the average FHA borrower and homebuyer will save $800 in 2023 alone. Agency officials hope to boost affordability in a frightful housing market, in which median home prices hover near record highs and mortgage rates slowly approach the 7% level. The Biden administration says the annual premium cut will help FHA borrowers, a higher proportion of which are Hispanic and Black borrowers and tend to have lower incomes and credit scores than other government-backed mortgage programs. We caught up with Julia Gordon, the FHA commissioner, to talk about the premium cuts, potential risks and the Federal Housing Finance Agency‘s recent reduction in loan-level pricing adjustments for first-time homebuyers and borrowers with lower FICO scores.

This interview has been lightly edited for length and clarity.

Flávia Furlan Nunes: How was the decision made to get to the 30 basis points cut? Julia Gordon: We analyzed the current state of the fund. And then we stressed the fund. We used scenarios where the economy or the housing market faced extreme pressures. And we looked at the amount we would need to have in reserve to maintain our capital ratio through those difficult times. And we set that as a buffer. So we made the size of the cut to the point where it would not eat into that buffer. The size of this is very prudent based on those analytics and stress tests. We also had to make it large enough to be meaningful to borrowers. So those were the two polls. And that’s how we came down on the 30 basis points. For right now, we will be sticking here for a while. 

Flávia Furlan Nunes: The current 11.1% capital ratio is nearly more than five times the statutory requirement. And the FHA acknowledged that even under a 2007-level stress test scenario, the capital ratio would still exceed 6%. Has that changed? Does the FHA see any greater risks than when they conducted that stress test scenario? Julia Gordon: We’re in very good financial shape right now. I would say there are two big risks. One is generally the macro economic environment and in particular jobs. If you hit a bad spell of unemployment, defaults will rise, and potentially claims will rise. So, that’s always a risk for any mortgage insurance company. You always have to look at employment, interest rates, of course. And for us, in particular, the specific risk that we look to now is the borrowers in our portfolio who still remained delinquent post pandemic. So, we have about 350,000 ish borrowers who are still in default, and who still need help. We’ve created new and very powerful tools for servicers to help them but it is possible that some of them will go to foreclosure and a claim. And so of course, we need to leave a buffer for that possibility, as much as we would like to prevent it through the operational work of the mortgage servicers. But again, like I said, we took all of those things into account when we settled on the number that we’ve announced today.

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February Texas Farm & Ranch News and Information: Courtesy of the Texas A&M Agricultural Law Blog. Please click on the logo to learn more.

Farm Insurance Policies Part #1 – Understanding the Policy

By:Robert Moore, Thursday, February 02nd, 2023

Farms are subject to more risks than ever before. Whether it’s the liability exposure of driving equipment on roadways or the potential of property loss due to a barn roof collapse, every farm has multiple sources of risk. While farmers can reduce their risk exposure through good business practices and rigorous safety protocols, there is no way to entirely eliminate inherent risks. For this reason, insurance policies that adequately protect against the multiple risks present is a necessity for farm operations. All farmers probably know the importance of insurance to protect their livelihood and their farm assets.  However, few farmers take the time to read and understand their insurance policy. The failure to read policies is not a result of apathy but more likely due to the almost unreadable nature of an insurance policy. Reading and understanding an insurance policy is difficult for anyone other than those in the insurance industry.

While each policy is unique, most farm policies do share some common terms or characteristics.  The following is a discussion explaining the more general parts of a farm insurance policy. Understanding the different parts of a policy and the concepts of the policy can help to better evaluate a policy to determine if it provides adequate coverage for a farm.

An insurance policy is a legal contract between an insurance company (the “insurer”) and the person or business entity being insured (the “insured”). The policy holds the insurer responsible for paying the insured for eligible claims. Furthermore, the contract requires the insured to meet certain obligations such as the timely reporting of claims. Once the policy becomes active, both the insurer and the insured are legally bound to the terms of the policy. This legal obligation is present even if the insured is unaware of some or all of the terms of the policy. It is the obligation of the insured to understand the policy.

Additional Resources: Here are a few references that we have found helpful in understanding our markets and economy…

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