Real estate closing

Average Time to Close on a Mortgage Loan: Around 46 Days

How long does it take to close on a mortgage loan these days? This is one of the most common questions we receive from home buyers and mortgage shoppers. It seems a lot of folks are concerned with timing — and rightfully so.

According to a recent report, the average time to close on a mortgage loan was 46 days toward the end of 2018. It has remained fairly consistent over the past year or so. The average time to close in 2019 will probably fall within that same range, or perhaps a bit less due to the ongoing digitization of the lending process.

Average Time to Close on a Home Loan: 46 Days

In December 2018, Ellie Mae published its latest “Origination Insight Report” with data through November 2018. It showed that the average time to close among all mortgage loans was 46 days for that month.

Some background might be helpful:

Ellie Mae is a company that provides software and related services to the mortgage lending industry. Their insight reports are based on “application data from a robust sampling of approximately 80 percent of all mortgage applications” that are processed through their software applications. So the insights yielded from these reports give us a pretty good idea of what is happening across the entire industry.

The report that they published in December stated:

“The average time to close increased slightly in November, up one day to 46 days. The average time to close a refinance held at 43 days while the average time to close a purchase increased to 48 days.”

(When averaged and rounded up, those two figures for home buyers and refinancing homeowners result in an average of 46 days for all borrowers.)

In this context, the “time to close” is the length of time between (A) the initial loan application and (B) the actual funding. Mortgage loans are typically funded on, or within a couple days of, the closing date.

Faster for Some, Slower for Others

To be clear, we are talking about the average time to close here. The actual time it takes to close on an individual mortgage loan can vary quite a bit, due to a number of factors.

Some borrowers sail through the mortgage underwriting process, which takes place prior to closing and funding. Other borrowers might encounter some snags along the way.

For example, the underwriter might identify some issues that need to be resolved before the loan can close and be funded. These are commonly referred to as “prior-to-funding” requirements or conditions.

For instance, the underwriter might need the borrower to provide a letter of explanation about a gap in employment, a large bank withdrawal or deposit, etc. Once the issue is resolved to the underwriter’s satisfaction, the loan can move toward closing and funding.

Related: Common conditions for underwriting

This is why the closing timeframe can vary from one borrower to the next. Still, the average time to close on a mortgage loan during 2018 was around 42 – 46 days. It will probably hover within that range through 2019 as well.

Coming Soon: A More Digitized Mortgage Process?

During 2018, there were a lot of developments in the mortgage lending industry that could reduce the average time to close going forward. The industry is adopting new technologies and procedures that are designed to streamline the overall lending process.

When compared to other industries, the mortgage industry is lagging behind in this kind of digitization. And that’s understandable, when you look at the amount of paperwork and verification that’s required to close a typical home loan. But it will happen, because consumers demand it.

We’re already seeing signs that the industry is moving in that direction. In a July 2018 Forbes article, Aly Yale wrote:

“Thanks to a new strategic partnership, homebuyers in 15 states can now see faster (and fully digital) closings on real estate transactions … digital notary platform Notarize has partnered with Title Resources, a national title company, to offer electronic notarizations to its customers.”

That particular partnership could help pave the way to a 100% digital closing process in those states where it’s available. It might also set a standard for where the industry needs to go.

Atlanta Skyline

Atlanta Housing Forecast for 2019: Outperforming the National Average?

A recent forecast predicted that the housing market in Atlanta will see bigger home-price gains in 2019, compared to the national average for that same period. A separate report predicted that, while home prices in Atlanta will rise more slowly in 2019, they’ll continue to climb faster than most cities across the U.S.

Cities Get a Boost from Being on Amazon’s Short List

A December 2018 press release from Zillow predicted that: “A handful of metro areas that spent the past year competing for Amazon’s second headquarters – including Washington, D.C., one of the winners – are expected to see their home-value growth outpace the nation in the coming year.”

Amazon was considering a number of cities to be the home of their next headquarters, and they ended up choosing two locations. They’ll be developing a second and third headquarters location in New York’s Long Island City and in Arlington, Virginia.

Atlanta, Georgia was also under consideration, and for a while there many were predicting that Amazon would set up its “HQ2” in the capital and most populous city of Georgia. But it didn’t pan out that way.

Still, the economists at Zillow believe that Atlanta — and other cities that were in the running but weren’t selected — could see a bump in economic activity.

“Amazon ultimately selected two of the country’s most prominent hubs of commerce for their second and third headquarters, but many of the candidate cities that were not ultimately selected could see spillover gains in 2019,” said Zillow senior economist Aaron Terrazas. 

The idea is that other companies will recognize the potential value of setting up shop in those short-listed cities, and that this will be a jobs creator going forward. It could also lead to bigger home-price gains, according to the report.

Atlanta Gets Bold Housing Market Forecast for 2019

This was all part of Zillow’s “Home Price Expectation Survey” for the fourth quarter of 2018. In that survey, they asked more than 100 real estate economists and investment gurus to make some predictions about the U.S. housing market in 2019.

Survey participants were also asked to choose three real estate markets that they felt were “most likely to outperform the U.S.” in 2019.

Topping that list were:

  1. Dallas, Texas
  2. Washington, D.C.
  3. Atlanta, Georgia

Home prices in Atlanta rose by around 13% over the past year or so, according to Zillow’s data. In the U.S. as a whole, they rose by an average of 7.7% during that same period. So clearly, the Atlanta real estate market outperformed the national average during 2018 — as it’s expected to do in 2019.

MetroDepth Report Predicts Steady Home-Price Gains

A separate report published by MetroDepth on January 1st predicts that home prices in Atlanta will rise more slowly in 2019 than they did in 2018, but that the city will continue to outpace the national average.

So here we have at least two sources predicting that Atlanta will be one of the hot housing markets in 2019, at least in terms of annual home-price appreciation.

The MetroDepth report also pointed out that 2019 could be a good year for buyers in the Atlanta area, due to a number of factors. Housing inventory in the area (i.e., the number of homes listed for sale) has risen over the past year, so buyers could have more properties to choose from in 2019.

Additionally, we are starting 2019 with 30-year mortgage rates averaging around 4.55%, which is only half a percentage higher than where they were at the start of 2018. Buyers who get a head start on their house hunting in 2019 might still take advantage of those historically low rates.

Disclaimer: This article contains forecasts and predictions for the Atlanta real estate market in 2019, which were provided by third-party sources. The Home Buying Institute does not make claims or assertions about future economic conditions. Housing-related forecasts should be viewed as the equivalent of an educated guess and not financial advice.

FHA logo

FHA Changes for 2019: Loan Limits Raised, Premiums Unchanged

Some important changes to the FHA loan program were announced last week. According to the Department of Housing and Urban Development (HUD), FHA loan limits for most U.S. counties will go up in 2019 in response to rising home values.

But program officials say there won’t be any reduction in FHA mortgage insurance premiums anytime soon. Here’s what you need to know about FHA loan changes for 2019.

FHA Loan Limits Increased for 2019

Home prices nationwide have risen steadily over the past year or so. As of December 2018, the median home value in the United States was $221,500. That was an increase of around 7.7% from a year earlier, according to Zillow. Prices are expected to continue rising in much of the U.S., throughout 2019.

As a result, federal housing officials have increased the conforming loan limits for most of the U.S. in 2019. VA and FHA loan limits will go up as well.

According to a December 14 press release from HUD:

“The Federal Housing Administration (FHA) today announced the agency’s new schedule of loan limits for 2019, with most areas in the country to experience an increase in loan limits in the coming year. These loan limits are effective for FHA case numbers assigned on or after January 1, 2019.”

In 2019, FHA loan limits will range from $314,827 to $726,525 for a single-family property. That’s the maximum mortgage size the Federal Housing Administration is able to insure.

There are exceptions for locations with higher construction costs, such as Hawaii, Alaska, Guam and the Virgin Islands. In these “special exception” areas, the FHA loan limit for a single-family property will be increased to $1,089,787 in 2019.

It’s important to note that these limits vary by county, since they are based on median home values. More expensive real estate markets (like San Francisco and New York City) have limits of up to $726,525. Other, more affordable markets tend to have lower limits.

So that’s the first FHA loan change for 2019. Borrowers will have a higher level of financing to work with next year, to go along with higher home prices.

The second announcement is more of a continuation of the status quo, rather than a policy change. And it has to do with FHA mortgage insurance premiums.

No Reduction in Mortgage Insurance Premiums

Borrowers who use FHA loans to purchase a home usually have to pay for mortgage insurance. With the FHA program, there are actually two of these premiums — upfront and annual.

During the end of his time in office, President Obama signed a measure that would have reduced the annual mortgage insurance premium for FHA loans. That reduction would have saved borrowers an average of $500 per year, according to officials. But it was later canceled by President Trump, shortly after he took office.

Over the past few months, some industry groups have urged HUD and FHA to lower the annual premium (as was previously planned). But that doesn’t appear likely during 2019.

During a November 2018 phone call with reporters, FHA’s Commissioner Brian Montgomery explained:

“We do have to be realistic about the fact that that is still a relatively thin margin. While the MMI Fund is sound at this point in time, I think we’re still far away from being in a position to consider any reduction in our mortgage insurance premiums.”

The “margin” he was referring to is the difference between (A) the capital reserve level that’s required by law and (B) the actual reserves in the fund. Those reserves are used to cover insurance claims from lenders, when borrowers default on their loans. 

So there you have them: one FHA loan change for 2019, and one non-change. Loan limits are going up in most counties across the U.S., but there doesn’t appear to be an insurance premium cut on the horizon.

Texas highlighted on map

All Texas Counties Get Higher Conforming Loan Limits for 2019

The conforming loan limit for Texas has been increased for 2019. Next year, all 254 counties across the state of Texas will have a conforming loan limit of $484,350. That’s for a single-family home purchase. Multifamily properties such as duplexes and triplexes have higher limits.

Higher Loan Limits for Texas in 2019

Last month, the Federal Housing Finance Agency (FHFA) announced that it was going to increase conforming loan limits for nearly all counties across the country. The new “baseline” limit will go up to $484,350 in 2019. Higher-cost real estate markets like San Francisco and New York City will have loan limits of up to $726,525.

According to their November 27 press release:

“The Federal Housing Finance Agency (FHFA) today announced the maximum conforming loan limits for mortgages to be acquired by Fannie Mae and Freddie Mac in 2019. In most of the U.S., the 2019 maximum conforming loan limit for one-unit properties will be $484,350, an increase from $453,100 in 2018.”

In Texas, all counties will have the baseline loan limit of $484,350 in 2019. While there are plenty of expensive homes in real estate markets across Texas, there are no “high-cost” areas in terms of median house values. So it’s the same limit for all 254 counties.

Conforming vs. Jumbo Mortgages

So what is a conforming loan exactly?

When a mortgage loan meets the size restrictions used by Freddie Mac and Fannie Mae, it is referred to as a conforming loan. It can therefore be sold to those two government-sponsored enterprises via the secondary mortgage market.

When a person borrows more than the conforming loan limit for their county, they are using a “jumbo” loan. The qualification requirements can be stricter for jumbo mortgage products, because there is a larger amount of money being borrowed and therefore a higher level of risk. For example, lenders often require larger down payments, higher credit scores, and higher income levels for borrowers who are seeking a jumbo mortgage loan.

A conforming loan, on the other hand, might have a lower bar for approval since it can be sold to Freddie Mac or Fannie Mae.

Median Home Price Is Well Below the New Limit

Conforming loan limits are based on median home values. They can vary from one county to the next because of their connection to house prices.

But in Texas, every county will have the same conforming loan limit in 2019. That’s because median home prices for most counties across the state fall below the new baseline loan limit of $484,350.

As of December 2018, the median home value for Texas was around $190,400. That’s obviously well below the 2019 conforming loan limit mentioned above. Even in the state’s more expensive real estate markets, like Austin, the median house price still falls below the new loan limits for 2019.

This means that a typical borrower in most cities across Texas should be able to finance a home purchase within the conforming loan limit range. But jumbo mortgages are still available for those borrowers who need a higher level of financing (and can meet the stricter qualification criteria).

VA and FHA Loan Programs in Texas

The conforming loan limits above apply to conventional mortgage products. “Conventional” means they are not insured or guaranteed by the government. The two main government-backed loan programs (VA and FHA) should also get higher limits for 2019.

The VA loan limits for Texas will be aligned with the conforming figures mentioned above. That’s because the Department of Veterans Affairs typically uses the limits established by the FHFA.

As for the FHA loan program, we are still awaiting an announcement from the Federal Housing Administration. They typically announce their new loan limits in December, for the year following. We expect to see that announcement within the next two or three weeks.

Update: On December 14, HUD announced that it was raising FHA loan limits for most counties across the country.

Neighborhood in San Jose

Philadelphia and San Jose: Biggest Home-Price Forecasts Among Major Cities

In a recent analysis conducted by the Home Buying Institute, Philadelphia and San Jose were found to have the highest home-price forecasts among major U.S. cities through the fall of 2019.

Strong Housing Market Forecasts for San Jose and Philadelphia

Home prices in most U.S. cities are expected to continue rising in 2019. But the amount of appreciation could vary widely from one city to the next, as is usually the case.

We wanted to know which major cities across the country are expected to have the biggest home-price gains over the next year or so. So we looked at the one-year forecasts provided by the real estate research team at Zillow, for the 30 most populous cities in the country.

Summary of findings:

  • Among the 30 largest cities, San Jose, California and Philadelphia, Pennsylvania had the highest home-price forecasts through fall 2019.
  • The company predicted that the median home value in San Jose would rise by 16.2% over the next 12 months. For Philadelphia, they predicted a one-year increase of 15.3%.
  • At the other end of the spectrum, Louisville, Kentucky and Indianapolis, Indiana had the lowest home-price forecasts among the 30 largest cities. In both of those cities, Zillow predicted that the median home value would actually drop slightly over the next 12 months.
  • Home prices for the nation as a whole were forecast to rise by 6.4% over the next year.

Note: These home-price forecasts were obtained from Zillow on November 24 – 25, 2018. They are one-year forecasts, so they project into the fall of 2019.

San Jose: Double-Digit Price Gains, Past and Present

The housing market in San Jose shrank over the past few years, with active listings dropping to record lows. This led to bidding wars and rapid price gains. While this once red-hot market appears to be cooling down, it still earned the strongest home-price forecast among the country’s most populous cities.

According to a November 2018 posting on Zillow’s website:

“San Jose home values have gone up 15.3% over the past year and Zillow predicts they will rise 16.2% within the next year.”

This is largely a tech story. High-paid tech workers lured by companies like Google and Apple have flooded into Silicon Valley over the past few years. Many of them settle in San Jose, the most populous city in that region.

San Jose’s population rose above the one-million mark last year, according to the U.S. Census Bureau. But the city’s housing market hasn’t keep pace with that growth. This has led to inventory shortages that are still evident today.

Housing inventory in San Jose has increased over the past year or so, but there still aren’t enough properties available to satisfy demand. So it’s no surprise to see such a big home-price forecast for the San Jose real estate market.

Philadelphia Housing Market ‘Heating Up’ More Than Most

Earlier this month, we reported that Philadelphia was one of a handful of housing markets that are heating up for 2019. This was based on a report from the real estate brokerage Redfin.

In a November 2018 press release, the company reported:

Wilmington, Delaware, Philadelphia and Atlanta lead the handful of metro areas where supply is shrinking, leaving more homes to go under contract within days, and for above-list price than a year ago.”

Philadelphia’s housing market inventory (the number of homes for sale) dropped by nearly 23% in October 2018, compared to the same period a year earlier. As a result, homes are selling faster, and more of them are selling above the original list price. These trends indicate strong demand from home buyers.

Among the 30 most populous cities in the country, Philadelphia had the second-highest home price forecast stretching into fall 2019. In November, Zillow’s research team stated:

“Philadelphia home values have gone up 11.4% over the past year and Zillow predicts they will rise 15.3% within the next year.”

In these and similar real estate markets, home buyers who are “on the fence” might want to consider purchasing sooner rather than later to get ahead of rising costs.

Disclaimer: This article contains housing-related trends, data and forecasts provided by third parties outside of our company. The Home Buying Institute (HBI) makes no claims or assertions about future economic conditions.

Atlanta houses

Report: These 8 Housing Markets Are ‘Heating Up’ the Most for 2019

What do Wilmington, Philadelphia, Atlanta and Rochester have in common? According to a recent housing industry report and forecast, these four real estate markets are currently “heating up” more than any other metro area in the country.

8 Housing Markets ‘Heating Up’ the Most

Recent reports have shown that the pricier coastal real estate markets like San Jose, California and Seattle, Washington are finally cooling down. In those types of markets (which have experienced a huge run-up in prices over the last few years), home values are now rising more slowly. And sellers are starting to make price cuts due to softening demand.

But according to a recent report from the real estate brokerage Redfin, many of the more “affordable inland metro areas are heating up” as we approach the end of 2018. These housing markets are poised for steady price growth and increased competition in 2019.

These warming markets include Wilmington, Delaware; Philadelphia, Pennsylvania; Atlanta, Georgia; and Rochester, New York. In these and other metros listed in the report, housing supply is shrinking and homes are selling faster.

Related: Atlanta outperforming the nation

Methodology: To determine which real estate markets across the country are warming up the most, Redfin “ranked the top 25 metro areas with populations of at least 500,000 people.” They looked at three indicators that suggest how active and competitive each market was, as of fall 2018:

  • Declines in housing inventory (the number of homes for sale)
  • Increases in the number of homes going under contract within two weeks
  • Increases in the share of homes selling for more than their list price

Based on this analysis, the group determined that the following metro-area housing markets are heating up the most:

  1. Wilmington, Deleware
  2. Philadelphia, Pennsylvania
  3. Atlanta, Georgia
  4. Rochester, New York
  5. Greensboro, North Carolina
  6. Akron, Ohio
  7. Richmond, Virginia
  8. Buffalo, New York

Of course, the degree of “warming” varies from one real estate market to the next. Each metro area has a different supply-and-demand dynamic. Here’s a more in-depth look at the four metro areas that topped their list.

Wilmington, DE: Housing Inventory Has Shrunk

In Wilmington’s housing market, the number of homes for sale decreased by -24.5% in October 2018, compared to a year earlier. That means there are significantly fewer homes on the market today than in the past. Typically, this kind of inventory contraction leads to increased competition among home buyers and sends prices north. Perhaps that’s why the company forecast that the Wilmington housing market was “heating up.”

Philadelphia, PA: Strong Home-Price Forecast for 2019

Like the other top four cities on this list, Philadelphia’s housing market has also shrunk over the last year or so. Homes are selling quickly due to strong demand and limited supply. According to a November 2018 forecast from Zillow: “Philadelphia home values have gone up 11.0% over the past year and Zillow predicts they will rise 12.8% within the next year.” That’s one of the strongest long-range forecasts we’ve seen for a major U.S. city.

Atlanta, GA: Homes Are Selling Quickly

According to the report mentioned above, nearly 29% of homes listed for sale in Atlanta were off the market within two weeks. That was for October 2018. About 21% of homes sold for more than the original list price. These indicators point to a market with strong demand from buyers and account for Atlanta’s positive housing forecast for 2019.

Rochester, NY: Many Offers Above List Price

Rochester, New York is another metro area where homes are selling quickly, and often above the list price. Based on the above report, 36% of homes sold within two weeks and for above the initial listing price. A recent forecast from the economic research team at Zillow predicts that prices in Rochester will continue inching upward into 2019.

Disclaimers: This article contains data, forecasts and reports provided by third parties not associated with our company. That information is deemed reliable but not guaranteed. The Home Buying Institute (HBI) makes no claims or assertions about future housing market conditions.

Coming attractions 2019

Outlook: Three Mortgage-Industry Trends That We Might See in 2019

Coming attractions 2019

A new round of mortgage industry forecasts and projections suggest that higher interest rates could lead to a purchase-dominated mortgage market in 2019. Meanwhile, mortgage qualification standards have eased, and this could bring more borrowers into the market next year.

Three Mortgage Trends We Could See in 2019

As we move into the holiday season, many home buyers are looking ahead to 2019. And many of them share the same questions: What will mortgage rates do in 2019? Will it be a good time to buy or refinance a home? Here are some recent trends that could carry over into next year.

Prediction #1: Thirty-year mortgage rates could hover around 5% in 2019.

At the start of 2018, the average rate for a 30-year fixed mortgage was 3.95%. That’s based on the long-running survey conducted by Freddie Mac. As of November 8, that average had risen to 4.94%. So today’s mortgage rates are about one full percent higher than they were at the beginning of this year.

As for forecasts and projections, some analysts expect 30-year loan rates to hover around 5% for much of 2019. The Mortgage Bankers Association (MBA) recently predicted that the average rate for a 30-year fixed home loan would start 2019 at 5.0%, and then hover around 5.1% for the rest of next year.

The economic research team at Freddie Mac offered a similar prediction for mortgage rates in 2019. In an October 2018 report, the group stated:

“We anticipate that the 30-year fixed-rate mortgage will average 4.5 percent in 2018, rising to 5.1 percent in 2019 and 5.6 percent in 2020.”

So their long-range outlook mirrors the forecast issued by the MBA. Analysts from both organizations expect long-term home loan rates to hover in the low 5% range for much of next year.

Did you know? While there are different types of home loans, the 30-year fixed-rate mortgage is by far the most popular financing among borrowers today. That’s why you see it mentioned so frequently within news reports, forecasts, etc.

The key takeaway here is that there appears to be some consensus among experts that mortgage rates will remain fairly stable throughout 2019.

Prediction #2: Purchase loans will dominate the market, as refinancing activity declines.

When mortgage rates trend upward, refinancing activity tends to decline. And we’ve already talked about the steady rise in rates that has occurred during 2018.

As a result of that trend, the mortgage market in 2019 will likely be dominated by purchase loans (i.e., those used by home buyers). Mortgage refinancing activity, on the other hand, will likely decline through the end of 2018 and into 2019.

According to a November 2018 press release from the analytics firm Black Knight, almost 1.9 million homeowners across the country still “have an interest rate incentive to refinance” their homes. But the window has closed for many more. The company’s data revealed that roughly 6.5 million homeowners “have now missed their opportunity to refinance their mortgages due to rising rates.”

Bottom line: Some homeowners in the U.S. could still benefit from refinancing. But if rates continue to rise, that number will shrink. In 2019, the mortgage market will probably consist primarily of purchase loans, with a smaller percentage of refinance loans.

Related: 4 things the housing market might do

Prediction #3: Mortgage lending standards will be more relaxed, compared to previous years.

Mortgage lending criteria have eased over the past year, and this could have an impact on the 2019 mortgage market as well. The short version is that it’s generally easier to qualify for a home loan today, compared to previous years.

There are several reasons for this. For one thing, Freddie Mac and Fannie Mae have eased the criteria they use when purchasing mortgage loans from lenders. They’re allowing higher debt-to-income ratios, and higher loan-to-value ratios. This means borrowers today can qualify for a mortgage loan with a higher level of household debt, and with less money down. Generally speaking.

An October 2018 report by the property analytics company CoreLogic stated:

“Mortgage credit underwriting eased for both conventional and Federal Housing Administration (FHA) home-purchase loans during the Q2 2018 compared with a year earlier … In the last few years, GSEs have expanded their credit box to creditworthy borrowers by increasing the maximum debt-to-income (DTI) and loan-to-value (LTV) ratios.”

Note: The GSEs in the above quote are the two government-sponsored enterprises, Freddie Mac and Fannie Mae. Their purchasing criteria tend to “trickle down” to the primary mortgage market, where they affect borrowers.

We recently reported that mortgage loan denial rates have declined steadily over the last seven years or so. This is partly due to an ongoing “easing” trend within the industry.

To be honest, it’s fairly easy to “forecast” this particular trend because it’s already happening. And it’s something that will probably carry over into 2019. That’s good news for borrowers.

Disclaimer: This article includes predictions and forecasts provided by third parties outside of our company. We have presented them here as an educational service to our readers. The Home Buying Institute (HBI) makes no claims or assertions about future economic conditions.

San Diego neighborhood. Source: Flickr, dmcdevit

San Diego Gets a ‘Slow but Steady’ Housing Forecast for 2019

A recent forecast for the San Diego real estate market suggests that home prices will continue rising into 2019, but at a slower pace than the previous year.

Forecast for San Diego Real Estate Market

The real estate research team at Zillow recently predicted that the median home value for San Diego, California would rise by around 4.3% over the next 12 months. This forecast was issued in November 2018, so it stretches into the fall of 2019.

As of November, the median home value in San Diego was $629,100. That was an increase of 6.2% over the previous 12 months.

So this particular forecast suggests that house values in San Diego will rise a bit more slowly next year than they did in 2018. This mirrors broader projections for the nation as a whole. The general consensus among housing analysts and economists appears to be that annual home-price appreciation will cool a bit over the coming months.

Rising Prices Create Affordability Issues for Many

Affordability has become an issue for many would-be home buyers in the San Diego area. This is another trend that is affecting many major cities across the country, but particularly in the western coastal markets.

During the 20-year period from 1998 to 2018, the median home value in San Diego rose by around 217%. But the median household income only rose by around 77% during that same 20-year timeframe.

This is true for many cities across California. Home prices have risen at a faster pace than income over the past couple of decades, and that has created affordability issues for a lot of residents.

The bottom line is that it has become harder for a person with median income to purchase a median-priced home in the San Diego area. These affordability issues could affect the local housing market in 2019, by softening demand.

In fact, the California Association of REALTORS® pointed to this trend in its forecast for the state’s housing market, published in October:

“A combination of high home prices and eroding affordability is expected to cut into housing demand and contribute to a weaker housing market in 2019, and 2018 home sales will register lower for the first time in four years.”

Sales have declined as well. Last month, the property analytics company CoreLogic reported that home sales across San Diego County dropped by 17.5% in September, compared to a year earlier. That was the lowest level of sales activity for a September in 11 years, and it could be a side effect of the affordability issues mentioned earlier.

Clearly, there is a shift occurring here. This is partly what’s driving the more modest forecasts for the San Diego housing market in 2019.

Positive Sign: Housing Inventory Rose in 2018

One bit of good news for home buyers planning to enter the market in 2019 is that housing inventory has risen over the past year. As of September 2018, the San Diego housing market had about a three-month supply of homes for sale. That was up from a low of about 1.5 months at the end of 2017.

This means there are more homes listed for sale today than last year. This is a trend we are seeing in a lot of housing markets across the western U.S. right now. And it’s good news for home buyers, because it means they will have more properties to choose from (and possibly less competition) compared to those who purchased in the past.

Inventory growth could also have a moderating effect on annual home-price appreciation, by tilting the scales of supply and demand toward a more balanced position.

Disclaimer: This article contains predictions and forecasts relating to the housing market in San Diego, California. Those forward-looking statements were provided by third parties not associated with our company. The publishers of this website make no claims or assertions about future housing conditions.

Credit Score

Average Credit Score for FHA Borrowers Dropped to 681 in 2018

An October 2018 report published by CoreLogic (a housing analytics and research company) showed that the average credit score among home buyers using an FHA loan dropped to 681 during 2018. A few years back, during the first quarter of 2011, the average credit score among home buyers using FHA loans was 709.

This indicates that a higher percentage of borrowers with lower scores are using this particular program to finance their home purchases. It’s a trend that could continue into 2019.

Related: Mortgage denial rates have dropped

Average Credit Score Among FHA Home Buyers

CoreLogic’s study examined a variety of trends relating to mortgage underwriting standards, for both FHA and conventional home loans. Among other things, they discovered that the average credit score among home buyers using the FHA program has dropped steadily over the last seven years or so.

To quote the report:

“Since Q2 2011, the average credit score of homebuyers with FHA loans has declined steadily (709 in Q1 2011 to 681 in Q2 2018) making loans more accessible to borrowers with moderate credit history.”

In contrast, the average score among home buyers using a conventional mortgage loan has remained largely unchanged since 2009. It has hovered within the range of 758 – 763 over the last nine years or so.

Terminology: FHA loans are originated by mortgage lenders and insured by the Federal Housing Administration, a government agency. Conventional loans, on the other hand, are not insured or guaranteed by the government. That’s the primary difference between these two financing options.

So it seems that the credit standards used by mortgage lenders have eased over the years for FHA borrowers, while holding steady for conventional borrowers.

The key takeaway for borrowers is this. If you have a relatively low score, you might have an easier time getting approved for an FHA loan than conventional. But it’s still wise to explore all of your financing options.

How Low Can You Go?

The 680 credit score mentioned above is just the average among FHA home buyers for the second quarter of this year. The official minimum required score is quite a bit lower. But here, it’s important to understand the difference between the program requirements set forth by HUD, and the requirements of individual mortgage lenders.

The FHA loan program is managed by the Federal Housing Administration, which falls under the Department of Housing and Urban Development (HUD). According to HUD Handbook 4000.1, borrowers need a “minimum decision credit score” of 500 or higher to be eligible for an FHA loan. A score of 580 or higher is required for maximum financing, and to take advantage of the 3.5% down payment option.

But those are just the official minimums. Mortgage lenders can set their own standards for credit scores as well, and these can vary from one lender to the next. So the only way to know if you qualify for the program is by speaking to an FHA-approved mortgage lender (or more than one, ideally). Meeting the minimum credit score requirement, by itself, does not automatically qualify a borrower for this program.

FHA Borrowers Are Carrying More Debt as Well

The above-mentioned report also showed that the average debt-to-income (DTI) ratio has risen, among home buyers using this program. It said that the “DTI for FHA loans started to rise after Q2 2015 and had reached its highest level in at least 14 years during Q2 2018 at 43 percent, up from 42 percent in Q2 2017.”

This means that borrowers are qualifying for and using FHA-insured mortgage loans with a higher level of debt than before, on average. So there appears to be some easing in this area as well.

Jacksonville waterfront

Jacksonville Leads Housing Forecasts Among Florida’s Major Cities

Jacksonville waterfront

Florida’s statewide Realtor association recently issued an overall rosy assessment of the state’s real estate market. Forecasts from other industry groups suggest that home prices in Jacksonville could rise by double digits over the next year, outpacing most other Florida cities.

Forecasts for Biggest Housing Markets in Florida

According to a November 1, 2018 press release from Florida Realtors®, the state’s “housing market had more sales, higher median prices, more pending sales and more new listings in 3Q 2018,” compared to the same time a year ago.

That’s for the state as whole. But when it comes to buying a home, local conditions matter more than statewide trends. And home-price appreciation can vary widely from one city to the next. So we looked to the housing and economic research team at Zillow to see what they expect for 2019, at the city level.

As it turns out, Jacksonville has one of the strongest housing market forecasts stretching into 2019. Zillow’s analysts predicted that the median home value in Jacksonville would rise by a whopping 12.6% over the next year. (This forecast was issued at the end of October 2018, so it extends into the fall of 2019.)

For comparison, here are Zillow’s predictions for other major cities in Florida.

  • Tampa: At the end of October 2018, the median home value in Tampa was around $216,000. At that time, the company was predicting that the median would rise by 6% over the next 12 months.
  • Orlando: The median house value in Orlando, Florida rose to around $234,000 as of fall 2018. That was a gain of roughly 10% from a year earlier. Looking forward, the group predicts that the median home price in Orlando will rise by 5% through fall of 2019.
  • St. Petersburg: The housing market in St. Petersburg has also experienced double-digit home price growth over the last year or so. By Zillow’s estimate, the median value rose 12.1% over the past 12 months (as of November 1, 2018). Their one-year forecast for this market calls for an additional gain of 5% over the next year.
  • Tallahassee: Among the major cities in Florida, Tallahassee had one of the lowest median home values. Zillow estimated it at $177,400, as of November 1. They predicted that the median home price in Tallahassee would rise by 4.3% over the coming year.
  • Sarasota: The real estate market in Sarasota has experienced smaller price gains than the cities listed above. The median home value for the city rose 5% over the past year, with a 12-month forecast calling for an additional 4% in appreciation.
  • Miami: As of fall 2018, the median house price within the Miami real estate market had reached $333,600. That marked a rise of about 4.6% over the previous year. The company’s economists predicted that the median value would rise by 3.6% over the next year or so.
  • Palm Beach: One of Florida’s most expensive real estate markets, Palm Beach has experienced a leveling of home values. In fact, Zillow reported a slight dip in the median home value for Palm Beach over the past year. Looking forward, however, they predict that the median price point will rise by 2.5% over the next year.
  • Cape Coral: Among the major Florida cities on this list, Cape Coral had the weakest housing market forecast extending over the next 12 months. At least, in terms of price growth. As of November 1, 2018, Zillow was forecasting a one-year change of just 0.1% for this market.

Granted, these are just forecasts. They are the equivalent of an educated guess based on current housing trends and expectations for the near future. So we probably shouldn’t get too hung up on the exact numbers being forecasted here.

The big takeaway here is that, while home prices across Florida are expected to rise in 2019, conditions can vary quite a bit at the city level. Home buyers who are planning to enter the real estate market in 2019 should research local conditions, as part of their preparation.

Disclaimer: This article contains predictions and forecasts for various housing markets across Florida. Those forward-looking statements were issued by third parties not associated with our company. As a general rule, the Home Buying Institute does not make claims or assertions about future housing conditions.