NAR Report Indicates a Strong Summer for Home Sales

Many home buyers and builders watched the 2015 housing market with cautious optimism. It now appears that after 10 consecutive months of sluggish sales numbers, the housing market could be poised for a strong summer. The recent NAR Pending Home Sales Index shows the number of houses under contract increased by 3.5 percent in February of 2016. That put pending home sales at their highest level since July of 2015. Industry analysts say pending sales reached a nine-year high in April of 2015. This recent uptick surprised many economists and comes as welcome news to real estate agents, builders, title insurance companies, and others employed in the housing sector.



Lenders more welcoming of home buyers

According to Bankrate, a 30-year fixed rate mortgage currently has an interest rate of about 3.70 percent. Additionally, some of the mortgage guidelines implemented after the housing market collapse are now relaxed. Programs like HomeReady™ help low-income and moderate-income home buyers obtain low-downpayment home loans. It also has expanded eligibility for houses located in areas hit by disaster, that are designated as low-income, and minority-heavy areas. This program is backed by the U.S. government through Fannie Mae and available from most mortgage lenders. The HomeReady™ program can also be used for refinancing up to 95 percent loan-to-value (LTV). Perhaps best of all, HomeReady™ is not limited to first-time buyers. Borrowers with a credit score of at least 620 may qualify.

Title insurance a key component of successful transactions

Lending institutions understand the importance of title insurance to protect themselves, but many individual home buyers still do not understand why they should have their own policy. Title insurance protects buyers in the event there are any undisclosed liens or easements on the property. The title insurance policy required by lenders only protects the lending institution's financial position in the property, not the home buyer. Title insurance is more important to home buyers now and in the future than it has ever been. The loose lending standards that led up to the housing market collapse resulted in countless second and third mortgages on homes with sketchy paperwork and little likelihood of proper disposition. Foreclosures were rushed and titles to real estate changed hands numerous times. All of this can create complications and clouds on titles. A owner's title insurance policy is every home buyer's best protection against the possible defects of a title that may be missed by a public records search.

Rising rents make homeownership more appealing

According the the U.S. Census, the number of households renting their primary residence is steadily increasing. The renter share of all U.S. households was approximately 34 percent in 2009. That number had increased to 37 percent in 2014. Many young people saw their parents struggle to maintain ownership of their home. What was once a deeply entrenched component of living a full life appeared more of a burden and source of stress to newly forming households. Millennials are more open to a community lifestyle and renting rather than putting down roots. Another factor adding to the increase in renter numbers is the aging population. More seniors are opting to move from high-maintenance homes to retirement communities that take care of maintenance and basic upkeep. The slight increase in demand quickly resulted in a rise in rent prices.

Home buyers more empowered today
The Consumer Financial Protection Bureau (CFPB) is helping make home buying a simpler and safer investment for people. As more people find it less expensive to purchase a home than rent, more households embrace the many benefits and freedoms that are unique to home owners. Over 6 million homes are expected to change hands in 2016. These home buyers have an abundance of programs and information available to them that can help facilitate a smooth transaction they will feel good about for many years to come.

What's In Store for the 2016 Housing Market?

While the constant headlines of home foreclosure numbers are now a distant memory, the housing market has still not quite returned to its pre-recession strength. New home starts spent this past spring idling in hope that millennials would soon dive full force into home ownership. But a lot of the millennials opted to continue renting and pay down some debt. The federal government enacted numerous rules and laws aimed at protecting home buyers from predatory lending. And mortgage rates remained at historic lows. One positive that has come from the housing market collapse is that more home buyers are aware of the importance of title insurance. This came from the large number of bank-owned (REO) properties that had to be reabsorbed into the market before any substantive market growth could begin. But, what do industry analysts anticipate for 2016?

Many consumers remain pessimistic

Trulia commissioned Harris Poll to survey Americans about their view of the current and future housing market. Business Insider reported the results. Their research found that 80 percent of people in the important millennial demographic hope to someday own their own home. They found that 75 percent of people in all age brackets still hold onto the American dream of home ownership. About 22 percent of respondents believe it will be more difficult to obtain a home loan in 2016 than it was in the preceding years, due primarily to rising interest rates. Thirty-one percent of those millennials say they do plan to purchase a home by 2018. Their job status and how much money they have saved for a down payment will determine whether they pursue that goal in 2016 or later.

Fannie Mae and FHA try to make obtaining a loan easier

In addition to more buyers understanding the importance of title insurance, home buyers are more cautious about getting a home loan. In an effort to draw some of the qualified buyers who are still sitting on the sidelines into the market, the Federal Housing Administration (FHA) lowered premiums on mortgage insurance below the traditional 0.85 percent to 1.35 percent. That is enough to save home buyers about $900 each year on their mortgage insurance. Additionally, Fannie Mae is also trying to make the path to home ownership smoother for buyers. Buyers qualified in other ways can get a home with as little as 3 percent down.

Another effort to make buying easier is the HomeReady mortgage program. HomeReady takes into consideration the income of other people living in the home, without these people being listed as a borrower on the mortgage. This means if a person represents at least 30 percent of the household income, their earnings can count toward the loan qualification. This program can also be used to include persons not living under the roof, like the parents of millennials who are willing to help their children with some monetary assistance.

Boomerang buyers may be coming back into market

While the first-time buyers get the most attention, it is the boomerang buyers who are likely to determine the overall strength of the 2016 housing market. The Northwestern University Institute for Policy Research estimates that  approximately seven million people across the United States lost their home to foreclosure during the recession. While the lenders may be reluctant to lend money to anyone who has a foreclosure in their past, the National Association of Realtors (NAR) says almost one million of those people who lost a home previously are looking to buy again. The housing market will never fully recover until this demographic is once again allowed to borrow money to get their American dream back.


It is important that all home buyers be more prudent with their purchase decision. This includes being sure they can comfortably afford their mortgage. They should also have a thorough home inspection, and purchase title insurance for their own protection, in addition to the title insurance that protects the lender.