To read full report go to http://gcta.com/v2/wp-content/uploads/2014/06/April2014-HousingReport-.pdf
The WilcoxReport.Com Insight on Single Family Housing, Lending and Job Growth Trends
By
Fletcher R. Wilcox
V.P. Business Development, Real Estate Analyst at Grand Canyon Title Agency, Inc.
FWilcox@gcta.com 602-648-1230
April 2014 Report on Existing Single Family Home Sales for Greater Phoenix
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Cooled Down: Sales under $200,000, Except for FHA Purchases
- Cooled Down: Cash Sales
- Cooled Down: Distressed Sales
- Warming Up: Mortgage Purchases with FHA Insured Loans and VA Guaranteed Loans
- Warming Up: First Time Homebuyers and Boomerang Buyers
- Hot: Luxury Sales
- Cooling Down: Number of New Monthly Listings
Conclusion
The single family housing market in Greater Phoenix has transitioned from a dominant cash purchase market fueled by inexpensive lender owned sales and short sales into a housing market more dependent on purchases with a mortgage.
When it comes to picking a mortgage, if a potential buyer has a choice between choosing either a conventional loan or an FHA loan, most will go conventional over FHA for the following reasons: The buyer has more money. They have at least the minimum required down payment of five percent which is higher than the FHA minimum required down payment of three and one-half percent. A higher down payment means a lower loan and lower mortgage payment for the borrower; Mortgage insurance is another reason. A borrower has to pay monthly mortgage insurance on a conventional loan if their down payment is less than twenty percent. With an FHA loan, a borrower not only pays monthly mortgage insurance, but there is an additional mortgage insurance premium added to the principle balance of the loan. If during the life of a conventional loan the borrower’s equity reaches eighty percent, the monthly mortgage insurance may be removed by the lender. This is not so with an FHA loan. FHA monthly mortgage insurance stays for the life of the loan.
If a potential buyer cannot qualify for a conventional loan, they might qualify for an FHA loan for the following reasons: As mentioned above, FHA has a lower down payment requirement; A borrower may qualify for FHA with a lower credit score than with conventional; Finally, someone who went through a foreclosure has to only wait three years to buy again with FHA, while most conventional loans require a seven year wait period.
The research in this report showed an increase in FHA purchases in April 2014 over April 2013. I believe this data suggests the emergence of an increasing first time homebuyer and boomerang buyer market who are able to qualify with FHA, but not with a conventional loan. I also believe that purchases with FHA loans will likely increase because of population growth and the high number of people who went through a foreclosure and want to own again.
Purchases with VA loans continue to be an important segment of the mortgage market. In 2012, VA loans were 4.4% of the existing single family purchase market. In 2013 VA loans were 5.7% of the purchase market, and year to date in 2014, 7.2% of all purchases. If a veteran went through a short sale or foreclosure a VA loan only requires a two year wait period.
Overall, the Greater Phoenix housing market will continue to improve. The speed at which the mortgage purchase market will grow and fuel the housing market depends much on job growth. Greater Phoenix has a mediocre 2.2% job growth number. If job growth once again reaches and sustains a growth rate of 4% to 5% the housing market would flourish.
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