state of real estate and mortgage lending

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STATE OFREAL ESTATE ANDMORTGAGE LENDINGIN JEFFERSON COUNTY, WASHINGTONAPRIL 6, 2015 EMILY C INGRAMThanks for coming today.

1Who is Emily C Ingram?Local mortgage lender with New American Funding14+ years experience Loan originator, processor, and underwriterBachelors degree in mathematicsBoard member, Jefferson Co Home Builders AssociationBoard member, Real Estate Professionals for Affordable Housing

2ObjectivesHome Prices & AffordabilityForeclosures & Short SalesMortgage Interest RatesMortgage Credit StandardsDemographics & Housing Environmental ConcernsExpectations for 2015

This is what were gonna talk about today.

I encourage feedback and questions. Id prefer not to just stand up here and talk to you for the next half hour. Feel free to participate.3Home PricesSource: Northwest Multiple Listing ServiceHigh in 2006 at $378,904.Low was in 2011 at $260,881 a full $100K less.Weve increased every year since then:2012 - $264,2502013 - $277,2072014 - $286,2134Winners & LosersAreaUnits Sold 2013Units Sold 2014Avg Sales Price 2013Avg Sales Price 2014Percentage ChangeCoyle76$401,999$178,166-55.68%Oak Bay128$387,304 $277,483 -28.36%Cape George3216$283,612 $226,249 -20.23%Shine2430$366,451 $328,907 -10.25%S Port Townsend4548$309,103 $287,299 -7.05%Quilcene1316$209,001 $207,943 -0.51%W Jefferson02$0 $69,500 0.00%Marrowstone914$417,444 $425,928 2.03%Port Townsend173186$272,575 $286,053 4.94%Hadlock3629$165,795 $176,780 6.63%Port Ludlow77111$284,328 $323,957 13.94%Chimacum Valley1416$217,756 $249,434 14.55%Kala Point2723$305,702 $350,276 14.58%Brinnon1629$170,617 $220,337 29.14%Gardner77$231,521 $302,449 30.64%Totals492541$277,208 $286,213 3.25%Source: Northwest Multiple Listing ServiceThis is a chart that highlights the change in average sales price from 2013 to 2014 for different areas of Jeff Co.I think we can discount the biggest losers and the biggest winners. I do know that Brinnon sold a million dollar home last year.Port Townsend home prices increased by almost 5%.Big shout out to Port LudlowThe most expensive homes were on Marrowstone Island. Yall are livin large over there.Followed closely by Kala Point at $350K.The most affordable area: Port Hadlock and Quilcene.5Will prices continue to rise?Short Term Projections5.3%Increase in home prices including distressed sales from 01/2015 to 01/2016.4.9%Increase in home prices excluding distressed sales from 01/2015 to 01/2016.Source: CoreLogic Home Price Index Report, January, 2015Nearly I talk to says yes. Are we going to see prices at 2005/2006 levels any time soon? No. But prices are expected to rise steadily for at least the next five years.6Foreclosures & Short Sales

Source: RealtyTrac U.S. Real Estate Statistics and Foreclosure TrendsForeclosures are down nationwide. Lowest level since July, 2006.nationwide foreclosure activity is on track to return to historic norms this year.

However, Washington state has seen an increase: up 17% in 2/2015. Increased five out of the last seven months.But Washington is still slightly under the national rate.

Nationwide = 1 in 1,295 homesWashington State 2/2015 = 1 in 1,421 homesJefferson County 2/2015 = 1 in 2,149 homes

If I take SFR in Jefferson County, bank owned, there are 13 listed. I think we had at least double that last year.

7

Has the market recovered?Photo by Dirk-Jan Kraan on flickr.Housing appears to have stepped off the rollercoaster.

Most people that I talk to say yes.

Theres a great publication that comes out every year called Emerging Trends in Real Estate. Its a joint venture between PWC and the Urban Land Institute. They interview more a thousand industry professionals every year and publish a forecast of real estate investment, finance, and development trends.

In their 2015 report they state, Housing seems to be putting the excesses of the bubble and the ensuing collapse behind it. The trend in residential real estate looks to be returning to the classic principles of supply and demand.

8Inventory

Photo by woodleywonderworks on flickrDateUnits ActiveUnits SoldMonths InventoryFebruary, 20143292513.16February, 2015300407.5Source: Northwest Multiple Listing ServiceWhats going on with supply & demand in Jefferson Co? Theres not much of it.

We calculate inventory in real estate by dividing the # of active listings or homes for sale by # of properties sold in any given month.

Explain chart

What does that mean?

Less than six months of inventory is considered a sellers market.When a home comes on the market its snatched up quickly.Multiple buyers often competing for the same house.This typically drives up prices. Ive seen several homes in the last few months go for MORE than the asking price.

This could very well change in the spring: According to one Realtor, If we look at the MLS, there are new listings all the time. Just in one week, the last seven days, we've had 38 new listings.

9How does affordability affect home ownership?

Jefferson CountyWashington StateAverage Annual Wage(2013)$34,497$53,029Median Household Income(2008 2012)$46,870$59,374Source: Washington State Employment Security DepartmentInventory aside, Id like to take a minute to talk about affordability. We still have an affordability issue in Jefferson County.

When I have to tell someone I cant help them, its most often due to income. They simply dont earn enough income to afford a home here.

In 2013, the average annual wage for Jefferson County was $34,497.The state average? $53,029.

For a person who works 40 hours/week, thats $16.59/hour.

How much home can an individual making $34,497/year afford? Obviously it depends on the type of loan, the interest rate, and the down payment. But lets assume an FHA loan with 3.5% down and an interest rate of 4.0%:With $0 in additional debt, that person could afford a $200,000 homeWith just $200/mo in additional debt, that person could afford a $165,000 home.

Whats our average purchase price? $286K.How many houses listed for less than 200K? 37 (according to Redfin on Saturday). Thats just 12.67% of total inventory.

Including this gem available in Brinnon for $12K10Mortgage Interest Rates

One thing that has aided affordability tremendously Interest rates.

Last year, I reported that experts expected interest rates to be 5-5.5% by this time. I lied.

The average 30-year mortgage as of April 2nd was 3.7%. That's really close to a record low of 3.31%. And much lower than the average rate of 5.9% 10-years ago.

I have been able to help a lot of people become homeowners b/c of the combination of low(er) home prices and low interest rates. Thats a great feeling!

Feds have indicated that they intend to raise rates slowly and carefully.

Mortgage interest rates are only loosely tethered to the Federal Funds Rate / 10-year Treasury note

Dominated by global players / international trader / Europes economy safety in the Treasury market by buying US government bonds. This pushes yields down and keeps mortgage interest rates down.

Thats been keeping rates down / see what happens this year / slow and steady / 4.75 - 5% by the end of the year? Yeah, I think so. Do I think were gonna see 6.5%? 11

Photo by luxomedia on flickrMortgage Credit StandardsSelling Representations and WarrantiesMy Community Mortgage 3% downFHA reduction in annual mortgage insurance premiumsStated income programJumbo competitionIs it getting any easier to get a mortgage loan? Im gonna say a little bit. Slowly but surely.

- New Lender Selling Representations and Warranties Framework. What the heck is that, right? So basically what happened when the market crashed

But there are more & more product options out there to address specific needs in the market. And more & more favorable terms.

My Community / Great alternative to FHA. A lot of FTHBs choose FHA mortgages b/c they only require 3.5% down. FNMA/FHLMC require 5% down. Well late last year FNMA/FHLMC announced their own 3% down program for FTHBs or people who dont currently own real estate. It also comes with lower mortgage insurance requirements.

- Not to be outdone, FHA made its own announcement early this year / for a $220,000 home, thats a savings of almost $100/month.

For better or worse, were also seeing a reemergence of the subprime market. / Different / No 1-day out of BK / Stated income loan / Youve probably heard about stated income loans where the borrower didnt have to prove his income. He could say he worked at McDonalds and made $120K and the lender would let him buy a $400K house! / This is very different / Self employed / bank statements / jumbo only / very targeted niche customer

Speaking of jumbo, theres a lot of competition / historically well performing / banks want these customers on the books / not sold on the secondary market / individual banks and lenders set the guidelines and interest rates / because of the competition for these customers, interest rates and terms are quite favorable / good news if youre looking for more than $417K of mortgage money.12Demographics & Housing Demand

Source: National Association of Realtors Home Buyer and Seller Generational Trends Report 2015Millennials = 1980 1995 (34 and younger)Gen X = 1965 1979 (35-49)Baby Boomers = 1946 1964 (50-68)Silent Generation or Builders = 1925 1945 (69-89)

So heres whats going on Baby Boomers always largest population in the world / Millennials have surpassed the Baby Boomers

Millennials not historically been homeowners / watched parents homes lose value / parents lose their homes to foreclosure / graduated high school