Gilbert Sun News Real Estate Guide - May 2020

REAL ESTATE

GILBERT SUN NEWS | MAY 17, 2020

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Mortgage rates low – and less accessible GSN NEWS SERVICES

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t’s a stark good news, bad news story.

The good: The lowest mortgage rates in recorded history are motivating many would-be home buyers and refinancing homeowners to seek out a loan.

The bad: Amid the economic upheaval caused by the novel coronavirus, it’s become significantly more difficult to get one of those loans.

As more Americans are getting furloughed and pink-slipped, lenders – ever mindful of the housing bust of more than a decade ago – are requiring higher credit scores and larger down payments.

Some have ceased making loans they consider riskier, such as those for self-employed borrowers and real estate in-

Melanie Nemetz

vestors; those that require lower credit scores and down payments; and those for larger amounts, such as jumbo mortgages.

Or they may be jacking up fees to make the loans prohibitively expensive.

That will mean that some folks who still want to go ahead and take advantage of those record-low mortgage interest rates won’t be able to do so. Rates fell to just 3.23 percent on a 30-year fixed-rate loan for the week ending April 30, according to Freddie Mac. Yet the availability of mortgage credit dropped 16.1 percent in March—a clear indication that lending standards are tightening up, according to the Mortgage Bankers Association’s Mortgage Credit Availability Index. That’s the lowest level of the index since mid-2015.

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Lenders have reasons to be cautious.

Roughly 7 percent of mortgages were in forbearance as of April 19, according to the MBA. Experts predict the number of homeowners unable to make loan payments due to economic hardship will rise as the downturn drags on.

Another wave of foreclosures may not be far behind when forbearance periods end, typically in 12 months.

“Guidelines have tightened up immensely, which is to be expected at times like this,” said Matthew Graham, chief operating officer of Mortgage News Daily.

“While it’s definitely unfair to borrowers who would make all their payments on time, lenders are adjusting for the higher probability of forbearance.”

About 5-20 percent of prospective borrowers could have trouble getting a mortgage due to the higher standards, said Javier Vivas, Realtor.com’s director of economic research.

Those numbers will likely rise as the recession worsens. Unemployment could top 20 percent in some worst-case sce-

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REAL ESTATE

GILBERT SUN NEWS | MAY 17, 2020

Despite pandemic, Gilbert housing market strong

BY MINDY JONES NEVAREZ GSN Guest Writer

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ovid-19 has brought innovation, compassion and community partnership in Gilbert to a whole new level of greatness.

Our commitment to reopening safely has been influenced by our relatively low case number and supported by the desire to minimize the impact to our thriving community.

Despite a dramatic decrease in the number of Gilbert residents buying and selling houses, there is no indication that the local housing market will be taken down by this pandemic.

Any impacts to the housing market appear to be short-lived and seen mostly in the first few weeks. We experienced panicked sellers making quick decisions to liquidate funds – which increased the number of listings on the market.

Buyers who had not lost their jobs

nor had been furloughed decided not to buy a home despite historically low interest rates creating a housing market that was actually more affordable than it was in 2019.

We saw many vacation rental property owners turn their Airbnb and VRBO properties into long-term rentals as Spring Training was cancelled and the hospitality industry withered.

Even that trend has reversed and we are now predicting the same shortage of available homes to rent as there was prior to the pandemic.

Gilbert has 27 percent less inventory on the market than this time last year so. While that is a marked improvement from the nearly 50 percent drop in inventory prior to the pandemic, it has validated our inclination early on that if even half the people interested in moving in and within Gilbert decided to wait this one out we still do not have enough houses for interested buyers.

The balance between supply and demand drives the price stability and days

of inventory. Both have been relatively unimpacted in Gilbert.

The current dollar per square foot average for Gilbert is $179.79 – up from $163.77 last year and up from $171.87 last quarter.

The average sales price for Gilbert is $411,390 up from $380,918 last year and $408,691 last quarter.

The months of supply in Gilbert is 1.7 with nearly no change from last year at 1.9 and last quarter at 1.5.

These numbers clearly delineate the global pandemic from the glut of inventory seen in 2006 and 2011 that ultimately led to the housing market crash of 2007 and 2008.

It would be naive to think that we can predict the future as we obviously did not see Covid-19 coming during one of the strongest economies we’ve ever seen in the Valley.

It would also be naive to think that there won’t be significant struggles for those who took a hit to their business, lost their job, found themselves in a

place of food insecurity that they had never experienced before or who have been otherwise emotionally, financially or medically impacted by this global wrecking ball.

Running alongside the pain and the grief of our community will be the lasting impact of a town that came together to give back – and a housing market that will stand strong.

Our homes are for many our greatest assets and a vital necessity to our well-being.

We’ve seen a 40 percent increase in accepted contracts over the last month as we start to tie the laces on our running shoes again.

The finish line is still a ways off but the countdown has started and Gilbert is leading the pack.

Mindy Jones Nevarez, a Gilbert Realtor and owner of the Amy Jones Group of Keller Williams Integrity First, can be reached at 480-250-3857, Mindy@amyjonesgroup.com or amyjonesgroup. com.

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BY PAUL MARYNIAK GSN Executive Editor

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s the inventory of available homes continues to shrink throughout the Valley, a new national study of rental housing indicated - finding either an affordable house or apartment is getting more difficult.

The Joint Center for Housing Studies at Harvard University said the typical renter is becoming more well-to-do and the apartment construct-bedroom median of $1,540,” adding the town saw “rent growth of 5.2% over the past year, the fastest in the metro.”

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REAL ESTATE

GILBERT SUN NEWS | MAY 17, 2020

MORTGAGE from page re1

narios, and even those who hold on to their jobs could see their salaries fall and lose bonuses, overtime pay, and side gigs.

Many of these folks have already ruled out immediate plans to buy a home.

“In the short term it will be a challenge for buyers to qualify for a home mortgage,” said Vivas. “In the mid- and longer term, the bigger concern will be whether they can carry that mortgage through the recession.”

Many folks with average credit scores, who may have even been pre-approved for a loan at the beginning of the year, may have trouble qualifying for a loan in today’s environment.

Before most folks had heard of COVID-19, credit score requirements started at just 580—or lower in some cases, primarily for government-backed loans. Now, most lenders issuing those loans are asking for credit scores starting between 640 and 680.

“It’s a fairly substantial increase,” said Arizona mortgage broker Rocke Andrews, president of the National Association of Mortgage Brokers. “It hurts a lot of the

first-time home buyers.”

Most JPMorgan Chase borrowers will need a minimum 700 credit score and 20 percent down to qualify for a new loan.

(There is at least one exception, the DreaMaker program targeted toward low- and moderate-income and first-time home buyers with lower credit scores and down payments. The bank was the fourth-biggest mortgage lender in 2019, according to Inside Mortgage Finance.

Flagstar Bank and Better.com are also now requiring borrowers to have higher credit scores. Flagstar is asking for 660 scores for FHA loans and 680 for VA and U.S. Department of Agriculture loans.

Better.com is asking for minimum 680 scores. Previously, lenders’ minimum scores were 640.

During this crisis, Navy Federal and Better.com have temporarily stopped offering FHA loans altogether.

“Credit policies are tightening for everything. ... We don’t want to see another crisis happen when people are getting loans they can’t afford,” said Better.com spokeswoman Tanya Hayre.

Fewer lenders are offering jumbo mortgages during this crisis because more money is on the line if the large borrowers go into forbearance or default on their payments. Jumbo loans typically start around $510,000 and go up to just over $765,000 in some of the nation’s most expensive real estate markets.

Banks don’t like to keep loans on their books, because it ties up capital they could be using to make more loans. So, they typically bundle up mortgages and sell them to investors in the secondary mortgage.

But jumbo loans aren’t backed by Fannie Mae or Freddie Mac. So investors consider them risky.

“We did see a really rapid slowdown in that market,” said Joel Kan, an economist at the MBA. “It’s harder to get a jumbo loan, and rates are higher.”

Self-employed, gig workers and real estate investors may also struggle to obtain a mortgage.

Many of them normally apply for a non-qualified mortgage because they need to verify their income with bank

Gilbert Real Estate Snapshot

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deposits instead of more traditional W-2 forms, pay stubs, and tax returns.

But these mortgages are deemed riskier and investors in the secondary mortgage market have little appetite for anything but the safest investments.

Lenders are upping the cost of these loans to account for the risk.

Plus, some lenders are discounting self-employed income. That means they might count only a portion of what these borrowers made last year as qualification for a mortgage. Some aren’t factoring in bonuses, expecting that these folks will earn less money this year with the economy in turmoil.

The discounting of earnings also boosts debt-to-income ratios – and lenders traditionally like to see less debt and more money coming in.

With folks losing their jobs or getting furloughed every day, lenders are also waiting until the last minute to verify employment and income.

“The unemployment picture has definitely gotten a lot worse and quickly,” said Kan.

Provided by the Amy Jones Group Your Local Real Estate Team (480) 250-3857 | www.amyjonesgroup.com • Average Days on Market: 33 days Down from 34 Days Last Month

• Active Listings: 646 Up from 626 Listings Last Month

• Monthly Sales: 380 Down from 407 Sales Last Month

• Listings Under Contract: 515 Up from 493 Listings Under Contract Last Month

• Average Sales Price: $411,390 Down from $422,962 Last Month

• Monthly Supply of Inventory: 1.7 Up from 1.5 Monthly Supply Last Month

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REAL ESTATE

GILBERT SUN NEWS | MAY 17, 2020

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