Fair Economic Forecast as Trump Policies Come into Focus

The U.S. economy will continue to grow—though at a “modest” rate—through the end of this year and into 2017, with President-Elect Trump’s proposed policies prompting Fannie Mae to issue a fair forecast in its recently released November 2016 Economic and Housing Outlook. Notably, the Outlook predicts shrinking housing affordability, especially if mortgage rates follow their post-election surge.

“The lack of homes for sale, particularly at the lower end of the market, continues to be a significant challenge for housing,” said Doug Duncan, Fannie Mae chief economist, in a statement on the Outlook. “Demand from first-time buyers has increased with household formation and is outpacing supply, leading to significant price increases and affordability challenges for entry-level buyers. Home purchase affordability will be constrained further if the recent pickup in mortgage rates persists, which would present a downside risk to our forecast of housing and mortgage activity.”

The Outlook anticipates economic growth overall to average 2.4 percent in the second half of 2016, up from 1.1 percent rate in the first half, with the full-year 2016 and 2017 expectations remaining at 1.8 percent—even as Trump’s policies come into focus.

“We haven’t changed the general tone of our forecast at this time, but we will incorporate new policy assumptions as they become more concrete,” said Duncan. “Depending on the incoming President’s policy priorities, our forecast for 2017 is subject to both upside and downside risks—for example, we expect near-term growth would get a boost from any tax cuts and spending increases that are made, but if new policies result in sharply higher tariffs on China and Mexico, re-thinking the Trans-Pacific Partnership, and renegotiating the North American Free Trade Agreement, it would likely drag on growth.”

Single-family construction, in addition, will not be as major of a factor as it has been in terms of GDP growth due to its more solid footing late this year and into 2017, the Outlook indicates.

Business investment and employment prospects, however, have begun to wane—a “late-cycle phase in which growth tends to moderate,” according to the Outlook.

Source: Fannie Mae

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Is buying still cheaper than renting?

Paying a mortgage remained cheaper than paying rent in most parts of the U.S. This past third quarter, although buyers who make a low downpayment may end up spending more to own than to rent in some areas, per a new ZiLLOW report  of housing costs.

Renters earning the U.S. Median of $53,620 spent 29.9 percent of their income to rent in the third quarter. Buyers who earn the U.S. Median and buy a home costing the Zillow-estimated U.S. Median of $176,500 spent 15.3 percent of their income on the mortgage.

The share of income spent on rent rose from its past second-quarter estimate of 29.5 percent, while the share of income to pay a mortgage stayed the same.

In its analysis, Zillow extracted out first-time buyers who might put down a downpayment as low as 5 percent. Those buyers will spend a little more, about 17 percent, per month to own because of fees and mortgage insurance.

“Homeownership remains very accessible for buyers that can scrape together a downpayment — even if that downpayment is relatively modest,” said Zillow Chief Economist Stan Humphries in a release.

The ability to come up with a downpayment, however, is likely stopping renters from buying, Humphries said. Zillow’s analysis, in fact, illustrates that for low-downpayment, first-time homebuyers, paying a mortgage can be more expensive in some cities than renting.

Renters in Los Angeles can expect to spend 47.9 percent of their income each month on the lease, but first-time buyers putting up a low downpayment will spend 50.7 percent on the mortgage payment.

Renting is either less expensive or marginally more expensive in other West Coast cities like Portland, Oregon, San Francisco, San Diego; and San Jose, California. In Seattle, where the median income is $70,352, renters spend 30.8 percent of their income per month, and first-time buyers spend 27.3 percent.

“What keeps me up at night is the fact that it still remains so difficult for so many potential buyers to make those particular stars align, largely because renting is so unaffordable these days,” said Humphries. “It’s very difficult to come up with a downpayment when so much of your monthly paycheck — especially on an entry-level salary — is going to your landlord instead of your savings.”

In other parts of the country, however, renting is vastly more expensive than buying. In Indianapolis, where the median income is close to the national median, first-time buyers with a low downpayment will spend 13.5 percent of their income on the mortgage, regular homebuyers will spend 10.8 percent and renters will spend 25.8 percent.

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7697 E Bridgewood Dr. AH

This Warmington model home is located in the beautiful guard gated Belsomet community in Anaheim Hills. This home features 6 bedrooms, 3 baths, 4 car garage, open kitchen to family room, formal living room and dining room, pool and spa. This home has a great layout and very private setting.
 click on the link for more info
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linkedin The Aragone Team Probate

As a Certified Probate/trust/Conservator-ship Specialist I work with the attorneys,trustees,fiduciaries and PRs in the disposition of the real estate assets within the estate and deal with the many complexities involved during the process to help reduce workload, increase client satisfaction, enlarge client profits, streamline transaction and avoid delays while increasing communication. My team provides a full spectrum of solutions to handle the management of the assets from the beginning of the process until close of escrow. We service Southern California.

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5479 E. Suncrest Cir, AH

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Outlook for 2012 REO/ShortSales

The outlook for 2012 continues to be filled with uncertainty. The market has been permanently transformed over the last few years, but will that be enough to move things forward or will it continue to stay stuck in the mud? There are several key factors which will decide the fate of Lenders as well as the direction that the Real Estate industry moves in 2012.

One major issue that will likely affect the real estate market in 2012 is the potential settlement between Servicers and state Attorneys General. The terms set out by the AG’s could free up the inventory currently slowly making its way through the pipeline. Another potential issue could be the rollout of a very lenient modification program which could most likely increase mortgage defaults because current borrowers would deliberately miss payments, hoping to qualify for debt reductions. The modification requirements could add up to 280 days to the time it takes Lenders to seize properties and increase the inventory of foreclosed homes. The costs of the delays, overhead requirements, advances and principal write-downs could be passed onto consumers. This would slow foreclosure timelines to a trickle, overflow local judicial systems and extend the recovery time for the economy as a whole.

We expect to see short sales continue to take center stage in 2012. Currently short sales have accounted for a larger percent of Lender workouts and we expect to see those levels rise in 2012. While Loan Modifications volumes have declined in 2011, performance has steadily improved over time.

Overall, the outlook for 2012 has one clear message: Be prepared for the unexpected. 2012 could be the year where the floodgates open up and volumes of foreclosures and REO begin to flow. However, the uncertainty of a Servicer settlement with the AG’s and the uncertainty of new government intervention could extend today’s current environment. If you are looking to buy or sell and need more info about s specific neighborhood feel free to call us at 714-366-6117 or visit http://www.TheAragoneTeam.com

We are here to help!


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