Steady interest rates bring mortgage volume back to life

Mortgage borrowers came back to the table last week to refinance and to purchase homes, after their numbers fell for most of the past month.

Total mortgage application volume rose 4.2 percent last week, according to the Mortgage Bankers Association’s seasonally adjusted report. Volume was still 15 percent lower compared with the same week one year ago.

The gains may be thanks to less volatility in the mortgage market, after wide swings at the start of August. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) remained unchanged at 4.81 percent last week, with points decreasing to 0.42 from 0.43 (including the origination fee) for loans with 20 percent downpayments.

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The average rate for jumbo loans, however, did decrease slightly. That may have spurred more refinance activity, as borrowers with larger loans have more to gain from even small drops in rates. Mortgage applications to refinance a home loan increased 6 percent for the week but were still 33 percent lower than a year ago, when interest rates were considerably lower.

The refinance share of mortgage activity increased to 38.7 percent of total applications from 37.6 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 6.5 percent of total applications. Homebuyers tend to favor ARMs when prices are high, because they offer lower interest rates and can be at a fixed rate for up to a decade.

Mortgage applications to purchase a home, which are less rate-sensitive week to week, rose 3 percent from the previous week and were barely 1 percent higher than a year ago. Buyers today are still facing a critical shortage of homes for sale and continued price gains. Home sales, however are strongest on the higher end of the market, so the drop in jumbo loan rates may have helped some buyers get off the fence and into a home.

Purchase application volume is currently below its 2018 average “due to persistent problems of affordability and low inventory,” said Joel Kan, an MBA economist.

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Mortgage rates have not moved at all this week either, making this Tuesday the eighth straight business day with no change.

“During that time, underlying bond markets have improved slightly,” said Matthew Graham, chief operating officer at Mortgage News Daily. “Normally, those improvements would translate to modest improvements in rates, but lenders are waiting for a bigger breakout that, thus far, has failed to materialize.”

Diana Olick



Federal legislation needed to declare housing a ‘right,’ says coalition

OTTAWA — The federal Liberal government needs to make good on its promise to declare housing a “fundamental human right” under Canadian law as part of its forthcoming national housing strategy, advocates for affordable housing said Tuesday.

Without such a declaration, the legislation that’s expected to be unveiled this fall that will bring that strategy into force will be rendered toothless, said Tim Richter, president of the Canadian Alliance to End Homelessness.

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“The federal government has committed to the right to housing, but to make this commitment meaningful, it must be recognized in law,” Richter told an Ottawa press conference where he released an open letter to Prime Minister Justin Trudeau, signed by a coalition of more than 170 prominent Canadians and organizations.

The letter spells out demands that new legislation require “goals and timelines” for reducing and eliminating homelessness.

It also called on the government to ensure its housing bill is consistent with international human rights obligations, and that the Liberals act to realize the right to housing within the shortest possible time, depending on how much money the government has at its disposal.

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The prime minister announced details last fall of his government’s decade-long national housing strategy, including the introduction of a housing benefit for families that won’t kick in until after the 2019 federal election.


The strategy also included a promise to introduce new legislation requiring the government to report to Parliament on housing targets and outcomes, as well as a commitment that 100,000 new affordable housing units would be built and another 300,000 existing affordable housing units repaired.

Canada is already a signatory to the UN-backed International Covenant on Economic, Social and Cultural Rights, which recognizes “adequate” housing as a right.

But declaring such a right domestically would ensure that governments, both federal and provincial, can’t back out of affordable housing commitments on a political whim, said Leilani Farha, the UN Special Rapporteur on the Right to Adequate Housing.

“The legislation has to articulate the right to adequate housing as a fundamental human right,” Farha said. “It has to name it.”

There have been concerns expressed among critics of such a move — including some Liberals — that declaring housing a right in law could encourage people to use the court system to obtain better housing, or to argue that their rights were violated should they be evicted for failing to pay rent.

But legally enshrining a right to housing would show that all Canadians deserve the right to security, good health and safety in the form of adequate housing, said NDP housing critic Sheri Benson.

“When we have thousands of Canadians sleeping out in the cold, patchwork solutions will not solve the housing problem,” Benson said.

Farha also dismissed concerns about widespread court actions, but said there has to be a way to force the government’s hand if it’s not ensuring the basic housing needs of its citizens are met on a wide scale.

“(The legislation) has to ensure that there are accountability and adjudication mechanisms so that governments can be held accountable,” she said.

More than 235,000 people experience homelessness in Canada each year, while 1.7 million households live in unsafe, unsuitable or unaffordable housing “because they have no better option,” said Campaign 2000’s Anita Khanna, who called the figures “disgraceful.”

Terry Pedwell, The Canadian Press

Lagos ranked 138 among ‘world’s worst cities’ to live in

SEVEN out of the 10 least liveable cities in the world are in Africa, according to the Economist Intelligence Unit (EIU) annual survey.

The league table ranks 140 cities on a range of factors, including political and social stability, crime, education and access to healthcare.

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Nigeria’s largest city, Lagos, was ranked 138 – two slots ahead of the bottom of the league table which is held by Syria’s war-torn capital, Damascus (140).

It was closely followed by Zimbabwe’s Harare (135), Libya’s Tripoli (134), Cameroon’s Douala (133), Algiers in Algeria (132) and Senegal’s Dakar (131).

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Johannesburg gained the rank of 86, making it the most livable of African cities.

The annual report says cities in the Middle East, Africa and Asia account for the ten-lowest scoring cities where “violence, whether through crime, civil insurgency, terrorism or war, has played a strong role”.

The Austrian capital Vienna came in first place.

Nigerian Tribune

Home Affordability Hits 10-Year Low in U.S.

According to the National Association of Home Builders / Wells Fargo Housing Opportunity Index, rising U.S. home prices and interest rates pushed housing affordability to a 10-year low in the second quarter of 2018.

In all, 57.1 percent of new and existing homes sold between the beginning of April and end of June were affordable to families earning the U.S. median income of $71,900. This is down from the 61.6 percent of homes sold in the first quarter that were affordable to median-income earners and the lowest reading since mid-2008.

The national median home price jumped from $252,000 in the first quarter of 2018 to $265,000 in the second quarter–the highest quarterly median price in the history of the HOI series. At the same time, average mortgage rates jumped by more than 30 basis points in the second quarter to 4.67 percent from 4.34 percent in the first quarter.

“Tight inventory conditions and rising construction costs are factors that are holding back housing and putting upward pressure on home prices,” said NAHB Chairman Randy Noel. “Meanwhile, tariffs on Canadian lumber imports into the U.S. are further eroding housing affordability. Builders are struggling to manage these costs to ensure pricing does not outpace expected gains in wage growth.”

“Rising household formations, along with a strong economic expansion in the second quarter that has fueled job growth, will support housing demand in the second half of 2018,” said NAHB Chief Economist Robert Dietz. “However, growing trade war concerns and the expectation of higher mortgage rates are additional headwinds negatively affecting housing affordability.” 

Syracuse, N.Y., was the nation’s most affordable major housing market. There, 89.1 percent of all new and existing homes sold in the second quarter were affordable to families earning the area’s median income of $74,100. Meanwhile, the nation’s most affordable smaller market was also located in the Empire State. In Elmira, N.Y., 97 percent of homes sold in the second quarter were affordable to families earning the median income of $71,000.

Rounding out the top five affordable major housing markets in respective order were Scranton-Wilkes Barre-Hazleton, Pa.; Harrisburg-Carlisle, Pa; Indianapolis-Carmel-Anderson, Ind.; and Youngstown-Warren-Boardman, Ohio-Pa.

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Smaller markets joining Elmira at the top of the list included Kokomo, Ind.; Davenport-Moline-Rock Island, Iowa-Ill.; Cumberland, Md.-W.Va.; and Wheeling, W.Va.-Ohio.

San Francisco, for the third straight quarter, was the nation’s least affordable major market. There, just 5.5 percent of the homes sold in the second quarter of 2018 were affordable to families earning the area’s median income of $119,600.

Other major metros at the bottom of the affordability chart were located in California. In descending order, they included Los Angeles,-Long Beach-Glendale; Anaheim-Santa Ana-Irvine; San Jose-Sunnyvale-Santa Clara; and San Diego-Carlsbad.

All five least affordable small housing markets were also in the Golden State. At the very bottom of the affordability chart was Salinas, where 9.8 percent of all new and existing homes sold were affordable to families earning the area’s median income of $69,100.

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In descending order, other small markets at the lowest end of the affordability scale included Santa Cruz-Watsonville; Napa; San Luis Obispo-Paso Robles-Arroyo Grande; and San Rafael. 

Denver Edition | By Monsef Rachid

Mortgage Rates in U.S. Dip in Early August


According to Freddie Mac most recent Primary Mortgage Market Survey, U.S. mortgage rates were mostly unchanged the first week of August 2018, but did ease up slightly.

Sam Khater, Freddie Mac’s chief economist, says mortgage rates have mostly drifted sideways this summer. “This stability is much needed for home sales, which have crested because of the multi-year run up in prices, tight affordable inventory and this year’s higher rates,” he said. “Going forward, the strong economy will support the housing market, but with affordability pressures mounting, further spikes in mortgage rates will lead to continued softening in home price growth.”

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Khater continued, “There continues to be a steady rate of job creation, but as we’ve seen throughout most of this economic expansion, wage growth is not meaningfully increasing above inflation. With home prices still climbing and mortgage rates up from 3.90 percent a year ago, some prospective buyers are definitely feeling an affordability crunch.”

Freddie Mac News Facts

  • 30-year fixed-rate mortgage (FRM) averaged 4.59 percent with an average 0.5 point for the week ending August 9, 2018, down from last week when it averaged 4.60 percent. A year ago at this time, the 30-year FRM averaged 3.90 percent.
  • 15-year FRM this week averaged 4.05 percent with an average 0.5 point, down from last week when it averaged 4.08 percent. A year ago at this time, the 15-year FRM averaged 3.18 percent.
  • 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.90 percent with an average 0.3 point, down from last week when it with an average 3.93 percent. A year ago at this time, the 5-year ARM averaged 3.14 percent.
  • Residential News » Washington D.C. Edition | By WPJ Staff

Growth in global top end property markets slowing down

Prime property price growth in key cities around the world is falling, up just 2.6per cent in the 12 months to June 2018, the weakest annual rise since the first quarter of 2012, the latest index shows.

Overall, the number of cities registering double digit annual price growth fell from seven to just three, quarter on quarter, according to the date from the prime global cities index from international real estate firm Knight Frank.

Guangzhou in China recorded the biggest annual price rise of 11.9per cent but this was down 16.1per cent from the first quarter of the year. Next was Singapore, up 11.5per cent, followed by Madrid up 10.3per cent, San Francisco up 9.5per cent and Tokyo and Edinburgh, both up 9.4per cent.


At the other end of the index, which tracks 43 cities, prices fell by 8.4per cent year on year in Stockholm, were down by 4.7per cent in Vancouver, down by 3.8per cent in Rome, down by 2.7per cent in Taipei, and down by 2per cent in Istanbul.

Prices were unchanged in Dublin, up by just 0.1per cent in New York, by 0.3per cent in Vienna, by 0.3per cent in Kuala Lumpur, by 0.5per cent in Milan, by 0.6per cent in Mumbai, by 1per cent in Monaco and by 1.5per cent in Jakarta.

According to Propertywire, the index analysis prices in Singapore have rebounded strongly but recent stamp duty changes may have an impact going forward and Cape Town and Dublin are seeing prime price growth soften but for very different reasons.

The rate of annual growth in Cape Town has halved in the last six months from 19.9per cent to 8.2per cent. The index report says that the citywide drought and the uncertainty over the process of land expropriation without compensation has weakened sales activity. However, six weeks of solid rainfall and new land guidance from the Government has mitigated this concern and sales volumes are strengthening again.

By contrast in Dublin where price growth has stalled, it is tighter lending rules, rising luxury supply and a reduction in sterling denominated buyers which is leading to more moderate price appreciation.

Partner for international residential research at Knight Frank, Kate Everett-Allen explained that the decline in the overall indexís performance is not due to a rising number of cities registering an annual decline. Instead, the weaker growth is due to the top performing cities rising more slowly.

The gap between the strongest and weakest performing city has shrunk from 33 to 20 percentage points in the last quarter. “The introduction of new, and the strengthening of existing, property market regulations, along with the rising cost of finance and a degree of political uncertainty is resulting in more moderate price growth at the luxury end of the worldís top residential markets,” she said.

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She pointed out that Singapore has accelerated up the annual rankings to second place and this may be because high land bids by developers has translated into higher new build values. In an attempt to curb price inflation, the authorities announced further increases to the Additional Buyer Stamp Duty in July and this includes higher rates for foreign buyers at 20per cent and for developers at 30per cent as well as tighter lending rules.

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Hong Kong has also introduced a new cooling measure, a new vacancy tax. Under the new rules, developers will incur a penalty, 200per cent of the annual rental value, if new apartments are left unsold and empty for six months or more.

In the United States it is San Francisco with annual growth of 9.5per cent and Los Angeles at 7.8per cent leading the national increases. Everett-Allen said that the US economy is firing on all cylinders and housing demand has been boosted by a buoyant labour market.

The Guardian

Mortgage market flat; building societies positive

Figures from the Building Societies Association show that in the first six months of 2018, 31 per cent of UK mortgage approvals were from a building society, an increase of nearly 4 per cent year-on-year.

These numbers appear to back up the assertion from both Santander and Nationwide that the mortgage market is becoming increasingly competitive, as mentioned in their half-yearly reports last week.

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The BSA’s report also shows that against a backdrop of a similar number of approvals in the same time frame, the balance between house purchases and remortgages has tipped in favour of the latter: mortgages approved for house purchases fell 4 per cent and remortgages rose by 7 per cent.

BSA chief executive Robin Fieth says: “All indications suggest that the subdued picture in the mortgage market will persist for some time. Surveyors are consistently reporting fewer newly agreed sales and the average time for a home to sell is rising.

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It is unsurprising that re-mortgage activity is on the increase.  With 9 in 10 new mortgages and two-thirds of outstanding mortgage balances on fixed rate, the trend is likely to continue.

Gary Adams


U.K. Housing Market Stays Subdued as Brexit, Rates Deter Buyers

Prices and sales stagnated and property values in London continued to fall, RICS said in a report.

“The continued uncertainty of Brexit, combined with punishing transaction costs are deterring any movement in the sales market, unless it is essential,” said Tom Dogger, managing director of BN Investment Ltd. in London. “Sellers have to offer large discounts to attract any interest.”

The BOE raised interest rates to the highest level since 2009 last week and fears are mounting that Britain could crash out of European Union without a deal. The summer heatwave and vacations also made for a quiet month in the housing market, agents said.

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The report highlighted the growing pressures in the rental sector as many landlords flee the market because of tax changes introduced over the past two years. RICS said fewer properties were made available to tenants last month and predicted the squeeze on supply could push up rents by 15 percent over the next five years.

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Simon Rubinsohn, the chief economist of RICS, said that higher rents are inevitable unless the government increases support for private rental projects or social housing.

“At the present time, there is little evidence that either is likely to make up the shortfall,” he said. “This augers ill for those many households for whom owner occupation is either out of reach financially or just not a suitable tenure.”

Karoliina Liimatainen

Did the Government intervene too early in Singapore’s private housing market?

With the new cooling measures, those buying a second property for investment purposes might have to set aside almost half of the property price for upfront payments, stamp duties and fees, say two observers.

Days after the release of Urban Redevelopment Authority’s flash estimates, the Government announced a new round of cooling measures, which caught many in the housing market by surprise.

Authorities might have been right in principle to impose these harsh cooling measures, amidst a private property market heating up. The private housing market experienced an inflexion in prices last year after 15 consecutive quarters of decline since fourth quarter of 2013.

In contrast to the gradual recovery in 2017, 2018 has seen a strong price growth momentum. Private property prices increased by 9.1 per cent in the second quarter of 2018.

Compared to the cumulative run-up of 62.2 per cent in private property prices from the second quarter of 2009 to the peak in 2013, this increase does not seem alarming. However, it should be noted that prices in 2017 rebounded from a relatively high base.

Housing price levels are also just 3 per cent short of the 2013 peak. Transaction volume also picked up as developers ramped up en bloc sales to quell pent-up demand.

But the timing and intensity of the latest interventions have been met with raised eyebrows. One analyst likens it to using “a sledgehammer to kill a fly”. The Real Estate Developers’ Association of Singapore describes the Government’s move as “tough” and “harsh”.

Real estate developers also assess that since the market has only started to show signs of improvement, there is no basis for the Government to intervene at such an early stage.

To be fair, the Government’s interventions do not come without warning. A large volume of en bloc sales has been completed at record-breaking prices in 2016 and 2017, with S$8.8 billion worth of transactions reported in the first half of this year.

These en bloc sites could be redeveloped into approximately 20,000 new private homes, doubling the number of new units in the next two years, according to the Monetary Authority of Singapore.

This has led to the Government’s increasing concerns about rising vacancy rates. If demand is not robust enough to match a bumper supply, there may be massive downward pressure on housing prices and rental.


How will the recent round of cooling measures, coupled with the earlier revision to the Buyer’s Stamp Duty (BSD), add to the costs of private housing purchases in Singapore?

First-time Singaporean buyers are only affected by the additional 1 per cent BSD, if they buy a private house of above S$1 million.

Assuming a second private condominium of S$1.5 million purchased for investment purposes after the July 2018 round of changes to the Additional Buyer’s Stamp Duty (ABSD), Singapore citizens would have to pay S$180,000 in ABSD. This figure is S$225,000 and S$300,000 for Permanent Residents (PRs) and foreigners respectively.

Coupled with valuation, legal fees and minimum downpayments, a Singaporean buyer is expected to fork out about S$600,000 at the outset. The figure is approximately S$650,000 for PRs and S$720,000 for foreigners – a huge proportion of the purchase price.

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For a smaller second condominium of S$1 million, Singaporean citizens will have to fork out an upfront payment amounting to S$397,600. For a S$2 million house, this figure amounts to slightly more than S$800,000.


If it sounds like a lot, we should keep in mind that many existing measures have not deterred a huge number of wealthy property owners.

The Ministry of National Development (MND) revealed in February that a total of 20,000 homeowners in Singapore own between three to 10 private residential properties in Singapore, with 15 per cent of them also owning a HDB flat.

These new ABSD measures will force these property buyers to re-evaluate whether buying second or more properties is still a feasible investment option in land-scarce Singapore.

Singapore citizens would need their second investment property price to appreciate by approximately 15 per cent, just to recover the ABSD and BSD. This figure is 23 per cent for foreigners.

There are other Asian cities which have already surpassed our current stamp duty rates. Foreigners looking to buy their second property in Hong Kong, for example, face a whopping 30 per cent in upfront stamp duties.


On top of this, Hong Kong is proposing a vacancy tax at 200 per cent of a newly built unit’s estimated annual rental value to discourage market speculators from buying and holding onto properties while waiting for their values to rise.

The immediate effects have been adverse. The sudden announcement of the new ABSD and loan-to-value ratio rules have triggered knee-jerk reactions from buyers, who flocked to showflats to place their option to purchase. More than 1,000 units of private condominiums were snatched up by panic buyers before the midnight deadline.

Shares of property developers and real estate agencies reacted most instantaneously in the first days of the new rules. Share prices dropped with some hitting record lows.


The Government’s actions come at a time when it is necessary to keep housing affordability in check. The new cooling measures are expected to adversely affect purchasing activities by investors and speculators in the private housing markets.

If those who are not willing to pay the additional ABSD choose to stay on the sidelines, the market could enter into a cooling period with little sale activities.

In a pessimistic scenario where the demand is dampened, developers may have to revise their prices to move sales.

Developers who plan to acquire new en bloc sites, and have properties in their portfolio – yet to be launched for sale – will suffer a double whammy. On top of the extra 5 per cent they will have to pay for acquiring the private residential projects, they may also face a dwindling pool of potential buyers in upcoming launches.

Developers may be hoping for an optimistic scenario in which unconstrained, undeterred buyers, including foreign investors, continue to bet on the long-term prospects of private residential properties in Singapore.


At first glance, the Government’s measures today may have muted the steady progress of the real estate market in the short-run.

Upon closer scrutiny, it may be more prudent to see them as preventive measures imposed ahead of time to prevent the property market from overheating, with adverse consequences for the economy.

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With the rapid buying and selling of private properties, the en bloc frenzy and residential land sales, the last to suffer in the speculative foray will be individuals who over-commit and stretch beyond their means.

The Government is obligated to act quickly to protect these individuals from being overly exposed to the risks in an overzealous market.

Such measures may ensure that in the long-run, Singapore continues to enjoy a stable and sustainable property market.

Sing Tien Foo is the Director and Tang Li Xuan Amanda is a Research Assistant at the Institute of Real Estate Studies, National University of Singapore. 

Source: CNA/nr


Important Commercial Real Estate Terms You Should Know

Commercial real estate is far more complex than residential real estate. The contracts are longer, often the price tags are higher, and included in the process are many complex terms that an ordinary person does not understand. Make sure before entering into a commercial real estate deal you are aware of these terms.

  1. Capitalization Rate (CAP Rate)

A Capitalization Rate, also known as a “CAP Rate,” is a term that is used to help determine the potential real estate deal. This term is based off of an algorithm by dividing the net operating income (NOI) by the sales price of the property (the fair market value of the property). Therefore, this result gives you  the return rate on your real estate interment. Many real estate investors acquire what the CAP rate is on property before purchasing a commercial real estate lot.

  1. Usable Square Footage

The USF, or usable square footage, is the amount of space that is actually available to be used in a commercial real estate rental property. There is a tremendous amount of space that is not useable such as exit hallways, stairways, bathrooms, etc. Therefore, the USF gives you an accurate idea of how much working space you have.

  1. Rentable Square Footage

The RSF, or rentable square footage, is the total amount of space, including any shared space. This footage will give you an accurate expectation of the amount of working space and shared space such as lobbies, bathrooms, hallways, etc. Landlords primarily use this number to determine the rental amount for the commercial property.

  1. Common Area Maintenance

CAM, or the Common Area Maintenances, is the amount of expenses you are responsible to pay for maintaining the building. Each landlord may calculate this differently; however, you should inquire with the landlord how the CAM has been calculated.

  1. Right of First Refusal

The Right of First Refusal, or ROFR, gives the tenant the ability to accept or decline any additional space that the landlord has available to rent. Therefore, the landlord would be required to offer to the tenant with a ROFR clause included in their lease any additional space before offering that space to the general public.

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  1. Sublease Clause

A sublease clause may or may not be included in the contract. This clause either permits or prohibits a tenant from subleasing their space to another individual or business. A sublease occurs when the tenant rents to someone else only a partial amount of time during the remaining time of the lease. Make sure you know if you are permitted to sublease in case an emergency arises.

  1. Assignment Clause

An assignment clause may prevent or prohibit the tenant from transferring the entire interest away to another person. Unlike sublease clauses which permit a tenant to reassume the space, after subleasing to someone else, the assignment clause transfers all the interest and does not allow the transferor to reassume his or her interest. In an assignment situation, the person who receives the assignment will be responsible for rent until the end of the lease term.

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  1. Escalation clause

An escalation clause will explain the amount the rent will escalate or increase annually. The increase may be determined based upon the property taxes, operating expenses, or even the Consumer Price Index.

Jordan Lulich

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