Jobs, low interest, tight inventory, set stage for 2015 growth 

This year demonstrated a steady build-up of housing momentum - fueled by significant improvements in economic fundamentals, low mortgage rates, and compressed inventory - and is expected to carry the market into 2015 gains, according to the 2014 Housing Review issued today by realtor.com, a provider of online real estate services operated by News Corp subsidiary Move Inc.

This review includes the Top 10 Real Estate Trends that defined the 2014 housing market. "Many of the gains that we recently predicted in the realtor.com 2015 Housing Forecast are built on housing growth established in 2014. Overall, this year's housing market showed steady advances over 2013 with significant improvement in key housing metrics, despite some remaining challenges," said Jonathan Smoke, chief economist for realtor.com. "Increases in job creation and gross domestic product have had a significant impact on consumer confidence and homebuyer demand.

"Paired with historically low interest rates, these factors kept properties moving quickly with median time on market at approximately 90 days. Unfortunately, the low number of homes for sale and stringent lending standards prevented a normal number of first-time homebuyers from closing on their first home in 2014," Smoke said. 

So without further ado, here is Smoke's look back at the top trends of 2014, which naturally have an echo into 2015.

First, the good.

• Improving economic fundamentals: After an especially harsh winter earlier in the year, the economy picked up steam and produced a banner year for new jobs. The GDP this year was higher, and is still trending higher, resulting in stronger consumer confidence.

• Historically low mortgage rates continued: Mortgage rates declined despite the end of quantitative easing this year. Global weakness, along with actions by the European Central Bank and similar central banks in Asia, kept our Federal Reserve from raising the Federal Fund Rate, which kept mortgage rates low.

• Deceleration of abnormal home-price gains or return to normal price appreciation: After two years of abnormally high levels of home-price appreciation in 2012 and 2013, price increases moderated throughout 2014. We are now experiencing increases in home prices consistent with long-term historical performance.

• Decline of distressed sales: Foreclosures and short sales declined throughout the year, and while total home sales decreased year over year, normal (non-distressed) home sales increased over 2013 - due to the decline of the distressed sales market. Foreclosure inventories also fell substantially, and are forecasted to be down 30 percent year over year at the close of 2014.

• End of the era of major investors active in purchases: Related to the drop in distressed sales opportunities, and against backdrop of higher home prices, portfolios of single-family homes for rent potentially reached their peak earlier this year. Large-scale investor purchase activity in the single-family market sector continued to decline, enabling more room for traditional first-time buyers.

And then the bad (i.e. the factors holding back recovery).

• Tight credit standards and limited mortgage availability: Despite historically low rates, many households were prevented from capitalizing on mortgage access because of overlays lenders added to qualification standards in order to limit put-back risk. A tight spread between approved and declined FICO scores shut out nearly half of the potential population this year. As a result, mortgage credit availability did not improve in 2014.

• Tight supply of inventory: While absolute inventories increased as the year progressed, supply did not outpace demand. Monthly supply of new homes and existing homes remained beneath normal levels, and the age of inventory was down year over year.

• Depressed levels of first-time buyers: The share of first-time buyers fell to the lowest level in over twenty years according to the National Association of Realtors. "But the first-time buyer share is showing signs of modest improvement by the year-end," said Lawrence Yun, NAR chief economist. Federal policy actions, such as revised regulations for lenders and new low down-payment programs introduced in December are anticipated to have a positive impact in 2015.

• Record levels of renters and ever-increasing rent prices: Continued declines in homeownership rates resulted in record numbers of renting households. Rent increases became an inflationary concern this year, and looking ahead, the pace of these increases are not slowing down.

• Lack of recovery in homebuilding and low share of new home sales: Single-family starts barely increased in 2014 over 2013. New home sales remain far from normal share levels - typically near 16%, now instead around 9%. New home prices increased substantially again this year, revealing that higher priced product is limiting the demand. 
   

Loans are inevitable for most adults. If you buy a house or car, use a credit card or go to college, you'll likely need to take out a loan. U.S. household debt stands at $11.7 trillion, according to a recent Federal Reserve Bank of New York survey that draws on information from 40 million individuals.

But taking out a loan doesn't always work out well, as anyone who has dealt with a debt collector can attest. So what mistakes are you most likely to make in the loan process? A good rule of thumb: If there's a chance your loan can destroy your marriage, business or send you into bankruptcy, you're about to make the biggest mistake of all: taking out the loan in the first place.

1. Not Reading the Fine Print
 

4 Reasons It Will Be Easier to Buy a Home in 2015

by Fox Business

Housing economists and would-be homebuyers are finding reasons for optimism as 2015 nears. To be fair, the bar's set pretty low after a tough year for housing.

However, there are some genuinely encouraging signs that next year will be better for prospective buyers. Economic recovery and an improving job market will go a long way to boosting affordability for buyers in many markets.

Here's a look at four reasons why the upcoming year might be a difference-maker for would-be homebuyers.

1. Looser Mortgage Credit 

After years of hyper-cautious lending, more mortgage lenders are starting to relax credit and underwriting requirements, which are also known as "overlays."

A big push in that direction came earlier this month when new guidelines from Fannie Mae and Freddie Mac took effect. These government-sponsored mortgage giants purchase about two-thirds of all new home loans.

The new policies were aimed at clearing up confusion about when lenders must buy back loans that go sour. Economists and industry insiders expect the newfound clarity will lead to broader access to mortgage credit.

"I've been told with absolute confidence that some lenders are lifting almost all of their overlays," David Stevens, president of the Mortgage Bankers Association, told the Wall Street Journal.

The Urban Institute estimates more "normal" lending requirements could mean an additional 1.2 million home loans every year.

2. Lower Down Payments

Prospective buyers have another reason to high-five Fannie and Freddie: They've recently agreed to get behind loans with just 3% down. That lower benchmark, coupled with loosening credit standards, will likely help more first-time buyers enter the market.

Buyers will need at least a 620 FICO score and be on the hook for private mortgage insurance. Requirements for the 3% option vary between the two agencies. Depending on their path, buyers may need to complete a homebuying education program or show they haven't recently owned a home.

"Our goal is to help additional qualified borrowers gain access to mortgages," Andrew Bon Salle, a Fannie Mae executive vice president, said in a statement. "We are confident that these loans can be good business for lenders, safe and sound for Fannie Mae and an affordable, responsible option for qualified borrowers."

FHA loans currently feature a 3.5% down payment requirement, but the accompanying mortgage insurance premiums have become increasingly expensive for many low- and middle-income borrowers. On a typical $200,000 loan, an FHA buyer might pay an extra $200 per month in mortgage insurance costs.

3. Cooling Home Prices

Some housing markets are still hotter than others. But the overall pace of housing price growth has slowed considerably. Freddie Mac's housing price index soared 10% from September 2012 through September 2013.

Over the last year, the index is up just 5%, and Freddie Mac economists expect only a 3% increase for 2015. Increases in housing inventory may also help to push down prices in some places.

4. Rates Still Low

Heading into 2014, most economists and housing wonks expected mortgage rates to top 5% by year's end. Last week, the average rate on a 30-year fixed mortgage didn't even top 4%, according to Freddie Mac's weekly lender survey. The 3.89% average rate marked an 18-month low.

A host of economic and geopolitical factors combined to keep rates lower than anticipated this year. They're almost certainly going to rise in 2015, maybe even into that long-predicted 5% range, but they'll still remain far below historical averages.

Before you buy a home, it's important to check your credit to get an idea of whether you'll meet lenders' requirements. You can check your credit reports - you can get them once a year for free, and you can also get a free credit report summary on Credit.com - to see where you stand. You can also use this calculator to see how much home you can afford, which can help you target your search to a price range that is right for you.

Millions of Homeowners Could Refinance and Save Big 

by CNN Money

Millions of homeowners could save big money -- and possibly their homes -- by refinancing to today's historically low rates. But most don't even apply.

Nearly one in five homeowners who are behind on their mortgage payments have loans with interest rates of 8% and higher -- nearly double today's rates of around 4%, according to nonprofit community development group NeighborWorks America.

The government recently launched a campaign to convince those most at risk to take the leap. According to the Federal Housing Finance Agency, nearly 770,000 homeowners are eligible for cheaper loans through its Home Affordable Refinance Program. Refinancing through that program could save homeowners an average of $200 a month, or $2,400 a year, the agency said.

Even homeowners who aren't struggling to make payments could benefit. Overall, there are 7.4 million mortgage borrowers in the U.S. with rates of 4.5% or higher who could qualify for -- and benefit from -- refinancing their mortgages, according to Black Knight Financial Services, a mortgage analytics company.

So why haven't homeowners acted?

It's a combination of procrastination and fear, according to study from the University of Chicago and Brigham Young University.

"Deciding to refinance is a complex decision," said University of Chicago professor Benjamin Keys, one of the authors of the study.

Many borrowers have heard horror stories from friends and neighbors who refinanced in the past, sometimes into predatory loans, he said.

Some borrowers who tried to refinance found the process "time consuming and confusing," said Jeanne Fekade-Sellassie, a senior vice president for NeighborWorks. "Others don't believe they qualify."

For borrowers who manage to make their payments, status quo seems to be working, so why risk change?

And then there are distressed borrowers who have been in and out of default for years, meeting with harried foreclosure counselors, dealing with unsympathetic lenders, compiling paperwork over and over. All of this to save homes that may be worth a lot less than the amount the borrowers owe.

Still, no matter how difficult the process, the savings can be worth the headache.

At 4%, borrowers who have a 30-year fixed-rate mortgage with a $200,000 balance would save more than $300 a month, compared with someone who has the same loan at a 6.5% rate. For those who are currently paying 8%, the savings comes to more than $500 a month.

Keys said the huge savings from refinancing may sound too good to be true to some. But the savings are real.

"It's a real shame if people miss out on the opportunity," he said.