Real estate investors made the most of Q4 2012.
According to the Mortgage Bankers Association (MBA), originations of multi-family and commercial mortgages increased nearly 50 percent during October, November and December 2012 as compared to the 3 months prior.
Low mortgage rates and a recovering U.S. housing market sparked a real estate investment frenzy which appears to have carried over into 2013.
Demand for home loans remains high across all loan and buyer types.
Multi-Unit Homes In High Demand
Multifamily and commercial mortgage originations surged between Q3 2012 and Q4 2012, climbing by close one-half. Furthermore, as compared to Q4 2011, as the housing market was renewing off its bottom, originations were up 50 percent as well.
Using investment in real estate as a proxy, then, this year’s housing market looks decidedly stronger than last. Multi-family and commercial mortgage lending has climbed to its highest point in five years, and 2013 is expected to remain similarly strong.
It’s notable, too, that multi-family homes accounted for a huge portion of the year-end gains.
With residential mortgage rates ending the year below 3.5% and rents rising more than 6% annually, real estate investors snapped up homes for purposes of building a portfolio.
According to real estate web company Trulia, several cities in which rents made large year-over-year gains include :
- Houston, Texas : 15.8% average rent increase for most recent 12 months
- Miami, Florida : 9.1% average rent increase for most recent 12 months
- Boston, Massachusetts : 6.0% average rent increase for most recent 12 months
Rents in Oakland climbed 10.0% percent year-over-year.
Mortgage Applications Also Increasing
The MBA also recently released its weekly Mortgage Applications Survey which showed, for the week ending February 1, mortgage applications climbed 3.4 percent as compared to the week prior.
Despite persistently rising mortgage rates, refinance activity has remained high. Mortgage rates have climbed from a New Year’s Day rate of 3.31 percent to today’s average rate of 3.53 percent for borrowers willing to pay 0.8 discount points plus a full set of closing cost.
Mortgage rates for a zero-closing cost mortgage are slightly higher.
78% of last week’s mortgage applications were for home refinances, comprised of FHA Streamline Refinances, VA Streamline Refinance, HARP loans, and rate-and-term refinancing, among others.
Purchase mortgage applications account for the remaining 22 percent of applications.
Renting An Owner-Occupied 3- or 4-Unit Home
Demand for multi-unit homes was supported by more than just experienced real estate investors — everyday home buyers bought them, too. Sometimes, to live in one unit and to rent the remaining ones.
This real estate investment strategy is allowable via the FHA or via conventional financing means. You can buy a 2- unit, 3-unit or 4-unit home, live in one of the “For Rent” units, then find tenants for the others. It’s a savvy way to offset monthly homeownership costs.
The FHA will allow for its standard 3.5% downpayment on a multi-unit home. Fannie Mae and Freddie Mac will require 20% downpayment for a 3- or 4-unit home. Ask your lender for how much home you’ll qualify.