Daily Real Estate News | November 20, 2009 | Share

One piece of good news coming out of the Great Recession is the increasing affordability of housing.

The typical U.S. family earning the nation's median income of $64,000 a year could afford to buy 70.1 percent of all homes sold in the United States during the third quarter, according to a report from the National Association of Home Builders and Wells Fargo. The report relied on the government standard of spending no more than 28 percent on housing. In the same quarter of 2008, only 56.1 percent qualified.

The five most affordable areas are:

• Indianapolis
• Youngstown, Ohio
• Detroit
• Warren, Mich.
• Grand Rapids, Mich.

The five least-affordable areas are:

• New York City
• San Francisco
• Honolulu
• Santa Ana, Calif.
• Nassau and Suffolk, Long Island, N.Y.

Source: CNNMoney.com, Les Christie (11/19/2009)

HOPEFULLY THIS WILL BE THE CASE

Daily Real Estate News | November 19, 2009 |

Housing industry consultant John Burns says low mortgage
rates and the home buyer tax credit, plus the availability of FHA loans - "the new subprime," as he calls it - will
combine to keep housing transaction levels at "near normal" through Spring 2010.

First-time homebuyers are about the half the market, he says, while the expansion of the housing tax credit will get
senior buyers "off the fence" and buying retirement properties.

What would have happened if Congress hadn't extended the tax credit? "I think we would see housing crater," Burns said.

Burns clients include home builders, lenders, and equity invrstors.

Source: the Wall Street Journal, Nick Timiraos (11/18/2009)
 

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POTENTIAL DOWNSIDE TO WAITING FOR HOUSING PRICES TO FALL FURTHER

Daily Real Estate News | November 18, 2009 |

SOME SECTORS OF THE REAL ESTATE MARKET ARE SHOWING LIFE.

Daily Real Estate News | November 17, 2009 |

Executives from some of the largest brokerages in the country expect to see their sales grow 6-8 percent in 2010 and home prices to start heading up about 3 percent, REALTORS® heard in a state of the real estate industry discussion Saturday at the 2009 NAR Conference & Expo.

J. Lennox Scott, chairman and CEO of John L. Scott Real Estate, said expansion of the tax credit to include repeat buyers will help boost middle-market sales next year, although mortgage financing above the $417,000 non-jumbo conforming loan limit will remain a challenge. "The repeat tax credit will at least start a conversation about buying" among existing home owners, Scott said.

Congress recently extended temporary high-cost loan limits of $729,750 for 2010, but the lion's share of markets don't qualify for those so-called jumbo-conforming loans. As a result, repeat buyers face tougher underwriting challenges. "People applying for a $419,000 mortgage are not wealthy-they're two teachers," said Helen Hanna Casey, president of Howard Hanna Real Estate Services, which operates in Pennsylvania, New York, and other states in that region.

The improvement in the middle market will help tighten inventories, helping to shore up prices, but the upper-end market will continue to underperform until companies start hiring again. That's when the industry will see more relocation business among transferees, a critical component of the upper-end market, said Scott.

Merle Whitehead, president and CEO of RealtyUSA said a key job of brokers next year is making sure their sales associates understand FHA, because federally-backed mortgages will remain the principal provider of mortgage financing for most borrowers. Too many sales associates still think of FHA as financing for people who can't qualify for conventional mortgages, but in fact FHA is the main source of mortgage capital today. "We have to change the thoughts and beliefs of our agents," he said.

-Robert Freedman, REALTOR® magazine

The Federal Housing Administration released an audit Thursday showing that its cash reserves had seriously declined because so many borrowers have defaulted on their mortgages.

The audit showed reserves to be 0.53 percent of the total portfolio, significantly below the 2 percent minimum mandated by Congress. The agency announced plans to tighten its credit rating standards so it wouldn't be a drain on taxpayers, but officials warned that if the drain worsens, the agency might fail, leaving taxpayers to clean up the mess.

Critics of the agency, which last year guaranteed about 30 percent of new loans, say it should tighten its standards further, including increasing down payments to 10 percent.

Source: The New York Times, David Streitfeld (11/13/2009)
 

REALTORS GIVING OF THEMSELVES

Daily Real Estate News | November 12, 2009 |

About 50 real estate practitioners kicked off the 2009 REALTORS® Convention & Expo on Wednesday, Nov. 11, by lending a hand to the building of 1441 Harding Avenue, a green home constructed by Habitat for Humanity. While the initial construction of the house began in August, real estate pros helped with some of the finishing touches: painting, nailing, framing doors, and putting up drywall. New homeowners Abdi Farah and Amran Abdi, Somalian refugees who relocated to the U.S. a few years ago, will be able to move in this December.

"Nothing feels better than to see your lifelong dream become a reality. Homeownership is one of the most important financial steps you could take in order to secure your family's future," Abdi Farah said.

Since 2001, NAR has partnered with Habitat for Humanity to build a home in the city where the REALTORS® Convention & Expo; however, this was the first green home built under this partnership. The unit was constructed under the LEED-certification guidelines and will be solar-powered. "Today is a great day to show that REALTORS® do care," said Bradford Bates, San Diego Habitat for Humanity's executive director.

"It's giving back, and helping a family to give them a leg up," said Jan Hayden, ABR®, e-PRO®, an associate with Coldwell Banker in Baltimore, who has worked on almost 60 Habitat for Humanity homes. Like Hayden, many of the participants volunteer for Habitat for Humanity in their local communities.

2009 NAR President Charles McMillan and other members of the NAR Leadership Team were on hand to present the family of five keys to their new home, along with a toolbox, green cleaning supplies, and a Lowe's gift card.

Source: Katherine Tarbox, REALTOR® magazine (11/12/2009)

New Rules Improve Transparency In Mortgage Closing Costs

Daily Real Estate News | November 9, 2009 |

New regulations from the Department of Housing and Urban Development will require that closing costs be spelled out on a revised and consumer-friendly version of the good-faith estimate form that borrowers are supposed to receive within three days of applying for a mortgage. These rules will take effect Jan. 1, 2010.

Fees are divided into three categories:

• Fees that cannot increase from upfront estimates to closing, including lender or broker's mortgage origination, processing, and underwriting charges, as well as lender or broker's "points" based on the interest rate quoted and local transfer taxes.
• Fees that can increase as much as 10 percent from upfront estimates, including services such as appraisals, title insurance, and recording fees from local governments.
• Fees that can increase without limit because the amount is difficult to predict in advance, including home owners insurance, daily interest charges on the loan, and initial deposits by the borrower into an escrow account.

The new HUD-1 form will allow the borrower to easily compare what they were told the settlement fees will be with what they actually are at closing.

Source: The Washington Post Writers Group, Kenneth R. Harney (11/06/2009)

Congress has provided the stimulus in the form of an extended tax credit period. Now we have to wait and see what the effect on the housing market will be.

The Senate yesterday passed legislation to extend the $8,000 home buyer tax credit to May 1, 2010, for first-time buyers and add a $6,500 tax credit for repeat buyers if they've lived in their home for five of the past eight years. Home prices are capped at $800,000.

The legislation was included in a bill to extend unemployment benefits and is expected to be passed by the House today or tomorrow. President Obama is expected to sign the legislation when it's sent to his desk.

Under the bill, income limits are expanded to $125,000 for individuals and $225,000 for joint filers. Individuals with incomes up to $145,000 and joint filers with incomes up to $245,000 qualify for reduced credits.

Households who have binding contracts in place by April 30 will be allowed an additional 60 days to complete their transaction. The deadline for members of the military serving out the U.S. for at least 90 days between Jan. 1, 2009, and May 1, 2010, has been extended one year.

Taxpayers can claim the credit on their federal income tax returns. If the credit exceeds their tax bill, the government will issue a check. Taxpayers will be able to claim the credit on their 2009 income tax return for purchases made in 2010.

More on the credit is available from NAR.

Source: The Associated Press (11/5/2009)

Potential Bad News for Sellers

Daily Real Estate News | November 3, 2009 |

SIGNS OF A REAL ESTATE MARKET RECOVERY?

Daily Real Estate News | November 2, 2009 |

Pending home sales rose again, marking eight consecutive monthly gains - the longest streak since measurement began in 2001, according to the National Association of REALTORS®.

The Pending Home Sales Index,^* a forward-looking indicator based on contracts signed in September, rose 6.1 percent to 110.1 from a reading of 103.8 in August, and is 21.2 percent higher than September 2008 when it stood at 90.9.

The gain from a year ago is the largest annual increase on record, and the index is at the highest level since December 2006 when it was 112.8.

Lawrence Yun, NAR chief economist, said the momentum is understandable.
"What we're witnessing is a rush of first-time buyers trying to beat the expiration of the tax credit at the end of this month," he said. "Home values will stabilize sooner rather than over-correcting. That, in turn, will mean wealth stabilization for the vast number of middle-class families and lay the foundation for a durable economic recovery."

Watch a video interview of Yun as he talks about these latest pending-home sales trends.

NAR estimates approximately 3 million renters are now financially well-qualified to buy a median-priced home. "As long as buyers do not overstretch and stay well within their budget, a sizable pent-up demand can be tapped among financially qualified potential buyers," Yun said. "Although the tax credit is greatly reviving the existing home market, new-home sales may continue to struggle as home builders hold back production to drive down inventory. In addition, there remains an ongoing credit crunch for construction loans."

The Pending Home Sales Index in the Northeast slipped 2.0 percent to 83.6 in September but remains 16.9 percent above September 2008. In the Midwest the index rose 8.1 percent to 98.2 in September and is 17.8 percent higher than a year ago. In the South, pending home sales increased 4.9 percent to an index of 109.7 and is 22.8 percent above September 2008. In the West the index jumped 10.2 percent to 143.8 and is 23.7 percent above a year ago.

Yun added that strong near-term reports should not be overstated. "We're clearly not out of the woods because an excess of homes remains on the market despite recent improvements," he said. "Although current inventory is getting closer to price equilibrium, foreclosures will continue to enter the pipeline. An extended and expanded tax credit would help absorb this incoming inventory."

- NAR

INDICATORS TO WATCH

Daily Real Estate News | October 29, 2009

What are the signs that mortgage rates, now at historic lows, are about to go up?

One way to catch a clue is to read the minutes of the Federal Reserve. For instance, the Federal Open Market Committee said in its September minutes that when it came to interest rates, there is "no policy change." And the minutes said that while the Fed believes "an economic recovery is underway," it regards a weak economy as a greater risk than inflation. Upcoming meeting minutes are likely to be just as forthcoming if an uptick is in the cards.

Other signs include:
 

• Declining unemployment: The unemployment rate is sitting at 9.7 percent. If lots of Americans go back to work, an increase in interest rates is likely.
• Rising discount rate: The rate the Fed charges banks that borrow from it directly stands at 0.5 percent. If it rises or the spread between it and the Federal Funds rate widens, then mortgage rate increases won't be far behind.

Source: BusinesWeek.com, Marc Roth (10/28/2009)
 

Senate Banking Committee Chairman Chris Dodd (D-Conn.) says Senate Democrats have agreed to extend the first-time home buyer tax credit. The latest version extends the program to home sales signed - not closed - by April 30. Purchasers would have another 60 days to close the sale. The credit will also be expanded to include so-called step-up buyers who have lived in their current home for at least five years.

The credit would be cut nearly 10 percent to a $7,290 cap. Income eligibility for first-time home buyers would stay the same, but it would rise for step-up buyers to $125,000 for individuals and $250,000 for couples.

Source: Bloomberg News, Dawn Kopecki and Ryan Donmoyer (10/27/2009)

GOOD NEWS FOR THOSE WHO PROCRASTINATED

Daily Real Estate News | October 27, 2009 |

It seems likely that the U.S. Senate will approve a deal to extend the First-Time Homebuyer Tax Credit, but the devil is in the details.

Florida Democrat Sen. Bill Nelson told reporters traveling to Florida with President Obama on Monday that he thought that the extension would be approved, but both senators and representatives are among those who think that there should be some fiscal offset for the cost of the extension. Spending any more money on the stimulus effort also could stir up a hornets' nest in some circles.

The proposal in the Senate that appears to have the most likelihood of passage would extend the $8,000 credit through March 31, then its value would drop by $2,000 for each of the subsequent three quarters of 2010. This plan was offered by Senate Majority Leader Harry Reid of Nevada and Senate Finance Committee Chairman Max Baucus, a Montana Democrat.

Source: Associated Press, Andrew Taylor (10/26/2009) and The Wall Street Journal, John D. McKinnon (10/27/2009)

Daily Real Estate News | October 26, 2009 |

Mortgage loan applicants with a credit dispute on their records may find it impossible to get a loan even if they have a score above 800 and a large down payment, warn consumer watchdogs.

The problem stems from a Fannie Mae policy that requires lenders to hand-underwrite these loans because that practice makes it harder for scammers to use the credit dispute law to hide bad credit experiences.

Denying people who are good credit risks a loan is frequently an unintended consequence, says Christopher Cruise, a mortgage originator and a founder of Responsible Loan Officers. "There's no question - when there are lots of other applications and business is good," applications requiring extra time and research "just aren't going to move."

The policy is "extremely unfair to honest consumers who are simply doing what they should - challenging misinformation," says Evan Hendricks, whose newsletter Privacy Times outlined Fannie Mae's policy in a recent report.

Fannie Mae says it is reviewing the policy and may change it.

Source: Washington Writers Group, Kenneth R. Harney (10/25/2009)

GREAT NEWS FOR THOSE LOOKING TO SELL THEIR HOMES OR IS IT?

Existing-home sales bounced back strongly in September with first-time buyers driving much of the activity, marking five gains in the past six months, according to the National Association of REALTORS®.

Existing-home sales-including single-family, townhomes, condominiums, and co-ops-jumped 9.4 percent to a seasonally adjusted annual rate of 5.57 million units in September from a level of 5.10 million in August, and are 9.2 percent higher than the 5.10 million-unit pace in September 2008. Sales activity is at the highest level in more than two years, since it hit 5.73 million in July 2007.

Lawrence Yun, NAR chief economist, said favorable conditions matched with a tax credit are boosting home sales. "Much of the momentum is from people responding to the first-time buyer tax credit, which is freeing many sellers to make a trade and buy another home," he said. "We are hopeful the tax credit will be extended and possibly expanded to more buyers, at least through the middle of next year, because the rising sales momentum needs to continue for a few additional quarters until we reach a point of a self-sustaining recovery."

Even with the improvement, Yun said the market is underperforming. "Despite spectacular gains in the stock market, principally from the financial sector recovery, most of the 75 million home-owning families have more wealth tied to their homes. Home values could soon turn consistently positive and help the broad base of middle-class families, but we are not there yet," he said.

Conditions for First-Time Buyers
Early information from a large annual consumer study to be released on Nov. 13, the 2009 National Association of REALTORS® Profile of Home Buyers and Sellers,shows that first-time home buyers accounted for more than 45 percent of home sales during the past year. A separate practitioner survey shows that distressed homes accounted for 29 percent of transactions in September.

NAR President Charles McMillan said affordability conditions remain historically high. "Potential first-time buyers can take heart in that affordability conditions this year are the highest on record dating back to 1970, but with the first-time buyer tax credit scheduled to expire at the end of next month, people could hold back from entering the market," he said. "Our read is that housing overshot on the downside because homes are selling for less than replacement construction costs in much of the country, and the home price-to-income ratio has fallen below the historical average."

Inventory Falls
Total housing inventory at the end of September fell 7.5 percent to 3.63 million existing homes available for sale, which represents an 7.8-month supply at the current sales pace, down from an 9.3-month supply in August. Unsold inventory totals are 15.0 percent below a year ago.

"The current housing supply is the lowest we've seen in two and a half years," Yun said. "If we could continue to absorb inventory at this pace, home prices would return to normal, modest appreciation patterns next year."

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to 5.06 percent in September from 5.19 percent in August; the rate was 6.04 percent in September 2008.

Home Sales Breakdown
The national median existing-home price for all housing types was $174,900 in September, which is 8.5 percent lower than September 2008. Distressed properties continue to downwardly distort the median price because they generally sell at a discount relative to traditional homes in the same area.

Single-family home sales rose 9.4 percent to a seasonally adjusted annual rate of 4.89 million in September from a pace of 4.47 million in August, and are 7.7 percent above the 4.54 million-unit level in September 2008. The median existing single-family home price was $174,900 in September, which is 8.1 percent below a year ago.

Existing condominium and co-op sales jumped 9.7 percent to a seasonally adjusted annual rate of 680,000 units in September from 620,000 in August, and are 9.7 percent above the 561,000-unit pace a year ago. The median existing condo price was $175,100 in September, down 11.7 percent from September 2008.

Here's the region-by-region picture:

• Northeast: Existing-home sales increased 4.4 percent to an annual level of 950,000 in September, and are 11.8 percent higher than September 2008. The median price was $234,700, down 7.0 percent from a year ago.
• Midwest: Existing-home sales jumped 9.6 percent in September to a pace of 1.25 million and are 7.8 percent above a year ago. The median price was $147,600, which is 1.0 percent below September 2008.
• South: Existing-home sales rose 9.0 percent to an annual level of 2.06 million in September and are 10.8 percent higher than September 2008. The median price was $153,500, down 7.6 percent from a year ago.
• West: Existing-home sales surged 13.0 percent to an annual rate of 1.30 million in September and are 5.7 percent above a year ago. The median price in the West was $219,000, which is 15.0 percent below September 2008.

Source: NAR

Daily Real Estate News | October 21, 2009 | Share

While obstacles to short sales remain, real estate practitioners say the process is becoming more efficient. Rather than waiting six months or more to push through a deal, agents say banks are more willing to negotiate prices up front.

"My gut feeling is that short sales seem to be the preferred avenue for distressed property now," says Cindi Hagley of San Ramon, Calif.-based Windermere Welcome Home. "It's cheaper for [banks] to do a short sale than go all the way to foreclosure."

The short-sale process has become more manageable now that banks are willing to pre-approve prices, reach out to underwater borrowers who have listed their homes for sale, implement Web-based systems that manage the short sale process, and add staff dedicated to short sales.

Additionally, the U.S. Treasury is set to implement a streamlined short sales framework and offer incentive payments of $1,500 to home owners and $1,000 to both loan servicers and second-lien holders.

Borrowers also prefer short sales because Fannie Mae requires them to wait only two years to own another home or even less than that if they were not delinquent. By contrast, those who lost their homes to foreclosure have to wait five years.

Source: San Francisco Chronicle, Carolyn Said (10/21/09)

A new housing price forecast predicts that home values will drop an average of 11.3 percent in 342 out of 381 markets by June 30, 2010.

Financial information and analysis firm Fiserv also predict that prices will stabilize and rise 3.6 percent in 2011.

Mark Zandi, chief economist with Moody's Economy.com, agrees with Fiserv. "I think more price declines are coming because the foreclosure crisis is not over," he says.

Fiserv called Miami the biggest loser, predicting a decline of 29.9 percent by next June. It also predicts large declines in Orlando, Las Vegas, and Phoenix.

Source: CNNMoney.com, Les Christie (10/20/2009)

GREAT ADVICE FOR CONDO BUYERS

Daily Real Estate News | October 19, 2009 |

Buyers who are considering the purchase of a condominium should inspect the health of the home owner's association before they close.

The seller should provide the buyer all financial documents relating to the association in time for an attorney for the buyer to review them before closing.

Here's some advice from Leonard Baron, professor of finance at San Diego State University, about the information that the seller should consider:

• Does the association budget include money for operating expenses such as water, lights, elevator maintenance, and landscaping?
• Is there extra money set aside in a reserve fund for long-term maintenance? If there is an outside reserve study, that should be provided. If not, there should be adequate money in the reserves right now to cover 50 percent of the estimated cost of repairs over the next 30 years.
• Do the condo's expenses exceed revenues due to a high foreclosure rate or other reasons that owners' debts go unpaid?
• If there is a shortfall, does the association have a plan besides cutting back on services for making it up?

Source: The Wall Street Journal, June Fletcher (10/17/2009)

ALL IN THE FAMILY

Intra-family loans can be the best way for parents to help their children purchase a property.
The strategy makes the purchase more affordable, increases the size of the home a cash-strapped purchaser can afford, and helps the parent leverage his gift to reduce a taxable estate.

The parent must charge interest at a market rate on family loans, says Ken Kilday, an adviser with USAA Wealth Management, or face IRS penalties. But parents can then take the $13,000—$26,000 for a couple—that can be gifted without eating into the gift exemption and apply it annually toward paying off their child’s loan.

Kilday also suggests that parents put in their will that upon their death, the loan be fully forgiven.

Source: Dow Jones Newswires, Taylor Smith (10/15/2009)