From Realtor Magazine Online, Daily Real Estate News November 30, 2009
The wealthier the investor, the more money they plan to put in real estate compared to the amount they have earmarked for stocks and bonds, according to Barclays Plc global survey. Investors believe real estate will yield better returns.
Twice as many people with more than $800,000 to invest plan to increase their investment in commercial and residential property compared to those who plan to reduce it, Barclay’s study reported.
Overall, investment in real estate among wealthy individuals is set to rise to 30 percent of the average portfolio from 28 percent now, according to the survey. That excludes properties used as a principal residence.
Source: Bloomberg, Peter Woodifield (11/30/2009)
Monday, November 30, 2009
Monday, November 23, 2009
Existing-Home Sales Record Big Gains
From Realtor Magazine Online, Daily Real Estate News November 23, 2009
Driven by the home buyer tax credit, existing-home sales showed another big gain in October with a strong uptrend established over the past seven months, according to the NATIONAL ASSOCIATION OF REALTORS®. At the same time, inventories have continued to decline.
Existing-home sales—including single-family, townhomes, condominiums and co-ops—surged 10.1 percent to a seasonally adjusted annual rate of 6.10 million units in October from a downwardly revised pace of 5.54 million in September, and are 23.5 percent above the 4.94 million-unit level in October 2008. Sales activity is at the highest pace since February 2007 when it hit 6.55 million.
Tax Credit Fuels Surge
Lawrence Yun, NAR chief economist, was surprised at the size of the gain. “Many buyers have been rushing to beat the deadline for the first-time buyer tax credit that was scheduled to expire at the end of this month, and similarly robust sales may be occurring in November,” he said. “With such a sale spike, a measurable decline should be anticipated in December and early next year before another surge in spring and early summer.”
Now that the tax credit has been extended and expanded, potential buyers have until April 30 to have a contract in place. “There is still a large pent-up demand that can be tapped before the tax credit expires. Our recent consumer survey further shows that 13 percent of successful first-time buyers had a previous contract that was cancelled or fell through—there likely are many more buyers who were attempting to purchase but simply ran out of time,” Yun said.
Historically low interest rates also are boosting the market. “Mortgage interest rates last month were the third lowest on record dating back to 1971,” Yun noted. According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to 4.95 percent in October from 5.06 percent in September; the rate was 6.20 percent in October 2008. Last week, Freddie Mac reporter the 30-year rate dropped to 4.83 percent.
Inventory Declines
NAR President Vicki Cox Golder said strong demand by first-time buyers is creating some unusual conditions. “In parts of the country, especially in Southwestern states but also in Florida and suburban Washington D.C., we’ve been getting many reports of multiple bids in the lower price ranges with foreclosed properties getting absorbed quickly,” she said.
“In fact, low-end inventory has become very tight in many areas and in some cases buyers are becoming more aggressive. In this kind of environment it’s important to work with a REALTOR® who can walk you through the process and help you negotiate a satisfactory deal,” Golder said.
Total housing inventory at the end of October fell 3.7 percent to 3.57 million existing homes available for sale, which represents a 7.0-month supply at the current sales pace, down from an 8.0-month supply in September. Unsold inventory totals are 14.9 percent below a year ago.
“The supply of homes on the market is now at the lowest level in over two-and-a half years – we’re getting closer to a general balance between buyers and sellers,” Yun said. The last time the relative housing inventory was this low was in February 2007 when it also was at a 7.0-month supply.
Existing Home Price by Type
The national median existing-home price for all housing types was $173,100 in October, down 7.1 percent from October 2008. Distressed properties, which accounted for 30 percent of sales in October, continue to downwardly distort the median price because they usually sell at a discount relative to traditional homes in the same area.
“In the second half of 2010, if home values show consistent stabilization or even a modest increase, then home sales could remain at normal healthy levels because consumers would no longer be worried about a price overcorrection,” Yun said.
He added that low home prices also are contributing to extremely favorable affordability conditions. “With the abnormal drop in home prices over the past few years, the price-to-income ratio has fallen below the historic trend line,” Yun said. “This is adding to the buying power of the typical family, with affordability conditions this year at the highest on record dating back to 1970, but prices are beginning to flatten and are poised to rise next year.”
Single-family home sales rose 9.7 percent to a seasonally adjusted annual rate of 5.33 million in October from a pace of 4.86 million in September, and are 21.4 percent above the 4.39 million-unit pace in October 2008. The median existing single-family home price was $173,100 in October, down 6.8 percent from a year ago.
Existing condominium and co-op sales surged 13.2 percent to a seasonally adjusted annual rate of 770,000 units in October from 680,000 in September, and are 40.8 percent above the 547,000-unit level a year ago. The median existing condo price was $172,900 in October, which is 10.4 percent below October 2008.
Regional Views
Here’s a look at existing-home sales figures in different regions of the United States:
* Northeast: Existing-home sales rose 11.6 percent to an annual level of 1.06 million in October, and are 27.7 percent higher than October 2008. The median price in the Northeast was $235,400, down 2.6 percent from a year ago.
*Midwest: Existing-home sales surged 14.4 percent in October to a pace of 1.43 million and are 28.8 percent above a year ago. The median price in the Midwest was $146,600, a gain of 1.1 percent from October 2008.
* South: Existing-home sales rose 12.7 percent to an annual level of 2.30 million in October and are 25.7 percent higher than October 2008. The median price in the South was $151,100, down 6.3 percent from a year ago.
* West: Existing-home sales increased 1.6 percent to an annual rate of 1.31 million in October and are 12.0 percent above a year ago. The median price in the West was $220,200, which is 14.7 percent below October 2008.
—NAR
Driven by the home buyer tax credit, existing-home sales showed another big gain in October with a strong uptrend established over the past seven months, according to the NATIONAL ASSOCIATION OF REALTORS®. At the same time, inventories have continued to decline.
Existing-home sales—including single-family, townhomes, condominiums and co-ops—surged 10.1 percent to a seasonally adjusted annual rate of 6.10 million units in October from a downwardly revised pace of 5.54 million in September, and are 23.5 percent above the 4.94 million-unit level in October 2008. Sales activity is at the highest pace since February 2007 when it hit 6.55 million.
Tax Credit Fuels Surge
Lawrence Yun, NAR chief economist, was surprised at the size of the gain. “Many buyers have been rushing to beat the deadline for the first-time buyer tax credit that was scheduled to expire at the end of this month, and similarly robust sales may be occurring in November,” he said. “With such a sale spike, a measurable decline should be anticipated in December and early next year before another surge in spring and early summer.”
Now that the tax credit has been extended and expanded, potential buyers have until April 30 to have a contract in place. “There is still a large pent-up demand that can be tapped before the tax credit expires. Our recent consumer survey further shows that 13 percent of successful first-time buyers had a previous contract that was cancelled or fell through—there likely are many more buyers who were attempting to purchase but simply ran out of time,” Yun said.
Historically low interest rates also are boosting the market. “Mortgage interest rates last month were the third lowest on record dating back to 1971,” Yun noted. According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to 4.95 percent in October from 5.06 percent in September; the rate was 6.20 percent in October 2008. Last week, Freddie Mac reporter the 30-year rate dropped to 4.83 percent.
Inventory Declines
NAR President Vicki Cox Golder said strong demand by first-time buyers is creating some unusual conditions. “In parts of the country, especially in Southwestern states but also in Florida and suburban Washington D.C., we’ve been getting many reports of multiple bids in the lower price ranges with foreclosed properties getting absorbed quickly,” she said.
“In fact, low-end inventory has become very tight in many areas and in some cases buyers are becoming more aggressive. In this kind of environment it’s important to work with a REALTOR® who can walk you through the process and help you negotiate a satisfactory deal,” Golder said.
Total housing inventory at the end of October fell 3.7 percent to 3.57 million existing homes available for sale, which represents a 7.0-month supply at the current sales pace, down from an 8.0-month supply in September. Unsold inventory totals are 14.9 percent below a year ago.
“The supply of homes on the market is now at the lowest level in over two-and-a half years – we’re getting closer to a general balance between buyers and sellers,” Yun said. The last time the relative housing inventory was this low was in February 2007 when it also was at a 7.0-month supply.
Existing Home Price by Type
The national median existing-home price for all housing types was $173,100 in October, down 7.1 percent from October 2008. Distressed properties, which accounted for 30 percent of sales in October, continue to downwardly distort the median price because they usually sell at a discount relative to traditional homes in the same area.
“In the second half of 2010, if home values show consistent stabilization or even a modest increase, then home sales could remain at normal healthy levels because consumers would no longer be worried about a price overcorrection,” Yun said.
He added that low home prices also are contributing to extremely favorable affordability conditions. “With the abnormal drop in home prices over the past few years, the price-to-income ratio has fallen below the historic trend line,” Yun said. “This is adding to the buying power of the typical family, with affordability conditions this year at the highest on record dating back to 1970, but prices are beginning to flatten and are poised to rise next year.”
Single-family home sales rose 9.7 percent to a seasonally adjusted annual rate of 5.33 million in October from a pace of 4.86 million in September, and are 21.4 percent above the 4.39 million-unit pace in October 2008. The median existing single-family home price was $173,100 in October, down 6.8 percent from a year ago.
Existing condominium and co-op sales surged 13.2 percent to a seasonally adjusted annual rate of 770,000 units in October from 680,000 in September, and are 40.8 percent above the 547,000-unit level a year ago. The median existing condo price was $172,900 in October, which is 10.4 percent below October 2008.
Regional Views
Here’s a look at existing-home sales figures in different regions of the United States:
* Northeast: Existing-home sales rose 11.6 percent to an annual level of 1.06 million in October, and are 27.7 percent higher than October 2008. The median price in the Northeast was $235,400, down 2.6 percent from a year ago.
*Midwest: Existing-home sales surged 14.4 percent in October to a pace of 1.43 million and are 28.8 percent above a year ago. The median price in the Midwest was $146,600, a gain of 1.1 percent from October 2008.
* South: Existing-home sales rose 12.7 percent to an annual level of 2.30 million in October and are 25.7 percent higher than October 2008. The median price in the South was $151,100, down 6.3 percent from a year ago.
* West: Existing-home sales increased 1.6 percent to an annual rate of 1.31 million in October and are 12.0 percent above a year ago. The median price in the West was $220,200, which is 14.7 percent below October 2008.
—NAR
Friday, November 20, 2009
15-Year Rate Hits Record Low
From Realtor Magazine Online, Daily Real Estate News November 20, 20
The average rate for 15-year mortgages reached a new bottom this week, dipping from 4.40 percent to 4.32 percent—the lowest level since Freddie Mac began tracking rates in 1991.
Rates for 30-year mortgages approached the all-time low of 4.78 percent again last week, falling to 4.83 percent from an average of 4.91 percent a week ago.
ellesley College economist Karl Case says the Federal Reserve's efforts to purchase mortgage-backed securities from Fannie Mae and Freddie Mac is lowering rates on home loans.
Source: Boston Herald, Thomas Grillo (11/20/09)
The average rate for 15-year mortgages reached a new bottom this week, dipping from 4.40 percent to 4.32 percent—the lowest level since Freddie Mac began tracking rates in 1991.
Rates for 30-year mortgages approached the all-time low of 4.78 percent again last week, falling to 4.83 percent from an average of 4.91 percent a week ago.
ellesley College economist Karl Case says the Federal Reserve's efforts to purchase mortgage-backed securities from Fannie Mae and Freddie Mac is lowering rates on home loans.
Source: Boston Herald, Thomas Grillo (11/20/09)
Tuesday, November 17, 2009
BREAKING NEWS: Tax Credit Extension & Expansion is Approved!
The $8,000 First-Time Homebuyer Tax Credit is Extended!
· Now, qualified first-time home buyers would receive their $8000 tax credit if they sign a purchase contract by April 30, 2010 and close by June 30, 2010.
· The home purchased must be their primary residence
· Buyer cannot have owned a home during the past three years
· Tax credit is up to 10% of the home value (not to exceed $8,000)
· Annual income caps to qualify for the tax credit have increased ($125K for single filers / $225K for joint filers). Partial tax credit can be granted for incomes up to $145K for single filers / $245 for joint filers.
PLUS New $6,500 Tax Credit for Current Home Owners Purchasing a Primary Residence
· Eligible home buyers must have lived in their current home for 5 consecutive years of the past 8 years.
· The new home does not have to cost more than the old home.
· Eligible for homes with purchase agreements signed between November 6, 2009 and April 30, 2010, and close by June 30, 2010
· Annual income caps to qualify for the full tax credit ($125K for single filers / $225K for joint filers). Partial tax credit can be granted for incomes up to $145K for single filers / $245 for joint filers.
Changes Chart and FAQs from www.realtor.org (National Association of Realtors® website). Please consult your CPA or Attorney re: tax implications - this post is not intended as an offer of accounting, tax planning or legal advice.
· Now, qualified first-time home buyers would receive their $8000 tax credit if they sign a purchase contract by April 30, 2010 and close by June 30, 2010.
· The home purchased must be their primary residence
· Buyer cannot have owned a home during the past three years
· Tax credit is up to 10% of the home value (not to exceed $8,000)
· Annual income caps to qualify for the tax credit have increased ($125K for single filers / $225K for joint filers). Partial tax credit can be granted for incomes up to $145K for single filers / $245 for joint filers.
PLUS New $6,500 Tax Credit for Current Home Owners Purchasing a Primary Residence
· Eligible home buyers must have lived in their current home for 5 consecutive years of the past 8 years.
· The new home does not have to cost more than the old home.
· Eligible for homes with purchase agreements signed between November 6, 2009 and April 30, 2010, and close by June 30, 2010
· Annual income caps to qualify for the full tax credit ($125K for single filers / $225K for joint filers). Partial tax credit can be granted for incomes up to $145K for single filers / $245 for joint filers.
Changes Chart and FAQs from www.realtor.org (National Association of Realtors® website). Please consult your CPA or Attorney re: tax implications - this post is not intended as an offer of accounting, tax planning or legal advice.
HUD Publishes New Tax Credit, Condominium Guidelines
HUD Condominium Policy
http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/
HUD has published two mortgagee letters: ML 2009-46A and ML 2009-46B. ML 2006-46A provides temporary changes to FHA condominium policy until December 2010. The key points are:
* The "Spot Loan" Approval process will be eliminated but not until February 1, 2010 (case numbers assigned) to facilitate a transition. FHA believes that this change is not as significant as many think but was willing to delay implementation until February 2010.
* Concentration levels: 50% new construction; 100% existing construction. Existing construction is defined as a project must have been completed for at least a year, as evidenced by issuance of the final or temporary certificate of occupancy of the last unit conveyed.
* Owner occupancy: 50% (Vacant or tenant occupied REO may be removed from the calculation (numerator and denominator)
* Lenders may now submit approval requests under either processing option. Lenders that are eligible for the Direct Endorsement Lender Review and Approval Process (DELRAP) may have HUD process condominium approvals at the lender's discretion.
Tax Credit Details
As you know, the tax credit was signed last Friday and was effective the next day (day after enactment) for the key provisions. NAR provided us w/ the following information. The highlights are:
* Tax credit is extended until April 30th 2010
* Sales contract must be signed by April 30th. (60 days to close)
* Effective for loans closed November 7th
* Sales price increased to $800,000
* Higher income limits - $125,000/$225,000
* Repeat borrowers' eligible IMMEDIATELY:
* Have lived in previous home 5 of last 8 years
* Must purchase new home as principal residence
* Can buy smaller house - do not have to sell current home
Accordingly, someone who meets the criteria above and closes on the purchase of a home today is eligible for the $6,500 tax credit.
If you have any questions or would like to discuss this situation further, email Tim James at drtimjames@prusd.com. We are standing-by to help.
http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/
HUD has published two mortgagee letters: ML 2009-46A and ML 2009-46B. ML 2006-46A provides temporary changes to FHA condominium policy until December 2010. The key points are:
* The "Spot Loan" Approval process will be eliminated but not until February 1, 2010 (case numbers assigned) to facilitate a transition. FHA believes that this change is not as significant as many think but was willing to delay implementation until February 2010.
* Concentration levels: 50% new construction; 100% existing construction. Existing construction is defined as a project must have been completed for at least a year, as evidenced by issuance of the final or temporary certificate of occupancy of the last unit conveyed.
* Owner occupancy: 50% (Vacant or tenant occupied REO may be removed from the calculation (numerator and denominator)
* Lenders may now submit approval requests under either processing option. Lenders that are eligible for the Direct Endorsement Lender Review and Approval Process (DELRAP) may have HUD process condominium approvals at the lender's discretion.
Tax Credit Details
As you know, the tax credit was signed last Friday and was effective the next day (day after enactment) for the key provisions. NAR provided us w/ the following information. The highlights are:
* Tax credit is extended until April 30th 2010
* Sales contract must be signed by April 30th. (60 days to close)
* Effective for loans closed November 7th
* Sales price increased to $800,000
* Higher income limits - $125,000/$225,000
* Repeat borrowers' eligible IMMEDIATELY:
* Have lived in previous home 5 of last 8 years
* Must purchase new home as principal residence
* Can buy smaller house - do not have to sell current home
Accordingly, someone who meets the criteria above and closes on the purchase of a home today is eligible for the $6,500 tax credit.
If you have any questions or would like to discuss this situation further, email Tim James at drtimjames@prusd.com. We are standing-by to help.
Thursday, November 5, 2009
News Flash
From C.A.R.
Homeowners win big with extension and expansion of federal tax credit
The U.S. House of Representatives today voted 403 to 12 to extend and expand the home buyer tax credit.
The bill passed the U.S. Senate late yesterday and now will go to President Obama for his signature, where it is expected to be signed this week.
The tax credit will be extended through April 30, 2010, with a 60-day extension if a binding contract is in place prior to the deadline. First-time home buyers will continue to receive a tax credit of up to $8,000, while existing homeowners will receive a credit of up to $6,500. Existing homeowners will be eligible for the $6,500 if they have lived in their current residences for at least five years. The bill also will increase the qualifying income limits from $75,000 for single tax filers and $150,000 for joint filers to $125,000 and $225,000, respectively. The purchase price of the home is capped at $800,000.
Under additional provisions in the bill, taxpayers can claim the credit on purchases completed in 2010 on their 2009 income tax returns. The bill maintains the provision that home buyers do not have to repay the credit, provided the home remains their primary residence for 36 months after purchase, and waives this requirement for active duty military personnel who move due to a military order.
For weeks, the CALIFORNIA ASSOCIATION OF REALTORS (C.A.R and its members have urged Congress and the U.S. Senate to extend and expand this crucial piece of legislation.
Nationwide, more than 1.4 million first-time home buyers were given the opportunity to become homeowners as a result of the Federal Tax Credit for First-time Home Buyers.
According to C.A.R. research, nearly 40 percent of first-time home buyers surveyed said they would not have purchased a home without the federal tax credit, and approximately 70 percent said the tax credit was "the most important" or a "very important" factor in their decision to buy a home.
Homeowners win big with extension and expansion of federal tax credit
The U.S. House of Representatives today voted 403 to 12 to extend and expand the home buyer tax credit.
The bill passed the U.S. Senate late yesterday and now will go to President Obama for his signature, where it is expected to be signed this week.
The tax credit will be extended through April 30, 2010, with a 60-day extension if a binding contract is in place prior to the deadline. First-time home buyers will continue to receive a tax credit of up to $8,000, while existing homeowners will receive a credit of up to $6,500. Existing homeowners will be eligible for the $6,500 if they have lived in their current residences for at least five years. The bill also will increase the qualifying income limits from $75,000 for single tax filers and $150,000 for joint filers to $125,000 and $225,000, respectively. The purchase price of the home is capped at $800,000.
Under additional provisions in the bill, taxpayers can claim the credit on purchases completed in 2010 on their 2009 income tax returns. The bill maintains the provision that home buyers do not have to repay the credit, provided the home remains their primary residence for 36 months after purchase, and waives this requirement for active duty military personnel who move due to a military order.
For weeks, the CALIFORNIA ASSOCIATION OF REALTORS (C.A.R and its members have urged Congress and the U.S. Senate to extend and expand this crucial piece of legislation.
Nationwide, more than 1.4 million first-time home buyers were given the opportunity to become homeowners as a result of the Federal Tax Credit for First-time Home Buyers.
According to C.A.R. research, nearly 40 percent of first-time home buyers surveyed said they would not have purchased a home without the federal tax credit, and approximately 70 percent said the tax credit was "the most important" or a "very important" factor in their decision to buy a home.
Friday, October 30, 2009
NAR Lauds Extension of Higher Loan Limits
From Realtor Magazine Online, Daily Real Estate News October 30, 2009
The NATIONAL ASSOCIATION OF REALTORS® thanked Congress for speedy action in passing a congressional resolution yesterday that would extend the current higher Fannie Mae, Freddie Mac, and FHA loan limits through 2010. The present loan limits would expire at the end of 2009 and revert to previous lower limits.
“NAR commends both houses of Congress for their quick action in continuing these higher limits during a time for recovery in the housing market and national economy. The higher limits, along with the home buyer tax credit extension, are necessary to keep the markets moving at this critical time,” said NAR President Charles McMillan.
“Home sales have shown significant movement upwards in the past six months and reduced inventory in some segments of the housing market, but not in all. Home purchases in the middle-income and higher brackets have not moved much, and those markets must improve before we can experience a fully sustained housing recovery. These higher loan limits will help motivate qualified home buyers to purchase in those markets,” McMillan said.
The resolution would extend the present conventional loan limits for Fannie and Freddie through the 2010 calendar year at 125 percent of local median home sales prices, up to a maximum of $729,750 in high-cost areas. The floor for FHA is $271,050; the floor for Fannie Mae and Freddie Mac conforming loan limits is $417,000.
The resolution now goes to President Obama, and he is expected to sign it today or Saturday to avoid a government shutdown.
Source: NAR (10/30/2009)
The NATIONAL ASSOCIATION OF REALTORS® thanked Congress for speedy action in passing a congressional resolution yesterday that would extend the current higher Fannie Mae, Freddie Mac, and FHA loan limits through 2010. The present loan limits would expire at the end of 2009 and revert to previous lower limits.
“NAR commends both houses of Congress for their quick action in continuing these higher limits during a time for recovery in the housing market and national economy. The higher limits, along with the home buyer tax credit extension, are necessary to keep the markets moving at this critical time,” said NAR President Charles McMillan.
“Home sales have shown significant movement upwards in the past six months and reduced inventory in some segments of the housing market, but not in all. Home purchases in the middle-income and higher brackets have not moved much, and those markets must improve before we can experience a fully sustained housing recovery. These higher loan limits will help motivate qualified home buyers to purchase in those markets,” McMillan said.
The resolution would extend the present conventional loan limits for Fannie and Freddie through the 2010 calendar year at 125 percent of local median home sales prices, up to a maximum of $729,750 in high-cost areas. The floor for FHA is $271,050; the floor for Fannie Mae and Freddie Mac conforming loan limits is $417,000.
The resolution now goes to President Obama, and he is expected to sign it today or Saturday to avoid a government shutdown.
Source: NAR (10/30/2009)
Thursday, October 29, 2009
How to Tell Mortgage Rates Are Rising
From Realtor Magazine Online, 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)
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)
FHA 203(k) Loans on the Rise
From Realtor Magazine Online, Daily Real Estate News October 29, 2009
The FHA-backed 203(k) rehab loan is an increasingly popular option in today’s market because so many available properties – especially foreclosures – are in need of repair.
A streamlined 203(k) provides money to pay for improvements such as a new roof, appliances, furnace, energy-efficient windows, and cosmetic improvements like carpet, paint, and remodeled kitchens and baths.
The maximum loan available is $35,000. The buyer must put down 3.5 percent of the acquisition plus repair costs. At closing, the seller is paid and the remaining money goes into an escrow account to pay for repairs.
A licensed contractor must complete the work within six months. Some lenders allow the borrower to do minor cosmetic work like painting themselves.
Source: Minneapolis-St. Paul Star-Tribune, Lynn Underwood (10/25/2009)
The FHA-backed 203(k) rehab loan is an increasingly popular option in today’s market because so many available properties – especially foreclosures – are in need of repair.
A streamlined 203(k) provides money to pay for improvements such as a new roof, appliances, furnace, energy-efficient windows, and cosmetic improvements like carpet, paint, and remodeled kitchens and baths.
The maximum loan available is $35,000. The buyer must put down 3.5 percent of the acquisition plus repair costs. At closing, the seller is paid and the remaining money goes into an escrow account to pay for repairs.
A licensed contractor must complete the work within six months. Some lenders allow the borrower to do minor cosmetic work like painting themselves.
Source: Minneapolis-St. Paul Star-Tribune, Lynn Underwood (10/25/2009)
Friday, October 23, 2009
IRS Urges Stronger Controls on Tax Credit
From Realtor Magazine Online, Daily Real Estate News October 23, 2009
If Congress decides to extend and expand the first-time home buyer credit, the Internal Revenue Service wants stronger regulation that would force anyone who claims the credit to actually prove they closed on the property.
Linda Stiff, deputy commissioner of the Internal Revenue Service, told the House Ways and Means Oversight Subcommittee on Thursday that the IRS would support requiring anyone claiming the credit to file a copy of a settlement statement from the U.S. Department of Housing and Urban Development, known as the HUD-1 form, with their tax return.
IRS auditors testified that the agency believes it paid thousands of fraudulent tax credit claims, totaling at least $139 million since the first of the year.
Source: The Wall Street Journal, Martin Vaughan (10/22/2009)
If Congress decides to extend and expand the first-time home buyer credit, the Internal Revenue Service wants stronger regulation that would force anyone who claims the credit to actually prove they closed on the property.
Linda Stiff, deputy commissioner of the Internal Revenue Service, told the House Ways and Means Oversight Subcommittee on Thursday that the IRS would support requiring anyone claiming the credit to file a copy of a settlement statement from the U.S. Department of Housing and Urban Development, known as the HUD-1 form, with their tax return.
IRS auditors testified that the agency believes it paid thousands of fraudulent tax credit claims, totaling at least $139 million since the first of the year.
Source: The Wall Street Journal, Martin Vaughan (10/22/2009)
Big Rebound in Existing-Home Sales
From Realtor Magazine Online, Daily Real Estate News October 23, 2009
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
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
Tuesday, October 13, 2009
Economists Predict Housing Recovery
From Realtor Magazine Online, Daily Real Estate News October 13, 2009
Economic forecasters predict that 2010 will be the first year since 2005 for housing to contribute to the growth of the U.S. economy, according to a survey released by the National Association for Business Economics.
Home prices are expected to rise 2 percent next year, but forecasters don’t believe the increase in prices will discourage homebuyers.
More than 80 percent of economists surveyed by the NABE think the recession is over and recovery has begun, but they expect the expansion to be slow because unemployment persists.
Source: Associated Press, Mae Anderson (10/12/2009)
Economic forecasters predict that 2010 will be the first year since 2005 for housing to contribute to the growth of the U.S. economy, according to a survey released by the National Association for Business Economics.
Home prices are expected to rise 2 percent next year, but forecasters don’t believe the increase in prices will discourage homebuyers.
More than 80 percent of economists surveyed by the NABE think the recession is over and recovery has begun, but they expect the expansion to be slow because unemployment persists.
Source: Associated Press, Mae Anderson (10/12/2009)
Homeownership Still A Good Investment
From Realtor Magazine Online, Daily Real Estate News October 13, 2009
The American dream of homeownership is still a good bet, financial advisors say firmly.
Despite the downturn in the last couple of years, homes have still appreciated an average of 4 percent a year since World War II. Plus, it’s a leveraged investment; a 10 percent down payment yields a 1,000 percent return if the price of the home doubles.
There are also valuable intangibles. Owning a home provides independence, security, community, and a roof over the owner’s head. No one can say that about investing in stock.
Source: Associated Press, Dave Carpenter (10/12/2009)
The American dream of homeownership is still a good bet, financial advisors say firmly.
Despite the downturn in the last couple of years, homes have still appreciated an average of 4 percent a year since World War II. Plus, it’s a leveraged investment; a 10 percent down payment yields a 1,000 percent return if the price of the home doubles.
There are also valuable intangibles. Owning a home provides independence, security, community, and a roof over the owner’s head. No one can say that about investing in stock.
Source: Associated Press, Dave Carpenter (10/12/2009)
Global Housing Prices Increase
From Realtor Magazine Online, Daily Real Estate News October 13, 2009
Home prices are recovering all around the world, according to the quarterly Knight Frank Global House Price Index.
The index showed housing prices rising in about 50 percent of countries, with the strongest recovery in the second quarter in the countries of Norway, Finland, and Sweden. Australia, Israel, and the Netherlands are also up.
Most of the increases are driven by historically low interest rates and buyer tax incentives. For instance, Sweden’s central bank cut the prime interest rate to 0.25 percent, so banks are offering home loans at 1.5 percent.
Source: BusinessWeek.com, Leona Liu (10/13/2009)
Home prices are recovering all around the world, according to the quarterly Knight Frank Global House Price Index.
The index showed housing prices rising in about 50 percent of countries, with the strongest recovery in the second quarter in the countries of Norway, Finland, and Sweden. Australia, Israel, and the Netherlands are also up.
Most of the increases are driven by historically low interest rates and buyer tax incentives. For instance, Sweden’s central bank cut the prime interest rate to 0.25 percent, so banks are offering home loans at 1.5 percent.
Source: BusinessWeek.com, Leona Liu (10/13/2009)
Monday, October 12, 2009
San Diego & Orange County Market Updates Available
The latest monthly update reports are now available. Simply email me at drtimjames@prusd.com to request your copies.
Tim
Tim
Monday, September 14, 2009
7 Tips for First-Time Home Buyers
From Realtor Magazine Online, Daily Real Estate News September 14, 2009
A year after the financial collapse of 2008, the housing market is very different than it was before the foreclosure crisis.
Here are seven bits of wisdom from economists and financial planners for anyone contemplating a home purchase today:
* Old-fashioned basics are more important than ever. The safest way to purchase a home is to put down 20 percent on a fixed-rate, 30-year (or less) mortgage.
* Don’t become overconfident about income growth. Even though buyers in their 20s and 30s will likely see their incomes grow more quickly than previous generations, it is important to act sensibly when borrowing.
* Anyone contemplating adding children to the family should calculate whether they could live on one income because having both halves of a couple work may turn out to be impractical.
* Include a maintenance budget. Even new homes need upkeep and repairs.
* Buyers who can't afford their dream home now should opt for a starter home where they can save money each month for what they really want.
* Consider a property that can be expanded and improved down the road when money is available.
* No two buyers are the same, but they should all feel confident with the loan they enter into, no matter the size of the mortgage.
Source: The New York Times, Ron Lieber (09/12/2009)
A year after the financial collapse of 2008, the housing market is very different than it was before the foreclosure crisis.
Here are seven bits of wisdom from economists and financial planners for anyone contemplating a home purchase today:
* Old-fashioned basics are more important than ever. The safest way to purchase a home is to put down 20 percent on a fixed-rate, 30-year (or less) mortgage.
* Don’t become overconfident about income growth. Even though buyers in their 20s and 30s will likely see their incomes grow more quickly than previous generations, it is important to act sensibly when borrowing.
* Anyone contemplating adding children to the family should calculate whether they could live on one income because having both halves of a couple work may turn out to be impractical.
* Include a maintenance budget. Even new homes need upkeep and repairs.
* Buyers who can't afford their dream home now should opt for a starter home where they can save money each month for what they really want.
* Consider a property that can be expanded and improved down the road when money is available.
* No two buyers are the same, but they should all feel confident with the loan they enter into, no matter the size of the mortgage.
Source: The New York Times, Ron Lieber (09/12/2009)
Wednesday, September 2, 2009
FHA Is Having Busiest Year Ever
From Realtor Magazine Online, Daily Real Estate News September 2, 2009
About 25 percent of all new mortgages are backed by the Federal Housing Administration in what will probably be the busiest year yet for the federal agency.
Applications for FHA mortgages rose 50 percent from last October through mid-August 2009 and approvals for purchases, refinancings, and reverse mortgages rose 70 percent to 1.67 million.
FHA loans "are one of the most important sources in this market," says Mark Zandi of Moody's Economy.com. "Without FHA, the housing slide would be much more severe. We wouldn't be talking about a recovery now. We'd still be talking about a crash."
Some analysts are concerned about the risk the FHA has taken on, but others point out that borrowers with FHA-insured loans now have an average credit score of 690, compared to 630 two years ago. Borrowers with a credit score below 500 must come up with a 10 percent down payment.
Source: USA Today, Stephanie Armour (09/02/2009)
About 25 percent of all new mortgages are backed by the Federal Housing Administration in what will probably be the busiest year yet for the federal agency.
Applications for FHA mortgages rose 50 percent from last October through mid-August 2009 and approvals for purchases, refinancings, and reverse mortgages rose 70 percent to 1.67 million.
FHA loans "are one of the most important sources in this market," says Mark Zandi of Moody's Economy.com. "Without FHA, the housing slide would be much more severe. We wouldn't be talking about a recovery now. We'd still be talking about a crash."
Some analysts are concerned about the risk the FHA has taken on, but others point out that borrowers with FHA-insured loans now have an average credit score of 690, compared to 630 two years ago. Borrowers with a credit score below 500 must come up with a 10 percent down payment.
Source: USA Today, Stephanie Armour (09/02/2009)
Tuesday, September 1, 2009
Priciest Zip Codes Down, Not Out
From Realtor Magazine Online, Daily Real Estate News September 1, 2009
This year, home prices fell in the nation’s most exclusive neighborhoods.
In Alpine, N.J., which tops Forbes’ magazine’s list of America’s 500 Most Expensive Zip Codes, home prices declined 23 percent in the last year. Overall, asking prices in the zip codes on Forbes’ list dropped an average of 7 percent. Prices are only rising in a few areas. For instance, on New York’s Upper West Side, zip code 10023, prices rose 4 percent in the last year.
Forbes’ list was compiled by Altos Research, a real estate data collection and research firm that tracks about 90 percent of all real estate transactions.
Based on Altos’ figures, here are the country’s 10 most-expensive Zip codes and the median home prices there:
1. 07620, Alpine, N.J., Median Home Price: $4,139,041
2. 94027, Atherton, Calif.: $3,849,133
3. 10014, New York, N.Y.: $3,521,514
4. 91008, Duarte, Calif.: $3,444,773
5. 90210, Beverly Hills, Calif.: $3,367,167
6. 92067, Rancho Santa Fe, Calif.: $3,362,493
7. 93108, Santa Barbara, Calif.: $3,284,652
8. 94024, Los Altos Hills, Calif.: median unavailable
9. 10065, New York, N.Y.: $3,176,534
10. 07926, Brookside, N.J.: $3,121,115
Source: Forbes, Francesca Levy (08/27/2009)
This year, home prices fell in the nation’s most exclusive neighborhoods.
In Alpine, N.J., which tops Forbes’ magazine’s list of America’s 500 Most Expensive Zip Codes, home prices declined 23 percent in the last year. Overall, asking prices in the zip codes on Forbes’ list dropped an average of 7 percent. Prices are only rising in a few areas. For instance, on New York’s Upper West Side, zip code 10023, prices rose 4 percent in the last year.
Forbes’ list was compiled by Altos Research, a real estate data collection and research firm that tracks about 90 percent of all real estate transactions.
Based on Altos’ figures, here are the country’s 10 most-expensive Zip codes and the median home prices there:
1. 07620, Alpine, N.J., Median Home Price: $4,139,041
2. 94027, Atherton, Calif.: $3,849,133
3. 10014, New York, N.Y.: $3,521,514
4. 91008, Duarte, Calif.: $3,444,773
5. 90210, Beverly Hills, Calif.: $3,367,167
6. 92067, Rancho Santa Fe, Calif.: $3,362,493
7. 93108, Santa Barbara, Calif.: $3,284,652
8. 94024, Los Altos Hills, Calif.: median unavailable
9. 10065, New York, N.Y.: $3,176,534
10. 07926, Brookside, N.J.: $3,121,115
Source: Forbes, Francesca Levy (08/27/2009)
Pending Home Sales on a Record Roll
From Realtor Magazine Online, Daily Real Estate News September 1, 2009
Contract activity for pending home sales has risen for six straight months, a pattern not seen in the history of the index since it began in 2001, according to the National Association of Realtors®.
The Pending Home Sales Index, a forward-looking indicator based on contracts signed in July, increased 3.2 percent to 97.6 from a reading of 94.6 in June, and is 12.0 percent higher than July 2008 when it was 87.1. The index is at the highest level since June 2007, when it was 100.7.
Affordability at Record HighLawrence Yun, NAR chief economist, said the housing market momentum has clearly turned for the better. “The recovery is broad-based across many parts of the country. Housing affordability has been at record highs this year with the added stimulus of a first-time buyer tax credit,” he said.
“Other buyers are taking advantage of low home values before prices turn higher. Nationally, the typical mortgage payment now takes less than 25 percent of a middle-income family’s monthly income to buy a median priced home, with payment percentages so far in 2009 being the lowest on record dating back to 1970. As long as home buyers stay within their budget, mortgage payments will be very manageable,” Yun said.
First-Time BuyersNAR estimates that about 1.8 to 2.0 million first-time buyers will take advantage of the $8,000 tax credit this year, with approximately 350,000 additional sales that would not have taken place without the credit. Buyers have little time to act because they must complete the transaction by November 30 to qualify for the credit. Unless extended, contracts signed but not completed by that date will not be eligible – it is taking approximately two months to complete home sales in the current market.
By Region
* Northeast: The Pending Home Sales Index declined 3.0 percent to 78.8 in July but is 4.7 percent higher than July 2008.
* Midwest: The index slipped 2.0 percent to 88.1 but is 8.1 percent above a year ago.
* South: Pending home sales activity rose 3.1 percent to an index of 103.8 in July and is 12.0 percent above July 2008.
* West: The index jumped 12.1 percent to 112.5 and is 20.0 percent above a year ago.
"Keep the Momentum Going"
NAR President Charles McMillan said Congress needs to keep the momentum going. “Even with a good recovery taking place, the market is not yet back to normal. With a gradual absorption of inventory, we are on the cusp of a general stabilization in home prices,” he said.
“To ensure that housing has a broad stimulus to the overall economy and stays on sound footing, we’re encouraging Congress to extend the tax credit into 2010, and to expand it to all buyers of primary residences. The faster we stabilize home prices, the fewer families will face foreclosure and the quicker credit can be extended to other sectors of the economy,” McMillan said.
NAR’s Housing Affordability Index stood at 158.5 in July, below the peak set in April but is still 36.0 percentage points higher than a year ago. The HAI is a broad measure of housing affordability using consistent values and assumptions over time, which examines the relationship between home prices, mortgage interest rates, and family income.
Yun expects existing-home sales to rise through the fourth quarter. “Unless the tax credit is extended, no one should be surprised to see home sales drop in the first quarter of next year,” he said. “However, the fundamentals of the housing market and the economy are trending up, and we expect home sales to generally pick up in the second quarter of 2010. The buyer psychology may be shifting from, ‘Why buy now when I can purchase later?’ to ‘I don’t want to miss out on a recovery.’”
Source: NAR
Contract activity for pending home sales has risen for six straight months, a pattern not seen in the history of the index since it began in 2001, according to the National Association of Realtors®.
The Pending Home Sales Index, a forward-looking indicator based on contracts signed in July, increased 3.2 percent to 97.6 from a reading of 94.6 in June, and is 12.0 percent higher than July 2008 when it was 87.1. The index is at the highest level since June 2007, when it was 100.7.
Affordability at Record HighLawrence Yun, NAR chief economist, said the housing market momentum has clearly turned for the better. “The recovery is broad-based across many parts of the country. Housing affordability has been at record highs this year with the added stimulus of a first-time buyer tax credit,” he said.
“Other buyers are taking advantage of low home values before prices turn higher. Nationally, the typical mortgage payment now takes less than 25 percent of a middle-income family’s monthly income to buy a median priced home, with payment percentages so far in 2009 being the lowest on record dating back to 1970. As long as home buyers stay within their budget, mortgage payments will be very manageable,” Yun said.
First-Time BuyersNAR estimates that about 1.8 to 2.0 million first-time buyers will take advantage of the $8,000 tax credit this year, with approximately 350,000 additional sales that would not have taken place without the credit. Buyers have little time to act because they must complete the transaction by November 30 to qualify for the credit. Unless extended, contracts signed but not completed by that date will not be eligible – it is taking approximately two months to complete home sales in the current market.
By Region
* Northeast: The Pending Home Sales Index declined 3.0 percent to 78.8 in July but is 4.7 percent higher than July 2008.
* Midwest: The index slipped 2.0 percent to 88.1 but is 8.1 percent above a year ago.
* South: Pending home sales activity rose 3.1 percent to an index of 103.8 in July and is 12.0 percent above July 2008.
* West: The index jumped 12.1 percent to 112.5 and is 20.0 percent above a year ago.
"Keep the Momentum Going"
NAR President Charles McMillan said Congress needs to keep the momentum going. “Even with a good recovery taking place, the market is not yet back to normal. With a gradual absorption of inventory, we are on the cusp of a general stabilization in home prices,” he said.
“To ensure that housing has a broad stimulus to the overall economy and stays on sound footing, we’re encouraging Congress to extend the tax credit into 2010, and to expand it to all buyers of primary residences. The faster we stabilize home prices, the fewer families will face foreclosure and the quicker credit can be extended to other sectors of the economy,” McMillan said.
NAR’s Housing Affordability Index stood at 158.5 in July, below the peak set in April but is still 36.0 percentage points higher than a year ago. The HAI is a broad measure of housing affordability using consistent values and assumptions over time, which examines the relationship between home prices, mortgage interest rates, and family income.
Yun expects existing-home sales to rise through the fourth quarter. “Unless the tax credit is extended, no one should be surprised to see home sales drop in the first quarter of next year,” he said. “However, the fundamentals of the housing market and the economy are trending up, and we expect home sales to generally pick up in the second quarter of 2010. The buyer psychology may be shifting from, ‘Why buy now when I can purchase later?’ to ‘I don’t want to miss out on a recovery.’”
Source: NAR
Monday, August 31, 2009
5 Steps to Financing a Sale
From Realtor Magazine Online, Daily Real Estate News August 31, 2009
Selling a home and helping the buyer finance may be a good option to getting a house sold, experts say. Yet it is imperative that the seller thoroughly investigate the buyer’s finances before agreeing to the deal.
Here are some important initial steps to take:
* Investigate the buyer by asking him to fill out a Uniform Residential Loan Application.
* Get bankruptcy details by checking out the case through Public Assess to Court Electronic Records (PACER), a service of the U.S. Judiciary.
* Pull the buyer’s credit report and eviction and criminal history via the American Apartment Owners Association Web site.
* Insist on 20 percent down or offer a contract for deed, which only confers full ownership rights after the home is paid off.
* Consider offering a lease-option with part of the payment going toward the purchase price, which gives the buyer time to repair his credit before seeking conventional financing.
Source: The Wall Street Journal, June Fletcher (08/28/2009)
Selling a home and helping the buyer finance may be a good option to getting a house sold, experts say. Yet it is imperative that the seller thoroughly investigate the buyer’s finances before agreeing to the deal.
Here are some important initial steps to take:
* Investigate the buyer by asking him to fill out a Uniform Residential Loan Application.
* Get bankruptcy details by checking out the case through Public Assess to Court Electronic Records (PACER), a service of the U.S. Judiciary.
* Pull the buyer’s credit report and eviction and criminal history via the American Apartment Owners Association Web site.
* Insist on 20 percent down or offer a contract for deed, which only confers full ownership rights after the home is paid off.
* Consider offering a lease-option with part of the payment going toward the purchase price, which gives the buyer time to repair his credit before seeking conventional financing.
Source: The Wall Street Journal, June Fletcher (08/28/2009)
Friday, August 28, 2009
Mortgage Rates Still Near Record Lows
From Realtor Magazine Online, Daily Real Estate News August 28, 2009
Long-term mortgage rates remain near record lows, despite rising slightly this week. Freddie Mac reported that average interest on a 30-year fixed loan was 5.14 percent, up from 5.12 percent a week ago.
Rates for 15-year home loans, meanwhile, rose to 4.58 percent from 4.56 percent last week.
Source: Pittsburgh Post-Gazette (08/28/09)
Long-term mortgage rates remain near record lows, despite rising slightly this week. Freddie Mac reported that average interest on a 30-year fixed loan was 5.14 percent, up from 5.12 percent a week ago.
Rates for 15-year home loans, meanwhile, rose to 4.58 percent from 4.56 percent last week.
Source: Pittsburgh Post-Gazette (08/28/09)
Option ARMs Put Recovery at Risk
From Realtor Magazine Online, Daily Real Estate News August 28, 2009
Option ARMs, which accounted for $750 billion in mortgages issued between 2004 and 2007, according to Inside Mortgage Finance, are at serious risk with at least 50 percent already in default.
Resets on option ARMS have doubled the payments for many holders.
“Everyone’s been focused on subprime, but we’re more concerned about this,” says Todd Jadlos, managing director of LPS Applied Analytics, which analyzes data for the financial industry. “By the time subprime defaults had increased 200 percent, in June and July of 2007, option ARMs had gone up 400 percent. People just didn’t notice because the overall numbers weren’t as high.”
Lenders have stopped offering option ARMS, but there are about 600,000 held by borrowers, three-quarters of whom are paying interest only. When the cap is reached – for most after they have held the loan for five years – they’ll face drastic increases.
Barclays Capital estimates that banks will lose $112 billion on option ARMs. Some banks are aggressively refinancing these loans, Barclays says.
Source: The New York Times, John Leland (08/26/2009)
Option ARMs, which accounted for $750 billion in mortgages issued between 2004 and 2007, according to Inside Mortgage Finance, are at serious risk with at least 50 percent already in default.
Resets on option ARMS have doubled the payments for many holders.
“Everyone’s been focused on subprime, but we’re more concerned about this,” says Todd Jadlos, managing director of LPS Applied Analytics, which analyzes data for the financial industry. “By the time subprime defaults had increased 200 percent, in June and July of 2007, option ARMs had gone up 400 percent. People just didn’t notice because the overall numbers weren’t as high.”
Lenders have stopped offering option ARMS, but there are about 600,000 held by borrowers, three-quarters of whom are paying interest only. When the cap is reached – for most after they have held the loan for five years – they’ll face drastic increases.
Barclays Capital estimates that banks will lose $112 billion on option ARMs. Some banks are aggressively refinancing these loans, Barclays says.
Source: The New York Times, John Leland (08/26/2009)
Thursday, August 27, 2009
Survey: People Moving for Happier Reasons
From Realtor Magazine Online, Daily Real Estate News August 27, 2009
People have gone back to moving in hopes it will improve their lives rather than moving to escape foreclosure or other aspects of the economic crisis, according to a survey of recent movers released this month by Relocation.com.
In the June survey, nearly 42 percent said they were in the process of buying a home or planning to buy one. Poll participants said their reason for moving was:
* To live in a bigger or better home (26 percent).
* To live in a better neighborhood or area (24 percent).
* To be closer to family or friends (12 percent).
* To live in an area with a lower cost of living (9 percent).
* To accommodate a change in marital status (6 percent).
Moving because of school, job loss, retirement, or foreclosure each generated 3 percent or less.
Responses to this survey are substantially different from the responses to a similar survey in March, when 41 percent said the recession was, at least partially, driving their move.
Source: Relocation.com (08/06/2009)
People have gone back to moving in hopes it will improve their lives rather than moving to escape foreclosure or other aspects of the economic crisis, according to a survey of recent movers released this month by Relocation.com.
In the June survey, nearly 42 percent said they were in the process of buying a home or planning to buy one. Poll participants said their reason for moving was:
* To live in a bigger or better home (26 percent).
* To live in a better neighborhood or area (24 percent).
* To be closer to family or friends (12 percent).
* To live in an area with a lower cost of living (9 percent).
* To accommodate a change in marital status (6 percent).
Moving because of school, job loss, retirement, or foreclosure each generated 3 percent or less.
Responses to this survey are substantially different from the responses to a similar survey in March, when 41 percent said the recession was, at least partially, driving their move.
Source: Relocation.com (08/06/2009)
Now's the Time to Buy in Real Estate
From Realtor Magazine Online, Daily Real Estate News August 27, 2009
Investors are returning as the real estate market recovers.
BusinessWeek’s real estate guru Marc Roth points out these opportunities, which he says make sense if investors are willing to look over the property carefully and ask tough questions.
Options they should consider include:
* Buying a single-family house. This could be a first home or a dream home or a home to rent out.
* Buying a multi-family investment property.
* Snapping up a vacation property. There are deep discounts to be found in high-end resort areas.
* Investing in a Real Estate Investment Trust. REITs were hit hard in the downturn, but many are on their way back.
Source: BusinessWeek, Marc Roth (08/26/2009)
Investors are returning as the real estate market recovers.
BusinessWeek’s real estate guru Marc Roth points out these opportunities, which he says make sense if investors are willing to look over the property carefully and ask tough questions.
Options they should consider include:
* Buying a single-family house. This could be a first home or a dream home or a home to rent out.
* Buying a multi-family investment property.
* Snapping up a vacation property. There are deep discounts to be found in high-end resort areas.
* Investing in a Real Estate Investment Trust. REITs were hit hard in the downturn, but many are on their way back.
Source: BusinessWeek, Marc Roth (08/26/2009)
Wednesday, August 26, 2009
Real Estate Pros See Prices Stabilizing
From Realtor Magazine Online, Daily Real Estate News August 26, 2009
Real estate professionals say that real estate prices will remain the same for the next six months, according to HomeGain’s quarterly survey of professional opinions.
More than 69 percent of the 1,100 practitioners surveyed by the real estate information service said they were convinced that home prices have hit bottom, down from 71 percent who held that opinion in the second quarter survey.
The survey also shows home sellers and buyers don’t see home values in the same way, a troublesome disconnect for many practitioners.
* 81 percent said the values of their clients’ homes have decreased in the last year.
* 75 percent said their clients believe their homes are worth more than the listing prices they recommended.
* 85 percent said their buyer clients were still convinced that homes for sale are overpriced.
* 71 percent said they persuaded their clients to list a property at less than what the sellers initially believed the property to be worth.
Source: HomeGain Real Estate Blog (08/20/2009)
Real estate professionals say that real estate prices will remain the same for the next six months, according to HomeGain’s quarterly survey of professional opinions.
More than 69 percent of the 1,100 practitioners surveyed by the real estate information service said they were convinced that home prices have hit bottom, down from 71 percent who held that opinion in the second quarter survey.
The survey also shows home sellers and buyers don’t see home values in the same way, a troublesome disconnect for many practitioners.
* 81 percent said the values of their clients’ homes have decreased in the last year.
* 75 percent said their clients believe their homes are worth more than the listing prices they recommended.
* 85 percent said their buyer clients were still convinced that homes for sale are overpriced.
* 71 percent said they persuaded their clients to list a property at less than what the sellers initially believed the property to be worth.
Source: HomeGain Real Estate Blog (08/20/2009)
Loan Volume Rises Again, Driven by Refinances
From Realtor Magazine Online, Daily Real Estate News August 26, 2009
Loan application volume rose again last week, increasing 7.5 percent on a seasonally adjusted basis compared to the previous week, the Mortgage Bankers Association reported.
On an unadjusted basis, the index increased 6.3 percent and was up 34.1 percent compared with the same week a year ago. This is the fourth consecutive week mortgage application volume has risen.
The increase was driven by refinances, with the refinance index increasing 12.7 percent from the previous week. The purchase index rose 1 percent with nearly all the increase coming from applications for government loans.
Mortgage rates rose slightly but the increase didn’t seem to deter applicants:
* 30-year fixed-rate mortgages increased to 5.24 percent from 5.15 percent.
* 15-year fixed-rate mortgages increased to 4.58 percent from 4.52 percent.
* 1-year ARMs increased to 6.74 percent from 6.66 percent.
Source: Mortgage Bankers Association (08/26/2009)
Loan application volume rose again last week, increasing 7.5 percent on a seasonally adjusted basis compared to the previous week, the Mortgage Bankers Association reported.
On an unadjusted basis, the index increased 6.3 percent and was up 34.1 percent compared with the same week a year ago. This is the fourth consecutive week mortgage application volume has risen.
The increase was driven by refinances, with the refinance index increasing 12.7 percent from the previous week. The purchase index rose 1 percent with nearly all the increase coming from applications for government loans.
Mortgage rates rose slightly but the increase didn’t seem to deter applicants:
* 30-year fixed-rate mortgages increased to 5.24 percent from 5.15 percent.
* 15-year fixed-rate mortgages increased to 4.58 percent from 4.52 percent.
* 1-year ARMs increased to 6.74 percent from 6.66 percent.
Source: Mortgage Bankers Association (08/26/2009)
New Home Sales Surge 9.6% in July
From Realtor Magazine Online, Daily Real Estate News August 26, 2009
New U.S. home sales surged 9.6 percent in July, rising for the fourth straight monthand beating expectations as the housing market shows continuing signs of rebounding from its historic downturn.
The Commerce Department said Wednesday that sales rose to a seasonally adjusted annual rate of 433,000 from an upwardly revisedJune rate of 395,000. Sales are now up 32 percent from the bottom in January, but off 69 percent from the frenzied peak four years ago.
Last month's sales pace was the strongest since September and exceeded the forecasts of economists surveyed by Thomson Reuters, who expected a pace of 390,000 units. The last time sales rose so dramatically was in February 2005.
The median sales price of $210,100, however, was still down 11.5 percent from $237,300 compared to the same time a year ago.
There were 271,000 new homes for sale at the end of July, down more than 3 percent from May. At the current salespace, that represents 7.5 months of supply, the lowest since April 2007. The decline means builders have scaled back on construction to the point where supply and demand are coming into balance.
Source: Associated Press, Alan Zibel (08/26/09)
New U.S. home sales surged 9.6 percent in July, rising for the fourth straight monthand beating expectations as the housing market shows continuing signs of rebounding from its historic downturn.
The Commerce Department said Wednesday that sales rose to a seasonally adjusted annual rate of 433,000 from an upwardly revisedJune rate of 395,000. Sales are now up 32 percent from the bottom in January, but off 69 percent from the frenzied peak four years ago.
Last month's sales pace was the strongest since September and exceeded the forecasts of economists surveyed by Thomson Reuters, who expected a pace of 390,000 units. The last time sales rose so dramatically was in February 2005.
The median sales price of $210,100, however, was still down 11.5 percent from $237,300 compared to the same time a year ago.
There were 271,000 new homes for sale at the end of July, down more than 3 percent from May. At the current salespace, that represents 7.5 months of supply, the lowest since April 2007. The decline means builders have scaled back on construction to the point where supply and demand are coming into balance.
Source: Associated Press, Alan Zibel (08/26/09)
Friday, August 21, 2009
Strong Gain in Existing-Home Sales
From Realtor Magazine Online, Daily Real Estate News August 21, 2009
For the first time in five years, existing-home sales have increased for four months in a row, according to the National Association of REALTORS®.
Existing-home sales – including single-family, townhomes, condominiums and co-ops – rose 7.2 percent to a seasonally adjusted annual rate of 5.24 million units in July from a level of 4.89 million in June. Sales are 5.0 percent above the 4.99 million-unit pace in July 2008. The last time sales rose for four consecutive months was in June 2004, and the last time sales were higher than a year earlier was November 2005.
Largest Gain in a Decade
Lawrence Yun, NAR chief economist, said he is encouraged. “The housing market has decisively turned for the better. A combination of first-time buyers taking advantage of the housing stimulus tax credit and greatly improved affordability conditions are contributing to higher sales,” he said.
The monthly sales gain was the largest on record for the total existing-home sales series dating back to 1999.
“Because price-to-income ratios have fallen below historical trends, there are more all-cash offers. In some recovering markets like San Diego, Las Vegas, Phoenix, and Orlando, the demand for foreclosed and lower-priced homes has spiked, and a lack of inventory is becoming a common complaint,” Yun said.
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to 5.22 percent in July from 5.42 percent in June. The rate was 6.43 percent in July 2008.
"First-Time Buyer Tax Credit is Working"
An NAR practitioner survey showed first-time buyers purchased 30 percent of homes in July, and that distressed homes accounted for 31 percent of transactions. NAR President Charles McMillan said the first-time buyer tax credit is working. “In addition to first-time buyers, we’re also seeing increased activity by repeat buyers. While many entry-level buyers are focused on the discounted prices of distressed homes, they’re also freeing some existing owners to sell and make a move,” he said.
“Realtors are the best resource for consumers in these changing market conditions because the transaction process has become more complex. Since it’s now taking longer to complete a home sale, first-time buyers who want to take advantage of the $8,000 tax credit should try to make contract offers by the end of September,” McMillan said. “Otherwise, they may miss the November 30 closing deadline.”
Inventory Up, Prices Down
Total housing inventory at the end of July rose 7.3 percent to 4.09 million existing homes available for sale, which represents a 9.4-month supply at the current sales pace, which was unchanged from June because of the strong sales gain. Raw inventory totals are 10.6 percent lower than a year ago when the number of unsold homes was at a record.
The national median existing-home price for all housing types was $178,400 in July, which is 15.1 percent lower than July 2008. Distressed properties continue to weigh down the median price because they typically sell for 15 to 20 percent less than traditional homes.
Single-Family Homes and Condos
Single-family home sales increased 6.5 percent to a seasonally adjusted annual rate of 4.61 million in July from a pace of 4.33 million in June, and are 5.0 percent higher than the 4.39 million-unit level in July 2008. The median existing single-family home price was $178,300 in July, which is 14.6 percent below a year ago.
Existing condominium and co-op sales jumped 12.5 percent to a seasonally adjusted annual rate of 630,000 units in July from 560,000 in June, and are 5.9 percent above the 595,000-unit level a year ago. The median existing condo price was $178,800 in July, down 18.9 percent from July 2008.
By Region:
* The Northeast surged 13.4 percent to an annual pace of 930,000 in July, and are 3.3 percent higher than July 2008. The median price in the Northeast was $236,700, down 15.0 percent from a year ago.
* Existing-home sales in the Midwest jumped 10.9 percent in July to a level of 1.22 million and are 8.0 percent above a year ago. The median price in the Midwest was $157,200, which is 5.9 percent less than July 2008.
* In the South, existing-home sales rose 7.1 percent to an annual pace of 1.95 million in July and are 5.4 percent higher than July 2008. The median price in the South was $164,500, down 7.1 percent from a year ago.
* Existing-home sales in the West slipped 1.7 percent to an annual rate of 1.13 million in July, but are 1.8 percent above a year ago. The median price in the West was $202,300, which is 28.0 percent below July 2008.
Source: NAR
For the first time in five years, existing-home sales have increased for four months in a row, according to the National Association of REALTORS®.
Existing-home sales – including single-family, townhomes, condominiums and co-ops – rose 7.2 percent to a seasonally adjusted annual rate of 5.24 million units in July from a level of 4.89 million in June. Sales are 5.0 percent above the 4.99 million-unit pace in July 2008. The last time sales rose for four consecutive months was in June 2004, and the last time sales were higher than a year earlier was November 2005.
Largest Gain in a Decade
Lawrence Yun, NAR chief economist, said he is encouraged. “The housing market has decisively turned for the better. A combination of first-time buyers taking advantage of the housing stimulus tax credit and greatly improved affordability conditions are contributing to higher sales,” he said.
The monthly sales gain was the largest on record for the total existing-home sales series dating back to 1999.
“Because price-to-income ratios have fallen below historical trends, there are more all-cash offers. In some recovering markets like San Diego, Las Vegas, Phoenix, and Orlando, the demand for foreclosed and lower-priced homes has spiked, and a lack of inventory is becoming a common complaint,” Yun said.
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to 5.22 percent in July from 5.42 percent in June. The rate was 6.43 percent in July 2008.
"First-Time Buyer Tax Credit is Working"
An NAR practitioner survey showed first-time buyers purchased 30 percent of homes in July, and that distressed homes accounted for 31 percent of transactions. NAR President Charles McMillan said the first-time buyer tax credit is working. “In addition to first-time buyers, we’re also seeing increased activity by repeat buyers. While many entry-level buyers are focused on the discounted prices of distressed homes, they’re also freeing some existing owners to sell and make a move,” he said.
“Realtors are the best resource for consumers in these changing market conditions because the transaction process has become more complex. Since it’s now taking longer to complete a home sale, first-time buyers who want to take advantage of the $8,000 tax credit should try to make contract offers by the end of September,” McMillan said. “Otherwise, they may miss the November 30 closing deadline.”
Inventory Up, Prices Down
Total housing inventory at the end of July rose 7.3 percent to 4.09 million existing homes available for sale, which represents a 9.4-month supply at the current sales pace, which was unchanged from June because of the strong sales gain. Raw inventory totals are 10.6 percent lower than a year ago when the number of unsold homes was at a record.
The national median existing-home price for all housing types was $178,400 in July, which is 15.1 percent lower than July 2008. Distressed properties continue to weigh down the median price because they typically sell for 15 to 20 percent less than traditional homes.
Single-Family Homes and Condos
Single-family home sales increased 6.5 percent to a seasonally adjusted annual rate of 4.61 million in July from a pace of 4.33 million in June, and are 5.0 percent higher than the 4.39 million-unit level in July 2008. The median existing single-family home price was $178,300 in July, which is 14.6 percent below a year ago.
Existing condominium and co-op sales jumped 12.5 percent to a seasonally adjusted annual rate of 630,000 units in July from 560,000 in June, and are 5.9 percent above the 595,000-unit level a year ago. The median existing condo price was $178,800 in July, down 18.9 percent from July 2008.
By Region:
* The Northeast surged 13.4 percent to an annual pace of 930,000 in July, and are 3.3 percent higher than July 2008. The median price in the Northeast was $236,700, down 15.0 percent from a year ago.
* Existing-home sales in the Midwest jumped 10.9 percent in July to a level of 1.22 million and are 8.0 percent above a year ago. The median price in the Midwest was $157,200, which is 5.9 percent less than July 2008.
* In the South, existing-home sales rose 7.1 percent to an annual pace of 1.95 million in July and are 5.4 percent higher than July 2008. The median price in the South was $164,500, down 7.1 percent from a year ago.
* Existing-home sales in the West slipped 1.7 percent to an annual rate of 1.13 million in July, but are 1.8 percent above a year ago. The median price in the West was $202,300, which is 28.0 percent below July 2008.
Source: NAR
What Has the Housing Crash Cost Americans?
From Realtor Magazine Online, Daily Real Estate News August 21, 2009
How much real wealth have Americans lost so far in the real estate crash?
The Federal Reserve estimates that the total market value of U.S. homes fell 18 percent from $21.9 trillion to $17.9 trillion or about $13,000 per person from the end of 2006 through March 31, 2009.
The Fed also estimates that homeowner’s equity has declined 40 percent from the peak and now accounts for just 41.4 percent of real estate values. By comparison, after the last slump in the 1990s, home equity levels remained in the high 50s.
This collapse in equity makes it difficult for potential buyers to sell their homes and trade up, which many experts say will weigh heavily on the housing recovery.
Source: The Wall Street Journal, Brett Arends (08/20/2009)
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How much real wealth have Americans lost so far in the real estate crash?
The Federal Reserve estimates that the total market value of U.S. homes fell 18 percent from $21.9 trillion to $17.9 trillion or about $13,000 per person from the end of 2006 through March 31, 2009.
The Fed also estimates that homeowner’s equity has declined 40 percent from the peak and now accounts for just 41.4 percent of real estate values. By comparison, after the last slump in the 1990s, home equity levels remained in the high 50s.
This collapse in equity makes it difficult for potential buyers to sell their homes and trade up, which many experts say will weigh heavily on the housing recovery.
Source: The Wall Street Journal, Brett Arends (08/20/2009)
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Tuesday, August 11, 2009
Why the Foreclosure Plan Isn't Working
From Realtor Magazine Online, Daily Real Estate News August 11, 2009
Why can’t mortgage servicers process more than 9 percent of the applications of borrowers eligible for a government retooling of their loans?
Here are five reasons spelled out:
1. Fax machines. Most loan servicers require that applications be faxed. "It's archaic. Given all the problems we've had with lost faxes, it seems unreasonable to use a fax system,” said Michael van Zalingen, director of homeownership services for Neighborhood Housing Services of Chicago.
2. Too many forms. Each servicers has its own form, as does Freddie Mac and Fannie Mae.
Outdated info. By the time the multiple forms get through the fax machine, the info is outdated and applicants have to start all over.
3. Green personnel. Servicers are hiring and training staff by the thousands and most of them haven’t been on the job long enough to understand the process.
4. Too complicated to comprehend. Some eligible borrowers are receiving loan modification offers without even applying, but the paperwork is such gobbledygook that they mistake it for trash and throw the offers away.
Source: CNNMoney, Tami Lubby (08/11/2009)
Why can’t mortgage servicers process more than 9 percent of the applications of borrowers eligible for a government retooling of their loans?
Here are five reasons spelled out:
1. Fax machines. Most loan servicers require that applications be faxed. "It's archaic. Given all the problems we've had with lost faxes, it seems unreasonable to use a fax system,” said Michael van Zalingen, director of homeownership services for Neighborhood Housing Services of Chicago.
2. Too many forms. Each servicers has its own form, as does Freddie Mac and Fannie Mae.
Outdated info. By the time the multiple forms get through the fax machine, the info is outdated and applicants have to start all over.
3. Green personnel. Servicers are hiring and training staff by the thousands and most of them haven’t been on the job long enough to understand the process.
4. Too complicated to comprehend. Some eligible borrowers are receiving loan modification offers without even applying, but the paperwork is such gobbledygook that they mistake it for trash and throw the offers away.
Source: CNNMoney, Tami Lubby (08/11/2009)
Friday, August 7, 2009
Foreclosure Bargains Are Disappearing
From Realtor Magazine Online, Daily Real Estate News August 7, 2009
Buyers of foreclosure have to be quick these days. Some houses go under contract fewer than 90 minutes after they are put on the market, says Brad Geisen, founder of Foreclosure.com.
"For every listing that comes out, we have 10 buyers," says Cesar Dias, an associate with Approved Real Estate Group in Stockton, Calif.
Dias had 15 minutes of fame after introducing foreclosure sales tours last year. Now the tours are defunct because there are not enough homes to show.
"We had a lot of inventory last summer. Now we're down to 1,500 listings — from more than 5,000," Dias says.
In Florida, real-estate investment companies, buying in bulk and paying cash, face competition.
Even in the hard-hit Detroit area, bargains are disappearing.
"For a good house that's not too beat up, in a good neighborhood, there's no lack of buyers in this market," says Andy Sakmar, founder of Century 21 Sakmar in Rochester, 20 miles north of the city. "There are a lot fewer of these properties than a year ago, and the super buys get multiple offers."
Source: CNNMoney.com, Les Christie (08/06/2009)
Buyers of foreclosure have to be quick these days. Some houses go under contract fewer than 90 minutes after they are put on the market, says Brad Geisen, founder of Foreclosure.com.
"For every listing that comes out, we have 10 buyers," says Cesar Dias, an associate with Approved Real Estate Group in Stockton, Calif.
Dias had 15 minutes of fame after introducing foreclosure sales tours last year. Now the tours are defunct because there are not enough homes to show.
"We had a lot of inventory last summer. Now we're down to 1,500 listings — from more than 5,000," Dias says.
In Florida, real-estate investment companies, buying in bulk and paying cash, face competition.
Even in the hard-hit Detroit area, bargains are disappearing.
"For a good house that's not too beat up, in a good neighborhood, there's no lack of buyers in this market," says Andy Sakmar, founder of Century 21 Sakmar in Rochester, 20 miles north of the city. "There are a lot fewer of these properties than a year ago, and the super buys get multiple offers."
Source: CNNMoney.com, Les Christie (08/06/2009)
Thursday, August 6, 2009
Census Trend: Fewer Owners, More Renters
From Realtor Magazine Online, Daily Real Estate News August 6, 2009
Homeownership rates are declining and will likely continue to fall through 2020, predicts a University of Utah analysis.
"[Homeownership] will fall steadily by about half a point per year," says Arthur C. Nelson, director of the university's Metropolitan Research Center. "We'll have far more renters in the future."
Homeownership peaked at nearly 70 percent in 2004 and 2005. By the second quarter of this year, it had declined to 67.4, according to the U.S. Census Bureau.
"We're returning more to what was normal in the 1960s," says Dowell Myers, housing demographer at the University of Southern California. "People didn't buy homes then as an investment. They bought them to raise families."
Source: USA Today, Haya El Nasser (08/06/2009)
Homeownership rates are declining and will likely continue to fall through 2020, predicts a University of Utah analysis.
"[Homeownership] will fall steadily by about half a point per year," says Arthur C. Nelson, director of the university's Metropolitan Research Center. "We'll have far more renters in the future."
Homeownership peaked at nearly 70 percent in 2004 and 2005. By the second quarter of this year, it had declined to 67.4, according to the U.S. Census Bureau.
"We're returning more to what was normal in the 1960s," says Dowell Myers, housing demographer at the University of Southern California. "People didn't buy homes then as an investment. They bought them to raise families."
Source: USA Today, Haya El Nasser (08/06/2009)
Inventories in Key Cities Shrinking, Broker Says
From Realtor Magazine Online, Daily Real Estate News August 6, 2009
ZipRealty reports that inventories declined 2.5 percent in July compared to June in the 28 metropolitan areas it covers. Compared to July 2008, inventories declined 27 percent.
Zip’s data includes properties listed on the multiple-listing services where the firm operates. It doesn’t include New York City, where appraisal firm Miller Samuel Inc. says inventory was down 7.8 percent compared with June, but up 6.9 percent from July 2008.
Research firm Zelman & Associates points out that on average in the last 25 years, inventories in July have declined 1 percent from June.
Source: The Wall Street Journal, James R. Hagerty (08/04/2009)
ZipRealty reports that inventories declined 2.5 percent in July compared to June in the 28 metropolitan areas it covers. Compared to July 2008, inventories declined 27 percent.
Zip’s data includes properties listed on the multiple-listing services where the firm operates. It doesn’t include New York City, where appraisal firm Miller Samuel Inc. says inventory was down 7.8 percent compared with June, but up 6.9 percent from July 2008.
Research firm Zelman & Associates points out that on average in the last 25 years, inventories in July have declined 1 percent from June.
Source: The Wall Street Journal, James R. Hagerty (08/04/2009)
IRS Cracking Down on False Tax Credit Claims
From Realtor Magazine Online, Daily Real Estate News August 6, 2009
The IRS is cracking down on people who don’t qualify for the first-time homebuyer tax credit but try to claim it anyway.
The IRS says it is investigating 24 cases of people who falsely claimed the first-time homebuyer credit on their federal income tax returns. Getting caught making a false claim carries a penalty of up to three years in jail and a fine of as much as $250,000.
The First-Time Homebuyer Credit, enacted in 2008 and modified in 2009, provides up to $8,000 for first-time homebuyers. The purchaser must be someone who has not owned a primary residence in the previous three years. If the taxpayer is married, this requirement also applies to the taxpayer’s spouse.
The home purchase must close before Dec. 1, and the credit may not be claimed on the purchaser’s tax return until after the taxpayer closes and has purchased the home.
[Editor's note: Learn about tax credit rules and get other tax credit help at a resource page at REALTOR® Magazine Online.]
Source: The Internal Revenue Service (07/29/2009) and The Boston Globe, Chris Reidy (08/03/2009)
The IRS is cracking down on people who don’t qualify for the first-time homebuyer tax credit but try to claim it anyway.
The IRS says it is investigating 24 cases of people who falsely claimed the first-time homebuyer credit on their federal income tax returns. Getting caught making a false claim carries a penalty of up to three years in jail and a fine of as much as $250,000.
The First-Time Homebuyer Credit, enacted in 2008 and modified in 2009, provides up to $8,000 for first-time homebuyers. The purchaser must be someone who has not owned a primary residence in the previous three years. If the taxpayer is married, this requirement also applies to the taxpayer’s spouse.
The home purchase must close before Dec. 1, and the credit may not be claimed on the purchaser’s tax return until after the taxpayer closes and has purchased the home.
[Editor's note: Learn about tax credit rules and get other tax credit help at a resource page at REALTOR® Magazine Online.]
Source: The Internal Revenue Service (07/29/2009) and The Boston Globe, Chris Reidy (08/03/2009)
Wednesday, August 5, 2009
More Home Owners Underwater as Prices Fall
From Realtor Magazine Online, Daily Real Estate News August 5, 2009
A report from Equifax and Moody's Economy.com shows that falling prices have left 24 percent of owner-occupied, single-family home owners with mortgage debt greater than the values of the residences.
At the end of this year's second quarter, more than 16 million Americans were in this predicament, an increase from 10 million a year earlier.
Almost 5 percent of owner-occupied dwellings are saddled with mortgage debt worth 150 percent of the property value. Nevada, where 40 percent of owner-occupied homes are "upside-down," is the hardest-hit state, followed by Arizona and California.
Source: Wall Street Journal, Nick Timiraos (08/05/09)
A report from Equifax and Moody's Economy.com shows that falling prices have left 24 percent of owner-occupied, single-family home owners with mortgage debt greater than the values of the residences.
At the end of this year's second quarter, more than 16 million Americans were in this predicament, an increase from 10 million a year earlier.
Almost 5 percent of owner-occupied dwellings are saddled with mortgage debt worth 150 percent of the property value. Nevada, where 40 percent of owner-occupied homes are "upside-down," is the hardest-hit state, followed by Arizona and California.
Source: Wall Street Journal, Nick Timiraos (08/05/09)
Mortgage Applications Rise for the Week
From Realtor Magazine Online, Daily Real Estate News August 5, 2009
Mortgage applications rose a seasonally adjusted 4.4 percent last week compared to the week before, as rates on fixed-rate mortgages dropped, according to the Mortgage Bankers Association.
Total application volume was up 18 percent for the week that ended July 31, compared with the same week in 2008, according to the MBA's weekly survey.
Refinance applications rose an unadjusted 7.2 percent last week, compared with the week before, while refinance application volume has risen 35 percentsince its recent low at the end of June. The volume of applications for mortgages to purchase a home was up a seasonally adjusted 0.9% last week.
Refinance applications made up a 54.2% share of all applications, up from 52.6% the week before. Interest rates were generally lower:
* 30-year fixed-rate mortgages fell to 5.17 percent from 5.36 percent.
* 15-year fixed-rate mortgages fell to 4.60 percent from 4.75 percent.
* 1-year ARMs were 6.67 percent, barely changed from 6.66 percent.
Source: Mortgage Bankers Association (08/05/09)
Mortgage applications rose a seasonally adjusted 4.4 percent last week compared to the week before, as rates on fixed-rate mortgages dropped, according to the Mortgage Bankers Association.
Total application volume was up 18 percent for the week that ended July 31, compared with the same week in 2008, according to the MBA's weekly survey.
Refinance applications rose an unadjusted 7.2 percent last week, compared with the week before, while refinance application volume has risen 35 percentsince its recent low at the end of June. The volume of applications for mortgages to purchase a home was up a seasonally adjusted 0.9% last week.
Refinance applications made up a 54.2% share of all applications, up from 52.6% the week before. Interest rates were generally lower:
* 30-year fixed-rate mortgages fell to 5.17 percent from 5.36 percent.
* 15-year fixed-rate mortgages fell to 4.60 percent from 4.75 percent.
* 1-year ARMs were 6.67 percent, barely changed from 6.66 percent.
Source: Mortgage Bankers Association (08/05/09)
Tuesday, August 4, 2009
6 Real Estate Investment Basics
From Realtor Magazine Online, Daily Real Estate News August 4, 2009
Miami real estate investor Kenneth D. Rosen outlines his “Big Six” investing guidelines in his new book, Investing in Income Properties.
Here are his six principles in a nutshell. He says all of them need to be present to make a deal worth doing. “If one’s not there, you stop and you don’t buy,” he says.
Location.
“A” locations are in areas where there is little land left to build on and the neighborhood has a certain prestige.
No-frills design with quality construction.
He looks for three or four parking spaces per 1,000 square feet, no more than 15 percent of space devoted to common areas, and simple but visually pleasing design.
Few or no vacancies.
Buildings with lots of small offices are easier to keep full than those that rely on renting out entire floors to one tenant.
Potential for appreciation.
Older buildings with lower rents have the most upside potential. As leases expire, the new owner can raise the rent.
Available financing.
Find a financial pro to help negotiate the right provisions.
Sale price based on existing income.
Avoid buying based on projected income.
Source: Miami Herald, Matthew Haggman (08/03/2009)
Miami real estate investor Kenneth D. Rosen outlines his “Big Six” investing guidelines in his new book, Investing in Income Properties.
Here are his six principles in a nutshell. He says all of them need to be present to make a deal worth doing. “If one’s not there, you stop and you don’t buy,” he says.
Location.
“A” locations are in areas where there is little land left to build on and the neighborhood has a certain prestige.
No-frills design with quality construction.
He looks for three or four parking spaces per 1,000 square feet, no more than 15 percent of space devoted to common areas, and simple but visually pleasing design.
Few or no vacancies.
Buildings with lots of small offices are easier to keep full than those that rely on renting out entire floors to one tenant.
Potential for appreciation.
Older buildings with lower rents have the most upside potential. As leases expire, the new owner can raise the rent.
Available financing.
Find a financial pro to help negotiate the right provisions.
Sale price based on existing income.
Avoid buying based on projected income.
Source: Miami Herald, Matthew Haggman (08/03/2009)
Investor Report: Auctions a Growing Niche
From Realtor Magazine Online, Daily Real Estate News August 4, 2009
The downturn in the residential real estate market sparked an increase in private live auctions, which totaled $59 billion in 2008, according to the National Association of Auctioneers.
Auction volume should rise again this year now that the commercial real estate sector is weakening.
Sheldon Good & Co. President Alan Kravets says auctions held in a down market help property investors and lenders minimize their losses, eliminating the carrying costs that would incur if the property languished on the market for several months.
National Association of Auctioneers deputy executive director Chris Longley adds that live auctions help "to quickly establish true market values in environments where people aren't really sure what the values are."
Source: Realty Times, Ken Harney (07/31/09)
The downturn in the residential real estate market sparked an increase in private live auctions, which totaled $59 billion in 2008, according to the National Association of Auctioneers.
Auction volume should rise again this year now that the commercial real estate sector is weakening.
Sheldon Good & Co. President Alan Kravets says auctions held in a down market help property investors and lenders minimize their losses, eliminating the carrying costs that would incur if the property languished on the market for several months.
National Association of Auctioneers deputy executive director Chris Longley adds that live auctions help "to quickly establish true market values in environments where people aren't really sure what the values are."
Source: Realty Times, Ken Harney (07/31/09)
Construction Spending Rises, Defies Forecasts
From Realtor Magazine Online, Daily Real Estate News August 4, 2009
Analysts predicted a 0.5 percent drop in construction spending in June, but they were wrong.
The U.S. Commerce Department said Monday that construction spending rose by a seasonally adjusted 0.3 percent annually in June. That’s positive news, despite the fact that overall spending was still down 10.2 percent compared to a year ago.
The increase was driven by federal government spending, which rose 1.9 percent. This offset a 0.5 percent decline in commercial, nonresidential building, including shrinkage in retail and offices.
Source: The Associated Press, Christopher S. Rugaber (08/03/2009)
Analysts predicted a 0.5 percent drop in construction spending in June, but they were wrong.
The U.S. Commerce Department said Monday that construction spending rose by a seasonally adjusted 0.3 percent annually in June. That’s positive news, despite the fact that overall spending was still down 10.2 percent compared to a year ago.
The increase was driven by federal government spending, which rose 1.9 percent. This offset a 0.5 percent decline in commercial, nonresidential building, including shrinkage in retail and offices.
Source: The Associated Press, Christopher S. Rugaber (08/03/2009)
Uptrend Continues in Pending Home Sales
From Realtor Magazine Online, Daily Real Estate News August 4, 2009
Pending home sales are up for the fifth consecutive month, the first time in six years for such a streak, according to NAR.
The Pending Home Sales Index, a forward-looking indicator based on contracts signed in June, rose 3.6 percent to 94.6 from an upwardly revised reading of 91.3 in May, and is 6.7 percent above June 2008 when it was 88.7. The last time there were five consecutive monthly gains was in July 2003.
Lawrence Yun, NAR chief economist, said a combination of positive market factors is fueling the gains. “Historically low mortgage interest rates, affordable home prices, and large selection are encouraging buyers who’ve been on the sidelines. Activity has been consistently much stronger for lower priced homes,” he said.
“Because it may take as long as two months to close on a home after signing a contract, first-time buyers must act fairly soon to take advantage of the $8,000 tax credit because they must close on the sale by November 30,” Yun said.
Here are the regional figures from the Pending Home Sales Index:
* The Northeast rose 0.4 percent to 81.2 in June and is 5.8 percent above a year ago.
* The Midwest increased 0.8 percent to 89.9 and is 11.6 percent above June 2008.
* The index in the South jumped 7.1 percent to 100.7 in June and is 8.9 percent higher than a year ago.
* In the West, the index rose 2.9 percent to 100.4 but is 0.2 percent below June 2008.
Source: NAR
Pending home sales are up for the fifth consecutive month, the first time in six years for such a streak, according to NAR.
The Pending Home Sales Index, a forward-looking indicator based on contracts signed in June, rose 3.6 percent to 94.6 from an upwardly revised reading of 91.3 in May, and is 6.7 percent above June 2008 when it was 88.7. The last time there were five consecutive monthly gains was in July 2003.
Lawrence Yun, NAR chief economist, said a combination of positive market factors is fueling the gains. “Historically low mortgage interest rates, affordable home prices, and large selection are encouraging buyers who’ve been on the sidelines. Activity has been consistently much stronger for lower priced homes,” he said.
“Because it may take as long as two months to close on a home after signing a contract, first-time buyers must act fairly soon to take advantage of the $8,000 tax credit because they must close on the sale by November 30,” Yun said.
Here are the regional figures from the Pending Home Sales Index:
* The Northeast rose 0.4 percent to 81.2 in June and is 5.8 percent above a year ago.
* The Midwest increased 0.8 percent to 89.9 and is 11.6 percent above June 2008.
* The index in the South jumped 7.1 percent to 100.7 in June and is 8.9 percent higher than a year ago.
* In the West, the index rose 2.9 percent to 100.4 but is 0.2 percent below June 2008.
Source: NAR
Monday, August 3, 2009
Higher-Priced Markets Still Feel Pain
From Realtor Magazine Online, Daily Real Estate News August 3, 2009
While low- and moderately-priced housing markets have taken off in many parts of the country, the higher-end market is still struggling. Sales are slow and more price declines are imminent, observers say.
Joshua Shapiro, chief U.S. economist at MFR Inc., points to management job losses and resetting adjustable-rate mortgages held by prime borrowers, and concludes, "You put all that together, it leads me to believe that the next leg down on home prices is going to come from the top."
Analysts at J.P. Morgan Chase & Co. recently predicted that the higher-priced housing market won’t recover until at least 2012, and peak-to-trough declines could surpass 60 percent, compared to 40 percent for the rest of the market.
Source: The Wall Street Journal, Nick Timiraos and James R. Hagerty (08/03/2009)
While low- and moderately-priced housing markets have taken off in many parts of the country, the higher-end market is still struggling. Sales are slow and more price declines are imminent, observers say.
Joshua Shapiro, chief U.S. economist at MFR Inc., points to management job losses and resetting adjustable-rate mortgages held by prime borrowers, and concludes, "You put all that together, it leads me to believe that the next leg down on home prices is going to come from the top."
Analysts at J.P. Morgan Chase & Co. recently predicted that the higher-priced housing market won’t recover until at least 2012, and peak-to-trough declines could surpass 60 percent, compared to 40 percent for the rest of the market.
Source: The Wall Street Journal, Nick Timiraos and James R. Hagerty (08/03/2009)
Investors Snag Distressed Miami Condos
From Realtor Magazine Online, Daily Real Estate News August 3, 2009
Investors in troubled markets like Phoenix, Las Vegas, and San Diego are watching as cash investors scoop up hundreds of condos at bargain prices from Miami developers and banks that are desperate to get the units off the books.
Unlike investors in the boom years, these buyers are well heeled and willing to be patient.
"They have the money and the knowledge and wherewithal to hold them until the market turns around," says Jennifer Drake, a real estate attorney with Becker & Poliakoff.
If this bulk-purchase strategy pays off in South Florida, expect to see it spread elsewhere, observers say.
Source: The Associated Press, Adrian Sainz (07/30/2009)
Investors in troubled markets like Phoenix, Las Vegas, and San Diego are watching as cash investors scoop up hundreds of condos at bargain prices from Miami developers and banks that are desperate to get the units off the books.
Unlike investors in the boom years, these buyers are well heeled and willing to be patient.
"They have the money and the knowledge and wherewithal to hold them until the market turns around," says Jennifer Drake, a real estate attorney with Becker & Poliakoff.
If this bulk-purchase strategy pays off in South Florida, expect to see it spread elsewhere, observers say.
Source: The Associated Press, Adrian Sainz (07/30/2009)
Thursday, July 30, 2009
New “Reg. Z” Rules Could Slow Closings
July 29, 2009 by Robert Freedman, Senior Editor, REALTOR® Magazine
Starting tomorrow, July 30, you could see transactions slowed as lenders try to navigate changes to rules (”Reg. Z”) on consumer disclosures under the Truth in Lending Act (TILA). By being aware of new time pressures lenders are under, you can help your clients understand what’s going on if transactions you’re working on get delayed prior to closing.
Here’s what’s happening under these “Reg. Z” changes:
Within three days of taking a loan application, lenders must give borrowers the Truth in Lending Act (TILA) disclosure and the Good Faith Estimate (GFE), then give borrowers a mandatory seven-day waiting period before the transaction can go to closing. Both the TILA disclosure and the GFE are required now but without the constrained timeline. Borrowers can elect to waive that seven-day holding period, but the Federal Reserve, which oversees TILA, says the waivers are not for the convenience of borrowers; they’re only to accommodate borrowers in the event of a financial emergency.
There’s another requirement: If the final annual percentage rate (APR) differs from the APR on the GFE by at least 0.125 percent, then another mandatory holding period of three days kicks in.
This could be a problem if the final APR isn’t known until just before the scheduled closing. You could have a situation in which the family has the moving truck all loaded only to learn the day before closing that the APR is different by at least 0.125 percent from the APR on the GFE.
Suddenly the closing can’t happen as scheduled.
Until lenders start operarting under the new rules, it’s unclear if delays will be the reality. But you should know about the new rules in any case. You can look at them yourself in the Federal Register. You can also look at an NAR summary on REALTOR.org.
The rules apply to primary homes and second homes; they don’t apply to investment properties. There are other details you should know. The NAR summary can be helpful.
Starting tomorrow, July 30, you could see transactions slowed as lenders try to navigate changes to rules (”Reg. Z”) on consumer disclosures under the Truth in Lending Act (TILA). By being aware of new time pressures lenders are under, you can help your clients understand what’s going on if transactions you’re working on get delayed prior to closing.
Here’s what’s happening under these “Reg. Z” changes:
Within three days of taking a loan application, lenders must give borrowers the Truth in Lending Act (TILA) disclosure and the Good Faith Estimate (GFE), then give borrowers a mandatory seven-day waiting period before the transaction can go to closing. Both the TILA disclosure and the GFE are required now but without the constrained timeline. Borrowers can elect to waive that seven-day holding period, but the Federal Reserve, which oversees TILA, says the waivers are not for the convenience of borrowers; they’re only to accommodate borrowers in the event of a financial emergency.
There’s another requirement: If the final annual percentage rate (APR) differs from the APR on the GFE by at least 0.125 percent, then another mandatory holding period of three days kicks in.
This could be a problem if the final APR isn’t known until just before the scheduled closing. You could have a situation in which the family has the moving truck all loaded only to learn the day before closing that the APR is different by at least 0.125 percent from the APR on the GFE.
Suddenly the closing can’t happen as scheduled.
Until lenders start operarting under the new rules, it’s unclear if delays will be the reality. But you should know about the new rules in any case. You can look at them yourself in the Federal Register. You can also look at an NAR summary on REALTOR.org.
The rules apply to primary homes and second homes; they don’t apply to investment properties. There are other details you should know. The NAR summary can be helpful.
Low-Priced Foreclosures Incite Bidding Wars
From msnbc.com
First-time buyers in some areas, especially those with large numbers of foreclosures, are finding that bank-owned properties are sparking bidding wars that drive up sale prices and entice investors – who often pay cash and buy several properties at once.
MAKING SENSE OF THE STORY FOR CONSUMERS
· Buyers are advised to work with REALTORS® to help increase the chances that their offers are accepted on homes, particularly those that are attractive to investors. With guidance from a REALTOR®, buyers can present offers that are more likely to be accepted by a bank. REALTORS® also often have knowledge of properties that are new on the market, and may have not yet caught the eyes of investors.
· Recently enacted federal legislation designed to help people remain in their homes has slowed the flow of foreclosures into the market, lowering the inventory and increasing the demand for remaining homes. In June, C.A.R.’s Unsold Inventory Index (UII) stood at 4.1 months, compared with 7.6 months for the same time period a year ago. The UII indicates the number of months needed to deplete the supply of homes on the market at the current sales rate. Homes priced $500,000 or below had an unsold inventory of approximately three months in June. In June 2008, the unsold inventory in this price range was nearly 10 months.
To read the full story, please click here
First-time buyers in some areas, especially those with large numbers of foreclosures, are finding that bank-owned properties are sparking bidding wars that drive up sale prices and entice investors – who often pay cash and buy several properties at once.
MAKING SENSE OF THE STORY FOR CONSUMERS
· Buyers are advised to work with REALTORS® to help increase the chances that their offers are accepted on homes, particularly those that are attractive to investors. With guidance from a REALTOR®, buyers can present offers that are more likely to be accepted by a bank. REALTORS® also often have knowledge of properties that are new on the market, and may have not yet caught the eyes of investors.
· Recently enacted federal legislation designed to help people remain in their homes has slowed the flow of foreclosures into the market, lowering the inventory and increasing the demand for remaining homes. In June, C.A.R.’s Unsold Inventory Index (UII) stood at 4.1 months, compared with 7.6 months for the same time period a year ago. The UII indicates the number of months needed to deplete the supply of homes on the market at the current sales rate. Homes priced $500,000 or below had an unsold inventory of approximately three months in June. In June 2008, the unsold inventory in this price range was nearly 10 months.
To read the full story, please click here
3-year Descent in Home Prices Appears at End
From New York Times
According to recent reports and forecasts by housing analysts, the three-year descent in home prices appears to be at an end. Eight cities, including San Francisco, showed price increases in May, up from four in April, and one in March, according to Standard and Poor’s/Case-Shiller Index. For the first time since early 2007, the index of 20 major cities was virtually flat, rather than down.
MAKING SENSE OF THE STORY FOR CONSUMERS
· Earlier reports show that sales of existing homes nationwide rose last month for the third consecutive month, while sales of new homes increased in June by the largest percentage in eight years, according to the NATIONAL ASSOCIATION OF REALTORS® (NAR) and the U.S. Commerce Dept., respectively.
· Although some skeptics believe the market is pausing before home prices decline further, the median price in California’s housing market appears to be stabilizing. June marked the fourth consecutive month of rising home prices and the second largest gain on record for the month of June, based on statistics dating back to 1979. The year-to-year decline in June also was the smallest in the past 16 months.
· The S&P/Case-Shiller price index for 20 cities showed a half-percent gain when May was compared with April. It was the first month-over-month increase in the index in 34 months. “It is very possible that years from now we will say that April 2009 was the trough in home prices,” said Maureen Maitland, vice president for index services at Standard & Poor’s.
· One explanation for the increase in median prices is the rise in demand from buyers, especially first timers taking advantage of the $8,000 federal tax credit, which expires in December. The NATIONAL ASSOCIATION OF REALTORS® (NAR) is lobbying for the tax credit to be extended and to be replaced with a $15,000 credit for all buyers.
· Another factor in the market’s resurgence is the prevalence of foreclosures, which make up about a third of all existing home sales. “Although another surge of foreclosures is expected later this year, demand remains strong, so the market may be able to absorb more distressed properties without significantly impacting the median price,” said C.A.R.’s Chief Economist Leslie Appleton-Young.
To read the full story, please click here
According to recent reports and forecasts by housing analysts, the three-year descent in home prices appears to be at an end. Eight cities, including San Francisco, showed price increases in May, up from four in April, and one in March, according to Standard and Poor’s/Case-Shiller Index. For the first time since early 2007, the index of 20 major cities was virtually flat, rather than down.
MAKING SENSE OF THE STORY FOR CONSUMERS
· Earlier reports show that sales of existing homes nationwide rose last month for the third consecutive month, while sales of new homes increased in June by the largest percentage in eight years, according to the NATIONAL ASSOCIATION OF REALTORS® (NAR) and the U.S. Commerce Dept., respectively.
· Although some skeptics believe the market is pausing before home prices decline further, the median price in California’s housing market appears to be stabilizing. June marked the fourth consecutive month of rising home prices and the second largest gain on record for the month of June, based on statistics dating back to 1979. The year-to-year decline in June also was the smallest in the past 16 months.
· The S&P/Case-Shiller price index for 20 cities showed a half-percent gain when May was compared with April. It was the first month-over-month increase in the index in 34 months. “It is very possible that years from now we will say that April 2009 was the trough in home prices,” said Maureen Maitland, vice president for index services at Standard & Poor’s.
· One explanation for the increase in median prices is the rise in demand from buyers, especially first timers taking advantage of the $8,000 federal tax credit, which expires in December. The NATIONAL ASSOCIATION OF REALTORS® (NAR) is lobbying for the tax credit to be extended and to be replaced with a $15,000 credit for all buyers.
· Another factor in the market’s resurgence is the prevalence of foreclosures, which make up about a third of all existing home sales. “Although another surge of foreclosures is expected later this year, demand remains strong, so the market may be able to absorb more distressed properties without significantly impacting the median price,” said C.A.R.’s Chief Economist Leslie Appleton-Young.
To read the full story, please click here
Wednesday, July 29, 2009
Bargains Abound for Retirees
From Realtor Magazine Online, Daily Real Estate News July 29, 2009
Now could be the perfect time to buy a home for your post-employment years. After all, home prices are down an average of 10 to 20 percent from the peak in most areas of the country and as much as 40 percent in some of the most appealing retirement areas.
Here are some factors that a potential buyer of a retirement property might consider:
* Moving to an area that has been hard hit by the housing downturn, like Miami or Las Vegas, can mean great prices for buyers.
* Trading a big home for a smaller property will reduce the cost of maintenance, insurance, and taxes.
* Buying a property now and renting it out can be profitable in the right areas as more people today prefer renting to owning.
In addition, below are retirement meccas where prices have dropped significantly, according to data from Moody’s Economy.com and the National Association of REALTORS® :
1. Las Vegas: -51 percent
2. San Diego: -47 percent
3. Phoenix: -52 percent
4.Tampa, Fla.: -38 percent
5. Naples, Fla.: -27 percent
6. Myrtle Beach, S.C.: -16 percent
Source: Money Magazine, Michaela Cavallaro (07/29/2009)
Now could be the perfect time to buy a home for your post-employment years. After all, home prices are down an average of 10 to 20 percent from the peak in most areas of the country and as much as 40 percent in some of the most appealing retirement areas.
Here are some factors that a potential buyer of a retirement property might consider:
* Moving to an area that has been hard hit by the housing downturn, like Miami or Las Vegas, can mean great prices for buyers.
* Trading a big home for a smaller property will reduce the cost of maintenance, insurance, and taxes.
* Buying a property now and renting it out can be profitable in the right areas as more people today prefer renting to owning.
In addition, below are retirement meccas where prices have dropped significantly, according to data from Moody’s Economy.com and the National Association of REALTORS® :
1. Las Vegas: -51 percent
2. San Diego: -47 percent
3. Phoenix: -52 percent
4.Tampa, Fla.: -38 percent
5. Naples, Fla.: -27 percent
6. Myrtle Beach, S.C.: -16 percent
Source: Money Magazine, Michaela Cavallaro (07/29/2009)
Author: Don't Abandon Underwater Mortgages
From Realtor Magazine Online, Daily Real Estate News July 29, 2009
David Bach, author of The Automatic Millionaire Homeowner: A Lifetime Plan to Finish Rich in Real Estate, pooh-poohs the notion that it makes any sense at all to walk away from a property that is underwater.
In an interview with the AOL.com personal finance Web site, Walletpop.com, Bach said about 50 percent of homes in foreclosure are there because their owners walked away from underwater real estate. He calls that “stupid, short-term thinking” and recalls a condo he bought in New York City in 2003. He put down $600,000, then property values dropped and he lost all his equity. “I was bummed,” he said.
But the loss wasn’t permanent. Four years later he sold the condo for $3.65 million – and made a $1.5 million profit, after commissions and taxes.
Some people might have thought it was “logical” to walk away, he said. “But it would have cost me $1.5 million.”
Source: WalletPop, Zac Bissonnette (07/23/2009)
David Bach, author of The Automatic Millionaire Homeowner: A Lifetime Plan to Finish Rich in Real Estate, pooh-poohs the notion that it makes any sense at all to walk away from a property that is underwater.
In an interview with the AOL.com personal finance Web site, Walletpop.com, Bach said about 50 percent of homes in foreclosure are there because their owners walked away from underwater real estate. He calls that “stupid, short-term thinking” and recalls a condo he bought in New York City in 2003. He put down $600,000, then property values dropped and he lost all his equity. “I was bummed,” he said.
But the loss wasn’t permanent. Four years later he sold the condo for $3.65 million – and made a $1.5 million profit, after commissions and taxes.
Some people might have thought it was “logical” to walk away, he said. “But it would have cost me $1.5 million.”
Source: WalletPop, Zac Bissonnette (07/23/2009)
Mortgage Applications Decline for the Week
From Realtor Magazine Online, Daily Real Estate News July 29, 2009
Mortgage applications fell 6.3 percent last week on a seasonally adjusted basis, according to the Mortgage Bankers Association weekly survey.
The weekly index fell to 495.4 from 528.9 the previous week. On an unadjusted basis the index decreased 6 percent compared with the previous week, but it was up 16.1 percent compared with the same week a year ago.
Most of the decrease was the result of fewer refinancing applications; the refinance index decreased 10.9 percent. The purchase index remained flat compared to the previous week.
Mortgage rates changed only slightly compared to the previous week:
* 30-year fixed-rate mortgages increased to 5.36 percent from 5.31 percent;
* 15-year fixed-rate mortgages decreased to 4.75 percent from 4.80 percent;
* 1-year ARMs increased to 6.66 percent from 6.50 percent.
Source: Mortgage Bankers Association (0729/2009)
Mortgage applications fell 6.3 percent last week on a seasonally adjusted basis, according to the Mortgage Bankers Association weekly survey.
The weekly index fell to 495.4 from 528.9 the previous week. On an unadjusted basis the index decreased 6 percent compared with the previous week, but it was up 16.1 percent compared with the same week a year ago.
Most of the decrease was the result of fewer refinancing applications; the refinance index decreased 10.9 percent. The purchase index remained flat compared to the previous week.
Mortgage rates changed only slightly compared to the previous week:
* 30-year fixed-rate mortgages increased to 5.36 percent from 5.31 percent;
* 15-year fixed-rate mortgages decreased to 4.75 percent from 4.80 percent;
* 1-year ARMs increased to 6.66 percent from 6.50 percent.
Source: Mortgage Bankers Association (0729/2009)
Tuesday, July 28, 2009
New Home Sales Rise
From Realtor Magazine Online, Daily Real Estate News July 28, 2009
Sales of newly built single-family homes rose 11 percent in June to an annualized rate of 384,000, according to a report released Monday by the U.S. Department of Housing and Urban Development.
Analysts called the report a good sign.
"That is really good news,” said Peter Morici, an economics professor at the University of Maryland. “With all the foreclosure activity sending down home prices, for new homes to jump like that is a good indicator that the economy is bottoming out."
Pat Newport, a housing industry analyst for IHS Global Insight, also applauded the report. "The tax credit is boosting demand, but what will happen when it goes away in December?" he asked.
Excess inventory still exists in some key markets:
* California
* Florida
* Las Vegas
* Arizona
But overall, business is better. "The time for getting deals is going away." Markstein said.
Source: CNNMoney.com, Les Christie (07/27/2009)
Sales of newly built single-family homes rose 11 percent in June to an annualized rate of 384,000, according to a report released Monday by the U.S. Department of Housing and Urban Development.
Analysts called the report a good sign.
"That is really good news,” said Peter Morici, an economics professor at the University of Maryland. “With all the foreclosure activity sending down home prices, for new homes to jump like that is a good indicator that the economy is bottoming out."
Pat Newport, a housing industry analyst for IHS Global Insight, also applauded the report. "The tax credit is boosting demand, but what will happen when it goes away in December?" he asked.
Excess inventory still exists in some key markets:
* California
* Florida
* Las Vegas
* Arizona
But overall, business is better. "The time for getting deals is going away." Markstein said.
Source: CNNMoney.com, Les Christie (07/27/2009)
Buyers Shouldn't Wait on Falling Prices
From Realtor Magazine Online, Daily Real Estate News July 28, 2009
Fear of overpaying for property is common these days, especially in places like New York where prices continue to be unstable.
If you encounter potential buyers who are frozen because they are concerned that they will pay too much, here are some factors to point out:
* Waiting for the right time can be expensive. Some buyers would have more equity today, despite falling prices, if they had bought when they were first considering it, instead of continuing to pay rent.
* Financing is fickle. Some people who were highly qualified last year can’t find financing this year because the credit market has tightened or their personal financial situation now makes them an undesirable borrower.
* Interest rates are headed up. If prices decline by another 10 percent, but interest rates increase by 1 percentage point, the monthly payment will be the same.
Source: The Wall Street Journal, Douglas Heddings (07/27/2009)
Fear of overpaying for property is common these days, especially in places like New York where prices continue to be unstable.
If you encounter potential buyers who are frozen because they are concerned that they will pay too much, here are some factors to point out:
* Waiting for the right time can be expensive. Some buyers would have more equity today, despite falling prices, if they had bought when they were first considering it, instead of continuing to pay rent.
* Financing is fickle. Some people who were highly qualified last year can’t find financing this year because the credit market has tightened or their personal financial situation now makes them an undesirable borrower.
* Interest rates are headed up. If prices decline by another 10 percent, but interest rates increase by 1 percentage point, the monthly payment will be the same.
Source: The Wall Street Journal, Douglas Heddings (07/27/2009)
Monday, July 27, 2009
Economists Optimistic That Market Is Upward Bound
From Realtor Magazine Online, Daily Real Estate News July 27, 2009
Economic recovery is still a few months away, say economists surveyed by USA Today, but two-thirds of them think existing-home sales have bottomed out.
Both housing and automotive markets “have the potential to generate some quite large percentage increases,” says Bill Cheney, chief economist at MFC Global Investment.
Overall, economists say unemployment won’t peak until the first half of next year and credit markets will remain tight.
"I think (the recovery) is going to be anemic," says Allen Sinai, chief economist at Decision Economics. "I don't think consumers have the wherewithal to buy a lot of cars and a lot of houses."
Source: USA Today, Paul Davidson; Barbara Hansen (07/27/2009)
Economic recovery is still a few months away, say economists surveyed by USA Today, but two-thirds of them think existing-home sales have bottomed out.
Both housing and automotive markets “have the potential to generate some quite large percentage increases,” says Bill Cheney, chief economist at MFC Global Investment.
Overall, economists say unemployment won’t peak until the first half of next year and credit markets will remain tight.
"I think (the recovery) is going to be anemic," says Allen Sinai, chief economist at Decision Economics. "I don't think consumers have the wherewithal to buy a lot of cars and a lot of houses."
Source: USA Today, Paul Davidson; Barbara Hansen (07/27/2009)
Positive Signs in West Point to U.S. Recovery
From Realtor Magazine Online, Daily Real Estate News July 27, 2009
If you were drawing a real estate market trend line, you’d start in the west and go east, according to real estate commentator Marc Roth of Business Week.
Roth says the decline in the real estate market began in the West in 2007 with a 20 percent drop in transactions. The South, Midwest, and Northeast had milder declines of 13 percent, 11 percent, and 7 percent respectively that year.
In 2008, the South, Midwest, and Northeast were dropping 15 percent to 16 percent, with the West down only 1 percent, he pointed out.
Today, in mid-2009, the number of properties sold in the West is up 7 percent, while declines in the other regions have shrunk to between 3.5 percent and 7 percent.
Roth argues that since industry trends have historically moved from the west to the northeast, these numbers are evidence that the housing decline is about to be history in nearly every part of the country.
Roth, who is president of Home Warranty of America, says, “I am putting my money where my opinions rest. … I believe these trends send a strong enough signal that I am adding staff to both my sales force and call center.”
Source: Business Week, Marc Roth (07/24/2009)
If you were drawing a real estate market trend line, you’d start in the west and go east, according to real estate commentator Marc Roth of Business Week.
Roth says the decline in the real estate market began in the West in 2007 with a 20 percent drop in transactions. The South, Midwest, and Northeast had milder declines of 13 percent, 11 percent, and 7 percent respectively that year.
In 2008, the South, Midwest, and Northeast were dropping 15 percent to 16 percent, with the West down only 1 percent, he pointed out.
Today, in mid-2009, the number of properties sold in the West is up 7 percent, while declines in the other regions have shrunk to between 3.5 percent and 7 percent.
Roth argues that since industry trends have historically moved from the west to the northeast, these numbers are evidence that the housing decline is about to be history in nearly every part of the country.
Roth, who is president of Home Warranty of America, says, “I am putting my money where my opinions rest. … I believe these trends send a strong enough signal that I am adding staff to both my sales force and call center.”
Source: Business Week, Marc Roth (07/24/2009)
Friday, July 24, 2009
30-Year Mortgage Rates Rise
From Realtor Magazine Online, Daily Real Estate News July 24, 2009
The average rate for a 30-year fixed mortgage this week rose to 5.2 percent from 5.14 percent a week ago, Freddie Mac reports. Industry professionals are keeping a close watch on the rate, hoping it does not climb too high and derail a recovery in the housing sector.
The National Association of REALTORS® confirms that sales of previously occupied residences increased for the third consecutive month in June -- something that has not happened in more than five years.
Source: Boston Globe (07/24/09)
The average rate for a 30-year fixed mortgage this week rose to 5.2 percent from 5.14 percent a week ago, Freddie Mac reports. Industry professionals are keeping a close watch on the rate, hoping it does not climb too high and derail a recovery in the housing sector.
The National Association of REALTORS® confirms that sales of previously occupied residences increased for the third consecutive month in June -- something that has not happened in more than five years.
Source: Boston Globe (07/24/09)
When Will the Housing Market Rebound?
From Realtor Magazine Online, Daily Real Estate News July 24, 2009
When will the housing slump finally end? Even the experts' crystal balls are hazy.
The Wall Street Journal, which Thursday reported its latest quarterly survey of housing data, says it depends on which city or part of the country you’re talking about.
Home sales were up compared to last year in Washington, D.C., and Northern Virginia, Orlando, Minneapolis, Southern California, and the San Francisco Bay area, according to findings from research firm MDA DataQuick as well as reports from local real estate practitioner organizations.
Sales declined in New York City and nearby Long Island, Chicago, and Charlotte, N.C., and the outlook was particularly bleak in Miami-Fort Lauderdale and much of Florida, Detroit, and Las Vegas.
But Jody Kahn, an analyst at John Burns Real Estate Consulting, a research organization, points out that there are variations even in the hardest-hit metro areas with the most attractive neighborhoods continuing to thrive.
Employment is the most telling factor, says Mark Zandi, chief economist at Moody's Economy.com. "If people don't have jobs or fear losing their jobs, then buying homes is out of the question," he says.
Source: The Wall Street Journal, James R. Hagerty (07/23/2009)
When will the housing slump finally end? Even the experts' crystal balls are hazy.
The Wall Street Journal, which Thursday reported its latest quarterly survey of housing data, says it depends on which city or part of the country you’re talking about.
Home sales were up compared to last year in Washington, D.C., and Northern Virginia, Orlando, Minneapolis, Southern California, and the San Francisco Bay area, according to findings from research firm MDA DataQuick as well as reports from local real estate practitioner organizations.
Sales declined in New York City and nearby Long Island, Chicago, and Charlotte, N.C., and the outlook was particularly bleak in Miami-Fort Lauderdale and much of Florida, Detroit, and Las Vegas.
But Jody Kahn, an analyst at John Burns Real Estate Consulting, a research organization, points out that there are variations even in the hardest-hit metro areas with the most attractive neighborhoods continuing to thrive.
Employment is the most telling factor, says Mark Zandi, chief economist at Moody's Economy.com. "If people don't have jobs or fear losing their jobs, then buying homes is out of the question," he says.
Source: The Wall Street Journal, James R. Hagerty (07/23/2009)
Thursday, July 23, 2009
House Extends High Limits for Federal Loans
From Realtor Magazine Online, Daily Real Estate News July 21, 2009
The House Appropriations Committee approved an extension of the $729,750 loan limits for Fannie Mae, Freddie Mac, and Federal Housing Administration financing in high-cost areas through September 2010.
Without this extension, the loan limits revert at the end of the year to $417,000 in the highest-cost areas.
The spending bill also would extend FHA’s Home Equity Conversion Mortgage reverse mortgage program for seniors. And it provides $70 million to continue pre-purchase counseling for prospective home buyers and counseling for families facing foreclosure.
Source: Inman News (07/21/2009)
The House Appropriations Committee approved an extension of the $729,750 loan limits for Fannie Mae, Freddie Mac, and Federal Housing Administration financing in high-cost areas through September 2010.
Without this extension, the loan limits revert at the end of the year to $417,000 in the highest-cost areas.
The spending bill also would extend FHA’s Home Equity Conversion Mortgage reverse mortgage program for seniors. And it provides $70 million to continue pre-purchase counseling for prospective home buyers and counseling for families facing foreclosure.
Source: Inman News (07/21/2009)
Experts Say Now is the Time to Buy
From Realtor Magazine Online, Daily Real Estate News July 21, 2009
Many investment experts advise it's time to buy. With prices falling, it is a once-in-a-generation chance to load up on property, they say.
How much of an investment portfolio should be devoted to real estate? David Swensen, who manages Yale University's endowment, says 20 percent is a smart number.
One possibility is real estate investment trusts (REITs), which, despite the fact that they are slashing dividends to conserve cash, are still paying average yields of 7.3 percent. That’s double the yield on Treasurys.
Should a home be part of the equation? Michael Kirby, founder of Green Street Advisors, says no.
"You should own a house to provide shelter," says Kirby. "In a way, it's not an investment, and it's not part of your investment portfolio. It's really just a living expense. By owning a house you are prepaying rent."
Source: Forbes (08/03/2009)
Many investment experts advise it's time to buy. With prices falling, it is a once-in-a-generation chance to load up on property, they say.
How much of an investment portfolio should be devoted to real estate? David Swensen, who manages Yale University's endowment, says 20 percent is a smart number.
One possibility is real estate investment trusts (REITs), which, despite the fact that they are slashing dividends to conserve cash, are still paying average yields of 7.3 percent. That’s double the yield on Treasurys.
Should a home be part of the equation? Michael Kirby, founder of Green Street Advisors, says no.
"You should own a house to provide shelter," says Kirby. "In a way, it's not an investment, and it's not part of your investment portfolio. It's really just a living expense. By owning a house you are prepaying rent."
Source: Forbes (08/03/2009)
Lease-Purchases on the Rise
From Realtor Magazine Online, Daily Real Estate News July 21, 2009
One way that buyers without enough money to get a mortgage can purchase a home is with a lease-purchase agreement.
Usually, the terms of the deal include a lease and an option to buy with part of the rent going toward the downpayment. The forced savings helps buyers amass enough to buy the house in the specified time frame, usually three to five years.
Cindy Walker, an associate with South Island Real Estate in Melbourne Beach, Fla., recently helped a young couple negotiate such a deal. She received a rental commission for the lease arrangement, and she will get a sales commission if the purchase option is executed.
Some real estate professionals find this arrangement unacceptable, but Walker says, “I look at it as money in the bank." She offers these tips for anyone contemplating using a lease-purchase option:
* Don’t be afraid to ask the seller if the owner would accept a lease-purchase agreement. Sellers might find it attractive once they understand it will generate regular rental income.
* Negotiate how much money will go toward the downpayment and whether the buyer or the seller or both will handle maintenance and repairs.
* Avoid prepayment penalties. No prepayment penalty increases the incentive to do the deal quickly. In most cases, that’s a good thing from both the buyer’s and the seller’s points of view.
Source: Florida Today, Anne Straub (07/19/2009)
One way that buyers without enough money to get a mortgage can purchase a home is with a lease-purchase agreement.
Usually, the terms of the deal include a lease and an option to buy with part of the rent going toward the downpayment. The forced savings helps buyers amass enough to buy the house in the specified time frame, usually three to five years.
Cindy Walker, an associate with South Island Real Estate in Melbourne Beach, Fla., recently helped a young couple negotiate such a deal. She received a rental commission for the lease arrangement, and she will get a sales commission if the purchase option is executed.
Some real estate professionals find this arrangement unacceptable, but Walker says, “I look at it as money in the bank." She offers these tips for anyone contemplating using a lease-purchase option:
* Don’t be afraid to ask the seller if the owner would accept a lease-purchase agreement. Sellers might find it attractive once they understand it will generate regular rental income.
* Negotiate how much money will go toward the downpayment and whether the buyer or the seller or both will handle maintenance and repairs.
* Avoid prepayment penalties. No prepayment penalty increases the incentive to do the deal quickly. In most cases, that’s a good thing from both the buyer’s and the seller’s points of view.
Source: Florida Today, Anne Straub (07/19/2009)
FHA Loans Set Record
From Realtor Magazine Online, Daily Real Estate News July 21, 2009
The Federal Housing Administration guaranteed 186,000 mortgages in June, a record number in its 75-year history.
FHA loans are popular because they are one of the few sources of low-down-payment mortgages. In the last year, they have accounted for about 46 percent of all mortgage applications.
Along with increasing numbers of FHA activity comes a rising number of delinquent loans, with the level of FHA mortgages in some stage of foreclosure reaching 7.4 percent in May.
Source: The Wall Street Journal, Nick Timiraos (07/20/2009)
The Federal Housing Administration guaranteed 186,000 mortgages in June, a record number in its 75-year history.
FHA loans are popular because they are one of the few sources of low-down-payment mortgages. In the last year, they have accounted for about 46 percent of all mortgage applications.
Along with increasing numbers of FHA activity comes a rising number of delinquent loans, with the level of FHA mortgages in some stage of foreclosure reaching 7.4 percent in May.
Source: The Wall Street Journal, Nick Timiraos (07/20/2009)
Investors Drive Foreclose Prices Up
From Realtor Magazine Online, Daily Real Estate News July 21, 2009
Home shoppers in parts of the country with lots of foreclosures are finding it increasingly difficult to buy. Investors are bidding up prices thousands above the original asking price.
Federal legislation slowing the number of foreclosures is adding to the problem by reducing the number of homes on the market. For instance, in Las Vegas, one of the areas where the bidding problem is greatest, home inventories are down 10 percent since March, according to the Las Vegas Association of REALTORS®.
When a bidding war erupts, the problem is particularly difficult for traditional buyers because investors are usually cash purchasers. They can bid up a property without concern whether the appraisal will prevent them from getting a loan.
Experts say the problem is not unlike the situation at the height of the housing bubble. "This market is about as abnormal as the hypermarket that we came out of a few years ago," says Jay Butler, director of the Realty Studies program at Arizona State University.
Source: The Associated Press, Jonathan J. Cooper (07/20/2009)
Home shoppers in parts of the country with lots of foreclosures are finding it increasingly difficult to buy. Investors are bidding up prices thousands above the original asking price.
Federal legislation slowing the number of foreclosures is adding to the problem by reducing the number of homes on the market. For instance, in Las Vegas, one of the areas where the bidding problem is greatest, home inventories are down 10 percent since March, according to the Las Vegas Association of REALTORS®.
When a bidding war erupts, the problem is particularly difficult for traditional buyers because investors are usually cash purchasers. They can bid up a property without concern whether the appraisal will prevent them from getting a loan.
Experts say the problem is not unlike the situation at the height of the housing bubble. "This market is about as abnormal as the hypermarket that we came out of a few years ago," says Jay Butler, director of the Realty Studies program at Arizona State University.
Source: The Associated Press, Jonathan J. Cooper (07/20/2009)
Monday, July 20, 2009
Higher-End Housing Moves Buyers in SoCal
By AUSTIN KILGORE, July 17, 2009
Improvements in mortgage availability and the belief that prices have hit rock bottom has buyers moving in the Southern California and the San Diego Bay area, according to La Jolla-based data analyzer MDA DataQuick.
In So Cal, buyers are responding to price cuts on mid- to high-end homes and the availability of credit for pricier homes. There were a 23,262 total new and existing homes and condo sales completed in San Diego, Orange, Los Angeles, Ventura, Riverside and San Bernardino counties in June, up 12% from May.
While foreclosures are still having an impact on the SoCal market, the effect is weakening. Foreclosure sales made up 45.3% of resales in June, down from 49.7% in May and the February peak of 56.7%.
Fewer foreclosure sales meant resale of homes priced $500,000 and above rose to represent nearly 20% of all sales in the SoCal region. It’s the first time that segment of the market made up more than 19% of all sales since October 2008, and comes after that figure had dipped to a low of 13.4% in January.
The increase in pricier home sales helped increase the median sales price for the second consecutive month to $265,000, up 6.4% from $249,000 in May.
DataQuick president John Walsh said the numbers should be viewed with cautious optimism.
“The rising median should still be viewed mainly as a sign the market’s moving back toward a more normal distribution of sales across the home price spectrum,” he said in a press release. “Sales in many higher-cost neighborhoods couldn’t have gotten much lower, so this recent uptick in activity should come as no surprise.”
Walsh added: “The recession and problem mortgages are fueling more high-end distress, hence more high-end ‘bargains.’ What’s missing, still, is a wide-open financing spigot for the would-be buyers of these more expensive homes.”
In the nine-county San Diego Bay area, sales were up 16.1% from 7,447 in May to 8,644 in June. The median price paid for those homes and condos was $352,000 last month, up 3.1 percent from $341,500 in May, the highest since the median was $375,000 in October 2008.
The percentage of foreclosure sales dropped to 37.3% in June, down from 40.5% in May, and is at its lowest point since August 2008 when foreclosure sales made up 36% of all transactions.
Improvements in mortgage availability and the belief that prices have hit rock bottom has buyers moving in the Southern California and the San Diego Bay area, according to La Jolla-based data analyzer MDA DataQuick.
In So Cal, buyers are responding to price cuts on mid- to high-end homes and the availability of credit for pricier homes. There were a 23,262 total new and existing homes and condo sales completed in San Diego, Orange, Los Angeles, Ventura, Riverside and San Bernardino counties in June, up 12% from May.
While foreclosures are still having an impact on the SoCal market, the effect is weakening. Foreclosure sales made up 45.3% of resales in June, down from 49.7% in May and the February peak of 56.7%.
Fewer foreclosure sales meant resale of homes priced $500,000 and above rose to represent nearly 20% of all sales in the SoCal region. It’s the first time that segment of the market made up more than 19% of all sales since October 2008, and comes after that figure had dipped to a low of 13.4% in January.
The increase in pricier home sales helped increase the median sales price for the second consecutive month to $265,000, up 6.4% from $249,000 in May.
DataQuick president John Walsh said the numbers should be viewed with cautious optimism.
“The rising median should still be viewed mainly as a sign the market’s moving back toward a more normal distribution of sales across the home price spectrum,” he said in a press release. “Sales in many higher-cost neighborhoods couldn’t have gotten much lower, so this recent uptick in activity should come as no surprise.”
Walsh added: “The recession and problem mortgages are fueling more high-end distress, hence more high-end ‘bargains.’ What’s missing, still, is a wide-open financing spigot for the would-be buyers of these more expensive homes.”
In the nine-county San Diego Bay area, sales were up 16.1% from 7,447 in May to 8,644 in June. The median price paid for those homes and condos was $352,000 last month, up 3.1 percent from $341,500 in May, the highest since the median was $375,000 in October 2008.
The percentage of foreclosure sales dropped to 37.3% in June, down from 40.5% in May, and is at its lowest point since August 2008 when foreclosure sales made up 36% of all transactions.
Housing Experts: Now Is a Perfect Time to Buy
From Realtor Magazine Online, Daily Real Estate News July 20, 2009
Don’t forget to remind potential buyers of something that is obvious to real estate professionals: Now is the time to buy, but that opportunity may be slipping away.
For people who have a job and money, a dream house is within reach, writes Marc Roth, founder of Home Warranty of America and a columnist for BusinessWeek.
He points out that mortgage rates remain low, prices are still at historic lows, and the government is offering incentives for first-time homebuyers.
He also adds that the inventory of homes to buy is still large, but it is shrinking. According to the NATIONAL ASSOCIATION OF REALTORS®, the housing inventory peaked in November 2008 at an 11-month supply.
At the end of May 2009, it had fallen to a 9.6-month supply.
Roth says anyone who dallies will miss a good opportunity to buy a first home at a terrific price or go shopping for a move-up property that is a great buy.
Source: BusinessWeek.com, Marc Roth (11/17/2009)
Don’t forget to remind potential buyers of something that is obvious to real estate professionals: Now is the time to buy, but that opportunity may be slipping away.
For people who have a job and money, a dream house is within reach, writes Marc Roth, founder of Home Warranty of America and a columnist for BusinessWeek.
He points out that mortgage rates remain low, prices are still at historic lows, and the government is offering incentives for first-time homebuyers.
He also adds that the inventory of homes to buy is still large, but it is shrinking. According to the NATIONAL ASSOCIATION OF REALTORS®, the housing inventory peaked in November 2008 at an 11-month supply.
At the end of May 2009, it had fallen to a 9.6-month supply.
Roth says anyone who dallies will miss a good opportunity to buy a first home at a terrific price or go shopping for a move-up property that is a great buy.
Source: BusinessWeek.com, Marc Roth (11/17/2009)
Friday, July 17, 2009
Home Builder Optimism Climbs
From Realtor Magazine Online, Daily Real Estate News July 17, 2009
Home-builder optimism improved this week with the National Association of Home Builders’ index of member sentiment rising two points to 17, its highest since September 2008.
The report tracks the perceptions of 484 residential builders nationwide. Index readings lower than 50 indicate a predominance of negative sentiment. Still, this increase could be a sign that new-home contractors are seeing improvement in the market.
Source: The Associated Press, Alex Veiga (07/16/2009)
Home-builder optimism improved this week with the National Association of Home Builders’ index of member sentiment rising two points to 17, its highest since September 2008.
The report tracks the perceptions of 484 residential builders nationwide. Index readings lower than 50 indicate a predominance of negative sentiment. Still, this increase could be a sign that new-home contractors are seeing improvement in the market.
Source: The Associated Press, Alex Veiga (07/16/2009)
California Home Prices Rise in June
From Realtor Magazine Online, Daily Real Estate News July 17, 2009
California’s median home prices rose 7 percent in June compared to May, according to MDA DataQuick, a real estate research firm.
The statewide median price increased to $246,000 from $230,000, triggered by an increase in sales of higher-priced homes.
"We're just now seeing the beginnings of more normal mortgage lending patterns," DataQuick President John Walsh says. "There's still a long way to go, but it looks like the worst of the grind is over."
DataQuick also pointed out that foreclosures accounted for 46 percent of sales, the first month since August 2008 that foreclosure sales were less than 50 percent of the total.
Source: The Associated Press, Jacob Adelman (07/16/2009)
California’s median home prices rose 7 percent in June compared to May, according to MDA DataQuick, a real estate research firm.
The statewide median price increased to $246,000 from $230,000, triggered by an increase in sales of higher-priced homes.
"We're just now seeing the beginnings of more normal mortgage lending patterns," DataQuick President John Walsh says. "There's still a long way to go, but it looks like the worst of the grind is over."
DataQuick also pointed out that foreclosures accounted for 46 percent of sales, the first month since August 2008 that foreclosure sales were less than 50 percent of the total.
Source: The Associated Press, Jacob Adelman (07/16/2009)
Home Lending Rates Falling Again
From Realtor Magazine Online, Daily Real Estate News July 17, 2009
Rates on 30-year fixed mortgages fell to 5.14 percent for the week ended July 16, down from 5.20 percent a week before and 6.26 percent a year earlier, Freddie Mac reports.
Interest on fixed home loans has fallen in four of the past five weeks, and Freddie Mac economist Frank Nothaft says rate activity during that time has lowered the monthly payment on a $200,000 loan by $56.
Here’s a look at how other mortgage rates performed this week:
* 15-year fixed loans fell to 4.63 percent from 4.69 percent.
* One-year adjustable-rate mortgages fell to 4.76 percent from 4.82 percent.
* Five-year hybrid ARMs bumped up a notch to 4.83 percent from 4.82 percent.
Source: Grand Junction Free Press, Wyatt Haupt Jr. (07/17/09)
Rates on 30-year fixed mortgages fell to 5.14 percent for the week ended July 16, down from 5.20 percent a week before and 6.26 percent a year earlier, Freddie Mac reports.
Interest on fixed home loans has fallen in four of the past five weeks, and Freddie Mac economist Frank Nothaft says rate activity during that time has lowered the monthly payment on a $200,000 loan by $56.
Here’s a look at how other mortgage rates performed this week:
* 15-year fixed loans fell to 4.63 percent from 4.69 percent.
* One-year adjustable-rate mortgages fell to 4.76 percent from 4.82 percent.
* Five-year hybrid ARMs bumped up a notch to 4.83 percent from 4.82 percent.
Source: Grand Junction Free Press, Wyatt Haupt Jr. (07/17/09)
Wednesday, July 15, 2009
Single-Family Home Prices Rise in May
From Realtor Magazine Online, Daily Real Estate News July 15, 2009
Nationwide, detached, single-family home prices gained 1.6 percent in May, according to Integrated Asset Services, a specialist in default management and residential collateral valuations.
The increase is the largest since July 2005, IAS reported. The index had previously declined more than 19 percent from its peak in June 2007.
Compared to April, the Northeast was up 3.2 percent, the Midwest 1.9 percent, the South 1.1 percent, and the West 0.9 percent.
In all areas but the South, prices also rose in April.
“Two month's worth of positive data hardly signals a turn in the national housing market," says Dave McCarthy, President and CEO of Integrated Asset Services. “But we have to be encouraged by what we’re seeing in several important counties and neighborhoods.”
Hardest-Hit Counties
IAS also tracks monthly changes in median sale prices in 15,000 struggling communities. It identifies the following counties where prices have fallen furthest since the 2006 peak:
1. Fresno, Calif. -28.1 percent
2. Imperial Calif. -45.2 percent
3. Kern, Calif. -33.8 percent
4. Monterey, Calif. -37.9 percent
5. San Bernardino, Calif. -29.1 percent
6. San Joaquin, Calif. -42.8 percent
7. Charlotte, Fla. -37.6 percent
8. Hernando, Fla. -38.7 percent
9. Lee, Fla. -45.2 percent
10. Pasco, Fla. -50 percent
Source: Integrated Asset Services (07/09/2009)
Nationwide, detached, single-family home prices gained 1.6 percent in May, according to Integrated Asset Services, a specialist in default management and residential collateral valuations.
The increase is the largest since July 2005, IAS reported. The index had previously declined more than 19 percent from its peak in June 2007.
Compared to April, the Northeast was up 3.2 percent, the Midwest 1.9 percent, the South 1.1 percent, and the West 0.9 percent.
In all areas but the South, prices also rose in April.
“Two month's worth of positive data hardly signals a turn in the national housing market," says Dave McCarthy, President and CEO of Integrated Asset Services. “But we have to be encouraged by what we’re seeing in several important counties and neighborhoods.”
Hardest-Hit Counties
IAS also tracks monthly changes in median sale prices in 15,000 struggling communities. It identifies the following counties where prices have fallen furthest since the 2006 peak:
1. Fresno, Calif. -28.1 percent
2. Imperial Calif. -45.2 percent
3. Kern, Calif. -33.8 percent
4. Monterey, Calif. -37.9 percent
5. San Bernardino, Calif. -29.1 percent
6. San Joaquin, Calif. -42.8 percent
7. Charlotte, Fla. -37.6 percent
8. Hernando, Fla. -38.7 percent
9. Lee, Fla. -45.2 percent
10. Pasco, Fla. -50 percent
Source: Integrated Asset Services (07/09/2009)
Loan Applications Rise as Rates Fall Again
From Realtor Magazine Online, Daily Real Estate News July 15, 2009
Loan applications continued to increase last week as mortgage rates decreased, according to the Mortgage Bankers Association weekly mortgage applications survey.
The market index rose 4.3 percent to 514.4 last week from 493.1 the previous week on a seasonally adjusted basis. On an unadjusted basis, the index increased 15.3 percent compared with the previous week and was down 2.7 percent compared with the same week a year ago.
The refinance index was up 17.7 percent while the purchase index decreased 9.4 percent compared to the previous week. More than half of applications were for refinances.
* 30-year fixed-rate mortgages decreased to 5.05 percent from 5.34 percent;
* 15-year fixed-rate mortgages decreased to 4.59 percent from 4.83 percent;
* 1-year ARMs decreased to 6.47 percent from 6.58 percent.
Source: Mortgage Bankers Association (07/15/2009)
Loan applications continued to increase last week as mortgage rates decreased, according to the Mortgage Bankers Association weekly mortgage applications survey.
The market index rose 4.3 percent to 514.4 last week from 493.1 the previous week on a seasonally adjusted basis. On an unadjusted basis, the index increased 15.3 percent compared with the previous week and was down 2.7 percent compared with the same week a year ago.
The refinance index was up 17.7 percent while the purchase index decreased 9.4 percent compared to the previous week. More than half of applications were for refinances.
* 30-year fixed-rate mortgages decreased to 5.05 percent from 5.34 percent;
* 15-year fixed-rate mortgages decreased to 4.59 percent from 4.83 percent;
* 1-year ARMs decreased to 6.47 percent from 6.58 percent.
Source: Mortgage Bankers Association (07/15/2009)
First-Time Buyers: Hurry for $8,000 Tax Credit
From Realtor Magazine Online, Daily Real Estate News July 15, 2009
It’s time to remind first-time home buyers that in order to qualify for the government’s $8,000 gift in the form of a tax credit, the deal must close by Dec. 1.
Buyers should have a purchase contract signed by early October, so they have 45 to 60 days to arrange financing and safely close the deal."
There's not as much sand in the hourglass as we may think," said Jim Merrion, regional director at RE/MAX Northern Illinois.
Source: Chicago Tribune, Mary Ellen Podmolik (07/11/2009)
It’s time to remind first-time home buyers that in order to qualify for the government’s $8,000 gift in the form of a tax credit, the deal must close by Dec. 1.
Buyers should have a purchase contract signed by early October, so they have 45 to 60 days to arrange financing and safely close the deal."
There's not as much sand in the hourglass as we may think," said Jim Merrion, regional director at RE/MAX Northern Illinois.
Source: Chicago Tribune, Mary Ellen Podmolik (07/11/2009)
Pending Home Sales Record Fourth Straight Monthly Gain
From N.A.R., July 15, 2009
Pending home sales show a sustained uptrend, rising for four consecutive months with very favorable housing affordability and a first-time buyer tax credit boosting activity, according to the latest survey.
The Pending Home Sales Index increased 0.1 percent to 90.7 from an upwardly revised reading of 90.6 in April, and is 6.7 percent higher than May 2008 when it was 85.0. The last time there were four consecutive monthly gains was in October 2004.
Lawrence Yun, NAR chief economist, cautions that there could be delays in the number of contracts that go to closing. “Closed existing-home sales have improved but are coming in lower than expected because some contracts are delayed or falling through from the application of new appraisal rules for many transactions,” he said.
“Rises in contract activity show buyers are becoming more active even as they face much more stringent loan underwriting standards. Speedy clarification of the appraisal rules could smooth a housing market recovery and support the overall economy.”
Pending home sales show a sustained uptrend, rising for four consecutive months with very favorable housing affordability and a first-time buyer tax credit boosting activity, according to the latest survey.
The Pending Home Sales Index increased 0.1 percent to 90.7 from an upwardly revised reading of 90.6 in April, and is 6.7 percent higher than May 2008 when it was 85.0. The last time there were four consecutive monthly gains was in October 2004.
Lawrence Yun, NAR chief economist, cautions that there could be delays in the number of contracts that go to closing. “Closed existing-home sales have improved but are coming in lower than expected because some contracts are delayed or falling through from the application of new appraisal rules for many transactions,” he said.
“Rises in contract activity show buyers are becoming more active even as they face much more stringent loan underwriting standards. Speedy clarification of the appraisal rules could smooth a housing market recovery and support the overall economy.”
The 203k Loan and How it Works
Before the 203k Loan.
When a buyer wanted to buy a home that needed repairs, those repairs usually had to be completed prior to the close of escrow. Plus, those repairs normally were the responsiblity of the seller.
But with so many foreclosures in today's market, the bank is the seller...and banks are exempt from having to disclose any of the property's shortcomings. Therefore, the home in need of repair is listed "as is". In the past, such transactions required out-of-pocket cash expenditures from the buyer - even just to bring the property up to where it is habitable, or up to code.
Today's 203k Loan.
203k loans allow you to FINANCE the cost of the repairs in the new loan amount. (Not to exceed 110% of the after improved value determined by the appraiser and 203k consultant.) In other words, if you buy a property $200,000 that needs $50,000 in repairs, you can borrow the extra $50,000. Too good to be true? NOPE. That's it in a nutshell.
The Math
Your down payment is basesd on the sale price PLUS the final cost of the repairs x 3.5%, so for example:
Sale price is $200,000 (DO not calculate 3.5% on this) + $50,000 in repairs/costs (which includes certain costs and reserves the lender will require), so your loan is actually for $250,000. To calculate your down payment, $250,000 x 3.5% = $8750.00. (You will also have to pay out-of-pocket for Closing Costs, as usual.)
The Process
You, the buyer, will hire (lender may recommend) a HUD approved FHA 203k Consultant to accompany you to the property to determine the required repairs. This is your "wish list" of repairs.
The bad news is: The fee charged by the consultant can range from $400 to $1,200 depending on the extent of repairs needed. (Check with your consultant prior to scheduling your appointment.)
The good news is: The HUD-approved FHA 203k Consultant's Fee may be included in the mortgage, so go back above to The Math and add the Consultant's Fee into the amount you will borrow in your FHA Loan, and recalculate your downpayment.
Once the Consultant has itemized the list of repairs, you, the buyer, will obtain bids (estimates) from several licensed contractors for the work that needs to be completed. Three estimates are recommended for each contractor, but three is not a fixed or mandated number; it is just good practice to always get at least three bids.
You, the buyer, can act as your own general contractor but only if you are experienced and licensed. (FHA says experienced, but most investors require the buyer to be licensed.) The contractors must provide documentation that needs to be approved by the lender prior to the final loan approval.
The Consultant will determine the "required" repairs versus the "wish list repairs". Start with the required repairs and then move on from there to your wish list.
This is an important step for the Consultant and the Appraiser. You do not want to over-improve the home and exceed the condition of the comparable properties in the area.
Once the Consultant completes his report of required - and wish list - repairs, the lender will forward it to the Appraiser for an "After Improved Value" appraisal. This is where you may run into problems if you plan to over-improve the property. The Appraiser's report will be based on similar properties in this similar market. If you have a lot of short sales or foreclosures occurring in that neighborhood, take care because the appraisal will be lower than you might otherwise expect.
The Final Appraisal Report
The Final Appraisal Report will be a product of "tweeking" between the Consultant, the Appraiser and you, the Buyer. The final result will define exactly what the Contractor(s) will perform and how much they will be paid.
Next, the entire file is submitted to underwriting for approval. Of course, YOU WILL NEED TO QUALIFY FOR THE FULL LOAN AMOUNT BORROWED, even though you may be living in the home during the rehab period. The normal steps for closing will occur.
A Big Pluses
You, the borrower, can include 6 months' of mortgage payments in the new loan amount since it's assumed that you will have TWO housing payments during the rehabiliation of the new home. This money will be deducted each month during the reahab process. This is optional.
Closing occurs, and the work begins within 30 days of closing/funding. (This is when your mortgage payments start since this is when you started borrowing the money - however, if you included the 6 months' mortgage payments, they will be deducted it from escrow, starting when your first payment is due.)
Disbursments are made throughout the following 6 months from the Escrow Account (normally 4 draws with one final inspection, but this can be increased for higher repair amounts) as the work is completed.
Summary
You already paid the seller the purchase price of the home. Then you borrowed an additional amount which sits in an Escrow Account to pay the contractors. Your total loan is the total amount you borrow: 96.5% of the Purchase Price + Repairs.
Once the last disbursement is made and the final inspection showing COMPLETED AS PER THE CONTRACT, you are done!
When a buyer wanted to buy a home that needed repairs, those repairs usually had to be completed prior to the close of escrow. Plus, those repairs normally were the responsiblity of the seller.
But with so many foreclosures in today's market, the bank is the seller...and banks are exempt from having to disclose any of the property's shortcomings. Therefore, the home in need of repair is listed "as is". In the past, such transactions required out-of-pocket cash expenditures from the buyer - even just to bring the property up to where it is habitable, or up to code.
Today's 203k Loan.
203k loans allow you to FINANCE the cost of the repairs in the new loan amount. (Not to exceed 110% of the after improved value determined by the appraiser and 203k consultant.) In other words, if you buy a property $200,000 that needs $50,000 in repairs, you can borrow the extra $50,000. Too good to be true? NOPE. That's it in a nutshell.
The Math
Your down payment is basesd on the sale price PLUS the final cost of the repairs x 3.5%, so for example:
Sale price is $200,000 (DO not calculate 3.5% on this) + $50,000 in repairs/costs (which includes certain costs and reserves the lender will require), so your loan is actually for $250,000. To calculate your down payment, $250,000 x 3.5% = $8750.00. (You will also have to pay out-of-pocket for Closing Costs, as usual.)
The Process
You, the buyer, will hire (lender may recommend) a HUD approved FHA 203k Consultant to accompany you to the property to determine the required repairs. This is your "wish list" of repairs.
The bad news is: The fee charged by the consultant can range from $400 to $1,200 depending on the extent of repairs needed. (Check with your consultant prior to scheduling your appointment.)
The good news is: The HUD-approved FHA 203k Consultant's Fee may be included in the mortgage, so go back above to The Math and add the Consultant's Fee into the amount you will borrow in your FHA Loan, and recalculate your downpayment.
Once the Consultant has itemized the list of repairs, you, the buyer, will obtain bids (estimates) from several licensed contractors for the work that needs to be completed. Three estimates are recommended for each contractor, but three is not a fixed or mandated number; it is just good practice to always get at least three bids.
You, the buyer, can act as your own general contractor but only if you are experienced and licensed. (FHA says experienced, but most investors require the buyer to be licensed.) The contractors must provide documentation that needs to be approved by the lender prior to the final loan approval.
The Consultant will determine the "required" repairs versus the "wish list repairs". Start with the required repairs and then move on from there to your wish list.
This is an important step for the Consultant and the Appraiser. You do not want to over-improve the home and exceed the condition of the comparable properties in the area.
Once the Consultant completes his report of required - and wish list - repairs, the lender will forward it to the Appraiser for an "After Improved Value" appraisal. This is where you may run into problems if you plan to over-improve the property. The Appraiser's report will be based on similar properties in this similar market. If you have a lot of short sales or foreclosures occurring in that neighborhood, take care because the appraisal will be lower than you might otherwise expect.
The Final Appraisal Report
The Final Appraisal Report will be a product of "tweeking" between the Consultant, the Appraiser and you, the Buyer. The final result will define exactly what the Contractor(s) will perform and how much they will be paid.
Next, the entire file is submitted to underwriting for approval. Of course, YOU WILL NEED TO QUALIFY FOR THE FULL LOAN AMOUNT BORROWED, even though you may be living in the home during the rehab period. The normal steps for closing will occur.
A Big Pluses
You, the borrower, can include 6 months' of mortgage payments in the new loan amount since it's assumed that you will have TWO housing payments during the rehabiliation of the new home. This money will be deducted each month during the reahab process. This is optional.
Closing occurs, and the work begins within 30 days of closing/funding. (This is when your mortgage payments start since this is when you started borrowing the money - however, if you included the 6 months' mortgage payments, they will be deducted it from escrow, starting when your first payment is due.)
Disbursments are made throughout the following 6 months from the Escrow Account (normally 4 draws with one final inspection, but this can be increased for higher repair amounts) as the work is completed.
Summary
You already paid the seller the purchase price of the home. Then you borrowed an additional amount which sits in an Escrow Account to pay the contractors. Your total loan is the total amount you borrow: 96.5% of the Purchase Price + Repairs.
Once the last disbursement is made and the final inspection showing COMPLETED AS PER THE CONTRACT, you are done!
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