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.
Thursday, July 30, 2009
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!
Tuesday, July 14, 2009
Freddie Mac Calls for Appropriate Comparables
From Realtor Magazine Online, Daily Real Estate News July 14, 2009
A July 10 lender bulletin from Freddie Mac says appraisers "must be familiar with the local market," select "appropriate comparable sales," and certify them as "most similar" to the property in question.
The bulletin also says appraisers are not required to use distressed properties in their comparable sales analyses unless they represent a good number of the properties on the market.
The bulletin is in response to the new Home Valuation Code of Conduct, which is being criticized for causing a shift among lenders to appraisal management firms outside the local market and for weakening home sales.
Source: Inman News, Matt Carter (07/14/09)
A July 10 lender bulletin from Freddie Mac says appraisers "must be familiar with the local market," select "appropriate comparable sales," and certify them as "most similar" to the property in question.
The bulletin also says appraisers are not required to use distressed properties in their comparable sales analyses unless they represent a good number of the properties on the market.
The bulletin is in response to the new Home Valuation Code of Conduct, which is being criticized for causing a shift among lenders to appraisal management firms outside the local market and for weakening home sales.
Source: Inman News, Matt Carter (07/14/09)
Thursday, July 9, 2009
Freddie Mac Turns to YouTube
From Realtor Magazine Online, Daily Real Estate News July 9, 2009
Freddie Mac has turned to YouTube to help late-paying borrowers understand how to get loan modification assistance through President Obama’s Making Home Affordable program and other workout initiatives.
Available in English and Spanish versions, the video, "Stop Foreclosure: Documents Your Lender Needs to Help You", is a two-minute guide to determining eligibility and accelerating the application process.
Source: Freddie Mac (07/08/2009)
Freddie Mac has turned to YouTube to help late-paying borrowers understand how to get loan modification assistance through President Obama’s Making Home Affordable program and other workout initiatives.
Available in English and Spanish versions, the video, "Stop Foreclosure: Documents Your Lender Needs to Help You", is a two-minute guide to determining eligibility and accelerating the application process.
Source: Freddie Mac (07/08/2009)
Short Sales: The Basics
From Realtor.org, July 9, 2009
What is a short sale?
A short sale is a transaction in which the lender, or lenders, agree to accept less than the mortgage amount owed by the current homeowner. In some cases, the difference is forgiven by the lender, and in others the homeowner must make arrangements with the lender to settle the remainder of the debt.
Why is the number of short sales rising?
Due to the recent economic crisis, including rising unemployment, and drops in home prices in communities across the nation, the number of short sales is increasing. Since a short sale generally costs the lender less than a foreclosure, it can be a viable way for a lender to minimize its losses.
A short sale can also be the best option for homeowners who are “upside down” on mortgages because a short sale may not hurt their credit history as much as a foreclosure. As a result, homeowners may qualify for another mortgage sooner once they get back on their feet financially. However, some lenders issue 1099s to short sale homeowners and those borrowers are thus liable for payment of taxes on the "forgiven" sums.
What challenges have short sales presented for REALTORS®?
The rapid increase in the number of short sales, and the short sales process itself present a number of challenges for REALTORS®. Major challenges include:
* Limited experience
Many REALTORS® are new to the short sales process; a difficulty which is compounded by many lenders' lack of sufficient and experienced staff to process short sales. Even if the REALTORS® are experienced, most servicers are under-staffed and still not adequately trained, making negotiating a short sale particularly difficult.
* Absence of a uniform process and application
Currently, both short-sales documents and processes are lender-specific, making it very difficult and time-consuming for REALTORS® to become knowledgeable and efficient in facilitating these transactions.
* Multiple lenders
When more than one lender is involved, the negotiations are much more difficult. Second lien holders often hold up the transaction to exert the largest possible payment, in exchange for releasing their lien, even though in foreclosure they will get nothing.
As a result of these challenges our members have reported difficulties with: unresponsive lenders; lost documents that require multiple submissions, inaccurate or unrealistic home value assessments, and long processing delays, which cause buyers to walk away.
What is being done to address or eliminate these challenges?
On May 14, 2009, the Obama Administration announced its upcoming Foreclosure Alternatives Program. Among other things, the new program:
* Establishes financial incentives for servicers, sellers, and second lien holders to encourage the completion of short-sale transactions.
* Requires that a timeline, of no fewer than 90 days, be set to allow a homeowner to sell a home, without threat of foreclosure action.
* Requires the short sale agreement to specify reasonable and customary real estate commissions and costs to be deducted from the sales prices. (The servicer must agree not to negotiate a lower commission after receiving an offer.)
* Will provide standardized documents, including short-sale agreements and offer acceptance letters.
The Foreclosure Alternatives Program is anticipated to launch in late July.
For more information on all the short-sales provisions included in the program, see NAR's Short Sales Incentive Summary and the government's Foreclosure Alternative Program fact sheet (PDF 44K).
What is a short sale?
A short sale is a transaction in which the lender, or lenders, agree to accept less than the mortgage amount owed by the current homeowner. In some cases, the difference is forgiven by the lender, and in others the homeowner must make arrangements with the lender to settle the remainder of the debt.
Why is the number of short sales rising?
Due to the recent economic crisis, including rising unemployment, and drops in home prices in communities across the nation, the number of short sales is increasing. Since a short sale generally costs the lender less than a foreclosure, it can be a viable way for a lender to minimize its losses.
A short sale can also be the best option for homeowners who are “upside down” on mortgages because a short sale may not hurt their credit history as much as a foreclosure. As a result, homeowners may qualify for another mortgage sooner once they get back on their feet financially. However, some lenders issue 1099s to short sale homeowners and those borrowers are thus liable for payment of taxes on the "forgiven" sums.
What challenges have short sales presented for REALTORS®?
The rapid increase in the number of short sales, and the short sales process itself present a number of challenges for REALTORS®. Major challenges include:
* Limited experience
Many REALTORS® are new to the short sales process; a difficulty which is compounded by many lenders' lack of sufficient and experienced staff to process short sales. Even if the REALTORS® are experienced, most servicers are under-staffed and still not adequately trained, making negotiating a short sale particularly difficult.
* Absence of a uniform process and application
Currently, both short-sales documents and processes are lender-specific, making it very difficult and time-consuming for REALTORS® to become knowledgeable and efficient in facilitating these transactions.
* Multiple lenders
When more than one lender is involved, the negotiations are much more difficult. Second lien holders often hold up the transaction to exert the largest possible payment, in exchange for releasing their lien, even though in foreclosure they will get nothing.
As a result of these challenges our members have reported difficulties with: unresponsive lenders; lost documents that require multiple submissions, inaccurate or unrealistic home value assessments, and long processing delays, which cause buyers to walk away.
What is being done to address or eliminate these challenges?
On May 14, 2009, the Obama Administration announced its upcoming Foreclosure Alternatives Program. Among other things, the new program:
* Establishes financial incentives for servicers, sellers, and second lien holders to encourage the completion of short-sale transactions.
* Requires that a timeline, of no fewer than 90 days, be set to allow a homeowner to sell a home, without threat of foreclosure action.
* Requires the short sale agreement to specify reasonable and customary real estate commissions and costs to be deducted from the sales prices. (The servicer must agree not to negotiate a lower commission after receiving an offer.)
* Will provide standardized documents, including short-sale agreements and offer acceptance letters.
The Foreclosure Alternatives Program is anticipated to launch in late July.
For more information on all the short-sales provisions included in the program, see NAR's Short Sales Incentive Summary and the government's Foreclosure Alternative Program fact sheet (PDF 44K).
Wednesday, July 8, 2009
Mortgage Fraud Continues to Increase
From Realtor Magazine Online, Daily Real Estate News July 8, 2009
Mortgage fraud continues to increase as vulnerable homeowners seek answers to their housing issues, according to the 2008 Mortgage Fraud Report released Tuesday by the Federal Bureau of Investigation.
Reported losses to fraud hit $1.4 billion, up 83 percent compared to 2007 and are likely to climb even higher in 2009, the FBI said.
The number of fraud reports was 63,713 in fiscal 2008, up from 46,717 the previous year.
"The downward trend in the housing market during 2008 provided a favorable climate for mortgage fraud schemes to proliferate," the report said. "Several of these schemes have the potential to spread if the current economic downward trend, as expected, continues into 2009 and beyond."
Source: The Associated Press (07/08/2009)
Comment: 100% of the blame for this current economic crisis (the dastardly deeds continuing to this date) lies in the lap of Barney Frank and Chris Dodd. And don't forget the lead actors: ACORN and the union gangsters. Americans have been raped by them!
Mortgage fraud continues to increase as vulnerable homeowners seek answers to their housing issues, according to the 2008 Mortgage Fraud Report released Tuesday by the Federal Bureau of Investigation.
Reported losses to fraud hit $1.4 billion, up 83 percent compared to 2007 and are likely to climb even higher in 2009, the FBI said.
The number of fraud reports was 63,713 in fiscal 2008, up from 46,717 the previous year.
"The downward trend in the housing market during 2008 provided a favorable climate for mortgage fraud schemes to proliferate," the report said. "Several of these schemes have the potential to spread if the current economic downward trend, as expected, continues into 2009 and beyond."
Source: The Associated Press (07/08/2009)
Comment: 100% of the blame for this current economic crisis (the dastardly deeds continuing to this date) lies in the lap of Barney Frank and Chris Dodd. And don't forget the lead actors: ACORN and the union gangsters. Americans have been raped by them!
Mortgage Applications Up Despite Holiday
From Realtor Magazine Online, Daily Real Estate News July 8, 2009
Demand for mortgages returned last week after two consecutive down weeks, pushing the index up 10.9 percent to 493.1 from 444.8 the previous week on a seasonally adjusted basis that reflected the July 4 holiday.
On an unadjusted basis, the index decreased 0.5 percent compared with the previous week, but rose 7.2 percent compared with the same week a year ago.
The refinance index increased 15.2 percent, while the purchase index rose 6.7 percent.
Mortgage rates were mostly unchanged from the previous week. 30-year fixed-rate mortgages were flat compared to the previous week at 5.34 percent;15-year fixed-rate mortgages increased to 4.83 percent from 4.81 percent; and 1-year ARMs increased to 6.58 percent from 6.52 percent.
Source: Mortgage Bankers Association (07/08/2009)
Demand for mortgages returned last week after two consecutive down weeks, pushing the index up 10.9 percent to 493.1 from 444.8 the previous week on a seasonally adjusted basis that reflected the July 4 holiday.
On an unadjusted basis, the index decreased 0.5 percent compared with the previous week, but rose 7.2 percent compared with the same week a year ago.
The refinance index increased 15.2 percent, while the purchase index rose 6.7 percent.
Mortgage rates were mostly unchanged from the previous week. 30-year fixed-rate mortgages were flat compared to the previous week at 5.34 percent;15-year fixed-rate mortgages increased to 4.83 percent from 4.81 percent; and 1-year ARMs increased to 6.58 percent from 6.52 percent.
Source: Mortgage Bankers Association (07/08/2009)
Tuesday, July 7, 2009
Common Ways to Hold Title
Title to real property in California may be held by individuals, either in Sole Ownership or Co-Ownership. Co-Ownership of real property occurs when title is held by two or more persons. There are several variations as to how title may be held. The following brief summarizes eight of the more common examples of Sole Ownership and Co-Ownership.
SOLE OWNERSHIP:
1. A Single Man/Woman – A man or woman who has never been legally married.
2. An Unmarried Man/Woman – A man or woman, who, having been married, is legally divorced.
3. A Married Man/Woman, as His/Her Sole and Separate Property – When a married man or woman wishes to acquire title in his/her name alone, the spouse must consent, by quit claim deed or otherwise to the transfer, thereby relinquishing all right, title and interest to the property.
CO-OWNERSHIP
4. Community Property: The California Civil Code defines community property as the property acquired by husband and wife, during marriage, when not acquired as separate property. Real property conveyed to a married person is presumed to be community property, unless otherwise stated. Under community property, both spouses have the right to dispose of one half of the property by will, but if without a will, the property goes to the surviving spouse without administration. If a spouse exercises his/her right to dispose of one half, that half is subject to administration in the estate.
5. Joint Tenancy: A joint tenancy estate is defined in the Civil Code as: “A joint interest is one property owned by two or more persons in equal shares, by a title created by a single will or transfer to joint tenancy.” A chief characteristic of joint tenancy property is the right of survivorship. When a joint tenant dies, title to the property vests in the surviving joint tenant(s). Therefore, joint tenancy property is not subject to disposition by will.
6. Tenancy in Common: Under tenancy in common, the co-owners own undivided interests, but unlike joint tenancy, these interests need not be equal in quantity or duration, and may arrive at different times. There is no right of survivorship; each tenant owns an interest which, on his/her death, vests in his/her heirs or devises.
7. Trust: Title to real property in California may be held in a title holding trust. The trust holds legal and equitable title to the real estate. The trustee holds title for the benefit of the trustor/beneficiary, who retains all the management rights and responsibilities.
8. Community Property with Right of Survivorship: Property of a husband and wife when declared in the transfer document to be community property with the right of survivorship and which may be accepted in writing on the face of the document by a statement signed or initialed by the grantees, shall, upon the death of one of the spouses, pass to the survivor, without administration, subject to the same procedures as property held in joint tenancy.
SOLE OWNERSHIP:
1. A Single Man/Woman – A man or woman who has never been legally married.
2. An Unmarried Man/Woman – A man or woman, who, having been married, is legally divorced.
3. A Married Man/Woman, as His/Her Sole and Separate Property – When a married man or woman wishes to acquire title in his/her name alone, the spouse must consent, by quit claim deed or otherwise to the transfer, thereby relinquishing all right, title and interest to the property.
CO-OWNERSHIP
4. Community Property: The California Civil Code defines community property as the property acquired by husband and wife, during marriage, when not acquired as separate property. Real property conveyed to a married person is presumed to be community property, unless otherwise stated. Under community property, both spouses have the right to dispose of one half of the property by will, but if without a will, the property goes to the surviving spouse without administration. If a spouse exercises his/her right to dispose of one half, that half is subject to administration in the estate.
5. Joint Tenancy: A joint tenancy estate is defined in the Civil Code as: “A joint interest is one property owned by two or more persons in equal shares, by a title created by a single will or transfer to joint tenancy.” A chief characteristic of joint tenancy property is the right of survivorship. When a joint tenant dies, title to the property vests in the surviving joint tenant(s). Therefore, joint tenancy property is not subject to disposition by will.
6. Tenancy in Common: Under tenancy in common, the co-owners own undivided interests, but unlike joint tenancy, these interests need not be equal in quantity or duration, and may arrive at different times. There is no right of survivorship; each tenant owns an interest which, on his/her death, vests in his/her heirs or devises.
7. Trust: Title to real property in California may be held in a title holding trust. The trust holds legal and equitable title to the real estate. The trustee holds title for the benefit of the trustor/beneficiary, who retains all the management rights and responsibilities.
8. Community Property with Right of Survivorship: Property of a husband and wife when declared in the transfer document to be community property with the right of survivorship and which may be accepted in writing on the face of the document by a statement signed or initialed by the grantees, shall, upon the death of one of the spouses, pass to the survivor, without administration, subject to the same procedures as property held in joint tenancy.
PMI Predicts Where Prices Are Likely to Fall
From Realtor Magazine Online, Daily Real Estate News July 7, 2009
Mortgage insurer PMI Group predicts that home prices will fall through the first quarter of 2011 in about 30 of the country’s 50 largest metropolitan areas.
“The housing market has been hit by a demand shock of high unemployment and a supply shock of distressed foreclosure sales,” LaVaughn Henry, senior economist at PMI.
The areas PMI says have the highest probability of lower prices in 2011 are:
* Miami
* Fort Lauderdale
* West Palm Beach, Fla.
* Orlando
* Tampa, Fla.
* Jacksonville, Fla.
* Riverside, Calif.
* Los Angeles
* Santa Ana, Calif.
* Sacramento
* San Diego
* Las Vegas
* Phoenix
* Providence, R.I.
* Detroit
Cities with the lowest probability of falling prices are:
* Cleveland
* Pittsburgh
* Columbus, Ohio
* San Antonio
* Houston
* Dallas
* Fort Worth
Source: Bloomberg, Dan Levy (7/07/2009)
Mortgage insurer PMI Group predicts that home prices will fall through the first quarter of 2011 in about 30 of the country’s 50 largest metropolitan areas.
“The housing market has been hit by a demand shock of high unemployment and a supply shock of distressed foreclosure sales,” LaVaughn Henry, senior economist at PMI.
The areas PMI says have the highest probability of lower prices in 2011 are:
* Miami
* Fort Lauderdale
* West Palm Beach, Fla.
* Orlando
* Tampa, Fla.
* Jacksonville, Fla.
* Riverside, Calif.
* Los Angeles
* Santa Ana, Calif.
* Sacramento
* San Diego
* Las Vegas
* Phoenix
* Providence, R.I.
* Detroit
Cities with the lowest probability of falling prices are:
* Cleveland
* Pittsburgh
* Columbus, Ohio
* San Antonio
* Houston
* Dallas
* Fort Worth
Source: Bloomberg, Dan Levy (7/07/2009)
Tips for Negotiating a Mortgage Deal
From Realtor Magazine Online, Daily Real Estate News July 7, 2009
Getting a mortgage loan these days can be a slow and frustrating experience.
Here are some things that buyers should know as they go through the application process:
Ask for the “Good Faith Estimate” early. It won’t be released until it is officially “complete” and all the questions are answered. Push applicants to find answers right away to all the lender’s questions.
Suggest they read and ask questions about the fine print. Identifying and negotiating all the fees and charges can cut an applicant’s costs.
Shop title insurance. Point buyers toward Web sites like Closing.com, where they can comparison shop.
Get a commitment. Insist that the lender or loan broker agree that there won’t be any other charges on the HUD-1, which most borrowers don’t see until they are at the settlement table. "If [the lender] won't agree to that, you have to be a little suspicious," says Claire Fennessey, senior vice president of Entitle Direct.
Question flood insurance. If a property requires flood insurance, point buyers (and sellers) toward a civil engineering firm with experience with the Federal Emergency Management Agency’s resources to ensure that they aren’t paying too much. Eligibility for a preferred risk policy can cut costs substantially.
Source: Chicago Tribune, Mary Ellen Podmolik (07/05/2009)
Getting a mortgage loan these days can be a slow and frustrating experience.
Here are some things that buyers should know as they go through the application process:
Ask for the “Good Faith Estimate” early. It won’t be released until it is officially “complete” and all the questions are answered. Push applicants to find answers right away to all the lender’s questions.
Suggest they read and ask questions about the fine print. Identifying and negotiating all the fees and charges can cut an applicant’s costs.
Shop title insurance. Point buyers toward Web sites like Closing.com, where they can comparison shop.
Get a commitment. Insist that the lender or loan broker agree that there won’t be any other charges on the HUD-1, which most borrowers don’t see until they are at the settlement table. "If [the lender] won't agree to that, you have to be a little suspicious," says Claire Fennessey, senior vice president of Entitle Direct.
Question flood insurance. If a property requires flood insurance, point buyers (and sellers) toward a civil engineering firm with experience with the Federal Emergency Management Agency’s resources to ensure that they aren’t paying too much. Eligibility for a preferred risk policy can cut costs substantially.
Source: Chicago Tribune, Mary Ellen Podmolik (07/05/2009)
Lenders Avoid Loan Modifications
From Realtor Magazine Online, Daily Real Estate News July 7, 2009
The Obama administration's $75 billion foreclosure prevention effort is unlikely to succeed because mortgage lenders cannot turn a profit on modified loans, concludes a new report by the Federal Reserve Bank of Boston.
Analyzing 665,410 loans originated between 2005 and 2007 that subsequently became seriously delinquent, the Boston Fed found that only 3 percent of borrowers had their loans modified to lower monthly payments, and about 5.5 percent received workouts that did not result in lower payments.
Also, up to 45 percent of approximately 150,000 borrowers who received some kind of aid ended up in arrears again, but about 30 percent of delinquent borrowers were able to fix their problems without help from their lenders.
Source: Boston Globe, Jenifer McKim (07/07/2009)
The Obama administration's $75 billion foreclosure prevention effort is unlikely to succeed because mortgage lenders cannot turn a profit on modified loans, concludes a new report by the Federal Reserve Bank of Boston.
Analyzing 665,410 loans originated between 2005 and 2007 that subsequently became seriously delinquent, the Boston Fed found that only 3 percent of borrowers had their loans modified to lower monthly payments, and about 5.5 percent received workouts that did not result in lower payments.
Also, up to 45 percent of approximately 150,000 borrowers who received some kind of aid ended up in arrears again, but about 30 percent of delinquent borrowers were able to fix their problems without help from their lenders.
Source: Boston Globe, Jenifer McKim (07/07/2009)
Prices Slide in Wealthiest Towns
From Realtor Magazine Online, Daily Real Estate News July 7, 2009
America’s high-end neighborhoods could feel the pain as homes linger on the market and prices slide.
There are more than 60,000 homes priced above $1 million listed on Realtor.com with the inventory at levels far above the national average of 10 months.
Some observers predict that big inventories in formerly protected enclaves will drive down prices as much as average prices fell in less-pricey metros a year ago. "Any [inventory] over seven months generally means falling prices," says David Stiff, chief economist at Fiserv in Brookfield, Wis.
Multi-million dollar communities with significant risk of taking big slides are:
1. Incline Village-Crystal Bay, Nev.
2. New Vernon, N.J.
3. Alpine, N.J.
4. Sagaponack, N.Y.
5. Amagansett, N.Y.
6. Bridgehampton, N.Y.
7. Ross, Calif.
8. Old Westbury, N.Y.
9. Santa Barbara, Calif.
10. Southampton, N.Y.
Source: Forbes, Stephanie Fitch and Matthew Woolsey (07/13/2009)
America’s high-end neighborhoods could feel the pain as homes linger on the market and prices slide.
There are more than 60,000 homes priced above $1 million listed on Realtor.com with the inventory at levels far above the national average of 10 months.
Some observers predict that big inventories in formerly protected enclaves will drive down prices as much as average prices fell in less-pricey metros a year ago. "Any [inventory] over seven months generally means falling prices," says David Stiff, chief economist at Fiserv in Brookfield, Wis.
Multi-million dollar communities with significant risk of taking big slides are:
1. Incline Village-Crystal Bay, Nev.
2. New Vernon, N.J.
3. Alpine, N.J.
4. Sagaponack, N.Y.
5. Amagansett, N.Y.
6. Bridgehampton, N.Y.
7. Ross, Calif.
8. Old Westbury, N.Y.
9. Santa Barbara, Calif.
10. Southampton, N.Y.
Source: Forbes, Stephanie Fitch and Matthew Woolsey (07/13/2009)
Monday, July 6, 2009
Another Rash of Foreclosures Coming Soon
From Realtor Magazine Online, Daily Real Estate News July 6, 2009
Some economic observers are predicting another wave of foreclosures later this summer or in the fall. That’s because lenders that have held off on foreclosures as part of President Obama’s plan will now move forward aggressively to clear the backlog of troubled mortgages.
Rising foreclosures will further depress home values, says Mark Zandi of Moody's Economy.com, who calculates that 15.4 million homeowners—one in five of those with first mortgages—will be underwater.
Seth Wheeler, a senior adviser to Treasury Secretary Timothy Geithner, says the government is “unlikely to implement another moratorium.”
But Wheeler said the government plans to put in place some programs that encourage lenders to try some alternatives to foreclosure.
Source: Chicago Tribune, Don Lee (07/06/2009)
Some economic observers are predicting another wave of foreclosures later this summer or in the fall. That’s because lenders that have held off on foreclosures as part of President Obama’s plan will now move forward aggressively to clear the backlog of troubled mortgages.
Rising foreclosures will further depress home values, says Mark Zandi of Moody's Economy.com, who calculates that 15.4 million homeowners—one in five of those with first mortgages—will be underwater.
Seth Wheeler, a senior adviser to Treasury Secretary Timothy Geithner, says the government is “unlikely to implement another moratorium.”
But Wheeler said the government plans to put in place some programs that encourage lenders to try some alternatives to foreclosure.
Source: Chicago Tribune, Don Lee (07/06/2009)
Tips for Parents Buying Homes for Children
From Realtor Magazine Online, Daily Real Estate News July 6, 2009
With home prices low, now could be a good time for parents to give their children a home or even an investment property.
Here are some suggestions for managing the tax consequences from Mark Luscombe, tax analyst with Wolters Kluwer.
Give a cash gift.
Individuals are allowed to gift up to $13,000 per person in a given year without incurring gift tax. That means a couple could give their offspring and spouse $52,000 in a single year to go toward a down payment.
Lend money.
The government requires that family members meet or exceed minimum loan rates to avoid having the loan be considered a gift. The rates are currently low. One way to handle this is for parent to use the $52,000 gift exclusion to forgive both interest and principal.
Use a trust.
Set up a qualified personal residence trust, or QPRT. You’ll need an attorney to handle this transaction, but in a nutshell, parents put the home they want to give their children into a trust. At the end of a pre-set term, the home passes to the children with no taxes due.
Source: The Wall Street Journal, Shelly Banjo (06/25/2009)
With home prices low, now could be a good time for parents to give their children a home or even an investment property.
Here are some suggestions for managing the tax consequences from Mark Luscombe, tax analyst with Wolters Kluwer.
Give a cash gift.
Individuals are allowed to gift up to $13,000 per person in a given year without incurring gift tax. That means a couple could give their offspring and spouse $52,000 in a single year to go toward a down payment.
Lend money.
The government requires that family members meet or exceed minimum loan rates to avoid having the loan be considered a gift. The rates are currently low. One way to handle this is for parent to use the $52,000 gift exclusion to forgive both interest and principal.
Use a trust.
Set up a qualified personal residence trust, or QPRT. You’ll need an attorney to handle this transaction, but in a nutshell, parents put the home they want to give their children into a trust. At the end of a pre-set term, the home passes to the children with no taxes due.
Source: The Wall Street Journal, Shelly Banjo (06/25/2009)
Jumbos Getting Easier to Find, Negotiate
From Realtor Magazine Online, Daily Real Estate News July 6, 2009
It’s still difficult for buyers to get jumbo mortgages, but it appears to be easier than it was six months ago.
Bank of America, Wells Fargo, and JPMorgan Chase & Co. are cutting rates somewhat, buying jumbo loans made by other lenders and purchasing them from brokers. One factor is that jumbo loans are not subject to new appraisal rules that are slowing much of the lending market.
"The whole jumbo market has improved in the last 90 days," says Terry Erwin, chief lending officer for KeyPoint Credit Union, a jumbo lender founded in 1979 to serve electronics industry workers in California's Silicon Valley.
Erwin says the most frequently selected loans at his company are 5/1 hybrid ARMs, which carry a fixed rate for five years before converting to a loan that adjusts annually.
Source: Inman News, Matt Carter (07/06/2009)
It’s still difficult for buyers to get jumbo mortgages, but it appears to be easier than it was six months ago.
Bank of America, Wells Fargo, and JPMorgan Chase & Co. are cutting rates somewhat, buying jumbo loans made by other lenders and purchasing them from brokers. One factor is that jumbo loans are not subject to new appraisal rules that are slowing much of the lending market.
"The whole jumbo market has improved in the last 90 days," says Terry Erwin, chief lending officer for KeyPoint Credit Union, a jumbo lender founded in 1979 to serve electronics industry workers in California's Silicon Valley.
Erwin says the most frequently selected loans at his company are 5/1 hybrid ARMs, which carry a fixed rate for five years before converting to a loan that adjusts annually.
Source: Inman News, Matt Carter (07/06/2009)
Wednesday, July 1, 2009
Pending Home Sales Rise Again
From Realtor Magazine Online, Daily Real Estate News July 1, 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 National Association of REALTORS®.
The Pending Home Sales Index, a forward-looking indicator based on contracts signed in May, 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 says. “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.”
Region
* Northeast: The Pending Home Sales Index in the Northeast rose 3.1 percent to 80.9 in May and is 6.8 percent above a year ago.
* Midwest : In the Midwest, the index slipped 1.3 percent to 89.2 but is 11.4 percent above May 2008.
* South: The index in the South declined 1.7 percent to 92.6 in May but is 7.9 percent higher than a year ago.
* West: In the West, the index rose 2.2 percent to 96.9 and is 0.7 percent above May 2008.
The Effects of Appraisals
NAR President Charles McMillan says the appraisal issue is complicated. “We see that distressed homes often are selling for 20 percent less than normal homes in the same area, but some appraisals don’t distinguish between traditional homes and distressed property,” he says. “In many cases appraisers from outside the area are being used, but as everyone knows real estate is local and appraisals should be done by an expert with local expertise.”
McMillan says sellers shouldn’t hesitate to speak with an appraiser about their home. “Sellers should feel free to tell an appraiser about improvements and renovations to their home, and how it compares with other homes in the neighborhood,” he adds.
“Also, if recent sales in the neighborhood were discounted, but not similar to your home in terms of quality or condition, that should be pointed out. It wouldn’t hurt to put all this in writing, especially if an appraiser is not familiar with your area. "
Affordability at a High
NAR’s Housing Affordability Index remains at historic highs. The affordability index fell to 171.6 in May from an upwardly revised 178.8 in April, which was the highest on record dating back to 1970. “Under these conditions the typical family would devote only 14.6 percent of gross income to mortgage principal and interest, which is one of the lowest percentages on record,” Yun says.
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.
A median-income family, earning $60,800, could afford a home costing $296,700 in May with a 20 percent down payment, assuming 25 percent of gross income is devoted to mortgage principal and interest. Affordability conditions for first-time buyers with the same income and small down payments are roughly 80 percent of what a median-income family can afford. The affordable price was significantly higher than the median existing single-family home price in May, which was $172,900.
First-time Buyer Tax Credits Boost
The first-time buyer tax credit also is benefiting the market. “Strong activity by entry-level buyers is helping to absorb inventory and allow some existing owners to make a trade,” Yun says Existing-home sales should trend up through the end of the year, with normal local market differences. “The big question is how much the appraisal issue will impact the ability of contracts to go to closing,” Yun says. “We are currently conducting a study to assess the degree to which new appraisal rules are impacting home sales.”
— NAR
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 National Association of REALTORS®.
The Pending Home Sales Index, a forward-looking indicator based on contracts signed in May, 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 says. “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.”
Region
* Northeast: The Pending Home Sales Index in the Northeast rose 3.1 percent to 80.9 in May and is 6.8 percent above a year ago.
* Midwest : In the Midwest, the index slipped 1.3 percent to 89.2 but is 11.4 percent above May 2008.
* South: The index in the South declined 1.7 percent to 92.6 in May but is 7.9 percent higher than a year ago.
* West: In the West, the index rose 2.2 percent to 96.9 and is 0.7 percent above May 2008.
The Effects of Appraisals
NAR President Charles McMillan says the appraisal issue is complicated. “We see that distressed homes often are selling for 20 percent less than normal homes in the same area, but some appraisals don’t distinguish between traditional homes and distressed property,” he says. “In many cases appraisers from outside the area are being used, but as everyone knows real estate is local and appraisals should be done by an expert with local expertise.”
McMillan says sellers shouldn’t hesitate to speak with an appraiser about their home. “Sellers should feel free to tell an appraiser about improvements and renovations to their home, and how it compares with other homes in the neighborhood,” he adds.
“Also, if recent sales in the neighborhood were discounted, but not similar to your home in terms of quality or condition, that should be pointed out. It wouldn’t hurt to put all this in writing, especially if an appraiser is not familiar with your area. "
Affordability at a High
NAR’s Housing Affordability Index remains at historic highs. The affordability index fell to 171.6 in May from an upwardly revised 178.8 in April, which was the highest on record dating back to 1970. “Under these conditions the typical family would devote only 14.6 percent of gross income to mortgage principal and interest, which is one of the lowest percentages on record,” Yun says.
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.
A median-income family, earning $60,800, could afford a home costing $296,700 in May with a 20 percent down payment, assuming 25 percent of gross income is devoted to mortgage principal and interest. Affordability conditions for first-time buyers with the same income and small down payments are roughly 80 percent of what a median-income family can afford. The affordable price was significantly higher than the median existing single-family home price in May, which was $172,900.
First-time Buyer Tax Credits Boost
The first-time buyer tax credit also is benefiting the market. “Strong activity by entry-level buyers is helping to absorb inventory and allow some existing owners to make a trade,” Yun says Existing-home sales should trend up through the end of the year, with normal local market differences. “The big question is how much the appraisal issue will impact the ability of contracts to go to closing,” Yun says. “We are currently conducting a study to assess the degree to which new appraisal rules are impacting home sales.”
— NAR
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