Study Uncovers Declines Among Owner-Occupant REO Buyers
12/02/2011 By: Carrie Bay
Looking for an REO buyer? It’s becoming harder to find owner-occupants to fit that bill.
New Vista Asset Management has published the results of a three-year study on buyers of foreclosed homes, covering 18 counties hit hardest by the mortgage crisis.
The company says the percentage of REO homes sold to owner-occupant buyers has decreased in almost every market.
In Los Angeles County, California, for example, owner-occupant REO buyers have dropped from 80 percent in 2009 to 60 percent by the third quarter of 2011.
New Vista’s study uses data extracted from local recorder, courthouse, and tax assessment records – looking at foreclosed homes sold by banks, HUD, Fannie Mae, and Freddie Mac – to determine whether the purchasers were owner-occupants or absentee owners using single-family homes as rental or vacation properties.
The company began tracking real estate sales transactions closed in the first quarter of 2009 and includes consecutive quarterly data through the third quarter of 2011.
“Although, quarter-by-quarter, we have observed some market-specific increases, over the entire period, owner occupancy rates for REO sales have broadly weakened,” said Brian Hurley, New Vista’s president and COO.
Hurley notes that with eleven consecutive quarters of data, the company can look beyond both seasonality and the temporary impact of demand stimuli such as the homebuyer tax credit, and observe “a clear pattern of decline.”
Wayne County, Michigan is the only market of the 18 analyzed that has seen the percentage of owner-occupant REO buyers increase over the last three years, albeit from extremely low levels.
In 2009, owner-occupants accounted for nearly 33 percent of REO purchases in Wayne County. By the third quarter of this year, their share had risen to just over 37 percent.
Wayne County was the only market that had an owner occupancy rate for single-family REO sales below 50 percent in 2009.
By the third quarter of 2011, owner occupancy rates for REO sales in an additional four of the studied counties had fallen below 50 percent, including Maricopa County, Arizona; Osceola County, Florida; Miami-Dade County, Florida; and Clark County, Nevada.
Most markets included in the study saw their share of owner-occupant REO buyers drop by double-digits over the three-year period.
Kevin Stein is with the California Reinvestment Coalition, a nonprofit organization that advocates for increased access to credit on behalf of California’s low-income communities.
Commenting on New Vista’s results, Stein said, “We are troubled by the significant drop in owner occupant purchases of REO properties in these hard hit markets, which is no doubt compounded by decreased access to credit and a failure to repair foreclosed properties to move-in condition.”
Stein says the increased investor acquisition of REOs is reversing the years of community development progress that nonprofits have facilitated.
“We need to ensure that lenders, nonprofits and government agencies are working together to give qualified homebuyers a fair chance to purchase REO properties and help stabilize residential neighborhoods,” Stein added.
While New Vista has been tracking the study’s findings since the first quarter of 2009, company management elected to formally publish the index in response to a growing focus on investor-driven solutions to the nation’s residential real estate crisis.
“Several initiatives now under consideration promise to channel more houses to investors rather than to owner-occupant purchasers,” Hurley noted.
“We timed the first release of our study to raise awareness of the community impacts that current REO disposition practices are already having,” he explained.
Hurley says bulk sales, drop-bid foreclosure auctions, and proposals under review by the Federal Housing Finance Agency (FHFA) to facilitate the sale of government-owned REOs for rental purposes all promise to move more REOs out of local real estate markets.
“Before the market adopts new strategies to address an expected surge in foreclosure volumes, we wanted the owner-occupancy impact of current approaches to be well understood,” Hurley said.
New Vista’s “Index of the Percentage of Single Family REO Properties Sold to Owner-Occupant Buyers” will now be published quarterly.
The company plans to increase coverage to include additional markets in 2012.
From: http://ping.fm/YmY4M
Monday, December 5, 2011
Friday, December 2, 2011
Unemployment Rate Drops to 8.6%
Unemployment Rate Drops to 8.6%
12/02/2011 By: Carrie Bay
The nation’s unemployment rate fell to 8.6 percent during the month of November, as employers added 120,000 new jobs to their payrolls, the U.S. Department of Labor said Friday.
By the government’s calculations, the unemployment rate declined by 0.4 percentage point from 9.0 percent reported in October to hit its lowest level since March of 2009.
Analysts at IHS Global Insight were expecting the economy to add 125,000 new jobs last month, but the rate to hold at 9.0 percent.
Earlier this month, IHS published the graphic above, illustrating its projections of how long it will take each state to return to peak levels of employment.
Employment assessments for both October and September were revised upward. The Labor Department says total nonfarm payroll employment rose by 210,000 jobs in September rather than the 158,000 previously reported. October’s numbers were revised from 80,000 new jobs to 100,000.
Still, the 72,000 more jobs than previously thought over past months isn’t enough to cut the unemployment rate by forty basis points.
Much of the drop can be explained by the fact that those who’ve been unemployed for extended periods are no longer counted as part of the Labor Department’s unemployed population as they become ineligible to claim unemployment benefits.
The Labor Department’s report does indicate that the size of its measurable labor force contracted by 315,000 persons.
Commenting on the latest numbers, Ed Delgado, CEO of the Five Star Institute, said, “While the decline in the national unemployment rate is significant [40 basis points] the comprehensive view of employment, or U6 rate, that includes all marginally attached to the labor force, remains high at 15.6 percent and 60 basis points higher than a year ago.”
Delgado went on to explain, “Some of the decline can be attributed to seasonal employment trends as we approach the holidays and we remain cautious that a one month decline of this magnitude does not necessarily suggest a sustainable trend … that said, the abrupt decline is an impressive one-month reduction in unemployment.”
The analysts at Capital Economics agree with that assessment. The sharp drop-off “is another illustration that the U.S. economy is, for now at least, shrugging off the global economic downturn and fears about the collapse of the euro-zone,” they said in a research note published Friday.
*Editor’s Note: The Five Star Institute is the parent company of DS News and DSNews.com.
From: http://www.dsnews.com/articles/unemployment-rate-drops-to-86-2011-12-02
12/02/2011 By: Carrie Bay
The nation’s unemployment rate fell to 8.6 percent during the month of November, as employers added 120,000 new jobs to their payrolls, the U.S. Department of Labor said Friday.
By the government’s calculations, the unemployment rate declined by 0.4 percentage point from 9.0 percent reported in October to hit its lowest level since March of 2009.
Analysts at IHS Global Insight were expecting the economy to add 125,000 new jobs last month, but the rate to hold at 9.0 percent.
Earlier this month, IHS published the graphic above, illustrating its projections of how long it will take each state to return to peak levels of employment.
Employment assessments for both October and September were revised upward. The Labor Department says total nonfarm payroll employment rose by 210,000 jobs in September rather than the 158,000 previously reported. October’s numbers were revised from 80,000 new jobs to 100,000.
Still, the 72,000 more jobs than previously thought over past months isn’t enough to cut the unemployment rate by forty basis points.
Much of the drop can be explained by the fact that those who’ve been unemployed for extended periods are no longer counted as part of the Labor Department’s unemployed population as they become ineligible to claim unemployment benefits.
The Labor Department’s report does indicate that the size of its measurable labor force contracted by 315,000 persons.
Commenting on the latest numbers, Ed Delgado, CEO of the Five Star Institute, said, “While the decline in the national unemployment rate is significant [40 basis points] the comprehensive view of employment, or U6 rate, that includes all marginally attached to the labor force, remains high at 15.6 percent and 60 basis points higher than a year ago.”
Delgado went on to explain, “Some of the decline can be attributed to seasonal employment trends as we approach the holidays and we remain cautious that a one month decline of this magnitude does not necessarily suggest a sustainable trend … that said, the abrupt decline is an impressive one-month reduction in unemployment.”
The analysts at Capital Economics agree with that assessment. The sharp drop-off “is another illustration that the U.S. economy is, for now at least, shrugging off the global economic downturn and fears about the collapse of the euro-zone,” they said in a research note published Friday.
*Editor’s Note: The Five Star Institute is the parent company of DS News and DSNews.com.
From: http://www.dsnews.com/articles/unemployment-rate-drops-to-86-2011-12-02
Delinquencies Still Falling but Foreclosures at an All-Time High
Delinquencies Still Falling but Foreclosures at an All-Time High
12/01/2011 By: Carrie Bay
Data released by Lender Processing Services (LPS) Thursday shows mortgage delinquencies are continuing to decline, now nearly 30 percent below their January 2010 peak.
Loans in the process of foreclosure, on the other hand, are steadily rising. LPS says foreclosure inventories reached an all-time high at the end of October, making up 4.29 percent of all active mortgages.
The average days delinquent for loans in foreclosure extended as well during the month of October, setting a new record of 631 days since last payment, while the average days delinquent for loans 90 or more days past due but not yet in foreclosure
From: http://ping.fm/6NWMx
12/01/2011 By: Carrie Bay
Data released by Lender Processing Services (LPS) Thursday shows mortgage delinquencies are continuing to decline, now nearly 30 percent below their January 2010 peak.
Loans in the process of foreclosure, on the other hand, are steadily rising. LPS says foreclosure inventories reached an all-time high at the end of October, making up 4.29 percent of all active mortgages.
The average days delinquent for loans in foreclosure extended as well during the month of October, setting a new record of 631 days since last payment, while the average days delinquent for loans 90 or more days past due but not yet in foreclosure
From: http://ping.fm/6NWMx
Tuesday, November 8, 2011
Franchisors offering buyers 'Home Price Protection'
Franchisors offering buyers 'Home Price Protection'
Payouts tied to market index instead of individual properties
By Steve Bergsman
Inman News™
Declining home prices and the foreclosure backlog are not the only obstacles to a housing recovery. There is also the psychological factor: Potential homeowners have lost confidence in the asset class.
It's easy to understand why. After decades of relatively steady, mostly upward movement in prices, home price appreciation soared during the boom -- until the recession brought prices crashing back to the trend line.
First-time homeowners and even families already in single-family residences who would normally move up to a bigger home have become fearful that the asset class is essentially unstable and could easily behave like the stock market with wild swings in pricing. Why move into a home bought at a certain a price, when tomorrow the value of that same house could be less than it was at move-in?
That's the issue T.J. Agresti, CEO of Greenwood Village, Colo.-based EquityLock Solutions, has tried to address with a program called Home Price Protection, which essentially offers buyers a chance to recoup dollars if home prices in their local market declined at the time they sell their homes as compared to move-in date.
"The only way to overcome revulsion to an asset class is for people to have faith and confidence in it again," Agresti said. "At the time of the bailouts, Federal Reserve Chairman Ben Bernanke talked about this type of product, but when asked why doesn't the government back a private company to provide insurance, he said flat out this has to be a private-sector answer."
The concept of using insurance or contracts to protect housing prices has been around since the 1970s, but with home prices very strong and then the advent of the bubble at the turn of the century, it wasn't something anyone was even considering because the thought that home values could fall as well as rise seemed like an impossibility.
After the mortgage crisis, recession and the flood of foreclosures trampled the housing market, the concept of home-price protection once again looked like a reasonable idea.
"In 2009, about a dozen companies formed to try and bring this product to market," Agresti said. "These included undercapitalized concept companies looking for funding."
The problem was, there were two different approaches: an insurance product that would protect homeowners from loss or a non-insurance product that would protect homeowners from risk.
Agresti chose the latter route.
"We were the first to market in May of this year," Agresti boasted.
Apparently, Home Price Protection filled a need because by midsummer, EquityLock Solutions finalized agreements with RE/MAX International, Keller Williams Realty and Prudential Real Estate. In addition, Stonecrest Homes, an Atlanta homebuilder, will include Home Price Protection on all of its completed homes and plots under development.
This is not insurance, but a financial agreement to pay the homeowner upon resale if the House Price Index (determined by the Federal Housing Finance Agency) declined in the marketplace. The contract is not purchased to insure against the loss of value in a particular real estate parcel. Instead, the contract pays out based on declines in the relevant market index, regardless of whether the home sells for a gain or a loss.
The minimum period for the contract is two years and the maximum is 15 years. There is a cap on the payout of 20 percent of the contract price.
Real estate companies have become interested in home-price protection because it provides an incentive to get buyers in the door. It also helps sellers. Generally, a price stalemate happens when a buyer wants a certain price cut, but the seller will go only so far down in the offering. Now the seller can say, "I won't reduce my price anymore, but I will pay for market protection.' "
Chris Brown, CEO at RE/MAX Connection REALTORS® in New Jersey, is involved with the Home Price Protection pilot program for RE/MAX in his state, which went live on July 26. When I spoke with Brown a few weeks afterward, his company already had eight commitments to contract, including one sale.
"In New Jersey, a normal seller has to compete with property values that are depressed because of foreclosed homes," Brown explained. "Sellers have to sacrifice equity to match up with price competition. Home Price Protection is a mechanism that will allow the seller to have the property stand out among all other properties and the seller doesn't have to reduce prices to match up with foreclosed homes."
Brown gives this example: Prices in certain neighborhoods have fallen 5 percent and the REALTOR® tells the homeowner, maybe he should cut his offering by 6.5 percent to be competitive. The homeowner has to ask himself: Do I really want to drop the price another $12,000 on a $200,000 house?
"The other option is, the REALTOR® can offer up to 1.7 percent compensation to a buyer to purchase Home Price Protection," Brown said. "To make it even more competitive, the REALTOR® said, 'Let's just cut the home price 1 percent.' Now they are looking at a drop of 2.7 percent as opposed to 6.5 percent and they have something tangible to give to the homebuyer.
"This particular product answers the challenge of consumer confidence," Brown said.
EquityLock Solutions is not trying to promote a product that allows people to game the system or make a bet on the market, Agresti said. "What we are trying to do is provide people with the stability that said, 'I want to move into this house. I'm going to stay in the house a normal amount of time. And, I'm not going to do that unless I get some protection from another market correction.' "
From: http://ping.fm/BVSCh
Payouts tied to market index instead of individual properties
By Steve Bergsman
Inman News™
Declining home prices and the foreclosure backlog are not the only obstacles to a housing recovery. There is also the psychological factor: Potential homeowners have lost confidence in the asset class.
It's easy to understand why. After decades of relatively steady, mostly upward movement in prices, home price appreciation soared during the boom -- until the recession brought prices crashing back to the trend line.
First-time homeowners and even families already in single-family residences who would normally move up to a bigger home have become fearful that the asset class is essentially unstable and could easily behave like the stock market with wild swings in pricing. Why move into a home bought at a certain a price, when tomorrow the value of that same house could be less than it was at move-in?
That's the issue T.J. Agresti, CEO of Greenwood Village, Colo.-based EquityLock Solutions, has tried to address with a program called Home Price Protection, which essentially offers buyers a chance to recoup dollars if home prices in their local market declined at the time they sell their homes as compared to move-in date.
"The only way to overcome revulsion to an asset class is for people to have faith and confidence in it again," Agresti said. "At the time of the bailouts, Federal Reserve Chairman Ben Bernanke talked about this type of product, but when asked why doesn't the government back a private company to provide insurance, he said flat out this has to be a private-sector answer."
The concept of using insurance or contracts to protect housing prices has been around since the 1970s, but with home prices very strong and then the advent of the bubble at the turn of the century, it wasn't something anyone was even considering because the thought that home values could fall as well as rise seemed like an impossibility.
After the mortgage crisis, recession and the flood of foreclosures trampled the housing market, the concept of home-price protection once again looked like a reasonable idea.
"In 2009, about a dozen companies formed to try and bring this product to market," Agresti said. "These included undercapitalized concept companies looking for funding."
The problem was, there were two different approaches: an insurance product that would protect homeowners from loss or a non-insurance product that would protect homeowners from risk.
Agresti chose the latter route.
"We were the first to market in May of this year," Agresti boasted.
Apparently, Home Price Protection filled a need because by midsummer, EquityLock Solutions finalized agreements with RE/MAX International, Keller Williams Realty and Prudential Real Estate. In addition, Stonecrest Homes, an Atlanta homebuilder, will include Home Price Protection on all of its completed homes and plots under development.
This is not insurance, but a financial agreement to pay the homeowner upon resale if the House Price Index (determined by the Federal Housing Finance Agency) declined in the marketplace. The contract is not purchased to insure against the loss of value in a particular real estate parcel. Instead, the contract pays out based on declines in the relevant market index, regardless of whether the home sells for a gain or a loss.
The minimum period for the contract is two years and the maximum is 15 years. There is a cap on the payout of 20 percent of the contract price.
Real estate companies have become interested in home-price protection because it provides an incentive to get buyers in the door. It also helps sellers. Generally, a price stalemate happens when a buyer wants a certain price cut, but the seller will go only so far down in the offering. Now the seller can say, "I won't reduce my price anymore, but I will pay for market protection.' "
Chris Brown, CEO at RE/MAX Connection REALTORS® in New Jersey, is involved with the Home Price Protection pilot program for RE/MAX in his state, which went live on July 26. When I spoke with Brown a few weeks afterward, his company already had eight commitments to contract, including one sale.
"In New Jersey, a normal seller has to compete with property values that are depressed because of foreclosed homes," Brown explained. "Sellers have to sacrifice equity to match up with price competition. Home Price Protection is a mechanism that will allow the seller to have the property stand out among all other properties and the seller doesn't have to reduce prices to match up with foreclosed homes."
Brown gives this example: Prices in certain neighborhoods have fallen 5 percent and the REALTOR® tells the homeowner, maybe he should cut his offering by 6.5 percent to be competitive. The homeowner has to ask himself: Do I really want to drop the price another $12,000 on a $200,000 house?
"The other option is, the REALTOR® can offer up to 1.7 percent compensation to a buyer to purchase Home Price Protection," Brown said. "To make it even more competitive, the REALTOR® said, 'Let's just cut the home price 1 percent.' Now they are looking at a drop of 2.7 percent as opposed to 6.5 percent and they have something tangible to give to the homebuyer.
"This particular product answers the challenge of consumer confidence," Brown said.
EquityLock Solutions is not trying to promote a product that allows people to game the system or make a bet on the market, Agresti said. "What we are trying to do is provide people with the stability that said, 'I want to move into this house. I'm going to stay in the house a normal amount of time. And, I'm not going to do that unless I get some protection from another market correction.' "
From: http://ping.fm/BVSCh
Monday, October 31, 2011
Home prices heading for triple-dip - Oct. 31, 2011
Home prices heading for triple-dip
By Les ChristieOctober 31, 2011: 5:37 AM ET
NEW YORK (CNNMoney) -- The besieged housing market has even further to fall before home prices really hit rock bottom.
According to Fiserv (FISV), a financial analytics company, home values are expected to fall another 3.6% by next June, pushing them to a new low of 35% below the peak reached in early 2006 and marking a triple dip in prices.
Several factors will be working against the housing market in the upcoming months, including an increase in foreclosure activity and sustained high unemployment, explained David Stiff, Fiserv's chief economist.
Should home values meet Fiserv's expectations, it would make it the third (and lowest) trough for home prices since the housing bubble burst.
The first post-bubble bottom was hit in 2009, when prices fell to 31% below peak. The First-Time Homebuyer Credit helped perk prices up by mid-2010, but by the time the credit expired, prices fell again.
In the second dip, which was reached last winter, prices were down 33%before staging a mild rally that was artificially spurred as banks slowed the processing of foreclosures following the robo-signing scandal, which found that loan servicers were rapidly signing foreclosures without properly vetting them.
Now that the scandal is mostly resolved, lenders are speeding more cases through the foreclosure pipeline and back onto the market, weighing on home prices even further.
Earlier this month, RealtyTrac reported the first quarterly increase in foreclosure filings in three quarters. Even more discouraging: new default notices were up 14%.
There's also a "shadow inventory" of homes in foreclosure that have yet to go back onto the market.
The specter that those foreclosed homes could flood the market at any time and drive prices significantly lower is a huge concern, said Mark Dotzour, an economist for Texas A&M University. "That's the elephant in the room," he said, noting that there are 6 million home currently in shadow inventory.
Biggest losers
Many of the regions that will be hardest hit were already beaten up during the previous two dips.
Naples, Fla., for example, is expected to take the biggest hit of any metro area, a price drop of another 18.9% by the end of next June, according to Fiserv. Home prices in the area have already fallen 61% from the peak.
Other cities expected to be hit hard include the not-so-lucky Las Vegas, which is expected to see home prices fall another 15.9% for a total loss of 66%; Riverside, Calif., is projected to fall another 14.8% (for a total decline of 61%); Miami is expected to decline by 13.2% (total loss: 57%), and Salinas, Calif. could drop by another 13% (for a total loss of 66%).
There will be some winners, however, led by Madera, Calif. and Carson City, Nev., which will each gain 15.5%. That's some consolation for hard-hit residents: The average home in each of these metro areas has lost more than half its value.
Other metro areas Fiserv expects to recover nicely are Yuma, Ariz. (up 9.5%), Yuba City, Calif. (9.2%) and Farmington, N.M. (8.3%).
Slow recovery ahead
Even after the housing market begins its comeback in mid-2012, the recovery is predicted to be modest at best. Nationwide, Fiserv is projecting that home prices will climb just 2.4% between June 2012 and June 2013.
A few individual metro areas will do better, with 31 of the 385 markets Fiserv monitors expected to pile up double-digit gains. Another 71 markets are expected to post increases of 5% or better.
I bought my dream retirement home -- cheap!
Many of the markets that will record the biggest increases are vacation or retirement communities that had taken some of the biggest hits during the bust.
The biggest "winner" will be Ocala, Fla.,with a 22.4% spike for the 12 months ending June 30, 2013. Ocala was one of the hardest hit communities in the U.S. over the past several years, with home prices falling some 50%.
Others anticipated gainers will be Napa, Calif., which Fiserv projects will improve by 20.9% over that same period; Panama City, Fla. (an estimated 18.2% jump) and Bremerton, Wash. and Carson City, Nev. (both expected to see home prices climb 17.9%).
Some cities will continue to fade, however. Fort Lauderdale, Fla.'s forecast is for a 9.2% drop through next June and another 6.7% the 12 months after that. Its neighbor, Miami, will endure 13.5% and 5.2% declines, respectively.
From: http://money.cnn.com/2011/10/31/real_estate/home_prices/index.htm?iid=Lead
By Les ChristieOctober 31, 2011: 5:37 AM ET
NEW YORK (CNNMoney) -- The besieged housing market has even further to fall before home prices really hit rock bottom.
According to Fiserv (FISV), a financial analytics company, home values are expected to fall another 3.6% by next June, pushing them to a new low of 35% below the peak reached in early 2006 and marking a triple dip in prices.
Several factors will be working against the housing market in the upcoming months, including an increase in foreclosure activity and sustained high unemployment, explained David Stiff, Fiserv's chief economist.
Should home values meet Fiserv's expectations, it would make it the third (and lowest) trough for home prices since the housing bubble burst.
The first post-bubble bottom was hit in 2009, when prices fell to 31% below peak. The First-Time Homebuyer Credit helped perk prices up by mid-2010, but by the time the credit expired, prices fell again.
In the second dip, which was reached last winter, prices were down 33%before staging a mild rally that was artificially spurred as banks slowed the processing of foreclosures following the robo-signing scandal, which found that loan servicers were rapidly signing foreclosures without properly vetting them.
Now that the scandal is mostly resolved, lenders are speeding more cases through the foreclosure pipeline and back onto the market, weighing on home prices even further.
Earlier this month, RealtyTrac reported the first quarterly increase in foreclosure filings in three quarters. Even more discouraging: new default notices were up 14%.
There's also a "shadow inventory" of homes in foreclosure that have yet to go back onto the market.
The specter that those foreclosed homes could flood the market at any time and drive prices significantly lower is a huge concern, said Mark Dotzour, an economist for Texas A&M University. "That's the elephant in the room," he said, noting that there are 6 million home currently in shadow inventory.
Biggest losers
Many of the regions that will be hardest hit were already beaten up during the previous two dips.
Naples, Fla., for example, is expected to take the biggest hit of any metro area, a price drop of another 18.9% by the end of next June, according to Fiserv. Home prices in the area have already fallen 61% from the peak.
Other cities expected to be hit hard include the not-so-lucky Las Vegas, which is expected to see home prices fall another 15.9% for a total loss of 66%; Riverside, Calif., is projected to fall another 14.8% (for a total decline of 61%); Miami is expected to decline by 13.2% (total loss: 57%), and Salinas, Calif. could drop by another 13% (for a total loss of 66%).
There will be some winners, however, led by Madera, Calif. and Carson City, Nev., which will each gain 15.5%. That's some consolation for hard-hit residents: The average home in each of these metro areas has lost more than half its value.
Other metro areas Fiserv expects to recover nicely are Yuma, Ariz. (up 9.5%), Yuba City, Calif. (9.2%) and Farmington, N.M. (8.3%).
Slow recovery ahead
Even after the housing market begins its comeback in mid-2012, the recovery is predicted to be modest at best. Nationwide, Fiserv is projecting that home prices will climb just 2.4% between June 2012 and June 2013.
A few individual metro areas will do better, with 31 of the 385 markets Fiserv monitors expected to pile up double-digit gains. Another 71 markets are expected to post increases of 5% or better.
I bought my dream retirement home -- cheap!
Many of the markets that will record the biggest increases are vacation or retirement communities that had taken some of the biggest hits during the bust.
The biggest "winner" will be Ocala, Fla.,with a 22.4% spike for the 12 months ending June 30, 2013. Ocala was one of the hardest hit communities in the U.S. over the past several years, with home prices falling some 50%.
Others anticipated gainers will be Napa, Calif., which Fiserv projects will improve by 20.9% over that same period; Panama City, Fla. (an estimated 18.2% jump) and Bremerton, Wash. and Carson City, Nev. (both expected to see home prices climb 17.9%).
Some cities will continue to fade, however. Fort Lauderdale, Fla.'s forecast is for a 9.2% drop through next June and another 6.7% the 12 months after that. Its neighbor, Miami, will endure 13.5% and 5.2% declines, respectively.
From: http://money.cnn.com/2011/10/31/real_estate/home_prices/index.htm?iid=Lead
Tuesday, October 25, 2011
Case-Shiller Continues to Record Improvements in Annual Price Changes
Case-Shiller Continues to Record Improvements in Annual Price Changes
10/25/2011 By: Carrie Bay
The annual rate of change in home prices continues to show improvement, according to Standard & Poor’s.
Data just released by the agency shows the 20-city composite and 10-city composite readings of the S&P/Case-Shiller index for August came in below their year-ago levels by 3.8 percent and 3.5 percent, respectively. The previous month, S&P reported a 4.1 percent and 3.7 percent annual decline.
Sixteen of the 20 cities covered by the index posted improved annual returns compared to July’s data. Los Angeles and Miami saw no change, while Atlanta and Las Vegas saw their annual rates of change fall deeper into negative territory.
At -8.5 percent, Minneapolis posted the lowest year-over-year return, but has improved in each of the
last three months. Detroit and Washington D.C. were the only two cities to see positive annual returns of +2.7 percent and +0.3 percent, respectively.
The closely watched Case-Shiller index posted a 0.2 percent increase in August versus July for both the 20-city and 10-city measurements, marking the fifth consecutive monthly gain. Ten of the 20 cities in the index saw home prices rise for the month.
“There was some weakness in the monthly statistics, as 10 of the cities post price declines in August over July,” said David M. Blitzer, chairman of the index committee at S&P Indices. “In the August data, the good news is continued improvement in the annual rates of change in home prices.”
Blitzer went on to explain, “In spring and summer’s seasonally strong period for housing demand, we cautioned that monthly increases in prices had to be paired with improvement in annual rates before anyone could declare that the market might be stabilizing. With 16 of 20 cities and both composites seeing their annual rates of change improve in August, we see a modest glimmer of hope with these data.”
As of August 2011, Blitzer says the crisis low for the 10-city composite was back in April 2009. It was more recent for the 20-city composite – the double-dip recorded in March 2011. Both readings are now about 3.9 percent above their cycle lows.
(developing story)
From: http://ping.fm/7YKcD
10/25/2011 By: Carrie Bay
The annual rate of change in home prices continues to show improvement, according to Standard & Poor’s.
Data just released by the agency shows the 20-city composite and 10-city composite readings of the S&P/Case-Shiller index for August came in below their year-ago levels by 3.8 percent and 3.5 percent, respectively. The previous month, S&P reported a 4.1 percent and 3.7 percent annual decline.
Sixteen of the 20 cities covered by the index posted improved annual returns compared to July’s data. Los Angeles and Miami saw no change, while Atlanta and Las Vegas saw their annual rates of change fall deeper into negative territory.
At -8.5 percent, Minneapolis posted the lowest year-over-year return, but has improved in each of the
last three months. Detroit and Washington D.C. were the only two cities to see positive annual returns of +2.7 percent and +0.3 percent, respectively.
The closely watched Case-Shiller index posted a 0.2 percent increase in August versus July for both the 20-city and 10-city measurements, marking the fifth consecutive monthly gain. Ten of the 20 cities in the index saw home prices rise for the month.
“There was some weakness in the monthly statistics, as 10 of the cities post price declines in August over July,” said David M. Blitzer, chairman of the index committee at S&P Indices. “In the August data, the good news is continued improvement in the annual rates of change in home prices.”
Blitzer went on to explain, “In spring and summer’s seasonally strong period for housing demand, we cautioned that monthly increases in prices had to be paired with improvement in annual rates before anyone could declare that the market might be stabilizing. With 16 of 20 cities and both composites seeing their annual rates of change improve in August, we see a modest glimmer of hope with these data.”
As of August 2011, Blitzer says the crisis low for the 10-city composite was back in April 2009. It was more recent for the 20-city composite – the double-dip recorded in March 2011. Both readings are now about 3.9 percent above their cycle lows.
(developing story)
From: http://ping.fm/7YKcD
Wednesday, October 12, 2011
Impact of Short Sales and Foreclosures on getting a new loan...
With all the foreclosures and short sales in the past few years, many of us in the real estate business are coming across clients with this history. I thought this information might help you and you clients if the occasion arises.
There are many variables involved when trying to figure out when someone will be able to purchase a home after a foreclosure or a short sale; however, the general guidelines that FHA, Fannie Mae and Freddie Mac follow when considering a loan after a short sale or foreclosure are as follows.
Short Sale with FHA loan
• Can purchase right away with no mortgage default/late payments
• 3 year wait if in default or late payments at the closing
• Reduced wait if the borrower has re-established good credit and can show more qualifying circumstances *
Short Sale with Fannie Mae Loan
• 2 year wait if the borrower puts 20 % down
• 4 year wait if the borrower puts between 10% to 20% down
• 7 year wait if the borrower puts less than 10% down
• 2 year wait if the borrower can show extenuating circumstances and puts more than 10% down *
Short Sale with Freddie Mac Loan
• 4 year wait before being able to get a loan
• 2 year wait if the borrower can show extenuating circumstances *
Foreclosure with an FHA Loan
• 3 year wait before being able to get a loan
• Reduced wait if the borrower can show extenuating circumstances and re- establishes good credit *
Foreclosure with a Fannie Mae Loan
• 7 year wait from the completed foreclosure sale date
• 3 year wait if the borrower can show extenuating circumstances. Additional underwriting requirements apply for 4 years after a 3 year waiting period.
• 7 year wait for a 2nd home, cash out re-financing, or an investment property
Foreclosure with a Freddie Mac Loan
• 5 year wait from the completed foreclosure sale date
• 3 year wait if the borrower can show extenuating circumstances *
*Qualifying/Extenuating circumstances are not applicable in most situations
There are many variables involved when trying to figure out when someone will be able to purchase a home after a foreclosure or a short sale; however, the general guidelines that FHA, Fannie Mae and Freddie Mac follow when considering a loan after a short sale or foreclosure are as follows.
Short Sale with FHA loan
• Can purchase right away with no mortgage default/late payments
• 3 year wait if in default or late payments at the closing
• Reduced wait if the borrower has re-established good credit and can show more qualifying circumstances *
Short Sale with Fannie Mae Loan
• 2 year wait if the borrower puts 20 % down
• 4 year wait if the borrower puts between 10% to 20% down
• 7 year wait if the borrower puts less than 10% down
• 2 year wait if the borrower can show extenuating circumstances and puts more than 10% down *
Short Sale with Freddie Mac Loan
• 4 year wait before being able to get a loan
• 2 year wait if the borrower can show extenuating circumstances *
Foreclosure with an FHA Loan
• 3 year wait before being able to get a loan
• Reduced wait if the borrower can show extenuating circumstances and re- establishes good credit *
Foreclosure with a Fannie Mae Loan
• 7 year wait from the completed foreclosure sale date
• 3 year wait if the borrower can show extenuating circumstances. Additional underwriting requirements apply for 4 years after a 3 year waiting period.
• 7 year wait for a 2nd home, cash out re-financing, or an investment property
Foreclosure with a Freddie Mac Loan
• 5 year wait from the completed foreclosure sale date
• 3 year wait if the borrower can show extenuating circumstances *
*Qualifying/Extenuating circumstances are not applicable in most situations
Bank of America Launches 'Test-and-Learn' Short Sale Program in Florida
Bank of America Launches 'Test-and-Learn' Short Sale Program in Florida
10/11/2011 By: Carrie Bay
Bank of America has begun a pilot program in Florida offering extra incentive payouts to distressed homeowners who agree to and successfully close on a short sale.
Incentive payments for relocation assistance range between $5,000 and $20,000. The program is being offered on a limited basis for investor-approved, pre-offer short sales.
Bank of America is calling it a pilot “test-and-learn” program.
A spokesperson for the bank explained that Florida is experiencing higher foreclosure rates than other parts of the country, and is therefore seen as a “viable market to gauge incremental short sale response and completion rates when presenting homeowners with relocation assistance at closing.”
If successful in Florida, Bank of America says the “test-and-learn” could be expanded to other states.
The short sale must be initiated between September 26 and November 30, 2011 and close by August 31, 2012.
Florida homeowners who qualify for the “test-and-learn” program will receive a solicitation mailer directly from Bank of America, or may learn about the program if they are working with a real estate agent who handles pre-approved short sales for BofA.
The bank has a dedicated team of short sale specialists standing by to help agents determine if their homeowner client qualifies for the short sale relocation assistance at: 877.459.2852.
Bank of America has already been offering short sale payouts in the state of Florida, albeit for smaller amounts.
Susie Kirkland with RE/MAX Southern Realty in Destin says she’s closed five transactions within the past couple of months through what BofA calls its Cooperative Short Sale Program. The bank awarded Kirkland’s short sellers $2,500 upon closing.
BofA is even extending short sale incentives to some investors. Steve Kravitz of Bankers Realty Services, Inc. in Fort Lauderdale just completed a short sale transaction last week on an investment property. BofA offered the non-occupant owner/seller $3,600.
Kravitz says his client had been late on a few payments, but there was no foreclosure filing on the property. BofA and other lenders are looking to short sales earlier on in the process, and getting ahead of the foreclosure crisis in areas where the system is already bogged down with distressed properties.
“We’ve had cases here where we’ve gotten short sales through where there haven’t even been any late payments at all,” Kravitz said.
Kravitz says short sales just make sense for a market as hard-hit as Florida. Not only can a short sale be more cost efficient when lenders are facing a foreclosure timeline of nearly two years, but it “gets more product and better product out to buyers,” he says.
He explained that oftentimes, a foreclosure property can sit vacant for more than a year, whereas with a short sale, the home is typically occupied up until a week or a few days prior to changing hands, which translates to a better quality home in better shape.
Kravitz says banks are becoming “more cooperative” and approving short sales more quickly. The investment property short sale Kravitz closed last week took just 45 days.
Other lenders are also extending incentive payouts to short sellers in Florida and some other hard-hit states such as California.
In July, DSNews.com reported that Wells Fargo, JPMorgan Chase, and Citi were all offering extra relocation assistance to borrowers opting for a short sale in certain markets.
Robert Valenzuela with Century 21 Schwartz Realty in Key Largo, Florida, says he’s completed six short sale transactions in which the seller was given money to help with relocation, the largest of which was a $45,000 payment from Chase Bank.
From: http://ping.fm/HxysS
10/11/2011 By: Carrie Bay
Bank of America has begun a pilot program in Florida offering extra incentive payouts to distressed homeowners who agree to and successfully close on a short sale.
Incentive payments for relocation assistance range between $5,000 and $20,000. The program is being offered on a limited basis for investor-approved, pre-offer short sales.
Bank of America is calling it a pilot “test-and-learn” program.
A spokesperson for the bank explained that Florida is experiencing higher foreclosure rates than other parts of the country, and is therefore seen as a “viable market to gauge incremental short sale response and completion rates when presenting homeowners with relocation assistance at closing.”
If successful in Florida, Bank of America says the “test-and-learn” could be expanded to other states.
The short sale must be initiated between September 26 and November 30, 2011 and close by August 31, 2012.
Florida homeowners who qualify for the “test-and-learn” program will receive a solicitation mailer directly from Bank of America, or may learn about the program if they are working with a real estate agent who handles pre-approved short sales for BofA.
The bank has a dedicated team of short sale specialists standing by to help agents determine if their homeowner client qualifies for the short sale relocation assistance at: 877.459.2852.
Bank of America has already been offering short sale payouts in the state of Florida, albeit for smaller amounts.
Susie Kirkland with RE/MAX Southern Realty in Destin says she’s closed five transactions within the past couple of months through what BofA calls its Cooperative Short Sale Program. The bank awarded Kirkland’s short sellers $2,500 upon closing.
BofA is even extending short sale incentives to some investors. Steve Kravitz of Bankers Realty Services, Inc. in Fort Lauderdale just completed a short sale transaction last week on an investment property. BofA offered the non-occupant owner/seller $3,600.
Kravitz says his client had been late on a few payments, but there was no foreclosure filing on the property. BofA and other lenders are looking to short sales earlier on in the process, and getting ahead of the foreclosure crisis in areas where the system is already bogged down with distressed properties.
“We’ve had cases here where we’ve gotten short sales through where there haven’t even been any late payments at all,” Kravitz said.
Kravitz says short sales just make sense for a market as hard-hit as Florida. Not only can a short sale be more cost efficient when lenders are facing a foreclosure timeline of nearly two years, but it “gets more product and better product out to buyers,” he says.
He explained that oftentimes, a foreclosure property can sit vacant for more than a year, whereas with a short sale, the home is typically occupied up until a week or a few days prior to changing hands, which translates to a better quality home in better shape.
Kravitz says banks are becoming “more cooperative” and approving short sales more quickly. The investment property short sale Kravitz closed last week took just 45 days.
Other lenders are also extending incentive payouts to short sellers in Florida and some other hard-hit states such as California.
In July, DSNews.com reported that Wells Fargo, JPMorgan Chase, and Citi were all offering extra relocation assistance to borrowers opting for a short sale in certain markets.
Robert Valenzuela with Century 21 Schwartz Realty in Key Largo, Florida, says he’s completed six short sale transactions in which the seller was given money to help with relocation, the largest of which was a $45,000 payment from Chase Bank.
From: http://ping.fm/HxysS
Tuesday, October 4, 2011
New Foreclosure Actions Jump Nearly 20% in August
New Foreclosure Actions Jump Nearly 20% in August
10/03/2011 By: Carrie Bay
Data released by Lender Processing Services (LPS) Monday shows that foreclosure starts were up in August by 19.7 percent when compared to the previous month.
However, LPS noted in its report that the 247,957 foreclosures initiated in August represents a 12.2 percent decline from a year earlier.
At the same time, of the approximately 4 million loans that are either 90 or more days delinquent or in foreclosure, the number in the 90-plus day delinquency bucket – 2,148,179 – has contracted to levels not seen since 2008, according to LPS’ study.
That’s not the only indicator of improvement LPS documented for problem loans. The company’s latest report also showed that, of loans that were current six
months prior, 1.4 percent had become seriously delinquent by August.
LPS says that percentage is less than half the rate seen in 2009, when the loan deterioration rate peaked at 2.9 percent.
At the same time, “first-time” delinquencies – new problem loans that had never been delinquent before – accounted for approximately a quarter of all new delinquencies, another sign of an improving trend for problem loans, according to LPS.
The company points out, however, that 23 percent of the nearly 46 million loans that were current as of the end of August were still at risk as a result of negative equity – a leading indicator of a borrower’s propensity to default.
LPS’ analysis of mortgage performance data at August month-end showed an all-time high in the number of loans shifting from foreclosure back into delinquent status, suggesting that process reviews and potential loss mitigation activity are continuing.
As a result, the company says foreclosure timelines continue to increase, with the average loan in foreclosure having been delinquent for a record 611 days.
Average delinquencies in non-judicial states continue to be about six months shorter at the time of foreclosure sale when compared to their judicial counterparts, where
LPS says backlogs continue to be extremely high.
From: http://www.dsnews.com/articles/new-foreclosure-actions-jump-nearly-20-in-august-2011-10-03
10/03/2011 By: Carrie Bay
Data released by Lender Processing Services (LPS) Monday shows that foreclosure starts were up in August by 19.7 percent when compared to the previous month.
However, LPS noted in its report that the 247,957 foreclosures initiated in August represents a 12.2 percent decline from a year earlier.
At the same time, of the approximately 4 million loans that are either 90 or more days delinquent or in foreclosure, the number in the 90-plus day delinquency bucket – 2,148,179 – has contracted to levels not seen since 2008, according to LPS’ study.
That’s not the only indicator of improvement LPS documented for problem loans. The company’s latest report also showed that, of loans that were current six
months prior, 1.4 percent had become seriously delinquent by August.
LPS says that percentage is less than half the rate seen in 2009, when the loan deterioration rate peaked at 2.9 percent.
At the same time, “first-time” delinquencies – new problem loans that had never been delinquent before – accounted for approximately a quarter of all new delinquencies, another sign of an improving trend for problem loans, according to LPS.
The company points out, however, that 23 percent of the nearly 46 million loans that were current as of the end of August were still at risk as a result of negative equity – a leading indicator of a borrower’s propensity to default.
LPS’ analysis of mortgage performance data at August month-end showed an all-time high in the number of loans shifting from foreclosure back into delinquent status, suggesting that process reviews and potential loss mitigation activity are continuing.
As a result, the company says foreclosure timelines continue to increase, with the average loan in foreclosure having been delinquent for a record 611 days.
Average delinquencies in non-judicial states continue to be about six months shorter at the time of foreclosure sale when compared to their judicial counterparts, where
LPS says backlogs continue to be extremely high.
From: http://www.dsnews.com/articles/new-foreclosure-actions-jump-nearly-20-in-august-2011-10-03
Thursday, September 29, 2011
20-percent rule for mortgage down payments unlikely in near future - The Washington Post
20-percent rule for mortgage down payments unlikely in near future
By Kenneth R. Harney, Published: September 23
Remember the proposed requirement from six federal agencies that home buyers make down payments of at least 20 percent if they want the lowest interest rates?
Remember the controversy that erupted over the plan last spring, when labor unions joined with bankers, civil rights groups, mortgage companies, real estate agents and consumer advocates to try to make sure it didn’t take effect? A bipartisan group of 39 senators and more than 250 Democrats and Republicans in the House even signed letters demanding that the agencies ditch the proposal on grounds that it would greatly harm a housing market in deep trouble.
Half a year has passed since then, so here’s an update: The 20-percent proposal is still alive, but it’s temporarily bogged down in agency reviews of the roughly 12,000 comments filed by interest groups and individuals. It almost certainly would not be ready for adoption until the first quarter of 2012. Even then, there would be a mandatory one-year lag before the requirement could take effect, pushing the issue into 2013 — well after the presidential and congressional elections.
But can it survive that long in its current form, given the rip currents of the political year that’s getting underway? The agencies themselves — the Federal Deposit Insurance Corp., the Treasury’s Office of the Comptroller of the Currency, the Department of Housing and Urban Development, the Federal Reserve, the Securities and Exchange Commission, and the Federal Housing Finance Agency — are officially remaining mum on the proposal during the comment review.
The group includes strong proponents of the 20-percent rule who argue that the “qualified residential mortgage” language Congress adopted in its 2010 Wall Street financial reform package requires them to devise a national standard for safe, low-risk home mortgages based on historical data on default and foreclosure risk. One of the statistical indicators of risk, based on studies of Fannie Mae and Freddie Mac mortgages, they say, is the amount of equity a borrower has in the property: The higher the initial equity, the lower the probability of foreclosure. Any standard that does not include down payments, proponents insist, will be deficient.
But the three co-sponsors of the provision say Congress expressly omitted any reference to down payments and never intended for the agencies to set an equity minimum that would prevent up to 40 percent of buyers from qualifying for a low-interest mortgage.
In testimony Sept. 8 before a House Financial Services subcommittee, Sen. Johnny Isakson (R-Ga.), one of the co-sponsors, said: “If this rule goes into effect as proposed, it will be the last nail in the coffin for the already crippled U.S. housing market. . . . Poor underwriting led us into the housing crisis, not down payments.”
Isakson, along with Sens. Mary Landrieu (D-La.) and Kay Hagan (D-N.C.), told the six agencies before they published the proposal that down payments were rejected in congressional discussions as an underwriting standard. The legislation intentionally left the door open for private mortgage insurance to cover the financial risks of down payments below 20 percent, just as the government-supervised mortgage investors Fannie Mae and Freddie Mac have permitted for decades.
A spokeswoman for Isakson declined to speculate whether, as rumored on Capitol Hill, he would introduce legislation to kill the 20-percent plan if it were adopted, but she did say in an e-mail that the senator has “faith that the regulators will make the right decision” and that “all his focus now is on stopping [the 20-percent plan] from happening.”
The controversy comes at a politically sensitive time for President Obama. Housing continues to be a lead weight holding back the economic recovery. His polling numbers are plunging, plus key segments of his political base — unions, community and economic development groups, and consumer activists — oppose any move to force working families to come up with more cash to buy a home. The six agencies’ rule — even in proposal form — is likely to be an attractive target for the president’s opponents next year.
The White House does not have the legal authority to dictate regulatory policy to independent bodies such as the Federal Reserve and the Federal Housing Finance Agency. But with Treasury and HUD playing important roles in formulating the final rule on mortgages, Obama has a direct pipeline to the policymaking process.
Bottom line: Don’t expect to see a 20-percent rule in the near future. Even independent regulators don’t operate in political vacuums. They’ve either gotten the message already or they will soon.
From: http://ping.fm/Bq5qe
By Kenneth R. Harney, Published: September 23
Remember the proposed requirement from six federal agencies that home buyers make down payments of at least 20 percent if they want the lowest interest rates?
Remember the controversy that erupted over the plan last spring, when labor unions joined with bankers, civil rights groups, mortgage companies, real estate agents and consumer advocates to try to make sure it didn’t take effect? A bipartisan group of 39 senators and more than 250 Democrats and Republicans in the House even signed letters demanding that the agencies ditch the proposal on grounds that it would greatly harm a housing market in deep trouble.
Half a year has passed since then, so here’s an update: The 20-percent proposal is still alive, but it’s temporarily bogged down in agency reviews of the roughly 12,000 comments filed by interest groups and individuals. It almost certainly would not be ready for adoption until the first quarter of 2012. Even then, there would be a mandatory one-year lag before the requirement could take effect, pushing the issue into 2013 — well after the presidential and congressional elections.
But can it survive that long in its current form, given the rip currents of the political year that’s getting underway? The agencies themselves — the Federal Deposit Insurance Corp., the Treasury’s Office of the Comptroller of the Currency, the Department of Housing and Urban Development, the Federal Reserve, the Securities and Exchange Commission, and the Federal Housing Finance Agency — are officially remaining mum on the proposal during the comment review.
The group includes strong proponents of the 20-percent rule who argue that the “qualified residential mortgage” language Congress adopted in its 2010 Wall Street financial reform package requires them to devise a national standard for safe, low-risk home mortgages based on historical data on default and foreclosure risk. One of the statistical indicators of risk, based on studies of Fannie Mae and Freddie Mac mortgages, they say, is the amount of equity a borrower has in the property: The higher the initial equity, the lower the probability of foreclosure. Any standard that does not include down payments, proponents insist, will be deficient.
But the three co-sponsors of the provision say Congress expressly omitted any reference to down payments and never intended for the agencies to set an equity minimum that would prevent up to 40 percent of buyers from qualifying for a low-interest mortgage.
In testimony Sept. 8 before a House Financial Services subcommittee, Sen. Johnny Isakson (R-Ga.), one of the co-sponsors, said: “If this rule goes into effect as proposed, it will be the last nail in the coffin for the already crippled U.S. housing market. . . . Poor underwriting led us into the housing crisis, not down payments.”
Isakson, along with Sens. Mary Landrieu (D-La.) and Kay Hagan (D-N.C.), told the six agencies before they published the proposal that down payments were rejected in congressional discussions as an underwriting standard. The legislation intentionally left the door open for private mortgage insurance to cover the financial risks of down payments below 20 percent, just as the government-supervised mortgage investors Fannie Mae and Freddie Mac have permitted for decades.
A spokeswoman for Isakson declined to speculate whether, as rumored on Capitol Hill, he would introduce legislation to kill the 20-percent plan if it were adopted, but she did say in an e-mail that the senator has “faith that the regulators will make the right decision” and that “all his focus now is on stopping [the 20-percent plan] from happening.”
The controversy comes at a politically sensitive time for President Obama. Housing continues to be a lead weight holding back the economic recovery. His polling numbers are plunging, plus key segments of his political base — unions, community and economic development groups, and consumer activists — oppose any move to force working families to come up with more cash to buy a home. The six agencies’ rule — even in proposal form — is likely to be an attractive target for the president’s opponents next year.
The White House does not have the legal authority to dictate regulatory policy to independent bodies such as the Federal Reserve and the Federal Housing Finance Agency. But with Treasury and HUD playing important roles in formulating the final rule on mortgages, Obama has a direct pipeline to the policymaking process.
Bottom line: Don’t expect to see a 20-percent rule in the near future. Even independent regulators don’t operate in political vacuums. They’ve either gotten the message already or they will soon.
From: http://ping.fm/Bq5qe
Monday, September 26, 2011
Rate Drop Spurs Home Refinancings - WSJ.com
Rate Drop Spurs Home Refinancing .
By NICK TIMIRAOS
The 30-year fixed-rate mortgage dipped below 4%, possibly triggering a refinancing boom for many of the same borrowers who already have taken advantage of rock-bottom interest rates.
According to a survey by Credit Suisse on Thursday, lenders were offering an average rate of 3.91% on 30-year fixed-rate mortgages to borrowers who paid "points," or fees, worth 1% of the loan balance.
Wells Fargo & Co. advertised on its website Friday afternoon a 3.875% rate on a 30-year fixed-rate mortgage, with fees of 1% on the loan.
Lou Barnes, a mortgage banker in Boulder, Colo., refinanced four borrowers on Thursday into 30-year fixed-rate mortgages at 3.875%. "At this point, the only people being helped are those who need it the least," he said.
For the home-sales market, low rates will help make homes more affordable, but may not boost home buying if consumers are worried about the economy.
"Today, the buyers' concern is the falling value of homes," said Mr. Barnes. "I've had potential buyers say: 'I don't care if rates are zero if prices are going to fall again.' "
Mortgages rates fell this past week after the Federal Reserve announced Wednesday that it would begin plowing payments from its portfolio of $885 billion in government-backed mortgage bonds back into mortgages. That caused a rally in the mortgage market because the Fed's move eliminates the risk that the central bank would be forced to sell its mortgage holdings as refinancing increases.
Mortgages rarely have been this cheap. A 1961 study by the National Bureau of Economic Research shows that loans made to World War II veterans in the late 1940s were available with 4% rates.
More than 60% of borrowers with a 30-year fixed-rate mortgage could reduce their mortgage rate by one percentage point, up from 42% at the beginning of August, according to Credit Suisse.
But some borrowers haven't been able to refinance rates because they can't qualify under loan standards that are much tighter than at the time of their first loan. Other borrowers don't have enough equity in their home to refinance.
Before the housing crisis, refinancing tended to jump when borrowers were able to lower their rate by 0.5 percentage point. Since 2009, mortgage applications have taken longer to process, while riskier borrowers have faced higher refinancing costs. As a result, borrowers typically now refinance when rates are 1.5 percentage points below their current rate, according to Bank of America mortgage analysts.
Donald Fraser, a 56-year old pathology assistant who shaved a full percentage point off the 4.875% mortgage he got last year, said he plans to stash most of the $2,700 a year in savings into retirement. "I don't think we'll ever see these rates in my lifetime or yours," he said.
It isn't clear how much these lower rates will help the economy, in part because a weakening economy is fueling the decline.
"We felt lucky. At the same time, we're lucky at the expense of a suffering market," said Richard Klompus, who refinanced his Glastonbury, Conn., home with a 4%, 30-year fixed-rate mortgage.
Mr. Klompus, 49, had a hybrid adjustable-rate mortgage that carries a 4.5% rate for the first five years before moving to a variable rate. He paid tens of thousands of dollars to pay down his loan balance to $417,000, the maximum size for loans eligible for purchase by mortgage companies Fannie Mae and Freddie Mac.
To encourage refinancing, Obama administration officials and U.S. regulators are in talks with lenders about ways to revamp an existing White House refinancing initiative designed to help borrowers with little or no equity. The program is open to borrowers whose loans are backed by Fannie and Freddie, which guarantee about half of all outstanding home loans.
The Federal Housing Finance Agency, which oversees Fannie and Freddie, is weighing a series of changes to the program, which has been snarled by a series of technical hurdles. Just 838,000 borrowers have refinanced, short of the hoped-for four million to five million. Just 63,000 of those borrowers have loans worth more than 105% of their home value.
"It hasn't worked, to be honest," said James Parrott, a top White House housing adviser, in a speech to industry executives this week. He said the housing market is at a "critical juncture" and policy decisions over the next six months could determine whether the economic headwinds are "going to be a blip or a broader struggle."
A separate question is whether banks will be able to handle the volume of mortgage applications.
Banks recently have laid off mortgage employees in anticipation of lower loan volumes, while shifting others to the backlog of delinquent loans. The reduced ability to handle loan volumes means that banks have charged higher rates relative to their borrowing costs, muting the decline in rates.
From: http://online.wsj.com/article/SB10001424053111904563904576589182943679612.html
By NICK TIMIRAOS
The 30-year fixed-rate mortgage dipped below 4%, possibly triggering a refinancing boom for many of the same borrowers who already have taken advantage of rock-bottom interest rates.
According to a survey by Credit Suisse on Thursday, lenders were offering an average rate of 3.91% on 30-year fixed-rate mortgages to borrowers who paid "points," or fees, worth 1% of the loan balance.
Wells Fargo & Co. advertised on its website Friday afternoon a 3.875% rate on a 30-year fixed-rate mortgage, with fees of 1% on the loan.
Lou Barnes, a mortgage banker in Boulder, Colo., refinanced four borrowers on Thursday into 30-year fixed-rate mortgages at 3.875%. "At this point, the only people being helped are those who need it the least," he said.
For the home-sales market, low rates will help make homes more affordable, but may not boost home buying if consumers are worried about the economy.
"Today, the buyers' concern is the falling value of homes," said Mr. Barnes. "I've had potential buyers say: 'I don't care if rates are zero if prices are going to fall again.' "
Mortgages rates fell this past week after the Federal Reserve announced Wednesday that it would begin plowing payments from its portfolio of $885 billion in government-backed mortgage bonds back into mortgages. That caused a rally in the mortgage market because the Fed's move eliminates the risk that the central bank would be forced to sell its mortgage holdings as refinancing increases.
Mortgages rarely have been this cheap. A 1961 study by the National Bureau of Economic Research shows that loans made to World War II veterans in the late 1940s were available with 4% rates.
More than 60% of borrowers with a 30-year fixed-rate mortgage could reduce their mortgage rate by one percentage point, up from 42% at the beginning of August, according to Credit Suisse.
But some borrowers haven't been able to refinance rates because they can't qualify under loan standards that are much tighter than at the time of their first loan. Other borrowers don't have enough equity in their home to refinance.
Before the housing crisis, refinancing tended to jump when borrowers were able to lower their rate by 0.5 percentage point. Since 2009, mortgage applications have taken longer to process, while riskier borrowers have faced higher refinancing costs. As a result, borrowers typically now refinance when rates are 1.5 percentage points below their current rate, according to Bank of America mortgage analysts.
Donald Fraser, a 56-year old pathology assistant who shaved a full percentage point off the 4.875% mortgage he got last year, said he plans to stash most of the $2,700 a year in savings into retirement. "I don't think we'll ever see these rates in my lifetime or yours," he said.
It isn't clear how much these lower rates will help the economy, in part because a weakening economy is fueling the decline.
"We felt lucky. At the same time, we're lucky at the expense of a suffering market," said Richard Klompus, who refinanced his Glastonbury, Conn., home with a 4%, 30-year fixed-rate mortgage.
Mr. Klompus, 49, had a hybrid adjustable-rate mortgage that carries a 4.5% rate for the first five years before moving to a variable rate. He paid tens of thousands of dollars to pay down his loan balance to $417,000, the maximum size for loans eligible for purchase by mortgage companies Fannie Mae and Freddie Mac.
To encourage refinancing, Obama administration officials and U.S. regulators are in talks with lenders about ways to revamp an existing White House refinancing initiative designed to help borrowers with little or no equity. The program is open to borrowers whose loans are backed by Fannie and Freddie, which guarantee about half of all outstanding home loans.
The Federal Housing Finance Agency, which oversees Fannie and Freddie, is weighing a series of changes to the program, which has been snarled by a series of technical hurdles. Just 838,000 borrowers have refinanced, short of the hoped-for four million to five million. Just 63,000 of those borrowers have loans worth more than 105% of their home value.
"It hasn't worked, to be honest," said James Parrott, a top White House housing adviser, in a speech to industry executives this week. He said the housing market is at a "critical juncture" and policy decisions over the next six months could determine whether the economic headwinds are "going to be a blip or a broader struggle."
A separate question is whether banks will be able to handle the volume of mortgage applications.
Banks recently have laid off mortgage employees in anticipation of lower loan volumes, while shifting others to the backlog of delinquent loans. The reduced ability to handle loan volumes means that banks have charged higher rates relative to their borrowing costs, muting the decline in rates.
From: http://online.wsj.com/article/SB10001424053111904563904576589182943679612.html
Readers question whether telemarketers who violate ?Do Not Call? lists are punished | Katie Fairbank Columns - Problem Solver - News for Dallas, Texas - The Dallas Morning News
Readers question whether telemarketers who violate “Do Not Call” lists are punished
Katie Fairbank
Problem Solver
problemsolver@dallasnews.com
Published: 24 September 2011 11:10 PM
THE PROBLEM: Dozens of readers contacted Problem Solver to say they had signed up for the state and national “Do Not Call” lists in hopes of avoiding telemarketing calls. But their phones keep ringing anyway. “Are telemarketers who violate the list punished in any way?” asked one reader. “I don’t see any consequences, so I’d appreciate a follow-up article on this problem.”
The penalty for ignoring the state “No Call” list is $25,000 per day, per violation. Breaking the rules that include the national “Do Not Call” list can result in civil penalties of up to $16,000 per violation.
Those are hefty fines. But while complaints about telemarketers are plentiful, enforcement actions are not.
Michael Lanham of Dallas found that out after a credit card marketing firm in Idaho kept calling his cellphone, even though he is registered on both the state and national lists.
Lanham first sacrificed some of his cell plan minutes to try to stop the calls. He went through the all-too-familiar routine of pressing “1” and waiting on hold for a human to come on the line.
“I explained that I was on all the ‘No Call’ lists, and I wanted them to honor that and take me off. His immediate response was to hang up on me,” said Lanham, who then logged onto the national “Do Not Call” list website to file a complaint. He was dismayed to realize it wouldn’t make much difference.
“The website clearly says that they really cannot enforce anything and that they cannot do anything but register the complaint,” he said. “I am sure that legitimate companies will try to abide by the rules, but the ‘No Call’ list is really a bit of a paper tiger. If someone chooses to violate the list, the consequences are minor, if any at all.”
In Texas, that’s mostly true. Consumers filed 6,185 complaints about calls to numbers registered on the “No Call” list between Sept. 1, 2008, and Aug. 31, 2010, according to a report from the Public Utility Commission.
Those 6,185 complaints initiated 13 investigations by the PUC, which oversees the lists. “Of these 13, five were referred to other agencies, six resulted in warning letters and two were found to be in full compliance,” the PUC reported to the Texas Legislature in December.
“The commission believes its approach to telemarketing (including No-Call List) investigations and enforcement strikes the appropriate balance between the use of the resources available to prosecute these types of violations and the seriousness of the violations,” the PUC’s report states.
The Texas attorney general’s office reported 154 complaints during the same two-year period. In response, the office opened 18 investigations, filed five lawsuits and reached an agreement with three companies believed to have violated the “Do Not Call” lists.
One of the lawsuits, filed in U.S. District Court in Dallas, was against Pleasant Valley Air Conditioning, an air conditioning and heating repair company that had generated over 1,000 telemarketing complaints with the Federal Trade Commission. Pleasant Valley agreed to a judgment of $100,000 and promised to stop making the calls.
Nationally, the FTC and the Federal Communications Commission jointly manage the “Do Not Call” list and caution consumers about “limitations” in jurisdiction. The agencies point out that calls from charities, surveyors or companies with which a consumer already has an existing business relationship are all allowed.
Also allowed are calls from political organizations seeking money and support. Politicians decided to leave those calls off the telemarketing list.
AT A GLANCE: REPORTING CALLS
Consumers may file complaints for violations of the Texas No-Call List with the Customer Protection Division of the Public Utility Commission.
Consumers may file complaints by phone at 1-888-782-8477; by mail at P.O. Box 13326, Austin, Texas 78711; or through a complaint form online at www.puc.state.tx.us/consumer/complaint/NoCallForm.aspx.
Consumers also can file complaints with the Office of the Attorney General of the State of Texas at http://ping.fm/rM7iC
SOURCES: Texas Public Utility Commission, Texas attorney general
From: http://ping.fm/6LqTC
Katie Fairbank
Problem Solver
problemsolver@dallasnews.com
Published: 24 September 2011 11:10 PM
THE PROBLEM: Dozens of readers contacted Problem Solver to say they had signed up for the state and national “Do Not Call” lists in hopes of avoiding telemarketing calls. But their phones keep ringing anyway. “Are telemarketers who violate the list punished in any way?” asked one reader. “I don’t see any consequences, so I’d appreciate a follow-up article on this problem.”
The penalty for ignoring the state “No Call” list is $25,000 per day, per violation. Breaking the rules that include the national “Do Not Call” list can result in civil penalties of up to $16,000 per violation.
Those are hefty fines. But while complaints about telemarketers are plentiful, enforcement actions are not.
Michael Lanham of Dallas found that out after a credit card marketing firm in Idaho kept calling his cellphone, even though he is registered on both the state and national lists.
Lanham first sacrificed some of his cell plan minutes to try to stop the calls. He went through the all-too-familiar routine of pressing “1” and waiting on hold for a human to come on the line.
“I explained that I was on all the ‘No Call’ lists, and I wanted them to honor that and take me off. His immediate response was to hang up on me,” said Lanham, who then logged onto the national “Do Not Call” list website to file a complaint. He was dismayed to realize it wouldn’t make much difference.
“The website clearly says that they really cannot enforce anything and that they cannot do anything but register the complaint,” he said. “I am sure that legitimate companies will try to abide by the rules, but the ‘No Call’ list is really a bit of a paper tiger. If someone chooses to violate the list, the consequences are minor, if any at all.”
In Texas, that’s mostly true. Consumers filed 6,185 complaints about calls to numbers registered on the “No Call” list between Sept. 1, 2008, and Aug. 31, 2010, according to a report from the Public Utility Commission.
Those 6,185 complaints initiated 13 investigations by the PUC, which oversees the lists. “Of these 13, five were referred to other agencies, six resulted in warning letters and two were found to be in full compliance,” the PUC reported to the Texas Legislature in December.
“The commission believes its approach to telemarketing (including No-Call List) investigations and enforcement strikes the appropriate balance between the use of the resources available to prosecute these types of violations and the seriousness of the violations,” the PUC’s report states.
The Texas attorney general’s office reported 154 complaints during the same two-year period. In response, the office opened 18 investigations, filed five lawsuits and reached an agreement with three companies believed to have violated the “Do Not Call” lists.
One of the lawsuits, filed in U.S. District Court in Dallas, was against Pleasant Valley Air Conditioning, an air conditioning and heating repair company that had generated over 1,000 telemarketing complaints with the Federal Trade Commission. Pleasant Valley agreed to a judgment of $100,000 and promised to stop making the calls.
Nationally, the FTC and the Federal Communications Commission jointly manage the “Do Not Call” list and caution consumers about “limitations” in jurisdiction. The agencies point out that calls from charities, surveyors or companies with which a consumer already has an existing business relationship are all allowed.
Also allowed are calls from political organizations seeking money and support. Politicians decided to leave those calls off the telemarketing list.
AT A GLANCE: REPORTING CALLS
Consumers may file complaints for violations of the Texas No-Call List with the Customer Protection Division of the Public Utility Commission.
Consumers may file complaints by phone at 1-888-782-8477; by mail at P.O. Box 13326, Austin, Texas 78711; or through a complaint form online at www.puc.state.tx.us/consumer/complaint/NoCallForm.aspx.
Consumers also can file complaints with the Office of the Attorney General of the State of Texas at http://ping.fm/rM7iC
SOURCES: Texas Public Utility Commission, Texas attorney general
From: http://ping.fm/6LqTC
Thursday, September 15, 2011
Surge in Defaults Breaks Six-Month Run of Declining Foreclosure Stats
Surge in Defaults Breaks Six-Month Run of Declining Foreclosure Stats
09/14/2011 By: Carrie Bay
The lingering effects of the foreclosure moratoriums enacted after evidence of improper foreclosure processing came to light appear to be fading. Data released by RealtyTrac Thursday shows the first rise in foreclosure filings since January, with all of the increase coming from new default notices.
The tracking company says filings – including default notices, scheduled auctions, and bank-repossessed REOs – rose 7 percent between July and August on the national stage. But with the steep declines seen over previous months, filings remain 33 percent below the level recorded in August 2010.
Default notices posted their biggest month-to-month increase since August of 2007, up 33 percent. The 78,880 new default notices filed last month represents a nine-month high, but is down 18 percent from a year earlier.
Default notices increased more than 40 percent on a month-over-month basis in several states, including New Jersey (42 percent), Indiana (46 percent), and California (55 percent).
James Saccacio, RealtyTrac’s CEO, says the big increase in new foreclosure actions is a sign lenders are pushing
foreclosures through and foreshadows more bank repossessions in the coming months.
Foreclosure auctions (NTS, NFS) were scheduled for 84,405 U.S. properties in August, a decrease of 1 percent from the previous month and a decrease of 43 percent from August 2010.
Despite the nationwide decrease, scheduled auctions were up substantially from the previous month in several states where the auction notice is the first public notice in the process, such as Oregon (19 percent), Arizona (20 percent), Georgia (22 percent), and Colorado (51 percent).
Lenders repossessed a total of 64,813 homes (REOs) in August, a 4 percent decrease from the previous month and a 32 percent decrease from a year earlier. The REO total in August marked a six-month low.
Five states accounted for more than half of the foreclosure activity in August. Leading the pack was California, where 59,383 properties had foreclosure filings during the month.
Florida posted the second highest state total with 23,569 filings, followed by Michigan (13,016), Illinois (12,493), and Georgia (11,743 properties).
RealtyTrac’s report shows that defaults surged in August in some of the hardest-hit local markets.
A 30 percent month-over-month increase in default notices helped Las Vegas maintain the nation’s highest foreclosure rate among large metropolitan areas.
Eight of the metros with top-10 foreclosure rates can be found in California. All but Stockton posted a double-digit monthly increase in default notices. The biggest jump was found in Visalia-Porterville, where new defaults climbed 97 percent from the previous month.
Closing out the metro top-10 list is Reno, Nevada. There, new defaults rose 23 percent in August.
From: http://ping.fm/py0Oc
09/14/2011 By: Carrie Bay
The lingering effects of the foreclosure moratoriums enacted after evidence of improper foreclosure processing came to light appear to be fading. Data released by RealtyTrac Thursday shows the first rise in foreclosure filings since January, with all of the increase coming from new default notices.
The tracking company says filings – including default notices, scheduled auctions, and bank-repossessed REOs – rose 7 percent between July and August on the national stage. But with the steep declines seen over previous months, filings remain 33 percent below the level recorded in August 2010.
Default notices posted their biggest month-to-month increase since August of 2007, up 33 percent. The 78,880 new default notices filed last month represents a nine-month high, but is down 18 percent from a year earlier.
Default notices increased more than 40 percent on a month-over-month basis in several states, including New Jersey (42 percent), Indiana (46 percent), and California (55 percent).
James Saccacio, RealtyTrac’s CEO, says the big increase in new foreclosure actions is a sign lenders are pushing
foreclosures through and foreshadows more bank repossessions in the coming months.
Foreclosure auctions (NTS, NFS) were scheduled for 84,405 U.S. properties in August, a decrease of 1 percent from the previous month and a decrease of 43 percent from August 2010.
Despite the nationwide decrease, scheduled auctions were up substantially from the previous month in several states where the auction notice is the first public notice in the process, such as Oregon (19 percent), Arizona (20 percent), Georgia (22 percent), and Colorado (51 percent).
Lenders repossessed a total of 64,813 homes (REOs) in August, a 4 percent decrease from the previous month and a 32 percent decrease from a year earlier. The REO total in August marked a six-month low.
Five states accounted for more than half of the foreclosure activity in August. Leading the pack was California, where 59,383 properties had foreclosure filings during the month.
Florida posted the second highest state total with 23,569 filings, followed by Michigan (13,016), Illinois (12,493), and Georgia (11,743 properties).
RealtyTrac’s report shows that defaults surged in August in some of the hardest-hit local markets.
A 30 percent month-over-month increase in default notices helped Las Vegas maintain the nation’s highest foreclosure rate among large metropolitan areas.
Eight of the metros with top-10 foreclosure rates can be found in California. All but Stockton posted a double-digit monthly increase in default notices. The biggest jump was found in Visalia-Porterville, where new defaults climbed 97 percent from the previous month.
Closing out the metro top-10 list is Reno, Nevada. There, new defaults rose 23 percent in August.
From: http://ping.fm/py0Oc
Friday, September 9, 2011
Shadow inventory Armageddon ? Foreclosure timeline up to an average of 599 days with 798,000 mortgages having no payment made in over 1 year and no foreclosure process initiated. Shadow inventory grows to over 6,540,000 properties. � Dr. Housing Bubble Blog
Shadow inventory Armageddon – Foreclosure timeline up to an average of 599 days with 798,000 mortgages having no payment made in over 1 year and no foreclosure process initiated. Shadow inventory grows to over 6,540,000 properties.
The biggest problem facing the housing market is still the large amount of stubborn shadow inventory. The fact that this figure remains elevated is a sign that the banking system after all these years and trillions of dollars in bailouts has yet to figure out a streamlined way to unload properties. The Federal Reserve is trying to grease the wheels with historically low mortgage rates but that has done very little since this does not address the weak economy. At the latest count there are 6.54 million loans that are either delinquent or in the foreclosure process. This figure hasn’t really moved much for the entire year. Properties have been sold from the REO (bank owned) pile but this is the tiny chunk of properties that is covered by the mainstream news and also that appear in public listing services. As we will show in charts later in this article, only examining this piece of the real estate pool is like seeing the tip of an iceberg and thinking there is nothing underneath it submerged in the water.
From: http://ping.fm/wWz0x
The biggest problem facing the housing market is still the large amount of stubborn shadow inventory. The fact that this figure remains elevated is a sign that the banking system after all these years and trillions of dollars in bailouts has yet to figure out a streamlined way to unload properties. The Federal Reserve is trying to grease the wheels with historically low mortgage rates but that has done very little since this does not address the weak economy. At the latest count there are 6.54 million loans that are either delinquent or in the foreclosure process. This figure hasn’t really moved much for the entire year. Properties have been sold from the REO (bank owned) pile but this is the tiny chunk of properties that is covered by the mainstream news and also that appear in public listing services. As we will show in charts later in this article, only examining this piece of the real estate pool is like seeing the tip of an iceberg and thinking there is nothing underneath it submerged in the water.
From: http://ping.fm/wWz0x
Thursday, September 8, 2011
Home Price Gains Expected to Wane: Clear Capital
Home Price Gains Expected to Wane: Clear Capital
09/07/2011 By: Carrie Bay
The warm weather homebuying season has kept prices moving up, but Clear Capital says the rate of appreciation is already slowing and weak consumer confidence points to a stormy rest of the year.
The “company’s latest report shows that home prices rose 4.0 percent over the four-month period ending in August when compared to the previous three months – an assessment Clear Capital refers to as a rolling quarter.
The company notes, however, that the recent gains over the summer months have not been enough to recoup longer-term declines, with national home prices still 6.2 percent below last year’s levels.
Dr. Alex Villacorta, director of research and analytics at Clear Capital, points out that the short-term gains reported in recent months are coming off of the record lows of winter.
“With summer coming to a close and the price gains clearly starting to level off, the market is at a critical juncture as to whether it can avoid another significant downturn into the slower buying seasons of fall and winter,” Villacorta said.
According to Clear Capital, low consumer confidence and a continued high unemployment rate support the company’s projection of downward home price movement for the remainder of 2011.
“The latest readings on consumer confidence paint an ominous picture that at present, consumers are still not ready to risk jumping into the market despite very low mortgage rates and very affordable home prices,” Villacorta added.
Based on Clear Capital’s latest report, the Midwest region leads the nation with a seasonal quarterly home price gain of 7.3 percent, buoyed by solid improvement in Chicago and the Ohio markets in particular.
In the Northeast home prices rose 4.9 percent, and in the South quarterly appreciation came in at 3.5 percent.
Home prices in the Western region of the U.S. were up just 0.7 percent. Clear Capital says with economic uncertainty and significant distressed sales activity affecting the West, this small gain may potentially represent peak price growth in the region for the rest of 2011.
Home prices in all four regions came in well below their readings at this time last year, with the smallest annual dip in the Northeast at 2.0 percent.
Jacksonville, Florida replaced Detroit as the “lowest performing” major market, posting a -2.7 percent quarterly price change. Eleven of the 15 markets on the low end of the price performance spectrum reside in the western part of the country.
Cleveland’s rolling quarter price gains jumped to 19.2 percent based on data through August, pushing the market to the top of Clear Capital’s “highest performing” list. The company says Cleveland’s large gains reflect vast differences in its REO composition between the winter and the spring-summer homebuying seasons.
From: http://ping.fm/QOCAR
09/07/2011 By: Carrie Bay
The warm weather homebuying season has kept prices moving up, but Clear Capital says the rate of appreciation is already slowing and weak consumer confidence points to a stormy rest of the year.
The “company’s latest report shows that home prices rose 4.0 percent over the four-month period ending in August when compared to the previous three months – an assessment Clear Capital refers to as a rolling quarter.
The company notes, however, that the recent gains over the summer months have not been enough to recoup longer-term declines, with national home prices still 6.2 percent below last year’s levels.
Dr. Alex Villacorta, director of research and analytics at Clear Capital, points out that the short-term gains reported in recent months are coming off of the record lows of winter.
“With summer coming to a close and the price gains clearly starting to level off, the market is at a critical juncture as to whether it can avoid another significant downturn into the slower buying seasons of fall and winter,” Villacorta said.
According to Clear Capital, low consumer confidence and a continued high unemployment rate support the company’s projection of downward home price movement for the remainder of 2011.
“The latest readings on consumer confidence paint an ominous picture that at present, consumers are still not ready to risk jumping into the market despite very low mortgage rates and very affordable home prices,” Villacorta added.
Based on Clear Capital’s latest report, the Midwest region leads the nation with a seasonal quarterly home price gain of 7.3 percent, buoyed by solid improvement in Chicago and the Ohio markets in particular.
In the Northeast home prices rose 4.9 percent, and in the South quarterly appreciation came in at 3.5 percent.
Home prices in the Western region of the U.S. were up just 0.7 percent. Clear Capital says with economic uncertainty and significant distressed sales activity affecting the West, this small gain may potentially represent peak price growth in the region for the rest of 2011.
Home prices in all four regions came in well below their readings at this time last year, with the smallest annual dip in the Northeast at 2.0 percent.
Jacksonville, Florida replaced Detroit as the “lowest performing” major market, posting a -2.7 percent quarterly price change. Eleven of the 15 markets on the low end of the price performance spectrum reside in the western part of the country.
Cleveland’s rolling quarter price gains jumped to 19.2 percent based on data through August, pushing the market to the top of Clear Capital’s “highest performing” list. The company says Cleveland’s large gains reflect vast differences in its REO composition between the winter and the spring-summer homebuying seasons.
From: http://ping.fm/QOCAR
Tuesday, August 9, 2011
ForSalebyOwner.COM FOUNDER HIRES A REAL ESTATE BROKER !!
This is great info for your FSBO prospects!
ForSalebyOwner.com founder gives up on own listing, hires real estate broker!!
AGBeat News | August 3, 2011
Former FSBO CEO sells home the traditional way
Founder and former CEO of ForSalebyOwner.com, Colby Sambrotto listed his 2,000 square foot New York condominium on his own through online classified ads and FSBO sites, but after six months, he opted to hire New York broker Jesse Buckler who immediately advised a price change as the listing was not attracting the right buyer.
After giving up on the DIY route, Sambrotto’s decision to hire a broker led to attracting multiple offers, closing for $150,000 over the original asking price. The WSJ reports the listing sold for $2.15 million including a 6% commission.
Many FSBOs turn to Realtors
The news stands as an enormous validation of the real estate profession and while some may tease, it is no laughing matter and the former FSBO CEO made a good financial decision.
AGBeat columnist Herman Chan said, “If people want to take a stab at For Sale By Owner (ie FSBO), go for it. But well over 80% of FSBO’s eventually have to list with an real estate agent to get their house sold. It’s harder than it looks!”
Not a new dilemma
Marlow Harris, Seattle Residential and Investment Consultant at Coldwell Banker Bain Associates told AGBeat, “The ForSaleByOwner.com founder’s dilemma is one we see quite often and is not unusual. Trying to sell your own property yourself or using a discount brokerage, is not the solution for everyone. Unusual properties, properties in the higher price range, these are more difficult to sell and often require specialization.”
Harris continues, “We see these choices across the board, from single family homes to huge housing developments. For instance, Vulcan, one of Paul Allen’s companies which has invested heavily in Redfin, does not use Redfin to market their many condominium projects. They use traditional real estate firms such as John L. Scott, Williams Marketing and Matrix Real Estate, finding that the do-it-yourself approach to real estate just doesn’t work for these types of sales.”
From: http://www.trulia.com/blog/allanerps/2011/08/article_forsalebyowner_com_founder_hires_a_real_estate_broker
ForSalebyOwner.com founder gives up on own listing, hires real estate broker!!
AGBeat News | August 3, 2011
Former FSBO CEO sells home the traditional way
Founder and former CEO of ForSalebyOwner.com, Colby Sambrotto listed his 2,000 square foot New York condominium on his own through online classified ads and FSBO sites, but after six months, he opted to hire New York broker Jesse Buckler who immediately advised a price change as the listing was not attracting the right buyer.
After giving up on the DIY route, Sambrotto’s decision to hire a broker led to attracting multiple offers, closing for $150,000 over the original asking price. The WSJ reports the listing sold for $2.15 million including a 6% commission.
Many FSBOs turn to Realtors
The news stands as an enormous validation of the real estate profession and while some may tease, it is no laughing matter and the former FSBO CEO made a good financial decision.
AGBeat columnist Herman Chan said, “If people want to take a stab at For Sale By Owner (ie FSBO), go for it. But well over 80% of FSBO’s eventually have to list with an real estate agent to get their house sold. It’s harder than it looks!”
Not a new dilemma
Marlow Harris, Seattle Residential and Investment Consultant at Coldwell Banker Bain Associates told AGBeat, “The ForSaleByOwner.com founder’s dilemma is one we see quite often and is not unusual. Trying to sell your own property yourself or using a discount brokerage, is not the solution for everyone. Unusual properties, properties in the higher price range, these are more difficult to sell and often require specialization.”
Harris continues, “We see these choices across the board, from single family homes to huge housing developments. For instance, Vulcan, one of Paul Allen’s companies which has invested heavily in Redfin, does not use Redfin to market their many condominium projects. They use traditional real estate firms such as John L. Scott, Williams Marketing and Matrix Real Estate, finding that the do-it-yourself approach to real estate just doesn’t work for these types of sales.”
From: http://www.trulia.com/blog/allanerps/2011/08/article_forsalebyowner_com_founder_hires_a_real_estate_broker
Tuesday, July 26, 2011
Case-Shiller Index Posts Second Straight Increase
Case-Shiller Index Posts Second Straight Increase
07/26/2011 By: Carrie Bay
For the second month since recording an official double-dip in home prices, the S&P/Case-Shiller index has posted an uptick.
Data just released by Standard & Poor’s shows that 16 of the 20 metros included in the study and both composites reported positive monthly increases.
The 10- and 20-city composites were up 1.1 percent and 1.0 percent, respectively, in May over April.
Detroit, Las Vegas, and Tampa were down over the month and Phoenix was unchanged.
On an annual basis, Washington D.C. was the only metro with a positive rate of change, up 1.3 percent.
The remaining 19 metros were down in May 2011 versus the same month last year. Minneapolis fared the worst posting a double-digit decline of 11.7 percent.
The 10-city and 20-city composites recorded annual declines of 3.6 percent and 4.5 percent, respectively, when compared to May 2010. (Last year’s spring season had the benefit of federal homebuyer tax credits which served to boost activity.)
Still, David Blitzer, chairman of the index committee for S&P, says he’s seeing some seasonal improvements in May’s data.
From: http://ping.fm/U50bu
07/26/2011 By: Carrie Bay
For the second month since recording an official double-dip in home prices, the S&P/Case-Shiller index has posted an uptick.
Data just released by Standard & Poor’s shows that 16 of the 20 metros included in the study and both composites reported positive monthly increases.
The 10- and 20-city composites were up 1.1 percent and 1.0 percent, respectively, in May over April.
Detroit, Las Vegas, and Tampa were down over the month and Phoenix was unchanged.
On an annual basis, Washington D.C. was the only metro with a positive rate of change, up 1.3 percent.
The remaining 19 metros were down in May 2011 versus the same month last year. Minneapolis fared the worst posting a double-digit decline of 11.7 percent.
The 10-city and 20-city composites recorded annual declines of 3.6 percent and 4.5 percent, respectively, when compared to May 2010. (Last year’s spring season had the benefit of federal homebuyer tax credits which served to boost activity.)
Still, David Blitzer, chairman of the index committee for S&P, says he’s seeing some seasonal improvements in May’s data.
From: http://ping.fm/U50bu
Real estate: It's time to buy again - Term Sheet
Thanks got to Don Williams for finding this terrific article!
Real estate: It's time to buy again
By Shawn Tully, senior editor-at-large
March 28, 2011: 5:00 AM ET
Forget stocks. Don't bet on gold. After four years of plunging home prices, the most attractive asset class in America is housing.
A home under construction in Austin. The number of new homes in the pipeline nationwide is quite low.
From his wide-rimmed cowboy hat to his roper boots, Mike Castleman fits moviedom's image of the lanky Texas rancher. On a recent March evening, Castleman is feeding cattle biscuits to his two pet longhorn steers, Big Buddy and Little Buddy, on his 460-acre Bar Ten Creek Ranch in Dripping Springs, a hamlet outside Austin in the Texas Hill Country. The spread is a medley of meandering streams, craggy cliffs, and centuries-old oaks. But even in this pastoral setting, his mind keeps returning to a subject he knows as well as any expert around: the housing market. "I'm a dirt-road economist who sees what's happening on the ground, and in 35 years I've never seen a shortage of new construction like the one I'm seeing today," declares Castleman, 70, now offering a biscuit to his miniature donkey Thumper. "The talking heads who are down on real estate will hate to hear this, but America needs to build a lot more houses. And in most markets the price of new homes is fixin' to rise, not fall."
Castleman is in a unique position to know. As the founder and CEO of a company called Metrostudy, he's spent more than three decades tracking real-time data on the country's inventory of new homes. Each quarter he dispatches 500 inspectors to literally drive through 45,000 subdivisions from Baltimore to Sacramento. The inspectors examine 5 million finished lots, one at a time, and record whether they contain a house that's under construction, one that's finished and for sale, or a home that's sold. Metrostudy covers 19 states, or around 65% of the U.S. housing market, including all the ones hardest hit by the crash: Florida, California, Arizona, and Nevada. The company's client list includes virtually every major homebuilder and bank -- from Pulte (PHM) and KB Home (KBH) to Bank of America (BAC) and Wells Fargo (WFC).
The key figures that Metrostudy collects, and that those clients prize, are the number of homes that are vacant and for sale in each city, and the number of months it takes to sell all of them. Together those figures measure inventory -- the key metric in determining whether a market has a surplus or a shortage of new housing.
Today Castleman is witnessing an extraordinary reversal of the new-home glut that helped sink prices just a few years ago. In the 41 cities Metrostudy covers, a total of 78,000 houses are now either vacant and for sale, or under construction. That's less than one-fourth of the 343,000 units in those two categories at the peak of the frenzy in mid-2006, and well below the level of a decade ago. "If we had anything like normal levels of buying, those houses would sell in 2½ months," says Castleman. "We'd see an incredible shortage. And that's where we're heading."
If all the noise you're hearing about housing has you totally confused, join the crowd. One day you'll read that owning a home has never been more affordable. The next day you'll see news that housing starts have plunged to nearly their lowest level in half a century, as headlines announced in March. After four years of falling prices and surging foreclosures, it's hard to know what to think. Even Robert Shiller and Karl Case can't agree. The two economists, who together created the widely followed S&P/Case-Shiller Home Price indices, are right now offering sharply contrasting views of housing's future. Shiller recently warned that the chances were high for a further double-digit drop in U.S. home prices. But in an interview with Fortune, Case took a far brighter view: "The lack of new home building is a huge help that a lot of people are ignoring," says Case. "People think I'm crazy to be optimistic, but housing is looking like the little engine that could."
To see where real estate is truly headed, it's critical to keep your eye firmly on the fundamentals that, over time, always determine the course of prices and construction. During the last decade's historic run-up in prices, Fortune repeatedly warned that things were moving too fast. In a cover story titled "Is the Housing Boom Over?," this writer's analysis found that the basic forces that govern the market -- the cost of owning vs. renting and the level of new construction -- were in bubble territory. Eventually reality set in, and prices plummeted. Our current view focuses on those same fundamentals -- only now they're pointing in the opposite direction.
So let's state it simply and forcibly: Housing is back.
Two basic factors are laying the foundation for dramatic recovery in residential real estate. The first is the historic drop in new construction that so amazes Castleman. The second is a steep decline in prices, on the order of 30% nationwide since 2006, and as much as 55% in the hardest-hit markets. The story of this downturn has been an astonishing flight from the traditional American approach of buying new houses to an embrace of renting. But the new affordability will gradually lure Americans back to buying homes. And the return of the homeowner will start raising prices in many markets this year.
Drumming up sales
Of course, home prices are low and home construction is weak for a reason: incredibly low demand. For our scenario to play out, America will need a decent economy, with job creation and consumer confidence continuing to claw their way back to normal.
One big fear is that today's tight credit standards will chill the market. But we're really returning to the standards that prevailed before the craze, and those requirements didn't stop prices and homebuilding from rising in a good economy. "The credit standards are now at about historical levels, excluding the bubble period," says Mark Zandi, chief economist for Moody's Analytics. "We saw prices rising with fundamentals in those periods, and it will happen again."
To see why, let's examine the remarkable shift in home affordability. A new study by Deutsche Bank measures affordability in two ways: first, the share of income Americans are paying to own a home. And second, the cost of owning vs. renting. On the first metric, the analysis finds that homeowners now pay just 9.8% of their income in after-tax mortgage, tax, and insurance payments. That's down from 17.2% at the bubble's peak in 2007, and by far the lowest number in the Deutsche Bank database, going back to 1999. The second measure, the cost of owning compared with renting, should also inspire potential buyers. In 28 out of 54 major markets, it's now cheaper to pay a mortgage and other major costs than to rent the same house. What's most compelling is that in all of the distressed markets, owning now wins by a wide margin -- a stunning reversal from four years ago. It now costs 34% less than renting in Atlanta. In Miami the average rent is now $1,031 a month, vs. the $856 it costs to carry a ranch house or stucco cottage as an owner. (For more, see The top 10 cities for home buyers)
Not all markets will bounce back equally, of course. Housing resembles the weather: The exact conditions are different in every city. But in general the big U.S. markets fall into two different climate zones right now. We'll call them the "nondistressed markets" and the "foreclosure markets." A more detailed look shows why the forecast for both is favorable.
Nondistressed markets: Ready for launch
No cities went untouched by the collapse in prices over the past few years. But markets such as Northern Virginia, Indianapolis, Minneapolis, San Diego, the San Francisco suburbs, and virtually all of Texas held up reasonably well. In those areas prices spiked far less than in bubble cities -- the foreclosure markets we'll get to shortly -- chiefly because they didn't get nearly as many speculators who thought they could flip the homes or rent them to snowbirds.
The nondistressed markets will be able to get prices rising and construction growing far faster than the harder-hit areas for a simple reason: Although some of these markets are still suffering from foreclosures, they don't need to work through the big overhang haunting a Las Vegas or a Phoenix. The number of new homes for sale or in the pipeline is extraordinarily low in nondistressed markets. San Diego is typical. It has just 921 freestanding homes for sale or under construction, compared with 4,425 in late 2005. The challenge for these cities is to generate enough demand to reduce inventories of existing, or resale, homes. In the entire country the resale supply stands at 3.5 million houses and condos. That's a fairly high number, since it would take more than eight months to sell those properties; seven months or below is the threshold for a strong market.
But in the nondistressed cities, the existing home inventory is lower, closer to seven months on average. So a modest increase in demand will translate into strong gains in both prices and new construction. That should happen quickly, because most of those markets -- including Silicon Valley, Northern Virginia, and Texas -- are now showing good job growth.
Zandi of Moody's Analytics expects that prices will rise three to four points faster than inflation for the next few years in virtually all of the nondistressed markets. His view is that prices will increase in line with rents, which are now growing briskly because apartments are in short supply. Those higher rents will encourage buyers to cross the street from an apartment to a home of their own.
In Northern Virginia, Chris Bratz, an engineer, and his wife, Amy DiElsi, a publicist, are planning to leave their rental apartment and become homeowners for the first time. The main reason? Buying has simply become a far better deal than renting. "The market got completely inflated, then it crashed, so prices are coming back to where they should be," says Chris. As the couple have watched prices fall, they have also watched the rent on their apartment spiral upward, reaching $2,700 a month. They calculate that they should be able to purchase a townhouse for between $400,000 and $500,000 and pay less per month for a mortgage.
The nondistressed markets will also lead the way in construction. Zandi predicts that for the nation as a whole, single-family housing "starts" -- measured when a builder pours a foundation for a new home -- will rise from 470,000 in 2010 to as much as 700,000 this year. A large portion of that activity will happen in nondistressed markets where a tightening supply of resale houses will start making new homes look like a good deal. "Our main competition is from resales," says Jeff Mezger, CEO of KB Home. "The prices of those homes have stayed so low, because of low demand, that it's hampered the ability of builders to sell new houses."
But many would-be buyers simply prefer a brand-new house. Eventually they'll move from renters to buyers, and the trend will accelerate now that prices are no longer dropping. In Minneapolis, Yuan Qu and her husband, Xiang Chen, a researcher at the University of Minnesota, just moved from a two-bedroom rental to a new light-blue four-bedroom ranch with a chocolate-colored roof on a spacious corner lot. They paid $400,000, a bargain price compared with a few years ago. The couple, both in their early thirties, moved to Minnesota from China six years ago. "We wanted to buy a house, and we've been waiting and waiting and waiting," says Qu. "The prices went down for so long, we finally thought they couldn't keep falling." For Qu the only choice was new construction. "We're not very handy people," she admits.
Foreclosure markets: The outlook is brightening
A home off the market in Mesa, Ariz.
The true disaster areas for housing since the bubble burst have been Sunbelt cities such as Las Vegas, Phoenix, and Miami -- places that boasted great job and population growth in the mid-2000s, only to suffer a housing crash that swamped them with empty homes and condos and crushed their economies. But people always want to live in those sunny locales, and their job markets are starting to recover, albeit slowly. In foreclosure markets the inventory problem is far greater because it includes not just traditional resale homes but millions of distressed properties. Fortunately those houses are now such a screaming deal that investors, including lots of mom-and-pop buyers, are purchasing them at a rapid pace. To be sure, some foreclosure markets won't rebound for years because they're both vastly overbuilt and far from big job centers; a prime example is California's Inland Empire, a real estate disaster zone 80 miles east of Los Angeles.
But the outlook is brightening for Phoenix, Las Vegas, Miami, and parts of Northern California. A big positive is the tiny supply of new homes entering the market. Phoenix, for example, has a total of just 8,100 new homes that are either for sale or under construction, down from 53,000 in mid-2006. The big test in these cities is absorbing the steady stream of distressed properties. The foreclosures put downward pressure on the market far out of proportion to their numbers because of markdown pricing. "We had levels of inventory even higher than this in 1990 and 1991," says MIT economist William Wheaton. "But they were traditional listings, not foreclosures, so they didn't create the big discounts you get with foreclosures."
Wheaton reckons that we'll see a flow of around 1 million foreclosures a year, at a fairly even pace, from now through 2013. That figure is frequently cited as evidence that the market is doomed for years in most foreclosure markets. Not so. The reason is that the vast bulk of those units, probably over 600,000, according to Gleb Nechayev, an economist with real estate firm CB Richard Ellis (CBG), are being converted to rentals either by investors or their current owners. Those properties are finding plenty of renters, since the rental market is still extremely strong across the country. Remember, the millions who lost their homes to foreclosure still need somewhere to live.
A typical investor is Alex Barbalat, a Russian immigrant who's purchased seven homes east of San Francisco in the towns of Bay Point, Antioch, and Pittsburg. His average purchase price is around $100,000 for homes that once sold for between $300,000 and $500,000. But he has no trouble finding renters, since his tenants can commute to jobs in San Francisco on the BART transit system. Barbalat is pocketing rental yields on the prices he paid of around 12%, and he's in no hurry to sell. "I'm holding them until prices drastically rise," he says.
Investment funds are also entering the game. Dotan Y. Melech looks for bargains in Las Vegas for UnitedAMS, a firm he co-founded that manages apartments and other real estate investments. The firm has raised more than $20 million from outside investors to purchase distressed properties. So far, Melech has bought around 300 houses and plans to purchase another 200 this year. He has no trouble renting the houses he buys, since, he estimates, occupancy rates in Las Vegas are touching 95%. The "cap rate," or return on investment after all expenses, is between 8% and 10% -- twice the rate on 10-year Treasuries. Melech rents to people who lost their homes but are reliable renters. "A lot of people can't be buyers because their credit got hurt," he says.
Even with investors jumping in, buying activity in foreclosure markets hasn't yet increased enough to bring inventories down. It will soon. Zandi thinks prices will fall a couple of percentage points lower in the distressed markets in the short run. "But that will be overshooting," he says. "It's like an elastic band. If prices do drop this year, they will need to bounce back because they'll be far too low compared with rents and replacement cost." Renters will come off the sidelines to purchase homes in the years ahead, precisely the opposite trend of the past few years.
Consider the example of Michael Dynda, a retired Air Force avionics technician who now works for a government contractor in Las Vegas. Dynda, 49, is a first-time buyer who put off purchasing for years, in part because prices were falling so rapidly in Las Vegas, with no bottom in sight. But last year the combination of bargain prices and low mortgage rates became too good to resist. He ended up purchasing a 2,300-square-foot stucco home for $240,000, or about half what it would have fetched in 2007. Dynda got a 4.38% home loan, and pays the same amount on his mortgage as on the rent on the house he left to become a homeowner. "The timing was about as good as it could get," says Dynda.
Mike Castleman's company tracks the inventory of new homes in 19 states across the country. He sees supply getting tight. "Home prices are fixin' to rise," he says.
Back on the ranch, Mike Castleman is lounging in his creek-front mansion, built from "a hundred tons of fine central Texas limestone." As he shows off his collection of custom-made guitars, including one crafted to resemble the skin of a rattlesnake, the homespun housing guru once again returns to his favorite topic.
Castleman claims that this recovery will look like all the others: It will bring a severe shortage of housing. He invokes the livestock business to explain. "It takes three years between the time a bull mates with a cow and when you get a calf ready for market," he says. "That's how it is in housing too. We'll get a big surge in demand and the drywall companies will take a long time to ramp up, and it will take years to get new lots approved. Buyers will show up looking for a house in a subdivision, and all the houses will be sold. The builders will tell them it will take six months to deliver a house." But those folks, says Castleman, will be set on buying a place. "And they'll want it so bad they'll bid the prices up!" In other words: Beat the crowd.
It's a Great Time to Buy a House
Mike Castleman, the Texan with the best realtime view of housing in the U.S., tells editor-atlarge Shawn Tully that the naysayers are about to get a big surprise: rising prices for new homes.
From: http://finance.fortune.cnn.com/2011/03/28/real-estate-its-time-to-buy-again/
Real estate: It's time to buy again
By Shawn Tully, senior editor-at-large
March 28, 2011: 5:00 AM ET
Forget stocks. Don't bet on gold. After four years of plunging home prices, the most attractive asset class in America is housing.
A home under construction in Austin. The number of new homes in the pipeline nationwide is quite low.
From his wide-rimmed cowboy hat to his roper boots, Mike Castleman fits moviedom's image of the lanky Texas rancher. On a recent March evening, Castleman is feeding cattle biscuits to his two pet longhorn steers, Big Buddy and Little Buddy, on his 460-acre Bar Ten Creek Ranch in Dripping Springs, a hamlet outside Austin in the Texas Hill Country. The spread is a medley of meandering streams, craggy cliffs, and centuries-old oaks. But even in this pastoral setting, his mind keeps returning to a subject he knows as well as any expert around: the housing market. "I'm a dirt-road economist who sees what's happening on the ground, and in 35 years I've never seen a shortage of new construction like the one I'm seeing today," declares Castleman, 70, now offering a biscuit to his miniature donkey Thumper. "The talking heads who are down on real estate will hate to hear this, but America needs to build a lot more houses. And in most markets the price of new homes is fixin' to rise, not fall."
Castleman is in a unique position to know. As the founder and CEO of a company called Metrostudy, he's spent more than three decades tracking real-time data on the country's inventory of new homes. Each quarter he dispatches 500 inspectors to literally drive through 45,000 subdivisions from Baltimore to Sacramento. The inspectors examine 5 million finished lots, one at a time, and record whether they contain a house that's under construction, one that's finished and for sale, or a home that's sold. Metrostudy covers 19 states, or around 65% of the U.S. housing market, including all the ones hardest hit by the crash: Florida, California, Arizona, and Nevada. The company's client list includes virtually every major homebuilder and bank -- from Pulte (PHM) and KB Home (KBH) to Bank of America (BAC) and Wells Fargo (WFC).
The key figures that Metrostudy collects, and that those clients prize, are the number of homes that are vacant and for sale in each city, and the number of months it takes to sell all of them. Together those figures measure inventory -- the key metric in determining whether a market has a surplus or a shortage of new housing.
Today Castleman is witnessing an extraordinary reversal of the new-home glut that helped sink prices just a few years ago. In the 41 cities Metrostudy covers, a total of 78,000 houses are now either vacant and for sale, or under construction. That's less than one-fourth of the 343,000 units in those two categories at the peak of the frenzy in mid-2006, and well below the level of a decade ago. "If we had anything like normal levels of buying, those houses would sell in 2½ months," says Castleman. "We'd see an incredible shortage. And that's where we're heading."
If all the noise you're hearing about housing has you totally confused, join the crowd. One day you'll read that owning a home has never been more affordable. The next day you'll see news that housing starts have plunged to nearly their lowest level in half a century, as headlines announced in March. After four years of falling prices and surging foreclosures, it's hard to know what to think. Even Robert Shiller and Karl Case can't agree. The two economists, who together created the widely followed S&P/Case-Shiller Home Price indices, are right now offering sharply contrasting views of housing's future. Shiller recently warned that the chances were high for a further double-digit drop in U.S. home prices. But in an interview with Fortune, Case took a far brighter view: "The lack of new home building is a huge help that a lot of people are ignoring," says Case. "People think I'm crazy to be optimistic, but housing is looking like the little engine that could."
To see where real estate is truly headed, it's critical to keep your eye firmly on the fundamentals that, over time, always determine the course of prices and construction. During the last decade's historic run-up in prices, Fortune repeatedly warned that things were moving too fast. In a cover story titled "Is the Housing Boom Over?," this writer's analysis found that the basic forces that govern the market -- the cost of owning vs. renting and the level of new construction -- were in bubble territory. Eventually reality set in, and prices plummeted. Our current view focuses on those same fundamentals -- only now they're pointing in the opposite direction.
So let's state it simply and forcibly: Housing is back.
Two basic factors are laying the foundation for dramatic recovery in residential real estate. The first is the historic drop in new construction that so amazes Castleman. The second is a steep decline in prices, on the order of 30% nationwide since 2006, and as much as 55% in the hardest-hit markets. The story of this downturn has been an astonishing flight from the traditional American approach of buying new houses to an embrace of renting. But the new affordability will gradually lure Americans back to buying homes. And the return of the homeowner will start raising prices in many markets this year.
Drumming up sales
Of course, home prices are low and home construction is weak for a reason: incredibly low demand. For our scenario to play out, America will need a decent economy, with job creation and consumer confidence continuing to claw their way back to normal.
One big fear is that today's tight credit standards will chill the market. But we're really returning to the standards that prevailed before the craze, and those requirements didn't stop prices and homebuilding from rising in a good economy. "The credit standards are now at about historical levels, excluding the bubble period," says Mark Zandi, chief economist for Moody's Analytics. "We saw prices rising with fundamentals in those periods, and it will happen again."
To see why, let's examine the remarkable shift in home affordability. A new study by Deutsche Bank measures affordability in two ways: first, the share of income Americans are paying to own a home. And second, the cost of owning vs. renting. On the first metric, the analysis finds that homeowners now pay just 9.8% of their income in after-tax mortgage, tax, and insurance payments. That's down from 17.2% at the bubble's peak in 2007, and by far the lowest number in the Deutsche Bank database, going back to 1999. The second measure, the cost of owning compared with renting, should also inspire potential buyers. In 28 out of 54 major markets, it's now cheaper to pay a mortgage and other major costs than to rent the same house. What's most compelling is that in all of the distressed markets, owning now wins by a wide margin -- a stunning reversal from four years ago. It now costs 34% less than renting in Atlanta. In Miami the average rent is now $1,031 a month, vs. the $856 it costs to carry a ranch house or stucco cottage as an owner. (For more, see The top 10 cities for home buyers)
Not all markets will bounce back equally, of course. Housing resembles the weather: The exact conditions are different in every city. But in general the big U.S. markets fall into two different climate zones right now. We'll call them the "nondistressed markets" and the "foreclosure markets." A more detailed look shows why the forecast for both is favorable.
Nondistressed markets: Ready for launch
No cities went untouched by the collapse in prices over the past few years. But markets such as Northern Virginia, Indianapolis, Minneapolis, San Diego, the San Francisco suburbs, and virtually all of Texas held up reasonably well. In those areas prices spiked far less than in bubble cities -- the foreclosure markets we'll get to shortly -- chiefly because they didn't get nearly as many speculators who thought they could flip the homes or rent them to snowbirds.
The nondistressed markets will be able to get prices rising and construction growing far faster than the harder-hit areas for a simple reason: Although some of these markets are still suffering from foreclosures, they don't need to work through the big overhang haunting a Las Vegas or a Phoenix. The number of new homes for sale or in the pipeline is extraordinarily low in nondistressed markets. San Diego is typical. It has just 921 freestanding homes for sale or under construction, compared with 4,425 in late 2005. The challenge for these cities is to generate enough demand to reduce inventories of existing, or resale, homes. In the entire country the resale supply stands at 3.5 million houses and condos. That's a fairly high number, since it would take more than eight months to sell those properties; seven months or below is the threshold for a strong market.
But in the nondistressed cities, the existing home inventory is lower, closer to seven months on average. So a modest increase in demand will translate into strong gains in both prices and new construction. That should happen quickly, because most of those markets -- including Silicon Valley, Northern Virginia, and Texas -- are now showing good job growth.
Zandi of Moody's Analytics expects that prices will rise three to four points faster than inflation for the next few years in virtually all of the nondistressed markets. His view is that prices will increase in line with rents, which are now growing briskly because apartments are in short supply. Those higher rents will encourage buyers to cross the street from an apartment to a home of their own.
In Northern Virginia, Chris Bratz, an engineer, and his wife, Amy DiElsi, a publicist, are planning to leave their rental apartment and become homeowners for the first time. The main reason? Buying has simply become a far better deal than renting. "The market got completely inflated, then it crashed, so prices are coming back to where they should be," says Chris. As the couple have watched prices fall, they have also watched the rent on their apartment spiral upward, reaching $2,700 a month. They calculate that they should be able to purchase a townhouse for between $400,000 and $500,000 and pay less per month for a mortgage.
The nondistressed markets will also lead the way in construction. Zandi predicts that for the nation as a whole, single-family housing "starts" -- measured when a builder pours a foundation for a new home -- will rise from 470,000 in 2010 to as much as 700,000 this year. A large portion of that activity will happen in nondistressed markets where a tightening supply of resale houses will start making new homes look like a good deal. "Our main competition is from resales," says Jeff Mezger, CEO of KB Home. "The prices of those homes have stayed so low, because of low demand, that it's hampered the ability of builders to sell new houses."
But many would-be buyers simply prefer a brand-new house. Eventually they'll move from renters to buyers, and the trend will accelerate now that prices are no longer dropping. In Minneapolis, Yuan Qu and her husband, Xiang Chen, a researcher at the University of Minnesota, just moved from a two-bedroom rental to a new light-blue four-bedroom ranch with a chocolate-colored roof on a spacious corner lot. They paid $400,000, a bargain price compared with a few years ago. The couple, both in their early thirties, moved to Minnesota from China six years ago. "We wanted to buy a house, and we've been waiting and waiting and waiting," says Qu. "The prices went down for so long, we finally thought they couldn't keep falling." For Qu the only choice was new construction. "We're not very handy people," she admits.
Foreclosure markets: The outlook is brightening
A home off the market in Mesa, Ariz.
The true disaster areas for housing since the bubble burst have been Sunbelt cities such as Las Vegas, Phoenix, and Miami -- places that boasted great job and population growth in the mid-2000s, only to suffer a housing crash that swamped them with empty homes and condos and crushed their economies. But people always want to live in those sunny locales, and their job markets are starting to recover, albeit slowly. In foreclosure markets the inventory problem is far greater because it includes not just traditional resale homes but millions of distressed properties. Fortunately those houses are now such a screaming deal that investors, including lots of mom-and-pop buyers, are purchasing them at a rapid pace. To be sure, some foreclosure markets won't rebound for years because they're both vastly overbuilt and far from big job centers; a prime example is California's Inland Empire, a real estate disaster zone 80 miles east of Los Angeles.
But the outlook is brightening for Phoenix, Las Vegas, Miami, and parts of Northern California. A big positive is the tiny supply of new homes entering the market. Phoenix, for example, has a total of just 8,100 new homes that are either for sale or under construction, down from 53,000 in mid-2006. The big test in these cities is absorbing the steady stream of distressed properties. The foreclosures put downward pressure on the market far out of proportion to their numbers because of markdown pricing. "We had levels of inventory even higher than this in 1990 and 1991," says MIT economist William Wheaton. "But they were traditional listings, not foreclosures, so they didn't create the big discounts you get with foreclosures."
Wheaton reckons that we'll see a flow of around 1 million foreclosures a year, at a fairly even pace, from now through 2013. That figure is frequently cited as evidence that the market is doomed for years in most foreclosure markets. Not so. The reason is that the vast bulk of those units, probably over 600,000, according to Gleb Nechayev, an economist with real estate firm CB Richard Ellis (CBG), are being converted to rentals either by investors or their current owners. Those properties are finding plenty of renters, since the rental market is still extremely strong across the country. Remember, the millions who lost their homes to foreclosure still need somewhere to live.
A typical investor is Alex Barbalat, a Russian immigrant who's purchased seven homes east of San Francisco in the towns of Bay Point, Antioch, and Pittsburg. His average purchase price is around $100,000 for homes that once sold for between $300,000 and $500,000. But he has no trouble finding renters, since his tenants can commute to jobs in San Francisco on the BART transit system. Barbalat is pocketing rental yields on the prices he paid of around 12%, and he's in no hurry to sell. "I'm holding them until prices drastically rise," he says.
Investment funds are also entering the game. Dotan Y. Melech looks for bargains in Las Vegas for UnitedAMS, a firm he co-founded that manages apartments and other real estate investments. The firm has raised more than $20 million from outside investors to purchase distressed properties. So far, Melech has bought around 300 houses and plans to purchase another 200 this year. He has no trouble renting the houses he buys, since, he estimates, occupancy rates in Las Vegas are touching 95%. The "cap rate," or return on investment after all expenses, is between 8% and 10% -- twice the rate on 10-year Treasuries. Melech rents to people who lost their homes but are reliable renters. "A lot of people can't be buyers because their credit got hurt," he says.
Even with investors jumping in, buying activity in foreclosure markets hasn't yet increased enough to bring inventories down. It will soon. Zandi thinks prices will fall a couple of percentage points lower in the distressed markets in the short run. "But that will be overshooting," he says. "It's like an elastic band. If prices do drop this year, they will need to bounce back because they'll be far too low compared with rents and replacement cost." Renters will come off the sidelines to purchase homes in the years ahead, precisely the opposite trend of the past few years.
Consider the example of Michael Dynda, a retired Air Force avionics technician who now works for a government contractor in Las Vegas. Dynda, 49, is a first-time buyer who put off purchasing for years, in part because prices were falling so rapidly in Las Vegas, with no bottom in sight. But last year the combination of bargain prices and low mortgage rates became too good to resist. He ended up purchasing a 2,300-square-foot stucco home for $240,000, or about half what it would have fetched in 2007. Dynda got a 4.38% home loan, and pays the same amount on his mortgage as on the rent on the house he left to become a homeowner. "The timing was about as good as it could get," says Dynda.
Mike Castleman's company tracks the inventory of new homes in 19 states across the country. He sees supply getting tight. "Home prices are fixin' to rise," he says.
Back on the ranch, Mike Castleman is lounging in his creek-front mansion, built from "a hundred tons of fine central Texas limestone." As he shows off his collection of custom-made guitars, including one crafted to resemble the skin of a rattlesnake, the homespun housing guru once again returns to his favorite topic.
Castleman claims that this recovery will look like all the others: It will bring a severe shortage of housing. He invokes the livestock business to explain. "It takes three years between the time a bull mates with a cow and when you get a calf ready for market," he says. "That's how it is in housing too. We'll get a big surge in demand and the drywall companies will take a long time to ramp up, and it will take years to get new lots approved. Buyers will show up looking for a house in a subdivision, and all the houses will be sold. The builders will tell them it will take six months to deliver a house." But those folks, says Castleman, will be set on buying a place. "And they'll want it so bad they'll bid the prices up!" In other words: Beat the crowd.
It's a Great Time to Buy a House
Mike Castleman, the Texan with the best realtime view of housing in the U.S., tells editor-atlarge Shawn Tully that the naysayers are about to get a big surprise: rising prices for new homes.
From: http://finance.fortune.cnn.com/2011/03/28/real-estate-its-time-to-buy-again/
Tuesday, July 19, 2011
Home building jumps in June after dismal spring - CNBC
Home building jumps in June after dismal spring
Published: Tuesday, 19 Jul 2011 | 9:36 AM ET Text Size
WASHINGTON - U.S. builders broke ground on more single-family homes and apartments in June, helping the battered construction industry gain a little life after a dismal spring.
The Commerce Department said Tuesday that builders began work on a seasonally adjusted 629,000 homes last month, a 14.6 percent increase from May.
Still, that's roughly half the 1.2 million homes per year that economists say must be built to sustain a healthy housing market. Jennifer Lee, a senior economist at BMO Capital Markets, called the gains "just a blip in the overall flat-lining trend of homebuilding activity."
"We have to see a rebound in job creation to sustain a recovery in housing," she said.
Much of the increase in June came from a surge in apartment construction, a volatile part of the industry. That sector jumped 31.8 percent last month.
Single-family home construction rose 9.4 percent. It was the biggest increase since June 2009, when the recession ended. But analysts said the pace of 453,000 homes per year was still too depressed to signal a turnaround.
"The underlying trend of single-family housing starts shows no signs of improving in a significant manner anytime soon," said Joshua Shapiro, chief U.S. economist at MFR Inc.
Building permits, a gauge of future construction, increased 2.5 percent.
Home construction rose in every part of the country. The biggest gains were in the Northeast and Midwest. In the Northeast, the building pace spiked 35.1 percent and in the Midwest, it rose 25.3 percent. In the South, it rose 10.6 percent and in the West, it increased 5.4 percent.
Though new homes represent just 20 percent of the overall home market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in taxes, according to the National Association of Home Builders.
The weak housing industry is also holding back the U.S. economy. In past modern-day recessions, housing accounted for 15 to 20 percent of overall economic growth. This time around, between 2009 and 2010, housing contributed just 4 percent to the gross domestic product.
Cash-strapped builders are struggling to compete with deeply discounted foreclosures and short sales. A short sale is when lenders allow borrowers to sell their homes for less than what is owed on the mortgage.
New-home sales fell in May to a seasonally adjusted pace of 319,000 homes per year. That's far below the 700,000 homes per year that economists consider healthy.
One reason is that previously occupied homes are a better deal than new homes. The median price of a new home is more than 30 percent higher than the median prices for a re-sale. That's more than twice the markup in healthy housing markets.
Loans are also harder to get. Most private lenders are requiring 20 percent down payments and higher credit scores for the lowest mortgage rates.
In the past month, President Barack Obama said the housing market has "been most stubborn to us trying to solve the problem." And last week Federal Reserve Chairman Ben Bernanke said the troubles facing home construction and sales were more persistent than previously thought.
The builders' trade group said Monday that its survey of industry sentiment rose to 15 in June. Any reading below 50 indicates negative sentiment about the housing market. The index hasn't reached 50 since April 2006, the peak of the housing boom.
From: http://ping.fm/63r0y
Published: Tuesday, 19 Jul 2011 | 9:36 AM ET Text Size
WASHINGTON - U.S. builders broke ground on more single-family homes and apartments in June, helping the battered construction industry gain a little life after a dismal spring.
The Commerce Department said Tuesday that builders began work on a seasonally adjusted 629,000 homes last month, a 14.6 percent increase from May.
Still, that's roughly half the 1.2 million homes per year that economists say must be built to sustain a healthy housing market. Jennifer Lee, a senior economist at BMO Capital Markets, called the gains "just a blip in the overall flat-lining trend of homebuilding activity."
"We have to see a rebound in job creation to sustain a recovery in housing," she said.
Much of the increase in June came from a surge in apartment construction, a volatile part of the industry. That sector jumped 31.8 percent last month.
Single-family home construction rose 9.4 percent. It was the biggest increase since June 2009, when the recession ended. But analysts said the pace of 453,000 homes per year was still too depressed to signal a turnaround.
"The underlying trend of single-family housing starts shows no signs of improving in a significant manner anytime soon," said Joshua Shapiro, chief U.S. economist at MFR Inc.
Building permits, a gauge of future construction, increased 2.5 percent.
Home construction rose in every part of the country. The biggest gains were in the Northeast and Midwest. In the Northeast, the building pace spiked 35.1 percent and in the Midwest, it rose 25.3 percent. In the South, it rose 10.6 percent and in the West, it increased 5.4 percent.
Though new homes represent just 20 percent of the overall home market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in taxes, according to the National Association of Home Builders.
The weak housing industry is also holding back the U.S. economy. In past modern-day recessions, housing accounted for 15 to 20 percent of overall economic growth. This time around, between 2009 and 2010, housing contributed just 4 percent to the gross domestic product.
Cash-strapped builders are struggling to compete with deeply discounted foreclosures and short sales. A short sale is when lenders allow borrowers to sell their homes for less than what is owed on the mortgage.
New-home sales fell in May to a seasonally adjusted pace of 319,000 homes per year. That's far below the 700,000 homes per year that economists consider healthy.
One reason is that previously occupied homes are a better deal than new homes. The median price of a new home is more than 30 percent higher than the median prices for a re-sale. That's more than twice the markup in healthy housing markets.
Loans are also harder to get. Most private lenders are requiring 20 percent down payments and higher credit scores for the lowest mortgage rates.
In the past month, President Barack Obama said the housing market has "been most stubborn to us trying to solve the problem." And last week Federal Reserve Chairman Ben Bernanke said the troubles facing home construction and sales were more persistent than previously thought.
The builders' trade group said Monday that its survey of industry sentiment rose to 15 in June. Any reading below 50 indicates negative sentiment about the housing market. The index hasn't reached 50 since April 2006, the peak of the housing boom.
From: http://ping.fm/63r0y
Monday, July 18, 2011
Advance Fees and Disclosires - Some MARS Stipulations No Longer Enforced
Some MARS Stipulations No Longer Enforced - Real estate agents who are in good standing under state licensing requirements, in compliance with state real estate laws, and assisting homeowners in obtaining short sales are no longer required to provide the MARS disclosures.
These agents may also collect advance fees.
07/15/2011 By: Krista Franks
The Federal Trade Commission will no longer enforce most provisions set forth in the Mortgage Assistance Relief Services (MARS) Rule, according to a statement released Friday.
The MARS Rule required real estate agents to make several disclosures when assisting distressed homeowners in obtaining short sales from their lenders or servicers.
The rule also banned advance fee collection and prohibited false or misleading statements.
After the Rule was enacted by Congress in 2009, several real estate agents complained that the disclosures often confused homeowners or misled them.
“As more and more American homeowners seek short sales, it is especially important that the Rule not inadvertently discourage real estate professionals from helping consumers with these types of transactions,” the FTC stated.
The MARS Rule required real estate agents to state that they are not associated with the government, nor have their services been approved by the government or the homeowner’s lender; the lender may choose not to alter the homeowner’s loan; and if a company tells a homeowner to stop making mortgage payments, they must warn them that they could lose their home or damage their credit rating.
Real estate agents who are in good standing under state licensing requirements, in compliance with state real estate laws, and assisting homeowners in obtaining short sales are no longer required to provide the MARS disclosures.
These agents may also collect advance fees.
Deceptive practices and false statements will still be prohibited by the FTC.
The FTC’s stay only applies to short sales and does not affect agents providing assistance with other types of relief such as loan modifications.
From: http://ping.fm/vrvt1
These agents may also collect advance fees.
07/15/2011 By: Krista Franks
The Federal Trade Commission will no longer enforce most provisions set forth in the Mortgage Assistance Relief Services (MARS) Rule, according to a statement released Friday.
The MARS Rule required real estate agents to make several disclosures when assisting distressed homeowners in obtaining short sales from their lenders or servicers.
The rule also banned advance fee collection and prohibited false or misleading statements.
After the Rule was enacted by Congress in 2009, several real estate agents complained that the disclosures often confused homeowners or misled them.
“As more and more American homeowners seek short sales, it is especially important that the Rule not inadvertently discourage real estate professionals from helping consumers with these types of transactions,” the FTC stated.
The MARS Rule required real estate agents to state that they are not associated with the government, nor have their services been approved by the government or the homeowner’s lender; the lender may choose not to alter the homeowner’s loan; and if a company tells a homeowner to stop making mortgage payments, they must warn them that they could lose their home or damage their credit rating.
Real estate agents who are in good standing under state licensing requirements, in compliance with state real estate laws, and assisting homeowners in obtaining short sales are no longer required to provide the MARS disclosures.
These agents may also collect advance fees.
Deceptive practices and false statements will still be prohibited by the FTC.
The FTC’s stay only applies to short sales and does not affect agents providing assistance with other types of relief such as loan modifications.
From: http://ping.fm/vrvt1
Friday, July 15, 2011
Daily Real Estate News
HUD: Lender paid kickbacks to real estate brokers, agents
Prospect Mortgage agrees to $3.1M fine, denies allegations
By Inman News
Inman News™
Prospect Mortgage LLC has agreed to pay $3.1 million to settle allegations by federal housing regulators that the company entered into sham affiliated business arrangements in order to pay kickbacks to real estate brokers, agents, banks, mortgage servicers and others who referred business to it.
Regulators had claimed Prospect operated as a "series limited liability company," a business structure unauthorized by the Federal Housing Authority (FHA).
According to the settlement agreement, Sherman Oaks, Calif.-based Prospect Mortgage denied the allegations. Prospect claimed it had disclosed its business structure to HUD in a previous audit and "therefore was under the assumption that its business structure did not violate HUD/FHA requirements" or the Real Estate Settlement Procedures Act (RESPA), the settlement said.
Prospect allegedly used its business structure to create "hundreds of sham joint ventures with real estate brokers, mortgage brokers, mortgage lenders, loan servicers and other settlement service providers and to share profits for the referral of real estate settlement services," the Department of Housing and Urban Development (HUD) said in announcing the settlement.
HUD alleged that Prospect entered into "series" or "subscription agreements" with real estate brokers, agents, banks, mortgage servicers and others to give the appearance that it was creating legitimate joint ventures to provide real and compensable services.
HUD said the "sham businesses" had few or no employees, capital, or offices and that all core mortgage origination services were performed by Prospect itself. Prospect, HUD said, allowed these affiliated businesses "to participate in the origination of FHA-insured loans out of branch offices registered with FHA as exclusive to Prospect."
In return for the referral of business, Prospect allegedly shared 50 percent of its profits with the "sham businesses," many of which were not FHA-approved lenders, HUD said.
"The real test for any bona fide affiliate business arrangement is whether the affiliate has sufficient capital and employees to stand on its own two feet," acting FHA Commissioner Carol Galante said in a statement. "In this case, it was clear that these sham companies had neither and were merely sharing profits for the referral of business."
Prospect agreed to dissolve the affiliated businesses and pay $3.1 million in fines.
From: http://ping.fm/H0Jcv
Prospect Mortgage agrees to $3.1M fine, denies allegations
By Inman News
Inman News™
Prospect Mortgage LLC has agreed to pay $3.1 million to settle allegations by federal housing regulators that the company entered into sham affiliated business arrangements in order to pay kickbacks to real estate brokers, agents, banks, mortgage servicers and others who referred business to it.
Regulators had claimed Prospect operated as a "series limited liability company," a business structure unauthorized by the Federal Housing Authority (FHA).
According to the settlement agreement, Sherman Oaks, Calif.-based Prospect Mortgage denied the allegations. Prospect claimed it had disclosed its business structure to HUD in a previous audit and "therefore was under the assumption that its business structure did not violate HUD/FHA requirements" or the Real Estate Settlement Procedures Act (RESPA), the settlement said.
Prospect allegedly used its business structure to create "hundreds of sham joint ventures with real estate brokers, mortgage brokers, mortgage lenders, loan servicers and other settlement service providers and to share profits for the referral of real estate settlement services," the Department of Housing and Urban Development (HUD) said in announcing the settlement.
HUD alleged that Prospect entered into "series" or "subscription agreements" with real estate brokers, agents, banks, mortgage servicers and others to give the appearance that it was creating legitimate joint ventures to provide real and compensable services.
HUD said the "sham businesses" had few or no employees, capital, or offices and that all core mortgage origination services were performed by Prospect itself. Prospect, HUD said, allowed these affiliated businesses "to participate in the origination of FHA-insured loans out of branch offices registered with FHA as exclusive to Prospect."
In return for the referral of business, Prospect allegedly shared 50 percent of its profits with the "sham businesses," many of which were not FHA-approved lenders, HUD said.
"The real test for any bona fide affiliate business arrangement is whether the affiliate has sufficient capital and employees to stand on its own two feet," acting FHA Commissioner Carol Galante said in a statement. "In this case, it was clear that these sham companies had neither and were merely sharing profits for the referral of business."
Prospect agreed to dissolve the affiliated businesses and pay $3.1 million in fines.
From: http://ping.fm/H0Jcv
Thursday, July 14, 2011
REALTOR� Magazine-Daily News-1 Million Foreclosures Delayed Until 2012
1 Million Foreclosures Delayed Until 2012
An estimated 1 million foreclosure-related notices for defaults, auctions, and home repossessions that should be filed by lenders this year will be pushed back until next year, according to the latest report by RealtyTrac.
While the delays could give home owners more time to catch up on their payments and try to avoid foreclosure, housing experts warn this means the looming shadow inventory of distressed properties likely will continue to plague the real estate market even longer.
"The best-case scenario is we don't get back to normal levels of foreclosure activity until 2015, which means the housing market recovery gets delayed by at least a year," says Rick Sharga, a senior vice president at RealtyTrac.
Foreclosure Notices Drop, Threat Still Looms
Overall, the number of homes repossessed by lenders in the first half of this year dropped 30 percent compared to the same period in 2010. But foreclosure processing delays — with lenders taking longer to take action against delinquent borrowers — is stalling the housing recovery, experts note.
About 1.2 million homes received a foreclosure-related notice in the first six months of this year — in other words, one in every 111 U.S. households, RealtyTrac reports.
Nevada continues to face the most foreclosures; one in every 21 households in that state received a foreclosure notice in the first half of the year.
The foreclosure process continues to lengthen too. From April and June, homes took 318 days on average to go from the first stage of foreclosure to ultimately where it was repossessed by the lender — that’s up from 298 days in the first three months of the year. (In New York, the foreclosure process took the longest at an average of 966 days or 2.6 years; Texas boasted the shortest at 92 days.)
Source: “Delays in Bank Processing Push Likely U.S. Foreclosures Until 2012, Stalling Recovery,” Associated Press (July 14, 2011)
From: http://ping.fm/H7Hcw
An estimated 1 million foreclosure-related notices for defaults, auctions, and home repossessions that should be filed by lenders this year will be pushed back until next year, according to the latest report by RealtyTrac.
While the delays could give home owners more time to catch up on their payments and try to avoid foreclosure, housing experts warn this means the looming shadow inventory of distressed properties likely will continue to plague the real estate market even longer.
"The best-case scenario is we don't get back to normal levels of foreclosure activity until 2015, which means the housing market recovery gets delayed by at least a year," says Rick Sharga, a senior vice president at RealtyTrac.
Foreclosure Notices Drop, Threat Still Looms
Overall, the number of homes repossessed by lenders in the first half of this year dropped 30 percent compared to the same period in 2010. But foreclosure processing delays — with lenders taking longer to take action against delinquent borrowers — is stalling the housing recovery, experts note.
About 1.2 million homes received a foreclosure-related notice in the first six months of this year — in other words, one in every 111 U.S. households, RealtyTrac reports.
Nevada continues to face the most foreclosures; one in every 21 households in that state received a foreclosure notice in the first half of the year.
The foreclosure process continues to lengthen too. From April and June, homes took 318 days on average to go from the first stage of foreclosure to ultimately where it was repossessed by the lender — that’s up from 298 days in the first three months of the year. (In New York, the foreclosure process took the longest at an average of 966 days or 2.6 years; Texas boasted the shortest at 92 days.)
Source: “Delays in Bank Processing Push Likely U.S. Foreclosures Until 2012, Stalling Recovery,” Associated Press (July 14, 2011)
From: http://ping.fm/H7Hcw
Friday, July 8, 2011
Tuesday, June 28, 2011
Post Double Dip, Case-Shiller Index Edges Higher
Post Double Dip, Case-Shiller Index Edges Higher
06/28/2011 By: Carrie Bay
One month after reporting that its home price gauge had officially double dipped, Standard & Poor’s says prices have inched up, in line with the expected seasonal boost that accompanies the spring buying season.
The 20-city composite reading of the S&P/Case-Shiller index posted a 0.7 percent increase in April versus March. It’s the first monthly gain in eight months.
The 20-city composite reading remains 4.0 percent below April 2010.
From: http://ping.fm/NOvF5
06/28/2011 By: Carrie Bay
One month after reporting that its home price gauge had officially double dipped, Standard & Poor’s says prices have inched up, in line with the expected seasonal boost that accompanies the spring buying season.
The 20-city composite reading of the S&P/Case-Shiller index posted a 0.7 percent increase in April versus March. It’s the first monthly gain in eight months.
The 20-city composite reading remains 4.0 percent below April 2010.
From: http://ping.fm/NOvF5
Friday, June 17, 2011
Inventory Overhang Means 6.5M New Households Needed
Inventory Overhang Means 6.5M New Households Needed
06/16/2011 By: Carrie Bay
Experts blame the massive inventory of existing homes on the market for hindering the U.S. housing sector’s recovery. The overhang has been inflated by large volumes of foreclosures, and it’s expected to grow with millions more coming down the pipeline.
Brendan Lowney, macroeconomist for the firm Forest Economic Advisors in Massachusetts, says it will take 6.5 million new household formations to absorb the excess inventory.
Lowney has spent more than 16 years interpreting international economic and policy trends and advising North American companies.
He estimates excess home inventories at 2.5 million. He says this oversupply has put downward pressure on home prices, which in turn has caused a variety of undesirable effects, such as pushing more houses underwater. This negative equity causes even more defaults, thereby increasing the oversupply, Lowney explained.
CoreLogic reports that nearly one-quarter of all mortgage borrowers in the U.S. were underwater as of the end of 2010.
The company’s analysts say the “stubbornly high” level of negative equity could have a significant impact on the industry’s shadow inventory – that looming supply of
homes that are winding their way through foreclosure and expected to end up as REO, plus homes that have already been repossessed by banks but not yet been put on the market.
At last count, Lender Processing Services put the number of mortgages that were delinquent or in foreclosure at 6,388,000. Of those, 2,184,000 properties were in the process of foreclosure.
CoreLogic says current shadow inventory has declined slightly over the past year, but will remain elevated for an extended period of time given that there are still over 2 million non-delinquent borrowers not part of the current shadow inventory but in “very deep negative equity,” which for some can serve as a default trigger particularly when other economic factors such as unemployment are added to the mix.
Based on an analysis of Census vacancy data and housing occupation trends, Lowney says it will take an average of 1.3 million new household formations per year, for the next five years, before a significant portion of the excess home inventory can be cleared.
Lowney states his estimate of the housing overhang sheds light on when the housing market will recover.
Looking at household formation data from the Census Bureau, the 10-year average has been 1.3 million per year.
The decade-high was 3.5 million new households formed in 2001, but there was a sharp falloff due to the recession, down to 772,000 in 2008, 398,000 in 2009, and only 357,000 in 2010.
The figures are expected to pick up this year, with some analysts estimating between 750,000 and 1 million new households in 2011.
Lowney’s not projecting a 1.3 million gain in new households for each year over the next five. He foresees a progression, airing on the conservative side with 600,000 in 2011 and steadily increasing to 1.9 million by 2015.
From: http://ping.fm/OLMB1
06/16/2011 By: Carrie Bay
Experts blame the massive inventory of existing homes on the market for hindering the U.S. housing sector’s recovery. The overhang has been inflated by large volumes of foreclosures, and it’s expected to grow with millions more coming down the pipeline.
Brendan Lowney, macroeconomist for the firm Forest Economic Advisors in Massachusetts, says it will take 6.5 million new household formations to absorb the excess inventory.
Lowney has spent more than 16 years interpreting international economic and policy trends and advising North American companies.
He estimates excess home inventories at 2.5 million. He says this oversupply has put downward pressure on home prices, which in turn has caused a variety of undesirable effects, such as pushing more houses underwater. This negative equity causes even more defaults, thereby increasing the oversupply, Lowney explained.
CoreLogic reports that nearly one-quarter of all mortgage borrowers in the U.S. were underwater as of the end of 2010.
The company’s analysts say the “stubbornly high” level of negative equity could have a significant impact on the industry’s shadow inventory – that looming supply of
homes that are winding their way through foreclosure and expected to end up as REO, plus homes that have already been repossessed by banks but not yet been put on the market.
At last count, Lender Processing Services put the number of mortgages that were delinquent or in foreclosure at 6,388,000. Of those, 2,184,000 properties were in the process of foreclosure.
CoreLogic says current shadow inventory has declined slightly over the past year, but will remain elevated for an extended period of time given that there are still over 2 million non-delinquent borrowers not part of the current shadow inventory but in “very deep negative equity,” which for some can serve as a default trigger particularly when other economic factors such as unemployment are added to the mix.
Based on an analysis of Census vacancy data and housing occupation trends, Lowney says it will take an average of 1.3 million new household formations per year, for the next five years, before a significant portion of the excess home inventory can be cleared.
Lowney states his estimate of the housing overhang sheds light on when the housing market will recover.
Looking at household formation data from the Census Bureau, the 10-year average has been 1.3 million per year.
The decade-high was 3.5 million new households formed in 2001, but there was a sharp falloff due to the recession, down to 772,000 in 2008, 398,000 in 2009, and only 357,000 in 2010.
The figures are expected to pick up this year, with some analysts estimating between 750,000 and 1 million new households in 2011.
Lowney’s not projecting a 1.3 million gain in new households for each year over the next five. He foresees a progression, airing on the conservative side with 600,000 in 2011 and steadily increasing to 1.9 million by 2015.
From: http://ping.fm/OLMB1
Tuesday, June 14, 2011
Fannie Mae offering REO agents $1,200 incentive � HousingWire
Fannie Mae offering REO agents $1,200 incentive
by JACOB GAFFNEY
Real estate agents selling real-estate owned properties on behalf of Fannie Mae must work toward selling the home to owner occupants.
And the government-sponsored enterprise will now offer a cash incentive of $1,200 to agents selling REOs, according to high level staffers at Fannie Mae.
"Beginning [Tuesday] we will continue our current incentive of up to 3.5% off buyer closing cost per property," said a Fannie Mae panelist at the REO Expo conference in Fort Worth, Texas. "And we are adding an additional $1,200 incentive."
"The initial offer must include this incentive," he added. "And the buyer must be an owner occupant."
There are other stipulations to receiving the $1,200 incentive, all which will be made available tomorrow on the HomePath website.
Fannie will also be rolling out a more comprehensive utility programs, for agents who pay to maintain REO properties.
Fannie dearly wants owner occupants to gravitate to the REO market. Another program, it's First Look standard, mandates that for the first 15 days on the market, only owner occupants can bid on REO properties.
Fannie Mae admits that costs are rising for REO agents in the sector, even if it is related to issues that are industry-wide.
"We know that title has become a challenge, not just for Fannie Mae," another panelist said.
From: http://www.housingwire.com/2011/06/14/fannie-mae-offering-reo-agents-1200-incentive
by JACOB GAFFNEY
Real estate agents selling real-estate owned properties on behalf of Fannie Mae must work toward selling the home to owner occupants.
And the government-sponsored enterprise will now offer a cash incentive of $1,200 to agents selling REOs, according to high level staffers at Fannie Mae.
"Beginning [Tuesday] we will continue our current incentive of up to 3.5% off buyer closing cost per property," said a Fannie Mae panelist at the REO Expo conference in Fort Worth, Texas. "And we are adding an additional $1,200 incentive."
"The initial offer must include this incentive," he added. "And the buyer must be an owner occupant."
There are other stipulations to receiving the $1,200 incentive, all which will be made available tomorrow on the HomePath website.
Fannie will also be rolling out a more comprehensive utility programs, for agents who pay to maintain REO properties.
Fannie dearly wants owner occupants to gravitate to the REO market. Another program, it's First Look standard, mandates that for the first 15 days on the market, only owner occupants can bid on REO properties.
Fannie Mae admits that costs are rising for REO agents in the sector, even if it is related to issues that are industry-wide.
"We know that title has become a challenge, not just for Fannie Mae," another panelist said.
From: http://www.housingwire.com/2011/06/14/fannie-mae-offering-reo-agents-1200-incentive
Friday, June 3, 2011
Double Dip: Altos Says Prices Have Been Steadily Rising Since Then
Double Dip: Altos Says Prices Have Been Steadily Rising Since Then
06/02/2011 By: Carrie Bay
While a number of closely-watched home price indices show that national readings have slipped into a double-dip, Altos Research says it’s come and gone.
According to the S&P/Case-Shiller index released earlier this week, national home prices dropped to a new recession low during the first quarter of this year as prices slipped another 4.2 percent.
Altos conducts its own analysis of price trends using active listing data to provide what the company says is more of a real-time view. The firm notes that the latest Case-Shiller findings are based on data only through the end of March. Since that time, Altos has recorded a steady uptick in prices for both major metros and mid-city markets across the country.
A separate study released this week by CoreLogic corroborates Altos’ assertion that prices have risen since the double-dip timestamp. CoreLogic says based on April sales activity, just after the Case-Shiller double-dip, it has recorded an increase in home prices nationally of 0.7 percent.
About three weeks ahead of the Case-Shiller announcement of a new cycle low, Clear Capital reported an official double-dip for its national home price gauge had hit, but in April rather than March.
Regardless of the disparities in the various home price indices, Altos says it expects to see a rising and falling pattern for several years. The firm’s VP Scott Sambucci believes the double dip is “really just the start of the next housing cycle.”
Altos has coined a colorful phrase to depict the ebb and flow of home prices – they call it the “Catfish Recovery.”
Sambucci laid it out by describing the catfish as a bottom dweller that moves slowly, feeding off the lake or river floor for a while, then heads up to the surface and back down, bobbing up and down without a distinct pattern or clear direction.
Altos says markets should plan for prices over the long term to hit a bottom, rise a bit, sink back down, rise again.
Sambucci says constant growth for home values is a myth. Charting housing cycles all the way back to 1890, he notes that the sharpest run-up by far occurred at the turn of the millennium, and the market is now in payback mode. In every other historical boom, Sambucci says the run-ups, all of which have been significantly smaller that the most recent, have always been given back.
“The housing recovery will take a long time and it is going to happen slowly,” Sambucci said.
In the short-term, Altos says the seasonal price bump for the spring is still evident in the firm’s active market statistics and will likely show up in the Case-Shiller numbers in late summer and early fall.
Altos recorded a 0.93 percent increase in its national home price composite between April and May.
The company says May numbers showed an increase in median prices across the board. The big winners were San Francisco (+3.33%), Washington D.C. (+3.27%), and San Jose (+3.14%).
Only two of the 26 markets tracked by Altos saw prices decrease: New York (-2.85%) and Las Vegas (-0.76%).
From: http://www.dsnews.com/articles/double-dip-altos-says-prices-have-been-steadily-rising-since-then-2011-06-02
06/02/2011 By: Carrie Bay
While a number of closely-watched home price indices show that national readings have slipped into a double-dip, Altos Research says it’s come and gone.
According to the S&P/Case-Shiller index released earlier this week, national home prices dropped to a new recession low during the first quarter of this year as prices slipped another 4.2 percent.
Altos conducts its own analysis of price trends using active listing data to provide what the company says is more of a real-time view. The firm notes that the latest Case-Shiller findings are based on data only through the end of March. Since that time, Altos has recorded a steady uptick in prices for both major metros and mid-city markets across the country.
A separate study released this week by CoreLogic corroborates Altos’ assertion that prices have risen since the double-dip timestamp. CoreLogic says based on April sales activity, just after the Case-Shiller double-dip, it has recorded an increase in home prices nationally of 0.7 percent.
About three weeks ahead of the Case-Shiller announcement of a new cycle low, Clear Capital reported an official double-dip for its national home price gauge had hit, but in April rather than March.
Regardless of the disparities in the various home price indices, Altos says it expects to see a rising and falling pattern for several years. The firm’s VP Scott Sambucci believes the double dip is “really just the start of the next housing cycle.”
Altos has coined a colorful phrase to depict the ebb and flow of home prices – they call it the “Catfish Recovery.”
Sambucci laid it out by describing the catfish as a bottom dweller that moves slowly, feeding off the lake or river floor for a while, then heads up to the surface and back down, bobbing up and down without a distinct pattern or clear direction.
Altos says markets should plan for prices over the long term to hit a bottom, rise a bit, sink back down, rise again.
Sambucci says constant growth for home values is a myth. Charting housing cycles all the way back to 1890, he notes that the sharpest run-up by far occurred at the turn of the millennium, and the market is now in payback mode. In every other historical boom, Sambucci says the run-ups, all of which have been significantly smaller that the most recent, have always been given back.
“The housing recovery will take a long time and it is going to happen slowly,” Sambucci said.
In the short-term, Altos says the seasonal price bump for the spring is still evident in the firm’s active market statistics and will likely show up in the Case-Shiller numbers in late summer and early fall.
Altos recorded a 0.93 percent increase in its national home price composite between April and May.
The company says May numbers showed an increase in median prices across the board. The big winners were San Francisco (+3.33%), Washington D.C. (+3.27%), and San Jose (+3.14%).
Only two of the 26 markets tracked by Altos saw prices decrease: New York (-2.85%) and Las Vegas (-0.76%).
From: http://www.dsnews.com/articles/double-dip-altos-says-prices-have-been-steadily-rising-since-then-2011-06-02
Tuesday, May 31, 2011
A Look at Case-Shiller, by Metro Area (May Update) - Real Time Economics - WSJ
May 31, 2011.Home Prices, by Metro Area
.Below, see data from the 20 metro areas Case-Shiller tracks, sortable by name, level, monthly change and year-over-year change. The Case Shiller indices have a base value of 100 in January 2000. So a current index value of 150 translates to a 50% appreciation rate since January 2000 for a typical home located within the metro market.
Metro Area March 2011 Level Monthly Change Annual Change
Atlanta 98.36 -1.9% -5.2%
Boston 147.36 -1.7% -2.7%
Charlotte 106.96 -2.4% -6.8%
Chicago 110.57 -2.4% -7.6%
Cleveland 96.80 -1.8% -6.3%
Dallas 112.89 -0.8% -2.5%
Denver 120.55 -0.6% -3.8%
Detroit 67.07 -2.0% -0.9%
Las Vegas 97.18 -1.1% -5.3%
Los Angeles 167.77 -0.3% -1.7%
Miami 137.28 -0.8% -6.1%
Minneapolis 105.57 -3.7% -10.0%
New York 163.50 -0.9% -3.4%
Phoenix 100.27 -0.5% -8.4%
Portland 132.67 -0.7% -7.6%
San Diego 153.88 -0.8% -4.0%
San Francisco 129.82 -0.1% -5.1%
Seattle 132.97 0.1% -7.5%
Tampa 127.08 -0.7% -6.9%
Washington 182.98 1.1% 4.3%
Sources: Standard & Poor's and Fiserv
From: http://blogs.wsj.com/economics/2011/05/31/a-look-at-case-shiller-by-metro-area-may-update-2/tab/interactive/
.Below, see data from the 20 metro areas Case-Shiller tracks, sortable by name, level, monthly change and year-over-year change. The Case Shiller indices have a base value of 100 in January 2000. So a current index value of 150 translates to a 50% appreciation rate since January 2000 for a typical home located within the metro market.
Metro Area March 2011 Level Monthly Change Annual Change
Atlanta 98.36 -1.9% -5.2%
Boston 147.36 -1.7% -2.7%
Charlotte 106.96 -2.4% -6.8%
Chicago 110.57 -2.4% -7.6%
Cleveland 96.80 -1.8% -6.3%
Dallas 112.89 -0.8% -2.5%
Denver 120.55 -0.6% -3.8%
Detroit 67.07 -2.0% -0.9%
Las Vegas 97.18 -1.1% -5.3%
Los Angeles 167.77 -0.3% -1.7%
Miami 137.28 -0.8% -6.1%
Minneapolis 105.57 -3.7% -10.0%
New York 163.50 -0.9% -3.4%
Phoenix 100.27 -0.5% -8.4%
Portland 132.67 -0.7% -7.6%
San Diego 153.88 -0.8% -4.0%
San Francisco 129.82 -0.1% -5.1%
Seattle 132.97 0.1% -7.5%
Tampa 127.08 -0.7% -6.9%
Washington 182.98 1.1% 4.3%
Sources: Standard & Poor's and Fiserv
From: http://blogs.wsj.com/economics/2011/05/31/a-look-at-case-shiller-by-metro-area-may-update-2/tab/interactive/
Wednesday, May 25, 2011
Draft bill would hike FHA loan down payments to 5%, slash loan limits
Draft bill would hike FHA loan down payments to 5%, slash loan limits
Legislation will likely draw fire from industry groups, Senate Democrats
By Ken Harney
Inman News™
Share ThisRepublicans on the House Financial Services Committee have drafted legislation that would raise the minimum down payment for FHA mortgages to 5 percent, cut FHA loan limits in most markets, and move the Agriculture Department's rural housing program to FHA's parent agency, HUD.
Though the draft bill has not been introduced, titled or assigned a number, it is expected to be the main subject of a hearing Wednesday before the Subcommittee on Insurance, Housing and Community Opportunity, chaired by Rep. Judy Biggert, R-Ill. After that, the bill is likely to be formally introduced and sped through subcommittee and committee votes and head for action by the full House.
The text of the draft bill appears to be a partial answer from House Republicans to the Obama administration's call earlier this year for a smaller federal government footprint in housing.
By lowering maximum FHA loan limits in large numbers of local areas -- well below even the limits that are already scheduled to kick in Oct. 1 -- the bill would squeeze down FHA loan volume across the country, cutting a resource for some home purchasers who can't obtain a conventional mortgage.
Here are some examples of current FHA loan ceilings, how they're scheduled to adjust in October, and where they'd end up under the Republican plan:
•In Los Angeles County, the present high-cost area maximum is $729,750, which was set by the federal economic stimulus legislation passed by Congress following the financial crisis of 2008. That ceiling is scheduled to drop to $625,500 Oct. 1. Under the new bill, however, the maximum FHA-insured loan amount allowed in Los Angeles would be $412,500 -- a $317,250 plunge from the current limit and $213,000 below the scheduled reduction this fall.
•Other counties in high-cost California would experience even sharper declines, such as Monterey, where the maximum would decline by $436,000 and Contra Costa, where the drop would be $379,750. Every county in California -- from big urban communities to rural areas -- would be on the losing end of the new FHA equation, and most reductions would be in the six figures.
•The lower limits would be significant in other states as well. Monroe County, Fla., would see maximum FHA loan limits go from $729,750 to $425,000. Under the scheduled Oct. 1 statutory decrease, the county -- which comprises the Florida Keys -- would have a $529,000 maximum. Sarasota, Fla., would see a $261,250 drop under the bill, Miami-Dade a decrease of $161,250, and Orange County (Orlando) limits would decline by $128,750.
•Large counties in the high-cost areas around Washington D.C. would see FHA limits drop by anywhere from $398,500 (Prince George's, Md.) to $366,250 in Baltimore. Most New England and mid-Atlantic states would end up with lower loan ceilings along with major markets in the Midwest and the Rocky Mountain states.
The FHA loan limit formula would be revised to 125 percent of the median home sale price in the local county under the bill, and the current $271,050 floor for loan limits nationwide would disappear.
Though major housing, real estate and lending groups had no comments pending the Wednesday hearing, they are likely to oppose the sharp cuts in loan limits.
Mortgage industry consultant Brian Chappelle, head of Potomac Partners in Washington, D.C., is scheduled to testify at the hearing and told Inman News that the higher loan ceilings are a bad idea.
Audits of FHA loan performance, Chappelle said, repeatedly have shown that higher-balance mortgages default and trigger claims against FHA's insurance funds at lower rates than smaller-balance loans.
"FHA is essentially an insurance company," he said, "and you need those (higher-balance) loans to spread the risk," just as private sector insurers do.
The Republican bill's call for a 5 percent minimum down payment on FHA loans also is likely to draw criticism from industry groups.
The National Association of REALTORS® and the National Association of Home Builders have opposed such a move in the past, arguing that there is no statistical evidence that adding 1.5 percent onto the current 3.5 percent minimum would significantly affect default probabilities of new FHA loans.
However, the higher down payments, along with the bill's prohibition of financing of closing costs, would make home purchases more difficult for substantial numbers of consumers.
Chappelle estimates that "40 percent of FHA borrowers would fall out" -- unable to afford the transaction -- "if they go to 5 percent down."
The bill also proposes shifting the Agriculture Department's rural housing program to the U.S. Department of Housing and Urban Development. A Republican staff member said "HUD has the housing responsibility and the expertise," so the change is logical.
However, proponents of the rural housing programs may not want to risk being swallowed up in an urban-oriented agency, nor is the Agriculture Department likely to want to lose a chunk of its traditional turf.
Where's the bill headed? Republicans say they are merely seeking to move the agenda they share with the Obama administration -- the smaller footprint concept -- which is, in turn, part of a larger agenda to phase out Fannie Mae and Freddie Mac.
Passage of the bill by the full House appears to be a real possibility, as Republicans are in control on that side of Capitol Hill.
But all bets are off in the Senate, where Democratic support for continuing FHA's role in the market is far stronger, and where dramatic cuts in loan limits in places like California, New York, Massachusetts and the East Coast's expensive markets likely won't fly.
Ken Harney writes an award-winning, nationally syndicated column, "The Nation's Housing," and is the author of two books on real estate and mortgage finance.
From: http://lowes.inman.com/newsletter/2011/05/25/news/143643
Legislation will likely draw fire from industry groups, Senate Democrats
By Ken Harney
Inman News™
Share ThisRepublicans on the House Financial Services Committee have drafted legislation that would raise the minimum down payment for FHA mortgages to 5 percent, cut FHA loan limits in most markets, and move the Agriculture Department's rural housing program to FHA's parent agency, HUD.
Though the draft bill has not been introduced, titled or assigned a number, it is expected to be the main subject of a hearing Wednesday before the Subcommittee on Insurance, Housing and Community Opportunity, chaired by Rep. Judy Biggert, R-Ill. After that, the bill is likely to be formally introduced and sped through subcommittee and committee votes and head for action by the full House.
The text of the draft bill appears to be a partial answer from House Republicans to the Obama administration's call earlier this year for a smaller federal government footprint in housing.
By lowering maximum FHA loan limits in large numbers of local areas -- well below even the limits that are already scheduled to kick in Oct. 1 -- the bill would squeeze down FHA loan volume across the country, cutting a resource for some home purchasers who can't obtain a conventional mortgage.
Here are some examples of current FHA loan ceilings, how they're scheduled to adjust in October, and where they'd end up under the Republican plan:
•In Los Angeles County, the present high-cost area maximum is $729,750, which was set by the federal economic stimulus legislation passed by Congress following the financial crisis of 2008. That ceiling is scheduled to drop to $625,500 Oct. 1. Under the new bill, however, the maximum FHA-insured loan amount allowed in Los Angeles would be $412,500 -- a $317,250 plunge from the current limit and $213,000 below the scheduled reduction this fall.
•Other counties in high-cost California would experience even sharper declines, such as Monterey, where the maximum would decline by $436,000 and Contra Costa, where the drop would be $379,750. Every county in California -- from big urban communities to rural areas -- would be on the losing end of the new FHA equation, and most reductions would be in the six figures.
•The lower limits would be significant in other states as well. Monroe County, Fla., would see maximum FHA loan limits go from $729,750 to $425,000. Under the scheduled Oct. 1 statutory decrease, the county -- which comprises the Florida Keys -- would have a $529,000 maximum. Sarasota, Fla., would see a $261,250 drop under the bill, Miami-Dade a decrease of $161,250, and Orange County (Orlando) limits would decline by $128,750.
•Large counties in the high-cost areas around Washington D.C. would see FHA limits drop by anywhere from $398,500 (Prince George's, Md.) to $366,250 in Baltimore. Most New England and mid-Atlantic states would end up with lower loan ceilings along with major markets in the Midwest and the Rocky Mountain states.
The FHA loan limit formula would be revised to 125 percent of the median home sale price in the local county under the bill, and the current $271,050 floor for loan limits nationwide would disappear.
Though major housing, real estate and lending groups had no comments pending the Wednesday hearing, they are likely to oppose the sharp cuts in loan limits.
Mortgage industry consultant Brian Chappelle, head of Potomac Partners in Washington, D.C., is scheduled to testify at the hearing and told Inman News that the higher loan ceilings are a bad idea.
Audits of FHA loan performance, Chappelle said, repeatedly have shown that higher-balance mortgages default and trigger claims against FHA's insurance funds at lower rates than smaller-balance loans.
"FHA is essentially an insurance company," he said, "and you need those (higher-balance) loans to spread the risk," just as private sector insurers do.
The Republican bill's call for a 5 percent minimum down payment on FHA loans also is likely to draw criticism from industry groups.
The National Association of REALTORS® and the National Association of Home Builders have opposed such a move in the past, arguing that there is no statistical evidence that adding 1.5 percent onto the current 3.5 percent minimum would significantly affect default probabilities of new FHA loans.
However, the higher down payments, along with the bill's prohibition of financing of closing costs, would make home purchases more difficult for substantial numbers of consumers.
Chappelle estimates that "40 percent of FHA borrowers would fall out" -- unable to afford the transaction -- "if they go to 5 percent down."
The bill also proposes shifting the Agriculture Department's rural housing program to the U.S. Department of Housing and Urban Development. A Republican staff member said "HUD has the housing responsibility and the expertise," so the change is logical.
However, proponents of the rural housing programs may not want to risk being swallowed up in an urban-oriented agency, nor is the Agriculture Department likely to want to lose a chunk of its traditional turf.
Where's the bill headed? Republicans say they are merely seeking to move the agenda they share with the Obama administration -- the smaller footprint concept -- which is, in turn, part of a larger agenda to phase out Fannie Mae and Freddie Mac.
Passage of the bill by the full House appears to be a real possibility, as Republicans are in control on that side of Capitol Hill.
But all bets are off in the Senate, where Democratic support for continuing FHA's role in the market is far stronger, and where dramatic cuts in loan limits in places like California, New York, Massachusetts and the East Coast's expensive markets likely won't fly.
Ken Harney writes an award-winning, nationally syndicated column, "The Nation's Housing," and is the author of two books on real estate and mortgage finance.
From: http://lowes.inman.com/newsletter/2011/05/25/news/143643
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