|
|
FINANCIAL LINKS:
www.bloomberg.com
www.bankrate.com
http://www.marketwatch.com
www.reuters.com
Buyers Who Wait May Lose a Lot
Potential home buyers who delay have a lot to lose.
First-time home buyer and move-up tax credits worth $8,000 and $6,500, respectively, expire April 30. Buyers who qualify get a dollar-for-dollar reduction in taxes or a cash payment if they don’t pay enough taxes to cover the credit.
Other factors that should spur buyers:
Low mortgage rates. If the Federal Reserve stops buying mortgage-backed securities at the end of March, 30-year rates will almost certainly rise to more than 6 percent.
Rising prices. About 30 percent of markets are already experiencing price increases. Prices are falling in 12 percent of markets, says Fiserv (but that only helps if you want to live there).
Source: Money Magazine, Beth Braverman (03/02/2010)
Fewer homeowners see home values falling
A recent report shows that one in five U.S. homeowners owed more on their mortgage than their home was worth in the fourth quarter; however, California’s housing market is bucking the national trend and is telling a different story.
MAKING SENSE OF THE STORY FOR CONSUMERS
Although the report by Zillow.com claims that the percentage of American single-family homes with mortgages in negative equity rose in the fourth quarter, the report does not account for seasonal changes. The traditional home-buying season is April through August. Historically, this time period also is when median home prices rise. In September, median home prices generally show a declining trend, and remain steady from November through February. The change in the median home price noted by Zillow.com is a typical year-end seasonality adjustment in price.
Unlike the national median home price, the month-over-month changes in California’s median home price for 2009 were stronger than the long-run average. Low interest rates and tax incentives led to a rise in the demand for housing. As a result, housing inventory was constrained and created upward pressure on home prices.
California’s housing market has shown signs of stabilization since early last year. Sales of existing, single-family homes bottomed out in August 2007, and the median home price reached its trough in February 2009. In December, California’s median home price was 25.1 percent above the low for the current cycle.
In December, the median price of an existing, single-family home rose to $306,820, an 8.4 percent rise year-over-year, the second consecutive year-over-year increase, and the 10th consecutive month-over-month increase, according to C.A.R.’s December sales and price report.
Although home buyers should not focus solely on future home price appreciation, homeowners who purchase a median-priced house, live in their home for at least five years, and sell it at the then current median price, have averaged an annual rate of return of more than 11 percent, according to data collected by C.A.R. over the last 40 years.
Home sales up, prices down nationwide
Home sales in 25 metro areas increased 1.5 percent nationwide in November compared with the previous month, and 46.7 percent compared with November 2008, according to a report by Radar Logic Inc. Prices decreased 4.2 percent across all metro areas surveyed; however, eight areas experienced year-over-year price increases. Half of the areas with year-over-year price increases were in California, according to the report. Radar Logic’s Residential Property Index (RPX), which measures changes in the price per square foot of homes, shows that transactions increased in 9 of the 11 months ending in November.
"Affordability measures are at their highest levels in years and home sales are moving toward normal levels. Nationwide, foreclosure sales have declined from 29 percent of total sales in November 2008 to 23 percent of sales in November 2009," said Michael Feder, president and CEO of Radar Logic.
California’s home inventory shrinks to 5-year low
California’s Unsold Inventory Index (UII), a closely watched index indicating the number of months needed to deplete the supply of homes on the market at the current sales rate, declined to 3.8 months in December, the lowest level in five years, according to the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.). By comparison, the UII for existing, single-family homes stood at 5.6 months in December 2008.
MAKING SENSE OF THE STORY FOR CONSUMERS
Some economists believe that California’s housing inventory is artificially low because many discretionary sellers—homeowners who do not have to sell their homes—are waiting on the sidelines until home prices rise. Others believe there are more foreclosures to come, as unemployment in the state continues to rise. However, C.A.R. predicts that foreclosures will remain flat in 2010 compared with 2009, as lenders are listing properties for sale at a more metered pace.
California’s housing market has shown signs of stabilization since early last year. Sales of existing, single-family homes bottomed out in August 2007, and the median home price reached its trough in February 2009.
In December, the median price of an existing, single-family home rose to $306,820, an 8.4 percent rise year-over-year, the second consecutive year-over-year increase, and the 10th straight month-over-month increase, according to C.A.R.’s December sales and price report.
With affordability near-historic highs, low interest rates, and home buyer tax credits, many properties in California are receiving multiple offers and sparking bidding wars. Home buyers who find themselves in bidding wars should work closely with their REALTOR® to ensure they are crafting realistic offers that are more likely to be accepted by the seller.
California home sales, median price rise in December
Sales of existing, single-family homes rose 1.7 percent in December, while the median price rose 8.4 percent compared with the prior year, according to C.A.R.’s latest sales and price report. The median price of an existing, single-family detached home in California during December 2009 was $306,820, an 8.4 percent increase from the revised $283,060 median for December 2008, according to the report. The December 2009 median price rose 0.8 percent compared with November’s $304,520 median price.
“As expected, the large year-to-year sales gains have diminished substantially compared with earlier in the year,” said C.A.R. President Steve Goddard. “However, home sales in December were strong, and were comparable to sales of late 2008. Activity in December can be attributed in part to the extension and expansion of the home buyer tax credit, as well as near-historic highs in affordability due to current price levels and low interest rates.”
Percentage of homes with negative equity declines
The percent of single-family homes with negative equity declined 21 percent in the third quarter, down from 23 percent in the second quarter, as home values stabilized in the short term and a greater number of underwater homeowners lost their homes to foreclosure, according to the third quarter Zillow Real Estate Market Reports.
Year-to-year home values declined 6.9 percent in the third quarter, the 11th consecutive quarter of year-to-year declines, according to the Zillow Home Value Index. However, the rate of year-to-year decline shrank for the third consecutive quarter.
Foreclosure resales remained high, accounting for 21.4 percent of all U.S. home sales in September, and represented the majority of sales in several MSAs including Merced, Calif., 74.2 percent; Stockton, Calif., 69.3 percent; Madera, Calif., 68.7 percent; and El Centro, Calif., 68.1 percent. Additionally, 26.9 percent of home sales nationwide sold for less than what the seller originally paid, according to the report.
|
Pending home sales rose again, marking eight consecutive monthly gains – the longest streak since measurement began in 2001, according to the National Association of Realtors®. The Pending Home Sales Index rose 6.1 percent to 110.1 from a reading of 103.8 in August, and is 21.2 percent higher than September 2008 when it stood at 90.9. The gain from a year ago is the largest annual increase on record, and the index is at the highest level since December 2006 when it was 112.8. Lawrence Yun, NAR chief economist, said the momentum is understandable. “What we’re witnessing is a rush of first-time buyers trying to beat the expiration of the tax credit at the end of this month,” he said. “Home values will stabilize sooner rather than over-correcting. That, in turn, will mean wealth stabilization for the vast number of middle-class families and lay the foundation for a durable economic recovery.” |
|
Congress Extends Homebuyer Tax Credit
Today Congress approved extending the First-Time Homebuyer tax credit to homes under contract by April 30, 2010 and closing by June 30, 2010. The credit, equal to 10% of a home’s purchase price, remains capped at $8,000 for first-time homebuyers. Congress also approved an expansion of the credit to allow homeowners who have been in a principal residence for at least 5 of the last 8 years to claim a tax credit of up to $6,500 if they sell that home and buy another primary residence. The goal was to provide an incentive not only for entry level, but for move-up buyers. Although income limits have been raised from $75,000 to $125,000 for individuals and from $125,000 to $225,000 for couples, home purchases exceeding $800,000 will not be eligible. In the end, lawmakers who supported the extension of the tax credit were forced to add it as an amendment to a bill extending unemployment benefits to gain passage. At a cost of over $10 billion, critics say this will be the last extension.
Jumbo Freeze Might be Thawing
October 15, 2009 by Robert Freedman · 5 Comments
Filed under: Economics, Mortgage Financing
By Robert Freedman, senior editor, REALTOR® Magazine
It’s still early but there are signs the availability of jumbo financing might be improving—although underwriting standards probably won’t ease any time soon. That means the days of creditworthy borrowers having a tough time getting financing for an amount over the conforming loan limit might be ending but they’ll still have to come up with a significant down payment and be prepared to show lots of documentation, like three years worth of tax returns instead of the customary two.
NAR Chief Economist Lawrence Yun says lenders are slowly getting back into the game because the climate of dread is lifting: Wall Street analysts and business executives have recalibrated their performance scenarios to reflect the greatly improved conditions among lower-priced homes (thanks to the home buyer tax credit and steeply discounted pricing). That in turn is creating a virtuous cycle as the improved scenarios help relax concerns over the economy, pushing up equities, which in turn creates the wealth that further increases confidence.
In other words, the improving lower-end housing market and the rising stock market are helping to push big financial services companies back into the business of loaning money rather than hoarding cash. As a result, it’s not just safe agency loans that lenders are willing to make (Fannie, Freddie and FHA) but also non-conforming jumbo loans. That helps further the narrowing of the interest rate spread between comforming and non-conforming loans.
I spoke with Las Vegas luxury home sales specialist Kenneth Lowman yesterday and he says the jumbo market has a long way to go before it’s back to where it needs to be, but, importantly, big loans are being made again. Earlier this year, that wasn’t so clear-cut.
“We recenty did a jumbo loan in record time,” he says. It was for a home listed at a couple of million dollars—obviously not an everyday deal for most salespeople—but it closed in just 22 days. Six months ago, he says, that never would have happened.
Yun predicts that financing for jumbo loans, second homes, and commercial real estate will show marked improvement by the middle of 2010. By late 2011 or early 2012, we might even see more non-agency, private-label loans securitized by Wall Street.
Yet the mortgage market by then will surely be different than it was during the housing boom, and in a good way. Buyers will be far more careful about staying within budget and lenders will be far more cautious about making loans to buyers who aren’t staying within budget.
Yet there remains a big concern: inflation. Although prices remain stable because of continuing slack in the economy (high unemployment, excess business capacity), once the enconomy starts growing again federal budget deficits will create inflationary pressure. The main way to head that off, says Yun, is for the government to produce a credible plan for getting the deficit under control.
Hear some more from Yun in an audio podcast he recorded earlier this week, mainly to talk about the need for Congress to extend the tax credit, and in his latest video interview, below, in which he talks about home-sale trends.
Prediction: Homes Sales to Rise 11 Percent
Sales of existing homes will rise 11 percent in 2010, and sales of new homes will climb 21 percent over this year, Mortgage Bankers Association Chief Economist Jay Brinkmann predicted in a speech Tuesday at the organization’s annual meeting.
"We still see a concentration in the lower end of the market," Brinkmann said. "The entry level homes are in demand."
Brinkmann also predicted further declines in existing home prices, with the median falling to $164,200 in the first quarter of 2010.
David Stevens, commissioner of the Federal Housing Administration, concurred, adding that mortgage rates will rise to 5.6 percent by the end of 2010, though not enough of an increase to discourage a 12 percent increase in mortgage applications next year.
Source: Associated Press, Alex Veiga (10/13/2009)
C.A.R.’s 2010 Housing Market Forecast released
The median home price in California will rise 3.3 percent to $280,000 in 2010 compared with a projected median of $271,000 this year, according to C.A.R.’s "2010 California Housing Market Forecast," presented today at CALIFORNIA REALTOR® EXPO 2009 in San Jose. Sales for 2010 are projected to decrease 2.3 percent to 527,500 units, compared with 540,000 units (projected) in 2009.
“California’s housing market continued its strong sales rebound this year, resulting from the continued pace of distressed properties coming to market,” said C.A.R. President James Liptak. “This follows two years of double-digit sales declines in 2006 and 2007. Looking ahead, we expect sales to moderate to a more sustainable pace.”
“After experiencing its sharpest decline in history, we expect the median price to rise modestly next year,” Liptak added. “2010 will mark the beginning of the ‘new normal’ for California’s housing market. This ‘new normal’ likely will feature a steady stream of sales driven by distressed properties in the low end of the market, coupled with moderate home-price appreciation.”
“With distressed properties accounting for nearly one-third of the sales in 2010, inventory will be relatively lean, under six months during the off-season months, and a roughly four-month supply during the peak season,” said C.A.R. and Vice President Leslie Appleton-Young. “We expect the median price to decrease slightly through the remainder of 2009 and into next year, then rise before leveling off next summer. For the year as a whole, home prices are forecast to reach $280,000. The wild cards for 2010 include foreclosures, loan resets, the labor market, and the California budget crisis, as well as the actions of the federal government.”
LOAN MODIFICATION ATTORNEYS UNDER INVESTIGATION
The State Bar of California has recently launched numerous investigations against attorneys for misconduct related to loan modifications. In a rare move, the State Bar has released the names of 16 attorneys under investigation, by opting to waive investigation confidentiality in favor of public protection. These attorneys have allegedly taken fees for promised services, but failed to perform those services or even communicate with their clients who face the possible loss of their homes. Their non-attorney staff may also be under investigation for unlawfully practicing law.
Rates to Begin Slow Climb through 2010
The Fed's recent announcement that it will be tapering off its mortgage-backed securities (MBS) purchase program by the first quarter of 2010 means one thing: mortgage rates will begin a gradual rise back to around 6%.
If you are waiting to purchase or refinance, further delay may mean missing the opportunity to lock-in rates that have remained around 4-5% for much of the year. The MBS-purchase program was designed to help keep rates low, and while this announcement does not mean we'll see a sharp, sudden increase in rates, we can expect a steady climb in rates through the program's end at the beginning of next year. Meanwhile, inventories of unsold homes have fallen to their lowest levels since April 2007, as more buyers move to take advantage of the current low rates and the government's $8,000 first-time buyer tax credit.
Are you currently debating whether to purchase or refinance a home? Call me today, and let's discuss your situation to see how I can help you take immediate advantage of the opportunities that exist in today's market
Climbing Out of Recession
By Lawrence Yun, Chief Economist, NAR Research
Lawrence YunSeptember has come again, and most folks are back from vacation. Kids are back in school. Traffic (in most locales) has returned to its usual nightmarish levels. Many of us are asking ourselves "where did the summer go?"
Well, summer is not the only thing that has ended. The world-wide economic recession is also essentially over. Led by countries such as Brazil, India, and, in particular, China, the economies of the world are digging themselves out of that recessionary ditch. Many other countries appear ready to emerge from the economic doldrums just as strongly. Poland, Chile, Mexico, Turkey, South Africa, and Vietnam could all re-emerge with stronger economies in 2010. Let's hope that as these and other countries travel the upward road to recovery their leaders and policymakers face up to global challenges and opportunities that stem from laying down the necessary institutional reforms that respect private property rights and the transfer of properties.
The U.S. economy, also, appears positioned to start that upward climb to recovery, and those improving foreign economies are also helping to pull the U.S. economy out of its recession as well. Healthier foreign economies mean increased exports from the U.S. Indeed, the net export picture in the U.S. has improved notably this year.
Another factor that will contribute to a reviving U.S. economy is the huge inventory restocking that needs to take place over the next several quarters. In the wake of the financial crisis in the fall of 2008 (and as part of the aftermath of the Lehman Brothers collapse), corporate credit was virtually nonexistent. And most companies kept their precious cash close - not spending it for any inventory purchase. Now, with inventory all but depleted, orders have been rising.
The most important factor, however, helping to kick-start the economy is the improving picture of housing. The housing component of the federal government's stimulus package has had the intended impact we had hoped for: decidedly lifting home sales, trimming inventory, and beginning to stabilize home prices. A big part of that successful "housing" stimulus was the first-time buyer tax credit. In fact, as of August an estimated 1.2 million first-time homebuyers took advantage of the tax credit that went to effect in February and joined the ranks of property owners. In the process a chain reaction was unleashed. Many existing homeowners were able to sell their homes to first-timers, and thus purchase their next home.
Let's look at just a few of the recent figures that should cheer us. Existing home sales - both single-family and condominiums/co-ops - rose 7.2 percent from June to July to post a seasonally adjusted annual rate of 5.24 million units. That is the highest month to month increase in at least 10 years. And perhaps even more telling is the fact that resales were higher by 5.0 percent compared to July of 2008. This is the first time in nearly four years that we have seen a positive year over year increase.
Pending sales, too, are on a roll. They continued their upward trend in July, posting positive gains on both a month to a month and year over year basis. In fact, July's index reading of 97.6 was the highest since June of 2007. Affordability, while declining slightly, is still at historically high levels and well above levels seen last year.
To insure that this positive momentum continues - and thus help keep both housing and the economy firmly back on track - a couple of things need to happen.
For one, that first-time homebuyer tax credit needs to continue for a bit longer. Its current expiration date is November 30 - and that is fast approaching. Given the lengthening time it has been taking to close on a home sale recently, a buyer would need to sign a contract by the end of September to assure the settlement occurs by the end of November. (NAR is working with policymakers encouraging an extension of this home buyer tax credit.) The tax credit does add to the already high budget deficit figures. But the economic recovery and the consequent gains in employment and tax revenues have been in the past and will continue to be into the future the principal factor determining a country's fiscal health. Furthermore, given that homeowners pay nearly all of the federal income tax, extending the temporary tax break for the housing sector at a budget cost of about $15 billion to help reverse a deep downturn is well justified. (The other aspects of the huge $787 billion in stimulus can be debated.) The need to get the buyers back could be even more critical at least through the middle of next year because of the incoming rise in newly foreclosed properties. The lingering toxic combination of a high unemployment rate and a sizable number of "underwater" homeowners will mean high foreclosures at least through the spring of 2010. These inventories need to be quickly absorbed.
Of course there are risks. A big wild card in a sustainable recovery is the commercial real estate market. Unlike residential real estate, commercial real estate did not receive much of a stimulus. This sector still faces strenuous challenges, particularly related to the issuance of commercial mortgage securities. On the positive side, the Federal Reserve has put more focus to the issue and it is likely more credit could flow into the currently frozen market. Recent improvements in bank profits and reserves should lead to more lending for small businesses and for commercial real estate. In addition, the improving economy will steadily induce companies to demand new commercial spaces.
Yes, the recession is essentially over - from a weird economists' definition based on production and not based on employment. But a full job recovery will take some time. Jobs will (finally) begin to be created from early 2010. Still, it will take at least 3 years to fully recoup the more than 7 million jobs that will have been lost during this economic cycle. But because of the economic liberty and secure property rights accorded to Americans, the country, despite the harsh short-term economic setback, will no doubt rise up again.
Mortgage problems are walloping Americans’ credit scores
Homeowners who find themselves struggling with mortgage payments and unsure how to handle the situation—short sale, foreclosure, or walk away—are advised to consider the impact of each on their credit scores.
Loan modifications that roll late payments and penalties into principal debt owed on the house can actually increase borrowers’ scores modestly, while refinancing underwater mortgages may have little or no negative effect on credit scores, according to Vantage Solutions, a scoring company created by the three national credit bureaus.
Short sales on the other hand can trigger large declines in credit scores, according to researchers. A homeowner with an excellent credit score might see a 120 to 130 point decline after a short sale.
Homeowners who choose to walk away from the home and stop payments altogether should expect their credit scores to fall 140 to 150 points, plus negative marks on their credit bureau files for up to seven years.
People filing for bankruptcy protection covering all their debts will get hit with an average 355- to 365-point drop in their scores. Bankruptcies remain on borrowers’ credit bureau files for 10 years.
But there is good news. Homeowners facing financial stress can experience minimal declines to their scores if they contact their loan servicer or lender when they first discover that they may have trouble making their monthly payments.
Fed Officials More Confident Recession Ending
According to the Wednesday release of the minutes of the last policy meeting, Federal Reserve officials were more confident than ever that the steep downturn in the economy was coming to an end. “Officials expected the pace of recovery to pick up in 2010, but they expressed a range of views, and considerable uncertainty, about the likely strength of the upturn,” the summary said. Their current thinking was that the recovery would be shaky at first and will be led by businesses rebuilding inventories. Consumer spending would have “no more than moderate growth” as households face “considerable headwinds including reduced wealth, tight credit and high levels of debt,” the minutes said. “Given their forecasts for only a gradual upturn in economic activity and subdued inflation, Fed members thought it would be likely that the federal funds rate would need to be maintained at an exceptionally low level for an extended period of time,” the FOMC said.
3-year descent in home prices appears to be at end
According to recent reports and forecasts by housing analysts, the three-year descent in home prices appears to be at an end. Eight cities, including San Francisco, showed price increases in May, up from four in April, and one in March, according to Standard and Poor’s/Case-Shiller Index. For the first time since early 2007, the index of 20 major cities was virtually flat, rather than down.
MAKING SENSE OF THE STORY FOR CONSUMERS
· Earlier reports show that sales of existing homes nationwide rose last month for the third consecutive month, while sales of new homes increased in June by the largest percentage in eight years, according to the NATIONAL ASSOCIATION OF REALTORS® (NAR) and the U.S. Commerce Dept., respectively.
· Although some skeptics believe the market is pausing before home prices decline further, the median price in California’s housing market appears to be stabilizing. June marked the fourth consecutive month of rising home prices and the second largest gain on record for the month of June, based on statistics dating back to 1979. The year-to-year decline in June also was the smallest in the past 16 months.
· The S&P/Case-Shiller price index for 20 cities showed a half-percent gain when May was compared with April. It was the first month-over-month increase in the index in 34 months. “It is very possible that years from now we will say that April 2009 was the trough in home prices,” said Maureen Maitland, vice president for index services at Standard & Poor’s.
· One explanation for the increase in median prices is the rise in demand from buyers, especially first timers taking advantage of the $8,000 federal tax credit, which expires in December. The NATIONAL ASSOCIATION OF REALTORS® (NAR) is lobbying for the tax credit to be extended and to be replaced with a $15,000 credit for all buyers.
· Another factor in the market’s resurgence is the prevalence of foreclosures, which make up about a third of all existing home sales. “Although another surge of foreclosures is expected later this year, demand remains strong, so the market may be able to absorb more distressed properties without significantly impacting the median price,” said C.A.R.’s Chief Economist Leslie Appleton-Young.
Freddie Mac Analysts Say Home Sales Have Bottomed
In Freddie Mac’s July 2009 Economic and Housing Market Outlook analysts said home sales bottomed in the first quarter of 2009 at an annualized rate of 4.46 million per year, and will post steady gains each quarter to reach a pace of 5.85 million sales per year by the fourth quarter of 2010. California has set the pace and posted 14 months of growth in a row, the report noted. Although many of these sales are foreclosures or short sales, it still indicates that there are ready buyers at current prices and these distressed sales do clear out the inventory of for-sale homes. California Association of Realtors annual survey echoed Freddie Mac’s findings declaring low rates, decreased prices and tax credits motivated CA buyers. CAR Survey found 49% of buyers purchased in a traditional market sale, 38% purchased a REO and 13% purchased a short sale. First-time homebuyers jumped to 38% of all sales and only 37% of all escrows closed on-time.
Falling prices, low rates prod California homebuyers
Favorable home prices, record-low interest rates, and the belief that rates will rise in the near future were the primary motivators leading home buyers to purchase, according to the CALIFORNIA ASSOCIATION OF REALTORS®’ (C.A.R.) “2009 Survey of California Home Buyers”.
MAKING SENSE OF THE STORY FOR CONSUMERS
· Sixty-eight percent of buyers said price decreases motivated them to buy a home, while 39 percent reported low interest rates helped them move to a better location. Twenty-three percent claimed the likelihood that rates will move up as the motivating factor.
· Housing affordability has improved dramatically in response to the decline in home prices along with historically low mortgage rates, creating a tremendous opportunity for home buyers in California. Home sales in California rebounded in 2008 and early 2009, reflecting the combination of favorable prices, low mortgage rates, and home buyer tax credits, fueled primarily by sales of distressed properties that accounted for more than half of the state’s transactions.
· Forty-nine percent of all buyers purchased a home through a traditional market sale, while 38 percent purchased a REO/bank-owned property, according to the survey. Reflecting the difficulty in closing short sales--properties selling for less than the loan amount--only 13 percent of buyers purchased a short-sale property.
· Home buyers who purchased a REO or bank-owned property experienced the highest level of difficulty in obtaining financing, compared with a more traditional transaction. They rated the level of difficulty as 8.9 (on a scale of 1 to 10 with 10 representing the greatest level of difficulty in obtaining financing) compared with a 7.7 for home buyers with a traditional market sale and 7.6 for short-sale home buyers.
Searching for a bottom in the housing market
With consumer confidence rising in May to its highest level in eight months, housing starts increasing more than 17 percent in May compared with the previous month, and sales of existing homes climbing 2.9 percent in April nationwide, it appears that the housing market may be stabilizing.
MAKING SENSE OF THE STORY FOR CONSUMERS
· Although sales of existing, single-family homes rose 35.2 percent in May in California, compared with a year ago, the median price declined 30.4 percent. Some industry analysts predict that as specialized adjustable-rate mortgages, known as option ARMS and Alt-A mortgages, reset over the next 18 to 24 months, prices could decline further before stabilizing.
· “We are seeing strong buying activity, particularly in those boom
and bust markets, where prices have declined significantly. Buyers
are coming in and fighting over properties – there is multiple bidding
in California and Florida,” says Lawrence Yun, chief economist with
the NATIONAL ASSOCIATION OF REALTORS®.
· Sales of existing homes are soaring as many investors and first-
time buyers purchase distressed properties. Yun estimates that
about 50 percent of current sales involve distressed properties, and
he expects the trend to continue as foreclosures rise in the months
ahead.
· Although some economists predict home prices will continue to
decline in the coming months, California’s median home price rose
for the third consecutive month in May, posting the largest monthly
increase on record for the month of May.
· Some buyers are trying to time the bottom of the market and purchase once it appears that prices are consistently and steadily rising. Many housing forecasters advise against this approach as buyers should not view their homes solely as investment opportunities. Historically, the average annual rate of return on a home lived in for five years or more is nearly 12 percent, based on data C.A.R. has collected over the last 40 years.
HR 3044 to place 18-month moratorium on HVCC
California Congressman Gary Miller has introduced H.R. 3044, which would place an 18-month moratorium on the recently imposed Home Valuation Code of Conduct (HVCC). The HVCC was worked out through an agreement between Fannie Mae, Freddie Mac, and the New York Attorney General’s Office (NYAG) in response to an investigation by the NYAG into Fannie and Freddie.
The purpose of the HVCC was to try and insulate the appraisal process from undue influences. The HVCC attempted to do this by placing tight controls and restrictions on the ordering of the appraiser, as well as purposes for communicating with the appraiser during the process. However, the implementation of the HVCC, which came about by neither regulation nor Congressional statute, has resulted in appraisals that cost more, take longer to perform, and are inaccurate. C.A.R. has heard from members throughout the state of similar difficulties with the HVCC and its negative impact on the California real estate transaction. C.A.R. is supporting H.R. 3044, and is asking California’s Congressional Delegation to sign onto the bill as a cosponsor.
May home sales increased 35.2 percent, price declined 30.4 percent
Home sales increased 35.2 percent in May in California compared with the same period a year ago, while the median price of an existing home declined 30.4 percent, C.A.R. reported last week. “With affordability for first-time buyers at a record high, sales of existing, single-family homes continued to remain above the 500,000 level for the ninth consecutive month,” said C.A.R. President James Liptak. “Buyers are beginning to realize that the combination of favorable home prices, historically low mortgage rates, and first-time home buyer tax credits, may not align again for many years.
“The sales gains over last year have diminished in recent months,” he added. “This trend is expected to continue through the end of the year, as limited inventory at the moderate and low end of the market constrains sales activity,” he said.
Closed escrow sales of existing, single-family detached homes in California totaled 556,590 in May at a seasonally adjusted annualized rate. Statewide home resale activity increased 35.2 percent from the revised 411,770 sales pace recorded in May 2008. Sales in May 2009 increased 2.9 percent compared with the previous month.
The median price of an existing, single-family detached home in California during May 2009 was $267,570, a 30.4 percent decrease from the revised $384,540 median for May 2008, C.A.R. reported. The May 2009 median price rose 4.2 percent compared with April’s $256,700 median price.
DRE issues fraud warning
The DRE recently issued a fraud warning alerting consumers about loan modification scams and informing consumers of what they can do to protect themselves. The alert is available in both English and Spanish. Last July, the DRE had fewer than 10 complaints involving loan modification companies; today the department has 750 pending investigations. In addition, since last October, the DRE has filed more than 200 Desist and Refrain Orders. A list of the companies and persons the DRE has filed an action against can be viewed at http://www.dre.ca.gov/cons_drs.asp.
It is worth noting that not all firms who collect advance fees for loan modification services do so illegally, the DRE said. In general, only licensed real estate brokers and attorneys operating within the scope of their license may collect advance fees. Real estate brokers must have their advance fee agreement reviewed by the DRE prior to its use to ensure it is compliant with real estate law.
C.A.R. also has learned of what appears to be a loan modification assistance program and lead generator, from a company using the legislative bill number 3648, that looks as if it’s a government entity, complete with a misleading seal closely resembling a governmental seal but that is not affiliated with the government. C.A.R. cautions all members to be on the alert for schemes seeking funds from REALTORS® or consumers with no value, or that may be misleading or unlawful.
Summertime....Will the Home Buying be Easy?
By Lawrence Yun, Chief Economist, NAR Research
It was a good kick-off for the summer season. The pending home sales index figure that was released earlier this month marked a third straight month of rising pending sales. That is certainly welcome and encouraging news. It is fairly obvious that first-time buyers are responding to the incentives of rock-bottom mortgage rates and the first-time buyer tax credit to pick up relatively cheaply priced homes. Indeed, recent figures suggest about 45 percent of buyers have been first-timers – a higher proportion than the typical 35 to 40 percent during more normal years.
A high proportion of the transacted homes are distressed, either in foreclosure or requiring a lender approval short-sale, with deep discounted prices. By the fourth quarter, existing-home sales are projected to be about 15 percent higher compared to the comparable period the year before if all goes as planned. Some of the recent first-time buyer transactions will help existing homeowners to make the sale and then buy the next home. Other first-time buyers purchasing vacant home still are helping in terms of absorbing inventory.
Home sales in the hard-hit California market have recently reached levels that are nearly twice as high compared to when they were in the trough. Evidently the California housing market is experiencing a tipping-point phenomenon: potential buyers suddenly wanting to enter the market all at once. People have waited and waited for the best time to enter the market. Why buy now if prices will be lower later? After having tumbled from unsustainable heights, home prices there are highly attractive and within budget for many fence-sitters. So when some buyers started to enter the market, other bystanders just couldn’t let others take advantage of the great buying opportunity. Many are now fighting to jump into the market. Multiple-bidding on lower-priced homes are said to be common in California. People who “lose out” during a bidding war don’t simply go home and wipe away their tears -- they come back with almost vengeance-like determination and hope their next bid will be the highest. What does that mean for home prices? Though the year-over-year price measurement will continue to show declines in California, probably for the remainder of the year, the month-to-month price trends will more likely be on an upswing. In short, people who buy in June 2009 will likely see a price gain in June 2010.
Pending home sales increase for third consecutive month
Record low mortgage interest rates boosted pending home sales for the third consecutive month, with some benefit now from the first-time buyer tax credit, according to a recent report from NAR. Its Pending Home Sales Index, a forward-looking indicator based on contracts signed in April, rose 6.7 percent to 90.3 from a reading of 84.6 in March, and is 3.2 percent above April 2008 when it stood at 87.5.
“Housing affordability conditions have been at historic highs, but now the $8,000 first-time buyer tax credit is beginning to impact the market,” said NAR Chief Economist Lawrence Yun. “Since first-time buyers must finalize their purchase by November 30 to get the credit, we expect greater activity in the months ahead, and that should spark more sales by repeat buyers.”
Right steps to take before disputing a credit error
Credit scores and reports continue to be one of the most important factors in determining whether consumers are extended lines of credit, and the amount they are offered. Credit reports provide lenders with a consumer’s credit history, including missed or late payments. Consumers concerned about errors in their credit reports should contact the three major credit bureaus to dispute the inaccuracies.
MAKING SENSE OF THE STORY FOR CONSUMERS
· Not all lenders report to the three major credit bureaus – Equifax, Experian and TransUnion – which means a mistake could appear on one, two, or all three reports. Rather than calling or mailing a dispute letter to one central agency, the errors must be disputed separately with each bureau.
· Consumers may obtain free copies of their credit reports once a year at www.annualcreditreport.com. This report will only show credit history, and not credit scores. To obtain a credit score, consumers can visit www.myfico.com.
· To dispute an error, consumers first should contact the lender that reported the information to the credit bureaus. Next, contact the credit bureaus using the numbers listed on the credit reports. This also can be done online at www.transunion.com, www.equifax.com, or www.experian.com. If the report is more than 60 days old, consumers should obtain a new report, which may have a new phone number. Also, if the report was obtained from a third-party site rather than directly from the credit bureau, consumers may have to order a report from the bureau to begin the dispute process.
· Bureaus typically have 30 to 45 days to “resolve” disputes. If it’s a simple factual error that is acknowledged by the lender, it could take as little as two weeks. Either way, consumers are notified of the bureau’s decision via regular mail or e-mail.
Pending home sales rose with many first-time buyers taking advantage of historically good housing affordability conditions, according to the latest survey. The Pending Home Sales Index, a forward-looking indicator based on contracts signed in March, increased 3.2 percent to 84.6 from a level of 82.0 in February, and is 1.1 percent higher than March 2008 when it was 83.7. Lawrence Yun, NAR chief economist, said it should take a few months for the market to gain momentum. “This increase could be the leading edge of first-time buyers responding to very favorable affordability conditions and an $8,000 tax credit, which increases buying power even more in areas where special programs allow buyers to use it as a downpayment,” he said. “We need several months of sustained growth to demonstrate a recovery in housing, which is necessary for the overall economy to turn around.”
|
Obama Administration Announces Financial Incentives and Uniform Process for Short Sales
The NATIONAL ASSOCIATION OF REALTORS® (NAR) today announced that the Obama Administration has added new incentives and uniform procedures for short sales under its new Foreclosure Alternatives Program (FAP), part of the administration’s Making Home Affordable plan.
Loan servicers may consider short sales or deeds-in-lieu of foreclosure for borrowers who do not qualify to have their loans modified on a permanent basis under the Making Home Affordable Loan Modification Program.
· Borrowers/homeowners qualify under the FAP if they meet minimum eligibility requirements for the Home Affordable Modification program, but don’t qualify for a modification or do not successfully complete the three-month trial period. Before proceeding with a foreclosure, servicers must determine if a short sale is appropriate.
· Incentives include: $1,000 for servicers for successful completion of a short sale or deed-in-lieu of foreclosure; $1,500 for borrowers/homeowners to help with relocation expenses; and up to $1,000 toward the cost of paying junior lien holders to release their liens (one dollar from the government for every $2 paid by the investors to the second lien holders).
· The program will include streamlined and standardized documents, including a Short Sale Agreement and an Offer Acceptance Letter. The goal is to minimize complexity and increase use of the short sale option.
· Servicers will independently establish both property value and minimum acceptable net return, in accordance with investor requirements. The price may be determined based on an appraisal or one or more broker price opinions (BPOs), issued no more than 120 days before the date of the short sale agreement.
· In the Short Sale Agreement, servicers must give borrowers/homeowners at least 90 days to market and sell the property, or up to one year, depending on market conditions. Property must be listed with a licensed real estate professional with experience in the neighborhood. No foreclosure may take place during the marketing period (at least 90 days) specified in the Short Sale Agreement.
· The Short Sale Agreement must specify the reasonable and customary real estate commissions and costs that may be deducted from the sales price. The servicer must agree not to negotiate a lower commission after an offer has been received.
· Servicers may not charge fees to borrowers/homeowners for participating in the FAP.
· The program is in effect through 2012.
· Servicers have the option to require the borrower/homeowner to agree to deed the property to the servicer in exchange for a release from the debt if the property does not sell within the time allowed in the Short Sale Agreement (plus any extensions).
A short sale may not mean you’re home free
Some homeowners who sell their homes through short sales are finding their mortgage companies still try to collect some or all of the difference between the bank-approved short-sale price and the outstanding mortgage balance. Some mortgage companies also are taking legal action to recover unpaid amounts after a foreclosure is completed.
MAKING SENSE OF THE STORY FOR CONSUMERS
-
HSBC Finance has implemented a one-year moratorium on the collection of deficiency balances for short sales and foreclosures that occur after April 1, due to the “current economic environment,” according to an official with the company.
-
Not all borrowers who sell their homes through a short sale or lose their homes to foreclosure will receive a deficiency claim. Often, mortgage companies don’t try to collect unpaid amounts either because state laws prohibit or limit such actions or the cost outweighs the potential return. California has anti-deficiency rules that prohibit lenders from pursuing borrowers after foreclosure, but California does not have anti-deficiency rules for a short sale.
-
The borrower’s situation often is the determining factor in whether the lender tries to collect the unpaid debt or not. The borrower’s employment status, assets, whether the home was purchased as an investment, and the amount of debt owed are taken into consideration.
-
It is important that sellers are informed of the lenders requirements, read the fine print, and ask questions when selling their home via a short sale. According to one real estate attorney who represents financially troubled homeowners, every short sale she has worked with has had a promissory note or terms giving the lender the right to collect a deficiency. Often, the terms are buried in the sale contract, according to the attorney.
Builder confidence rises five points to highest level since Oct. 2008
Builder confidence in the market for newly built, single-family homes rose five points in April to the highest level since October 2008, according to the most recent National Association of Home Builders/Wells Fargo Housing Market Index (HMI) report. It was the largest one-month increase recorded since May of 2003, and brings the HMI to 14, out of single-digit territory for the first time in six months. Every component of the HMI reflected the boost, with the biggest gain recorded for sales expectations in the next six months, according to the report.
“This is a very encouraging sign that we are at or near the bottom of the current housing depression,” said NAHB Chief Economist David Crowe. “With the prime home buying season now underway, builders report that more buyers are responding to the pull of much-improved affordability measures, including low home prices, extremely favorable mortgage rates, and the introduction of the $8,000 first-time home buyer tax credit.”
Each of the HMI’s component indexes recorded substantial gains in April, with a 10-point increase in the component gauging builder sales expectations for the next six months, bringing that index to 25. The component gauging current sales conditions and the component gauging traffic of prospective buyers each rose five points, to 13 and 14, respectively, according to the report.
Gain Seen in Pending Home Sales, Housing Affordability Sets New Record
Pending home sales have edged up, hinting at a possible pickup of sales activity in coming months, according to the National Association of Realtors®. The Pending Home Sales Index, a forward-looking indicator based on contracts signed in February, rose 2.1 percent to 82.1 from a reading of 80.4 in January, but is 1.4 percent below February 2008 when it was 83.3. Lawrence Yun, NAR chief economist, said the market is continuing to underperform. “Pending home sales have a way to go for there to be a meaningful increase, but recent increases in shopping activity are hopeful indicators that we’ll see additional sales gains,” he said. “More buyers are getting into the market to take advantage of stimulus incentives and much improved housing affordability conditions, but it will take a few months before we could see this turn up in measurable sales contract activity.”
Top Economists Say Recovery Has Begun
Economic recovery is about making people feel more confident, says Mark Zandi, chief economist of Moody’s Economy.com.
Zandi evidenced increasing home sales and gains in the stock market are some promising signs that the worst is over and people will start spending again.
“We’re starting to see some pent-up demand for goods,” he says.
But Zandi warns that the situation is still fragile. "Confidence is a very fickle thing. It can go from abject pessimism that pervades now to a more balanced view of the world rather quickly.”
Robert Brusca of FAO Economics is predicting strong growth in the last half of the year and a quick recovery for the labor market. "You've lost 5 million jobs. It shouldn't be hard to put 2.5 million jobs back on rather quickly after you hit bottom," he said.
Joseph Carson, chief economist at AllianceBernstein, calls improving home sales, a rising stock market, and better-than-expected retail sales in February and March good signs of a turnaround. By the time President Obama’s stimulus package takes effect, the economy will be ready, he says.
"The stimulus has a much better chance of working if trends are already turning up than if it needs to halt a decline," he said.
Source: CNNMoney, Chris Isidore (04/06/2009)
6 Reasons Why It's Still a Good Time to Buy
The housing market is looking healthier. Here are six reasons why now is the time to jump into the market.
1. Uncle Sam is willing to help. First-time buyers (defined as anyone who hasn’t owned a home in the last three years) are entitled to a maximum $8,000 tax credit; interest rates are at record lows; and the Federal Reserve is doing its best to make mortgage loans available. (Sign up for a Webinar to learn more about the home buyer tax credit)
2. People have to live somewhere. About 800,000 new households are formed each year in this country, ensuring that the housing market will tighten, even if the economy doesn’t soar.
3. Borrowers leverage their investment. If you put $10,000 into the stock market and it earns 10 percent, you’ve earned $1,000. If you put $10,000 down on a home and its values increases 10 percent, you’ve made $10,000.
4. When prices come back up, you’ll have instant equity. In parts of the country where foreclosures have driven down prices, better times will mean the price of the home you buy will rise rapidly.
5. Mortgage costs stay the same. If you get a fixed-rate mortgage, the monthly payment stays the same – while everything else, including rent, goes upward.
6. You own it. There is something comforting in the notion that your home is your own. You can paint it any color you want, let the dog run in the back yard and hang a swing for the kids in the front.
Source: The Wall Street Journal, June Fletcher (03/27/2009)
POLL FINDS AMERICANS OPTIMISTIC DESPITE THE RECESSION
Nearly eight-in-10 Americans believe it still is possible to improve their economic standing and remain optimistic that their family's economic circumstances will improve within their lifetime and across generations, according to a new study by Pew's Economic Mobility Project This is true across racial lines and even among lower-income, less-educated and unemployed people, according to the poll.
"Although the current economic crisis seems to be deepening each day and many families are feeling the pinch -- either through company layoffs, decreasing home values or loss of retirement savings -- Americans are taking a longer-term view," said John E. Morton, managing director of Economic Policy at The Pew Charitable Trusts. "We may be struggling in our daily lives, but Americans are confident in themselves and their ability to get ahead in the future."
Many Americans said the government currently does more to hurt than help people trying to move up the economic ladder, according to the poll. However, a majority support a wide range of policies the government could adopt to encourage upward economic mobility, such as making college more affordable, investing in early childhood education, making retirement savings easier, or providing job training and financial education. In addition, 71 percent said it is more important for the country to provide people a fair chance of improving their economic standing than it is to reduce inequality in the United States.
SCAM ARTISTS USING FORGED LETTERHEAD TO CON CALIFORNIANS
California Attorney General Edmund G. Brown Jr. is warning consumers that scam artists are using the forged letterhead of major lenders to con worried Californians into paying thousands of dollars for non-existent loan modification services.
"Californians should be deeply skeptical of anyone who demands money up front and makes extravagant promises that they can save their home," Brown said. Steps consumers can take to protect themselves from loan modification fraud are available at http://ag.ca.gov/newsalerts/release.php?id=1697&.
Complaints may be filed with the Attorney General's Office at: Office of the Attorney General - Public Inquiry Unit, P.O. Box 944255, Sacramento, CA 94244, or online at http://ag.ca.gov/consumers/general.php.
Pending Sales Down, Affordability at Record
The Pending Home Sales Index, a forward-looking indicator based on contracts signed in January, fell 7.7 percent to 80.4 from a downwardly revised reading of 87.1 in December, according to NAR's latest report.
The index is 6.4 percent below January 2008 when it was 85.9.
The index is at the lowest level since tracking began in 2001, when the index value was set at 100.
Lawrence Yun, NAR chief economist, says the downturn in the economy weighed heavily on the data.
“Even with many serious potential home buyers on the sidelines waiting for passage of the stimulus bill, job losses and weak consumer confidence were a natural drag on home sales,” he says. “We expect similarly soft home sales in the near term, but buyers are expected to respond to much improved affordability conditions and from the $8,000 first-time buyer tax credit.”
Breakdown By Region
Here's how the PHSI fared across the country:
-
Northeast: dropped 12.7 percent to 57.8 in January and is 19.7 percent below a year ago.
-
Midwest: declined 9.2 percent to 72.6 and is 13.8 percent below January 2008.
-
South: fell 11.9 percent to 82.2 in January and is 9.1 percent below a year ago.
-
West: rose 2.4 percent to 103.6 and is 13.5 percent higher than January 2008.
Buying Power Rises Significantly
NAR President Charles McMillan says it’s ironic with the weak housing market that affordability conditions have improved dramatically.
“Housing affordability is at a record high – the buying power of a typical family has risen significantly,” McMillan says. “With the drop in interest rates, a median-income family can afford a home costing $20,000 more than a year ago for the same monthly mortgage payment. With the strong housing stimulus, we are hopeful inventory will get trimmed and help prices to stabilize in many areas by the end of this year.”
Indeed, NAR’s Housing Affordability Index rose 13.6 percentage points in January to 166.8, a new record high. The HAI, a broad index of affordability using consistent values and assumptions over time, shows that the relationship between home prices, mortgage interest rates and family income is the most favorable since tracking began in 1970.
The HAI indicates a median-income family, earning $59,800, could afford a home costing $283,400 in January with a 20 percent downpayment, assuming 25 percent of gross income is devoted to mortgage principal and interest; affordability conditions for first-time buyers with the same income and small downpayments are roughly 80 percent of that amount. A year ago, the typical family could afford a home costing $263,300.
Yun: Hopeful for Spring Turnaround
“Conditions have been aligning very favorably for home buyers with the exception of consumer confidence," Yun says. "But I am hopeful that sales will turn around by late spring and early summer because history suggests that home sales can rise even in times of job losses when housing affordability rises.”
House Passes Mortgage Bankruptcy Bill
The U.S. House approved legislation on Thursday that will allow bankruptcy judges to lengthen terms, cut interest rates and reduce the principal owed by bankrupt borrowers.
The so-called "cramdown" bill (the actual name of the bill is the "Helping Families Save Their Home Act") passed by a margin of 234-191. The legislation was modified to become more lender friendly; it requires borrowers to certify that they provided their lenders with financial information and gave them time to provide other alternatives.
Borrowers receiving a cramdown must reimburse their lender for a portion of the loss if they sell the property before they complete a five-year bankruptcy repayment plan.
House Republican Leader John Boehner of Ohio, who opposed the legislation, says it forces those who acted responsibly to “subsidize scam artists, speculators and those who knowingly made bad decisions.”
The bill also permanently increases the Federal Deposit Insurance Corp.’s insurance on bank deposits to $250,000, gives loan servicers legal protection when they modify troubled loans, and retools the Hope for Homeowners lending program, which has so far been a failure.
The Senate is expected to consider a version of the bill as early as next week.
U.S. housing market bottom within sight
Although some housing markets across the nation have experienced price declines of 50 percent or more from their peaks, namely in high-cost states such as Florida and California, it appears a bottom is in sight. According to a report from Moody’s Economy.com, the bottom, in terms of home prices, will likely take place in the fourth quarter.
MAKING SENSE OF THE STORY FOR CONSUMERS
· The report states that nearly 62 percent of the nation’s 381 metropolitan areas will have experienced double-digit-percent declines in home prices, peak-to-trough, before bottoming out.
· Housing inventories are falling, sales are rising, and home prices are becoming better aligned with incomes, which will help lead to a housing correction. Although lawmakers are working on plans to help stabilize the market, the report forecasts that even with further government intervention, the recession will keep the housing market from fully recovering until the end of the year.
· According to the report, home sales will have declined by 40 percent and housing starts by 70 percent nationwide from peak to trough. However, California’s home sales tell a different story. C.A.R. economists project sales for 2009 to increase 12.5 percent to 445,000 units, compared with 395,600 units (projected) in 2008.
|
|
|
|