The U.S. had 1.8 million distressed homes in January that had yet to be listed for sale, a “shadow inventory” that is expected to weigh on home prices for years.
Market researcher CoreLogic said Wednesday that the shadow inventory had shrunk slightly the past year, from 2 million homes in January 2010.
The dip was driven by an improving economy, which helped more people stay current on their mortgages, strengthening in some home prices last year and more loan modifications, says Sam Khater, CoreLogic senior economist.
Khater expects the numbers to keep falling with an improving economy. But risks remain, including renewed declines in U.S. home prices and any hit to the national economic recovery.
Even if the biggest increases are over, the situation “will be shaky for some time,” Khater says.
As defined by CoreLogic, the shadow inventory includes homes that are more than 90 days delinquent on the mortgage, are in the foreclosure process or are already bank owned.
CoreLogic expects all of the shadow inventory to eventually become foreclosed homes. Foreclosed homes sell at a 20 percent to 30 percent discount to non-foreclosed homes so they represent an especially “virulent” threat to home prices, says Stan Humphries, chief economist at Internet real estate portal Zillow.com.
The nation’s universe of distressed homes is even bigger than the shadow inventory.
CoreLogic says that supply also includes homes whose mortgages are 90 days or more past due that may become current and those with mortgages 90 days or more past due that are already listed for sale.
When adding them up, and considering the current pace of sales, CoreLogic estimates that it’ll take more than 21 months in New Jersey, Illinois and Maryland to sell the homes that are 90 days or more delinquent.
The long time frames underscore the scope and magnitude of the U.S. housing recession. “It’s hitting far and wide in America,” Humphries says.
Some states that were hit early and hard by the real estate bust – and are now seeing more robust sales – don’t have as much of an overhang of distressed homes.
Source: USA TODAY, a division of Gannett Co. Inc., Julie Schmit.
Thursday, March 31, 2011
Millennials: ‘The new lifeblood’ for the industry
More of the millennial generation is approaching the homebuying age, but they aren’t like buyers before, according to a recent study by Wells Fargo.
Millennials – those born between 1979 and 1991 – are more diverse, technology-driven, and tend to trust their instincts more so than previous generations.
Despite media reports of a sour real estate market, Millennials still are optimistic with their views about homeownership, according to Wells Fargo, which surveyed more than 3,000 Americans to discover their attitudes about homeownership. In the survey, Wells Fargo found that millennials even responded favorably to more rigorous credit requirements, saying they found them beneficial to their goal of remaining in a home once they buy.
The millennial generation consists of about 51.5 million potential first-time homebuyers, the Wells Fargo study says – which is 6 million more than the baby boomers who reached homebuying age in 1977.
Brad Blackwell, executive vice president at Wells Fargo, says the wave of Millennials will be the new lifeblood for the industry.
“We’re going to have to figure out how to reach them,” Blackwell says.
Source: “Wells Fargo study finds new kind of homebuyer on the way: Millennials,” HousingWire.com (March 25, 2011)
Millennials – those born between 1979 and 1991 – are more diverse, technology-driven, and tend to trust their instincts more so than previous generations.
Despite media reports of a sour real estate market, Millennials still are optimistic with their views about homeownership, according to Wells Fargo, which surveyed more than 3,000 Americans to discover their attitudes about homeownership. In the survey, Wells Fargo found that millennials even responded favorably to more rigorous credit requirements, saying they found them beneficial to their goal of remaining in a home once they buy.
The millennial generation consists of about 51.5 million potential first-time homebuyers, the Wells Fargo study says – which is 6 million more than the baby boomers who reached homebuying age in 1977.
Brad Blackwell, executive vice president at Wells Fargo, says the wave of Millennials will be the new lifeblood for the industry.
“We’re going to have to figure out how to reach them,” Blackwell says.
Source: “Wells Fargo study finds new kind of homebuyer on the way: Millennials,” HousingWire.com (March 25, 2011)
Wednesday, March 30, 2011
Realtors oppose high downpayment requirement
High downpayment requirements being proposed by federal regulatory agencies will unnecessarily burden homebuyers and significantly impede the economic and housing recovery, according to the National Association of Realtors®. Rule changes are mandated under the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Six agencies – the Department of Housing and Urban Development, Federal Deposit Insurance Corp., Federal Housing Finance Agency, Federal Reserve, Office of the Comptroller of the Currency, and the U.S. Securities and Exchange Commission – are developing risk retention regulations that requires lenders to retain 5 percent of a mortgage’s credit risk unless the mortgage is a qualified residential mortgage (QRM) –(FHA and VA mortgages would also be exempted.) Currently, the definition of a QRM is being debated.
“As the leading advocate for homeownership, NAR supports a reasonable and affordable (downpayment) coupled with quality credit standards, strong documentation and sound underwriting,” said NAR President Ron Phipps. “A narrow definition of QRM, with an unnecessarily high downpayment requirement, will increase the cost and reduce the availability of mortgage credit, significantly delaying a housing recovery.”
NAR believes that Congress intended to create a broad QRM exemption that includes a wide variety of traditionally safe, well-underwritten products. Evidence shows that responsible lending standards and ensuring a borrower’s ability to repay a mortgage loan has the greatest impact on reducing lender risk.
“We need to strike a balance between reducing investor risk and providing affordable mortgage credit,” Phipps says. “Better underwriting and credit quality standards have greatly reduced risk. Adding unnecessarily high minimum downpayment requirements will only exclude hundreds of thousands of buyers from homeownership, despite their creditworthiness and proven ability to afford the monthly payment.”
The definition of QRM is important because it will determine the types of mortgages available in the future. Borrowers with less than 20 percent down could be forced to pay higher fees and interest rates – up to 3 percentage points more – for loans that do not meet narrow QRM criteria.
NAR says that a narrowly defined QRM could also lead to tighter FHA eligibility requirements and higher FHA premiums.
“Saving the necessary downpayment has always been the principal obstacle to buyers seeking to purchase their first home,” says Phipps. “Proposals requiring high downpayments will only drive more borrowers to FHA, increase costs for borrowers by raising interest rates and fees, and effectively price many eligible borrowers out of the housing market.”
Source: Florida Realtors®
Six agencies – the Department of Housing and Urban Development, Federal Deposit Insurance Corp., Federal Housing Finance Agency, Federal Reserve, Office of the Comptroller of the Currency, and the U.S. Securities and Exchange Commission – are developing risk retention regulations that requires lenders to retain 5 percent of a mortgage’s credit risk unless the mortgage is a qualified residential mortgage (QRM) –(FHA and VA mortgages would also be exempted.) Currently, the definition of a QRM is being debated.
“As the leading advocate for homeownership, NAR supports a reasonable and affordable (downpayment) coupled with quality credit standards, strong documentation and sound underwriting,” said NAR President Ron Phipps. “A narrow definition of QRM, with an unnecessarily high downpayment requirement, will increase the cost and reduce the availability of mortgage credit, significantly delaying a housing recovery.”
NAR believes that Congress intended to create a broad QRM exemption that includes a wide variety of traditionally safe, well-underwritten products. Evidence shows that responsible lending standards and ensuring a borrower’s ability to repay a mortgage loan has the greatest impact on reducing lender risk.
“We need to strike a balance between reducing investor risk and providing affordable mortgage credit,” Phipps says. “Better underwriting and credit quality standards have greatly reduced risk. Adding unnecessarily high minimum downpayment requirements will only exclude hundreds of thousands of buyers from homeownership, despite their creditworthiness and proven ability to afford the monthly payment.”
The definition of QRM is important because it will determine the types of mortgages available in the future. Borrowers with less than 20 percent down could be forced to pay higher fees and interest rates – up to 3 percentage points more – for loans that do not meet narrow QRM criteria.
NAR says that a narrowly defined QRM could also lead to tighter FHA eligibility requirements and higher FHA premiums.
“Saving the necessary downpayment has always been the principal obstacle to buyers seeking to purchase their first home,” says Phipps. “Proposals requiring high downpayments will only drive more borrowers to FHA, increase costs for borrowers by raising interest rates and fees, and effectively price many eligible borrowers out of the housing market.”
Source: Florida Realtors®
Top 6 cities where buying beats renting
Cities hard-hit by the housing market crash now offer some of the best buys in real estate – places where it makes more sense to buy than rent, according to a new report from Deutsche Bank. The study measured affordability by the share of income that residents pay to own a home, as well as the cost of owning vs. renting.
Here six cities that topped Deutsche Bank’s list.
1. Atlanta
Rent as a percent of after tax mortgage payment: 151.2 percent
Median home price change, 2006-2010: -33.2 percent
In Atlanta, the average monthly rent is about 50 percent more than the average after-tax mortgage payment. Plus, home prices in Atlanta have dropped nearly 14 percent year-over-year in February, creating a great opportunity for buyers to cash in.
2. Orlando
Rent as a percent of after tax mortgage payment: 137.2 percent
Median home price change, 2006-2010: -51.3 percent
Orlando saw a larger drop in home prices during the past year than any of Florida’s other metro areas, according to a Florida Realtors® report cited by the Orlando Sentinel.
3. Rochester, N.Y.
Rent as a percent of after tax mortgage payment: 136 percent
Median home price change, 2006-2010: 3.6 percent
While housing prices in Rochester – the second-largest economy in New York State – inched up slightly between 2006 and 2010, the city still favors homeownership over renting.
4. Cleveland
Rent as a percent of after tax mortgage payment: 132.6 percent
Median home price change, 2006-2010: -14.8 percent
It costs about 24 percent less to buy a home in Cleveland than it does to rent.
5. Tampa-St. Petersburg
Rent as a percent of after tax mortgage payment: 131.6 percent
Median home price change, 2006-2010: -41.4 percent
Tampa-St. Petersburg was one of the most overbuilt areas during the housing boom, and it ranks ninth in the country for foreclosures. But it’s still an attractive spot for retirees, and with dropping home prices it’s now more affordable to own than rent here.
6. Las Vegas
Rent as a percent of after tax mortgage payment: 125.1 percent
Median home price change, 2006-2010: -56.5 percent
Empty homes and condos blanket Las Vegas, but a comeback is in sight. More than half of sales in Las Vegas are from cash buyers, signaling investors have re-emerged. A strong rental market also means renting out properties still offer a good return.
Source: INFORMATION, INC. Bethesda, MD
Here six cities that topped Deutsche Bank’s list.
1. Atlanta
Rent as a percent of after tax mortgage payment: 151.2 percent
Median home price change, 2006-2010: -33.2 percent
In Atlanta, the average monthly rent is about 50 percent more than the average after-tax mortgage payment. Plus, home prices in Atlanta have dropped nearly 14 percent year-over-year in February, creating a great opportunity for buyers to cash in.
2. Orlando
Rent as a percent of after tax mortgage payment: 137.2 percent
Median home price change, 2006-2010: -51.3 percent
Orlando saw a larger drop in home prices during the past year than any of Florida’s other metro areas, according to a Florida Realtors® report cited by the Orlando Sentinel.
3. Rochester, N.Y.
Rent as a percent of after tax mortgage payment: 136 percent
Median home price change, 2006-2010: 3.6 percent
While housing prices in Rochester – the second-largest economy in New York State – inched up slightly between 2006 and 2010, the city still favors homeownership over renting.
4. Cleveland
Rent as a percent of after tax mortgage payment: 132.6 percent
Median home price change, 2006-2010: -14.8 percent
It costs about 24 percent less to buy a home in Cleveland than it does to rent.
5. Tampa-St. Petersburg
Rent as a percent of after tax mortgage payment: 131.6 percent
Median home price change, 2006-2010: -41.4 percent
Tampa-St. Petersburg was one of the most overbuilt areas during the housing boom, and it ranks ninth in the country for foreclosures. But it’s still an attractive spot for retirees, and with dropping home prices it’s now more affordable to own than rent here.
6. Las Vegas
Rent as a percent of after tax mortgage payment: 125.1 percent
Median home price change, 2006-2010: -56.5 percent
Empty homes and condos blanket Las Vegas, but a comeback is in sight. More than half of sales in Las Vegas are from cash buyers, signaling investors have re-emerged. A strong rental market also means renting out properties still offer a good return.
Source: INFORMATION, INC. Bethesda, MD
Fla. consumer confidence declines in March
Consumer confidence among Floridians dropped four points in March to 72 as many economic indicators for Florida continue to show signs of weakness, according to a new University of Florida (UF) survey.
Three of the index components decreased as natural disasters and political turmoil overseas offset the index’s seven-point spike in January – a spike that remained unchanged in February.
“There has been a lot of news in March for consumers to process,” says Chris McCarty, director of UF’s Survey Research Center in the Bureau of Economic and Business Research. “The unrest in the Middle East and North Africa has been both inspirational and unnerving. The deteriorating circumstances in Libya have been of enormous concern due to U.S. involvement and the effect on oil production. The earthquake in Japan raises questions about the stability of Japanese products, companies with a base in Japan, as well as reflection on the safety of our own nuclear-based power grid.”
McCarty also said gas prices, which had already been on their way up prior to these events, are likely to continue rising due to potential shortages from Libya, offline refineries in Japan, increased demand from China and India, and seasonal increases as summer approaches.
Floridians still express confidence in their personal financial situations, but survey results show they are weary of the effects nationally. Perceptions of U.S. economic conditions over the next year dropped nine points to 68 – the biggest decline in that category since a 16-point drop in May 2010. Perceptions of U.S. economic conditions over the next five years dropped six points to 74, its lowest reading since August 2010, when it was 69. Confidence in purchasing big-ticket items such as cars and appliances fell nine points to 79.
The only index component to rise was perceptions of personal financial situations now compared to a year ago, which increased by one point to 57. Perceptions of personal financial situations expected a year from now remained at 81.
“The January and February consumer confidence readings seemed somewhat high,” McCarty said. “While we had expected a decline as the budget situation both at the state and national level unfolded, this decline is in no small part due to the events in the Middle East, North Africa and Japan. This is particularly noticeable in the readings on perceptions of economic conditions which often register pessimism regarding such events in the short run but recover within a month or two.”
Those situations aside, Floridians must deal with further economic declines at home. McCarty said the median price for a single-family home in Florida fell sharply in January and slightly more in February to $121,900, the lowest level since March 2001. Sales tax revenues, though higher than last year, are below estimates, requiring deeper cuts to the state budget. The potential cuts are broad-based, McCarty said, affecting virtually all public employees and Medicaid recipients.
One of the bright spots for Florida was that unemployment fell in February to 11.5 percent, down from 11.9 percent in January.
As time passes, the aftermath of the political uprisings and the Japan earthquake should weigh less on consumers, but the combination of rising gas prices, budget cuts and double-digit unemployment could negate a climb in confidence.
“Immediately prior to the past recession, consumer confidence rose and fell with fluctuating gas prices,” McCarty said. “As prices of gas and food increase, consumers already struggling to balance their budgets will grow increasingly pessimistic. Although stability in the stock market will provide some balance to those forces, it is likely that the negatives will keep consumer confidence in the upper 60s to lower 70s for the next few months.”
The research center, a part of UF’s Warrington College of Business Administration, conducts the Florida Consumer Attitude Survey monthly. Respondents are 18 or older and live in households telephoned randomly. The preliminary index for March was collected from 679 responses.
Sources: Florida Realtors®
Three of the index components decreased as natural disasters and political turmoil overseas offset the index’s seven-point spike in January – a spike that remained unchanged in February.
“There has been a lot of news in March for consumers to process,” says Chris McCarty, director of UF’s Survey Research Center in the Bureau of Economic and Business Research. “The unrest in the Middle East and North Africa has been both inspirational and unnerving. The deteriorating circumstances in Libya have been of enormous concern due to U.S. involvement and the effect on oil production. The earthquake in Japan raises questions about the stability of Japanese products, companies with a base in Japan, as well as reflection on the safety of our own nuclear-based power grid.”
McCarty also said gas prices, which had already been on their way up prior to these events, are likely to continue rising due to potential shortages from Libya, offline refineries in Japan, increased demand from China and India, and seasonal increases as summer approaches.
Floridians still express confidence in their personal financial situations, but survey results show they are weary of the effects nationally. Perceptions of U.S. economic conditions over the next year dropped nine points to 68 – the biggest decline in that category since a 16-point drop in May 2010. Perceptions of U.S. economic conditions over the next five years dropped six points to 74, its lowest reading since August 2010, when it was 69. Confidence in purchasing big-ticket items such as cars and appliances fell nine points to 79.
The only index component to rise was perceptions of personal financial situations now compared to a year ago, which increased by one point to 57. Perceptions of personal financial situations expected a year from now remained at 81.
“The January and February consumer confidence readings seemed somewhat high,” McCarty said. “While we had expected a decline as the budget situation both at the state and national level unfolded, this decline is in no small part due to the events in the Middle East, North Africa and Japan. This is particularly noticeable in the readings on perceptions of economic conditions which often register pessimism regarding such events in the short run but recover within a month or two.”
Those situations aside, Floridians must deal with further economic declines at home. McCarty said the median price for a single-family home in Florida fell sharply in January and slightly more in February to $121,900, the lowest level since March 2001. Sales tax revenues, though higher than last year, are below estimates, requiring deeper cuts to the state budget. The potential cuts are broad-based, McCarty said, affecting virtually all public employees and Medicaid recipients.
One of the bright spots for Florida was that unemployment fell in February to 11.5 percent, down from 11.9 percent in January.
As time passes, the aftermath of the political uprisings and the Japan earthquake should weigh less on consumers, but the combination of rising gas prices, budget cuts and double-digit unemployment could negate a climb in confidence.
“Immediately prior to the past recession, consumer confidence rose and fell with fluctuating gas prices,” McCarty said. “As prices of gas and food increase, consumers already struggling to balance their budgets will grow increasingly pessimistic. Although stability in the stock market will provide some balance to those forces, it is likely that the negatives will keep consumer confidence in the upper 60s to lower 70s for the next few months.”
The research center, a part of UF’s Warrington College of Business Administration, conducts the Florida Consumer Attitude Survey monthly. Respondents are 18 or older and live in households telephoned randomly. The preliminary index for March was collected from 679 responses.
Sources: Florida Realtors®
Vacation- and investment-home shares hold even in 2010
The market share of vacation- and investment-home sales held steady in 2010, although the sales volume declined with the overall market, according to the National Association of Realtors® (NAR).
NAR’s 2011 Investment and Vacation Home Buyers Survey, covering existing- and new-home transactions in 2010, shows vacation-home sales accounted for 10 percent of transactions last year while the portion of investment sales was 17 percent – both unchanged from 2009.
“Despite extraordinarily tight credit conditions for purchasing a second home, the market share for vacation and investment homes held steady,” says NAR Chief Economist Lawrence Yun. “A sizeable number of buyers made deals with all-cash offerings.”
All-cash purchases have become prevalent in the second-home market in recent years: 59 percent of investment buyers paid cash in 2010, as did 36 percent of vacation-home buyers.
With an overall decline in home sales during 2010, the volume of 543,000 vacation-home sales was down 1.8 percent from 553,000 in 2009. Investment purchases fell 7.8 percent to 867,000 in 2010 from 940,000 the previous year. Primary residence sales declined 5.6 percent to 3.81 million from 4.04 million in 2009.
Foreclosure or trustee sales accounted for 17 percent of investment purchases and 11 percent of vacation-home sales in 2010, compared with 5 percent of primary purchases.
“Second home buyers purchased more distressed homes at discount than did buyers of primary residences,” Yun says.
The median vacation-home price was $150,000 in 2010, down 11.2 percent from $169,000 in 2009, while the median investment-home price was $94,000, which is 10.5 percent below the $105,000 median in 2009. By contrast, the median primary residence price declined a relatively modest 4.5 percent to $176,700 last year from $185,000 in 2009.
The typical vacation-home buyer in 2010 was 49 years old, had a median household income of $99,500 and purchased a property that was a median distance of 375 miles from his or her primary residence; 31 percent of vacation homes were within 100 miles and 41 percent were more than 500 miles.
Investment-home buyers had a median age of 45, earned $87,600 and bought a home that was fairly close to their primary residence – a median distance of 19 miles.
“The fall in home prices has opened opportunities for more families to enter the second-home market – the median income of investment buyers today is lower than it’s been in recent years,” Yun says. While the median income of vacation-home buyers in 2010 is slightly above 2007 when it was $99,100, the median income of an investment-home buyer is 5.7 percent below $92,900 in 2007.
“Even if purchases are delayed due to economic circumstances, the underlying long-term demand – the desire for purchasing second homes – remains because people in their 30s and 40s will reach the prime age for buying and will drive the second-home market in coming decades as conditions permit,” Yun says.
Currently, 40.7 million people in the U.S. are ages 50-59 – a group that dominated sales in the first part of the past decade and established records for second-home sales. An additional 43.8 million people are now in the primary buying demographic of 40-49 years old, while another 40.4 million are 30-39.
Lifestyle factors continue to be the primary motivation for vacation-home buyers, with the desire for rental income driving investment purchases. Vacation homes were more likely to be located in a rural area, while investment homes were more likely to be in a suburban location.
“Vacation-home buyers want the property for their own personal use, with 84 percent saying the primary reason for buying was to use for vacations or as a family retreat,” Yun says. “Rental income generation was the primary motive for investment buyers. At the same time, nearly half indicated they sought to diversify their investments or saw a good investment opportunity.”
Thirty-four percent of vacation-home buyers said they plan to use the property as a primary residence in the future, as did 10 percent of investment buyers.
Twenty-one percent of investment buyers and 14 percent of vacation buyers purchased the property for a family member, friend or relative to use. “Some of these buyers purchase a home for their son or daughter to use while attending school,” Yun says.
Vacation-home buyers plan to keep their property for a median of 13 years while investment buyers plan to hold their property for a median of 10 years.
Thirty-six percent of vacation homes purchased in 2010 were in the South, 27 percent in the West, 19 percent in the Northeast and 15 percent in the Midwest; 3 percent were located outside the U.S.
The distribution of investment properties differed from vacation homes: 32 percent were in the South, 24 percent in the West, 21 percent in the Northeast and 20 percent in the Midwest; 3 percent were purchased outside the U.S.
NAR’s analysis of U.S. Census Bureau data shows there are 7.9 million vacation homes and 41.6 million investment units in the U.S., compared with 74.8 million owner-occupied homes.
NAR’s 2011 Investment and Vacation Home Buyers Survey, conducted in March 2011, includes answers from 1,895 usable responses about home purchases during 2010. The survey controlled for age and income, based on information from the larger 2010 NAR Profile of Home Buyers and Sellers, to limit any biases in the characteristics of respondents.
NAR sells the report for $19.95 to NAR members and $149.95 for non-members.
The 2011 Investment and Vacation Home Buyers Survey can be ordered by calling (800) 874-6500, or online at www.realtor.org/prodser.nsf/Research.
Source: Florida Realtors®
NAR’s 2011 Investment and Vacation Home Buyers Survey, covering existing- and new-home transactions in 2010, shows vacation-home sales accounted for 10 percent of transactions last year while the portion of investment sales was 17 percent – both unchanged from 2009.
“Despite extraordinarily tight credit conditions for purchasing a second home, the market share for vacation and investment homes held steady,” says NAR Chief Economist Lawrence Yun. “A sizeable number of buyers made deals with all-cash offerings.”
All-cash purchases have become prevalent in the second-home market in recent years: 59 percent of investment buyers paid cash in 2010, as did 36 percent of vacation-home buyers.
With an overall decline in home sales during 2010, the volume of 543,000 vacation-home sales was down 1.8 percent from 553,000 in 2009. Investment purchases fell 7.8 percent to 867,000 in 2010 from 940,000 the previous year. Primary residence sales declined 5.6 percent to 3.81 million from 4.04 million in 2009.
Foreclosure or trustee sales accounted for 17 percent of investment purchases and 11 percent of vacation-home sales in 2010, compared with 5 percent of primary purchases.
“Second home buyers purchased more distressed homes at discount than did buyers of primary residences,” Yun says.
The median vacation-home price was $150,000 in 2010, down 11.2 percent from $169,000 in 2009, while the median investment-home price was $94,000, which is 10.5 percent below the $105,000 median in 2009. By contrast, the median primary residence price declined a relatively modest 4.5 percent to $176,700 last year from $185,000 in 2009.
The typical vacation-home buyer in 2010 was 49 years old, had a median household income of $99,500 and purchased a property that was a median distance of 375 miles from his or her primary residence; 31 percent of vacation homes were within 100 miles and 41 percent were more than 500 miles.
Investment-home buyers had a median age of 45, earned $87,600 and bought a home that was fairly close to their primary residence – a median distance of 19 miles.
“The fall in home prices has opened opportunities for more families to enter the second-home market – the median income of investment buyers today is lower than it’s been in recent years,” Yun says. While the median income of vacation-home buyers in 2010 is slightly above 2007 when it was $99,100, the median income of an investment-home buyer is 5.7 percent below $92,900 in 2007.
“Even if purchases are delayed due to economic circumstances, the underlying long-term demand – the desire for purchasing second homes – remains because people in their 30s and 40s will reach the prime age for buying and will drive the second-home market in coming decades as conditions permit,” Yun says.
Currently, 40.7 million people in the U.S. are ages 50-59 – a group that dominated sales in the first part of the past decade and established records for second-home sales. An additional 43.8 million people are now in the primary buying demographic of 40-49 years old, while another 40.4 million are 30-39.
Lifestyle factors continue to be the primary motivation for vacation-home buyers, with the desire for rental income driving investment purchases. Vacation homes were more likely to be located in a rural area, while investment homes were more likely to be in a suburban location.
“Vacation-home buyers want the property for their own personal use, with 84 percent saying the primary reason for buying was to use for vacations or as a family retreat,” Yun says. “Rental income generation was the primary motive for investment buyers. At the same time, nearly half indicated they sought to diversify their investments or saw a good investment opportunity.”
Thirty-four percent of vacation-home buyers said they plan to use the property as a primary residence in the future, as did 10 percent of investment buyers.
Twenty-one percent of investment buyers and 14 percent of vacation buyers purchased the property for a family member, friend or relative to use. “Some of these buyers purchase a home for their son or daughter to use while attending school,” Yun says.
Vacation-home buyers plan to keep their property for a median of 13 years while investment buyers plan to hold their property for a median of 10 years.
Thirty-six percent of vacation homes purchased in 2010 were in the South, 27 percent in the West, 19 percent in the Northeast and 15 percent in the Midwest; 3 percent were located outside the U.S.
The distribution of investment properties differed from vacation homes: 32 percent were in the South, 24 percent in the West, 21 percent in the Northeast and 20 percent in the Midwest; 3 percent were purchased outside the U.S.
NAR’s analysis of U.S. Census Bureau data shows there are 7.9 million vacation homes and 41.6 million investment units in the U.S., compared with 74.8 million owner-occupied homes.
NAR’s 2011 Investment and Vacation Home Buyers Survey, conducted in March 2011, includes answers from 1,895 usable responses about home purchases during 2010. The survey controlled for age and income, based on information from the larger 2010 NAR Profile of Home Buyers and Sellers, to limit any biases in the characteristics of respondents.
NAR sells the report for $19.95 to NAR members and $149.95 for non-members.
The 2011 Investment and Vacation Home Buyers Survey can be ordered by calling (800) 874-6500, or online at www.realtor.org/prodser.nsf/Research.
Source: Florida Realtors®
Tuesday, March 29, 2011
NAR: Feb. pending home sales rise
Pending home sales increased in February but with notable regional variations, according to the National Association of Realtors® (NAR).
The Pending Home Sales Index (PHSI), a forward-looking indicator, rose 2.1 percent to 90.8, based on contracts signed in February, from 88.9 in January. The index is 8.2 percent below 98.9 recorded in February 2010. The data reflects contracts and not closings, which normally occur with a lag time of one or two months.
“Month-to-month movements can be instructive, but in this uneven recovery it’s important to look at the longer-term performance,” says Lawrence Yun, NAR chief economist. “Pending home sales have trended up very nicely since bottoming out last June, even with periodic monthly declines. Contract activity is now 20 percent above the low point immediately following expiration of the homebuyer tax credit.”
Yun notes there could have been some weather impact in the February data. “All of the regions saw gains except for the Northeast, where unusually bad winter weather may have curtailed some shopping and contract activity.”
The PHSI in the Northeast fell 10.9 percent to 65.5 in February and is 18.4 percent below a year ago. In the Midwest, the index rose 4.0 percent in February to 81.1 but is 15.9 percent below February 2010.
Pending home sales in the South increased 2.7 percent to an index of 100.3 but are 5.3 percent below a year ago. In the West, the index rose 7.0 percent to 105.6 and is 0.6 percent higher than February 2010.
“We may not see notable gains in existing-home sales in the near term, but they’re expected to rise 5 to 10 percent this year with the economic recovery, job creation and excellent affordability conditions providing confidence to buyers who’ve been on the sidelines,” Yun says.
Source: Florida Realtors®
The Pending Home Sales Index (PHSI), a forward-looking indicator, rose 2.1 percent to 90.8, based on contracts signed in February, from 88.9 in January. The index is 8.2 percent below 98.9 recorded in February 2010. The data reflects contracts and not closings, which normally occur with a lag time of one or two months.
“Month-to-month movements can be instructive, but in this uneven recovery it’s important to look at the longer-term performance,” says Lawrence Yun, NAR chief economist. “Pending home sales have trended up very nicely since bottoming out last June, even with periodic monthly declines. Contract activity is now 20 percent above the low point immediately following expiration of the homebuyer tax credit.”
Yun notes there could have been some weather impact in the February data. “All of the regions saw gains except for the Northeast, where unusually bad winter weather may have curtailed some shopping and contract activity.”
The PHSI in the Northeast fell 10.9 percent to 65.5 in February and is 18.4 percent below a year ago. In the Midwest, the index rose 4.0 percent in February to 81.1 but is 15.9 percent below February 2010.
Pending home sales in the South increased 2.7 percent to an index of 100.3 but are 5.3 percent below a year ago. In the West, the index rose 7.0 percent to 105.6 and is 0.6 percent higher than February 2010.
“We may not see notable gains in existing-home sales in the near term, but they’re expected to rise 5 to 10 percent this year with the economic recovery, job creation and excellent affordability conditions providing confidence to buyers who’ve been on the sidelines,” Yun says.
Source: Florida Realtors®
March Consumer Confidence Index declines
The Conference Board Consumer Confidence Index, which had increased in February, declined in March. The Index now stands at 63.4, down from 72.0 in February. The Present Situation Index improved to 36.9 from 33.8. The Expectations Index, which measures attitudes about the future, decreased to 81.1 from 97.5 last month.
“The sharp decline in confidence was prompted by a sharp decline in expectations,” says Lynn Franco, director of The Conference Board Consumer Research Center. “Consumers’ inflation expectations rose significantly in March, and their income expectations soured – a combination that will likely impact spending decisions. On the other hand, consumers’ assessment of current conditions improved, indicating that while the short-term future may be uncertain, the economy continues to expand.”
Consumers’ assessment of current conditions improved in March. Those claiming business conditions are “good” increased to 15.1 percent from 12.4 percent, while those claiming business conditions are “bad” decreased to 37.0 percent from 39.3 percent.
Consumers’ current appraisal of the job market, however, was slightly less favorable than in February. Those saying jobs are “hard to get” edged up to 44.6 percent from 44.4 percent, while those stating jobs are “plentiful” dipped to 4.4 percent from 4.9 percent.
Consumers’ short-term outlook was considerably less favorable than in February. The proportion of consumers expecting business conditions to improve over the next six months declined to 20.6 percent from 25.2 percent, while those anticipating business conditions will worsen increased to 16.2 percent from 10.3 percent.
Consumers were also more downbeat about the labor market. Those expecting more jobs in the months ahead declined to 19.9 percent from 21.2 percent, while those anticipating fewer jobs rose to 20.7 percent from 15.0 percent. The proportion of consumers expecting an increase in their incomes declined to 15.3 percent from 17.4 percent.
The monthly Consumer Confidence Survey, based on a probability-design random sample, is conducted for The Conference Board by The Nielsen Company, a leading global provider of information and analytics around what consumers buy and watch. The cutoff date for March’s preliminary results was March 16, 2011.
Source: Florida Realtors®
“The sharp decline in confidence was prompted by a sharp decline in expectations,” says Lynn Franco, director of The Conference Board Consumer Research Center. “Consumers’ inflation expectations rose significantly in March, and their income expectations soured – a combination that will likely impact spending decisions. On the other hand, consumers’ assessment of current conditions improved, indicating that while the short-term future may be uncertain, the economy continues to expand.”
Consumers’ assessment of current conditions improved in March. Those claiming business conditions are “good” increased to 15.1 percent from 12.4 percent, while those claiming business conditions are “bad” decreased to 37.0 percent from 39.3 percent.
Consumers’ current appraisal of the job market, however, was slightly less favorable than in February. Those saying jobs are “hard to get” edged up to 44.6 percent from 44.4 percent, while those stating jobs are “plentiful” dipped to 4.4 percent from 4.9 percent.
Consumers’ short-term outlook was considerably less favorable than in February. The proportion of consumers expecting business conditions to improve over the next six months declined to 20.6 percent from 25.2 percent, while those anticipating business conditions will worsen increased to 16.2 percent from 10.3 percent.
Consumers were also more downbeat about the labor market. Those expecting more jobs in the months ahead declined to 19.9 percent from 21.2 percent, while those anticipating fewer jobs rose to 20.7 percent from 15.0 percent. The proportion of consumers expecting an increase in their incomes declined to 15.3 percent from 17.4 percent.
The monthly Consumer Confidence Survey, based on a probability-design random sample, is conducted for The Conference Board by The Nielsen Company, a leading global provider of information and analytics around what consumers buy and watch. The cutoff date for March’s preliminary results was March 16, 2011.
Source: Florida Realtors®
GOP shifts strategy on housing market overhaul
House Republicans plan to introduce eight bills on Tuesday that would each take a small step toward pushing taxpayer-backed mortgage giants Fannie Mae and Freddie Mac out of business, according to congressional aides and lobbyists.
The GOP strategy of using a bite-sized approach to ease the government out of the mortgage system seems to be an acknowledgment that it would be hard to move a single, sweeping bill through Congress this year due to lawmakers’ concerns about going too far and rattling the feeble housing market. The aides and lobbyists spoke on condition of anonymity, a day before GOP lawmakers planned to announce the bills.
Rep. Jeb Hensarling, R-Texas, a member of the House GOP leadership, introduced a wide-ranging bill earlier this month that would end the government’s ownership of Fannie and Freddie in two years. They would either be phased out completely or become fully private companies within three years after that.
The Republican drive to eliminate Fannie Mae and Freddie Mac has been a big part of the effort to shrink government and protect taxpayers. They are also under pressure to take action because during the fight over last year’s financial overhaul law, they said Fannie and Freddie were major contributors to the housing meltdown and chastised President Barack Obama and congressional Democrats for ignoring them in the legislation.
The two companies, along with other federal agencies, backed about 9 in 10 new mortgages over the past year and own or back more than $5 trillion worth of home loans. The collapse of the housing market nearly brought them down in 2008, leading to a federal takeover that has so far cost taxpayers $150 billion.
Hensarling’s bill whittling down the government’s role in mortgages has worried lawmakers who fear that private lenders wouldn’t pick up the slack with today’s frail housing market. Foreclosure rates are high, and home prices and home sales have remained puny
Many congressional aides and lobbyists argue that legislation might have a tough time passing the GOP-controlled House, and little chance of surviving in the Democratic-run Senate. Compounding the difficulty of winning votes for the proposal are the nation’s Realtors, homebuilders and mortgage bankers, who want the government to continue its role in guaranteeing many loans.
While phasing out Fannie and Freddie, Hensarling’s bill also would boost the guarantee fee they charge lenders and take other steps aimed at gradually pushing them out of the mortgage market – in hopes that private banks and lending companies would take their place.
The smaller bills Republicans planned to announce today would incorporate many of those proposals, including a gradual increase in Fannie’s and Freddie’s fees and reducing the size of loans they can back, aides and lobbyists said.
The Obama administration also favors phasing out the two mortgage giants. It has presented lawmakers with three options for doing so with differing, ongoing roles for the government.
Rep. Scott Garrett, R-N.J., who chairs the House subcommittee that oversees Fannie and Freddie and was a leader of the GOP legislative effort, could not be reached on Monday, according to his spokesman, Ben Veghte.
Source: The Associated Press, Alan Fram. All rights reserved.
The GOP strategy of using a bite-sized approach to ease the government out of the mortgage system seems to be an acknowledgment that it would be hard to move a single, sweeping bill through Congress this year due to lawmakers’ concerns about going too far and rattling the feeble housing market. The aides and lobbyists spoke on condition of anonymity, a day before GOP lawmakers planned to announce the bills.
Rep. Jeb Hensarling, R-Texas, a member of the House GOP leadership, introduced a wide-ranging bill earlier this month that would end the government’s ownership of Fannie and Freddie in two years. They would either be phased out completely or become fully private companies within three years after that.
The Republican drive to eliminate Fannie Mae and Freddie Mac has been a big part of the effort to shrink government and protect taxpayers. They are also under pressure to take action because during the fight over last year’s financial overhaul law, they said Fannie and Freddie were major contributors to the housing meltdown and chastised President Barack Obama and congressional Democrats for ignoring them in the legislation.
The two companies, along with other federal agencies, backed about 9 in 10 new mortgages over the past year and own or back more than $5 trillion worth of home loans. The collapse of the housing market nearly brought them down in 2008, leading to a federal takeover that has so far cost taxpayers $150 billion.
Hensarling’s bill whittling down the government’s role in mortgages has worried lawmakers who fear that private lenders wouldn’t pick up the slack with today’s frail housing market. Foreclosure rates are high, and home prices and home sales have remained puny
Many congressional aides and lobbyists argue that legislation might have a tough time passing the GOP-controlled House, and little chance of surviving in the Democratic-run Senate. Compounding the difficulty of winning votes for the proposal are the nation’s Realtors, homebuilders and mortgage bankers, who want the government to continue its role in guaranteeing many loans.
While phasing out Fannie and Freddie, Hensarling’s bill also would boost the guarantee fee they charge lenders and take other steps aimed at gradually pushing them out of the mortgage market – in hopes that private banks and lending companies would take their place.
The smaller bills Republicans planned to announce today would incorporate many of those proposals, including a gradual increase in Fannie’s and Freddie’s fees and reducing the size of loans they can back, aides and lobbyists said.
The Obama administration also favors phasing out the two mortgage giants. It has presented lawmakers with three options for doing so with differing, ongoing roles for the government.
Rep. Scott Garrett, R-N.J., who chairs the House subcommittee that oversees Fannie and Freddie and was a leader of the GOP legislative effort, could not be reached on Monday, according to his spokesman, Ben Veghte.
Source: The Associated Press, Alan Fram. All rights reserved.
Monday, March 28, 2011
Questions raised over good faith estimates
Good Faith Estimate forms do not always provide borrowers with a complete picture of what they will be paying in costs for their loan at closing, mortgage industry experts warn.
The three-page Good Faith Estimate forms provide buyers and homeowners who are getting a mortgage a line-by-line disclosure of what their borrowing costs will be with the mortgage. As of Jan. 1, 2010, lenders now must provide the disclosure form to borrowers within three days of receiving a loan application.
The forms were revamped over a year ago, but the lack of clarity that still exists on the form can lead to delayed closings or even the loss of a locked-in interest rate, says Melissa Key, a spokeswoman for the Mortgage Bankers Association.
The new Good Faith Estimate form “is better than it used to be, but it’s not up to snuff,” Kathleen Day, a spokeswoman for the Center for Responsible Lending, told The New York Times. “There are things that need to be unbundled and made clearer.”
For example, the form fails to break out seller paid costs, such as transfer taxes. These costs, instead, are grouped into the “total estimated settlement charges” figure that falls at the bottom of the form. As such, borrowers at times unknowingly look at a larger amount than they’ll have to pay.
The form also doesn’t account for downpayments in the “total estimated settlement charges” column, leading borrowers to look at a smaller final number than they’ll need to actually pay, experts say.
Some changes may be on the horizon, though. The new Consumer Financial Protections Bureau has said it will consider revising the good faith estimate forms again to make all costs more transparent to the borrower.
Source: INFORMATION, INC. Bethesda, MD
The three-page Good Faith Estimate forms provide buyers and homeowners who are getting a mortgage a line-by-line disclosure of what their borrowing costs will be with the mortgage. As of Jan. 1, 2010, lenders now must provide the disclosure form to borrowers within three days of receiving a loan application.
The forms were revamped over a year ago, but the lack of clarity that still exists on the form can lead to delayed closings or even the loss of a locked-in interest rate, says Melissa Key, a spokeswoman for the Mortgage Bankers Association.
The new Good Faith Estimate form “is better than it used to be, but it’s not up to snuff,” Kathleen Day, a spokeswoman for the Center for Responsible Lending, told The New York Times. “There are things that need to be unbundled and made clearer.”
For example, the form fails to break out seller paid costs, such as transfer taxes. These costs, instead, are grouped into the “total estimated settlement charges” figure that falls at the bottom of the form. As such, borrowers at times unknowingly look at a larger amount than they’ll have to pay.
The form also doesn’t account for downpayments in the “total estimated settlement charges” column, leading borrowers to look at a smaller final number than they’ll need to actually pay, experts say.
Some changes may be on the horizon, though. The new Consumer Financial Protections Bureau has said it will consider revising the good faith estimate forms again to make all costs more transparent to the borrower.
Source: INFORMATION, INC. Bethesda, MD
FHA scrutiny shows cracks
When the Federal Housing Administration stopped a New York mortgage company from making FHA loans in June, the move came nearly three years after agency records flagged the company’s lending practices as potentially fraudulent.
The FHA, the government agency created to help increase homeownership, knew since at least October 2007 that Cambridge Home Capital posed a danger to homebuyers and repeatedly violated the agency’s safe-lending standards. Even so, a USA TODAY investigation found, the agency continued to approve mortgages issued by the company.
In 2008, when Cambridge had one of the worst records of any agency lender, the FHA still approved 528 of the company’s mortgages.
It was not the first time an alert from the FHA’s “early warning system” – a database that flags problem lenders – failed to move the agency to protect homebuyers and taxpayers. Hundreds of companies violated the FHA’s safe-lending standards but continued to receive its blessing to lend money in the past three years, USA TODAY found.
The FHA promotes homeownership by insuring the mortgages of borrowers who don’t qualify for conventional bank mortgages. But the agency’s weak enforcement of its own rules put thousands of homebuyers in danger of getting loans based on fraudulent records or sloppy work at a time when lending companies were pushing high-risk loans, USA TODAY found:
The FHA for years ignored internal warnings about lenders with high rates of failing loans, partly because it worried about discouraging mortgage companies from using the FHA insurance program. As a result, the FHA approved 15,000 mortgages since late 2008 from companies that had violated agency standards for a full year or more by having an excessive number of their mortgages go into default.
In at least six instances in the past three years, lenders that the FHA flagged as potentially fraudulent were subsequently accused by state or federal authorities of mortgage fraud. The Justice Department sued Cambridge in December, alleging the company had tricked 17 families into buying homes they couldn’t afford and pocketed $1 million in fees on FHA loans.
The FHA has no reliable system for learning when one of its lenders is charged with or convicted of mortgage fraud. Since 2005, at least 13 mortgage companies continued to write FHA-insured loans after federal or state authorities brought criminal or civil mortgage-fraud cases against them.
Although the agency says it has stepped up enforcement in the past year, many of the companies affected had either closed or stopped making FHA loans by then. During this time, three of the 15 largest FHA lenders have repeatedly violated default standards yet continue underwriting thousands of FHA-approved loans.
The agency’s ability to remove bad lenders is under scrutiny after the nation’s worst housing bust since the Great Depression. The FHA now insures a record 6.8 million mortgages. Last year, it covered 19.1 percent of all home-purchase loans, compared with 3.8 percent in 2006. As the world’s largest mortgage insurer, the agency authorizes roughly 3,000 mortgage companies to decide on its behalf whether people they are lending to qualify for FHA insurance.
Tens of thousands of bad loans that the FHA approved from 2006 through 2008 are resulting in record numbers of insurance claims. The FHA traditionally pays all claims from the premiums it collects. But lawmakers fear a billion-dollar taxpayer rescue and want the FHA to get tough on companies with questionable lending records.
“My concern has been that if you have lenders that are continuing to lend, and the borrowers are not even paying their first mortgage payment, who are the people lending the money and what kind of lending standards are they using?” said Rep. Shelley Moore Capito, R-W.Va., a senior member of the House Financial Services Committee. “The last thing we want is the FHA to come to Congress and say, ‘We really need a backstop.’”
The FHA has moved to improve its finances by excluding borrowers with the lowest credit scores from its insurance program. It also now requires other risky homebuyers to make a 10 percent downpayment, instead of the 3.5 percent most FHA borrowers make.
Some fear the agency is cracking down more on borrowers than on lenders. “We definitely think right now the FHA needs to focus on lender enforcement rather than tightening underwriting guidelines, because they are the only point of access to credit for low-income and minority folks,” said Sonia Garrison of the Center for Responsible Lending, an advocacy group.
A wide loophole
The agency’s chief anti-fraud tool is its “Neighborhood Watch Early Warning System,” which identifies lenders with a high percentage of mortgages that fail within two years of closing.
The premise is that any borrower who stops paying a mortgage that quickly probably should not have been approved for the loan in the first place. “If a lot of loans are going bad in the first year or two, then that’s a pretty good indicator that the lender is not doing the job properly,” said John Weicher, FHA commissioner from 2001 to 2005.
The FHA can revoke its approval of any lender with an unusually high percentage of loans that default quickly. Approval is withdrawn only in regions where a lender’s default rate is double the regional average for FHA lenders. The FHA has 81 regions.
But Neighborhood Watch has been undermined by loopholes and delays since the day the FHA published a legal notice in December 1992 announcing the program would begin in a month. Seven years later, it finally began.
And when the program started, the Government Accountability Office (GAO), Congress’ investigative arm, pointed out that the new system excluded thousands of FHA-approved lenders from having their defaults analyzed. These lenders, called underwriters, make the final decision about approving a mortgage after reviewing documents such as home appraisals and borrowers’ income statements and credit reports. The FHA now calls underwriters “the most critical lending party to a mortgage.”
The FHA took six years – from 2000 to 2006 – to announce it was going to monitor underwriters’ defaults. And then it took another four years, until January 2010, for the agency to actually start. “There hadn’t been a whole lot of institutional enforcement,” said David Stevens, FHA commissioner since July 2009.
The result: Some large regional underwriters violated default standards for two years or more.
Great Country Mortgage Bankers of Miami, the largest FHA lender in South Florida in 2008, violated FHA standards in that region from early 2008 to early 2010.
First Alternative Mortgage of New Rochelle, N.Y., the third-largest FHA lender in upstate New York in 2008-2009, violated agency standards in that region from late 2007 to late 2009.
Even some lenders subject to monitoring since 1999 have escaped sanction. Those companies, called originators, assemble loan documents and send them to underwriters.
A total of 821 violations of FHA standards have gone unpunished since late 2007, while the agency has taken action in 222 instances of violations, USA TODAY found. The number of lenders violating FHA standards is a small portion of the 11,600 companies now with FHA approval.
But some say the inaction helped create a lax atmosphere.
“They had a system that they put in place, but they never used it,” said Peter Lansing, president of Universal Lending Corp., an FHA-approved lender in Denver. “None of the lenders out there really cared about it that much.”
A September report by the Housing and Urban Development (HUD) inspector general said that the FHA didn’t pursue underwriters at a time when it had lost enormous business to subprime lenders offering no-downpayment loans. More important than enforcement, the report said, the agency wanted to “attract and retain lenders to originate and underwrite FHA loans.”
Fall below radar
The FHA also has been unaware of lenders’ legal problems. The agency has no system to learn when federal prosecutors charge or convict FHA lenders, spokesman Brian Sullivan said. The mortgage companies themselves are supposed to tell the FHA when they are charged. But, Sullivan noted, “Many lenders fail to report.”
For example:
U.S. Mortgage Corp. of New Jersey got agency approval for more than 1,300 mortgages over four years after a company loan officer pleaded guilty in 2005 to falsifying mortgage applications for unqualified borrowers to get FHA-insured loans. The FHA continued to approve U.S. Mortgage’s mortgages even after the loan officer and two other employees, including part-owner Gerald Carti, pleaded guilty to charges related to getting fraudulent FHA mortgages for borrowers.
Homeowners have defaulted on 119 of the 1,300 mortgages so far, records show.
The FHA approved 138 loans from Fidelity Home Mortgage of Baltimore over a six-month period in 2008 after company owner Stan Mavroulis was indicted on federal tax-fraud charges that he skimmed $1.9 million from his business.
As Mavroulis negotiated a guilty plea that year, his company retained its FHA approval even as it violated default standards in seven regions, from eastern Pennsylvania to Georgia to central Texas. Fifty-seven of the 138 loans went into early default.
“There are people out there doing things that are just awful – I mean, totally illegal, and it takes HUD a long time to recognize a lawbreaker,” said John Councilman of the National Association of Mortgage Brokers.
That concern is growing as individuals who ran shady subprime lending operations have formed new businesses specializing in FHA-insured mortgages.
“A lot of the unscrupulous types that were doing the subprime stuff have migrated over to the FHA,” said Bryan Howell, chief attorney for HUD’s inspector general, which scrutinizes the agency.
The FHA inspects only a small sampling of mortgages to ensure they comply with procedures. Last year, HUD’s inspector general looked into 284 loans that had defaulted within two years. The result: 140 of them had serious problems. Borrowers’ income and assets were overstated; liabilities and credit problems were minimized. The FHA had to pay $11 million in claims on the 140 questionable loans, the inspector general found.
“There are a lot of lenders who take shortcuts,” Howell said.
Punishing dead firms
Stevens, the FHA commissioner, said he’s stepped up enforcement aggressively, noting that he launched the program to monitor underwriter defaults after he had been on the job for six months. Under his watch, the FHA shut down two major lenders, LendAmerica and Taylor, Bean & Whitaker, in 2009 for multiple violations of FHA rules.
The FHA in late 2009 hired its first “chief risk officer” – former Freddie Mac executive Bob Ryan – and in 2010 increased the minimum net worth for FHA lenders in an effort to weed out mortgage companies with weak finances.
The FHA has issued 22 revocation orders against underwriters since June. Fifteen were against companies that had not made an FHA loan in nine months or more. One company, Popular Mortgage of Miami, was barred from underwriting in December – nearly three years after it had made its last FHA mortgage.
“This is all a big show to prove they’re doing some enforcement,” said Sheri Hughes, operations manager of Access Mortgage. The FHA in November barred the company’s New Jersey branch from originating FHA mortgages – a year after the company had stopped doing FHA loans, agency records show.
“Why did they go through all the trouble and time to terminate somebody who isn’t doing FHA business anyway?” Hughes says.
In 2010, the FHA issued a record 117 revocation orders – against both underwriters and brokers. During the decade from 1999 to 2008, the agency issued an average of 31 orders a year.
But 56 of last year’s orders were against entities that had closed or stopped doing FHA loans, including 27 companies that had not made an FHA-insured loan in six months, FHA records show.
Sullivan, the FHA spokesman, said the agency reviews the default records of any company that is listed as active.
Stevens said his actions “are having a significant impact” and have forced lenders to pay closer attention to their defaults. “My general view is it takes time,” he said. “You’re having to create a culture that wasn’t necessarily as predominant in past regimes.”
Two weeks ago, Stevens announced his resignation from the FHA to become president of the Mortgage Bankers Association, which lobbies the FHA on behalf of 2,400 mortgage companies, brokers and commercial banks. He will leave the FHA Thursday.
Source: USA TODAY, a division of Gannett Co. Inc., Thomas Frank, USA TODAY.
The FHA, the government agency created to help increase homeownership, knew since at least October 2007 that Cambridge Home Capital posed a danger to homebuyers and repeatedly violated the agency’s safe-lending standards. Even so, a USA TODAY investigation found, the agency continued to approve mortgages issued by the company.
In 2008, when Cambridge had one of the worst records of any agency lender, the FHA still approved 528 of the company’s mortgages.
It was not the first time an alert from the FHA’s “early warning system” – a database that flags problem lenders – failed to move the agency to protect homebuyers and taxpayers. Hundreds of companies violated the FHA’s safe-lending standards but continued to receive its blessing to lend money in the past three years, USA TODAY found.
The FHA promotes homeownership by insuring the mortgages of borrowers who don’t qualify for conventional bank mortgages. But the agency’s weak enforcement of its own rules put thousands of homebuyers in danger of getting loans based on fraudulent records or sloppy work at a time when lending companies were pushing high-risk loans, USA TODAY found:
The FHA for years ignored internal warnings about lenders with high rates of failing loans, partly because it worried about discouraging mortgage companies from using the FHA insurance program. As a result, the FHA approved 15,000 mortgages since late 2008 from companies that had violated agency standards for a full year or more by having an excessive number of their mortgages go into default.
In at least six instances in the past three years, lenders that the FHA flagged as potentially fraudulent were subsequently accused by state or federal authorities of mortgage fraud. The Justice Department sued Cambridge in December, alleging the company had tricked 17 families into buying homes they couldn’t afford and pocketed $1 million in fees on FHA loans.
The FHA has no reliable system for learning when one of its lenders is charged with or convicted of mortgage fraud. Since 2005, at least 13 mortgage companies continued to write FHA-insured loans after federal or state authorities brought criminal or civil mortgage-fraud cases against them.
Although the agency says it has stepped up enforcement in the past year, many of the companies affected had either closed or stopped making FHA loans by then. During this time, three of the 15 largest FHA lenders have repeatedly violated default standards yet continue underwriting thousands of FHA-approved loans.
The agency’s ability to remove bad lenders is under scrutiny after the nation’s worst housing bust since the Great Depression. The FHA now insures a record 6.8 million mortgages. Last year, it covered 19.1 percent of all home-purchase loans, compared with 3.8 percent in 2006. As the world’s largest mortgage insurer, the agency authorizes roughly 3,000 mortgage companies to decide on its behalf whether people they are lending to qualify for FHA insurance.
Tens of thousands of bad loans that the FHA approved from 2006 through 2008 are resulting in record numbers of insurance claims. The FHA traditionally pays all claims from the premiums it collects. But lawmakers fear a billion-dollar taxpayer rescue and want the FHA to get tough on companies with questionable lending records.
“My concern has been that if you have lenders that are continuing to lend, and the borrowers are not even paying their first mortgage payment, who are the people lending the money and what kind of lending standards are they using?” said Rep. Shelley Moore Capito, R-W.Va., a senior member of the House Financial Services Committee. “The last thing we want is the FHA to come to Congress and say, ‘We really need a backstop.’”
The FHA has moved to improve its finances by excluding borrowers with the lowest credit scores from its insurance program. It also now requires other risky homebuyers to make a 10 percent downpayment, instead of the 3.5 percent most FHA borrowers make.
Some fear the agency is cracking down more on borrowers than on lenders. “We definitely think right now the FHA needs to focus on lender enforcement rather than tightening underwriting guidelines, because they are the only point of access to credit for low-income and minority folks,” said Sonia Garrison of the Center for Responsible Lending, an advocacy group.
A wide loophole
The agency’s chief anti-fraud tool is its “Neighborhood Watch Early Warning System,” which identifies lenders with a high percentage of mortgages that fail within two years of closing.
The premise is that any borrower who stops paying a mortgage that quickly probably should not have been approved for the loan in the first place. “If a lot of loans are going bad in the first year or two, then that’s a pretty good indicator that the lender is not doing the job properly,” said John Weicher, FHA commissioner from 2001 to 2005.
The FHA can revoke its approval of any lender with an unusually high percentage of loans that default quickly. Approval is withdrawn only in regions where a lender’s default rate is double the regional average for FHA lenders. The FHA has 81 regions.
But Neighborhood Watch has been undermined by loopholes and delays since the day the FHA published a legal notice in December 1992 announcing the program would begin in a month. Seven years later, it finally began.
And when the program started, the Government Accountability Office (GAO), Congress’ investigative arm, pointed out that the new system excluded thousands of FHA-approved lenders from having their defaults analyzed. These lenders, called underwriters, make the final decision about approving a mortgage after reviewing documents such as home appraisals and borrowers’ income statements and credit reports. The FHA now calls underwriters “the most critical lending party to a mortgage.”
The FHA took six years – from 2000 to 2006 – to announce it was going to monitor underwriters’ defaults. And then it took another four years, until January 2010, for the agency to actually start. “There hadn’t been a whole lot of institutional enforcement,” said David Stevens, FHA commissioner since July 2009.
The result: Some large regional underwriters violated default standards for two years or more.
Great Country Mortgage Bankers of Miami, the largest FHA lender in South Florida in 2008, violated FHA standards in that region from early 2008 to early 2010.
First Alternative Mortgage of New Rochelle, N.Y., the third-largest FHA lender in upstate New York in 2008-2009, violated agency standards in that region from late 2007 to late 2009.
Even some lenders subject to monitoring since 1999 have escaped sanction. Those companies, called originators, assemble loan documents and send them to underwriters.
A total of 821 violations of FHA standards have gone unpunished since late 2007, while the agency has taken action in 222 instances of violations, USA TODAY found. The number of lenders violating FHA standards is a small portion of the 11,600 companies now with FHA approval.
But some say the inaction helped create a lax atmosphere.
“They had a system that they put in place, but they never used it,” said Peter Lansing, president of Universal Lending Corp., an FHA-approved lender in Denver. “None of the lenders out there really cared about it that much.”
A September report by the Housing and Urban Development (HUD) inspector general said that the FHA didn’t pursue underwriters at a time when it had lost enormous business to subprime lenders offering no-downpayment loans. More important than enforcement, the report said, the agency wanted to “attract and retain lenders to originate and underwrite FHA loans.”
Fall below radar
The FHA also has been unaware of lenders’ legal problems. The agency has no system to learn when federal prosecutors charge or convict FHA lenders, spokesman Brian Sullivan said. The mortgage companies themselves are supposed to tell the FHA when they are charged. But, Sullivan noted, “Many lenders fail to report.”
For example:
U.S. Mortgage Corp. of New Jersey got agency approval for more than 1,300 mortgages over four years after a company loan officer pleaded guilty in 2005 to falsifying mortgage applications for unqualified borrowers to get FHA-insured loans. The FHA continued to approve U.S. Mortgage’s mortgages even after the loan officer and two other employees, including part-owner Gerald Carti, pleaded guilty to charges related to getting fraudulent FHA mortgages for borrowers.
Homeowners have defaulted on 119 of the 1,300 mortgages so far, records show.
The FHA approved 138 loans from Fidelity Home Mortgage of Baltimore over a six-month period in 2008 after company owner Stan Mavroulis was indicted on federal tax-fraud charges that he skimmed $1.9 million from his business.
As Mavroulis negotiated a guilty plea that year, his company retained its FHA approval even as it violated default standards in seven regions, from eastern Pennsylvania to Georgia to central Texas. Fifty-seven of the 138 loans went into early default.
“There are people out there doing things that are just awful – I mean, totally illegal, and it takes HUD a long time to recognize a lawbreaker,” said John Councilman of the National Association of Mortgage Brokers.
That concern is growing as individuals who ran shady subprime lending operations have formed new businesses specializing in FHA-insured mortgages.
“A lot of the unscrupulous types that were doing the subprime stuff have migrated over to the FHA,” said Bryan Howell, chief attorney for HUD’s inspector general, which scrutinizes the agency.
The FHA inspects only a small sampling of mortgages to ensure they comply with procedures. Last year, HUD’s inspector general looked into 284 loans that had defaulted within two years. The result: 140 of them had serious problems. Borrowers’ income and assets were overstated; liabilities and credit problems were minimized. The FHA had to pay $11 million in claims on the 140 questionable loans, the inspector general found.
“There are a lot of lenders who take shortcuts,” Howell said.
Punishing dead firms
Stevens, the FHA commissioner, said he’s stepped up enforcement aggressively, noting that he launched the program to monitor underwriter defaults after he had been on the job for six months. Under his watch, the FHA shut down two major lenders, LendAmerica and Taylor, Bean & Whitaker, in 2009 for multiple violations of FHA rules.
The FHA in late 2009 hired its first “chief risk officer” – former Freddie Mac executive Bob Ryan – and in 2010 increased the minimum net worth for FHA lenders in an effort to weed out mortgage companies with weak finances.
The FHA has issued 22 revocation orders against underwriters since June. Fifteen were against companies that had not made an FHA loan in nine months or more. One company, Popular Mortgage of Miami, was barred from underwriting in December – nearly three years after it had made its last FHA mortgage.
“This is all a big show to prove they’re doing some enforcement,” said Sheri Hughes, operations manager of Access Mortgage. The FHA in November barred the company’s New Jersey branch from originating FHA mortgages – a year after the company had stopped doing FHA loans, agency records show.
“Why did they go through all the trouble and time to terminate somebody who isn’t doing FHA business anyway?” Hughes says.
In 2010, the FHA issued a record 117 revocation orders – against both underwriters and brokers. During the decade from 1999 to 2008, the agency issued an average of 31 orders a year.
But 56 of last year’s orders were against entities that had closed or stopped doing FHA loans, including 27 companies that had not made an FHA-insured loan in six months, FHA records show.
Sullivan, the FHA spokesman, said the agency reviews the default records of any company that is listed as active.
Stevens said his actions “are having a significant impact” and have forced lenders to pay closer attention to their defaults. “My general view is it takes time,” he said. “You’re having to create a culture that wasn’t necessarily as predominant in past regimes.”
Two weeks ago, Stevens announced his resignation from the FHA to become president of the Mortgage Bankers Association, which lobbies the FHA on behalf of 2,400 mortgage companies, brokers and commercial banks. He will leave the FHA Thursday.
Source: USA TODAY, a division of Gannett Co. Inc., Thomas Frank, USA TODAY.
First-time homebuyers getting shut out
Many first-time homebuyers are sitting on the sidelines of the U.S. housing market, hampering its ability to gain traction.
Last month, 34 percent of existing-home purchases were made by first-time buyers, according to the National Association of Realtors. In January, they were 29 percent of the market, the lowest since NAR surveys started tracking them monthly in late 2008.
In healthy markets, first-time buyers make up 40 percent to 45 percent of all purchasers. They play a critical role in buying starter homes so those owners can buy more expensive homes.
Despite low mortgage rates and falling prices in many markets, existing-home sales have been weak for months and were down 2.8 percent in February from a year ago.
What’s keeping more first-timers at bay:
Expired tax credits. Federal credits boosted home sales in 2009 and 2010 and lured some first-time buyers into the market sooner than normal, says Lawrence Yun, NAR chief economist. The credits expired in April. Last March, 48 percent of buyers were first-timers, Inside Mortgage Finance data show. “It’ll take some time to rebuild that pipeline,” Yun says.
Lending standards. Tighter lending standards since the housing bust are edging out first-timers who can’t meet credit or employment history requirements in a still-weak economy, says Guy Cecala, publisher of Inside Mortgage Finance.
Higher credit standards are reflected in loans bought by government-backed mortgage giants Freddie Mac and Fannie Mae. Last year, loans in Freddie Mac’s portfolio had an average credit score of 758, it says. That was up from 720 five years ago.
Many lenders are also requiring higher downpayments, says Greg McBride, senior analyst at Bankrate.com. The best terms kick in with 20 percent or more down. Higher down payments are driving more buyers to Federal Housing Administration loans. The FHA requires as little as 3.5 percent down for borrowers with good credit scores. In fiscal year 2010, FHA loans were 19 percent of the home purchase market vs. 14 percent a decade before.
Competition. In February, cash buyers accounted for a record 33 percent of existing-home sales, NAR says. In some areas, including Southern Nevada, cash buyers now account for more than half of existing-home sales. Sellers often prefer cash offers because they’re more likely to close, says Realtor Jerry Abbott of Grupe Real Estate in Stockton, Calif. He recently had one listing with six offers: one cash, two with 20 percent downpayments and four FHA, which often means first-time buyers.
“The seller didn’t even consider the FHA” offers, Abbott says.
Source: USA TODAY, a division of Gannett Co. Inc., Julie Schmit, USA TODAY.
Last month, 34 percent of existing-home purchases were made by first-time buyers, according to the National Association of Realtors. In January, they were 29 percent of the market, the lowest since NAR surveys started tracking them monthly in late 2008.
In healthy markets, first-time buyers make up 40 percent to 45 percent of all purchasers. They play a critical role in buying starter homes so those owners can buy more expensive homes.
Despite low mortgage rates and falling prices in many markets, existing-home sales have been weak for months and were down 2.8 percent in February from a year ago.
What’s keeping more first-timers at bay:
Expired tax credits. Federal credits boosted home sales in 2009 and 2010 and lured some first-time buyers into the market sooner than normal, says Lawrence Yun, NAR chief economist. The credits expired in April. Last March, 48 percent of buyers were first-timers, Inside Mortgage Finance data show. “It’ll take some time to rebuild that pipeline,” Yun says.
Lending standards. Tighter lending standards since the housing bust are edging out first-timers who can’t meet credit or employment history requirements in a still-weak economy, says Guy Cecala, publisher of Inside Mortgage Finance.
Higher credit standards are reflected in loans bought by government-backed mortgage giants Freddie Mac and Fannie Mae. Last year, loans in Freddie Mac’s portfolio had an average credit score of 758, it says. That was up from 720 five years ago.
Many lenders are also requiring higher downpayments, says Greg McBride, senior analyst at Bankrate.com. The best terms kick in with 20 percent or more down. Higher down payments are driving more buyers to Federal Housing Administration loans. The FHA requires as little as 3.5 percent down for borrowers with good credit scores. In fiscal year 2010, FHA loans were 19 percent of the home purchase market vs. 14 percent a decade before.
Competition. In February, cash buyers accounted for a record 33 percent of existing-home sales, NAR says. In some areas, including Southern Nevada, cash buyers now account for more than half of existing-home sales. Sellers often prefer cash offers because they’re more likely to close, says Realtor Jerry Abbott of Grupe Real Estate in Stockton, Calif. He recently had one listing with six offers: one cash, two with 20 percent downpayments and four FHA, which often means first-time buyers.
“The seller didn’t even consider the FHA” offers, Abbott says.
Source: USA TODAY, a division of Gannett Co. Inc., Julie Schmit, USA TODAY.
Friday, March 25, 2011
Solar Pool Heaters Can Lower Energy Costs
The upfront investment is high, but solar pool heaters can lower energy costs by harnessing the renewable energy of the sun.
Homeowners in search of a greener and more economical method of keeping their swimming pools warm are harnessing the sun's energy. Solar pool heaters can lower energy costs because they rely primarily on a free and renewable energy source, rather than electricity or natural gas.
Solar pool heaters cost more upfront than traditional alternatives, perhaps 50% more than electric heat pumps and several times more than gas heaters. However, the payback can come in as little as two years, depending on local utility rates and other factors.
Solar pool heaters cost more upfront than traditional alternatives, perhaps 50% more than electric heat pumps and several times more than gas heaters. However, the payback can come in as little as two years, depending on local utility rates and other factors.
How solar pool heaters works
A typical solar pool heating system (http://www.energysavers.gov/your_home/water_heating/index.cfm/mytopic=13230) centers around large plastic solar collectors installed on the south-facing roof of a house. A pump circulates pool water through the collectors, where it's heated gradually. A return line takes the warm water back to the pool. Professional installation of a system takes about a day.
The setup is similar to a solar-thermal water heater (http://www.houselogic.com/articles/is-solar-thermal-hot-water-for-you/) that's used to heat water for use inside a home. A key difference is the collectors used for solar pool heating are less sophisticated (and cheaper) because water for a pool only needs to rise a few degrees, vs. tens of degrees for indoor use. A typical pump will send all the water in a pool through the collectors twice in 24 hours.
A solar heater typically can raise a pool's temperature by 15 degrees Farenheit. Optimal conditions are subjective, but 80 degrees should be comfortable for most swimmers. Teenagers might be willing to dive in when the temperature is in the 70s, while some people won't dip a toe in the water until it reaches 90 degrees.
How quickly the temperature can rise depends on location. Texans can see a 5-degree increase in a day, while in Alaska it may be less than a degree every 24 hours. Cooler air temperatures, cloudy skies, and fewer daylight hours all affect the performance of solar pool heaters, which require little maintenance and usually last 10 to 20 years.
The setup is similar to a solar-thermal water heater (http://www.houselogic.com/articles/is-solar-thermal-hot-water-for-you/) that's used to heat water for use inside a home. A key difference is the collectors used for solar pool heating are less sophisticated (and cheaper) because water for a pool only needs to rise a few degrees, vs. tens of degrees for indoor use. A typical pump will send all the water in a pool through the collectors twice in 24 hours.
A solar heater typically can raise a pool's temperature by 15 degrees Farenheit. Optimal conditions are subjective, but 80 degrees should be comfortable for most swimmers. Teenagers might be willing to dive in when the temperature is in the 70s, while some people won't dip a toe in the water until it reaches 90 degrees.
How quickly the temperature can rise depends on location. Texans can see a 5-degree increase in a day, while in Alaska it may be less than a degree every 24 hours. Cooler air temperatures, cloudy skies, and fewer daylight hours all affect the performance of solar pool heaters, which require little maintenance and usually last 10 to 20 years.
Cost of solar pool heaters
Solar pool heaters are more popular and cost-effective in sunny states like Florida, Arizona, and California, where the systems have penetrated as much as 60% of the residential market. In the East and Midwest, where sun isn't as plentiful and utility rates are more reasonable, it can take longer to realize the economic benefits.
A typical solar heating system might run between $4,500 and $7,000 installed, depending on pool size, according to manufacturers. Electric heat pumps (http://www.energysavers.gov/your_home/water_heating/index.cfm/mytopic=13200), the most popular alternative, cost $3,500 to $4,500; gas pool heaters (http://www.energysavers.gov/your_home/water_heating/index.cfm/mytopic=13160), the least efficient option, run between $1,000 and $1,500.
Breaking even on a solar pool heater will depend on several factors, especially local utility rates. Manufacturers estimate a typical homeowner will see a return on investment in two to five years vs. a gas heater. The U.S. Department of Energy puts the payback period between 1.7 and seven years.
The federal energy tax credit (http://www.houselogic.com/articles/claim-your-residential-energy-tax-credits/) doesn't apply to solar heating for pools, but some states offer incentives (http://www.dsireusa.org/). For example, Arizona (http://www.azsolarcenter.org/economics/tax-breaks.html) gives tax credits and sales-tax rebates to homeowners who install solar pool heaters.
A typical solar heating system might run between $4,500 and $7,000 installed, depending on pool size, according to manufacturers. Electric heat pumps (http://www.energysavers.gov/your_home/water_heating/index.cfm/mytopic=13200), the most popular alternative, cost $3,500 to $4,500; gas pool heaters (http://www.energysavers.gov/your_home/water_heating/index.cfm/mytopic=13160), the least efficient option, run between $1,000 and $1,500.
Breaking even on a solar pool heater will depend on several factors, especially local utility rates. Manufacturers estimate a typical homeowner will see a return on investment in two to five years vs. a gas heater. The U.S. Department of Energy puts the payback period between 1.7 and seven years.
The federal energy tax credit (http://www.houselogic.com/articles/claim-your-residential-energy-tax-credits/) doesn't apply to solar heating for pools, but some states offer incentives (http://www.dsireusa.org/). For example, Arizona (http://www.azsolarcenter.org/economics/tax-breaks.html) gives tax credits and sales-tax rebates to homeowners who install solar pool heaters.
Roofs can make or break decision
Systems must be sized by a pro. Generally, the surface area of the rooftop collectors should be equal to 85% to 100% of the surface area of your pool. In areas that don't get substantial sunlight, that percentage might climb as high as 150%.
The size and condition of your roof help determine whether a solar pool heater is right for you. Collectors require a lot of square footage on a south-facing roof. The installer will also need to make sure the roof is sound enough to support the collectors. Older roofs may need repairs or replacement, adding to the project cost.
There's also the issue of sun exposure. A solar pool heater doesn't work well on cloudy days or when collectors are blocked by shade. In general, heat pumps can raise water temperatures faster and more reliably than solar heaters, albeit at a higher cost. If budget isn't a concern, you can install a heat pump as a backup.
The size and condition of your roof help determine whether a solar pool heater is right for you. Collectors require a lot of square footage on a south-facing roof. The installer will also need to make sure the roof is sound enough to support the collectors. Older roofs may need repairs or replacement, adding to the project cost.
There's also the issue of sun exposure. A solar pool heater doesn't work well on cloudy days or when collectors are blocked by shade. In general, heat pumps can raise water temperatures faster and more reliably than solar heaters, albeit at a higher cost. If budget isn't a concern, you can install a heat pump as a backup.
Solar blankets are a must
To keep heat from escaping, homeowners should use solar pool covers, sometimes called solar blankets (http://www.energysavers.gov/your_home/water_heating/index.cfm/mytopic=13140). Covering a pool with a floating solar blanket when it's not in use not only keeps heat from escaping, but also adds another 5 degrees to the water temperature. As well, solar blankets reduce evaporation, which lowers the amount of replacement water and chemicals needed.
The cost of solar blankets varies depending on size and quality, but figure a good-quality blanket that's 12 feet by 24 feet will run about $100. The blanket can be spread over the pool surface (and removed) by hand, or plan to spend at least a couple of hundred dollars more on a reel system.
A solar blanket pays for itself. Even in balmy Miami, it can cost $2,848 a year (http://www.energysavers.gov/your_home/water_heating/index.cfm/mytopic=13180) to heat an uncovered 1,000-square-foot outdoor pool to 80 degrees using an 80% efficient gas heater. The cost is $1,460 (http://www.energysavers.gov/your_home/water_heating/index.cfm/mytopic=13220) when an electric heat pump is used instead. But in conjunction with a solar blanket, those annual costs plummet to $584 and $300, respectively.
Julie Sturgeon has written about residential pools for nearly a decade. She can't take advantage of solar heating because her roof is shaded on all sides.
The cost of solar blankets varies depending on size and quality, but figure a good-quality blanket that's 12 feet by 24 feet will run about $100. The blanket can be spread over the pool surface (and removed) by hand, or plan to spend at least a couple of hundred dollars more on a reel system.
A solar blanket pays for itself. Even in balmy Miami, it can cost $2,848 a year (http://www.energysavers.gov/your_home/water_heating/index.cfm/mytopic=13180) to heat an uncovered 1,000-square-foot outdoor pool to 80 degrees using an 80% efficient gas heater. The cost is $1,460 (http://www.energysavers.gov/your_home/water_heating/index.cfm/mytopic=13220) when an electric heat pump is used instead. But in conjunction with a solar blanket, those annual costs plummet to $584 and $300, respectively.
Julie Sturgeon has written about residential pools for nearly a decade. She can't take advantage of solar heating because her roof is shaded on all sides.
Source: HouseLogic
1 in 5 Canadians interested in buying U.S. property
A new survey from BMO Bank of Montreal and conducted by Leger Marketing finds that one in five Canadians would now consider purchasing property in the United States. Lower home prices and a strong Canadian dollar have sparked their interest in purchasing U.S. property.
Overall housing prices in the United States have fallen by 30 percent over the past four years. However, prices in traditional Canadian snowbird destinations have dropped even more. For example, prices in Tampa are down 44 percent, Phoenix fell 54 percent, Las Vegas 57 percent, and Miami 49 percent.
“Now, with the American economy and employment gaining strength, home sales should pick up and put a floor under soft prices,” said Sal Guatieri, senior economist, BMO Bank of Montreal. “We expect prices to rise over time as the overhang of unsold homes eases.” He also expects the American dollar to strengthen, which would add to the investment potential for Canadians who jump into the real estate market now.
Other survey findings:
• Men are more likely to consider purchasing a U.S. home, 29 percent compared to 16 percent of women.
• Regionally, residents of Alberta (31 percent), British Columbia (28 percent), and the Prairie Provinces (27 percent) are most interested in buying U.S. property.
Some Canadian banks, such as BMO, have branch offices operating in Florida and elsewhere in the U.S.
Source: Florida Realtors®
Overall housing prices in the United States have fallen by 30 percent over the past four years. However, prices in traditional Canadian snowbird destinations have dropped even more. For example, prices in Tampa are down 44 percent, Phoenix fell 54 percent, Las Vegas 57 percent, and Miami 49 percent.
“Now, with the American economy and employment gaining strength, home sales should pick up and put a floor under soft prices,” said Sal Guatieri, senior economist, BMO Bank of Montreal. “We expect prices to rise over time as the overhang of unsold homes eases.” He also expects the American dollar to strengthen, which would add to the investment potential for Canadians who jump into the real estate market now.
Other survey findings:
• Men are more likely to consider purchasing a U.S. home, 29 percent compared to 16 percent of women.
• Regionally, residents of Alberta (31 percent), British Columbia (28 percent), and the Prairie Provinces (27 percent) are most interested in buying U.S. property.
Some Canadian banks, such as BMO, have branch offices operating in Florida and elsewhere in the U.S.
Source: Florida Realtors®
Ignorance is not bliss on home coverage
Your homeowners insurance policy probably isn’t something you review as often or as closely as bank statements or tax documents – but staying in the dark can cost you, experts say.
Nearly a third of consumers polled by MetLife last June didn’t know how much their home, condo or townhouse was insured for.
Checking up on a homeowners insurance policy isn’t typically on an average customer’s to-do list, but it doesn’t have to be hard, says Madelyn Flannagan, the Independent Insurance Agents & Brokers of America’s vice president of agent development, education and research. Insurers are required to send renewal notices each year, reflecting changes in coverage and premium charges. And insurance information often comes with annual interest statements from your mortgage company, she says.
“That’s a great opportunity to take a look at your homeowners policy,” and can help determine if you need to adjust coverage to reflect changes in your home or lifestyle in the past year, Flannagan says.
Homeowners need to track construction costs more closely than real estate values when determining how much to insure a home for, industry experts say. The price to rebuild has surged in the past few years due to labor, materials and energy costs, while home values have fallen. Some consumers have mistakenly lowered the amount of coverage they’re buying for their home to reflect how much it would sell for now that the housing bubble has burst, leaving them underinsured. “It has been a trend in areas hit hard by a bad real estate market,” says Amy Danise, senior managing editor of consumer website Insure.com.
There are smarter ways to save on coverage, says Jeanne Salvatore, senior vice president of public affairs at the Insurance Information Institute. “The biggest issue, I think, recently is that some people are very misguided and have thought, ‘Well my home is not worth so much anymore, I can safely drop or reduce insurance,’“ she says.
The housing market has also pushed many homeowners to build additions or make improvements when they can’t sell their home. Not getting this new construction added to insurance policies is a common error. “They get wrapped up in the remodeling and never even think of picking up the phone to let home insurance companies know,” says Danise.
The risk of disaster or insufficient coverage surges when those improvements take place in the basement, insurance experts say. Flood insurance doesn’t come standard with most home policies, and basements are also susceptible to seepage and pump backups.
If the new construction and possessions within, such as fancy TVs and furniture, aren’t covered, homeowners will come up short in the case of a natural disaster or break-in. A finished basement automatically adds to the usable square footage of a house, affecting the cost to rebuild if homeowners needed to start from scratch.
Consumers are particularly misinformed when it comes to knowing how much money they’ll get from insurers to replace belongings in the house, MetLife found. Close to half of those polled didn’t know how much their belongings were covered for, and nearly three-quarters said they would be reimbursed for the full cost to replace personal belongings in case of disaster.
The average homeowners policy covers possessions at a fixed percentage (typically, 50 percent to 70 percent) of the value that the home is insured for, according to the Insurance Information Institute. Consumers should still pay attention to the worth of their belongings, though, as the allotted coverage for personal possessions can easily fall short if a house is a stocked with costly art, furnishings, electronics and other valuables.
Homeowners insurance typically covers inside possessions in two ways: replacement value or cash value. The latter takes into account how items such as furniture and electronics have depreciated, while replacement value gives you the money to repurchase an item at its current cost.
Cash-value insurance costs less in premium payments, but could leave homeowners strapped if they’re forced to replace their goods after a fire, flood or break-in. If you’re looking to save on monthly payments, raise the deductible rather than opting for the cash-value coverage, says Salvatore.
Experts suggest regularly photographing and videotaping possessions to know what you have and whether your coverage is sufficient. There’s an app for that. The National Association of Insurance Commissioners offers a free iPhone mobile application called myHOME Scr.APP.book for taking an inventory of possessions. The application lets users capture and store images, descriptions and product serial numbers. It can sort the information room by room, and provides a backup file to be shared via e-mail.
Source: USA TODAY, a division of Gannett Co. Inc., Erin Kutz.
Nearly a third of consumers polled by MetLife last June didn’t know how much their home, condo or townhouse was insured for.
Checking up on a homeowners insurance policy isn’t typically on an average customer’s to-do list, but it doesn’t have to be hard, says Madelyn Flannagan, the Independent Insurance Agents & Brokers of America’s vice president of agent development, education and research. Insurers are required to send renewal notices each year, reflecting changes in coverage and premium charges. And insurance information often comes with annual interest statements from your mortgage company, she says.
“That’s a great opportunity to take a look at your homeowners policy,” and can help determine if you need to adjust coverage to reflect changes in your home or lifestyle in the past year, Flannagan says.
Homeowners need to track construction costs more closely than real estate values when determining how much to insure a home for, industry experts say. The price to rebuild has surged in the past few years due to labor, materials and energy costs, while home values have fallen. Some consumers have mistakenly lowered the amount of coverage they’re buying for their home to reflect how much it would sell for now that the housing bubble has burst, leaving them underinsured. “It has been a trend in areas hit hard by a bad real estate market,” says Amy Danise, senior managing editor of consumer website Insure.com.
There are smarter ways to save on coverage, says Jeanne Salvatore, senior vice president of public affairs at the Insurance Information Institute. “The biggest issue, I think, recently is that some people are very misguided and have thought, ‘Well my home is not worth so much anymore, I can safely drop or reduce insurance,’“ she says.
The housing market has also pushed many homeowners to build additions or make improvements when they can’t sell their home. Not getting this new construction added to insurance policies is a common error. “They get wrapped up in the remodeling and never even think of picking up the phone to let home insurance companies know,” says Danise.
The risk of disaster or insufficient coverage surges when those improvements take place in the basement, insurance experts say. Flood insurance doesn’t come standard with most home policies, and basements are also susceptible to seepage and pump backups.
If the new construction and possessions within, such as fancy TVs and furniture, aren’t covered, homeowners will come up short in the case of a natural disaster or break-in. A finished basement automatically adds to the usable square footage of a house, affecting the cost to rebuild if homeowners needed to start from scratch.
Consumers are particularly misinformed when it comes to knowing how much money they’ll get from insurers to replace belongings in the house, MetLife found. Close to half of those polled didn’t know how much their belongings were covered for, and nearly three-quarters said they would be reimbursed for the full cost to replace personal belongings in case of disaster.
The average homeowners policy covers possessions at a fixed percentage (typically, 50 percent to 70 percent) of the value that the home is insured for, according to the Insurance Information Institute. Consumers should still pay attention to the worth of their belongings, though, as the allotted coverage for personal possessions can easily fall short if a house is a stocked with costly art, furnishings, electronics and other valuables.
Homeowners insurance typically covers inside possessions in two ways: replacement value or cash value. The latter takes into account how items such as furniture and electronics have depreciated, while replacement value gives you the money to repurchase an item at its current cost.
Cash-value insurance costs less in premium payments, but could leave homeowners strapped if they’re forced to replace their goods after a fire, flood or break-in. If you’re looking to save on monthly payments, raise the deductible rather than opting for the cash-value coverage, says Salvatore.
Experts suggest regularly photographing and videotaping possessions to know what you have and whether your coverage is sufficient. There’s an app for that. The National Association of Insurance Commissioners offers a free iPhone mobile application called myHOME Scr.APP.book for taking an inventory of possessions. The application lets users capture and store images, descriptions and product serial numbers. It can sort the information room by room, and provides a backup file to be shared via e-mail.
Source: USA TODAY, a division of Gannett Co. Inc., Erin Kutz.
Rate on 30-year fixed mortgage rises to 4.81%
Fixed mortgage rates edged up this week, but even 30-year rates below 5 percent have done little to boost home sales.
Freddie Mac said Thursday the average rate on the 30-year fixed mortgage rose to 4.81 percent from 4.76 percent the previous week. It hit a 40-year low of 4.17 percent in November.
The average rate on the 15-year fixed mortgage increased to 4.04 percent from 3.97 percent. It reached 3.57 percent in November, the lowest level on records dating back to 1991.
Mortgage rates tend to track the yield on the 10-year Treasury note, which rose this week.
Still, low rates haven’t helped the weak housing market. In February, sales of previously occupied homes fell 9.6 percent and new-home sales tumbled to the slowest pace in nearly a half-century.
High unemployment, a record number of foreclosures and tight lending standards have kept people from making purchases. Other would-be buyers are waiting for home prices to bottom out, which most economists predict won’t happen until midyear.
To calculate average mortgage rates, Freddie Mac collects rates from lenders across the country on Monday through Wednesday of each week. Rates often fluctuate significantly, even within a single day.
The average rate on a five-year adjustable-rate mortgage rose to 3.62 percent from 3.57 percent. The five-year hit 3.25 percent last month, the lowest rate on records dating back to January 2005.
The average rate on one-year adjustable-rate home loans increased to 3.21 percent from 3.17 percent, which was the lowest level in a year for the one-year ARM rate.
The rates do not include add-on fees, known as points. One point is equal to 1 percent of the total loan amount. The average fee for the 30-year fixed loan and 15-year fixed loan in Freddie Mac’s survey was 0.7 point. The average fee for the five-year ARM and the 1-year ARM was 0.6 point.
Source: The Associated Press, Janna Herron, AP real estate writer. All rights reserved.
Freddie Mac said Thursday the average rate on the 30-year fixed mortgage rose to 4.81 percent from 4.76 percent the previous week. It hit a 40-year low of 4.17 percent in November.
The average rate on the 15-year fixed mortgage increased to 4.04 percent from 3.97 percent. It reached 3.57 percent in November, the lowest level on records dating back to 1991.
Mortgage rates tend to track the yield on the 10-year Treasury note, which rose this week.
Still, low rates haven’t helped the weak housing market. In February, sales of previously occupied homes fell 9.6 percent and new-home sales tumbled to the slowest pace in nearly a half-century.
High unemployment, a record number of foreclosures and tight lending standards have kept people from making purchases. Other would-be buyers are waiting for home prices to bottom out, which most economists predict won’t happen until midyear.
To calculate average mortgage rates, Freddie Mac collects rates from lenders across the country on Monday through Wednesday of each week. Rates often fluctuate significantly, even within a single day.
The average rate on a five-year adjustable-rate mortgage rose to 3.62 percent from 3.57 percent. The five-year hit 3.25 percent last month, the lowest rate on records dating back to January 2005.
The average rate on one-year adjustable-rate home loans increased to 3.21 percent from 3.17 percent, which was the lowest level in a year for the one-year ARM rate.
The rates do not include add-on fees, known as points. One point is equal to 1 percent of the total loan amount. The average fee for the 30-year fixed loan and 15-year fixed loan in Freddie Mac’s survey was 0.7 point. The average fee for the five-year ARM and the 1-year ARM was 0.6 point.
Source: The Associated Press, Janna Herron, AP real estate writer. All rights reserved.
Thursday, March 24, 2011
What Is a 'Safe' Mortgage?
Later this month, the Federal Deposit Insurance Corp. will consider new rules that define what a safe or “qualified” residential mortgage is as part of the Dodd-Frank financial overhaul law.
Experts say the classification will likely have broad sweeping effects on the mortgage market..
The Dodd-Frank financial overhaul law, which was passed last summer, contains a risk-retention requirement that requires issuers of securities backed by mortgages and other assets to maintain 5 percent of the risk of a loan, if it is packaged into a security and sold to investors, Dow Jones reports. The idea is that lenders would be more careful with making loans since they would face steeper losses if a loan went bad.
Six federal agencies are working to resolve numerous issues on the proposal but one of the most controversial issues yet to be resolved is which loans are exempt from the risk-retention requirement and would be considered safe or “qualified” mortgages.
Expecting some heated debate, regulators have suggested issuing two different plans for public comment: One plan would call for a minimum 20 percent down payment, and another plan would recommend a 10 percent down payment as well as mortgage insurance.
FDIC banking regulators have called for a minimum 20 percent down payment requirement for new mortgages, but lawmakers and consumer advocates have argued that number is too high and could hamper an already sluggish housing market.
Loans guaranteed by Fannie Mae and Freddie Mac, which make up about 70 percent of the mortgage market, are expected to be exempt as long as they remain under government control. Government agencies such as the Federal Housing Administration are already exempt.
Source: “FDIC to Consider Rules Defining ‘Safe’ Mortgages,” Dow Jones Business News (March 22, 2011)
Experts say the classification will likely have broad sweeping effects on the mortgage market..
The Dodd-Frank financial overhaul law, which was passed last summer, contains a risk-retention requirement that requires issuers of securities backed by mortgages and other assets to maintain 5 percent of the risk of a loan, if it is packaged into a security and sold to investors, Dow Jones reports. The idea is that lenders would be more careful with making loans since they would face steeper losses if a loan went bad.
Six federal agencies are working to resolve numerous issues on the proposal but one of the most controversial issues yet to be resolved is which loans are exempt from the risk-retention requirement and would be considered safe or “qualified” mortgages.
Expecting some heated debate, regulators have suggested issuing two different plans for public comment: One plan would call for a minimum 20 percent down payment, and another plan would recommend a 10 percent down payment as well as mortgage insurance.
FDIC banking regulators have called for a minimum 20 percent down payment requirement for new mortgages, but lawmakers and consumer advocates have argued that number is too high and could hamper an already sluggish housing market.
Loans guaranteed by Fannie Mae and Freddie Mac, which make up about 70 percent of the mortgage market, are expected to be exempt as long as they remain under government control. Government agencies such as the Federal Housing Administration are already exempt.
Source: “FDIC to Consider Rules Defining ‘Safe’ Mortgages,” Dow Jones Business News (March 22, 2011)
Wi-Fi hotspot capability on AT&T devices comes with a catch
When AT&T retired its $30 unlimited data plan for smart phones last year and replaced it with two plans with data caps ($15/200 megabytes and $25/2 gigabytes), the company did allow existing unlimited users to keep their plans as long as they wish.
If you switch to one of the new plans, you can’t go back to the unlimited plan (well, not officially), but you can buy a new phone or extend your contract without having to sacrifice your endless well of wireless bits.
But AT&T is not above dangling some very big carrots to get you off that unlimited plan.
Case in point: The Dallas-based company recently announced that several of its smart phones (such as the HTC Inspire 4G and the iPhone 4 with the most recent iOS 4.3 update) can be used to create Wi-Fi hotspots to wirelessly connect multiple devices to the Internet.
However, you cannot use the Wi-Fi hotspot functionality with an unlimited data plan.
Houston Chronicle tech writer Dwight Silverman wrote on his blog that a company rep told him the Wi-Fi hotspots only work if you sign up for a “Data Pro plus AT&T Mobile Hotspot” plan.
That plan costs $45 and includes a 4-gig data allowance, with an overage fee of $10 per gigabyte.
I checked with my local AT&T contact, who confirmed that anyone with an unlimited data plan who wants to use the Wi-Fi hotspot functionality will have to shift to the tiered plan.
Granted, if you’re really determined to keep your unlimited data plan and get your hotspot, you could jailbreak your iPhone or root your Android device. But frankly, that sort of roll-your-own mobile gimcrackery has always seemed like more trouble to me than it’s worth.
I’d bet the next carrot/stick moment will come when AT&T launches it LTE 4G service this summer, as I wouldn’t be surprised to see the company say that unlimited data users are not eligible for the faster speeds.
The price of progress, I guess.
Source: The Dallas Morning News. Distributed by McClatchy-Tribune Information Services.
If you switch to one of the new plans, you can’t go back to the unlimited plan (well, not officially), but you can buy a new phone or extend your contract without having to sacrifice your endless well of wireless bits.
But AT&T is not above dangling some very big carrots to get you off that unlimited plan.
Case in point: The Dallas-based company recently announced that several of its smart phones (such as the HTC Inspire 4G and the iPhone 4 with the most recent iOS 4.3 update) can be used to create Wi-Fi hotspots to wirelessly connect multiple devices to the Internet.
However, you cannot use the Wi-Fi hotspot functionality with an unlimited data plan.
Houston Chronicle tech writer Dwight Silverman wrote on his blog that a company rep told him the Wi-Fi hotspots only work if you sign up for a “Data Pro plus AT&T Mobile Hotspot” plan.
That plan costs $45 and includes a 4-gig data allowance, with an overage fee of $10 per gigabyte.
I checked with my local AT&T contact, who confirmed that anyone with an unlimited data plan who wants to use the Wi-Fi hotspot functionality will have to shift to the tiered plan.
Granted, if you’re really determined to keep your unlimited data plan and get your hotspot, you could jailbreak your iPhone or root your Android device. But frankly, that sort of roll-your-own mobile gimcrackery has always seemed like more trouble to me than it’s worth.
I’d bet the next carrot/stick moment will come when AT&T launches it LTE 4G service this summer, as I wouldn’t be surprised to see the company say that unlimited data users are not eligible for the faster speeds.
The price of progress, I guess.
Source: The Dallas Morning News. Distributed by McClatchy-Tribune Information Services.
Governor Scott names Ken Lawson DBPR secretary
Gov. Rick Scott named former federal prosecutor Ken Lawson as Secretary of the Florida Department of Business and Professional Regulation (DBPR).
A native Floridian, Lawson has held regulatory positions within the private sector and federal government. As Secretary of DBPR, he will oversee the licensing and regulation of businesses and professionals in the state of Florida, including those in real estate.
Lawson held several senior positions with federal law enforcement agencies prior to this appointment. As the Assistant Secretary of Enforcement for the Department of the Treasury, he oversaw a staff of attorneys and investigators, and had oversight of federal law enforcement agencies responsible for protecting America’s financial system. Lawson also served as the Assistant Chief Counsel for Field Operations at the Transportation Security Administration.
For seven years, Lawson was an Assistant United States Attorney in the Criminal Division for the Middle District of Florida (Tampa). In addition, he served as a Captain in the United States Marine Corps, Judge Advocate General’s Division.
In the private sector, Lawson spent two years with Booz Allen Hamilton as a consultant, including a year as Chief of Party for the Financial Crimes Prevention Project in Jakarta, Indonesia, where he directed international anti-money laundering, anti-corruption and counterterrorist financing projects. Lawson most recently served as vice-president for Compliance at nFinanSe Inc., a financial services company in Tampa. He is a graduate of Florida State University and the Florida State University College of Law.
Source: Florida Realtors®
A native Floridian, Lawson has held regulatory positions within the private sector and federal government. As Secretary of DBPR, he will oversee the licensing and regulation of businesses and professionals in the state of Florida, including those in real estate.
Lawson held several senior positions with federal law enforcement agencies prior to this appointment. As the Assistant Secretary of Enforcement for the Department of the Treasury, he oversaw a staff of attorneys and investigators, and had oversight of federal law enforcement agencies responsible for protecting America’s financial system. Lawson also served as the Assistant Chief Counsel for Field Operations at the Transportation Security Administration.
For seven years, Lawson was an Assistant United States Attorney in the Criminal Division for the Middle District of Florida (Tampa). In addition, he served as a Captain in the United States Marine Corps, Judge Advocate General’s Division.
In the private sector, Lawson spent two years with Booz Allen Hamilton as a consultant, including a year as Chief of Party for the Financial Crimes Prevention Project in Jakarta, Indonesia, where he directed international anti-money laundering, anti-corruption and counterterrorist financing projects. Lawson most recently served as vice-president for Compliance at nFinanSe Inc., a financial services company in Tampa. He is a graduate of Florida State University and the Florida State University College of Law.
Source: Florida Realtors®
Wednesday, March 23, 2011
New-home sales plunged in February to record low
March 23, 2011 – Buyers of new homes plunged in February to the fewest on records dating back nearly half a century, a dismal sign for an already-weak housing market.
The Commerce Department says new-home sales fell 16.9 percent last month to a seasonally adjusted annual rate of 250,000 homes. It's the third straight monthly decline and far below the 700,000-a-year pace that economists view as healthy.
The median price of a new home dropped nearly 14 percent to $202,100, the lowest since December 2003. New home prices are now 30 percent higher than of those being resold.
Builders have struggled to compete with a wave of foreclosures that has lowered the price of previously occupied homes. High unemployment, tight credit and uncertainty over prices have also kept many potential buyers from making purchases.
Source: The Associated Press.
The Commerce Department says new-home sales fell 16.9 percent last month to a seasonally adjusted annual rate of 250,000 homes. It's the third straight monthly decline and far below the 700,000-a-year pace that economists view as healthy.
The median price of a new home dropped nearly 14 percent to $202,100, the lowest since December 2003. New home prices are now 30 percent higher than of those being resold.
Builders have struggled to compete with a wave of foreclosures that has lowered the price of previously occupied homes. High unemployment, tight credit and uncertainty over prices have also kept many potential buyers from making purchases.
Source: The Associated Press.
Vacation home sales surge higher
Vacation home and condominium sales in Florida, Hawaii and other states hit hard by the housing downturn have posted dramatic gains.
In Miami, existing condo sales surged 58 percent during the year-over-year period ended in February; and statewide, condo and single-family home sales climbed 29 percent and 13 percent, respectively, due to low property prices and mortgage rates.
About 50 percent of these sales were cash purchases, and about 70 percent involved foreclosures or short sales.
“We’re even seeing instances in certain neighborhoods with multiple offers above asking price,” says Miami Realtors Chairman Jack Levine.
This means home prices continue to decline, with the median in Miami down 23 percent for single-family homes and 25 percent for condos from February 2010. However, prices are beginning to pick up on the Miami waterfront, where distressed sales accounted for only a fraction of transactions.
Source: INFORMATION, INC. Bethesda, MD
In Miami, existing condo sales surged 58 percent during the year-over-year period ended in February; and statewide, condo and single-family home sales climbed 29 percent and 13 percent, respectively, due to low property prices and mortgage rates.
About 50 percent of these sales were cash purchases, and about 70 percent involved foreclosures or short sales.
“We’re even seeing instances in certain neighborhoods with multiple offers above asking price,” says Miami Realtors Chairman Jack Levine.
This means home prices continue to decline, with the median in Miami down 23 percent for single-family homes and 25 percent for condos from February 2010. However, prices are beginning to pick up on the Miami waterfront, where distressed sales accounted for only a fraction of transactions.
Source: INFORMATION, INC. Bethesda, MD
New homes are becoming a bad deal in weak markets
A new home, the dream of many would-be buyers, makes less and less financial sense in many places.
A wave of foreclosures has driven down the cost of previously occupied homes and made them even more of a comparative bargain. By contrast, new homes have become more expensive.
The median price of a new home in the United States is now 48 percent higher than that of a home being resold, more than three times the gap in a healthy housing market.
Such a disparity can be a drag on the economy. New homes represent a small fraction of sales, but they cause economic ripples, bringing business to construction and other industries. Sluggish new-home sales deprive the economy of strength.
“A lot of people are saying, ‘If I can get a great deal on a home already on the market, why go through the headaches of getting a new home?’” says Mark Vitner, a senior economist with Wells Fargo. “There’s a relatively small group of people who have the credit, have the downpayment and are secure in their jobs that can go out and buy new.”
The gap is widening because prices of previously occupied homes are falling fast, pulled down by waves of foreclosures and short sales. A short sale occurs when a lender lets a homeowner sell for less than is owed on the mortgage. New homes aren’t directly affected by such sales.
The median price of a new home – the price at which half the homes sell for more and half sell for less – has risen almost 6 percent in the past year to $230,600, even though last year was the worst for sales in nearly a half-century.
Slowed by those higher prices, new-home sales have plummeted over the past year to the lowest level since records began being kept in 1963. The government provides fresh data on new-home sales Wednesday.
By contrast, sales of previously occupied homes have fallen almost 3 percent in the past year. Prices have dropped more than 5 percent. In February, the median price for a resale was $156,100, according to the National Association of Realtors.
That adds up to a price difference of $74,500, or 48 percent, the highest markup in at least a decade. In healthier markets, a new home typically runs about 15 percent more, according to government data.
Home prices and sales still vary sharply among metro areas. Cities with more foreclosures tend to have more resale homes that have languished on the market and are priced at a bargain. That makes new homes in those areas comparatively expensive.
In Atlanta, for instance, where foreclosures accounted for one in every 23 homes sold last year, the median price of a previously occupied single-family home was $109,900, about 12 percent lower than a year ago, according to the Georgia data firm Smart Numbers. The median price of a new home was more than twice that.
“That’s as much of a difference as we’ve ever seen,” said Steve Palm, president of Smart Numbers. “New homes can’t compete, and that means jobs.”
An average of three jobs and $90,000 in taxes are created for each home built, according to the National Association of Home Builders.
In some areas, older homes were more expensive before the housing market bust. That was especially true in urban neighborhoods with little or no room left to build on. But now, buyers get their pick even in some of the trendiest places.
That’s what Robert Rost is finding in central Phoenix. Rost doesn’t want to commute far to his job. He’s been looking for a home for about five months but can’t find new properties in the neighborhoods where he wants to live.
“I don’t want to commute 45 minutes to an hour a day one-way,” the 38-year-old computer engineer says.
Homebuilders have taken notice. Residential construction has all but come to a halt. Builders broke ground last month on the fewest homes in nearly two years. And building permits, a gauge of future construction, sank to their lowest in more than 50 years.
Many builders are waiting for new-home sales to pick up and for the glut of foreclosures and other distressed properties to be reduced. But with 3 million foreclosures forecast this year nationwide, a turnaround isn’t expected for at least three years.
Don Eyler, who has owned E and R Construction in Terre Haute, Ind., for three decades, blames the banks. He says people are still interested in having a custom-built home but can’t finance the purchase. Tighter credit has made it harder to get larger loans.
Eyler typically built eight homes a year before the housing boom and bust. Now, he’s averaging just about five. And he’s making less profit on each.
“We hope we can stay in business until it gets better, but the turning point is this year,” Eyler says. “If it doesn’t change, we’ll have to do something different.”
Contributing to higher new-home prices is the rising cost of building materials.
Fewer new homes sold means fewer jobs added to an economy struggling with 8.9 percent unemployment. About 2.2 million overall construction jobs have disappeared since the housing boom went bust. That’s nearly a third of the people the industry employed in January 2007.
Workers in residential construction have fared even worse than other construction employees. Homebuilders cut nearly 1.3 million jobs in that time, or 39 percent of total payrolls.
Besides generating jobs in construction and other fields, new-home purchases tend to help the economy because buyers are more likely to buy new furniture, appliances and other amenities.
There’s also the psychological factor. In good times, most homes rise in value. But new homes historically have risen faster – by an additional 1.5 percent a year, according to Realtors and census data.
When homes appreciate in value, people feel they have more money. So they spend more.
“When you have more net worth, especially in your home, you feel richer,” says Chris G. Christopher Jr., senior principal economist at IHS Global Insight.
Source: The Associated Press, Derek Kravitz, AP business writer. All rights reserved. AP business writers Christopher S. Rugaber in Washington and Alex Veiga in Los Angeles contributed to this report.
A wave of foreclosures has driven down the cost of previously occupied homes and made them even more of a comparative bargain. By contrast, new homes have become more expensive.
The median price of a new home in the United States is now 48 percent higher than that of a home being resold, more than three times the gap in a healthy housing market.
Such a disparity can be a drag on the economy. New homes represent a small fraction of sales, but they cause economic ripples, bringing business to construction and other industries. Sluggish new-home sales deprive the economy of strength.
“A lot of people are saying, ‘If I can get a great deal on a home already on the market, why go through the headaches of getting a new home?’” says Mark Vitner, a senior economist with Wells Fargo. “There’s a relatively small group of people who have the credit, have the downpayment and are secure in their jobs that can go out and buy new.”
The gap is widening because prices of previously occupied homes are falling fast, pulled down by waves of foreclosures and short sales. A short sale occurs when a lender lets a homeowner sell for less than is owed on the mortgage. New homes aren’t directly affected by such sales.
The median price of a new home – the price at which half the homes sell for more and half sell for less – has risen almost 6 percent in the past year to $230,600, even though last year was the worst for sales in nearly a half-century.
Slowed by those higher prices, new-home sales have plummeted over the past year to the lowest level since records began being kept in 1963. The government provides fresh data on new-home sales Wednesday.
By contrast, sales of previously occupied homes have fallen almost 3 percent in the past year. Prices have dropped more than 5 percent. In February, the median price for a resale was $156,100, according to the National Association of Realtors.
That adds up to a price difference of $74,500, or 48 percent, the highest markup in at least a decade. In healthier markets, a new home typically runs about 15 percent more, according to government data.
Home prices and sales still vary sharply among metro areas. Cities with more foreclosures tend to have more resale homes that have languished on the market and are priced at a bargain. That makes new homes in those areas comparatively expensive.
In Atlanta, for instance, where foreclosures accounted for one in every 23 homes sold last year, the median price of a previously occupied single-family home was $109,900, about 12 percent lower than a year ago, according to the Georgia data firm Smart Numbers. The median price of a new home was more than twice that.
“That’s as much of a difference as we’ve ever seen,” said Steve Palm, president of Smart Numbers. “New homes can’t compete, and that means jobs.”
An average of three jobs and $90,000 in taxes are created for each home built, according to the National Association of Home Builders.
In some areas, older homes were more expensive before the housing market bust. That was especially true in urban neighborhoods with little or no room left to build on. But now, buyers get their pick even in some of the trendiest places.
That’s what Robert Rost is finding in central Phoenix. Rost doesn’t want to commute far to his job. He’s been looking for a home for about five months but can’t find new properties in the neighborhoods where he wants to live.
“I don’t want to commute 45 minutes to an hour a day one-way,” the 38-year-old computer engineer says.
Homebuilders have taken notice. Residential construction has all but come to a halt. Builders broke ground last month on the fewest homes in nearly two years. And building permits, a gauge of future construction, sank to their lowest in more than 50 years.
Many builders are waiting for new-home sales to pick up and for the glut of foreclosures and other distressed properties to be reduced. But with 3 million foreclosures forecast this year nationwide, a turnaround isn’t expected for at least three years.
Don Eyler, who has owned E and R Construction in Terre Haute, Ind., for three decades, blames the banks. He says people are still interested in having a custom-built home but can’t finance the purchase. Tighter credit has made it harder to get larger loans.
Eyler typically built eight homes a year before the housing boom and bust. Now, he’s averaging just about five. And he’s making less profit on each.
“We hope we can stay in business until it gets better, but the turning point is this year,” Eyler says. “If it doesn’t change, we’ll have to do something different.”
Contributing to higher new-home prices is the rising cost of building materials.
Fewer new homes sold means fewer jobs added to an economy struggling with 8.9 percent unemployment. About 2.2 million overall construction jobs have disappeared since the housing boom went bust. That’s nearly a third of the people the industry employed in January 2007.
Workers in residential construction have fared even worse than other construction employees. Homebuilders cut nearly 1.3 million jobs in that time, or 39 percent of total payrolls.
Besides generating jobs in construction and other fields, new-home purchases tend to help the economy because buyers are more likely to buy new furniture, appliances and other amenities.
There’s also the psychological factor. In good times, most homes rise in value. But new homes historically have risen faster – by an additional 1.5 percent a year, according to Realtors and census data.
When homes appreciate in value, people feel they have more money. So they spend more.
“When you have more net worth, especially in your home, you feel richer,” says Chris G. Christopher Jr., senior principal economist at IHS Global Insight.
Source: The Associated Press, Derek Kravitz, AP business writer. All rights reserved. AP business writers Christopher S. Rugaber in Washington and Alex Veiga in Los Angeles contributed to this report.
Tuesday, March 22, 2011
Buyers Ready to Snatch Bargains This Spring
Bargain prices on housing combined with low interest rates below 5 percent may bring the real estate market its busiest spring season in years, economists say.
Distressed sales continue to put downward pressure on home prices, which may lure more buyers off the fence and ready to snag a deal during the typical prime-time buying season.
Some builders are ramping up discounts on new homes as well as boosting commissions to brokers to try to spark more transactions.
Sellers of existing-homes also are getting more competitive in pricing their homes.
"After three years of the housing downturn, people are becoming much more realistic in terms of valuing their homes," says Lawrence Yun, chief economist at the National Association of REALTORS®.
An improved job market with better income potential may also motivate more people to buy, says David Berson of the PMI Group.
“Household formations are also very important," Berson says. "Kids may have moved back in with their parents, or two people may have moved in together, because of job concerns. Now they can move into their own place."
While interest rates are sitting comfortably below 5 percent for now (30-year fixed rates averaged 4.76 percent last week), economists warn the attractive low rates won’t last long.
"Few think mortgage rates are going lower," says Mark Zandi, Moody's Analytics chief economist. "It's more likely they will be 6 percent than 4 percent next spring. This lights a fire under buyers."
Source: “Discounts Expected in Spring Housing Market,” The Wall Street Journal (March 22, 2011)
Distressed sales continue to put downward pressure on home prices, which may lure more buyers off the fence and ready to snag a deal during the typical prime-time buying season.
Some builders are ramping up discounts on new homes as well as boosting commissions to brokers to try to spark more transactions.
Sellers of existing-homes also are getting more competitive in pricing their homes.
"After three years of the housing downturn, people are becoming much more realistic in terms of valuing their homes," says Lawrence Yun, chief economist at the National Association of REALTORS®.
An improved job market with better income potential may also motivate more people to buy, says David Berson of the PMI Group.
“Household formations are also very important," Berson says. "Kids may have moved back in with their parents, or two people may have moved in together, because of job concerns. Now they can move into their own place."
While interest rates are sitting comfortably below 5 percent for now (30-year fixed rates averaged 4.76 percent last week), economists warn the attractive low rates won’t last long.
"Few think mortgage rates are going lower," says Mark Zandi, Moody's Analytics chief economist. "It's more likely they will be 6 percent than 4 percent next spring. This lights a fire under buyers."
Source: “Discounts Expected in Spring Housing Market,” The Wall Street Journal (March 22, 2011)
Commercial real estate moving towards recovery
There are signs of a strengthening U.S. economy in declining initial jobless claims, rising business and consumer confidence, and growing employment figures. As a result, the PwC Real Estate Barometer, a new feature in the first quarter 2011 PwC Real Estate Investor Survey, finds that the fundamentals of the commercial real estate industry are slowly improving; and it supports the consensus among surveyed investors that the industry is moving past the bottom of the cycle.
The barometer tracks the anticipated performances of the four main property sectors – office, retail, industrial, and multifamily – from 2011 to 2014. By analyzing historical and forecast stock data, the barometer measures how the inventory of each sector changes over time in relation to the four stages of the real estate cycle – contraction, expansion, recession and recovery. In addition, barometer analyses are prepared for various geographic regions and specific metro areas.
“Surveyed investors sense that the commercial real estate industry is moving past the bottom of the cycle, but the speed at which the U.S. economy is improving fundamentals has been slow and uneven at best,” says Mitch Roschelle, partner, U.S. real estate advisory practice leader, PwC. “However, as investors become more confident about the long-awaited recovery of the industry, they are eager to get deals done. This bodes well for the industry as the volume of capital chasing deals is expected to increase in all sectors as investors work to deploy capital before interest rates rise, overall cap rates increase and the industry shifts more in favor of sellers.”
According to the barometer, the majority of office stock will be in recovery by year-end 2011 due to a lack of new supply and signs of decreasing vacancy for the U.S. office market. Even though job creation remains a concern, recovery is on the horizon with 86.2 percent of the U.S. office sector out of the market bottom by year-end 2012. In contrast, individual office markets that are expected to remain in recession through 2012 include Chicago, Las Vegas, Los Angeles and Tampa.
For the retail market, inconsistent consumer spending and inflationary fears will keep the majority of retail stock (76.6 percent) in recession through 2012. A recovery will materialize by year-end 2013, with 77.1 percent of retail inventory in that phase. Individual retail markets that are expected to perform better than this sector as a whole include Long Island, Nashville and Fairfield County, which are each expected to be in recovery through 2012.
Availability rates for the U.S. industrial sector are expected to peak in 2011 as tenant demand strengthens on the heels of a growing economy. As a result, the bulk of industrial stock will be in recovery in 2011 and 2012 (71.8 and 86.2 percent, respectively). As imports and exports increase, a larger portion of industrial stock will enter the expansion phase in 2013 and 2014 (20.9 and 40.6 percent, respectively). Individual industrial markets that are expected to lag this sector as a whole include Tampa, Akron, Cleveland and Minneapolis.
The U.S. multifamily sector is well ahead of the other three sectors in terms of recovery. As tighter lending restrictions limit homebuying opportunities, pent-up housing demand will enlarge the portion of multifamily stock in the expansion phase through 2014, when it hits 30.2 percent. Two multifamily markets that are not expected to enter the expansion phase over the near term include New Orleans (in recovery through 2014) and Syracuse (in recession through 2014).
Lower overall cap rates
The report finds that the average overall capitalization (cap) rate, a reflection of an investment’s anticipated ownership risk, decreased in 27 of the 31 surveyed markets as signs of recovery become more apparent for both the economy and the industry. The highest quarterly decreases occurred in the regional apartment markets, where average cap rates compressed between 39 and 73 basis points this quarter.
Although an increasing number of investors are expanding acquisition searches to include secondary markets and “impaired” assets, cap rate compression continues to mainly occur for better-positioned and well-located assets that exhibit stable rent rolls and limited near-term leasing risk. Looking ahead, strong buyer interest, combined with more fluid debt markets, is recognized in investors’ expectations that overall cap rates will either hold steady or decline over the next six months. Most survey participants expect overall cap rates to hold steady in 25 of the Survey’s 31 markets over the next six months.
“This year is a pivotal one for the industry, as 2011 began on the right foot with a string of positive news, giving investors the feeling that the recovery is real,” said Susan Smith, editor-in-chief of PwC’s quarterly survey. “That said, there remain concerns among surveyed participants, such as rising oil prices, a still-shaky residential housing sector and upcoming debt maturities. Despite these challenges, many investors remain focused on acquiring assets in anticipation of a continued recovery. Strong competition among buyers and the low-interest-rate environment continue to push overall cap rates lower for nearly all of the survey’s markets.”
Source: Florida Realtors®
The barometer tracks the anticipated performances of the four main property sectors – office, retail, industrial, and multifamily – from 2011 to 2014. By analyzing historical and forecast stock data, the barometer measures how the inventory of each sector changes over time in relation to the four stages of the real estate cycle – contraction, expansion, recession and recovery. In addition, barometer analyses are prepared for various geographic regions and specific metro areas.
“Surveyed investors sense that the commercial real estate industry is moving past the bottom of the cycle, but the speed at which the U.S. economy is improving fundamentals has been slow and uneven at best,” says Mitch Roschelle, partner, U.S. real estate advisory practice leader, PwC. “However, as investors become more confident about the long-awaited recovery of the industry, they are eager to get deals done. This bodes well for the industry as the volume of capital chasing deals is expected to increase in all sectors as investors work to deploy capital before interest rates rise, overall cap rates increase and the industry shifts more in favor of sellers.”
According to the barometer, the majority of office stock will be in recovery by year-end 2011 due to a lack of new supply and signs of decreasing vacancy for the U.S. office market. Even though job creation remains a concern, recovery is on the horizon with 86.2 percent of the U.S. office sector out of the market bottom by year-end 2012. In contrast, individual office markets that are expected to remain in recession through 2012 include Chicago, Las Vegas, Los Angeles and Tampa.
For the retail market, inconsistent consumer spending and inflationary fears will keep the majority of retail stock (76.6 percent) in recession through 2012. A recovery will materialize by year-end 2013, with 77.1 percent of retail inventory in that phase. Individual retail markets that are expected to perform better than this sector as a whole include Long Island, Nashville and Fairfield County, which are each expected to be in recovery through 2012.
Availability rates for the U.S. industrial sector are expected to peak in 2011 as tenant demand strengthens on the heels of a growing economy. As a result, the bulk of industrial stock will be in recovery in 2011 and 2012 (71.8 and 86.2 percent, respectively). As imports and exports increase, a larger portion of industrial stock will enter the expansion phase in 2013 and 2014 (20.9 and 40.6 percent, respectively). Individual industrial markets that are expected to lag this sector as a whole include Tampa, Akron, Cleveland and Minneapolis.
The U.S. multifamily sector is well ahead of the other three sectors in terms of recovery. As tighter lending restrictions limit homebuying opportunities, pent-up housing demand will enlarge the portion of multifamily stock in the expansion phase through 2014, when it hits 30.2 percent. Two multifamily markets that are not expected to enter the expansion phase over the near term include New Orleans (in recovery through 2014) and Syracuse (in recession through 2014).
Lower overall cap rates
The report finds that the average overall capitalization (cap) rate, a reflection of an investment’s anticipated ownership risk, decreased in 27 of the 31 surveyed markets as signs of recovery become more apparent for both the economy and the industry. The highest quarterly decreases occurred in the regional apartment markets, where average cap rates compressed between 39 and 73 basis points this quarter.
Although an increasing number of investors are expanding acquisition searches to include secondary markets and “impaired” assets, cap rate compression continues to mainly occur for better-positioned and well-located assets that exhibit stable rent rolls and limited near-term leasing risk. Looking ahead, strong buyer interest, combined with more fluid debt markets, is recognized in investors’ expectations that overall cap rates will either hold steady or decline over the next six months. Most survey participants expect overall cap rates to hold steady in 25 of the Survey’s 31 markets over the next six months.
“This year is a pivotal one for the industry, as 2011 began on the right foot with a string of positive news, giving investors the feeling that the recovery is real,” said Susan Smith, editor-in-chief of PwC’s quarterly survey. “That said, there remain concerns among surveyed participants, such as rising oil prices, a still-shaky residential housing sector and upcoming debt maturities. Despite these challenges, many investors remain focused on acquiring assets in anticipation of a continued recovery. Strong competition among buyers and the low-interest-rate environment continue to push overall cap rates lower for nearly all of the survey’s markets.”
Source: Florida Realtors®
Adjustable-rate mortgages gain steam again
Shortly after the subprime mortgage crisis, adjustable-rate mortgages were often blamed for leading to soaring rates of loan defaults and home foreclosures – which ultimately caused many borrowers to shun them due to its higher risk than fixed-rate mortgages. Now more borrowers are revisiting ARMs.
ARMs, which have low initial interest rates that change over time, aren’t exactly the same as they were before the subprime crisis, however. Lenders have introduced more conservative ARM products that no longer offer extra-low “teaser” rates that adjust every six months or “pick-a-pay” and “option” features that let borrowers pay less than the monthly interest that will give them a bigger bill later on, The New York Times reports.
The ARMs most in demand are “5/1” and “7/1,” which have fixed interest rates for the first five or seven years and then adjust annually at a capped rate.
Bank of America has reported a higher interest in its ARM products, with nearly twice as many ARM transactions last month than last year. ARMs account for 10 percent of all of its mortgages, the bank reports.
Source: INFORMATION, INC. Bethesda, MD
ARMs, which have low initial interest rates that change over time, aren’t exactly the same as they were before the subprime crisis, however. Lenders have introduced more conservative ARM products that no longer offer extra-low “teaser” rates that adjust every six months or “pick-a-pay” and “option” features that let borrowers pay less than the monthly interest that will give them a bigger bill later on, The New York Times reports.
The ARMs most in demand are “5/1” and “7/1,” which have fixed interest rates for the first five or seven years and then adjust annually at a capped rate.
Bank of America has reported a higher interest in its ARM products, with nearly twice as many ARM transactions last month than last year. ARMs account for 10 percent of all of its mortgages, the bank reports.
Source: INFORMATION, INC. Bethesda, MD
Census Bureau: 18% of Fla. homes vacant
housing units in the state: 18 percent, or 1.6 million.
As a result, a number of media reports have focused on the large number of vacancies, considering it a reflection of homes for sale, and an indication of the time it would take for the real estate market to fully recover. However, many homes the Census Bureau considers vacant are empty by choice – homes in which snowbirds live only a few months out of the year, for example, or homes under construction but not yet inhabitable.
According to the U.S. Census Bureau, the definition of “vacant” means “no one is living in it at the time of the interview, unless its occupants are only temporarily absent” or “entirely occupied by persons who have a usual residence elsewhere.” The latter would include snowbirds or other part-time Florida residents
In addition, “New units not yet occupied are classified as vacant housing units if construction has reached a point where all exterior windows and doors are installed and final usable floors are in place.” Many media reports have not included or explained the Census definition for “vacant” homes, resulting in a misleading impression of Florida’s housing market.
Still, Florida’s vacancy rate surpassed other states. Arizona’s vacancy rate was 16 percent, while Nevada’s was 14 percent. California had 8 percent vacancies.
In Florida, Collier County registered a 32 percent vacancy rate, according to the Census Bureau, though Southwest Florida has a high number of snowbirds that would register as vacant. Lee County’s vacancy rate was 30 percent, while Miami-Dade registered 12 percent.
Source: Florida Realtors®
As a result, a number of media reports have focused on the large number of vacancies, considering it a reflection of homes for sale, and an indication of the time it would take for the real estate market to fully recover. However, many homes the Census Bureau considers vacant are empty by choice – homes in which snowbirds live only a few months out of the year, for example, or homes under construction but not yet inhabitable.
According to the U.S. Census Bureau, the definition of “vacant” means “no one is living in it at the time of the interview, unless its occupants are only temporarily absent” or “entirely occupied by persons who have a usual residence elsewhere.” The latter would include snowbirds or other part-time Florida residents
In addition, “New units not yet occupied are classified as vacant housing units if construction has reached a point where all exterior windows and doors are installed and final usable floors are in place.” Many media reports have not included or explained the Census definition for “vacant” homes, resulting in a misleading impression of Florida’s housing market.
Still, Florida’s vacancy rate surpassed other states. Arizona’s vacancy rate was 16 percent, while Nevada’s was 14 percent. California had 8 percent vacancies.
In Florida, Collier County registered a 32 percent vacancy rate, according to the Census Bureau, though Southwest Florida has a high number of snowbirds that would register as vacant. Lee County’s vacancy rate was 30 percent, while Miami-Dade registered 12 percent.
Source: Florida Realtors®
Monday, March 21, 2011
Feds relent on wiring in Chinese drywall homes
For more than a year, two federal agencies have urged homeowners with Chinese drywall to replace all electrical wiring when fixing their homes.
On Friday, the U.S. Consumer Product Safety Commission (CPSC) and the U.S. Department of Housing and Urban Development altered course – lending credence to a homebuilders group’s protocol, conflicting with a court-monitored national remediation program and drawing criticism from some quarters.
The federal agencies revised their drywall remediation guidelines to say that some, but not all, electrical wiring and components must be removed. The change stems from additional laboratory testing of electrical components that found long-term exposure to hydrogen sulfide – the primary gas emitted by the tainted drywall – did not always substantially worsen the risk of smoke or fire.
“In general, residential electrical system components appear to be relatively tolerant of the corrosive environment created by problem drywall, if the system is installed properly,” a commission report said.
The commission and HUD also added 2009 to the range of years in which the corrosive drywall was installed in U.S. homes. The previous ending year was 2008. Drywall installed in 2009 was imported two to three years earlier, the agencies said.
The drywall, mostly imported from China, has been blamed for emitting sulfuric gases that corrode electrical and metal components, produce noxious odors and cause health ailments such as runny noses and headaches.
Concerned that corroded electrical wires could lead to a higher risk of fire, the commission hired Sandia National Laboratories in New Mexico to conduct long-term testing. The lab purchased electrical outlets, circuit breakers, wiring and other electrical components, then subjected them to eight weeks of testing that simulated 40 years’ worth of corrosive conditions that could be found in homes with the problem drywall.
Their findings: Some components corroded faster than others, depending on how often they were used, how well they were installed or connected, and other factors. Based on that, officials revised the guidelines to recommend replacing the following items that tend to corrode faster:
• Fire-safety alarm devices, including smoke and carbon monoxide alarms.
• Electrical distribution components such as receptacles, switches and circuit breakers.
• Gas service piping and fire-suppression sprinkler systems.
Other electrical wiring, such as that behind walls, also can corrode but not severely enough to always warrant their automatic removal, the agencies and laboratory said.
But that recommendation was heavily qualified.
“While no fire, smoking, or other safety events occurred during the course of this experiment, CPSC staff and Sandia are mindful of the limited scope and controlled conditions of this experiment,” they said in an 89-page report of their findings. “The experiment does not, and could not, possibly capture every permutation of conditions, wiring, installation, brands, environmental conditions and other possible confounding factors that are actually present in the affected houses.”
For additional findings from the Interagency Drywall Task Force’s investigation, visit www.DrywallResponse.gov.
Source: The Bradenton Herald, Fla. Distributed by McClatchy-Tribune Information Services.
On Friday, the U.S. Consumer Product Safety Commission (CPSC) and the U.S. Department of Housing and Urban Development altered course – lending credence to a homebuilders group’s protocol, conflicting with a court-monitored national remediation program and drawing criticism from some quarters.
The federal agencies revised their drywall remediation guidelines to say that some, but not all, electrical wiring and components must be removed. The change stems from additional laboratory testing of electrical components that found long-term exposure to hydrogen sulfide – the primary gas emitted by the tainted drywall – did not always substantially worsen the risk of smoke or fire.
“In general, residential electrical system components appear to be relatively tolerant of the corrosive environment created by problem drywall, if the system is installed properly,” a commission report said.
The commission and HUD also added 2009 to the range of years in which the corrosive drywall was installed in U.S. homes. The previous ending year was 2008. Drywall installed in 2009 was imported two to three years earlier, the agencies said.
The drywall, mostly imported from China, has been blamed for emitting sulfuric gases that corrode electrical and metal components, produce noxious odors and cause health ailments such as runny noses and headaches.
Concerned that corroded electrical wires could lead to a higher risk of fire, the commission hired Sandia National Laboratories in New Mexico to conduct long-term testing. The lab purchased electrical outlets, circuit breakers, wiring and other electrical components, then subjected them to eight weeks of testing that simulated 40 years’ worth of corrosive conditions that could be found in homes with the problem drywall.
Their findings: Some components corroded faster than others, depending on how often they were used, how well they were installed or connected, and other factors. Based on that, officials revised the guidelines to recommend replacing the following items that tend to corrode faster:
• Fire-safety alarm devices, including smoke and carbon monoxide alarms.
• Electrical distribution components such as receptacles, switches and circuit breakers.
• Gas service piping and fire-suppression sprinkler systems.
Other electrical wiring, such as that behind walls, also can corrode but not severely enough to always warrant their automatic removal, the agencies and laboratory said.
But that recommendation was heavily qualified.
“While no fire, smoking, or other safety events occurred during the course of this experiment, CPSC staff and Sandia are mindful of the limited scope and controlled conditions of this experiment,” they said in an 89-page report of their findings. “The experiment does not, and could not, possibly capture every permutation of conditions, wiring, installation, brands, environmental conditions and other possible confounding factors that are actually present in the affected houses.”
For additional findings from the Interagency Drywall Task Force’s investigation, visit www.DrywallResponse.gov.
Source: The Bradenton Herald, Fla. Distributed by McClatchy-Tribune Information Services.
Florida’s existing home, condo sales up in February
Florida’s existing home and existing condo sales rose in February, according to the latest housing data released by Florida Realtors®. Existing home sales increased 13 percent last month with a total of 13,701 homes sold statewide compared to 12,164 homes sold in February 2010, according to Florida Realtors. February’s statewide sales of existing condos rose 29 percent compared to the previous year’s sales figure.
Seventeen of Florida’s metropolitan statistical areas (MSAs) reported increased existing home sales in February; 18 MSAs had higher condo sales. It’s the third month in a row that Florida Realtors has reported higher year-over-year existing home and existing condo sales statewide.
“Current market conditions and very low mortgage rates continue to offer great opportunities to anyone looking to buy a home in Florida,” said 2011 Florida Realtors® President Patricia Fitzgerald, manager/broker-associate with Illustrated Properties in Hobe Sound and Mariner Sands Country Club in Stuart. “Every day, Realtors® help people realize their dreams of homeownership – they see the positive impact that homeownership has on families and communities.”
She added, “To showcase homeownership opportunities across the state, Florida Realtors is sponsoring its second annual Florida Open House Weekend, March 26-27. Realtors will host open houses on behalf of home sellers in neighborhoods from the Panhandle to the Keys, giving buyers a chance to tour dozens of homes in a single weekend. Talk to a local Realtor about Florida Open House Weekend and look for participating open houses throughout your community.”
Florida’s median sales price for existing homes last month was $121,900; a year ago, it was $124,500 for a 2 percent decrease. Analysts with the National Association of Realtors® (NAR) note that sales of foreclosures and other distressed properties continue to downwardly distort the median price because they generally sell at a discount relative to traditional homes. The median is the midpoint; half the homes sold for more, half for less.
The national median sales price for existing single-family homes in January 2011 was $159,400, down 2.7 percent from a year ago, according to NAR. In Massachusetts, the statewide median resales price was $284,500 in January; in California, it was $278,900; in New York, it was $227,000; and in Maryland, it was $222,535.
NAR’s latest outlook notes that continuing improvements in the economy is a positive sign for the housing sector. “The housing market is healing with sales fluctuating at times, depending on the flow of distressed properties coming on the market,” said NAR Chief Economist Lawrence Yun. “The broad fundamentals for a housing recovery are developing. Job growth, high housing affordability and rising apartment rent are conducive to bringing more buyers into the market.”
In Florida’s year-to-year comparison for condos, 6,984 units sold statewide last month compared to 5,424 units in February 2010 for an increase of 29 percent. The statewide existing condo median sales price last month was $77,300; in February 2010 it was $90,400 for a 14 percent decrease. The national median existing condo price was $154,900 in January 2011, according to NAR.
The interest rate for a 30-year fixed-rate mortgage averaged 4.95 percent in February, down slightly from the 4.99 percent average during the same month a year earlier, according to Freddie Mac. Florida Realtors’ sales figures reflect closings, which typically occur 30 to 90 days after sales contracts are written.
Source: Florida Realtors®
Seventeen of Florida’s metropolitan statistical areas (MSAs) reported increased existing home sales in February; 18 MSAs had higher condo sales. It’s the third month in a row that Florida Realtors has reported higher year-over-year existing home and existing condo sales statewide.
“Current market conditions and very low mortgage rates continue to offer great opportunities to anyone looking to buy a home in Florida,” said 2011 Florida Realtors® President Patricia Fitzgerald, manager/broker-associate with Illustrated Properties in Hobe Sound and Mariner Sands Country Club in Stuart. “Every day, Realtors® help people realize their dreams of homeownership – they see the positive impact that homeownership has on families and communities.”
She added, “To showcase homeownership opportunities across the state, Florida Realtors is sponsoring its second annual Florida Open House Weekend, March 26-27. Realtors will host open houses on behalf of home sellers in neighborhoods from the Panhandle to the Keys, giving buyers a chance to tour dozens of homes in a single weekend. Talk to a local Realtor about Florida Open House Weekend and look for participating open houses throughout your community.”
Florida’s median sales price for existing homes last month was $121,900; a year ago, it was $124,500 for a 2 percent decrease. Analysts with the National Association of Realtors® (NAR) note that sales of foreclosures and other distressed properties continue to downwardly distort the median price because they generally sell at a discount relative to traditional homes. The median is the midpoint; half the homes sold for more, half for less.
The national median sales price for existing single-family homes in January 2011 was $159,400, down 2.7 percent from a year ago, according to NAR. In Massachusetts, the statewide median resales price was $284,500 in January; in California, it was $278,900; in New York, it was $227,000; and in Maryland, it was $222,535.
NAR’s latest outlook notes that continuing improvements in the economy is a positive sign for the housing sector. “The housing market is healing with sales fluctuating at times, depending on the flow of distressed properties coming on the market,” said NAR Chief Economist Lawrence Yun. “The broad fundamentals for a housing recovery are developing. Job growth, high housing affordability and rising apartment rent are conducive to bringing more buyers into the market.”
In Florida’s year-to-year comparison for condos, 6,984 units sold statewide last month compared to 5,424 units in February 2010 for an increase of 29 percent. The statewide existing condo median sales price last month was $77,300; in February 2010 it was $90,400 for a 14 percent decrease. The national median existing condo price was $154,900 in January 2011, according to NAR.
The interest rate for a 30-year fixed-rate mortgage averaged 4.95 percent in February, down slightly from the 4.99 percent average during the same month a year earlier, according to Freddie Mac. Florida Realtors’ sales figures reflect closings, which typically occur 30 to 90 days after sales contracts are written.
Source: Florida Realtors®
Friday, March 18, 2011
South Florida Market Update, FEB 2011
Miami-Dade Pending Home Sales Rise 22 Percent in February
Miami, FL - Total cumulative pending home sales - including single-family homes and condominiums - in Miami-Dade County increased 22 percent in February compared to a year earlier, from 9,164 to 11,182, and 4.5 percent, up from 10,698, compared to the previous month according to the MIAMI Association of REALTORS and the Southeast Florida Multiple Listing Service (SEFMLS)
Miami, FL - Total cumulative pending home sales - including single-family homes and condominiums - in Miami-Dade County increased 22 percent in February compared to a year earlier, from 9,164 to 11,182, and 4.5 percent, up from 10,698, compared to the previous month according to the MIAMI Association of REALTORS and the Southeast Florida Multiple Listing Service (SEFMLS)Broward County Pending Home Sales Continue to RiseMiami, FL - Total cumulative pending home sales - including single-family homes and condominiums - in Broward County increased 7.7 percent in February compared to a year earlier, from 7,791 to 8,391, and 2.6 percent, and 8 percent 
Miami Condominium Sales Surge in January
Miami, FL - Sales of existing condominiums in the Miami Metropolitan Statistical Area (MSA) increased 134 percent, from 540 to 1,262, compared to January 2010 and 233 percent compared to January 2009, according to the 25,000-member MIAMI Association of REALTORS and the Southeast Florida Multiple Listing Service (SEFMLS). Sales of existing single-family homes rose 55 percent in January, from 436 to 676, compared to January 2010 and 66 percent compared to January 2009.
Miami, FL - Sales of existing condominiums in the Miami Metropolitan Statistical Area (MSA) increased 134 percent, from 540 to 1,262, compared to January 2010 and 233 percent compared to January 2009, according to the 25,000-member MIAMI Association of REALTORS and the Southeast Florida Multiple Listing Service (SEFMLS). Sales of existing single-family homes rose 55 percent in January, from 436 to 676, compared to January 2010 and 66 percent compared to January 2009.Broward Home Sales Rise in JanuaryMiami, FL - In Broward County, condominium sales increased 17 percent from 1,192 last month compared to 1,233 January 2010 and 132 percent compared to January 2009, according to the 25,000-member MIAMI Association of 
Miami Home Sales Rise in 4Q
Miami, FL - In the Miami Metropolitan Statistical Area (MSA), sales of homes - including existing single-family homes and condominiums - increased 29 percent in the fourth quarter of 2010, from 3,671 to 4,740, compared to a year earlier and 93 percent compared to the fourth quarter of 2008. This rise marks 10 consecutive quarters of increasing sales according to the MIAMI Association of REALTORS and the Southeast Florida Multiple Listing Service. .
Broward Home Prices Stabilize in 4Q
Miami, FL - In the Fort Lauderdale Metropolitan Statistical Area (MSA), sales of homes - including existing single-family homes and condominiums - decreased 14.4 percent, from 5,085 to 4,354, in the fourth quarter of 2010 compared to a year earlier but were 30 percent higher compared to the fourth quarter of 2008, according to the MIAMI Association of REALTORS and the Southeast Florida Multiple Listing Service.
Miami, FL - In the Miami Metropolitan Statistical Area (MSA), sales of homes - including existing single-family homes and condominiums - increased 29 percent in the fourth quarter of 2010, from 3,671 to 4,740, compared to a year earlier and 93 percent compared to the fourth quarter of 2008. This rise marks 10 consecutive quarters of increasing sales according to the MIAMI Association of REALTORS and the Southeast Florida Multiple Listing Service. .
Broward Home Prices Stabilize in 4Q
Miami, FL - In the Fort Lauderdale Metropolitan Statistical Area (MSA), sales of homes - including existing single-family homes and condominiums - decreased 14.4 percent, from 5,085 to 4,354, in the fourth quarter of 2010 compared to a year earlier but were 30 percent higher compared to the fourth quarter of 2008, according to the MIAMI Association of REALTORS and the Southeast Florida Multiple Listing Service.
Miami-Dade Pending Home Sales Continue to Rise
Miami, FL - Total cumulative pending home sales - including single-family homes and condominiums - in Miami-Dade County increased 28 percent in January compared to a year earlier, from 8,388 to 10,698, and 2.5 percent, from 10,437, compared to the previous month according to the MIAMI Association of REALTORS and the Southeast Florida Multiple Listing Service (SEFMLS).
Broward County Pending Home Sales on the Rise
Miami, FL - Total cumulative pending home sales - including single-family homes and condominiums - in Broward County increased four percent in January compared to a year earlier, from 7,447 to 7,770, and 2.6 percent, from 7,571, month-over-month according to the MIAMI Association of REALTORS and the Southeast Florida Multiple Listing Service (SEFMLS).
Miami, FL - Total cumulative pending home sales - including single-family homes and condominiums - in Miami-Dade County increased 28 percent in January compared to a year earlier, from 8,388 to 10,698, and 2.5 percent, from 10,437, compared to the previous month according to the MIAMI Association of REALTORS and the Southeast Florida Multiple Listing Service (SEFMLS).
Broward County Pending Home Sales on the Rise
Miami, FL - Total cumulative pending home sales - including single-family homes and condominiums - in Broward County increased four percent in January compared to a year earlier, from 7,447 to 7,770, and 2.6 percent, from 7,571, month-over-month according to the MIAMI Association of REALTORS and the Southeast Florida Multiple Listing Service (SEFMLS).
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