In the aftermath of the nation’s housing-market collapse and recession, more than 500 midsize and large cities have seen a rise in the share of homes that are rented rather than owned, according to a USA TODAY analysis of Census data.
Almost 4 million homes have been lost to foreclosures the past five years, turning many former owner-occupied homes into rentals.
The shift to rental housing is potentially long lasting and portends changes for neighborhood stability and how people build wealth, economists say.
“The changes are big but glacial,” says Mark Zandi, economist at Moody’s Analytics.
The swing from owner- to tenant-occupied homes in the past decade has been dramatic in some places:
Of the 100 largest cities, some of those with the largest shifts were Irvine, Calif., which went from about 40 percent of occupied homes rented in 2000 to 49.8 percent in 2010; Philadelphia increased from 40.7 percent to 45.9 percent; and Birmingham, Ala., rose from 46.3 percent to 50.7 percent.
Twenty-five cities including Baltimore, Minneapolis, Sacramento and Salt Lake City swung from having more than half of homeowners in 2000 to majorities of renters in 2010. In Reading, Pa., 57.6 percent of occupied homes were rentals in 2010, up from 49 percent in 2000.
Florida, California and Arizona had the most cities where the share of renter-occupied housing grew by at least 5 percentage points. All three states have been hit hard by foreclosures.
Nationwide, 34.9 percent of occupied homes were rented in 2010, up from 33.8 percent in 2000.
The Census data that USA TODAY analyzed for cities covered only housing within the cities’ boundaries, not their much larger metropolitan areas.
Vacant properties, excluding seasonal or vacation homes, accounted for 7.9 percent of U.S. housing units in 2010.
It’s not clear how many of those have since become rentals or owner-occupied homes.
The renter household market had remained fairly stable from 1990 to 2006, says Daniel McCue, senior research analyst at Harvard University’s Joint Center for Housing Studies.
Since 2006, when housing prices peaked, the number of renter households in the U.S. has grown an average of 692,000 a year, while owner households have fallen an average of 201,000 a year, Census surveys show.
Several factors will boost the growth of rental homes for years to come, Zandi says, including continued foreclosures, continued drops in home prices that frighten buyers and potential cuts to government subsidies supporting homeownership.
On the other hand, 74 percent of renters think owning is superior to renting, said a recent survey by mortgage giant Fannie Mae.
“There’s still a pull toward homeownership although it’s been diminished,” McCue says.
Contributing: Paul Overberg
Source: USA TODAY, a division of Gannett Co. Inc., Julie Schmit and Barbara Hansen.
Tuesday, May 31, 2011
Home-price index at lowest point since 2006
An index of home prices in the United States’ major metro areas has sunk to its lowest level since the housing bubble burst in late 2006.
Prices fell from February to March in 18 of the metro areas tracked by the Standard & Poor’s/Case-Shiller 20-city index. And prices in a dozen markets have reached their lowest points since the housing crisis began. Prices in March rose only in the Seattle and Washington, D.C., metro areas.
A record number of foreclosures are forcing home prices down, and they are expected to keep falling through this year.
The 12 cities now at their lowest levels in nearly four years are: Atlanta, Charlotte, Chicago, Cleveland, Detroit, Las Vegas, Miami, Minneapolis, New York, Phoenix, Portland (Oregon), and Tampa.
Source: The Associated Press.
Prices fell from February to March in 18 of the metro areas tracked by the Standard & Poor’s/Case-Shiller 20-city index. And prices in a dozen markets have reached their lowest points since the housing crisis began. Prices in March rose only in the Seattle and Washington, D.C., metro areas.
A record number of foreclosures are forcing home prices down, and they are expected to keep falling through this year.
The 12 cities now at their lowest levels in nearly four years are: Atlanta, Charlotte, Chicago, Cleveland, Detroit, Las Vegas, Miami, Minneapolis, New York, Phoenix, Portland (Oregon), and Tampa.
Source: The Associated Press.
Friday, May 27, 2011
Miami leads cities in reports of mortgage modification fraud
South Florida’s high-level of housing distress and large population of minorities combine to make it a nation-leading hotspot for fraudsters offering mortgage modification scams, a new report shows.
According to an analysis by the Homeownership Preservation Foundation, Miami leads the nation in the number of reported mortgage modification scams, followed by Los Angeles, Las Vegas, Houston and Chicago.
The report found that racial and ethnic minorities were particularly susceptible to these scams, accounting for more than half of all complaints nationwide.
“Repeated studies have shown that minorities were disproportionately targeted for predatory lending during the housing boom, and we have compelling evidence indicating that minorities are bearing the brunt of an unusually high percentage of mortgage scams,” said Homeownership Preservation Foundation CEO Colleen Hernandez, in a statement. HPF’s report was based on a year’s worth of calls to its 888-995-HOPE hotline, which provides free counseling to distressed homeowners.
Florida had the nation’s second highest proportion of mortgage modification scam complaints, accounting for 7 percent of the total. California led the country with 22 percent.
A state law passed in 2008 made it illegal for companies offering mortgage modification help to charge homeowners upfront. The Federal Trade Commission proposed a rule last year that did basically the same thing.
The Florida attorney general’s office received more than 2,500 complaints about mortgage modification scams last year and is investigating 70 companies.
Earlier this month, the attorney general’s office filed a lawsuit against three Delray Beach companies, after hundreds of homeowners complained that they had paid upfront fees ranging from $495 to $2,000 for mortgage modification services that were never provided.
Nationwide, the average amount charged upfront by mortgage modification companies is $2,589, according to HPF’s report.
Source: The Miami Herald, Toluse Olorunnipa. Distributed by McClatchy-Tribune Information Services.
According to an analysis by the Homeownership Preservation Foundation, Miami leads the nation in the number of reported mortgage modification scams, followed by Los Angeles, Las Vegas, Houston and Chicago.
The report found that racial and ethnic minorities were particularly susceptible to these scams, accounting for more than half of all complaints nationwide.
“Repeated studies have shown that minorities were disproportionately targeted for predatory lending during the housing boom, and we have compelling evidence indicating that minorities are bearing the brunt of an unusually high percentage of mortgage scams,” said Homeownership Preservation Foundation CEO Colleen Hernandez, in a statement. HPF’s report was based on a year’s worth of calls to its 888-995-HOPE hotline, which provides free counseling to distressed homeowners.
Florida had the nation’s second highest proportion of mortgage modification scam complaints, accounting for 7 percent of the total. California led the country with 22 percent.
A state law passed in 2008 made it illegal for companies offering mortgage modification help to charge homeowners upfront. The Federal Trade Commission proposed a rule last year that did basically the same thing.
The Florida attorney general’s office received more than 2,500 complaints about mortgage modification scams last year and is investigating 70 companies.
Earlier this month, the attorney general’s office filed a lawsuit against three Delray Beach companies, after hundreds of homeowners complained that they had paid upfront fees ranging from $495 to $2,000 for mortgage modification services that were never provided.
Nationwide, the average amount charged upfront by mortgage modification companies is $2,589, according to HPF’s report.
Source: The Miami Herald, Toluse Olorunnipa. Distributed by McClatchy-Tribune Information Services.
Fixed mortgage rates fall to 2011 lows
Fixed mortgage rates hit the lowest point of the year for the third straight week.
Freddie Mac said Thursday the average rate on the 30-year loan fell to 4.60 percent from 4.61 percent. That’s the lowest point since mid-December. The average rate on the 15-year fixed mortgage, a popular refinance option, slipped to 3.78 percent from 3.80 percent. That marked the lowest level since late November.
Rates have fallen for six weeks in a row. They tend to track the yield on the 10-year Treasury note, which crept lower this week on worries over Europe’s ongoing debt crisis.
While low mortgage rates make purchasing a home more attractive, sales are still slumping. Sales of new homes rose in April from the previous month, but are down almost a quarter from last year, the Commerce Department said Tuesday. And the number of people buying previously occupied homes is well below what economists consider healthy, despite an uptick in activity in April.
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 fell to 3.41 percent from 3.48 percent. The five-year adjustable-rate loan hit 3.25 percent last month, the lowest rate on records dating back to January 2005.
The average rate on a one-year adjustable-rate loan also decreased to 3.11 percent from 3.15 percent. That matched the lowest level in the last year.
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 0.5 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 loan fell to 4.60 percent from 4.61 percent. That’s the lowest point since mid-December. The average rate on the 15-year fixed mortgage, a popular refinance option, slipped to 3.78 percent from 3.80 percent. That marked the lowest level since late November.
Rates have fallen for six weeks in a row. They tend to track the yield on the 10-year Treasury note, which crept lower this week on worries over Europe’s ongoing debt crisis.
While low mortgage rates make purchasing a home more attractive, sales are still slumping. Sales of new homes rose in April from the previous month, but are down almost a quarter from last year, the Commerce Department said Tuesday. And the number of people buying previously occupied homes is well below what economists consider healthy, despite an uptick in activity in April.
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 fell to 3.41 percent from 3.48 percent. The five-year adjustable-rate loan hit 3.25 percent last month, the lowest rate on records dating back to January 2005.
The average rate on a one-year adjustable-rate loan also decreased to 3.11 percent from 3.15 percent. That matched the lowest level in the last year.
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 0.5 point.
Source: The Associated Press, Janna Herron, AP real estate writer. All rights reserved.
Pending home sales drop after two gains
Pending home sales fell in April following increases in February and March, with unusual weather and economic softness adding to ongoing problems that are hobbling a recovery, according to the National Association of Realtors®.
The Pending Home Sales Index (PHSI), a forward-looking indicator based on contract signings, dropped 11.6 percent to 81.9 in April from a downwardly revised 92.6 in March. The index is 26.5 percent below a cyclical peak of 111.5 in April 2010 when buyers were rushing to beat the contract deadline for the homebuyer tax credit.
The data reflects contracts but not closings, which normally occur with a lag time of one or two months.
Lawrence Yun, NAR chief economist, says the dip in contracts may be due to temporary factors. “The pullback in contract signings is disappointing and implies a slower than expected market recovery in upcoming months,” he says. “The economy hit a soft patch in April from sharply rising oil prices, widespread severe weather with the heaviest precipitation in 20 years, and a sudden rise in unemployment claims.”
Yun notes the growth in retail sales slowed measurably in April, while sales at furniture and home furnishing stores declined sharply. “Nonetheless, the magnitude of the fall in pending home sales is larger than can be implied by broad economic factors, so we need to see if it’s just a one-month aberration.
“No doubt the continuing excessively tight mortgage underwriting process is making the housing market recovery unnecessarily slow,” he says. “Lenders and bank regulators need to be mindful of the historically low default rates among mortgage borrowers of the past two years. A robust economic and housing market recovery cannot occur as long as banks continue to hold onto huge cash reserves. We simply have to get back to sound, common-sense lending standards to provide mortgages to creditworthy borrowers who are buying homes well within their means. Bank balance sheets show rising cash reserves and declining loan balances – it’s time to loosen the purse strings.”
The PHSI in the Northeast rose 1.7 percent to 64.5 in April but is 33.4 percent below a year ago. In the Midwest the index fell 10.4 percent to 74.1 and is 30.2 percent below April 2010. Pending home sales in the South dropped 17.2 percent to an index of 91.3 in April and are 27.0 percent below a year ago. In the West the index declined 8.9 percent to 89.1 and is 16.9 percent below April 2010.
“Even with very favorable affordability conditions, job growth and a pent-up demand from abnormally low household formation during the past three years, the recovery will continue to be uneven and sluggish given the ongoing credit constraints,” Yun says.
Source: Florida Realtors®
The Pending Home Sales Index (PHSI), a forward-looking indicator based on contract signings, dropped 11.6 percent to 81.9 in April from a downwardly revised 92.6 in March. The index is 26.5 percent below a cyclical peak of 111.5 in April 2010 when buyers were rushing to beat the contract deadline for the homebuyer tax credit.
The data reflects contracts but not closings, which normally occur with a lag time of one or two months.
Lawrence Yun, NAR chief economist, says the dip in contracts may be due to temporary factors. “The pullback in contract signings is disappointing and implies a slower than expected market recovery in upcoming months,” he says. “The economy hit a soft patch in April from sharply rising oil prices, widespread severe weather with the heaviest precipitation in 20 years, and a sudden rise in unemployment claims.”
Yun notes the growth in retail sales slowed measurably in April, while sales at furniture and home furnishing stores declined sharply. “Nonetheless, the magnitude of the fall in pending home sales is larger than can be implied by broad economic factors, so we need to see if it’s just a one-month aberration.
“No doubt the continuing excessively tight mortgage underwriting process is making the housing market recovery unnecessarily slow,” he says. “Lenders and bank regulators need to be mindful of the historically low default rates among mortgage borrowers of the past two years. A robust economic and housing market recovery cannot occur as long as banks continue to hold onto huge cash reserves. We simply have to get back to sound, common-sense lending standards to provide mortgages to creditworthy borrowers who are buying homes well within their means. Bank balance sheets show rising cash reserves and declining loan balances – it’s time to loosen the purse strings.”
The PHSI in the Northeast rose 1.7 percent to 64.5 in April but is 33.4 percent below a year ago. In the Midwest the index fell 10.4 percent to 74.1 and is 30.2 percent below April 2010. Pending home sales in the South dropped 17.2 percent to an index of 91.3 in April and are 27.0 percent below a year ago. In the West the index declined 8.9 percent to 89.1 and is 16.9 percent below April 2010.
“Even with very favorable affordability conditions, job growth and a pent-up demand from abnormally low household formation during the past three years, the recovery will continue to be uneven and sluggish given the ongoing credit constraints,” Yun says.
Source: Florida Realtors®
Wednesday, May 25, 2011
Housing affordability rises to record level
Nationwide housing affordability during the first quarter of 2011 rose to its highest level in the more than 20 years it has been measured, according to National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI) data released today.
The HOI indicated that 74.6 percent of all new and existing homes sold in the first quarter of 2011 were affordable to families earning the national median income of $64,400. This eclipsed the previous high of 73.9 percent set during the fourth quarter of 2010 and marked the ninth consecutive quarter that the index has been above 70 percent. Until 2009, the HOI rarely topped 65 percent and never reached 70 percent.
“With interest rates remaining at historically low levels, today’s report indicates that homeownership is within reach of more households than it has been for more than two decades,” said Bob Nielsen, chairman of the National Association of Home Builders (NAHB) and a home builder from Reno, Nev. “While this is good news for consumers, homebuyers and builders continue to confront extremely tight credit conditions, and this remains a significant obstacle to many potential home sales.”
Syracuse, N.Y., was the most affordable major housing market in the country during the first quarter of the year. In Syracuse, 94.5 percent of all homes sold were affordable to households earning the area’s median family income of $64,300.
Also ranking near the top of the most affordable major metro housing markets were Youngstown-Warren-Boardman, Ohio-Pa.; Indianapolis-Carmel, Ind.; Warren-Troy-Farmington Hills, Mich.; and Toledo, Ohio.
Among smaller housing markets, the most affordable was Kokomo, Ind., where 98.6 percent of homes sold during the first quarter of 2011 were affordable to families earning a median income of $61,400. Other smaller housing markets near the top of the index included Monroe, Mich.; Cumberland, Md.-W.Va.; Elkhart-Goshen, Ind.; and Springfield, Ohio.
New York-White Plains-Wayne, N.Y.-N.J., led the nation as the least affordable major housing market during the first quarter of 2011. In New York, 24.1 percent of all homes sold during the quarter were affordable to those earning the area’s median income of $65,600. This marks the 12th consecutive quarter that the New York metropolitan division has held this position.
Other major metro areas near the bottom of the affordability index included San Francisco-San Mateo-Redwood City, Calif.; Los Angeles-Long Beach-Glendale, Calif.; Honolulu; and Santa Ana-Anaheim-Irvine, Calif., respectively.
San Luis Obispo-Paso Robles, Calif., where 47.6 percent of the homes were affordable to families earning the median income of $72,500, was the least affordable of the smaller metro housing markets in the country during the first quarter. Other small metro areas ranking near the bottom included Santa Cruz-Watsonville, Calif.; Laredo, Texas; Ocean City, N.J; and Santa Barbara-Santa Maria-Goleta, Calif.
Source: Florida Realtors®
The HOI indicated that 74.6 percent of all new and existing homes sold in the first quarter of 2011 were affordable to families earning the national median income of $64,400. This eclipsed the previous high of 73.9 percent set during the fourth quarter of 2010 and marked the ninth consecutive quarter that the index has been above 70 percent. Until 2009, the HOI rarely topped 65 percent and never reached 70 percent.
“With interest rates remaining at historically low levels, today’s report indicates that homeownership is within reach of more households than it has been for more than two decades,” said Bob Nielsen, chairman of the National Association of Home Builders (NAHB) and a home builder from Reno, Nev. “While this is good news for consumers, homebuyers and builders continue to confront extremely tight credit conditions, and this remains a significant obstacle to many potential home sales.”
Syracuse, N.Y., was the most affordable major housing market in the country during the first quarter of the year. In Syracuse, 94.5 percent of all homes sold were affordable to households earning the area’s median family income of $64,300.
Also ranking near the top of the most affordable major metro housing markets were Youngstown-Warren-Boardman, Ohio-Pa.; Indianapolis-Carmel, Ind.; Warren-Troy-Farmington Hills, Mich.; and Toledo, Ohio.
Among smaller housing markets, the most affordable was Kokomo, Ind., where 98.6 percent of homes sold during the first quarter of 2011 were affordable to families earning a median income of $61,400. Other smaller housing markets near the top of the index included Monroe, Mich.; Cumberland, Md.-W.Va.; Elkhart-Goshen, Ind.; and Springfield, Ohio.
New York-White Plains-Wayne, N.Y.-N.J., led the nation as the least affordable major housing market during the first quarter of 2011. In New York, 24.1 percent of all homes sold during the quarter were affordable to those earning the area’s median income of $65,600. This marks the 12th consecutive quarter that the New York metropolitan division has held this position.
Other major metro areas near the bottom of the affordability index included San Francisco-San Mateo-Redwood City, Calif.; Los Angeles-Long Beach-Glendale, Calif.; Honolulu; and Santa Ana-Anaheim-Irvine, Calif., respectively.
San Luis Obispo-Paso Robles, Calif., where 47.6 percent of the homes were affordable to families earning the median income of $72,500, was the least affordable of the smaller metro housing markets in the country during the first quarter. Other small metro areas ranking near the bottom included Santa Cruz-Watsonville, Calif.; Laredo, Texas; Ocean City, N.J; and Santa Barbara-Santa Maria-Goleta, Calif.
Source: Florida Realtors®
Troubled home market creates generation of renters
A growing number of Americans can’t afford a home or don’t want to own one, a trend that’s spawning a generation of renters and a rise in apartment construction.
Many of the new renters are former owners who lost homes to foreclosure or bankruptcy. For others who could afford one, a home now feels too costly, too risky or unlikely to appreciate enough to make it a worthwhile investment.
The proportion of U.S. households that own homes is at its lowest point since 1998. When the housing bubble burst four years ago, 31.6 percent of households were renters. Now, it’s at 33.6 percent and rising. Since the housing meltdown, nearly 3 million households have become renters. At least 3 million more are expected by 2015, according to census data analyzed by Harvard’s Joint Center for Housing Studies and The Associated Press.
All told, nearly 38 million households are renters.
Among the signs of a rising rental market:
• The pace of apartment construction has surged 115 percent from its October 2009 low. It’s still well below a healthy level. But permits for apartments, a gauge of future construction, hit a two-year peak in March. By contrast, permits for single-family homes are on pace for their lowest annual level on records dating to 1960.
• The number of completed apartments averaged about 250,000 a year before the boom. They fell to 54,000 last year and will probably number around the same this year. But then the number will likely double to about 100,000 in 2012 and hit 250,000 by 2013 or 2014, according to the CoStar Group, a research firm. The lag is due to the time it takes for an apartment building to be completed: an average of 14 months.
• Demand is driving up rents. The median price of advertised rents rose 4.1 percent between the end of 2009 and the end of 2010, census data shows. Few expect the higher prices to stem the flood of renters, though. One reason: Younger adults don’t value homeownership as earlier generations did and many prefer to rent, studies show.
• Rental housing is giving builders more work just as construction of single-family homes has dried up. Still, that economic lift won’t make up for all the single-family houses not being built. Apartments account for only about one-fourth of homes. And renters are outspent roughly 2-to-1 by homeowners, who pay for items from lawn care to remodeling that helps drive the economy.
Before the housing bust, mortgage rates were so low it was often cheaper to buy than rent. That was true a decade ago in more than half the 54 biggest metro areas, according to Moody’s Analytics. Today, by contrast, it’s cheaper to rent in about 72 percent of metro areas.
Consider Mason Hamilton, 26, an energy consultant who rents an apartment with his wife for $1,100 a month in Alexandria, Virginia, outside Washington. He’d like something bigger. But he says he doesn’t plan to buy even though he could afford to.
“My parents always told me, ‘You need to buy a place; you need to buy property,’” he says. “But the housing market is insane.”
Many younger Americans see owning as risky. It hardly seems the best way to build wealth, especially when prices are falling.
“There’s been this idea for years, a part of the American dream, that owning a home improves and strengthens communities,” said John McIlwain, a senior fellow at the nonprofit Urban Land Institute. “But what we’ve learned over the past few years is that many people simply are not ready to own a home.”
From the 1940s until 2007, homes appreciated an average of nearly 5 percent a year, adjusted for inflation. In the past four years, the median price of a single-family home has sunk 37 percent, by $57,500, to its lowest since 2002. Yet in some areas, owning is still too expensive for many.
“It’s becoming so difficult for most Americans to afford a home, with larger downpayments and tighter credit, that it is creating a renter’s nation,” says Robert Shiller, a Yale economist and co-creator of the Case-Shiller home price index. “The home is no longer an investment; it’s a burden.”
Homeownership bestows its own financial advantages, of course. Each loan payment builds equity. Loan interest and property taxes provide tax deductions. And in normal housing markets, home values rise over time.
But for now, renting is more attractive. Hamilton, the energy consultant, says his father, a 58-year-old teacher in Richmond, Virginia, still owes nearly as much on his mortgage as his house is worth.
“He’s stuck in that house,” Hamilton says. “After telling me to buy for all of those years, he’d love to rent like me.”
Source: The Associated Press, Derek Kravitz, AP real estate writer.
Many of the new renters are former owners who lost homes to foreclosure or bankruptcy. For others who could afford one, a home now feels too costly, too risky or unlikely to appreciate enough to make it a worthwhile investment.
The proportion of U.S. households that own homes is at its lowest point since 1998. When the housing bubble burst four years ago, 31.6 percent of households were renters. Now, it’s at 33.6 percent and rising. Since the housing meltdown, nearly 3 million households have become renters. At least 3 million more are expected by 2015, according to census data analyzed by Harvard’s Joint Center for Housing Studies and The Associated Press.
All told, nearly 38 million households are renters.
Among the signs of a rising rental market:
• The pace of apartment construction has surged 115 percent from its October 2009 low. It’s still well below a healthy level. But permits for apartments, a gauge of future construction, hit a two-year peak in March. By contrast, permits for single-family homes are on pace for their lowest annual level on records dating to 1960.
• The number of completed apartments averaged about 250,000 a year before the boom. They fell to 54,000 last year and will probably number around the same this year. But then the number will likely double to about 100,000 in 2012 and hit 250,000 by 2013 or 2014, according to the CoStar Group, a research firm. The lag is due to the time it takes for an apartment building to be completed: an average of 14 months.
• Demand is driving up rents. The median price of advertised rents rose 4.1 percent between the end of 2009 and the end of 2010, census data shows. Few expect the higher prices to stem the flood of renters, though. One reason: Younger adults don’t value homeownership as earlier generations did and many prefer to rent, studies show.
• Rental housing is giving builders more work just as construction of single-family homes has dried up. Still, that economic lift won’t make up for all the single-family houses not being built. Apartments account for only about one-fourth of homes. And renters are outspent roughly 2-to-1 by homeowners, who pay for items from lawn care to remodeling that helps drive the economy.
Before the housing bust, mortgage rates were so low it was often cheaper to buy than rent. That was true a decade ago in more than half the 54 biggest metro areas, according to Moody’s Analytics. Today, by contrast, it’s cheaper to rent in about 72 percent of metro areas.
Consider Mason Hamilton, 26, an energy consultant who rents an apartment with his wife for $1,100 a month in Alexandria, Virginia, outside Washington. He’d like something bigger. But he says he doesn’t plan to buy even though he could afford to.
“My parents always told me, ‘You need to buy a place; you need to buy property,’” he says. “But the housing market is insane.”
Many younger Americans see owning as risky. It hardly seems the best way to build wealth, especially when prices are falling.
“There’s been this idea for years, a part of the American dream, that owning a home improves and strengthens communities,” said John McIlwain, a senior fellow at the nonprofit Urban Land Institute. “But what we’ve learned over the past few years is that many people simply are not ready to own a home.”
From the 1940s until 2007, homes appreciated an average of nearly 5 percent a year, adjusted for inflation. In the past four years, the median price of a single-family home has sunk 37 percent, by $57,500, to its lowest since 2002. Yet in some areas, owning is still too expensive for many.
“It’s becoming so difficult for most Americans to afford a home, with larger downpayments and tighter credit, that it is creating a renter’s nation,” says Robert Shiller, a Yale economist and co-creator of the Case-Shiller home price index. “The home is no longer an investment; it’s a burden.”
Homeownership bestows its own financial advantages, of course. Each loan payment builds equity. Loan interest and property taxes provide tax deductions. And in normal housing markets, home values rise over time.
But for now, renting is more attractive. Hamilton, the energy consultant, says his father, a 58-year-old teacher in Richmond, Virginia, still owes nearly as much on his mortgage as his house is worth.
“He’s stuck in that house,” Hamilton says. “After telling me to buy for all of those years, he’d love to rent like me.”
Source: The Associated Press, Derek Kravitz, AP real estate writer.
GOP proposing increase in FHA downpayments
A Republican-led proposal circulated Monday would boost the downpayment requirement for mortgages backed by the Federal Housing Administration, a move that some industry experts said would shut potential homebuyers out of the market.
Borrowers who take out FHA-insured mortgages are permitted to put down as little as 3.5 percent, making those loans an especially attractive choice for first-time homebuyers. But as defaults rose during the housing market’s worst days, FHA’s cash reserves dwindled, creating concerns that taxpayers may have to come to the agency’s rescue.
The Republican proposal would require most FHA borrowers to put down at least 5 percent. Those who support the idea say that forcing borrowers to have more equity in their homes would better protect homeowners against default and thus improve the agency’s finances. The issue will be discussed Wednesday at a House Financial Services subcommittee hearing led by Rep. Judy Biggert (R-Ill.).
The proposal has not been formally introduced in legislative form. And it’s unlikely to gain traction without bipartisan support, said Jaret Seiberg, an analyst at MF Global Inc. But if enacted, its immediate impact on the housing market would be negative, he said. Gathering the upfront cash is often the biggest hurdle for those buying their first homes.
Demanding more money down “would make it even harder for first-time buyers to enter the housing market regardless of their incomes or earning potential,” Seiberg wrote in a note to clients Monday.
Mark A. Calabria, director of financial regulation studies at the Cato Institute, said larger downpayments would no doubt have some drag on the housing market. “But it’s a modest drag because it’s a fairly small change,” said Calabria, who is scheduled to testify at Wednesday’s hearing. “It’s a smart and reasonable thing to do.”
A similar Republican proposal stalled in the House last year after the Obama administration vehemently opposed it, warning that such an increase would undermine the already fragile housing market by shrinking the agency’s loan volume.
At a hearing last year, FHA Commissioner David H. Stevens told House lawmakers that raising the minimum downpayment to 5 percent would lower the agency’s loan volume by 40 percent in the next fiscal year and shut out 300,000 first-time homebuyers.
Since then, the FHA has raised its downpayment to 10 percent for borrowers with the poorest credit. In a report to Congress, the administration said it would consider raising FHA’s downpayment requirement as part of a broader effort to curb the government’s role in housing finance. Separately, the administration teamed up with banking regulators to propose a rule that would enable only those who put down 20 percent to get the lowest interest rates, though that rule does not apply to FHA borrowers.
The administration declined to comment Monday on the most recent Republican proposal. But at least one banking industry consultant, Brian Chappelle, plans to tell lawmakers Wednesday that the proposal is unnecessary, especially now that FHA has raised the fees it charges borrowers by 60 percent since 2008 and dramatically improved the credit quality of its borrowers in recent years.
Source: washingtonpost.com, Dina ElBoghdady
Borrowers who take out FHA-insured mortgages are permitted to put down as little as 3.5 percent, making those loans an especially attractive choice for first-time homebuyers. But as defaults rose during the housing market’s worst days, FHA’s cash reserves dwindled, creating concerns that taxpayers may have to come to the agency’s rescue.
The Republican proposal would require most FHA borrowers to put down at least 5 percent. Those who support the idea say that forcing borrowers to have more equity in their homes would better protect homeowners against default and thus improve the agency’s finances. The issue will be discussed Wednesday at a House Financial Services subcommittee hearing led by Rep. Judy Biggert (R-Ill.).
The proposal has not been formally introduced in legislative form. And it’s unlikely to gain traction without bipartisan support, said Jaret Seiberg, an analyst at MF Global Inc. But if enacted, its immediate impact on the housing market would be negative, he said. Gathering the upfront cash is often the biggest hurdle for those buying their first homes.
Demanding more money down “would make it even harder for first-time buyers to enter the housing market regardless of their incomes or earning potential,” Seiberg wrote in a note to clients Monday.
Mark A. Calabria, director of financial regulation studies at the Cato Institute, said larger downpayments would no doubt have some drag on the housing market. “But it’s a modest drag because it’s a fairly small change,” said Calabria, who is scheduled to testify at Wednesday’s hearing. “It’s a smart and reasonable thing to do.”
A similar Republican proposal stalled in the House last year after the Obama administration vehemently opposed it, warning that such an increase would undermine the already fragile housing market by shrinking the agency’s loan volume.
At a hearing last year, FHA Commissioner David H. Stevens told House lawmakers that raising the minimum downpayment to 5 percent would lower the agency’s loan volume by 40 percent in the next fiscal year and shut out 300,000 first-time homebuyers.
Since then, the FHA has raised its downpayment to 10 percent for borrowers with the poorest credit. In a report to Congress, the administration said it would consider raising FHA’s downpayment requirement as part of a broader effort to curb the government’s role in housing finance. Separately, the administration teamed up with banking regulators to propose a rule that would enable only those who put down 20 percent to get the lowest interest rates, though that rule does not apply to FHA borrowers.
The administration declined to comment Monday on the most recent Republican proposal. But at least one banking industry consultant, Brian Chappelle, plans to tell lawmakers Wednesday that the proposal is unnecessary, especially now that FHA has raised the fees it charges borrowers by 60 percent since 2008 and dramatically improved the credit quality of its borrowers in recent years.
Source: washingtonpost.com, Dina ElBoghdady
Tuesday, May 24, 2011
Commercial Markets Stabilizing, Demand Growing
The improving economy and job creation mean growing demand for commercial real estate, according to the National Association of REALTORS®.
Lawrence Yun, NAR chief economist, said job creation will be the biggest factor moving forward. “Job growth creates demand for commercial space, and the economy should be adding between 1.5 million and 2 million jobs annually both this year and in 2012, with the unemployment rate falling to 8.0 percent by the end of next year,” he said. “Given the minimal new supply in recent years, the rising demand means vacancy rates will be trending down in the commercial real estate sectors. Individual markets are now stabilizing and in some cases rising.”
From the second quarter of this year to the second quarter of 2012, NAR forecasts vacancy rates to decline 1.0 percentage point in the office sector, 0.9 point in industrial real estate, 0.5 point in the retail sector and 1.1 percentage points in the multifamily rental market.
The Society of Industrial and Office Realtors®, in its SIOR Commercial Real Estate Index, an attitudinal survey of more than 360 local market experts, shows a firming up of market fundamentals.
The SIOR index, measuring the impact of 10 variables, rose 6.8 percentage points to 57.5 in the first quarter, the highest since the fall of 2008. The Northeast and South drove improvements in market conditions. Vacancy rates are improving, but concessions continue to make it a tenant’s market.
Although the SIOR index remains notably lower than a level of 100 that represents a balanced marketplace, this is the sixth consecutive quarterly improvement after almost three years of decline. The last time the index was at 100 was in the third quarter of 2007.
A separate NAR commercial lending survey shows 65 percent of REALTORS® report lending conditions have tightened thus far in 2011, and six out of 10 failed to complete a transaction this year due to financing problems. Regional banks provide the majority of commercial loans, followed by private investors. National banks are a distant third.
“Just as in the residential sector, lending problems are the biggest issue impacting commercial real estate,” Yun noted.
The multifamily sector is the only area that has clearly turned the corner, resulting in consistently falling vacancy rates and rising rents. “Solid rises in apartment rents will force some renters to consider home ownership,” Yun said.
NAR’s latest COMMERCIAL REAL ESTATE OUTLOOK offers projections for four major commercial sectors and analyzes quarterly data in the office, industrial, retail and multifamily markets. Historic data were provided by CBRE Econometric Advisors.
Office Markets
Vacancy rates in the office sector are expected to fall from 16.3 percent in the second quarter of this year to 15.3 percent in the second quarter of 2012.
The markets with the lowest office vacancy rates currently are Honolulu and New York City, each with vacancies below 9 percent.
Office rents are projected to rise 0.3 percent this year and another 4.3 percent in 2012. In 57 markets tracked, net absorption of office space, which includes the leasing of new space coming on the market as well as space in existing properties, is likely to be 26.6 million square feet in 2011.
Industrial Markets
Industrial vacancy rates are expected to decline from 13.9 percent in the current quarter to 13.0 percent in the second quarter of 2012.
At present, the areas with the lowest industrial vacancy rates are Los Angeles and Salt Lake City, with vacancies in the 7 to 8 percent range.
Annual industrial rent should decline 1.5 percent in 2011 before rising 2.0 percent next year. Net absorption of industrial space in 58 markets tracked is seen at 126.1 million square feet in 2011.
Retail Markets
Retail vacancy rates are forecast to decline from 13.1 percent in the second quarter of this year to 12.6 percent in the second quarter of 2012.
Markets with the lowest retail vacancy rates currently include Honolulu; Long Island, N.Y.; and San Jose, Calif., all with vacancies below 8 percent.
Average retail rent is expected to decline 1.4 percent in 2011, and then rise 0.7 percent next year. Net absorption of retail space in 53 tracked markets is projected to be 5.4 million square feet in 2011.
Multifamily Markets
The apartment rental market – multifamily housing – is continuing to tighten as household formation grows. Multifamily vacancy rates should drop from 5.8 percent in the current quarter to 4.7 percent in the second quarter of 2012.
Areas with the lowest multifamily vacancy rates presently are Pittsburgh; San Jose, Calif.; and Portland, Ore., with vacancies below 3 percent.
Average apartment rent is likely to rise 3.4 percent this year and another 4.3 percent in 2012. Multifamily net absorption is forecast at 250,800 units in 59 tracked metro areas in 2011.
---Source: NAR
Lawrence Yun, NAR chief economist, said job creation will be the biggest factor moving forward. “Job growth creates demand for commercial space, and the economy should be adding between 1.5 million and 2 million jobs annually both this year and in 2012, with the unemployment rate falling to 8.0 percent by the end of next year,” he said. “Given the minimal new supply in recent years, the rising demand means vacancy rates will be trending down in the commercial real estate sectors. Individual markets are now stabilizing and in some cases rising.”
From the second quarter of this year to the second quarter of 2012, NAR forecasts vacancy rates to decline 1.0 percentage point in the office sector, 0.9 point in industrial real estate, 0.5 point in the retail sector and 1.1 percentage points in the multifamily rental market.
The Society of Industrial and Office Realtors®, in its SIOR Commercial Real Estate Index, an attitudinal survey of more than 360 local market experts, shows a firming up of market fundamentals.
The SIOR index, measuring the impact of 10 variables, rose 6.8 percentage points to 57.5 in the first quarter, the highest since the fall of 2008. The Northeast and South drove improvements in market conditions. Vacancy rates are improving, but concessions continue to make it a tenant’s market.
Although the SIOR index remains notably lower than a level of 100 that represents a balanced marketplace, this is the sixth consecutive quarterly improvement after almost three years of decline. The last time the index was at 100 was in the third quarter of 2007.
A separate NAR commercial lending survey shows 65 percent of REALTORS® report lending conditions have tightened thus far in 2011, and six out of 10 failed to complete a transaction this year due to financing problems. Regional banks provide the majority of commercial loans, followed by private investors. National banks are a distant third.
“Just as in the residential sector, lending problems are the biggest issue impacting commercial real estate,” Yun noted.
The multifamily sector is the only area that has clearly turned the corner, resulting in consistently falling vacancy rates and rising rents. “Solid rises in apartment rents will force some renters to consider home ownership,” Yun said.
NAR’s latest COMMERCIAL REAL ESTATE OUTLOOK offers projections for four major commercial sectors and analyzes quarterly data in the office, industrial, retail and multifamily markets. Historic data were provided by CBRE Econometric Advisors.
Office Markets
Vacancy rates in the office sector are expected to fall from 16.3 percent in the second quarter of this year to 15.3 percent in the second quarter of 2012.
The markets with the lowest office vacancy rates currently are Honolulu and New York City, each with vacancies below 9 percent.
Office rents are projected to rise 0.3 percent this year and another 4.3 percent in 2012. In 57 markets tracked, net absorption of office space, which includes the leasing of new space coming on the market as well as space in existing properties, is likely to be 26.6 million square feet in 2011.
Industrial Markets
Industrial vacancy rates are expected to decline from 13.9 percent in the current quarter to 13.0 percent in the second quarter of 2012.
At present, the areas with the lowest industrial vacancy rates are Los Angeles and Salt Lake City, with vacancies in the 7 to 8 percent range.
Annual industrial rent should decline 1.5 percent in 2011 before rising 2.0 percent next year. Net absorption of industrial space in 58 markets tracked is seen at 126.1 million square feet in 2011.
Retail Markets
Retail vacancy rates are forecast to decline from 13.1 percent in the second quarter of this year to 12.6 percent in the second quarter of 2012.
Markets with the lowest retail vacancy rates currently include Honolulu; Long Island, N.Y.; and San Jose, Calif., all with vacancies below 8 percent.
Average retail rent is expected to decline 1.4 percent in 2011, and then rise 0.7 percent next year. Net absorption of retail space in 53 tracked markets is projected to be 5.4 million square feet in 2011.
Multifamily Markets
The apartment rental market – multifamily housing – is continuing to tighten as household formation grows. Multifamily vacancy rates should drop from 5.8 percent in the current quarter to 4.7 percent in the second quarter of 2012.
Areas with the lowest multifamily vacancy rates presently are Pittsburgh; San Jose, Calif.; and Portland, Ore., with vacancies below 3 percent.
Average apartment rent is likely to rise 3.4 percent this year and another 4.3 percent in 2012. Multifamily net absorption is forecast at 250,800 units in 59 tracked metro areas in 2011.
---Source: NAR
Proposal to Raise FHA Loan Down Payment
Republicans on the House Financial Services Committee have drafted a bill to raise the minimum down payment for Federal Housing Administration-backed loans to 5 percent as well as cut FHA loan limits in many markets. FHA-backed loans are a main source of mortgages for first-time home buyers.
Currently, home owners who take out FHA-backed loans are required to have a minimum down payment of 3.5 percent; the GOP bill seeks to raise that to 5 percent. The GOP says it wants to protect home owners against default and improve FHA’s finances.
The bill has not yet been introduced but remains in draft form. However, the draft legislation is expected to be discussed on Wednesday by the subcommittee.
The draft legislation also calls for lowering FHA loan limits in several areas.
As of now, the maximum size of FHA-backed loans in expensive areas of the country is set to drop to $625,500 from $729,750 as of Oct. 1. In less expensive areas, the limit may drop to $271,050. The GOP draft bill wants to drop the limits even more to 125 percent of a county's median home price, Dow Jones reports.
"While we support reforms to strengthen the program, changes should not be made at consumers' expense by drastically impacting the affordability and availability of mortgage capital," Ron Phipps, the National Association of REALTORS®’ president, said in a statement.
Source: “House Republicans Aim to Raise Money Down for FHA Loans,” Dow Jones International News (May 23, 2011)
Currently, home owners who take out FHA-backed loans are required to have a minimum down payment of 3.5 percent; the GOP bill seeks to raise that to 5 percent. The GOP says it wants to protect home owners against default and improve FHA’s finances.
The bill has not yet been introduced but remains in draft form. However, the draft legislation is expected to be discussed on Wednesday by the subcommittee.
The draft legislation also calls for lowering FHA loan limits in several areas.
As of now, the maximum size of FHA-backed loans in expensive areas of the country is set to drop to $625,500 from $729,750 as of Oct. 1. In less expensive areas, the limit may drop to $271,050. The GOP draft bill wants to drop the limits even more to 125 percent of a county's median home price, Dow Jones reports.
"While we support reforms to strengthen the program, changes should not be made at consumers' expense by drastically impacting the affordability and availability of mortgage capital," Ron Phipps, the National Association of REALTORS®’ president, said in a statement.
Source: “House Republicans Aim to Raise Money Down for FHA Loans,” Dow Jones International News (May 23, 2011)
More paying zero taxes
Florida’s turbulent housing market has had an unintended consequence: Thousands of homeowners don’t pay a dollar in property tax.
No, this isn’t a real estate scam. Blame higher homestead exemptions and falling home prices that essentially removed houses from the tax rolls.
“It’s a basic fundamental in American society and tax policy that everybody should pay something,” said Warren Weathers, chief deputy for the Hillsborough County property appraiser’s office. “Some of these (exemptions) were created for people who barely have anything, and that’s not bad. But there are people ... that have the ability to pay that don’t pay some of their fair share.”
It couldn’t have come at a worse time for budget-conscious municipalities. The exemptions cost the county millions in property tax revenue, and that’s on top of millions lost because of falling values. Hillsborough County saw property taxes owed go from $1.9 billion in 2008 to $1.7 billion in 2009 to $1.5 billion in 2010.
For many of those with tax bills of zero, their properties are valued less by county property appraisers than their qualified homestead exemption, usually $25,000. For properties worth more, a $50,000 exemption brings the tax bill down to almost nothing.
In Hillsborough, more than 7,000 homeowners didn’t pay property taxes last year, according to data from the property appraiser’s office. That’s up from 4,920 in 2008.
An additional 5,700 pay some tax, such as to the school board, but they don’t contribute anything toward the county’s general fund. And that’s where the money comes from to pay public services such as roads, sewer service and libraries. That number is up from 1,238 in 2007.
The homes range from modest to middle-class to extravagant. Most owners who don’t owe property taxes live in poor neighborhoods where home values have plummeted.
For example, a shotgun-style home at 2809 N. 10th St., in the Ybor City area north of Interstate 4, is valued at $23,569 by the county property appraiser. The owner has a $25,000 homestead exemption. Taxable value: zero.
Sybil Faulker, 86, has owned the 10th Street home for 50 years and has never paid property taxes. Faulker, who lives on Social Security, said the lower tax bill is critical for the poor, especially in a deep recession.
“It’s a huge help, and I live in a 91-year-old home,” Faulker said. “When people have a brand-new home worth $200,000 to $300,000, that’s different. They have the income to pay.”
Even the housing boom wasn’t enough to push up the value of Faulker’s home enough to cause her to owe property taxes, county records show. But for many, rising values caused property taxes to increase beyond what they could afford. Exemptions were provided to help alleviate the burden, but now that values have plummeted, the exemptions allow more people to pay little or no tax.
During the housing boom, the homestead exemption was raised from $25,000 to $50,000. The Legislature mandated that the second $25,000 could not bring the taxable value to zero. Instead, the property would have to be worth more than $75,000 to get the full $50,000 exemption.
Still, the extra savings is big for some.
Consider a home at 2810 N. 10th St., which sold in 2004 for $145,000. It’s now valued at $67,287 by the property appraiser. The owner has a homestead exemption of $42,287, bringing the taxable value to $25,000.
Few homes in this neighborhood sold, even during the housing boom. Many of the owners are elderly and have stayed put. So these homes weren’t affected by investors who flooded other neighborhoods, artificially driving up prices during the housing bubble.
Hillsborough has always had low-valued homes, especially in the inner city and some rural areas, Weathers said. But other changes to real estate, such as apartment-to-condominium conversions and toxic drywall made in China, have sent taxable values plummeting.
Consider this condo conversion at the Towers at Carrollwood Village. One condo unit sold for $90,000 in 2005 and is now valued at $19,657. The homestead exemption is $17,250, bringing the taxable value to zero.
The rest of the 114 condos in the complex have a similar tax situation, said Chris Weiss of the Hillsborough County property appraiser’s office.
A condominium complex in New Tampa is in the same boat. The Villas Condominiums has 282 units, Weiss said, and was also saturated with investor-owners. Both complexes have been hit hard by foreclosures, he said.
A condo at the New Tampa development sold for $106,900 in 2005 and is now worth just $16,230. The homestead exemption brings the taxable value to nothing.
Toxic drywall costs the county about $1 million in property taxes, Weathers said.
“That’s because Florida gives owners of houses with the tainted drywall a break on their taxes. As long as the drywall is in the house, it isn’t worth anything, say state legislators who passed the bill.
“No one wants to buy a home with this drywall problem,” Weathers said.
The owners of a million-dollar home on Davis Islands saw their tax bill go from $20,192 in 2009 to $6,310. The home’s toxic drywall has made it worthless, according to the county property appraiser. The taxes due for the property are on land only.
Judy Redmiller, a homeowner in South Tampa, says she pays hefty taxes now but didn’t when she lived in Ybor City because her home was valued lower. She says she supports some tax breaks for people who need it, but paying nothing is unreasonable.
“I think everyone should pay some amount because the money goes to schools, streets, services that benefit us all,” Redmiller said.
Private property appraiser David Teacher said he understands people wanting their neighbors to pay their fair share but, he said, there is an upside. Falling home prices and no – or low – property tax is a big incentive for investors to buy.
“There have been some people that say, ‘Oh, that doesn’t sound fair.’ But I have to say the good thing about this is all the cash purchases and investors who are coming and helping us stabilize this market.”
Teacher said he has seen homes in East Tampa selling for as low as $7,000. Sure, he said, they need work, but most still could be good deals.
“What better investment,” he said. “Look at the return on your money. Some homes are selling for less than the cost of a car.”
Source:Tampa Tribune, Fla., Shannon Behnken. Distributed by McClatchy-Tribune Information Services.
No, this isn’t a real estate scam. Blame higher homestead exemptions and falling home prices that essentially removed houses from the tax rolls.
“It’s a basic fundamental in American society and tax policy that everybody should pay something,” said Warren Weathers, chief deputy for the Hillsborough County property appraiser’s office. “Some of these (exemptions) were created for people who barely have anything, and that’s not bad. But there are people ... that have the ability to pay that don’t pay some of their fair share.”
It couldn’t have come at a worse time for budget-conscious municipalities. The exemptions cost the county millions in property tax revenue, and that’s on top of millions lost because of falling values. Hillsborough County saw property taxes owed go from $1.9 billion in 2008 to $1.7 billion in 2009 to $1.5 billion in 2010.
For many of those with tax bills of zero, their properties are valued less by county property appraisers than their qualified homestead exemption, usually $25,000. For properties worth more, a $50,000 exemption brings the tax bill down to almost nothing.
In Hillsborough, more than 7,000 homeowners didn’t pay property taxes last year, according to data from the property appraiser’s office. That’s up from 4,920 in 2008.
An additional 5,700 pay some tax, such as to the school board, but they don’t contribute anything toward the county’s general fund. And that’s where the money comes from to pay public services such as roads, sewer service and libraries. That number is up from 1,238 in 2007.
The homes range from modest to middle-class to extravagant. Most owners who don’t owe property taxes live in poor neighborhoods where home values have plummeted.
For example, a shotgun-style home at 2809 N. 10th St., in the Ybor City area north of Interstate 4, is valued at $23,569 by the county property appraiser. The owner has a $25,000 homestead exemption. Taxable value: zero.
Sybil Faulker, 86, has owned the 10th Street home for 50 years and has never paid property taxes. Faulker, who lives on Social Security, said the lower tax bill is critical for the poor, especially in a deep recession.
“It’s a huge help, and I live in a 91-year-old home,” Faulker said. “When people have a brand-new home worth $200,000 to $300,000, that’s different. They have the income to pay.”
Even the housing boom wasn’t enough to push up the value of Faulker’s home enough to cause her to owe property taxes, county records show. But for many, rising values caused property taxes to increase beyond what they could afford. Exemptions were provided to help alleviate the burden, but now that values have plummeted, the exemptions allow more people to pay little or no tax.
During the housing boom, the homestead exemption was raised from $25,000 to $50,000. The Legislature mandated that the second $25,000 could not bring the taxable value to zero. Instead, the property would have to be worth more than $75,000 to get the full $50,000 exemption.
Still, the extra savings is big for some.
Consider a home at 2810 N. 10th St., which sold in 2004 for $145,000. It’s now valued at $67,287 by the property appraiser. The owner has a homestead exemption of $42,287, bringing the taxable value to $25,000.
Few homes in this neighborhood sold, even during the housing boom. Many of the owners are elderly and have stayed put. So these homes weren’t affected by investors who flooded other neighborhoods, artificially driving up prices during the housing bubble.
Hillsborough has always had low-valued homes, especially in the inner city and some rural areas, Weathers said. But other changes to real estate, such as apartment-to-condominium conversions and toxic drywall made in China, have sent taxable values plummeting.
Consider this condo conversion at the Towers at Carrollwood Village. One condo unit sold for $90,000 in 2005 and is now valued at $19,657. The homestead exemption is $17,250, bringing the taxable value to zero.
The rest of the 114 condos in the complex have a similar tax situation, said Chris Weiss of the Hillsborough County property appraiser’s office.
A condominium complex in New Tampa is in the same boat. The Villas Condominiums has 282 units, Weiss said, and was also saturated with investor-owners. Both complexes have been hit hard by foreclosures, he said.
A condo at the New Tampa development sold for $106,900 in 2005 and is now worth just $16,230. The homestead exemption brings the taxable value to nothing.
Toxic drywall costs the county about $1 million in property taxes, Weathers said.
“That’s because Florida gives owners of houses with the tainted drywall a break on their taxes. As long as the drywall is in the house, it isn’t worth anything, say state legislators who passed the bill.
“No one wants to buy a home with this drywall problem,” Weathers said.
The owners of a million-dollar home on Davis Islands saw their tax bill go from $20,192 in 2009 to $6,310. The home’s toxic drywall has made it worthless, according to the county property appraiser. The taxes due for the property are on land only.
Judy Redmiller, a homeowner in South Tampa, says she pays hefty taxes now but didn’t when she lived in Ybor City because her home was valued lower. She says she supports some tax breaks for people who need it, but paying nothing is unreasonable.
“I think everyone should pay some amount because the money goes to schools, streets, services that benefit us all,” Redmiller said.
Private property appraiser David Teacher said he understands people wanting their neighbors to pay their fair share but, he said, there is an upside. Falling home prices and no – or low – property tax is a big incentive for investors to buy.
“There have been some people that say, ‘Oh, that doesn’t sound fair.’ But I have to say the good thing about this is all the cash purchases and investors who are coming and helping us stabilize this market.”
Teacher said he has seen homes in East Tampa selling for as low as $7,000. Sure, he said, they need work, but most still could be good deals.
“What better investment,” he said. “Look at the return on your money. Some homes are selling for less than the cost of a car.”
Source:Tampa Tribune, Fla., Shannon Behnken. Distributed by McClatchy-Tribune Information Services.
Lenders now own 872,000 homes
U.S. banks and money lenders now own 872,000 homes, a number that could more than double in the coming years, real estate research firm RealtyTrac said.
The current number of properties owned by banks and lenders is nearly double what they owned in 2007, before the housing market began to collapse, The New York Times reported Monday.
Lenders frequently sell homes at a substantial discount and economists expect it will take three years for lenders to sell the properties they have taken over.
That means for the next three years at least, the sale of so-called distressed homes will continue to slow a recovery in the housing market.
“It remains a heavy weight on the banking system. Housing prices are falling, and they are going to fall some more,” said Mark Zandi, chief economist of Moody’s Analytics.
Moody’s has predicted home values could drop an average of 5 percent by the end of 2011 before making a slight comeback in 2012.
A separate real estate research firm, Trepp, said lenders could lose $40 billion by selling homes at discounted prices.
Lenders are also aware that while they sell homes at discount prices, “We are contributing to the downward spiral in market values,” said Eric Will, who manages distressed home sales at the Federal Home Loan Mortgage Corp.
“We want to make sure we are helping stabilize communities,” Will said.
Source: United Press International
The current number of properties owned by banks and lenders is nearly double what they owned in 2007, before the housing market began to collapse, The New York Times reported Monday.
Lenders frequently sell homes at a substantial discount and economists expect it will take three years for lenders to sell the properties they have taken over.
That means for the next three years at least, the sale of so-called distressed homes will continue to slow a recovery in the housing market.
“It remains a heavy weight on the banking system. Housing prices are falling, and they are going to fall some more,” said Mark Zandi, chief economist of Moody’s Analytics.
Moody’s has predicted home values could drop an average of 5 percent by the end of 2011 before making a slight comeback in 2012.
A separate real estate research firm, Trepp, said lenders could lose $40 billion by selling homes at discounted prices.
Lenders are also aware that while they sell homes at discount prices, “We are contributing to the downward spiral in market values,” said Eric Will, who manages distressed home sales at the Federal Home Loan Mortgage Corp.
“We want to make sure we are helping stabilize communities,” Will said.
Source: United Press International
New-home sales up, but pace remains sluggish
More Americans bought new homes for a second straight month in April, a hopeful sign. Still, sales remain far below the pace that would represent a healthy housing market.
New-home sales rose 7.3 percent last month to a seasonally adjusted annual rate of 323,000 homes, the Commerce Department said Tuesday. A normal housing market would mean a pace of about 700,000 new-home sales a month.
People have little incentive to buy new homes, in part because they’re comparatively expensive. The median price of a new home rose more than 2 percent from March to $217,900. New-home prices are more than 30 percent higher the median price of re-sales – twice the normal markup.
Last year, Americans bought the fewest number of homes on records going back 47 years.
Fewer new homes mean fewer jobs. Each new home creates an average of three jobs for a year and generates $90,000 in taxes, according to the National Association of Home Builders.
Many builders have been waiting for the glut of foreclosures and other distressed properties to be cleared before stepping up construction. But with a record 1.2 million foreclosures forecast this year, a recovery isn’t expected for years.
Source: The Associated Press, Derek Kravitz, AP real estate writer.
New-home sales rose 7.3 percent last month to a seasonally adjusted annual rate of 323,000 homes, the Commerce Department said Tuesday. A normal housing market would mean a pace of about 700,000 new-home sales a month.
People have little incentive to buy new homes, in part because they’re comparatively expensive. The median price of a new home rose more than 2 percent from March to $217,900. New-home prices are more than 30 percent higher the median price of re-sales – twice the normal markup.
Last year, Americans bought the fewest number of homes on records going back 47 years.
Fewer new homes mean fewer jobs. Each new home creates an average of three jobs for a year and generates $90,000 in taxes, according to the National Association of Home Builders.
Many builders have been waiting for the glut of foreclosures and other distressed properties to be cleared before stepping up construction. But with a record 1.2 million foreclosures forecast this year, a recovery isn’t expected for years.
Source: The Associated Press, Derek Kravitz, AP real estate writer.
Positive News about the South Florida Real Estate Market
Miami Home Sales Continue to Trend Upwards in 1Q
Miami, FL -
In the Miami Metropolitan Statistical Area (MSA), sales of homes - including existing single-family homes and condominiums - increased 71 percent in the first quarter of 2011, from 3,450 to 5,910, and 26 percent from the previous quarter. This rise marks 11 consecutive quarters, since the third quarter of 2008, of increasing sales 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 71 percent in the first quarter of 2011, from 3,450 to 5,910, and 26 percent from the previous quarter. This rise marks 11 consecutive quarters, since the third quarter of 2008, of increasing sales according to the MIAMI Association of REALTORS and the Southeast Florida Multiple Listing Service.
Broward Home Sales, Condominium Prices Rise in 1QMiami, FL -
In Broward County, sales of homes - including existing single-family homes and condominiums - increased
19 percent in the first quarter of 2011, from 6,198 a year earlier to 7,403, and 70 percent from the previous quarter, according to the MIAMI Association of REALTORS and the Southeast Florida Multiple Listing Service.
In Broward County, sales of homes - including existing single-family homes and condominiums - increased
19 percent in the first quarter of 2011, from 6,198 a year earlier to 7,403, and 70 percent from the previous quarter, 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 current cumulative pending home sales - including single-family homes and condominiums - in Broward County are 1.2 percent higher compared to a year ago, from 8,525 to 8,628, and were down a negligible .43 percent month-over-month from 8,665, according to the 24,000-MIAMI Association of REALTORS and the local MLS systems.
Monday, May 23, 2011
Will REOs Hamper a Housing Recovery?
The nation’s largest banks and mortgage lenders currently own more than 872,000 homes — properties in which they repossessed from foreclosure, according to RealtyTrac. That is nearly twice the amount they repossessed in 2007, when the financial crisis began.
But the problem may get even worse: Banks are ready to repossess another 1 million homes in foreclosure, RealtyTrac reports.
The swelling number of lender-owned homes has economists concerned because higher inventories of distressed homes can depress overall home values. Economists say that it could take lenders three years to sell their foreclosed home inventory.
“It remains a heavy weight on the banking system,” says Mark Zandi, the chief economist of Moody’s Analytics.
Indeed, the high number of lender-owned homes stands to cost banks $40 billion in additional losses as they’re forced to sell these homes at sharp discounts over the next two years, according to Trepp, a real estate research firm.
Real estate professionals told The New York Times that lenders seem overwhelmed by the huge inventory of homes. They also say these lender-owned listings are often out of date and overpriced by as much as 10 percent, and that lenders take too long to accept an offer.
These homes also can sit in limbo for nearly two years. It can take 400 days just for lenders to foreclose on the home and then 176 days, on average, to sell it.
Source: “As Lenders Hold Homes in Foreclosure, Sales Are Hurt,” The New York Times (May 23, 2011)
But the problem may get even worse: Banks are ready to repossess another 1 million homes in foreclosure, RealtyTrac reports.
The swelling number of lender-owned homes has economists concerned because higher inventories of distressed homes can depress overall home values. Economists say that it could take lenders three years to sell their foreclosed home inventory.
“It remains a heavy weight on the banking system,” says Mark Zandi, the chief economist of Moody’s Analytics.
Indeed, the high number of lender-owned homes stands to cost banks $40 billion in additional losses as they’re forced to sell these homes at sharp discounts over the next two years, according to Trepp, a real estate research firm.
Real estate professionals told The New York Times that lenders seem overwhelmed by the huge inventory of homes. They also say these lender-owned listings are often out of date and overpriced by as much as 10 percent, and that lenders take too long to accept an offer.
These homes also can sit in limbo for nearly two years. It can take 400 days just for lenders to foreclose on the home and then 176 days, on average, to sell it.
Source: “As Lenders Hold Homes in Foreclosure, Sales Are Hurt,” The New York Times (May 23, 2011)
Census: Housing top reason to relocate
Among those who moved between 2009 and 2010, more than four out of 10 (16.4 million or 43.7 percent) did so for housing-related reasons, such as the desire to live in a new or better home or apartment, according to data from the U.S. Census Bureau’s “Geographical Mobility: 2010.”
Among other reasons for moving, people cited family concerns (30.3 percent), such as a change in marital status, employment needs (16.4 percent) and other factors (9.5 percent).
In 2010, 37.5 million people 1 year and older changed residences in the U.S. within the past year. At 12.5 percent in 2010, the mover rate was not statistically different from 2009.
“Mover rates differ by characteristics, such as age, race, Hispanic origin, marital status, income or even whether the housing unit is owned or rented,” said David Ihrke, survey statistician in the Census Bureau’s Social, Economic and Housing Statistics Division. “Tracking mobility allows us to examine shifts in demographic trends in the population for the nation, regions and metro areas as a whole.”
In 2010, 69.3 percent of all movers stayed within the same county, 16.7 percent moved to a different county in the same state, 11.5 percent moved to a different state, and 2.5 percent moved from abroad to the U.S.
By region, people in the Northeast were the least likely to move, with a mover rate of 8.3 percent in 2010. The Northeast was followed by the Midwest (11.8 percent), the South (13.6 percent) and the West (14.7 percent). The mover rate for each region was not significantly different between 2009 and 2010.
Principal cities within metropolitan areas experienced a net loss of 2.3 million movers, while the suburbs experienced a net gain of 2.5 million movers.
Other highlights:
• Of the civilian population 16 and older who were unemployed, 19.8 percent lived in different residence one year earlier compared with 12.4 percent who were employed. Among those not in the labor force, 9.5 percent lived in a different residence one year earlier.
• Generally, people with incomes below the poverty line were more likely to move than those just above the poverty line. In 2010, 23.6 percent of people with incomes below 100 percent of the poverty line had moved within the last year compared with 16.5 percent of people with incomes between 100 and 149 percent of the poverty line.
• The black alone population had the highest mover rate (16.7 percent), followed by Hispanics (15.6 percent), Asian alone (13.9 percent) and white alone not Hispanic (10.8 percent).
Source: Florida Realtors®
Among other reasons for moving, people cited family concerns (30.3 percent), such as a change in marital status, employment needs (16.4 percent) and other factors (9.5 percent).
In 2010, 37.5 million people 1 year and older changed residences in the U.S. within the past year. At 12.5 percent in 2010, the mover rate was not statistically different from 2009.
“Mover rates differ by characteristics, such as age, race, Hispanic origin, marital status, income or even whether the housing unit is owned or rented,” said David Ihrke, survey statistician in the Census Bureau’s Social, Economic and Housing Statistics Division. “Tracking mobility allows us to examine shifts in demographic trends in the population for the nation, regions and metro areas as a whole.”
In 2010, 69.3 percent of all movers stayed within the same county, 16.7 percent moved to a different county in the same state, 11.5 percent moved to a different state, and 2.5 percent moved from abroad to the U.S.
By region, people in the Northeast were the least likely to move, with a mover rate of 8.3 percent in 2010. The Northeast was followed by the Midwest (11.8 percent), the South (13.6 percent) and the West (14.7 percent). The mover rate for each region was not significantly different between 2009 and 2010.
Principal cities within metropolitan areas experienced a net loss of 2.3 million movers, while the suburbs experienced a net gain of 2.5 million movers.
Other highlights:
• Of the civilian population 16 and older who were unemployed, 19.8 percent lived in different residence one year earlier compared with 12.4 percent who were employed. Among those not in the labor force, 9.5 percent lived in a different residence one year earlier.
• Generally, people with incomes below the poverty line were more likely to move than those just above the poverty line. In 2010, 23.6 percent of people with incomes below 100 percent of the poverty line had moved within the last year compared with 16.5 percent of people with incomes between 100 and 149 percent of the poverty line.
• The black alone population had the highest mover rate (16.7 percent), followed by Hispanics (15.6 percent), Asian alone (13.9 percent) and white alone not Hispanic (10.8 percent).
Source: Florida Realtors®
An Android-Powered Home?
Buyers may someday ask you: “Is this home powered by Android?”
The ability to control a home via smartphone may not be too distant in the future, experts say. Google is setting the way for home owners to use its Android software to control everyday household items, everything from turning on and off the lights, the dishwasher, a lamp, and more.
Google’s Android@Home software would be built into appliances and light bulbs so it can wirelessly communicate with Android devices. For example, LightingScience this year released LED light bulbs that can connect with Android devices to turn off the lights without having to get up to flip the switch. Google also introduced the Open Accessory toolkit, which will help developers create other everyday household items that are compatible with Android devices.
“Everything should be Android-ified,” says Andy Rubin, head of Android. “We should just take it to new levels. It’s no longer something that people will go to the store to buy and then bring to their home or bring to their office. It’s something that will actually bridge those things.”
Source: “Turn Your Android Phone Into a Remote Control for Your Home,” The New York Times (May 10, 2011)
The ability to control a home via smartphone may not be too distant in the future, experts say. Google is setting the way for home owners to use its Android software to control everyday household items, everything from turning on and off the lights, the dishwasher, a lamp, and more.
Google’s Android@Home software would be built into appliances and light bulbs so it can wirelessly communicate with Android devices. For example, LightingScience this year released LED light bulbs that can connect with Android devices to turn off the lights without having to get up to flip the switch. Google also introduced the Open Accessory toolkit, which will help developers create other everyday household items that are compatible with Android devices.
“Everything should be Android-ified,” says Andy Rubin, head of Android. “We should just take it to new levels. It’s no longer something that people will go to the store to buy and then bring to their home or bring to their office. It’s something that will actually bridge those things.”
Source: “Turn Your Android Phone Into a Remote Control for Your Home,” The New York Times (May 10, 2011)
Uncover best investments with the right data
Supplying key housing data based on ZIP code – instead of an entire geographic area – can give investor clients greater insight into short-term and long-term appreciation potential of a property and help them make more informed decisions, experts say.
Here are three key pieces of data that real estate professionals can provide to help uncover homes with the greatest probability for appreciation:
▪ Home valuations: Home valuations by ZIP code compared with the foreclosure inventory for that same ZIP code can offer insight into the health of the area’s housing market.
▪ Foreclosure inventory: A better snapshot at the employment outlook in the area can be found by evaluating the number of foreclosure homes than even the city-wide employment figures, writes Elaine Zimmerman in a recent RISMedia article. An area with less than one foreclosure per 10,000 dwellings indicates low unemployment for that ZIP code.
▪ Asking prices: Compare the asking price for foreclosures in a ZIP code to similar non-foreclosure properties in the same ZIP code. If there isn’t a more than 20 percent difference between the two, the area will recover quickly; the smaller the percentage of difference, the more quickly that ZIP code will rebound, Zimmerman notes.
Source: INFORMATION, INC. Bethesda, MD
Here are three key pieces of data that real estate professionals can provide to help uncover homes with the greatest probability for appreciation:
▪ Home valuations: Home valuations by ZIP code compared with the foreclosure inventory for that same ZIP code can offer insight into the health of the area’s housing market.
▪ Foreclosure inventory: A better snapshot at the employment outlook in the area can be found by evaluating the number of foreclosure homes than even the city-wide employment figures, writes Elaine Zimmerman in a recent RISMedia article. An area with less than one foreclosure per 10,000 dwellings indicates low unemployment for that ZIP code.
▪ Asking prices: Compare the asking price for foreclosures in a ZIP code to similar non-foreclosure properties in the same ZIP code. If there isn’t a more than 20 percent difference between the two, the area will recover quickly; the smaller the percentage of difference, the more quickly that ZIP code will rebound, Zimmerman notes.
Source: INFORMATION, INC. Bethesda, MD
New push to phase out Fannie, Freddie
House of Representatives Republicans issued seven more bills that set out to reform Fannie Mae and Freddie Mac. That brings the total up to 15 bills since March.
The Republicans want to chip away at the government-sponsored enterprises (GSEs) that back or guarantee more than $5 trillion worth of U.S. mortgages and securitize about 90 percent of all new mortgages. The GSEs have been under federal control since September 2008, and lawmakers have been debating how to change their role in the mortgage market.
“We can no longer afford to sit back and allow the ongoing bailout of these failed institutions to continue,” says Rep. Scott Garrett (R-N.J.), chairman of the GSE subcommittee. “While special interest groups and the guardians of the status quo may not want to admit it, Fannie and Freddie’s days are numbered. It’s not a matter of if, but when – the quicker we begin the process of dismantling them the better off we’ll be.”
The seven latest bills, unveiled by Republicans in the House Financial Services Committee, set out to end bailouts for Fannie and Freddie and bring private capital into the mortgage market. Among the bills, proposed legislation would require Fannie and Freddie to dispose of all non-mission-critical assets; set a total dollar cap on the amount of money that can be used for the bailout of the GSEs; end the Affordable Housing Trust Fund that provides resources for affordable housing; and ensure replicas of the GSEs would not be created in the future housing finance system to replace Fannie and Freddie.
The GOP will face other competing bills. The latest, a bipartisan bill by House lawmakers John Campbell (R-Calif.) and Gary Peters (D-Mich.), seeks to wind down Fannie and Freddie within five years and create five new government agencies that would be privately funded.
The National Association of Realtors® has proposed its own version of GSE reforms. NAR says its proposal keeps the consumer in mind and will make sure the lending market keeps funding home sales. To read NAR’s position, click here.
Source: “Republicans Release Second Wave of GSE Reform Bills,” HousingWire (May 13, 2011), and “New Round of GSE Reform Bills Unveiled,” LoanRateUpdate.com (May 19, 2011) http://www.housingwire.com/2011/05/13/republicans-release-second-wave-of-gse-reform-bills
Source: INFORMATION, INC. Bethesda, MD
The Republicans want to chip away at the government-sponsored enterprises (GSEs) that back or guarantee more than $5 trillion worth of U.S. mortgages and securitize about 90 percent of all new mortgages. The GSEs have been under federal control since September 2008, and lawmakers have been debating how to change their role in the mortgage market.
“We can no longer afford to sit back and allow the ongoing bailout of these failed institutions to continue,” says Rep. Scott Garrett (R-N.J.), chairman of the GSE subcommittee. “While special interest groups and the guardians of the status quo may not want to admit it, Fannie and Freddie’s days are numbered. It’s not a matter of if, but when – the quicker we begin the process of dismantling them the better off we’ll be.”
The seven latest bills, unveiled by Republicans in the House Financial Services Committee, set out to end bailouts for Fannie and Freddie and bring private capital into the mortgage market. Among the bills, proposed legislation would require Fannie and Freddie to dispose of all non-mission-critical assets; set a total dollar cap on the amount of money that can be used for the bailout of the GSEs; end the Affordable Housing Trust Fund that provides resources for affordable housing; and ensure replicas of the GSEs would not be created in the future housing finance system to replace Fannie and Freddie.
The GOP will face other competing bills. The latest, a bipartisan bill by House lawmakers John Campbell (R-Calif.) and Gary Peters (D-Mich.), seeks to wind down Fannie and Freddie within five years and create five new government agencies that would be privately funded.
The National Association of Realtors® has proposed its own version of GSE reforms. NAR says its proposal keeps the consumer in mind and will make sure the lending market keeps funding home sales. To read NAR’s position, click here.
Source: “Republicans Release Second Wave of GSE Reform Bills,” HousingWire (May 13, 2011), and “New Round of GSE Reform Bills Unveiled,” LoanRateUpdate.com (May 19, 2011) http://www.housingwire.com/2011/05/13/republicans-release-second-wave-of-gse-reform-bills
Source: INFORMATION, INC. Bethesda, MD
US predicts 3 to 6 major Atlantic hurricanes
U.S. government forecasters announced Thursday they expect three to six major hurricanes during an above average Atlantic storm season.
No major hurricane has made a U.S. landfall in five years, but the forecasters warned U.S. coastal residents that odds are diminished that they can’t expect a sixth straight year without a major landfall on either the Atlantic or Gulf coasts.
As many as 18 named tropical storms may develop during the six-month Atlantic hurricane season that begins June 1, according to forecasters at the National Ocean and Atmospheric Administration. Six to 10 of those storms could strengthen into hurricanes with top winds of at least 74 mph, the agency said. Three to six could become major hurricanes, with maximum winds of 111 mph and up.
Last year’s hurricane season was one of the busiest on record with 19 named storms, including 12 hurricanes. The 2011 season was not expected to be as extreme, partly because ocean temperatures were only two degrees warmer than normal, instead of four degrees warmer as they were last year, said NOAA administrator Jane Lubchenco.
“We still expect that to support an above average hurricane season,” Lubchenco said.
Also, a Pacific Ocean weather phenomenon known as “La Nina” was expected to dissipate early in the summer before the season’s peak, typically from August to October, Lubchenco said.
La Nina is an unusual cooling of the Pacific waters near the equator. When its in effect, wind shear over the Caribbean Sea and tropical Atlantic decreases, meaning that tropical storms have a chance to develop and strengthen before being ripped apart.
Forecasters say La Nina helped make the 2010 season so active. The opposite El Nino phenomenon, which warms Pacific waters near the equator and increases wind shear over the Atlantic, helps suppress storm development.
Nevertheless, atmospheric and marine conditions indicating a high-activity era that began in 1995 continues and lingering La Nina impacts such as reduced wind shear are conducive to a busy storm season, said Gerry Bell, lead seasonal hurricane forecaster at NOAA’s Climate Prediction Center in Washington.
“We don’t think La Nina will be a player for much of the season, but that’s really secondary,” Bell said. “Conditions are already starting to be in place and we expect them to develop, and that’s why we expect an active season to be likely.”
No major hurricane has made a U.S. landfall since Category 3 Hurricane Wilma struck Florida in 2005, though Hurricane Ike caused extensive damage in September 2008 when it roared ashore in Galveston, Texas, as a strong Category 2 storm with top winds around 109 mph. After peaking as a Category 4 storm near the Turks and Caicos Islands, Ike caused $10 billion in damage in Texas, Louisiana and Arkansas, making it the third-costliest storm after Hurricanes Katrina in 2005 and Andrew in 1992, according to the National Hurricane Center.
Scientists said coastal residents can’t expect their luck to hold.
“The US was lucky last year. Despite an above normal season we did not have significant damage from these storms on U.S. land. The winds that steer where storms go kept them away from our coastlines,” Lubchenco said. “We cannot count on having the same luck this year.”
Federal Emergency Management Agency Administrator Craig Fugate urged residents from Texas to Maine to develop disaster plans and determine whether they live in evacuation zones.
“Far too many people will not be prepared and will try to get ready in the last minutes when a hurricane is threatening their community and not have enough time,” Fugate said.
Forecasters name tropical storms when their top winds reach 39 mph. The first named storm of the 2011 season will be Arlene.
The seasonal average is 11 named storms, six hurricanes and two major hurricanes.
In April, Colorado State University researchers predicted 16 named storms would form this season, with five strengthening into major hurricanes.
Hurricane season ends Nov. 30.
Online: NOAA’s National Hurricane Center: http://www.hurricanes.gov/
Source: The Associated Press, Jennifer Kay (Associated Press). All rights reserved.
No major hurricane has made a U.S. landfall in five years, but the forecasters warned U.S. coastal residents that odds are diminished that they can’t expect a sixth straight year without a major landfall on either the Atlantic or Gulf coasts.
As many as 18 named tropical storms may develop during the six-month Atlantic hurricane season that begins June 1, according to forecasters at the National Ocean and Atmospheric Administration. Six to 10 of those storms could strengthen into hurricanes with top winds of at least 74 mph, the agency said. Three to six could become major hurricanes, with maximum winds of 111 mph and up.
Last year’s hurricane season was one of the busiest on record with 19 named storms, including 12 hurricanes. The 2011 season was not expected to be as extreme, partly because ocean temperatures were only two degrees warmer than normal, instead of four degrees warmer as they were last year, said NOAA administrator Jane Lubchenco.
“We still expect that to support an above average hurricane season,” Lubchenco said.
Also, a Pacific Ocean weather phenomenon known as “La Nina” was expected to dissipate early in the summer before the season’s peak, typically from August to October, Lubchenco said.
La Nina is an unusual cooling of the Pacific waters near the equator. When its in effect, wind shear over the Caribbean Sea and tropical Atlantic decreases, meaning that tropical storms have a chance to develop and strengthen before being ripped apart.
Forecasters say La Nina helped make the 2010 season so active. The opposite El Nino phenomenon, which warms Pacific waters near the equator and increases wind shear over the Atlantic, helps suppress storm development.
Nevertheless, atmospheric and marine conditions indicating a high-activity era that began in 1995 continues and lingering La Nina impacts such as reduced wind shear are conducive to a busy storm season, said Gerry Bell, lead seasonal hurricane forecaster at NOAA’s Climate Prediction Center in Washington.
“We don’t think La Nina will be a player for much of the season, but that’s really secondary,” Bell said. “Conditions are already starting to be in place and we expect them to develop, and that’s why we expect an active season to be likely.”
No major hurricane has made a U.S. landfall since Category 3 Hurricane Wilma struck Florida in 2005, though Hurricane Ike caused extensive damage in September 2008 when it roared ashore in Galveston, Texas, as a strong Category 2 storm with top winds around 109 mph. After peaking as a Category 4 storm near the Turks and Caicos Islands, Ike caused $10 billion in damage in Texas, Louisiana and Arkansas, making it the third-costliest storm after Hurricanes Katrina in 2005 and Andrew in 1992, according to the National Hurricane Center.
Scientists said coastal residents can’t expect their luck to hold.
“The US was lucky last year. Despite an above normal season we did not have significant damage from these storms on U.S. land. The winds that steer where storms go kept them away from our coastlines,” Lubchenco said. “We cannot count on having the same luck this year.”
Federal Emergency Management Agency Administrator Craig Fugate urged residents from Texas to Maine to develop disaster plans and determine whether they live in evacuation zones.
“Far too many people will not be prepared and will try to get ready in the last minutes when a hurricane is threatening their community and not have enough time,” Fugate said.
Forecasters name tropical storms when their top winds reach 39 mph. The first named storm of the 2011 season will be Arlene.
The seasonal average is 11 named storms, six hurricanes and two major hurricanes.
In April, Colorado State University researchers predicted 16 named storms would form this season, with five strengthening into major hurricanes.
Hurricane season ends Nov. 30.
Online: NOAA’s National Hurricane Center: http://www.hurricanes.gov/
Source: The Associated Press, Jennifer Kay (Associated Press). All rights reserved.
Fixed mortgage rates touch new low for 2011
Fixed mortgage rates fell this week to the lowest point of the year, offering incentive for homeowners to save money by refinancing their loans.
Freddie Mac said Thursday that the average rate on the 30-year loan fell to 4.61 percent. That’s down from 4.63 percent and the lowest level since mid-December.
The average rate on the 15-year fixed mortgage, a popular refinance option, slipped to 3.80 percent from 3.82 percent. That marked the lowest point since late November.
Rates track the yield on the 10-year Treasury note, which fell to the lowest level of the year this week.
Low rates haven’t been enough to jumpstart the weak housing market. Fewer people bought previously occupied homes in April, the National Association of Realtors said Thursday. Sales fell to a seasonally adjusted annual rate of 5.05 million units, far below the 6 million homes a year that economists consider a healthy market.
However, the number of borrowers looking to refinance is now at the highest level since the second week of December, according to the Mortgage Bankers Association. Refinance activity has increased 33 percent over the last five weeks, mirroring the steady decline in rates.
Despite the gains, refinancing is only at half the level it reached in the fall of last year when mortgage rates fell to record lows. The rate on the 30-year home loan hit a four-decade low of 4.17 percent in November. The 15-year mortgage rate reached 3.57 percent that same month, the lowest level on records dating back to 1991.
“We’re not seeing a (refinancing) boom by any means,” said Pava Leyrer, president of Heritage National Mortgage in Michigan.
She said many borrowers refinanced when rates were lower last year. Others don’t have enough equity in their homes because values have fallen too much or their credit isn’t polished enough for them to qualify.
And those who may shave off a percentage point or more from their mortgage rate face higher closing costs this year because of a recent fee increase for appraisals, title insurance and other costs. That could offset any savings from an interest rate reduction.
“If it’s purely a rate decision, the difference needs to be one and a half percentage points,” said Ritch Workman, co-owner of Workman Mortgage in Melbourne, Fla.
Workman has noticed an uptick in applications for purchase mortgages. Would-be buyers are taking advantage of the combination of low rates and declining home prices.
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 3.48 percent from 3.41 percent. The five-year adjustable-rate loan hit 3.25 percent last month, the lowest rate on records dating back to January 2005.
The average rate on a one-year adjustable-rate loan also increased to 3.15 percent from 3.11 percent, the lowest level for the rate in the last year.
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 that the average rate on the 30-year loan fell to 4.61 percent. That’s down from 4.63 percent and the lowest level since mid-December.
The average rate on the 15-year fixed mortgage, a popular refinance option, slipped to 3.80 percent from 3.82 percent. That marked the lowest point since late November.
Rates track the yield on the 10-year Treasury note, which fell to the lowest level of the year this week.
Low rates haven’t been enough to jumpstart the weak housing market. Fewer people bought previously occupied homes in April, the National Association of Realtors said Thursday. Sales fell to a seasonally adjusted annual rate of 5.05 million units, far below the 6 million homes a year that economists consider a healthy market.
However, the number of borrowers looking to refinance is now at the highest level since the second week of December, according to the Mortgage Bankers Association. Refinance activity has increased 33 percent over the last five weeks, mirroring the steady decline in rates.
Despite the gains, refinancing is only at half the level it reached in the fall of last year when mortgage rates fell to record lows. The rate on the 30-year home loan hit a four-decade low of 4.17 percent in November. The 15-year mortgage rate reached 3.57 percent that same month, the lowest level on records dating back to 1991.
“We’re not seeing a (refinancing) boom by any means,” said Pava Leyrer, president of Heritage National Mortgage in Michigan.
She said many borrowers refinanced when rates were lower last year. Others don’t have enough equity in their homes because values have fallen too much or their credit isn’t polished enough for them to qualify.
And those who may shave off a percentage point or more from their mortgage rate face higher closing costs this year because of a recent fee increase for appraisals, title insurance and other costs. That could offset any savings from an interest rate reduction.
“If it’s purely a rate decision, the difference needs to be one and a half percentage points,” said Ritch Workman, co-owner of Workman Mortgage in Melbourne, Fla.
Workman has noticed an uptick in applications for purchase mortgages. Would-be buyers are taking advantage of the combination of low rates and declining home prices.
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 3.48 percent from 3.41 percent. The five-year adjustable-rate loan hit 3.25 percent last month, the lowest rate on records dating back to January 2005.
The average rate on a one-year adjustable-rate loan also increased to 3.15 percent from 3.11 percent, the lowest level for the rate in the last year.
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, May 19, 2011
Mortgage Forms to get More Consumer-Friendly
Borrowers may soon have an easier time sorting out all of those key details and expenses associated with their mortgage as well as more easily compare loan terms when trying to shop around for a mortgage that works best for them.
The Consumer Financial Protection Bureau recently unveiled its “Know Before You Owe” project and is seeking public feedback on two “consumer friendly” prototype mortgage disclosure forms that will replace the current required disclosure forms by July 2012.
The prototype forms itemize key costs associated with the mortgage, including total closing costs, monthly payments, and projected monthly payments for future years. The forms also provide more details about the mortgage’s terms than the current form does.
The bureau is running tests on the prototype forms as well as seeking public comment. Review the sample forms and provide feedback at http://www.consumerfinance.gov/knowbeforeyouowe.
Source: “Mortgage Disclosures Getting Another Revamp,” Associated Press (May 18, 2011)
The Consumer Financial Protection Bureau recently unveiled its “Know Before You Owe” project and is seeking public feedback on two “consumer friendly” prototype mortgage disclosure forms that will replace the current required disclosure forms by July 2012.
The prototype forms itemize key costs associated with the mortgage, including total closing costs, monthly payments, and projected monthly payments for future years. The forms also provide more details about the mortgage’s terms than the current form does.
The bureau is running tests on the prototype forms as well as seeking public comment. Review the sample forms and provide feedback at http://www.consumerfinance.gov/knowbeforeyouowe.
Source: “Mortgage Disclosures Getting Another Revamp,” Associated Press (May 18, 2011)
U.S. home sales by foreign buyers surge
The U.S. continues to remain a top destination for foreign buyers as international purchases surged by $16 billion this year – one of the highest increases in recent years – according to the National Association of Realtors®’ 2011 Profile of International Home Buying Activity.
According to the survey, total residential international sales in the U.S. for the year ending March 2011 equaled $82 billion, up from $66 billion in 2010. Total international sales were split evenly between non-resident foreigners and recent immigrants, while combined total domestic and international existing-home sales in the U.S. reached $1.07 trillion.
Florida had 31 percent of total international transactions this year, the most of any state. California had 12 percent, Texas had nine percent, and Arizona rounded out the top four with six percent of international transactions.
“The U.S. has always been a desirable place to own property and a profitable investment,” says NAR President Ron Phipps. “In recent years, we’ve seen more and more foreign buyers coming here to take advantage of low prices and plentiful inventory. In addition to the advantageous market conditions, Realtors in this country have a global perspective and experience in working with clients from different cultures and real estate practices, helping them bring value to their international clients.”
Historically, foreign buyers have been attracted to property ownership in the U.S. for a number of reasons. U.S. homes are generally less expensive than comparable foreign properties, homes in this country are viewed as a secure investment, and the U.S. market offers rental opportunities and long-term appreciation potential.
More recently, Realtors have noticed new factors motivating foreign buyers. Many U.S. colleges and universities have a significant number of international students, and some foreign families are purchasing U.S. properties in college areas so their child has a place to live. Another source of international demand is foreign executives temporarily working in the U.S., some of whom prefer to purchase a residence instead of renting.
“Besides the strength of the dollar and the general economic trends in the U.S., international buyers are also recognizing the benefits of homeownership in this country, especially in the case of recent immigrants,” says Phipps. “Many foreigners perceive owning a home here as an important accomplishment in their efforts to become established in this country.”
Recent international buyers came from 70 different countries, up from 53 countries in 2010. For the fourth consecutive year, Canada was the top country of origin, with 23 percent of sales to foreigners. China was second most popular, with nine percent of international sales this year. Tied for third were Mexico, the U.K. and India. Argentina and Brazil combined reported an increase in foreign sales with five percent, up from two percent in 2010. The top five countries of origin accounted for 53 percent of international transactions in 2011.
The average price paid by an international buyer was $315,000 compared to the overall U.S. average of $218,000. However, 45 percent of international purchases were under $200,000. This price segment has grown significantly over the years, most likely due to overall price declines in the U.S., as well as the strengthening of some foreign currencies.
Almost every state had at least one international transaction in the past year. The four states with the heaviest concentration of international buyer activity have remained the same over the past five years.
Foreign buyers are primarily interested in three factors when deciding where to buy in the U.S.: proximity to their home country, convenience of air transportation, climate and location. Generally, the East Coast attracts European buyers. The West Coast remains popular for Asian purchasers. Mexican buyers are traditionally attracted to the Southwestern markets. Florida is most popular among South Americans, Europeans and Canadians.
Similar to last year, 28 percent of Realtors in 2011 reported working with an international client. Fifty-five percent served at least one foreign client, while the bulk of international transactions were handled by a small percentage of Realtors. Only eight percent of members obtained 50 percent or more of their transactions from international clients.
Sixty-one percent of foreign buyers purchased a single-family home while 36 percent bought a condo/apartment or townhouse.
In addition, 62 percent of international purchases were reported as being all cash. This percentage is significantly higher than all-cash purchases for domestic buyers, mostly due to the differences in international credit reporting standards.
Financing challenges continue to be a major hurdle for international buyers, with 32 percent reporting these as their reason for not buying a home. Many Realtors reported that their foreign clients faced mortgage financing issues, as well as problems with legal, tax and immigration laws.
To download the full report, visit NAR’s website.
Source: Florida Realtors®
According to the survey, total residential international sales in the U.S. for the year ending March 2011 equaled $82 billion, up from $66 billion in 2010. Total international sales were split evenly between non-resident foreigners and recent immigrants, while combined total domestic and international existing-home sales in the U.S. reached $1.07 trillion.
Florida had 31 percent of total international transactions this year, the most of any state. California had 12 percent, Texas had nine percent, and Arizona rounded out the top four with six percent of international transactions.
“The U.S. has always been a desirable place to own property and a profitable investment,” says NAR President Ron Phipps. “In recent years, we’ve seen more and more foreign buyers coming here to take advantage of low prices and plentiful inventory. In addition to the advantageous market conditions, Realtors in this country have a global perspective and experience in working with clients from different cultures and real estate practices, helping them bring value to their international clients.”
Historically, foreign buyers have been attracted to property ownership in the U.S. for a number of reasons. U.S. homes are generally less expensive than comparable foreign properties, homes in this country are viewed as a secure investment, and the U.S. market offers rental opportunities and long-term appreciation potential.
More recently, Realtors have noticed new factors motivating foreign buyers. Many U.S. colleges and universities have a significant number of international students, and some foreign families are purchasing U.S. properties in college areas so their child has a place to live. Another source of international demand is foreign executives temporarily working in the U.S., some of whom prefer to purchase a residence instead of renting.
“Besides the strength of the dollar and the general economic trends in the U.S., international buyers are also recognizing the benefits of homeownership in this country, especially in the case of recent immigrants,” says Phipps. “Many foreigners perceive owning a home here as an important accomplishment in their efforts to become established in this country.”
Recent international buyers came from 70 different countries, up from 53 countries in 2010. For the fourth consecutive year, Canada was the top country of origin, with 23 percent of sales to foreigners. China was second most popular, with nine percent of international sales this year. Tied for third were Mexico, the U.K. and India. Argentina and Brazil combined reported an increase in foreign sales with five percent, up from two percent in 2010. The top five countries of origin accounted for 53 percent of international transactions in 2011.
The average price paid by an international buyer was $315,000 compared to the overall U.S. average of $218,000. However, 45 percent of international purchases were under $200,000. This price segment has grown significantly over the years, most likely due to overall price declines in the U.S., as well as the strengthening of some foreign currencies.
Almost every state had at least one international transaction in the past year. The four states with the heaviest concentration of international buyer activity have remained the same over the past five years.
Foreign buyers are primarily interested in three factors when deciding where to buy in the U.S.: proximity to their home country, convenience of air transportation, climate and location. Generally, the East Coast attracts European buyers. The West Coast remains popular for Asian purchasers. Mexican buyers are traditionally attracted to the Southwestern markets. Florida is most popular among South Americans, Europeans and Canadians.
Similar to last year, 28 percent of Realtors in 2011 reported working with an international client. Fifty-five percent served at least one foreign client, while the bulk of international transactions were handled by a small percentage of Realtors. Only eight percent of members obtained 50 percent or more of their transactions from international clients.
Sixty-one percent of foreign buyers purchased a single-family home while 36 percent bought a condo/apartment or townhouse.
In addition, 62 percent of international purchases were reported as being all cash. This percentage is significantly higher than all-cash purchases for domestic buyers, mostly due to the differences in international credit reporting standards.
Financing challenges continue to be a major hurdle for international buyers, with 32 percent reporting these as their reason for not buying a home. Many Realtors reported that their foreign clients faced mortgage financing issues, as well as problems with legal, tax and immigration laws.
To download the full report, visit NAR’s website.
Source: Florida Realtors®
Florida’s existing home, condo sales rise in April 2011
Florida’s existing home and existing condo sales rose in April, according to the latest housing data released by Florida Realtors®. Existing home sales increased 2 percent last month with a total of 17,192 homes sold statewide compared to 16,781 homes sold in April 2010, according to Florida Realtors. Statewide sales of existing condos last month rose 17 percent compared to the year-ago sales figure.
Twelve of Florida’s metropolitan statistical areas (MSAs) reported higher existing home sales in April; 14 MSAs also had higher condo sales. It’s the fifth consecutive month that Florida Realtors has reported higher year-over-year existing home and existing condo sales statewide.
“Market conditions remain optimal for qualified buyers with strong credit,” said 2011 Florida Realtors® President Patricia Fitzgerald, manager/broker-associate with Illustrated Properties in Hobe Sound and Mariner Sands Country Club in Stuart. “Mortgage interest rates are under five percent, a range of housing options is available at very affordable prices, and the economic recovery continues to strengthen. Realtors across the state are reporting increased interest from buyers ready to find their Florida dream home.”
Florida’s median sales price for existing homes last month was $131,700; a year ago, it was $140,300 for a 6 percent decrease. However, April’s statewide existing home median price was 4.3 percent higher than it was in March. 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 March 2011 was $160,500, down 5.3 percent from a year ago, according to NAR. In California, the statewide median resales price was $286,010 in March; in Massachusetts, it was $273,475; in New York, it was $215,000; and in Maryland, it was $215,000.
NAR’s latest industry outlook predicts that existing home sales will continue to rise gradually but unevenly. “Existing home sales have risen in six of the past eight months, so we’re clearly on a recovery path,” said NAR Chief Economist Lawrence Yun. “With rising jobs and excellent affordability conditions, we project moderate improvements into 2012, but not every month will show a gain – primarily because some buyers are finding it too difficult to obtain a mortgage.”
In Florida’s year-to-year comparison for condos, 8,987 units sold statewide last month compared to 7,703 units in April 2010 for an increase of 17 percent. The statewide existing condo median sales price last month was $91,900; in April 2010 it was $100,200 for an 8 percent decrease. April’s statewide existing condo median price was 9 percent higher than it was in March. The national median existing condo sales price was $153,100 in March 2011, according to NAR.
The interest rate for a 30-year fixed-rate mortgage averaged 4.84 percent in April, significantly lower than the 5.10 percent averaged 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®
Twelve of Florida’s metropolitan statistical areas (MSAs) reported higher existing home sales in April; 14 MSAs also had higher condo sales. It’s the fifth consecutive month that Florida Realtors has reported higher year-over-year existing home and existing condo sales statewide.
“Market conditions remain optimal for qualified buyers with strong credit,” said 2011 Florida Realtors® President Patricia Fitzgerald, manager/broker-associate with Illustrated Properties in Hobe Sound and Mariner Sands Country Club in Stuart. “Mortgage interest rates are under five percent, a range of housing options is available at very affordable prices, and the economic recovery continues to strengthen. Realtors across the state are reporting increased interest from buyers ready to find their Florida dream home.”
Florida’s median sales price for existing homes last month was $131,700; a year ago, it was $140,300 for a 6 percent decrease. However, April’s statewide existing home median price was 4.3 percent higher than it was in March. 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 March 2011 was $160,500, down 5.3 percent from a year ago, according to NAR. In California, the statewide median resales price was $286,010 in March; in Massachusetts, it was $273,475; in New York, it was $215,000; and in Maryland, it was $215,000.
NAR’s latest industry outlook predicts that existing home sales will continue to rise gradually but unevenly. “Existing home sales have risen in six of the past eight months, so we’re clearly on a recovery path,” said NAR Chief Economist Lawrence Yun. “With rising jobs and excellent affordability conditions, we project moderate improvements into 2012, but not every month will show a gain – primarily because some buyers are finding it too difficult to obtain a mortgage.”
In Florida’s year-to-year comparison for condos, 8,987 units sold statewide last month compared to 7,703 units in April 2010 for an increase of 17 percent. The statewide existing condo median sales price last month was $91,900; in April 2010 it was $100,200 for an 8 percent decrease. April’s statewide existing condo median price was 9 percent higher than it was in March. The national median existing condo sales price was $153,100 in March 2011, according to NAR.
The interest rate for a 30-year fixed-rate mortgage averaged 4.84 percent in April, significantly lower than the 5.10 percent averaged 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®
Wednesday, May 18, 2011
Some Sellers Offer Financing to Get Deals Closed
Buyers who have a foreclosure or bankruptcy in their credit past wouldn’t be a likely candidate to secure financing from a bank anytime soon for a home purchase. As a result, some sellers are stepping in to offer seller financing to get a home sold.
Seller financing, once popular in the 1980s when mortgage rates spiked to 18 percent, is making a comeback in areas flooded by foreclosures and where tight lending standards are keeping some buyers on the sidelines, reports Bloomberg News.
“The market is locked up because there’s no financing,” says Gordon Albrecht, executive vice president of FCI Lender Services Inc. “This is moving houses.”
Last year, 52,991 U.S. homes were purchased with various forms of seller financing--a 56 percent jump from 2008, according to the REALTORS® Property Resource LLC. In 2010, such deals made up 1.5 percent of all transactions.
One popular form of seller financing is known as a land contract, which is when a buyer takes possession of the home but the seller holds the title until the debt is completely paid off. The loan’s terms--such as down payments and interest rates--are negotiable. These arrangements usually consist of a balloon payment in five to 10 years, which is when buyers will have to repay the seller or lose the home, along with any money they already put into it.
Source: “Home Sellers Become Lenders to Poor-Credit Buyers,” Bloomberg (May 11, 2011)
Seller financing, once popular in the 1980s when mortgage rates spiked to 18 percent, is making a comeback in areas flooded by foreclosures and where tight lending standards are keeping some buyers on the sidelines, reports Bloomberg News.
“The market is locked up because there’s no financing,” says Gordon Albrecht, executive vice president of FCI Lender Services Inc. “This is moving houses.”
Last year, 52,991 U.S. homes were purchased with various forms of seller financing--a 56 percent jump from 2008, according to the REALTORS® Property Resource LLC. In 2010, such deals made up 1.5 percent of all transactions.
One popular form of seller financing is known as a land contract, which is when a buyer takes possession of the home but the seller holds the title until the debt is completely paid off. The loan’s terms--such as down payments and interest rates--are negotiable. These arrangements usually consist of a balloon payment in five to 10 years, which is when buyers will have to repay the seller or lose the home, along with any money they already put into it.
Source: “Home Sellers Become Lenders to Poor-Credit Buyers,” Bloomberg (May 11, 2011)
4 tech trends to implement now
With social media and mobile phones advancing, technology is allowing practitioners to connect with more consumers, send files faster, and ultimately, do more business.
At the Professional Development Forum at the Realtors® Midyear Legislative Meetings, technology expert Amy Chorew of TheTechByte.com urged practitioners to consider incorporating these strategies into their business models.
1. Market through social media. An NAR study finds that 87 percent of homebuyers begin their search online, but Chorew says that more will probably start at social media sites. “Permission-based marketing such as Facebook or Twitter allows the customers to listen or read messages because they are interested in the content of the message,” she explained. She cautions practitioners to be careful with the content they create for social media and how they use the “Like” and “Share” functions. However, when used effectively, she says this could be all the marketing they need to do.
2. Work in the cloud. Real estate pros often have to exchange large files between colleagues and clients. Cloud computing allows you to store those files online and access them later from a smart phone or desktop no matter where you’re located. Chorew recommends Dropbox.com, Google Docs, or Box.net, which syncs with DocuSign, an e-signature company.
3. Make your site mobile. Five years ago, Web site developers were concerned with making sure that their pages looked good on all browsers. Today, Web hosts need to make sure their site is navigable on all mobile devices. “People expect to be able to pull up a site from any device and have it look good.” Chorew recommends that practitioners make it a priority to develop their sites for mobile devices.
4. Go viral with video. As more smartphones come built in with video cameras, Chorew says you can expect to see more video on real estate sites, since it can show more of the property. She recommends trying out the video functions on your digital camera before investing in a video camera and always recording with a small tripod.
Source: Katherine Tarbox, Realtor® Magazine and Florida Realtors®
At the Professional Development Forum at the Realtors® Midyear Legislative Meetings, technology expert Amy Chorew of TheTechByte.com urged practitioners to consider incorporating these strategies into their business models.
1. Market through social media. An NAR study finds that 87 percent of homebuyers begin their search online, but Chorew says that more will probably start at social media sites. “Permission-based marketing such as Facebook or Twitter allows the customers to listen or read messages because they are interested in the content of the message,” she explained. She cautions practitioners to be careful with the content they create for social media and how they use the “Like” and “Share” functions. However, when used effectively, she says this could be all the marketing they need to do.
2. Work in the cloud. Real estate pros often have to exchange large files between colleagues and clients. Cloud computing allows you to store those files online and access them later from a smart phone or desktop no matter where you’re located. Chorew recommends Dropbox.com, Google Docs, or Box.net, which syncs with DocuSign, an e-signature company.
3. Make your site mobile. Five years ago, Web site developers were concerned with making sure that their pages looked good on all browsers. Today, Web hosts need to make sure their site is navigable on all mobile devices. “People expect to be able to pull up a site from any device and have it look good.” Chorew recommends that practitioners make it a priority to develop their sites for mobile devices.
4. Go viral with video. As more smartphones come built in with video cameras, Chorew says you can expect to see more video on real estate sites, since it can show more of the property. She recommends trying out the video functions on your digital camera before investing in a video camera and always recording with a small tripod.
Source: Katherine Tarbox, Realtor® Magazine and Florida Realtors®
Lawmakers call for investigation of HUD program
A bipartisan group of federal lawmakers is calling on Congress to look into the nation’s housing-construction program for the poor, citing years-long delays and other breakdowns that have thwarted the production of hundreds of affordable-housing projects.
Senate Banking Chairman Tim Johnson (D-S.D.) and Sen. Richard C. Shelby (Ala.), the panel’s ranking Republican, said Monday that they will seek to investigate the Department of Housing and Urban Development’s HOME program, which delivers $2 billion a year to local housing agencies to build and renovate homes around the country.
Rep. Elijah E. Cummings (Md.), the ranking Democrat on the House Oversight and Government Reform Committee, also called for an investigation, sending a letter on Tuesday to committee Chairman Darrell Issa (R-Calif.).
“It’s quite disturbing,” Cummings said. “I expect every dime to be spent effectively and efficiently. The American people are not getting what they bargained for. This is one that hits home – literally.”
Three other lawmakers – Reps. Spencer Bachus (R-Ala.), chairman of the Financial Services Committee; Randy Neugebauer (R-Tex.), chairman of the subcommittee on oversight and investigations; and Judy Biggert (R-Ill.), chairman of the subcommittee on housing and insurance – sent a letter to HUD on Tuesday demanding detailed information about delayed projects and the agency’s oversight.
A year-long Washington Post investigation, published this week, found that nearly 700 construction projects awarded $400 million have been idling on HUD’s books – some for a decade or longer – leaving a blighted trail of empty lots and abandoned buildings in neighborhoods nationwide. HUD cuts checks but does not track the pace of construction and often fails to spot delayed or defunct projects, The Post found.
“We are deeply concerned by these reports, particularly at a time when so many Americans are in need of affordable housing,” Johnson and Shelby said in a joint statement.
HUD officials defended the HOME program this week, noting that the 700 projects cited by The Post represent 2.5 percent of 28,000 active developments. Officials added that some of the projects are delayed because “we’re in the middle of a housing crisis in this country.”
The Post did not attempt to track all 28,000 open projects, instead analyzing 5,100 deals worth $50,000 or more. Hundreds were started years before the housing crisis. In addition to the 700 projects, The Post identified 600 development deals that have never drawn any money even though it has been available for a year or more, tying up $250 million. In January, HUD started canceling these projects.
Source: washingtonpost.com, Debbie Cenziper
Senate Banking Chairman Tim Johnson (D-S.D.) and Sen. Richard C. Shelby (Ala.), the panel’s ranking Republican, said Monday that they will seek to investigate the Department of Housing and Urban Development’s HOME program, which delivers $2 billion a year to local housing agencies to build and renovate homes around the country.
Rep. Elijah E. Cummings (Md.), the ranking Democrat on the House Oversight and Government Reform Committee, also called for an investigation, sending a letter on Tuesday to committee Chairman Darrell Issa (R-Calif.).
“It’s quite disturbing,” Cummings said. “I expect every dime to be spent effectively and efficiently. The American people are not getting what they bargained for. This is one that hits home – literally.”
Three other lawmakers – Reps. Spencer Bachus (R-Ala.), chairman of the Financial Services Committee; Randy Neugebauer (R-Tex.), chairman of the subcommittee on oversight and investigations; and Judy Biggert (R-Ill.), chairman of the subcommittee on housing and insurance – sent a letter to HUD on Tuesday demanding detailed information about delayed projects and the agency’s oversight.
A year-long Washington Post investigation, published this week, found that nearly 700 construction projects awarded $400 million have been idling on HUD’s books – some for a decade or longer – leaving a blighted trail of empty lots and abandoned buildings in neighborhoods nationwide. HUD cuts checks but does not track the pace of construction and often fails to spot delayed or defunct projects, The Post found.
“We are deeply concerned by these reports, particularly at a time when so many Americans are in need of affordable housing,” Johnson and Shelby said in a joint statement.
HUD officials defended the HOME program this week, noting that the 700 projects cited by The Post represent 2.5 percent of 28,000 active developments. Officials added that some of the projects are delayed because “we’re in the middle of a housing crisis in this country.”
The Post did not attempt to track all 28,000 open projects, instead analyzing 5,100 deals worth $50,000 or more. Hundreds were started years before the housing crisis. In addition to the 700 projects, The Post identified 600 development deals that have never drawn any money even though it has been available for a year or more, tying up $250 million. In January, HUD started canceling these projects.
Source: washingtonpost.com, Debbie Cenziper
Freddie Mac rolls out summer promotion
HomeSteps, the real estate sales unit of Freddie Mac, launched a nationwide sales promotion for its inventory of foreclosed homes.
The HomeSteps Summer Sales Promotion offers up to 3.5 percent for the buyer’s closing costs and a $1,200 selling agent bonus for initial offers received May 16 – July 31, 2011, and escrows that are closed on or before Sept. 30, 2011. This offer is valid only on HomeSteps homes sold to owner-occupant buyers.
A two-year Home Protect limited home warranty that covers electrical, plumbing, air conditioning, heating and other major systems and appliances is offered on some eligible HomeSteps homes. Home Protect also provides discounts of up to 30 percent on the purchase of appliances, though terms, conditions and limitations apply and not all homes or borrowers will qualify. For details, see www.HomeSteps.com/smartbuy.
For HomeSteps Summer Sales Promotion details and conditions, visit http://www.homesteps.com/.
Source: Florida Realtors®
The HomeSteps Summer Sales Promotion offers up to 3.5 percent for the buyer’s closing costs and a $1,200 selling agent bonus for initial offers received May 16 – July 31, 2011, and escrows that are closed on or before Sept. 30, 2011. This offer is valid only on HomeSteps homes sold to owner-occupant buyers.
A two-year Home Protect limited home warranty that covers electrical, plumbing, air conditioning, heating and other major systems and appliances is offered on some eligible HomeSteps homes. Home Protect also provides discounts of up to 30 percent on the purchase of appliances, though terms, conditions and limitations apply and not all homes or borrowers will qualify. For details, see www.HomeSteps.com/smartbuy.
For HomeSteps Summer Sales Promotion details and conditions, visit http://www.homesteps.com/.
Source: Florida Realtors®
Scott signs property insurance re-write
A sweeping measure aimed at reducing costs to property insurers and liability for taxpayers was signed into law Tuesday by Gov. Rick Scott, who said it was a significant first step in restoring the private insurance market in Florida.
Equally important, Scott said the measure (SB 408) will help lower the number of Florida coastal residents now insured by the state-backed Citizens Property Insurance Corp., the state’s largest property insurer with 1.3 million policies, by making it easier for private companies to compete.
“We’ve got to recruit other companies, other insurance companies,” Scott said Tuesday in an interview with the News Service. “We’ve got to make sure Citizens goes back to being the insurance company of last resort.”
Among its changes, the bill allows insurance companies to charge more for policies that pay replacement costs upfront while offering discounts to policyholders who opt to get reimbursed for lost items as they are replaced.
A major provision places more restrictions on sinkhole coverage. The law makes it easier for insurers to challenge claims and shortens to two years the window in which policyholders can file claims.
“This bill focuses on addressing cost drivers in the system and will yield long-term benefits for Florida by stabilizing the property insurance market and attracting new capital investment to our state,” said Kevin McCarty, Florida’s insurance commissioner, who supported similar changes that were vetoed last year by then Gov. Charlie Crist.
Less enthused, however, were critics of insurers, led by Sen. Mike Fasano, R-New Port Richey, who said the changes left many policyholders at risk of losing private insurance altogether and being forced to go into Citizens – the opposite of one of the bill’s intended effects.
“Unfortunately, what happens next is that every homeowner, every condo owner, every mobile homeowner, and every small business owner will be paying higher premiums to private insurers and will see their rates go up in the next 18 months,” Fasano said in an interview.
Scott’s decision drew immediate praise from the Senate sponsor, business groups and the industry as a whole.
“(The bill) closes loopholes that invite fraudulent claims by restricting misleading advertising and misleading solicitations,” said Richter, R-Naples, sponsor of the bill. “It also attacks cost drivers in an effort to responsibly lower insurance premiums. With hurricane season quickly approaching, this legislation is critical to ensure a solvent industry that policyholders can rely on.”
The insurance industry lobbied the issue hard. State Farm, Florida’s second largest property insurer behind state-backed Citizens Property Insurance Corp, spent at least $150,000 for the quarter to press its case to lawmakers. FCCI, a regional commercial insurer, spent more than $250,000 in lobbying fees.
Business groups including the Florida Chamber of Commerce and Associated Industries of Florida lauded the signing Tuesday, calling the measure a good first step.
“We should not be requiring all Floridians, including businesses, charities, homeowners, churches and automobile policyholders to pay hurricane taxes,” said Jose Gonzales, of AIF. “We should not be subsidizing million-dollar beach homes on Florida’s coast and we should not be going into every hurricane season hoping for a miracle.”
Fasano, however, said he hopes to return to the issue when lawmakers return next year after policyholders feel the effects.
“Gov. Scott ran on a platform of no new taxes or fees,” Fasano said. “The law pretty much ensures that we will see a rise in fees, a tax if you will, on all rate payers.”
Source: News Service of Florida, Michael Peltier
Equally important, Scott said the measure (SB 408) will help lower the number of Florida coastal residents now insured by the state-backed Citizens Property Insurance Corp., the state’s largest property insurer with 1.3 million policies, by making it easier for private companies to compete.
“We’ve got to recruit other companies, other insurance companies,” Scott said Tuesday in an interview with the News Service. “We’ve got to make sure Citizens goes back to being the insurance company of last resort.”
Among its changes, the bill allows insurance companies to charge more for policies that pay replacement costs upfront while offering discounts to policyholders who opt to get reimbursed for lost items as they are replaced.
A major provision places more restrictions on sinkhole coverage. The law makes it easier for insurers to challenge claims and shortens to two years the window in which policyholders can file claims.
“This bill focuses on addressing cost drivers in the system and will yield long-term benefits for Florida by stabilizing the property insurance market and attracting new capital investment to our state,” said Kevin McCarty, Florida’s insurance commissioner, who supported similar changes that were vetoed last year by then Gov. Charlie Crist.
Less enthused, however, were critics of insurers, led by Sen. Mike Fasano, R-New Port Richey, who said the changes left many policyholders at risk of losing private insurance altogether and being forced to go into Citizens – the opposite of one of the bill’s intended effects.
“Unfortunately, what happens next is that every homeowner, every condo owner, every mobile homeowner, and every small business owner will be paying higher premiums to private insurers and will see their rates go up in the next 18 months,” Fasano said in an interview.
Scott’s decision drew immediate praise from the Senate sponsor, business groups and the industry as a whole.
“(The bill) closes loopholes that invite fraudulent claims by restricting misleading advertising and misleading solicitations,” said Richter, R-Naples, sponsor of the bill. “It also attacks cost drivers in an effort to responsibly lower insurance premiums. With hurricane season quickly approaching, this legislation is critical to ensure a solvent industry that policyholders can rely on.”
The insurance industry lobbied the issue hard. State Farm, Florida’s second largest property insurer behind state-backed Citizens Property Insurance Corp, spent at least $150,000 for the quarter to press its case to lawmakers. FCCI, a regional commercial insurer, spent more than $250,000 in lobbying fees.
Business groups including the Florida Chamber of Commerce and Associated Industries of Florida lauded the signing Tuesday, calling the measure a good first step.
“We should not be requiring all Floridians, including businesses, charities, homeowners, churches and automobile policyholders to pay hurricane taxes,” said Jose Gonzales, of AIF. “We should not be subsidizing million-dollar beach homes on Florida’s coast and we should not be going into every hurricane season hoping for a miracle.”
Fasano, however, said he hopes to return to the issue when lawmakers return next year after policyholders feel the effects.
“Gov. Scott ran on a platform of no new taxes or fees,” Fasano said. “The law pretty much ensures that we will see a rise in fees, a tax if you will, on all rate payers.”
Source: News Service of Florida, Michael Peltier
Tuesday, May 17, 2011
Construction of new homes dropped in April
Construction of new homes dropped in April, another troubling sign for the battered housing market.
Builders broke ground on 10.6 percent fewer new homes last month from the previous month. The seasonally adjusted rate fell to 523,000 homes per year, the Commerce Department said Tuesday. That’s down nearly 25 percent from one year ago and less than half the 1.2 million homes per year that economists consider a sign of a healthy market.
Tighter lending standards and high unemployment are weighing on the housing sector, which is in the midst of one of its worst years in history.
Builders are also struggling to compete with millions of foreclosures, which are forcing down prices for previously occupied homes. The median price of a new home was about 34 percent higher in March than the median price for a resale. That’s more than twice the markup in healthy housing markets.
In some cities, prices are half of what they were before the housing market collapsed in 2006 and 2007. Many potential buyers who could qualify for loans are worried that prices will fall further. Others are hesitant to put their own homes on the market when prices are dropping.
The weak housing market is weighing on the overall economic recovery. Each new home built creates an average of three jobs for a year and generates about $90,000 in taxes, according to the builders’ group.
In past modern-day recessions, housing accounted for 15 to 20 percent of overall economic growth. In the first post-recession year, between 2009 and 2010, housing contributed just 4 percent to the economy.
On Monday the National Association of Home Builders said its survey of homebuilder sentiment was unchanged at 16. That’s the same level it has been for six of the past seven months. Any reading below 50 indicates negative sentiment about the market. The index hasn’t been above that level since April 2006.
And when asked about where they see sales of single-family home heading over the next six months, the builders surveyed offered their most pessimistic outlook since September.
Source: The Associated Press, Derek Kravitz, AP real estate writer. All rights reserved.
Builders broke ground on 10.6 percent fewer new homes last month from the previous month. The seasonally adjusted rate fell to 523,000 homes per year, the Commerce Department said Tuesday. That’s down nearly 25 percent from one year ago and less than half the 1.2 million homes per year that economists consider a sign of a healthy market.
Tighter lending standards and high unemployment are weighing on the housing sector, which is in the midst of one of its worst years in history.
Builders are also struggling to compete with millions of foreclosures, which are forcing down prices for previously occupied homes. The median price of a new home was about 34 percent higher in March than the median price for a resale. That’s more than twice the markup in healthy housing markets.
In some cities, prices are half of what they were before the housing market collapsed in 2006 and 2007. Many potential buyers who could qualify for loans are worried that prices will fall further. Others are hesitant to put their own homes on the market when prices are dropping.
The weak housing market is weighing on the overall economic recovery. Each new home built creates an average of three jobs for a year and generates about $90,000 in taxes, according to the builders’ group.
In past modern-day recessions, housing accounted for 15 to 20 percent of overall economic growth. In the first post-recession year, between 2009 and 2010, housing contributed just 4 percent to the economy.
On Monday the National Association of Home Builders said its survey of homebuilder sentiment was unchanged at 16. That’s the same level it has been for six of the past seven months. Any reading below 50 indicates negative sentiment about the market. The index hasn’t been above that level since April 2006.
And when asked about where they see sales of single-family home heading over the next six months, the builders surveyed offered their most pessimistic outlook since September.
Source: The Associated Press, Derek Kravitz, AP real estate writer. All rights reserved.
Property tax break for active duty military
If you have clients who served in Iraq or Afghanistan during 2010, they’ll want to know about new legislation providing a tax break for homestead owners.
HB 1141 implements a constitutional amendment approved by voters in 2010 and provides a new homestead exemption for military personnel on active duty overseas. The exemption is based on the amount of time the individual served overseas.
How to calculate the tax break
Taxable value of the property multiplied by the percentage of time spent overseas in 2010. (Calculate percentage of time spent overseas by taking the number of days overseas and dividing it by 365).
So, if someone spent six months overseas in 2010, he or she would get a 50 percent discount. If someone spent the entire year overseas (12 months), he or she would get a 100 percent discount.
The property tax discount applies to 2011 taxes, but applicants must apply to their county property appraiser by June 1. If applicants miss the June 1 deadline, they have a second chance, but must apply with 25 days of receiving their assessment notice (TRIM Notice) and demonstrate extenuating circumstances.
“Since many counties do not even have an application form yet, you might recommend (that applicants) send a letter to their county appraiser before June 1,” says
Vicki Weber, an attorney with Hopping Green & Sams in Tallahassee, Fla. “In the letter, they should say, ‘I know about HB 1141, and I was deployed overseas last year. I qualify, and I will submit an application as soon as you send me one. But in the meantime, consider this my application.’”
After 2011, the application deadline is March 1.
Questions? Call Florida Realtors Legal Hotline, an included member benefit for Realtors in Florida at (407) 438-1409.
Source: Florida Realtors®
HB 1141 implements a constitutional amendment approved by voters in 2010 and provides a new homestead exemption for military personnel on active duty overseas. The exemption is based on the amount of time the individual served overseas.
How to calculate the tax break
Taxable value of the property multiplied by the percentage of time spent overseas in 2010. (Calculate percentage of time spent overseas by taking the number of days overseas and dividing it by 365).
So, if someone spent six months overseas in 2010, he or she would get a 50 percent discount. If someone spent the entire year overseas (12 months), he or she would get a 100 percent discount.
The property tax discount applies to 2011 taxes, but applicants must apply to their county property appraiser by June 1. If applicants miss the June 1 deadline, they have a second chance, but must apply with 25 days of receiving their assessment notice (TRIM Notice) and demonstrate extenuating circumstances.
“Since many counties do not even have an application form yet, you might recommend (that applicants) send a letter to their county appraiser before June 1,” says
Vicki Weber, an attorney with Hopping Green & Sams in Tallahassee, Fla. “In the letter, they should say, ‘I know about HB 1141, and I was deployed overseas last year. I qualify, and I will submit an application as soon as you send me one. But in the meantime, consider this my application.’”
After 2011, the application deadline is March 1.
Questions? Call Florida Realtors Legal Hotline, an included member benefit for Realtors in Florida at (407) 438-1409.
Source: Florida Realtors®
Monday, May 16, 2011
Mortgage debt falls at record clip in U. S.
Americans are reducing mortgage payments at a record clip, directing cash that once went for debt into consumer spending and savings.
Low interest rates, defaults and refinancings have shaved more than $100 billion off the nation’s annual mortgage bill, an amount comparable to all unemployment benefits for one year or this year’s Social Security payroll tax cut.
“This is a form of economic stimulus that goes to Main Street rather than Wall Street,” says Nicholas Carroll, a journalist on consumer finance and author of Walk Away From Debt for a Better Future. When freed from a mortgage payment, people’s first purchases tend to be necessities, such as socks and underwear, he says.
Homeowners have trimmed interest payments alone by 11 percent or $67 billion a year from the peak in 2008, according to the Bureau of Economic Analysis (BEA). The savings come equally from grabbing lower interest rates and reducing what’s owed by paying down principal or defaulting on loans.
The nation has slashed total mortgage debt from nearly $11 trillion at the mid-2008 peak to $10.3 trillion in the first three months of 2011, the BEA reports.
The trend shows no sign of slowing. About 9 percent of mortgage borrowers are behind on payments, and 4.6 percent of homes are in foreclosure, says the Mortgage Bankers Association.
Even so, homeowners are reducing mortgages far more slowly than they added to them during the housing bubble. Borrowers took on $1 trillion in new principal and $90 billion in extra interest in 2006 alone, BEA data show. Shrinking mortgage payments are a sign of the economy resetting in the housing bust’s aftermath.
“No one remained untouched, not homeowners, Wall Street, investors or the government,” says economist Sam Khater of CoreLogic, which tracks real estate trends. “One positive sign is that housing is becoming more affordable.”
Economic effects of lower mortgage debt:
• Savings. For the first time since 1998, households are saving more than they’re spending on mortgage interest.
• Interest. Mortgage interest consumes 5.27 percent of the nation’s after-tax income, the lowest since 2004 and comparable to the 1980s and ‘90s.
• Rates. The average interest rate on all mortgages not just new ones has fallen for 16 consecutive quarters to 5.96 percent, the lowest since the government started keeping track in 1977. The tumbling rate reflects borrowers restructuring loans to become better credit risks and shortening 30-year mortgages to 15-year loans.
“Households are managing their debt down by bringing cash to the table to qualify for super-low rates,” Mortgage Bankers Association economist Michael Fratantoni says. That’s a change from the housing bubble, when “cash out” loans let borrowers leave mortgage signings with spending money, he says.
Consumers have started borrowing more for cars, appliances and other big-ticket items in the past two months but not for homes, Fratantoni says. “Consumers are cautious.”
Source: USA TODAY, a division of Gannett Co. Inc., Dennis Cauchon, USA TODAY
Low interest rates, defaults and refinancings have shaved more than $100 billion off the nation’s annual mortgage bill, an amount comparable to all unemployment benefits for one year or this year’s Social Security payroll tax cut.
“This is a form of economic stimulus that goes to Main Street rather than Wall Street,” says Nicholas Carroll, a journalist on consumer finance and author of Walk Away From Debt for a Better Future. When freed from a mortgage payment, people’s first purchases tend to be necessities, such as socks and underwear, he says.
Homeowners have trimmed interest payments alone by 11 percent or $67 billion a year from the peak in 2008, according to the Bureau of Economic Analysis (BEA). The savings come equally from grabbing lower interest rates and reducing what’s owed by paying down principal or defaulting on loans.
The nation has slashed total mortgage debt from nearly $11 trillion at the mid-2008 peak to $10.3 trillion in the first three months of 2011, the BEA reports.
The trend shows no sign of slowing. About 9 percent of mortgage borrowers are behind on payments, and 4.6 percent of homes are in foreclosure, says the Mortgage Bankers Association.
Even so, homeowners are reducing mortgages far more slowly than they added to them during the housing bubble. Borrowers took on $1 trillion in new principal and $90 billion in extra interest in 2006 alone, BEA data show. Shrinking mortgage payments are a sign of the economy resetting in the housing bust’s aftermath.
“No one remained untouched, not homeowners, Wall Street, investors or the government,” says economist Sam Khater of CoreLogic, which tracks real estate trends. “One positive sign is that housing is becoming more affordable.”
Economic effects of lower mortgage debt:
• Savings. For the first time since 1998, households are saving more than they’re spending on mortgage interest.
• Interest. Mortgage interest consumes 5.27 percent of the nation’s after-tax income, the lowest since 2004 and comparable to the 1980s and ‘90s.
• Rates. The average interest rate on all mortgages not just new ones has fallen for 16 consecutive quarters to 5.96 percent, the lowest since the government started keeping track in 1977. The tumbling rate reflects borrowers restructuring loans to become better credit risks and shortening 30-year mortgages to 15-year loans.
“Households are managing their debt down by bringing cash to the table to qualify for super-low rates,” Mortgage Bankers Association economist Michael Fratantoni says. That’s a change from the housing bubble, when “cash out” loans let borrowers leave mortgage signings with spending money, he says.
Consumers have started borrowing more for cars, appliances and other big-ticket items in the past two months but not for homes, Fratantoni says. “Consumers are cautious.”
Source: USA TODAY, a division of Gannett Co. Inc., Dennis Cauchon, USA TODAY
In tougher new mortgage reality, preparation is key
All you needed was a pulse. In the not-so-distant past, that’s practically all it took to qualify for a mortgage. Now an exhaustive array of paperwork awaits potential borrowers.
Call it the new mortgage reality. Lenders that got burned when the housing market collapsed are taking extra steps to protect themselves and are requiring more financial documents than ever.
But these tougher requirements don’t mean getting a mortgage has to be too stressful, as long as you’re prepared.
Here are five ways to cut down on the hassles and help you anticipate the records you may need:
1. Start by requesting your free credit report.
You won’t receive a copy of your credit score, but it’s important to review a report from the three credit reporting agencies: Experian, TransUnion and Equifax. Make sure the information on each is correct.
If you have any late payments or recent inquiries on your report, prepare to explain the circumstances to a lender in writing. You’ll have to settle any open collections, tax liens or judgments before you close the mortgage.
“There is such a thing as not enough credit,” says John Stearns, a broker at American Fidelity Mortgage in Wisconsin. He says some borrowers only have one credit card and no other credit accounts such as car loans, cell phone bills or student loans. Ideally, lenders like to see borrowers manage at least three accounts to show they can handle credit responsibly.
2. Organize all your financial documents.
Lenders will ask for at least two months’ worth of pay stubs and bank statements. Pull out 2009 and 2010 federal tax returns, W-2’s and 401(k) statements.
If you receive alimony or child support, request up-to-date records from the court, which can take up to 90 days.
Make sure your name, address and account numbers are correct on all statements. If you recently changed your name because of marriage or divorce, make sure the update is reflected on all financial documents and that they match your identification cards. The same guidelines apply for your address if you recently moved.
3. Keep your finances simple for at least two months.
“Don’t do anything funny with your money, or it could cost you,’ “ says Pava Leyrer, president of Heritage National Mortgage in Michigan.
That means don’t make any out-of-the-ordinary deposits into your checking account, whether it’s gift money, cash from selling a car or payments from giving piano lessons. If you do, make sure to have receipts and copies of checks to give to the lender to show the source of the funds.
One of Leyrer’s recent borrowers had to write a letter to a lender explaining that a $55 bank deposit was birthday money from grandma. Another had to prove that paintings she sold at a yard sale would sell for a similar amount on eBay or Craigslist.
Another pitfall: paying off a large debt ahead of applying for a mortgage. A lender will want to know where that big sum of money came from.
Lastly, don’t overdraw your checking account for at least two months. Even if you have overdraft protection, the lender will think you have cash flow problems.
4. Document your downpayment.
That means if you received a large amount from an inheritance, request the documents from the estate trustee to prove you rightfully were given the money. A downpayment that taps money from a money market fund or other account requires a statement showing the transfer into your checking account. A 401(k) loan also must be documented.
If you receive all or part of the downpayment as a gift from a relative, you’ll be asked to produce a letter that outlines your relationship to the gift giver, the address of the property, the amount of the gift, where the giver got the funds, and a statement that the gift is not a loan.
A good rule of thumb: Any money going toward the downpayment should be in your account at least two weeks before closing, including paychecks and bonuses.
5. Show a stable work history for the past two years.
Coming out of a recession, many borrowers might need to explain any employment gaps in writing. Also, those who took temp jobs or switched careers to deal with the hard times may have to field questions from the lender and may want to wait an additional year to apply. Another red flag for lenders: a wage cut or a change in compensation from, say a salaried position to one where you earn commissions.
Source: www.washingtonpost.com, Janna Herron
Call it the new mortgage reality. Lenders that got burned when the housing market collapsed are taking extra steps to protect themselves and are requiring more financial documents than ever.
But these tougher requirements don’t mean getting a mortgage has to be too stressful, as long as you’re prepared.
Here are five ways to cut down on the hassles and help you anticipate the records you may need:
1. Start by requesting your free credit report.
You won’t receive a copy of your credit score, but it’s important to review a report from the three credit reporting agencies: Experian, TransUnion and Equifax. Make sure the information on each is correct.
If you have any late payments or recent inquiries on your report, prepare to explain the circumstances to a lender in writing. You’ll have to settle any open collections, tax liens or judgments before you close the mortgage.
“There is such a thing as not enough credit,” says John Stearns, a broker at American Fidelity Mortgage in Wisconsin. He says some borrowers only have one credit card and no other credit accounts such as car loans, cell phone bills or student loans. Ideally, lenders like to see borrowers manage at least three accounts to show they can handle credit responsibly.
2. Organize all your financial documents.
Lenders will ask for at least two months’ worth of pay stubs and bank statements. Pull out 2009 and 2010 federal tax returns, W-2’s and 401(k) statements.
If you receive alimony or child support, request up-to-date records from the court, which can take up to 90 days.
Make sure your name, address and account numbers are correct on all statements. If you recently changed your name because of marriage or divorce, make sure the update is reflected on all financial documents and that they match your identification cards. The same guidelines apply for your address if you recently moved.
3. Keep your finances simple for at least two months.
“Don’t do anything funny with your money, or it could cost you,’ “ says Pava Leyrer, president of Heritage National Mortgage in Michigan.
That means don’t make any out-of-the-ordinary deposits into your checking account, whether it’s gift money, cash from selling a car or payments from giving piano lessons. If you do, make sure to have receipts and copies of checks to give to the lender to show the source of the funds.
One of Leyrer’s recent borrowers had to write a letter to a lender explaining that a $55 bank deposit was birthday money from grandma. Another had to prove that paintings she sold at a yard sale would sell for a similar amount on eBay or Craigslist.
Another pitfall: paying off a large debt ahead of applying for a mortgage. A lender will want to know where that big sum of money came from.
Lastly, don’t overdraw your checking account for at least two months. Even if you have overdraft protection, the lender will think you have cash flow problems.
4. Document your downpayment.
That means if you received a large amount from an inheritance, request the documents from the estate trustee to prove you rightfully were given the money. A downpayment that taps money from a money market fund or other account requires a statement showing the transfer into your checking account. A 401(k) loan also must be documented.
If you receive all or part of the downpayment as a gift from a relative, you’ll be asked to produce a letter that outlines your relationship to the gift giver, the address of the property, the amount of the gift, where the giver got the funds, and a statement that the gift is not a loan.
A good rule of thumb: Any money going toward the downpayment should be in your account at least two weeks before closing, including paychecks and bonuses.
5. Show a stable work history for the past two years.
Coming out of a recession, many borrowers might need to explain any employment gaps in writing. Also, those who took temp jobs or switched careers to deal with the hard times may have to field questions from the lender and may want to wait an additional year to apply. Another red flag for lenders: a wage cut or a change in compensation from, say a salaried position to one where you earn commissions.
Source: www.washingtonpost.com, Janna Herron
The impact of Dodd-Frank on real estate
Although the 2,314-page Dodd-Frank Wall Street Reform and Consumer Protection Act signed into law last year doesn’t affect real estate brokers and agents as much as, say, mortgage originators, it does have some significant implications for the industry, said Phillip Schulman, a partner at the Washington, D.C. law firm K&L Gates LLP.
In remarks at the Real Estate Services Forum Thursday during the Realtors® Midyear Legislative Meetings, Schulman told attendees that the mortgage lending sector was targeted by many of the bill’s provisions.
“[Dodd-Frank] came down hard on loan officers and mortgage brokers. Why? Because they were the ones working with the borrowers,” said Schulman, adding that in the future all originators will be qualified, licensed, and registered, as well as issued a unique identifier.
“Anytime there’s a violation committed by a loan officer, it’s going to be reported in a nationwide system,” he said.
The bill also affects the financial sector, particularly in terms of the structure of securities, which are debts or equities that are packaged for investment. To avoid the financial fraud of the previous decade, Dodd-Frank requires financial companies that create securities to hold a minimum 5 percent stake in them – the exception being securities that are composed of qualified residential mortgages (QRM).
Current QRM requirements for borrowers include no option adjustable-rate mortgages (ARMs), no bankruptcy in the past three years, no prior short sale or foreclosure, and points and fees charged by the lender totaling less than 3 percent of the loan’s value. Furthermore, lenders and regulators have recently recommended implementing a higher minimum downpayment.
The increasingly stringent requirements pose a serious challenge to a viable housing market, Schulman noted.
“The eligible loan is shrinking and shrinking, and it’s going to be harder for someone who has any dents or scratches in their credit to get a loan,” he said. “It’s all well and good to get the riff-raff out of the business and get rid of these exotic, fly-by-night financial products, but let’s not throw the baby out with the bath water.
“We just came through a decade of this laissez-faire attitude. The atmosphere was one of easy money. We put millions of Americans in homes who probably should not have been there. Today, Washington is all about risk management. Congress and regulators stepped in and were asked to regulate. So they did what they always do. They overregulated. I think until we earn back the trust of the Congress and the regulators and even the American people, we’re going to continue to be scrutinized like never before.”
Important, real estate-related changes
The Bureau of Consumer Financial Protection – a new behemoth regulatory agency that Jay N. Varon, Schulman’s fellow speaker and a litigation partner with law firm Foley & Lardner LLP, characterized as the “centerpiece” of Dodd-Frank – officially launches on July 21. This organization will encompass a half-dozen current regulatory agencies and 18 consumer statutes, including RESPA. It will also have what Varon called “nuclear” penalties, meaning punishments for violations that are much more stringent.
There will also be new prohibitions on steering and loan-officer compensation. Dodd-Frank changed the compensation model for loan officers to prevent them from steering consumers into loans that may not be right for them, yet profitable for the lending company. According to Schulman, loan officers will collect the same sum per loan, whether it’s a 30-year fixed mortgage or an option ARM. Still, he said this new arrangement isn’t entirely foolproof.
“Businessmen figure out a way to make every system work. Sure, they’ll pay them 50 basis points for loans of all kinds. But they can also pay them bonuses based on total volume,” he explained.
Appraisals and AMCs: New regulations in Dodd-Frank are designed to protect appraiser independence, Schulman said. These rules also sunset the Home Valuation Code of Conduct (HVCC), which caused a great deal of consternation among real estate professionals who say it contributed to the collapse of deals after it was enacted in 2009.
Source: Florida Realtors®
In remarks at the Real Estate Services Forum Thursday during the Realtors® Midyear Legislative Meetings, Schulman told attendees that the mortgage lending sector was targeted by many of the bill’s provisions.
“[Dodd-Frank] came down hard on loan officers and mortgage brokers. Why? Because they were the ones working with the borrowers,” said Schulman, adding that in the future all originators will be qualified, licensed, and registered, as well as issued a unique identifier.
“Anytime there’s a violation committed by a loan officer, it’s going to be reported in a nationwide system,” he said.
The bill also affects the financial sector, particularly in terms of the structure of securities, which are debts or equities that are packaged for investment. To avoid the financial fraud of the previous decade, Dodd-Frank requires financial companies that create securities to hold a minimum 5 percent stake in them – the exception being securities that are composed of qualified residential mortgages (QRM).
Current QRM requirements for borrowers include no option adjustable-rate mortgages (ARMs), no bankruptcy in the past three years, no prior short sale or foreclosure, and points and fees charged by the lender totaling less than 3 percent of the loan’s value. Furthermore, lenders and regulators have recently recommended implementing a higher minimum downpayment.
The increasingly stringent requirements pose a serious challenge to a viable housing market, Schulman noted.
“The eligible loan is shrinking and shrinking, and it’s going to be harder for someone who has any dents or scratches in their credit to get a loan,” he said. “It’s all well and good to get the riff-raff out of the business and get rid of these exotic, fly-by-night financial products, but let’s not throw the baby out with the bath water.
“We just came through a decade of this laissez-faire attitude. The atmosphere was one of easy money. We put millions of Americans in homes who probably should not have been there. Today, Washington is all about risk management. Congress and regulators stepped in and were asked to regulate. So they did what they always do. They overregulated. I think until we earn back the trust of the Congress and the regulators and even the American people, we’re going to continue to be scrutinized like never before.”
Important, real estate-related changes
The Bureau of Consumer Financial Protection – a new behemoth regulatory agency that Jay N. Varon, Schulman’s fellow speaker and a litigation partner with law firm Foley & Lardner LLP, characterized as the “centerpiece” of Dodd-Frank – officially launches on July 21. This organization will encompass a half-dozen current regulatory agencies and 18 consumer statutes, including RESPA. It will also have what Varon called “nuclear” penalties, meaning punishments for violations that are much more stringent.
There will also be new prohibitions on steering and loan-officer compensation. Dodd-Frank changed the compensation model for loan officers to prevent them from steering consumers into loans that may not be right for them, yet profitable for the lending company. According to Schulman, loan officers will collect the same sum per loan, whether it’s a 30-year fixed mortgage or an option ARM. Still, he said this new arrangement isn’t entirely foolproof.
“Businessmen figure out a way to make every system work. Sure, they’ll pay them 50 basis points for loans of all kinds. But they can also pay them bonuses based on total volume,” he explained.
Appraisals and AMCs: New regulations in Dodd-Frank are designed to protect appraiser independence, Schulman said. These rules also sunset the Home Valuation Code of Conduct (HVCC), which caused a great deal of consternation among real estate professionals who say it contributed to the collapse of deals after it was enacted in 2009.
Source: Florida Realtors®
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