Pending home sales rose strongly in May with all regions experiencing gains from a year ago, pointing to higher housing activity in the second half of the year, according to the National Association of Realtors® (NAR).
The Pending Home Sales Index, a forward-looking indicator based on contract signings, rose 8.2 percent to 88.8 in May from an upwardly revised 82.1 in April and is 13.4 percent higher than the 78.3 reading in May 2010. The data reflects contracts but not closings, which normally occur with a lag time of one or two months.
This is the first time since April 2010 that contract activity was above year-ago levels, and the monthly gain was the strongest increase since last November when the index rose 10.6 percent.
NAR Chief Economist Lawrence Yun said the improvement bodes well for home prices. “Absorption of inventory is the key to price improvement, and this solid gain in contract signings implies that home values in many localities are or will soon be stabilizing as inventories get absorbed at a faster pace,” he said. “Some markets have made a rapid turnaround, going from soft activity to contract signings rising by more than 30 percent from a year ago, including areas such as Hartford, Conn.; Indianapolis; Minneapolis; Houston; and Seattle.”
Pending home sales have trended up unevenly since bottoming last June, rising in seven of the past 11 months. “Home sales still could be 15 to 20 percent higher,” Yun said. “If banks would simply return to normal sound underwriting standards and begin lending to more creditworthy borrowers, we’d get a much faster recovery in the housing sector.”
“In addition, a nonsensical situation has developed recently in some states with HUD unable to complete foreclosure deals because of insufficient funds to pay attorney fees at closing, even with buyers offering the full listing price,” Yun added.
The PHSI in the Northeast rose 7.3 percent to 69.2 in May and is 4.4 percent above a year ago. In the Midwest the index jumped 10.5 percent to 82.8 and is 17.2 percent higher than May 2010. Pending home sales in the South increased 4.1 percent to an index of 95.0 in May and are 14.6 percent higher than a year ago. In the West the index surged 12.9 percent to 100.6 and is 13.5 percent above May 2010.
Yun cautioned that healthy job creation is necessary to ensure a solid recovery in both housing and the overall economy. “The job market has sputtered recently, and because variations in local job creation impact housing demand, markets will recover unevenly around the country,” he said.
Source: Florida Realtors®
Thursday, June 30, 2011
New real estate-related laws take effect July 1
It took five years to accomplish, but starting tomorrow, the $243 million cap on the housing trust funds is history.
A bill passed by the 2011 Florida Legislature removes the cap enacted by the 2004 Legislature at the peak of the housing boom. Since 2007, when the $243 million limit took effect, Florida Realtors and nearly three dozen other organizations lobbied lawmakers to “scrap the cap” on the Sadowski Housing Trust Funds. The fund is sustained entirely by a portion of documentary stamp taxes paid on deeds.
“Ensuring that doc stamps will still be directed to affordable housing, their intended purpose, is a huge win for Florida families and for the Florida Realtors organization, which played a big part in the creation of the Sadowski Affordable Housing Act in 1992,” says John Sebree, Florida Realtors vice president of Public Policy. “We owe a tremendous amount of credit to Rep. Gary Aubuchon (R-Cape Coral) and to Sen. Mike Bennett (R-Bradenton) for sponsoring HB 639 and SB 912 and restoring trust in the housing trust funds.”
This year, the Florida Housing Finance Corporation has $64 million for state and local housing programs for downpayment assistance, foreclosure prevention and renovating properties for low- to moderate-income families.
HB 639/SB 912 and eight other real estate-related bills take effect tomorrow. Of particular interest to Realtors is HB 849, which changes the initial requirements for certain persons acting as home inspectors and removes language enacted last year that allowed Division 1 contractors to perform both the home inspection and make repairs.
As a result, the Home Inspection Disclosure has been updated to reflect the fact that home inspectors are regulated and licensed by the state. HID-2 is available from FormSimplicity (login required).
Other laws taking effect July 1, 2011, include:
Protection for title insurance policyholders. HB 1007 was introduced on behalf of the Department of Financial Services (DFS) to ensure that property owners continue to have title insurance coverage even if their underwriter is liquidated. When an underwriter is liquidated, as is currently the case, all other underwriters in the state will pay an assessment to DFS. This assessment will be passed on — over a period not to exceed seven years — to new policyholders in the form of a surcharge of up to $25. DFS indicates that the surcharge resulting from the underwriter currently being liquidated would be significantly less than $25.
You’re S.A.F.E. to move about the transaction. SB 1316 codifies into the Florida S.A.F.E. Mortgage Licensing Act the same language contained in a federal act that allows Florida real estate licensees to list and sell short sales without having to first obtain additional licensure under Chapter 494.
Sales associates catch business tax break. Sales associates who don’t currently pay a business tax (formerly known as occupational licenses taxes) at the local level should be happy with HB 311. Local governments that were not collecting business taxes from sales associates on Oct. 13, 2010, may not do so in the future. Local governments that were collecting business taxes from sales associates on that date are not impacted.
More changes to condo and homeowners’ association laws. HB 1195 seeks to fix aspects of last year’s big condo legislation. Among the highlights:
• Allows condo, homeowners and cooperative associations to demand full monthly rent from tenants in properties of owners who are behind in maintenance payments. Landlords are banned from punishing tenants who comply with the law.
• Exempts condos less than four stories high with exterior corridors from installing manual fire alarm systems.
• Permits associations to install impact glass and other code-compliant windows for hurricane protection.
• Prevents unit owners who are delinquent in their association fees to access common areas and other community assets.
Economic development — possibly to benefit affordable housing. HB 7205 creates a new trust fund to be used for economic development efforts. The State Economic Enhancement and Development Trust Fund will be established in July 2012 and will initially include $125 million drawn from money that now flows to the state's affordable housing trust fund and the state's road-building trust fund.
Challenging property tax assessments. So many property owners are challenging their assessments that it has resulted in a number of school boards being unable to forecast their budgets. As a result, Rep. Ana Rivas Logan (R-Miami) filed HB 281 on behalf of the Miami-Dade School Board. As originally filed, this bill required property owners who appealed their assessment to pay 75 percent of the appraised value. Florida Realtors helped to amend the bill to allow owners to make a good faith payment during the appeal process if it extends beyond April 1 of the next year. The new law will apply to petitions filed with value adjustments boards on or after July 1, 2011.
Curbing adverse possession scams. SB 1142 seeks to make it more difficult for people to take possession of homes vacated, often due to foreclosure or other financial hardships, and claim ownership under adverse possession. Among other things, the new law requires county property appraisers to notify the owner of record when an adverse possession claim is made on their property, and giving this individual priority on paying back taxes.
Source: Florida Realtors®
A bill passed by the 2011 Florida Legislature removes the cap enacted by the 2004 Legislature at the peak of the housing boom. Since 2007, when the $243 million limit took effect, Florida Realtors and nearly three dozen other organizations lobbied lawmakers to “scrap the cap” on the Sadowski Housing Trust Funds. The fund is sustained entirely by a portion of documentary stamp taxes paid on deeds.
“Ensuring that doc stamps will still be directed to affordable housing, their intended purpose, is a huge win for Florida families and for the Florida Realtors organization, which played a big part in the creation of the Sadowski Affordable Housing Act in 1992,” says John Sebree, Florida Realtors vice president of Public Policy. “We owe a tremendous amount of credit to Rep. Gary Aubuchon (R-Cape Coral) and to Sen. Mike Bennett (R-Bradenton) for sponsoring HB 639 and SB 912 and restoring trust in the housing trust funds.”
This year, the Florida Housing Finance Corporation has $64 million for state and local housing programs for downpayment assistance, foreclosure prevention and renovating properties for low- to moderate-income families.
HB 639/SB 912 and eight other real estate-related bills take effect tomorrow. Of particular interest to Realtors is HB 849, which changes the initial requirements for certain persons acting as home inspectors and removes language enacted last year that allowed Division 1 contractors to perform both the home inspection and make repairs.
As a result, the Home Inspection Disclosure has been updated to reflect the fact that home inspectors are regulated and licensed by the state. HID-2 is available from FormSimplicity (login required).
Other laws taking effect July 1, 2011, include:
Protection for title insurance policyholders. HB 1007 was introduced on behalf of the Department of Financial Services (DFS) to ensure that property owners continue to have title insurance coverage even if their underwriter is liquidated. When an underwriter is liquidated, as is currently the case, all other underwriters in the state will pay an assessment to DFS. This assessment will be passed on — over a period not to exceed seven years — to new policyholders in the form of a surcharge of up to $25. DFS indicates that the surcharge resulting from the underwriter currently being liquidated would be significantly less than $25.
You’re S.A.F.E. to move about the transaction. SB 1316 codifies into the Florida S.A.F.E. Mortgage Licensing Act the same language contained in a federal act that allows Florida real estate licensees to list and sell short sales without having to first obtain additional licensure under Chapter 494.
Sales associates catch business tax break. Sales associates who don’t currently pay a business tax (formerly known as occupational licenses taxes) at the local level should be happy with HB 311. Local governments that were not collecting business taxes from sales associates on Oct. 13, 2010, may not do so in the future. Local governments that were collecting business taxes from sales associates on that date are not impacted.
More changes to condo and homeowners’ association laws. HB 1195 seeks to fix aspects of last year’s big condo legislation. Among the highlights:
• Allows condo, homeowners and cooperative associations to demand full monthly rent from tenants in properties of owners who are behind in maintenance payments. Landlords are banned from punishing tenants who comply with the law.
• Exempts condos less than four stories high with exterior corridors from installing manual fire alarm systems.
• Permits associations to install impact glass and other code-compliant windows for hurricane protection.
• Prevents unit owners who are delinquent in their association fees to access common areas and other community assets.
Economic development — possibly to benefit affordable housing. HB 7205 creates a new trust fund to be used for economic development efforts. The State Economic Enhancement and Development Trust Fund will be established in July 2012 and will initially include $125 million drawn from money that now flows to the state's affordable housing trust fund and the state's road-building trust fund.
Challenging property tax assessments. So many property owners are challenging their assessments that it has resulted in a number of school boards being unable to forecast their budgets. As a result, Rep. Ana Rivas Logan (R-Miami) filed HB 281 on behalf of the Miami-Dade School Board. As originally filed, this bill required property owners who appealed their assessment to pay 75 percent of the appraised value. Florida Realtors helped to amend the bill to allow owners to make a good faith payment during the appeal process if it extends beyond April 1 of the next year. The new law will apply to petitions filed with value adjustments boards on or after July 1, 2011.
Curbing adverse possession scams. SB 1142 seeks to make it more difficult for people to take possession of homes vacated, often due to foreclosure or other financial hardships, and claim ownership under adverse possession. Among other things, the new law requires county property appraisers to notify the owner of record when an adverse possession claim is made on their property, and giving this individual priority on paying back taxes.
Source: Florida Realtors®
Wednesday, June 29, 2011
Mortgage fraud reports rise as lenders review docs
Reports of likely mortgage fraud increased sharply during the first quarter as big banks took another look at loan documents questioned by mortgage insurers and investors, according to the Treasury Department bureau that tracks such reports.
The Financial Crimes Enforcement Network said Tuesday that it received 25,485 tips about possible mortgage fraud in the first three months of the year, up 31 percent from the 19,420 that it received in the same period a year ago.
FinCEN receives the tips, also called suspicious activity reports, because it enforces the law requiring banks to tell the government about questionable financial transactions. The agency helps track illegal money transfers, catch money launderers and shut down accounts linked to corrupt political leaders.
Mortgage-fraud reports increased sharply because mortgage investors and insurers are demanding that banks to buy back billions of dollars in loans that appear to be fraudulent, FinCEN said.
When banks bundled loans into bonds or resold them, the bonds were insured against default by bond insurers and the government-controlled mortgage giants Fannie Mae and Freddie Mac. To protect the insurers, the banks agreed to buy back any loans that turned out to involve mortgage fraud.
After the housing market cratered and thousands of loans went into default, bond insurers and buyers started flagging loans that they suspected of fraud. They say the banks are obligated to rebuy the loans.
The banks are taking a closer look at the paperwork to see if the claims by insurers and investors hold up. In thousands of cases, they are finding fake documents and payment methods, FinCEN said.
Top lenders Bank of America Corp. and Wells Fargo & Co. and JPMorgan Chase & Co. face some of the biggest repurchase demands.
Source: The Associated Press.
The Financial Crimes Enforcement Network said Tuesday that it received 25,485 tips about possible mortgage fraud in the first three months of the year, up 31 percent from the 19,420 that it received in the same period a year ago.
FinCEN receives the tips, also called suspicious activity reports, because it enforces the law requiring banks to tell the government about questionable financial transactions. The agency helps track illegal money transfers, catch money launderers and shut down accounts linked to corrupt political leaders.
Mortgage-fraud reports increased sharply because mortgage investors and insurers are demanding that banks to buy back billions of dollars in loans that appear to be fraudulent, FinCEN said.
When banks bundled loans into bonds or resold them, the bonds were insured against default by bond insurers and the government-controlled mortgage giants Fannie Mae and Freddie Mac. To protect the insurers, the banks agreed to buy back any loans that turned out to involve mortgage fraud.
After the housing market cratered and thousands of loans went into default, bond insurers and buyers started flagging loans that they suspected of fraud. They say the banks are obligated to rebuy the loans.
The banks are taking a closer look at the paperwork to see if the claims by insurers and investors hold up. In thousands of cases, they are finding fake documents and payment methods, FinCEN said.
Top lenders Bank of America Corp. and Wells Fargo & Co. and JPMorgan Chase & Co. face some of the biggest repurchase demands.
Source: The Associated Press.
Consumer confidence falls again amid likely worries about Social Security, Medicare
Consumer confidence among Floridians declined for the fourth time in five months — falling to 66 in June — as the U.S. economy continues to sputter, according to a new University of Florida survey.
“Floridians appear to be growing concerned about the short-run health of the U.S. economy,” said Chris McCarty, director of UF’s Survey Research Center in the Bureau of Economic and Business Research. “As the deadline to adjust the debt ceiling approaches, some Floridians, particularly seniors, may be anticipating cuts to Social Security and Medicare that will likely have to be part of any long-term deficit reduction solution. Others may have concerns about raising the debt ceiling.”
Four of the five index components the survey measures decreased. The largest decline was in perceptions of U.S. economic conditions over the next year, which fell seven points to 61. Perceptions of personal financial situation expected a year from now fell one point to 74, perceptions of U.S. economic conditions over the next five years fell one point to 72 and confidence in purchasing big-ticket items such as cars and appliances dropped four points to 70. The only component to increase was perceptions of personal financial situation now compared to a year ago, which rose one point, to 53.
The declines among senior citizens surveyed were significant with possible cuts to Social Security and Medicare looming. Confidence among those aged 60 and over fell by an average of 7.25 points in four index components. Confidence in purchasing big-ticket items fell 11 points to 68, perceptions of U.S. economic conditions over the next year fell eight points to 55, perceptions of personal financial situation expected a year from now fell six points to 59 and perceptions of personal finances now compared to a year ago dropped four points to 45.
National and international economic woes may have also led to the decline, McCarty said. National unemployment increased to 9.1 percent and the debt crisis in Greece and other Eurozone countries is causing instability in markets worldwide.
Despite bleak economic news nationally, Florida experienced some positives. State unemployment (10.6 percent) declined for the fifth consecutive month, gasoline prices fell almost 15 cents per gallon and the median price for a single-family home — which has increased steadily since February — increased again in May to $135,000. McCarty did caution that foreclosures are expected to pick up again as processing delays abate, which may contribute to lower consumer confidence.
June’s index of 66 is its lowest mark since August 2010.
“Typically I would characterize 66 as quite low for consumer confidence and would not expect much more of a decrease barring a dramatic negative event in the economy,” McCarty said. “I do expect there to be big changes on the way from a budget deal prior to Aug. 2 in order to get an increase to the debt ceiling. This will be the first installment of further budget reductions over the next couple of years that will negatively impact many Floridians. It is likely that consumer confidence will stay in the middle to upper 60s and possibly decline further as the details of the budget deal are revealed.”
The research center, part of the Warrington College of Business Administration, conducts the Florida Consumer Attitude Survey monthly. Respondents are 18 or older and live in households telephoned randomly. The preliminary index for June was collected from 408 responses. The index is benchmarked to 1966, so a value of 100 represents the same level of confidence for that year.
Source: Florida Realtors®
“Floridians appear to be growing concerned about the short-run health of the U.S. economy,” said Chris McCarty, director of UF’s Survey Research Center in the Bureau of Economic and Business Research. “As the deadline to adjust the debt ceiling approaches, some Floridians, particularly seniors, may be anticipating cuts to Social Security and Medicare that will likely have to be part of any long-term deficit reduction solution. Others may have concerns about raising the debt ceiling.”
Four of the five index components the survey measures decreased. The largest decline was in perceptions of U.S. economic conditions over the next year, which fell seven points to 61. Perceptions of personal financial situation expected a year from now fell one point to 74, perceptions of U.S. economic conditions over the next five years fell one point to 72 and confidence in purchasing big-ticket items such as cars and appliances dropped four points to 70. The only component to increase was perceptions of personal financial situation now compared to a year ago, which rose one point, to 53.
The declines among senior citizens surveyed were significant with possible cuts to Social Security and Medicare looming. Confidence among those aged 60 and over fell by an average of 7.25 points in four index components. Confidence in purchasing big-ticket items fell 11 points to 68, perceptions of U.S. economic conditions over the next year fell eight points to 55, perceptions of personal financial situation expected a year from now fell six points to 59 and perceptions of personal finances now compared to a year ago dropped four points to 45.
National and international economic woes may have also led to the decline, McCarty said. National unemployment increased to 9.1 percent and the debt crisis in Greece and other Eurozone countries is causing instability in markets worldwide.
Despite bleak economic news nationally, Florida experienced some positives. State unemployment (10.6 percent) declined for the fifth consecutive month, gasoline prices fell almost 15 cents per gallon and the median price for a single-family home — which has increased steadily since February — increased again in May to $135,000. McCarty did caution that foreclosures are expected to pick up again as processing delays abate, which may contribute to lower consumer confidence.
June’s index of 66 is its lowest mark since August 2010.
“Typically I would characterize 66 as quite low for consumer confidence and would not expect much more of a decrease barring a dramatic negative event in the economy,” McCarty said. “I do expect there to be big changes on the way from a budget deal prior to Aug. 2 in order to get an increase to the debt ceiling. This will be the first installment of further budget reductions over the next couple of years that will negatively impact many Floridians. It is likely that consumer confidence will stay in the middle to upper 60s and possibly decline further as the details of the budget deal are revealed.”
The research center, part of the Warrington College of Business Administration, conducts the Florida Consumer Attitude Survey monthly. Respondents are 18 or older and live in households telephoned randomly. The preliminary index for June was collected from 408 responses. The index is benchmarked to 1966, so a value of 100 represents the same level of confidence for that year.
Source: Florida Realtors®
Tuesday, June 28, 2011
The Better Bargain: Foreclosure or Short Sale?
Short sales and foreclosures have flooded the housing market in recent years, and buyers are often drawn to the bargain prices but may be hesitant to jump into what usually is a difficult transaction and a long process. Bankrate.com recently tackled the question of “Which to Buy: Short Sale or Foreclosure?” in an article that helps buyers weigh the pros and cons of a distressed property. Experts note that the question largely depends on buyers' situations, how quickly they need a home, and their tolerance for fixer-uppers.
Foreclosure Pros and Cons
Buying a foreclosure is often faster than purchasing a short sale. Plus, buyers often can negotiate closing costs and price in foreclosure sales, Elaine Zimmermann, a real estate investor in Memphis, Tenn., told Bankrate.com.
However, abandoned homes in foreclosure can deteriorate very quickly so the buyer may need to weigh the condition of the home and whether they want a fixer upper. Scarred walls and carpets and appliances that were damaged by the former owner are not uncommon in a foreclosure, says David Richardson, an inspector in the Detroit area who's certified by the American Society of Home Inspectors.
Short Sales Pros and Cons
A short-sale home is still owned by the occupant, so it tends to be in better condition than a foreclosure, experts say.
"The short sale is, in my opinion, far better than buying a foreclosure because the home is generally in better condition because it's been occupied," says Gwen Daubenmeyer, a certified distressed property expert with RE/MAX in Detroit. "The utilities have been maintained, usually the lawn is maintained, those kinds of things."
But short sales often can take a longer time than a foreclosure to close. However, the federal Home Affordable Foreclosure Alternatives program, or HAFA, may be able to help speed up the short-sale process since it has created a timeline to hold mortgage lenders accountable, but still “it’s not perfect by any means,” Daubenmeyer says.
Source: “Which to Buy: Short Sale or Foreclosure?” Bankrate.com (June 2011)
Foreclosure Pros and Cons
Buying a foreclosure is often faster than purchasing a short sale. Plus, buyers often can negotiate closing costs and price in foreclosure sales, Elaine Zimmermann, a real estate investor in Memphis, Tenn., told Bankrate.com.
However, abandoned homes in foreclosure can deteriorate very quickly so the buyer may need to weigh the condition of the home and whether they want a fixer upper. Scarred walls and carpets and appliances that were damaged by the former owner are not uncommon in a foreclosure, says David Richardson, an inspector in the Detroit area who's certified by the American Society of Home Inspectors.
Short Sales Pros and Cons
A short-sale home is still owned by the occupant, so it tends to be in better condition than a foreclosure, experts say.
"The short sale is, in my opinion, far better than buying a foreclosure because the home is generally in better condition because it's been occupied," says Gwen Daubenmeyer, a certified distressed property expert with RE/MAX in Detroit. "The utilities have been maintained, usually the lawn is maintained, those kinds of things."
But short sales often can take a longer time than a foreclosure to close. However, the federal Home Affordable Foreclosure Alternatives program, or HAFA, may be able to help speed up the short-sale process since it has created a timeline to hold mortgage lenders accountable, but still “it’s not perfect by any means,” Daubenmeyer says.
Source: “Which to Buy: Short Sale or Foreclosure?” Bankrate.com (June 2011)
Freddie Mac: Better Days Ahead in Housing
Freddie Mac’s chief economist is optimistic that the housing market and economy will improve in the second half of 2011.
Freddie Mac Chief Economist Frank Nothaft said mortgage rates will likely remain historical lows of between 4.5 percent and 5 percent for the remainder of the year. Also, he expects more buyers to stop waiting on the sidelines as recent price drops in home prices have improved affordability.
Nothaft said consumers’ uncertainty about the economy has caused them to delay home purchases and other “big-ticket items.”
"Some potential buyers who have the means to buy are awaiting clearer signs that home values have firmed," Nothaft says.
But Nothaft says they should be getting their signs in the second half of the year, with projected job gains, and a growing, improved economy.
"Even though near-term concerns over income and sales growth are restraining consumer spending, business hiring, and new building, a number of positive signs in the economy indicate that growth will continue and is likely to accelerate in the second half of this year," Nothaft said. "Look for a gradual improvement in housing activity in the coming year.”
Source: “Freddie Mac Economist Sees Sunny Economy in Second Half,” HousingWire (June 27, 2011)
Freddie Mac Chief Economist Frank Nothaft said mortgage rates will likely remain historical lows of between 4.5 percent and 5 percent for the remainder of the year. Also, he expects more buyers to stop waiting on the sidelines as recent price drops in home prices have improved affordability.
Nothaft said consumers’ uncertainty about the economy has caused them to delay home purchases and other “big-ticket items.”
"Some potential buyers who have the means to buy are awaiting clearer signs that home values have firmed," Nothaft says.
But Nothaft says they should be getting their signs in the second half of the year, with projected job gains, and a growing, improved economy.
"Even though near-term concerns over income and sales growth are restraining consumer spending, business hiring, and new building, a number of positive signs in the economy indicate that growth will continue and is likely to accelerate in the second half of this year," Nothaft said. "Look for a gradual improvement in housing activity in the coming year.”
Source: “Freddie Mac Economist Sees Sunny Economy in Second Half,” HousingWire (June 27, 2011)
Florida Realtors: Homeowners should take summer safety precautions
Many families across Florida and the rest of the nation will spend the Fourth of July holiday away from home, basking on the state’s beautiful beaches, traveling to see relatives or maybe just visiting friends for a backyard barbecue.
To fully enjoy those activities and other summertime pursuits spent away from home, Florida Realtors® suggests that homeowners take precautions to safeguard their residences when they’re not around. Crime rates across the country often start to peak as temperatures rise during warm weather months – the same time that many families leave their homes unoccupied and unprotected.
“A home is the biggest financial investment that most people will make in their lifetimes, but it is also the place where they raise their families, build memories and share their dreams for the future,” says Florida Realtors® 2011 President Patricia Fitzgerald, manager/broker-associate with Illustrated Properties in Hobe Sound and Mariner Sands Country Club in Stuart. “It just makes sense to take steps to protect something so priceless.”
Homeowners can take these simple precautions to make their homes less of a target for criminals:
No home alone: Before leaving your home during the day, make it look as if someone is still at home by using timers on lights in various rooms. Even though daylight hours are longer during the summer, it may still get dark faster than you expect or you may return home later than anticipated, and taking this step ensures that your home appears occupied at all times.
No open door policy: Ensure that all doors leading to the home and garage are locked, even when leaving for short periods of time. The typical burglary takes less than five minutes, and unlocked doors, combined with an empty home, put out the “welcome mat” for crime.
Someone to watch over me: Be landscape smart. Shrubbery and other plants can grow very rapidly during the warm, wet summer months, so keep them trimmed to allow your neighbors to keep an eye on your home. Also, an unkempt yard could be viewed as a sign of an empty home to a burglar.
A key reminder: When leaving home, take your house keys along or leave a spare set with a trusted neighbor. Never leave a key under a welcome mat, in a mailbox or other hiding spots – most burglars know where to look.
Crime doesn’t take a vacation: If you’re planning to be away from home on vacation for more than a day or two, ask a neighbor to park a car in your driveway and pick up your mail and newspapers – or be sure to make arrangements to cancel the paper and hold the mail. Disable your garage door opener and manually lock it from the inside, and don’t forget to check that the door leading from the garage to the home is locked, too.
Source: Florida Realtors®
To fully enjoy those activities and other summertime pursuits spent away from home, Florida Realtors® suggests that homeowners take precautions to safeguard their residences when they’re not around. Crime rates across the country often start to peak as temperatures rise during warm weather months – the same time that many families leave their homes unoccupied and unprotected.
“A home is the biggest financial investment that most people will make in their lifetimes, but it is also the place where they raise their families, build memories and share their dreams for the future,” says Florida Realtors® 2011 President Patricia Fitzgerald, manager/broker-associate with Illustrated Properties in Hobe Sound and Mariner Sands Country Club in Stuart. “It just makes sense to take steps to protect something so priceless.”
Homeowners can take these simple precautions to make their homes less of a target for criminals:
No home alone: Before leaving your home during the day, make it look as if someone is still at home by using timers on lights in various rooms. Even though daylight hours are longer during the summer, it may still get dark faster than you expect or you may return home later than anticipated, and taking this step ensures that your home appears occupied at all times.
No open door policy: Ensure that all doors leading to the home and garage are locked, even when leaving for short periods of time. The typical burglary takes less than five minutes, and unlocked doors, combined with an empty home, put out the “welcome mat” for crime.
Someone to watch over me: Be landscape smart. Shrubbery and other plants can grow very rapidly during the warm, wet summer months, so keep them trimmed to allow your neighbors to keep an eye on your home. Also, an unkempt yard could be viewed as a sign of an empty home to a burglar.
A key reminder: When leaving home, take your house keys along or leave a spare set with a trusted neighbor. Never leave a key under a welcome mat, in a mailbox or other hiding spots – most burglars know where to look.
Crime doesn’t take a vacation: If you’re planning to be away from home on vacation for more than a day or two, ask a neighbor to park a car in your driveway and pick up your mail and newspapers – or be sure to make arrangements to cancel the paper and hold the mail. Disable your garage door opener and manually lock it from the inside, and don’t forget to check that the door leading from the garage to the home is locked, too.
Source: Florida Realtors®
Monday, June 27, 2011
Commercial real estate prices dip
Moody’s Investors Service is reporting that U.S. commercial real estate prices declined by 3.7 percent during the month of April, as distressed prices masked the price recovery seen in larger, higher-quality assets.
The commercial property sector continues to struggle with slumping demand, and April marks the fifth straight decline in the Moodys/Real Estate Analytics LLC commercial property price index. On the bright side, the price recovery that began a year ago among “trophy properties” in the biggest U.S. markets continued unabated.
Tad Philipp, Moody’s director of CRE research, states, “In April, we continued to see a case of where the strong are getting stronger and the weak are getting weaker. Major asset/major market prices have recovered more than half of their post-peak losses, while prices for distressed transactions have continued to bounce around the bottom.” Distressed property sales have now made up at least one-fifth of the repeat-sales transaction volume for 17 consecutive months.
Source: INFORMATION, INC.
The commercial property sector continues to struggle with slumping demand, and April marks the fifth straight decline in the Moodys/Real Estate Analytics LLC commercial property price index. On the bright side, the price recovery that began a year ago among “trophy properties” in the biggest U.S. markets continued unabated.
Tad Philipp, Moody’s director of CRE research, states, “In April, we continued to see a case of where the strong are getting stronger and the weak are getting weaker. Major asset/major market prices have recovered more than half of their post-peak losses, while prices for distressed transactions have continued to bounce around the bottom.” Distressed property sales have now made up at least one-fifth of the repeat-sales transaction volume for 17 consecutive months.
Source: INFORMATION, INC.
Tight Credit Continues to Shut Buyers Out
With the tightening of credit over the last few years by banks, more potential buyers find they are being shut out of home ownership, unable to obtain financing for their home purchase. And it’s not just buyers with poor credit histories being rejected for home loans--some buyers are even coming with stellar credit scores and big down payments, experts say.
For example, Amy Menell told The Wall Street Journal how a bank denied her for a home loan, despite her credit score being above 800, no debt, and having a down payment of more than 50 percent of the cost of the $400,000 home. However, Menell, who was in the process of finalizing a divorce, works as a real estate agent and didn’t have much income in 2009. While her business has picked up since then, she did not have the two years of documented income the banks wanted to process her loan application.
Other qualified buyers coming with good credit scores and credit histories are also finding themselves unable to get a home loan. Those who are having the toughest time are those who have seen their incomes drop or interrupted by a time of unemployment and self-employed applicants.
The percentage of mortgage applications rejected by the nation's largest lenders increased last year: The country’s 10 largest mortgage lenders denied 26.8 percent of loan applications in 2010, which is up from 23.5 percent in 2009, according to an analysis by The Wall Street Journal.
The analysis showed denial rates for loans were highest in Miami, Detroit, and New Orleans. In Miami, for example, nearly 44 percent of home loan applications were denied last year (home prices in Miami have dropped by 50 percent since their 2006 peak), according to The Wall Street Journal. Lenders denied the fewest loans in Raleigh, N.C.; Bethesda, Md.; and San Jose, Calif.
An Ease in Sight?
Banks continue to be under pressure to avoid heavy losses, which fueled the tightened standards in the first place.
"Clearly we got too loose. This is a return to historical standards," says Doug Duncan, Fannie's chief economist.
Lenders don’t appear to have plans to ease credit soon either. Nearly four in 10 banks reported even tighter mortgage lending standards for the 12-month period ended in February, according to a survey by the Office of the Comptroller of the Currency. Only 8 percent of the banks surveyed said they had eased their credit standards.
Source: “Tighter Lending Crimps Housing,” The Wall Street Journal (June 25, 2011)
For example, Amy Menell told The Wall Street Journal how a bank denied her for a home loan, despite her credit score being above 800, no debt, and having a down payment of more than 50 percent of the cost of the $400,000 home. However, Menell, who was in the process of finalizing a divorce, works as a real estate agent and didn’t have much income in 2009. While her business has picked up since then, she did not have the two years of documented income the banks wanted to process her loan application.
Other qualified buyers coming with good credit scores and credit histories are also finding themselves unable to get a home loan. Those who are having the toughest time are those who have seen their incomes drop or interrupted by a time of unemployment and self-employed applicants.
The percentage of mortgage applications rejected by the nation's largest lenders increased last year: The country’s 10 largest mortgage lenders denied 26.8 percent of loan applications in 2010, which is up from 23.5 percent in 2009, according to an analysis by The Wall Street Journal.
The analysis showed denial rates for loans were highest in Miami, Detroit, and New Orleans. In Miami, for example, nearly 44 percent of home loan applications were denied last year (home prices in Miami have dropped by 50 percent since their 2006 peak), according to The Wall Street Journal. Lenders denied the fewest loans in Raleigh, N.C.; Bethesda, Md.; and San Jose, Calif.
An Ease in Sight?
Banks continue to be under pressure to avoid heavy losses, which fueled the tightened standards in the first place.
"Clearly we got too loose. This is a return to historical standards," says Doug Duncan, Fannie's chief economist.
Lenders don’t appear to have plans to ease credit soon either. Nearly four in 10 banks reported even tighter mortgage lending standards for the 12-month period ended in February, according to a survey by the Office of the Comptroller of the Currency. Only 8 percent of the banks surveyed said they had eased their credit standards.
Source: “Tighter Lending Crimps Housing,” The Wall Street Journal (June 25, 2011)
Americans spend at weakest pace in 20 months
Americans spent at the weakest pace in 20 months, a sign that high gas prices are taking a toll on the economy.
Consumer spending was unchanged in May, the Commerce Department said Monday. That was the worst result since September 2009. And when adjusted for inflation, spending actually dropped 0.1 percent.
April’s consumer spending figures were revised to show a similar decline when adjusting for inflation. It marked the first decline in inflation-adjusted spending since January 2010.
Incomes rose 0.3 percent for the second straight month. But adjusted for inflation, after-tax incomes increased only 0.1 percent in May, after falling by the same amount in the previous month.
Stock futures fell immediately after the report was released. Dow futures plunged 115 points.
Neil Dutta, an economist at Bank of America Merrill Lynch, pointed out that inflation-adjusted, after-tax income is now slightly lower than it was in January.
“It was a very poor report all around,” he said. “I think it’s clear that higher gasoline prices are taking a bite out of consumer spending.”
Consumer spending accounts for 70 percent of economic activity. The spike in gas prices has forced many consumers to cut back on discretionary purchases, such as furniture and vacations, which help boost growth.
Fewer jobs and high unemployment have left workers with little leverage to ask for raises. And slow wage growth hurts the broader economy because consumers have less money to spend.
Hiring slowed considerably this spring after a strong start at the beginning of the year. The economy created only 54,000 jobs in May, the lowest amount in eight months. That followed three months in which employers hired an average of 220,000 net new workers each month. The unemployment rate rose to 9.1 percent last month.
The economy expanded at an annual rate of 1.9 percent in the January-March period. Many economists believe that growth is only slightly better in the current April-June period.
The report also showed that prices are increasing across many goods and services. A key inflation gauge followed by the Federal Reserve rose 0.2 percent in May, after increasing 0.3 percent or higher in each of the previous five months.
But excluding the volatile food and energy categories, inflation rose 0.3 percent in May, the most since October 2009.
Gas prices have eased since peaking in early May at a national average of nearly $4 per gallon. In the past two months they have dropped to a national average of $3.57 per gallon, according to AAA’s daily fuel gauge.
An Associated Press survey of 38 top economists predicts that rate will be about 2.3 percent. Economists are optimistic for the second half of the year, saying growth should pick up to a 3.2 percent pace. They note that two of the biggest factors slowing the economy are abating.
Gas prices are falling. And U.S. factories are expected to begin producing more once Japan’s factories resume more normal operations. The March 11 earthquake and tsunami in that country has led to a parts shortage, particularly for auto and electronics manufacturers.
Still, growth must be stronger to significantly lower the unemployment rate. The economy would need to grow 5 percent for a whole year to significantly bring down the unemployment rate. Economic growth of just 3 percent a year would hold the unemployment steady and keep up with population growth.
Americans boosted their savings a bit in May, keeping 5 percent of their after-tax income. That is up from 4.9 percent in April.
Source: The Associated Press, Christopher S. Rugaber, AP economics writer.
Consumer spending was unchanged in May, the Commerce Department said Monday. That was the worst result since September 2009. And when adjusted for inflation, spending actually dropped 0.1 percent.
April’s consumer spending figures were revised to show a similar decline when adjusting for inflation. It marked the first decline in inflation-adjusted spending since January 2010.
Incomes rose 0.3 percent for the second straight month. But adjusted for inflation, after-tax incomes increased only 0.1 percent in May, after falling by the same amount in the previous month.
Stock futures fell immediately after the report was released. Dow futures plunged 115 points.
Neil Dutta, an economist at Bank of America Merrill Lynch, pointed out that inflation-adjusted, after-tax income is now slightly lower than it was in January.
“It was a very poor report all around,” he said. “I think it’s clear that higher gasoline prices are taking a bite out of consumer spending.”
Consumer spending accounts for 70 percent of economic activity. The spike in gas prices has forced many consumers to cut back on discretionary purchases, such as furniture and vacations, which help boost growth.
Fewer jobs and high unemployment have left workers with little leverage to ask for raises. And slow wage growth hurts the broader economy because consumers have less money to spend.
Hiring slowed considerably this spring after a strong start at the beginning of the year. The economy created only 54,000 jobs in May, the lowest amount in eight months. That followed three months in which employers hired an average of 220,000 net new workers each month. The unemployment rate rose to 9.1 percent last month.
The economy expanded at an annual rate of 1.9 percent in the January-March period. Many economists believe that growth is only slightly better in the current April-June period.
The report also showed that prices are increasing across many goods and services. A key inflation gauge followed by the Federal Reserve rose 0.2 percent in May, after increasing 0.3 percent or higher in each of the previous five months.
But excluding the volatile food and energy categories, inflation rose 0.3 percent in May, the most since October 2009.
Gas prices have eased since peaking in early May at a national average of nearly $4 per gallon. In the past two months they have dropped to a national average of $3.57 per gallon, according to AAA’s daily fuel gauge.
An Associated Press survey of 38 top economists predicts that rate will be about 2.3 percent. Economists are optimistic for the second half of the year, saying growth should pick up to a 3.2 percent pace. They note that two of the biggest factors slowing the economy are abating.
Gas prices are falling. And U.S. factories are expected to begin producing more once Japan’s factories resume more normal operations. The March 11 earthquake and tsunami in that country has led to a parts shortage, particularly for auto and electronics manufacturers.
Still, growth must be stronger to significantly lower the unemployment rate. The economy would need to grow 5 percent for a whole year to significantly bring down the unemployment rate. Economic growth of just 3 percent a year would hold the unemployment steady and keep up with population growth.
Americans boosted their savings a bit in May, keeping 5 percent of their after-tax income. That is up from 4.9 percent in April.
Source: The Associated Press, Christopher S. Rugaber, AP economics writer.
Friday, June 24, 2011
NAHB testifies before Congress on flood insurance
The National Association of Home Builders (NAHB) supported a five-year extension of the National Flood Insurance Program (NFIP) before the Senate Banking Committee.
Barry Rutenberg, first vice chairman of NAHB and a home builder from Gainesville, Fla., told lawmakers that NFIP’s recent series of short-term extensions has created a high level of uncertainty in the program, and that has caused severe problems for the nation’s already troubled housing markets.
“Unfortunately during this latest interruption, many homebuyers faced delayed or cancelled closings due to the inability to obtain NFIP insurance for a mortgage,” said Rutenberg. “In other instances, builders themselves were forced to halt or postpone construction on a new home due to the lack of flood insurance approval, adding unneeded delay and job loss. NAHB believes a long-term extension will ensure the nation’s real estate markets operate smoothly.”
The current reauthorization of the program expires on Sept. 30.
While NAHB supports NFIP reforms, Rutenberg also urged lawmakers to proceed with care. Congress could take steps to bolster the program’s balance sheet could also have unintended consequences, such as increasing the cost of housing.
In its testimony, NAHB supported several reforms:
• Create a more expansive “deluxe” flood insurance option or a menu of insurance options from which policyholders could pick and choose.
• Raise the minimum deductible for paid claims to give homeowners a strong incentive to mitigate and protect their homes, thereby reducing potential future losses to the NFIP.
• Establish a Technical Mapping Advisory Council, as seen in House bill H.R. 1309, to ensure the scientific validity of Flood Insurance Rate Maps.
• Keep the Special Flood Hazard Area and any mapping to the 100-year flood level (1 percent annual flood risk), because any expansion would substantially increase the cost of home construction and severely impact housing affordability.
Established in 1968, the NFIP offers affordable flood insurance to homeowners and businesses in flood plains and other low-lying areas that otherwise might not be able to obtain coverage.
Source: Florida Realtors®
Barry Rutenberg, first vice chairman of NAHB and a home builder from Gainesville, Fla., told lawmakers that NFIP’s recent series of short-term extensions has created a high level of uncertainty in the program, and that has caused severe problems for the nation’s already troubled housing markets.
“Unfortunately during this latest interruption, many homebuyers faced delayed or cancelled closings due to the inability to obtain NFIP insurance for a mortgage,” said Rutenberg. “In other instances, builders themselves were forced to halt or postpone construction on a new home due to the lack of flood insurance approval, adding unneeded delay and job loss. NAHB believes a long-term extension will ensure the nation’s real estate markets operate smoothly.”
The current reauthorization of the program expires on Sept. 30.
While NAHB supports NFIP reforms, Rutenberg also urged lawmakers to proceed with care. Congress could take steps to bolster the program’s balance sheet could also have unintended consequences, such as increasing the cost of housing.
In its testimony, NAHB supported several reforms:
• Create a more expansive “deluxe” flood insurance option or a menu of insurance options from which policyholders could pick and choose.
• Raise the minimum deductible for paid claims to give homeowners a strong incentive to mitigate and protect their homes, thereby reducing potential future losses to the NFIP.
• Establish a Technical Mapping Advisory Council, as seen in House bill H.R. 1309, to ensure the scientific validity of Flood Insurance Rate Maps.
• Keep the Special Flood Hazard Area and any mapping to the 100-year flood level (1 percent annual flood risk), because any expansion would substantially increase the cost of home construction and severely impact housing affordability.
Established in 1968, the NFIP offers affordable flood insurance to homeowners and businesses in flood plains and other low-lying areas that otherwise might not be able to obtain coverage.
Source: Florida Realtors®
Fixed mortgage rates flat, hover near yearly low
Fixed mortgage rates were mostly unchanged this week, hovering near yearly lows.
The average rate on the 30-year loan held steady at 4.50 percent, Freddie Mac said Thursday. It hit 4.49 percent two weeks ago, the lowest level this year. The average rate on the 15-year fixed mortgage, popular for refinancing, inched up to 3.69 percent. Last week it reached a yearly low of 3.67 percent.
Rates typically track the yield on the 10-year Treasury note. That yield has been dropping in recent weeks based on weak data that points to a slower economy.
Low mortgage rates and falling home prices have done little to boost the troubled housing markets. Tougher lending standards and bigger downpayment requirements have prevented many people from taking advantage of the ultra-low rates. Many people who can qualify are holding off, worried that prices have yet to bottom out.
Fewer people purchased previously occupied homes in May. Sales fell to their lowest level of the year. Since the housing market went bust in 2006, sales have fallen in four of the past five years and hit a 13-year low last year.
New-home sales fell last month to a seasonally adjusted annual rate of 319,000 homes. That’s far below the 700,000 homes per year that economists say must be sold to sustain a healthy housing market.
Federal Reserve Chairman Ben Bernanke said Wednesday that the housing market is dragging down the broader economy. For the market to recover, he said foreclosures must be cleared from the pipeline of homes for sale.
Most economists say home prices will keep falling through the rest of the year. Many forecasts don’t anticipate a rebound in prices until at least 2013.
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 from 3.27 percent to 3.25 percent, the lowest rate on records dating back to 2005. The average rate on a one-year adjustable-rate loan rose to 2.99 percent, slightly above the record low of 2.95 percent.
The rates do not include the extra fees known as points. One point is equal to 1 percent of the total loan amount.
The average fees rose to 0.8 percent from 0.7 percent for the 30-year fixed loan, according to Freddie Mac’s survey. They were flat at 0.7 percent for the 15-year fixed loan, the survey found. The average fees for the five-year and one-year ARM were unchanged at 0.6 percent and 0.5 percent, respectively.
Source: The Associated Press, Daniel Wagner. All rights reserved.
Breakout: Mortgage Rate Trend Index
This week, one-third (33%) of the industry experts polled by Bankrate.com believe mortgage rates will rise over the next week or so; just 7% think they’ll fall; and 60% believe rates will remain relatively unchanged.
The average rate on the 30-year loan held steady at 4.50 percent, Freddie Mac said Thursday. It hit 4.49 percent two weeks ago, the lowest level this year. The average rate on the 15-year fixed mortgage, popular for refinancing, inched up to 3.69 percent. Last week it reached a yearly low of 3.67 percent.
Rates typically track the yield on the 10-year Treasury note. That yield has been dropping in recent weeks based on weak data that points to a slower economy.
Low mortgage rates and falling home prices have done little to boost the troubled housing markets. Tougher lending standards and bigger downpayment requirements have prevented many people from taking advantage of the ultra-low rates. Many people who can qualify are holding off, worried that prices have yet to bottom out.
Fewer people purchased previously occupied homes in May. Sales fell to their lowest level of the year. Since the housing market went bust in 2006, sales have fallen in four of the past five years and hit a 13-year low last year.
New-home sales fell last month to a seasonally adjusted annual rate of 319,000 homes. That’s far below the 700,000 homes per year that economists say must be sold to sustain a healthy housing market.
Federal Reserve Chairman Ben Bernanke said Wednesday that the housing market is dragging down the broader economy. For the market to recover, he said foreclosures must be cleared from the pipeline of homes for sale.
Most economists say home prices will keep falling through the rest of the year. Many forecasts don’t anticipate a rebound in prices until at least 2013.
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 from 3.27 percent to 3.25 percent, the lowest rate on records dating back to 2005. The average rate on a one-year adjustable-rate loan rose to 2.99 percent, slightly above the record low of 2.95 percent.
The rates do not include the extra fees known as points. One point is equal to 1 percent of the total loan amount.
The average fees rose to 0.8 percent from 0.7 percent for the 30-year fixed loan, according to Freddie Mac’s survey. They were flat at 0.7 percent for the 15-year fixed loan, the survey found. The average fees for the five-year and one-year ARM were unchanged at 0.6 percent and 0.5 percent, respectively.
Source: The Associated Press, Daniel Wagner. All rights reserved.
Breakout: Mortgage Rate Trend Index
This week, one-third (33%) of the industry experts polled by Bankrate.com believe mortgage rates will rise over the next week or so; just 7% think they’ll fall; and 60% believe rates will remain relatively unchanged.
Thursday, June 23, 2011
Cash Buyers Continue to Dominate
For the fifth-straight month, cash buyers accounted for at least 30 percent of existing-home sales, the National Association of REALTORS® reported this week.
In May, all-cash buyers made up 30 percent of existing home sales, which compares to 25 percent in May 2010 and 12 percent two years ago, according to NAR.
Low prices from foreclosures are tempting cash buyers--who are mostly investors--and prompting them to snag deals. They’re turning many of their housing purchases into rentals and immediately finding quick profits, housing experts say.
"These are people who're ... getting back into the market because they see good value," says Stan Humphries, Zillow chief economist.
Cash buyers tend to dominate in cities where home prices have fallen the most and foreclosures are the most prevalent. For example, in Miami-Fort Lauderdale, 63 percent of first-quarter buyers paid in cash and in Las Vegas, which consistently boasts the highest foreclosure rate, cash buyers made up nearly 50 percent of first-quarter sales, according to Zillow.com.
Without cash buyers, "we would be in much worse shape than we are," says Jim Gillespie, CEO of Coldwell Banker Real Estate. "They recognize that this is the smartest time to buy." Home prices are 33 percent below the peak reached in 2006.
Source: “Cash Buyers Scooping Up Homes,” USA Today (June 22, 2011)
In May, all-cash buyers made up 30 percent of existing home sales, which compares to 25 percent in May 2010 and 12 percent two years ago, according to NAR.
Low prices from foreclosures are tempting cash buyers--who are mostly investors--and prompting them to snag deals. They’re turning many of their housing purchases into rentals and immediately finding quick profits, housing experts say.
"These are people who're ... getting back into the market because they see good value," says Stan Humphries, Zillow chief economist.
Cash buyers tend to dominate in cities where home prices have fallen the most and foreclosures are the most prevalent. For example, in Miami-Fort Lauderdale, 63 percent of first-quarter buyers paid in cash and in Las Vegas, which consistently boasts the highest foreclosure rate, cash buyers made up nearly 50 percent of first-quarter sales, according to Zillow.com.
Without cash buyers, "we would be in much worse shape than we are," says Jim Gillespie, CEO of Coldwell Banker Real Estate. "They recognize that this is the smartest time to buy." Home prices are 33 percent below the peak reached in 2006.
Source: “Cash Buyers Scooping Up Homes,” USA Today (June 22, 2011)
Economic trouble puzzles Fed chief, too
The economy’s continuing struggles aren’t just confounding ordinary Americans. They’ve also stumped the head of the Federal Reserve.
Fed Chairman Ben Bernanke told reporters Wednesday that the central bank had been caught off guard by recent signs of deterioration in the economy. And he said the troubles could continue into next year.
“We don’t have a precise read on why this slower pace of growth is persisting,” Bernanke said. He said the weak housing market and problems in the banking system might be “more persistent than we thought.”
It was the Fed chief’s most explicit warning yet that the economy will face serious challenges next year. For several months, he had said the factors working against economic growth appeared to be “transitory.”
The Fed cut its forecast for economic growth this year to a range of 2.7 percent to 2.9 percent from an April forecast of 3.1 percent to 3.3 percent. It also cut its forecast for next year to a range of 3.3 percent to 3.7 percent from an earlier 3.5 percent to 4.2 percent. The Fed also said unemployment would stay higher than it had expected earlier.
In a policy statement issued at the end of a two-day meeting, the Fed blamed the worsening economic outlook in part on higher energy prices and the earthquake and tsunami in Japan, which slowed production of cars and other products.
But at a press conference afterward, the second of what the Fed says will be regular question-and-answer sessions with reporters, Bernanke conceded the economy’s troubles are more puzzling and potentially more long-lasting than a pair of temporary shocks.
The Fed noon announcement had little effect on the stock and bond markets. Bernanke began speaking at 2:15, and stocks started falling at about 2:30, when he acknowledged that some of the economy’s problems could linger into next year. The Dow Jones industrial average closed down 80 points for the day.
The Fed’s statement Wednesday stood in contrast to the Fed’s more upbeat view when officials last met, eight weeks ago. At that time, the central bank said the job market was gradually improving.
Since then, the economic news has been gloomy. The government reported that the economy grew at an annual rate of only 1.8 percent in the first three months of the year. It isn’t expected to grow much faster in the current quarter. The economy added 54,000 jobs in May, far fewer than in the previous two months. Consumer spending has weakened, too.
The bad economic news is taking a political toll on President Barack Obama. For the first time this year, an Associated Press-GfK poll found that fewer than 50 percent of respondents believe Obama deserves re-election. Obama’s overall approval rating fell to 52 percent in the new poll. It had risen as high as 60 percent after the U.S. raid last month in Pakistan that killed Osama bin Laden.
The new Fed statement acknowledged a slowdown over the past two months. “They see the weakness,” said Bruce McCain, chief investment strategist at Key Private Bank. “You can hear their concern about economic weakness despite their hope it is likely to be temporary.”
The Fed stuck to its plan to bring an end this month to a program to help the economy by buying $600 billion in government bonds. The Fed also intends to keep short-term interest rates near zero “for an extended period,” a phrase it has been using the past two years. Though the central bank noted that inflation has risen, it expects that to be temporary as well.
The Fed has kept rates at ultra-low levels since December 2008. Abandoning the promise to keep them there for an “extended period” would be viewed as a signal that the Fed is preparing to raise interest rates. Many private economists think it will be another full year before the economy has recovered enough for the Fed to do it.
Economists looking for clues to the Fed’s next move didn’t get much help Wednesday. “There’s no obvious hint of tightening here,” said Jim O’Sullivan, chief economist at MF Global. “There’s no hint of new easing.”
The bond-buying program has been controversial. Supporters say the bond purchases have kept interest rates low and encouraged spending. Low long-term rates make it easier to buy homes and cars and for companies to expand.
They also argue that those lower rates fueled a stock rally. Since Bernanke outlined plans for the program last August, the Standard & Poor’s 500 index is up 24 percent. Lower rates made stocks more attractive to investors than bonds, whose yields were falling.
The average rate on a 30-year mortgage has stayed below 5 percent for all but two weeks this year and was 4.5 percent last week. But low rates haven’t helped home sales much. They fell in May to the lowest level since November.
Critics, including some Fed officials, saw things differently. They warned that by pumping so much money into the economy, the Fed increased the risks of high inflation later.
Source: The Associated Press, Paul Wiseman and Martin Crutsinger, AP economics writers. All rights reserved.
Fed Chairman Ben Bernanke told reporters Wednesday that the central bank had been caught off guard by recent signs of deterioration in the economy. And he said the troubles could continue into next year.
“We don’t have a precise read on why this slower pace of growth is persisting,” Bernanke said. He said the weak housing market and problems in the banking system might be “more persistent than we thought.”
It was the Fed chief’s most explicit warning yet that the economy will face serious challenges next year. For several months, he had said the factors working against economic growth appeared to be “transitory.”
The Fed cut its forecast for economic growth this year to a range of 2.7 percent to 2.9 percent from an April forecast of 3.1 percent to 3.3 percent. It also cut its forecast for next year to a range of 3.3 percent to 3.7 percent from an earlier 3.5 percent to 4.2 percent. The Fed also said unemployment would stay higher than it had expected earlier.
In a policy statement issued at the end of a two-day meeting, the Fed blamed the worsening economic outlook in part on higher energy prices and the earthquake and tsunami in Japan, which slowed production of cars and other products.
But at a press conference afterward, the second of what the Fed says will be regular question-and-answer sessions with reporters, Bernanke conceded the economy’s troubles are more puzzling and potentially more long-lasting than a pair of temporary shocks.
The Fed noon announcement had little effect on the stock and bond markets. Bernanke began speaking at 2:15, and stocks started falling at about 2:30, when he acknowledged that some of the economy’s problems could linger into next year. The Dow Jones industrial average closed down 80 points for the day.
The Fed’s statement Wednesday stood in contrast to the Fed’s more upbeat view when officials last met, eight weeks ago. At that time, the central bank said the job market was gradually improving.
Since then, the economic news has been gloomy. The government reported that the economy grew at an annual rate of only 1.8 percent in the first three months of the year. It isn’t expected to grow much faster in the current quarter. The economy added 54,000 jobs in May, far fewer than in the previous two months. Consumer spending has weakened, too.
The bad economic news is taking a political toll on President Barack Obama. For the first time this year, an Associated Press-GfK poll found that fewer than 50 percent of respondents believe Obama deserves re-election. Obama’s overall approval rating fell to 52 percent in the new poll. It had risen as high as 60 percent after the U.S. raid last month in Pakistan that killed Osama bin Laden.
The new Fed statement acknowledged a slowdown over the past two months. “They see the weakness,” said Bruce McCain, chief investment strategist at Key Private Bank. “You can hear their concern about economic weakness despite their hope it is likely to be temporary.”
The Fed stuck to its plan to bring an end this month to a program to help the economy by buying $600 billion in government bonds. The Fed also intends to keep short-term interest rates near zero “for an extended period,” a phrase it has been using the past two years. Though the central bank noted that inflation has risen, it expects that to be temporary as well.
The Fed has kept rates at ultra-low levels since December 2008. Abandoning the promise to keep them there for an “extended period” would be viewed as a signal that the Fed is preparing to raise interest rates. Many private economists think it will be another full year before the economy has recovered enough for the Fed to do it.
Economists looking for clues to the Fed’s next move didn’t get much help Wednesday. “There’s no obvious hint of tightening here,” said Jim O’Sullivan, chief economist at MF Global. “There’s no hint of new easing.”
The bond-buying program has been controversial. Supporters say the bond purchases have kept interest rates low and encouraged spending. Low long-term rates make it easier to buy homes and cars and for companies to expand.
They also argue that those lower rates fueled a stock rally. Since Bernanke outlined plans for the program last August, the Standard & Poor’s 500 index is up 24 percent. Lower rates made stocks more attractive to investors than bonds, whose yields were falling.
The average rate on a 30-year mortgage has stayed below 5 percent for all but two weeks this year and was 4.5 percent last week. But low rates haven’t helped home sales much. They fell in May to the lowest level since November.
Critics, including some Fed officials, saw things differently. They warned that by pumping so much money into the economy, the Fed increased the risks of high inflation later.
Source: The Associated Press, Paul Wiseman and Martin Crutsinger, AP economics writers. All rights reserved.
New home sales fell in May, median price rose
Fewer Americans bought new homes last month, the latest sign that the struggling housing market won’t rebound this year.
The Commerce Department says new-home sales fell 2.1 percent in May to a seasonally adjusted annual rate of 319,000 homes. That’s far below the 700,000 homes per year that economists say must be sold to sustain a healthy housing market.
The median sales price rose 2.6 percent from April to $222,600. That’s more than 30 percent higher than the median sales of price of older, re-sale homes.
Separately, the Labor Department said the number of people who applied for unemployment benefits rose by the most in a month, signaling growing weakness in the job market. Applications rose by 9,000 to a seasonally adjusted 429,000 last week. It was the second increase in three weeks and the 11th straight week that applications have been above 400,000.
Housing remains the weakest part of the U.S. economy, analysts say. Sales of new homes have fallen 18 percent in the two years since the recession ended. Last year was the worst for new-home sales on records dating back half a century.
Though new homes represent only about 20 percent of the overall home market, they have an outsize impact on the economy. Each new home creates an average of three jobs and $90,000 in taxes, according to the National Association of Home Builders.
Larger downpayment requirements, tougher lending standards and high unemployment are preventing people from buying homes. Many people who can afford to buy are holding off, worried that prices have yet to bottom out.
Sales were uneven across the country. In the Northeast, they plunged nearly 27 percent and sales dropped 3.5 percent in the West. But sales stayed flat from April in the Midwest and rose 2.4 percent in the South.
The number of new homes on the market fell again in May to its lowest level on record — 166,000 homes. It would take a little more than 6 months to clear those homes off the market, which economists say is a healthy level. But that number is artificially low, they say. In reality, millions of potential sellers are waiting for prices to rise before putting their own homes on the market.
One reason new homes are priced so much higher than previously occupied homes is the flood of foreclosures and short sales — when lenders let homeowners sell for less than they owe on their mortgage. Those homes are selling at an average discount of 20 percent. Ultimately, foreclosure sales pull down neighboring home values.
Roughly 1.2 million homes will be foreclosed upon this year, according to foreclosure tracker RealtyTrac Inc., and an additional 1.7 million homes represent the nation’s “shadow inventory” of homes that are at risk of foreclosure, according to real estate data firm CoreLogic.
Federal Reserve Chairman Ben Bernanke said Wednesday that the housing market was a strong and persistent factor hurting the broader economy. For the market to recover, he said foreclosures must be cleared from the pipeline of homes for sale.
Bernanke said he would prefer that banks help homeowners facing foreclosure by lowering their monthly payments through modified loans. But he also said that if those modifications were not appropriate, it was important to speed up foreclosures to “give people confidence that they can buy and not be buying into a falling market.”
Last year was the fifth straight year that new-home sales fell. That followed record-high sales in the previous five years, when the housing market was booming. Economists say it will take years before sales return to pre-housing boom levels.
A telling sign of how far things have fallen: Home prices have dropped more during this recession than they did during the Great Depression in the 1930s. And it took 19 years for prices to fully recover during the depression.
Source: The Associated Press, Derek Kravitz, AP real estate writer. All rights reserved.
The Commerce Department says new-home sales fell 2.1 percent in May to a seasonally adjusted annual rate of 319,000 homes. That’s far below the 700,000 homes per year that economists say must be sold to sustain a healthy housing market.
The median sales price rose 2.6 percent from April to $222,600. That’s more than 30 percent higher than the median sales of price of older, re-sale homes.
Separately, the Labor Department said the number of people who applied for unemployment benefits rose by the most in a month, signaling growing weakness in the job market. Applications rose by 9,000 to a seasonally adjusted 429,000 last week. It was the second increase in three weeks and the 11th straight week that applications have been above 400,000.
Housing remains the weakest part of the U.S. economy, analysts say. Sales of new homes have fallen 18 percent in the two years since the recession ended. Last year was the worst for new-home sales on records dating back half a century.
Though new homes represent only about 20 percent of the overall home market, they have an outsize impact on the economy. Each new home creates an average of three jobs and $90,000 in taxes, according to the National Association of Home Builders.
Larger downpayment requirements, tougher lending standards and high unemployment are preventing people from buying homes. Many people who can afford to buy are holding off, worried that prices have yet to bottom out.
Sales were uneven across the country. In the Northeast, they plunged nearly 27 percent and sales dropped 3.5 percent in the West. But sales stayed flat from April in the Midwest and rose 2.4 percent in the South.
The number of new homes on the market fell again in May to its lowest level on record — 166,000 homes. It would take a little more than 6 months to clear those homes off the market, which economists say is a healthy level. But that number is artificially low, they say. In reality, millions of potential sellers are waiting for prices to rise before putting their own homes on the market.
One reason new homes are priced so much higher than previously occupied homes is the flood of foreclosures and short sales — when lenders let homeowners sell for less than they owe on their mortgage. Those homes are selling at an average discount of 20 percent. Ultimately, foreclosure sales pull down neighboring home values.
Roughly 1.2 million homes will be foreclosed upon this year, according to foreclosure tracker RealtyTrac Inc., and an additional 1.7 million homes represent the nation’s “shadow inventory” of homes that are at risk of foreclosure, according to real estate data firm CoreLogic.
Federal Reserve Chairman Ben Bernanke said Wednesday that the housing market was a strong and persistent factor hurting the broader economy. For the market to recover, he said foreclosures must be cleared from the pipeline of homes for sale.
Bernanke said he would prefer that banks help homeowners facing foreclosure by lowering their monthly payments through modified loans. But he also said that if those modifications were not appropriate, it was important to speed up foreclosures to “give people confidence that they can buy and not be buying into a falling market.”
Last year was the fifth straight year that new-home sales fell. That followed record-high sales in the previous five years, when the housing market was booming. Economists say it will take years before sales return to pre-housing boom levels.
A telling sign of how far things have fallen: Home prices have dropped more during this recession than they did during the Great Depression in the 1930s. And it took 19 years for prices to fully recover during the depression.
Source: The Associated Press, Derek Kravitz, AP real estate writer. All rights reserved.
Regulators urged to reconsider QRM definition
At a news conference on Capitol Hill this week, the original sponsors of the Qualified Residential Mortgage provision in the Dodd-Frank Act – Sens. Mary Landrieu (D-La.), Johnny Isakson (R-Ga.) and Kay Hagan (D-N.C.) – joined Reps. John Campbell (R-Calif.) and Brad Sherman (D-Calif.) to urge regulators to reconsider unnecessarily high downpayment requirements under the proposed QRM rule.
“As the leading advocate for homeownership, the National Association of Realtors® (NAR) firmly believes Congress intended to create a broad QRM exemption – strong evidence shows that responsible lending standards and ensuring a borrower’s ability to repay have the greatest impact on reducing lender risk, and not high downpayments,” said NAR President Ron Phipps.
NAR has forged the broad-based Coalition for Sensible Housing Policy, which includes 44 organizations focused on drawing attention to the proposed regulation’s onerous 20 percent downpayment requirement. The coalition asked for and recently received an extension of the comment period until August 1, 2011. NAR and its coalition partners have also gathered the support of 44 U.S. Senators, who recently wrote to regulators expressing their intent on QRM and opposing the imposition of a sizable downpayment; 282 House members signed a similar letter.
Concurrent with the event, NAR and the coalition unveiled a white paper “Proposed Qualified Residential Mortgage Definition Harms Creditworthy Borrowers While Frustrating Housing Recovery,” an in-depth analysis of the impact of the proposed QRM rule. The white paper will be submitted as the coalition’s official comments to the rule.
NAR wants federal regulators to honor congressional intent by crafting a QRM exemption that includes a wide variety of traditionally safe, well documented and properly underwritten products.
“As written, the proposed QRM rule violates congressional intent, makes homeownership more expensive for millions of responsible consumers and jeopardizes the fragile housing recovery,” Phipps said. “We urge regulators to reconsider the proposed QRM definition to help hard-working, creditworthy Americans continue to realize their dreams of homeownership.”
Source: NAR
© 2011 Florida Realtors®
“As the leading advocate for homeownership, the National Association of Realtors® (NAR) firmly believes Congress intended to create a broad QRM exemption – strong evidence shows that responsible lending standards and ensuring a borrower’s ability to repay have the greatest impact on reducing lender risk, and not high downpayments,” said NAR President Ron Phipps.
NAR has forged the broad-based Coalition for Sensible Housing Policy, which includes 44 organizations focused on drawing attention to the proposed regulation’s onerous 20 percent downpayment requirement. The coalition asked for and recently received an extension of the comment period until August 1, 2011. NAR and its coalition partners have also gathered the support of 44 U.S. Senators, who recently wrote to regulators expressing their intent on QRM and opposing the imposition of a sizable downpayment; 282 House members signed a similar letter.
Concurrent with the event, NAR and the coalition unveiled a white paper “Proposed Qualified Residential Mortgage Definition Harms Creditworthy Borrowers While Frustrating Housing Recovery,” an in-depth analysis of the impact of the proposed QRM rule. The white paper will be submitted as the coalition’s official comments to the rule.
NAR wants federal regulators to honor congressional intent by crafting a QRM exemption that includes a wide variety of traditionally safe, well documented and properly underwritten products.
“As written, the proposed QRM rule violates congressional intent, makes homeownership more expensive for millions of responsible consumers and jeopardizes the fragile housing recovery,” Phipps said. “We urge regulators to reconsider the proposed QRM definition to help hard-working, creditworthy Americans continue to realize their dreams of homeownership.”
Source: NAR
© 2011 Florida Realtors®
Wednesday, June 22, 2011
ARMs Stage a Comeback
More home buyers are being tempted again by the ultra-low rates of adjustable-rate mortgages, which have fallen to the 3 percent range. ARMs were once blamed as a contributor in sending the housing market from boom to gloom.
In the first quarter of this year, about 12 percent of the $325 billion in new mortgages made were ARMs. In the fourth quarter last year, ARMs made up 9 percent of new mortgages, reports the newsletter Inside Mortgage Finance. During the housing boom, ARMs made up 45 percent of mortgages issued in 2006.
However, near the end of housing’s heyday, many ARMs began to reset to higher rates and borrowers began to default in floods. Experts say that many borrowers who had ARMs did not fully understand the terms of their loan, causing the public to become more skittish of the adjustable-rate mortgages and their use has drop over recent years.
But ARMs are starting to gain more traction again in financing home purchases. Hybrid ARMs are catching on, in which there’s a period of three or five years where the interest rate is fixed before resetting. Experts say those tend to be good choices if you plan to sell your home in that period because you can take advantage of the low interest rates.
“If you know you will sell the home within five years, then it’s a no-brainer,” says Rick Cason, owner of Integrity Mortgage in Orlando, Fla. “But most people are unsure about what the future holds for themselves or the housing market.”
Source: “Borrowers Wade Back into Adjustable-Rate Mortgages,” The New York Times (June 21, 2011)
In the first quarter of this year, about 12 percent of the $325 billion in new mortgages made were ARMs. In the fourth quarter last year, ARMs made up 9 percent of new mortgages, reports the newsletter Inside Mortgage Finance. During the housing boom, ARMs made up 45 percent of mortgages issued in 2006.
However, near the end of housing’s heyday, many ARMs began to reset to higher rates and borrowers began to default in floods. Experts say that many borrowers who had ARMs did not fully understand the terms of their loan, causing the public to become more skittish of the adjustable-rate mortgages and their use has drop over recent years.
But ARMs are starting to gain more traction again in financing home purchases. Hybrid ARMs are catching on, in which there’s a period of three or five years where the interest rate is fixed before resetting. Experts say those tend to be good choices if you plan to sell your home in that period because you can take advantage of the low interest rates.
“If you know you will sell the home within five years, then it’s a no-brainer,” says Rick Cason, owner of Integrity Mortgage in Orlando, Fla. “But most people are unsure about what the future holds for themselves or the housing market.”
Source: “Borrowers Wade Back into Adjustable-Rate Mortgages,” The New York Times (June 21, 2011)
All-cash buyers scooping up homes
Cash buyers are snapping up homes in markets nationwide, betting that deals won’t get much better.
Last month, all-cash buyers accounted for 30 percent of existing home sales, up from 25 percent in May 2010, and 12 percent two years ago, says the National Association of Realtors.
Cash buyers, who are mostly investors, accounted for at least 30 percent of existing-home sales for the fifth-straight month, the association says. They hit 35 percent of buyers in March.
The cash buyers are enticed by low prices and potential rental income, economists say. But while their activity has helped curb price drops, price increases have yet to follow.
In May, the median price of an existing single-family home fell 4.5 percent to $166,700 from a year ago, the association reported Tuesday. Volume also dropped. Existing home sales in the month including single family, condos and townhouses were down 15 percent from the previous May, when a federal tax credit boosted sales.
Without cash buyers, “We would be in much worse shape than we are,” says Jim Gillespie, CEO of Coldwell Banker Real Estate. “They recognize that this is the smartest time to buy,” because U.S. home prices are 33 percent below their 2006 peak.
Cash buyers are especially prevalent in markets where prices have fallen the most, often areas hard hit by foreclosures.
In Las Vegas, the foreclosure capitol of the U.S. for the past four years, cash buyers accounted for 49 percent of first-quarter sales vs. 20 percent in the first quarter of 1997, says data from real estate site Zillow.com. In that area, home prices are almost 60 percent off their 2006 peak.
In the Miami-Fort Lauderdale area, 63 percent of first-quarter buyers paid in cash, vs. 39 percent in 1997’s first quarter, Zillow says.
Phoenix is also seeing more cash buyers, 44 percent in the first quarter up from 25 percent in the same 1997 period, Zillow data show.
The big numbers are “positive news,” says Stan Humphries, Zillow chief economist. “These are people who’re getting back into the market because they see good value.”
Cash buyers often get better deals because sellers know their offers won’t fall through for lack of financing, says Walt Danley, president of the luxury real estate firm The Walt Danley Group in Arizona. A discount of up to 5 percent is typical, he says.
While Danley sees many foreign buyers paying cash, investors looking for rentals are also big cash buyers.
Given low prices, they can buy homes, rent them and be immediately cash-flow positive, says Paul Dales, an economist for Capital Economics.
Source: USA TODAY, a division of Gannett Co. Inc., Julie Schmit.
Last month, all-cash buyers accounted for 30 percent of existing home sales, up from 25 percent in May 2010, and 12 percent two years ago, says the National Association of Realtors.
Cash buyers, who are mostly investors, accounted for at least 30 percent of existing-home sales for the fifth-straight month, the association says. They hit 35 percent of buyers in March.
The cash buyers are enticed by low prices and potential rental income, economists say. But while their activity has helped curb price drops, price increases have yet to follow.
In May, the median price of an existing single-family home fell 4.5 percent to $166,700 from a year ago, the association reported Tuesday. Volume also dropped. Existing home sales in the month including single family, condos and townhouses were down 15 percent from the previous May, when a federal tax credit boosted sales.
Without cash buyers, “We would be in much worse shape than we are,” says Jim Gillespie, CEO of Coldwell Banker Real Estate. “They recognize that this is the smartest time to buy,” because U.S. home prices are 33 percent below their 2006 peak.
Cash buyers are especially prevalent in markets where prices have fallen the most, often areas hard hit by foreclosures.
In Las Vegas, the foreclosure capitol of the U.S. for the past four years, cash buyers accounted for 49 percent of first-quarter sales vs. 20 percent in the first quarter of 1997, says data from real estate site Zillow.com. In that area, home prices are almost 60 percent off their 2006 peak.
In the Miami-Fort Lauderdale area, 63 percent of first-quarter buyers paid in cash, vs. 39 percent in 1997’s first quarter, Zillow says.
Phoenix is also seeing more cash buyers, 44 percent in the first quarter up from 25 percent in the same 1997 period, Zillow data show.
The big numbers are “positive news,” says Stan Humphries, Zillow chief economist. “These are people who’re getting back into the market because they see good value.”
Cash buyers often get better deals because sellers know their offers won’t fall through for lack of financing, says Walt Danley, president of the luxury real estate firm The Walt Danley Group in Arizona. A discount of up to 5 percent is typical, he says.
While Danley sees many foreign buyers paying cash, investors looking for rentals are also big cash buyers.
Given low prices, they can buy homes, rent them and be immediately cash-flow positive, says Paul Dales, an economist for Capital Economics.
Source: USA TODAY, a division of Gannett Co. Inc., Julie Schmit.
FHFA House Price Index rises 0.8% in April
House prices rose 0.8 percent on a seasonally adjusted basis from March to April, according to the Federal Housing Finance Agency’s (FHFA) monthly House Price Index. It was the first month-to-month price increase since May 2010.
The previously reported 0.3 percent decrease in March was revised to a 0.4 percent decrease. For the 12 months ending in April, U.S. prices fell 5.7 percent, and the U.S. index is 19.3 percent below its April 2007 peak and roughly the same as the January 2004 index level.
The FHFA monthly index is calculated by using the purchase price of houses sold to or guaranteed by Fannie Mae or Freddie Mac.
For the nine Census Divisions tracked during the March-April period, seasonally adjusted monthly price changes ranged from -1.3 percent in the Mountain Division to +2.2 percent in the New England Division.
Florida, which is in the South Atlantic division, was one of only three to show a price drop with -0.2 percent.
Source: Florida Realtors®
The previously reported 0.3 percent decrease in March was revised to a 0.4 percent decrease. For the 12 months ending in April, U.S. prices fell 5.7 percent, and the U.S. index is 19.3 percent below its April 2007 peak and roughly the same as the January 2004 index level.
The FHFA monthly index is calculated by using the purchase price of houses sold to or guaranteed by Fannie Mae or Freddie Mac.
For the nine Census Divisions tracked during the March-April period, seasonally adjusted monthly price changes ranged from -1.3 percent in the Mountain Division to +2.2 percent in the New England Division.
Florida, which is in the South Atlantic division, was one of only three to show a price drop with -0.2 percent.
Source: Florida Realtors®
Tuesday, June 21, 2011
Scam cheats borrowers out of loan payments
A new scam cropping up across the country is cheating some homeowners out of one, two or more monthly mortgage payments.
The Chicago Tribune referred to it as the “handoff rip-off” scheme. In the scam, mortgage holders receive a letter telling them that a new company has assumed the management of their loans and that they must start making mortgage payments to the new company.
Many homeowners aren’t familiar with the rules when it comes to mortgage-servicing transfers, so they follow the letter’s directions and send payments to the new company, which could cost them thousands of dollars.
Homeowners should understand the mortgage-service transfer rules so they won’t be duped. For example, a company that provides a mortgage on behalf of a loan’s owner must send a “goodbye” letter notifying them that, on a specific date, their payment should be sent to a new company. Then, a week or so later, the homeowner must receive a second letter from the new servicer that provides the mortgage payment information (their principal, interest, and escrow).
Both letters should include the homeowner’s loan number.
When in doubt, homeowners should contact their original mortgage servicer to find out if the letter is legit or fraud.
The scheme “works for maybe two months” because that is usually how long it takes for borrowers to realize they’ve been tricked, says Becky Walzak, a loan-quality assurance expert. “But if the bad guys are any good, they’ve taken in thousands of payments from thousands of people. They cash them, and they move on to the next batch of borrowers.”
Source: INFORMATION, INC.
The Chicago Tribune referred to it as the “handoff rip-off” scheme. In the scam, mortgage holders receive a letter telling them that a new company has assumed the management of their loans and that they must start making mortgage payments to the new company.
Many homeowners aren’t familiar with the rules when it comes to mortgage-servicing transfers, so they follow the letter’s directions and send payments to the new company, which could cost them thousands of dollars.
Homeowners should understand the mortgage-service transfer rules so they won’t be duped. For example, a company that provides a mortgage on behalf of a loan’s owner must send a “goodbye” letter notifying them that, on a specific date, their payment should be sent to a new company. Then, a week or so later, the homeowner must receive a second letter from the new servicer that provides the mortgage payment information (their principal, interest, and escrow).
Both letters should include the homeowner’s loan number.
When in doubt, homeowners should contact their original mortgage servicer to find out if the letter is legit or fraud.
The scheme “works for maybe two months” because that is usually how long it takes for borrowers to realize they’ve been tricked, says Becky Walzak, a loan-quality assurance expert. “But if the bad guys are any good, they’ve taken in thousands of payments from thousands of people. They cash them, and they move on to the next batch of borrowers.”
Source: INFORMATION, INC.
Reverse mortgage a tricky way to pull money from home
Reverse mortgages allow people 62 and older to borrow against their home equity. Like marriage, the experts say, these are arrangements not to be entered into unadvisedly or lightly.
That’s because reverse mortgages are actual loans that must be repaid in full – when you move, when you sell your house or upon your death, rather than in monthly installments.
But, said David Certner, AARP’s legislative-policy director, it’s something to consider “if you want to remain in your current home and don’t have other options.”
“If the one asset you have is your home, a reverse mortgage will let you turn it into a payment stream,” Certner said. “Maybe you simply need a home-equity loan, or to sell the home and move to something smaller. For a lot of people who want to stay in their own homes, the reverse mortgage is one way to help accomplish that.”
Though home values have dropped steeply since the real estate bubble burst in 2006, many older Americans have owned their houses for decades and have vast amounts of equity to tap into.
Yet of the millions of home loans originated between 1990 and 2010, just 660,000 were reverse mortgages, AARP says.
Why? Because reverse mortgages can be complicated, sometimes pricey affairs compared with the financial alternatives.
There are three kinds of reverse mortgages, but the lion’s share – 95 percent – are Home Equity Conversion Mortgages (HECM) insured by the Federal Housing Administration.
HECMs cost more than traditional mortgages. They have no income or medical requirements, and the cash can be used for any purpose, such as paying medical bills.
Currently, the national loan limit for a HECM is $625,500. How much you can borrow depends, among other factors, on your age, the appraised value of your home, and current interest rates.
The older you are, and the more equity you have in your house, the more you can borrow. Though 62 is the minimum age, many experts advise against reverse mortgages then – you may have a greater need to tap into your home equity later in life.
To qualify for HECMs, borrowers must own their properties outright or have small mortgage balances; occupy the properties as principal residences; and not be delinquent on any federal debts, such as income taxes.
Borrowers must participate in “consumer information sessions” provided by counselors approved by the Department of Housing and Urban Development. (These typically cost $125, Certner said.)
During the course of the reverse mortgage, you must pay your homeowners’ insurance and property taxes, plus keep the house in good repair. If you don’t, the loan can become due.
Advantages to reverse mortgages include:
• How you get the money is your choice: in fixed monthly payments, a lump sum, a credit line or a combination of the three. You can change the option any time for $20.
• Even if you receive more in payments than your home is worth, you will never owe more than the home’s value.
• Loan advances are not taxable and generally don’t affect Social Security or Medicare benefits.
• You retain title to your home.
The reverse mortgage must be repaid in full when the last surviving borrower dies or sells the home, or when it is no longer the primary residence. An HECM lets a borrower live in a nursing home or other medical facility for up to 12 months before the loan comes due.
After the home is sold and the reverse mortgage and fees are repaid, the remaining equity belongs to the borrower or heirs.
Among the disadvantages:
• Lenders, who must be FHA-approved, may charge servicing fees during the loan’s term.
• Loans may carry variable interest rates tied to short-term indexes, although AARP says more than 70 percent now have fixed interest rates.
• If interest rates are fixed, you must borrow the maximum amount against your home’s equity.
• Refinancing your existing mortgage or taking out a home-equity loan or line of credit may be a less expensive alternative to a reverse mortgage, which can have substantial upfront fees.
For example, the standard HECM loan charges a 2 percent mortgage-insurance premium up front on the home’s value, not the amount borrowed. If you own a $400,000 house, the upfront premium would be $8,000, regardless of the loan amount.
You also will pay an origination fee to compensate the lender for processing the reverse mortgage. That fee can be up to $2,500 if your house is valued at less than $125,000. If your house is valued higher, lenders can charge 2 percent of the first $200,000, plus 1 percent of the amount over $200,000, with a cap of $6,000.
The HECM Saver Loan, which made its debut in October, charges only 0.01 percent of a home’s value up front. But this loan usually carries a higher interest rate, and you can’t borrow as much as you can with a standard HECM.
Closing costs for a reverse mortgage include an appraisal, a title search, and insurance, surveys, inspections, recording fees, taxes, and credit checks. You can pay for most such HECM costs through the proceeds of the loan. Though that means no out-of-pocket payments, it reduces the net loan amount available.
A lender may charge a monthly servicing fee of no more than $30 if the loan has an annually adjusting interest rate, $35 if the interest rate adjusts monthly.
Reverse-mortgage foreclosures have been rare – until recently.
“Because the borrower is responsible for paying taxes, insurance and upkeep,” Certner said, tough economic times have “put a lot of people in trouble, especially in hard-hit markets like Florida.”
Source: The Philadelphia Inquirer. Distributed by McClatchy-Tribune Information Services.
That’s because reverse mortgages are actual loans that must be repaid in full – when you move, when you sell your house or upon your death, rather than in monthly installments.
But, said David Certner, AARP’s legislative-policy director, it’s something to consider “if you want to remain in your current home and don’t have other options.”
“If the one asset you have is your home, a reverse mortgage will let you turn it into a payment stream,” Certner said. “Maybe you simply need a home-equity loan, or to sell the home and move to something smaller. For a lot of people who want to stay in their own homes, the reverse mortgage is one way to help accomplish that.”
Though home values have dropped steeply since the real estate bubble burst in 2006, many older Americans have owned their houses for decades and have vast amounts of equity to tap into.
Yet of the millions of home loans originated between 1990 and 2010, just 660,000 were reverse mortgages, AARP says.
Why? Because reverse mortgages can be complicated, sometimes pricey affairs compared with the financial alternatives.
There are three kinds of reverse mortgages, but the lion’s share – 95 percent – are Home Equity Conversion Mortgages (HECM) insured by the Federal Housing Administration.
HECMs cost more than traditional mortgages. They have no income or medical requirements, and the cash can be used for any purpose, such as paying medical bills.
Currently, the national loan limit for a HECM is $625,500. How much you can borrow depends, among other factors, on your age, the appraised value of your home, and current interest rates.
The older you are, and the more equity you have in your house, the more you can borrow. Though 62 is the minimum age, many experts advise against reverse mortgages then – you may have a greater need to tap into your home equity later in life.
To qualify for HECMs, borrowers must own their properties outright or have small mortgage balances; occupy the properties as principal residences; and not be delinquent on any federal debts, such as income taxes.
Borrowers must participate in “consumer information sessions” provided by counselors approved by the Department of Housing and Urban Development. (These typically cost $125, Certner said.)
During the course of the reverse mortgage, you must pay your homeowners’ insurance and property taxes, plus keep the house in good repair. If you don’t, the loan can become due.
Advantages to reverse mortgages include:
• How you get the money is your choice: in fixed monthly payments, a lump sum, a credit line or a combination of the three. You can change the option any time for $20.
• Even if you receive more in payments than your home is worth, you will never owe more than the home’s value.
• Loan advances are not taxable and generally don’t affect Social Security or Medicare benefits.
• You retain title to your home.
The reverse mortgage must be repaid in full when the last surviving borrower dies or sells the home, or when it is no longer the primary residence. An HECM lets a borrower live in a nursing home or other medical facility for up to 12 months before the loan comes due.
After the home is sold and the reverse mortgage and fees are repaid, the remaining equity belongs to the borrower or heirs.
Among the disadvantages:
• Lenders, who must be FHA-approved, may charge servicing fees during the loan’s term.
• Loans may carry variable interest rates tied to short-term indexes, although AARP says more than 70 percent now have fixed interest rates.
• If interest rates are fixed, you must borrow the maximum amount against your home’s equity.
• Refinancing your existing mortgage or taking out a home-equity loan or line of credit may be a less expensive alternative to a reverse mortgage, which can have substantial upfront fees.
For example, the standard HECM loan charges a 2 percent mortgage-insurance premium up front on the home’s value, not the amount borrowed. If you own a $400,000 house, the upfront premium would be $8,000, regardless of the loan amount.
You also will pay an origination fee to compensate the lender for processing the reverse mortgage. That fee can be up to $2,500 if your house is valued at less than $125,000. If your house is valued higher, lenders can charge 2 percent of the first $200,000, plus 1 percent of the amount over $200,000, with a cap of $6,000.
The HECM Saver Loan, which made its debut in October, charges only 0.01 percent of a home’s value up front. But this loan usually carries a higher interest rate, and you can’t borrow as much as you can with a standard HECM.
Closing costs for a reverse mortgage include an appraisal, a title search, and insurance, surveys, inspections, recording fees, taxes, and credit checks. You can pay for most such HECM costs through the proceeds of the loan. Though that means no out-of-pocket payments, it reduces the net loan amount available.
A lender may charge a monthly servicing fee of no more than $30 if the loan has an annually adjusting interest rate, $35 if the interest rate adjusts monthly.
Reverse-mortgage foreclosures have been rare – until recently.
“Because the borrower is responsible for paying taxes, insurance and upkeep,” Certner said, tough economic times have “put a lot of people in trouble, especially in hard-hit markets like Florida.”
Source: The Philadelphia Inquirer. Distributed by McClatchy-Tribune Information Services.
Fannie Mae: Growth slowing but not stalled
Prospects for accelerating growth have grown dimmer recently due to downward revisions of first-quarter economic activity and slowdowns across a broad set of indicators during May, according to the June 2011 Economic Outlook released today by Fannie Mae’s Economics & Mortgage Market Analysis Group. Weakness in economic activities spanning manufacturing, consumer spending, jobs and housing has resulted in the group downgrading projected growth for the current quarter, as well as for the second half of they year.
For 2011, economic growth is expected to come in at 2.5 percent, down from 2.9 percent in the previous forecast and more than a full percentage point lower than the forecast at the beginning of the year.
Elevated inventories continue to put downward pressure on home prices, continuing the trend that started at the end of the homebuyer tax credit last summer. The group forecasts that we still have not seen the bottom for home prices, expecting additional home price declines through the third quarter before flattening out at the end of 2011.
“Ultimately, the labor market holds the key to a housing recovery, but job growth is needed in order to activate housing demand,” says Fannie Mae Chief Economist Doug Duncan. “Hiring delays will continue to push out timing for the housing rebound.”
Source: Florida Realtors®
For 2011, economic growth is expected to come in at 2.5 percent, down from 2.9 percent in the previous forecast and more than a full percentage point lower than the forecast at the beginning of the year.
Elevated inventories continue to put downward pressure on home prices, continuing the trend that started at the end of the homebuyer tax credit last summer. The group forecasts that we still have not seen the bottom for home prices, expecting additional home price declines through the third quarter before flattening out at the end of 2011.
“Ultimately, the labor market holds the key to a housing recovery, but job growth is needed in order to activate housing demand,” says Fannie Mae Chief Economist Doug Duncan. “Hiring delays will continue to push out timing for the housing rebound.”
Source: Florida Realtors®
Florida’s existing home, condo sales rise in May 2011
Florida’s existing home and existing condo sales rose in May, according to the latest housing data released by Florida Realtors®. Existing home sales increased 3 percent last month with a total of 17,228 homes sold statewide compared to 16,790 homes sold in May 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 May; 14 MSAs also had higher condo sales. It’s the sixth consecutive month that Florida Realtors has reported higher year-over-year existing home and existing condo sales statewide.
“With low mortgage rates and a broad inventory of homes at affordable prices, qualified buyers are realizing that there may never be a better time to find the home they’ve been dreaming of in Florida,” said 2011 Florida Realtors President Patricia Fitzgerald, manager/broker-associate with Illustrated Properties in Hobe Sound and Mariner Sands Country Club in Stuart. “Consult a local Realtor® about qualification criteria and to find out more about opportunities in your local housing market.”
Florida’s median sales price for existing homes last month was $135,500; a year ago, it was $142,900 for a 5 percent decrease. However, May’s statewide existing home median price was about 2.9 percent higher than it was in April. 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 April 2011 was $163,200, down 5.4 percent from a year ago, according to NAR. In California, the statewide median resales price was $293,570 in April; in Massachusetts, it was $279,000; in Maryland, it was $226,370; and in New York, it was $200,000.
According to NAR’s latest industry outlook, tight credit is one of the reasons why the market is underperforming. “Although existing-home sales are expected to trend up unevenly through next year, unnecessarily tight credit is continuing to restrain the market along with a steady level of low appraisals that result in contract cancellations,” said NAR Chief Economist Lawrence Yun. “A robust economic and housing market recovery cannot occur as long as banks continue to hold onto huge cash reserves.”
In Florida’s year-to-year comparison for condos, 8,338 units sold statewide last month compared to 7,104 units in May 2010 for an increase of 17 percent. The statewide existing condo median sales price last month was $98,200; in May 2010 it was $96,400 for a 2 percent increase. May’s statewide existing condo median price was about 6.9 percent higher than it was in April. The national median existing condo sales price was $167,300 in April 2011, according to NAR.
The interest rate for a 30-year fixed-rate mortgage averaged 4.64 percent in May, a drop from the 4.89 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 May; 14 MSAs also had higher condo sales. It’s the sixth consecutive month that Florida Realtors has reported higher year-over-year existing home and existing condo sales statewide.
“With low mortgage rates and a broad inventory of homes at affordable prices, qualified buyers are realizing that there may never be a better time to find the home they’ve been dreaming of in Florida,” said 2011 Florida Realtors President Patricia Fitzgerald, manager/broker-associate with Illustrated Properties in Hobe Sound and Mariner Sands Country Club in Stuart. “Consult a local Realtor® about qualification criteria and to find out more about opportunities in your local housing market.”
Florida’s median sales price for existing homes last month was $135,500; a year ago, it was $142,900 for a 5 percent decrease. However, May’s statewide existing home median price was about 2.9 percent higher than it was in April. 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 April 2011 was $163,200, down 5.4 percent from a year ago, according to NAR. In California, the statewide median resales price was $293,570 in April; in Massachusetts, it was $279,000; in Maryland, it was $226,370; and in New York, it was $200,000.
According to NAR’s latest industry outlook, tight credit is one of the reasons why the market is underperforming. “Although existing-home sales are expected to trend up unevenly through next year, unnecessarily tight credit is continuing to restrain the market along with a steady level of low appraisals that result in contract cancellations,” said NAR Chief Economist Lawrence Yun. “A robust economic and housing market recovery cannot occur as long as banks continue to hold onto huge cash reserves.”
In Florida’s year-to-year comparison for condos, 8,338 units sold statewide last month compared to 7,104 units in May 2010 for an increase of 17 percent. The statewide existing condo median sales price last month was $98,200; in May 2010 it was $96,400 for a 2 percent increase. May’s statewide existing condo median price was about 6.9 percent higher than it was in April. The national median existing condo sales price was $167,300 in April 2011, according to NAR.
The interest rate for a 30-year fixed-rate mortgage averaged 4.64 percent in May, a drop from the 4.89 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®
Monday, June 20, 2011
Compact housing needed for population shift
The U.S. population is projected to grow by 150 million within the next 40 years and “more compact, mixed-use development” is needed to handle the growth and changing demands, Patrick Phillips, CEO for the Urban Land Institute, told an audience at the National Association of Real Estate Editors annual conference this week.
“The design and development of urban areas will be radically different in the decades ahead,” he said. “We are seeing a push to make our cities more livable and sustainable.”
One-person households are the fastest-growing type of household, he noted. Also, younger generations, in buyer preference surveys, are placing a higher value on the sense of community and are willing to swap extra space for convenience.
An urban renaissance has been taking place with neighborhoods that are near urban centers becoming more desirable, Phillips said.
Source: INFORMATION, INC.
“The design and development of urban areas will be radically different in the decades ahead,” he said. “We are seeing a push to make our cities more livable and sustainable.”
One-person households are the fastest-growing type of household, he noted. Also, younger generations, in buyer preference surveys, are placing a higher value on the sense of community and are willing to swap extra space for convenience.
An urban renaissance has been taking place with neighborhoods that are near urban centers becoming more desirable, Phillips said.
Source: INFORMATION, INC.
Sell your home with ambient aromatherapy
Retail stores use ambient scents to generate a psychological response that leads to more sales, and real estate agents can use the same strategy when selling homes.
Scent marketing is the reason realty professionals bake cookies in homes during showings; but given the steep number of homes currently on the market, experts say it might be more practical to use essential oils to create a pleasant scent in the home. Agents and sellers can concoct fragrances using jojoba, grapeseed, vanilla, lavender and sweet orange essential oils, blending them in a bowl with sea salt.
They also can create a vacuum powder with baking soda and bergamot and ylang-ylang essential oils or a simmer containing apple slices, cinnamon, vanilla bean and whole cloves. These natural scents are better appreciated than synthetic fragrances.
“Using even tiny amounts of familiar, tempting aromas like the oils of cinnamon, clove, vanilla and orange can fill a whole house with pleasant ambient fragrance and make it an attractive purchase for potential buyers,” according to Tom Havran, branded products developer with Aura Cacia.
Source: INFORMATION, INC. Bethesda, MD
Scent marketing is the reason realty professionals bake cookies in homes during showings; but given the steep number of homes currently on the market, experts say it might be more practical to use essential oils to create a pleasant scent in the home. Agents and sellers can concoct fragrances using jojoba, grapeseed, vanilla, lavender and sweet orange essential oils, blending them in a bowl with sea salt.
They also can create a vacuum powder with baking soda and bergamot and ylang-ylang essential oils or a simmer containing apple slices, cinnamon, vanilla bean and whole cloves. These natural scents are better appreciated than synthetic fragrances.
“Using even tiny amounts of familiar, tempting aromas like the oils of cinnamon, clove, vanilla and orange can fill a whole house with pleasant ambient fragrance and make it an attractive purchase for potential buyers,” according to Tom Havran, branded products developer with Aura Cacia.
Source: INFORMATION, INC. Bethesda, MD
Demand for rentals increases
The downturn in the economy has changed the way people live and think about real estate, forcing many to become renters and sending adult children back home to live.
Three economists at the National Association of Real Estate Editors conference last Friday said those trends could affect the residential real estate market for years to come.
And that double dip you’ve been hearing about in the housing market? Never happened. The market’s still on it’s way down, they agreed.
The sluggish job market, falling home prices and persistent foreclosures have driven up demand in the rental market, especially in hard-hit areas such as Tampa Bay, said Stan Humphries, an economist with Zillow.com.
Foreclosed homeowners are often forced into the rental market. More adult children are moving back home with their parents and more elderly are moving in with their kids, Humphries said.
There’s also an uptick of multiple families moving in together to help make ends meet, he said. This increase in rental demand will translate to higher rental rates this year, said Humphries who predicts rental rates will increase 3.5 to 4.5 percent in 2011, compared to the previous year.
At the same time, Humphries said 1.2- to 2.2-million people will transition from owners to renters over the next couple of years.
Humphries’ other panelists, Jed Smith, an economist with the National Association of Realtors and Mark Dotzour, an economist with Texas A & M Real Estate Center, agreed.
Housing prices are now falling, after a brief period of what looked like stabilization late last year, but all three economists said the nation isn’t experiencing a double dip.
“We never hit bottom in the first place,” Dotzour said.
Dotzour and Smith, with the Realtors, said government intervention, such as tax credit incentives for buyers and failed mortgage modifications, actually made things worse in the long run.
“We like capitalism on the way up and socialism on the way down,” Dotzour said. “And we’re paying for it now.”
Humphries said the government spent $15 billion to $20 billion on tax credits, and “we’re paying all that back.”
The bright side of this continued downturn is that multi-family developers will benefit, the economists said.
Multi-family housing starts are up, and developers are preparing for additional increase in demand, Humphries said.
As foreclosures increase and are resold to people who want to live there, rather than to investors, prices will stabilize. When that happens, he said, single-family demand will increase, too.
But it’s unclear how long it will take for that to happen, Dotzour said.
“Why would a bank wait 24 months to start the foreclosure process?” he said.
Banks are still taking too long to foreclose, he said, adding that the market won’t be stable until all the foreclosure inventory is reabsorbed into the market.
When things have improved, though, Humphries said, the housing landscape in most metros will look different. That’s particularly true, he said, in areas like Tampa Bay, where builders constructed thousands of new homes on the outskirts of the city.
“People want to live closer to cities and in smaller homes,” Humphries said. “A lot of the housing stock in the suburbs don’t speak to that demand.”
That may mean more redevelopment near downtown cores.
Source: Tampa Tribune, Fla., Shannon Behnken. Distributed by McClatchy-Tribune Information Services.
Three economists at the National Association of Real Estate Editors conference last Friday said those trends could affect the residential real estate market for years to come.
And that double dip you’ve been hearing about in the housing market? Never happened. The market’s still on it’s way down, they agreed.
The sluggish job market, falling home prices and persistent foreclosures have driven up demand in the rental market, especially in hard-hit areas such as Tampa Bay, said Stan Humphries, an economist with Zillow.com.
Foreclosed homeowners are often forced into the rental market. More adult children are moving back home with their parents and more elderly are moving in with their kids, Humphries said.
There’s also an uptick of multiple families moving in together to help make ends meet, he said. This increase in rental demand will translate to higher rental rates this year, said Humphries who predicts rental rates will increase 3.5 to 4.5 percent in 2011, compared to the previous year.
At the same time, Humphries said 1.2- to 2.2-million people will transition from owners to renters over the next couple of years.
Humphries’ other panelists, Jed Smith, an economist with the National Association of Realtors and Mark Dotzour, an economist with Texas A & M Real Estate Center, agreed.
Housing prices are now falling, after a brief period of what looked like stabilization late last year, but all three economists said the nation isn’t experiencing a double dip.
“We never hit bottom in the first place,” Dotzour said.
Dotzour and Smith, with the Realtors, said government intervention, such as tax credit incentives for buyers and failed mortgage modifications, actually made things worse in the long run.
“We like capitalism on the way up and socialism on the way down,” Dotzour said. “And we’re paying for it now.”
Humphries said the government spent $15 billion to $20 billion on tax credits, and “we’re paying all that back.”
The bright side of this continued downturn is that multi-family developers will benefit, the economists said.
Multi-family housing starts are up, and developers are preparing for additional increase in demand, Humphries said.
As foreclosures increase and are resold to people who want to live there, rather than to investors, prices will stabilize. When that happens, he said, single-family demand will increase, too.
But it’s unclear how long it will take for that to happen, Dotzour said.
“Why would a bank wait 24 months to start the foreclosure process?” he said.
Banks are still taking too long to foreclose, he said, adding that the market won’t be stable until all the foreclosure inventory is reabsorbed into the market.
When things have improved, though, Humphries said, the housing landscape in most metros will look different. That’s particularly true, he said, in areas like Tampa Bay, where builders constructed thousands of new homes on the outskirts of the city.
“People want to live closer to cities and in smaller homes,” Humphries said. “A lot of the housing stock in the suburbs don’t speak to that demand.”
That may mean more redevelopment near downtown cores.
Source: Tampa Tribune, Fla., Shannon Behnken. Distributed by McClatchy-Tribune Information Services.
Friday, June 17, 2011
11 Fastest-Selling Real Estate Markets
11 Fastest-Selling Real Estate Markets
Nationally, the median age of inventory of homes on the market shrank slightly in May from April to 92 days, but still marks a 4.55 percent year-over-year increase.
But in some markets homes are selling much faster. For example, the fastest-selling market continues to be Denver, where homes are selling, on average, in just over a month at 39 days.
Here’s a look at the fastest-selling markets from May, based on the median age of inventory of 146 markets tracked by Realtor.com.
Denver
Median age of inventory: 39
Median list price: $253,700
Oakland, Calif.
Median age of inventory: 46
Median list price: $320,000
Tampa-St. Petersburg-Clearwater, Fla.
Median age of inventory: 51
Median list price: $134,900
San Francisco
Median age of inventory: 57
Median list price: $628,000
Washington, D.C.-Md.-Va.-W.Va.
Median age of inventory: 60
Median list price: $369,999
Bakersfield, Calif.
Median age of inventory: 60
Median list price: $134,900
Rochester, N.Y.
Median age of inventory: 61
Median list price: $139,900
Omaha, Neb.
Median age of inventory: 61
Median list price: $150,000
Anchorage, Alaska
Median age of inventory: 61
Median list price: $289,000
Fresno, Calif.
Median age of inventory: 61
Median list price: $151,900
San Jose, Calif.
Median age of inventory: 61
Median list price: $479,000
Source: REALTOR® Magazine
Nationally, the median age of inventory of homes on the market shrank slightly in May from April to 92 days, but still marks a 4.55 percent year-over-year increase.
But in some markets homes are selling much faster. For example, the fastest-selling market continues to be Denver, where homes are selling, on average, in just over a month at 39 days.
Here’s a look at the fastest-selling markets from May, based on the median age of inventory of 146 markets tracked by Realtor.com.
Denver
Median age of inventory: 39
Median list price: $253,700
Oakland, Calif.
Median age of inventory: 46
Median list price: $320,000
Tampa-St. Petersburg-Clearwater, Fla.
Median age of inventory: 51
Median list price: $134,900
San Francisco
Median age of inventory: 57
Median list price: $628,000
Washington, D.C.-Md.-Va.-W.Va.
Median age of inventory: 60
Median list price: $369,999
Bakersfield, Calif.
Median age of inventory: 60
Median list price: $134,900
Rochester, N.Y.
Median age of inventory: 61
Median list price: $139,900
Omaha, Neb.
Median age of inventory: 61
Median list price: $150,000
Anchorage, Alaska
Median age of inventory: 61
Median list price: $289,000
Fresno, Calif.
Median age of inventory: 61
Median list price: $151,900
San Jose, Calif.
Median age of inventory: 61
Median list price: $479,000
Source: REALTOR® Magazine
Wells Fargo Stops Reverse Mortgage Loans
Wells Fargo Home Mortgage announced that it will stop taking applications for new reverse mortgage loans by the end of the month due to the unpredictable nature of home values.
Reverse mortgages generally are sold to those over age 62 who want to tap into their home equity to pay for personal expenses like medical bills. Reverse mortgages don’t have to be repaid until the home owner sells the property or passes away, which is how it differs from home equity loans.
The company will continue to service customers who already have existing reverse mortgages, but will no longer take new applications as of June 30.
Wells Fargo joins a growing number of banks that are getting out of the reverse mortgage origination business due to the sluggish real estate market, which has made it more difficult for banks to determine home values and how much they should lend in the reverse mortgages. Bank of America announced in February that it also would stop processing new reverse mortgage loans.
Source: “Wells Fargo Home Mortgages Halts Making Reverse Mortgages, Cites ‘Unpredictable’ Home Values,” The Associated Press (June 16, 2011)
Reverse mortgages generally are sold to those over age 62 who want to tap into their home equity to pay for personal expenses like medical bills. Reverse mortgages don’t have to be repaid until the home owner sells the property or passes away, which is how it differs from home equity loans.
The company will continue to service customers who already have existing reverse mortgages, but will no longer take new applications as of June 30.
Wells Fargo joins a growing number of banks that are getting out of the reverse mortgage origination business due to the sluggish real estate market, which has made it more difficult for banks to determine home values and how much they should lend in the reverse mortgages. Bank of America announced in February that it also would stop processing new reverse mortgage loans.
Source: “Wells Fargo Home Mortgages Halts Making Reverse Mortgages, Cites ‘Unpredictable’ Home Values,” The Associated Press (June 16, 2011)
Top picks for international buyers
International buyers are taking advantage of real estate bargains in the United States. Last year, international buyers reportedly spent $41 billion on purchasing homes in the U.S.
So which cities do they most have their eye on?
Ten out of the 24 most popular American cities for international buyers are in Florida, according to Trulia. Last year, Europeans, Canadians and Brazilians reportedly spent about $13 billion on homes in Florida alone.
Here are the most popular Florida cities for international buyers, according to Trulia, in order of demand:
1. Cape Coral, Fla.
2. Miami
3. Fort Lauderdale, Fla.
4. Naples, Fla.
5. Fort Myers, Fla.
6. Miami Beach, Fla.
7. Kissimmee, Fla.
8. Orlando, Fla.
9. Jacksonville, Fla.
10. Tampa, Fla.
Source: Florida Realtors®
So which cities do they most have their eye on?
Ten out of the 24 most popular American cities for international buyers are in Florida, according to Trulia. Last year, Europeans, Canadians and Brazilians reportedly spent about $13 billion on homes in Florida alone.
Here are the most popular Florida cities for international buyers, according to Trulia, in order of demand:
1. Cape Coral, Fla.
2. Miami
3. Fort Lauderdale, Fla.
4. Naples, Fla.
5. Fort Myers, Fla.
6. Miami Beach, Fla.
7. Kissimmee, Fla.
8. Orlando, Fla.
9. Jacksonville, Fla.
10. Tampa, Fla.
Source: Florida Realtors®
Citizens has cash for all but biggest storms
Citizens Property Insurance, the state-backed company and largest property insurer in Florida, has enough in reserves and reinsurance coverage to pay claims unless there’s a 1-in-50 year hurricane like Andrew – or a season with multiple major hurricanes like 2004, a Citizens official told Gov. Rick Scott and the Cabinet on Thursday.
Citizens Executive Vice President Susanne Murphy told Cabinet members that the company has about $10 billion in reserves for its coastal wind-only accounts and another $5.6 billion for other accounts, though that includes about $3 billion in liquidity from bond sales that would have to be paid back.
A 1-in-5 year hurricane could be handled just with Citizens current surplus, and a 1-in-25 year storm that causes $8 billion in damage could be paid for with the company’s surplus and its reinsurance through the state Hurricane Catastrophe Fund.
If a major storm like Andrew hit, however, it would mean assessments on all Florida policy holders, though Murphy reminded the Cabinet that the law has changed so Citizens policy holders would bear the largest share of that cost as well. Citizens policy holders could now be assessed a fee equal to 15 percent of their premium for each of the company’s three accounts that’s in deficit – meaning a possible 45 percent hit if there’s a large storm the company can’t pay claims on.
People insured by the private market could see assessments of up to 6 percent of their premium for each account. The assessed amount would vary depending on how long state officials stretch the payments out – with the possibility that a large assessment might be charged over decades to keep the annual amount lower.
Source: News Service of Florida
Citizens Executive Vice President Susanne Murphy told Cabinet members that the company has about $10 billion in reserves for its coastal wind-only accounts and another $5.6 billion for other accounts, though that includes about $3 billion in liquidity from bond sales that would have to be paid back.
A 1-in-5 year hurricane could be handled just with Citizens current surplus, and a 1-in-25 year storm that causes $8 billion in damage could be paid for with the company’s surplus and its reinsurance through the state Hurricane Catastrophe Fund.
If a major storm like Andrew hit, however, it would mean assessments on all Florida policy holders, though Murphy reminded the Cabinet that the law has changed so Citizens policy holders would bear the largest share of that cost as well. Citizens policy holders could now be assessed a fee equal to 15 percent of their premium for each of the company’s three accounts that’s in deficit – meaning a possible 45 percent hit if there’s a large storm the company can’t pay claims on.
People insured by the private market could see assessments of up to 6 percent of their premium for each account. The assessed amount would vary depending on how long state officials stretch the payments out – with the possibility that a large assessment might be charged over decades to keep the annual amount lower.
Source: News Service of Florida
Mortgage rates flat after hitting yearly low
Fixed mortgage rates stayed roughly flat after falling for eight weeks.
The average rate on the 30-year loan ticked up from a yearly low of 4.49 percent to 4.50 percent, Freddie Mac said Thursday. The average rate on the 15-year fixed mortgage, a popular refinance option, fell to 3.67 percent from 3.68 percent. That’s a low for the year.
Rates tend to track the yield on the 10-year Treasury note. The 10-year yield has been dropping as fears over that economic recovery is slowing.
Most people can’t take advantage of the low mortgage rates because they can’t meet tougher lending requirements. And many who could afford to refinance likely did so last year, when rates fell to their lowest levels in decades.
Sales of new and previously occupied homes rose in April. But sales are well below healthy levels as waves of foreclosures have pushed prices down. Many would-be buyers are holding off, worried that prices have yet to bottom out.
And prices are expected to keep falling until the glut of foreclosures for sale is reduced, companies start hiring in greater numbers, banks ease up on their tougher lending rules and more people think it makes sense to buy a house again. In some areas of the country, that could take years.
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 inched down to 3.27 percent from 3.28 percent last week. It hit 3.25 percent in April, the lowest on records dating back to 2005.
The average rate on a one-year adjustable-rate loan rose to 2.97 percent from 2.95 percent, which was the lowest on records going back to 1986.
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 fees were 0.7 for both the 30-year and 15-year fixed loan in Freddie Mac’s survey. The average fee for the five-year ARM was 0.6 and the one-year ARM was 0.5.
Source: The Associated Press, Derek Kravitz, AP business writer. All rights reserved.
The average rate on the 30-year loan ticked up from a yearly low of 4.49 percent to 4.50 percent, Freddie Mac said Thursday. The average rate on the 15-year fixed mortgage, a popular refinance option, fell to 3.67 percent from 3.68 percent. That’s a low for the year.
Rates tend to track the yield on the 10-year Treasury note. The 10-year yield has been dropping as fears over that economic recovery is slowing.
Most people can’t take advantage of the low mortgage rates because they can’t meet tougher lending requirements. And many who could afford to refinance likely did so last year, when rates fell to their lowest levels in decades.
Sales of new and previously occupied homes rose in April. But sales are well below healthy levels as waves of foreclosures have pushed prices down. Many would-be buyers are holding off, worried that prices have yet to bottom out.
And prices are expected to keep falling until the glut of foreclosures for sale is reduced, companies start hiring in greater numbers, banks ease up on their tougher lending rules and more people think it makes sense to buy a house again. In some areas of the country, that could take years.
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 inched down to 3.27 percent from 3.28 percent last week. It hit 3.25 percent in April, the lowest on records dating back to 2005.
The average rate on a one-year adjustable-rate loan rose to 2.97 percent from 2.95 percent, which was the lowest on records going back to 1986.
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 fees were 0.7 for both the 30-year and 15-year fixed loan in Freddie Mac’s survey. The average fee for the five-year ARM was 0.6 and the one-year ARM was 0.5.
Source: The Associated Press, Derek Kravitz, AP business writer. All rights reserved.
Thursday, June 16, 2011
Home Inventories Grow, Prices Fall
The inventory of for-sale homes grew in May by 3.5 percent, which marks the biggest monthly increase of the year, according to the latest housing data from Realtor.com. However, overall inventories dropped 14.3 percent compared to a year ago at this time.
Median asking prices for homes were down last month, falling 1.6 percent which follows two months of increases, the data shows.
Some of the largest declines were seen in Chicago and Tampa, Fla, where asking prices were down 5.7 percent from April, and in Phoenix prices were down 5.4 percent.
Listing prices increased in only 10 of the 146 markets tracked by Realtor.com. Denver and Washington, D.C., posted some of the largest listing price increases.
The National Association of REALTORS® will release next week its report on sales and inventory of existing homes.
Source: “More Homes Listed and Lingering, Data Show,” The Wall Street Journal (June 16, 2011)
Median asking prices for homes were down last month, falling 1.6 percent which follows two months of increases, the data shows.
Some of the largest declines were seen in Chicago and Tampa, Fla, where asking prices were down 5.7 percent from April, and in Phoenix prices were down 5.4 percent.
Listing prices increased in only 10 of the 146 markets tracked by Realtor.com. Denver and Washington, D.C., posted some of the largest listing price increases.
The National Association of REALTORS® will release next week its report on sales and inventory of existing homes.
Source: “More Homes Listed and Lingering, Data Show,” The Wall Street Journal (June 16, 2011)
Signs of a Real Estate Recovery?
The number of home owners who were put on notice for defaulting on their mortgage payments dropped last month to the lowest level since 2006, RealtyTrac reports.
Meanwhile, foreclosure filings for the eighth straight month also were down as filings fell 33 percent in May compared to a year earlier and 2 percent month-over-month. Also, lenders took back fewer homes in May, the second straight month of declines. And bank repossessions were down in May too — down nearly 30 percent over the last 12 months.
Is this a sign of a recovery in real estate, which has been bogged down by a high number of foreclosures over the last several years?
Experts are still cautious. Lingering delays in banks’ foreclosure process may be the culprit for the declining numbers, they say, and not an overall improving picture of the number of home owners facing foreclosure.
"Foreclosure processing delays continue to mask the true face of the foreclosure situation," says James Saccacio, the CEO of RealtyTrac. "Lenders are somewhat unevenly pushing batches of bad loans through foreclosure as they overhaul their paperwork and documentation procedures."
Overall, banks hold 2 million homes in some stage of foreclosure. Banks are on track to repossess about 200,000 fewer homes this year than in 2010; the projection is 800,000 this year compared to 1 million last year.
Where Foreclosures Are Highest
Nevada continues to lead with the highest rate of foreclosures — one in every 103 households received a foreclosure notice there in May.
Here are the top 10 states with the highest foreclosure rate in May:
1. Nevada
2. Arizona
3. California
4. Michigan
5. Utah
6. Georgia
7. Idaho
8. Florida
9. Illinois
10. Colorado
Source: “Bank Processing Delays Led to Drop in Homes Entering Foreclosure Process, Repossessed in May,” Associated Press (June 16, 2011) and “Foreclosures Fall for 8th Straight Month,” CNNMoney (June 16, 2011)
Meanwhile, foreclosure filings for the eighth straight month also were down as filings fell 33 percent in May compared to a year earlier and 2 percent month-over-month. Also, lenders took back fewer homes in May, the second straight month of declines. And bank repossessions were down in May too — down nearly 30 percent over the last 12 months.
Is this a sign of a recovery in real estate, which has been bogged down by a high number of foreclosures over the last several years?
Experts are still cautious. Lingering delays in banks’ foreclosure process may be the culprit for the declining numbers, they say, and not an overall improving picture of the number of home owners facing foreclosure.
"Foreclosure processing delays continue to mask the true face of the foreclosure situation," says James Saccacio, the CEO of RealtyTrac. "Lenders are somewhat unevenly pushing batches of bad loans through foreclosure as they overhaul their paperwork and documentation procedures."
Overall, banks hold 2 million homes in some stage of foreclosure. Banks are on track to repossess about 200,000 fewer homes this year than in 2010; the projection is 800,000 this year compared to 1 million last year.
Where Foreclosures Are Highest
Nevada continues to lead with the highest rate of foreclosures — one in every 103 households received a foreclosure notice there in May.
Here are the top 10 states with the highest foreclosure rate in May:
1. Nevada
2. Arizona
3. California
4. Michigan
5. Utah
6. Georgia
7. Idaho
8. Florida
9. Illinois
10. Colorado
Source: “Bank Processing Delays Led to Drop in Homes Entering Foreclosure Process, Repossessed in May,” Associated Press (June 16, 2011) and “Foreclosures Fall for 8th Straight Month,” CNNMoney (June 16, 2011)
Latinos, first-time buyers key to recovery
The National Association of Hispanic Real Estate Professionals (NAHREP) published a report “The State of Hispanic Homeownership,” that offers data on the Hispanic homebuyer market and why it is poised, due to its population size, high desire and buying clout, to drive first-time homebuyer purchases and accelerate the nation’s economic recovery.
A digital copy of the report in PDF format is available here.
According to the report, minorities and immigrants are expected to drive demand for condominiums, smaller starter homes and first trade-up homes for the next 15 years. They’re also expected to be a rapidly growing segment of the middle and middle-upper markets for housing.
“The Latin boom has been forecasted for years, but we are now seeing the front edge of it; and it has the potential to help the nation’s housing system get back on track if we can create a safe credit environment for new buyers to get into the market,” says Carmen Mercado, president of the 18,000-member trade group.
The report, penned by former housing fellow, researcher and author Alejandro Becerra, cites the following trends:
• Hispanics are now the largest minority group in the nation and represent a growing portion of the 26 to 46 age group involved in most home sales.
• Hispanics have a greater propensity than other population groups to pick up stakes and move to other parts of the country in search of better jobs and more affordable housing.
• Hispanics continue to attain steady gains in income, education and entrepreneurship; and they have a strong work ethic, desire to succeed and purchasing power. Those traits will enable more of them to achieve homeownership.
• The current environment of record low interest rates, government-backed loans and less predatory lending makes sustainable homeownership more affordable.
• Earlier housing surveys show that Hispanics strongly aspire to become homeowners and are more motivated than the general population to buy a home for emotional and financial reasons. Fifty-seven percent of Hispanics consider owning a home a symbol of success, compared to only 33 percent of all Americans.
While Hispanics have been severely impacted by foreclosure, the larger population of potential homebuyers was unaffected by the crisis. However, tight credit, higher fees and stricter underwriting requirements continue to remain barriers. The report says that downpayment assistance and savings programs are crucial.
“In the climate of crisis, we must resist overreaching with regulations that make homeownership more expensive for millions of responsible consumers who have the buying power to revitalize our fragile housing market,” says Mercado. “Homeownership remains a cornerstone of family stability and long-term wealth creation.”
Source: Florida Realtors®
A digital copy of the report in PDF format is available here.
According to the report, minorities and immigrants are expected to drive demand for condominiums, smaller starter homes and first trade-up homes for the next 15 years. They’re also expected to be a rapidly growing segment of the middle and middle-upper markets for housing.
“The Latin boom has been forecasted for years, but we are now seeing the front edge of it; and it has the potential to help the nation’s housing system get back on track if we can create a safe credit environment for new buyers to get into the market,” says Carmen Mercado, president of the 18,000-member trade group.
The report, penned by former housing fellow, researcher and author Alejandro Becerra, cites the following trends:
• Hispanics are now the largest minority group in the nation and represent a growing portion of the 26 to 46 age group involved in most home sales.
• Hispanics have a greater propensity than other population groups to pick up stakes and move to other parts of the country in search of better jobs and more affordable housing.
• Hispanics continue to attain steady gains in income, education and entrepreneurship; and they have a strong work ethic, desire to succeed and purchasing power. Those traits will enable more of them to achieve homeownership.
• The current environment of record low interest rates, government-backed loans and less predatory lending makes sustainable homeownership more affordable.
• Earlier housing surveys show that Hispanics strongly aspire to become homeowners and are more motivated than the general population to buy a home for emotional and financial reasons. Fifty-seven percent of Hispanics consider owning a home a symbol of success, compared to only 33 percent of all Americans.
While Hispanics have been severely impacted by foreclosure, the larger population of potential homebuyers was unaffected by the crisis. However, tight credit, higher fees and stricter underwriting requirements continue to remain barriers. The report says that downpayment assistance and savings programs are crucial.
“In the climate of crisis, we must resist overreaching with regulations that make homeownership more expensive for millions of responsible consumers who have the buying power to revitalize our fragile housing market,” says Mercado. “Homeownership remains a cornerstone of family stability and long-term wealth creation.”
Source: Florida Realtors®
Wednesday, June 15, 2011
U.S. firm OKs $55M Chinese drywall settlement
A Miami-based supplier of tainted Chinese drywall agreed in a court filing Tuesday to a $55 million settlement of claims that the corrosive product damaged homes, all or nearly all of them in Florida.
The proposed settlement, which requires approval from U.S. District Judge Eldon Fallon in New Orleans, would resolve claims by thousands of plaintiffs against Banner Supply Co., several related companies and Banner’s insurers.
Tuesday’s deal covers just a portion of the claims by homeowners who blame drywall for a host of problems, including corrosion of electrical wiring, appliances and electronics. Fallon is presiding over more than 10,000 claims by residents blaming damage to their homes on Chinese drywall, which was used in construction throughout Florida and the Gulf Coast before the housing bubble burst.
Only plaintiffs whose homes contain Chinese drywall supplied by Banner would be eligible for shares of the $54.5 million settlement fund, paid by four of Banner’s insurers.
Banner purchased roughly 1.4 million sheets of Chinese drywall, most of which was made by Knauf Plasterboard Tianjin Co.
“Banner maintains it had no knowledge that the Chinese drywall was defective,” Tuesday’s court filing says. “Banner merely distributed drywall manufactured in China, primarily by the Knauf Group, after receiving certifications and warranties from Knauf that the drywall was safe and not defective in any way.”
However, plaintiffs’ attorneys claim Banner knew by October 2006 that builders were complaining about odors from the drywall and yet continued to sell it. Banner also allegedly entered into a confidential agreement with Knauf in early 2007 that called for Knauf to replace about 44,000 pieces of its drywall with a domestic product.
Michael Peterson, a lawyer for Banner, said in an email that Banner intends to take legal action against its suppliers.
“We have learned certain facts during the litigation that lead us to believe that certain manufacturers made misrepresentations regarding their Chinese-manufactured drywall,” Peterson said.
Plaintiffs’ attorneys said they are trying to negotiate settlements with other companies. The Banner agreement is “an important step in the right direction toward global resolution of these claims,” said Ervin Gonzalez, one of the lead plaintiffs’ attorneys.
In April, insurers for a different Chinese drywall supplier, Interior/Exterior Building Supply, agreed to pay up to $8 million to settle similar claims. Interior/Exterior supplied drywall made by two Chinese companies – Knauf and Taishan Gypsum Co. – to builders in Texas, Louisiana, Mississippi and Alabama.
The vast majority of the remaining claims are against Knauf and Taishan, Gonzalez said.
Source: Copyright © 2011 The Associated Press, Michael Kunzelman.
The proposed settlement, which requires approval from U.S. District Judge Eldon Fallon in New Orleans, would resolve claims by thousands of plaintiffs against Banner Supply Co., several related companies and Banner’s insurers.
Tuesday’s deal covers just a portion of the claims by homeowners who blame drywall for a host of problems, including corrosion of electrical wiring, appliances and electronics. Fallon is presiding over more than 10,000 claims by residents blaming damage to their homes on Chinese drywall, which was used in construction throughout Florida and the Gulf Coast before the housing bubble burst.
Only plaintiffs whose homes contain Chinese drywall supplied by Banner would be eligible for shares of the $54.5 million settlement fund, paid by four of Banner’s insurers.
Banner purchased roughly 1.4 million sheets of Chinese drywall, most of which was made by Knauf Plasterboard Tianjin Co.
“Banner maintains it had no knowledge that the Chinese drywall was defective,” Tuesday’s court filing says. “Banner merely distributed drywall manufactured in China, primarily by the Knauf Group, after receiving certifications and warranties from Knauf that the drywall was safe and not defective in any way.”
However, plaintiffs’ attorneys claim Banner knew by October 2006 that builders were complaining about odors from the drywall and yet continued to sell it. Banner also allegedly entered into a confidential agreement with Knauf in early 2007 that called for Knauf to replace about 44,000 pieces of its drywall with a domestic product.
Michael Peterson, a lawyer for Banner, said in an email that Banner intends to take legal action against its suppliers.
“We have learned certain facts during the litigation that lead us to believe that certain manufacturers made misrepresentations regarding their Chinese-manufactured drywall,” Peterson said.
Plaintiffs’ attorneys said they are trying to negotiate settlements with other companies. The Banner agreement is “an important step in the right direction toward global resolution of these claims,” said Ervin Gonzalez, one of the lead plaintiffs’ attorneys.
In April, insurers for a different Chinese drywall supplier, Interior/Exterior Building Supply, agreed to pay up to $8 million to settle similar claims. Interior/Exterior supplied drywall made by two Chinese companies – Knauf and Taishan Gypsum Co. – to builders in Texas, Louisiana, Mississippi and Alabama.
The vast majority of the remaining claims are against Knauf and Taishan, Gonzalez said.
Source: Copyright © 2011 The Associated Press, Michael Kunzelman.
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