To generate more revenue, Wells Fargo is reportedly turning to commercial real estate loans. Wells Fargo & Co. is expanding its lending to the commercial real estate sector, at a time when many other banks are trimming it. The bank is also buying up commercial real estate loans from other banks.
Wells Fargo has become the leading holder of commercial mortgages among banks, boasting $3.3 billion in loan holdings during the second quarter, according to Trepp LLC.
"We like the risk-return of the business," David Hoyt, who heads wholesale banking for Wells Fargo, told The Wall Street Journal.
Last week, Wells Fargo reportedly agreed to buy $3.3 billion in loans for commercial properties from Anglo Irish Bank Corp., The Wall Street Journal reports. Earlier this month, Wells Fargo purchased about $1.4 billion in U.S. loan holdings from Bank of Ireland.
J.P. Morgan Chase also seems to be trying to cash in on commercial real estate. It’s been steadily increasing its commercial property lending too. Last summer, the bank purchased a $3.5 billion portfolio of mostly multifamily performing loans from Citigroup Inc.
Source: “Wells Fargo Jumps on Commercial Deals,” The Wall Street Journal (Aug. 31, 2011)
Wednesday, August 31, 2011
Mortgage Activity Drops 9.6% This Week
The number of people applying for a mortgage dropped 9.6 percent for the week ending Aug. 26 compared to a week earlier, mostly due to a big drop in refinancing activity, the Mortgage Bankers Association reports.
Low interest rates have helped lift refinance activity in recent weeks but for the second straight week refinancings have started to slow, despite rates staying near 10-month lows. The Refinance Index alone dropped 12.2 percent this week from the previous week.
Meanwhile, the Purchase Index -- a gauge for home buying -- dropped 1.3 percent this week, and was 8.2 percent lower than the same week one year ago. Overall, purchase volume remains near 15-year lows, says Mike Fratantoni, MBA’s vice president of research and economics.
Source: “Mortgage Applications Decrease in Latest MBA Weekly Survey,” Mortgage Bankers Association (Aug. 31, 2011)
Low interest rates have helped lift refinance activity in recent weeks but for the second straight week refinancings have started to slow, despite rates staying near 10-month lows. The Refinance Index alone dropped 12.2 percent this week from the previous week.
Meanwhile, the Purchase Index -- a gauge for home buying -- dropped 1.3 percent this week, and was 8.2 percent lower than the same week one year ago. Overall, purchase volume remains near 15-year lows, says Mike Fratantoni, MBA’s vice president of research and economics.
Source: “Mortgage Applications Decrease in Latest MBA Weekly Survey,” Mortgage Bankers Association (Aug. 31, 2011)
HUD to develop national affordability index
The U.S. Department of Housing and Urban Development (HUD) announced that it will create a nationwide reference tool for homebuyers that lists all local housing and transportation costs: the Housing and Transportation Affordability Index.
The initiative will cost $3.2 million, and a private contractor – The Manhattan Strategies Group, LLC, and its subcontractor, the Center for Neighborhood Technology (CNT) – will create the database.
“Affordability is much more than just paying the mortgage. It involves other costs like transportation, gas and utilities,” says HUD Secretary Shaun Donovan. “A national affordability index will (give homebuyers) better information about the true cost of a home by taking into account its proximity to jobs, schools and other services.”
Donovan says HUD is creating the index to help homebuyers understand the true cost of homeownership. Transportation costs, for example, are not included in most current affordability studies, even though transportation is usually a household’s second-most significant expense.
“Unfortunately, many people believe that to qualify for a mortgage, they have to buy a house far away from their work … but the transportation costs could end up making their total costs more expensive in the long run,” says Shelley Poticha, director of the Office of Sustainable Housing and Communities at HUD.
According to a recent study of 28 metropolitan areas done by the Center for Housing Policy and CNT, the average household pays 27 percent of its income for housing and 20.2 percent of its income for transportation. For working families earning $50,000, those two costs account for 57 percent of the household income.
Manhattan Strategy Group (MSG) says it will work for the next two years to create the Housing and Transportation Affordability Index Tool, which HUD will also use to analyze the impact of programs in HUD-supported communities.
Source: Florida Realtors®
The initiative will cost $3.2 million, and a private contractor – The Manhattan Strategies Group, LLC, and its subcontractor, the Center for Neighborhood Technology (CNT) – will create the database.
“Affordability is much more than just paying the mortgage. It involves other costs like transportation, gas and utilities,” says HUD Secretary Shaun Donovan. “A national affordability index will (give homebuyers) better information about the true cost of a home by taking into account its proximity to jobs, schools and other services.”
Donovan says HUD is creating the index to help homebuyers understand the true cost of homeownership. Transportation costs, for example, are not included in most current affordability studies, even though transportation is usually a household’s second-most significant expense.
“Unfortunately, many people believe that to qualify for a mortgage, they have to buy a house far away from their work … but the transportation costs could end up making their total costs more expensive in the long run,” says Shelley Poticha, director of the Office of Sustainable Housing and Communities at HUD.
According to a recent study of 28 metropolitan areas done by the Center for Housing Policy and CNT, the average household pays 27 percent of its income for housing and 20.2 percent of its income for transportation. For working families earning $50,000, those two costs account for 57 percent of the household income.
Manhattan Strategy Group (MSG) says it will work for the next two years to create the Housing and Transportation Affordability Index Tool, which HUD will also use to analyze the impact of programs in HUD-supported communities.
Source: Florida Realtors®
Florida Realtors issues international profile
To assess the significance of foreign homebuyers in Florida, the National Association of Realtors®, in cooperation with Florida Realtors, asked the state’s Realtors about working with international clients. The survey was similar to last year’s survey as reported in Profile of International Home Buyers in Florida, 2010.
The survey was conducted during late June/early July based on information supplied by Florida Realtor members who supplied information from the past 12 months. A total of 1024 responses were received, of which 787 (77 percent of respondents) said they had served foreign clients.
Foreigners participated in about 25 percent of all Florida residential sales in the 12 months ending June 2011; the estimate is subject to plus or minus 5 percent error. Nationally, the level of international sales is relatively small – in the neighborhood of 3 percent of all transactions. However, Florida’s international sales are a major portion of the market.
Major survey results
• Approximately 25 percent of all sales in Florida are to foreigners.
• Nearly all sales are for cash.
• Foreign purchasers buy upper end homes with a median price of approximately $174,700.
• International investors cite value as a major reason for their purchase – the discounted prices of U.S. real estate coupled with the weaker U.S. dollar.
• Canadians were the top investors in U.S. property, with the United Kingdom now less important than in 2010. Brazil and Venezuela have become more important.
International demand for U.S. property differs in significant ways from internal demand. The important domestic market drivers – jobs, consumer confidence, family formation and economic growth – have negatively impacted domestic transactions. However, international sales have different market drivers – perceptions of value relative to foreign comps, the desire to diversify assets, potential vacation use, rental opportunities, and an interest in placing assets in areas with well-defined and secure property rights.
The Profile of International Home Buying Activity 2011 finds that the international market has grown slightly in recent years, and somewhat offsets declining demand internally.
There is rising affluence throughout the world, and clients come from a wide variety of countries purchase U.S. real estate. Four states – Arizona, California, Florida, and Texas – accounted for 58 percent of total U.S. residential home sales to non-resident foreigners. Florida accounted for 31 percent of total U.S. residential home sales to non-resident foreigners in the same time period.
The complete survey is available online on the research page of floridarealtors.org.
Source: Florida Realtors®
The survey was conducted during late June/early July based on information supplied by Florida Realtor members who supplied information from the past 12 months. A total of 1024 responses were received, of which 787 (77 percent of respondents) said they had served foreign clients.
Foreigners participated in about 25 percent of all Florida residential sales in the 12 months ending June 2011; the estimate is subject to plus or minus 5 percent error. Nationally, the level of international sales is relatively small – in the neighborhood of 3 percent of all transactions. However, Florida’s international sales are a major portion of the market.
Major survey results
• Approximately 25 percent of all sales in Florida are to foreigners.
• Nearly all sales are for cash.
• Foreign purchasers buy upper end homes with a median price of approximately $174,700.
• International investors cite value as a major reason for their purchase – the discounted prices of U.S. real estate coupled with the weaker U.S. dollar.
• Canadians were the top investors in U.S. property, with the United Kingdom now less important than in 2010. Brazil and Venezuela have become more important.
International demand for U.S. property differs in significant ways from internal demand. The important domestic market drivers – jobs, consumer confidence, family formation and economic growth – have negatively impacted domestic transactions. However, international sales have different market drivers – perceptions of value relative to foreign comps, the desire to diversify assets, potential vacation use, rental opportunities, and an interest in placing assets in areas with well-defined and secure property rights.
The Profile of International Home Buying Activity 2011 finds that the international market has grown slightly in recent years, and somewhat offsets declining demand internally.
There is rising affluence throughout the world, and clients come from a wide variety of countries purchase U.S. real estate. Four states – Arizona, California, Florida, and Texas – accounted for 58 percent of total U.S. residential home sales to non-resident foreigners. Florida accounted for 31 percent of total U.S. residential home sales to non-resident foreigners in the same time period.
The complete survey is available online on the research page of floridarealtors.org.
Source: Florida Realtors®
Tuesday, August 30, 2011
‘Most Efficient’ Labels Debut for Appliances
The Energy Star program has been criticized for allowing too many home appliances to carry the energy efficiency label. So now the Environmental Protection Agency and the Department of Energy, which jointly run Energy Star, are announcing a new label—"most efficient"—reserved for the utmost energy efficient washers, dryers, and other appliances.
The Energy Star Most Efficient program will start on a pilot basis through the rest of the year, USA Today reports. The designation will be reserved for the top 5 percent of energy-efficient products.
Appliances first eligible for the designation will include clothes washers, heating and cooling systems, televisions, and refrigerator-freezers. In the fall, the EPA will consider new categories for the label.
The “most efficient” products must “demonstrate efficiency performance that is truly exceptional, inspirational or leading-edge—consistent with the interests of environmentally motivated consumers and early adopters," according to EPA’s guidelines.
To view a list of products that have so far received the new label, visit energystar.gov/mostefficient.
Source: “New ‘Most Efficient’ Label Takes Energy Star Step Further,” USA Today (Aug. 29, 2011)
The Energy Star Most Efficient program will start on a pilot basis through the rest of the year, USA Today reports. The designation will be reserved for the top 5 percent of energy-efficient products.
Appliances first eligible for the designation will include clothes washers, heating and cooling systems, televisions, and refrigerator-freezers. In the fall, the EPA will consider new categories for the label.
The “most efficient” products must “demonstrate efficiency performance that is truly exceptional, inspirational or leading-edge—consistent with the interests of environmentally motivated consumers and early adopters," according to EPA’s guidelines.
To view a list of products that have so far received the new label, visit energystar.gov/mostefficient.
Source: “New ‘Most Efficient’ Label Takes Energy Star Step Further,” USA Today (Aug. 29, 2011)
Consumer confidence lowest in 2 years
Consumers’ confidence in August dropped almost 15 points to the lowest level since April 2009 as worries about the economy fueled the wildest stock market swings since the financial meltdown in 2008.
At a time when Americans are increasingly worried about a weak job market, higher costs for food and clothing, and recent stock market turmoil, the falling confidence numbers raise new concerns about their willingness to spend and jumpstart the economy. That’s particularly important since consumer spending accounts for 70 percent of U.S. economic activity.
“Consumer confidence deteriorated sharply in August, as consumers grew significantly more pessimistic about the short-term outlook,” said Lynn Franco, director of The Conference Board Consumer Research Center, in a statement.
The Conference Board said Tuesday that its Consumer Confidence Index fell to 44.5, down from a revised 59.2 in July. The number was the lowest level since April 2009 when the reading was 40.8. It also is far below the 53.3 that analysts had expected. A reading above 90 indicates the economy is on solid footing; above 100 signals strong growth.
A number of factors contributed to the index’s decline. The index, which is based on a random survey of consumers sent to 5,000 households from Aug. 1 to Aug. 18, captured the wildest week on Wall Street since the financial crisis in 2008.
Four days into the survey period, on Aug. 5, S&P downgraded the U.S. federal debt and concern revived about the health of European banks. Following that, The Dow Jones industrial average had four consecutive days of 400-point swings for the first time in its 115-year history during the week that ended Aug. 12.
Besides debt talks and market fluctuations, Americans are still plagued by old economic worries. The nation’s unemployment rate is stuck at 9 percent. Home values remain weak. And shoppers are facing rising costs for everything from food to clothing as retailers try to offset their higher costs for labor and materials.
As a result, one gauge of the index that measures how shoppers feel about the economy dropped to 33.3 from 35.7. Another measure that assesses shoppers’ outlook over the next six months fell to 51.9, down from 74.9 last month.
Consumers’ views on jobs, in particular, have become more pessimistic. Those claiming that jobs are “hard to get” increased to 49.1 percent from 44.8 percent, while those stating jobs are “plentiful” declined to 4.7 percent from 5.1 percent.
Those anticipating more jobs in the months ahead decreased to 11.4 percent from 16.9 percent, while those expecting fewer jobs increased to 31.5 percent from 22.2 percent. The proportion of consumers anticipating an increase in their incomes dropped to 14.3 percent from 15.9 percent.
Source: The Associated Press, Anne D’Innocenzio, AP retail writer.
At a time when Americans are increasingly worried about a weak job market, higher costs for food and clothing, and recent stock market turmoil, the falling confidence numbers raise new concerns about their willingness to spend and jumpstart the economy. That’s particularly important since consumer spending accounts for 70 percent of U.S. economic activity.
“Consumer confidence deteriorated sharply in August, as consumers grew significantly more pessimistic about the short-term outlook,” said Lynn Franco, director of The Conference Board Consumer Research Center, in a statement.
The Conference Board said Tuesday that its Consumer Confidence Index fell to 44.5, down from a revised 59.2 in July. The number was the lowest level since April 2009 when the reading was 40.8. It also is far below the 53.3 that analysts had expected. A reading above 90 indicates the economy is on solid footing; above 100 signals strong growth.
A number of factors contributed to the index’s decline. The index, which is based on a random survey of consumers sent to 5,000 households from Aug. 1 to Aug. 18, captured the wildest week on Wall Street since the financial crisis in 2008.
Four days into the survey period, on Aug. 5, S&P downgraded the U.S. federal debt and concern revived about the health of European banks. Following that, The Dow Jones industrial average had four consecutive days of 400-point swings for the first time in its 115-year history during the week that ended Aug. 12.
Besides debt talks and market fluctuations, Americans are still plagued by old economic worries. The nation’s unemployment rate is stuck at 9 percent. Home values remain weak. And shoppers are facing rising costs for everything from food to clothing as retailers try to offset their higher costs for labor and materials.
As a result, one gauge of the index that measures how shoppers feel about the economy dropped to 33.3 from 35.7. Another measure that assesses shoppers’ outlook over the next six months fell to 51.9, down from 74.9 last month.
Consumers’ views on jobs, in particular, have become more pessimistic. Those claiming that jobs are “hard to get” increased to 49.1 percent from 44.8 percent, while those stating jobs are “plentiful” declined to 4.7 percent from 5.1 percent.
Those anticipating more jobs in the months ahead decreased to 11.4 percent from 16.9 percent, while those expecting fewer jobs increased to 31.5 percent from 22.2 percent. The proportion of consumers anticipating an increase in their incomes dropped to 14.3 percent from 15.9 percent.
Source: The Associated Press, Anne D’Innocenzio, AP retail writer.
Spring buying boosts home prices in U.S. cities
Spring buying pushed home prices up for a third straight month in most major U.S. cities in June. But the housing market remains shaky, and further price declines are expected this year.
The Standard & Poor’s/Case-Shiller home-price index showed Tuesday that prices increased in June from May in 19 of the 20 cities tracked. Prices rose 3.6 percent in the April-June quarter from the previous quarter. Neither of those numbers is adjusted for seasonal factors.
Over the past 12 months, home prices have declined in all 20 cities after adjusting for seasonal factors.
Chicago, Minneapolis, Washington and Boston posted the biggest monthly increases. Metro areas hit hardest by the housing crisis, including Las Vegas and Phoenix, reported small seasonal increases.
Housing has been a drag on the economy and is a key reason it has struggled to recover two years after the recession officially ended. Home sales are on pace this year to be the worst in 14 years.
High unemployment, larger downpayment requirements and tighter credit are preventing many buyers from entering the market. Many who can afford to buy are waiting because they are worried prices have yet to hit bottom.
Analysts say home prices have stabilized in coastal cities over the past six months. But many Sun Belt cities have reached their lowest point since the housing market went bust more than four years ago.
“These shifts suggest that we are back to regional housing markets, rather than a national housing market where everything rose and fell together,” said David M. Blitzer, chairman of the S&P’s index committee.
The index measures prices compared with those in January 2000 and creates a three-month moving average. The June data is the latest available.
Last year, a homebuyer tax credit helped boost prices temporarily. But prices began to fall shortly after the tax credit expired. They tumbled in big metro areas in March to their lowest level since 2002.
As prices have fallen, so too have sales.
The pace of sales for previously occupied homes is trailing last year’s 4.91 million sold, the fewest since 1997. In a healthy economy, people buy roughly 6 million homes each year.
Sales of new homes fell in July for third straight month. This year is shaping up to be the worst for sales of new homes on records dating back to 1963.
Foreclosures and short sales – when a lender agrees to sell for less than what is owed on a mortgage – made up about 30 percent of all home sales last month, up from about 10 percent in past years. And 1.7 million potential foreclosures are being held up, according to real estate firm CoreLogic, either by backlogged courts or lenders awaiting state and federal probes into troubled foreclosure practices.
Source: The Associated Press, Derek Kravitz , AP real estate writer. All rights reserved.
The Standard & Poor’s/Case-Shiller home-price index showed Tuesday that prices increased in June from May in 19 of the 20 cities tracked. Prices rose 3.6 percent in the April-June quarter from the previous quarter. Neither of those numbers is adjusted for seasonal factors.
Over the past 12 months, home prices have declined in all 20 cities after adjusting for seasonal factors.
Chicago, Minneapolis, Washington and Boston posted the biggest monthly increases. Metro areas hit hardest by the housing crisis, including Las Vegas and Phoenix, reported small seasonal increases.
Housing has been a drag on the economy and is a key reason it has struggled to recover two years after the recession officially ended. Home sales are on pace this year to be the worst in 14 years.
High unemployment, larger downpayment requirements and tighter credit are preventing many buyers from entering the market. Many who can afford to buy are waiting because they are worried prices have yet to hit bottom.
Analysts say home prices have stabilized in coastal cities over the past six months. But many Sun Belt cities have reached their lowest point since the housing market went bust more than four years ago.
“These shifts suggest that we are back to regional housing markets, rather than a national housing market where everything rose and fell together,” said David M. Blitzer, chairman of the S&P’s index committee.
The index measures prices compared with those in January 2000 and creates a three-month moving average. The June data is the latest available.
Last year, a homebuyer tax credit helped boost prices temporarily. But prices began to fall shortly after the tax credit expired. They tumbled in big metro areas in March to their lowest level since 2002.
As prices have fallen, so too have sales.
The pace of sales for previously occupied homes is trailing last year’s 4.91 million sold, the fewest since 1997. In a healthy economy, people buy roughly 6 million homes each year.
Sales of new homes fell in July for third straight month. This year is shaping up to be the worst for sales of new homes on records dating back to 1963.
Foreclosures and short sales – when a lender agrees to sell for less than what is owed on a mortgage – made up about 30 percent of all home sales last month, up from about 10 percent in past years. And 1.7 million potential foreclosures are being held up, according to real estate firm CoreLogic, either by backlogged courts or lenders awaiting state and federal probes into troubled foreclosure practices.
Source: The Associated Press, Derek Kravitz , AP real estate writer. All rights reserved.
Monday, August 29, 2011
Pending home sales slip in July but up strongly from 2010
Pending home sales declined in July but remain well above year-ago levels, according to the National Association of Realtors® (NAR). All regions show monthly declines except for the West, which continues to show the highest level of sales contract activity.
The Pending Home Sales Index (PHSI), a forward-looking indicator based on contract signings, slipped 1.3 percent to 89.7 in July from 90.9 in June; but it’s 14.4 percent above the 78.4 index in July 2010. The data reflects contracts but not closings.
“The market can easily move into a healthy expansion if mortgage underwriting standards return to normalcy,” says Lawrence Yun, NAR chief economist. “We also need to be mindful that not all sales contracts are leading to closed existing-home sales. Other market frictions need to be addressed, such as assuring that proper comparables are used in appraisal valuations and streamlining the short sales process.”
The PHSI in the Northeast declined 2.0 percent to 67.5 in July but is 9.7 percent above July 2010. In the Midwest the index slipped 0.8 percent to 79.1 in July but is 18.8 percent above a year ago. Pending home sales in the South fell 4.8 percent to an index of 94.4 but are 9.5 percent higher than July 2010. In the West, the index rose 3.6 percent to 110.8 in July and is 20.6 percent above a year ago.
“Looking at pending home sales over a longer span, contract activity over the past three months is fairly comparable to the first three months of the year – and well above the low seen in April,” Yun says. “The underlying factors for improving sales are developing, such as rising rents, record high affordability conditions and investors buying real estate as a future inflation hedge. It is now a question of lending standards and consumers having the necessary confidence to enter the market.”
Source: Florida Realtors®
The Pending Home Sales Index (PHSI), a forward-looking indicator based on contract signings, slipped 1.3 percent to 89.7 in July from 90.9 in June; but it’s 14.4 percent above the 78.4 index in July 2010. The data reflects contracts but not closings.
“The market can easily move into a healthy expansion if mortgage underwriting standards return to normalcy,” says Lawrence Yun, NAR chief economist. “We also need to be mindful that not all sales contracts are leading to closed existing-home sales. Other market frictions need to be addressed, such as assuring that proper comparables are used in appraisal valuations and streamlining the short sales process.”
The PHSI in the Northeast declined 2.0 percent to 67.5 in July but is 9.7 percent above July 2010. In the Midwest the index slipped 0.8 percent to 79.1 in July but is 18.8 percent above a year ago. Pending home sales in the South fell 4.8 percent to an index of 94.4 but are 9.5 percent higher than July 2010. In the West, the index rose 3.6 percent to 110.8 in July and is 20.6 percent above a year ago.
“Looking at pending home sales over a longer span, contract activity over the past three months is fairly comparable to the first three months of the year – and well above the low seen in April,” Yun says. “The underlying factors for improving sales are developing, such as rising rents, record high affordability conditions and investors buying real estate as a future inflation hedge. It is now a question of lending standards and consumers having the necessary confidence to enter the market.”
Source: Florida Realtors®
Economic slowdown impacts commercial markets
Commercial real estate vacancy rates are flat, and projections for improvement have been moderated because economic growth and job creation have been weaker than expected, but modest improvements are expected over the coming year, according to the National Association of Realtors®.
Lawrence Yun, NAR chief economist, said the weakening economy will slow the growth in demand for space. “Disappointing economic growth in recent months means a slower recovery for most of the commercial real estate sectors, although multifamily housing continues to benefit from pent-up demand resulting from an abnormal slowdown in household formation in recent years,” he said. “Many young people, who normally would have struck out on their own from 2008 to 2010, had been doubling up with roommates or moving back into their parents’ homes. However, they’ve been entering the rental market as new households in stronger numbers this year. As a result, apartment vacancy rates are declining and rents are rising at faster rates.”
Growth in the gross domestic product slowed to 0.4 percent in the first quarter and 1.3 percent in the second quarter, much lower than the 4 to 5 percent expansion needed after a recession.
“A healthy recovery is already occurring in the multifamily sector, with average apartment rent expected to rise 2.5 percent this year and another 3.2 percent in 2012,” Yun said. “Normally, rising rents correspond to rising home prices. However, this isn’t happening in this recovery because buyers are constrained by unnecessarily restrictive mortgage underwriting standards, so the underlying demand isn’t drawing inventory down quickly enough to support price growth.”
Looking at commercial vacancy rates from the third quarter of this year to the third quarter of 2012, NAR forecasts vacancies to decline 0.3 percentage points in the office sector, 0.6 points in industrial real estate, 0.7 points in the retail sector, and 0.9 percentage points in the multifamily rental market.
The Society of Industrial and Office Realtors, in its SIOR Commercial Real Estate Index, an attitudinal survey of 266 local market experts, shows erosion in market conditions. All regions posted declines except the West.
The SIOR index, measuring the impact of 10 variables, declined 2.6 percentage points to 54.9 in the second quarter, following a strong gain of 6.8 percentage points in the first quarter.
The SIOR index remains well below the level of 100 that represents a balanced marketplace, but had seen six consecutive quarterly improvements prior to last quarter’s decline. The last time the index was at 100 was in the third quarter of 2007.
Fundamentals are largely unchanged, with vacancy rates relatively flat. Eight out of 10 respondents said office and industrial leasing activity is below historic levels, and seven out of 10 said asking rents are below a year ago. It remains a tenant’s market, with many tenants benefiting from moderate concessions and rent discounts.
Construction activity is nearly nonexistent in most areas, and it is a buyer’s market for development acquisitions. Local experts said commercial office and industrial prices are below construction costs in 83 percent of markets.
NAR’s latest “Commercial Real Estate Outlook” offers projections for four major commercial sectors and analyzes quarterly data in the office, industrial, retail and multifamily markets. Historic data for metro areas were provided by REIS Inc., a source of commercial real estate performance information.
Office markets
Vacancy rates in the office sector are forecast to fall from 16.6 percent in the third quarter of this year to 16.3 percent in the third quarter of 2012.
The markets with the lowest office vacancy rates currently are Washington D.C., with a vacancy rate of 8.6 percent; New York at 10.1 percent; and Long Island, N.Y., 13.0 percent.
Office rents are expected to rise 0.8 percent in 2011 and another 1.5 percent next year. Net absorption of office space in the U.S., which includes the leasing of new space coming on the market as well as space in existing properties, is projected to be 28.3 million square feet this year.
Industrial markets
Industrial vacancy rates are likely to decline from 12.7 percent in the current quarter to 12.1 percent in the third quarter of 2012.
At present, the areas with the lowest industrial vacancy rates are Los Angeles, with a vacancy rate of 5.5 percent; Orange County, Calif., 6.2 percent; and Miami at 8.9 percent.
Annual industrial rent is expected decline 0.9 percent this year before rising 2.0 percent in 2012. Net absorption of industrial space nationally should be 47.8 million square feet this year.
Retail markets
Retail vacancy rates are projected to decline from 12.9 percent in the third quarter of this year to 12.2 percent in the third quarter of 2012.
Markets with the lowest retail vacancy rates currently include San Francisco, 3.8 percent; Northern New Jersey, 6.1 percent; and three markets at 6.4 percent each: Los Angeles; Long Island, N.Y.; and San Jose, Calif.
Average retail rent is forecast to decline 0.4 percent this year, and then rise 0.7 percent in 2012. Net absorption of retail space is seen at 5.6 million square feet this year.
Multifamily markets
The apartment rental market — multifamily housing — should see vacancy rates drop from 5.5 percent in the current quarter to 4.6 percent in the third quarter of 2012. Apartment vacancies below 5 percent generally are considered a landlord’s market.
Areas with the lowest multifamily vacancy rates presently are Minneapolis, 2.5 percent; New York, 2.8 percent; and Portland, Ore., at 2.9 percent.
Multifamily net absorption is likely to be 237,700 units this year.
Source: Florida Realtors®
Lawrence Yun, NAR chief economist, said the weakening economy will slow the growth in demand for space. “Disappointing economic growth in recent months means a slower recovery for most of the commercial real estate sectors, although multifamily housing continues to benefit from pent-up demand resulting from an abnormal slowdown in household formation in recent years,” he said. “Many young people, who normally would have struck out on their own from 2008 to 2010, had been doubling up with roommates or moving back into their parents’ homes. However, they’ve been entering the rental market as new households in stronger numbers this year. As a result, apartment vacancy rates are declining and rents are rising at faster rates.”
Growth in the gross domestic product slowed to 0.4 percent in the first quarter and 1.3 percent in the second quarter, much lower than the 4 to 5 percent expansion needed after a recession.
“A healthy recovery is already occurring in the multifamily sector, with average apartment rent expected to rise 2.5 percent this year and another 3.2 percent in 2012,” Yun said. “Normally, rising rents correspond to rising home prices. However, this isn’t happening in this recovery because buyers are constrained by unnecessarily restrictive mortgage underwriting standards, so the underlying demand isn’t drawing inventory down quickly enough to support price growth.”
Looking at commercial vacancy rates from the third quarter of this year to the third quarter of 2012, NAR forecasts vacancies to decline 0.3 percentage points in the office sector, 0.6 points in industrial real estate, 0.7 points in the retail sector, and 0.9 percentage points in the multifamily rental market.
The Society of Industrial and Office Realtors, in its SIOR Commercial Real Estate Index, an attitudinal survey of 266 local market experts, shows erosion in market conditions. All regions posted declines except the West.
The SIOR index, measuring the impact of 10 variables, declined 2.6 percentage points to 54.9 in the second quarter, following a strong gain of 6.8 percentage points in the first quarter.
The SIOR index remains well below the level of 100 that represents a balanced marketplace, but had seen six consecutive quarterly improvements prior to last quarter’s decline. The last time the index was at 100 was in the third quarter of 2007.
Fundamentals are largely unchanged, with vacancy rates relatively flat. Eight out of 10 respondents said office and industrial leasing activity is below historic levels, and seven out of 10 said asking rents are below a year ago. It remains a tenant’s market, with many tenants benefiting from moderate concessions and rent discounts.
Construction activity is nearly nonexistent in most areas, and it is a buyer’s market for development acquisitions. Local experts said commercial office and industrial prices are below construction costs in 83 percent of markets.
NAR’s latest “Commercial Real Estate Outlook” offers projections for four major commercial sectors and analyzes quarterly data in the office, industrial, retail and multifamily markets. Historic data for metro areas were provided by REIS Inc., a source of commercial real estate performance information.
Office markets
Vacancy rates in the office sector are forecast to fall from 16.6 percent in the third quarter of this year to 16.3 percent in the third quarter of 2012.
The markets with the lowest office vacancy rates currently are Washington D.C., with a vacancy rate of 8.6 percent; New York at 10.1 percent; and Long Island, N.Y., 13.0 percent.
Office rents are expected to rise 0.8 percent in 2011 and another 1.5 percent next year. Net absorption of office space in the U.S., which includes the leasing of new space coming on the market as well as space in existing properties, is projected to be 28.3 million square feet this year.
Industrial markets
Industrial vacancy rates are likely to decline from 12.7 percent in the current quarter to 12.1 percent in the third quarter of 2012.
At present, the areas with the lowest industrial vacancy rates are Los Angeles, with a vacancy rate of 5.5 percent; Orange County, Calif., 6.2 percent; and Miami at 8.9 percent.
Annual industrial rent is expected decline 0.9 percent this year before rising 2.0 percent in 2012. Net absorption of industrial space nationally should be 47.8 million square feet this year.
Retail markets
Retail vacancy rates are projected to decline from 12.9 percent in the third quarter of this year to 12.2 percent in the third quarter of 2012.
Markets with the lowest retail vacancy rates currently include San Francisco, 3.8 percent; Northern New Jersey, 6.1 percent; and three markets at 6.4 percent each: Los Angeles; Long Island, N.Y.; and San Jose, Calif.
Average retail rent is forecast to decline 0.4 percent this year, and then rise 0.7 percent in 2012. Net absorption of retail space is seen at 5.6 million square feet this year.
Multifamily markets
The apartment rental market — multifamily housing — should see vacancy rates drop from 5.5 percent in the current quarter to 4.6 percent in the third quarter of 2012. Apartment vacancies below 5 percent generally are considered a landlord’s market.
Areas with the lowest multifamily vacancy rates presently are Minneapolis, 2.5 percent; New York, 2.8 percent; and Portland, Ore., at 2.9 percent.
Multifamily net absorption is likely to be 237,700 units this year.
Source: Florida Realtors®
Financial turmoil intensifies homebuyers’ anxiety
The past month wasn't exactly a confidence-booster for would-be home buyers and sellers.
They've witnessed a turbulent stock market, a downgrade of U.S. credit, a spreading European debt crisis and a U.S. economy that seems to be running in place.
And now many say they're even more hesitant – a retreat that could further delay a rebound in housing. It could hold back the overall economy, too.
"I have people who are just waiting and waiting, who just haven't pulled the trigger even though they have the down payment," said John Stearns, senior mortgage banker at American Fidelity Mortgage outside Milwaukee. "There's a lot of kicking tires. A lot of people saying they just won't do it."
Their unease explains why applications for home mortgages sank last week to a nearly 15-year low. What's more, sales of new homes fell more than expected in July – and analysts think the financial turmoil may be accelerating that slide this month.
"Buyers just don't want to commit to anything right now," said Joel Naroff of Pennsylvania-based Naroff Economic Advisors.
Interviews with more than three dozen agents, brokers and would-be buyers and sellers indicate that the heightened uncertainty in the financial markets and the economy has made people even more cautious than before.
Consider:
• Eric Younan, a marketing professional at an accounting firm who was about to buy a home in July in Farmington Hills, Mich. Then along came August. "What really scared me is that I'm a single guy, and I don't want to have a mortgage by myself," Younan says. "The economy is taking a pounding, and my friends who are getting laid off are leaving the state. Prices are still falling. So I'd rather have money in the bank than money in a house."
• Fernando Maza, a security system programmer in Broward County, Fla., who was about to buy a second home, right before the stream of unnerving developments on the economy and the stock market. Now, he's less sure. "House prices could go down," he says. "There's so much inventory and not a lot of qualified buyers."
• Kurt Winiecki, a financial planner in Chicago who has been counseling a young couple on whether to buy or continue to rent. August made Winiecki's decision easier: He's telling them to rent. "What if they lose 20 percent of their equity and they can't sell the house? It's just too big a risk."
Even before the recent financial upheavals, the home market was being depressed by the economy's many problems: High unemployment. Stagnant pay. Rising health care expenses. High debt loads. A wave of foreclosures. Shrunken home equity.
And real estate agents were saying that more buyers were walking away at the last minute. In June, the latest month for which figures are available, about 16 percent of closings were canceled. That was the highest figure since record keeping started more than a year ago.
This year is on pace to be the worst for home sales in 14 years. Nationally, prices are at 2002 levels, and even lower in areas like Phoenix, Las Vegas and Tampa, Fla.
But the past few weeks' turmoil may be making everything worse. Homebuilder stocks, for instance, have been battered – even more than the stock market as a whole. As a group, they've shed nearly 23 percent, according to a Standard & Poor's analysis, compared with about 12 percent for the Dow Jones industrial average.
In normal times, today's record-low mortgage rates would energize buying. Yet while more people are refinancing, applications for new mortgages are stuck at 10-year lows, according to Inside Mortgage Finance.
Part of the problem is that many people can't buy even if they want to. More than 23 percent of homeowners owe more on their homes than they're worth. An additional 25 percent have less than 20 percent equity in their homes, according to Capital Economics.
That means that nearly half of homeowners couldn't qualify for a new mortgage because they couldn't produce a big enough down payment.
Add to that a chaotic stock market and a weak economy, and the belief is taking hold among many that now isn't the time to invest in the biggest purchase in most people's lives.
"There's a reassessment of risk across the planet," says Jonathan Miller of New York-based real estate consultancy Miller Samuel. "Volatility breeds uncertainty, and this is intimidating for consumers."
Consider the lack of interest in Eric Johannson's home. A pilot for cargo hauler Atlas Air, Johannson put his lakefront Houston home on the market in July 2010. He planned to upgrade to a home in Orlando, where his wife took a new job.
Yet despite the house's excellent condition, it has drawn not a single offer, even after the price was slashed to $249,000 – $100,000 less than what Johannson and his wife paid in 2008.
"If this economic situation drags out much longer, my wife just may have to quit her job and career" and move back to Houston, Johansson says.
Source: The Associated Press, Michelle Conlin and Derek Kravitz (AP Business Writers). All rights reserved.
They've witnessed a turbulent stock market, a downgrade of U.S. credit, a spreading European debt crisis and a U.S. economy that seems to be running in place.
And now many say they're even more hesitant – a retreat that could further delay a rebound in housing. It could hold back the overall economy, too.
"I have people who are just waiting and waiting, who just haven't pulled the trigger even though they have the down payment," said John Stearns, senior mortgage banker at American Fidelity Mortgage outside Milwaukee. "There's a lot of kicking tires. A lot of people saying they just won't do it."
Their unease explains why applications for home mortgages sank last week to a nearly 15-year low. What's more, sales of new homes fell more than expected in July – and analysts think the financial turmoil may be accelerating that slide this month.
"Buyers just don't want to commit to anything right now," said Joel Naroff of Pennsylvania-based Naroff Economic Advisors.
Interviews with more than three dozen agents, brokers and would-be buyers and sellers indicate that the heightened uncertainty in the financial markets and the economy has made people even more cautious than before.
Consider:
• Eric Younan, a marketing professional at an accounting firm who was about to buy a home in July in Farmington Hills, Mich. Then along came August. "What really scared me is that I'm a single guy, and I don't want to have a mortgage by myself," Younan says. "The economy is taking a pounding, and my friends who are getting laid off are leaving the state. Prices are still falling. So I'd rather have money in the bank than money in a house."
• Fernando Maza, a security system programmer in Broward County, Fla., who was about to buy a second home, right before the stream of unnerving developments on the economy and the stock market. Now, he's less sure. "House prices could go down," he says. "There's so much inventory and not a lot of qualified buyers."
• Kurt Winiecki, a financial planner in Chicago who has been counseling a young couple on whether to buy or continue to rent. August made Winiecki's decision easier: He's telling them to rent. "What if they lose 20 percent of their equity and they can't sell the house? It's just too big a risk."
Even before the recent financial upheavals, the home market was being depressed by the economy's many problems: High unemployment. Stagnant pay. Rising health care expenses. High debt loads. A wave of foreclosures. Shrunken home equity.
And real estate agents were saying that more buyers were walking away at the last minute. In June, the latest month for which figures are available, about 16 percent of closings were canceled. That was the highest figure since record keeping started more than a year ago.
This year is on pace to be the worst for home sales in 14 years. Nationally, prices are at 2002 levels, and even lower in areas like Phoenix, Las Vegas and Tampa, Fla.
But the past few weeks' turmoil may be making everything worse. Homebuilder stocks, for instance, have been battered – even more than the stock market as a whole. As a group, they've shed nearly 23 percent, according to a Standard & Poor's analysis, compared with about 12 percent for the Dow Jones industrial average.
In normal times, today's record-low mortgage rates would energize buying. Yet while more people are refinancing, applications for new mortgages are stuck at 10-year lows, according to Inside Mortgage Finance.
Part of the problem is that many people can't buy even if they want to. More than 23 percent of homeowners owe more on their homes than they're worth. An additional 25 percent have less than 20 percent equity in their homes, according to Capital Economics.
That means that nearly half of homeowners couldn't qualify for a new mortgage because they couldn't produce a big enough down payment.
Add to that a chaotic stock market and a weak economy, and the belief is taking hold among many that now isn't the time to invest in the biggest purchase in most people's lives.
"There's a reassessment of risk across the planet," says Jonathan Miller of New York-based real estate consultancy Miller Samuel. "Volatility breeds uncertainty, and this is intimidating for consumers."
Consider the lack of interest in Eric Johannson's home. A pilot for cargo hauler Atlas Air, Johannson put his lakefront Houston home on the market in July 2010. He planned to upgrade to a home in Orlando, where his wife took a new job.
Yet despite the house's excellent condition, it has drawn not a single offer, even after the price was slashed to $249,000 – $100,000 less than what Johannson and his wife paid in 2008.
"If this economic situation drags out much longer, my wife just may have to quit her job and career" and move back to Houston, Johansson says.
Source: The Associated Press, Michelle Conlin and Derek Kravitz (AP Business Writers). All rights reserved.
Fixed mortgage rates rise from decades lows
Fixed mortgage rates edged up this week from their lowest levels in decades. But few have been able to capitalize on them.
The average rate on the 30-year fixed mortgage rose to 4.22 percent, Freddie Mac said Thursday. That's up from 4.15 percent last week, the lowest level on records dating to 1971.
The average rate on the 15-year fixed mortgage, a popular refinancing option, rose to 3.44 percent. Last week it fell to 3.36 percent,
Mortgage rates typically track the yield on the 10-year Treasury note. Yields rose this week as investors shifted money back into stocks. The stock markets were more stable after a turbulent stretch. Bond yields rise as their prices fall.
Still, low rates have not been enough to revive the weak housing market. Mortgage applications to purchase a home fell last week to a 15-year low, according to the Mortgage Bankers Association.
High unemployment and fear that the country may be on the verge of another recession have left many people hesitant to buy a home.
Others can't qualify for the low rates. Their credit is too weak to meet banks' tighter lending standards. Many banks are requiring larger down payments. Some potential homebuyers are stuck in homes that are worth less than the existing mortgage.
Over the past year, the average rate on the 30-year fixed mortgage has been below 5 percent for all but two weeks. Yet sales remain unhealthy.
Sales of new homes are on pace to finish the year as the lowest on records dating back to 1963. The pace of re-sales is shaping up to be the worst in 14 years.
Home prices haven't fared much better. Since the peak of the housing boom in 2007, homes have lost nearly a third of their value.
The weak housing market has been a drag on the economy. And without more jobs, the housing market is unlikely to recover any time soon.
To calculate average mortgage rates, Freddie Mac surveys lenders across the country Monday through Wednesday of each week.
The average rate on a five-year adjustable-rate mortgage fell to 3.07 percent. That's the lowest rate on records dating to January 2005. It was the fourth straight week of record lows for this type of loan.
The average rate for the one-year adjustable-rate mortgage rose to 2.93 from 2.86 percent. Last week's average was the lowest on records going back to 1984.
The rates do not include extra fees known as points. One point is equal to 1 percent of the total loan amount.
The average fees for the 30-year, 15-year and 5-year loans held steady at 0.7 point, 0.6 point and 0.5 point, respectively. The average fee on the one-year adjustable mortgage fell to 0.5 point from 0.7 point.
Source: The Associated Press, Daniel Wagner (AP Business Writer). All rights reserved.
The average rate on the 30-year fixed mortgage rose to 4.22 percent, Freddie Mac said Thursday. That's up from 4.15 percent last week, the lowest level on records dating to 1971.
The average rate on the 15-year fixed mortgage, a popular refinancing option, rose to 3.44 percent. Last week it fell to 3.36 percent,
Mortgage rates typically track the yield on the 10-year Treasury note. Yields rose this week as investors shifted money back into stocks. The stock markets were more stable after a turbulent stretch. Bond yields rise as their prices fall.
Still, low rates have not been enough to revive the weak housing market. Mortgage applications to purchase a home fell last week to a 15-year low, according to the Mortgage Bankers Association.
High unemployment and fear that the country may be on the verge of another recession have left many people hesitant to buy a home.
Others can't qualify for the low rates. Their credit is too weak to meet banks' tighter lending standards. Many banks are requiring larger down payments. Some potential homebuyers are stuck in homes that are worth less than the existing mortgage.
Over the past year, the average rate on the 30-year fixed mortgage has been below 5 percent for all but two weeks. Yet sales remain unhealthy.
Sales of new homes are on pace to finish the year as the lowest on records dating back to 1963. The pace of re-sales is shaping up to be the worst in 14 years.
Home prices haven't fared much better. Since the peak of the housing boom in 2007, homes have lost nearly a third of their value.
The weak housing market has been a drag on the economy. And without more jobs, the housing market is unlikely to recover any time soon.
To calculate average mortgage rates, Freddie Mac surveys lenders across the country Monday through Wednesday of each week.
The average rate on a five-year adjustable-rate mortgage fell to 3.07 percent. That's the lowest rate on records dating to January 2005. It was the fourth straight week of record lows for this type of loan.
The average rate for the one-year adjustable-rate mortgage rose to 2.93 from 2.86 percent. Last week's average was the lowest on records going back to 1984.
The rates do not include extra fees known as points. One point is equal to 1 percent of the total loan amount.
The average fees for the 30-year, 15-year and 5-year loans held steady at 0.7 point, 0.6 point and 0.5 point, respectively. The average fee on the one-year adjustable mortgage fell to 0.5 point from 0.7 point.
Source: The Associated Press, Daniel Wagner (AP Business Writer). All rights reserved.
Thursday, August 25, 2011
Mortgage Applications Plunge to 15-Year Low
Despite record low interest rates, mortgage applications for purchasing a home fell again last week, reaching its lowest level since December 1996, the Mortgage Bankers Association reports.
Buyers continue to be reluctant out of fears the U.S. economy could fall into another recession or due to job insecurity, experts say.
Overall, mortgage applications fell to a seasonally adjusted rate of 2.4 percent last week compared to the week prior. Mortgage applications for home purchases dropped 5.7 percent.
"Another week of volatile markets and rampant uncertainty regarding the economy kept prospective home buyers on the sidelines," says Mike Fratantoni, MBA’s vice president of research and economics.
Source: “Home Loan Applications Fall to 15-Year Low,” The Associated Press (Aug. 24, 2011)
Buyers continue to be reluctant out of fears the U.S. economy could fall into another recession or due to job insecurity, experts say.
Overall, mortgage applications fell to a seasonally adjusted rate of 2.4 percent last week compared to the week prior. Mortgage applications for home purchases dropped 5.7 percent.
"Another week of volatile markets and rampant uncertainty regarding the economy kept prospective home buyers on the sidelines," says Mike Fratantoni, MBA’s vice president of research and economics.
Source: “Home Loan Applications Fall to 15-Year Low,” The Associated Press (Aug. 24, 2011)
White House Weighs Mass Refinancing Plan
The White House is considering a housing proposal that would allow millions of home owners with government-backed mortgages to refinance into lower interest rates, The New York Times reports.
“A wave of refinancing could be a strong stimulus to the economy, because it would lower consumers’ mortgage bills right away and allow them to spend elsewhere,” an article in The New York Times notes.
Many home owners have been unable to take advantage of today’s low interest rates — which are averaging around 4 percent — because they don’t qualify for refinancing at the best rates since they owe more on their home than it is currently worth or because of poor credit. The refinancing plan is still under discussion of how it would work, The New York Times said.
“This is the best stimulus out there because it doesn’t increase the deficit, it accomplishes monetary policy, and it reduces defaults in housing,” Christopher J. Mayer, an economist at the Columbia Business School, told The New York Times.
The White House is also considering other options to try to stimulate the housing market or save home owners from foreclosure. Such options include more changes to its refinancing programs so more home owners can participate or a home rental program to that would rent out foreclosures instead of putting them for sale so foreclosures would stop weighing down overall home prices.
Source: “U.S. May Back Refinance Plan for Mortgages,” The New York Times (Aug. 24, 2011)
“A wave of refinancing could be a strong stimulus to the economy, because it would lower consumers’ mortgage bills right away and allow them to spend elsewhere,” an article in The New York Times notes.
Many home owners have been unable to take advantage of today’s low interest rates — which are averaging around 4 percent — because they don’t qualify for refinancing at the best rates since they owe more on their home than it is currently worth or because of poor credit. The refinancing plan is still under discussion of how it would work, The New York Times said.
“This is the best stimulus out there because it doesn’t increase the deficit, it accomplishes monetary policy, and it reduces defaults in housing,” Christopher J. Mayer, an economist at the Columbia Business School, told The New York Times.
The White House is also considering other options to try to stimulate the housing market or save home owners from foreclosure. Such options include more changes to its refinancing programs so more home owners can participate or a home rental program to that would rent out foreclosures instead of putting them for sale so foreclosures would stop weighing down overall home prices.
Source: “U.S. May Back Refinance Plan for Mortgages,” The New York Times (Aug. 24, 2011)
Foreclosures made up 31% of home sales in 2Q
Foreclosures made up roughly one-third of all home sales this spring. While that’s a smaller share of sales from the previous quarter, it’s six times the percentage of foreclosures in a healthy housing market.
Foreclosure sales, which include homes purchased after they received a notice of default or were repossessed by lenders, accounted for 31 percent of the market in the April-June quarter, foreclosure listing firm RealtyTrac Inc. said Thursday.
The share of the market would likely have been larger this spring if not for a state and federal investigation into faulty paperwork by banks and servicers. The probe has led many banks to delay foreclosure sales. Once that is complete, foreclosures will likely surge later this year.
As a slice of all home purchases, foreclosure sales peak two years ago at 37.4 percent. In the second quarter, they declined from 36 percent in the January-March period.
In all, 265,087 homes in some stage of foreclosure or owned by banks were sold in the second quarter, down 11 percent from the same period a year ago. Sales of all other types of homes also declined, according to RealtyTrac’s figures, which differ from other home-sales estimates.
Bank-owned homes, which are sold after being repossessed, accounted for nearly 19 percent of all sales. That's unchanged from the previous quarter.
Distressed properties, often in need of repair, typically sell at big discounts and weaken prices for neighboring homes.
A bank-owned home this spring sold for 40 less than the average price of other homes, according to RealtyTrac. That’s up from 36 percent in the previous quarter and 34 percent from the same quarter one year ago.
Sales of homes in the foreclosure process or short sales went for 21 percent less than the average home sold, the firm said. That’s up from an average of 17 percent in the first quarter and 14 percent in the second quarter of 2010. A short sale is when lender agrees to accept less than what is owed on the mortgage.
The average sales price of a foreclosure property was $164,217, down less than 1 percent from the January-March quarter and nearly 5 percent from the April-June quarter in 2010, the firm said.
Nevada led all states with foreclosure sales accounting for 65 percent of all home sales, RealtyTrac said.
In Arizona, foreclosure sales represented 57 percent of all home sales for the quarter, up 16 percent from a year ago. In California, foreclosure sales accounted for 51 percent of all home sales in the second quarter, virtually unchanged from last year.
Several other states had foreclosure sales that accounted for at least one third of all home sales in the first quarter: Michigan, Colorado, Florida, Illinois and Oregon.
Source: The Associated Press, Derek Kravitz, AP real estate writer. All rights reserved.
Foreclosure sales, which include homes purchased after they received a notice of default or were repossessed by lenders, accounted for 31 percent of the market in the April-June quarter, foreclosure listing firm RealtyTrac Inc. said Thursday.
The share of the market would likely have been larger this spring if not for a state and federal investigation into faulty paperwork by banks and servicers. The probe has led many banks to delay foreclosure sales. Once that is complete, foreclosures will likely surge later this year.
As a slice of all home purchases, foreclosure sales peak two years ago at 37.4 percent. In the second quarter, they declined from 36 percent in the January-March period.
In all, 265,087 homes in some stage of foreclosure or owned by banks were sold in the second quarter, down 11 percent from the same period a year ago. Sales of all other types of homes also declined, according to RealtyTrac’s figures, which differ from other home-sales estimates.
Bank-owned homes, which are sold after being repossessed, accounted for nearly 19 percent of all sales. That's unchanged from the previous quarter.
Distressed properties, often in need of repair, typically sell at big discounts and weaken prices for neighboring homes.
A bank-owned home this spring sold for 40 less than the average price of other homes, according to RealtyTrac. That’s up from 36 percent in the previous quarter and 34 percent from the same quarter one year ago.
Sales of homes in the foreclosure process or short sales went for 21 percent less than the average home sold, the firm said. That’s up from an average of 17 percent in the first quarter and 14 percent in the second quarter of 2010. A short sale is when lender agrees to accept less than what is owed on the mortgage.
The average sales price of a foreclosure property was $164,217, down less than 1 percent from the January-March quarter and nearly 5 percent from the April-June quarter in 2010, the firm said.
Nevada led all states with foreclosure sales accounting for 65 percent of all home sales, RealtyTrac said.
In Arizona, foreclosure sales represented 57 percent of all home sales for the quarter, up 16 percent from a year ago. In California, foreclosure sales accounted for 51 percent of all home sales in the second quarter, virtually unchanged from last year.
Several other states had foreclosure sales that accounted for at least one third of all home sales in the first quarter: Michigan, Colorado, Florida, Illinois and Oregon.
Source: The Associated Press, Derek Kravitz, AP real estate writer. All rights reserved.
Wednesday, August 24, 2011
3 Myths to Social Networking
Many misconceptions exist about social networking and how to use it for business. Neal Rodriguez, an online marketing expert, recently wrote an article at Forbes.com that highlighted a few of the most common myths in a recent article:
Myth 1: Social media can replace your Web site. Web sites are still important and so is e-mail, Rodriguez says. According to Rodriguez, e-mail remains one of the most powerful ways to prospect for business. “Although you can capture e-mail addresses on social media networks, it is a lot easier to simply add a form at multiple locations on your Web site,” Rodriguez says.
Myth 2: You can’t measure your return in social media realms.
Rodriguez suggests tracking where your users are coming from on your social networks and identify the actions they're taking on your sites--such as whether they're viewing a slide show, reading an article, commenting to a post, and so on. You can also use such services as Google Analytics URL Builder to add a link you want to track (use the field labeled “Website URL”).
Myth 3: You need to be on every social network.
Instead of being on every single site, zoom in on a few main ones and focus your efforts on keeping those up-to-date, instead of fragmenting your time across several. Rodriguez suggests visiting search.twitter.com or Facebook and type targeted key words into the search fields that describe services or topics that relate to your business or niche. Study the Web pages that surface; Rodriguez suggests asking whether they represent your target community. If so, Rodriguez encourages to make interactions.
Read all top 10 myths about social media at Forbes.com.
Source: “10 Myths About Social Networking for Business,” Forbes.com (Aug. 10, 2011)
Myth 1: Social media can replace your Web site. Web sites are still important and so is e-mail, Rodriguez says. According to Rodriguez, e-mail remains one of the most powerful ways to prospect for business. “Although you can capture e-mail addresses on social media networks, it is a lot easier to simply add a form at multiple locations on your Web site,” Rodriguez says.
Myth 2: You can’t measure your return in social media realms.
Rodriguez suggests tracking where your users are coming from on your social networks and identify the actions they're taking on your sites--such as whether they're viewing a slide show, reading an article, commenting to a post, and so on. You can also use such services as Google Analytics URL Builder to add a link you want to track (use the field labeled “Website URL”).
Myth 3: You need to be on every social network.
Instead of being on every single site, zoom in on a few main ones and focus your efforts on keeping those up-to-date, instead of fragmenting your time across several. Rodriguez suggests visiting search.twitter.com or Facebook and type targeted key words into the search fields that describe services or topics that relate to your business or niche. Study the Web pages that surface; Rodriguez suggests asking whether they represent your target community. If so, Rodriguez encourages to make interactions.
Read all top 10 myths about social media at Forbes.com.
Source: “10 Myths About Social Networking for Business,” Forbes.com (Aug. 10, 2011)
Fannie Mae Revises Growth Estimate
Fannie Mae has revised its economic growth forecast to 1.4 percent this year, down from a July estimate of 2.4 percent, and to 2 percent for 2012, down from its prediction of 3.1 percent last month. The firm expects housing activity to weaken, except for the rental sector. The housing market and overall economy, it said, will be impacted by lower business and consumer confidence and a slowdown in hiring.
Source: "Fannie Mae Revises Growth Estimate," TwinCities.com (08/23/11)
Source: "Fannie Mae Revises Growth Estimate," TwinCities.com (08/23/11)
Fannie: Dark clouds loom but no recession
The economy was hit by a barrage of disappointing news during the last month, which led to a downgrade in the overall macro economic forecast released today by Fannie Mae’s Economics & Mortgage Market Analysis Group.
While the August 2011 Economic Outlook does not forecast a double dip recession, it finds that the chance of a double-dip recession is roughly equivalent to a coin toss. For all of 2011, economic growth is expected to downshift to 1.4 percent from 3.1 percent in 2010. Growth is expected to pick up in 2012, but only to about 2.0 percent, compared to the 3.1 percent projected in the July forecast.
“Key factors … have revealed that we have a bigger hole to dig out of, which explains the consumer angst over the lack of employment growth,” says Fannie Mae Chief Economist Doug Duncan. “Moreover, European financial market and fiscal policy turmoil, coupled with the U.S. debt ceiling debate, have hit on consumer confidence, which is at recessionary levels.”
Duncan says Americans are clearly worried about global, big-picture concerns.
“Housing has moved into second position behind general economic concerns among consumers, which is demonstrated in our National Housing Survey results,” Duncan says. “Our July data shows that 70 percent of Americans think the economy is on the wrong track, up from 60 percent a year ago. In turn, despite historically low interest rates, consumers are still saying they don’t see this as a good time to go out and borrow money to buy a house.”
Housing activity is expected to weaken along with the overall economy due to a renewed decline in business and consumer confidence, and a weaker jobs forecast.
One exception is the rental housing market. The rental vacancy rate (the share of rental housing that is vacant and for rent) plunged from 9.7 percent to 9.2 percent in the second quarter of 2011, and is now at its lowest rate in nine years. A lower rate of homeownership suggests that a rising share of households have gone from owning to renting.
Source: Florida Realtors®
While the August 2011 Economic Outlook does not forecast a double dip recession, it finds that the chance of a double-dip recession is roughly equivalent to a coin toss. For all of 2011, economic growth is expected to downshift to 1.4 percent from 3.1 percent in 2010. Growth is expected to pick up in 2012, but only to about 2.0 percent, compared to the 3.1 percent projected in the July forecast.
“Key factors … have revealed that we have a bigger hole to dig out of, which explains the consumer angst over the lack of employment growth,” says Fannie Mae Chief Economist Doug Duncan. “Moreover, European financial market and fiscal policy turmoil, coupled with the U.S. debt ceiling debate, have hit on consumer confidence, which is at recessionary levels.”
Duncan says Americans are clearly worried about global, big-picture concerns.
“Housing has moved into second position behind general economic concerns among consumers, which is demonstrated in our National Housing Survey results,” Duncan says. “Our July data shows that 70 percent of Americans think the economy is on the wrong track, up from 60 percent a year ago. In turn, despite historically low interest rates, consumers are still saying they don’t see this as a good time to go out and borrow money to buy a house.”
Housing activity is expected to weaken along with the overall economy due to a renewed decline in business and consumer confidence, and a weaker jobs forecast.
One exception is the rental housing market. The rental vacancy rate (the share of rental housing that is vacant and for rent) plunged from 9.7 percent to 9.2 percent in the second quarter of 2011, and is now at its lowest rate in nine years. A lower rate of homeownership suggests that a rising share of households have gone from owning to renting.
Source: Florida Realtors®
New-home sales fell 0.7% in July
The number of Americans who bought new homes fell for the fourth straight month in July, putting sales on track to finish this year as the worst on records dating back half a century.
Sales of new homes fell nearly 1 percent in July to a seasonally adjusted annual rate of 298,000, the Commerce Department said Tuesday. That’s less than half the 700,000 that economists say represent a healthy market.
Housing remains the weakest part of the economy. Last year was the worst for new-home sales on records dating back a half century.
While new homes represent less than one-fifth of the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs and $90,000 in taxes, according to the National Association of Home Builders.
But all sales remain weak. Sales of previously occupied homes fell in July for the third time in four months, and they are trailing last year’s 4.91 million sales, the fewest since 1997. In a healthy economy, people buy roughly 6 million existing homes annually.
High unemployment, larger required downpayments and tougher lending standards are preventing many people from buying homes.
Plunging stocks and a growing fear that the U.S. could tip back into another recession are also keeping people from entering the troubled housing market.
A report last week on sales of previously owned homes showed that more sales than usual fell apart at the last minute, a sign that many buyers may be nervous about the economy. At least 16 percent of deals were canceled ahead of closings last month – four times the rate in May.
Foreclosures and short sales are forcing down prices. A short sale is when a lender accepts less than what is owed on the mortgage.
Those homes are selling at an average discount of 20 percent, and they lower neighboring values. That’s made many re-sales a bargain compared with new homes, creating an average 30 percent disparity in prices.
Sales of new homes have fallen 18 percent in the two years since the Great Recession officially ended.
A telling sign of how bad things have gotten for the housing industry: Prices have dropped more since the recession started, on a percentage basis, than during the Great Depression of the 1930s.
And it took 19 years for prices to fully recover after the Depression.
Source: The Associated Press, Derek Kravitz, AP real estate writer.
Sales of new homes fell nearly 1 percent in July to a seasonally adjusted annual rate of 298,000, the Commerce Department said Tuesday. That’s less than half the 700,000 that economists say represent a healthy market.
Housing remains the weakest part of the economy. Last year was the worst for new-home sales on records dating back a half century.
While new homes represent less than one-fifth of the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs and $90,000 in taxes, according to the National Association of Home Builders.
But all sales remain weak. Sales of previously occupied homes fell in July for the third time in four months, and they are trailing last year’s 4.91 million sales, the fewest since 1997. In a healthy economy, people buy roughly 6 million existing homes annually.
High unemployment, larger required downpayments and tougher lending standards are preventing many people from buying homes.
Plunging stocks and a growing fear that the U.S. could tip back into another recession are also keeping people from entering the troubled housing market.
A report last week on sales of previously owned homes showed that more sales than usual fell apart at the last minute, a sign that many buyers may be nervous about the economy. At least 16 percent of deals were canceled ahead of closings last month – four times the rate in May.
Foreclosures and short sales are forcing down prices. A short sale is when a lender accepts less than what is owed on the mortgage.
Those homes are selling at an average discount of 20 percent, and they lower neighboring values. That’s made many re-sales a bargain compared with new homes, creating an average 30 percent disparity in prices.
Sales of new homes have fallen 18 percent in the two years since the Great Recession officially ended.
A telling sign of how bad things have gotten for the housing industry: Prices have dropped more since the recession started, on a percentage basis, than during the Great Depression of the 1930s.
And it took 19 years for prices to fully recover after the Depression.
Source: The Associated Press, Derek Kravitz, AP real estate writer.
Monday, August 22, 2011
Mortgage rates likely to hit 4%?
The 30-year fixed rate mortgage recently reached a new low of 4.15 percent and should continue to decline in the immediate future due to the weak job market, turbulent financial markets and a surplus inventory of foreclosures.
Housing Predictor analysts believe the 30-year loan will likely fall to 4 percent, which could boost home sales, especially among first-time buyers.
Marketing companies, banks, and mortgage lenders have been lowering rates to increase business and have seen an increase in refinancing.
Source: INFORMATION, INC.
Housing Predictor analysts believe the 30-year loan will likely fall to 4 percent, which could boost home sales, especially among first-time buyers.
Marketing companies, banks, and mortgage lenders have been lowering rates to increase business and have seen an increase in refinancing.
Source: INFORMATION, INC.
Fannie Mae fire sales dilute regional home values
Fannie Mae and Freddie Mac are selling hundreds – perhaps thousands – of foreclosed properties in metro Detroit for far less than they appear to be worth, a practice that leaders say is driving down local property values and weakening neighborhoods.
In some instances, homes listed by the government-financed mortgage giants are being snapped up by private investors, then re-sold within days or weeks for far more money.
Local officials blame the federal government – which took control of Fannie and Freddie in 2008 at a cost to taxpayers of at least $141 billion – for doing little to stop the fire sales.
“It’s an unconscionable practice,” said Oakland County, Mich., Treasurer Andy Meisner. “It’s fiscally irresponsible from their perspective because they’re getting pennies on the dollar, and it’s fiscally reckless from our perspective” because Fannie and Freddie “are almost single-handedly … killing our property values.”
Meg Burns, chief of policy at the Federal Housing Finance Agency, which regulates Fannie and Freddie, acknowledged the two companies are eager to sell foreclosed homes as quickly as possible. But she said the aim is to prevent vacant homes and neighborhood deterioration, not to destroy property values.
A Detroit Free Press investigation, including an analysis of more than 700 real estate transactions in the past year, finds that Fannie and Freddie are selling foreclosed homes, on average, for one-third less than the homes’ already-deflated market value in some areas, and at less than half of market value in other neighborhoods.
Critics say the low list prices are part of the companies’ rush to get foreclosed homes off their books while U.S. taxpayers are still covering the mortgage giants’ losses, three years after the federal government bailout.
In February and March, 34 Fannie and Freddie properties in Southfield, Mich., were sold by the mortgage giants for 55 percent of their market value, on average, property records show.
In Farmington, Mich., and Farmington Hills, Mich., 30 homes sold at 66 percent of their market value.
And 75 Fannie and Freddie homes in Warren, Mich., sold for an average of 45 percent of their market value.
The price tags on some home sales were equally jaw-dropping. Take these examples in Oakland County:
• A foreclosed Ferndale home with a market value of more than $70,000 was sold by Fannie for $11,100 in February.
• A Waterford home valued at $73,000 was sold by Fannie for $8,619 in January.
• Freddie sold a Milford Township home on 5 acres for $101,000 in 16 days. Its market value was nearly twice that: $194,300.
Oakland County Deputy Executive Bob Daddow called the sales a “travesty” that have helped home values fall by a third since 2007, costing local governments tax revenues.
“It crushes our budgets. … We’re completely revamping government as we once knew it,” Daddow said.
Critics say Fannie and Freddie can sell homes far below their value because, under the terms of the companies’ 2008 taxpayer bailout, taxpayers cover the cost of their losses.
Moreover, because the mortgage giants dominate the local market of distressed property sales, ordinary homeowners and other sellers of foreclosed homes are forced to compete with their prices, further driving down property values and local tax revenues.
The situation is particularly acute in the region’s poorest cities. In Detroit, 49 Fannie properties sold this summer at 22 percent of market value, on average.
And across Wayne County, Fannie Mae properties went at fire-sale prices, records show:
• $2,500 for an Ecorse home that is valued at $60,000
• $45,000 for a Livonia home valued at nearly $100,000
• $11,000 for a home in Westland valued at $56,400.
Wayne County Executive Robert Ficano said the U.S. Treasury Department, which is bailing out Fannie and Freddie, should investigate the sales and “hold people accountable for things that just don’t make common sense.”
Similar complaints echoed from Macomb County, Mich.
“It’s fundamentally clear to me that the federal government is … dumping them on the market,” Warren Mayor Jim Fouts said of the home sales and the blight that follows. “It’s creating some unacceptable problems for cities like Warren,” which is located in Macomb County.
Across Macomb County, Fannie Mae appears to be selling on the cheap: $29,000 for a Fannie property in Harrison Township valued at $152,240; $18,000 for a Fannie property in Eastpointe valued at $64,120.
Burns, the official at the Federal Housing Finance Agency, disputes that the mortgage giants are dumping homes, arguing they are merely trying to stabilize neighborhoods by keeping homes from sitting empty.
“Our overarching concern is vacant properties sitting on the market for too long.”
An FHFA spokeswoman, Corinne Russell, added that Fannie and Freddie have procedures to ensure that sales of foreclosed homes are “sound and that every effort is made to preserve the assets, helping to protect the community from destabilization and decline.”
Fannie Mae spokesman Andrew Wilson said the company typically bases its listing price on an appraisal and the recommendation of a broker.
“Once a value has been established … our marketing efforts are primarily focused on finding buyers for our properties at a price that promotes neighborhood stabilization,” he said. “Our No. 1 goal is to sell to owner-occupants who will move into the neighborhood and help to stabilize the community.”
Wilson declined to answer other questions about Fannie’s practices or address the metro Detroit home sale data compiled by the Detroit Free Press.
Freddie spokesman Brad German said he rejected “assertions that we’re selling at uncompetitive prices.”
Nationally, during the first quarter of 2011, German said Freddie Mac properties sold at 92 percent of market value, as determined by market sales.
“We stand by our pricing and marketing strategy, which is helping us minimize losses while being good stewards of taxpayer resources and supporting the housing market,” German said.
German also took issue with the Free Press analysis, arguing that the assessed value of a home doesn’t always capture factors that can lower the price the home is eventually sold for, such as the current condition of the property and the market.
But Dearborn, Mich., appraiser Jumana Judeh said assessed value – used in part to figure property taxes – remains “an excellent reflection of the market.”
Wayne State University law professor John Mogk, an expert in real estate and urban development, also called assessed values a valid benchmark and “a reasonable standard to use.”
In Michigan, the assessed value is supposed to be half the market value of a home. Independence Township, Mich., appraiser Louise Braun used twice a home’s assessed value as her benchmark to compare Fannie and Freddie sales of foreclosed homes against the sale of other single-family homes in several Oakland County communities.
• In June, for example, Fannie and Freddie foreclosures sold at 67 percent of the market value in Berkley, on average. Non-foreclosed homes in Berkley sold at 96 percent of market value, on average.
• Fannie and Freddie homes in Orion Township and Lake Orion sold, on average, for 70 percent of their value. Non-foreclosures sold at 114 percent of market value.
• And in Independence Township and Clarkston, the Fannie and Freddie homes sold, on average, for 76 percent of market value, compared with the non-foreclosures that sold for 108 percent of market value, on average.
Georgia Institute of Technology accounting professor Charles Mulford, who studies how companies report their finances, said Fannie and Freddie feel no compulsion to maximize profits now that they are controlled – and subsidized – by the government. The companies, he said, are more interested in getting troubled mortgages, including foreclosed homes, “off the books so they can start anew, making new loans, loans that are more profitable.”
Dwayne McLachlan, president of the Michigan Assessors Association and the Pittsfield Township assessor, said the impact of depressed home sales on communities can be devastating.
“All it takes is one low sale in a neighborhood to corrupt that market for that (subdivision) or site condo complex,” said Braun, the Independence Township appraiser.
Time and again, area property records show, investors are snapping up low-ball listings by Fannie and Freddie and turning a quick and sizable profit, an indication that the mortgage giants are listing the homes for far too little, real estate experts said.
Ted Phillips, executive director of the United Community Housing Coalition, a Detroit advocacy group for low-income housing, said he has seen Fannie Mae refuse to allow homeowners to stay in a home for less than what they owe on a mortgage – only to sell the property to an investor for far less than what the struggling homeowner had offered to pay.
“Then you’ve got another slum rental property in the community. If they’re using tax dollars, why aren’t they using tax dollars efficiently?” he said.
“Even the worst slum landlord understands that basic concept. Why wouldn’t you take the $10,000 from the homeowner? But they will take $2,000 or $3,000 from an investor?”
Freddie Mac sold a Warren property on March 15 for $31,000. The home resold 10 days later for $45,500. The city says no building permits were pulled, indicating that it was unlikely the buyer made any big improvements before reselling the home at a 47 percent profit.
Fannie Mae sold an Auburn Hills, Mich., home in June 2010 for $45,000. It was resold for $129,900 in January. No permits were pulled on that home, either.
That home was among 38 Fannie and Freddie properties that were resold, or “flipped,” in Oakland County during the first four months of 2011. The homes fetched, on average, twice what Fannie and Freddie received for the homes.
While resales by investors may help stabilize housing prices, critics say the U.S. taxpayers who bailed out Fannie and Freddie are the ones being shortchanged when these homes are listed for less than what they might fetch.
“It’s another indicator the selling price is not representative of the market,” said Philip Mastin, director of assessments and equalization for Wayne County, who said Fannie and Freddie homes are being resold at nearly double the original price in his county.
Listings of Fannie and Freddie homes show that the mortgage giants were prepared to sell some houses for less than what comparable properties in the same neighborhood fetched, records show.
For example, Fannie listed a four-bedroom home in Troy, Mich., at $141,000 in March, even though four similar or smaller homes nearby sold for roughly $160,000. The Fannie home was on the market for three days before it had a buyer for $170,000 – nearly $30,000 above its list price.
Freddie Mac was willing to take $153,900 for a property in South Lyon, Mich., last spring, even though there was a nearly identically sized home in that subdivision listed at the same time for $193,000 and a smaller house for $164,900. Freddie got $155,000 for its property; the other sellers got $179,000 and $165,500.
German, the Freddie spokesman, said the mortgage giant’s properties sell in an average of 110 days nationally. But in metro Detroit, Freddie’s own numbers show that its properties are selling far more quickly – in roughly 50 days. Property experts say that indicates the homes are listed too low.
Of the 72 homes that Freddie contracted for sale in Oakland County in April, 58 were on the market for less than a month before buyers signed contracts, according to data compiled by Braun.
One of the Freddie foreclosures, in Springfield Township, Mich., was offered in the Multiple Listing Service at 9:19 a.m. on April 11 for $38,900 – even though its market value was $123,000. Within 24 hours, someone had a contract to buy it for $42,500.
Judeh, the Dearborn appraiser, said homes typically need three to six months of marketing. “And if you don’t market them properly, it becomes dumping, not selling, and there’s a huge difference,” Judeh said.
Through May, home prices in metro Detroit have fallen 38 percent since 2000, according to the S&P/Case-Shiller home price index. As Fannie and Freddie contribute to the downward spiral in property values, tax revenues fall, too.
In Eastpointe, property values have dropped 54 percent since 2008, and Linda Weishaupt, assessor and deputy city clerk, blames foreclosures for much of that decline.
Since 2009, property values have dropped 21 percent in Rochester Hills, Mich., and the city expects another 10 percent reduction over the next two years, said Keith Sawdon, city finance director.
Erik Ambrozaitis, a Rochester Hills Realtor and mayoral candidate, said the decline in revenues is “the crisis. The roads in front of my house are starting to crumble. As a Realtor, I’m deeply concerned. As a homeowner, I’m really concerned. As a former council member, it is a disaster.”
Mastin, the Wayne County official, said even if home prices recover, communities won’t recoup lost revenues quickly.
“We will never be able to recover what’s been lost,” Mastin said. “What’s been taken away has been taken away.”
Source: Detroit Free Press. Distributed by McClatchy-Tribune Information Services.
In some instances, homes listed by the government-financed mortgage giants are being snapped up by private investors, then re-sold within days or weeks for far more money.
Local officials blame the federal government – which took control of Fannie and Freddie in 2008 at a cost to taxpayers of at least $141 billion – for doing little to stop the fire sales.
“It’s an unconscionable practice,” said Oakland County, Mich., Treasurer Andy Meisner. “It’s fiscally irresponsible from their perspective because they’re getting pennies on the dollar, and it’s fiscally reckless from our perspective” because Fannie and Freddie “are almost single-handedly … killing our property values.”
Meg Burns, chief of policy at the Federal Housing Finance Agency, which regulates Fannie and Freddie, acknowledged the two companies are eager to sell foreclosed homes as quickly as possible. But she said the aim is to prevent vacant homes and neighborhood deterioration, not to destroy property values.
A Detroit Free Press investigation, including an analysis of more than 700 real estate transactions in the past year, finds that Fannie and Freddie are selling foreclosed homes, on average, for one-third less than the homes’ already-deflated market value in some areas, and at less than half of market value in other neighborhoods.
Critics say the low list prices are part of the companies’ rush to get foreclosed homes off their books while U.S. taxpayers are still covering the mortgage giants’ losses, three years after the federal government bailout.
In February and March, 34 Fannie and Freddie properties in Southfield, Mich., were sold by the mortgage giants for 55 percent of their market value, on average, property records show.
In Farmington, Mich., and Farmington Hills, Mich., 30 homes sold at 66 percent of their market value.
And 75 Fannie and Freddie homes in Warren, Mich., sold for an average of 45 percent of their market value.
The price tags on some home sales were equally jaw-dropping. Take these examples in Oakland County:
• A foreclosed Ferndale home with a market value of more than $70,000 was sold by Fannie for $11,100 in February.
• A Waterford home valued at $73,000 was sold by Fannie for $8,619 in January.
• Freddie sold a Milford Township home on 5 acres for $101,000 in 16 days. Its market value was nearly twice that: $194,300.
Oakland County Deputy Executive Bob Daddow called the sales a “travesty” that have helped home values fall by a third since 2007, costing local governments tax revenues.
“It crushes our budgets. … We’re completely revamping government as we once knew it,” Daddow said.
Critics say Fannie and Freddie can sell homes far below their value because, under the terms of the companies’ 2008 taxpayer bailout, taxpayers cover the cost of their losses.
Moreover, because the mortgage giants dominate the local market of distressed property sales, ordinary homeowners and other sellers of foreclosed homes are forced to compete with their prices, further driving down property values and local tax revenues.
The situation is particularly acute in the region’s poorest cities. In Detroit, 49 Fannie properties sold this summer at 22 percent of market value, on average.
And across Wayne County, Fannie Mae properties went at fire-sale prices, records show:
• $2,500 for an Ecorse home that is valued at $60,000
• $45,000 for a Livonia home valued at nearly $100,000
• $11,000 for a home in Westland valued at $56,400.
Wayne County Executive Robert Ficano said the U.S. Treasury Department, which is bailing out Fannie and Freddie, should investigate the sales and “hold people accountable for things that just don’t make common sense.”
Similar complaints echoed from Macomb County, Mich.
“It’s fundamentally clear to me that the federal government is … dumping them on the market,” Warren Mayor Jim Fouts said of the home sales and the blight that follows. “It’s creating some unacceptable problems for cities like Warren,” which is located in Macomb County.
Across Macomb County, Fannie Mae appears to be selling on the cheap: $29,000 for a Fannie property in Harrison Township valued at $152,240; $18,000 for a Fannie property in Eastpointe valued at $64,120.
Burns, the official at the Federal Housing Finance Agency, disputes that the mortgage giants are dumping homes, arguing they are merely trying to stabilize neighborhoods by keeping homes from sitting empty.
“Our overarching concern is vacant properties sitting on the market for too long.”
An FHFA spokeswoman, Corinne Russell, added that Fannie and Freddie have procedures to ensure that sales of foreclosed homes are “sound and that every effort is made to preserve the assets, helping to protect the community from destabilization and decline.”
Fannie Mae spokesman Andrew Wilson said the company typically bases its listing price on an appraisal and the recommendation of a broker.
“Once a value has been established … our marketing efforts are primarily focused on finding buyers for our properties at a price that promotes neighborhood stabilization,” he said. “Our No. 1 goal is to sell to owner-occupants who will move into the neighborhood and help to stabilize the community.”
Wilson declined to answer other questions about Fannie’s practices or address the metro Detroit home sale data compiled by the Detroit Free Press.
Freddie spokesman Brad German said he rejected “assertions that we’re selling at uncompetitive prices.”
Nationally, during the first quarter of 2011, German said Freddie Mac properties sold at 92 percent of market value, as determined by market sales.
“We stand by our pricing and marketing strategy, which is helping us minimize losses while being good stewards of taxpayer resources and supporting the housing market,” German said.
German also took issue with the Free Press analysis, arguing that the assessed value of a home doesn’t always capture factors that can lower the price the home is eventually sold for, such as the current condition of the property and the market.
But Dearborn, Mich., appraiser Jumana Judeh said assessed value – used in part to figure property taxes – remains “an excellent reflection of the market.”
Wayne State University law professor John Mogk, an expert in real estate and urban development, also called assessed values a valid benchmark and “a reasonable standard to use.”
In Michigan, the assessed value is supposed to be half the market value of a home. Independence Township, Mich., appraiser Louise Braun used twice a home’s assessed value as her benchmark to compare Fannie and Freddie sales of foreclosed homes against the sale of other single-family homes in several Oakland County communities.
• In June, for example, Fannie and Freddie foreclosures sold at 67 percent of the market value in Berkley, on average. Non-foreclosed homes in Berkley sold at 96 percent of market value, on average.
• Fannie and Freddie homes in Orion Township and Lake Orion sold, on average, for 70 percent of their value. Non-foreclosures sold at 114 percent of market value.
• And in Independence Township and Clarkston, the Fannie and Freddie homes sold, on average, for 76 percent of market value, compared with the non-foreclosures that sold for 108 percent of market value, on average.
Georgia Institute of Technology accounting professor Charles Mulford, who studies how companies report their finances, said Fannie and Freddie feel no compulsion to maximize profits now that they are controlled – and subsidized – by the government. The companies, he said, are more interested in getting troubled mortgages, including foreclosed homes, “off the books so they can start anew, making new loans, loans that are more profitable.”
Dwayne McLachlan, president of the Michigan Assessors Association and the Pittsfield Township assessor, said the impact of depressed home sales on communities can be devastating.
“All it takes is one low sale in a neighborhood to corrupt that market for that (subdivision) or site condo complex,” said Braun, the Independence Township appraiser.
Time and again, area property records show, investors are snapping up low-ball listings by Fannie and Freddie and turning a quick and sizable profit, an indication that the mortgage giants are listing the homes for far too little, real estate experts said.
Ted Phillips, executive director of the United Community Housing Coalition, a Detroit advocacy group for low-income housing, said he has seen Fannie Mae refuse to allow homeowners to stay in a home for less than what they owe on a mortgage – only to sell the property to an investor for far less than what the struggling homeowner had offered to pay.
“Then you’ve got another slum rental property in the community. If they’re using tax dollars, why aren’t they using tax dollars efficiently?” he said.
“Even the worst slum landlord understands that basic concept. Why wouldn’t you take the $10,000 from the homeowner? But they will take $2,000 or $3,000 from an investor?”
Freddie Mac sold a Warren property on March 15 for $31,000. The home resold 10 days later for $45,500. The city says no building permits were pulled, indicating that it was unlikely the buyer made any big improvements before reselling the home at a 47 percent profit.
Fannie Mae sold an Auburn Hills, Mich., home in June 2010 for $45,000. It was resold for $129,900 in January. No permits were pulled on that home, either.
That home was among 38 Fannie and Freddie properties that were resold, or “flipped,” in Oakland County during the first four months of 2011. The homes fetched, on average, twice what Fannie and Freddie received for the homes.
While resales by investors may help stabilize housing prices, critics say the U.S. taxpayers who bailed out Fannie and Freddie are the ones being shortchanged when these homes are listed for less than what they might fetch.
“It’s another indicator the selling price is not representative of the market,” said Philip Mastin, director of assessments and equalization for Wayne County, who said Fannie and Freddie homes are being resold at nearly double the original price in his county.
Listings of Fannie and Freddie homes show that the mortgage giants were prepared to sell some houses for less than what comparable properties in the same neighborhood fetched, records show.
For example, Fannie listed a four-bedroom home in Troy, Mich., at $141,000 in March, even though four similar or smaller homes nearby sold for roughly $160,000. The Fannie home was on the market for three days before it had a buyer for $170,000 – nearly $30,000 above its list price.
Freddie Mac was willing to take $153,900 for a property in South Lyon, Mich., last spring, even though there was a nearly identically sized home in that subdivision listed at the same time for $193,000 and a smaller house for $164,900. Freddie got $155,000 for its property; the other sellers got $179,000 and $165,500.
German, the Freddie spokesman, said the mortgage giant’s properties sell in an average of 110 days nationally. But in metro Detroit, Freddie’s own numbers show that its properties are selling far more quickly – in roughly 50 days. Property experts say that indicates the homes are listed too low.
Of the 72 homes that Freddie contracted for sale in Oakland County in April, 58 were on the market for less than a month before buyers signed contracts, according to data compiled by Braun.
One of the Freddie foreclosures, in Springfield Township, Mich., was offered in the Multiple Listing Service at 9:19 a.m. on April 11 for $38,900 – even though its market value was $123,000. Within 24 hours, someone had a contract to buy it for $42,500.
Judeh, the Dearborn appraiser, said homes typically need three to six months of marketing. “And if you don’t market them properly, it becomes dumping, not selling, and there’s a huge difference,” Judeh said.
Through May, home prices in metro Detroit have fallen 38 percent since 2000, according to the S&P/Case-Shiller home price index. As Fannie and Freddie contribute to the downward spiral in property values, tax revenues fall, too.
In Eastpointe, property values have dropped 54 percent since 2008, and Linda Weishaupt, assessor and deputy city clerk, blames foreclosures for much of that decline.
Since 2009, property values have dropped 21 percent in Rochester Hills, Mich., and the city expects another 10 percent reduction over the next two years, said Keith Sawdon, city finance director.
Erik Ambrozaitis, a Rochester Hills Realtor and mayoral candidate, said the decline in revenues is “the crisis. The roads in front of my house are starting to crumble. As a Realtor, I’m deeply concerned. As a homeowner, I’m really concerned. As a former council member, it is a disaster.”
Mastin, the Wayne County official, said even if home prices recover, communities won’t recoup lost revenues quickly.
“We will never be able to recover what’s been lost,” Mastin said. “What’s been taken away has been taken away.”
Source: Detroit Free Press. Distributed by McClatchy-Tribune Information Services.
Citizens policy pushes some homeowners to add new roofs
Homeowners across Florida who are up for an insurance policy renewal with the state’s insurer of last resort are receiving letters about their roofs.
Anyone with a home 25 years old or older must get an inspection and prove to Citizens Property Insurance Corp. that their roof is expected to last at least three more years.
Robert Brown says he thought he had a few more years to save money to put new roofs on his rental homes. But Citizens told him the roofs must be replaced now, or it won’t renew his policies.
“They’re forcing people to put on a new roof, even if you have a few years of life left on the roof,” Brown said. “This could force a lot of people into foreclosure, if they can’t afford the roof and then lose their insurance.”
Replacing a roof on a typical home can cost thousands of dollars.
The relatively new requirement for the roof inspection comes on the heels of another controversial Citizens policy. The company recently said it’s raising its rates for sinkhole coverage by 400 to 2,000 percent in some Bay area locations.
When it comes to the roof policy, some customers can’t afford a new roof now and say they’re letting their insurance lapse, local insurance agents said.
“This couldn’t come at a worse time,” said Laura Hart, of Florian Insurance Inc. in Hudson. “This is the worst economy most of these people have seen in their lives.”
Hart said some customers are angry that their insurance company is taking away their chance to save longer for a new roof.
If an inspector says the roof is damaged, has visible signs of leaking, or if the inspector thinks the roof might not last three years, Citizens wants it repaired or replaced.
Christine Ashburn, spokeswoman for Citizens, said the company wants to make sure it’s not covering homes that are vulnerable to hurricanes because of a weak roof.
Ashburn said the three-year lifespan rule is reasonable, and too many homeowners wait too long to replace their roofs.
“Insurance is not a maintenance program, and it’s important for Citizens to make sure we’re not covering homes with roofs in disrepair,” Ashburn said. “If we have a deficit after a hurricane, everyone in Florida could be assessed to make up for it.”
Ashburn said the company instituted the new roof requirements for some policyholders a year ago, but more homeowners are learning about now, as their policies come up for renewal.
“Tampa may have clusters of older homes, and that may be why more homeowners are complaining about the roof policy now,” Ashburn said.
Citizens is Florida’s insurer of last resort, meaning many of its policyholders couldn’t get coverage through private insurers. So customers can’t shop around.
Kirsten Tams-Schleitwiler, of AAA Insurance Agency, in Sun City Center, said she has also had customers say they’ll just go without insurance.
That’s dangerous for anyone, she said, and not really an option for those with a mortgage. Without insurance, a bank will assign insurance to the property, which is typically triple the cost of a regular policy, she said.
Nathan Dutcher, of Point Residential in Tampa, inspects roofs and said his business is up, mostly because of worried Citizens customers. Most shingle roofs are advertised to last 25 years, but few do, he said, because of the Florida heat.
“Homeowners are frustrated,” Dutcher said. “People don’t have too much money for that now, they don’t really think about, “Hey, I’m going to need a new roof this year or next year.’“
Some homeowners, though, know they’ll need a new roof soon but aren’t ready to replace it yet.
That’s what happened to Ted Williams in Tampa. He planned to buy a new roof next spring, after he received his tax return.
“My wife got a letter that explained that in order to renew our insurance, the roof had to be replaced,” Williams said. “With citizens being the lone insurance choice, it’s not fair, but what can I say?”
Williams said his roof was about three years old when he moved in 14 years ago. He knew the roof wasn’t in good shape but was still surprised he couldn’t wait until spring to replace it.
The roof cost him $6,000.
“We have four kids and are trying to buy school clothes and things,” Williams said. “But you can’t go without insurance on your home, not when a hurricane could come.”
Source: Tampa Tribune, Fla., Shannon Behnken. Distributed by McClatchy-Tribune Information Services.
Anyone with a home 25 years old or older must get an inspection and prove to Citizens Property Insurance Corp. that their roof is expected to last at least three more years.
Robert Brown says he thought he had a few more years to save money to put new roofs on his rental homes. But Citizens told him the roofs must be replaced now, or it won’t renew his policies.
“They’re forcing people to put on a new roof, even if you have a few years of life left on the roof,” Brown said. “This could force a lot of people into foreclosure, if they can’t afford the roof and then lose their insurance.”
Replacing a roof on a typical home can cost thousands of dollars.
The relatively new requirement for the roof inspection comes on the heels of another controversial Citizens policy. The company recently said it’s raising its rates for sinkhole coverage by 400 to 2,000 percent in some Bay area locations.
When it comes to the roof policy, some customers can’t afford a new roof now and say they’re letting their insurance lapse, local insurance agents said.
“This couldn’t come at a worse time,” said Laura Hart, of Florian Insurance Inc. in Hudson. “This is the worst economy most of these people have seen in their lives.”
Hart said some customers are angry that their insurance company is taking away their chance to save longer for a new roof.
If an inspector says the roof is damaged, has visible signs of leaking, or if the inspector thinks the roof might not last three years, Citizens wants it repaired or replaced.
Christine Ashburn, spokeswoman for Citizens, said the company wants to make sure it’s not covering homes that are vulnerable to hurricanes because of a weak roof.
Ashburn said the three-year lifespan rule is reasonable, and too many homeowners wait too long to replace their roofs.
“Insurance is not a maintenance program, and it’s important for Citizens to make sure we’re not covering homes with roofs in disrepair,” Ashburn said. “If we have a deficit after a hurricane, everyone in Florida could be assessed to make up for it.”
Ashburn said the company instituted the new roof requirements for some policyholders a year ago, but more homeowners are learning about now, as their policies come up for renewal.
“Tampa may have clusters of older homes, and that may be why more homeowners are complaining about the roof policy now,” Ashburn said.
Citizens is Florida’s insurer of last resort, meaning many of its policyholders couldn’t get coverage through private insurers. So customers can’t shop around.
Kirsten Tams-Schleitwiler, of AAA Insurance Agency, in Sun City Center, said she has also had customers say they’ll just go without insurance.
That’s dangerous for anyone, she said, and not really an option for those with a mortgage. Without insurance, a bank will assign insurance to the property, which is typically triple the cost of a regular policy, she said.
Nathan Dutcher, of Point Residential in Tampa, inspects roofs and said his business is up, mostly because of worried Citizens customers. Most shingle roofs are advertised to last 25 years, but few do, he said, because of the Florida heat.
“Homeowners are frustrated,” Dutcher said. “People don’t have too much money for that now, they don’t really think about, “Hey, I’m going to need a new roof this year or next year.’“
Some homeowners, though, know they’ll need a new roof soon but aren’t ready to replace it yet.
That’s what happened to Ted Williams in Tampa. He planned to buy a new roof next spring, after he received his tax return.
“My wife got a letter that explained that in order to renew our insurance, the roof had to be replaced,” Williams said. “With citizens being the lone insurance choice, it’s not fair, but what can I say?”
Williams said his roof was about three years old when he moved in 14 years ago. He knew the roof wasn’t in good shape but was still surprised he couldn’t wait until spring to replace it.
The roof cost him $6,000.
“We have four kids and are trying to buy school clothes and things,” Williams said. “But you can’t go without insurance on your home, not when a hurricane could come.”
Source: Tampa Tribune, Fla., Shannon Behnken. Distributed by McClatchy-Tribune Information Services.
Friday, August 19, 2011
5 iPhone Apps to Help Manage Documents
Inman News recently featured from TopAppCharts.com the top iPhone apps for managing documents, which can help you better access, edit, and share documents while on-the-go. Here are five iPhone apps that topped the list:
1. Scanner Pro: Scan multipage documents; upload to Dropbox and Evernote. ($6.99)
2. Documents to Go Premium-Office Suite: Edit, create and view Word, Excel and PowerPoint files as well as view PDFs, iWork, and other files. ($16.99)
3. Documents Free (Mobile Office Suite): Edit and manage spreadsheet and text files, online and offline; use it to open files on your PC or Mac. (Free)
4. TurboScan: Scan multipage documents, receipts, business cards, etc. and convert them into PDFs. ($1.99)
5. FileApp: File manager and reader; copy files on your device to look at them while on-the-go. (Free)
Read all 10 of the most popular iPhone apps for managing documents at Inman News.
Source: “Top 10 iPhone Apps to Manage Documents,” Inman News (Aug. 18, 2011)
1. Scanner Pro: Scan multipage documents; upload to Dropbox and Evernote. ($6.99)
2. Documents to Go Premium-Office Suite: Edit, create and view Word, Excel and PowerPoint files as well as view PDFs, iWork, and other files. ($16.99)
3. Documents Free (Mobile Office Suite): Edit and manage spreadsheet and text files, online and offline; use it to open files on your PC or Mac. (Free)
4. TurboScan: Scan multipage documents, receipts, business cards, etc. and convert them into PDFs. ($1.99)
5. FileApp: File manager and reader; copy files on your device to look at them while on-the-go. (Free)
Read all 10 of the most popular iPhone apps for managing documents at Inman News.
Source: “Top 10 iPhone Apps to Manage Documents,” Inman News (Aug. 18, 2011)
Housing Affordability at Highest in 20 Years
Housing affordability continued to be near record highs in the second quarter, hovering near its highest level in the 20-plus years it has been recorded, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index.
About 72 percent of all new and existing-homes sold in the second quarter of the year were affordable to families earning the national median income of $64,200, according to the index. The record high remains 74.6 percent, which was reached last quarter.
"At a time when home ownership is within reach of more households than it has been for more than two decades and interest rates are at historically low levels, the sluggish economy and the extremely tight credit conditions confronting home buyers and builders remain significant obstacles to many potential home sales," says Bob Nielsen, chairman of the National Association of Home Builders. "That said, however, some housing markets across the country have stabilized and are beginning to show signs of a budding recovery."
Most Affordable Housing Markets
According to the index, Youngstown-Warren-Boardman, Ohio-Pa., was the most affordable major housing market during the second quarter with 93.7 percent of all homes sold found to be affordable to households earning the area's median family income of $54,900. Other cities ranking near the top for affordability is: Syracuse, N.Y.; Indianapolis-Carmel, Ind.; Dayton, Ohio; and Lakeland-Winter Haven, Fla.
Least Affordable Markets
The index found the least affordable market in the country--for the 13th consecutive quarter--is New York-White Plains-Wayne, N.Y.-N.J., in which 25.2 percent of all homes sold during the quarter were affordable to those earning the area's median income of $67,400. The other least affordable major metro areas includes San Francisco-San Mateo-Redwood City, Calif.; Santa Ana-Anaheim-Irvine, Calif.; Los Angeles-Long Beach-Glendale, Calif.; and Honolulu.
By REALTOR® Magazine Daily News
About 72 percent of all new and existing-homes sold in the second quarter of the year were affordable to families earning the national median income of $64,200, according to the index. The record high remains 74.6 percent, which was reached last quarter.
"At a time when home ownership is within reach of more households than it has been for more than two decades and interest rates are at historically low levels, the sluggish economy and the extremely tight credit conditions confronting home buyers and builders remain significant obstacles to many potential home sales," says Bob Nielsen, chairman of the National Association of Home Builders. "That said, however, some housing markets across the country have stabilized and are beginning to show signs of a budding recovery."
Most Affordable Housing Markets
According to the index, Youngstown-Warren-Boardman, Ohio-Pa., was the most affordable major housing market during the second quarter with 93.7 percent of all homes sold found to be affordable to households earning the area's median family income of $54,900. Other cities ranking near the top for affordability is: Syracuse, N.Y.; Indianapolis-Carmel, Ind.; Dayton, Ohio; and Lakeland-Winter Haven, Fla.
Least Affordable Markets
The index found the least affordable market in the country--for the 13th consecutive quarter--is New York-White Plains-Wayne, N.Y.-N.J., in which 25.2 percent of all homes sold during the quarter were affordable to those earning the area's median income of $67,400. The other least affordable major metro areas includes San Francisco-San Mateo-Redwood City, Calif.; Santa Ana-Anaheim-Irvine, Calif.; Los Angeles-Long Beach-Glendale, Calif.; and Honolulu.
By REALTOR® Magazine Daily News
Less than 1 in 5 homes have flood insurance
Less than a fifth of U.S. homeowners have a flood insurance policy that protects their property and personal belongings, even though more than four out of every five natural disasters nationwide involve flooding, according to the Insurance Information Institute (I.I.I.).
Coverage for flood damage resulting from surface water, including storm surge caused by hurricanes, is excluded under standard homeowners and renters insurance policies. Flood coverage is available from the National Flood Insurance Program (NFIP) and from a few private insurance companies.
During the first six months of 2011, the federal government declared 28 major flood disasters. This put the U.S. well ahead of the pace set in 2010 when 50 federally declared major flood disasters occurred during the entire year.
“People tend to underestimate the risk of flooding,” says Jeanne M. Salvatore, senior vice president and consumer spokesperson for the I.I.I. “But, in fact, 90 percent of all natural disasters in this country involve flooding. It is important to note that there is a 30-day waiting period for flood insurance to go into effect, so don’t delay purchasing this important financial protection.”
The percentage of homeowners with flood insurance was highest in the South, at 19 percent. Thirteen percent of Midwestern homeowners had a flood insurance policy in 2011, along with 12 percent of homeowners in the West and 5 percent in the Northeast.
Consumers can find out their risk of flood and the cost of a policy by going to the NFIP’s website: FloodSmart.gov.
NFIP provides coverage for up to $250,000 for the structure of a home and $100,000 for personal possessions. It provides replacement cost coverage for the structure of a home but only actual cash value coverage for possessions. Replacement cost coverage pays to rebuild a home as it was before the damage. Actual cash value is replacement cost coverage minus depreciation. Flood insurance is also readily available for renters.
There is a 30-day waiting period after applying for flood coverage and paying the premium before the policy goes into effect. The only exceptions are:
• If a homeowner purchases flood insurance in connection with making, increasing, extending or renewing a loan.
• If a lender determines that a loan on a property that does not have flood insurance should be protected by flood insurance, there is no waiting period as long as the premium is presented at the completion of a loan application.
• There is a one-day waiting period if a homeowner purchases flood insurance during the 13-month waiting period following the effective date of a revised community flood map issued by FEMA, the agency with oversight over NFIP.
“Flood insurance is also easy to buy. It can be purchased from the same agent or company representative who sold you your home or renters insurance policy,” said Salvatore. “So to file a flood insurance claim, you can simply get in touch with your insurance company.”
Source: Florida Realtors®
Coverage for flood damage resulting from surface water, including storm surge caused by hurricanes, is excluded under standard homeowners and renters insurance policies. Flood coverage is available from the National Flood Insurance Program (NFIP) and from a few private insurance companies.
During the first six months of 2011, the federal government declared 28 major flood disasters. This put the U.S. well ahead of the pace set in 2010 when 50 federally declared major flood disasters occurred during the entire year.
“People tend to underestimate the risk of flooding,” says Jeanne M. Salvatore, senior vice president and consumer spokesperson for the I.I.I. “But, in fact, 90 percent of all natural disasters in this country involve flooding. It is important to note that there is a 30-day waiting period for flood insurance to go into effect, so don’t delay purchasing this important financial protection.”
The percentage of homeowners with flood insurance was highest in the South, at 19 percent. Thirteen percent of Midwestern homeowners had a flood insurance policy in 2011, along with 12 percent of homeowners in the West and 5 percent in the Northeast.
Consumers can find out their risk of flood and the cost of a policy by going to the NFIP’s website: FloodSmart.gov.
NFIP provides coverage for up to $250,000 for the structure of a home and $100,000 for personal possessions. It provides replacement cost coverage for the structure of a home but only actual cash value coverage for possessions. Replacement cost coverage pays to rebuild a home as it was before the damage. Actual cash value is replacement cost coverage minus depreciation. Flood insurance is also readily available for renters.
There is a 30-day waiting period after applying for flood coverage and paying the premium before the policy goes into effect. The only exceptions are:
• If a homeowner purchases flood insurance in connection with making, increasing, extending or renewing a loan.
• If a lender determines that a loan on a property that does not have flood insurance should be protected by flood insurance, there is no waiting period as long as the premium is presented at the completion of a loan application.
• There is a one-day waiting period if a homeowner purchases flood insurance during the 13-month waiting period following the effective date of a revised community flood map issued by FEMA, the agency with oversight over NFIP.
“Flood insurance is also easy to buy. It can be purchased from the same agent or company representative who sold you your home or renters insurance policy,” said Salvatore. “So to file a flood insurance claim, you can simply get in touch with your insurance company.”
Source: Florida Realtors®
Rate on 30-year mortgage falls to lowest on record
The average rate on a 30-year fixed mortgage has fallen to its lowest level on records dating to 1971.
The rate on the most popular mortgage dipped to 4.15 percent from 4.32 percent a week ago, Freddie Mac said Thursday. Its previous low of 4.17 percent was reached in November.
The last time long-term rates were lower was in the 1950s, when 30-year loans weren’t widely available. Most long-term home loans lasted 20 or 25 years.
Few expect record-low rates to energize the depressed home market. Over the past year, the average rate on the 30-year fixed mortgage has been below 5 percent for all but two weeks. Yet prices and sales remain unhealthy and are holding back the overall economy.
Five years ago, the average 30-year fixed rate was near 6.5 percent. In 2000, it exceeded 8 percent.
Most homeowners are paying rates more than a full percentage point higher than the current average. The average rate on all outstanding mortgages is 5.3 percent, Freddie Mac said, citing data from the Bureau of Economic Analysis.
After previous recessions, housing accounted for 15 percent to 20 percent of overall economic growth. This time, in 2009 and 2010, housing contributed just 4 percent to the economy.
“The housing market is not going to turn around because of this, because it isn’t the mortgage rate that matters,” said Joel Naroff, head of Naroff Economic Advisors. Naroff blamed the “horrendous” process of qualifying for a mortgage despite tougher lending standards. He said trying to sell a home in many markets is just as difficult.
Many would-be buyers can’t take advantage of the low rates. The unemployment rate is 9.1 percent, few Americans are getting raises and many are struggling to shrink their debt loads.
Banks are also insisting on higher credit scores and larger downpayments for first-time buyers. Many repeat buyers have too little equity invested in their homes to qualify for loans. Others are too nervous about the economy or their job security to invest in a home.
The average rate on a 15-year fixed mortgage, which is popular for refinancing, fell to 3.36 percent, also a record low. It’s the third straight week of record lows for the popular refinancing option. Freddie Mac’s records date to 1991, but analysts believe the new low on the 15-year mortgage is the lowest ever.
Borrowers who qualify have rushed to refinance and take advantage of the low rates. Refinancing accounted for 70 percent of mortgage applications in the first half of the year, Freddie Mac said. Refinancings tend to provide less benefit to the economy than home purchases do.
Mortgage rates typically track the yield on the 10-year Treasury note. Economic fears have drawn investors to the safety of Treasurys, driving down the yield on the 10-year note to barely above 2 percent. That helped lower mortgage rates.
The Federal Reserve offered a dim outlook of the economy last week, saying it expects growth will stay weak for two more years. As a result, the Fed said it expects to keep short-term rates near zero through mid-2013.
Roughly 14 million Americans remain unemployed. And the economy isn’t creating enough jobs to rapidly trim that figure. The economy grew at an annual rate of just 0.8 percent in the first six months of this year, the slowest such pace since the recession officially ended more than two years ago. In June, consumers cut spending for the first time in 20 months.
Fewer Americans bought previously occupied homes in July for the third time in four months, the National Association of Realtors said Thursday in a separate report. It said sales fell 3.5 percent last month to a seasonally adjusted annual rate of 4.67 million homes. That’s far below the 6 million that economists say must be sold to sustain a healthy housing market.
To calculate average mortgage rates, Freddie Mac surveys lenders across the country Monday through Wednesday of each week.
The average rate on a five-year adjustable-rate mortgage fell to 3.08 percent, its lowest level on records dating to January 2005. Last week’s reading of 3.13 percent also was a record low. The week before was, too.
The average for one-year adjustable-rate loans fell to 2.86 percent, the lowest on records going back to 1984. Last week’s average of 2.89 also set a record.
The rates do not include extra fees known as points. One point is equal to 1 percent of the total loan amount.
Source; The Associated Press. All rights reserved.
The rate on the most popular mortgage dipped to 4.15 percent from 4.32 percent a week ago, Freddie Mac said Thursday. Its previous low of 4.17 percent was reached in November.
The last time long-term rates were lower was in the 1950s, when 30-year loans weren’t widely available. Most long-term home loans lasted 20 or 25 years.
Few expect record-low rates to energize the depressed home market. Over the past year, the average rate on the 30-year fixed mortgage has been below 5 percent for all but two weeks. Yet prices and sales remain unhealthy and are holding back the overall economy.
Five years ago, the average 30-year fixed rate was near 6.5 percent. In 2000, it exceeded 8 percent.
Most homeowners are paying rates more than a full percentage point higher than the current average. The average rate on all outstanding mortgages is 5.3 percent, Freddie Mac said, citing data from the Bureau of Economic Analysis.
After previous recessions, housing accounted for 15 percent to 20 percent of overall economic growth. This time, in 2009 and 2010, housing contributed just 4 percent to the economy.
“The housing market is not going to turn around because of this, because it isn’t the mortgage rate that matters,” said Joel Naroff, head of Naroff Economic Advisors. Naroff blamed the “horrendous” process of qualifying for a mortgage despite tougher lending standards. He said trying to sell a home in many markets is just as difficult.
Many would-be buyers can’t take advantage of the low rates. The unemployment rate is 9.1 percent, few Americans are getting raises and many are struggling to shrink their debt loads.
Banks are also insisting on higher credit scores and larger downpayments for first-time buyers. Many repeat buyers have too little equity invested in their homes to qualify for loans. Others are too nervous about the economy or their job security to invest in a home.
The average rate on a 15-year fixed mortgage, which is popular for refinancing, fell to 3.36 percent, also a record low. It’s the third straight week of record lows for the popular refinancing option. Freddie Mac’s records date to 1991, but analysts believe the new low on the 15-year mortgage is the lowest ever.
Borrowers who qualify have rushed to refinance and take advantage of the low rates. Refinancing accounted for 70 percent of mortgage applications in the first half of the year, Freddie Mac said. Refinancings tend to provide less benefit to the economy than home purchases do.
Mortgage rates typically track the yield on the 10-year Treasury note. Economic fears have drawn investors to the safety of Treasurys, driving down the yield on the 10-year note to barely above 2 percent. That helped lower mortgage rates.
The Federal Reserve offered a dim outlook of the economy last week, saying it expects growth will stay weak for two more years. As a result, the Fed said it expects to keep short-term rates near zero through mid-2013.
Roughly 14 million Americans remain unemployed. And the economy isn’t creating enough jobs to rapidly trim that figure. The economy grew at an annual rate of just 0.8 percent in the first six months of this year, the slowest such pace since the recession officially ended more than two years ago. In June, consumers cut spending for the first time in 20 months.
Fewer Americans bought previously occupied homes in July for the third time in four months, the National Association of Realtors said Thursday in a separate report. It said sales fell 3.5 percent last month to a seasonally adjusted annual rate of 4.67 million homes. That’s far below the 6 million that economists say must be sold to sustain a healthy housing market.
To calculate average mortgage rates, Freddie Mac surveys lenders across the country Monday through Wednesday of each week.
The average rate on a five-year adjustable-rate mortgage fell to 3.08 percent, its lowest level on records dating to January 2005. Last week’s reading of 3.13 percent also was a record low. The week before was, too.
The average for one-year adjustable-rate loans fell to 2.86 percent, the lowest on records going back to 1984. Last week’s average of 2.89 also set a record.
The rates do not include extra fees known as points. One point is equal to 1 percent of the total loan amount.
Source; The Associated Press. All rights reserved.
Thursday, August 18, 2011
Shadow Inventory Falls, Expected to Continue
Standard & Poor’s estimates that it would take nearly four years — or 47 months — for the housing market to work through its shadow inventory at the current rate. While that number is still high, it marks an improvement over S&P’s first quarter report that had estimated 52 months.
Shadow inventory represents homes that are in the foreclosure system but haven’t hit the market yet. S&P defines shadow inventory as foreclosure and REO properties in 90-day delinquency or worse.
"In conjunction with stable liquidation rates, we believe these are positive signs that the amount of time it will take to clear this 'shadow inventory' should continue to decline over the next year," S&P analysts said.
Delays from mortgage servicers in processing foreclosures likely will cause more than 1 million foreclosures to be postponed until next year, RealtyTrac recently reported.
As such, "the shadow inventory will continue to jeopardize the housing market's recovery until servicers are able to improve liquidation times," S&P said. "However, if and when that happens, an influx of homes will likely enter the market, increasing supply and driving prices down further."
Shadow inventories are largest in New York, where S&P estimates it will take 144 months — or 12 years — to work through foreclosure properties at the current rate. That is down slightly from 146 months in the first quarter.
Source: “Standard & Poor’s: Shadow Inventory Levels Begin to Improve,” HousingWire (Aug. 17, 2011)
Shadow inventory represents homes that are in the foreclosure system but haven’t hit the market yet. S&P defines shadow inventory as foreclosure and REO properties in 90-day delinquency or worse.
"In conjunction with stable liquidation rates, we believe these are positive signs that the amount of time it will take to clear this 'shadow inventory' should continue to decline over the next year," S&P analysts said.
Delays from mortgage servicers in processing foreclosures likely will cause more than 1 million foreclosures to be postponed until next year, RealtyTrac recently reported.
As such, "the shadow inventory will continue to jeopardize the housing market's recovery until servicers are able to improve liquidation times," S&P said. "However, if and when that happens, an influx of homes will likely enter the market, increasing supply and driving prices down further."
Shadow inventories are largest in New York, where S&P estimates it will take 144 months — or 12 years — to work through foreclosure properties at the current rate. That is down slightly from 146 months in the first quarter.
Source: “Standard & Poor’s: Shadow Inventory Levels Begin to Improve,” HousingWire (Aug. 17, 2011)
Existing-Home Sales Down in July
Existing-home sales declined in July from an upwardly revised June pace but are notably higher than a year ago, according to the National Association of REALTORS®. Monthly gains in the Northeast and Midwest were offset by declines in the West and South.
Total existing-home salesfell 3.5 percent to a seasonally adjusted annual rate of 4.67 million in July from 4.84 million in June, but are 21.0 percent above the 3.86 million unit pace in July 2010, which was a cyclical low immediately following the expiration of the home buyer tax credit.
Lawrence Yun, NAR chief economist, said there is a tug and pull on the market. “Affordability conditions this year have been the most favorable on record dating back to 1970, but many buyers are being held back because banks are offering financing to only the most highly qualified borrowers, ignoring a large share of otherwise creditworthy buyers,” he said. “Those potential buyers represent the difference between an uneven recovery and a much more robust housing market that could stimulate additional economic activity and create jobs.”
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 4.55 percent in July, up from 4.51 percent in June; the rate was 4.56 percent in July 2010. Last week, Freddie Mac reported the 30-year fixed rate dropped to 4.32 percent.
NAR President Ron Phipps said an unacceptably high number of potential home buyers are unable to complete transactions. “For both mortgage credit and home appraisals, there’s been a parallel pendulum swing from very loose standards which led to the housing boom, to unnecessarily restrictive practices as an overreaction to the housing correction,” he said.
“Beyond the tight credit problems, all appraisals must be done by valuators with local expertise and using reasonable comparisons — it doesn’t make sense to consistently see so many valuations coming in below negotiated prices, often below replacement construction costs,” Phipps said.
In an environment following a large price correction, Phipps said a price negotiated between a buyer and seller would appear to be a fair market price. “Banks frequently request numerous sales comparisons, well beyond the customary three comps used in the past, with little consideration that some of those properties may be discounted foreclosures used to valuate a traditional home in good condition,” he said. “To a great extent, banks are exerting influence on appraised valuations with negative impacts for both home sales and prices.”
The national median existing-home price for all housing types was $174,000 in July, down 4.4 percent from July 2010. Distressed homes — foreclosures and short sales typically sold at deep discounts — accounted for 29 percent of sales in July, compared with 30 percent in June and 32 percent in July 2010.
Total housing inventory at the end of July fell 1.7 percent to 3.65 million existing homes available for sale, which represents a 9.4-month supply at the current sales pace, up from a 9.2-month supply in June.
Who’s Buying?
All-cash sales accounted for 29 percent of transactions in July, unchanged from June; they were 30 percent in June 2010; investors account for the bulk of cash purchases.
First-time buyers purchased 32 percent of homes in July, up from 31 percent in June; they were 38 percent in July 2010. Investors accounted for 18 percent of purchase activity in July compared with 19 percent in June and 19 percent in July 2010. The balance of sales was to repeat buyers, which were a 50 percent market share in July, unchanged from June.
Single-family home sales declined 4.0 percent to a seasonally adjusted annual rate of 4.12 million in July from 4.29 million in June, but are 21.5 percent above the 3.39 million level in July 2010. The median existing single-family home price was $174,800 in July, down 4.5 percent from a year ago.
Existing condominium and co-op sales were unchanged at a seasonally adjusted annual rate of 550,000 in July, and are 17.3 percent above the 469,000-unit pace one year ago. The median existing condo price was $168,400 inJuly, down 4.0 percent from July 2010.
Existing-home sales in the Midwest increased 1.0 percent in July to a pace of 1.05 million and are 31.3 percent above a year ago. The median price in the Midwest was $146,300, down 2.9 percent from July 2010.
In the South, existing-home sales declined 1.6 percent to an annual level of 1.84 million in July but are 19.5 percent aboveJuly 2010. The median price in the South was $152,600, which is 2.2 percent below a year ago.
Existing-home sales in the West fell 12.6 percent to an annual pace of 1.04 million in July but are 16.9 percent above a year ago. The median price in the West was $208,300 down 7.1 percent from July 2010.
Source: NAR
Total existing-home salesfell 3.5 percent to a seasonally adjusted annual rate of 4.67 million in July from 4.84 million in June, but are 21.0 percent above the 3.86 million unit pace in July 2010, which was a cyclical low immediately following the expiration of the home buyer tax credit.
Lawrence Yun, NAR chief economist, said there is a tug and pull on the market. “Affordability conditions this year have been the most favorable on record dating back to 1970, but many buyers are being held back because banks are offering financing to only the most highly qualified borrowers, ignoring a large share of otherwise creditworthy buyers,” he said. “Those potential buyers represent the difference between an uneven recovery and a much more robust housing market that could stimulate additional economic activity and create jobs.”
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 4.55 percent in July, up from 4.51 percent in June; the rate was 4.56 percent in July 2010. Last week, Freddie Mac reported the 30-year fixed rate dropped to 4.32 percent.
The Price Is Right?
Contract failures — cancellations caused largely by declined mortgage applications or failures in loan underwriting from appraised values coming in below the negotiated price — were unchanged in July, reported by 16 percent of NAR members. In addition, 9 percent of REALTORS® report a contract was delayed in the past three months due to low appraisals, and another 13 percent said a contract was renegotiated to a lower sales price because an appraisal was below the initially agreed price.NAR President Ron Phipps said an unacceptably high number of potential home buyers are unable to complete transactions. “For both mortgage credit and home appraisals, there’s been a parallel pendulum swing from very loose standards which led to the housing boom, to unnecessarily restrictive practices as an overreaction to the housing correction,” he said.
“Beyond the tight credit problems, all appraisals must be done by valuators with local expertise and using reasonable comparisons — it doesn’t make sense to consistently see so many valuations coming in below negotiated prices, often below replacement construction costs,” Phipps said.
In an environment following a large price correction, Phipps said a price negotiated between a buyer and seller would appear to be a fair market price. “Banks frequently request numerous sales comparisons, well beyond the customary three comps used in the past, with little consideration that some of those properties may be discounted foreclosures used to valuate a traditional home in good condition,” he said. “To a great extent, banks are exerting influence on appraised valuations with negative impacts for both home sales and prices.”
The national median existing-home price for all housing types was $174,000 in July, down 4.4 percent from July 2010. Distressed homes — foreclosures and short sales typically sold at deep discounts — accounted for 29 percent of sales in July, compared with 30 percent in June and 32 percent in July 2010.
Total housing inventory at the end of July fell 1.7 percent to 3.65 million existing homes available for sale, which represents a 9.4-month supply at the current sales pace, up from a 9.2-month supply in June.
Who’s Buying?
All-cash sales accounted for 29 percent of transactions in July, unchanged from June; they were 30 percent in June 2010; investors account for the bulk of cash purchases.
First-time buyers purchased 32 percent of homes in July, up from 31 percent in June; they were 38 percent in July 2010. Investors accounted for 18 percent of purchase activity in July compared with 19 percent in June and 19 percent in July 2010. The balance of sales was to repeat buyers, which were a 50 percent market share in July, unchanged from June.
Single-family home sales declined 4.0 percent to a seasonally adjusted annual rate of 4.12 million in July from 4.29 million in June, but are 21.5 percent above the 3.39 million level in July 2010. The median existing single-family home price was $174,800 in July, down 4.5 percent from a year ago.
Existing condominium and co-op sales were unchanged at a seasonally adjusted annual rate of 550,000 in July, and are 17.3 percent above the 469,000-unit pace one year ago. The median existing condo price was $168,400 inJuly, down 4.0 percent from July 2010.
Around the Country
Regionally, existing-home sales in the Northeast rose 2.7 percent to an annual level of 750,000 in July and are 19.0 percent above July 2010. The median price in the Northeast was $245,600, down 6.8 percent from a year ago.Existing-home sales in the Midwest increased 1.0 percent in July to a pace of 1.05 million and are 31.3 percent above a year ago. The median price in the Midwest was $146,300, down 2.9 percent from July 2010.
In the South, existing-home sales declined 1.6 percent to an annual level of 1.84 million in July but are 19.5 percent aboveJuly 2010. The median price in the South was $152,600, which is 2.2 percent below a year ago.
Existing-home sales in the West fell 12.6 percent to an annual pace of 1.04 million in July but are 16.9 percent above a year ago. The median price in the West was $208,300 down 7.1 percent from July 2010.
Source: NAR
Florida’s existing home, condo sales up in July
Florida’s existing home and existing condo sales rose in July, according to the latest housing data released by Florida Realtors®. Existing home sales increased 12 percent last month with a total of 15,517 homes sold statewide compared to 13,874 homes sold in July 2010, according to Florida Realtors. Statewide sales of existing condos last month also rose 12 percent compared to the year-ago sales figure.
“Realtors in markets across the state are reporting increased activity from potential homebuyers who are ready to advantage of historically low mortgage rates and current availability of affordable housing options,” said 2011 Florida Realtors President Patricia Fitzgerald, manager/broker-associate with Illustrated Properties in Hobe Sound and Mariner Sands Country Club in Stuart.
Fifteen of Florida’s metropolitan statistical areas (MSAs) reported higher existing home sales in July; 13 MSAs had higher existing condo sales.
The statewide median sales price for existing homes last month was $136,500; a year ago, it was $137,700 for only a 1 percent decrease. Analysts with the National Association of Realtors® (NAR) note that sales of foreclosures and other distressed properties continue to downwardly distort the median price because they generally sell at a discount relative to traditional homes. The median is the midpoint; half the homes sold for more, half for less.
The national median sales price for existing single-family homes in June 2011 was $184,600, up 0.6 percent from a year ago, according to NAR. In Massachusetts, the statewide median resales price was $325,850 in June; in California, it was $295,300; in Maryland, it was $247,100; and in New York, it was $221,595.
In Florida’s year-to-year comparison for condos, 6,619 units sold statewide last month compared to 5,904 units in July 2010 for an increase of 12 percent. The statewide existing condo median sales price last month was $90,900; in July 2010 it was $87,800 for a 4 percent increase. NAR notes the national median existing condo sales price was $182,300 in June 2011.
Economic uncertainty continued to impact the recovery of the housing sector, according to NAR’s latest industry outlook. NAR Chief Economist Lawrence Yun pointed to overly restrictive lending requirements, low appraisals and federal budget issues as factors affecting the pace of sales activity.
Economic and political worries also dampened the outlook for Florida’s real estate markets, according to the University of Florida’s Bergstrom Center for Real Estate Studies’ latest quarterly survey of real estate trends. The report surveys economists, industry executives, real estate scholars, researchers and other experts.
“Even though unemployment in Florida improved in many markets, the pace of change and the still-high levels are affecting the pace of improvements in the real estate markets,” said Center Director Tim Becker. “Consumers continue to be cautious and pessimistic about their own spending, which is also affecting the rate of fundamental improvement.”
According to Freddie Mac, the interest rate for a 30-year fixed-rate mortgage averaged 4.55 percent in July, about the same level as the 4.56 percent average during the same month a year earlier. Florida Realtors’ sales figures reflect closings, which typically occur 30 to 90 days after sales contracts are written.
Source: Florida Realtors®
“Realtors in markets across the state are reporting increased activity from potential homebuyers who are ready to advantage of historically low mortgage rates and current availability of affordable housing options,” said 2011 Florida Realtors President Patricia Fitzgerald, manager/broker-associate with Illustrated Properties in Hobe Sound and Mariner Sands Country Club in Stuart.
Fifteen of Florida’s metropolitan statistical areas (MSAs) reported higher existing home sales in July; 13 MSAs had higher existing condo sales.
The statewide median sales price for existing homes last month was $136,500; a year ago, it was $137,700 for only a 1 percent decrease. Analysts with the National Association of Realtors® (NAR) note that sales of foreclosures and other distressed properties continue to downwardly distort the median price because they generally sell at a discount relative to traditional homes. The median is the midpoint; half the homes sold for more, half for less.
The national median sales price for existing single-family homes in June 2011 was $184,600, up 0.6 percent from a year ago, according to NAR. In Massachusetts, the statewide median resales price was $325,850 in June; in California, it was $295,300; in Maryland, it was $247,100; and in New York, it was $221,595.
In Florida’s year-to-year comparison for condos, 6,619 units sold statewide last month compared to 5,904 units in July 2010 for an increase of 12 percent. The statewide existing condo median sales price last month was $90,900; in July 2010 it was $87,800 for a 4 percent increase. NAR notes the national median existing condo sales price was $182,300 in June 2011.
Economic uncertainty continued to impact the recovery of the housing sector, according to NAR’s latest industry outlook. NAR Chief Economist Lawrence Yun pointed to overly restrictive lending requirements, low appraisals and federal budget issues as factors affecting the pace of sales activity.
Economic and political worries also dampened the outlook for Florida’s real estate markets, according to the University of Florida’s Bergstrom Center for Real Estate Studies’ latest quarterly survey of real estate trends. The report surveys economists, industry executives, real estate scholars, researchers and other experts.
“Even though unemployment in Florida improved in many markets, the pace of change and the still-high levels are affecting the pace of improvements in the real estate markets,” said Center Director Tim Becker. “Consumers continue to be cautious and pessimistic about their own spending, which is also affecting the rate of fundamental improvement.”
According to Freddie Mac, the interest rate for a 30-year fixed-rate mortgage averaged 4.55 percent in July, about the same level as the 4.56 percent average during the same month a year earlier. Florida Realtors’ sales figures reflect closings, which typically occur 30 to 90 days after sales contracts are written.
Source: Florida Realtors®
USDA still offers no-downpayment mortgages
Thanks to funding from federal programs to boost the housing market, the U.S. Department of Agriculture (USDA) still has $11.2 billion in its coffers earmarked for mortgage loans. The USDA’s Rural Development Service’s Section 502 loan is one of the few mortgage programs that requires no downpayment.
In earlier years, the program ran out of money by late summer, leaving homebuyers in limbo as they waited for the new budget year to begin. In Florida, most low-income and middle-income buyers qualify if they live in rural areas, smaller towns or some outlying suburbs to larger cities.
The program will change slightly after Oct. 1, when buyers will be required to pay a 0.3 percent premium for mortgage insurance monthly; however, the cost of upfront mortgage insurance will be reduced to 2 percent from its current 3.5 percent.
For more information, visit the USDA’s website.
Source: Florida Realtors®
In earlier years, the program ran out of money by late summer, leaving homebuyers in limbo as they waited for the new budget year to begin. In Florida, most low-income and middle-income buyers qualify if they live in rural areas, smaller towns or some outlying suburbs to larger cities.
The program will change slightly after Oct. 1, when buyers will be required to pay a 0.3 percent premium for mortgage insurance monthly; however, the cost of upfront mortgage insurance will be reduced to 2 percent from its current 3.5 percent.
For more information, visit the USDA’s website.
Source: Florida Realtors®
Wednesday, August 17, 2011
Borrowers Opt for Shorter Loan Terms
Record-reaching low interest rates have prompted more home owners to shorten the terms of their mortgages. Thirty-four percent of refinancers changed their loan to a 20- or 15-year mortgage during the first quarter -- the highest level in seven years, Freddie Mac reports.
Mortgage companies are also reporting a higher demand for shorter-term mortgages. For example, LendingTree reports that 15-year mortgages have increased 30 percent from a year ago.
Quicken Loans recently debuted a product that allows borrowers to select the term of their mortgage. The most popular mortgage term selected is 8 years, followed by 13 years.
"Mortgage-burning parties are back," Bob Walters, chief economist for Quicken Loans, told USA Today.
Shortening the term of a mortgage can save home owners "tens or even hundreds of thousands of dollars in interest costs," Keith Gumbinger, vice president of HSH Associates, told USA Today. Some borrowers are finding that refinancing into a shorter term may not even increase their monthly payments, since 15-year rates are so low.
However, some borrowers who want to refinance are finding they’re being shut out, experts say. Home owners who don’t have a credit score of 720 or higher or don’t have at least 20 percent in home equity may not qualify for the lowest rates.
Source: “More Home Owners Shorten Mortgage Terms,” USA Today (Aug. 15, 2011)
Mortgage companies are also reporting a higher demand for shorter-term mortgages. For example, LendingTree reports that 15-year mortgages have increased 30 percent from a year ago.
Quicken Loans recently debuted a product that allows borrowers to select the term of their mortgage. The most popular mortgage term selected is 8 years, followed by 13 years.
"Mortgage-burning parties are back," Bob Walters, chief economist for Quicken Loans, told USA Today.
Shortening the term of a mortgage can save home owners "tens or even hundreds of thousands of dollars in interest costs," Keith Gumbinger, vice president of HSH Associates, told USA Today. Some borrowers are finding that refinancing into a shorter term may not even increase their monthly payments, since 15-year rates are so low.
However, some borrowers who want to refinance are finding they’re being shut out, experts say. Home owners who don’t have a credit score of 720 or higher or don’t have at least 20 percent in home equity may not qualify for the lowest rates.
Source: “More Home Owners Shorten Mortgage Terms,” USA Today (Aug. 15, 2011)
Down real estate market looking pretty good
Despite the recent ups and downs in the capital markets, Freddie Mac’s U.S. Economic and Housing Market Outlook for August finds room for optimism. First, an extended period of both low short- and long-term interest rates should help as the market continues to struggle.
Outlook highlights
• The employment number was up 117,000, the best showing since April, and the unemployment rate edged down a tenth to 9.1 percent.
• Over the first half of 2011, growth was figured to be about 0.8 percent at an annual rate – positive but too weak to generate enough jobs to keep pace with labor force growth.
• Compared with the first quarter of 2008, borrowers are paying about $130 billion less in mortgage interest today, at an annual rate.
• The likelihood of an extended period of both relatively low short- and long-term interest rates is helpful news for the housing market’s recovery.
• Interest rates on 15-year fixed-rate loans – a popular choice for refinancing borrowers – reached about 3.5 percent in early August, assuring the refinance boom continues.
• The Freddie Mac House Price Index for the U.S. shows that prices are down 25 percent, on average, as of June 2011 compared with their peak obtained five years ago.
The complete August 2011 U.S. Economic and Housing Market Outlook is available on Freddie Mac’s website.
Source: Florida Realtors®
Outlook highlights
• The employment number was up 117,000, the best showing since April, and the unemployment rate edged down a tenth to 9.1 percent.
• Over the first half of 2011, growth was figured to be about 0.8 percent at an annual rate – positive but too weak to generate enough jobs to keep pace with labor force growth.
• Compared with the first quarter of 2008, borrowers are paying about $130 billion less in mortgage interest today, at an annual rate.
• The likelihood of an extended period of both relatively low short- and long-term interest rates is helpful news for the housing market’s recovery.
• Interest rates on 15-year fixed-rate loans – a popular choice for refinancing borrowers – reached about 3.5 percent in early August, assuring the refinance boom continues.
• The Freddie Mac House Price Index for the U.S. shows that prices are down 25 percent, on average, as of June 2011 compared with their peak obtained five years ago.
The complete August 2011 U.S. Economic and Housing Market Outlook is available on Freddie Mac’s website.
Source: Florida Realtors®
Tuesday, August 16, 2011
Freddie Offers Cash Incentives for Buying Condos
Freddie Mac’s HomeSteps unit is offering cash to buyers willing to purchase one of its foreclosed condos that has been lingering on the market. HomeSteps is hoping to unload some of its high inventory of foreclosed condos through the incentive program, known as HomeSteps Condo Cash.
Through the “Condo Cash” program, condo buyers of HomeSteps properties can get up to $1,500 to help pay for standard home owner association dues.
The offer is only valid to owner-occupant buyers and on HomeStep condos that have been on the market for at least 120 days. To participate, buyers must submit offers between Aug. 15 and Nov. 15, and close escrow by Dec. 30.
Some of the homes also come with a two-year Home Protect home warranty to cover electrical, plumbing, air conditioning, heating, and other major appliances and systems. Home Protect also is offering up to 30 percent discounts on the purchase of new appliances (see www.HomeSteps.com/smartbuy for more information).
Source: “HomeSteps Offers Condo Buyers Up to $1,500 for Future Association Dues for Limited Time,” Freddie Mac (Aug. 15, 2011)
Through the “Condo Cash” program, condo buyers of HomeSteps properties can get up to $1,500 to help pay for standard home owner association dues.
The offer is only valid to owner-occupant buyers and on HomeStep condos that have been on the market for at least 120 days. To participate, buyers must submit offers between Aug. 15 and Nov. 15, and close escrow by Dec. 30.
Some of the homes also come with a two-year Home Protect home warranty to cover electrical, plumbing, air conditioning, heating, and other major appliances and systems. Home Protect also is offering up to 30 percent discounts on the purchase of new appliances (see www.HomeSteps.com/smartbuy for more information).
Source: “HomeSteps Offers Condo Buyers Up to $1,500 for Future Association Dues for Limited Time,” Freddie Mac (Aug. 15, 2011)
Preserved federal mortgage role sought
President Obama has directed a small team of advisers to develop a proposal that would keep the government playing a major role in the nation’s mortgage market, extending a federal loan subsidy for most home buyers, according to people familiar with the matter.
The decision follows the advice of his senior economic and housing advisers, who favor maintaining the government’s role as an insurer of mortgages for most borrowers. The approach could even preserve Fannie Mae and Freddie Mac, the mortgage finance giants owned by the government, although under different names and with significant new constraints, said people knowledgeable about the discussions.
A decision to preserve a major government role would mark a big milestone in the effort to craft a new housing policy from the wreckage of the mortgage meltdown and could mean a larger part for Fannie and Freddie than administration officials had signaled.
In a statement, the White House said it is premature to say that senior officials have agreed on any of the three main options outlined earlier this year in an administration white paper on reforming the housing finance system.
“It is simply false that there has been a decision to move forward with any particular option,” said Matt Vogel, a White House spokesman. “All three options remain under active consideration and we are deepening our analysis around how each would potentially be implemented. No recommendation has been made to the president by his economic advisers.”
The proposal is likely to draw criticism from many Republicans, who blame the financial crisis on policies they say overly encouraged the housing market. And many economists, including some who have worked in the White House under Obama, consider the federal role harmful to the free market.
But if this approach became law, it probably would keep in place the kind of popular home loans that have been around for decades – 30-year fixed-rate mortgages with relatively low interest rates.
Officials have not determined whether to advance a final proposal before the 2012 presidential election. Officials from the White House, the Treasury Department and the Department of Housing and Urban Development are working out the details.
The government could maintain a substantial role in various ways. These include restructuring Fannie and Freddie as public utilities overseen by a government regulator. The government would no longer guarantee their financial health, as in the past, but would continue to backstop the mortgage-backed securities they issue using loans made by private banks.
Or the two companies could be shut down and replaced with several successors that, likewise, would have their mortgage-backed securities guaranteed by the government in exchange for a fee. A federal guarantee, by reducing the risk to investors, can make it cheaper for firms to raise money for making home loans, in turn reducing mortgage rates.
For years, Fannie and Freddie – shareholder-owned companies chartered by Congress to support the housing market – owned or insured trillions of dollars in home loans. When the housing market crashed, the government seized the firms, and it has spent more than $150 billion propping them up.
Since then, Fannie and Freddie have played a key role in ensuring the availability of mortgages amid the market upheaval. But the Obama administration has said it wants to scale back the federal role.
In weighing whether to preserve Fannie and Freddie, administration officials have several concerns, said people familiar with the discussions. They spoke on the condition of anonymity because the talks are still preliminary.
The firms spent decades developing a market in which investors worldwide can buy and sell securities backed by U.S. home loans, and administration officials don’t want to jeopardize it.
In addition, officials don’t want to punish the thousands of Fannie and Freddie employees who have specialized knowledge about the mortgage market and had nothing to do with the poor business decisions top executives made in the run-up to the financial crisis.
But some critics warn that nearly any government role could leave taxpayers on the hook.
“The long-term consequence is that the taxpayers ultimately have to bail out the government’s losses,” said Peter Wallison, a fellow at the American Enterprise Institute. He added, “There is only one legitimate role for government in guaranteeing mortgages: That is mortgages for low-income people, to enable them to buy homes.”
Under the approach Obama endorsed, the government would seek to limit the exposure of taxpayers. Fannie, Freddie or other successor firms would charge a fee to mortgage lenders and banks and use the money to create an insurance pool to cover losses on mortgage securities caused by defaults on the underlying loans. The government would be the last line of defense in case of another housing market meltdown, using taxpayer money to cover losses only if the insurance pool ran dry.
Some special advantages awarded to Fannie and Freddie would be eliminated, according to people familiar with the matter. For example, the two companies were allowed for decades to do business while holding a fraction of the reserves – essentially, rainy-day money – that banks and other financial firms were required to hold. This advantage allowed Fannie and Freddie to grow very large. The companies, or the firms that replace them, would have to start holding much more in reserve.
The administration’s strategy also would require Fannie and Freddie, if they remain in some form, to shed many of the mortgages they own. Their loan portfolios, which have ballooned recently, would shrink greatly over coming years and perhaps be eliminated. Private firms would have to fill the void.
“We remain committed to winding down Fannie and Freddie, though such significant measures would need to be done gradually and with care,” said Vogel, the White House spokesman. “We believe that it is essential to bring private capital back to the center of a reformed housing system.”
Although banks would be able to make any home loans they wanted, only those that met federal standards would be eligible to be included in securities assembled by Fannie, Freddie or successor companies. And only those securities would have a government guarantee.
Any effort to remake the nation’s housing finance system would be phased in over five to 10 years.
Since early in his tenure, Obama has promised to offer a proposal to overhaul the nation’s housing finance system.
In February, the administration released a long-awaited white paper discussing an overhaul of the housing finance system. The paper called for the end of Fannie and Freddie but did not say what should replace them.
Three options were presented. The first two called for greatly reducing the federal role in the mortgage market, perhaps eliminating it. A third option called for largely maintaining the government’s footprint but introducing several changes to reduce the chances that another taxpayer bailout would be needed. (All the options preserved the Federal Housing Administration, a government agency that helps low- and middle-income and minority homebuyers.)
The administration’s decision in February to release a series of options – and not make a formal recommendation – reflected a political calculation and a disagreement among Obama’s advisers.
Two top Obama advisers, HUD Secretary Shaun Donovan and Treasury Secretary Timothy F. Geithner, think the government should maintain an outsize role in the housing market, administration officials said.
Donovan thinks federal support for housing fulfills a public service, while Geithner has been focused on the need for the government to have a way to keep the mortgage market operating during a financial crisis.
Other advisers, however, opposed a continued government role over the long run. Austan Goolsbee, who this month left his job as chairman of Obama’s Council of Economic Advisers, argued that the federal role in housing distorts the free market. By subsidizing mortgage investments, he argued, the government drives capital away from other types of investments – for example, those in companies developing environmentally friendly technology. He also warned that the government is putting enormous sums of taxpayer money on the line while conveying little actual benefit to homebuyers.
In a meeting with the president, Goolsbee said that the government had finally brought Fannie and Freddie’s excesses to heel by taking over the companies and that it would be a mistake to let them loose in the market again, said a person familiar with the meeting. Goolsbee likened the companies to a villain held in a special prison who shouldn’t be freed just because he promises to help the poor, the source recounted.
Lawrence H. Summers, who was director of the National Economic Council until early this year, argued that, over the long term, it didn’t make sense to have a government-backed agency providing guarantees to the mortgage market but that Fannie and Freddie still play a crucial role.
“My position was that we needed to maximize activity in the short run to support the housing market,” Summers said in an interview. “Discussions of scaling down Fannie and Freddie were vastly premature under the circumstances of a collapsing housing market.”
After a decade or so, he added, the government role might be phased out. He cautioned that models similar to Fannie and Freddie “were problematic because they were likely to lead to the same type of abuses” that Fannie and Freddie engendered.
Gene Sperling, who became director of the National Economic Council this year, shepherded the release of the white paper. He agreed that a continued government guarantee made sense.
In the end, Obama signaled agreement. The White House, however, says the president has not made a final decision.
Source: washingtonpost.com, Zachary A. Goldfarb
The decision follows the advice of his senior economic and housing advisers, who favor maintaining the government’s role as an insurer of mortgages for most borrowers. The approach could even preserve Fannie Mae and Freddie Mac, the mortgage finance giants owned by the government, although under different names and with significant new constraints, said people knowledgeable about the discussions.
A decision to preserve a major government role would mark a big milestone in the effort to craft a new housing policy from the wreckage of the mortgage meltdown and could mean a larger part for Fannie and Freddie than administration officials had signaled.
In a statement, the White House said it is premature to say that senior officials have agreed on any of the three main options outlined earlier this year in an administration white paper on reforming the housing finance system.
“It is simply false that there has been a decision to move forward with any particular option,” said Matt Vogel, a White House spokesman. “All three options remain under active consideration and we are deepening our analysis around how each would potentially be implemented. No recommendation has been made to the president by his economic advisers.”
The proposal is likely to draw criticism from many Republicans, who blame the financial crisis on policies they say overly encouraged the housing market. And many economists, including some who have worked in the White House under Obama, consider the federal role harmful to the free market.
But if this approach became law, it probably would keep in place the kind of popular home loans that have been around for decades – 30-year fixed-rate mortgages with relatively low interest rates.
Officials have not determined whether to advance a final proposal before the 2012 presidential election. Officials from the White House, the Treasury Department and the Department of Housing and Urban Development are working out the details.
The government could maintain a substantial role in various ways. These include restructuring Fannie and Freddie as public utilities overseen by a government regulator. The government would no longer guarantee their financial health, as in the past, but would continue to backstop the mortgage-backed securities they issue using loans made by private banks.
Or the two companies could be shut down and replaced with several successors that, likewise, would have their mortgage-backed securities guaranteed by the government in exchange for a fee. A federal guarantee, by reducing the risk to investors, can make it cheaper for firms to raise money for making home loans, in turn reducing mortgage rates.
For years, Fannie and Freddie – shareholder-owned companies chartered by Congress to support the housing market – owned or insured trillions of dollars in home loans. When the housing market crashed, the government seized the firms, and it has spent more than $150 billion propping them up.
Since then, Fannie and Freddie have played a key role in ensuring the availability of mortgages amid the market upheaval. But the Obama administration has said it wants to scale back the federal role.
In weighing whether to preserve Fannie and Freddie, administration officials have several concerns, said people familiar with the discussions. They spoke on the condition of anonymity because the talks are still preliminary.
The firms spent decades developing a market in which investors worldwide can buy and sell securities backed by U.S. home loans, and administration officials don’t want to jeopardize it.
In addition, officials don’t want to punish the thousands of Fannie and Freddie employees who have specialized knowledge about the mortgage market and had nothing to do with the poor business decisions top executives made in the run-up to the financial crisis.
But some critics warn that nearly any government role could leave taxpayers on the hook.
“The long-term consequence is that the taxpayers ultimately have to bail out the government’s losses,” said Peter Wallison, a fellow at the American Enterprise Institute. He added, “There is only one legitimate role for government in guaranteeing mortgages: That is mortgages for low-income people, to enable them to buy homes.”
Under the approach Obama endorsed, the government would seek to limit the exposure of taxpayers. Fannie, Freddie or other successor firms would charge a fee to mortgage lenders and banks and use the money to create an insurance pool to cover losses on mortgage securities caused by defaults on the underlying loans. The government would be the last line of defense in case of another housing market meltdown, using taxpayer money to cover losses only if the insurance pool ran dry.
Some special advantages awarded to Fannie and Freddie would be eliminated, according to people familiar with the matter. For example, the two companies were allowed for decades to do business while holding a fraction of the reserves – essentially, rainy-day money – that banks and other financial firms were required to hold. This advantage allowed Fannie and Freddie to grow very large. The companies, or the firms that replace them, would have to start holding much more in reserve.
The administration’s strategy also would require Fannie and Freddie, if they remain in some form, to shed many of the mortgages they own. Their loan portfolios, which have ballooned recently, would shrink greatly over coming years and perhaps be eliminated. Private firms would have to fill the void.
“We remain committed to winding down Fannie and Freddie, though such significant measures would need to be done gradually and with care,” said Vogel, the White House spokesman. “We believe that it is essential to bring private capital back to the center of a reformed housing system.”
Although banks would be able to make any home loans they wanted, only those that met federal standards would be eligible to be included in securities assembled by Fannie, Freddie or successor companies. And only those securities would have a government guarantee.
Any effort to remake the nation’s housing finance system would be phased in over five to 10 years.
Since early in his tenure, Obama has promised to offer a proposal to overhaul the nation’s housing finance system.
In February, the administration released a long-awaited white paper discussing an overhaul of the housing finance system. The paper called for the end of Fannie and Freddie but did not say what should replace them.
Three options were presented. The first two called for greatly reducing the federal role in the mortgage market, perhaps eliminating it. A third option called for largely maintaining the government’s footprint but introducing several changes to reduce the chances that another taxpayer bailout would be needed. (All the options preserved the Federal Housing Administration, a government agency that helps low- and middle-income and minority homebuyers.)
The administration’s decision in February to release a series of options – and not make a formal recommendation – reflected a political calculation and a disagreement among Obama’s advisers.
Two top Obama advisers, HUD Secretary Shaun Donovan and Treasury Secretary Timothy F. Geithner, think the government should maintain an outsize role in the housing market, administration officials said.
Donovan thinks federal support for housing fulfills a public service, while Geithner has been focused on the need for the government to have a way to keep the mortgage market operating during a financial crisis.
Other advisers, however, opposed a continued government role over the long run. Austan Goolsbee, who this month left his job as chairman of Obama’s Council of Economic Advisers, argued that the federal role in housing distorts the free market. By subsidizing mortgage investments, he argued, the government drives capital away from other types of investments – for example, those in companies developing environmentally friendly technology. He also warned that the government is putting enormous sums of taxpayer money on the line while conveying little actual benefit to homebuyers.
In a meeting with the president, Goolsbee said that the government had finally brought Fannie and Freddie’s excesses to heel by taking over the companies and that it would be a mistake to let them loose in the market again, said a person familiar with the meeting. Goolsbee likened the companies to a villain held in a special prison who shouldn’t be freed just because he promises to help the poor, the source recounted.
Lawrence H. Summers, who was director of the National Economic Council until early this year, argued that, over the long term, it didn’t make sense to have a government-backed agency providing guarantees to the mortgage market but that Fannie and Freddie still play a crucial role.
“My position was that we needed to maximize activity in the short run to support the housing market,” Summers said in an interview. “Discussions of scaling down Fannie and Freddie were vastly premature under the circumstances of a collapsing housing market.”
After a decade or so, he added, the government role might be phased out. He cautioned that models similar to Fannie and Freddie “were problematic because they were likely to lead to the same type of abuses” that Fannie and Freddie engendered.
Gene Sperling, who became director of the National Economic Council this year, shepherded the release of the white paper. He agreed that a continued government guarantee made sense.
In the end, Obama signaled agreement. The White House, however, says the president has not made a final decision.
Source: washingtonpost.com, Zachary A. Goldfarb
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