Archive for July, 2010
Post-Downturn Changes Affect Practitioners
Even the most resourceful, resilient real estate practitioners have run into challenges since the downturn. Here are some of the issues they face today:
• Buyers and sellers who strive to pinch pennies make the job more difficult — and less profitable. “Consumers are looking at agents differently and saying, ‘We don’t need to buy the full level of service,’” says Katherine Pancak, professor of finance and real estate at the University of Connecticut.
• The overall number of real estate professionals has dropped during the past two years, although some states, including Texas, Michigan, and New York, have seen increases in the past year of up to 10 percent in new real estate licensing applications.
• Persistence is an important factor in today’s real estate business. The average U.S. home is on the market for 150 days before it sells, up 43 percent from two years ago, according to Altos Research.
Source: SmartMoney, Alyssa Abkowitz (07/15/2010)
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Mortgage Applications Rise as Rates Stay Low
Applications to purchase homes rose 3.4 percent last week compared to the previous week on a seasonally adjusted basis, according to the Mortgage Bankers Association weekly survey.
On an unadjusted basis, the purchase index rose 15.3 percent compared with the previous week, but was down 35.7 percent compared to the same week a year ago.
This is only the second time in 10 weeks that purchase mortgage applications have increased.
“The strength in purchase applications comes from government loans, likely indicating that prospective buyers are drawn by the lower down payment requirements,” says Michael Fratantoni, MBA’s vice president of research and economics.
Mortgage rates remained low:
• 30-year fixed-rate mortgages decreased to 4.59 percent from 4.69 percent.
• 15-year fixed-rate mortgages decreased to 4.05 percent from 4.12 percent.
• 1-year ARMs decreased to 7.17 percent from 7.20 percent.
Source: Mortgage Bankers Association (07/21/2010)
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Feds Asked to Stop Home Resale Fees
Housing advocates and experts hosted a press conference today to launch the Coalition to Stop Wall Street Home Resale Fees and ask United States Secretary of the Treasury Timothy Geithner to ban the financial scheme.
Wall Street Home Resale Fees are a controversial new financial scheme that has already been restricted in 17 states, with Illinois Governor Pat Quinn signing legislation yesterday.
Some actors in the real estate industry, in consultation with Wall Street advisers, are attempting to add language to home purchase contracts requiring a percentage of the final sales price of a home be paid to private third parties every time the property is sold, typically for 99 years. These actors are then attempting to sell the right to collect these fees on Wall Street — lining their pockets while stealing equity from home owners.
The Coalition to Stop Wall Street Home Resale Fees brings together a wide array of organizations, including the American Land Title Association, National Association of REALTORS® , American Federation of State, County, and Municipal Employees, Vote Vets, the Institute for Liberty, the Center for Responsible Lending, and the Property Rights Alliance. The Coalition has organized to fight the financial scheme of Wall Street Home Resale Fees and to protect home owners across the country.
More information is online at www.stophomeresalefees.org.
Source: NAR
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Sales Slow but Remain Above Last Year
With the scheduled closing deadline for the home buyer tax credits, existing-home sales slowed in June but remained at relatively elevated levels, according to the National Association of REALTORS®.
Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, fell 5.1 percent to a seasonally adjusted annual rate of 5.37 million units in June from 5.66 million in May, but are 9.8 percent higher than the 4.89 million-unit pace in June 2009.
Lawrence Yun, NAR chief economist, said the market shows uncharacteristic yet understandable swings as buyers responded to the tax credits. “June home sales still reflect a tax credit impact with some sales not closed due to delays, which will show up in the next two months,” he said. “Broadly speaking, sales closed after the home buyer tax credit will be significantly lower compared to the credit-induced spring surge. Only when jobs are created at a sufficient pace will home sales return to sustainable healthy levels.”
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to a record low 4.74 percent in June from 4.89 percent in May; the rate was 5.42 percent in June 2009.
The national median existing-home price for all housing types was $183,700 in June, which is 1.0 percent higher than a year ago. Distressed homes were at 32 percent of sales last month, compared with 31 percent in May; it was also 31 percent in June 2009.
Source: NAR
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Mixing Businesses May Send a Mixed Message
With the economic landscape still unstable, real estate practitioners may be tempted to supplement their income with a side business.
Agents who decide to pursue this approach, however, must be warned that cross-marketing products and services that do not complement each other likely will prove to be an unsuccessful venture. For example, a realty professional who decides to also sell beauty products to the same client base could end up losing credibility with both sets of customers.
While the optimal strategy may be for a real estate practitioner to simply devote 100 percent of his or her time and energy to the primary business of real estate, those who do dabble in other areas should at the very least choose to cross-sell products and services that are compatible.
If that is not possible, another person should be brought in to spearhead the secondary business.
In cases where neither of those options will work, agents should refrain from promoting the two businesses simultaneously, meaning that they should keep marketing for the two income streams completely separate — whether in written marketing materials or in person, such as by wearing a REALTOR® pin while hosting a Pampered Chef event.
Source: Realty Times, Jennifer Allan (07/19/10)
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Apartment Web Sites Sees Bump in 2010
The Apartments.com family of Web sites saw a 14 percent increase in traffic in the first six months of 2010 compared to 2009.
The increase was largely driven by the rise in the use of mobile devices with mobile visits increasing 117 percent in 2010. The number of consumers accessing apartment community information through text messages also has increased by 250 percent.
“The significant level of renter activity on our site throughout the first half of the year is a positive indicator of what’s to come,” says Kevin Doyle, senior vice president and general manager of Apartments.com.
Source: Apartments.com (07/20/2010)
A Light at the End of the Commercial Tunnel
Observers of the commercial real estate market in California are beginning to see light at the end of the tunnel.
“After eighteen months of pessimism about office and industrial markets we are now seeing indications that, after the markets hit bottom later in this year or early next year, they will follow the pattern of increased non-residential construction coming two to three years after the end of the recession rather than the pattern of a multi-year stasis in this sector,” said Jerry Nickelsburg, senior economist and an author of the UCLA Anderson Forecast.
Optimism is greater in Los Angeles and Orange County, reflecting improving strength in manufacturing, Nickelsburg says.
Source: UCLA Anderson Forecast (07/16/2010)
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Did the Housing Credit Attract New Buyers?
At least one noted economist doesn’t believe that the home buyer tax credit brought new buyers into the market.
Milton Ezrati, a senior economist and market strategist at Lord Abbett, argues that the credit only encouraged buyers to rethink their timing.
“People who were looking crowded their purchases into March and April in order to qualify for the credit, driving up home sales by almost 30 percent.” Ezrati writes in the Wall Street Journal. “Then, because so many of those sales would have occurred after April, recorded sales fell suddenly by about 30 percent in May. Housing starts and residential construction put in place followed this same up-and-down pattern.”
Source: The Wall Street Journal, Emily Peck (07/19/2010)
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Rentals Are a Booming Business
Web sites like Airbnb.com, HomeAway.com, and Craigslist are enjoying a surge of listings from home owners, many of whom admit they are hoping to avoid foreclosure by renting out their properties.
Airbnb.com – its full name is AirBed & Breakfast – is the newest of these sites. Since its founding in 2007, it has grown to encompass rentals in 5,700 cities in 148 countries. The company charges 10 percent to travelers and 3 percent to the home owner.
HomeAway.com charges home owners $300 annually to list a property. It is adding 15,000 new properties each month.
Craigslist is free of charge.
Source: Bloomberg, Scott Hamilton and Anthony Feld (07/20/2010)
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Seller Financing Can Have Tax Advantages
Offering to hold either a second mortgage or a primary mortgage in either a residential or a commercial sale can be a good deal for the seller.
The primary advantage is deferral of taxes due. Sellers are normally taxed as the principal is received, spreading the tax bill over several years, explains Richard Schank, a financial planner with PTS Brokerage in Mt. Laurel, N.J.
Other advantages can include:
· Support for a higher-than-average price.
· An interest rate that provides a relatively high return on investment.
The safest arrangement includes obtaining a deed in lieu of foreclosure from the buyer, which allows the seller to take back the property if the note isn’t paid in a timely fashion.
Source: Investor’s Business Daily, Jeff Schnepper (07/15/2010)
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Fannie Mae Reviews Last-Minute Credit Checks
Fannie Mae announced last week that it is reviewing the rule it put in place earlier this year requiring lenders to do a second credit check shortly before closing.
The goal of the rule is to identify new debt that might undermine an applicant’s ability to pay, but for both home buyers and lenders, the second check is problematic. The search can uncover a short-term debt — medical bills that insurance is likely to pay — that would nevertheless derail a purchase.
“We keep telling people: ‘Don’t open new accounts. Don’t close existing accounts. Don’t do anything whatsoever that will alter your credit situation,’” says Eric Gates, a mortgage broker for Apex Home Loans. “But there will be people who can’t avoid increasing their credit card balances, or already have, and that’s where the problems will crop up.”
Lenders are particularly concerned about the rule because Fannie can require them to buy back loans in default up to two years after closing if there is evidence that the borrower had more debt than was disclosed at the time of closing.
Source: Washington Post, Dina ElBoghdady (07/16/2010)
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Home Builder Confidence Declines
The National Association of Home Builders monthly reading of builder confidence declined to 14, the lowest level since March 2009.
“The pause in sales following expiration of the home buyer tax credits is turning out to be longer than anticipated due to the sluggish pace of improvement in the rest of the economy,” David Crowe, NAHB’s chief economist, explained in a statement.
The NAHB predicts that business will improve 10 percent in the second half of the year.
Source: The Wall Street Journal, Robbie Whelan (07/19/2010)
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Spending Index Declines in June
The Deloitte Consumer Spending Index declined in June, down for the second consecutive month. Factors included decreasing real wages, continuing heightened unemployment, a shrinking tax base – and, of course, the housing market.
The home buyer tax credit ended and home sales quickly declined and prices shrunk, said Carl Steidtmann, chief economist with Deloitte Research. Steidtmann expects the current housing situation to stay that way for several more months until the job market picks up.
Source: Deloitte & Touche (07/16/2010)
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New 1099 Rules Aimed at Curbing Tax Cheaters
Self-employed real estate practitioners should expect a host of new paperwork beginning in 2012.
That will be the first year that whenever a firm buys more than $600 a year in goods or services from a vendor – whether it is a giant company or a one-person show – the vendor will be due a 1099 from the purchaser at the end of the year.
Lawmakers passed the provision to help fund healthcare changes by closing the “tax gap” created by cheaters. An estimated $300 billion of revenue is lost to tax evasion every year.
Critics say the new rules expand current reporting requirements significantly, with the burden falling on sole proprietors and other very small businesses. The new rules require tracking payments throughout the year to see if they fall into the over-$600 category.
If the vendor fails to supply his or her tax ID number, then the payer is required to withhold 28 percent of the payment and send that amount to the IRS.
There is a way around this. Businesses that pay with credit or debit cards are excused from sending 1099s.
Source: The Wall Street Journal, Laura Saunders (07/17/2010)
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Calculating the New Medicare Tax
The healthcare reform law passed earlier this year includes a little-discussed tax on some forms of real estate transactions.
The tax, which supports Medicare, potentially affects couples with adjusted gross incomes greater than $250,000 a year and singles with incomes above $200,000. Existing home sale tax breaks remain in place.
The tax is levied on the gain figured on the lesser of the sale of the house or the amount by which the sellers’ income exceeds the appropriate threshold.
Here’s an example offered in the Washington Post:
· Profit on home sale: $600,000
· Sellers’ income: $300,000
· Deductible amount under current law for a married couple: $500,000
· Capital gains tax due on $100,000: $15,000
Because the hypothetical sellers’ income is over the threshold, they’ll have to pay the new Medicare tax as well, which would be calculated in one of the following ways:
· Taxable profit: $100,000
· Difference between annual income and taxable profit: $200,000
· Difference between $300,000 income and $250,000 threshold: $50,000
The sellers would pay 3.8 percent on the lower number, which is $50,000. Thus, they owe IRS $1,900.
Source: Washington Post, Benny L. Kass (07/17/2010)
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Pregnant Women Have Trouble Getting Mortgages
Some lenders are balking at approving loans when a new parent has temporary lost income because she is home taking care of the baby.
Even if a parent expects to be back at work in weeks, banks still may deny the mortgage. “If you are not back at work, it’s a huge problem,” says Rick Cason, owner of Integrity Mortgage, a mortgage firm in Orlando, Fla. “Banks only deal in guaranteed income these days. “
Lenders will not consider disability payments as income because they don’t last for three years.
A spokesperson for Fannie Mae said that a borrower on maternity or paternity leave could qualify for a mortgage by providing a letter from a doctor with the approved return-to-work date and a letter from the employer confirming the acceptability of the return date.
But mortgage brokers and practitioners say lenders aren’t interpreting the guidelines that way. “There is no real assurance that the new mom will come back to work after she has the baby,” says Marc Savitt, president of the Mortgage Center, a brokerage in Martinsburg, W.Va. “It’s just prudent underwriting to go ahead and approve the loan, but she has to be back before closing.”
Source: The New York Times, Tara Siegel Bernard (07/19/2010)
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Buyers Should Shop for the Best Rate
Anyone shopping for a new mortgage these days should shop around, says Cameron Findlay, chief economist for LendingTree.
Although mortgage rates look astoundingly low, the spread between what the bank receives and what it pays investors has actually increased, giving banks more room to negotiate.
Applicants with good credit scores should aggressively seek the best rates they can find by comparison shopping, starting with the bank they usually do business with.
Source: The New York Times, Jennifer Saranow Schultz (07/17/2010)
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Frugal Tips for Making a Home More Appealing
Homeowners who want to sell but don’t have a lot of cash to spruce up their properties might consider these tips from Bankrate.com for upgrading a property without spending a fortune.
Polish up the kitchen. Add new cabinet door handles, replace lighting and update the faucet set. Unless the cabinets are mica, give them a fresh coat of paint. Order new doors for kitchen appliances.
Tidy up the bath. Replace the toilet seat. Clean up the floor with vinyl tiles or sheet vinyl applied over the old floor. Re-grout the tub and, if the tub is dingy, add a new prefabricated tub and shower surround.
Paint the walls.
Add closet systems to all the bedrooms, pantry, and entry closets.
Hire a plumber and an electrician to fix anything that is loose or that leaks.
Clean the carpets or, if they are worn, cover them with area rugs.
Replace ceiling lights with inexpensive but attractive fixtures.
Refinish or repaint the front door and replace the hardware.
Mow the lawn, edge the sidewalks, mulch all the beds and put two big planters at either side of the front door.
Source: Bankrate.com (07/14/2010)
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FHA Looking for Deceptive Lenders
The Federal Housing Finance Agency is investigating lenders who sold losing securities to Fannie Mae and Freddie Mac.
The agency has issued 64 subpoenas for loan files and other documents in order to determine whether sellers of the securities made false statements or left out key information. The FHFA said in a statement that it is “prepared to take appropriate action to ensure compliance, if necessary.”
So far, Fannie and Freddie have lost $145 billion in tax-payer dollars shoring up shaky mortgages.
Source: Associated Press, Alan Zibel (07/12/2010)
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Depot on way to grand opening
Everything is on track for the Aiken Railroad Depot’s Sept. 18 grand opening, according to All Aboard! Chairman Tim Simmons.
Work on the main building is nearing completion and the last of the museum’s interactive exhibits designed by The History Workshop of Charleston is expected to be installed by July 28 in the mezzanine. After furniture is placed in the building, City of Aiken Parks, Recreation and Tourism Department staff will move in to what will serve as the department’s headquarters and City’s Visitors Center; and all that will be left is some general landscaping, planting and sidewalk paving before the depot opens its doors to the public.
“We’re going through the punch list with the contractor now,” Simmons said.
The new depot replicates the original building constructed in 1899, and work on the main building and exterior work on the two dining cars make up phase one of the project.
Once the Friends of the Railroad Depot can check off on phase one, the group will hand over the depot to the City of Aiken and, more than likely, enter into a Memorandum of Understanding regarding the facility.
Everything is on track for the Aiken Railroad Depot’s Sept. 18 grand opening, according to All Aboard! Chairman Tim Simmons.
Work on the main building is nearing completion and the last of the museum’s interactive exhibits designed by The History Workshop of Charleston is expected to be installed by July 28 in the mezzanine. After furniture is placed in the building, City of Aiken Parks, Recreation and Tourism Department staff will move in to what will serve as the department’s headquarters and City’s Visitors Center; and all that will be left is some general landscaping, planting and sidewalk paving before the depot opens its doors to the public.
“We’re going through the punch list with the contractor now,” Simmons said.
The new depot replicates the original building constructed in 1899, and work on the main building and exterior work on the two dining cars make up phase one of the project.
Once the Friends of the Railroad Depot can check off on phase one, the group will hand over the depot to the City of Aiken and, more than likely, enter into a Memorandum of Understanding regarding the facility.
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Small-Business Lending Drops Sharply in June
Government-backed loans to the country’s small businesses slumped in June after a key federal program ran out of money — for a fourth time.
Banks made less than $400 million in loans backed by the SBA’s flagship program last month, a sharp decrease from $1.5 billion in May. Legislation to renew the program, which reduces the risk for banks making small-business loans and eliminates costly fees, passed the House but has stalled in the Senate, which could take up the issue again as early as this week.
Source: Los Angeles Times, Sharon Bernstein, (07/13/10)
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Treasury Secretary Defends Recovery Efforts
U.S. Treasury Secretary Timothy Geithner in a PBS television interview on Tuesday defended government efforts to reduce foreclosures.
He said the federal programs helped millions of families stay in their homes because of reduced monthly payments, while tax credits allowed million of Americans to purchase property.
He said the programs aren’t helping “the most fortunate Americans who bought very, very expensive homes or a second home. … They’re not going to reach people who lied about their income, were unable to prove that they had income — weren’t able to prove they were eligible.”
Source: Reuters News (07/06/2010)
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Firefighters urge inclusion of pets in family fire escape plan
Most parents know the importance of family fire escape plans for themselves and their children, but firefighters urge pet owners to practice getting their pets to safety as well.
As families spend vacations away from home during the summer months, they often leave their animals with less supervision.
Belvedere Fire Chief Chad Hyler is encouraging families to equip their homes with the latest in fire safety technology to protect human and animal life.
“We also encourage pet owners to use a window cling, posted near the front of the home, to help our firefighters quickly identify the accurate number of pets inside so they can be rescued once the humans are safe,” he said.
Firefighters remind pet owners to evacuate pets on a leash or in a pet carrier if possible, and know your pets hiding places.
Also remember to extinguish open flames. Pets are generally curious and will investigate cooking appliances, candles or even a fire in your fireplace.
Take a walk around your home and look for areas where pets might start fires inadvertently, such as the stove knobs, loose wires and other potential hazards.
Secure young pets, especially young puppies, that should be kept away from potential fire-starting hazards when you are away from home. When leaving pets home alone, keep them in areas or rooms near entrances where firefighters can easily find them.
Practice escape routes with pets and keep collars and leashes available in case of an emergency and keep your window cling information updated.
Many participating fire departments will have these stickers, including Belvedere Fire Department. They are also for sale at most pet stores.
Stickers can be picked up at 204 Hampton Ave. in Belvedere and are offered free at www.adt.com/pets.
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For Gen Y, Tiny Is the New Small
Condo and apartment developers in cities nationwide are thinking small in an effort to keep prices low and satisfy Gen Y buyers who are more concerned about location than they are about spacious accommodations.
The more expensive a city, the smaller the new developments. In San Francisco, there are a number of complexes where units range from 250 to 350 square feet. In Vancouver, British Columbia, there is a “micro-loft” building where apartments are 270 square feet.
“For Gen Y, the home is a place to live out of, not to live in,” says John McIlwain, a senior fellow for housing at The Urban Land Institute in Washington D.C. “They don’t think of this as a sacrifice. It’s just their lifestyle.”
Source: MSNBC.com, Jane Hodges (07/08/2010)
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Don’t Let Buyers Move in Before Closing
“If the buyers need a place to live until their property closes, put them up at your house, in a hotel, send them on a vacation, but whatever you do, avoid allowing them to take possession of the property prior to closing,” says Inman columnist Bernice Ross.
Ross believes that liability is too great and the risk of failure to close too severe when sellers let buyers move in early, but if such a situation is unavoidable, here are some of her key recommendations.
· Insist that the buyers sign a separate lease agreement with a two- or three-month security deposit.
· Use a lease agreement generated by an attorney or other real estate professional.
· Make sure that there is appropriate insurance in place. Standard homeowners insurance doesn’t cover the situation.
· Document the condition of the property with extensive photos and videos.
Source: Inman News, Bernice Ross (07/06/2010)
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Demand Down for Pricey Vacation Homes
The demand for expensive vacation properties has no official gauge, but reports from places like the Hamptons on New York’s Long Island, Key West, Fla., and Martha’s Vineyard in Massachusetts were all similarly jubilant in the first quarter of this year.
The second quarter was a different story with demand for luxury properties apparently fading. “There is a lot of concern about a double-dip recession that’s keeping people on the sidelines, especially at the high end,” says Mark Goldman, a mortgage broker with Cobalt Financial Corp. in San Diego.
Buyers of second homes are being asked to put down as much as 40 percent to get a loan at a time when many of them still don’t feel like their jobs are secure, says David Crowe, chief economist for the National Association of Home Builders.
“It’s discretionary spending,” Crowe says. “It’s something people are only going to do when they feel good about their situations.”
Source: Bloomberg, Kathleen M. Howley (07/08/2010)
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Mortgage Applications Decline for 8th Week
Applications for mortgages to purchase property declined again last week, falling eight out of the last nine weeks, according to the Mortgage Bankers Association.
The purchase index decreased 2 percent last week compared with the previous week on an adjusted basis. The unadjusted purchase index declined 2.3 percent and was down 34.7 percent compared to the same week a year ago.
“For the month of June, purchase applications declined almost 15 percent relative to the prior month, and were down more than 30 percent compared to April, the last month in which buyers were eligible for the tax credit,” said Michael Fratantoni, MBA’s vice president of research and economics.
With mortgage rates at record lows, applications to refinance existing mortgages increased 9.2 percent from the previous week.
Mortgage rates were at near-record lows:
· 30-year fixed-rate mortgages increased to 4.68 percent from 4.67 percent;
· 15-year fixed-rate mortgages increased to 4.11 percent from 4.06 percent;
· 1-year ARMs increased to 7.20 percent from 7.05 percent.
Source: Mortgage Bankers Association (07/07/2010)
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Rents Rise as Apartment Vacancies Fall
Apartment vacancies were down and rents were up last month as people got tired of living in their parents’ basements and rented a place of their own.
Nationally, the apartment vacancy rate was 7.8 percent at the end of June, according to research firm Reis Inc., down from 8 percent in the first quarter.
Rents rose 0.7 percent from April to June, the largest quarterly gain in two years.
The advantage hasn’t returned “completely back to owners right now,” says Hessam Nadji, managing director at real estate firm Marcus & Millichap. “But we’re well under way to see that balance shift back.”
Source: The Wall Street Journal, Nick Timiraos (07/08/2010)
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Relocation News Is Getting Better
The economy is normalizing with only 1 percent of those in a recent survey saying they were moving because they lost their home to foreclosure, according to Relocation.com, which has been tracking people who move for the last year using a series of surveys.
In February of this year, a survey found 5 percent of respondents saying that was the case.
Also in February, 13 percent of respondents said they were moving because of job loss, but in June only 4 percent moved for that reason.
In the June survey, 4 percent said they planned to purchase a first home when they moved, while 10 percent said they planned to move to a better home in a nicer neighborhood.
Some 18 percent of June movers were previous homeowners who moved and were purchasing a new home, up from 12 percent in February, while 12 percent were former renters who planned to purchase a home in the new locale.
Source: Relocation.com (07/07/2010)
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Fannie, Freddie Cautioned on Energy Loans
A new federal program that encourages municipalities to lend homeowners money to add energy-efficient features to their properties has gotten a thumbs down from the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac,
The program called Property Assessed Clean Energy or PACE allows local governments to sell municipal bonds and let homeowners use special property-tax assessments to pay off the cost of improvements over 15 to 20 years.
FHFA has raised concerns that these are first-lien loans, which subordinates first mortgages. It told Fannie and Freddie to avoid financing homes with this kind of debt. PACE supporters say the program is no different from property-tax assessments to pay for sewers and road improvements.
U.S. Reps. Henry Waxman (D., Calif.) and Barney Frank (D., Mass.) have called on government agencies to modify the program so neither taxpayers nor mortgage investors are likely to lose money.
Source: The Wall Street Journal, Nick Timiraos (07/07/2010)
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Mortgage Rates Hit Another Record Low
The average interest on a 30-year fixed mortgage dipped to a new record low of 4.57 percent this week — down from 4.58 percent a week ago, according to Freddie Mac, which began tracking rates in 1971.
Still, the low rates may not provide much of a boost for the housing market because many people do not qualify for new mortgages or have already obtained loans at low rates this year.
Source: Indianapolis Star (07/09/10)
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Million-Dollar Borrowers Defaulting
More than 14 percent — one in seven — borrowers with mortgages greater than $1 million have stopped paying them. Slightly more than 8 percent of mortgages of less than $1 million are delinquent, according to real estate analytics firm CoreLogic.
“The rich are different: They are more ruthless,” says Sam Khater, CoreLogic’s senior economist.
CoreLogic points out that the wealthy don’t seem to be particularly worried about the concerns of lesser earners like being sued by their lender or prevented from getting a mortgage in the future.
Source: The New York Times, David Streitfeld (07/08/2010)
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What to Look for in an Outdoor Kitchen
Outdoor kitchens continue to be one of the hottest trends in home décor, but not all of them are created equal.
Here are some things to consider when evaluating the safety and durability of this attractive yet vulnerable feature:
• Is there adequate ventilation? Extensive outdoor cooking spaces should be carefully designed to keep smoke and odors away from dining spaces.
• Was the installation done by licensed and insured installers? If something does goes wrong — even years later — these professionals will stand behind their work.
• Are the cabinets, countertops, and appliances really weather proof and likely to hold up?
Source: The Plain Dealer (Cleveland, Ohio), Roxanne Washington (07/01/2010)
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Job Market Still Holding Back Housing
The one factor that would certainly push up demand for homes is increased employment, but many analysts are now predicting that employment won’t revive significantly until 2011.
This doesn’t bode well for the immediate recovery of the housing market. “If you’re looking for a silver lining in housing, you aren’t going to find it here,” Mike Larson of Weiss Research said in a report.
“The overall economy is rolling over, consumer confidence is slumping, and, most importantly, we just aren’t creating jobs,” Larson added. “With so many Americans unemployed or underemployed, the housing market is going to keep hurting.”
Source: U.S. News & World Report, Luke Mullins (07/01/2010)
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Many HAMP Modifications May Fail
Fitch Ratings Ltd. forecasts that borrowers whose loans are modified under the federal Home Affordable Modification Program, or HAMP, are 65 percent to 75 percent likely to re-default within a year.
Fitch says the failure rate is high because borrowers have too much other debt, including car loans, credit cards, and other obligations.
Officials defend the program, saying that if HAMP saves the homes of one-third of the borrowers, it is a success.
Source: The Wall Street Journal, James R. Hagerty (06/16/2010)
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Mortgage Bonds Boom Drives Rates Down
Residential mortgage bonds backed by the U.S. government have become a safe haven for investors again, helping to drive mortgage rates to record lows.
The average interest on 30-year fixed loans fell this week to 4.58 percent, down from 4.69 percent a week ago, reports Freddie Mac.
Relatively few home owners are refinancing at the bargain rates, however, in large part because many eligible borrowers did so when rates were almost as low last year.
Source: The Wall Street Journal, Mark Gongloff (07/02/10)
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Walkability Is a New Desired Amenity
The increasing interest among Americans in walkability is spawning a change in attitude about the desirability of not only urban areas, but also suburbs — both old and new — that have nearby amenities that can be reached on foot.
Having amenities within walking distance can boost the value of a home as much as $3,000, according to one study. Another found that “location efficiency,” a measure of transportation costs, affected the number of foreclosures in a neighborhood.
Source: The Wall Street Journal, Nancy Keates (07/02/2010)
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States Attract Retirees With Favorable Taxes
States are wooing retirees with tax breaks. On average, retirees pay only half the state income tax levied on working-age people, according to researchers at the University of New Hampshire and Georgia State.
Seven states — Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming — don’t tax personal income at all. New Hampshire and Tennessee tax interest and dividends but not other income. Still, these states may not offer the best total deal for seniors because other states have crafted special programs that reduce taxes and fees across the board.
Considering everything, here are the states that tax experts say offer the best deals for residents older than 65:
1. Georgia
2. Pennsylvania
3. Mississippi
4. Illinois
5. Michigan
6. Kentucky
7. New York
8. South Carolina
9. Delaware
10. Louisiana
Source: Forbes, Ashlea Ebeling (06/28/2010)
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Foreclosures Account for 31% of Sales
Online foreclosure marketplace RealtyTrac reported today that homes in foreclosures accounted for 31 percent of the residential sales in the first quarter of 2010. The average sales price of these properties was nearly 27 percent below the average sales price of properties not in foreclosure.
RealtyTrac expects foreclosure discounts to stay between 25 percent and 30 percent as lenders steadily release foreclosures. The average price of foreclosed properties is $171,971.
Overall, foreclosures are down 14 percent in the first quarter compared to the fourth quarter of 2009. They are down 33 percent from the peak during the first quarter of 2009.
Source: RealtyTrac and Bloomberg, Dan Levy (06/30/2010)
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Factory-Built Homes Gaining Acceptance
Factory-built homes are gaining popularity among buyers who appreciate the speed with which they can be constructed as well as their discounted price – 10 to 35 percent less compared to stick built, according to the Manufactured Housing Institute.
One problem is the difficulty potential buyers have finding information and qualified builders. “We have not, as an industry, learned to promote our homes,” admits Vic DePhillips, chairman of the National Association of Home Builders’ (NAHB) Building Systems Councils.
Some locales still aren’t accepting of factory-built technology, but increasing numbers of zoning boards have come to understand that finished factory-built homes look no different than stick built, says John Perry, chief executive of Contempri Industries Inc., a modular house manufacturer in Pinckneyville, Ill.
Source: Chicago Tribune, Leslie Mann (06/25/2010)
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Analysts Question Fannie Mae Plan
Fannie Mae intends to file lawsuits against so-called strategic defaulters and force them to wait seven years before obtaining another mortgage backed by the organization. But experts wonder how the firm will determine which home owners defaulted strategically.
Experts also question whether the policy is viable given its departure from White House initiatives to bolster the housing market.
The policy is intended to force borrowers to pursue short sales or surrender the deed, rather than enter foreclosure, says Fannie Mae.
Source: New York Times, David Streitfeld 06/25/10
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10 Most Recession-Proof U.S. Cities
The most recession-proof cities didn’t see home prices surge in the first place, says the MetroMonitor, a quarterly report released by Brookings Institute’s Metropolitan Policy Program.
MetroMonitor identified 21 large metro areas that have enjoyed robust economies and stable labor and housing markets in the last few years.
“Most of these cities have some general characteristics in common,” says Howard Weil, author of the report and a fellow at the Metropolitan Policy Program. “They didn’t experience huge housing bubbles followed by a crash, and their economies weren’t rooted in the auto industry.”
The top 10 stable cities identified by MetroMonitor are:
1. Albany, N.Y.
2. Augusta, Ga.
3. Austin, Texas
4. Baton Rouge, La.
5. Buffalo, N.Y.
6. Columbia, S.C.
7. Dallas
8. Des Moines, Iowa
9. El Paso, Texas
10. Honolulu
Source: CNNMoney.com, Hibah Yousuf (06/24/2010)
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Tax Credit Deadline Extension in Jeopardy
Up to 180,000 home buyers will lose their tax credit through no fault of their own if Congress fails to pass an extension to the home buyer tax credit by June 30 when the closing deadline expires.
Included in that number are thousands of home buyers in every state of the union, from 390 in Wyoming to 17,700 in California, according to estimates by the National Association of REALTORS®.
“We are strongly urging the Senate and the House to act quickly to pass this legislation and ease the minds and pocketbooks of these home buyers,” said NAR President Vicki Cox Golder, owner of Vicki L. Cox & Associates in Tucson, Ariz.
“These are not buyers who just entered into the market. These are buyers who previously met all the qualifications for the tax credit, but find themselves at the mercy of a workflow jam with lenders or other delays such as lapses in the National Flood Insurance Program, Rural Housing Service, and new home construction, and might not be able to complete the purchase of their homes by the current deadline,” said Golder. “It would be a tragedy for them not to be able to complete the purchase in time to claim the credit.”
NAR issued the following state-by-state estimate of the number of home sales that would be delayed beyond the June 30 deadline; numbers are rounded to the nearest 10:
Alabama, 2,590; Alaska, 830; Arizona, 5,440; Arkansas, 2,090; California, 17,700; Colorado, 3,390; Connecticut, 1,770; Delaware, 400; District of Columbia, 300; Florida, 14,830; Georgia, 6,270; Hawaii, 710; Idaho, 1,270; Illinois, 7,030; Indiana, 3,560; Iowa, 2, 030; Kansas, 1,840; Kentucky, 2,540; Louisiana,1,800; Maine, 840; Maryland, 2,630; Massachusetts, 3,930; Michigan, 6,470; Minnesota, 3,760; Mississippi, 1,530; Missouri, 3,600; Montana, 760; Nebraska, 1,110; Nevada, 3,800; New Hampshire, 690; New Jersey, 4,300; New Mexico, 1,160; New York, 9,190; North Carolina, 4,890; North Dakota, 460; Ohio, 8,510; Oklahoma, 2,760; Oregon, 2,090; Pennsylvania, 5,830; Rhode Island, 500; South Carolina, 2,460; South Dakota, 500; Tennessee, 3,910; Texas, 15,340; Utah, 1,130; Vermont, 400; Virginia, 3,890; Washington, 3,190; West Virginia, 940; Wisconsin, 2,690; and Wyoming, 390.
Source: NAR
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Mortgage Applications Keep Sliding
The number of applications for mortgages to purchase homes continued to decrease last week, down 3.3 percent compared to the previous week on an adjusted basis, according to the Mortgage Bankers Association weekly survey.
On an unadjusted basis, the purchase index declined 3.8 percent and was down 36 percent from the same week a year ago.
This was the seventh out of eight weeks purchase applications have declined, keeping the purchase index at 13-year lows.
Driven by financial market volatility, mortgage rates declined again last week with 15-year loans reaching a record low, according to Michael Fratantoni, MBA’s vice president of research and economics.
30-year fixed-rate mortgages decreased to 4.67 percent from 4.75 percent;
15-year fixed-rate mortgages decreased to 4.06 percent from 4.19 percent;
1-year ARMs were unchanged at 7.05 percent.
Source: Mortgage Bankers Association (06/30/2010)
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House Approves Tax Credit Extension
The U.S. House on Tuesday agreed to give home buyers until Sept. 30 to close on eligible properties and still qualify for the home buyer tax credits.
The current deadline requires buyers to close by June 30 in order to qualify.
The Senate must still approve the measure. Supporters there are planning to tack the bill onto one that would extend unemployment benefits, hoping the popularity of the tax credit extension will overcome Senate objections to extending unemployment.
Practitioners estimate that at least 200,000 buyers won’t be able to close today because settlement offices are slammed, short sales are delayed,and lenders are overwhelmed.
Critics say extending the deadline is an invitation for more fraud.
Keep up with the latest news from NAR about the proposed extension.
Source: Reuters News, Corbett B. Daly (06/29/2010)
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Financial Reform Bill Gives Nod to Simple Loans
Under the proposed financial reform compromise bill, a mortgage lender would have to keep 5 percent of each mortgage when it is securitized, unless the mortgage is a plain vanilla type of loan that the government dubs a “qualified residential mortgage.”
Analysts believe that such an incentive is means that the mortgages available to most borrowers will come from conventional institutions like banks. If more exotic loans are available, they will be offered by private lenders that charge significant fees to take these risks.
Source: Bankrate.com, Holden Lewis (06/29/2010)
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Mortgage Rates Hit an All-Time Low
Average interest on a 30-year fixed mortgage fell to an all-time low of 4.69 percent this week, down from 4.75 percent a week ago, reports Freddie Mac.
Although rates have held below 5 percent since early May, Michael Fratantoni of the Mortgage Bankers Association notes that demand for purchase loans has fallen in six of the past seven weeks and now is at a 13-year low. Consumers have grown used to low rates, he explains, adding that they balk at buying because they are more concerned about stagnant wages and high unemployment.
Source: Washington Post, Dina ElBoghdady (06/25/10)
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What Do Apartment Dwellers Really Want?
Nationwide apartment rental firm ApartmentGuide.com says the majority of apartment seekers between June 2009 and June 2010 looked for apartments in the $500 to $700 price range, followed by $700 to $900.
Distance from the city center was also a factor, with the majority of apartment hunters seeking homes five miles form the city center, followed by 10 miles, then 20 miles.
These are the other top features that apartment seekers sought over the last 12 months:
• Washer and dryer in unit
• Pets (allowed)
• Air conditioning
• Some paid utilities
• Washer and dryer connections
• Dishwasher
• Balcony
• Garage
• Cable-ready
• Furnished available
• Fitness center
• Swimming pool
• Short-term lease available
• Gated access
• Oversized closets
Sources: ApartmentGuide.com (06/22/2010)
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