Archive for September, 2010
Multifamily Property Market Is on the Mend
Sales of multifamily housing is picking up nationwide, commercial practitioners say.
Buyers believe the sector is a sound bet because current prices are below construction costs in many cases and rental business is improving. Plus, there has been little additional development in the past couple of years and some industry analysts believe that shortly there will be a shortage in some markets.
Financing for apartment buildings is at a 50-year low, with seven- to 10-year mortgages available for as little as 4 percent.
The sector could face some pain. Yields are about 5 percent while a year ago investors were getting close to 6 percent with about a quarter of the transactions involving distressed sellers.
Source: The Wall Street Journal, Dawn Wotapka (09/22/2010)
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Are Cramdowns the Answer to Underwater Properties?
The rising number of home repossessions could encourage Congress to pass cramdown legislation, something lenders fought vigorously and prevailed against when bankruptcy laws were reformed.
But the cramdown concept has been working successfully in Chapter 12 of the bankruptcy code, which affects farmland.
Cramdowns, or more properly “bifurcation,” divide the value of the debt between that which reflects the current appraised value of the property and that which is now unsecured because the underlying value has declined. The borrower is required to pay the secured portion of the loan and the remainder is treated as unsecured debt – and generally forgiven.
Economists for the Federal Reserve Bank of Cleveland wrote in a research paper that is getting a lot of attention that the negative effect of cramdowns in agricultural lending has been minor. Cramdowns succeed in keeping farmers on their properties and banks get what they would have gotten if they had foreclosed.
Source: Universal Syndicate: Lew Sichelman (09/19/2010)
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Fannie, Freddie in the Home-Selling Business
Fannie Mae and Freddie Mac repossessed more than 191,000 homes during the first six months of 2010, twice as many as a year earlier.
The mortgage financiers must act carefully to avoid flooding the market with foreclosures, which tend to depress neighborhood home prices in the process.
As an alternative, Fannie Mae has launched a pilot “lease-and-hold” program in which foreclosures are rented rather than sold; the move could pose challenges, however, as the firm takes on the new role of property manager.
Source: The Wall Street Journal, Nick Timiraos (09/17/10)
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Where Is the Shadow Inventory?
For the last year, the real estate industry has been talking about shadow inventory and the coming flood of distressed properties. Where are they?
Here’s what’s happening, according to a recent paper by Alan Mallach, a senior fellow the Brookings Institution:
· Some delinquencies have been resolved through loan modifications or people working out the problems on their own.
· Banks are getting better at managing short sales.
· Investors are aggressively buying up properties, sometimes in bulk, directly from the banks or at courthouse auctions so they don’t hit the market.
The likeliest outcome, Mallach predicts, is a steady flow of foreclosures over a long timeframe that will prevent another crash in home prices, but will probably lead to low or no appreciation in home prices.
Source: The Wall Street Journal, Nick Timiaros (09/16/2010)
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Number of Price Reductions Rise in Some Cities
Price reductions on properties for sale have increased for the third consecutive month to 26 percent, according to statistics provided by Trulia.com.
While home sellers in some cities cut prices aggressively, those in 24 of the 50 cities tracked by Trulia held steady.
“We’re seeing gradual improvement in many U.S. cities – several for consecutive months,” said Pete Flint, CEO of Trulia. “What this shows us is that while we’re in for a long climb to bring stability back to the housing market and while it’s going to take time, that climb appears to at least be underway in some parts of the country.”
Cities with the highest percentage of price reductions in September were:
1. Minneapolis, 43 percent
2. Milwaukee, 40 percent
3. Phoenix, 39 percent
4. Mesa, Ariz., 37 percent
5. Albuquerque, N.M., 35 percent
6. Memphis, Tenn., 35 percent
7. Boston, 35 percent
8. Tucson, Ariz., 34 percent
9. Baltimore, 34 percent
10. Dallas, 34 percent
Cities with the lowest percentage of price reductions in September:
1. Detroit, 16 percent
2. Miami, 18 percent
3. Oakland, Calif., 19 percent
4. El Paso, Texas, 19 percent
5. San Jose, Calif., 20 percent
6. New York, 20 percent
7. Los Angeles, 22 percent
8. San Antonio, 23 percent
9. Denver, 23 percent
10. Fort Worth, Texas, 23 percent
Source: Trulia.com (09/15/2010)
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Home Buying and Selling Tips for Fall
HGTV’s real estate site Front Door says the weeks between now and the end-of-the year holidays are the best ones to find a bargain. Here are some of their tips for fall buyers and sellers:
Fall Sellers:
· Replace faded summer plants with fall-blooming flowers and add autumn decorations to the home.
· Expect low-ball offers and be prepared with higher counter offers.
· Freshen up listing photos by shooting pictures that make it less obvious that the seasons have changed.
· Price the home to sell. A price that is a little lower than the competition may be a winning move.
· Be willing to show the property and hold open houses whenever potential buyers are ready.
Fall Buyers:
· Look for motivated sellers who have a reason to move on by the end of the year.
· Explore new constructions. Builders are often particularly interested in selling before the new tax year.
· Beware of fall maintenance issues. Consider overflowing gutters and leaf-covered lawns warning signs.
· Shape offers carefully. Even in this market it is possible to turn sellers off with a too-low bid.
Source: FrontDoor.com (09/16/2010)
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CoreLogic Predicts Days On Market Could Double
The majority of the 3.3 million delinquent mortgages will end in foreclosure and that will drive down prices before year-end, CoreLogic analysts said Thursday.
CoreLogic also predicted that the additional inventory of foreclosed homes could double the time to sell from the current 11-month average.
“Given that the tax credit simply pulled demand forward, the distressed share is expected to rise … during the fall, when non-distressed seasonal sales begin to decline,” analysts said.
Source: Reuters News (09/16/2010)
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10 Reasons to Buy a Home
Time magazine is being overly pessimistic in its recent cover piece that called into question the benefits of homeownership. In fact, now is a great time to buy. And, what’s more, tomorrow will be a great time to own, because the fundamental strength of homeownership hasn’t changed.
Why is now a great time to buy? Here are 10 reasons:
1. You can get a good deal. Prices are down 30 percent on average. They’re at a level that makes sense for people’s income.
2. Mortgages are cheap. At 4.3 percent on average for a 30-year fixed-rate mortgage, your costs to own are down by a fifth from two years ago.
3. You can save on taxes. When you add up the deductions for mortgage interest and others, the cost of owning can drop below renting for a comparable place.
4. It’ll be yours. The one benefit to owning that never changes is that you can paint your walls orange if you want (generally speaking; there might be some community restrictions). How many landlords will let you do that?
5. You can get a better home. In some markets, it’s simply the case that the nicest places are for-sale homes and condos.
6. It offers some inflation protection. Historically, appreciation over time outpaces inflation.
7. It’s risk capital. If the economy picks up, you stand to benefit from that, even if you’re goal is just to have a nice place to live.
8. It’s forced savings. A part of your payment each month goes to equity.
9. There is a lot to choose from. There are some 4 million homes available today, about a year’s supply. Now’s the time to find something you like and get it.
10. Sooner or later the market will clear. The U.S. is expected to grow by another 100 million people in 40 years. They have to live somewhere. Demand will eventually outpace supply.
Source: Wall Street Journal, Brett Arends (9/16/10)
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70 Percent Say Buying Now is Good
A survey by Fannie Mae shows that 70 percent of Americans believe it is a good time to buy a home.
That is up from 64 percent in January 2010.
Still, 33 percent–up from 30 percent in January–say they’ll rent next time around.
About 67 percent believe housing is a safe investment, down from 83 percent of people questioned in a similar survey in 2003.
Source: Reuters News (09/16/2010)
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Owners, Practitioners Think Prices Will Fall
About 48 percent of real estate professionals and 33 percent of homeowners believe home prices will decline over the next six months, according to a survey by HomeGain.
Only 10 percent of real estate professionals and 18 percent of homeowners believe home prices will increase in the next six months.
Sellers continue to doubt the accuracy of prices recommended by practitioners, with 79 percent believing that their homes are worth more than professional appraisals.
On the other side of the fence, 69 percent of practitioners say that their home-buying clients think homes for sale are overpriced.
Source: Real Estate Economy Watch, Steve Cook (09/21/2010)
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Most Large Metros See Economic Improvement
A quarterly report released Wednesday by Brookings Institute’s Metropolitan Policy Program listed the top 20 strongest performing metropolitan areas. Most of these cities experienced an increase in manufacturing jobs and only modest declines in home prices.
“While most large metropolitan areas saw growth in output and jobs in the second quarter, it’s far too early to open the champagne. The good news isn’t all that good,” Howard Wial, a Brookings fellow, said in a statement. “We are nowhere near where we were prior to this recession.”
The 20 strongest performing metro areas were:
1. Albany, N.Y.
2. Augusta, Ga.
3. Austin, Texas
4. Baton Rouge, La.
5. Buffalo, N.Y.
6. Dallas
7. Des Moines, Iowa
8. El Paso, Texas
9. Honolulu
10. Houston
11. Jackson, Miss.
12. Kansas City, Mo.
13. Little Rock, Ark.
14. Madison, Wis.
15. McAllen, Texas
16. Oklahoma City, Okla.
17. Omaha, Neb.
18. Rochester, N.Y.
19. San Antonio, Texas
20. Washington, D.C.
Source: CNNMoney.com, Annalyn Censky (09/15/2010)
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Regulator: Banks Should Help Bail Out GSEs
Banks should assume some of the cost for bailing out Fannie Mae and Freddie Mac because they sold them bad mortgages, Edward DeMarco, the acting director for the Federal Housing Finance Agency, said Wednesday.
In written testimony submitted for a House Financial Services subcommittee hearing, DeMarco said banks have a legal obligation to buy back bad loans and the government may take further action to force buybacks if, “discussions do not yield reasonable outcomes soon.”
The top Democrat on the committee, Rep. Paul Kanjorski, agreed that banks must share the blame. “We must begin to think about approaches for recouping taxpayers’ money in the long run,” he said. “We found a way to pay for the savings and loan crisis, and we can surely find a way to recover the costs associated with this crisis.”
Source: The Associated Press, Alan Zibel (09/15/2010)
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Repossessions Rise as Defaults Drop
Lenders repossessed more homes in August than they have since the beginning of the housing crisis even as the number of properties entering the foreclosure process declined for the seventh month in a row, according to foreclosure listing firm RealtyTrac Inc.
Banks have increased foreclosures to clear out their inventories of bad loans, but despite repossessing 95,364 homes last month, they still have thousands to go, estimates Rick Sharga, RealtyTrac senior vice president.
Analysts predict that this shadow inventory will prevent home prices from bottoming out, despite a 28 percent decline in prices from 2006.
“Whether it’s the sidelined, shadow, or current inventory, the issue is there’s more supply than demand,” said Oliver Chang, Morgan Stanley housing strategist. “Once you reach a bottom, it will take three or four years for prices to begin to rise 1 or 2 percent a year.”
Source: The Associated Press, Alex Veiga (09/16/2010) and Bloomberg, John Gittelsohn and Kathleen M. Howley (09/15/2010)
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New Program Aimed to Keep Owners Paying
As strategic defaults rise, Loan Value Group, headed by Howard “Howie” Hubler, a mortgage trader who was deeply involved in Wall Street losses three years ago, is offering banks a way to resolve the problem.
The program involves the investors structuring a reward for borrowers, usually 10 percent of the loan balance, payable when the loan is paid off. While the reward won’t give the borrower positive equity, it could give him a reason to keep paying.
The plan is paid for by whomever owns the loan. So far, three hedge funds have signed up. Loan Value Group tells investors that the program isn’t affected by accounting rules that otherwise would require a modified mortgage to be written down.
Borrowers pay nothing to participate and participation doesn’t affect their credit scores.
Source: The Wall Street Journal, Nick Timiraos (09/13/2010)
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Strategic Mortgage Defaults on the Rise
They work like this: The borrower owes $250,000 on a home that’s now worth $200,000. They stop paying the mortgage, but it takes the bank six months to a year to foreclose and evict the borrower. Meanwhile, he or she pays no house payments and the bank absorbs the negative equity.
The drawback for the borrower is damaged credit and the possibility in some states that the bank will sue for a deficiency judgment.
Paola Sapienza, a professor of finance at Northwestern University and an expert on strategic defaults, points to what he calls the “contagion effect.” As the practice gets more common, the stigma declines and more people say, “Look I’ve done it, and I’m fine.”
Source: St. Louis Post-Dispatch, Stephen Deere (09/12/2010)
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More Luxury House Hunters May Buy
Interest in luxury real estate is picking up, according to a survey for United Marketing, which found that the percentage of people with incomes greater than $306,000 a year who plan to buy homes has risen from 3 percent in 2008 to 11 percent this year.
Laurie Moore-Moore, CEO of The Institute for Luxury Home Marketing, said that while she doesn’t believe this market is booming, she is seeing sellers who are more realistic about prices and that is persuading affluent buyers to consider purchases.
“Luxury home buyers have been buying this summer,” said Moore-Moore. “After waiting in the wings, many affluent buyers spent the summer shopping for value and snapping up trophy properties.”
Source: UPI, Steve Cook (09/12/2010)
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African-American exhibit is coming to Racing Hall of Fame
An exhibit featuring the contributions of the African-American community to the equine and Thoroughbred industries in the area will be featured next February during Black History Month at the Aiken Thoroughbred Racing Hall of Fame and Museum.
“We’re reaching out to the African-American community to people who may have photographs, stories or clippings or anything else they may want to share for the exhibit,” said Lisa Hall, City of Aiken Parks, Recreation and Tourism Department and Aiken Thoroughbred Racing Hall of Fame program supervisor. “We’ve already had a couple of e-mail inquiries.”
African-Americans have played a significant role in the sport of Thoroughbred racing. African-American jockeys during a 27-year period – from 1875-1902 – were a dominant force in the Kentucky Derby as 11 different riders won the Run for the Roses 15 times during that span. African-Americans have made significant contributions as horsemen as owners, trainers, grooms and exercise riders.
“People can call me at the office if they want to set up an appointment to come by and show me what they have. I’ll be more then happy to sit down and take a look,” said Hall.
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30-Year Mortgage Rates Rise
Average interest on 30-year fixed mortgages rose for the first time since June, lifting to 4.35 percent this week from 4.32 percent last week and 5.07 percent a year ago, reports Freddie Mac. Rates for 15-year fixed loans held at 3.83 percent, the record low set last week.
Also, the five-year adjustable-rate mortgage averaged 3.56 percent, compared to 3.54 percent last week and 4.51 percent a year ago; and the one-year ARM fell to 3.46 percent from 3.5 percent last week and 4.64 percent a year ago.
Source: The Wall Street Journal, Amy Hoak (09/10/10)
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Recipients of First Tax Credit to Begin Payback
Borrowers who took advantage of the original 2008 home buyer tax credit must begin paying the credit back this year. The Inspector General for Tax Administration (TIGTA) says 950,000 owe money.
The required payments are amortized over 15 years – $500 per year. If the property is sold, the credit must be paid at closing.
The TIGTA says the IRS has the incorrect purchase date in its database for some taxpayers who took the original credit. These people may never be identified as owing money, it admits.
Source: Bankrate.com, Kay Bill (09/09/2010)
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Expert Proposes Rewarding Good Borrowers
At least one mortgage financing expert thinks that the government ought to consider rewarding people who are in financially sound shape and who want to continue to pay their underwater mortgages on time.
Keith Gumbinger, a vice president at the HSH Associates mortgage-consulting firm, told Fortune magazine that he wants the federal government to issue what he calls, “value gap coverage.”
It would work this way: You bought a home for $350,000 in July 2006 with 100 percent financing at 6.8 percent. Now the property is worth $280,000, but your mortgage balance is $334,000. You can’t refinance because you are underwater, but willing and able to pay. In Gumbinger’s scenario, you’d get a new $280,000 mortgage at 4.7 percent. The government would guarantee the remaining $54,000, on which you’d pay 4.7 percent interest to the current mortgage holder. This reduces your payments by $6,700 a year – about 25 percent. No mortgage lender has to take a write down.
Source: Fortune, Allan Sloan (09/07/2010)
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LendingTree Sues Competitors
LendingTree is suing its competitors for patent infringement, claiming that they are illegally using its online system for managing loans.
In a lawsuit filed on Wednesday, LendingTree sought a jury trial to force Zillow Inc., NexTag Inc., Adchemy Inc. and QuinStreet Inc. to compensate it for lost profits and patent infringement.
Zillow says its software differs substantially from LendingTree’s. Officials for NexTag and QuinStreet didn’t return calls. Adchemy’s attorney refused to comment.
Source: Charlotte Observer, Christina Rexrode (09/09/2010)
Commercial Real Estate Yields Spur Investors
Yields on U.S. commercial real estate are nearing a record high compared to Treasury bonds. Many investors take that as a signal to buy property.
Capitalization rates, a measure of real estate yields, averaged 7.22 percent in the second quarter, as calculated by the National Council of Real Estate Investment Fiduciaries. That was 4.29 percentage points higher than the yield on 10-year government bonds as of June 30 and 4.75 percentage points higher than Treasury yields as of Aug. 31.
These returns are near the record 5.39 percentage points in the first quarter of 2009, when the U.S. was dealing with the worst economic downturn since the Great Depression. The spread shrank to less than 80 basis points when commercial real estate prices peaked in 2007.
“The data indicate that real estate is poised for a rebound,” says Gerardo Lietz, who advises pension funds on property investments.
Source: Bloomberg, Hui-yong Yu (09/01/2010)
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Housing Less Likely to Be Wealth Builder
The housing market may stabilize, but some economists believe that real estate will never again be the investment it once was.
Stan Humphries, chief economist for Zillow.com, predicts that in the future housing values will only keep up with inflation. “All those theories advanced during the boom about why housing is special — that more people are choosing to spend more on housing, that more people are moving to the coasts, that we were running out of usable land — didn’t hold up.”
Dean Baker, co-director of the Center for Economic and Policy Research, says it will take 20 years for the market to recover the $6 trillion lost since 2005 and values will never catch up.
Bob Walters, chief economist of the online mortgage firm Quicken, is more optimistic. “You have to live somewhere,” he says. “In three or four years, people will resume a normal course, and home values will continue to increase.”
Source: The New York Times, David Streitfeld (08/22/2010)
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Mortgage Applications Slip Slightly
Applications to purchase a home rose last week on a seasonally adjusted basis compared to the previous week, according to the Mortgage Bankers Association weekly survey.
On an unadjusted basis, the purchase index decreased 0.4 percent compared to the previous week and was 37 percent lower than it was the same week a year ago.
“Despite the slight increase in purchase activity in the past week, the continued low level of purchase applications indicates we are unlikely to see an increase in new home sales reported for August or existing home sales reported for September,” says Michael Fratantoni, MBA’s vice president of research and economics.
Refinance applications increased 2.8 percent last week compared to the previous week and are at their highest level since May 1, 2009.
Here’s a look at performances of mortgage rates:
• 30-year fixed-rate mortgages decreased to 4.43 percent from 4.55 percent.
• 15-year fixed-rate mortgages decreased to 3.88 percent from 3.91 percent.
• 1-year ARMs increased to 6.95 percent from 6.84 percent.
Source: Mortgage Bankers Association (09/01/2010)
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No Class-Action Status on Phony Appraisals
A U.S. District court refused a request for class-action status in a suit by First American Corp. shareholders who complained that the title insurer’s stock fell when it was accused of colluding with Washington Mutual to fraudulently inflate home values.
The case was brought by Pennsylvania pension fund, Berks County Employees’ Retirement Fund on behalf of shareholders who invested in First American between April 2006 and November 2007, when New York Attorney General Andrew Cuomo sued First American.
Cuomo accused First American and its eAppraiseIT unit of responding to pressure from WaMu to use appraisers who inflated appraisals.
A New York state appeals court in June 2010 said Cuomo could proceed with the lawsuit.
Source: Reuters News (08/31/2010)
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5 Reasons Homeownership Trumps Renting
The seemingly endless run of bad housing news is discouraging some potential home buyers from considering a purchase. But the truth is that the advantages of homeownership have very little to do with investment gains. The best things about owning a home have a lot more to do with personal comfort and satisfaction.
Here are five of them:
· Be your own landlord. The bank can only kick you out if you don’t pay; a landlord can be much less dependable – deciding to sell the property or choosing to live there themselves.
· Paying the principal is forced savings. Yes, it’s possible that home prices will fall further. It is also possible that your 401(k) will lose value. But over the long haul, both are likely to enjoy modest gains in value.
· Fixed-rate mortgages never rise – and eventually you pay them off. With mortgage rates at record lows, people who buy now are locking in real bargains.
· Good schools. Family-sized rentals are harder to come by in areas with excellent public schools.
· Spacious properties in pleasant neighborhoods. Sizable homes in attractive communities are almost always owned – not rented.
Source: The New York Times, Ron Lieber (08/27/2010)
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Farmers Market offers fresh food, information
My granddaddy was a farmer, and he was constantly sending me home with fresh vegetables after every visit – nothing really beats a fresh grown tomato or bell pepper.
Last week, after I repeatedly told myself I was going to check out the Aiken County Farmers Market, I finally went there for a story. It was a Tuesday morning, but the turnout was still pretty good. One table was set up with milk, eggs and large jars of golden honey. Other tables held fresh okra, blueberries and peppers of the most brightest and vibrant colors.
I find myself envying the lifestyle of a farmer. Spending time outdoors working on a farm sounds like a fun, fulfilling job especially after you gather up the fruits and vegetables you worked so hard to grow. I spent a lot of time on my granddaddy’s farm helping him pick vegetables and feeding his cattle. I enjoyed it immensely, but I was always exhausted by the end of the day. I would help him out for one day and go back to my normal routine while he would continue on with his early mornings and long days of hard, physical labor.
It is hard work, and it’s one of those jobs that never stop. It’s a fragile career, too, as farmers depend on the weather, the most unpredictable and volatile thing in the world, to assist in the growth of their crops.
I know my granddaddy had some rough years on the farm – especially when the price of feed for his cattle increased and people started buying less and less locally. The financial balance was altered – he was spending more money than he was making to keep his farm going. That hasn’t stopped him though; he’s 70, still raising cattle and growing his pepper and bean gardens.
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How to Vet a Builder
For anyone thinking about hiring a builder for custom work, here are some points to consider:
· Hire a good real estate attorney who has experience with new-construction contracts, knows state law, and is familiar with the issues unique to the area in which the property will be built.
· Talk to other customers. Ask how satisfied they are with the builder and how his projects have held up over time.
· Investigate. Search the builder’s name and company online and make sure that there aren’t lots of complaints about him.
· Expect him to negotiate. In this market, a potential customer should be able to expect that a builder will be flexible.
Source: Thinkglink.com, Ilyce Glink (08/27/2010)
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Administration Undecided about Another Tax Credit
Housing and Urban Development Secretary Shaun Donovan said Sunday on CNN’s “State of the Union” that the administration would “do everything we can” to stabilize the U.S. housing market.
Whether it will resurrect the first-time home buyer tax credit is up in the air. Donovan said that the drop in home sales in July was worse than the administration expected.
Donovan also said that the Federal Housing Administration will launch an emergency loan program to help unemployed borrowers stay in their homes and a program to help underwater borrowers refinance.
Source: Bloomberg, Holly Rosenkrantz (08/29/2010)
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Foreclosures Down, But Late Payments Up
The wave of foreclosures appears to be subsiding slightly. According to data from Mortgage Bankers Association’s National Delinquency Survey:
• The percentage of loans on which foreclosure action were started during the second quarter was 1.11 percent, down 12 basis points from last quarter and down 25 basis points from one year ago.
• The percentage of loans in the foreclosure process at the end of the second quarter was 4.57 percent, a decrease of six basis points from the first quarter of 2010, but an increase of 27 basis points from one year ago.
• Loans that were 90 days or more past due or in the process of foreclosure was 9.11 percent, a decrease of 43 basis points from first quarter, but an increase of 114 basis points compared to the second quarter of last year.
“The good news is that foreclosure starts are down, and the inventory of homes anywhere in the process of foreclosure fell for the first time since 2006 and had the largest drop since 2005,” says Jay Brinkmann, MBA’s chief economist.
The bad news is that the percent of loans one payment behind had peaked in the first quarter of 2009 at 3.77 percent and fell to 3.31 percent by the end of 2009. Now that rate has risen to 3.51 percent.
“Only when we see a consistent increase in employment will we see an increase in sales and starts, and a sustained improvement in the delinquency numbers,” Brinkmann adds.
Source: Mortgage Bankers Association (08/26/2010)
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Collectible’ Homes Hit Hard by Downturn
The sales of historic and architecturally-significant homes have been hard hit.
During the boom many of these properties sold for stratospheric prices. Today they languish on the market.
In the Silver Lake neighborhood of Los Angeles, the How House, designed by Rudolph Schindler was listed in September 2008 for $5 million. It is now down to $1.9 million.
A Frank Lloyd Wright-designed property in Pasadena, Calif., known as La Miniatura, was listed by Crosby Doe Associates at $7.7 million. Now it’s down to $5 million and there is a possibility that a Japanese art collector may buy it and move it to Japan.
Source: Associated Press, Jacob Adelman (08/28/2010)
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Mortgage Rates Continue to Fall
Average interest on long-term mortgages slid to a record low for the eighth time in nine weeks and could dip more. Freddie Mac reports that 30-year fixed loans averaged 4.36 percent this week, down from 4.42 percent a week ago; the 15-year fixed rate fell to a new low of 3.86 percent from 3.90 percent; and adjustable-rate mortgages were also below 4 percent.
The Mortgage Bankers Association’s Michael Fratantoni said the group expects that rates “will begin to rise as the economic situation improves along with jobs.”
Source: Pittsburgh Tribune-Review, Sam Spatter (08/27/10)
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Flood Insurance Program in Debt and in Trouble
The National Flood Insurance Program was designed to be self-sustaining, but it’s $19 billion in the hole. The Congressional Budget Office says the program will add $900 million a year to the debt.
The reasons, according to a review by USA Today, include leniency in allowing flooded home owners to rebuild over and over in the nation’s worst flood planes.
Some claimants have received more than 10 times the value of their properties. For instance, the owner of a Fairhope, Ala., home, on Mobile Bay has received $2.3 million claims to repair a $153,000 home. The owner of a $116,000 Houston home has received $1.6 million.
The second big issue is discounts for second-homes, many of them going to wealthy owners in places like Hilton Head Island, S.C., and Longboat Key, Naples, and Sanibel in Florida.
One partial solution would be insisting that recipients of flood insurance payouts raise their homes when they rebuild, but local communities have allowed home owners to evade attempts at enforcing this regulation.
Source: USA Today, Thomas Frank (08/26/2010)
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Amount of Negative Equity Declines Slightly
Nearly 11 million, or 23 percent, of all residential properties with mortgages were in negative equity at the end of the second quarter of 2010, down from 11.2 million and 24 percent from the first quarter of 2010, according to housing analyst CoreLogic.
• Negative equity remains concentrated in five states: Nevada, which had the highest percentage negative equity with 68 percent of all of its mortgaged properties underwater, followed by Arizona (50 percent), Florida (46 percent), Michigan (38 percent), and California (33 percent).
• The biggest declines in negative equity were concentrated in the hardest-hit states. Nevada experienced an 11.8 percentage point decline in negative equity share, followed by California (-1.3), Florida (-1.3), and Arizona (-1.3). About two-thirds of all states experienced a decline in negative equity share. Since peaking in the fourth quarter of 2009, the number of borrowers in a negative equity position has declined by about 350,000.
• The declines were entirely due to foreclosures, not the stabilization or small increases in prices in some markets. The largest decrease in negative equity occurred among those with loan-to-value (LTV) ratios in excess of 125 percent, where the number of negative equity borrowers fell to 4.8 million, down from 5 million last quarter.
• Homes with more equity are appreciating faster than underwater homes. The average values of properties with 50 percent or more equity increased over 1 percent between the fourth quarter of 2009 and the second quarter of 2010. Properties with 25 to 50 percent in equity increased an average of 0.2 percent in that period. However, values fell for every segment in negative equity, with the biggest value decline occurring for properties that are 50 percent or more in negative equity.
“Negative equity continues to both drive foreclosures and impede the housing market recovery. With nearly 5 million borrowers currently in severe negative equity, defaults will remain at a high level for an extended period of time,” says Mark Fleming, chief economist with CoreLogic.
Source: CoreLogic (08/26/2010)
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New Home Sales Fall to 37-Year Low
Sales of new homes fell 12.4 percent in July to the lowest level since the government started keeping records in 1963, the U.S. Commerce Department reported Wednesday.
Single-family home sales fell to a seasonally adjusted annual sales rate of 276,000 units, a 32.4 percent drop from June.
The median sale price for new homes in July was $204,000, a 4.2 percent decline from June, and a 2.9 reduction from July 2009, according to Commerce.
New-home inventory at the end of July was 210,000, a 9.1-month supply at the current sales pace.
Source: The Los Angeles Times, Alejandro Lazo (08/26/2010)
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Home Owners Switching to Natural Plants
Home owners seeking to save money are landscaping their properties with plants that are native to the area.
These gardening design schemes generally require less water. The practice started in the West, where this kind of design is called “xeriscaping” — based on the Greek word for “dry.” But lately, it is spreading all over the country.
Water savings can be significant. According to the Water Research Foundation of Denver, landscape watering accounts for 40 percent to 70 percent of residential water use. Converting to this kind of landscaping can reduce annual household water use by 30 percent.
Source: The Wall Street Journal, Anne Marie Chaker (08/18/2010)
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More African-Americans Moving South
A growing number of African-American families are resettling in Southern states. At least 5 million have moved from Northern to Southern states since 1990, according to U.S. Census Bureau numbers released this month.
African-Americans, many of whose parents and grandparents left the South after the Civil War, began moving back in the 1970s. “They were coming back and reclaiming the South,” says Zandria Robinson, a professor of sociology at the University of Mississippi.
Today, the move is largely driven by economics, with blacks moving to the South for jobs and what Robinson terms, “a new beginning.”
Source: Gannett News Service, Chris Echegaray (08/22/2010)
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Storytime in the Gardens set to begin the fall season in September
Storytime in the Gardens begins its fall season on Tuesday, Sept. 7.
The program invites parents and their young children to curl up on the grass in Hopelands Gardens and enjoy listening to local senior adults read three to four books aloud to the audience.
Storytime in the Gardens will be held every Tuesday at 4 p.m. until Oct. 26 at the grassy area behind the Aiken Thoroughbred Racing Hall of Fame.
This is the 18th year the program is being offered and has had more than a thousand participants in the past.
“It has really grown. It is a good, solid program that children and parents love,” said Hopelands Gardens and Rye Patch supervisor Lisa Hall. “The senior citizens usually read three to four books, and one of the books we will give to the children to take home for free.”
This event is sponsored by the Women of Woodside Inc.
Hall said Storytime in the Gardens is appropriate for children ages 8 and younger.
This is a free program, and families are encouraged to bring a blanket or chair to sit on and snacks are welcome.
In the case of inclement weather, the program will be held at the H. Odell Weeks Activities Center.
Local senior adults who are interested in acting as readers call Hall at 642-7650.
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Survey: A Quarter of Renters Want to Remain So
More than 25 percent of today’s renters do not intend to ever become home owners, based on the results of a survey conducted on behalf of San Francisco-based Trulia.
Of those who do plan to buy, the real estate information search engine found, two-thirds expect to wait more than two years to do so — a trend that could choke recovery of the nation’s housing market.
“Renters converting into buyers are crucial to turning around the housing slump,” says Trulia CEO Pete Flint. Asked by Trulia to identify factors that could persuade them to purchase a home in the next year, poll respondents cited the ability to save for a down payment, finding a new job, and the availability of favorable borrowing costs.
The research was carried out by Harris Interactive, which queried 2,055 U.S. adults, including 1,345 home owners.
Source: South Florida Business Journal (08/18/10)
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Mortgage Applications Jump
Mortgage applications rose 4.9 percent last week as more borrowers refinanced at the lowest rates in decades.
The Mortgage Bankers Association said Wednesday the gain was fueled by a 5.7 percent increase in refinancing applications. The number of loans taken out to purchase homes edged up by less than 1 percent. The numbers are adjusted for seasonal factors.
Refinancing is at its highest level since May 2009 and makes up 82.4 percent of all new loan activity, its highest share since January 2009.
However, low mortgage rates have done little to boost home sales, which have been hurt by high unemployment, slow job growth, and strict credit standards. Purchase activity is 41.5 percent below its level at the end of April, when two federal tax credits for home buyers expired.
Rates have fallen since spring as investors sought the safety of Treasury bonds, lowering their yield. Mortgage rates tend to track those yields.
Interest rates declined for the week:
• 30-year fixed loan fell to 4.55 percent from 4.6 percent.
• 15-year fixed-rate loan fell to 3.91 percent from 3.99 percent.
• 1-year ARMs decreased to 6.84 percent from 6.90 percent.
The Mortgage Bankers Association’s survey covers more than 50 percent of all applications nationwide.
Source: Associated Press, J.W. Elphinstone (8/25/2010)
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Fannie Mae to Prohibit ‘Appraisal Cutting’
Fannie Mae is banning a common practice known as “appraisal cutting,” starting next week.
When lenders selling loans to the firm challenge a valuation, the underwriter will have to contact the appraiser directly; if the lender is unable to settle the dispute, its only option will be to order a second appraisal.
Lenders will be unable to simply cut the value of the appraisal or shop around for the best appraisal.
Source: American Banker, Kate Berry and Marc Hochstein (08/26/10).
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Owner Financing Can Expedite Sales
Owner financing can help sell a property even in this challenging market.
Banks generally are willing to accept rent credits for an option to buy as an acceptable down payment, but both buyers and sellers must follow these guidelines for Fannie Mae and Freddie Mac to sanction the transaction.
The rental amount must be determined by a property appraisal with the credit for the down payment clearly calculated as the difference between market rent and actual rent paid for 12 months. For instance, if market rent is $1,000 and rent paid is $1,200, $200 could be credited monthly toward the down payment.
The rent/purchase agreement must be for a minimum of 12 months. The contract must clearly specify a rental amount as well as the portion to be credited toward the purchase.
The buyer will need copies of canceled checks or money order receipts for 12 months, proving rental payments to persuade the bank to credit the funds toward the down payment.
Source: Creative Investor, Rodney Williams (08/23 2010)
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Is the Housing Slowdown a Sign of a Double-Dip?
Home construction and property sales led the U.S. out of seven recessions since 1960, but this time around, housing isn’t helping. In fact, some outspoken analysts like Celia Chen, who tracks the industry for Moody’s Analytics Inc., fear housing may drive us back into recession.
“There is an epidemic of thrift,” explains Nariman Behravesh, chief economist at business analysts IHS Inc. “Households and businesses are super-cautious right now.”
Unlike analysts for Moody’s, HIS’ Behravesh is more sanguine. He says, “Sometime in the next six to 12 months, we’ll start to see more movement on home and car purchases and greater willingness on the part of businesses to hire.”
Source: Bloomberg, John Gittelsohn and Bob Willis (08/23/2010
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Government Mortgage-Aid Program Struggling
Nearly two-thirds of the people involved in the federal government’s mortgage-relief program have been unable to complete it.
Only 32 percent of those who started the program have received loan modifications and are making their payments on time. The remainder have dropped out.
“The government program as currently structured is petering out. It is taking in fewer home owners, more are dropping out, and fewer people are ending up in permanent modifications,” says Mark Zandi, chief economist at Moody’s Analytics.
Zandi predicts another 1.5 million foreclosures and short sales in 2011.
Source: Associated Press, Martin Crutsinger (08/20/2010)
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