Archive for February, 2012
Housing Starts Post Highest Level in 3 Years
Housing starts rose 1.5 percent in January from December, led by a surge in apartment construction, the Commerce Department reported Thursday.
Housing starts in January reached a seasonally annual rate of 699,000 units, reaching its highest level since October 2008.
The main reason for the January increase was due to a 14.4 percent rise in groundbreaking on rental properties or buildings with five units or more.
However, while multifamily units saw a rise in January, the construction of single-family homes had a modest drop of 1 percent for the month. The January decrease follows a strong 12 percent gain in single-family construction in December.
While single-family home construction has made strides over the last few months, construction still remains low and is at about half the rate that is considered healthy for the sector.
Still, more builders are feeling encouraged about the signs of a gradual recovery in the new-home market. Building permits in January, a future gauge to construction, ticked up 0.7 percent. Also, a recent index showed that builder sentiment was at its highest level in nearly five years.
Source: “Single-Family Homes Cool off After December Jump; Apartments Rebound as Starts Rise 1.5%,” Associated Press (Feb. 16, 2012) and “Housing Starts Climb More Than Expected in January,” Reuters (Feb. 16, 2012)
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30-Year Rates Continue to Hold at Record Lows
Fixed-mortgage rates continue to hover at record lows, with the 30-year fixed-rate mortgage staying at the record low of 3.87 percent since the first week of February, Freddie Mac reports in its weekly mortgage market survey. The 30-year fixed-rate mortgage, the most popular choice among home buyers, has been below 4 percent for the past 11 weeks.
Here’s a closer look at mortgages rates for the week ending Feb. 16:
30-year fixed-rate mortgages: averaged 3.87 percent, with an average 0.8 point, matching last week’s average. A year ago at this time, 30-year rates averaged 5 percent.
15-year fixed-rate mortgages: averaged 3.16 percent, with an average 0.8 point, also matching last week’s average. Last year at this time, 15-year rates averaged 4.27 percent.
5-year adjustable-rate mortgages: averaged 2.82 percent this week, with an average 0.8 point, dropping slightly from last week’s 2.83 percent average. Last year, 5-year ARMs averaged 3.87 percent.
1-year ARMs: averaged 2.84 percent, with an average 0.6 point, rising from last week’s 2.78 percent average. A year ago at this time, 1-year ARMs averaged 3.39 percent.
Source: Freddie Mac
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Bernanke: Low Rates Will Help Banks
Ben Bernanke, the Federal Reserve chairman, says keeping interest rates low will spur loan demand and eventually help improve banks’ profitability in the long run, The Wall Street Journal reports.
The Fed has made a rare vow to keep key rates “exceptionally low” until late 2014.
But banks have expressed concern over the Fed’s low-interest-rate policy, saying that it is costing them profitability and that overly strict regulations on banks’ are preventing an increase in lending activity.
“The purpose of the Federal Reserve’s policy of low interest rates is to speed the economic recovery, which will increase loan demand and opportunities for profitable lending, among many other benefits, and thus, ultimately, lead to higher net interest margins,” Bernanke said at a community banking conference in Arlington, Va., on Thursday.
Source: “Bernanke: Fed’s Low Rates Should Help Bank Profitability In Long Run,” The Wall Street Journal (Feb. 16, 2012)
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Housing Affordability Reaches New Records
Housing affordability rose to a record high during the fourth quarter of 2011, which means a home buyer’s purchasing power is greater than it ever has been before, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index.
The index showed that 75.9 percent of all new and existing homes sold in the fourth quarter were affordable to families earning the national median income of $64,200, according to the index. That marks the highest percentage recorded in the index’s 20-year history.
“While today’s report indicates that home ownership is within reach of more households than it has been for more than two decades, overly restrictive lending conditions confronting home buyers and builders remain significant obstacles to many potential homes sales, even with interest rates at historically low levels,” says Barry Rutenberg, chairman of the National Association of Home Builders.
Most Affordable Cities
According to the index, the most affordable major housing market was Youngstown-Warren-Boardman, Ohio, in which 95 percent of all homes sold during the fourth quarter were affordable to households earning the median family income of $54,900, according to the index.
Other top affordable housing markets include: Lakeland-Winter Haven, Fla.; Modesto, Calif.; Harrisburg-Carlisle, Pa.; and Toledo, Ohio.
Least Affordable Cities
However, some metro areas still remain too pricey for buyers. The least affordable major housing market during the fourth quarter was New York-White Plains-Wayne, N.Y.-N.J., in which 29 percent of all homes sold were affordable to those earning the area’s media income of $67,400.
Other high-priced metro areas at the bottom of the affordability index include: Honolulu; San Francisco-San Mateo-Redwood City, Calif.; Santa Ana-Anaheim-Irvine, Calif.; and Los Angeles-Long Beach-Glendale, Calif.
Source: National Association of Home Builders
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Fed Chair Says ‘Normal Lending’ Key to Recovery
The Federal Reserve’s monetary policy and efforts to keep interest rates low have contributed to increased housing affordability. However, those strategies have not yet had the desired effect of stimulating the economy into a full recovery as banks have stuck to their guns on strict lending standards.
“We want [banks] to take a balanced approach. We want them to make prudent loans, but we don’t want them to turn away creditworthy borrowers,” said Federal Reserve Chairman Ben Bernanke during his speech Friday to home builders at the 2012 International Builders’ Show in Orlando.
Echoing recommendations outlined in the a Federal Reserve white paper released Jan. 5, Bernanke called for increased lending to creditworthy home buyers and more loan modifications and mortgage refinancings to help revitalize the housing industry and economy.
“Normal lending is a big part of getting the economy back on its feet,” said Bernanke, who also called for greater access to loans for investors to purchase homes in bulk.
Relaxed credit standards contributed to the housing crisis, thus tightened borrowing was necessary to protect banks, investors, and borrowers, Bernanke said. However, the lending pendulum may have swung too far the other direction.
REALTORS® are feeling the credit crunch affecting their clients, with 34 percent of reporting that mortgage accessibility is the biggest factor prohibiting their clients from purchasing a home, according to the 2011 NAR Member Profile.
The Fed has been working to improve lending conditions, helping banks become strong again through regulation and administering “stress tests” to ensure lenders have enough capital. And some progress has been made. According to a recent Fed survey of loan officers, there were reports of a slight uptick in lending nationwide.
Bernanke addressed other issues still hindering the housing market recovery, including the fact that 12 million home owners – or more than one in five borrowers with a mortgage – are underwater. Additionally, the drop in home equity by more than 50 percent since the peak of the housing boom has resulted in the loss of more than $7 trillion in household wealth nationally.
Federal Reserve staff estimate that distressed sales, which include both short sales and REOs, now account for 30 percent of home sales. And about one-fourth of vacant homes for sale in the second quarter of 2011 were bank-owned.
“With home prices falling and rents rising, it could make sense in some markets to turn some of the foreclosed homes into rental properties,” said Bernanke, advocating for REO-to-rental programs.
As of early November 2011, about 60 metropolitan areas each had at least 250 REO properties for sale by the GSEs and the FHA. However, NAR has asked policymakers “to proceed cautiously with the REO-to-rental program since housing markets are complex and varied.” NAR has also advised that any REO-to-rental program be administered by local entities, market experts, and licensed real estate professionals.
By Erica Christoffer, REALTOR® Magazine
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Could the Mortgage Deal Lead to a Jump in Foreclosures?
A $25 billion mortgage settlement announced between major banks and state and government officials is supposed to bring aid to troubled home owners, but it could also bring a wave of new foreclosures, CNNMoney reports.
During the yearlong negotiations, some banks slowed down repossessing homes, and now they may have a backlog of troubled loans on the books — loans that can’t be saved by the deal’s aid on refinancing or mortgage principal reduction.
“The bottom line is that 2012 will see a lot of foreclosures that should have taken place in 2011 and didn’t,” Rick Sharga, executive vice president for Carrington Holdings, told CNNMoney.
Last year, foreclosure filings dropped 34 percent. This year, Daren Blomquist, vice president of RealtyTrac, estimates that new foreclosure filings will increase to between 2.2 million and 2.5 million compared to last year’s 1.9 million filings in 2011.
The mortgage deal is aimed at helping home owners avoid foreclosure. One million struggling home owners may see their mortgage principal reduced as part of the deal. But the home owners must be able to afford new, lower payments. The banks will have no choice but to foreclose on home owners who stop making payments altogether or cannot afford a new payment structure on their loan.
But the spike in the backlog of foreclosures may not be all bad for the housing market, experts say.
“The market needs to clear out a lot of the distressed inventory before prices start to come back,” Sharga said. There are more than 3 million home owners seriously delinquent on their mortgage or in foreclosure currently.
The five banks part of the settlement are Bank of America, Citigroup, JPMorgan Chase, Wells Fargo, and Ally Financial.
Source: “Mortgage Deal Means More Foreclosures,” CNNMoney (Feb. 10, 2012)
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Banks Offer More Cash Incentives for Short Sales
More banks are offering home owners incentives to sell their houses in a short sale to prevent a costly foreclosure to the bank. In fact, some banks are offering struggling home owners as much as $35,000 to do a short sale, according to an article at CNNMoney.
Many home owners have been surprised at banks’ recent willingness to approve short sales.
“Initially, the home owners are skeptical,” says Elizabeth Weintraub, a real estate professional in Sacramento, Calif. “The bank may have already turned down their request for a modification. Then, one day, they call and say, ‘Let us give you some cash.’”
For banks, the incentives have proven to be a smarter move than letting a property fall into foreclosure.
“The first choice is a modification, but if that’s impossible then a short sale is a faster, more efficient solution,” Tom Kelly, a spokesman for Chase Mortgage, said.
With a foreclosure, home owners stop making their mortgage payments and usually property taxes as well. They also often put off maintenance issues, which can cause the home to lose value even more. Foreclosed homes sold, on average, for 22 percent less than homes not in foreclosure in December, according to National Association of REALTORS®’ data. For comparison, discounts for short sales were about 14 percent.
“I’ve seen a lot of foreclosures for sale where it would cost a lot more than $20,000 to get them into condition to sell again,” says John Hayton, a short sale specialist in Orlando, Fla.
Source: “Banks Pay Delinquent Borrowers $35,000 to Sell Their Homes,” CNNMoney (Feb. 10, 2012)
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Major Metros Get Too Pricey for Some Buyers
More Americans may be growing reluctant to buy homes in some of the nation’s priciest areas because of the high cost.
“Even though people often say they want to live in urban neighborhoods where they can walk more and drive less, they get more for their buck where the car is king,” says Jed Kolko, Trulia’s chief economist. “Most long-distance searches are toward smaller, suburban, more sprawling areas, not toward the older, dense cities of the northeast.”
According to a new study by Trulia and 24/7 Wall St., Americans may be avoiding relocation to the following metro areas due to the high costs of real estate:
1. Newark-Union, N.J.-Penn.
Median home price: $400,000
2. San Jose-Sunnyvale-Santa Clara, Calif.
Median home price: $546,000
3. Washington-Arlington-Alexandria, D.C.-Va.-Md.-W.V.
Median home price: $390,000
4. Philadelphia, Penn.
Median home price: $265,000
5. Bethesda-Rockville-Frederick, Md.
Median home price: $700,000
“Most of the cities attracting lots of search activity from outsiders had huge price declines during the housing bust,” says Kolko. “They’re now much more affordable than they were during the boom — especially to people in cities where prices are still high.”
Source: “Newark, San Jose, Washington and More Major Cities Where No One Wants to Move,” 24/7 Wall St. (Feb. 10, 2012)
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How to Work With Today’s Savvy Investors
Investors nowadays are more willing to pay cash or make a large down payment as they seek to get in on real estate deals for renting or flipping, according to a recent article at Realty Times.
Some investors are eyeing real estate as a better investment than money market funds or stocks.
Julie Wyss, a short sale and luxury home specialist in Silicon Valley, Calif., offers some of the following tips in a recent article at Realty Times for working with today’s savvy investors:
Understand what they want: Many investors will want to look at short sales or fixer uppers. They expect you to understand distressed sales as well as their investment goals so you can find them the right properties that match their needs.
Be good at negotiating. You should be able to spot a good deal for your client and advise them on a suitable offers based on market values. Also, review the rate and terms of the deal closely and make sure it’s what the investor wants — they trust you to have their back. Make sure there are no problems with liens or easements.
Electronic signatures: “They appreciate the convenience of electronic signatures, when permitted,” Wyss writes. “Electronic signatures are not allowed on a short sale, but offering to send a traveling notary or providing curb-side pick up can overcome that obstacle and help them maintain a sense of control without actually managing you.”
Have people who can help them: They may need vendors who can help fix up the property, so have people on hand to recommend, such as painters, hardwood floor finishers, roofers, general contractors, landscapers, pool repairers, and HVAC companies. Make sure the contractors are not only reliable and offer good service but also competitive prices.
Source: “Real Estate Investors Offer Big Pay Off, If You Can Keep Up,” Realty Times (Feb. 10, 2012)
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Study Reveals Main Culprit Behind Falling Home Values
Blame it on distressed sales for falling home values, according to CoreLogic’s December Home Price Index.
Home prices nationwide dropped nearly 5 percent from 2010 to 2011, but if you exclude distressed sales, prices dropped only by 0.9 percent, according to CoreLogic.
Foreclosures continue to hamper neighboring property values.
“Until distressed sales in the market recede, we will see continued downward pressure on prices,” Mark Fleming, chief economist of CoreLogic, told AOL Real Estate.
The states that saw home prices decline by the largest amounts since the housing peak are Nevada, Arizona, Florida, Michigan, and California. All five states have a high rate of foreclosures too. Nevada, which has the highest foreclosure rate in the country for the last several years, saw home values fall 60 percent since the peak.
Source: “Distressed Sales Undercut Home Prices in 2011, Study Says,” AOL Real Estate (Feb. 2, 2012)
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FHA May Ease Seller Concession Cap
Many in the real estate industry were concerned that a change announced last year to the maximum seller contributions allowed for Federal Housing Administration-insured loans could cause more deals to fall apart. The FHA announced last year that it would cut seller contributions from 6 percent to 3 percent for purchases using FHA-insured loans. Seller concessions, such as seller assistance to buyers in closing costs, can play a big part in FHA-financed home sales and in closing deals, real estate agents say.
Inman News reports that the FHA may be rethinking its seller contribution cap and will likely announce changes to its policy in April.
“Rather than an across-the-board 3 percent ceiling on all FHA mortgages, the new policy would permit higher seller contributions, probably between 4 and 5 percent, on smaller loan balances,” Inman News reports. “Meanwhile, the 3 percent cap would be mandatory on all loan amounts above some yet-to-be-specified limit.”
Inman News also speculates that a dollar ceiling on seller concessions might be announced, like a maximum cap of $6,000 instead of a percentage.
“The FHA is what’s keeping us alive,” Steve A. Brown, executive vice president of Memphis-based Crye-Leike, told Inman News. “If they do a 3 percent across-the-board limit, that would knock out a lot of our sales. But if they go with some graduated deal tied into lower-priced homes, then we should be all right.”
Source: “FHA Concessions on Seller Concessions?” Inman News (Jan. 25, 2012)
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Fannie Mae Gains More Short-Sale Authority
Five mortgage insurers have granted Fannie Mae mortgage servicers the authority to complete a short sale or deeds in lieu of foreclosure without getting their separate approval, HousingWire reports.
Traditionally, mortgage insurance groups have had to give the OK before a short sale can be processed on a property with a guaranteed loan.
Now, without that extra step, Fannie mortgage servicers may be able to speed up short sale approvals on Fannie-backed loans.
The PMI Group, which filed for bankruptcy in November, is the latest mortgage insurer this week to grant Fannie the authority to no longer wait for its approval on short sales. The other four mortgage insurers also giving Fannie the authority are: Genworth, MGIC, Republic Mortgage Insurance Co., and Radian Guaranty.
Regardless, Fannie has instructed its mortgage servicers to make sure a short sale does not conflict with any existing mortgage insurance coverage before approving it.
Source: “PMI Group Latest Mortgage Insurer to Give Fannie Mae Short-Sale Authority,” HousingWire (Feb. 2, 2012)
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Bernanke Defends Keeping Rates Low for 3 More Years
Federal Reserve Chair Ben Bernanke defended his comments about the housing market and the central bank’s decision to hold interest rates at lows until 2014 in testimony Thursday to the House Budget Committee.
Some lawmakers on Thursday questioned the Fed’s move to keep rates low for three more years, saying it brings a risk to higher inflation and stymies economic growth.
Recently, the Fed announced that it doesn’t plan to raise its benchmark interest rates from a record low until late 2014, a move that will likely keep mortgage rates at record lows as well.
Bernanke says that while the economy is showing improvement, the pace has been slow and many threats remain to economic recovery, such as European’s debt crisis, the nation’s rising debt, and the still-ailing housing market.
Bernanke said he feels the sluggish housing market is holding back overall economic growth.
National Association of Realtors® President Moe Veissi says that while the housing market has shown signs of stabilizing, lawmakers need to make housing needs more of a top priority.
“We fully support Chairman Bernanke’s comments that the lack of available and affordable mortgage financing, low home values, and high foreclosure inventories are inhibiting a meaningful housing market recovery,” Veissi said in a statement. “We believe more can be done to address the lack of available and affordable mortgage financing to creditworthy borrowers and stem the rising inventory of foreclosed homes, which is depressing home values in communities across the country. Housing and home ownership issues affect all Americans, and stabilizing the housing market is critical to the nation’s economy making a meaningful recovery.”
Source: “Bernanke Urges Caution in Overly Rapid Deficit Cutting,” Associated Press (Feb. 2, 2012) and the National Association of REALTORS®
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Did Builders Overbuild Oversized Houses?
Forty-three percent of Americans like big, suburban homes, but the majority prefers condos, apartments, and smaller homes, Chris Nelson, who heads the University of Utah’s Metropolitan Research Center, said at a smart growth conference this week.
Nelson said that there needs to be less building of large homes and more concentration on constructing smaller houses and attached residences to meet future demand.
“Is it any wonder that suburban homes are plummeting in price, because there is far less demand of those homes than in the past?” Nelson told a crowd at the New Partners for Smart Growth conference in San Diego this week. “We are out of balance in terms of where the market is right now, let alone trending toward the future.”
Nelson estimates that developers need about 10 million more attached homes and 30 million small homes on 4,000-square-foot lots or less to meet future home buying demand.
Joe Molinaro, who heads the smart-growth program at the National Association of REALTORS®, says consumers are showing a stronger desire for walkable neighborhoods and shorter commutes, according to consumer surveys.
Source: “U.S. Overbuilt in Big Houses, Planners Find,” The San Diego Union-Tribune (Feb. 2, 2012)
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Settlement Over Mortgage Abuses May Come This Week
States have until the end of this week to decide whether they will agree to sign onto a settlement over mortgage abuses with the nation’s largest banks, Reuters News reports.
State and federal officials have been in settlement talks for more than a year but have been unable to reach an agreement.
The proposed deal would include mortgage principal write-downs for distressed home owners. Banks would also pay up to $25 billion. In return, state and federal officials would release banks from facing civil claims from any errors in servicing and originating loans, Reuters reports.
The banks involved in settlement negotiations are Bank of America, Wells Fargo & Co., JPMorgan Chase & Co., Citigroup, and Ally Financial Inc.
Some states have been reluctant to sign onto the deal, criticizing the settlement as being too lenient on banks.
Reuters News says that states have one week to make a decision about whether to sign on with the settlement. An announcement is expected next week.
Source: “States to Decide This Week on Mortgage Deal,” Reuters (Jan. 30, 2012)
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Home Ownership Rate Drops to 1997-Levels
The home ownership rate took another dip in the fourth quarter of 2011, falling for the seventh year in a row as fewer Americans own their homes.
The home ownership rate now stands at 66 percent, a level that hasn’t been reached since 1997, the U.S. Census Bureau reported this week. The home ownership rate peaked at 69.2 percent in the fourth quarter of 2004, and has gradually fallen ever since.
The home ownership rate has fallen the most in the West, standing at 60 percent — a big drop compared to 64.5 percent in the fourth quarter of 2006, the Census reports.
Some people who want to own a home are being shut out of the market because they’re unable to qualify for financing for a mortgage, Paul Dales, an economist with Capital Economics, told the USA Today. Stringent loan standards have been blamed on holding back a housing recovery.
As such, more people are turning to renting. Nearly 34 percent of occupied homes in the fourth quarter were rentals, Census data shows.
“The share of Americans who are willing and able to own their own home is still falling,” analysts at Capital Economics told HousingWire. “The flipside is more households in the rented sector and fewer properties lacking tenants. This is helping to drive rents, and therefore landlords’ returns, higher.”
Source: “Home Ownership Rate Falls to 14-Year Low,” HousingWire (Jan. 31, 2012) and “Home Ownership Rate Falls to 66% as Downturn Nears a Bottom,” USA Today (Jan. 31, 2012)
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Investors Jump in to Turn Foreclosures into Rentals
The government and private equity firms are gearing up to start marketing foreclosed homes as rentals in an effort to help lessen the downward impact foreclosures have on the price of nearby homes.
The Federal Housing Finance Agency plans to offer some of its 180,000 foreclosed homes through Fannie Mae and Freddie Mac to private operators who will turn them into rental properties, Bloomberg News reports.
The Federal Housing Administration also plans to participate in a rental program. In a November memo, it has suggested that its program work with public-private partnerships to share the risk and profits, as well as explore offering rent-to-own opportunities to tenants of the homes.
Private equity firms are stepping up to acquire some single-family homes to manage as rentals. GTIS Partners has already earmarked $1 billion by 2016 to acquire single-family homes to manage as rentals. GI Partners also says it will invest $1 billion on rental housing.
“We’re starting to see this as a billion-dollar opportunity to buy rental housing,” Thomas Shapiro, the founder of the GTIS Partners fund, told Bloomberg News.
A few months ago, the White House solicited ideas from the public on how to work a foreclosure rental program to get a better grip on the government’s foreclosure inventory. The White house says it hopes that by turning some of the foreclosures that have dogged many markets into rentals, it will be able to ward off any further drops to overall home prices.
Source: “Foreclosures Draw Private Equity as U.S. Sells Homes,” Bloomberg (Jan. 31, 2012)
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Obama Refi Plan Would Help Non-GSE-Backed Borrowers
In the details released today, President Barack Obama fleshed out a proposal he announced in his State of the Union speech to boost the housing market by helping more underwater home owners than are currently being served by lenders.
The President said he wants to make the federal government’s existing mortgage refinance program, called HARP (Home Affordable Refinance Program) available to more home owners. It’s currently available to struggling borrowers with loans backed by Fannie Mae and Freddie Mac. For these borrowers, incentives are provided under certain conditions to make refinancing more attractive.
Under the new proposal, HARP would be expanded to include borrowers with loans that aren’t backed by Fannie and Freddie. These are the borrowers whose loans were securitized in private-label securities without any federal backing, and they would be allowed to refinance into FHA-backed loans, the same as the Fannie and Freddie borrowers. The administration has estimated that borrowers would save $3,000 a year in mortgage costs.
To be eligible, borrowers would have to have made their mortgage payments over the last six months with only one delinquency, and their loan amount couldn’t exceed the FHA loan limit for their area. If borrowers owe more than 140 percent of the value of their home, the lender has to agree to reduce the loan balance. Also, borrowers wouldn’t have to submit a full file of paperwork for the refinancing as long as they can verify their employment. The proposal also would enable borrowers who still have equity in their home — up to 20 percent — to participate.
The changes will require legislation, so Congress will have to agree to them for the expanded program to take effect.
In his State of the Union speech last week, Obama said he would pay for the expanded program using a fee charged to the country’s largest banks so the initiative wouldn’t add to the deficit. But some members of Congress have said they oppose charging banks a fee to cover the cost.
The Obama plan would also introduce a Bill of Rights for home owners, part of which is intended to smooth the mortgage modification and foreclosure processes, which today can be contentious and difficult for borrowers to understand. A key part of this is an effort to curb banks’ practice of undertaking a mortgage modification while at the same time proceeding with a foreclosure — a process called dual tracking. Before they can start foreclosure, banks will have to show they took all reasonable steps to modify a borrower’s mortgage.
To help ease inventories of foreclosed homes, the plan would give a green light to Fannie Mae to implement a pilot program to make foreclosures available to investors in bulk purchases for conversion to rental housing. Under the pilot, Fannie would package for sale foreclosed homes in a limited number of markets and require them to be used as rental properties for a period of time.
NAR has concerns with this proposal and has been talking with federal regulators to ensure that the program is carefully tailored to the communities who can truly benefit from it, that small- and medium-sized investors be able to participate, and that real estate professionals continue to play a role in the disposition of the homes.
In a statement released after the President outlined the details of his proposal, NAR said it’s urging the regulator of Fannie and Freddie, the Federal Housing Finance Agency, “to proceed cautiously with the REO-to-rental program since housing markets are complex and varied.
“NAR believes an overly aggressive REO-to-rental program that is not privately administered by local entities and does not involve substantial participation of local market experts, especially licensed real estate professionals, could be disruptive and counterproductive to communities already suffering from high foreclosure inventories and lower housing values.”
By Robert Freedman, REALTOR® Magazine
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6 Most Stressful American Cities
Some cities are known for having more stress than others. Sperling’s Best Places recently ranked the most stressful cities in the country, taking into account such factors as unemployment, suicide rate, divorce rate, commute times, crime, mental health, and the number of cloudy days, among other factors.
Florida cities appeared the most in the top 10.
“I was shocked by the concentration of Florida cities clustered in the top ten,” Bert Sperling, lead researcher, said in a statement. “But when we look into the statistics, we can see some of the reasons,” such as high levels of divorce, suicide, unemployment, and stress from a sluggish housing market.
The following are the cities that topped Sperling’s “Most Stressful City” list for 2012, as well as a few factors contributing to the city residents’ unease.
1. Tampa-St. Petersburg-Clearwater, Fla.: A high suicide rate was among the most notable stress factors for Tampa.
Divorce rate: 12.3%
Commute time: 28.3 (minutes)
Unemployment: 11.2%
Violent crime (per 100,000 population): 500
2. Las Vegas-Paradise, Nev.: It emerges on top for highest divorce rate in the nation.
Divorce rate: 13.2%
Commute time: 27 (minutes)
Unemployment: 14%
Violent crime (per 100,000 population): 763.4
3. Miami-Miami Beach-Kendall, Fla.: The city’s stress is mostly blamed on a high number of violent crime rate and high alcohol consumption.
Divorce rate: 11.5%
Commute time: 33.2 (minutes)
Unemployment: 12.5%
Violent crime (per 100,000 population): 733.3
4. Jacksonville, Fla.: One of the city’s top stressors is its high divorce rate.
Divorce rate: 12.3%
Commute time: 28 (minutes)
Unemployment: 10.4%
Violent crime (per 100,000 population): 557
5. Detroit-Livonia-Dearborn, Mich.: The city is in the 100-percentile in the nation for the most violent crime and property crime.
Divorce rate: 11.4%
Unemployment: 15.7%
Commute time: 27 (minutes)
Violent crime (per 100,000 population): 1111.2
6. Orlando-Kissimmee, Fla.: The city has a high number of property crimes, which contributes to its stress.
Divorce rate: 10.7%
Commute time: 29.6 (minutes)
Unemployment: 10.4%
Violent crime (per 100,000 population): 613.7
See the full list of the Top 10 Most Stressful American Cities at CNBC.
Source: “America’s Most Stressful Cities in 2012,” CNBC.com (Jan. 20, 2012) and “Stressful Cities 2012,” Sperling’s Best Places
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Where List Prices Have Fallen the Most in a Year
While nationally, the median list price has been on the rise the last year, increasing 5 percent year-over-year to $188,000, according to December 2011 housing data published by Realtor.com.
But home prices the past year haven’t been rising everywhere. For example, Detroit continues to face a plague of foreclosures that are bringing home values down in the area. The metro area had the biggest drop in median list prices the past year.
The following are the cities with the biggest drops in median list prices year-over-year, based on December 2011 housing data of 146 metro markets tracked by Realtor.com.
1. Detroit: -11.01%
Median list price: $80,000
2. Chicago: -10%
Median list price: $189,000
3. Las Vegas: -7.62%
Median list price: $120,000
4. Sacramento, Calif.: -6.98%
Median list price: $199,900
5. Los Angeles-Long Beach, Calif.: -6.37%
Median list price: $324,900
6. Atlanta, Ga.: -6.25%
Median list price: $150,000
7. Orange County, Calif.: -5.53%
Median list price: $425,000
8. San Francisco, Calif.: -4.92%
Median list price: $599,000
By Melissa Dittmann Tracey, REALTOR® Magazine Daily News
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First-Time Buyers More Willing to Compromise
When it comes to space and upgrades, first-time home buyers are more willing to compromise than repeat buyers, according to the National Association of REALTORS®’ 2011 “Profile of Home Buyers and Sellers.”
While they have big wish lists too, first-time buyers seem to be most driven by finding a home that offers a reasonable monthly mortgage payment.
“Single home buyers tend to value affordability above all when they are choosing a home and a neighborhood,” says Jessica Lautz, NAR’s manager of member and consumer survey research. “They also focus more on living some place convenient to friends and family, as well as entertainment and leisure activities.”
The median age of first-time home buyers is 31, and about 26 percent are married with children.
First-time home buyers tend to rate energy efficiency high on their wish list, as well as simple, no-hassle technology use in their house, the study finds.
But “even if they like the idea of solar panels, first-time buyers are not likely to spend an extra $20,000 to have them,” says Stephen Melman, director of economic services for economics and housing policy for the National Association of Home Builders.
First-time buyers also are willing to compromise on space: The median-size of a home purchased by a first-time buyer is 1,570 square feet.
Overall, “the top three things that buyers want are a great room instead of a formal living room, a walk-in closet in the master bedroom, and a laundry room,” says Melman. “First-time buyers want the same thing, but they are more likely to be satisfied with a small laundry room without an attached mudroom and with a smaller master bedroom and a smaller walk-in closet.”
But one thing first-time buyers aren’t as willing to compromise on: Buying a home that needs a lot of repairs.
“Buyers that don’t have any experience with home maintenance tend to be afraid of renovations, so home sellers should be sure to fix everything they can and make minor home improvements in order to appeal to first-time buyers,” Melman says.
Source: “Size Matters Most to First-time Buyers,” HSH.com and Fox Business News (Jan. 26, 2012)
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Will High Rents Push People to Buy Homes?
With Marcus & Millichap’s National Apartment Report showing that the U.S. average for asking rents in 2011 came in at $1,061 a month, housing analysts believe more apartment tenants will look to own.
Some expect the average monthly rent to rise to as much as $1,101 this year, which Paul Bishop of the National Association of REALTORS® says should prompt more potential home buyers to “think twice before renting.”
Source: “High Apartment Rents Seen Pushing People to Buy Homes,” Investor’s Business Daily (Jan. 27, 2012)
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2011 Marks Worst Year on Record for New-Home Sales
Sales of new-home declined in December, dropping 2.2 percent, and marking the end to the worst year on record for new-home sales, the Commerce Department reported Thursday.
New-home sales reached a seasonally adjusted annual pace of 307,000 in December — less than half the 700,000 pace that economists consider healthy for the sector.
In 2011, 302,000 new homes were sold nationwide, overtaking 2010’s 323,000 sales that had previously marked the worst year for sales on record.
The new-home sector continues to struggle to compete against discounted distressed properties that are plaguing many markets and have put downward pressure on home prices. Builders also say tighter lending standards are preventing some home buyers for qualifying for financing, and appraisals of new-homes are coming in lower on the agreed upon purchase price, causing more deals to fall through.
In December, the median sales price of a new-home was $210,300, according to the Commerce Department.
Turnaround Coming?
Despite the latest numbers from December, new-home sales rose in the overall final quarter of 2011. Home construction for single-family homes increased in the final three months of 2011, and an index measuring homebuilder sentiment showed builders are more positive about where the market is heading too.
“Although this [December] decline was unexpected, it does not change the story that housing has likely bottomed,” Jennifer H. Lee, senior economist at BMO Capital Markets, told the Associated Press.
Source: “New Home Sales 2011: Worst Year on Record,” Associated Press (Jan. 26, 2012)
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Mortgage Rates Hit New Lows Again
Mortgage rates once again inched lower this week, lowering the cost of borrowing and increasing housing affordability.
“Most mortgage rates eased to all-time record lows this week as fourth quarter growth in the economy fell short of market projections,” Frank Nothaft, Freddie Mac’s chief economist, said in a statement.
Here’s a closer look at rates for the week ending Feb. 2:
30-year fixed-rate mortgages: averaged a new record low of 3.87 percent, with an average 0.8 point, dropping from last week’s 3.98 percent average. A year ago at this time, 30-year rates averaged 4.81 percent.
15-year fixed-rate mortgages: also reached new lows this week, averaging 3.14 percent, with an average 0.8 point. Last week, 15-year rates averaged 3.24 percent and a year ago at this time 15-year rates averaged 4.08 percent.
5-year adjustable-rate mortgages: averaged 2.80 percent, with an average 0.7 point, dropping from last week’s 2.85 percent average. Last year at this time, 5-year ARMs averaged 3.69 percent.
1-year ARMs: averaged 2.76 percent this week, with an average 0.6 point, inching up slightly from last week’s 2.74 percent average. A year ago, 1-year ARMs saveraged 3.26 percent.
Source: Freddie Mac
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6 Charged in ‘Builder Kickback’ Scam
Six Charlotte, N.C., residents were charged with working with a home builder in a mortgage scheme that involved offering “builder kickbacks” to fake buyers, which prosecutors say resulted in hundreds of fraudulent sales in the area between January 2005 and February 2008.
The defendants, which include real estate agents, an accountant, mortgage brokers, and the builder’s owner, were working with Tara Properties to sell houses, according to court documents filed by prosecutors.
Tara, which typically builds homes in the $100,000 to $200,000 range, would offer kickbacks of 15 percent of the sales price, prosecutors say. But the kickbacks were never disclosed to lenders or disclosed on loan applications, prosecutors allege.
Prosecutors allege that Tara paid more than $5 million in kickbacks, and the straw buyers involved in the scheme were able to bilk more than $42 million in fraudulent loans from lenders.
Straw buyers lied on mortgage applications about income and assets, employment, and their intent to occupy the home as a primary residence, court document say. The majority of the deals ended in foreclosure.
The defendants have declined to make public statements on the charges.
Source: “6 Charged in Charlotte-Area Mortgage Scheme,” The Charlotte Observer (Jan. 24, 2012)
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Pending Home Sales Decline in December, Remain Above a Year Ago
After reaching a 19-month high, pending home sales eased in December but stayed above year-ago levels, according to the National Association of REALTORS®.
The Pending Home Sales Index, a forward-looking indicator based on contract signings, declined 3.5 percent to 96.6 in December from 100.1 in November but is 5.6 percent above December 2010 when it was 91.5. The data reflects contracts but not closings.
Lawrence Yun, NAR chief economist, said the trend line remains positive. “Even with a modest decline, the preceding two months of contract activity are the highest in the past four years outside of the homebuyer tax credit period,” he said. “Contract failures remain an issue, reported by one-third of REALTORS® over the past few months, but home buyers are not giving up.”
Yun said some buyers successfully complete the sale after a contract delay, while others stay in the market after a contract failure and make another offer. “Housing affordability conditions are too good to pass up,” he said. “Our hope is lending conditions will gradually improve with sustained increases in closed existing-home sales.”
The PHSI in the Northeast declined 3.1 percent to 74.7 in December and is 0.8 percent below a year ago. In the Midwest the index rose 4.0 percent to 95.3 and is 13.3 percent higher than December 2010. Pending home sales in the South slipped 2.6 percent to an index of 101.1 in December but are 4.9 percent above a year ago. In the West the index fell 11.0 percent in December to 107.9 but is 3.7 percent higher than December 2010.
Source: National Association of REALTORS®
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Where the Biggest Foreclosure Discounts Are
Foreclosures in the third quarter sold, on average, for about a 34 percent discount compared to the average sales price of homes not in foreclosure, according to the latest report from RealtyTrac.
But in some metro areas discounts can be even larger between foreclosures and other home sales.
Here are the metro areas that offered some of the largest discounts in foreclosure sales in the third quarter of 2011:
Trenton-Ewing, N.J.: The average price of a foreclosure sale here was $108,302 — which is nearly 68 percent below the average sales price of a home not in foreclosure. In the third quarter, foreclosures accounted for 8 percent of all sales in the metro area.
St. Louis: Foreclosures sold for an average price of $80,545 — nearly 55 percent below the average sales price of a home not in foreclosure. Foreclosure accounted for nearly 13 percent of all home sales in the St. Louis metro area.
Milwaukee: The average foreclosure sold for $93,250, about 53 percent below the average sales price of a home not in foreclosure. Foreclosure sales accounted for 17 percent of all sales in the area.
Other metro areas posting large foreclosure discounts: Springfield, Mass. (52 percent); Saginaw, Mich. (52 percent); New Haven-Milford, Conn. (51 percent); Memphis (51 percent); San Francisco (51 percent); Toledo, Ohio (50 percent); Bridgeport-Stamford-Norwalk, Conn. (50 percent); and Atlanta (50 percent).
Source: “Foreclosures Account for 20% of Residential Sales in Q3,” RISMedia (Jan. 25, 2012)
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Mortgage Rates Rise After Posting Record Lows
Mortgage rates started to edge higher this week, after a series of recent positive reports showing the housing market on the mend, Freddie Mac reported in its weekly mortgage market survey.
The 30-year fixed-rate mortgage after posting all-time record lows for the past three weeks reversed course this week and ticked up to 3.98 percent. Still, this is the eighth consecutive week that 30-year fixed-rate mortgages have remained below 4 percent, Freddie Mac reported.
“Fixed mortgage rates ticked up this week as the housing market ended 2011 on a high note,” Frank Nothaft, Freddie Mac’s chief economist, said in a statement. Existing-home sales increased 5 percent in December, the largest amount since May 2010.
Here’s a closer look at mortgage rates for the week ending Jan. 26:
30-year fixed-rate mortgages: averaged 3.98 percent, with an average 0.7 point, up from last week’s low of 3.88 percent. A year ago at this time, 30-year rates averaged 4.80 percent.
15-year fixed-rate mortgages: averaged 3.24 percent, with an average 0.8 point, inching up after last week’s 3.17 percent average. Last year at this time, 15-year rates averaged 4.09 percent.
5-year adjustable-rate mortgages: averaged 2.85 percent, with an average 0.7 point, also up from last week’s 2.82 average. Last year at this time, 5-year ARMs averaged 3.70 percent.
1-year ARMs: averaged 2.74 percent this week, with an average 0.6 point–holding at last week’s 2.74 percent average. A year ago at this time, 1-year ARMs averaged 3.26 percent.
Source: Freddie Mac
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Builders Feel the Most Upbeat in More Than 4 Years
Builder confidence is at its highest level since June 2007, yet another sign that things are finally perking up in the new-home market, which has faced some of its darkest days on record this past year.
For the fourth consecutive month, builder sentiment for newly built, single-family homes was on the rise, according to the National Association of Home Builders and Wells Fargo Housing Market Index. The index measures builder sentiment on current and future sales conditions and buyer traffic.
The latest increase in the January index is “universally represented across every index component and region,” said Bob Nielsen, NAHB chairman.
“This good news comes on the heels of several months of gains in single-family housing starts and sales, and is yet another indication of the gradual but steady improvement that is beginning to take hold in an increasing number of housing markets nationwide,” Nielsen said.
Coming Off a Dismal 2011
The Commerce Department reported Thursday that for the third straight month, single-family home construction rose 4.5 percent in December. However, overall housing starts for the month dropped 4.1 percent, with gains in the single-family sector offset by a nearly 28 percent drop in apartment construction in December.
The latest news wraps up a dismal year for new-home building, with 2011 marking the fewest number of single-family homes built in half-century. In all, builders started about 606,900 homes in 2011 — that’s half the 1.2 million economists consider healthy for the sector.
Nevertheless, despite the mostly sluggish year for the sector, building did start to pick up in the last part of 2011 and housing analysts are upbeat that will continue. “We expect further sustained gains in starts and permits over the next few months; a real recovery is getting started,” Ian Shepherdson, chief U.S. economist at High Frequency Economics, told the Associated Press.
Threats to Recovery Remain
NAHB Chief Economist David Crowe warns that “caution remains the word of the day as many builders continue to voice concerns about potential clients being unable to qualify for an affordable mortgage, appraisals coming through below construction cost, and the continuing flow of foreclosed properties hitting the market.”
Source: National Association of Home Builders and “December Ends Worst Year for Single-Family Home Construction,” Associated Press (Jan. 19, 2012)
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