Real Estate News

Mortgage Fraud Cases Rise 20%

The percentage of mortgage fraud activity rose 20 percent in the third quarter compared to a year earlier, a report by the Financial Crimes Enforcement Network finds. Almost 62 percent of the nearly 20,000 suspicious activity reports in the third quarter, which ended Sept. 30, began about four years ago, the report noted.

Suspicious activity included loan workout or debt elimination, questionable refinance or loan modification attempts, as well as Social Security number discrepancies on loan applications.

“As housing markets look to recover, criminals persist in their efforts to prey on struggling home owners, while financial institutions continue to uncover apparent fraud as they work through their portfolios of earlier mortgages now in default,” FinCEN Director James Freis said in a statement.

The top five states with the highest number of fraud reports per capita in the third quarter were:

Hawaii
California
Nevada
Florida
Delaware

Meanwhile, the top five counties for fraud reports were Santa Clara County, Calif.; Honolulu; Orange County, Calif.; San Bernardino County, Calif.; and Palm Beach County, Fla.

Source: Financial Crimes Enforcement Network

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‘Rehab’ Loans Surge in Popularity to Fix Up Properties

More borrowers are exploring financing options to cover the costs of rehabbing properties they buy. “Rehab” loans are surging in popularity, according to a New York Times article.

“We’re seeing an explosive growth in these loans,” says Ed Brehm with Prospect Mortgage, one of the country’s largest processors of 203(k) loans. The spike in demand is from the higher number of bank-owned properties as well as borrowers who can no longer get home equity loans, he says.

A survey in January from the National Association of REALTORS® found that 35 percent of the homes on the market are either short sales or foreclosures, and of those properties, 37 percent were considered “below” or “well below” average condition. The poor condition may have been from homes left abandoned or damaged from disgruntled home owners who were forced to leave.

The Federal Housing Administration’s 203(k) is particularly seeing an increase in interest among home purchasers. The loan covers the cost of buying the home but also for renovating it, and is paid back like a regular mortgage. The loan can be used for rehabbing the structure of the home to adding new floors and appliances.

Fannie Mae also offers rehab financial assistance as part of its HomePath lending program.

Source: “‘Rehab’ Loans to the Rescue,” The New York Times (March 1, 2012)

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Home Prices Stabilize Despite Increase in REOs

An increase in distressed properties on the market is no longer chipping away at overall home prices, an “unusual and encouraging” sign, a new report suggests.

In fact, the report found that in the top 15 metro areas REOs dramatically increased in February, but those areas still showed average gains or mostly stable home prices compared to the previous month, a new report by Clear Capital shows. Distressed properties typically are known to put downward pressure on nearby home prices.

Alex Villacorta, director of research and analytics at Clear Capital, says improvements in the job market, an uptick in consumer confidence, and an increase in activity among investors making cash purchases may be helping to pull home prices up and “could be in play with the resiliency we’re seeing in prices against increasing REO this month.”

Overall, national home prices dropped 1.9 percent year-over-year, which is the smallest margin drop in 10 months, according to Clear Capital’s March housing report.

“Home prices across the nation saw light levels of depreciation in February, consistent with the trend we have seen over the last several months,” Villacorta noted. “However, the Northeast, Midwest, and West improved performance against last month’s quarterly declines in light of increases in REO saturation, which is unusual and encouraging.”

With the uptick in REO activity, however, “we’ll be keeping a very close eye on the effects of the attorneys general settlement with servicers, as it could dramatically change the flow of REO properties moving through the foreclosure process and significantly impact values in the near future,” Villacorta said.

Source: Clear Capital and “Home Price Declines Resilient Against REO Saturation: Clear Capital,” HousingWire (March 5, 2012)

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Rare Southern Plantations Go Up for Sale

A number of South Carolina’s privately owned historic plantations are hitting the market, a rare occurrence in property sales. Housing experts say that the sluggish economy and cost of maintaining these properties as well as generational changes in ownership are the reasons behind the increase in plantation sales.

The plantations in South Carolina for-sale range in size from 350 acres to 7,000 acres and are listed from $3 million up to $20 million.

Plantations aren’t for everybody, Helen Geer, a Charleston, S.C., real estate broker told Reuters. “These places are very, very expensive to take care of, and people are cash-strapped right now,” she notes.

Eight plantations are currently for sale in South Carolina. The plantations, which once grew indigo, rice, and cotton, often hold a rich history from colonial times through the Civil War.

“South Carolina is certainly not at the level of Connecticut or New York or Los Angeles or Colorado as far as property values are concerned,” Geer said. “We don’t have as many $8 million-plus properties available for sale in this area. But that buyer is always out there.”

Source: “Historic Plantations Hit the Market in South Carolina,” Reuters (March 4, 2012)

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Troubled-Home Ordinances on the Rise

In an effort to prevent blight, municipalities increasingly are imposing ordinances that require mortgage servicers to cough up fees, post bond for repairs, and register homes headed toward foreclosure.

The number of laws mandating registration of vacant or foreclosed property has surged more than 50 percent over the last six months to 980, with California and Florida each approving more than 100 such ordinances. The trend could burden banks, investors and the housing government-sponsored enterprises with millions and possibly even billions in extra costs.

Source: “Mortgage Holders Slammed With Raft of Costly Troubled-Home Ordinances,” American Banker (March 6, 2012)

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The Most Ethnically Diverse Metro?

Houston surpasses other metros in the country in one measure of ethnic diversity, a report from Rice University shows in analyzing census data from 1990, 2000, and 2010.

In Houston, the Latino population grew to one-fifth — or 20.8 percent — of the metro’s total population in 1990 and to 35.5 percent in 2010, according to the study. The Anglo population, on the other hand, decreased during that time frame, now making up 39.7 percent of Houston metro residents.

The report says that Latinos will eventually be the majority race in the area, overtaking Anglos.

“Houston is one of a handful of what is known as majority-minority cities, where Anglos represent less than 50 percent of the population,” Jennifer Bratter, co-author of the report, said in a statement.

Source: “Houston Surpasses New York and Los Angeles as the ‘Most Diverse in Nation,’” Huffington Post (March 2012)

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Is Your Seller Serious About Selling?

When sellers aren’t realistic about the price in listing their home, they may not be all that serious about getting their home sold in the first place.

“Before aggressively investing time in sellers who may never be ready to price their homes realistically for today’s buyers, get to know them and establish routine communications,” writes Bob Floss, 2011-2012 president of the Chicago Association of REALTORS®, in a recent RISMedia article. “If you connect with prospects effectively and provide a full picture of the market, the true sellers will eventually signal when they are prepared to make the move.”

Floss suggests negotiating — in advance — target dates in which the seller agrees to consider a price change on the property if it hasn’t sold yet. For example, the agent may have the seller to agree to consider a price reduction after a certain number of market days have passed.

Also, Floss suggests keeping clients informed about the local market conditions and selling trends. He recommends agents take advantage of housing data available through their local REALTOR® association’s multiple-listing service and other resources to educate sellers about what’s going on in the market so that they can be realistic when it comes to pricing and in negotiations for getting their home sold.

Source: “How to Tell When Your Seller Means Business,” RISMedia (March 1, 2012)

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Number of Underwater Home Owners Grows

Nearly 23 percent of home owners owe more on their houses than they are currently worth, according to new data from the last three months of 2011 released by CoreLogic.

More specifically, the number of underwater home owners rose slightly from 22.1 percent in mid-2011 to 22.8 percent by the end of last year.

“When they’re upside down, borrowers may be current on their payments but they’re more vulnerable to economic storms — like job losses — that could tip them over into default,” says Sam Khater, senior economist at CoreLogic.

About 8 percent of underwater home owners have already lagged on their mortgage payments.

Source: “Underwater Borrowers Are on the Rise,” CNNMoney (March 1, 2012)

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Mortgage Rates Drop Closer to All-Time Lows

After rising last week following positive housing indicators, mortgage rates fell back near all-time lows once again this week, Freddie Mac reports in its weekly mortgage market survey.

“Fixed mortgage rates bottomed out in January and February of this year, which is helping spur the housing market,” said Frank Nothaft, Freddie Mac’s chief economist.

This week, the National Association of REALTORS® reported that pending home sales increased in January, reaching its strongest pace since April 2010. The Federal Reserve also noted that real estate activity in the residential sector increased modestly in most of the districts it tracks and that home sales increased.

Here’s a closer look at rates for the week ending March 1, 2012:

30-year fixed-rate mortgages: averaged 3.90 percent, with an average 0.8 point, dropping from last week’s 3.95 percent average. A year ago at this time, 30-year rates averaged 4.87 percent.
15-year fixed-rate mortgages: averaged 3.17 percent, with an average 0.8 point, dropping from 3.19 percent last week. Last year, 15-year rates averaged 4.15 percent.
5-year adjustable-rate mortgages: averaged 2.83 percent, with an average 0.7 point, rising from last week’s 2.80 percent average. Last year, 5-year ARMs averaged 3.72 percent.
1-year ARMs: averaged 2.72 percent, with an average 0.6 point, this week, dropping slightly from last week’s 2.73 percent average. A year ago, 1-year ARMs averaged 3.23 percent.

Source: Freddie Mac

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NAR: REO Rental Programs Largely Unnecessary

Housing markets are complex and varied, and a government pilot program to turn bank-owned properties into rentals could be disruptive and counterproductive in some markets, according to the National Association of REALTORS®.

NAR urges the Federal Housing Finance Agency (FHFA) to proceed cautiously with its Real Estate-Owned (REO) Initiative pilot program to sell homes repossessed by government agencies to private investors to convert into rental units.

“REALTORS® support efforts to reduce the high inventories of foreclosures, but all real estate is local and we are concerned that REO-to-rental programs are not necessary in some areas and could even hinder the recovery,” NAR President Moe Veissi said. “In many communities REOs are already moving well through the normal processes, so we urge caution when proceeding with a rental program.”

According to a recent NAR analysis, while the overall visible inventory of foreclosures has been trending down across the country, there is a noticeable difference in foreclosure inventories in states that require judicial proceedings to foreclose on a property versus inventories in states that do not require the court’s intervention. Foreclosure inventories in judicial states are currently 2.5 times higher than non-judicial states. In addition, the disposition of foreclosure inventories is considerably faster in non-judicial states, where foreclosure sales rates are four times higher than in judicial states.

“Inventories of condos and single-family homes for sale continuously fell last year, suggesting that there is no significant oversupply of visible foreclosure inventory in the market,” NAR Chief Economist Lawrence Yun said. “Even the shadow inventories of distressed homes have fallen, though they remain elevated and are an ongoing concern. The government REO-to-rental plan could work in areas where buyers are not quickly absorbing the shadow inventory.”

To prevent further increases in foreclosure inventory, NAR has repeatedly called for improved lending to creditworthy home buyers and have urged lenders to make more loan modifications, mortgage refinancings, and short sales, which will help stabilize struggling housing markets.

“While REO-to-rental programs could be successful in a few communities, we believe that doing more to ensure mortgage availability for qualified home buyers and investors could be even more beneficial in helping absorb excess foreclosure inventories across the country,” Veissi said.

NAR urges that a national advisory board be created to ensure that current and future REO-to-rental pilot programs truly benefit the local community, minimize taxpayer losses and stabilize home values, and suggests substantial participation of local market experts, especially licensed real estate professionals, who have unparalleled knowledge of local market conditions.

Source: NAR

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Commercial Real Estate Vacancy Rates Improve

According to the National Association of REALTORS®’ quarterly commercial real estate forecast, all of the major commercial real estate sectors are seeing improved fundamentals, but multifamily housing is becoming a landlord’s market, commanding bigger rent increases. These trends also are confirmed in NAR’s recent quarterly Commercial Real Estate Market Survey.

Lawrence Yun, NAR chief economist, said vacancy rates are improving in all of the major commercial real estate sectors. “Sustained job creation is benefiting commercial real estate sectors by increasing demand for space,” he said. “Vacancy rates are steadily falling. Leasing is on the rise and rents are showing signs of strengthening, especially in the apartment market where rents are rising the fastest.”

NAR forecasts commercial vacancy rates over the next year to decline 0.4 percentage point in the office sector, 0.8 point in industrial real estate, 0.9 point in the retail sector and 0.2 percentage point in the multifamily rental market.

“Household formation appears to be rising from pent-up demand,” Yun said. “The tight apartment market should encourage more apartment construction. Otherwise, rent increases could further accelerate in the near-to-intermediate term.”

The Society of Industrial and Office REALTORS® shows a notable gain in its SIOR Commercial Real Estate Index, an attitudinal survey of 297 local market experts.

The SIOR index, measuring the impact of 10 variables, jumped 8.3 percentage points to 63.8 in the fourth quarter, following a gain of 0.6 percentage point in the third quarter. The index remains well below the level of 100 that represents a balanced marketplace, which was last seen in the third quarter of 2007.

Most market indicators posted advances in the fourth quarter, but 71 percent of respondents said leasing activity is below historic levels in their market — an improvement from 83 percent in the third quarter. Only 29 percent report there is ample sublease space available.

Office and industrial space remains a tenant’s market — 87 percent of participants feel that tenants are getting a range of benefits ranging from moderate concessions to deep rent discounts.

Construction activity is still low, with 95 percent of experts reporting it is below normal, and 83 percent said it is a buyers’ market for development acquisitions; prices are below construction costs in 78 percent of markets.

Participants are broadly expecting stronger conditions for the current quarter, with two out of three expecting market improvement.

NAR’s latest Commercial Real Estate Outlookoffers projections for four major commercial sectors and analyzes quarterly data in the office, industrial, retail and multifamily markets. Historic data for metro areas were provided by REIS Inc., a source of commercial real estate performance information.
Office Markets

Vacancy rates in the office sector are projected to fall from 16.4 percent in the current quarter to 16.0 percent in the first quarter of 2013.

The markets with the lowest office vacancy rates presently are Washington, D.C., with a vacancy rate of 9.5 percent; New York City, at 10.0 percent; and New Orleans, 12.4 percent.

After rising 1.6 percent in 2011, office rents should increase another 1.9 percent this year and 2.4 percent in 2013. Net absorption of office space in the U.S., which includes the leasing of new space coming on the market as well as space in existing properties, is forecast at 20.1 million square feet in 2012 and 28.1 million next year.
Industrial Markets

Industrial vacancy rates are likely to decline from 11.7 percent in the first quarter of this year to 10.9 percent in the first quarter of 2013.

The areas with the lowest industrial vacancy rates currently are Orange County, Calif., with a vacancy rate of 4.8 percent; Los Angeles, 4.9 percent; and Miami at 7.6 percent.

Annual industrial rent is expected to rise 1.8 percent in 2012 and 2.3 percent next year. Net absorption of industrial space nationally is seen at 40.6 million square feet this year and 57.7 million in 2013.
Retail Markets

Retail vacancy rates are forecast to decline from 11.9 percent in the current quarter to 11.0 percent in the first quarter of 2013.

Presently, markets with the lowest retail vacancy rates include San Francisco, 3.6 percent; Fairfield County, Conn., at 5.1 percent; and Long Island, N.Y., at 5.4 percent.

Average retail rent should rise 0.7 percent this year and 1.2 percent in 2013. Net absorption of retail space is projected at 9.9 million square feet this year and 23.9 million in 2013.
Multifamily Markets

The apartment rental market – multifamily housing – is likely to see vacancy rates drop from 4.7 percent in the first quarter to 4.5 percent in the first quarter of 2013; multifamily vacancy rates below 5 percent generally are considered a landlord’s market with demand justifying higher rents.

Areas with the lowest multifamily vacancy rates currently are New York City, 1.8 percent; Minneapolis and Portland, Ore., each at 2.5 percent; and San Jose, Calif., at 2.7 percent.

After rising 2.2 percent last year, average apartment rent is expected to increase 3.8 percent in 2012 and another 4.0 percent next.

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Entire Town for Sale in Montana for $1.4M

If a home isn’t enough for your buyer, how about an entire town?

A small village known as Pray, Mont., is for sale, which means one buyer could own his or her very own town for $1.4 million. The small village, founded in 1907, is about 30 miles north of Yellowstone National Park and boasts a population of 197, according to Census data.

The five-acre scenic countryside town includes a four-unit trailer park, a now-closed general store, a post office, and other small buildings. The town falls along Highway 540 — once a heavily traveled route for tourists who were heading to Yellowstone National Park.

“It’s a town,” Barbara Walker, the owner of the property, maintains. “There’s status in being able to own a town.” Plus, as the owner you get to wear multiple hats: Besides being the owner of the property, Walker says she’s also the unofficial mayor, sheriff, garbage control, and animal control officer for the town too.

Source: “Got $1.4M to Spare? There’s a Tiny Montana Village for Sale,” The Daily (Feb. 27, 2012)

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Chicago Area MLS Adds ‘Green’

To protect against “greenwashing” and false claims of “green” homes, a midwest MLS is adding green fields and disclosure documents to more easily highlight and verify these selling features.

Real estate professionals in the Chicago metro part of the Midwest Real Estate Data (MRED) organization will now have access to new multiple listing service data fields, which they can use to highlight energy efficiency features in a home. MRED encompasses northern Illinois, southern Wisconsin, and portions of northwest Indiana.

MRED added the “green” MLS fields to help real estate professionals better spotlight energy efficiency home features and improvements, provide utility bill summaries, as well as include detailed green disclosures or an LEED certificate. Real estate professionals can upload up to 14 green disclosure documents too.

The fields will also provide appraisers with easier access to the “green” features of a property, which they may then use in their valuations of properties.

Source: “MRED Adds New Green Disclosure Capabilities,” Inman News (March 1, 2012) [Log-in required]

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Could Rising Rents Bump Up Home Sales?

Home sales may get a boost from the rising prices occurring in the rental market, which is making it cheaper to own rather than rent in a growing number of cities.

“We might see a spring season better than the numbers are predicting,” Jay Brinkmann, the Mortgage Bankers Association’s chief economist, said during the an MBA conference in Florida this week.

The number of renters in the country increased during the housing crisis, while home ownership dropped to a 14-year low. But with rental costs rising nationwide, more renters may be lured to buying a home, particularly with home prices falling and mortgage rates hovering at record lows.

Mike Fratantoni, MBA’s vice president of economics and research, is forecasting home sales to increase 10 percent in 2013. An improving employment picture also is expected to have a positive impact on housing, MBA economists noted.

Still, “everything is going to be based overall where the economy goes,” Brinkmann said. “This is going to be a slow year. There are a number of headwinds we’re facing in terms of economic growth.”

Source: “MBA: Rising Rental Costs May Drive Home Sales Up,” HousingWire (Feb. 23, 2012)

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BofA Cuts Ties With Fannie Mae

Bank of America announced on Thursday that it will no longer sell some of its mortgages to Fannie Mae.

Effective this month, the nation’s second-largest bank says it will no longer permit mortgages for home purchases, as well as certain refinanced mortgages, to be packaged into Fannie Mae loan securitizations.

The move follows a dispute Bank of America and other banks are having with Fannie on who should take responsibility and endure the costs for past mortgages that ended up in default. Fannie, as well as some investors, want the banks to buy back past loans they made that defaulted.

Bank of America says it will continue to sell its loans to Freddie Mac. It also will continue to sell Fannie Mae loans refinanced through the Making Home Affordable program.

Source: “Bank of America Stops Selling Some Loans to Fannie,” Reuters News (Feb. 23, 2012)

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Search for Greenhouse Gas Emitters in Your Market

The Environmental Protection Agency (EPA) recently released its greenhouse gas (GHG) data report in the form of a new online tool — an interactive map that lets members of the public see what facilities are the largest suppliers of fossil fuels and highest direct emitters of greenhouse gases into the atmosphere.

Users can easily search for emitters by region, down to the street level, to see what type of greenhouse gases have been released as of 2010, at what quantities, and by whom.

Gina McCarthy, assistant administrator for EPA’s Office of Air and Radiation, explained that the new reporting map offers a tool for communities and businesses to find cost- and fuel-saving efficiencies. The information, she said, may also “foster technologies to protect public health and the environment.”

According to NAR’s 2011 Profile of Buyers and Sellers, home buyers are becoming more conscious of environmental efficiency and commuting costs when it comes to their home purchase due to higher energy expenditures as well as “an overall concern for the environment.” When it came to factors being considered when purchasing a home, environmentally friendly community features were listed as “very important” or “somewhat important” to nearly half of all buyers.

Real estate professionals can use the map to help educate their buyers, alleviate concerns, or help answer questions in their market.

Environmental factors that are most important to buyers are those “directly related to the buyers’ pocketbook,” according to the 2011 Profile of Buyers and Sellers survey. Heating and cooling costs were at least “somewhat” important to 87 percent of home buyers. Commuting costs were at least “somewhat” important to 73 percent of home buyers.

By Erica Christoffer, REALTOR® Magazine

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Mortgage Rates Inch Up After Record Lows

For the first time in three weeks, fixed mortgages rate moved up from their all-time lows, Freddie Mac reports in its weekly mortgage market survey.

One of the factors leading to higher fixed mortgage rates this week was signs of a gradually improving housing market, Freddie Mac Chief Economist Frank Nothaft says. For example, the Mortgage Bankers Association reported this week that seriously delinquent loans — those 90 days or more past due — and the inventory of foreclosures dropped 5.3 percent by the end of 2011, marking the lowest quarterly share since the beginning of 2009. Also, the National Association of REALTORS® reported this week that existing-home sales in January were at their strongest pace since May 2010.

Here’s a closer look at how rates fared for the week ending Feb. 23:

30-year fixed-rate mortgages: averaged 3.95 percent, with an average 0.8 point, up slightly from last week’s all-time low of 3.87 percent. A year ago, 30-year rates averaged 4.95 percent.
15-year fixed-rate mortgages: averaged 3.19 percent, with an average 0.8 point, inching up from last week’s 3.16 percent average. Last year, 15-year rates averaged 4.22 percent at this time.
5-year adjustable-rate mortgages: averaged 2.80 percent this week, with an average 0.7 point, dropping from last week’s 2.82 percent average. Last year, 5-year ARMs averaged 3.80 percent at this time.
1-year ARMs: averaged 2.73 percent, with an average 0.6 point, also dropping from last week’s 2.84 percent average. A year ago at this time, 1-year ARMs averaged 3.40 percent.

Source: Freddie Mac

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FSBO Site Founder Reaches Out to Real Estate Pros

ForSaleByOwner.com founder and former chief operating officer Colby Sambrotto made headlines in August 2011 when he hired a real estate broker to sell his Manhattan condo. Now he’s working to bridge the gap between FSBOs and real estate pros with his most recent online venture, USRealty.com.

The property listing Web site allows sellers to post their homes for sale for a fee, with costs running as high as $399. As a licensed brokerage, the company will then post those listings on multiple listing services in the sellers’ local markets.

As with his prior site, this new business aims to reduce expenses associated with real estate transaction — including commissions. However, Sambrotto said that USRealty.com is not an attempt at disintermediation, unlike ForSaleByOwner.com. He aims to get real estate professionals involved this time around.

“I learned a lot of lessons at ForSaleByOwner.com,” he told REALTOR® Magazine. “People want to buy and sell their homes without having to pay commissions. It was great at reducing transaction costs, but it didn’t sell enough houses to be the game changer I thought it would be.”

How can he persuade practitioners to participate in this site while reducing the amount of commission paid on transactions? By encouraging buyer’s agents to show their customers the listings on the USRealty.com site, he explained. If their buyers purchase a home listed on USRealty.com, they’ll get a standard 3 percent commission, Sambrotto said. Also, the site will refer unsuccessful sellers out to real estate pros in local markets.

Sambrotto said his goal is to provide a good experience for real estate professionals while serving a distinct section of the housing market.

“I want to have warm relations with agents: The fact that this model is what it is validates that,” he explained. “But at the end of the day, a lot of Americans cannot afford to pay those commissions. We’re here to serve a specific niche. There’s always been a segment of the market that’s not traditional. A lot of these people can’t sell their home in the traditional way.”

While he didn’t roll out USRealty.com with distressed home owners as the intended user, he said the site has drawn a great deal of interest from that group. “It wasn’t built with that specific purpose in mind, but that seems to be the consumer that’s most attracted to this,” Sambrotto said.

By Brian Summerfield, REALTOR® Magazine

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Study: Number of Kids Living in Poverty Rises

The number of children living in high-poverty areas jumped 25 percent from 2000 to 2010, an alarming finding, according to a new study by the nonprofit group, the Annie E. Casey Foundation.

In 2010, nearly 8 million children lived in high-poverty areas, which is considered areas in which 30 percent or more of the households earn an annual income of less than $22,314 for a family of four. The study found that three-quarters of the children are living in poverty-stricken areas despite having at least one parent working too.

“The recession has really set back much of the progress that was made in the 1990s when poverty went down,” says Robert Sampson, head of the Social Sciences Program at the Radcliffe Institute for Advanced Study.

According to the study, the states with the highest rates of children living in poverty-stricken areas are:

Mississippi
New Mexico
Louisiana
Texas
Arizona

Meanwhile, the cities with the highest rates of children living in poverty are: Detroit, Cleveland, Miami, Milwaukee, Fresno, Calif., and Atlanta.

Source: “More U.S. Kids Living in High-Poverty Areas,” Reuters News (Feb. 23, 2012)

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Top 10 States for Foreclosures in January

Foreclosures ticked up in January nationwide as more banks continued to work through backlogs of defaulting mortgages on their books, RealtyTrac reports.

For more than five years, Nevada has been the state leader with the highest rate of foreclosure filings in the country. In January, one in every 198 homes received a foreclosure notice in the state.

Still, Nevada is seeing progress: The state saw an 8 percent decrease in foreclosure activity from December to January, and filings were down 52 percent year-over-year.

Here are the states that are still facing the highest foreclosure rates in the nation:

Nevada: 1 in every 198 homes received a foreclosure filing in January
California: 1 in every 265
Arizona: 1 in every 325
Georgia: 1 in every 328
Michigan: 1 in every 354
Florida: 1 in every 363
Illinois: 1 in every 369
Delaware: 1 in every 373
Colorado: 1 in every 523
Indiana: 1 in every 555

Nationwide, one in every 624 households received a foreclosure filing in January. (Read more from the latest nationwide foreclosure report from RealtyTrac.)

While Nevada may still have the highest rate of foreclosures among states, some individual cities are seeing even higher rates of foreclosures. The worst hit-place for foreclosures is Stockton, Calif., in which one out of every 140 households received a foreclosure notice in January. In fact, nine of the country’s top 10 highest foreclosure rates were in metro areas in California — with Las Vegas the only city outside of that state on the list (ranked at No. 5).

By Melissa Dittmann Tracey, REALTOR® Magazine Daily News

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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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10 Housing Markets Getting the Most Web Traffic

Chicago continues to garner the most Web traffic at Realtor.com, taking the No. 1 spot once again for the highest search ranking in December at Realtor.com.

Based on rankings of 146 metro markets, here are the cities that had the highest search rankings for December 2011 at Realtor.com:

1. Chicago
Median list price: $189,000

2. Detroit
Median list price: $80,000

3. Los Angeles-Long Beach, Calif.
Median list price: $324,900

4. Phoenix-Mesa, Ariz.
Median list price: $165,000

5. Atlanta
Median list price: $150,000

6. Tampa-St. Petersburg-Clearwater, Fla.
Median list price: $139,900

7. Philadelphia, Pa.-N.J.
Median list price: $224,950

8. Dallas
Median list price: $190,000

9. Las Vegas
Median list price: $120,000

10. Orlando, Fla.
Median list price: $155,000

By Melissa Dittmann Tracey for REALTOR® Magazine’s Daily News

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Banks, Gov’t Near Deal on Foreclosure Settlement

Up to 1 million at-risk, underwater borrowers may be eligible for a reduction on their mortgage principal, if a settlement between big banks and government officials gets the final approval.

The mortgage aid is reportedly on the table as big banks and federal and state government officials are nearing an end to months of settlement talks stemming from foreclosure abuses allegedly made by banks that caused many home owners to lose their home.

“We’re very close to a settlement that would both fix the servicing problems, but also help over a million families around the country stay in their homes and get help,” Shaun Donovan, U.S. Housing and Urban Development Secretary, said during a recent forum at the Winter Meeting of the U.S. Conference of Mayors in Washington.

Under the proposed settlement, major lenders J.P. Morgan Chase, Bank of America, Wells Fargo, Citigroup, and Ally Financial would pay between $20 billion to $25 billion to settle alleged foreclosure abuses.

Donovan also said banks also would reduce the mortgage principal of up to 1 million borrowers by about $20,000 each. Furthermore, he noted that some families who were wrongly foreclosed upon may get compensated as a result of the settlement.

Source: “Foreclosure Deal With Banks Is ‘Very Close,’ HUD’s Chief Says,” Reuters (Jan. 18, 2012)

Wanted: Skilled Appraisers

In markets where foreclosures and distressed properties are common, experienced appraisers should be used to conduct the complex appraisals, says Appraisal Institute President Sara Stephens.

However, the Appraisal Institute has acknowledged that new rules blocking lenders from hiring their own appraisers mean that appraisers are often hired by appraisal management companies, which generally absorb some of the fee that appraisers earn.

The National Association of REALTORS® has long asserted that appraisals conducted by less experienced appraisers can derail transactions and impede the market’s recovery. A recent REALTOR® Magazine webinar addresses these issues and offers advice on how to work with appraisers. Download the presentation slides or playback the event recording.

Source: “Unskilled Appraisers Seen as Problem,” NASDAQ (01/17/12)

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Don’t Lag on Winter Home Maintenance

Homes may require some extra attention when it comes to maintenance to protect itself against the cold, harsh weather.

A recent article at Realty Times offers up some maintenance tips for the winter months:

Keep out drafts. Twice a year check your windows and doors for any air leaks, and add caulking, if needed. If extra caulking won’t suffice and you don’t have the money for a replacement, consider adding a storm door to keep out drafts or at least purchasing a draft blocker, which lies at the bottom of your door to block out the cold air.

Check the heating system. “Central heat and air units need to be checked over,” the Realty Times article notes. “When a unit is well-serviced it will save you fuel and thus money.”

Assess the ductwork. Make a trip to the attic to ensure that any parts haven’t become disconnected as well as a critter hasn’t chewed through any duct work.

Clean the gutters. Gutters can become clogged of leaves or other debris. When that happens, they can hold water, which can eventually rot away the siding or roof of your home. Make sure to keep the gutters clean.

Prevent freezing pipes. “When the weather drops below freezing you need to keep your pipes from freezing,” the Realty Times article notes. “Let faucets drip and unhook all outdoor hoses.”

Read more winter maintenance tips at Realty Times. NAR’s consumer site HouseLogic.com also has thorough tips and information for seasonal maintenance that you can provide to your customers and clients.

Source: “Winter Home Maintenance,” Realty Times (Jan. 19, 2012)

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Mortgage Applications Surge 23%

Record-low mortgage rates sparked a wave in mortgage applications for home purchase and refinancings last week, increasing more than 20 percent in a week, the Mortgage Bankers Association reports.

For the week ending Jan. 13, mortgage applications for refinancing applications jumped 26.4 percent while home purchase applications, a future gauge for home buying, increased 10.3 percent.

“With mortgage rates reaching new lows, refinance volume jumped,” Michael Fratantoni, MBA’s vice president of research and economics, said in a statement. “Purchase activity also increased as buyers returned to the market after the holiday season.”

Freddie Mac reported that 30-year fixed-rate mortgage averaged a record low of 3.89 percent for the week ending Jan. 12. For six consecutive weeks, 30-year fixed-rate mortgages — the most popular choice among home buyers — has averaged below 4 percent.

Source: “Mortgage Applications Surge on Refinancing Demand,” Reuters (Jan. 18, 2012)

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Home Inspector Sues Agent for Calling Him ‘Total Idiot’

A Lincoln, Neb., area housing inspector says he resents being described as a “total idiot” in an e-mail that was reportedly sent to more than 400 real estate agents, and he’s suing a real estate agent and her company for the name-calling.

According to the lawsuit, home inspector Matthew Steinhausen alleges that real estate agent Shelly Nitz was asked for feedback from agents at her company, Wood Bros. Realty and HomeServices of Nebraska, about Steinhausen.

In response, Steinhausen says in court documents that Nitz responded in an e-mail to the 400 or so agents: “He did an inspection in Seward for the agent that sold one of my listings. I will never let him near one of my listings ever again. Total idiot.”

In the defamation lawsuit, Steinhausen says the comment has greatly hurt his business and has resulted in more than $50,000 in damages.

“When I lose work because of a falsehood e-mailed en masse accusing me of being an idiot, it’s infuriating,” Steinhausen told the Lincoln Journal Star. Steinhausen told the Lincoln Journal Star that he felt Nitz was upset over an August 2008 inspection he did of one of her listings that she may have felt was overly critical.

Nitz and HomeServices have declined to comment publicly on the lawsuit.

Source: “Nebraskan Sues over ‘Total Idiot’ Description,” Associated Press (Jan. 17, 2012) and “Idiot Comment Spurs Lawsuit,” The Lincoln Journal Star (Jan. 17, 2012)

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