Purchase a Home

Real estate closings fall, pending sales rise

2010-08-25T22:25:00.000+08:00

July sales of single family homes and condominiums in the nine sample Seacoast towns fell from June totals as the Federal Tax Credit under agreement June 30 deadline expired.

Despite the closing news, pending sales, spurred by low home mortgage interest rates, actually improved 10 percent for single family homes and a very healthy 44 percent on the condo side.

According to the Seacoast Board of Realtors, the tax credit expiration, combined with a normal July slowdown, led to a 40 percent drop in single family closings and a 48 percent drop in condominium sales. The totals were behind last year's figures, single family sales falling 21 percent from June 2009 and condos by 46 percent.

Single family inventory also reached its highest total in at least three years with 583 units available for purchase.

The month also produced the most $1 million-plus sales since June 2008 — five, including the $3 million sale of 58 Ocean Boulevard in Rye. That was the largest transaction since the $4.1 million sale of 7 Heather Drive, Rye, in October.

"We are still moving at a steady pace over years past despite the tax credit offered by the federal government expiring," said Joanna Rousseau, president of the Seacoast Board of Realtors. "Buyers are looking at great competitive rates from lenders and with interest rates being so low, many homeowners are finding relief by refinancing."

Source

Connecticut Home Sales Surge, Prices Rise

2010-08-25T22:10:00.000+08:00

Single-family house sales in Connecticut surged 33 percent in June, boosted by the federal home buyer tax credit, and the median sale price rose for the seventh month in a row, according to a new report Thursday.

The median sale price in June — meaning half the sales are above, half below — rose about 3 percent to $264,900, compared with $257,000 for the same month a year ago, according to The Warren Group, which tracks real estate trends in New England and issues monthly reports.

June single-family house sales statewide increased to 3,477, compared with 2,612 a year ago. It was the first time sales exceeded 3,000 since August 2007.

In Hartford County, sales rose 16.4 percent to 882, compared with 758 a year ago. The median sale price slipped 3.8 percent to $232,750 from $242,000 in June 2009.

It remains unclear if the signs of recovery in the state's housing market will continue now that the tax credit has expired. To qualify for the credit, purchase contracts had to be signed by April 30 and closed by the end of June.

Economists are concerned that Connecticut employers remain tentative about adding to their payrolls and unemployment remains high. Home buyers need to feel secure in their jobs or confident they can find another if they lose theirs to make a major purchase such as a home.

Mortgage rates, however, remain at historic lows — an enticing carrot for buyers.

"The home buyer tax credit served its purpose and pushed buyers into the market," said Timothy M. Warren Jr., chief executive of Warren, publisher of The Commercial Record. "Low mortgage rates may help to continue the trend for the second half of the year."

Sales rose in all of eight of the state's eight counties, with Fairfield County leading the way with a 62 percent increase. The median sales price, however, slid in all but Fairfield and Tolland counties. The deepest decline was in Windham County, down 11.2 percent.

Source

Foreclosure Report for June & July

2010-08-25T21:56:00.000+08:00

Homeownership Education Learning Program, H.E.L.P. June/July foreclosure report.

In Riverside County

Notice of Defaults-Over the last 120 days=8,245 was 10,122 in May
Notice of Trustee Sales, last 120 days, Currently Scheduled=11,727 was 12,976 in May
Actual Trustee Sale-Over the last 120 days= 5,779 was 6,275 in May, Now bank owned
Trustee Sales cancelled over last 120 days and still need to be dealt with=7,002 (This number must be added to the number of defaults above for accurate totals)

In San Bernardino County:

Notice of Defaults-Over the last 120 days= 6,983 was 7,903 in May
Notice of Trustee Sales Currently Scheduled=9,605 was 10,427 in May
Actual Trustee Sale-Over the last 120 days=4,712 was 5,224 in May
Trustee Sales cancelled over last 120 days and still need to be dealt with=5,660

In Sacramento County

Notice of Defaults-Over the last 120 days=4,870 was 5,406 in May
Notice of Trustee Sales Currently Scheduled=5,335 was 5,520 in May
Actual Trustee Sale-Over the last 120 days=3,136 was 3,485 in May
Trustee Sales cancelled over last 120 days and still need to be dealt with=2,761

In Orange County

Notice of Defaults-Over the last 120 days=4,855
Notice of Trustee Sales Currently Scheduled=8,031
Actual Trustee Sale-Over the last 120 days=1,818
Trustee Sales cancelled over last 120 days and still need to be dealt with=5,527

In San Diego County

Notice of Defaults-Over the last 120 days=5,975
Notice of Trustee Sales Currently Scheduled=8,466
Actual Trustee Sale-Over the last 120 days=2,770
Trustee Sales cancelled over last 120 days and still need to be dealt with=5,502

“Economist are currently giving Astrology a good name.” Source, unknown

Many of us are feeling this way as we have attended workshops and private events from some of the highest profile lectures and economist. Many of them have been reporting since 2008, that the next quarter or two will be a bumpy ride and then things will stabilize and from there we will see slow growth for a few years before things begin to heat up. Eventually they will be correct.

Whether one is a bull or a bear on the market can be predicated on who is paying them to do the research and report on it. Banks and industry economist can, at times, seem to paint a nice picture of what is just around the corner. Any and all positive news, even if it is only for one to two months, is now considered a trend and reported as proof that things have turned around.

As the largest holders of mortgage backed securities that are at risk continue to unload their portfolios to vulture funds of one sort or another, the free market system will begin to do its job. Some will receive principle reductions that will be earned over a three year period of on time performance of their modified terms and others will simply find themselves having to rent for a period of three to five years before entering the home buying market once again.

According to the reports on the HAMP program, the average “back end” ratio of a borrower who has received assistance is over 63%. This number is a combination of one’s total housing expense plus all other installment and revolving debt divided by their gross monthly earnings. Historically, the number that was tolerated by the industry and allowed the US to have some of the best performing mortgage backed securities in the World was 36% to 38%. FHA allowed one to go as high as 41%. 63% is typically viewed as not sustainable.

If a family of two wage earners receives a modification with a 63% back end ratio this means they are unable to afford virtually anything else other than their home and serving their current debt. Most modifications are temporary and will have graduating payments in the future. If this families earning are not going to go up commiserate with their increase in housing expense the fear is that they postponed the inevitable. In addition, as they continue to meet new neighbor after new neighbor who purchased their model for 30% to 50% less than what their modification balance is, they’ll begin the process of asking themselves; “What are we doing?”

Currently, counselors are to sit with borrowers, take in their financial information send it into the lender/servicer who will get the documentation to one who understands the GSE and HUD underwriting criteria. Next, the servicer will then underwrite the borrowers qualifications and enter this data, along with valuation information, as well as projected valuation data and run the Net Present Value calculation. This process helps to determine if it is in the lender/servicers best interest to modify, short sale, or foreclose.

If all of the industry can agree that this is what is occurring, why not allow the industry retail arms to join the fight and get paid for doing this? The money is already being spent and the results are not currently impressive. The Director of HAMP, the Office of the Comptroller and the Office of Thrift Supervision, have all lamented that the efforts to date have not been what was originally hoped for.

If too many obtained loans they could not afford through poor underwriting standards and then you offer loan modifications by simply asking people what they make and what their expenses are over the telephone then is it any surprise most modifications failed or are failing? In fairness, this practice has stopped as of June 2010 and the most recent numbers are getting better.

Telephone any loan underwriter in America and they will tell you that even seasoned loan officers and loan processors often fail to provide the necessary paperwork in order for them to make a decision on the first submission. If professionals can have trouble and this is what they do for a living, imagine how difficult this process must be for consumers who go it alone or even counselors who may not have the same background as the private sector professionals.

Cynics believe temporary cash flow to all parties involved in this daisy chain is the current goal and seen by the financial industry as the best way to manage their portfolios that will take years to resolve. This is being done knowing full well that many of those who may have received a modification will ultimately lose their home. Fitch (The ratings agency) reported on this explaining that upwards of 60% to 65% of those who receive a modification will eventually fail.

The current system is causing a back log and is causing those who would normally self cure, or not go into default in the first place to give up and become part of the delinquent statistics. The greatest challenge we have is the lack of speed in this overall process. American homeowners are not feeling like they are being treated fair and equal. They believe more and more that the system is rigged against them and the longer this process of helping homeowners in trouble takes, the more people will feel this way and stop making their payments in order to get the help that more and more are beginning to feel entitled to.

Speed, that is what is needed. Pain will occur, but it can be tolerated as the private sector will finally feel comfortable jumping in with both feet and their massive investment dollars will stimulate our economy and offer hope for many consumers who are lacking the all important confidence to spend money.

The work force is already in place. The remaining loan officers in the business are pretty good. They could do a great job collecting the proper paperwork, putting a great package together and submitting it electronically (It’s what they do!) so the underwriters can make a decision. Then, if the decision is not favorable, the borrower has a choice; self cure, short sale, or participates in a deed in lieu agreement. Foreclosure is the last option.

Here are some headlines and news you should know:

Prime Foreclosures Are On The Rise

Despite efforts to assist distressed homeowners, the number of foreclosure actions completed by mortgage servicers has steadily risen over the past four quarters, according to a new report from the Comptroller of the Currency and the Office of Thrift Supervision. “Completed foreclosures increased across all risk categories, with the highest percentage increase among prime mortgages,” the OCC/OTS Mortgage Metrics report says.

New home sales plunged 33% in May…

…after the expiring homebuyer tax credit pushed sales in April to the highest level since August 2008. Most housing analysts expected a decline but not one this significant. According to the U.S. Census Bureau, sales of newly constructed single-family homes dropped to a seasonally adjusted annual rate of 300,000 in May from a 446,000 rate in April.
California Fared Better

The California Association of Realtors reported that sales increased 1.2% compared to May a year ago. The median price statewide jumped 23.2%, to $324,430.

Short sales continue to grow…

In Q1 as an alternative to foreclosure, increasing 9.2 percent to 41,033 – more than doubling from a year ago.
Our Country’s Debt Is Growing and is a Growing Concern

Debt Interest Payments (No principle, just interest) will be 28% of ALL Federal Tax Revenue by 2014. Source: Niall Ferguson, Harvard Professor and author. The States will continue to have crisis after crisis over the next two to four years that will catch up to our Bond market causing the rate we pay as a Country to go up on our National debt and forcing us into a national crisis that will all but force massive cuts in what we have grown accustomed to and expect.

Report by Lender Processing Services Inc. (LPS)

Shows a 2.3% month-over-month increase in the nation’s home-loan delinquency rate to 9.2% in May.
The percentage of mortgage loans in default beyond 90 days increased slightly, while both delinquency and foreclosure rates continue to remain relatively stable at historically high levels. There are currently more than 7.3 million loans currently in some stage of delinquency.

The report also shows that the average number of days for a loan to move from 30-days delinquent to foreclosure sale continues to increase, and is now at an all-time high of 449 days, resulting in an increase in “shadow” foreclosure inventory.
Commercial Delinquencies

The delinquent unpaid principal balance (UPB) for commercial mortgage-backed securities (CMBS) grew by $2.9 billion last month, according to Realpoint’s monthly delinquency report. The total delinquent UPB at the end of May was $57.34 billion – a 205% increase from a year ago, when the reported delinquent UPB was $18.78 billion.

Delinquencies on loans in commercial mortgage-backed securities rose by the smallest amount in 11 months in June but could accelerate again, according to a new report from Fitch. Fitch said its CMBS delinquency index rose to 8.14% in June from 7.97% in May. The hotel sector continued to have the highest delinquencies, although the rate was flat at 18.6%.

Good News

The IMF raised its global growth forecast, and expects the world economy to expand 4.6% this year vs. an April projection of 4.2%. The revision reflects stronger-than-expected growth in the first half of the year, with Canada and the U.S. leading advanced economies. The growth forecast for 2011 is unchanged at 4.3%, making the IMF the most recent agency, but certainly not the first, to foresee slowing growth next year as the recovery loses some steam.

Multiple Credit Relationships Lead To Fewer Delinquencies

A new study developed by TransUnion finds that consumers with multiple account relationships with the same lender outperform consumers who maintain only one relationship with that lender, with the biggest improvements in delinquencies seen among mortgages.

Now I suppose we will see legislation sponsored that offers tax breaks to those who will do all of their business from mortgage, to credit card, to life and homeowners insurance with just one company. My Dad said not to put all my eggs in one basket. I think I’ll follow his advice.

Congressional Budget Office

The government’s bailout of Fannie Mae and Freddie Mac, placing the companies in conservatorship in September 2008, has been costly. The two GSEs, so far, have been given over $150 billion to stay afloat. And recent estimates from the Congressional Budget Office put the tab for subsidizing Fannie and Freddie at $389 billion, when all is said and done.
Orange County CA.

The inventory of homes in foreclosure and short sales that are on the market in Orange County, Calif., has grown by 29% so far this year, according to Altera Real Estate. The company notes, “The active distressed inventory has increased from 2,555 homes at the beginning of the year to 3,307, levels not seen since May of 2009.” In Orange County, the distressed homes inventory represents 31% of the current active inventory.

HAMP Numbers

Servicers completed 51,200 permanent modifications in June, a 7% improvement from May, but also dropped a record 91,100 borrowers in payment trials from the program.

Overall, the Home Affordable Modification Program has helped nearly 400,000 struggling borrowers reduce their mortgage payments to 31% of monthly income as part of permanent modifications to their residential loans.
But 520,800 mortgagors that attempted to qualify by completing the three-month payment trials fell short and their trials were cancelled by servicers.

Refinance Applications Account for 80% of the Market

Refinancing applications are now at their highest level since last spring and are driving the increase in this week’s Mortgage Bankers Association Market Composite Index.

Bernanke called the economic outlook; “unusually uncertain”!

Bernanke said the Fed is prepared to take more policy actions as needed, but isn’t ready “to take any specific steps in the near term.” He also noted that current policy is “already quite stimulative” and available options “are not going to be conventional options.” Bernanke sees “moderate” economic growth despite a “somewhat weaker outlook” and low inflation with significant time needed to restore jobs.

Unemployment for IE and Other Areas

http://www.bls.gov/web/metro/laulrgma.htm This link will take you to the US labor statistics. Please pay attention to the U-6 figures as they reflect a more accurate picture.

Protecting Tennant At Foreclosure Act

Renters who find themselves indirect victims of foreclosure were not forgotten in the financial reform legislation. The Dodd-Frank bill will extend the Protecting Tenants at Foreclosure Act (PTFA) through the end of 2014.

Freddie Mac Report Their Delinquencies Are Down

The number of past due home loans guaranteed by Freddie Mac has fallen below the 4 percent threshold. The company’s latest report shows that the number of single-family mortgages at least three months past due or in foreclosure stood at 3.96 percent at the end of June. That’s down from a high of 4.20 percent as recently as February
China’s Massive Spending May Be Coming to an End?

Chinese manufacturing slowed in July, with the official purchasing managers’ index sinking to its lowest level since February 2009. Chinese growth is being restrained partly by government curbs on lending and property speculation but, taken together with disappointing growth in the U.S. and elsewhere, the slowdown in Chinese manufacturing will likely add to global recovery fears.
Great News on HSBC

HSBC’s net income doubled as the bank’s North American unit returned to profitability for the first time in three years and loan loss provisions dropped 46%.

HAMP, Fannie, Freddie and FHA

They’re all reporting better numbers based on new originations. HAMP can now report that while very selective on who ultimately gets a modification; those that do are performing much better. Fannie, Freddie and FHA are all reporting that the current group of borrowers applying for loans is some of the best quality of borrowers they have seen in recent memory.
If you are in the business you know this to be true as many in the business are afraid to fund a loan since “buy backs” are now a daily topic around the office.

A Double Dip Will Be Historically Unusual

So say the experts and I sure hope they are correct. Overall the economy is doing better and the recovery is personal and the timing of the recovery depends on when you get a job that allows you to pay your bills.Buyers, Hear Me On This. The Time Is Now!

Yes, values are predicted to go lower, but the cost of money is expected to go up the minute employment figures stabilize as the Feds head of inflation. Just a 2% jump in interests will erode a huge amount of purchasing power for you. Rates are artificially being held down to get you to take action. Do it now.
$250,000 loan amount at today’s 5% is $1,342.05, principle and interest. At 7% the payment is $1,663.26. The difference is $321.21. At 7% over a 30 year term this predicted jump will erode, $48,280.29 of your buying power.

If the homes are predicted to go down another 7 to 10%, that’s between $17,000 and $25,000 in temporary losses of value on a home that you bought at historic low interest rates fixed for thirty years. If you wait, you may have to pay much more in interest and possibly eroding any perceived gains due to temporary price. My advice, feel free to jump. If you wait, you may be paying more in interest. This could cost you more in the long run.

Source

Miami Home Sales Up Significantly From Last Year

2010-08-25T21:51:00.000+08:00

The Miami area recorded its highest level of escrow closings since 2007 this June. Low mortgage rates, low home prices and federal tax credits for homebuyers all contributed to the area’s substantial improvement. See the following article from DQNews for more on this.

Miami area home sales rose sharply in June, the result of low prices, low mortgage rates and what was likely the final big boost from the federal home buyer tax credits. Sales of existing condos rose to a five-year high, while the region's overall median sale price inched up from May but remained 6 percent lower than a year ago, a real estate information service reported.

In June 9,296 new and resale houses and condos closed escrow in the metro area encompassing Miami-Dade, Palm Beach and Broward counties. That was up 18.3 percent from May and up 20.4 percent from June 2009, according to MDA DataQuick of San Diego, Calif. The firm tracks real estate trends nationally via public property records.

On average, sales have increased 7.1 percent between May and June since 1997.

Total escrow closings were the highest for any June since 2007, but they fell 26.3 percent short of the average for that month since 1997, when DataQuick's complete Miami-area stats begin. Sales have increased on a year-over-year basis for 16 consecutive months.

Last month's resales (excludes new homes) of single-family detached houses and condos combined were the highest for the month of June since 2006. Resales have risen year-over-year for 19 consecutive months. New-home sales in June rose 21.2 percent above the May tally but were 1.4 percent lower than a year ago and the lowest for the month of June since at least 1997.

New-home sales have suffered as builders struggle to compete with distressed sales. New homes made up 6.2 percent of total June sales, far below the decade average of 20 percent of monthly sales.

The 4,355 condos that resold in June marked a 15.2 percent gain from May and a 33.0 percent increase from June 2009. It was the highest number of condo resales for that month since June 2005, when 6,070 condos resold. Condo resales made up 46.8 percent of total Miami-area home sales in June, compared with 48.1 percent a year earlier and a monthly average of 32.8 percent over the past decade.

In the Miami market's high end, the number of houses and condos that sold for $1 million or more rose to 262 in June, up 13.4 percent from 231 in May and up 21.9 percent from 215 in June 2009. During the first six months of this year, 1,230 houses and condos sold for $1 million or more, up 32.5 percent from the same period last year. The figures are based on an analysis of public property records, where there was a purchase price or loan of $1 million or more. The peak month for $1 million-plus home sales was in June 2005, when 583 sold in the Miami area.

The median price paid for all new and resale houses and condos sold in the Miami region during June was $150,000, up 1.4 percent from $148,000 in May but down 6.3 percent from $160,000 in June 2009.

June's overall median sale price stood 48.3 percent below the peak $290,000 median in June 2007. The Miami area's median price has fallen on a year-over-year basis for 33 consecutive months.

The median price paid for resale condos in June was $100,000, nearly unchanged from $100,150 in May and down 4.8 percent from $105,000 in June 2009. Last month the resale condo median stood 54.3 percent below its $219,000 peak in July 2006.

The median paid for resale single-family detached houses held at $185,000, the same as in May but down 1.5 percent from $187,750 a year ago, and down 45.6 percent from a June 2007 peak of $340,000.

Another price gauge analysts watch, the median paid per square foot for resale single-family detached houses, rose slightly on a year-over-year basis for the first time since September 2006. Last month the figure inched up to $108, up from $106 per square foot in May and up 0.9 percent from $107 in June 2009. Last month's figure was still 48.8 percent below the region's $211 peak in summer 2006.

A popular form of financing used by first-time home buyers government-insured FHA loans accounted for 43.5 percent of all home purchase loans in June, down from 45.6 percent in May but up from 43.1 percent a year ago. Two years ago it was 19.1 percent.

Absentee buyers purchased 31.8 percent of all homes sold in the Miami area in June, down from 33.2 percent in May but up from 31.0 percent a year ago, according to public property records. In June absentee buyers paid a median $105,000, down from $110,300 in May and down from $113,000 a year earlier. Absentee buyers are often investors, but could include second-home buyers and others who indicated at the time of sale that their property tax bill would be sent to a different address.

About 3.1 percent of the homes sold in June had been flipped within a six-month period, meaning they had been bought on the open market and then re-sold within that six-month window. That was up slightly from a flipping rate of 3.0 percent of all sales in May and up from 2.2 percent a year earlier. Flipping rates were higher before the housing market correction: In July 2005, for example, the Miami-area flipping rate was 5.6 percent.

Source

How to buy a foreclosed home

2010-08-09T20:07:00.000+08:00

With the downturn in the economy over the past two years, hundreds of thousands of homes have gone into foreclosure, offering a unique, once-in-a-lifetime opportunity for many Americans to buy a home at an unheard of price, sometimes 30 percent or more off the most recent sale price.

Buying a home is always a challenge. Buying a foreclosed home presents unique challenges, however. You need to be willing to hunt, put up with lenders who offer surprisingly little information about the properties they've taken back, real estate agents who have little experience or incentive in selling foreclosed homes, and loan officers who demand nearly perfect credit ratings to obtain a loan in today's tight-fisted market.

Foreclosed properties are typically referred to as REOs (real estate owned by the lender), according to FindLaw.com, a leading online resource for legal information, and are owned by the lending institution or government agency that backed the mortgage. For one reason or another, the owner failed to make payments on the loan and the lender foreclosed on the property (repossessed it).

Banks and other home-lending institutions are not in the business of owning property. They're in the business of making money on the money they lend. So it's in their best interest to sell a foreclosed property, and they are often anxious to do so. Properties of all types, including single-family homes and condominiums, can be foreclosed. Depending upon local regulations and traditions, some lending institutions will sell their properties through real estate agents who specialize in REO properties, while other institutions will sell foreclosed properties through auctions conducted by a county sheriff.

Because of the volume of foreclosed homes currently on the market, a growing number of lenders have turned to selling properties through heavily advertised public auctions in which dozens or sometimes hundreds of properties are sold in one or two days. The Federal Housing Administration (FHA) has sold foreclosed properties through local auctions for many years, typically announced in the classified sections of local newspapers. Potential buyers submit bids on the day of the auction, accompanied by a certified check for a percentage of the bid price. The highest bidder usually gets the home.

Buying a foreclosed property can be risky if you are not familiar with the procedures involved. Such a sale may not include the safeguards that are present in a traditional sale, such as a lender and a title insurance company. Therefore, if you plan to buy foreclosed properties, says FindLaw.com, it is important to familiarize yourself with the process and consult with a lawyer who specializes in this area.

Here are some other tips from FindLaw.com about buying a foreclosed home:

* Not all foreclosed properties are good deals. It seems like foreclosed properties are everywhere these days; however, not every property is a smart purchase. Search for a foreclosed property as if you were buying a home in a hot market. Start by researching neighborhoods that you really want to live in, then get in your car and drive through the neighborhood looking for properties that aren't kept up as well as neighboring properties.

* Find an experienced real estate agent. Some sellers of foreclosed properties, including lenders that have repossessed a property, may refuse to work directly with the buyer. Find a real estate agency that has experience in dealing with foreclosures and is willing to represent you.

* Hire a real estate attorney. All states have different laws and regulations involving foreclosed properties. You may need to consult with a real estate attorney specializing in foreclosed properties to assist you. Buying a foreclosed home can be a very complex and time-consuming process in some states; the right attorney may be able to help you cut through the red tape.

* Check the assessor's office. Many counties now include vital ownership and tax information on their Web sites about residential property, including the identity of the owner, the previous price paid for the home, and how much the property is being taxed. Knowing what the previous owner paid for the property will help you gauge its potential worth now.

* Tour and inspect the property. It's vital to inspect any property before buying it, but it's absolutely critical when buying a foreclosed property. Many foreclosed homes are not kept up or have been abused by their former owner and may require thousands of dollars in repairs and maintenance. If the property is located in a neighborhood with a lot of potential, investing to rehab a property may be worth the money.

* Have your financing lined up. Over the past two years, many lenders have tightened their lending standards and are only offering loans to those who have solid credit ratings and the long-term means to pay for a home. Sellers of foreclosed properties are leery of buyers who don't have their financing together. Like buying a home at the top of the market, it's in your best interest to offer the most solid financial package in order to win the home you want.

Source

Mortgage rates still trending low, refinance applications surging

2010-08-07T20:03:00.002+08:00

Interest rates were down and mortgage activity was up last week, according to the latest data from the Mortgage Bankers Association.

And this week, even lower rates are possible for people who qualify.

This entry at Total Mortgage notes that Freddie Mac today is reporting the current average rate on a 30-year, fixed-rate mortgage is 4.57 percent, for the lowest rate since Freddie Mac started keeping track in 1971.

Meanwhile, the bankers association survey for actual transactions last week showed that the average rate for a 30-year, fixed-rate mortgage dropped to 4.59 percent, from 4.69 percent the week before. This was the lowest 30-year contract rate ever recorded in that survey as well, the bankers association said.

The average interest rate for a 15-year, fixed-rate mortgage decreased to 4.05 percent, from 4.12 percent previously.

The data from last week also showed many more people were refinancing mortgages than taking out new ones. The survey found refinance activity made up nearly 80 percent of all mortgage applications last week, an increase of 8.6 percent in refinances from the previous week.

But purchase activity, for the first time in many weeks, also was up, showing a 3.4 percent increase in applications. That's some good news for the housing industry, at least for existing homes for sale. Demand for new home construction is still low.

The banker association survey covers more than 50 percent of all U.S. retail residential mortgage applications, and it has been done weekly since 1990. Mortgage bankers, commercial banks and thrifts respond to the survey.

Source

Pricing your home to sell in today's market

2010-08-05T20:02:00.000+08:00

With no federal tax credit to entice buyers, today's home sellers have to get even more serious about making a deal.

That means pricing aggressively -- low enough to compete with foreclosures in some markets. It's a conversation that stings, said Summer Greene, a real-estate agent for a Better Homes and Gardens Real Estate brokerage office in Fort Lauderdale, Fla.

"It's like telling them that their children are ugly," she said.

Many people with homes on the market already are slashing prices to catch buyers' attention. Twenty-four percent of listings on the market as of July 1 had gone through at least one price reduction -- that's a 9% increase from the previous month, according to the most recent data from Trulia.com, a real-estate listings site.

Price cuts are more prevalent in some markets than others, and the average size of the cut varies, too. In Minneapolis, for example, 40% of the listings had at least one reduction and the average reduction was 9% of the listing price. In Las Vegas, 12% of the homes had price cuts, but the reductions averaged 15% off the listing price.

Reducing their price is one way sellers are trying to weather the "tax-credit hangover" that the country is currently in, said Tara Nelson, consumer educator for Trulia.com. Slashing the price is the one thing a seller can do these days to attract attention.

"There's just not a whole lot of incentive right now for buyers to urgently buy," Nelson said. Mortgage rates have been relatively low for a while so buyers aren't concerned they'll miss that window, and inventory has been creeping up since April, she said. To be eligible for the home-buyer tax credit, buyers needed to have a contract on a house by April 30.

The Mortgage Bankers Association said the volume of mortgage applications to purchase a home during the week ending July 9 was its lowest since December 1996 -- despite mortgage rates that are near record lows.

Wait it out

If clients don't "really, really have to sell," Greene said she often advises them to hold off. "If they can wait it out, we're counseling them to do so, unless they have a lot of equity in the house," she said.

"If it's worth 3% to 5% to wait and they don't have a compelling reason to move," the best choice could be to batten down the hatches until next year, she said.

For some sellers at or near a negative equity situation -- owing more on their home than it's currently worth -- it's possible that modest appreciation could mean the difference between a traditional sale and a short sale, which would do some damage to the seller's credit rating. In a short sale, the lender agrees to accept less for the property than the borrower owes on the mortgage.

But for any home seller, the decision of when to sell depends largely on the local market.

"There are markets still declining -- in Florida, for example -- and some that are already growing -- in California, for example," said Mark Fleming chief economist for CoreLogic, in an email.

Home-price appreciation stabilized while the tax credit was in effect, but tepid labor-market and income growth will cause prices to moderate and possibly decline for the rest of 2010, Fleming said in a recent press release.

Nationwide, prices should continue to fall until early next year, with a bottom expected in the spring, according to Moody's Analytics. From the first quarter of 2010 to the first quarter of 2011, prices are expected to drop 5%, said Celia Chen, senior director of housing economics for Moody's Analytics.

Weak price appreciation should follow, she said. From the end of 2010 to the end of 2011, homes are expected to appreciate at a level below 1%; from the end of 2011 to the end of 2012, they'll appreciate by about 4%, she said. Foreclosures and short sales are expected to put pressure on home prices for the next couple of years, keeping them from rising as quickly as they otherwise might, Chen said.

"It's not going to make that much difference if you wait a year to sell a house," at least from a price perspective, Chen said, since you might not be able to sell for that much more than in today's market.

But what could change in a year is demand for homes and your ability to find a buyer -- and to do so more quickly. There may be more house hunters then who will chip away at the large amount of inventory, she said.

"The main constraints are weakness in the job market and the demand for homes," Chen said. "We expect [the job market] to improve over the next year. As it gains traction, we will see more job growth and that will benefit housing demand."
Cutting your losses

If you're sick of the waiting game and wanted to move yesterday, price your home right from the beginning. If it's low enough, it should attract multiple bidders and you might even get more than you're asking for, Greene said.

"I do what the banks are doing with foreclosures right now: Price aggressively and get multiple offers," Greene said.

Don't be afraid to reduce the price if you're not getting any nibbles. If the home hasn't been shown a lot or is on the market longer than average -- or if you're getting feedback that your home is overpriced -- think about cutting the price. If and when you cut, make it count, Nelson said.

"Small, penny-ante, minimal reductions -- $1,000 here, $2,000 there -- unless that is a large percentage of your asking price, they almost signal unreasonableness," Nelson said. Unless it's a sizable drop, potential buyers might sit and wait for the next drop, she said.

Also, if a price reduction brings your asking price within a certain search parameter -- say, from above $250,000 to just below $250,000 -- that can help, she said. "That does actually open up new audiences for a home... if you can cut it below the next search parameter cutoff," Nelson said.

And remember: If you're selling a home to buy a new one, you'll likely get a good price on that new abode. Because the person you're buying that home from likely will be going through the same wrenching, price-dropping experience you are.

Source

Opportunities And Pitfalls In The Current Real Estate Market

2010-08-05T19:55:00.000+08:00

Has the real estate crisis created opportunities for savvy investors? Is there light at the end of the tunnel if you're hoping to sell your home within the next few years? For an expert opinion on these questions and more, I recently sat down with real estate guru Ilyce Glink. Glink is a nationally syndicated columnist and author of Buy, Close and Move In!: How to Navigate the New World of Real Estate--Safely and Profitably--and End Up with the Home of Your Dreams. She also writes about the latest in the world of real estate on ThinkGlink.com; on her Home Equity blog on CBS Moneywatch.com; and on the Equifax Personal Finance blog. In addition, she is the chief content strategist for realtyjoin.com, a social networking site for those in the real estate industry.

Your book has a section called "10 Things That Have Changed in Real Estate, 10 Things That Haven't." What are the key things that have changed?
The biggest change is that you need to have "skin in the game," a phrase coined by celebrated investor Warren Buffett. That means that if you want to buy real estate today, either to live in or to invest in, you'll need to put down cash, and sometimes a lot of it. The FHA minimum is now 3.5%; for conventional financing you'll need 5%. You'll need to have a 30%-plus down payment for investment property, and if you're buying anything expensive, you might have to put down even more than that.

Another big change in the world of mortgage finance is that we've gone backward in time, and lenders will now verify every piece of information you give them at least once. You'll also find lenders nixing deals for the oddest reasons. I just heard from someone who said the lender refused to fund the loan without a better explanation of an errant $300 check. On a $500,000 mortgage, it's tough to understand why that's important, but it's an example of how nitpicky lenders are and how they want to understand everything about the most minute detail of your finances.

So what's hot and what's not in the real estate market? Any tips for buyers in this market, especially those who might be looking to real estate for current income?
The very low end of the spectrum is hot with investors right now. You're seeing people get all excited about buying property for $15,000, $25,000, and even $50,000. And, those deals exist all over the country. I recently posted a couple of blogs on MoneyWatch.com about how much you can buy for $35,000, and they got thousands of views.

Low purchase prices may seem appealing, but you have to take the same precautionary steps to evaluate a value of property, whether it is listed for $35,000 or $350,000. The only difference is that if you buy something for $35,000, you can rent it out for very little money and still have positive cash flow. In the book, I talk in great detail about how to think about value, how to analyze cash flow, and how to think about the investment overall.

If you're buying a place for income, you need to understand the numbers in a deal. If you don't understand income and how income affects investment property value, then you shouldn't be investing in real estate. Savvy investors hire a team of professionals (realtor, lawyer, accountant, 1031 company, mortgage lender, inspector, and so on) to assist them in creating a proper valuation for a property. If you want to invest, you should build your team and get them to interact with each other. That's how they'll help you make smarter decisions.

For example, if you're buying a warehouse or a retail strip center, you probably aren't an expert in commercial building construction. You won't know if an interior wall is failing or if it's likely the roof will leak. You're far better off hiring a commercial property inspector to walk you through the property and help you figure out what it will take to keep it maintained and in good working order. If you buy the property and later decided to sell it and buy a different investment property, you'll need a top accountant and 1031 exchange specialist to help you complete the transaction and meet Internal Revenue Service rules.

It's really hard to do it on your own and be profitable. It's one of the biggest mistakes early investors make. At the very least, find an experienced agent who represents other investors to help you identify property and get yourself a great real estate attorney who can help draw up documents that will protect you and your other assets.

The trend in residential real estate is to build smaller, more energy-efficient houses that are cheaper to own and maintain. All of the McMansions built in the 1980s and 1990s could become white elephants that see their value erode, even as the larger market recovers.

Do you have any advice for those looking to remodel? What types of upgrades are prudent?
The remodeling industry was hit extremely hard last year, and while more people are planning to fix up their homes this year, the problem is one of financing. You either have to save up enough money to fix your house or you have to charge it on your credit card. You can no longer take out a home equity loan, use the proceeds to fix up your house, and then refinance the balance into a new mortgage. Home equity lines of credit are hard to come by these days because the federal government wants lenders to keep a percentage of every HELOC on their own books. As a result, they're few and far between.

This isn't the time to make big, flashy improvements to your home. The economy is still extremely fragile, and we may be heading for a double-dip recession. If you can live with your grungy carpet for another year, you should do it.

When it comes to fixing up your house, you want to spend as carefully as possible. Figure out what amenities are standard in your neighborhood, and then build to that level--not a penny more. If you have to sell for some reason, you don't want to take a bath financially.

What's your advice to people who are thinking it may be time to consider buying a second/vacation home? Key pointers?
I do think that now is a great time to buy. I've just blogged on the three reasons why people buy vacation homes: as a place to create family memories, as an eventual place to retire and rent out until retirement hits, and for pure investment reasons. Decide which kind of vacation home buyer you are and then reverse-engineer the process to figure out what kind of vacation home you should be buying. If you can't afford the cash down payment or have a lot of excess cash to keep the place running and in great shape, don't buy a vacation home. It's easy to think you're getting a great deal because of the purchase price, only to find yourself snowed under by management costs, cleaning expenses, and resort fees. If you're going to rent your vacation home, here are nine things you should know.

How about sellers--any advice for them? Is it a good time to trade up to a larger or better home if you can swing it?
Can you sell your home right now? Can you get enough cash out of your primary residence to be able to trade up to a larger home? What most buyers forget is that a larger home means larger utility bills, maintenance costs, and upgrading costs, as well as higher taxes and insurance premiums. There's more to maintain, cool, and decorate. Can you afford all that?

Right now, those homeowners who can sell their property, whatever size and wherever they live, control the market. The problem is that many of those sellers are so freaked out that they don't really want to buy anything right now. So, they're thinking about renting or are moving in with family or friends. We're seeing the housing market continue to shrink at the moment, but it won't always be that way.

Property values might not rebound until 2020--or later, depending on where you live. You can't make a decision about selling based on when you think the housing market will rebound. That's like saying, "Should I sell my stock today or wait for the company to rebound?" We don't know when that will happen, if ever.

If you want to sell, and have a compelling reason to move, you should figure out an exit strategy. If homes are selling in your area, then you should try to sell your house. If homes aren't selling, and you're 40% underwater with your mortgage, you'll have to either do a short sale, a deed-in-lieu of foreclosure, or a strategic default.

Source

Nevada still No. 1 in foreclosures as more price declines expected

2010-07-18T21:37:00.000+08:00

A surge in foreclosure filings suggests that the housing market is headed for the feared "double dip," with some analysts predicting a further decline in Las Vegas home prices of up to 20 percent.

Nevada continues to lead the nation with one in every 17 households receiving a foreclosure notice in the first half of the year, Irvine, Calif.-based RealtyTrac listing service reported.

The state was hit with 5,140 notices of default in June, 4,736 notices of trustee sale and 2,963 real estate-owned properties that have gone back to the bank for a total of 12,839 foreclosure filings. That brings the six-month total to 64,429 filings, down 6.2 percent from the year-ago period and down 13.2 percent from the second half of 2009.

Nationwide, more than 1.65 million properties received foreclosure notices from January through June, an 8 percent increase from the year-ago period, RealtyTrac reported.

The "shadow inventory" of foreclosed homes being held by banks could grow as more borrowers enter into strategic default, walking away from homes with negative equity. Some 75 percent of Las Vegas homeowners are underwater, owing more than their home is worth, according to First American CoreLogic.

These numbers paint a bleak picture for Las Vegas and other cities engulfed by the subprime mortgage crisis that sparked a wave of foreclosures. Analysts foresee home prices declining throughout the rest of this year and possibly for years to come.

"I would not deny the possibility of a double dip," said Larry Murphy, president of Las Vegas-based SalesTraq research firm. "I would not deny the possibility of prices going down some more. We still have a lot of inventory out there, a lot of vacant inventory, and the economy is just not cooperating."

SalesTraq reported a median existing-home price of $122,847 in May, a 1.4 percent decrease from a year ago. It's down from a peak of $285,000 in 2006.

"I hate to say it, but we could see prices decline another 10 percent," Murphy said.

Kaye Cuba, senior director of valuation services for Cushman & Wakefield in Las Vegas, set the number a little higher, at a 15 percent to 20 percent further decline on the residential side.

After offering a glimmer of hope that home sales were picking up and prices were stabilizing, the housing market took a turn for the worse after the homebuyer tax credit expired in April.

Purchase applications fell for the ninth time in the last 10 weeks, the Mortgage Bankers Association reported for the week ending July 9. The seasonally adjusted purchase index dropped 3.1 percent and now stands at the lowest level since December 1996.

"This unprecedented slide in the purchase index further confirms that homebuyers largely remained on the sidelines through the month of June and now, it appears into July as well," the bankers' report said. "While we believe the relatively modest index declines over the past few weeks suggest sales are no longer in free fall, it appears homebuyers have yet to re-emerge to any significant degree post the tax credit, as we believe many consumers sense home prices still have further to fall."

Most housing analysts were expecting a surge in home closings in June as buyers rushed to get the federal tax credit. Instead, sales fell 11.2 percent in Las Vegas to 3,360 in June, the Greater Las Vegas Association of Realtors reported.

"Looking ahead, given the moderation we are currently witnessing in sales activity, we would not be surprised to see sales tail off further in the wake of the tax credit expiration," Raymond James analysts Buck Horne and Paul Puryear wrote in a June report. "Thus, while the Las Vegas resale market has demonstrated signs of stabilization, we are becoming increasingly concerned about the potential for renewed price declines."

With 14 percent unemployment and a 51 percent decline in home prices, Las Vegas is one of 13 housing markets that will never recover, 24/7 Wall St. website said.

"Most cities with sharp drops in home values are also the hardest-hit by the recession's impact on employment," the website said. "These areas may take years to get back to normal employment rates of 5 percent. In the meantime, home prices will continue to stagnate or worse, continue to fall because of lack of buyers."

Murphy said the Las Vegas economy must show substantial improvement for housing to recover, including a significant drop in the unemployment rate, a push toward higher room rates and a return of free-spending visitors. Also, population growth has stalled or even declined, taking away demand for new homes.

"I thought we'd hit bottom when median prices hit $120,000 last year and stayed between $120,000 and $125,000," Murphy said. "It really hasn't recovered. It just stopped bleeding. Given the state of the national economy and Nevada's economy, it's entirely possible we could see prices go down again."

SalesTraq showed repossessed homes dropping below 1,000 in December, January and February, then climbing back to 1,248 in March, 2,146 in April and 1,688 in May. There were 6,932 foreclosures through May, compared with 8,714 in the year-ago period.

Some housing experts see short sales as a panacea for the foreclosure crisis, even though the short-sale process can take four to six months to complete. Two years ago, short sales accounted for about 8 percent of Las Vegas existing-home sales. That figure had doubled to 16 percent by late last year and has increased by 2 to 5 percentage points a month.

David Brownell of Keller Williams Realty in Las Vegas sees a fundamental shift in the local housing market as short sales catch up with and maybe surpass foreclosures.

He counted 1,550 foreclosure sales in June, or 38 percent of total sales, compared with 1,403 short sales, or 34 percent of the total. That's the closest they've ever been.

"At the end of last year, I predicted that short sales would become the majority of the Las Vegas market for closed units," Brownell said. "This may be the last month that REO closings finish in first place. I feel a new market developing, another shift is occurring, and I think we are settling into a market dynamic that will exist for three, five, maybe even 10 years."

Inventory of homes for sale on the Multiple Listing Service has also started to climb after falling from a peak of more than 23,000 in 2006. It's up to 21,361 in June, the Realtors association reported.

Source

Record-low mortgage rates sparking home "refis," but not new sales

2010-07-18T21:32:00.000+08:00

Despite creating happy homeowners, record-low mortgage rates have done little to grease the real estate market locally or nationally.

According to Bankrate.com, an average 30-year fixed residential mortgage is 4.63 percent, and a 15-year loan is at 4.13 percent. Plenty of people are taking advantage of those numbers, but for home refinancing - not home purchasing. Of all mortgages being issued, between 75 and 80 percent are for refinancing existing mortgages, according to the Mortgage Bankers Association.

So even as the costs of a homes - from the purchase price to the financing costs - are at lifetime lows, double-digit unemployment, consumer uncertainty, and falling real estate sale values are forcing people to hunker down and stay put.

The number of transactions in Lackawanna County increased about a fourth from May to June to 240 closings for the month. But an increase is typical for this time of year, and the volume of transactions still not enough to flush out the inventory of homes.

Tougher credit standards and stricter underwriting has made getting a mortgage more difficult than just a few years ago, said Christian Saunders, a Lewith & Freeman Real Estate agent.

"Gone are the days when you could breathe on a glass and if it fogged up, get a mortgage," he said.

The difference between rates now and rates in April equate to about a $60 per month savings on an average priced home, and mortgage rates aren't the only reason people buy a home, said Bankrate.com chief economist Greg McBride. "Any more than people get married because of a sale at the bridal shop," he said.

That's not enough to get buyers to set aside their lack of confidence or certainty about the economy.

"If an $8,000 tax credit couldn't get people off the sidelines, $60 per month won't do it, either," he said.

Source

On the House: Renting may be the way to go

2010-07-17T05:15:00.001+08:00

A seminar sponsored by the Federal Reserve in May at which a couple of speakers urged that, while the nation's financial system remains in disarray, Americans consider alternatives to buying houses.

One alternative mentioned was renting with an option to buy, which Stephanie Selden of Philadelphia VIP, a group that provides legal counseling for low-income people, countered was prone to scams, leaving "many of our clients with nothing."

Another was renting until things get better. Fannie Mae chief economist Doug Duncan said a recent survey showed that "public awareness of mortgage problems" had made current renters wary of buying now, and that "most believe it will be harder to buy in the future."

The suggestion that we find alternatives to buying won't sit well with real estate agents and builders. Though the tax credits made a dent in the supply, there are still a lot of houses for sale - and still not many buyers.

Traditionally, summer is a slow time, and the tax credits pushed a lot of people who might have bought houses now to buy them in late winter and spring instead.

In an e-mail, reader Doug Waymer of Chalfont went as far as to suggest that the credits were "a costly taxpayer handout to folks who were already going to buy a home," resulting in "no improvement to the housing market."

The tax credits simply stole from future sales, Waymer wrote, "and with the expiration, sellers now need to lower prices." He added he had "pleaded with my sister and brother-in-law to close the deal on their Connecticut house sale April 30."

Though his kin were fine with the price they were getting, they didn't want to settle by the required deadline. "They lost their buyer and are having to paint the exterior, as well as drop their price again," he said.

Waymer makes a good point, especially when you consider that even though fixed mortgage interest rates remain below 5 percent and home prices have been reduced by short sales and foreclosures, there are relatively few real buyers out there.

In the last month or so, mortgage rates have dropped almost half a percentage point on a conventional 30-year loan.

Long & Foster vice president Art Herling says half a percent may not seem like much, but it can have a huge impact on the ability to buy a home.

At 5.375 percent, a $300,000 30-year conventional mortgage obtained in March would have a monthly payment of $1,679.91. At today's average rate of 4.875 percent, that same mortgage would cost $1,587.62 - a saving of almost $93 a month. "You would save $33,224 over the life of the loan," Herling said, and "that is a much bigger saving than an $8,000 tax credit."

In its outlook for housing published June 14, the Joint Center for Housing Studies at Harvard wasn't encouraging.

"Many factors are still weighing heavily on the market," said the center's director, Nicolas P. Retsinas. "Elevated vacancy rates, record foreclosures, the expiration of the tax credit, and high unemployment are all causes for concern."

Despite falling home prices, loan modifications, and softening rents, the downturn has not lowered the number of households spending half or more of their income on housing, which stood at 18.6 million in 2008. Instead, the share of those with severe housing-cost burdens climbed to a new height.

So, should you buy or rent?

The American Bankers Association recommends that you think about these things:

* The monthly costs, and whether you can afford them. Mortgage payments under 30 percent of your monthly income is a good rule of thumb.
* What the total rent or mortgage payments, plus other credit obligations, will be. No more than 40 percent of monthly income is advised.
* Whether you have the credit score to qualify for a good interest rate.
* The cost of taxes, monthly maintenance, or other fees.
* The number of years you plan to live in the house.

Source

Low mortgage rates just got lower

2010-07-16T05:10:00.001+08:00

Home buyers and homeowners seeking to refinance now can lock in the most affordable home-loan deals in nearly four decades, economists say.

“Home loan interest rates for all but traditional 1-year adjustable-rate mortgages (ARMs) hit all-time record lows in our Primary Mortgage Market Survey,” noted Frank Nothaft, Freddie Mac vice president and chief economist.

Benchmark 30-year fixed mortgage rates dipped to a record-low 4.69 percent in late June from 4.75 percent a week earlier, according to Freddie Mac.

It is the lowest average 30-year fixed loans have been since April of 1971 when President Richard Nixon was in the White House. Last year at this time, the 30-year fixed loans averaged 5.42 percent.

Fifteen-year fixed mortgages dipped to an average of 4.13 percent in late June from 4.20 percent. It is the lowest average 15-year fixed loans have been since September of 1991, when Freddie Mac began surveying this mortgage type.

A year ago at this time, the 15-year fixed loans averaged 4.87 percent.

However, if you are planned to buy a home or refinance, better hurry. The record low rates likely will not last.

Economists with the Mortgage Bankers Association (MBA) predict 30-year fixed mortgage rates are likely to rise to 5.4 percent during the fourth quarter of 2010, reach 6 percent in late 2011 and skyrocket as high as 6.6 percent range by late 2012.

Although the world of mortgageland is unpredictable and volatile, the MBA predictions are likely to come true. Few of today’s novice borrowers remember that 11 years ago in August of 1999, lenders were quoting 8.15 percent on a 30-year fixed mortgage.

To appreciate today’s historically low rates, housing experts say home buyers need only to look at what banks and mortgage lenders where charging in the early 1980s.

According to Freddie Mac, benchmark 30-year mortgage rates peaked at a whopping 18.45 percent in October of 1981 during the last Great Recession. Rates fell below 10 percent in April of 1986, then bounced in the 9-percent to 10-percent range during the balance of the 1980s.

Along with record low mortgage rates, economists note that there is increasing evidence that the housing market is stabilizing in many parts of the country as sale increase. Home resale prices have remained stubbornly low, but that could change.

The RE/MAX Northern Illinois real estate network noted that the market for larger move-up homes priced from $300,000 to $700,000 is rebounding in the Chicago area.

This year, move-up homes are selling in greater numbers, with sales during the January through May period 37 percent higher than last year, noted Jim Merrion, regional directory of RE/MAX.

Illinois Association of Realtors is forecasting that median home prices in the Chicago area soon will start to rise, and so will apartment rents.

“Evidence of some upward pressure on rental prices may provide some longer-term benefit for the housing market,” predicted Geoffrey J.D. Hewings, an economist at the University of Illinois.

“With little or no [construction] funding available for new apartment units, rent increases may provide some incentives for renters to consider house purchases over the course of the year,” Hewings said.

Source

Home-Efficiency Program Takes Hit

2010-07-14T22:28:00.000+08:00

A White House-backed effort to encourage home-energy improvements was dealt a blow Tuesday after a federal regulator said the program posed significant risks to mortgage lenders and investors.

The Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac, suggested the mortgage finance titans should avoid participating in the program or should tighten their lending standards where the initiative moves forward.

Workers for Namaste Solar install solar panels at a home last year in Boulder, Colo. A federal program aiding such firms may be endangered.

The move could effectively torpedo the fledgling program that lets homeowners borrow money from their local governments to finance the high upfront costs of energy-efficient upgrades, like solar panels or efficient furnaces.

City and state leaders say the decision could put at risk a program they had hoped would boost jobs and conservation efforts.

The development is a setback to the Department of Energy, which had championed the program, called Property Assessed Clean Energy, or PACE.

It also marks a rare instance in which Fannie and Freddie, through their regulator, have refused to adopt a policy directive from the Obama administration.

PACE lets homeowners use special property-tax assessments to pay off, over 15 to 20 years, the cost of new improvements. Local governments sell municipal bonds to fund it.

While PACE enjoyed White House support, it raised concerns of Fannie and Freddie and their regulator because PACE liens are senior to existing mortgage debt. That helps cities sell bonds more easily, but it means that in the event of a foreclosure, PACE liens are paid off before the mortgage lender gets any money.

In May, Fannie and Freddie said the liens violated the terms of their contracts to purchase loans from lenders and said they would require borrowers to pay off the liens before refinancing or selling their properties. The announcements, which raised concerns that borrowers would have to pay off their mortgages early, led most municipalities to suspend their PACE programs.

In Tuesday's announcement, the Federal Housing Finance Agency directed Freddie and Fannie to let participating borrowers keep their liens without penalty.

But it also instructed Freddie and Fannie to resolve the problems created by a first-lien loan. To do that, mortgage giants could require municipalities to have borrowers seek permission from lenders on each lien. Or, the regulator said they could tighten lending standards for all borrowers in jurisdictions that have PACE programs, an unlikely proposition.

Any of the steps outlined by the agency could severely limit PACE programs that rely on the first-lien status.

PACE backers said they could turn to Congress to pass legislation or to state attorneys general take legal action.

"They're basically saying they'll redline communities that move forward with PACE financing," said Will Toor, a commissioner in Boulder County, Colo. The county funded 600 liens since starting its program last year, but suspended it in May and notified 168 property owners last week their applications couldn't be funded because of the program's uncertain future.

PACE backers say the program is no different from other property-tax assessments used to fund sewers and roads that are usually senior to existing debt.

Critics say PACE liens are different because they are electively used for upgrades to individual properties. They also say there aren't sufficient safeguards to ensure that homeowners have the ability to repay the new debt. Fannie and Freddie "need to protect their operations and, in my view, to protect homeowners," said Alfred Pollard, the FHFA's general counsel.

In a statement, a spokeswoman for the Department of Energy said it would work with communities to design programs "to meet the concerns of independent federal regulators while delivering significant savings for homeowners." The scenario highlights the awkward position created by federal control of the Fannie and Freddie, which were taken over by the government nearly two years ago. The Treasury has injected $145 billion into the companies to keep them afloat.

As privately-run companies, the companies could have decided long ago not to purchase loans with PACE liens. But as wards of the state, the companies can't lobby or take positions on public policy and instead it fell to their regulator to handle the matter.

Tuesday's announcement followed a letter from Reps. Henry Waxman (D., Calif.) and Barney Frank (D., Mass.) calling on government agencies to seek an outcome that would allow the programs to continue without putting taxpayers or mortgage investors at risk.

Source

U.S. housing market remains fragile despite low mortgage rates

2010-07-04T21:01:00.001+08:00

After showing signs of a fledgling recovery from the worst downturn in decades, the U.S. housing market appears to be heading back toward the doldrums, as the expiration of a lucrative tax credit for buyers and increased uncertainty about the economy cause home sales to plummet.

The sudden weakness in residential real estate has struck nearly every region of the country, according to recent government and industry data, driving down sales of new and previously owned homes alike in May. On Thursday, the National Association of Realtors said an index that measures sales contracts signed on existing homes plunged 30 percent in May, more than twice what analysts had forecast, to the lowest level since the group started tracking the numbers in 2001.

Those sharp declines come despite record-low mortgage rates and historically cheap home prices. The market's renewed fragility highlights concerns about whether the U.S. economy will hurtle back into recession and illustrates the impact of the nation's high unemployment rate, now at 9.7 percent. On Friday, the government will issue jobless figures for June that could signal what is in store for housing and economic growth.

As long as people are without jobs or fear losing their livelihoods, they are unlikely to commit to buying a home and saddling themselves with 30 years of mortgage payments.

"It sounds simplistic but it bears repeating: 'No job = No house,' " Mike Larson, an analyst with Weiss Research, wrote in a note to clients Thursday. "With so many Americans unemployed or underemployed, the housing market is going to keep hurting."

In a report last month, Harvard University's Joint Center for Housing Studies singled out high joblessness as "one of the biggest drags" on the market. Based on past downturns, the report concluded that job growth is highly correlated to a sustained housing recovery, even more so than falling mortgage interest rates.

Many housing analysts are rethinking their predictions for the market's performance for the year. More than half of the 106 economists and analysts surveyed by Macromarkets in June said they expect a dip in home prices; that's up from 40 percent in May.

Despite the flash of pessimism, many economists expect the market to stabilize, but they won't have a clean read on its direction until the fall or winter, when the lingering effects of the tax credit clear the system.

That credit, which expired April 30, heavily distorted normal home sales patterns by enticing people to buy homes earlier than they had planned, thereby eating into future sales, economists said.

"The tax credit was like a Band-Aid over the housing market," said Mark Vitner, a senior economist at Wells Fargo Securities. "Now that the Band-Aid has been ripped off, we've found that the wound has not quite yet healed."
Surprising drops

Home sales were expected to decline once the credit ended, but May's acute drops have surprised many analysts. If the trend continues through the rest of the year, it could upend the market's tepid rebound and undermine the broader economy.

The unsteadiness is further reflected in the fact that the average rate on a 30-year fixed-rate mortgage hit a record low of 4.65 percent this week, but applications for home-purchase mortgages were down for all but one of the past eight weeks, slipping 3.3 percent last week, according to industry data.

Complicating the recovery's prospects is an excess supply of unsold homes on the market, swelled in part by increasing numbers of foreclosed properties for sale. Even though the number of homes on the market is down significantly from its peak, the national inventory of vacant homes for sale or rent remains uncomfortably high at 6.5 million. That's 2 million units more than the market needs, Vitner said.

Mark Zandi, chief economist at Moody's Economy.com, said he expects the glut of unsold homes will rise because lenders are starting to sell more foreclosed properties to the public. The number of foreclosures for sale rose 11 percent in the first quarter from the previous quarter -- the first quarterly increase since mid-2008, Zandi said.

Many lenders have come under political pressure to delay foreclosures and modify troubled loans. But as they get a better handle on which loans are unsalvageable, they are starting to complete more foreclosures and put them up for sale, Zandi said.

Government data released last month show that the number of foreclosures completed by the nation's largest national banks and federally regulated thrifts jumped 19 percent in the first quarter from the previous one.
Pulling down values

Once those foreclosures hit the market, however, they sell at steep discounts and pull down the values of surrounding homes. If the share of these distressed sales rise, as many economists predict, prices will suffer.

The recently expired tax break may have diluted the impact of foreclosures by boosting the number of traditional sales, said housing economist Tom Lawler. It also encouraged anxious buyers to bid up prices so they could make their purchase before the tax credit program ended, he said.

The tax credit offered up to $8,000 to some first-time buyers and $6,500 for certain repeat buyers. To qualify, buyers had to sign a contract by April 30 and close by June 30. But lenders and real estate agents reported widespread delays in processing a crush of mortgage applications in time for the June deadline. The Realtors group estimates that as many as 180,000 could miss out on the credit as a result of the backlog.

To keep the momentum going, Congress week voted this week to extend the closing date on the tax credit to Sept. 30. President Obama is expected to sign the measure Friday morning.

With the government's incentives for buyers gone by early fall and a cloudy employment picture, economists seem more keenly aware of the fragile nature of the housing sector's health.

"We're kind of sitting here in low tide," said Stuart Hoffman, chief economist at PNC Financial. "We're not sure if the tide is coming in and we're about to drown, or if it's moving out and we'll be left standing there dry as a bone."

Source

Pending Home Sales Plunged in May

2010-07-04T20:59:00.000+08:00

Mixed results for two key economic statistics in May: Construction spending fell less than expected, but pending home sales plunged.

First the relatively good news: Construction spending dipped 0.2% in May, the U.S. Commerce Department announced Thursday, a reading that was considerably smaller than the 0.5% decline expected by a Bloomberg survey. Given April's 2.3% surge in construction spending, a mild pullback was expected. In May, private residential construction spending fell 0.4% and private non-residential construction spending fell 0.8%.

However, as in April, public construction spending, which includes fiscal stimulus infrastructure and related projects, bolstered the May total, rising 0.4% after a 1.6% jump in April.

Pending Home Sales Plunge After Tax Credit Expires

Now the bad news: Pending home sales plunged 30.0% in May, the National Association of Realtors announced Thursday, as the number of homes heading to a closing declined as the end of the homer buyer tax credit approached on April 30.

The May pending home sale swoon follows three strong months of pending home sale gains -- further evidence that the home buyer tax credit encouraged some prospective home buyers to buy a home sooner, and increased home sales. Lawrence Yun, NAR chief economist, argued that the May pending home sales plunge was expected, rational and natural.

"Consumers are rational and they rushed to meet the tax credit eligibility deadline in April," Yun said, in a statement. "The sharp decline in contract signings in May is a natural result with similar low levels of sales activity anticipated in June."

Yun added that, provided job growth ensues in the months ahead, the pace of home sales should pick up later this year and reach a sustainable level, due to "very favorable [home] affordability conditions."

In May, pending home sales plunged in every region. Sales plummeted 31.6% in the Northeast, plunged 32.1% in the Midwest, sank 33.3% in the South, and swooned 20.9% in the West.

In general, economists view existing home sales as a more-accurate indicator of housing sector activity than pending home sales, due to the number of pending home sales that fall through, as a result of mortgage problems, title issues, liens, and other complications that sometimes prevent signed housing contracts from being finalized.

In sum, May's construction and pending home sales data comprise a microcosm of the U.S. economy at this stage of the recovery. Fiscal stimulus, either in the form of infrastructure spending by federal and local governments or via the home buyer tax credit, have helped stabilize construction spending and home sales. However, it remains to be seen whether the U.S. economy has enough demand in the system to advance to a self-sustaining expansion in the quarters ahead.

Source

Tax Credit as Mortgage Down Payment Now Official Federal Government Policy

2009-05-25T19:21:00.000+08:00

I've become numb a long time ago ... but seeing these programs and "solutions" one after the other is simply.... I don't have words. Just enjoy - last week we mentioned how some states had created a work around to use the tax REBATE (i.e. AFTER you buy the home you get the handout) as a substitute for a down payment and closing costs [May 8: Minyanville - Subprime Lending is Back with a Vengeance]

In an effort to boost home buying -- even for marginally qualified borrowers -- a number of states are finding creative ways to advance the tax credit to buyers on the day they get their new keys, rather than having to wait for next year's refund check. This allows buyers to pay for things like closing costs, mortgage points - or even the down payment.

Well folks - it did not take long... the early results of letting people who cannot even find enough money to put 3.5% down into the housing market must of been spectacular. Because in just the blink of an eye this "adjustment" to what Congress originally approved, has now become the federal standard.

(May 12, 2009) Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, said that the Federal Housing Administration is going to permit its lenders to allow homeowners to use the $8,000 tax credit as a downpayment.

Secretary Donovan said that important changes, which the National Association of Realtors(R) has been calling for, will help consumers purchase a home. "We all want to enable FHA consumers to access the home buyer tax credit funds when they close on their home loans so that the cash can be used as a downpayment," Donovan said.

According to Donovan, the FHA's approved lenders will be permitted to "monetize" the tax credit through short-term bridge loans. This will allow eligible home buyers to access the funds immediately at the closing table.

This is the same FHA we posted last week would cause the next housing bust [May 6: WSJ - FHA Loans, the Next Housing Bust]

Last year banks issued $180 billion of new mortgages insured by the FHA, which means they carry a 100% taxpayer guarantee. Many of these have the same characteristics as subprime loans: low downpayment requirements, high-risk borrowers, and in many cases shady mortgage originators. FHA now insures nearly one of every three new mortgages, up from 2% in 2006.

... taxpayer losses are mounting on its $562 billion portfolio. According to Mortgage Bankers Association data, more than one in eight FHA loans is now delinquent -- nearly triple the rate on conventional, nonsubprime loan portfolios. Another 7.5% of recent FHA loans are in "serious delinquency," which means at least three months overdue.

Because FHA also allows borrowers to finance closing costs and other fees as part of the mortgage, the purchaser's equity can be very close to zero.

So let's wrap this up and put a bow on it. Effectively the US government is going to allow people with "3.5% down" (now covered by the tax payers gift of $8000) to enter into agreements of sub 5% mortgage rates, to FICO scores as low as 620. As long as its your first home. Closing costs? Remembers the FHA allows people to finance that... you don't need to have it on you.

To put that in perspective this means, based on the median home price in America - about 70% of homes are now available to home buyers for less upfront than a rental. In a rental you at least need to save enough to put down a security deposit. Under this innovative program (that was not the original intent of the legislation) $8000 can finance 3.5% down on up to a $228,000 home.

Anyone who can make the monthly payments from there now is welcome to join the home ownership class. Or if you really don't care about your 620, 630 FICO score you can basically get into one of these homes, not make a single payment and live rent free from 12-18 months before they get around to foreclosing on you (which many banks are dragging their feet on).

And if the home value goes down even 1% and you find yourself immediately underwater? You walk away and send the keys to the US taxpayer - we're going to pay for it on the back end as well as the front end.

This is what was done in the auto industry - it's called pulling forward demand with greater and greater incentives (0% interest rates for multiple years, $4K, $5K, $6K rebates). Now we pulled almost all natural demand for home buyers that should of been arriving in 2008-2009 into 2006-2007. So you have to create an even stronger drug when you can rustle up enough home buyers. And here we are.... and when home data "drops at a slower rate than the previous period" we can rally on "2nd derivative improvement"... failing to mention whom is bearing the costs for that improvement.

Am I surprised? No. It's all Groundhog Day at this point - each program begins to sound like the other. Common theme is taxpayer handouts and taxpayers bearing risk - Kick the Can policies. In my predictions piece for 2009 I wrote things would get so desperate... err, correction - I wrote green shoots would be so plentiful that:

But larger than that - my prediction is Fannie/Freddie and then above and beyond that, for people who do not have 20% down and won't pay for insurance, the FHA - will wage a war against current mortgages. We'll see interest rate buydowns, we'll see principal reductions, we'll see anything and everything that basically gives a big (bleep) you to people who have been honoring the system. In return we will tell those people, well if your neighbor's house goes into foreclosure we will all suffer, so it's a necessary evil.

By the back half of 2009, refinancing will reach levels (and above) seen in the bubble years of 2005-2006. Obama & Co will also come up with myriad plans for buyers to suck up excess inventory - the government will be our partner. Nothing should surprise you - this will be an all out assault - we are already seeing the first inane ideas such as no appraisal refinances. The "private" mortgage industry will be almost completely crowded out as no one can compete with what the government will offer.

Source

Finding the 'Perfect Time' to Buy a Home

2009-05-24T19:18:00.000+08:00

In the kitchen, it's common wisdom that you don't try to catch a falling knife. But in real estate markets that have recently seen double-digit declines, many buyers are anxious to catch the equivalent of a falling house.

They're betting they can buy property at or near its cyclical bottom by scoping out distressed but fundamentally desirable neighborhoods, floating lowball offers and focusing on bank-owned homes.

It's easy to understand why, given the property values in some of the nation's hardest-hit real estate markets. Home prices in the five worst-performing major metropolitan areas -- Las Vegas, Miami, Phoenix, San Francisco and San Diego -- are down more than 40 percent from their peaks, according to the S&P/Case-Shiller Home Prices Indices. With interest rates for government-backed mortgages at record lows, monthly payments for owner-occupants are at their most affordable levels in years.

Nonetheless, economists and veteran real estate investors say market timing is a risky proposition.

"The odds of you timing the bottom perfectly are pretty low," says Rick Sharga, vice president of marketing at RealtyTrac, a foreclosure data provider. "If you're that good, you should be playing the stock market every day."

Although the current buyer's market may look attractive, rising unemployment rates and persistently high foreclosure rates add pressure on the battered housing sector. Housing Predictor, a forecasting Web site, predicts that 25 housing markets, from Las Vegas to Seattle, will see declines between 14 percent and 27 percent this year.

Sharga sees little reason for prospective owner-occupants in most markets to back away from buying an affordable property. Prices could drop further, he says, but the worst has probably passed. Additionally, historically low mortgage rates and tax incentives for new buyers probably won't last much longer.

Still, real estate is the ultimate local commodity, and some markets will be closer to bottom than others, so prospective buyers looking to protect themselves against further price declines need to consider local economic conditions. Before finalizing a purchase, real estate experts advise that price-sensitive buyers check these five critical factors.

Mortgages


30 yr fixed	4.98%	5.14%
30 yr fixed jumbo	6.22%	6.55%
15 yr fixed	4.63%	4.86%
15 yr fixed jumbo	5.94%	6.29%
5/1 ARM	4.59%	4.39%
5/1 jumbo ARM	5.14%	4.68%

Bankrate.com

Look for positive indicators: Rising prices are the most obvious indicator of a market recovery, but they’re also evidence that the cycle has already passed its low point. In still-declining markets, however, you can still find other positive indicators. David Kendall, a Realtor in Oakland, Calif., says he's encouraged to see a rise in sales volumes in some hard-hit ZIP codes, indicating that buyers are comfortable with current prices. Other potential turnaround signs include a drop in the number of days that homes sit on the market and an uptick in competitive bidding for compellingly priced properties.

Be aware of "shadow inventory": Banks often don't want to put their entire real estate inventory on the market at once. Doing so can depress prices, particularly in neighborhoods that have not yet seen a high number of foreclosure sales. Because of several factors -- including the recently expired moratorium on home repossessions and anticipation around new federal mortgage assistance programs -- banks have been allowing such "shadow inventory" to build up, says Chris Matty, marketing director at ForeclosurePoint, which publishes foreclosure data. "There's a huge pool of inventory and distressed homes that have not made it to the market yet," he says. "But eventually that has to come."

Source

FHA Decision Could Benefit Home Buyers, Builders

2009-05-23T19:14:00.000+08:00

The U.S. government gave ailing home builders a ray of hope, although it also raised concerns lending mistakes that fueled the housing boom - and bust - could be repeated.

The Department of Housing and Urban Development's Federal Housing Administration is paving the way for first-time buyers to tap a federal tax credit of up to $8,000 for a downpayment. The announcement, made Tuesday before several thousand real-estate agents attending the National Association of Realtors' Real Estate Summit, could prove a game changer for the sluggish housing ... continue reading

Is buying a home with a friend a good idea?

2009-05-22T19:13:00.000+08:00

What do you do if you want to buy a house but can't afford it? Ever thought about buying a home with a friend?

More and more, friends are teaming up to do just that. Time Magazine recently dubbed the term 'Co-Ho,' for communal homeowners.

While it can save you money and help build equity, there are some pitfalls. But a couple of friends who partnered up to purchase a home together say if you do it right, it can work.

Good friends Jaime Arb-Haessig and Sarah Marzolf share a duplex in northeast Portland and by 'sharing,' we mean the loan, the taxes, the maintenance and the utility bills. Both are in their early 30s and figured they would pool their money to give them greater buying power.

"I work at a non-profit, so I would not be able to afford to buy a house by myself," said Marzolf.

"When I was looking to buy a home, I realized I couldn't buy into a neighborhood I wanted to live in," said Arb-Haessig.

But owning a home together meant having their finances and assets tied together and the bank doesn't care who is late with the check. If one person defaults on the loan, both their credit ratings could take a hit. The thought of that didn't sit well with their families at first.

"Hell no was my parents' reaction," said Marzolf. "They're like 'that's not a good idea, you don't know what's going to happen.' "

But the contract was very specific and included everything from how long they plan to keep the property, how it will be sold, how to handle repairs, what happens if one moves out, what happens when one of them dies and even naming a third-party mediator in case something turns ugly.

The two don't anticipate anything going wrong and said their living arrangement has actually helped their friendship.

"We've stayed closer than we would have otherwise," said Arb-Haessig. "And we're more up on what's going on in each other's lives."

They also have other contingencies in place. They opened a joint rainy day account for emergency repairs or if someone is a little late on a payment one month. Arb-Haessig also recommends consulting a real estate attorney.

Source

Not-So-Tricky Split: The Home Buyer Tax Credit

2009-05-21T19:10:00.000+08:00

The new-and-improved version of the First-Time Homebuyer Credit offers rookie home buyers (or those who simply haven't owned a home in the past three years) a chance to get a federal income tax credit of up to $8,000. Thanks to this year’s Stimulus Act, you don't have to repay the credit like you did with last year’s version.

Even better, the IRS says unmarried individuals can team up on a home purchase and then share the credit. If you're thinking of going this route, here's what you need to know to get the best tax-saving results:
How Much You'll Get

The updated First-Time Homebuyer Credit can be applied to purchases of homes that occur between Jan. 1, 2009, and Nov. 30, 2009. The maximum credit equals the lesser of 10% of the purchase price of a principal residence or $8,000. Or, in the case of married individuals who file separately, $4,000. (These amounts are up from the $7,500 and $3,750 limits for purchases that occurred between April 9 and Dec. 31 of last year.)

There are some catches, however. The credit is phased out (reduced or completely eliminated) if your modified adjusted gross income (MAGI) is too high. (For this purpose, MAGI means the adjusted gross income figure reported on the last line on page 1 of your Form 1040 increased by certain income from outside the U.S. that is exempt from taxation.)

For married joint filers, the credit is phased out when the MAGI is between $150,000 and $170,000. For unmarried individuals and married individuals who file separately, the credit is phased out between MAGI of $75,000 and $95,000.

You can use the credit to offset your entire federal income tax bill, including any alternative minimum tax (AMT). Since the credit is refundable, you can collect any amount left over after your tax bill has been reduced to zero in cold, hard cash.
Eligibility

The credit is only available to buyers who have not owned a principal residence in the U.S. during the three-year period that ends on the purchase date for the home. That home must serve as the new principal residence.

If you’re married, both you and your spouse must pass the three-year test (whether or not you file jointly). If you’re unmarried, and you team up with another person to buy a home that serves as the new principal residence for you both and you both pass the three-year test, then you can share the credit. If only one of you passes the three-year test, only that person can claim the credit.
Unmarried Buyers Can Share the Credit

Say two (or more) unmarried individuals buy a home together that serves as their new principal residence. Assuming each person passes the three-year test and they jointly own the property as tenants in common or as joint tenants, they can pretty much share the credit any way they choose, according to IRS Notice 2009-12. However, the total credit is still limited to the lesser of 10% of the purchase price or $8,000. And the credit allocated to each person is still subject to the phase-out rule, based on MAGI. Although the IRS doesn’t actually say so, it appears you can’t claim a credit that exceeds your share of the purchase price (including your share of any mortgage debt). Here’s an example to illustrate the possibilities.

Example: Say you and your significant other jointly buy a home for $150,000 in June of this year and you both pass the three-year test. You pay 60% of the cost, and your partner pays 40%. The available credit for this purchase is $8,000 (lesser of 10% of the purchase price or the $8,000 credit ceiling). You and the other person could agree to share the credit 60/40 to reflect your shares of the purchase price. But if the other person's MAGI is too high to claim the credit and yours is not, then it makes good tax-saving sense to have the entire $8,000 allocated to you. On the flip side, if your MAGI is too high, the entire $8,000 could be allocated to the other person. Or you could split the credit 50/50, or 75/25, or 25/75, or whatever allocation suits the two of you best. Anything you decide is OK with IRS.
Word of Caution: Credit Must Be Repaid in Some Circumstances

Under last year’s version of the First-Time Home Buyer Credit, those who bought homes between April 9, 2008, and Dec. 31, 2008, were generally required to repay the credit over 15 years. The Stimulus Act eliminated the repayment rule -- in most cases. However, the repayment rule can still hit you if you sell the home you buy in 2009 within three years of the purchase date or stop using the home as your principal residence during that time. If either of those events occurs, you generally must repay your entire credit when you file your Form 1040 for the year during which the triggering event occurs (no 15-year repayment deal for you

Source

ARMed and underwater Refinancing is still possible under president's program

2009-05-11T17:37:00.000+08:00

Question: I have a problem. Like most people out there, my mortgage is underwater. However, I have a double negative in that I bought my home in late June 2005 with an adjustable-rate mortgage with the idea of refinancing after three years.

Now, the economy has taken a plunge, along with the value of my home, which I purchased for $129,000 and is now worth $110,00-$115,000. My lender will allow borrowers such as me to refi only twice. I have gone that route once before, and I'm afraid to go there again because if I refi too early, I won't be able to do it again. My payments are $1,186 a month on a 8.625% interest rate and that hurts!
I live in a low-income area. I have spoken to another bank, which tells me my wife and I are qualified for an FHA loan. Both of us have good jobs and make enough money to cover the mortgage. But we feel its time to switch to a fixed-rate loan. So far, no lender has been able to help us.

Answer: You seem to be an excellent candidate for President Obama's Making Home Affordable program. But before you go there, I'd say that if your current lender is willing to refinance you out of an ARM into a fixed-rate mortgage, go for it. I doubt rates are going to fall much more than they already have, so I wouldn't be afraid to pull the trigger a second time because it's "too early."

A Santa Barbara wildfire forces thousands to evacuate their homes and California Gov. Arnold Schwarzenegger declares a state of emergency. Video courtesy of Fox News.
There is nothing wrong with grabbing a rate in the 5% range right now, especially if it gives you payments you can afford. My gosh, that's better than a 3.5 point difference. So in your case, the second time could be a charm.
If you are not successful, check out www.makinghomeaffordable.gov, which outlines the administration's plan to help stabilize the housing market by reducing the mortgage payments of up to 9 million eligible homeowners.

The refinance portion of the effort gives up to 5 million owners with loans owned or guaranteed by either Fannie Mae or Freddie Mac an opportunity to trade in their loans for ones that are easier on their pocketbooks. And the loan modification part commits $75 billion to keep as many as 4 million other families in their homes by preventing avoidable foreclosure.

The Web site has detailed information about these programs along with self-assessment tools and calculators to empower borrowers with the resources they need to determine whether they might be eligible for a modification or a refinance under the program. Check out the Making Home Affordable site.
Borrowers also can use the site to connect to free counseling resources to answer any questions they may have about their own personal situations. You'll also find a checklist of key documents and materials to have ready when making that important call to your lender as well as FAQs from borrowers in similar circumstances.

Q: I enjoyed your article on tax credits for energy efficient home improvements. The question I have is, do the credits phase out at higher income levels like so many of the recent tax rebates and credits (typically over $75,000).

A: Good news. There are no income limitations on the energy credits. So feel free to spend away.

Q: Great article on reverse mortgage for seniors who want to scale down the housing ladder. What happens to the lower property tax basis on the first house, the one in California? Who pays the property tax bill, and could they have used the lower or carryover basis of the old property tax basis since they over 55? See previous Realty Q&A.

A: I'm an East Coast guy who doesn't know all that much about the Left Coast. So I turned your question over to Robert D. Yeary, CEO of Reverse Mortgage Solutions. The Spring, Tex., firm has developed a specialized, state of the art system to service reverse mortgages in all jurisdictions. Here's his response:

"In California, you can transfer your old tax base to a new house, provided the county in which you purchase your new home allows that transfer. Not all counties do that. But even in jurisdictions that do allow a transfer, if you pay more for the new house, you can only transfer the tax base if the purchase price is no greater than 105% of the amount for which you sold your previous residence. If you wait a full year after the sale of your home, you can transfer 110% of the selling price."
If the new house is considerably less expensive that the home you sold, Yeary suggests considering what the property tax would be without transferring the lower basis to the new place.

"Surprisingly," he says, "in California, real estate taxes are fairly low thanks to Proposition 13. Taxes are set at the time you purchase the home and can go up only so much every year. There are plenty of houses worth $500,000 or more in California with low tax bases because they were purchased years ago for $35,000."
Yeary also notes that the Golden State offers several tax relief program for low and moderate-income seniors.

Source

Where can working Americans afford a home?

2009-05-10T17:28:00.000+08:00

They are still priced out of the housing market in many cities across the country, a new study concludes.

Housing prices may have plummeted, but they’re still not affordable for many working men and women in America.

The National Housing Conference Thursday released its annual “Paycheck to Paycheck” report, which compares workers salaries and home prices in more than 200 communities across the country.

The bursting of the real estate bubble has made owning a home more affordable for some, with the median price of a home dropping 14.5 percent nationally in the past year, the report concluded. But the majority of essential workers like teachers, police, and firefighters still cannot afford to buy a home in the towns and cities where they work, it added.

The “Paycheck to Paycheck” report takes an in-depth look at construction-related jobs, which are expected to get a boost from the Obama administration’s stimulus package. It analyzed five jobs: construction managers, carpenters, equipment operators, long-haul truck drivers, and construction laborers. It concluded that only construction managers, who make about $100,000 a year, can afford to buy a home in the 208 housing markets analyzed.

Carpenters were able to afford to own a home in 51 of the 208 studied markets, and equipment operators in 35 markets. Construction laborers were priced out of 196 of the communities.

“Just because prices are falling, that doesn’t mean that we have seen an end to the problem of affordability, because for many people, particularly at the low end of the income spectrum, people are losing their jobs or their hours are being cut back,” says Nicolas Retsinas, director of Harvard’s Joint Center on Housing Studies.

“So it’s not just the cost of housing, whether to purchase or rent, but it is also people’s ability to pay,” he adds. “And in this economic situation we’re in, that’s becoming much more problematic.”

San Francisco remains the most expensive city in which to buy a home, with a median price of $575,000, according to the report. That’s down from $770,000 a year ago. New York ranks second with a median price of $455,000, a drop of $70,000 from a year ago. The least expensive places are Saginaw, Mich., and Youngstown, Ohio, each with a median home price of $73,000.

That price is affordable for most working Americans. But there’s a catch. “The problem in a lot of these more-affordable areas is that unemployment is a substantial problem, so being able to actually purchase a home still may not be in everyone’s cards,” says Maya Brennan, a researcher at the Center for Housing Policy, the research arm of the National Housing Conference.

The report also found that rents rose nationally by 3.7 percent in the past year. But in Florida, which has been hit hard by the foreclosure crisis, rents spiked more significantly.

“One hypothesis is that as people are losing their homes, they become renters. And in the past renters could easily become homeowners, but now that door is shut to many,” says Professor Retsinas. “So in some markets, you see an increase in demand for rental housing, and an increase in demand for anything has a tendency to raise prices.”

The data have prompted calls for federal, state, and local officials to create more affordable housing, particularly in high-priced urban areas. The Department of Housing and Urban Development already has a Neighborhood Stabilization Program, which is designed to rehabilitate abandoned foreclosed homes, a certain amount of which must be affordable. But housing experts say that much more needs to be done.

“Although home prices have dropped, states and localities and the nation as a whole still have to pay attention to the needs of low- and moderate-income workers,” says Ms. Brennan. “A lot of communities can take advantage of the lower home prices to try to buy some properties themselves and get them preserved as affordable housing for the future.”

Some housing policy experts like Retinas see the housing market crisis as an opportunity.

“There’s an irony that in the midst of this calamity in the housing market, there’s a reaffirmation of the adage that housing really matters,” he says. “It was very difficult in years gone by to put affordable housing on the agenda, because people considered it an afterthought. Now have learned full well what happens when people lose their homes and are unable to afford a place to live.”

Source

First 100 days of Obama: Stimulus plan includes tax breaks for many people

2009-05-09T18:45:00.001+08:00

Whether the multibillion-dollar economic stimulus plan will actually jump-start the nation's ailing economy is uncertain.

But one thing is for sure: The plan has real perks for many American families -- some worth hundreds of dollars, some worth thousands. Of course, some families will benefit little, if at all.

For more information on the incentives, go to www.irs.gov and click on "Update on Recovery Tax Provisions for Individuals and Businesses."

Break for home buyers » Buy a home before Dec. 1 and you could get as much as $8,000.

The money is a tax credit that does not have to be repaid if the home remains your primary residence for at least three years. Although it is touted as an incentive for first-time buyers, those who have owned homes in the past may qualify, as well.

The IRS defines a first-time buyer as someone who has not owned a home in the three years prior to the date he or she closes on a home this year.

The free money is available only to those who have purchased after Jan. 1. Buyers who purchased between April 8 and Dec. 31, 2008, are eligible for an incentive worth as much as $7,500, but that must be repaid.

The credit is reduced or eliminated for higher-income taxpayers. It begins to be phased out for single filers with modified adjusted gross incomes of more than $75,000. Those earning more than $95,000 don't qualify.

Advertisement
For married couples filing jointly, the credit begins to be phased out at incomes of more than $150,000; those earning more than $170,000 don't qualify.

Incentive for car buyers » Purchase a new car, light truck, motor home or motorcycle and you may be entitled to deduct the taxes you paid on next year's tax return.

Taxes on up to $49,500 of the purchase price may be deducted if you bought after Feb. 16 and before Jan. 1, 2010.

Unlike the homebuyer tax credit, which reduces your tax liability dollar for dollar, this deduction simply reduces your taxable income. So, its value depends on your tax bracket.

The amount of this deduction also is phased out for higher-income taxpayers. Don't itemize? That doesn't matter -- you can still take this deduction.

In addition to the $8,000 federal incentive, Utah is offering $6,000 grants to homebuyers. Unlike the federal money, the state incentive is available only for those who buy new homes, and it's limited to the first 1,600 home buyers. About 1,100 grants are still available. For information, go to www.utahhousingcorp.org.

More money in worker paychecks » Most taxpayers qualify for a tax credit of up to $400 this year and next -- $800 for married couples filing jointly.

But taxpayers won't have to wait until they file their returns before they get their money. This benefit is being coordinated with employers, who are delivering the incentive by withholding less money from paychecks -- to the tune of about $45 to $65 more per month for some people.

The credit, based on 6.2 percent of earned income, phases out for higher-income taxpayers.

To compensate for the reduced amount being withheld, employees will take a tax credit when filing 2009 and 2010 returns. So, even though less money is being taken out of paychecks, employees won't owe more in taxes or get less of a refund.

More benefits for the unemployed » Weekly unemployment benefits have been increased by $25 per week, and workers who exhaust 26 weeks of unemployment benefits may be eligible for 20 additional weeks.

Even better, the first $2,400 of unemployment benefits a person receives in 2009 is tax free. Additionally, many laid-off workers are eligible for a new 65 percent subsidy that helps cover much of the high cost of continuing health insurance coverage under the federal COBRA program.

The subsidy is available for up to nine months. You must have been laid off between Sept. 1, 2008, and Dec. 31 of this year to qualify. For information, call your former employer's human resources department or contact the Utah Department of Insurance at www.insurance.utah.gov or by calling (801) 538-3077.

Source

First-time homebuyer? Take advantage of this tax benefit

2009-05-08T18:44:00.000+08:00

Under two recent pieces of federal legislation, a first-time homebuyer may be able to take advantage of a tax benefit when purchasing a home.

Note that a "first time home buyer" includes those who have not owned a home in the three years prior to a current purchase, but may have owned a home prior to those three years.

For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse. But there are two different types of credits: one for those who purchased a home between April 9, 2008, and Dec. 31, 2008, who may be eligible for a federal tax credit of up to $7,500, and another for first-time buyers who purchase a home between Jan. 1, 2009, and before Dec. 1, 2009, who may be eligible for a federal tax credit of up to $8,000.

In either case, the credit is equal to 10 percent of the purchase price of a principal residence, up to $7,500 or $8,000.

There are, however, differing effects to the two credits. Unlike other types of tax credits, the first-time homebuyer credit for 2008 must be repaid over 15 years. Furthermore, it will need to be repaid in full if the taxpayer sells the house within the 16-year repayment period.

Some have described the credit as an "interest-free loan" because of this repayment requirement.

In contrast, the 2009 tax credit does not have to be repaid, but home buyers must use the residence as a principal residence for at least three years, or face recapture of the tax credit amount.

The credit is phased out, or reduced, for individuals with modified adjusted gross income between $75,000 and $95,000. For married couples filing a joint return, the phase out range is $150,000 to $170,000.

The tax credit amount is reduced to zero for taxpayers with adjusted gross income of more than $95,000 (single) or $170,000 (married), and is reduced proportionally for taxpayers with adjusted gross income between these amounts.

To determine modified adjusted gross income, it is necessary to add certain sums, such as foreign income, foreign-housing deductions, student-loan deductions, IRA contribution deductions and deductions for higher-education costs.

Interestingly, the credit is fully refundable, meaning taxpayers will be able to obtain an additional federal tax refund of up to $7,500 or $8,000, even if they have no other tax liabilities or if the credit is more than the tax that they owe. Typically this involves the government sending the taxpayer a check for a portion, or even all, of the amount of the refundable tax credit.

For a home that a taxpayer builds, the purchase date is the first date of occupancy of the home. For a pre-existing home, the purchase date is the date when closing occurs and the title to the property transfers to the home owner.

A primary residence is a residence in which an individual lives most of the time and can be a house, condominium, or even mobile home. The definition of principal residence is identical to the one used to determine whether you may qualify for the $250,000-$500,000 capital gain tax exclusion for principal residences.

People who purchased a home between April 9, 2008, and Dec. 31, 2008, (the $7,500 credit) should claim the credit on their 2008 tax returns, and may need to amend the return if one has already been filed. The credit must be repaid in 15 equal installments over 15 years, beginning with the 2010 tax year.

People who purchased a home between Jan. 1, 2009, and before Dec. 1, 2009, (the $8,000 credit), can claim the credit on their 2008 or 2009 tax returns (if the 2008 return is already filed, the taxpayer will need to amend that return to treat the purchase as occurring on Dec. 31, 2008).

Taxpayers using the 2009 credit do not have to repay it provided the home remains their main residence for 36 months after the purchase date.

Given the complexities with the differing credits, and the fact that an amended tax return may need to be filed, readers are urged to consult with their financial, tax and legal professionals to assist in claiming the refund.

Source

New tax credit available for homebuyers

2009-05-07T18:42:00.000+08:00

Missouri is offering a unique addition to a federal tax credit program intended to bring the country's housing market out of the doldrums by offering credits to first-time homebuyers.

The program, which is part of the $787 billion federal stimulus package passed in February, increases the amount that first-time homebuyers can receive from the program from $7,500 to $8,000. The original amount was set in stimulus package passed in November 2008.

The Missouri Housing and Development Commission is offering a variation of the program that no other U.S. state is practicing. The commission is offering to preemptively loan homebuyers the money for the federal tax credit before the federal government distributes the credit. The homebuyer then turns federal credit over to the state commission, and must keep the same address for three years. The homebuyer must also pay back the loan before June 2010 to avoid interest charges.

Without this variation, homebuyers in Missouri would first have to purchase a home, and then would receive their tax credit after they filed their income taxes for the following tax season.

U.S. Sen. Claire McCaskill, D-Mo., was in Columbia on Saturday for a news conference to discuss the program. The conference was held at the home of Travis and Jessica Peterson, two longtime Columbia residents who just purchased a home on the east side of the city and soon thereafter received $8,000 from the program.

In a news release issued prior to her appearance, McCaskill said the tax credit program would help to recover the economy.

"Buying a first home is an integral part of the American dream and the economic recovery package gives first-time homebuyers a tremendous incentive and help in realizing that dream," McCaskill said in the release.

The Petersons, who had already purchased the house but received the credit, said they were going to use the money to build a privacy fence around the backyard of the house.

Jessica Peterson said the fence would be useful because the couple is expecting a child in October.

"We're very happy he could do this," Peterson said.

Columbia Board of Realtors President Carol Van Gorp said since the beginning of March, 14 percent of homes sold in Columbia used the tax credit.

Van Gorp said the credit could be useful for college-aged homebuyers that seek to leave rental properties. She said it was not uncommon for the parents of students to buy houses in the names of their children so that they can cash in on the credit.

Van Gorp said the program would help stimulate the economy, not only by moving sluggish housing sales, but also through the purchase of consumer goods and the collection of sales tax.

"We need housing to recover so that the economy can recover," Van Gorp said.

According to data released by the Kaiser Family Foundation, the rate of foreclosures in Missouri was lower than the national average. According to the National Association of Home Builders, there was an increase in new home sales in the U.S. in March, up almost 20,000 new homes from 331,000 sold in January. In March 2008, though, 513,000 homes were sold in the U.S.

Andi Benson, a spokeswoman for the Missouri Housing and Development Commission, said 97 home sales have closed using the credit, and an additional 257 are being processed. She said 47 of the cleared sales went to owners in their 20s.

Benson said the loan was intended to help first time homebuyers pay their down payments and closing costs.

"Most of us don't have that kind of money laying around," Benson said.

Source