Westside Real Estate Update

2006-08-28T12:46:00.000-07:00

LENDERS' WORKOUT PROGRAMS OFFER HELP FOR BORROWERS IN TROUBLE

Whether it's from a job loss, medical emergency, mortgage-payment hike or simply personal-finance mismanagement, a small but growing number of homeowners is falling into foreclosure every year.

For most people who fall behind on their mortgage, their first instinct is to avoid all contact with the lender. But that's a mistake, consumer counselors and others say, because it's likely those financial problems will only get worse, making it harder to work out the best repayment terms.

Many borrowers don't realize that lenders are as eager as homeowners to avoid foreclosures, which cost lenders $40,000 to $60,000 per house, according to industry estimates. Most lenders offer "workout" programs where they work with the borrower on repayment plans that meet the borrower's financial circumstances.

"Going to the lender is ideal. The sooner, the better," said Erica Sandberg, a spokeswoman with the Consumer Credit Counseling Service of San Francisco, certified by the U.S. Housing and Urban Development Department to provide housing counseling.

Lenders agree. "It's never too early and never too late to call your lender," said Loretta Abrams, vice president of consumer affairs for HSBC North America.

And, "any of our borrowers can approach our workout staff," said Tim McGarry, spokesman at Washington Mutual. "It's always our goal to keep people in homes. Foreclosure is a bad outcome for us as a lender."

Justifiably nervous

But plenty of borrowers -- about half, according to some focus-group research -- are afraid that divulging their money woes to their lender will prompt the lender to accelerate the foreclosure process.

That fear is not surprising: Often, when borrowers fall into financial difficulty, their first contact with the lender may encourage them to run in the other direction the next time the phone rings. That's because many lenders, if a borrower is 30 to 60 days' late, initially have the collections department call.

"A collection agent's job is really to get you to pay. They want to know when you're going to pay, how much you're going to pay, how you're going to pay," said J. Michael Collins, a principal at PolicyLab Consulting Group, LLC, a market-research firm focusing on consumers' financial decisions, in Ithaca, N.Y. "It's a very ... aggressive approach."

It's not until the borrower is close to defaulting on the loan that lenders move the account to the "loss mitigation" department, staffed not by collection agents but by people trained to work with the borrower to prevent foreclosure, Collins said.

Some lenders already understand this issue. "Lenders who are working with borrowers who have a history of credit problems, they understand that the first time you make contact with that borrower when they're in trouble, you've got to facilitate a cooperative relationship," Collins said. "But what a lot of lenders are used to is more of a market where people have more income. There's no real good reason for somebody not to pay" is the standard thinking.

Still, Collins says he sees a shift happening, with more prime-market lenders realizing the importance of making that initial contact with the borrower a cooperative one.

Maybe that's because some see delinquency and foreclosure rates getting worse before they get better, thanks to more people holding loans with adjustable rates set to move higher. In some cases those adjustments will push up monthly mortgage bill 30% or more.

More foreclosures coming?

Adjustable-rate mortgages are a growing portion of the mortgage-loan market, accounting for about one-fourth of all home loans nationwide, and three-fourths of subprime home loans in 2005, according to a recent report by ACORN, an advocate for low- and moderate-income families.

"While foreclosure activity continues to remain slightly below historical averages, the number of properties in some stage of foreclosure from January to July has increased by 39% compared to the same period of 2005," said James Saccacio, chief executive officer of RealtyTrac, a foreclosure-tracking company, in a recent press release.

First-quarter data from the Mortgage Bankers Association shows delinquency and foreclosure rates essentially flat, and still a small portion of the overall loan market. But there's been an up-tick in late payments among borrowers with subprime credit.

About 4.41% of all loans were late 30 days or more in the first quarter compared with 4.31% for the first quarter in 2005, according to MBA. That delinquency rate includes homes in the foreclosure process.

For loans held by borrowers with subprime credit, 12.02% of adjustable-rate loans were delinquent, up from 10.25% a year earlier, according to the MBA, which says its survey covers about 80% of residential mortgage loans in the U.S.

"When these people get faced with their first increased payment and their payment goes from $600 to $1,200, that's very difficult for folks to deal with," Collins said. Some borrowers "had no idea their payment was going to go up this much," he said, citing his research with focus groups of borrowers in default on their adjustable-rate mortgages.

And it's not only working-class people who are surprised, said Douglas Robinson, a spokesman for NeighborWorks America, a nonprofit company that works on housing and community-development issues.

"We're seeing more and more middle-income homeowners who are in trouble, particularly on the coasts -- the Boston, New York, California markets where home buyers may have stretched just a little bit to get into that house in those high-priced markets ... and for whatever reason they miscalculated the increase that would occur," Robinson said.

Consumer counseling agencies also say they've seen a rise in the number of people coming to them with mortgage-related problems.

"We're seeing a surge in the people who are calling because they have [adjustable-rate mortgages] and they can no longer afford the monthly payment," said Sandberg, of CCCS in San Francisco. "They end up behind on their credit-card payments. Then they can't refinance the mortgage because their credit is damaged. Then they're stuck with these high mortgage payments and damaged credit."

Meanwhile, the number of homeowners seeking help from her agency in preventing a foreclosure jumped 125% in the past two years, said Betty Parker, housing coordinator for the Consumer Credit Counseling Service of North Central Texas. "We see well over a hundred foreclosure preventions a month," she said.

What to expect

The good news is lenders do want to work with borrowers. If your lender's collection department is still calling you, consider working with a third-party housing counselor.

You can reach housing counselors by calling 888-995-HOPE, a number recommended by NeighborWorks America. Or you can call 866-845-2227 to reach one of 1,000 housing counselors certified by the National Foundation for Credit Counseling.

Be sure to confirm the U.S. Department of Housing and Urban Development has certified those counselors.

"It's better if they're working through an agency. I think the lender will be more responsive," said Ron Chicaferro, executive vice president of Thornburgh Mortgage, in Santa Fe, N.M.

When you start negotiating, your lender will likely offer you one of its "loan workout" options, which tend to be about the same across lenders, though some lenders are more willing to work with borrowers than others. "Some of them are great and some of them are ... a little more challenging," Parker said.

One option is a repayment plan, where any late payments are spread out and added to your regular mortgage bill. Another common option: Forbearance, where mortgage payments are reduced or suspended for a set period of time.

Some borrowers are eligible for mortgage modification, essentially a rewriting of the loan to extend its term or to reduce the interest rate.

Then, there's the short sale: In a situation where the borrower is simply unable to maintain the mortgage payment, the lender will sometimes allow the borrower to sell the house for less than the outstanding balance on the loan.

The borrower has to arrange the sale, but gets to walk away without a foreclosure on record (though the seller may owe taxes on the portion of the loan that the lender has forgiven). The lender doesn't have to deal with foreclosure proceedings or with selling the house.

Plenty of Web sites offer valuable information:

Tips on avoiding foreclosure, from CCCS of San Francisco

The Hope for Homeowners site also has tips

The NeighborWorks America site also has useful information

Also, check your state and city Web sites for "consumer affairs" or "consumer services" - they often list homeowner assistance programs, said Abrams, of HSBC.

-- August 22, 2006

By Andrea Coombes

From MarketWatch

2006-08-25T13:36:00.000-07:00

WHAT DO AGENTS REALLY BRING TO THE TABLE?

I hate going to the dentist. I've always had good teeth, only one cavity in my head, so why spend all that money (not to mention the dental insurance) on a service I've never really needed. As long as I brush and floss, why do I need someone with a doctor's degree to look over my teeth, clean them, whiten them, etc.?

Besides, I've pulled teeth myself -- when I was just a grade school kid, in fact. So if I can pull teeth at that age, with just a string and a doorknob, why on earth do I have to pay a professionally trained tooth puller now? As I reminisce on those days of my early tooth-pulling, I even recall getting paid for pulling my own teeth! That's right. Every morning after pulling my teeth, I had money under my pillow.

Obviously, anyone who has received quality dental care in the past sees right through the absurdity of this argument. However, when it comes to real estate agents, everyone wants them to provide their services for discounted prices – even free.

Licensed real estate professionals bring state-mandated training and knowledge to the table for buyers and sellers. In fact, agents have to get as much, or more, training than what it would take for some college degrees before being given permission by the state to represent buyers and sellers in the transaction.

By the time a transaction is over, it is chock full of legally-binding documents controlling the transaction, pulling two parties together to exchange hundreds of thousands of dollars to complete a transaction that they may be involved in only a couple of times in their life.

Both the buyer and seller must perform to the contract, and most times, they don't even know how or what they're supposed to do to perform the paragraphs they just agreed to perform.

Nearly half of the buyers are purchasing for the first time, according to the National Association of Realtors. They only think agents are there to usher them into houses and that's it. And that's because hundreds of thousands of agents make that tooth extraction look so easy.

Why should you have a real estate agent on your investing/buying/selling team when it comes to building wealth?

There's talk on Capitol Hill of how the real estate industry has a "strangle hold" on the business. It makes me want to, not so much defend, as much as bring to the forefront what licensed professionals actually bring to the table for consumers.

You've heard the term, "You get what you pay for," and that doesn't go wasted on agents as well. Many sellers would love to get through the transaction themselves, without any help from a "middle man," to save the commission dollars. It sounds like it makes sense, "Hey, why pay thousands of dollars of your money to sell a house when you can do it yourself?"

But every agent has a real estate license regulated by the state. This means they are knowledgeable about various aspects of real estate law, rules and regulations, such as:

What rights exist for land and how they can be traded

How title can be held and how to ensure clear title to the land

Financing: traditional, non-traditional, owner-held, etc.

Fair housing laws: federal, state and local

Local limits on the sale and trade of real estate

State disclosure laws and regulations on the trade of real estate

Contracts and forms

Most sellers and buyers I've talked with, while having access to plenty of "information" on the internet about the sales transaction, do not have a handle on the nuances, pitfalls, and inherent dangers of legal problems they can face in the midst of this huge investment.

Published: August 25, 2006

By M. Anthony Carr

Realty Times

2006-08-23T12:45:00.000-07:00

MORTGAGE MARKET ALSO IN FOR SOFT LANDING

Mortgage demand is down and delinquencies and foreclosures are up, but just as the housing market bust is more of a soft landing, major financial institutions and most households aren't likely to crumble under the weight of risky loans.

While the number of riskier loans has risen in the past few years, lenders still hold more traditional mortgages than subprime and "non-traditional" mortgages.

Among the smaller fraction of buyers who use subprime mortgages and the larger fraction that use "non-traditional" home loans, those who also purchased homes at a time when prices peaked in their market are most at risk for an individual bust.

Most homeowners, however, should weather even a nasty housing market storm.

The Federal Reserve's July 2006 Senior Loan Officer Opinion Survey on Bank Lending Practices, defines subprime mortgages as loans made to borrowers with weakened credit histories stemming from payment delinquencies, charge-offs, judgments, or bankruptcies; loans made to borrowers with reduced repayment capacity as measured by credit scores or debt-to-income ratios; and loans to borrowers with incomplete credit histories.

The Feds consider as non-traditional mortgages, adjustable rate mortgages (ARMs) with multiple payment options; interest-only mortgages; mortgages with limited income verification; and mortgages secured by non-owner-occupied properties, among others.

Of the thirty domestic banks with subprime residential mortgages on the books, the Feds found:

At three out of four banks, subprime mortgages accounted for less than 5 percent of their residential mortgages. One out of five said subprime loans accounted for 5 to 15 percent of their mortgage portfolio.

The remainder said the subprime share was more than 20 percent.

Most, 83 percent, said the quality of their subprime residential real estate portfolios -- as measured by delinquencies and charge-offs -- remained unchanged or actually improved over the past year. Only about 17 percent said the quality had deteriorated somewhat.

Two out of three lenders expect subprime loan quality to stabilize over the next 12 months with the remainder expecting the quality to deteriorate.
Greater risk may be afoot in the larger non-traditional prime loan category. When the Feds asked 48 domestic banks, the Feds found more substantial holdings in this category.

About 45 percent of the banks reported a non-traditional loan share of less than 5 percent; 20 percent of the banks reported the share was between 5 and 15 percent and seven lenders said non-traditional mortgage products accounted for more than 30 percent of their home loans.

Nearly 30 percent of banks indicated expectations that the quality of the non-traditional residential mortgage products currently on their books will deteriorate somewhat over the next twelve months. These banks accounted for more than 50 percent of all residential mortgages on the books of respondents at the end of the first quarter.

This July survey also included a special question about the demand for investment property financing.

Thirty percent of the banks indicated that demand for these loans have weakened, 20 percent said demand was stronger and about 50 percent said demand remained the same over the past year.

Published: August 18, 2006

by Broderick Perkins
Realty Times

2006-08-21T10:24:00.000-07:00

WATCH OUT FOR UTILITY TREE EASEMENTS

No matter where you live, whether it's in an urban area, a residential area or an agricultural area, you can appreciate the value of a tree. Trees do so much for us.

Obviously, they provide us with often much needed shade. But in addition to shade, they also help reduce soil erosion and prevent flooding. A mature tree can consume a substantial amount of water every day, thereby reducing flooding.

Sometimes, property owners must take legal action in order to protect their trees. This kind of legal action is more common than you might think.

A common problem that I wish to focus on in this column concerns utility easements on property. The easement may be for a common electric line, a telephone company line, or even a natural gas line. Many homeowners have property subject to these easements.

The easement allows the utility to run its line or pipe on, under or over a piece of property. In turn, the property owner, or its predecessor, is usually paid a small amount of money. In the case of a subdivision, often the developer receives the payment. The subsequent purchasers often receive no money, but must be forever burdened by the easement.

Utilities could never exist without these easements because their network of pipes and wires needs to reach out into the community and this can only be done through easements.

What I am referring to in this article is a common easement condition requiring that the ground in the areas of the pipes and wires be maintained so as to allow for repairs and inspections. Some utility companies are claiming they have a right to cut down trees, often mature trees, pursuant to this easement requirement.

The question is: Do you have to allow the company to enter your property and destroy your trees? The answer is maybe yes, and maybe no.

What follows are some factors that may resolve this question.

The first question concerns the utility easement language. How specific was the easement? Was it clear that trees can't be planted over the easement area? Or did it only require that if any vegetation exists, it be maintained in good order so that visual inspections can occur and physical access can take place?

Does the easement specifically provide for the right to remove trees? Or is this right being presumed by the utility company?

How long has it been since the last time that the utility sought to enforce its rights under the easement. If it has been decades, did the utility effectively forfeit its rights under the easement?

What is the purpose of the easement? Are less invasive means of satisfying its goals available other than tree removal?

Was the property use restriction properly recorded so that the property owner had a way of knowing about the restriction before the purchase was made. If not, it is possible that the restriction may not have legal force.

Sometimes these matters can be resolved through compromise. Perhaps a better maintenance campaign can resolve any concerns that the utility might have.

However, if the utility is dead set on removing mature trees from your property, you need to decide whether the value of those trees is worth seeking legal assistance. The utility will have an experienced lawyer. If you want to fight for your rights in court, you too will likely need one.

If your lawyer determines that you have a legal right to stop any tree destruction, there is a good chance that your lawyer will go into court and ask for an injunction. An injunction is a court order that stops the utility company from taking down any trees until the court has an opportunity to engage in further evaluation of the merits.

Injunctions are not easy to obtain. Your ability to obtain one will be largely dependent on an ability to demonstrate irreparable harm if an injunction is not granted as well as an ability to demonstrate that the legal issues are on your side.

The legal issues can be complicated and very fact specific. The key, however, is that simply because a utility claims a right to destroy your trees does not mean that it really has that right. I am a tree person who feels badly when mature trees are unfairly destroyed. I wish any one whose trees are at risk the best of luck.

Published: August 17, 2006

By Stuart Lieberman

Realty Times

2006-08-18T09:09:00.000-07:00

SINGLE GIRL POWER GROWING INFLUENCE IN REAL ESTATE

Ladies, take note, you've begun taking a larger role in the area of homeownership over the last few years, according to a new study from the Joint Center for Housing Studies at Harvard University.

"Not only are unmarried women a large segment of the home buying population," says Rachel Bogardus Drew, the author of the report, "but they are fast-growing, too, increasing their share of home buyers by 50 percent in eight years. The value of their home purchases over a 3-plus year period totaled more than $550 billion ... ."

The study is as much a report on the sociological changes in our country as on the buying practices of women. The continued breakdown of the family has pushed women to start fending for themselves, financially, instead of waiting for the combination of salaries with a mate to purchase a home.

"Two out of three female buyers were previously married, though that share drops significantly for younger buyers," Ms. Drew points out. "They also have lower incomes than unmarried men and married home buyers, but are less apt to finance their home purchase."

Still, the overwhelming buying segment is made up of married couples at 63 percent, but now unmarried women are the second highest buying group (at least when looking at marital status) at 20 percent in the last three years. Unmarried men make up 17 percent of the buying pool.

The demographics paint an admirable picture of the group, being older than their unmarried male counterparts, and facing many obstacles, demonstrating their determination to get in the real estate ownership circle. They also have lower incomes and many of them are buying with children in tow (30 percent).

Financially, they've demonstrated that even with lower incomes, homeownership is available. At $37,000, their median income is 11 percent less than single men, but account for why they are less likely than married couples to live in single family homes -- however, the majority of them were move up buyers in the last three years. They are plodding along with wealth growth, taking a patient path to building their net worth by buying low, selling when the market grows and moving into a larger, more expensive dwelling.

The growth of this demographic has not gone unnoticed, as both for-profit and not-for-profit entities have begun initiatives to help women in their quest for homeownership. One of the groups was the Women's Mortgage Industry Network (WMIN), which was launched four years ago and is sponsored by Freddie Mac. The group's goals include engaging "the mortgage industry and non-financial service providers in a targeted education and counseling campaign that it believes will help close the gap in homeownership rates," according to information from FreddieMac.com.

One of the most interesting points of this report was one of the buying options Ms. Drew uncovered in her report of single women, purchasing in a co-housing community.

"Co-housing communities, though relatively small in number -- about 50 in the U.S. -- are an attractive choice for women who want the privacy of their own home with the benefit of a supportive, surrounding community. These communities typically consist of 12 to 42 self-sufficient private dwelling units, but also include a common kitchen/dining space where meals are shared as well as communal outdoor space. Other arrangements help to pair single mothers looking for a shared living situation," she writes.

"By pooling incomes single mothers can often afford to buy a more desirable home, and by living together they can share household tasks and childcare, which can free up valuable time. Living with someone can also provide critical emotional support and help make single parenting less exhausting and lonely."

Obviously, this is a growing segment of the real estate industry and will continue it's upward trend with the aging of the baby boom generation and the natural selection of women living an average seven years longer than men.

Published: August 18, 2006

By M. Anthony Carr

Realty Times

2006-08-16T13:28:00.000-07:00

NAR PRESIDENT SAYS FED DECISION IS GOOD FOR HOUSING

WASHINGTON (August 9, 2006) – The decision yesterday by the Federal Reserve’s Federal Open Market Committee not to raise the federal funds rate for the 18th straight time indicated that the Federal Reserve recognizes the value of the housing economy to the national economy as a whole, the president of the National Association of Realtors® said today.

“This move sends a very positive signal to the housing sector, which has been so robust over the past five years that it has sustained the economy while other sectors have lagged. Largely as a direct result of more than two years of interest rate hikes, the housing market today is fragile in some parts of the country. The Fed’s decision indicates that it realizes the vital role housing plays in the economy,” said NAR President Thomas M. Stevens, senior vice president of NRT Inc.

The decision by the FOMC leaves the banks’ prime lending rate, the benchmark for various consumer and business loans, at 8.25 percent. Before the Fed started raising rates in June 2004, the prime had been at 4 percent.

Stevens said the Fed’s decision indicates it realizes the economy has slowed, especially the housing economy. “We can’t continue to raise rates without expecting the housing economy to suffer. That translates into higher costs for home buyers, slower sales and a lower level of economic activity in housing, which accounts for one-fourth to one-fifth of the gross domestic product,” he said.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries.

Article offered by NAR

2006-08-14T13:39:00.000-07:00

SWIMMING POOLS: DO THEY INCREASE OR DECREASE A HOME'S VALUE?

Maybe the sweltering days of summer have you wishing for a pool as a backyard oasis.

Like Clark Griswold in "National Lampoon's Christmas Vacation," who fantasizes about buying an in-ground pool with his holiday bonus, you can see it already: The crystal clear water, the poolside deck, the floating raft just waiting for you to climb on and sunbathe.

You're not alone.

Some real estate professionals caution that a swimming pool can be a deterrent to some buyers when the home goes back on the market; having an in-ground pool in the backyard has the potential to dissuade an interested buyer with no desire for the feature or the maintenance it demands.

Still, Americans apparently can't stay away from buying personal water wonderlands, according to statistics compiled by the Association of Pool & Spa Professionals. It isn't just the pool itself, either; many times the backyard investment continues poolside with the installation of homey decks and outdoor kitchens.

In 2005, 176,500 in-ground pools were sold and installed, bringing the total number of those pools in the country up to 4.7 million, according to the association's statistics. About 4.3 million pools were sparkling throughout the country in 2002.

Also in 2005, 219,000 above-ground pools were sold, bringing the total number of them in the country to 3.6 million, the association found. About 3.4 million above ground pools were scattered throughout the country in 2002.

And in some areas of the country, a house's pool is more of a necessity than a flaw.

Smart swimming

In places where pools are common, "a house without a pool would be harder to sell," said Brian Van Bower, president of Aquatic Consultants Inc., a pool-design firm based in Florida.

Seven in 10 Arizona homes have pools, said Roger Soares II, president of Hydroscapes LLC, a pool-design and construction company based in Arizona. "In a lot of areas it's not a need, but here it's a necessity because it's so hot."

Often times, homeowners would rather buy a home with a pool than have to install it themselves, Soares said. If you do buy a home that already has a pool, make sure to get it looked at by a qualified pool inspector, said Suzanne Barrows, spokeswoman for the Association of Pool & Spa Professionals.

"We recommend that you have the pool inspected by a pool person, but in some cases home inspectors have taken education courses so they know what to do," Barrows said. "If the home inspector is a reputable inspector and he or she doesn't know how to inspect a pool, they'll say so, and the good ones will have names of people in the area who could do it."

But if you're already settled and are contemplating buying a pool for your home, it's best to think before you dive.

Above-ground pools traditionally don't add any value to a home come resale time, according to research from the National Association of Realtors. They also aren't much of a deterrent to buyers because they can be easily removed, said Wallace Perry, Coldwell Banker United, Realtors' president and chief operating officer for the Carolinas region.

"It's not enough of an economic factor to influence it (the sale) either way," he said. A seller might even take the pool down and bring it to their new home.

In-ground pools have a different story.

They do tend to add value to a home -- about 7.7%, according to National Association of Realtors statistics. Regionally, in-ground pools will add about 5% to the value of a home in the Northeast part of the country, about 6% in the Midwest and 7.5% in the Southeast and West. In the Southwest, a swimming pool will add nearly 11% to the home's value.

But because they're permanent, buyers who aren't interested in the upkeep or the energy costs of in-ground pools may turn away from a home with one, Perry said. Heated pools especially can run up a power bill, he said.

The feature seems to interfere more often in the sale of lower-priced homes -- homes with selling prices of less than $200,000, Perry said. On the higher end of the market, a pool doesn't seem to be a factor and will probably even enhance a home's appeal, he said.

In general, in-ground pools will usually return 50% of their original cost when the home is sold, Perry said. Depending on location, the age of the pool and maintenance given throughout its lifetime, the return could be even less, said Carolyn Helmlinger, president of Coldwell Banker Mid-America Group, Realtors in Des Moines.

Your own enjoyment, therefore, should be the primary reason for installing a pool.

"If you're going to put in a pool, you need to be comfortable that you're going to be there more than five years," Perry said.

Deep pockets

Another reason to tread carefully before buying a swimming pool: It's a big investment of money and time.

Again, above-ground pools aren't as permanent or as pricey, with many of them available for a couple thousand dollars or less.

Although there are still companies advertising in-ground pools around $16,000, the average price is more like $30,000 to $35,000, which would get its owner a water feature and possibly a spa, Soares said. Landscaping around the pool could cost anywhere from $3,000 to more than $100,000.

Then there's the maintenance once it's installed.

Running the filter -- assuming you have an efficient pump -- will cost an average of $20 a month if it's run all day, every day, Soares said. Chemicals could cost between $5 and $20 a month in the winter and anywhere from $20 to $100 a month during the summer. Pay someone to take care of the pool instead and the going rate is around $65 a month, he said.

Easier chemical distribution through automated dispensing has helped save time and eliminate some of the hassles of pool care, said Ed Kahn, editor of pool magazines including "Pool & Spa Living." Also popular: salt chlorination systems, which covert regular salt to chlorine and prevent pool owners from ever having to buy a chemical.

Emerging pool styles are tailoring to customers' needs as well. New, smaller pools, for example, are configured in a way to provide some of the benefits of hot tubs, Kahn said.

"It looks like a small pool, it has the propulsion system that creates a current in the water so you can literally swim in place as if you're swimming in a large pool," he said. On resting days, owners can use the pool for hydrotherapy.

Aquatic fitness centers produced by Vista, Calif.-based Dimension One Spas allow for vertical and horizontal exercises with less impact, said Bob Hallam, the company's president. They also take up less space.

The pools are so popular, the company is doubling production this year to meet demand, he said. Models run from $25,000 to $35,000, he said.

Why the surge of popularity for the product? "We're all aging, and a lot of people my age -- which is a baby boomer -- still want to keep in good shape," Hallam said. The warm water lessens impact on the joints.

Pool envy?

If the memory of a fun Fourth of July pool party at the neighbor's house still has you desiring your own aqua retreat, Barrows offers these questions to consider before heading to the show room or calling a builder:

What do you want to use the pool for? Is it for exercise or to splash around in? Look around online for styles and prices. The Association of Pool & Spa Professionals' consumer site, www.poolpeopleusa.com, is a place to start.
Who is going to use the pool? Adults? Children? The association also maintains a site for kids, www.splashzoneusa.com, that emphasizes pool safety.
Do you want the design of the pool to mesh with the rest of the yard? Landscaping can be as simple as a small deck and as elaborate as an outdoor kitchen with fire pits and pizza ovens.
What kind of pool do you want? In-ground? Above-ground? A swim spa? Consider what kinds of pools are in your neighborhood or talk with a local real estate professional if you have any concerns about what installing a pool will do to your resale value.

Above all, talk to pool owners before jumping into a purchase, Soares said. Ask them how they liked their builder. Do additional homework by checking a builder's references and finding out how long they've been in business.

"It's amazing how many people will not do that," he said.

-- August 09, 2006

By Amy Hoak
From Marketwatch

2006-08-11T09:43:00.000-07:00

HOME SALES TO HOLD FAIRLY STEADY FOR BALANCE OF YEAR

WASHINGTON (August 8, 2006) – The housing market is in a process of stabilizing with little change in overall sales volume expected over the balance of the year, according to the National Association of Realtors®.

David Lereah, NAR’s chief economist, said the indicators already are leveling-off. “We’ve seen a minor easing in closed transactions of existing-home sales, and a slight increase in the leading indicator of pending sales based on contracts,” he said. “New-home sales and housing starts have been fluctuating, so the overall market is stabilizing.”

“On one hand is the rise in mortgage interest rates that has slowed sales in many higher-cost markets, and on the other is 3.8 million new jobs over the last two years,” Lereah said. “This means many potential home buyers could enter the market in the foreseeable future, especially in moderately priced areas where affordability conditions remain favorable. In fact, this is already occurring.”

Although sales will be fairly steady over the balance of the year, declines since last fall mean annual totals will be lower. Existing-home sales are forecast to fall 6.5 percent to 6.61 million this year, the third highest on record after 2005 and 2004. New-home sales are projected to drop 12.8 percent in 2006 to 1.12 million, also the third best on record. Housing starts should be down 9.1 percent to 1.88 million this year.

The 30-year fixed-rate mortgage is running nearly a percentage point higher than a year ago but is likely to rise very slowly in the months ahead, reaching 6.9 percent in the fourth quarter.

NAR President Thomas M. Stevens from Vienna, Va., said current market conditions are favorable for buyers. “The rise in housing supply is the biggest change in the market over the last year,” said Stevens, senior vice president of NRT Inc. “Clearly, this has taken pressure off of home prices and has significantly widened choices for buyers. At the same time, sellers are getting excellent returns – but in this competitive environment they need real estate professionals more than any time since the 1990s to market their homes and maximize value.”

The national median existing-home price for all housing types is forecast to grow 4.3 percent this year to $229,000, while the median new-home price is expected to rise only 0.5 percent to $242,100 as builders offer incentives to clear unsold inventory.

The unemployment rate should average 4.7 percent for the balance of the year. Inflation, as measured by the Consumer Price Index, is likely to be 3.5 percent for 2006, while growth in the U.S. gross domestic product is projected at 3.5 percent. Inflation-adjusted disposable personal income is expected to grow 3.0 percent this year.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries.

# # #

Article offered by NAR

2006-08-02T13:00:00.000-07:00

CREDIT SCORES ARE EVER-CHANGING

What do you do if your credit score is high enough to obtain the rate and product you are seeking, but is not as high as you think it should be?

"Leave it alone," says Southwest Florida mortgage broker Frank Cicione.

"This is not an ego trip," Cicione advised his colleagues who were taking a four-unit continuing education course in understanding credit scoring at the Florida Association of Mortgage Brokers annual convention last week in Tampa.

"If it ain't broker, don't fix it," he told the class.

Not messing with a good thing is sound advice for consumers. Why? Because trying to improve your score could actually result in a lower score, not a higher one. Some steps to a higher number are counterintuitive, such as opening a new account and closing out an old one, a step that you could really mess up your score.

Another common mistake borrowers make is showing up at a broker's office with a credit score that has been purchased over the Internet. More likely than not, Cicione told the class, the score you have in your hands is going to be 50-60 points lower than the classic FICO score the mortgage business goes by.

"It's going to be lower than our industry-specific score almost every time," the 36-year mortgage industry veteran said of generalized scores designed for sale to consumers, but not businesses.

A savvy broker trained in the nuances of credit scoring will advise borrowers right away that the score they purchased off the Internet is not the same as the one used by lenders so that there will be no surprises.

But if your broker didn't mention that and the score he receives is much lower than the one you pulled, don't be alarmed. He's not trying to rip you off by forcing you into a higher-rate loan.

Cicione, a broker in the Ft. Myers area who was president of his state trade association in 1999, also pointed out to the class that mortgage scores are nothing more than a "snapshot" of the consumer's credit profile at a particular point in time. "Thirty-days later," he said, the score "could be very different, even if they don't do anything rash," like buying furniture or a new car on time.

Credit scores "are active things," he said. "They're vibrant, and a new score is generated every single time" an inquiry is made.

To understand why you didn't score better than you expected, Cicione told the class to ignore late payments and look instead to the four reason codes or key factors given with each score.

"These codes are your roadmap," he said. "They are listed in the order of importance or weight causing a negative impact when calculating the score. And they should be relayed back to the consumer to explain how they can change their credit profile and increase their score over time."

Although other things often contribute to a lower score, he added, the reason codes list the more important problems that lead to lower scores. And here's another tip: While four factors will be listed, the first two "are the ones you really want to pay attention to," according to the long-time broker. "The lower ones are probably not worth worrying about."

Published: July 26, 2006

by Lew Sichelman

Realty Times

2006-07-28T12:04:00.000-07:00

HOUSE PASSES BILL TO BOOST HOME OWNERSHIP UNDER FHA

Program changes affect down payment, loan limits

The U.S. House of Representatives on Tuesday passed legislation that aims to increase home-ownership opportunities for low- and moderate-income Americans through restructuring of Federal Housing Administration policies.

The bill, H.R. 5121, dubbed "The Expanding American Homeownership Act," was created in response to rising home prices and outdated loan limits that eliminated FHA financing for buyers in many U.S. housing markets.

The bill specifically will:

Eliminate the current statutory 3 percent minimum down payment, reducing a significant barrier to home ownership. FHA's existing down-payment requirement does not meet the demands of today's marketplace, where most first-time home buyers put down 2 percent or less. The "new" FHA would offer a variety of down-payment options.

Create a new, risk-based insurance premium structure for FHA that would match the premium amount with the credit profile of the borrower. It would replace the current structure, in which there is standard premium amount for all borrowers, while still protecting the soundness of its Insurance Fund. FHA would have the flexibility to charge a lower premium for low-risk borrowers, and to charge higher-risk borrowers a slightly higher premium.
Increase and simplify FHA's loan limits. FHA's loan limit in high-cost areas would rise from 87 percent to 100 percent of the GSE conforming loan limit and in lower-cost areas from 48 percent to 65 percent of the conforming loan limit. In many areas of the country, the existing FHA limits are lower than the cost of new construction, eliminating FHA financing as an option for buyers of new homes in those markets. FHA has simply been priced out of the market in other areas, such as California, where FHA insured only about 5,000 home mortgages in all of 2005, down 95 percent from 109,000 in 2000.

"When FHA was formed in 1934, it was an historic event that made home ownership possible for people who had nowhere else to turn," said Assistant Secretary for Housing-Federal Housing Commissioner Brian D. Montgomery. "We are now closer to another landmark -- a modernized, flexible FHA that can respond to the needs of today's low and moderate-income home buyers who need a helping hand."

***

Wednesday, July 26, 2006

Inman News

2006-07-26T11:21:00.000-07:00

PICKING AND CHOOSING THE NEXT REAL ESTATE BOOM AREA

Everyone's looking for the next real estate rush -- the place where people will be able to buy at $100,000 and sell for $200,000 in six months. So I get emails about whether one town is a better place to buy over another. Is it time to buy or sell waterfront property? Is land the next boom market for real estate?

The answer, simply, to all the above is "yes." Yes, if all the parameters that support a growing economy are in place and about to move forward. Yes, if the investment meets your goals on your budget at this time. Yes, if you have the proper financing in place to create a positive cash flow or find a property that is moving up in value at a clip higher than inflation.

Real estate, unlike stocks or bonds, is a good investment any time … you just have to know where to buy. Like the old adage goes: location, location, location. The location is key and depends on the economic picture of that location at the time. Wouldn't you have loved to have bought a house in the D.C. market, for instance, seven years ago? Any property would have done you proud. The whole market grew at 153 percent in that period of time. Thus, location and timing were key, all based on the advent of the latest economic boom, coupled with an affordable, but low supply of adequate housing.

So where can you find that formula now? Start looking at smaller markets where federal spending or private investing is moving upward. For the start-up investor, look around your state first. And then use the following points as a guide on whether it's a good time to buy:

Low housing prices. Where do the prices stand as compared to the potential for rental income? If a rental unit can be purchased so that the monthly rent covers the mortgage and tax payments, then this makes for a good start on the investment road. While many would-be investors look at the asset growth of an investment, they should really be looking at the net rental income instead. If you can make 8 to 12 percent annual return on the value of a home in rental income, that is a good investment indeed.
To find housing prices, start with a web search such as, "springfield virginia housing prices," or whatever community you're researching.

Stable economy. What's happening on the state and local basis. Again, begin your search by finding the state/local economic development authority. You'll be looking for economic growth as compared to the U.S. economy and how it's headed as compared to the past few years. Look for economic forecasts, charts, employment/unemployment data, etc. Pour over these with a fine tooth comb to find out if the community where you want to invest is moving upward, headed down, etc.

New jobs/plants/federal spending planned. In the above searches for the current economic picture, look for what's happening as far as growth. Are new corporations moving in to the market? Are current companies expanding their facilities? Are there job cuts or job growth? If you see indications that growth is on the way, get your check book out and start looking for an investor mortgage. But make sure you check one more thing.

Rental vacancy rate. Okay, the housing prices are within your budget and the economy is stable; heck, it's even about to grow. Great. How's the rental inventory? Is there a lot of it? Is there too much of it? The vacancy rate let's you know how long your property will be on the market and how much rental income you'll be able to pull in each month. Will you have a positive or negative cash flow each month?
Once you have these points in your plan covered, you're now ready to start looking at property. Get together your real estate team (agent, lender, insurance agent, contractor, etc.) and hit the road to building wealth.

Published: July 21, 2006

by M. Anthony Carr
Realty Times

2006-07-24T11:25:00.000-07:00

FANNIE MAE FORECASTS 10% DROP IN 2006 HOME SALES

Report predicts mortgage originations could fall 18%

The number of homes changing hands in 2006 could decline by up to 10 percent next year, and mortgage originations could fall by 18 percent to $2.41 trillion in 2006, the top economists at Fannie Mae project.

In a report issued Wednesday, Fannie Mae economists David Berson and Molly Boesel said a weakening investor demand and a lack of affordability could bring sales volume down 8 percent to 10 percent next year, to 7.61 million units. That would still be the third-best year ever for home sales, the report notes.

"The surge in the number of immigrants over the past 25 years, the age-structure of the population, and continued job and income growth as the overall economy grows around trend rates should partially offset the drop in sales related to affordability and investors," the report said.

The falloff in sales will be most pronounced in areas with weak economies and where the falloff in investor demand creates a large increase in the supply of homes for sale. Home prices could fall in those areas, slowing overall home-price gains to 3 percent in 2006, ending two years of double-digit growth.

A recent surge in new-home sales -- new-home sales jumped by 4.6 percent in May, to the highest level since December -- appears to be an anomaly, Berson and Boesel said, possibly caused by double counting sales as cancellations have risen. For the first five months of 2006, actual sales were down 10.8 percent from a year ago, and the Mortgage Bankers Association purchase applications index in June was at its lowest level since October 2003.

"Even though new sales have increased, the level of unsold inventories has continued to climb to record highs -- clearly a warning sign for home prices should sales slip in coming months," the Fannie Mae report said. "We think that sales will decline over the rest of the year, as leading indicators of sales continue to weaken."

The expected drop in home sales will also have an impact on mortgage originations, which Fannie Mae predicts will fall 18 percent to $2.41 trillion. While mortgages associated with home purchases are only expected to decline by 2 percent, to $1.48 trillion, higher interest rates are expected to continue to squeeze the refinance market, which Berson and Boesel predict will slide by 36 percent to $931 billion.

That's even after taking into account an expected pickup in refinancing of adjustable-rate mortgages as consumers try to avoid higher monthly payments by moving to fixed-rate or lower-rate ARMs. ARMs are still expected to account for a 25 percent share of home loans two years from now (compared to 29 percent today), because it will take several years of slower home-price gains before some home buyers can take advantage of fixed-rate mortgages.

Citing Commerce Department figures, Fannie Mae's economists think real gross domestic product (GDP) growth slowed to 2.5 percent to 3 percent in the second quarter, down from 5.6 percent in the first quarter. High energy prices, the lagged effects of tighter monetary policy and a drop in the housing market should keep inflation in check, they say, which could allow the Federal Reserve to hike the federal funds rate one more time this year, holding at 5.5 percent or perhaps even rolling rates back.

"We expect the Fed to tighten one more time before the end of the summer, bringing the federal funds rate up to 5.5 percent, before it pauses for a while to observe the impact of … tightening on inflation and economic activity," they said. "If, as we project, core inflation falls back a bit as the economy slows, then the Fed could remain on the sidelines for a while -- and possibly even ease slightly in 2007 if economic growth remains at a below-trend pace. But if core inflation rises further or economic growth remains above-trend, then additional tightening probably would occur."

***

Inman News

2006-07-21T16:15:00.000-07:00

HOME APPRAISALS: MAKE SURE YOU READ THEM

Every lender requires one, but sometimes sellers and buyers don't always look them over carefully. And in some cases, buyers and sellers don't see their appraisals at all because they are asking the wrong person for the report.

Gerald A. McKinzie, owner of McKinzie Metro Appraisal, says that the only person an appraiser can give the appraisal to is the actual client. So if the appraisal is ordered by the lender then the mortgage company or bank will get the appraisal. "We can't give the appraisal to [the homeowner] because of appraiser ethics and I think this is pretty true nationwide. [Appraisers] cannot give the report or the conclusion of the report or their findings to anyone but their client," says McKinzie.

However, McKinzie says, your mortgage company, bank, or lending institution that ordered the appraisal can provide you with a copy.

The American Society of Appraisers says that an appraisal is important, now more than ever. With a fluctuating market, increased inventory, and housing prices dropping in many areas, the association says, having an appraisal is critical and valuable information. If you didn't receive an appraisal when you purchased your home, the association says that under federal law it is your right to receive one. The association highly recommends that you request a copy of it.

"Homeowners should point out anything they can to the appraiser who comes to do the inspection," says McKinzie. He says even things that might not be top of mind or easy to spot such as a new furnace should be mentioned. Also, remodeling, upgrades, new roofs, new flooring, and landscaping are important to mention to the appraiser.

"We have instances a lot of times where we find we're appraising a house in 2006 and the same house sold in 2003. Well the tendency for some appraisers would be to say, well it sold for $300,000 in 2003 and if I add so many percent per year this is what I get in 2006," says McKinzie. But he adds that what the appraiser might be overlooking "is that the person who bought [the house] in 2003 may have finished off the entire basement or they may have added a deck."

Appraisals are opinions of value that can affect the ability to borrow to purchase a home. Residential real estate appraisals are determined by using a Comparison Method. The appraiser compares your home to similar homes in the same neighborhood that have already sold in order to determine the value of your house.

Age, general size, construction quality, number of bedrooms and baths, lot size, garages, and pools are all comparison categories for the appraiser. The association says that reviewing your appraisal can give you hints about which areas are worth investing more money in when it comes to remodeling. For instance, if you have a home that has fewer bathrooms than the average home in your area, you might consider adding a bathroom. If you have an outdated kitchen this can cause your appraisal to come in at a lower value than a nearby, similar home that is up-to-date.

McKinzie says when you're ready to sell your home, "If the appraisal was done in the last five years you might get some idea where the appraiser says something negative about it such as house will not market as well because it has shag carpeting in the bedrooms on the second floor. If you see that in the appraisal and [the carpet] is still there then it might be time to correct that issue."

Reading your home appraisal will offer information and insight on how your home fits into the marketplace.

Published: July 17, 2006

by Phoebe Chongchua

Realty Times

2006-07-19T17:13:00.000-07:00

DO-IT-YOURSELF OPTIONS FOR SAVING MONEY ON YOUR NEXT MOVE

Moving your home, especially long distance, can cost you a mint if you want full-service packing and shipping. That might be your only option if you have one of the larger McMansions or your apartment is full of antique furnishings that need to be protected. For those who can rough it a little, there are more and more do-it-yourself options out there.

Rental trucks allow you to do it all yourself -- pack, drive and unpack.

Say you're moving from New York City to Danbury, Conn., deep in the suburbs 68 miles away. A 24-foot truck -- enough to pack up a three-bedroom apartment -- from U-Haul will cost you $271 for two days with 109 miles thrown in.

The same move from New York to Pasadena, Calif., would be $2,746 for 10 days with 3,400 miles included. With Penske, such a cross-country trip in a 26-foot truck costs $2,501 with 10 days and unlimited miles.

If you're up for packing but not driving, a few services will drop off containers at your home for you to load at your leisure. Then they will drive or ship your furniture to your new home. It costs more than renting but you pay nothing for gas and travel expenses and you get plenty of time to load and unload. The downside: these services aren't available everywhere and you'll have to arrange street parking yourself.

Door-To-Door (doortodoor.com) will drop off large crates made of plywood and covered with a weatherproof tarp to your home. They are big enough to hold king-size mattresses and each fits around one bedroom's worth of furniture. You have five days to load and unload on either end.

Location may be a problem. Door-To-Door serves most, but not all, metro areas. In some places, such as New York City, the company won't leave the crates on the street overnight. You'll have to pay for their moving company to load your crates for you.

That will cost you $5,400 for four containers from New York to Los Angeles, for example, or $3,000 from New York to Boston. Prices include insurance up to $1,200 per container.

If you've always wanted your own semi, ABF U-Pack Moving will deliver a 28-foot trailer to your street or driveway. You pay by the foot and you can use as much or as little of the trailer as you want. The company packs the rest with commercial freight.

Nineteen feet of trailer space, enough for a three-bedroom home, would cost $3,000 from Chicago to Los Angeles, but you may have to pack it in one day depending on parking regulations. Insurance is not included.

Compare those rates with Allied Van Lines, a full-service international mover. For the same three-bedroom, you'll pay around $7,000 for a cross-country move or $3,000 for New York to Danbury just for the transport, plus another $2,000 for full-service packing.

-- July 17, 2006

By Marshall Loeb

From Marketwatch

2006-07-17T14:35:00.000-07:00

SELLERS FACE CONTINGENT DILEMMA

Contingencies in contracts will always exist. It is a rare thing to find a written contract which satisfies both parties right up front without a contingency.

In a sellers market, even if the buyer writes it with no contingencies, the seller will tack on a few of his own -- must find home of choice, comes to mind. Even so, when sellers add contingencies, it's usually only a couple that are easily remedied and which don't cost the buyer much money. When buyers add contingencies, on the other hand, it means the seller may face delayed expenses (such has home inspection defects) or have the chance that the house may not sell at all. Here's what I mean.

A Washington, D.C. area seller writes that he has "drastically lowered" his price, has a great agent and is "very realistic about the market," but that he's turned down two contingent contracts with unrealistic buyers. Having lowered the price to 30 percent below appraised value, the two contracts have both been contingent on the buyer selling his or her home first before completing the sale.

In further discussion, both buyers, according to this seller, are very unrealistic about the value of their own homes, and want to put them on the market way overpriced.

"They think my house is a great deal because I have lowered my price," Tired Seller writes. "Then they write a contract based on the equity they 'assume' they have in their home. They want to list it way overpriced ... . My plan is to just keep lowering the price until it sells. Any advice?"

First of all, if you've already drawn two contracts, then you may have hit the low-enough point. Now, work on the marketing and seller subsidies up front. In addition, before rejecting an offer outright, I would write a counter that the buyer can only list the property for a certain amount. Don't say, "market value price," go ahead and have your agent draw up a comparative market analysis on the buyer's house and base the price on that CMA.

In addition, ask the buyer to follow the same modus operandi you have -- be willing to drop the price every other week until it draws a contract. Write all this verbiage in the "Other Terms" section of the contract. Remember, in real estate everything is negotiable.

When a contract comes through, in a buyers market a seller needs to remember to keep his or her cool. You don't need to roll over a play dead, accepting any terms the buyer offers. Remember, you have a contract in your hand. While the buyers may have dozens of other homes to choose from, they have chosen yours because it obviously fits their housing needs. They also obviously like your price, so now concentrate on the terms. In today's market, if your house is priced right, then you only have to focus on terms to get a winning contract on the board.

The challenge of accepting a contingent contract in many MLS's around the country, is that the status changes from Active to Under Contract/Contingencies. The problem with that is with so many homes on the market, 99 percent of buyer agents search only Active listings for their buyers -- they rarely seek out UC/Contingencies status. Why bother? They are obviously in negotiation with a buyer already.

So switching the status may mean your home lingers toward closing while waiting for the buyers' home to sell. On the other hand, the buyer becomes much more motivated to sell and may be willing to drop the price right away to elicit a quick sale.

The No. 1 contingency in contracts today is the home inspection. Instead of fearing this contingency, the astute seller will conduct his or her own home inspection and fix the problems before the buyer finds something later. Be tough on your own house. If it has an old air conditioner -- have it worked on and serviced. Make sure all the plugs work properly.

If you are a do-it-yourselfer, make sure you have the permits or at least professional inspections necessary to show you did the work right. I've seen sellers redo the plumbing and/or electrical work of the previous owner who was a DIY because they just didn't know it was done wrong.

In other words, the seller who anticipates the challenges from a buyer will be ahead of the game. Don't wait till you "find out" that you have termites -- look it up and uncover the defect before it's a surprise. Be willing to accept contingencies, but also be willing to negotiate to make it work for you as well.

Published: June 30, 2006

By M. Anthony Carr
Realty Times

2006-07-14T09:07:00.000-07:00

WALL STREET RATING AGENCY REINS IN "PIGGYBACK" MORTGAGE COMBOS

"Piggyback" mortgage programs -- one of the most popular ways to afford a home purchase in many high-cost markets -- are getting tough new scrutiny from Wall Street.

In fact, bond market restrictions that took effect July 1 could raise interest rates and fees for some home buyers who expect to take out a piggyback this summer.

The name piggyback refers to the combination of a standard, conventional 30-year mortgage with a junior lien or second mortgage. The two loans are closed simultaneously and allow home purchasers to put little or nothing down while avoiding payment of private mortgage insurance (PMI) premiums.

PMI is required by most lenders whenever a borrower puts less than 20 percent down. In a piggyback plan, by contrast, a purchaser might combine a conventional first mortgage equal to 80 percent of the home value and a floating-rate home equity credit line equal to 15 percent of the property value. The purchaser would make a 5 percent downpayment to complete the deal -- a so-called 80-15-5 transaction. Other possibilities include an 80-20 piggyback -- no downpayment required -- or an 80-10-10, with a 10 percent downpayment.

Piggyback lenders frequently sell the first loan into the secondary market (to Fannie Mae, Freddie Mac, or private bond issuers), and retain the home equity credit line or second mortgage in their own portfolios. Loans that are sold into the secondary market usually end up in giant pools of mortgages that are converted into bonds for institutional investors.

Wall Street ratings agencies tell investors how risky the underlying mortgages in a pool are -- i.e., how likely they are to default and cut off the investor's income stream. The most influential of the ratings agencies in the mortgage arena is Standard & Poor's. Though consumers may be unaware, S&P's ratings and criteria often affect what rates and fees are charged to borrowers at the time of origination.

Recently S&P conducted an extensive analysis of nearly 640,000 piggyback first-lien mortgages contained in bond pools. Many of the mortgages helped fund home purchases in California, Washington DC, New York and other high-cost areas between 2002-2004. S&P's findings amounted to a big dose of bad news for fans of piggybacks: First-lien mortgages connected with piggybacks are far more likely to go into default than stand-alone first mortgages of comparable size.

According to S&P credit analyst Kyle Beauchamp, first mortgages that were originated as piggybacks are 43 percent more likely to go into default than standard first mortgages. Piggybacks made to borrowers with FICO credit scores below 660 are 50 percent more likely to go into default than stand-alone first mortgages made to borrowers with identical credit scores.

To counter the higher risk of nonpayment, S&P has begun imposing higher credit enhancements or pool insurance requirements on piggyback mortgages. That added cost to lenders selling loans to Wall Street, in turn, will be passed along to individual borrowers in the form of higher rates or fees.

Why the higher propensity to default? Mortgage industry analysts say the piggyback deals are essentially low or no downpayment programs without the benefit of private mortgage insurance. The inherent risk is the same as any "high LTV" (low downpayment) mortgage, but there is no built-in mechanism to cover that risk for the investor.

A second key factor, according to a research paper by Dr. Charles Calhoun, former deputy chief economist of the Office of Federal Housing Enterprise Oversight (OFHEO), is piggyback borrowers' exposure to rising interest costs on their floating-rate home equity credit lines.

With the Federal Reserve moving short-term rates up steadily from 2005 through last month, many piggyback borrowers have found themselves financially squeezed with no easy refinancing options.

Published: July 10, 2006

By Kenneth R. Harney

Realty Times

2006-07-12T12:20:00.000-07:00

HOME SALES EXPECTED TO STABILIZE IN THE MONTHS AHEAD

WASHINGTON (July 11, 2006) – Home sales are projected to ease modestly but should stay within a relatively narrow range over the balance of the year, according to the National Association of Realtors.

David Lereah, NAR’s chief economist, said the market is showing signs of stabilizing. “The major housing indicators have been moving up and down within a reasonable range, which means the market should even-out just below present levels,” he said. “At the same time, housing inventory levels are balanced in much of the country, so overall price appreciation will be at a normal rate. We should see home sales rise and fall month to month, but don’t look for any big shifts one way or the other.”

Existing-home sales are expected to decline 6.7 percent to 6.60 million in 2006 from 7.08 million last year. That would still be the third highest level on record. New-home sales should fall 12.8 percent this year to 1.12 million from 1.28 million in 2005. Housing starts are forecast to decline 6.8 percent to 1.93 million this year from 2.07 million in 2005.
The 30-year fixed-rate mortgage is likely to reach 7.0 percent by the end of the year.

“The uptick in interest rates has been slowing home sales,” Lereah said. “We remain concerned about the potential impact of higher interest rates in some of the more expensive areas of the country.”

NAR President Thomas M. Stevens from Vienna, Va., said consumers who have been on the sidelines should feel more confident about the market normalization. “When it comes to big ticket purchases, buyers are more comfortable in a stabilizing environment,” said Stevens, senior vice president of NRT Inc. “At the same time, home sellers in most areas understand that the period of abnormal price growth is over, and they have become more realistic about the current market. This is helping to ease the pressure on home prices in some areas.”

The national median existing-home price for all housing types is expected to rise 5.3 percent to $231,300 in 2006. With more construction in lower cost regions as well as price incentives that are helping to clear unsold inventory, the median new-home price should increase 1.0 percent this year to $243,300.

The unemployment rate is projected to average 4.7 percent in 2006, while inflation, as measured by the Consumer Price Index, is forecast at 3.4 percent. Growth in the U.S. gross domestic product is expected to be 3.4 percent this year, and inflation-adjusted disposable personal income is likely to grow 3.1 percent.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries.

# # #

Existing-home sales for June will be released July 25; the Pending Home Sales Index is scheduled for August 1 and the next forecast will be August 8.

Article offered by the NAR

2006-07-10T13:53:00.000-07:00

SELLERS FIND IT DIFFICULT TO SET A PRICE IN A VOLATILE MARKET

A year or two ago, pricing a house was simple. Sellers only had to look at what their neighbors were charging, add 10% and wait for the bidding wars to begin.

Now that the market has grown uncertain, homeowners are at more of a loss when deciding what price tag to put on their property. So in an attempt to attract buyers, some sellers are experimenting with non-traditional strategies for setting prices. Approaches include starting high and cutting the figure every few weeks, dropping the price to a different bracket to attract new shoppers or giving a range of numbers rather than one set figure.

Golledge House, Bradbury, Calif.: Advertised a range between $1.198 million and $1.298 million, to reach more buyers

Home-sellers are trying these strategies as real-estate markets across the country continue to send mixed signals. Listings are on the rise -- they are triple last year's levels in parts of Southeastern Florida and five times higher in Phoenix. In Washington, D.C., home builders are dumping inventory and undercutting existing home prices by offering rebates on closing costs or outright discounts. Overall, home prices are growing at the slowest pace in two years, though they were still up 12.5% in the first quarter from a year earlier, as measured by the Office of Federal Housing Enterprise Oversight. In some affluent places, like Palm Springs, Calif., and Palm Beach County, Fla., single-family home prices have flattened or declined.

A changing market can especially highlight the flaws of traditional pricing sources, including Web sites that list comparable home sales and estimates from real-estate agents. Agents may quote too-high prices to get listings, for one, and some Web sites have too few recent listings (within the last six months) to be useful. And while banks can access automated appraisal tools to determine prices, mostly used in calculating a home-equity line of credit or loan, consumers generally can't get those numbers.

When times are slow, most agents recommend setting a price that's just at or 5% below the market. Yet not everyone takes that advice. Below, a sampling of four unusual pricing strategies.

A Range on the Home

When Eleanor and Simon Golledge put their Bradbury, Calif., home on the market in April, there were hardly any local listings for comparison. Their rural town has fewer than 1,000 residents, and many of the homes, including theirs, were custom built. So instead of naming a price, the Golledges (who are selling the home without an agent) settled on an asking range. On a for-sale-by-owner Web site, they say they will "entertain offers" from $1.198 million to $1.298 million.

Ms. Golledge, an accountant, says she got the idea from local brokers, who often use price ranges. It almost worked. The couple, who paid $770,000 for the house two years ago, has received three offers near or below the low end of the range. They accepted the highest, for $1.2 million, but it fell through on a seller's contingency. (The Golledges had a clause in the contract that they needed to find a home they wanted to buy within a certain time period. They didn't.) They're hoping for another offer that's closer to their high number.

The practice, sometimes known as "value range pricing," first came into use in Australia in the early 1990s and was adopted by some California brokers soon afterward. There are scattered adherents throughout the country, but it's not widely practiced.

Broker Carlton Lund in Carlsbad, Calif., has used the approach for a decade, and almost all of his listings now come with a range. "It's all about widening the pool of buyers and getting them to the table," says Mr. Lund, who suggests a spread of between 10% and 12%. He says that about three-quarters of the homes he works with typically sell at the upper end of the range -- though that has dropped to half in a slower market recently.

Marcus Allen, a professor at Florida Atlantic University and co-author of a related study published last August in the Journal of Real Estate Finance and Economics, hasn't seen a clear benefit. After researching the sale of 6,000 homes in Texas, he found that using a range increased the amount of time it takes to sell a home by 5%, and didn't have an impact on final prices. He calls it "a novelty pricing strategy."

Slashing Early

Two weeks ago, Rita and Daniel Davis put their three-bedroom Craftsman bungalow in Minneapolis on the market for $284,900.

A week later, the price tag was $279,900.

Cutting the price is common practice -- just not so quickly. In Minneapolis, sellers generally wait 30 to 45 days before making a reduction, says Mary Leizinger, a real-estate agent who is working with the couple. The fast drop wasn't due to unfamiliarity with the market. Before they listed their house, the couple had visited seven others for sale nearby. They discovered that many were similar to theirs, and worse, there was something for sale on every block. By cutting their price within days, the couple hopes to send a message that they're flexible. "We're between a rock and a hard place," says Ms. Davis, a businesswoman.

Rob Cohen, a real-estate broker in Boston, thinks the strategy could work, especially given that the market price is often a moving target when sales are slow. He also understands that sellers might want to test the waters with a slightly optimistic number, to get the best possible deal. However, he always prefers to set a home's price at or below market and hold for a while. "This isn't a business of hopes and dreams," he says.

Ms. Davis isn't sure if it will pay off either, but the couple still has room to negotiate. They bought their place 35 years ago for $17,900.

Slashing Often

In February, Jonathan Hinkle, a telecommunications account manager, put his five-bedroom home in Lansdowne, Va., on the market for $1.35 million. He purposely set it high and cut the number by $50,000 a few weeks later -- and continued dropping it by $50,000 every few weeks until it reached $1.05 million. Mr. Hinkle, who bought the house two years ago, says that's close to the lowest price at which he can afford to sell.

Hinkle House, Lansdowne, Va.: Dropped from $1.35 million to $1.05 million in $50,000 increments

He heard about the idea from a real-estate agent who had used the tactic before. "The market is so volatile, this seemed a good strategy," he says. It required some patience; he says he didn't get any serious shoppers until the price fell to $1.1 million. However, all were lured away by nearby builders, who recently began underwriting closing costs, buying down mortgage rates and giving away such things as $500 gasoline cards and three years' worth of paid electric bills. (The practice is growing more common. A study by the National Association of Home Builders shows that more than half of all builders are throwing in incentives to sell homes, up from a third a year ago.) Mr. Hinkle, who wants to buy a newly built home nearby, has used that to his advantage: He asked the builder to discount the new home so he could take less on the old home. The builder agreed.

Playing With Blocks

Buyers tend to think in price blocks -- a habit that may be reinforced by the Internet. According to a study conducted by the National Association of Realtors last year, eight out of 10 buyers begin their home search online, meaning that they see homes only in the price parameters they enter into search engines.

Houston real-estate broker Melinda Noel says the span often depends on the price. Buyers tend to look in $20,000 to $25,000 increments for homes under $500,000, in $50,000 increments for homes between $500,000 and $1 million, and in $250,000 increments over $1 million. She has counseled sellers to set a price at the top of a break point, and then jump down a whole notch if the market doesn't respond -- say, from $749,000 to $699,000. "The goal is to hit the top of the market, without going over the edge," she says.

Cincinnati professor John Bryan tried to price his home carefully. He surfed through local listings online and then waited until May, when real-estate sales are traditionally strongest, to put it on the market. (He bought a new five-bedroom home in January, a slow month for sales.) He finally set the price at $324,000.

He received one contract, for $307,000, but that fell through. He has just lowered the price to $299,900, even though he may lose money on the deal after closing costs and commissions. (He bought at $250,000 in 1998 and added $56,000 in renovations, including a new kitchen, air-conditioning system and landscaping.) He hopes the new price will bring his listing to the attention of a new group of Internet shoppers. Mr. Bryan says he is disappointed that he had to drop the price so low, but he thought it was the best solution. "I'm trying to break a psychological barrier," he says.

-- July 03, 2006

By June Fletcher

From The Wall Street Journal Online

2006-07-07T08:45:00.000-07:00

AFFORDABLE DISASTER INSURANCE ESSENTIAL TO PROTECT AMERICAN DREAM OF HOMEOWNERSHIP

WASHINGTON (June 28, 2006 )– Recent natural disasters have raised concerns that the cost of homeownership can easily spiral out of reach for the average consumer during times of catastrophe if homeowner insurance isn’t made affordable, the National Association of Realtors® said today in written testimony to the House Subcommittee on Housing and Community Opportunity.

“Options for obtaining and maintaining coverage for natural disasters are dwindling,” said Thomas M. Stevens of Vienna, Va., president of NAR. “America’s hard-working families deserve a comprehensive federal natural disaster policy that makes natural disaster insurance available and affordable and reduces the circumstances under which insurance companies cancel these insurance policies.”

Recent research conducted by NAR in the state of Florida concluded that the lack of affordable or available homeowners’ insurance contributed to a slowdown in Florida real estate markets, which can contribute to a slowdown in overall economic activity in the region.

“When buyers and sellers in high-risk states cannot obtain or retain homeowners insurance, which is necessary for a mortgage, it can slow home sales in those areas,” said Stevens. “A strong housing market is the foundation of a healthy economy, and as a nation, we must safeguard the vitality of the residential and commercial real estate markets.”

As Congress addresses the need for a comprehensive natural disaster insurance policy, NAR stands ready to assist in formulating solutions to this problem. “If the ‘big one’ hits, and people are not insured, then the American taxpayer will pay the price,” said Stevens.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries.
###

Article offered by The NAR

2006-07-05T14:58:00.000-07:00

NEW STUDY PINPOINTS TOP PLACES WHERE REAL-ESTATE PRICES MAY FALL

Some of the nation's hottest housing markets are cooling, but the strength of the economy is balancing the risk of home-price declines, according to PMI Mortgage Insurance Co., which released its U.S. Market Risk Index on Tuesday.

The average risk score for the country's largest metropolitan statistical areas was 288 in the first quarter, one point up from the last quarter and 70 points up from a year ago. During the quarter, 25 metropolitan areas saw increases in risk, while 20 saw decreases.

The index uses data from the Office of Federal Housing Enterprise Oversight, the Bureau of Labor Statistics and the PMI affordability index to assign 50 of the country's largest metropolitan areas a score from one to 1,000.

A score of 100 means the area has a 10% chance its home prices will decline over the next two years. Higher scores mean a greater risk of home-price declines in the future. The New Orleans area was left out of the quarter's results due to the impact of Hurricane Katrina.

"This quarter's data signals that in many areas the expansion of the housing balloon has slowed substantially," said Mark Milner, chief risk officer of PMI Mortgage Insurance Co., in a statement. The company is a subsidiary of the PMI Group Inc.

"The Risk Index also shows that slowing price appreciation is balanced by underlying economic strength. In the absence of an unexpected economic shock, this makes a gradual cooling of the market the most likely outcome," Milner added.

Thirteen metropolitan areas had risk scores higher than 500 -- indicating a 50% or greater risk of home-price declines in the next two years. The San Diego-Carlsbad-San Marcos, Calif., area had the highest risk, with a rating of 599. Newark, N.J., and Miami both had 32-point increases in risk over the quarter, landing at 459 and 359, respectively.

Thirty-four markets experienced decelerating home prices over the year, with Las Vegas leading the group. Appreciation slowed to 14.5% in Las Vegas, down from 30.1% a year ago.

"We'd reached a point where prices had gotten too far away from economic fundamentals," according to Milner. "A return to a more normalized appreciation climate is a natural outcome."

Appreciation may be slowing in a number of markets, but it is still positive in the country's largest metropolitan areas -- with half of them maintaining appreciation rates in the double digits.

Other findings from the report include the following:

Risk is concentrated along the coasts: Eight of the 13 highest risk areas are located in California and five are in the Northeast.

Six markets saw appreciation of more than 20% over the year. Phoenix saw appreciation of 31.1%; Orlando, Fla., saw appreciation of 27.7%; Fort Lauderdale, Fla., saw appreciation of 25.7% and Miami saw appreciation of 24.7%.

Four higher-risk markets saw appreciation drop into the single digits over the year. San Diego experienced 7.7% appreciation; Boston experienced 5.7% appreciation; Providence, R.I., experienced 9.5% appreciation, and Cambridge, Mass., experienced 5.2% appreciation.

Affordability decreased in more than half of the largest metropolitan areas during the first quarter of 2006. Affordability increased slightly in 19 markets due to slower price growth; five of the markets were in Texas and six were in the Midwest.

All but four of the largest metropolitan areas -- Detroit, Milwaukee, Cleveland and Warren, Mich. -- have seen recent employment growth. Las Vegas led the country in employment growth at 6.23% over the year, followed by Phoenix with 6.02%.

Below are the risk scores for the top 50 metropolitan areas, minus New Orleans:

San Diego-Carlsbad-San Marcos, Calif., 599
Nassau-Suffolk, N.Y., 589
Boston-Quincy, Mass., 588
Santa Ana-Anaheim-Irvine, Calif., 588
Sacramento-Arden-Arcade-Roseville, Calif., 585
Riverside-San Bernardino-Ontario, Calif., 583
Oakland-Fremont-Hayward, Calif., 582
Los Angeles-Long Beach-Glendale, Calif., 575
Providence-New Bedford-Fall River, RI-Mass., 568
San Francisco-San Mateo-Redwood City, Calif., 560
San Jose-Sunnyvale-Santa Clara, Calif., 559
Cambridge-Newton-Framingham, Mass., 537
Edison, N.J., 536
New York-White Plains-Wayne, N.Y.-N.J., 498
Las Vegas-Paradise, Nev., 481
Newark-Union, N.J.-Penn., 459
Fort Lauderdale-Pompano Beach-Deerfield Beach, Fla., 441
Washington-Arlington-Alexandria, D.C.-Va.-Md.-W.Va., 431
Miami-Miami Beach-Kendall, Fla., 359
Minneapolis-St. Paul-Bloomington, Minn.-Wis., 355
Detroit-Livonia-Dearborn, Mich., 337
Baltimore-Towson, Md., 307
Tampa-St. Petersburg-Clearwater, Fla., 294
Virginia Beach-Norfolk-Newport News, Va.-N.C., 278
Warren-Troy-Farmington Hills, Mich., 184
Orlando-Kissimmee, Fla., 179
Phoenix-Mesa-Scottsdale, Ariz., 175
Atlanta-Sandy Springs-Marietta, Ga., 165
Denver-Aurora, Colo., 149
Philadelphia, 130
Chicago-Naperville-Joliet, Ill., 127
St. Louis, Mo.-Ill., 112
Seattle-Bellevue-Everett, Wash., 109
Portland-Vancouver-Beaverton, Ore.-Wash., 108
Milwaukee-Waukesha-West Allis, Wis., 108
Kansas City, Mo.-Kan., 101
Austin-Round Rock, Texas, 93
Charlotte-Gastonia-Concord, N.C.-S.C., 87
Houston-Sugar Land-Baytown, Texas, 83
Dallas-Plano-Irving, Texas, 80
Nashville-Davidson-Murfreesboro, Tenn., 71
Fort Worth-Arlington, Texas, 69
Cleveland-Elyria-Mentor, Ohio, 68
Columbus, Ohio, 65
San Antonio, 65
Cincinnati-Middletown, Ohio-Ky.-Ind., 64
Memphis, Tenn.-Miss.-Ark., 61
Indianapolis-Carmel, Ind., 58
Pittsburgh, 57

-- June 30, 2006

By Amy Hoak

From Marketwatch

2006-07-03T17:32:00.000-07:00

EXISTING-HOME SALES SLOW IN MAY

Nationwide median price rises 6% from a year ago

The rate of existing-home sales dropped 1.2 percent in May compared to April and fell 6.6 percent compared to May 2005, the National Association of Realtors reported today.

The median sales price of existing homes, meanwhile, increased 6 percent from May 2005 to May 2006 while the average sale price rose 3.8 percent in that time.

Total existing-home sales -- including single-family, townhomes, condominiums and co-ops -- slowed since April to a seasonally adjusted annual rate of 6.67 million units in May.

The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months. Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity, the association noted.

David Lereah, NAR's chief economist, said in a statement, "There's now a clear pattern of slower home-sales activity in many higher-cost markets, which are more sensitive to rises in interest rates, and higher home sales in moderately priced areas, which have experienced job growth. Although mortgage interest rates remain historically low, the uptrend in interest rates this year is affecting those buyers who are at the margins of affordability."

Freddie Mac reported that the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 6.6 percent in May, up from 6.51 percent in April. The rate was 5.72 percent in May 2005.

The national median existing-home price for all housing types was $230,000 in May, up 6 percent from $217,000 in May 2005. The median is a typical market price where half of the homes sold for more and half sold for less.

"Overall price appreciation has returned to normal levels as the supply of homes on the market has risen to a balanced range," Lereah stated.

Total housing inventory levels rose 5.5 percent at the end of May to 3.6 million existing homes available for sale, which represents a 6.5-month supply at the current sales pace. A supply of more than six months is generally indicative of a buyer's market.

Existing condominium and cooperative housing sales increased 1.9 percent to a seasonally adjusted annual rate of 852,000 units in May from a pace of 836,000 in April, but were 6.6 percent below the 912,000-unit pace in May 2005. The median existing condo price was $229,300 in May, up 1.9 percent from a year earlier.

Single-family home sales slipped 1.5 percent to a seasonally adjusted annual rate of 5.82 million in May from 5.91 million in April, and were 6.6 percent below the 6.23 million-unit level in May 2005. The median existing single-family home price was $229,700 in May, up 6.4 percent from a year ago.

Regionally, existing-home sales in the West rose 0.7 percent to an annual pace of 1.41 million in May, but were 13.5 percent lower than May 2005. The median price in the West was $345,000, up 4.5 percent from a year ago, the Realtor group reported.

Existing-home sales in the South increased 0.4 percent to a pace of 2.62 million in May, and were 3.7 percent below May 2005. The median existing-home price in the South was $190,000, up 5.6 percent from a year earlier.

In the Midwest, existing-home sales declined 3.8 percent in May to a level of 1.51 million, and were 5.6 percent lower than a year ago. The median price in the Midwest was $174,000, up 1.2 percent from May 2005.

Existing-home sales in the Northeast dropped 4.2 percent to an annual sales rate of 1.13 million units in May, and were 5 percent below a year ago. The median price in the Northeast was $287,000, up 7.1 percent from May 2005.

The association noted that the only valid comparisons for median prices are with the same period a year earlier because of the seasonality in buying patterns. "Month-to-month comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns," the association reported.

June 27, 2006

Article offered by Inman News

2006-06-30T13:54:00.000-07:00

PASSAGE OF NATIONAL FLOOD INSURANCE LEGISLATION CRITICAL TO HOMEOWNERS

WASHINGTON (June 27, 2006) –The Flood Modernization and Reform Act (H.R. 4973) passed by the House of Representatives yesterday will strengthen the protection of property owners against flood related disasters and provide flood insurance to millions of homeowners across the country, the National Association of Realtors® said today.

“Floods can strike any place and at any time, and in the wake of the most destructive hurricane season in nearly a century and the recent heavy rains experienced over much of the Midwest and the East Coast, this legislation is critical. NAR strongly supports the provisions in the bill that emphasize the importance of accurate and current flood maps and increase the NFIP (National Flood Insurance Program) borrowing authority to pay existing claims. Meeting contractually obligated payments to policyholders is paramount,” said Thomas M. Stevens of Vienna, Va., president of NAR.

NAR has backed the provisions for increasing premiums on repetitive loss properties that have a significant impact on NFIP, increasing coverage limits, reducing the waiting period for policies to become effective, creating a national levee inventory, and requiring FEMA to report to Congress on the financial status of the NFIP. “These provisions will strengthen the NFIP over the long-term,” said Stevens.

In an earlier letter to the House Financial Committee, Stevens said that non-primary residences should be given the same consideration as primary residences and should not be charged full risk premiums unless they are a repetitive loss property. NAR continues to have reservations over the provision in H.R. 4973 that would eliminate subsidies on non-primary residences and business properties.

“NAR also is concerned with Rep. Scott Garrett’s (R- N.J.) amendment, which was adopted in Tuesday’s hearing. We believe the result will be that owners of neighboring primary residences, with identical risk of flooding, will be paying different rates for flood insurance. This presents a truly unfair and possibly discriminatory situation,” said Stevens.

“Overall, we are very pleased with the actions taken today by the House and believe this legislation will help protect homeowners,” says Stevens.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries.

Article offered by the NAR

2006-06-28T13:43:00.000-07:00

REAL ESTATE TAXES, ENERGY COSTS WORRY POTENTIAL HOMEOWNERS

Survey shows housing affordability, healthcare costs are also top issues

Rising property taxes and energy costs are among the leading worries associated with home ownership, according to an annual survey conducted by the National Association of Realtors trade group's Housing Opportunity Program.

About 34 percent of respondents stated that property taxes are a top worry, while 28 percent said they were most troubled by energy costs and 14 percent cited rising mortgage interest rates as a leading concern.

The Housing Opportunity Program, created in 2002, has a mission to promote rental and home-ownership opportunities for consumers.

By a 2-to-1 margin, respondents said they believe that high monthly payments, rather than high down payments, are "the greatest obstacle to buying a home," according to an association announcement about the survey.

About 82 percent of respondents said high energy costs are one of their top three concerns, 53 percent cited lack of affordable healthcare and 42 percent cited lack of affordable housing in their community. About one-third said they worry that the cost of housing is so unaffordable that they will never be able to buy a home and more than 58 percent are concerned that the cost of a home is becoming so unaffordable that it is hurting their local economy, the Realtor group reported.

Between one-fifth and one-third of respondents said they are not seeing enough of their friends and family and they are not as involved in their neighborhood as they would like, according to the survey results. They also report missing out on promotions, having less productivity and cutting back on vacations because they have to work too much to pay for their home or they don't have the money because of high home costs.

About 68 percent of survey participants said they believe having enough money to pay rent every month is difficult for families in their community -- up 7 percent from last year.

Eight in 10 said they would be willing to support more affordable housing for people in their community and a record 68 percent said they would be more likely to vote for a candidate who worked to make housing more affordable in their area, up 6 percent in two years, the Realtor group reported.

"Many families are struggling to meet the high cost of home ownership, and increasingly those costs are property taxes and energy utilities," stated Thomas M. Stevens, NAR president and senior vice president of NRT Inc.

In 2003, the average monthly mortgage principal and interest payment was $840. In 2005, families were paying 23.8 percent more, or $1,040 monthly. In the past year alone, the average monthly mortgage principal and interest payment has gone up 11.5 percent -- from $1,015 in April 2005 to $1,132 in April 2006, the Realtor group reported.

The Energy Information Administration estimates that in February 2006 the price of electricity was 12 percent higher than February 2005; natural gas was up 28 percent; and home heating oil was up 25 percent. State and local property taxes for the 2004 fiscal year averaged $1,121 per person, up 13.8 percent from fiscal year 2003 when the average was $985, and 15.7 percent higher than the $969 average for the 2002 fiscal year, according to Census Bureau statistics.

"Americans are increasingly looking to their community leaders to seek ways to take a more active role in addressing affordability issues in their communities," Stevens stated.

About 57 percent of respondents said they are increasingly concerned that their children or other family members will not be able to afford housing in their communities, and 46 percent said they worry that they and family members will be forced to live in less desirable areas because homes in more desirable areas are not affordable.

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June 28, 2006

Article offered by Inman News

2006-06-26T13:13:00.000-07:00

MARKET CONDITIONS

A new bill presented in the Senate this week could have far reaching effects for low and moderate income buyers.

Senator Jim Talent (Rep) of Missouri already has the support of HUD secretary Alphonso Jackson for his "The Expanding American Homeownership Act."

The new proposal would "modernize" the FHA, which doesn't meet the demands of many low and moderate income buyers, by:

Eliminating three percent minimum down payments and offering a variety of downpayment options.

Create new insurance premium structures to match the credit profile of borrowers.

Increase and simplify loan limits -- 87 to 100 percent in high cost areas and 48 to 65 in lower cost areas.

"In many areas of the country, the existing FHA limits are lower than the cost of new construction, eliminating FHA financing as an option for buyers of new homes in those markets. FHA has simply been priced out of the market in other areas, such as California, where FHA insured only about 5,000 home mortgages in all of 2005, down 95 percent from 109,000 in 2000." (HUD)

And it isn't just the Senate that is getting in on the action. The House introduced its version of the Expanding American Homeownership Act in early April, which intends to "modernize and update the National Housing Act and enable the Federal Housing Administration to use risk-based pricing to more effectively reach underserved borrowers, and for other purposes." It was approved by the House Financial Committee on May 24, 2006.

For information on your area, please click here.

by Carla L. Davis

2006-06-23T18:41:00.000-07:00

"LOSING" ON REAL ESTATE PRICE A MATTER OF PERSPECTIVE

When it comes to pricing your house when you’re ready to sell it, keep in mind you must sell in the market you’re in today. It doesn’t matter what your former neighbor got six months ago, or what properties are listed for now. All that matters is this -- whatever the last sale price in your neighborhood of your model -- that’s probably your sale price now.

When you’re looking at what you’ll gain on the sale of your house, let’s keep it in perspective. If house prices increased year after year at 4 percent per year and then suddenly people were selling their houses for 1 percent less than last year’s asking price, would that be reasonable? If so, then when property is moving up at 20 percent per year for several years and then suddenly you have to sell it for 5 percent less than the prices last year, would that be reasonable? The challenge is when we move from percentages to dollar amounts. If 5 percent represented $5,000, most people wouldn’t blink. It’s when 5 percent represents $25,000 that sellers start to freak.

In the DC area, we were experiencing astounding rates of appreciation as a region, 20 percent from 2004 to 2005 prices. Many homeowners have experienced a doubling in property values over the last five years. The average home price is now about $540,000, according to the local multiple listing system. Now, price appreciation has subsided and is sitting at a mere 5 to 8 percent region wide (depending on where you’re standing). Sounds pretty healthy, still, right? You would think.

However, there are stories from the field on how sellers are defending their prices as if their lives depended on it. While sellers are sitting on hundreds of thousands of dollars of equity, they can’t stand the idea of dropping their price by $25,000 or $50,000 to sell it today. The house that was $260,000 in 1999, is now selling for $569,000 today. But some sellers now want that same type appreciation and can’t imagine selling it for less than $589,000. Bringing it down the $20,000 or $40,000 to sell the property seems, well, just not fair.

What’s even scarier are the agents who are defending their prices in a correcting market. I have to keep in mind that nearly half the agents in the country (as well as here in the Capital region) were not in business five years ago. They’ve just now entered a market where prices have to be corrected, dropped -- improved, as it were.

However, as I talk with agents around the region about their listings, they’ll be the first to let you know, "It won’t sell for what the seller’s asking," but they’re too afraid to tell the seller the sobering news.

The market is like playing Russian roulette. Sometimes you don’t know what you have until you pull the trigger. Somebody needs to blink. Sellers seem to be saying to buyers, "I’ll drop my price, just make an offer." While buyers are blankly replying, "I’ll make an offer, just lower your price."

It’s this stalemate that has played a part in creating an abundant supply of houses on the market in the DC area. We’re talking upwards to 200 percent more homes on the market in any given year-to-year comparison. And, folks, after a dearth of homes in this area, it’s a good thing. Is it affecting prices? Sure thing. Will prices come down? Absolutely. Are sellers going to lose money? Well – in some cases.

For sellers staying in the same area, keep in mind, if you have to drop your price by 5 percent, then the seller of the house you’re buying (usually a lot more expensive) is probably doing to drop the sales price by about the same percentage point. It means that while you may "lose" money on the sale of your home, you’ll more than likely "gain" it on the purchase up.

Keep in mind, the market is the market. When it’s time to buy, buy. When it’s time to move, then sell. Work with the market you’re in, not in the market you wish it would be.

Published: June 16, 2006

by M. Anthony Carr