Housing in 2009: Up and Down

Overall housing news in 2009 could continue to be grim if – as predicted – a flood of Alt-A and option adjustable-rate mortgages reset and push homeowners with previously strong financial situations into foreclosure.

"We're in the middle of the game here," said Joseph Seneca, professor of economics at Rutgers University in New Jersey. "There's significant further unwinding to come. We're in a downward spiral with job losses that is reinforcing the weakness in the consumer markets, particularly in the largest investment the consumer makes, in his home."

Seneca says the government’s aggressive efforts to stabilize housing are helping, but housing won’t really recover until prices fall so far that large numbers of buyers jump back into the game.

In the meantime, the price of housing is increasing in some areas that are immune to the economic slowdown. These areas include the energy-producing states of North Dakota, South Dakota, Okalahoma, Alaska and Montana. Washington, D.C. with its host of government and defense jobs is doing well. Boston, San Diego and Orange County, Calif., where prices have dropped enough to increase affordability significantly, are also seeing price increases.

Source: Business Week, Prashant Gopal (12/24/2008)

Where Buyers Are Picking Up Housing Bargains

Smart investors in all parts of the country are picking up fabulous housing bargains.

Bill Leon, president of Florida’s Broward (County) Real Estate Investors Association, has been buying and selling investment property for years, but he thinks today’s deals are unprecedented. “People are afraid not to sell because they don’t know where the bottom of the market is,” he says.

David Dweck, a hard-money lender, believes the best buys are in what he calls “workforce housing,” aging bungalows on small lots. They are selling for as little as 10 cents on the dollar compared to what they were going for in 2006, he says, then fixed up and resold or rented quickly.

"People have been beaten down by fear, negativity, constant media bombardment," says Dweck. "There is a silver lining. The future looks bright."

Sheresa Pompay, an associate with Hunt Real Estate ERA in Chandler, Ariz., says bad publicity is good for real estate investors. "I love the people who read about all the gloom and doom, because they stay on the sidelines and go, 'It hasn't hit bottom.' Whatever. By the time everyone jumps back in, we'll be out and doing something else."

Fortune magazine predicts that these will be the 10 worst-performing real-estate markets – and the best places for finding bargains – in 2009:
Los Angeles, down -24.9 percent
Stockton, Calif., -24.7 percent
Riverside, Calif. -23.3 percent
Miami-Miami Beach, -22.8 percent
Sacramento, -22.2 percent
Santa Ana-Anaheim, Calif., -22 percent
Fresno, Calif., -21.6 percent
San Diego, Calif., 21.1 percent
Bakersfield, Calif., -20.9 percent
Washington, D.C., -19.9 percent

Source: Fortune, David Whitford (12/23/2008)

Is Now a Good Time to Refinance?

Refinancing now sounds appealing, but for lots of people, it isn’t all that easy.

Applications for refinances tripled earlier this month after the Federal Reserve promised to buy up $600 billion of mortgage debt. And rates for 30-year fixed mortgages are falling below 5 percent – the lowest in 50 years – but many home owners will have trouble doing the deal.

Having at least 20 percent equity in a home is important. A credit score of at least 720 and a debt ratio that is less than 43 percent are both essential.

Jumbo mortgages are still expensive. A 5/1 adjustable-rate with an initial interest rate for five years and an annual reset is averaging 6.6 percent. Traditional 30-year fixed are at 7.49 percent. Home owners in this situation may have to just ride it out.

Source: Business Week, Lauren Young (12/22/08)

Even Modifying Loans Doesn't Seem to Help

The federal Office of the Comptroller of the Currency and the Office Thrift Supervision reported increasing delinquencies and foreclosures Monday.

Although the numbers of loan modifications continue to grow, default rates are increasing more quickly, Comptroller of the Currency John C. Dugan expressed frustration and emphasized the need to figure out why modifying mortgages isn’t working.

The report showed:

• The number of delinquent loans increased during the third quarter across all loan categories — prime, Alt-A and subprime. The percentage of current and performing mortgages fell from 93.33 percent at the end of the first quarter to 91.47 percent at the end of the third quarter.
• Banks and thrifts continued to work with borrowers to mitigate losses and help borrowers retain their homes with loan modifications and payment plans increasing by 13 percent from the second quarter to the third quarter.
• Loans held on the books of servicing banks and thrifts had lower re-default rates at 35.06 percent after three months and 50.86 percent after six months, compared with loans serviced on behalf of third parties. The report speculated that the lower re-default rate for loans held by servicers may suggest that there is greater flexibility to modify loans in more sustainable ways when loans are held on a servicer's own books than when loans have been sold to third parties.

Source: Office of the Comptroller of the Currency (12/22/08)

Economists Blame Housing Bubble on Tax Break

Some economists are blaming the housing bubble on the tax break that passed in 1997, removing taxes on most home sales.

This tax treatment encouraged people to put more money into real estate because it could be a tax-free windfall. A recent study by the Federal Reserve found that 17 percent of the increase in home sales over the last decade is attributable to this tax change.

Vernon L. Smith, a Nobel laureate and economics professor at George Mason University, has said the tax law change was responsible for ''fueling the mother of all housing bubbles.''

The law’s defenders say that it removed a tax incentive that pushed home owners to trade up because before 1997, people had to buy a house at a price that was at least as high as the cost of their previous home to avoid capital gains taxes. Now they can sell and buy a smaller property or rent.

Source: The New York Times, Vikas Bajaj and David Leonhardt (12/19/08)

Fannie Tightens Lending Rules on Condos

Fannie Mae is tightening mortgage criteria on condos, particularly in Florida.

Fannie sent a memo Tuesday to lenders that the number of delinquent mortgages it owns or guaranteed that are secured by condos in Florida is at an all-time high. To combat the problem, it is requiring higher loan-to-value ratios for condos. It also increased the minimum share of condos that must be owner occupied in a new or newly converted building to 70 percent from 51 percent.

Fannie tightened criteria across the country as well. No more than 15 percent of the units can be 30 days or more past due on association payments.

Source: American Banker, Allison Bisbey Colter (12/18/08)

Buyers Being Lured to 100% Loan Program

More buyers in search of home loans are turning to an obscure program operated by the United States Department of Agriculture.

The program allows no-money-down purchases. In fact, including a mortgage insurance policy, a borrower can seek up to 102 percent.

To be eligible, buyers can’t have income that exceeds 115 percent of the median county income. The loans are restricted to low-density areas, generally towns of no more than 25,000 residents. The loans are made by private lenders, then insured by the government.

Some home builders are promoting the use of this program. "It's one of our main tools right now," says John Bargnesi, vice president for sales of Scottsdale, Ariz., home builder Meritage Homes.

Source: The Wall Street Journal, Nick Timiraos (12/16/08)

Tips for Buying at a Foreclosure Auction

If you’re thinking about buying a house at a foreclosure auction, here’s some advice from experienced auction buyers.

Pay cash. Most auctions require you to close in fewer than 30 days. That’s not enough time to get a bank loan. Hard-money loans are an option, but the going rate is 15 percent plus points, and refinancing right away is probably not an option.

Check the place out. Most auction companies working for banks will let you get in with an inspector a week or so before the sale.

Get a separate appraisal. A knowledgeable appraiser can keep you from getting caught up in the frenzy and paying too much.

Look for short sales. Instead of buying at a foreclosure auction, negotiate a short sale prior to foreclosure. Buying short takes patience, but you are likely to get a very good deal.

Source: Fortune, David Whitford (12/22/2008)

Fed Expected to Cut Key Interest Rate Tuesday

The Federal Reserve begins a two-day meeting today where it is expected to cut it's key interest rate, perhaps to an all-time low.

The Fed will likely announce Tuesday that it is cutting its key rate in half to just 0.50 percent. However, a few economists predict the Fed will go even further and cut the rate to one-quarter of a percentage point.

If that happens, it will be the lowest rate on record going back to 1954, when records tracking the monthly rates were first kept.

However deeply the Fed decides to cut rates, the prime rate for many consumer and small-business loans would drop by a corresponding amount. The prime lending rate, currently at 4 percent, is used to determine rates on home equity loans, certain credit cards, and certain consumer loans, the Associated Press reports.

"It is not so much going to give the economy a big push forward. It's more a case of trying to help the economy from being pushed further backward by all these negative events," said Stuart Hoffman, chief economist at PNC Financial Services Group.

Source: The Associated Press (12/14/12008)

Where Will Housing Prices Go Next?

How long will it take for home values to zoom back up. Some prognosticators predict decades. Others say there is a brighter picture.

"We will never see these prices again in our lifetime, when you adjust for inflation," says Peter Schiff, president of investment firm Euro Pacific Capital of Darien, Conn. "These were lifetime peaks."

But Wachovia economist Adam York expects home values to recover fairly quickly, beginning in 2010. "The one saving grace is the population is growing by 3 million people a year," he says. "They need to live somewhere. That means more roofs."

You be the judge, Here are some historic measures:

Rent. In the last half century, homes have on average sold for 20 times what it costs to rent them for a year. In 2006, at least in some places, they were selling for 32 times annual rent.

Income. From 1950 to 2000, home values sold for three times average household income. In 2006, average household income was $66,500, which should have put median home prices at $200,000. Instead the median was $301,000.

Appreciation. Existing home values rose 0.5 percent annually, adjusted for inflation, from 1950 to 2000. From 2000 to 2006, they rose at the annualized rate of 8.2 percent above inflation and peaked with a 12.3 percent rise in 2005.

Source: USA Today, Dennis Cauchon (12/12/2008)

'Extreme Makeover' Winners Face Foreclosure

One of the most-watched winners on ABC-TV’s "Extreme Makeover: Home Edition" is about to undergo foreclosure.

The Nov. 6, 2004, show, which set an "Extreme Makeover" ratings record, featured Judy and Larry Vardon, who are both deaf. The show remodeled their home to accommodate their blind, autistic son Vance, now 16 years old.

The Vardons currently face a monthly house payment of $2,300 and a mortgage rate that has topped 11 percent.

"Everyone thought the house was paid for," says Gerald Naftaly, the mayor of Oak Park, Mich., where the family lives. "But that wasn't the case. They still had their mortgage. They are just another number with the mortgage company."

Vardon, 50, works at Chrysler's Sterling Heights stamping plant. The couple is working with Lighthouse of Oakland County, a nonprofit group that aids families in crisis, to help them negotiate a lower mortgage rate.

Source: The Associated Press (12/08/08)

Obama Urges Action to Help Home Owners

President-elect Barack Obama on Sunday criticized the current administration for its failure to aggressively help home owners who are faced with foreclosure.

He called for immediate action and urged the Bush administration to find a way to encourage banks and mortgage holders to renegotiate the terms of existing mortgages in way s that would keep costs for borrowers down.

On "Meet the Press," he told anchor Tom Brokaw that it was the wrong time to worry about whether or not undeserving homeowners will benefit from the plan.

"If my neighbor's house is on fire, even if they were smoking in the bedroom or leaving the stove on, right now my main incentive is to put out that fire so that it doesn't spread to my house," Obama said.

Source: Washington Post, Anne E. Komblut (12/07/2008)

Fraud Grows, Despite More Consumer Protection

Real estate fraud continues to grow, despite aggressive responses from federal regulators.

The Federal Bureau of Investigations has reported that incidents of mortgage fraud have tripled over the last two years to 21,994, with the value of the crimes quadrupling to $1.01 billion.

The crimes range from individuals lying on their applications to complex rings of identity thefts, straw buyers and appraisal fraud.

Harvard Law School professor Howell E. Jackson, who authored a study of mortgage brokers and yield spread premiums, blames the anonymity of the mortgage business. Thirty years ago, applicants went down to their local bank and dealt with a loan officer who they probably knew. Today, the business has grown and changed and most buyers never talk to a lender. Instead, they rely on a broker to get them the best deal.

Jackson estimated that brokers will earn an estimated $33 billion in commissions this year.

"People should ask their broker how much they're making, including both yield spread premiums and direct fees, and if it's over $2,000 they should question why," says Jackson. "No one says the broker has to make a certain amount. It's negotiable."

Source: Los Angeles Times, David Streitfeld (12/05/08)

Economists Ponder Future of Home Prices

For the second year in a row, REALTORS® report that exterior remodeling projects return the most money as a percentage of cost, as detailed in the 2008 Remodeling Cost vs. Value Report.

On a national level, wood deck additions and all types of siding replacements–upscale fiber cement, midrange vinyl, and upscale foam-backed vinyl–returned more than 80 percent of project costs upon resale. Of these, the most profitable project was upscale fiber cement siding, which recouped 86.7 percent of costs, followed by wood decks at 81.8 percent, midrange vinyl siding at 80.7 percent, and upscale foam-backed vinyl siding at 80.4 percent.

The 2008 Remodeling Cost vs. Value Report compares construction costs with resale values for 30 midrange and upscale remodeling projects comprising additions, remodels and replacements in 79 markets across the country, expanding from 60 markets last year.

Projects With Highest, Lowest Returns

In addition to wood decks and siding, window replacements and kitchen remodels also returned a relatively high percentage of remodeling costs on a national basis.

All types of window replacements–upscale and midrange wood and upscale and midscale vinyl–returned more than 76 percent of costs. A major midrange kitchen remodel returned 76 percent of project costs, while a minor midrange kitchen remodel returned 79.5 percent of costs.

On a national level, bathroom remodels, while still a relatively good investment, do not return as high a percentage as in previous years. A midrange bathroom remodel was estimated to return 74.4 percent on resale, comparable to a midrange attic-to-bedroom conversion, at 73.6 percent of costs recouped, and a midrange basement remodel, at 72.7 percent of costs recouped.

As in last year’s report, the least profitable remodeling projects in terms of resale value were home office remodels, sunroom additions, and back-up power generators, returning only 54.4 percent, 56.6 percent, and 57.1 percent, respectively, of project costs.

National Association of Realtors® President Charles McMillan says the resale value of any given remodeling project depends on a variety of factors.

“A home’s overall condition, availability and condition of surrounding properties, location, and regional economic climate are all factors that will influence the value of any remodeling project,” he says.

Results of the report are summarized in the December 2008 issue of REALTOR® Magazine. The issue also includes examples of actual remodeling projects that were less expensive than many of the report’s cost estimates. Read the story online.

Full project descriptions, as well as national, regional and local project data for the 79 cities covered by the report will be posted at www.costvsvalue.com by Dec. 5.

This is the 11th consecutive year that the report, which is produced by Hanley Wood, LLC, was completed in cooperation with REALTOR® Magazine. For the report, Realtors® provided their insight into local markets and buyer home preferences.

Source: NAR

Economists Ponder Future of Home Prices

When will home prices go back up again?

Economists surveyed by The Wall Street Journal say that home prices won’t hit bottom until the second half of 2009 at the earliest and some say the downward trend will continue until 2011 or 2012. After that they may rise again, but not nearly as fast as they have in the last decade. Instead they will rise just a little faster than inflation and stay in line with increases in household income.

William Wheaton, a professor of economics and real estate at the Massachusetts Institute of Technology, says he expects house prices to increase at a rate roughly 1-percentage point higher than inflation over the long term.

Celia Chen, director of housing economics at Moody’s Economy.com is more optimistic, expecting home values to rise an average of 4 percent per year over the next couple of decades.

Demographer William Frey predicts that growth will continue in coastal and Southern cities while populations in rustbelt areas like Michigan, Ohio, Western Pennsylvania and Upstate New York will continue to decline.

The great unknown is the impact aging baby boomers will have. While retirees in the past have often headed for warmer and suburban areas, boomers have tended to confound expectations. They could well show a propensity for staying put or moving to urban areas for the cultural life or to be near friends and family, shunning sun-dappled retirements communities.

Source: The Wall Street Journal, James R. Hagerty (12/02/2008)

Warnings of Mortgage Meltdown Were Ignored

According to a review of regulatory documents by the Associated Press, the Bush administration ignored multiple warnings of impending financial meltdown during the last five years and didn't follow through on federal regulator’s proposals for tighter regulations.

In 2005, federal bank regulators proposed new guidelines for banks writing risky loans. They proposed a cap on the number of exotic mortgages and sought to make banks that bundled and sold mortgages inform buyers about their risks. The proposal also would have required banks to better vet potential borrowers and clearly inform them of the potential for skyrocketing interest rates.

The proposals didn’t require congressional action or a presidential signature, but the banking industry lobbied heavily against the proposals and administration urged regulators to drop them.

Diane Casey-Landry, of the American Bankers Association, said industry opposition was based on the banks' best information. "You're looking at a decline in real estate values that was never contemplated," she said.

Source: The Associated Press, Matt Apuzzo (12/01/2008)

Bernanke Underestimated Mortgage Fallout

Federal Reserve Chair Ben Bernanke says he underestimated the amount of fallout from risky mortgages.

"I and others were mistaken early on in saying that the subprime crisis would be contained," Bernanke said in an article in the Dec. 1 issue of The New Yorker magazine.

"The causal relationship between the housing problem and the broad financial system was very complex and difficult to predict," he said in the piece titled "Anatomy of a Meltdown."

Source: The Associated Press, Jeannine Aversa (11/23/2008)

Fannie, Freddie Suspend Some Foreclosures

Fannie Mae and Freddie Mac will halt foreclosures of occupied dwellings from Nov. 26 to Jan. 9 so that servicers have more time to develop workout plans for struggling borrowers.

The plan could buy extra time for approximately 16,000 borrowers to try to save their homes, according to the mortgage giants, but some experts worry that it only will delay inevitable foreclosures.

Meanwhile, the companies will commence a streamlined modification program on Dec. 15, under which hundreds of thousands of borrowers shelling out over 38 percent of earnings on mortgage payments could see their payments lowered by lenders.

Source: Reuters, Al Yoon, Dan Burns (11/21/08)

Government Mortgage Refis Aren't Working

The two primary government programs offered as solutions for borrowers facing foreclosure are on the verge of being declared busts, acknowledged Steven Preston, secretary of the U.S. Department of Housing and Urban Development.

The FHASecure program announced in August 2007 has only helped about 4,000 borrowers late on payments. Hope for Homeowners has received a total of 111 applications since its introduction on Oct. 1.

Preston says the rules for the Hope for Homeowners program are being modified to allow lenders to take a smaller loss, making new loans for 96.5 percent of the home’s current value rather than the previous 90 percent.

FHASecure is also under review, according to Preston.

Source: The Associated Press (11/19/2008)

Another Loan Modification Plan on the Way

The Bush Administration announced a plan Tuesday that would use part of the government’s $700 billion in bailout money to encourage loan modifications so that borrowers would receive more affordable loans that requires less than 38 percent of their income to pay.

To qualify, borrowers must live in their homes, not be in bankruptcy proceedings, and owe at least 90 percent of the value of their home.

Fannie Mae and Freddie Mac would administer the program.Critics say that the plan won’t work. FDIC Chairman Sheila Bair said it "falls short of what is needed to achieve wide scale modifications of distressed mortgages."

Source: The Wall Street Journal, Damian Paletta, Jessica Holzer and Ruth Simon (11/12/08)

Pending Home Sales Down 4.6% in September

Pending home sales fell on the heels of a strong gain a month earlier as credit tightened and economic conditions deteriorated, according to the NATIONAL ASSOCIATION OF REALTORS®.

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in September, declined 4.6 percent to 89.2 from an upwardly revised reading of 93.5 in August, but is 1.6 percent higher than September 2007 when it stood at 87.8.

Lawrence Yun, NAR chief economist, said pending sales have been above year-ago levels for two months in a row. “The month-to-month weakening in pending home sales is understandable, but because the index remains above year-ago levels it means we’re still in a broad period of stabilization,” he said.

“Conditions remain mixed around the country, but markets that are showing annual sales gains include Long Island, N.Y.; Boston; Minneapolis; Denver and Washington, D.C., in addition to consistent solid gains in California and Florida.”

The pending home sales index in the West rose 3.7 percent to 113.6 in September and remains 39.5 percent above a year ago. In the Midwest the index slipped 0.7 percent to 83.3 and is 3.1 percent below September 2007.

The index in the South fell 7.9 percent to 89.0 in September and is 11.3 percent below a year ago. In the Northeast, the index dropped 16.8 percent to 66.4 and is 9.4 percent below September 2007.

NAR President Richard F. Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif., said it’s a challenging time for both buyers and sellers. “Beyond affordable financing, correct pricing and professional expertise are keys to success in the market today,” he said. “Consumers need REALTORS® more than ever to help them navigate the transaction process in these uncertain times.”

Yun projects growth in the U.S. gross domestic product (GDP) to contract in the fourth quarter of this year and the first quarter of 2009, before expanding in latter part of 2009 as home sales recover. “Right now we’re in a recession and unemployment will increase through 2009,” he said. “Consumer spending has halted and businesses are very cautious of expanding. It is unclear by how much the global economic slowdown will dampen U.S. exports, which had been rising strongly.”

“The depth of the recession depends entirely on housing – with sufficient housing stimulus, the recession will be shallow. If government actions stay focused on housing, the cost to the Treasury would be much less that the potential losses in the nation’s output and income in a severe recession.”

Looking at middle-ground assumptions, existing-home sales are expected to total 5.02 million in 2008, rising to 5.32 million next year and 5.62 million in 2010.

For all of 2008, home prices will have fallen by more than 20 percent in Las Vegas, Phoenix, and many California and Florida markets, while many markets in middle America will experience little change. Wide variations in home price movements will continue in 2009, with Houston and Denver likely to see respectable price gains while most other markets experience no notable change.

New-home sales are likely to total around 487,000 this year and 413,000 in 2009 before rising to 520,000 in 2010. Housing starts, including multifamily units, will probably total 936,000 units in 2008 and 781,000 next year, then increase to 886,000 in 2010. “Housing construction won’t improve before existing-home sales recover and inventory conditions become more balanced,” Yun said.

The 30-year fixed-rate mortgage should average 6.2 percent in the fourth quarter, rise gradually to 6.5 percent during the second half of 2009 and then average 6.7 percent in 2010. NAR’s housing affordability index is averaging 19 percentage points higher this year than in 2007, but is estimated to ease modestly in 2009.

The unemployment rate is expected to be 6.4 percent in the fourth quarter and then average 7.0 percent in 2009. “We’ve lost jobs throughout the year, and we could see jobs continue to decline for another six months – unemployment may top out around 7.0 percent,” Yun said.

Inflation, as measured by the Consumer Price Index, is seen at 4.4 percent for 2008, easing to 2.2 percent next year. Inflation-adjusted disposable personal income is projected to grow 1.4 percent this year and 1.6 percent in 2009.

Obama Will Support Housing, Says NAR

President-elect Barack Obama is likely to make a housing market recovery a central part of his economic revival plan.

That was the assessment of NAR leaders, speaking to a packed audience Thursday at the Peabody Hotel during the opening forum of the REALTORS® Conference.

Obama has long made housing a priority, said Illinois Association of REALTORS® CEO Gary Clayton, who knows the president-elect from his days as a state senator. Clayton said with a chuckle that he now regrets not joining Obama’s weekly poker game.

In Illinois, Obama advocated tax credits for property owners and fought to end predatory lending, Clayton said. As a U.S. senator, he’s advocated for a stronger FHA and voted for the NAR-backed economic stimulus bill, which increased loan limits in high-cost areas.

NAR Chief lobbyist Jerry Giovaniello addressed election banter about Obama having a “socialist” agenda. “There’s not much left to socialize,” he joked, referring to the government rescue of Fannie Mae, Freddie Mac, insurance giant AIG, and the entire U.S. banking system. “I think Jiffy Lube may be next,” he said, to uproarious laughter.

Clayton said the real Obama is a “friendly, fun guy. He’s smart, quick, and a good listener but no pushover.” Giovaniello described Obama as “careful and cautious,” someone who will listen to all sides of an issue before making decision.

Besides winning the presidency, Democrats gained seats in both the House and the Senate. Giovaniello told the crowd that didn’t necessarily mean legislators will have an anti-business bent. A substantial number are “Blue Dog Democrats,” he said, who tend to be conservative and business oriented. And many already have sided with REALTORS® on key real estate issues.

“We made our friends before we needed them,” he said, “so thank you for being involved in the REALTOR® party.

It’s Still The Economy

Clearly the state of the economy was on everyone’s minds, and NAR 2009 President Charles McMillan asked Chief Economist Lawrence Yun about his economic outlook.

“We are in a recession,” Yun said. “In the next six months, we may lose up to 1 million jobs. But the good news is, historically housing moves independently from the economy. We are seeing a 20 percent improvement in home sales in states like California, Florida, and Virginia. The economy will not improve without a housing recovery.”

In the meantime, NAR is doing all it can to help REALTORS® through the tough times, McMillan said. Among the free resources at REALTOR.org are daily economic commentaries, an FHA toolkit, and 150 local market reports.

The association also offers a host of money-saving benefits. For more information, visit REALTOR.org/NARHelpsYou.

President-elect Barack Obama is likely to make a housing market recovery a central part of his economic revival plan. That was the assessment of NAR leaders, speaking to a packed audience Thursday at the Peabody Hotel during the opening forum of the REALTORS® Conference.

Obama has long made housing a priority, said Illinois Association of REALTORS® CEO Gary Clayton, who knows the president-elect from his days as a state senator. Clayton said with a chuckle that he now regrets not joining Obama’s weekly poker game.

In Illinois, Obama advocated tax credits for property owners and fought to end predatory lending, Clayton said. As a U.S. senator, he’s advocated for a stronger FHA and voted for the NAR-backed economic stimulus bill, which increased loan limits in high-cost areas.

NAR Chief lobbyist Jerry Giovaniello addressed election banter about Obama having a “socialist” agenda. “There’s not much left to socialize,” he joked, referring to the government rescue of Fannie Mae, Freddie Mac, insurance giant AIG, and the entire U.S. banking system. “I think Jiffy Lube may be next,” he said, to uproarious laughter.

Clayton said the real Obama is a “friendly, fun guy. He’s smart, quick, and a good listener but no pushover.” Giovaniello described Obama as “careful and cautious,” someone who will listen to all sides of an issue before making decision.

Besides winning the presidency, Democrats gained seats in both the House and the Senate. Giovaniello told the crowd that didn’t necessarily mean legislators will have an anti-business bent.

A substantial number are “Blue Dog Democrats,” he said, who tend to be conservative and business oriented. And many already have sided with REALTORS® on key real estate issues.

“We made our friends before we needed them,” he said, “so thank you for being involved in the REALTOR® party.

It’s Still The Economy

Clearly the state of the economy was on everyone’s minds, and NAR 2009 President Charles McMillan asked Chief Economist Lawrence Yun about his economic outlook.

“We are in a recession,” Yun said. “In the next six months, we may lose up to 1 million jobs. But the good news is, historically housing moves independently from the economy. We are seeing a 20 percent improvement in home sales in states like California, Florida, and Virginia. The economy will not improve without a housing recovery.”

In the meantime, NAR is doing all it can to help REALTORS® through the tough times, McMillan said. Among the free resources at REALTOR.org are daily economic commentaries, an FHA toolkit, and 150 local market reports.

The association also offers a host of money-saving benefits. For more information, visit REALTOR.org/NARHelpsYou

Stop Worrying About Stock Market Losses

If you're worried about how much money you lost from your retirement account over the past few months, it’s time to refocus your thoughts.

The stock market will regain strength and your investments will grow over time, certified financial planner Chris Bird told a packed audience Thursday at the 2008 REALTORS® Conference & Expo in Orlando. Getting caught up in short-term fluctuations will only cause distress.

"Don't believe the talking heads who say the sky is falling," Bird said at the Women's Council of REALTORS® financial planning seminar.

Bird said a 401(k) account is the best vehicle for saving and growing money for retirement—offering far more benefits than an IRA. Not only are annual deposit limits higher in a 401(k), but if you're 50 years old or older, you can put extra money into your account annually, enabling you to "catch up" for the years you missed.

The other beauty of a 401(k): flexibility to borrow money from the account without taking a tax hit. IRA plans, on the other hand, don’t allow you to borrow, only withdraw. And when you take money out, you’ll have to pay taxes and penalties.

So what if you already have an IRA and you need some extra cash right now? Bird suggests rolling over your IRA to a 401(k) so you can write yourself a loan. It’s as easy as can be: "All you have to do is check a box," he said. "You don't even have to say what you're going to use the money for."

However, borrowed money does have to be paid back within five years or you face a penalty. But at a reasonable interest rate (about 6 percent currently), the payback isn’t overly burdensome.

For people with kids, Bird offered up another flexible savings idea: Socking money away in a tax-exempt "529" college savings plan. You can borrow money against that account, the majority of it tax free, by temporarily making yourself the designated recipient.

"Stealing from your kids" isn’t an ideal strategy unless you really need the money, Bird said. If you must take money from the account, you should pay it back and redesignate your child as the recipient.

—Robert Freedman

1031 Exchanges: Tax-Deferred, Not Tax-Free

There are many complex rules governing 1031 exchanges, but one of the most important rules is easy to remember: “If you take the cash, you pay the taxes,” said Craig Brown, a vice president of IPX1031 Exchange, which specializes in exchange transactions.

If a seller exchanges one like-kind investment property for another, and the transaction results in any cash for the seller, that amount is taxable—even if the seller is taking on additional mortgage debt.

“Debt does not offset cash,” said Brown, who is based in Dallas.

Capital Gains Concerns

If your client expects to see cash from a 1031 exchange, it may be better to initiate the transaction in 2008, when the capital gains tax rate is only 15 percent, he said.

“You can’t predict what will happen next year to the capital gain rate, but many of my clients are concerned Congress will increase it next year, and they want to take advantage of the current rate,” Brown said.

If an exchange isn’t completed until 2009, the investor may choose to pay taxes on the gain in either 2008 or 2009 under IRS installment sales rules.

What Qualifies as a 1031?

To qualify for a 1031 exchange, a property must meet four basic rules:

1. Be held for an investment or used for productive purposes in a business.
2. Be exchanged with a like-kind property (any other type of real estate).
3. Investor must identify replacement properties for the one being exchanged within 45 days.
4. Exchange transaction must be completed within 180 days.

While it’s not possible to exchange a principal residence, a recent court ruling has clarified rules that make it possible to exchange a second home or a vacation home, Brown said.

The property must meet these requirements: The owner has held the property for at least two years; rented the property for at least 14 days per year at fair market value; and used the property personally for no more than 14 days of each year.

Dream House Rules

The same ruling spelled out circumstances under which owners could defer taxes when exchanging any type of investment property for a “dream house,” that they will eventually live in full-time.

First, the investor must rent out the dream home for 14 days a year for at least two years, and use it for no more than 14 days per year. At the end of the two-year span, the home could be converted to a principle residence for the owner’s use. The two-day session on 1031 exchanges was presented by the REALTORS® Land Institute. For more information, visit www.riland.com

—Mariwyn Evans

California Considers Foreclosure Moratorium

California Gov. Arnold Schwarzenegger is prepared to propose a 90-day ban on foreclosures.

The program would give borrowers and lenders enough time to find a solution to their problems or work out a modification to the loan, authors of the bill say.

Schwarzenegger says his plan is better than the one President-Elect Barack Obama plans to propose because it offers a “safe harbor” to mortgage lenders. Lenders that could prove they have offered a robust modification program could avoid having a stay put on individual foreclosures, says David Crane, an adviser to the governor.

Schwarzenegger, who will explain the total program on Thursday, is expected to seek tougher licensing requirements for loan originators and to ask to allow the state Department of Real Estate and Department of Corporations to enforce federal laws and regulations regarding the Truth in Lending Act.

Source: Reuters News (11/05/2008)

ZIPs Where Property Is Selling Fastest

Altos Research, which tracks real estate data all over the country, identified these ZIP codes in which homes for sale spent the fewest days on the market.

In cases where communities of relatively fast-selling real estate were clustered, the best ZIP Code in the area was chosen.

Overall, expensive homes and big bargains are selling with general ease, says Ken Gold, director of the Center for Real Estate Education and Research at Ohio State University. Meanwhile, homes in middle-income neighborhoods are selling the slowest, he says.

Here's the list of the Top 10 fastest-selling ZIPs:
Sunnyvale, Calif. 94087: 66 days on market
Austin, Tex. 78749: 68 days on market
San Diego, Calif. 92131: 70 days on market
Plano, Tex. 75075: 75 days on market
Portland, Ore. 97202: 77 days on market
Houston, Tex. 77094: 77 days on market
Wakefield, Mass. 01880: 79 days on market
Seattle, Wash. 98117: 86 days on market
Littleton, Colo. 80130: 90 days on market
Atlanta, Ga. 30340: 91 days on market

Source: Business Week, Prashant Gopal (09/05/2008)

Fannie, Freddie Takeover Keeps Mortgages Flowing

The federal government's sweeping takeover of mortgage market giants Fannie Mae and Freddie Mac is expected to have positive short-term benefits to the real estate market and opens the door for the industry to shape the restructuring of the companies.

The NATIONAL ASSOCIATION OF REALTORS® commended the Treasury Department's decision, which it said will bring much-needed stability and continued liquidity to the nation’s mortgage market.

"This demonstrates that the government is clearly committed to keeping the flow of capital uninterrupted, which is crucial to the housing sector and the economy," NAR President Richard F. Gaylord said in a statement Monday.

Fannie and Freddie own or guarantee almost half of the country's $12 trillion in outstanding home mortgage debt.

"Fannie Mae and Freddie Mac play a vital role in the U.S. economy by making fair and affordable mortgage loans available for home buyers and owners," Gaylord said. "Their critical mission must not be interrupted, and Sunday’s announcement goes a long way in making sure that does not happen."

What the Plan Involves

Under the Treasury Department's action, the two government-sponsored enterprises are placed in a government conservatorship and overseen by two government-appointed chiefs, former Merrill Lynch vice chairman Herbert Allison at Fannie Mae and former U.S. Bancorp CFO David Moffett at Freddie Mac.

Daniel Mudd, who led Fannie Mae for the last few years, and Richard Syron, his counterpart at Freddie Mac, have been relieved of their jobs.

The federal government is taking up to an 80 percent stake in the companies and will review their financial condition on a quarterly basis, injecting money into their operations as needed. The government is directing the companies to help stabilize housing markets by requiring them to increase their mortgage funding over the next year and a half.

For the long-term, the companies and their regulator, the Federal Housing Finance Agency, will begin planning for a major reorganization of their operations, away from their current 100-percent, privately owned model.

According to news reports, one of the models being discussed is something akin to a public utility, in which the government sets limits on the amount of annual return on equity to shareholders.

Positive Real Estate Impact

For the real estate industry, the short term impact is expected to be positive, says NAR Chief Economist Lawrence Yun. With the government now explicitly backing the companies' mortgage obligations, the market for the GSE securities will be treated more like Treasurys, thereby exerting downward pressure on rates, he says.

That will help drive a positive cycle of investment as investors return to the market, further lowering rates and generating funds to lenders to expand their mortgage loan operations. That is expected to help speed up housing sales in markets across the country and help stabilize home prices.

The main down side to the federal intervention will be felt by the companies' current shareholders, who will no longer receive dividend payments and whose holdings are diluted by the equity stake of the federal government.

Looking ahead, the directive for the companies and their regulator to start work on their long-term restructuring opens the door for NAR to help shape that process, and the association already has a process underway to do that, say NAR legislative and regulatory affairs analysts.

— REALTOR® Magazine Online

6 Web Sites That Make Decorating Fun

6 Web Sites That Make Decorating Fun

For many people, one of the most fun parts about buying a home is redecorating it.

Most of these sites are trying to sell products, but they are free to use and could give new home owners some good ideas.

• DesignMyRoom.com- This is a sophisticated and complex site. It opens with a series of brief videos with Robert Verdi, a charming "Queer Eye for the Straight Guy"- style guide to the art of interior decoration. The site allows you to choose furniture, art and accessories for 30 generic rooms.
• BHG.com - Choose from Color-a-Room or Color-a-Home (exterior).
• AndersonFloors.com- The Image Builder Design Center is a basic program that will change the color of the flooring, walls, ceiling and trim.
• WoodFloors.org- From the National Wood Flooring Association, Design a Room is another basic wall and floor site.
• Mohawk.Swatchbox.com - Mohawk DreamVision allows you to choose a room type (kitchen, bedroom, bath) and style (traditional, modern, etc.) then start designing.
• Corian.com- The My Room Designer offers a good choice of cabinets, wall colors and of course, countertops.

Source: St. Louis Post-Dispatch, David Bonetti (08/23/2008)

Existing-Home Sales Hit 5-Month High

Existing-Home Sales Hit 5-Month High

Existing-home sales rose in July to the highest level in five months, although they continue to be well below the numbers from last year at this time, according to the NATIONAL ASSOCIATION OF REALTORS®.

Existing-home sales – including single-family, townhomes, condominiums and co-ops – increased 3.1 percent in July to a seasonally adjusted annual rate of 5 million units from a downwardly revised level of 4.85 million in June. Sales were 13.2 percent lower than the 5.76 million-unit pace in July 2007.

NAR President Richard F. Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif., said the up-and-down pattern may break soon.

“We hope the new tools in the hands of home buyers from the recently enacted housing stimulus package will spark a sustained sales uptrend in the months ahead,” he said. “Buyers who’ve been on the sidelines should take a closer look at what’s available to them now in terms of financing and incentives. Given some of the inventory on the market, we also strongly encourage buyers to get a professional home inspection.”

Median Price Down 7.1% from Year Ago

The national median existing-home price for all housing types was $212,400 in July, down 7.1 percent from a year ago when the median was $228,600.

Lawrence Yun, NAR chief economist, said home prices in some regions could soon increase.

“Sales have picked up significantly in several Florida and California markets. Home prices generally follow sales trends after a few months of lag time,” he said. “Still, inventory remains high in many parts of the country and will require time to fully absorb. We expect more balanced conditions in 2009 and will eventually return to normal long-term appreciation patterns.”

Analysis of NAR price data since 1968 shows home prices normally rise 1 to 2 percentage points above the overall rate of inflation, building wealth over the typical period of homeownership.

11-Month Supply of Homes for Sale

Total housing inventory at the end of July rose 3.9 percent to 4.67 million existing homes available for sale, which represents an 11.2.-month supply at the current sales pace, up from a 11.1-month supply in June. The rise in supply results from a sharp increase in condo inventory; the single family supply declined.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 6.43 percent in July from 6.32 percent in June; the rate was 6.70 percent in July 2007.

Single-family home sales rose 3.1 percent to a seasonally adjusted annual rate of 4.39 million in July from 4.26 million in June, but are 12.4 percent below the 5.01 million-unit level a year ago. The median existing single-family home price was $210,900 in July, down 7.7 percent from July 2007.

Existing condominium and co-op sales increased 3.4 percent to a seasonally adjusted annual rate of 610,000 units in July from 590,000 in June, but are 18.6 percent below the 749,000-unit pace in July 2007. The median existing condo price4 was $223,400 in July, which is 2.7 percent below a year ago.

In Detail: Regional Sales, Prices

West. Regionally, existing-home sales in the West jumped 9.7 percent in July to a level of 1.13 million and are 0.9 percent higher than July 2007. The median price in the West was $273,200, down 22.2 percent from a year ago.

Northeast. In the Northeast, existing-home sales rose 5.9 percent to an annual pace of 900,000 in July, but are 11.8 percent below a year ago. The median price in the Northeast was $278,700, which is 4.9 percent lower than July 2007.

Midwest. Existing-home sales in the Midwest increased 0.9 percent to an annual rate of 1.12 million in July, but are 17.0 percent lower than July 2007. The median price in the Midwest was $175,400, up 1.0 percent from a year ago.

South. In the South, existing-home sales slipped 0.5 percent to an annual pace of 1.85 million in July, and are 18.1 percent below a year ago. The median price in the South was $179,300, down 3.5 percent from June 2007.

— NAR

Presidential Candidates Spar Over Homes

Presidential candidate John Mc Cain triggered a media fuss this week when he couldn’t immediately answer a question about how many homes he and his wife own.

Property records reviewed by The Associated Press show McCain and his family appear to own at least eight homes and condos in three states.

Democratic candidate Barack Obama tried to make a little hay out of the news, saying that McCain was out of touch with Americans who were struggling to pay the mortgage. But the McCain campaign was quick to point out that Obama has his own questionable housing background, having bought his Hyde Park, Chicago home from a seller who had been convicted of influence peddling.

Source: The San Francisco Chronicle (08/22/2008)

HUD Study: Home Costs Up 128 Percent

Between 1985 and 2005, the median monthly housing costs for a U.S. family rose 128 percent from $345 to $798, according to a U.S. Department of Housing and Urban Development study.

The good news is that the portion of income that families spent on housing during that period was nearly flat, increasing from 19 percent to 22 percent during those 20 years.

According to the HUD report on trends in housing expenses, when the costs are figured in constant 2005 dollars, whether a homeowner had a mortgage or not, housing costs in that same 20-year period rose 25 percent, including utilities, water, trash and real estate taxes.

Housing costs for renters in the same time period rose only 8 percent.

Download the full report from HUD.

Source: National Low Income Housing Coalition (08/15/2008)

Trump Saves Ed McMahon From Foreclosure

Donald Trump says he will bail out Ed McMahon by buying his foreclosed home and leasing it back to the show host.

The 85-year-old McMahon was Johnny Carson’s sidekick on "The Tonight Show" for three decades. He hasn’t been able to work for 18 months after breaking his neck. During that time, he defaulted on a $4.5 million mortgage from Countrywide Financial Corp.

Trump says he doesn't know McMahon personally, but acted out of compassion. "When I was at the Wharton School of Business I'd watch him every night," the mega-developer said. "How could this happen?"

Source: The Associated Press (08/14/08)

Economists Predict Fannie, Freddie Bailout

The odds are greater than 50/50 that the U.S. government will spend tax dollars to prop up Fannie Mae and Freddie Mac, according to economists surveyed by the Wall Street Journal.

Economists put the probability at 59 percent that the Treasury Department will have to step in to bailout one or the other of the government-sponsored enterprises.

"Blank checks almost always get filled in and cashed," says Stuart Hoffman of PNC Financial Services Group.

About 40 percent of the economists say concern over inflation should take precedence over slow economic growth, but they are nearly unanimous in predicting that the Federal Reserve will hold the key federal-funds rate steady at 2 percent through 2008, raising it to at least 2.5 percent by June 2009.

Source: The Wall Street Journal, Phil Izzo (08/15/08)

10 Most Expensive States for Closing Costs

A slowing housing market isn’t stopping closing costs from rising, according to a study by Bankrate.com.

The 2007 average closing cost of $2,736 has gone up to an average of $3,118 in 2008, a 14 percent increase. New York City at $4,016 is the most expensive place to close. North Carolina is the least expensive area with an average fee of $2,650.

Here are the top 10 most expensive states to pay closing costs.

New York: $4,016
Texas: $3,975
Florida: $3,683
Oklahoma: $3,558
New Mexico: $3,465
New Jersey: $3,432
Pennsylvania: $3,411
Alaska: $3,409
Colorado: $3,358
California: $3,321

Source: Bankrate.com (08/07/08)

New TLC Fix-Up Show Offers Dose of Reality

TLC’s newest real estate reality show, “Hope for Your Home,” which debuted Saturday at 8:30 p.m., gives financially strained home owners $10,000 to make practical improvements that could help make the house sell and get them out of a hole.

The families, who are all based in Southern California, confer with real estate practitioners, mortgage brokers, and contractors then use the cash to do things like fix the bathroom plumbing, reseed the front yard or – in one family’s case – get the washing machine out of the back yard.

After the fix-up, the property is reappraised. In some episodes the result will seem disappointing, says show host and veteran real estate professional Kirsten Kemp Becker.

"There are certainly episodes where it's not necessarily feel-good TV at the end, but it's a real profile for what's going on," says Becker. "Sometimes, there's nothing to do except try hard and hope to be rewarded."

Source: The Wall Street Journal, Michelle Kung (08/09/08)

What's Fair Got to do With it?

Is it fair that prudent taxpayers and home owners should bail out people who borrowed foolishly and companies whose executives were responsible for the credit crunch?

The answer is “no,” but that doesn’t make the bailout a mistake, says Zvi Bodie, finance professor at Boston University. "My own view is that the world isn't fair," says Bodie. "But would it be fair to put the economy into a deep recession or depression? I don't think so."

If the monetary and fiscal authorities are right in their judgment that the risk of an economic plunge of frightening proportions is real, then the actions they're taking are fair to all of us, Bodie contends.

The U.S. economy in 2008 — with a 5.7 percent unemployment rate and economy expanding at a 1.9 percent average annual rate — is far from Depression-era statistics and only time will tell whether monetary and fiscal authorities exercised sound judgment or panicked. In the meantime, history rewards the bold — not the timid — when the financial system is threatened with collapse, according to Bodie.

Source: Business Week. Chris Farrell (08/05/2008)

Most Consumers Pleased With Real Estate Agent

A survey published in the September issue of Consumer Reports shows that most consumers are pleased with the services of their real estate practitioner.

The survey of 9,141 readers who bought or sold a home (or tried to) found that 71 percent were very or completely satisfied with their practitioner, while only 12 percent said they were dissatisfied.

Practitioners with most of the larger real-estate chains and independent brokers earned reader scores of 79 or higher, which indicated that respondents found these professionals provide "very satisfying" service.

Eighty-six percent of those surveyed who put their homes on the market made a sale; only 8 percent of would-be sellers eventually gave up and took their homes off the market. (The rest were still trying to sell when the survey was completed.)

What Sellers Said

Eighty-two percent of respondents who sold with the help of a practitioner received $5,000 less, on average, than their original asking price.

Almost all of the 17 percent who sold their homes without professional help said they received about what they originally asked.

What Buyers Said

Sixty-six percent of Consumer Reports' readers who used a practitioner to help them buy a home paid an average of $5,000 less than the listing price, and the 34 percent of buyers who negotiated their own deals, without representation, paid close to the asking price.

Lower Commission = Happier Seller

The survey also found that many real estate professionals would negotiate commission rates if sellers haggle. Sellers who paid commission rates 3 percent or lower were just as satisfied with their brokers' performance as those who paid 6 percent or more, the survey reported.

Forty-six percent of sellers surveyed attempted to negotiate a lower commission rate. About 71 percent succeeded.

Source: Consumer Reports (08/04/2008)

Getting a Mortgage Tougher for Buyers

Difficulty in landing a mortgage is keeping many buyers out of the market.

At the peak of the housing boom, about 20 percent of the mortgage market was subprime, and nearly 20 percent was "Alt-A loans” or "A-minus" loans, typically offered those with good credit but with high debt-to-loan ratios or little or no proof of income.

Both categories are now nearly extinct. That means about 40 percent of the residential mortgage market has all but disappeared, according to David Olson of Wholesale Access Mortgage Research and Consulting.

"The underwriting has really tightened up," Olson says, "Before, if you could fog a mirror, you got a loan. Now, that's not the case.

"Nationwide, practitioners say they are encountering more potential buyers who can’t get financing.

"Buyers come in with confidence, and once they have talked with a lending practitioner, it's like they've been hit over the head with a ton of bricks," says Dean Moss, an agent at Keller Williams Fox and Associates Realty in Chicago.

A study conducted using data from a Reno, Nev., multiple listing service, found that about 30 percent of sales haven’t closed after 90 days. Practitioner Guy Johnson, who analyzed the data, suggests that buyers stay on top of their loans, checking in with their lender frequently to make sure the loan for which they’ve been approved is still the same.

"A loan commitment letter," he adds, "isn't really as solid as it once was."

Source: USA Today, Anna Bahney (08/05/2008)

How the New First-Time Buyer Tax Credit Works

Under the new housing bill, home buyers who have not owned a home in the last three years will be eligible for a tax credit equal to 10 percent of the property up to a maximum of $7,500.Here’s how it works:

• The credit is $3,750 for married couples filing separately. Unmarried people who jointly purchase a home will be able to divide the $7,500 credit.
• This program is actually a loan, which home buyers must repay over 15 years at zero percent interest beginning in the second year after they purchase the home. A home buyer who qualified for the whole credit would pay $500 for 15 years or about $41.67 per month.
• The credit applies only to homes purchased on or after April 9, 2008, and before July 1, 2009.
• High-income home buyers don’t qualify: Eligibility begins phasing out for single filers with adjusted income of more than $75,000 and $150,000 for joint filers. It completely phases out at $95,000 for singles and $170,000 for married couples filing jointly.

Source: The Washington Post, Michelle Singletary (07/03/08)

Neighborhoods Where the Bubble Hasn't Burst

Neighborhoods Where the Bubble Hasn't Burst

In a report for Forbes.com, Hotpads.com, an aggregator of rental listings, produced a price-to-earnings spread for each ZIP code in the country's 40 largest cities by comparing rental costs with buying costs for similar properties, based on number of bedrooms, location, and price per square foot.

A price-to-earnings ratio, or P/E, expresses how much a buyer has to pay for each dollar of return. Buyers in high P/E neighborhoods pay a huge premium to live in the area relative to how much it costs to rent a similar property there.

A high P/E can simply mean a neighborhood is overpriced, but it can also indicate where buyers have gambled that the area will ultimately appreciate further, turning an overpaying buyer into a smart investor.

Here are 10 neighborhoods, by ZIP code, where P/E is highest, but so is the confidence that the area will appreciate further:

New York, TriBeCa, ZIP code 10013, Purchase-to-rent spread: 36.3
Boston, Chinatown, ZIP code 02111, P/E spread: 30.5
Seattle, Downtown, ZIP code 98104, P/E spread: 30.3
Los Angeles, West Hollywood, ZIP code 90038, P/E spread: 30.2
San Diego, Calif., Mission Hills, ZIP code 92103, P/E spread: 30
San Francisco, Outer Sunset, ZIP code 94122, P/E spread: 28.5
Phoenix, Coronado, ZIP code 85006, P/E spread: 27.1
Dallas, Greenway Parks, ZIP code 75209, P/E spread: 26.7
Portland, Ore., Rose City Park, ZIP code 97213, P/E spread: 26.6
San Jose, Calif., Willow Glen, ZIP code 95125, P/E spread: 26.1

Source: Forbes.com, Matt Woolsey (07/29/2008)

Lenders Feel Pressure to Curb Vacancies

A growing number of municipalities are charging mortgage companies fees to cover the cost of maintenance on vacant properties.

These levies can be stiff, averaging $500 a year. If a lender doesn’t put a maintenance plan in place quickly, some communities are also assessing punitive damages that can amount to $1,000 a day. Unpaid levies are tacked onto the lender’s property-tax bill.

William Good is commissioner of inspectional services for Boston, where the city is requiring that owners of vacant properties hire a local property manager to be responsible for inspecting the property monthly and maintaining it.

"The idea is to get some responsibility so these buildings don't sit there and have a negative impact on the community while people argue about who is responsible,” Good says.

The Mortgage Bankers Association says that mortgage companies are committed to maintaining vacant properties.

Source: The Wall Street Journal, Ruth Simon (07/29/08)

'Extreme Makeover' House Faces Foreclosure

Three years after a Lake City, Ga, home was featured on "Extreme Makeover," the home is in foreclosure and about to be auctioned.

The Harper Family used the renovated property as collateral to get a $450,000 loan. Now they are unable to pay the bills and the property will be auctioned on the steps of the Clayton County Courthouse on Aug. 5.

ABC-TV said in a statement that it advises each family to consult a financial planner after they get their new home.

"Ultimately, financial matters are personal, and we work to respect the privacy of the families," the network said.

Source: The Associated Press (07/28/08)

Dale Earnhardt Banners Sparks Controversy

Dale Earnhardt Banners Sparks Controversy

A real estate developer is stirring up controversy in Kannapolis, N.C., the hometown of late NASCAR driver Dale Earnhardt, with his request that the town take down banners honoring the racing legend.

California developer David Murdock is building a 350-acre project on the site of the old Pillowtex mill. He asked for the banners to be taken down in part because they're dirty and torn.

City Manager Mike Legg wrote in a July 18 memo to the city council that the "The Dale Trail" banners would be permanently removed from the site.

"There are many that do not want to see anything 'Dale related' go back up,” Legg said. “Somewhere, there is the right mix between racing, tourism, and life science, but that needs to be worked through."

Councilman Richard Anderson said taking down the banners is disrespectful to the Earnhardt family. Earnhardt’s mother, Martha, lives in Kannapolis.

Source: The Associated Press (07/25/2008)

SIPC WARNS INVESTORS OF NEW IDENTIFY THEFT "PHISHING" SCHEME INVOLVING PHONY REQUEST FOR CONFIDENTIAL FINANCIAL INFORMATION WASHINGTON, D.C.,

July 21, 2008 – The Securities Investor Protection Corporation (SIPC), which maintains a special reserve fund authorized by Congress to help investors at failed brokerage firms, today cautioned investors about a new identity theft scam designed to extract confidential information and cash from unwary individuals.

SIPC officials said they are investigating phony emails sent by a supposed "senior investment advisor" claiming to act for an actual SIPC member. In fact, the individual whose name appears in the emails has nothing to do with the scheme, and the actual brokerage firm named is likewise not involved in the fraudulent solicitation. The email asserts that the brokerage firm is acting on behalf of SIPC, in order to return funds to the investor targeted by the email.

The scheme involves an "insurance investment claim" supposedly to be made through the brokerage firm on behalf of SIPC. In order to get the information supposedly needed to file the claim, the bogus email sender includes a fake SIPC "Beneficiary Information for Automatic Deposit of Payment" form that requires information that could be used to directly withdraw funds from an investor’s accounts. The phony form even includes a false detailed form routing number: "SIPC 4531/09 (4-00).

"SIPC President Stephen Harbeck said: "This is a scam – pure and simple. It does not relate to any actual liquidation of a brokerage firm. There is no address provided for correspondence. There is no reference to a specific brokerage firm failure. No one should provide the kind of personal information asked for in this case without first being 100 percent sure that it is coming from a valid entity."

Investor reports about e-mails that may have been falsely sent in the name of SIPC should be directed to vdrew@sipc.org. Investors receiving any such suspicious e-mails are encouraged to forward the original e-mail to SIPC. To learn more about how SIPC brokerage account liquidations actually work, go to http://www.sipc.org/pdf/SIPC_brochure_Investors_Guide_To_BD_Liquidations.pdf on the Web.

This is at least the fourth identity theft scheme to target SIPC and investors since 2003.

SIPC warned the public on January 29, 2004, that its Web site at http://www.sipc.org had been copied as a "look-alike" Web site at another URL as part of the scheme of a nonexistent brokerage firm. That Web site has since been taken down. On December 11, 2003, SIPC cautioned the public about "brokerage identity theft" schemes, under which con artists falsely pose on the Web as authentic brokerage firms that are members of the SIPC, and then persuade unwary investors to engage in transactions. Brokerage identity theft victims often are told to check the membership database on SIPC's Web site, in order to "prove" that the firm is a SIPC member, when in fact the illicit promoters have simply stolen the identity of a real SIPC member.

ABOUT SIPC
The Securities Investor Protection Corporation is the U.S. investor's first line of defense in the event a brokerage firm fails owing customer cash and securities that are missing from customer accounts. From the time Congress created it in 1970 through December 2006, SIPC has advanced $505 million in order to make possible the recovery of $15.7 billion in assets for an estimated 626,000 investors. Although not every investor is protected by SIPC, SIPC estimates that no fewer than 99 percent of persons who are eligible have been made whole in the failed brokerage firm cases that it has handled to date.

SIPC either acts as trustee or works with an independent court-appointed trustee in a brokerage insolvency case to recover funds. The statute that created SIPC provides that customers of a failed brokerage firm receive all non-negotiable securities that are already registered in their names or in the process of being registered. At the same time, funds from the SIPC reserve are available to satisfy the remaining claims of each customer up to a maximum of $500,000. This figure includes a maximum of $100,000 on claims for cash.

Affordable Ways to Makeover Bathrooms

A dreary, outdated bathroom can be a home sale deal breaker.

Remodeling magazine says the average price of a mid-range bathroom remodel in 2007 was $14,445. But $500 worth of nips and tucks can upgrade the room, says Lytel Young, host of HGTV’s "Save My Bath."

"There are three important things in a bathroom," Young says. "Clean, simple, and orderly. That's the key for every budget, whether it's $500 or $40,000.

"He recommends these inexpensive steps to sellers whose baths need a facelift:
* Rip out the dated medicine cabinet and replace it with a big mirror.
* Replace the lighting with new sconces on both sides of the mirror plus a new overhead fixture on a dimmer.
* Re-caulk the tub and shower.
* Repaint with a neutral color, but decorate with big, fluffy colorful towels.
* Hang some framed art.

Source: The Washington Post, Terri Sapienza (04/24/08)

Sacramento Has Deepest Price Cuts

Spring is traditionally the busiest time of the year for real estate professionals. As the country enters its third year of a real estate slowdown, many are seeing the beginning of a thaw.

One reason is that sellers are giving up on boom-time prices and settling for less.BusinessWeek with the help from Altos Research, a real-time housing research firm, ranked 14 of the country's largest cities based on how much sellers have cut listing prices in the last 12 months.

Listing information for New York City isn’t included, but a recent report suggests that Manhattan prices have climbed 13 percent compared to a year ago.

Here are some of the nation's best buying opportunities based on Business Week’s analysis:

Annual asking price change
Sacramento, Calif : -40.96 percent
Phoenix: -25.85 percent
Los Angeles: -25.56 percent
Las Vegas: -23.38 percent
Atlanta: -22.19 percent
San Diego: -20.34 percent
Boston: -15.50 percent
Miami: -13.84 percent
Chicago: -12.34 percent
Seattle: -3.83 percent
Washington, D.C.: -3.53 percent
San Francisco: -3.41 percent
Houston: -2.41 percent
Denver: -0.55 percent

Source: BusinessWeek, Prashant Gopal (04/18/2008)

Neighbor Complaints Here to Stay

Conflicts with neighbors are a universal problem. Differences in lifestyles and values trigger disagreements wherever people live. Here are some of the top problems, along with suggestions for resolving them.

• Too noisy. Barking dogs and rattling air conditioners are among the excessive noise complaints that most rankle neighbors. Solution: Try talking with neighbor about bothersome noise. There may be an easy solution - extra carpeting, piano practice limited to certain hours, outdoor parties moved inside after 11 p.m. If not, the noise-sensitive might be happiest living somewhere with large yards.

• My view is ruined! We're not just talking about new construction that blocks your view of the water. The case of the Commonwealth of Massachusetts vs. Michael Palermo is expected to be heard in the Lowell Superior Court next month. The case deals with Palermo and his neighbor, a single mother of two young children. Local police charged Palermo with a string of misdemeanor and felonies because he stood naked in front of a window. Tyngsborough Deputy Police Chief Richard Burrows says, "The window he was using for exposing faced the street. Not just the victim could see him, but potentially anybody on or near the street could see this going on." Solution: Before buying, check zoning of nearby land and look into neighborhood construction plans. If all else fails, keep the drapes drawn.

• That house is ugly. One side of the house is painted bright yellow; the other is a dark green. MIT professor Richard de Neufville, who lives on the yellow side, says the answer is peaceful coexistence. Before a difference in taste escalated into a much larger issue, de Neufville and his neighbor determined color coordination wasn't worth a fight. “This is life in the big city. I'm not against, in principle, having the same color, but I don't think I have to make a special effort," says de Neufville. Solution: Talk it out with neighbors rather than let resentment build, but pick your fights carefully. Is it really worth an argument?

Source: REALTOR® Magazine Online; The Boston Glove, Shira Springer (04/06/0228)

Help for Borrowers in Plainest Language

Home shoppers who need basic home buying information might turn to the National Consumers League’s newly launched Mortgage Town, a free Web site that explains the benefits and risks of homeownership and the ins and outs of loan options, inspections, and closings.

The site also offers homeowners facing foreclosure a way to figure out the identity of their mortgage company.

"MortgageTown is a user-friendly and reliable resource for consumers to become better versed in the process of getting a mortgage and what pitfalls to avoid as they head down that road,” said Sally Greenberg, executive director of the National Consumers League.

Source: National Consumers League (04/02/2008)

Million Dollar Homes at Bargain Prices

Now could be a great time to buy a million dollar home in a nice area at a bargain price.

Forbes magazine has identified Rancho Santa Fe, Calif., Marco Island, Fla., Castle Rock, Colo., Annandale, Va., and Bergen County, N.J., as five high-end areas where million dollar foreclosures abound.

Traditionally good borrowers with strong credit scores previously purchased a lot of these homes. In many cases, the foreclosure has come about because the homes are now worth significantly less than the inflated prices the owners originally paid. The homes have sunk into negative equity situations and the previous owners don’t want to make the payments, so they walk away, says Wendell Cox, founder of Demographia, a housing research company.

But foreclosures are not all bad news for the high-end real estate market. Nelson Gonzalez, a practitioner with Esslinger-Wooten-Maxwell, specializing in Miami Beach, says that the rash of foreclosures in Florida, which has the second-highest foreclosure rate in the country, has driven interest from out-of-town and foreign buyers looking to snag a deal.

"They think that every house in Florida is in foreclosure," he says. "The offers we're getting are fairly decent, but the sellers are not coming down yet."

Source: Forbes, Matt Woolsey (03/13/08)

More Banks Consider Short Sales

After about a year of dealing slowly and reluctantly with short sale offers, many banks are reconsidering, looking for solutions that will allow them to recoup debt in foreclosure situations.

Observers say that if the trend continues, it will reduce or eliminate the need for taxpayer bailouts.

The National Short Sale Center, which helps short buyers negotiate with banks, says three-quarters of its short offers are approved now, up from maybe half six months ago.

"Before, people on the phone at banks didn't even have the authority to negotiate. Now they're calling us with numbers," says Pam B. Canada of nonprofit NeighborWorks in Sacramento, Calif.

To be sure, many agents and counselors think banks still have their heads in the sand. "They're out to get the last dime, even when people don't have a dime," says real estate practitioner Heidi Mueller in San Francisco as she heads to an auction sale on the courthouse steps.

Source: Forbes, Bernard Condon (04/07/08)

FBI Examining 17 Lenders

The FBI is currently investigating 17 firms involved in the mortgage lending industry, bureau officials told Reuters News in an exclusive interview. The bureau had previously acknowledged it was investigating 16 firms. Officials say the criminal probe could take years to complete.

The FBI has assigned 100 agents to investigate corporate fraud aspects of the housing crisis, including subprime lending and insider trading. Another 150 are looking at related securities fraud, and 153 are looking at loan originations, says Neil Power, economic crimes unit chief of the FBI’s financial crimes section.

The majority of cases are in New York and California, Powers says.

The opportunities for fraud existed all along the chain from mortgage origination to the investors in mortgage-backed securities. But the problems begin in loan applications that required minimal or no documentation, the officials said.

"That's the start of the fraud right there," said Mike Cuff, a supervisory special agent in the economic crimes unit.

Source: Reuters News, Randall Mikkelsen (03/18/2008)

Fed cuts rates by 3/4 of a point

Central bank lowers key rate to lower borrowing costs for consumers, businesses, as it risks lower dollar in effort to ward off recession.

Last Updated: March 18, 2008: 2:42 PM EDT

NEW YORK (CNNMoney.com) -- The Federal Reserve slashed a key interest rate by three-quarters of apercentage point Tuesday, the latest in a series of moves by the central bank to try and restore confidence in the economy and battered financial markets.

The Fed cut its federal funds rate, an overnight bank lending rate, to 2.25%. It is the sixth cut in the past six months and comes at a time when the Fed is trying to keep the economy from slipping into recession - although many think it's already entered one.

Interest rate cuts are usually viewed as beneficial for the economy since they typically lead to more lending. The federal funds rate affects how much consumers pay on credit cards and home equity lines of credit, as well as the rate paid by many businesses on loans tied to banks' prime rate. But some experts think lower rates won't solve the credit crunch paralyzing Wall Street.

The Fed cited a weakening labor market and a slowdown in spending by consumers, as well as a continued crisis in financial markets and tight availability of credit to justify the cut. U.S. employers have cut 85,000 jobs so far this year, according to the Labor Department, the most in four years.

But two members of the central bank's policymaking body - Dallas Fed President Richard Fisher and Philadelphia Fed President Charles Plosser both voted against the cut. According to the Fed's statement, they "preferred less aggressive action."

Some economists have argued the rate cuts will cause a continued weakening in the value of the dollar and a further spike in commodity prices -- which could lead to higher prices for gas, food and imported goods. According to a new national CNN/Opinion Research Corp. poll released Tuesday, Americans said inflation is their top economic concern.

The Fed acknowledged in its statement that inflation pressures have grown more than expected, and it promised to monitor prices in the months ahead. But it said it still believed the greater risk to the economy was that of slowing growth, not a spike in prices.

To that end, many investors were hoping the Fed would cut rates even further. According to federal funds futures on the Chicago Board of Trade, investors had priced in a 100% chance of a full percentage point cut Tuesday. What's more, traders are betting on another half-point cut by the end of April, the Fed's next meeting.

First Published: March 18, 2008: 2:18 PM EDT



Find this article at: http://money.cnn.com/2008/03/18/news/economy/fed_rates/index.htm?eref=rss_topstories

New FHA mortgage limits in California give 14 counties maximum $729,750, more states to follow

By Marcy Gordon
ASSOCIATED PRESS
11:26 a.m. March 5, 2008

WASHINGTON – The government on Wednesday raised the mortgage limits for loans guaranteed by the Federal Housing Administration in 14 high-cost California counties.

The Department of Housing and Urban Development released the new loan limits for California – a hotbed during the housing boom that now is suffering the worst home-price declines in the nation. The limits, with the maximum at $729,750, are derived from median home prices in each county.

HUD is expected to raise the limits in other counties nationwide in the coming days.

The economic stimulus package includes a temporary increase in the limit on FHA-backed loans, from $362,790 to as high as $729,750 in expensive areas, to let more homeowners with high-rate subprime mortgages refinance into federally insured loans.

The package also includes a temporary increase in the cap on mortgages that the government-sponsored mortgage companies Fannie Mae and Freddie Mac can buy or guarantee from $417,000 to $729,750.

The idea is to stoke investor demand for securities made up of more expensive mortgages – so-called jumbo loans – backed by Fannie and Freddie, the two biggest mortgage financers in the country. That would drive interest rates lower and spur home buying and refinancing.

Roughly half of all jumbo mortgages are in California, according to federal regulators.
The Federal Housing Administration, a Depression-era agency within HUD, insures mortgages for low- and middle-income borrowers.

Counties that get the $729,750 maximum for FHA loans are likely to get that same level for Fannie and Freddie mortgages, experts said. HUD is expected to designate new Freddie and Fannie limits for other parts of the country too.

In California, the counties at the maximum level for FHA loans are Alameda, Contra Costa, Los Angeles, Marin, Monterey, Napa, Orange, San Benito, San Francisco, San Mateo, Santa Barbara, Santa Clara, Santa Cruz and Ventura. At the other end, Lassen, Modoc and Trinity counties are subject to a loan cap of $271,050 – which is the lowest possible amount for an FHA-backed loan under the new law.

HUD Secretary Alphonso Jackson said Wednesday the new limits will make FHA-backed loans available to as many as 30,000 Californians and 250,000 homeowners nationwide.

The new limits “will allow for greater economic stability for our communities,” Jackson said in a speech in Los Angeles. A text of his remarks was distributed by HUD.

“We confront an emergency, a crisis,” Jackson said. “Los Angeles has been hard hit.”

He noted that home foreclosures in southern California soared 433 percent in January from a year earlier.

Find this article at: http://www.signonsandiego.com/news/business/20080305-1126-mortgagelimits-california.htm



For San Diego County
Median Home Price: $558,000
FHA Limit: $697,500
Conforming Loan Limit: $697,500

Group says more Californians can afford to buy their first home

By Alex Veiga, AP Business Writer
Tuesday, February 19, 2008
(02-19) 12:13 PST Los Angeles (AP) --

Frustrated California renters take heed: A trade group says it's getting easier for people to afford their first home.

With home prices in a downward spiral in many once-booming areas, the percentage of California households that can afford to finance an entry-level home increased in the last three months of 2007 compared to the same period a year earlier, the California Association of Realtors said Tuesday.

The trade group for real estate agents calculates affordability based on the minimum household income required to make a 10 percent downpayment and secure an adjustable interest rate loan at 6.21 percent.

Some 33 percent of the households in the state met those guidelines in the fourth quarter — up from 25 percent in the same three months of 2006, the association said.

Buyers needed to earn $82,200 to afford financing of $411,170, the typical statewide price for an entry-level home during the quarter, the trade association estimated.

The monthly payment for such a purchase, including taxes and insurance, was $2,740, the association said.

An entry-level home was defined as one priced at about 85 percent of the median home price in an area.

The most affordable area of the state during the quarter was the desert north of Los Angeles, where some 54 percent of households met the association's $43,800 annual income threshold to finance an entry-level home priced at $218,880.

Sacramento County was next, with 53 percent of households within the income range needed to afford a home priced at $252,920.

The least affordable area was the Central Coast region of Monterey, where only 20 percent of households earned the $118,200 needed to finance an entry-level home at $591,200.

In Los Angeles County, 27 percent of households earned the $86,700 a year needed to buy a home priced at $433,200.

Some 46 percent of households in Riverside and San Bernardino counties, which have been hit particularly hard by rising foreclosures and falling home values, earned $57,600 a year, enough to finance a $287,330 home, the association said.

In the San Francisco Bay area, meanwhile, only 23 percent of households reported income of at least $132,300, the minimum to purchase a home priced at $660,660.


TEAM WELLS TELLS - WHAT DOES THAT MEAN FOR YOU???
• As the median home price declines, many potential home buyers who had previously believed an entry-level home was out of reach may now find themselves in a position to buy.
• The median price of an existing, single-family detached home in California during December 2007 was $475,460, a 16.5 percent decrease from the revised $569,350 median for December 2006.
• Prospective buyers for the most part need not worry about the bidding wars that drove up home prices during the housing boom.
• First-time home buyers needed to earn an annual income of $82,200 to buy an entry-level home in California in the fourth quarter of 2007, down 15 percent from the $96,600 annual income needed to buy during the last three months of 2006.

Lenders to Offer Reprieves To Delinquent Borrowers

By Renae MerleWashington Post Staff WriterWednesday, February 13, 2008; D01

The Bush administration and six large mortgage lenders unveiled a plan yesterday to offer some homeowners facing foreclosure 30-day reprieves to work out alternatives.

The program, which will target homeowners who are 90 or more days late on payments, is the industry's latest attempt to untangle the mess caused by years of lax mortgage standards.

These homeowners will receive a letter offering a "pause" in the foreclosure process to try to work out a repayment schedule.

Delinquent borrowers have always had the option of calling their lender for help in advance of a foreclosure. But the foreclosure process typically continued during those talks. Under this plan, there would be a 30-day freeze in the process.

Unlike a government-endorsed rescue effort announced last year, the new program, called Project Lifeline, is not limited to subprime mortgages, home loans given to borrowers with weak credit. It also includes foreclosures triggered by home-equity loans, prime loans and second liens.

Modifications to loans would be made on a case-by-case basis, and not all eligible loans are expected to be salvageable, industry officials said.

Homeowners in bankruptcy protection will not be eligible for the program, which also excludes vacant and investment properties. The offer also will not apply to borrowers whose homes are scheduled for a foreclosure sale within 30 days.

"None of these efforts are a silver bullet that will undo the excesses of the past years," said Treasury Secretary Henry M. Paulson Jr. For example, the program won't help borrowers who put down little or no money and who don't want to continue to live in the house, he said.

Countrywide Financial, Bank of America, Citigroup, J.P. Morgan Chase, Washington Mutual and Wells Fargo are participating in Project Lifeline. They are also members of the Hope Now Alliance, the industry-financed nonprofit group that has been coordinating efforts to reach struggling subprime mortgage borrowers.

"For some homeowners, that extra time will make the difference," said Floyd Robinson, president of consumer real estate at Bank of America.

The plan is a good-faith effort by lenders to reach out to delinquent borrowers, said Alex J. Pollock, a resident fellow at the American Enterprise Institute, a conservative policy research and advocacy group. "It seems to be a quite a reasonable, sensible program to be done along with other things," he said. "There is obviously a lot of thinking going on.".

Critics said the plan is still far short of what is needed to stem the tide of foreclosures, which cost lenders millions of dollars and are expected to increase as subprime borrowers face interest rate increases on adjustable-rate mortgages. The national foreclosure rate rose more than 50 percent last year.

"The industry and the Administration are running to catch up as fast as they can to a problem that is getting broader and deeper by the day, but they seem to be falling further and further behind," Sen. Christopher J. Dodd (D-Conn.), chairman of the Senate Banking Committee, said in a statement.

Giving borrowers an extra 30 days is prudent but a common measure, said John Taylor, president of the National Community Reinvestment Coalition.

"A lot of the industry under normal circumstances tries to avoid foreclosure and work with the borrower," he said. "The real problem is that most of these borrowers are in properties that are not worth what the mortgage is. They are locked into a loan they can no longer afford. This program doesn't get at any of that."

He said: "You can give them 60 more days, or 90 days. If there isn't a product that they can be refinanced into that matches their ability to pay, then we're really not going to be helping eight out of 10 people."

The plan will probably assist only a small percentage of the estimated 425,000 homeowners who are 90 days or more delinquent on their loans, said Mark Zandi, chief economist at Moody's Economy.com. These homeowners are already under stress, and lenders would have to be willing to make significant changes, including reducing mortgage balances substantially, he said. "I would be surprised if we're talking more than tens of thousands of homeowners that are helped."

The mortgage industry has been fighting the perception that it is not doing enough to help troubled homeowners, pointing out that the number of loans modified, including freezing and lowering interest rates, has doubled in the past year. During the fourth quarter of last year, lenders modified 141,000 loans, up from 76,000 in the previous three months, according to the Hope Now Alliance.

Those numbers are likely to increase as lenders implement the program announced last year to freeze the interest rates of qualified subprime borrowers, industry officials said yesterday.
But Taylor said the industry has targeted the "low-hanging fruit" for modifications -- "those borrowers who have a strong financial condition, who with slight modifications would be able to continue under their mortgage."

30-Year Mortgage Rates Continue to Climb

Freddie Mac reports a jump in the 30-year fixed mortgage rate to 5.72 percent during the week ended Feb. 14, from 5.67 percent the prior week.

Interest on 15-year fixed loans, meanwhile, climbed to 5.25 percent from 5.15 percent over the same period.

Rates dropped, however, for five-year adjustable mortgages to 5.19 percent from 5.21 percent; while the one-year ARM held steady at 5.03 percent.

Freddie Mac chief economist Frank Nothaft says economic uncertainty is responsible for the movement in mortgage rates, noting that some borrowers are finding it difficult to obtain mortgages due to stricter credit standards.

Source: San Jose Mercury News, Martin Crutsinger (Calif.) (02/15/08)

Narrow Refinance Plan Will Help Few

The current Federal Housing Administration (FHA) Secure program is expected to help only 44,000 subprime borrowers, or 5 percent of those who are more than two months behind in their payments.

A study circulated by the American Securitization Forum suggests that one way around this poor showing is by allowing borrowers delinquent for any reason to refinance into an FHA loan. Currently, the option is available only to borrowers facing a rising interest rate.

Another problem with the program is that the FHA Secure program is unattractive to lenders because they may have a hard time selling the loans. That’s because the agency’s own securitization arm, facing pressure from traders, pledged to keep its FHA Secure loans out of standard Ginnie Mae bonds.

Source: Reuters News (02/05/2008)

FICO Scoring System Gets Redesign

Fair Isaac Corp., the company that devised the ubiquitous FICO credit scores, announced this week that it plans to roll out a suite of tools designed to predict future default risk.

Fair Isaac says the new products will predict how lenders can offer even more debt to consumers without taking on undue risk.

The update revamps the old credit-scoring formula so that it penalizes consumers with a high debt load more than the earlier version. FICO 08 should increase predictive strength by 5 to 15 percent, according to Fair Isaac's vice president of scoring, Tom Quinn.

FICO 08 is also expected to do a better job of determining which consumers with past defaults are "more on the road to recovery and should have more of a higher score," Quinn says.

The new index can look at three consumers with a 700 FICO score and determine which of the three could take on additional debt without defaulting, according to the company.

Source: Star-Tribune, Kara McGuire (01/22/08)

2007 Existing-home Sales Fifth Highest

Existing-home sales declined in December following several months of stable activity, with total sales in 2007 at the fifth highest on record, according to the NATIONAL ASSOCIATION OF REALTORS®.

Existing-home sales – including single-family, townhomes, condominiums and co-ops – slipped 2.2 percent to a seasonally adjusted annual rate of 4.89 million units in December from a pace of 5.00 million in November, and are 22.0 percent below the 6.27 million-unit level in December 2006.

For all of 2007 there were 5,652,000 existing-home sales, the fifth highest year on record; however, the total was 12.8 percent below the 6,478,000 transactions recorded in 2006.

Lawrence Yun, NAR chief economist, said the market is experiencing uncharacteristic weakness.“Home sales remain weak despite improved affordability conditions in many parts of the country, but we could get a quick boost to the market if loan limits are raised in combination with the bold cut in the Fed funds rate,” he said. “Home prices are lower, mortgage interest rates continue to decline and incomes are higher, but many potential buyers are delaying a purchase.”

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to 6.10 percent in December from 6.21 percent in November; the rate was 6.14 percent in December 2006. Last week, Freddie Mac reported the 30-year fixed rate dropped to 5.69 percent. “Although interest rates on jumbo loans have fallen somewhat, they remain well above conventional mortgage rates,” Yun said. “It isn’t surprising that the share of single-family homes selling for more than $500,000 fell to 12.4 percent of transactions in December from 14.2 percent a year ago.”

Total housing inventory fell 7.4 percent at the end of December to 3.91 million existing homes available for sale, which represents a 9.6-month supply3 at the current sales pace, down from a 10.1-month supply in November. “The fall in inventory in December is encouraging, but inventories remain elevated and buyers have a clear edge over sellers in many markets,” Yun said.The national median existing-home price2 for all housing types was $208,400 in December, down 6.0 percent from a year earlier when the median was $221,600. Because home sales have slowed the most in higher cost markets, there is a downward distortion to the national median as the mix of closed sales has changed over the past year. For all of 2007, the median price was $218,900, down 1.4 percent from a median of $221,900 in 2006.

NAR President Richard Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif., said that raising the loan limit on conventional financing is urgently needed. “The most effective way to stimulate housing and minimize the potential for a recession is for lawmakers to raise the limit on conforming mortgages to $625,000, which would open safe and affordable financing to buyers in high-cost areas,” he said. “It is grossly unfair that some Americans do not have access to low-interest rate loans. This would help people as they move away from risky subprime mortgages and high-interest rate jumbo loans.”

NAR projects the higher loan limit would increase annual home sales by nearly 350,000, reduce foreclosures by 140,000 to 210,000, and increase economic activity by $44 billion. “What’s more, this would come at no cost to taxpayers – it’s a policy change that could really boost the economy,” Gaylord said.

Other projections of NAR’s analysis show raising the loan limit would reduce the supply of homes on the market by 1.0 to 1.5 months, and strengthen home prices by 2.0 to 3.0 percentage points. In addition, as many as 500,000 jumbo loans would be refinanced to lower interest rates.

Gaylord said current housing conditions vary widely. “Many local areas continue to have healthy or improving local housing markets,” he said. “For example, we saw higher home sales last month in diverse areas such as San Antonio; Syracuse; Springfield, Ill.; and Sarasota, Fla. If you’re thinking about getting into the market as a buyer or a seller, consult a Realtor® to learn about conditions in your area – they may be considerably different from the composite national picture.”

Single-family home sales declined 2.0 percent to a seasonally adjusted annual rate of 4.31 million in December from 4.40 million in November, and are 21.6 percent below 5.50 million-unit level in December 2006. In all of 2007, single-family sales fell 13.0 percent to 4.94 million.

The median existing single-family home price was $206,500 in December, down 6.5 percent from a year earlier. For all of 2007, the single-family median was $217,800, down 1.8 percent from 2006.

Existing condominium and co-op sales fell 3.3 percent to a seasonally adjusted annual rate of 580,000 units in December from 600,000 in November, and are 24.5 percent below the 768,000-unit pace a year ago. Condo sales for all of 2007 fell 11.0 percent to 713,000 units.

The median existing condo price4 was $222,200 last month, which is 2.5 percent below December 2006. In all of 2007, the median condo price was $226,400, up 2.0 percent from 2006.

Source: NAR