Buyers Increasingly Suspicious of Foreclosures
Fewer buyers are willing to consider purchasing foreclosed property than they were seven months ago, according to a study commissioned by Trulia.com and RealtyTrac.
Seven months ago, 54 percent of adults surveyed said they would consider purchasing a foreclosed home. In November, only 47 percent of adults say they’d buy a foreclosure.
The chief turnoff is perceived risk, with 80 percent of those surveyed citing hidden repair costs, a tricky buying process, and the possibility that the neighborhood will lose more value and drag the property down with it.
To compensate for these risks, 75 percent say they expect at least a 25 percent discount and 30 percent say they would only buy if there is a 50 percent discount compared with a comparable home that isn’t in foreclosure.
Other findings:
* 56 percent of single/never married adults were at least somewhat likely to consider purchasing a foreclosed home, down from 60 percent in April.
* 43 percent of married adults were at least somewhat likely to consider purchasing a foreclosed home, down from 50 percent in April.
* 42 percent of divorced/separated/widowed adults were at least somewhat likely to consider purchasing a foreclosed home, down from 50 percent from April.
Source: Trulia.com (12/16/2008)
Key Interest Rate as low as it can go
The Federal Reserve on Tuesday lowered its benchmark federal funds rate to a range or zero to 0.25 percent and said it would likely keep rates low for an extended period.
“The Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability,” the Fed said.
The Fed also said it was prepared to purchase more debt issued or guaranteed by Fannie Mae, Freddie Mac and other government-sponsored mortgage agencies. And it said it is considering purchases of longer-term U.S. Treasury debt.
“The focus of the committee’s policy going forward will be to support the functioning of financial markets and stimulate the economy through open market operations and other measures that sustain the size of the Federal Reserve’s balance sheet at a high level,” it said.
Michael Woolfolk, senior currency strategist, at the Bank of New York-Mellon, applauded the Fed’s approach. “We think it’s the best possible move for the U.S.
consumer and for the financial market,” Woolfolk said.
Source: Reuters News, Mark Felsenthal (10/16/2008)
Mortgage Applications Back on the Rise
Mortgage applications climbed last week in response to falling interest rates, according to the Mortgage Bankers Association weekly mortgage applications survey.
The index increased 2.9 percent to 841.4 from 817.7 the previous week on an adjusted basis. On an unadjusted basis, it also increased 2.9 percent and was up 37.3 percent compared with the same week a year ago.
Most of the activity was in refinances, which increased to 76.9 percent of the total.
“It doesn’t solve the problem for people who owe more than their home is worth, but for the significant majority who are able to refinance, it is quite a boon,” said Bob Walters, chief economist at Quicken Loans in Livonia, Mich.
Interest rates were down last week compared with the previous week, and are expected to decline still further in response to the Federal Reserve cutting its benchmark rate to a record low this week.
Last week’s already low rates continued to decline:
- 30-year fixed-rate mortgages decreased to 5.18 percent from 5.44 percent;
- 15-year fixed-rate mortgages decreased to 4.93 percent from 5.08 percent
- 1-year ARMs decreased to 6.63 percent from 6.76 percent.
Source: Mortgage Bankers Association and Reuters News, Lynn Adler (12/17/2008)
Ten Real Estate Predictions for 2009
2009 is likely to be a year of continuing adjustment to a changing real estate marketplace. Prepare yourself and your business with these predictions from HGTV’s FrontDoor.com Web site.
- Sellers will continue to face falling home values in the new year because they’ll be competing with banks and builders who are slashing prices to sell off the still-huge inventory of foreclosures and new homes.
- The Obama administration will act on its plan to crack down on abusive lending practices.
- Mortgage holders in danger of losing their homes will receive more assistance from a variety of programs since the Senate’s Joint Economic Committee has predicted two million foreclosures in 2009.
- Banks’ restructuring should bring increasing calm, making loan modifications and short sales easier to obtain. Eventually this will lead to a decrease in the number of bank-owned properties on the market.
- Mortgage applications will continue to receive a comprehensive review, requiring borrowers to provide extensive income and debt documentation. Those with the best credit will get the best rates.
- The foreclosure crisis has created wiser consumers, with a deeper understanding of real estate, mortgages, and credit enabling better decision-making going forward.
- Green is good with increasing numbers of buyers opting for smaller homes that are within walking distance of school and work.
- Buyers and sellers will be more and more tech savvy, relying on tools like video, webcasts, and mobile search. Consumers and practitioners will benefit from being ahead of the curve.
- Prices will be low as will interest rates, creating great buying opportunities, and likely, inspiring reluctant buyers to make their move.
- The recession will end and buyers will regain confidence in the market.
Source: Frontdoor.com (12/03/2008)
Business Picks Up Where Prices Have Tumbled
Sales are picking up in markets where prices are deflated, but the business is different than it was before the bubble burst, observers say.
The housing market in deflated markets–like Arizona, California, Florida, and Nebraska–are beginning to show signs of a rebound. Analysts say that prices have fallen to the point that those with average salaries can afford to buy once again.
“The buyers are returning,” says Lawrence Yun, National Association of Realtors chief economist. “And in such a strong way that, now, we are hearing in some cases there is multiple bidding, which hints that maybe pricing is reaching a bottom point. But inventory remains high.”
In California’s San Joaquin County, sales in September and October reached sales levels about equal to business at the height of the boom in 2005, says DataQuick, which provides property data.
But new buyers are primarily first-timers and investors looking to cash in. Local practitioners say the buyers are primarily local residents who have cash to spend.
“It’s the couple down the street that has a nice nest egg and who wants to put it into something that will give them a good return,” says Bev Marlow, head of the Central Valley Association of REALTORS®.
Source: The Christian Science Monitor, Ben Arnoldy (12/16/08)
Surveys Show More Gains for Green Building
In November, the results of more than 10 surveys and reports exploring an array of topics such as worker productivity in green buildings, cost premiums, and perceptions of the business case for going green were released.
Such new data has been in demand lately as building stakeholders attempt to gauge how the credit crunch and a full year of recession have affected green construction.
Almost universally, the research points to another good year in 2009.
The “Green Building Impact Report 2008″ from Greener World Media, which quantifies the overall effects of Leadership in Energy and Environmental Design (LEED) certification on industry and the environment, determined that companies in LEED buildings have realized annual employee productivity gains exceeding $170 million as a result of improved indoor environmental quality–a figure that is projected to jump into the billions by 2015 as the number of employees in LEED buildings grows more than tenfold.
The report further predicts an overall “flattening” of the rate of LEED growth as it begins to saturate markets nationwide, but continued expansion in the amount of floor area that is certified.
Other research chronicles how the downturn in construction will affect green building development in the months to come. McGraw Hill’s “2009 Green Outlook” study, for instance, said green building seems to be insulated from the recession and is growing “in spite of the market downturn.”
Meanwhile, at a recent Ernst & Young roundtable of construction company executives, a whopping 99 percent of survey respondents said interest in green development would increase in 2009 or at least remain the same as it is this year.
Eighty percent of respondents in a recent poll by the Building Owners and Management Association (BOMA) International and the U.S. Green Building Council (USGBC) said that energy efficiency measures have defrayed costs, and 65 percent said their green investments have generated a positive return on investment.
Finally, nearly 70 percent of corporate real estate executives described sustainability as a “critical business issue” in a joint survey by CoreNet Global and Jones Lang LaSalle, which is up nearly 20 points from 2007.
Source: CoStar Group, Andrew C. Burr (12/05/08)
Low Prices, Low Rates Mean Opportunity
Housing prices have fallen dramatically all over the country and rates on 30-year fixed-rate mortgages are already close to 5.5 percent. Experts say it’s possible, with government encouragement, that rates will fall as low as 4.5 percent.
Now is the time for first-time to step up. Here are some things to consider:
- Prices have always softened in the winter. As temperatures fall, bargain hunters will have bigger then usual opportunities.
- New homes likely to become scarce. Ian Shepherdson, chief United States economist for the research firm High Frequency Economics, said he believes that a steep drop-off in inventory of new homes is coming soon, thanks to a rapid decrease in home builder activity.
- Location. Location. Location. Buying the best-priced house in a really good neighborhood is still smart.
- Will values go up? You may have to live in a house for 10 years, but over time, buyers will almost certainly make money.
Source: The New York Times, Ron Lieber (12/05/2008)
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 ways 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)
Small Is Beautiful to Renters and Buyers
Teeny-tiny housing is increasingly appealing to buyers and renters, especially when there are spacious common areas packed with amenities. Apartments as small as 264 square feet are a big draw in Legacy Village in Plano, Texas.
Developers point to these issues as drivers in the trend:
- No money. The smaller the place, the cheaper the monthly rent or mortgage. People who don’t have money find low prices appealing.
- Small is green. Smaller units consume less space, water and energy.
- Urban renaissance. “People love the social interaction associated with density,” said Steve Patterson, CEO of Florida-based Zom, developer of rental housing from Texas to the Mid-Atlantic.
The trend is here to stay, said Michael Newman, president and CEO of Golub & Co., an international real estate development and investment firm. “In this economy, people still want to be in cool places, and they’ll trade down size for location,” Newman said.
Source: USA Today, Hava el Nassar (12/05/2008)
Mortgage Rates Take a Big Dip This Week
For the week ended Dec. 3, Freddie Mac reported the lowest interest on 30-year fixed home loans since late January.
The rate came in at an average of 5.53 percent, down from 5.97 percent the previous week and 5.96 percent a year ago; while 15-year fixed mortgages settled at 5.33 percent compared to 5.74 percent last week and 5.65 percent in the year-earlier period.
Borrowing costs for short-term loans also were lower, with one-year adjustable-rate mortgages dipping to 5.02 percent from 5.18 percent a week ago and 5.46 percent a year ago.
Five-year hybrid ARMs, meanwhile, fell to 5.77 percent from 5.86 percent last week and 5.75 percent during the same period of last year.
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