Mortgage Rates Drop This Week
A dip in the long-term mortgage rate this week offered home owners a refinancing opportunity, according to Freddie Mac.
This week’s rates:
- Average interest on 30-year fixed loans fell to 5.16 percent from 5.25 percent last week.
- Interest on 15-year fixed loans also declined, slipping to 4.81 percent from 4.92 percent.
Source: Charleston Post and Courier (02/13/09)
Metro Home Prices Down on Distressed Sales
Most metropolitan area median home prices, impacted by distressed sales, trended down in the fourth quarter from a year earlier. At the same time, existing-home sales rose in only six states from the fourth quarter of 2007, according to the latest survey by the NATIONAL ASSOCIATION OF REALTORS ®.
In the fourth quarter, 134 out of 153 metropolitan statistical areas showed declines in median existing single-family home prices from the same period in 2007, pulled down by active sales at the lower end that were driven by foreclosures. One area was unchanged and 18 metros reported price gains. NAR’s track of metro area home prices dates back to 1979.
Distressed sales – foreclosures and short sales – accounted for 45 percent of transactions in the fourth quarter, dragging down the national median existing single-family price to $180,100, which is 12.4 percent below the fourth quarter of 2007 when conditions were more balanced; the median is where half sold for more and half sold for less.
NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said homes and neighborhoods minimally impacted by foreclosures have moderate prices changes. “Distressed home sales have risen from about 38 percent of transactions in the third quarter, meaning people are responding to discounted prices and are slowly absorbing the excess inventory. Buyers clearly see value in today’s pricing,” he said.
“It has never been more important than now to work with local professionals to properly gauge local neighborhood conditions because foreclosures are heavily skewing the broader home price figures to be much lower. Big discounts are not occurring in neighborhoods with few foreclosures. A REALTOR® who is knowledgeable about local conditions can counsel consumers in making sound long-term housing decisions,” McMillan said.
Total state existing-home sales, including single-family and condo, were at a seasonally adjusted annual rate2 of 4.70 million units in the fourth quarter, down 6.4 percent from 5.02 million units in the third quarter, and are 5.9 percent below the 5.00 million-unit pace in the fourth quarter of 2007.
Lawrence Yun, NAR chief economist, said the market is clearly depressed from job losses and consumer concerns about the economy. “Assuming housing provisions in the economic stimulus package are quickly enacted and provide enough encouragement for home buyers, we could see a quick lift in home sales for the critical spring home-buying season,” he said.
“If that occurs, we could see home prices begin to stabilize in many metro areas later this year as supply and demand begin to return to balance, which would greatly benefit the overall economy,” Yun said.
According to Freddie Mac, the national average commitment rate on a 30-year conventional fixed-rate mortgage fell to 5.86 percent in the fourth quarter from 6.32 percent in the third quarter; the rate was 6.23 percent in the fourth quarter of 2007.
The largest sales gain in the fourth quarter from a year earlier was in Nevada, up 133.7 percent, followed by California which rose 84.7 percent, Arizona, up 42.6 percent, and Florida with a 12.5 percent increase.
“Once again, we see a pattern of strong sales gains, particularly in lower price homes, in areas with price declines resulting from foreclosures,” Yun said. “For example, in California and Florida, where distressed sales accounted for roughly two-third of all sales, the median price fell by much more as lower priced home sales far outpaced higher priced sales.”
Areas with the steepest declines in single-family home prices, more than 30 percent below the fourth quarter of 2007, include Las Vegas-Paradise, seven metro areas in California, Phoenix-Mesa-Scottsdale, and three metros in Florida. “Clearly these areas are attracting bargain hunters,” Yun added.
The largest single-family home price increase in the fourth quarter was in the Beaumont-Port Arthur area of Texas, where the median price of $132,600 rose 16.7 percent from a year ago. Next was the Bloomington-Normal, Ill., area at $159,300, up 9.6 percent from the fourth quarter of 2007, followed by Dover, Del., where the median price increased 6.5 percent to $212,500.
Median fourth-quarter metro area single-family home prices ranged from an affordable $43,900 in the Saginaw-Saginaw Township North area of Michigan to $610,000 in Honolulu. The second most expensive area was the San Jose-Sunnyvale-Santa Clara area of California, at $525,000, followed by San Francisco-Oakland-Fremont at $487,100.
Other affordable markets include the Youngstown-Warren-Boardman area of Ohio and Pennsylvania at $61,700 and Toledo, Ohio, at $75,600.
In the condo sector, metro area condominium and cooperative prices – covering changes in 56 metro areas – showed the national median existing-condo price was $186,000 in the fourth quarter, down 15.8 percent from the fourth quarter of 2007. Eight metros showed annual increases in the median condo price and 48 areas had declines.
The strongest condo price increases were in the Dallas-Fort Worth-Arlington area at $149,500, up 14.1 percent, followed by Toledo, where the median condo price of $153,900 rose 11.4 percent from the fourth quarter of 2007, and the Philadelphia-Camden-Wilmington area at $210,200, up 10.2 percent.
Metro area median existing-condo prices in the fourth quarter ranged from $88,500 in the Palm Bay-Melbourne-Titusville area of Florida to $391,900 in San Francisco-Oakland-Fremont. The second most expensive condo market reported was Honolulu at $315,600, followed by the New York-Wayne-White Plains area of New York and New Jersey at $292,600.
Other affordable condo markets include Las Vegas-Paradise at $91,200 in the fourth quarter, and the Sacramento–Arden-Arcade-Roseville area at $94,700.
Regionally, existing-home sales in the Northeast fell 11.9 percent in the fourth quarter to a pace of 760,000 units and are 13.9 percent below a year ago.
The median existing single-family home price in the Northeast declined 4.7 percent to $248,800 in the fourth quarter from the same period in 2007. The best gain in the region was in Pittsfield, Mass., where the median price of $206,000 rose 1.7 percent from the fourth quarter of 2007, followed by Reading, Penn., at $155,100, up 1.0 percent, and Buffalo-Niagara Falls, N.Y., where the price rose 0.8 percent to $106,200.
In the Midwest, existing-home sales dropped 9.3 percent in the fourth quarter to a pace of 1.04 million and are 12.4 percent below a year ago.
The median existing single-family home price in the Midwest fell 10.6 percent to $139,500 in the fourth quarter from the same period in 2007. After Bloomington-Normal, the next strongest metro price increase in the region was in Bismarck, N.D., where the median price of $164,300 was 6.0 percent higher than a year ago, followed by Decatur, Ill., at $79,300, up 5.9 percent, and the Wichita, Kan., area, at $118,200, up 3.9 percent.
In the South, existing-home sales declined 7.3 percent in the fourth quarter to an annual rate of 1.73 million and are 13.4 percent lower than the same period in 2007.
The median existing single-family home price in the South was $158,300 in the fourth quarter, down 7.5 percent from a year earlier. After Beaumont-Port Arthur and Dover, the strongest price increase in the region was in El Paso, Texas, with a 5.3 percent gain to $140,700, followed by Jackson, Miss., at $126,600, up 4.7 percent.
Existing-home sales in the West rose 2.6 percent in the fourth quarter to an annual rate of 1.17 million and are 26.5 percent above a year ago.
The median existing single-family home price in the West was $243,200 in the fourth quarter, which is 25.1 percent below the fourth quarter of 2007. With a strong prevalence of distressed homes selling at discounted prices in the West, there were no reported metro areas in the region showing median price gains from a year earlier.
Fannie Eases Its Investor Loan Rules
To speed recovery of the housing market, Fannie Mae in March will begin purchasing and guaranteeing mortgages for borrowers carrying loans on as many as nine other properties, up from the current limit of three.
However, the number of months of reserve payments that must be held by investors will rise to six in June from two currently.
“One of the things that leads the economy out of a housing crisis is when prices get cheap enough that investors start moving in and buying things,” says Joe Garrett of the Berkeley, Calif.-based consulting firm Garret, Watts & Co.
Source: American Banker, Harry Terris (02/10/09)
International Interest Grows in U.S. Lending
The Association of Foreign Investors in Real Estate (AFIRE) reports that foreign real estate lenders could grow lending by as much as 58 percent in the United States this year, with interest in cross-border property investing especially robust.
In a recent AFIRE member survey, the top five most attractive U.S. cities in terms of investment dollars were the District of Columbia, New York City, San Francisco, Los Angeles and Houston.
Meanwhile, 53 percent ranked the United States as the nation providing the most secure property investments.
Respondents also listed multifamily housing, office space, industrial properties, retail, and hotels as the top five preferred property types.
Source: National Mortgage News, Bonnie Sinnock (02/09/09)
Short Sale v. Foreclosure
Q: I am thinking of relocating to Miami Beach, as I’ve read that there are deals there. Is it better to negotiate with a short seller or look for houses already owned by the bank? And if I go for the latter, how low should my offer be—and will the lender offer me financing?
![[Short Sale v. Foreclosure]](http://s.wsj.net/public/resources/images/OB-CX855_miamif_D_20090109152155.jpg)
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A: There’s no shortage of distressed properties in Miami Beach. RealQuest.comcurrently lists 442 homes there that are somewhere in the foreclosure process, and 58 that have gone back to the bank. And Fannie Mae just launched a test program that will preapprove short sales, making it easier for buyers like you. However, the program is not available in your area.
But bear in mind that in the case of both short sales and bank-owned homes you are negotiating with lenders rather than sellers. In a short sale, the seller might be desperate to accept any offer to avoid foreclosure, but that doesn’t matter if the primary and junior lien holders don’t agree to it. With bank-owned properties, you will be dealing with the “real-estate owned” or REO department of the lender who took ownership of the house at the auction. In both cases, you should be prepared to be patient, since lenders are overwhelmed with distress sales these days and may take weeks to respond to your offer. According to a survey of real-estate agents conducted in November by Campbell Communications the average wait time to get an answer from a lender on a short sale is 8.1 weeks, up from 4.5 weeks in a survey conducted earlier in 2008.
It’s hard to know whether or not you’ll get a better deal on a short sale or a bank-owned home because the situation varies with each property. Some short sales are priced higher because the seller has junior lien holders who won’t sign off on the deal unless they’re paid something. But some foreclosures are priced higher than corresponding short sales because the bank needs to recover costs for repairs, especially if an angry former owner decided to punch holes in the walls, steal the light fixtures and flush cement down the toilet.
Because the back stories of properties differ, you should begin your quest by finding a buyer broker that specializes in distressed properties (many won’t touch them, since deals typically take a long time to close, and commissions tend to be minimal). A good buyer broker will be able to provide a comparative market analysis that shows sales of similar homes, and may also be able to get a sense from other brokers of prices of pending sales. That’s important to know because lenders are going to try to hold out for fair market value for the home, even in a declining market, and will insist on an appraisal to justify the sales price to their shareholders. The broker should also investigate how long the property has been on the market, what’s owed on it and how many offers it has received.
While it isn’t unusual to see both short sales and bank-owned properties listed at prices far below those offered by traditional sellers, don’t expect them to sell for much more than 20% below asking price, says Fort Lauderdale, Fla., broker Scott Coloney, who has assembled a “foreclosure response team” of financial and legal partners to facilitate distress sales. In fact, properties in good condition and in desirable locations may even spark bidding wars. “So low-balling is a waste of time,” he says.
Moreover, with your bid you’ll have to show that you have the cash to buy the property, or a letter from a lender pre-approving you for a loan. That letter can be from the bank that owns the property—and you’ll probably be taken more seriously as a bidder if it is—but don’t expect the bank to offer you special low financing terms to close the deal.
NAR Backs ‘HOPE For Homeowners’
THE NATIONAL ASSOCIATION OF REALTORS® today announced its support for new legislation introduced by House Financial Services Committee Chairman Barney Frank, D-Mass., that is designed to ease loan modifications and improve refinancing options for America’s troubled home owners by revamping the HOPE for Homeowners program.
“HOPE for Homeowners, was designed to help families refinance into safer, more affordable mortgages, in many cases helping those families avoid a devastating foreclosure,” says NAR President Charles McMillan. “Despite being well-intentioned, the HOPE for Homeowners program has had limited success. Lenders have found the program difficult to participate in because of many of the program’s constraints.
This legislation, H.R. 703, is expected to make the program more lender-friendly, while preserving the benefits to homeowners. It would also limit risks to the FHA fund and to the American taxpayer. This is important legislation and we hope Congress will move forward with it.”
The legislation would also provide access to Troubled Asset Relief Program funds for small institutions and community banks and encourage additional actions to expand mortgage funding capacity in the primary market. “Stabilizing the housing market will help the nation’s economic future,” says McMillan. “H.R. 703, along with other stimulus bills being considered, will go a long way to help families keep their homes.”
NAR continues its push to enact legislation that will help stabilize and stimulate the housing market. Its four-point plan, introduced in November, is designed to spur home sales and stem the rapid rise in foreclosures by lowering mortgage interest rates and unclogging the credit market, extending the home buyer tax credit, making the increased loan limits permanent, and increasing liquidity in the both the commercial and residential real estate market.
NAR expressed support and vowed to work with Congress and the administration to establish strong housing legislation that will help stabilize home values, prevent foreclosures and put the U.S. economy on the road to recovery.
How to Find Money to Invest in Real Estate
These days it’s particularly tough for someone involved in a small-business real-estate venture to find funding.
David Gass, founder of Business Credit Services of Las Vegas, offers these suggestions to real estate entrepreneurs in search of investors or loans.
- Put together financial documentation for your plan. Detail the time and money and “sweat equity” that you’ve already put in, the income potential, and the amount that you’re prepared to invest going forward,. Calculate a profit-and-loss statement that factors in costs for maintenance, repairs, property taxes, and advertising.
- Talk to local bankers first. They are the ones most likely to understand your business.
- Private investors and angel investor networks are another alternative. If you go this route, work with an attorney. “You need a solid structure in place with the right operating agreement to protect all parties,” Gass says.
Source: BusinessWeek.com, Karen E. Klein (02/02/2009)
Mortgage Rates Remain Below 5%
The weekly average rate borrowers were quoted on Zillow for 30-year mortgages rose slightly last week to 4.96 percent, up from 4.92 percent the week prior, according to the Zillow Mortgage Rate Monitor.
Meanwhile, rates for 15-year fixed mortgages increased to 4.72 percent, up from 4.58 percent and 5-1 adjustable rate mortgages decreased to 5.22 percent from 5.35 percent.
Rates for 30-year fixed mortgages rose slightly on Monday evening, with the average rate on Zillow Mortgage Marketplace at 5.01 percent.
At a state level, the 30-year fixed rate in Michigan was the only rate decrease recorded, dropping from 5.05 percent to 5 percent. Rates on 30-year fixed mortgages were lowest in the states of Oregon (4.87 percent) and Florida (4.88 percent), while Colorado (5.06 percent) and Tennessee (5.06 percent) had the highest rates.
The Zillow Mortgage Rate Monitor is compiled each week using thousands of mortgage rates quoted on Zillow Mortgage Marketplace by mortgage lenders to borrowers who have submitted loan requests. Zillow Mortgage Marketplace is a lending marketplace where borrowers can anonymously receive mortgage quotes directly from lenders.
Tax Credit Changes Could Unleash Home Sales
If all home buyers become eligible for a tax credit without a repayment feature, it could result in an additional 555,000 home sales, enough to meaningfully draw down excess housing inventory, the NATIONAL ASSOCIATION OF REALTORS® says.
An evaluation of options for a home buyer tax credit by NAR shows wide ranging implications and benefits. A full credit to all buyers means an additional 2.22 million households would meet the income requirements for purchasing a home, but only one in four of those households would actually make a purchase.
Under the current $7,500 first-time home buyer tax credit, which must be repaid over 15 years, 264,000 households meet the purchase requirements. Using the same assumptions, with plans to hold their home for a median 10 years, it would mean only 66,000 additional sales.
Lawrence Yun, NAR chief economist, said NAR is advocating a tax credit for any home purchase meeting qualifying underwriting standards. “A home buyer incentive is critical to help reduce housing inventory and stabilize home prices,” he said. “The bigger the incentive, the faster housing can help pull the economy out of recession. The cost to the Treasury would be far less than the additional costs of a prolonged recession with insufficient housing stimulus.”
Analysis of other options shows that if only first-time buyers are eligible and the repayment feature is dropped, it could mean an additional 202,000 home sales. If extended to all home buyers but the repayment feature is retained, the gain would be 181,000 home sales.
NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said a flexible approach to the tax credit would have added benefits. “A home buyer tax credit also should be allowed to be used as a part of downpayment. This would instantly add an equity cushion for homeowners – a vested financial interest provides the foundation for sustainable homeownership, which helps improve economic stability,” he said.
NAR estimates only 25 percent of newly eligible households would become homeowners, and does not capture the effect of increased trade-up buying activity. As such, these projections may understate the full impact of a home buyer tax credit.
Mortgage Applications Climb as Rates Fall
Mortgage loan applications bounced back last week as rates fell and end-of-the-year holiday hoopla faded.
The Mortgage Bankers Association weekly index of application volume rose to 1,324.8, an increase of 15.8 percent on a seasonally adjusted basis from 1,143.8 the previous week.
On an unadjusted basis, the index rose 95.7 percent compared to the previous week and was up 52.4 percent compared with the same week a year ago.
Refinances continued to dominate the applications with 85.3 percent of the loans being refinances, up from 79.8 percent the previous week.
Lenders have nearly stopped offering adjustable rate mortgages with the ARM share representing 1.1 percent compared to 0.9 percent the previous week.
Interest rates continued to decrease:
- 30-year fixed-rate mortgages decreased to 4.89 percent from 5.07 percent;
- 15-year fixed-rate mortgages decreased to 4.63 percent from 4.67 percent;
- 1-year ARMs decreased to 5.89 percent from 5.90 percent.
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