NAR Reiterates Plan to Jumpstart Housing Market
To move the country out of this economic crisis, Congress and the next administration must place significant emphasis on restoring confidence in the housing market, Charles McMillan, the National Association of Realtors® president, testified to the House Financial Services Committee Tuesday.
“The housing sector is at the core of the current economic crisis,” McMillan says. “A renewed, revitalized and robust housing market is essential to generating commerce and helping families build wealth.”
McMillan said he was glad to see that Chairman Barney Frank, D-Mass., introduced last week H.R. 384, the TARP Reform and Accountability Act. Many points in this bill reinforce NAR’s proposed recovery plan to stimulate housing investment, mitigate foreclosures, help current home owners, and provide needed liquidity to commercial mortgage markets to ensure that financing is available.
The principle focus of NAR’s plan is to ensure that the Troubled Asset Relief Program does what it was originally intended to do—end the credit crisis and jumpstart mortgage lending.
“It is imperative to get TARP back on track by targeting funds for mortgage relief, which will help lower mortgage rates and reduce foreclosures,” McMillan said. “In addition, eliminating the repayment feature of the first-time home buyer tax credit and expanding it to all home buyers; reinstating the higher mortgage loan limits for FHA, Fannie Mae and Freddie Mac; and lowering mortgage interest rates through a buy-down program will meaningfully impact the housing industry.”
NAR’s plan also includes keeping mortgage interest rates low, boosting home buyer confidence, and reducing the current foreclosure rate. NAR has also asked that regulators be encouraged to help financial institutions resolve problems in the short-sale process, make it easier for servicers to modify existing loans, remove unreasonable underwriting guidelines and insist that credit reporting agencies correct errors promptly.
“Low interest rates are only effective if people can get a loan,” McMill said. “We hear every day from our members that even home buyers with good credit are having trouble getting mortgage loans. We must all work together to unclog the housing and financial system.”
NAR called on Congress to use current TARP dollars to not only reduce interest rates, but also fix operational issues that are preventing consumers from getting or modifying home loans.
“These are critical steps that must be undertaken quickly if we are to right our nation’s housing and financial markets,” McMillan said.
NAR hailed the House of Representatives’ actions and called on the Senate to move quickly in adopting its proposal. NAR also expressed hope that the new administration will focus on a housing recovery as it moves forward with a larger stimulus package.
Study Predicts Riskiest Markets for Price Drops
Home prices are likely to fall still more, according to a new study by mortgage insurer PMI Group Inc.
The study predicts that home prices will be lower than they are now in 97 percent of 381 metro areas by the third quarter of 2010.
The riskiest markets for falling home prices are California’s Inland Empire; the greater Miami, Fla., area; Lake Havasu City-Kingman, Ariz.; and the Cape Coral-Fort Myers, Fla., areas.
The cities with the lowest risk of further declines include the Dallas-Fort Worth area, greater Houston and Pittsburgh.
Home prices showed signs of recovery in the third quarter of 2008, but with rising unemployment rates, home prices fell further in the fourth quarter, says PMI chief economist David Berson.
Source: The Wall Street Journal, Ruth Simon (01/13/09)
Buyers Lured to Bargain Luxury Properties
Prices for luxury second-home markets are falling out of the stratosphere–and attracting buyers who were previously priced out of the market.
Prices in the Caribbean have dropped by $500,000 and European retreats in Spain, Malta, and Portugal are down 30 percent, says Lucy Russell, managing director of Quintessentially Estates.
“The second-home market has suffered considerably,” says Marc Cohen, director of Ledbury Research, the London-based luxury consultancy.
He says active buyers have changed from the typical 65-year-old retiree who has sold his business or retired from a high-salaried job to a younger person who sees opportunity in declining markets.
“Those who need to sell will do so for substantially less than they would have six months ago,” says Charles Weston-Baker, managing director of Savills, U-K real estate services provider.
Source: Newsweek International, Ginanne Brownell (01/12/09)
Mortgage Deals Abound, for Some Borrowers
Now’s the time to get a great deal on a mortgage, but borrowers should shop around.
Rates are changing constantly and they differ widely among lenders. Borrowers typically need a FICO score of at least 720 for the best interest rates, although for a fee Fannie Mae and Freddie Mac will guarantee loans with FICO scores as low as the mid-600s. Having enough cash for a 20 percent down payment is also important. But borrowers can get loans with lower downpayment requirements. FHA, for instance, makes loans available for a minimum 3.5 percent down.
For a conforming loan, monthly mortgage payments can’t exceed 28 percent of gross income, while all debt payments, including student loans, can’t exceed 36 percent of gross income.
Source: Business Week, Peter Coy (12/31/2008)
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)
Signs of Letup in Home Price Slide
The decline in residential property prices appears to be slowing, according to preliminary data from First American CoreLogic.
A preview of its November report shows that home prices fell 9.6 percent last month, compared with 10.4 percent in October and 11.2 percent in September.
“The consistent deceleration over the past two months with November indicating the same trend in price declines is encouraging because it could portend the trough in price declines,” says Mark Fleming, chief economist for First American CoreLogic.
Still, layoffs and the swollen supply of unsold homes remain a concern, he notes.
Source: American Banker (12/29/08)
Home Buyer Tax Credit: How It Works
First-time homebuyers in 2008 can take an income-tax credit on their purchase, thanks to passage in Congress earlier this year of the first-time home buyer tax credit.
The definition of first-time homebuyer is generous. To get the credit, the homebuyer cannot have owned a home in the previous three years. The home must be a principal residence and purchased between April 9, 2008 and July 1, 2009.
The credit is equal to 10 percent of the purchase price, up to $7,500. Single taxpayers with modified adjusted gross income up to $75,000 and couples with MAGI up to $150,000 will qualify for full credit. Singles with MAGI up to $95,000 and couples with MAGI up to $170,000 will get a reduced amount. Those with higher incomes don’t qualify.
If the amount of tax a homebuyer owes is less than the amount of the credit, they get to keep the difference in the form of an IRS refund.
The homebuyer must begin to repay the credit in two years in increments of about $500 a year over a 15-year period for those who received the full credit
Homebuyers who sell their home before the credit is repaid must pay off the loan with any profits. If they sell the home at a loss, the loan is forgiven.
[Editor's Note: The credit is set to expire in mid-2009, although industry groups, including the NATIONAL ASSOCIATION OF REALTORS®, are encouraging Congress to extend it. NAR is also encouraging Congress to make the credit available to all buyers and to eliminate the repayment requirement. More detail on how the credit works is available from NAR on REALTOR.org.]
Source: Chicago Tribune, Mary Umberger (12/28/2008)
Amid Rate Drops, Mortgage Applications Soar
With interest rates approaching reaching historic lows, the application volume for mortgages jumped a seasonally adjusted 48 percent last week compared with the previous week, according to the Mortgage Bankers Association’s weekly survey.
Application activity for the week ending December 19th was 124.6 percent over the same period a year ago, the Washington, D.C-based MBA said. The spike in applications coincided with another drop in mortgage rates, as the government’s efforts to unfreeze the residential-mortgage market show further signs of having the desired effect.
Applications to refinance existing mortgages increased 62.6 percent on a week-to-week basis, while applications filed for mortgages to buy homes increased a seasonally adjusted 10.6 percent. Refinancings made up 83.2 percent of all applications filed last week, up from 76.9 percent the previous week.
According to the MBA survey, interest rates fell across the board:
- Rates on 30-year fixed-rate mortgages averaged 5.04 percent last week, their lowest level in more than five years.
This was down from 5.18 percent the previous week.
- Fifteen-year fixed-rate mortgages averaged 4.91 percent, down from 4.93 percent the week before.
- One-year ARMs averaged 6.36 percent, down from 6.63 percent.
Source: Mortgage Bankers Association and MarketWatch (12/24/08)
Mortgage Applications Surge on Falling Rates
Mortgage lenders are seeing a deluge of applications for refinancings as borrowing costs decline due to a recent cut in the federal funds rate by the Federal Reserve, and many are hiring temporary workers or reassigning employees to handle the swelling volume.
Some experts believe the jump in refis could signal a turning point in the market and reduce pressure on banks by the U.S. government to bolster lending following the distribution of millions of dollars in assistance.
However, it remains uncertain how many borrowers will qualify for loans, how long it will take to process loans under new documentation and credit standards, and whether borrowers will back down in hopes that mortgage rates will fall further.
Source: Wall Street Journal, Dan Fitzpatrick (12/22/08)
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.
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