Is a Stimulus for Housing Next?
Sources say the Obama administration’s housing plan, to be unveiled Feb. 18, will allow bankruptcy judges to modify mortgages and will use Fannie Mae and Freddie Mac to refinance borrowers who owe more than their homes are worth but are current on their payments.
It also will reduce loan payments for struggling home owners through lower interest rates or longer loan terms, with the government possibly giving lenders a subsidy of $800 to $1,000 per loan to minimize losses.
Home owners could be forced to ultimately repay the difference between their original and reduced payments–a provision meant to keep borrowers from defaulting for the purpose of qualifying for assistance, and the administration also wants Fannie Mae and Freddie Mac to adopt national loan modification standards.
Source: The Wall Street Journal, Deborah Solomon (02/18/09)
Mortgage Applications Back on the Upswing
Mortgage applications swung back up after last week’s sharp decline, with the index reaching 875.3, up 45.7 percent on a seasonally adjusted basis from 600.6 a week earlier.
On an unadjusted basis, the index increased 47.7 percent compared with the previous week and was up 5.2 percent compared with the same week a year ago.
The refinance share of mortgage activity increased 74.2 percent of total applications from 66.7 percent the previous week.
Meanwhile, mortgage rates were down for the week:
- 30-year fixed-rate mortgages decreased to 4.99 percent from 5.19 percent;
- 15-year fixed-rate mortgages decreased to 4.66 percent from 5 percent;
- 1-year ARMs decreased to 6.10 percent from 6.22 percent
Source: Mortgage Bankers Association (02/18/2009)
Obama’s Next Challenge: Stop Foreclosures
After President Obama signed the $787 billion economic stimulus plan into law Tuesday, he said now the focus needs to be on stopping the spread of foreclosures and falling home values.
“We must … do everything we can to help responsible home owners stay in their homes,” Obama said.
The challenge, say those who have been studying the problem, is to lower the amount of money borrowers must pay every month.
More than half of mortgage modifications have left borrowers with the same or higher loan payments because lenders tack on past-due principal, interest, taxes and insurance, which drives the total owed higher, according to an analysis by Alan M. White, a professor at Valparaiso University School of Law. The study looked at more than 23,000 modifications.
At the same time, White says, lenders have been unwilling to reduce principal even for borrowers owing vastly more than their homes are worth.
As a result, 49 percent of borrowers redefaulted within six months after receiving a modification that increased their principal and interest payments by 10 percent to 20 percent, according to ratings company Fitch.
The re-default rate was 21 percent for borrowers who saw their payments fall by 20 percent or more.
Source: The Wall Street Journal, Ruth Simon (02/18/2009)
Despite Market, Many Choose Real Estate Career
Despite challenges facing the real estate business, the state of New York administered more than 700 licensing exams to aspiring real estate professionals in December 2008.
“We’ve been much busier than we thought we’d be,” said Stephanie Barron, a manager at the New York Real Estate Institute, which offers licensing classes.
Although 25 percent fewer sat for the exam in December 2008 than in December 2007.
Recruiters for New York City real estate firms say that a new associate can expect to earn about $50,000 a year, but getting started can be a challenge and newcomers may take weeks to close their first deal.
“Someone coming into the biz, who is going to focus on sales from day one, should have at least a six-month nest egg, and it would probably be better to have more than that,” said Stephen Love, who directs recruiting at Ardor New York Real Estate.
Source: The New York Times, Michael M. Grynbaum (02/13/2009)
Expect to Hear More on Housing Assistance Plan
The Obama administration is considering plans to subsidize mortgage payments for owners facing financial troubles and allow underwater homeowners to refinance. Plans are likely to be announced Wednesday.
The refinancing proposal is expected to include a test that troubled homeowners could use to prove eligibility before their mortgage becomes delinquent.
The administration also is expected to endorse a cram-down plan that will allow judges to modify mortgages during bankruptcy procedures. And it will push for legislation that will remove obstacles that prevent mortgage servers from modifying troubled loans.
Mortgage giants Bank of America Corp., J.P. Morgan Chase & Co. and Citigroup Inc. have halted foreclosures until Obama announces details on these plans.
Source: The Wall Street Journal, Deborah Solomon and Robin Sidel (02/14/2009)
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.
Stimulus Advances With Tax Credit Changes
The $790 billion stimulus package hammered out by House and Senate conferees late yesterday increases the home buyer tax credit to $8,000, from $7,500, and drops the repayment feature for buyers who hold on to their property for at least three years.
The NATIONAL ASSOCIATION OF REALTORS ® has sought removal of the repayment requirement because it discourages buyers from taking advantage of the tax credit. The three-year minimum holding period is a safeguard against speculators’ use of the credit.
The legislation also extends the effective date of the credit to December 1 from June 30, and extends eligibility to borrowers who buy their home with the help of state or local financial assistance that comes from the proceeds of tax-exempt mortgage revenue bonds.
The credit remains open only to first-time buyers (those who haven’t owned in at least three years) and some income eligibility restrictions apply, but those are unchanged from the existing program.
Other provisions reportedly in the bill that could help housing markets and communities include:
- FHA and conforming loan limits. Specifics have not been released but reports indicate that the 2008 limits have been reinstated for 2009 except in those communities where the 2009 limits are higher. Additional increases in individual communities may also be available at the discretion of the secretary of the U.S. Department of Housing and Urban Development.
- Foreclosure mitigation and neighborhood stabilization. Funding for states and localities to be used for neighborhood stabilization activities for the redevelopment of abandoned and foreclosed homes are authorized. Some news reports put the funding level at $2 billion.
- Rental assistance. Up to $1.5 billion to provide short-term rental assistance and other aid for families during the economic crisis.
- Transportation infrastructure. Up to $29 billion for highway construction projects, $8 billion for rail projects, and $5 billion to weatherize low-income homes.
- Rural housing development. Increased funding for the Rural Housing Service direct and guaranteed loan programs.
- Low-income housing grants. Allow states to trade in a portion of their 2009 low-income housing tax credits for Treasury grants to finance the construction or acquisition and rehabilitation of low-income housing, including those with or without tax credit allocations
- Tax-exempt housing bonds. Tax-exempt interest earned on specified state and local bonds issued during 2009 and 2010 will not be subject to the Alternative Minimum Tax (AMT). In addition, financial institutions will have greater capacity to purchase tax-exempt state and local bonds
- Energy efficient housing. Grants for energy retrofits for federally assisted housing (Section 8), funding for energy efficiency and conservation block grants to states, and Increases in the residential tax credit through 2010 for certain energy efficient upgrades.
Source: NAR, AP, Washington Post, New York Times, Bloomberg, and Wall Street Journal.
America’s Fastest-Growing Towns
In the last decade, there have been hundreds of communities in every state that have seen significant growth in new homes.
Many of them are outside the urban core and often far from established centers of employment. In a new report, BusinessWeek poses the question: Will the current economic slowdown put an end to these communities?
“The boomtowns of this decade are not booming so much in the last couple years,” said William H. Frey, a demographer at the Brookings Institution in Washington, D.C., tells the magazine. “It’s possible those places will come back again. A lot depends on where the economy grows and where the new knowledge centers are.”
BusinessWeek worked with Gadberry Group, a business location company, to identify communities in every state that have experienced the largest growth. The results were published in a report called “America’s Biggest Boomtowns.”
The top 10 fastest-growing communities:
- Summerlin South, Nev., 618 percent
- Katy, Texas, 168 percent
- Wentzville, Mo., 160 percent
- Spring Hill, Tenn., 157 percent
- South Carolina, 156 percent
- Brighton, Colo., 153 percent
- Wesley Chapel, Fla., 151 percent
- Lehi, Utah, 110 percent
- Canton, Ga., 99 percent
- Oswego, Ill., 98 percent
Source: Business Week, Prashant Gopal (02/06/2009)
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.
Contact Us Today!
Please allow us the opportunity to be of assistance. You may feel free to contact us directly via this website or by the preferred method below. Thank you for visiting.
Highers Group Realty
5000 Eldorado PKWY #150
Frisco TX 75034
Phone: (214) 392-6400
Email: nancy@highersgrouprealty.com