Category Archives: Real Estate

What Will the New ‘Normal’ for Housing Be?

January 30, 2013 jd 1 Comment

Mortgage giant Fannie Mae recently offered some predictions of what the housing market’s “normal” will look like in the next two years.

In its report, “Transition to ‘Normal’?”, Fannie says while the housing market has shown improvement, uncertainty remains over both the economy and the real estate market.

“Our forecast is that 2013 and 2014 will exhibit below-potential economic growth,” according to the white paper. “This is despite the fact that we expect the housing rebound will continue and that the economy will benefit from the gradual increased growth of U.S.-based manufacturing, as well as the expansion of domestic energy production.”

The following are some of the projections Fannie made in its report:

Mortgage rates to stay low: Fannie Mae expects mortgage rates to remain low over the next few years. The mortgage giant expects rates will increase to no more than 4.2 percent by the end of 2014.
FHA loans may get more expensive: More costs may be assigned to Federal Housing Administration loans.
Refinancing drops: The boom in refinancing may have peaked last year with slower activity projected this year. “We expect 2012 to be seen as the high watermark for refinances and 2013 as the first of several transition years as the housing finance market transitions back to a more normal balance between purchase and refinance activity.”
Foreclosures continue to fall: Fannie expects foreclosures to continue to decline from their peaks as more alternatives to foreclosure are pursued.
Housing starts to rise: Fannie Mae predicts that housing starts will increase 23 percent in 2013 — which would be 60 percent more than the record low in 2010. Fannie expects housing starts won’t reach sustainable levels until 2016.
Mortgage originations grow: “Given our expectations of continued improvement in housing starts, home sales, and home prices in 2013,” Fannie Mae writes, “we project that purchase mortgage originations will rise to $642 billion from a forecast of $518 billion in 2012.”

Source: “‘Normal’ Housing Market May Not be What it Used to Be,” Realty Times (Jan. 30, 2013)

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Real Estate

Housing Inventories Are Falling

January 24, 2013 jd 2 Comments

Photo Credit: http://www.shakesville.com/2008/06/my-former-landlord.html

Home prices are increasing across the country as the number of homes for-sale continues to fall. But at a time when buyer demand is picking up, why is inventory still so low?

Inventories fell to 1.82 million at the end of last year, a 21.6 percent drop from one year earlier, the National Association of REALTORS® reports.

The Wall Street Journal recently highlighted several reasons behind the dropping inventories, including:

Sellers hesitant to sell: About 22 percent of home owners with a mortgage are still underwater, owing more than their home is currently worth. Home owners don’t tend to sell unless a life-changing event occurs when they’re underwater because they don’t want to take a loss on the sale of their house. CoreLogic data shows that inventories are the most constrained in areas with the highest number of underwater borrowers.
Not enough equity to trade up: Often times, home owners rely on the equity from their home to make a down payment on their next home. With fewer home owners seeing equity in their houses, they may not have enough money to move into a pricier home, which is constraining the would-be “trade up” buyer from moving.
Investors continue to snatch up properties: Investors are snapping up properties, but they’ve changed their strategy from past years, which is also constraining inventories. Now they’re holding onto properties and turning them into rentals instead of rehabbing properties and flipping them for profit. This is keeping fewer homes on the market.
Banks are slowing down foreclosures: Banks have new rules to meet with the foreclosure process, and it’s causing them to move at a slower pace in foreclosing on homes. Banks also are showing a preference for short sales and loan modifications, which are curbing the number of foreclosed homes on the market.
Builders are doing less building: Housing starts were at record lows from 2009 through 2011 so there’s less inventory being added to the market. A rebound in the new-home market has only recently started to occur.

Source: “Six Reasons Housing Inventory Keeps Declining,” The Wall Street Journal (Jan. 22, 2013)

Six Reasons Housing Inventory Keeps Declining

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Real Estate

Banks Close To $10B Settlement Over Foreclosure Abuses

January 2, 2013 jd

Fourteen banks are reportedly nearing a $10 billion settlement with banking regulators over the banks’ past involvement in foreclosure mishandlings that included faulty paperwork and excessive fees, The New York Times reports.

About $3.75 billion of the reported settlement would go to aid home owners who lost their homes to foreclosure — more than double what was set aside from a $26 billion settlement reached in 2012 among the state attorneys general and five of the nation’s largest banks.

The majority of the money from the latest settlement would go to help home owners struggling to make their payments and remain in their homes, such as with aid like loan modifications or lowering the amount of principal on their mortgages.

Banks have faced several settlements with government officials and home owners in recent months that have aimed to hold them accountable for the 2008 financial crisis and subsequent housing slump. From 2007 to early 2012, four million Americans faced foreclosure.

“It’s certainly a victory for consumers and could help entire neighborhoods,” Lynn Drysdale, a former co-chairwoman of the National Association of Consumer Advocates, told The New York Times about the latest proposed settlement. “But the devil, as they say, is in the details, and for those people who have had to totally uproot their lives because of eviction it may still not be enough.”

The same banks involved in the $26 billion mortgage settlement–JPMorgan Chase, Bank of America, Wells Fargo, Citigroup and Ally Financial — also are included in this recent settlement, The New York Times reports.

Sources: “Settlement Expected on Past Abuses in Home Loans,” The New York Times (Dec. 30, 2012) Daily Real Estate News

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Real Estate

Buying a Home During the Holiday?

December 10, 2012 jd

Once Thanksgiving is over, the real estate world typically starts to wind down for the holidays and doesn’t usually reawaken until after New Year’s. But potential home buyers who are prepared to close in today’s competitive market may want to keep house hunting while everyone else is waiting for spring.

REALTORS® especially recommend that serious home buyers continue shopping if they have repeatedly lost out on deals because of a limited and continually decreasing supply of homes. Buying intensity typically cools down at the start of fall through early January, which could increase the odds for those with more patience.

Would-be buyers historically have bowed out during the winter season because they are overwhelmed by holiday spending and commitments. There’s also the aversion of moving in the middle of a school year. Consumer interest typically picks back up again in the New Year and peaks in the spring.

Certain buyers may be well-served to buy during the winter because of sellers who must move for various reasons including a job change or transfer or the possible sunsetting of the Mortgage Forgiveness Debt Relief Act, which lets certain home sellers get tax relief on mortgage debt forgiven by lenders. The possible expiration has pushed home sellers to list and short sell their homes before year’s end.

Read the full story

Should you buy a home during the holidays?

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Real Estate

When Buying a Home Factoring in the Cost of Commuting

November 30, 2012 jd

A recent study by the Center for Housing Policy and the Center for Neighborhood Technology suggests that borrowers of moderate means would be smart to calculate the costs of commuting before buying.

The study, which looked at transportation and housing costs in the 25 largest metropolitan areas, found that transportation costs rose faster than incomes in every area over the last decade.
That has added to the financial burden shouldered by moderate-income homeowners, defined as households earning 50 to 100 percent of a metropolitan area’s median income. Transportation consumes 30 percent of their income, on average. Add housing costs to that and the combined cost burden rises to 72 percent.
The study also found that some metropolitan areas generally considered more affordable become less so after transportation is figured in.
Mortgage underwriters sometimes look at a home’s location relative to where the buyer works, but in most cases a long distance between the two is an issue only if it suggests that the buyer isn’t actually going to live in the house.

Read the full story

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Real Estate

Real Estate News November 2012

November 24, 2012 jd

Los Angeles Times

Drop in U.S. mortgage delinquency rates led by California, Arizona
The national mortgage delinquency rate – the percentage of borrowers 60 days or more late on their payments – fell to 5.41 percent in the third quarter from 5.88 percent in the same period in 2011, said TransUnion, one of the three major credit reporting companies.

Read the full story
San Diego Union-Tribune

How the U.S. mortgage settlement can help military members
The national mortgage settlement between 49 states and five of the nation’s largest banks includes protections for service members. Under the settlement, participating banks have agreed to provide consumers relief, everything from granting short sales to modifying mortgages to make them more affordable for homeowners.

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Los Angeles Times

FHA gives those who defaulted on homes another chance
The FHA, which backs nearly 8 million loans, is helping rebound buyers recapture the American dream, boosting the housing market in the process. But that’s touched off a fierce debate about the financial and ethical wisdom of bankrolling borrowers who contributed to the last housing bubble – and the potential cost to taxpayers.

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Real Estate

New Short Sale Program Offers Relief For Underwater Homeowners

November 16, 2012 jd

One of the federal government’s most-important financial relief efforts for underwater homeowners started operating Nov. 1.

Making sense of the story

Traditionally short sales, where the lender agrees to accept less than the full amount owed and the house is sold to a new purchaser at a discounted price, are associated with extended periods of delinquency by the original owner. The new Fannie-Freddie program breaks with tradition by allowing short sales for owners who are current on their payments but are encountering a hardship that could force them into default.

Eligible hardships under the new program run the gamut: Job loss or reduction in income; divorce or separation; death of a borrower or another wage earner who helps pay the mortgage; serious illness or disability; employment transfer of 50 miles or greater; natural or man-made disaster; a sudden increase in housing expenses beyond the borrower’s control; a business failure; and “other,” meaning a serious financial issue that isn’t one of the above.

Homeowners who participate in this new program should be aware that although officials at the Federal Housing Finance Agency – the agency that oversees the program – are working on possible solutions with the credit industry at the moment, it appears that borrowers who use the new program may be hit with significant penalties on their FICO credit scores – 150 points or more.

Other factors to consider are promissory notes and other “contributions.” In the majority of states where lenders can pursue deficiencies, Fannie and Freddie expect borrowers who have assets to either make upfront cash contributions covering some of the loan balance owed or sign a promissory note. This would be in exchange for an official waiver of the debt for credit reporting purposes, potentially producing a more favorable credit score for the sellers.

Finally, participants should be aware of second-lien hurdles. The program sets a $6,000 limit on what second lien holders – banks that have extended equity lines of credit or second mortgages on underwater properties – can collect out of the new short sales. Some banks, however, don’t consider this a sufficient amount and may threaten to thwart sales if they cannot somehow extract more.

Read the full story

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Real Estate

National Median Home Prices Up 9.5% From Year Ago Levels

November 1, 2012 jd 1 Comment

By Lawrence Yun

The national median home price, at $187,400, is up 9.5 percent from year-ago levels, and the market is on pace to see 4.82 million home sales this year, a 9.3 percent improvement over last year. Almost two-thirds of sales are completed within three months, a big jump from a year earlier. But practitioner confidence, a good indicator of how the market will look down the road, has barely budged for months. All trend lines are from August 2011 to August 2012.

Existing-home sales is a seasonally adjusted annual rate, which is the actual rate of sales for the month, multiplied by 12 and adjusted for seasonal sales differences. Pending home sales is an index that measures housing contract activity. An index of 100 is equal to the level of activity during 2001, the benchmark year. Inventory measures the number of existing homes on the market at the end of the month. Buyer and seller traffic, current conditions, six-month expectations, and time on market derive from a monthly REALTOR® Confidence Index. Results are based on 3,421 responses to 6,000 surveys sent to large and small real estate offices. The survey asks practitioners to indicate whether conditions are strong (100 points), moderate (50), or weak (0). Some data may be revised from previous issues.

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Real Estate

End is Near for Certain Tax Exemptions

October 27, 2012 jd

Photo credit: www.inspirational-quotes-short-funny-stuff.com

Currently, any debt forgiven by a lender in a short sale, loan modification, or foreclosure is exempt from federal taxation. However, that exemption is scheduled to expire Jan. 1, 2013.

Making sense of the story

Borrowers will have to count mortgage relief from lenders as income on their federal tax returns, if the exemption is allowed to expire. That means, for example, a borrower would have to pay taxes on a $100,000 reduction in principal owed on a loan, or a $20,000 write-off in the amount owed after a short sale.
An extension of the tax exemption – established under the Mortgage Forgiveness Debt Relief Act of 2007 – is a strong possibility. But given that Congress will have to grapple with serious fiscal issues after the November elections, there is no guarantee the exemption will emerge from those negotiations intact.
The Debt Relief Act exemption applies only to canceled mortgage debt used to buy, build, or improve a primary residence, not a second home. The maximum exemption is $2 million.
Reinstating the tax would undercut the the effect of the National Mortgage Settlement reached earlier this year in the federal government’s investigation into banks’ mishandling of foreclosure documents.
Under the terms of the settlement, five of the biggest mortgage lenders must put some $17 billion toward debt relief that enables borrowers to stay in their homes. Smaller portions are reserved for short sales and refinancing.

Read the full story

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Real Estate

Homes Are Selling Faster

October 24, 2012 jd

Photo credit: future-dreamhome.blogspot.com

Inventories of for-sale homes aren’t the only thing that is dropping. The amount of time homes are staying on the market is growing shorter as well—down 11 percent in the last year—according to the latest Realtor.com data.

Homes were listed on average 95 days, according to September housing data. That is down from 107 days a year earlier.

Homes are selling the fastest in Oakland, Calif., in which the median age of the inventory averages 21 days, which is 57 percent below what it was a year ago. Denver, Colo. boasts a median age of inventory of only 38 days, followed by fast-selling markets of Stockton-Lodi, Calif., with 43 days, and San Francisco with 44 days.

As the median age of the inventory is falling, inventories of for-sale homes continue to hover at record lows too, dropping 18 percent last month compared to a year ago.

“There’s a recovery,” Curt Beardsley, vice president of Realtor.com, told BusinessWeek. “Our market times are low and there’s actually a compression of inventory.”

Home buyer demand is increasing, with housing affordability still high and ultra low mortgage rates that have pushed home buyers’ purchasing power higher. The rise in demand has caused asking prices to also rise. Last month, the median asking price was $191,500, which is up 0.8 percent compared to a year earlier, Realtor.com reports.

Source: “Listings of Homes for Sale Drop as U.S. Housing Recovers,” BusinessWeek (Oct. 15, 2012) and REALTOR® Magazine Daily News

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