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Real Estate

Home Prices Continue to Rise Over Last Year’s Levels

 
More housing reports released on Tuesday showed home prices on the rise. The Federal Housing Finance Agency reported that U.S. home prices increased 3.7 percent from a year ago in the 12-month period ending in July.

FHFA’s home price index is now at about the same level it was in June 2004. However, it’s 16.4 percent below the peak reached in April 2007. To calculate its housing index, the FHFA uses purchase price data on mortgages owned or guaranteed by Freddie Mac and Fannie Mae.

Also on Tuesday, S&P/Case-Shiller released a report also showing home prices on the rise for the fourth consecutive month and at their highest level in nearly two years. S&P/Case-Shiller report measures home prices in 10-city and 20-city composite indices. In its 20-city index, S&P/Case-Shiller reported home prices up 1.2 percent compared to a year earlier.

“The news on home prices in this report confirm recent good news about housing,” David M. Blitzer, chairman of the index committee at S&P Dow Jones Indices, told The Wall Street Journal. “Single family housing starts are well ahead of last year’s pace, existing home sales are up, the inventory of homes for sale is down and foreclosure activity is slowing. All in all, we are more optimistic about housing.”

Last week, NAR reported that the median price on existing-homes rose 9.5 percent over year ago levels. The median home price in August is $187,400.

The increase to the sales price in August was the strongest since January 2006 when median home prices had risen 10.2 percent higher than what they were a year ago.

The National Association of REALTORS® will release its pending home sales report on Thursday.

Source: “FHFA Home Price Index Now Equals 2004 Levels,” HousingWire (Sept. 25, 2012) and “Case-Shiller Shows Home Prices Rise Sharply Again,” The Wall Street Journal (Sept. 25, 2012)

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Real Estate

Taking Advantage of Low Mortgage Rates

English: Mortgage debt
Mortgage debt (Photo credit: Wikipedia)

 

 

 

 

 

 

Mortgage rates continue to set new record lows, leaving many home buyers and re-financers wondering how low rates can go and how to capture the best rates now.

  • Many economists are forecasting that mortgage rates will rise again later this year as the American economy gradually improves and as more global investors turn to the U.S. as a safe haven for money.
  • The average rate on a 30-year fixed-rate mortgage averaged 3.71 percent the week of June 14.
    The rate had averaged 3.9 percent three months earlier and 4.5 percent a year earlier.
  • According to one economist, rates could possibly fall further, perhaps as much as a quarter of a percentage point, but it is more likely that they would start a “slow drift” upward.
  • Those planning to refinance or buy a home in the next two or three months might want to consider locking in a mortgage rate now.
  • Borrowers with rate locks, with a built-in deadline, often receive priority treatment from lenders, because the borrower is telling the lender that he or she is serious about closing soon.
  • Lock-in costs and policies vary widely, and are based partly on the time frame the borrower wants covered.  Most borrowers will need a 60- to 90-day lock.
  • If interest rates continue to fall during the lock period, borrowers can ask the lender to rewrite the rate lock at an additional cost, or obtain a “float-down” provision in the original agreement.  A lock with a float-down agreement allows the borrower to change the rate, often only once, before closing on the mortgage.  This option is generally more expensive than a standard lock.

 

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Real Estate

Short Sales May Get Shorter

English: The Colonial Revival headquarters of ... The Colonial Revival headquarters of Fannie Mae, designed by architect Leon Chatelain, Jr. in 1956, located at 3900 Wisconsin Avenue, N.W., in the Cathedral Heights neighborhood of Washington, D.C. (Photo credit: Wikipedia)

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning June 15, the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac, will require both agencies to give short-sale buyers a final decision within 60 days.

  • Under this same guideline, Fannie Mae and Freddie Mac also must respond to initial requests for a short sale within 30 days of receiving the buyer’s submission.
  • According to one analyst, expedited sales as a result of the new directive will benefit the entire housing market.  They could also remove some risks for buyers – many of whom previously had to wait months for a decision and then ended up not getting the house they wanted.
  • Lenders favor short sales because they are less costly and more efficient than foreclosures.  Yet the homeowners, trying to exit as gracefully as possible, never know how long the process will take or how badly their credit will be hurt.
  • Although short sales have a reputation for being easier on credit scores than foreclosures, Experian says that is a “fairly common misperception.” If there is a difference in impact, according to Experian, it is slight.
  • Both short sales and foreclosures remain on the credit report for seven years, but foreclosures don’t appear until the legal paperwork is filed, and that could take months.
  • The effect was measured by an analysis by VantageScore, a provider of credit scores used by lenders.  The higher the credit rating a consumer has, the more points he or she would lose in a short sale.
  • If consumers started with an 830 score, they would most likely lose 100 to 110 points from a short sale, 120 to 130 points from a foreclosure.  But a homeowner with a 625 score, who is behind on his mortgage and some credit card payments, would lose 15 to 25 points from a short sale and 10 to 20 points from a foreclosure.

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Real Estate

Home Sales Increasing And Prices Are Bouncing Back

Seal of the United States Federal Housing Fina...
Seal of the United States Federal Housing Finance Agency. (Photo credit: Wikipedia)

 

 

 

 

 

 

 

 

I’ve noticed an increase in sales in Nevada County.  A recent article which I’m republishing here indicates that  home prices are increasing nationwide.

“The Federal Housing Finance Agency reported that nationwide home prices posted their first gain in the first quarter since 2007. While the gain was modest at 0.6 percent, housing experts note it’s still another sign that the housing market is gaining momentum.

FHFA’s housing price index is calculated using home sales price information based off Freddie Mac and Fannie Mae-backed mortgages.

FHFA’s seasonally adjusted monthly index rose 1.8 percent in March over February, which is the largest monthly increase in at least 20 years. Year-over-year, home prices increased 2.7 percent, FHFA reports.

“Increased affordability and a somewhat smaller inventory of homes for sale are positively impacting house prices,” says Andrew Leventis, FHFA’s principal economist.

Price increases were the highest in Hawaii with a 10.3 percent increase, and in Washington, D.C., which saw a 9.8 percent gain, according to FHFA.

Still, Number of Underwater Home Owners Remain High

Despite recent improvements in home prices, the percentage of underwater borrowers has shown little improvement in the last year. More than 30 percent of home owners in the first quarter remained underwater on their mortgage, owing more on their home than it’s currently worth, according to a new Zillow housing report.

A year ago, 32.4 percent of all borrowers had negative equity on their loan compared to 31.4 percent during the most recent quarter, Zillow reports.

Yet, Zillow notes that nine out of 10 underwater borrowers are current on their mortgage payments.

“[It’s] important to note that negative equity remains only a paper loss for the vast majority of underwater home owners,” says Stan Humphries, Zillow’s chief economist. “As home values slowly increase and these home owners continue to pay down their principal, they will surface again.”

The highest share of underwater home owners continues to be in Las Vegas, where 71 percent of home owners are underwater, followed by Phoenix (at 55.5 percent) and Atlanta (at 55.2 percent), according to the Zillow housing report.

Source: “U.S. Housing Prices Rise,” UPI (May 23, 2012); “Home Prices Rose Most in Two Decades in March, FHFA Says,” Bloomberg News (May 23, 2012) and “More than 30% of Mortgage Borrowers Still Underwater,” CNNMoney (May 24, 2012)

 

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Real Estate

Home Affordable Refinance Program Plan A Boost To Borrowers, Banks

 

The Obama administration announced broad outlines of the revised Home Affordable Refinance Program on Oct. 24. Fannie Mae and Freddie Mac issued guidance last week that filled in most of the details.

  • HARP 2 greatly reduces or eliminates the risk-based fees Fannie and Freddie charge on many loans and virtually eliminates the chance that lenders will have to pay for losses on loans that go into default if they made underwriting mistakes. It also vastly streamlines the underwriting process.
  • Although lenders can begin taking applications Dec. 1, it could take several months before the new loans are made. Fannie Mae said it won’t begin buying certain types of refinanced loans until March.
  • To qualify, the existing loan must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009. The loan balance must be more than 80 percent of the home’s market value. The loan must be current for the past six months, with no more than one late payment in the past 12 months. Those who previously refinanced through HARP are ineligible.
  • The new program improves on the existing HARP refi program by letting borrowers refinance into a new fixed-rate loan regardless of how much is owed. The existing program caps the new loan at 125 percent of the home’s market value.
  • Homeowners also can refinance into a new adjustable rate loan that has a fixed rate for at least the first five years, but in this case the new first mortgage cannot exceed 105 percent of the home’s value.
  • In most cases, borrowers won’t have to pay for a new appraisal (Fannie or Freddie will use their automated in-house appraisals) or have any particular debt-to-income ratio or credit score.
  • Borrowers who refinance through their existing loan servicer generally won’t have to document their income or assets or have a particular credit score or debt-to-income ratio. The lender will only have to verify that one borrower on the loan has a job or other source of income, but not the amount of income.
  • Homeowners who refinance through a new lender will have to meet additional underwriting requirements, but not as many as people who are refinancing through traditional routes.
  • Borrowers can have a second loan on the house of any amount and still qualify, as long as the holder of the second mortgage resubordinates it to the new loan. Most of the big lenders have agreed to do so, but there is no guarantee they or others will.
  • If borrowers have mortgage insurance on the existing loan, they must maintain it, but they should be able to transfer that insurance to the new loan at the old premium rate, according to Freddie Mac. The big mortgage insurers have agreed to allow this, but again there is no guarantee all will.
  • There are still many questions about the program, such as what interest rates banks will charge, whether they will impose additional fees or underwriting requirements beyond what Fannie and Freddie require, and whether investors will be willing to buy securities backed by these new HARP 2 loans.

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Real Estate

Mistakes Housing Investors Make


With traditional investments delivering low returns, some are considering buying rental housing.  However, potential investors should do their homework and avoid the following common mistakes.

Making sense of the story

  • Investing in real estate right now can be profitable, if everything goes as planned.  Rents are increasing in many areas, and more properties may be coming on the market.
  • Last month, the Obama administration asked for proposals on how to convert at least some of Fannie Mae’s and Freddie Mac’s inventories of foreclosed homes into affordable rentals.
  • Traditionally, investors rented out properties for 1 percent of the purchase price per month.  However, according to one property management firm, today, some investors are receiving as much as 2 percent of the purchase price.
  • While it may be true that in some areas home prices are relatively low, that doesn’t mean the property can be rented out.  Homes in deserted subdivisions aren’t any more appealing to renters than they are to buyers.  The same is true for less-attractive properties or those in less-desirable school districts.
  • Prior to purchasing a property, investors should also factor in closing costs of 3 percent to 6 percent, the costs to fix up the place and maintain it, and the holding costs.
  • Investors become landlords, and as such, need to keep in mind that, just like homeowners, tenants may not always be able to pay rent.  Evicting tenants can take several weeks.
  • It’s also important to remember that owning a rental is not the same as owning a home.  An owner may put up with flaws in a home that a renter wouldn’t tolerate.  Additionally, many states and communities have strict laws for landlords, even for those who own only one property.

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Real Estate

Short Sale Fraud Rampant, Investigators Say

Caution protect yourself against mortgage relief scams
Picture courtesy of Utah Home Group

 

Lenders are losing out on thousands of dollars–sometimes within just mere hours–due to short sale fraud, which is skyrocketing and plaguing the housing market, investigators say.

In one of the most common short sale scams, an investor submits a low offer on a home that is underwater, in which the borrower owes more on the mortgage than the home is currently worth. Scam artists, working with the investor, present the lowball offer to the lender, asking for a short sale to be completed. Appraisals or broker price opinions may be manipulated to help persuade lenders to do the short sale (one common method: Misstating the home’s location so that the home is compared to lower cost homes).

The lender agrees to the short sale, but is unaware that there is really a higher bid on the home from a legitimate buyer. Once the lender approves the short sale, the scammer then resells the home to the higher, legitimate bidder–often on the same day.

“These same-day resales are on average nearly $50,000 greater than the lender agreed upon short-sale price,” said Tim Grace, senior vice president of product management and analytics at CoreLogic. Short sale fraud is expected to cost lenders more than $375 million this year, which is an increase of more than 20 percent from last year, according to CoreLogic.

Last year, fraud associated with short sales comprised half of all fraud investigations for mortgage companies like Freddie Mac, said Robert Hagberg, an investigator for Freddie Mac.

Source: “Short Sale Fraud Plagues the Housing Market,” CNNMoney (July 14, 2011) 

 

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Real Estate

Banks Stop Accepting Certain Mortgage Applications

 

In anticipation of the expiration of current loan limits on Sept. 30, 2011, Bank of America has decided to stop accepting conventional and government applications for loan amounts that will exceed the permanent loan amounts.  The deadline to submit loan applications was July 1.

According to an email from Bank of America, conventional loans that exceed the permanent loan limits will now be required to use non-conforming programs.

Barring Congressional action, the maximum FHA, Fannie Mae, and Freddie Mac conforming loan limit will decline to $625,500 beginning Oct. 1, 2011, from the current $729,750 limit, though the majority of counties will fall far below the $625,500 maximum.  The conforming loan limit determines the maximum size of a mortgage that FHA, Fannie Mae, and Freddie Mac government-sponsored enterprises (GSEs) can buy or guarantee.  Non-conforming or jumbo loans typically carry a higher mortgage interest rate than a conforming loan and require a higher down payment, increasing the monthly payment and negatively impacting housing affordability for California home buyers.

 

 

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Real Estate

New Loan Limits Would Hurt Home Sales


Unless Congress takes action, the current loan limits will expire on Sept. 30 and the cost of a mortgage could rise significantly, especially in high-cost areas such as California.

  • More than 30,000 California families could face higher down payments, higher mortgage rates, and stricter loan qualification requirements if conforming loan limits on mortgages backed by the Federal Housing Administration (FHA), Fannie Mae, and Freddie Mac are reduced beginning October 1, 2011, according to analysis by the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.).
  • The conforming loan limit determines the maximum size of a mortgage that FHA, Fannie Mae, and Freddie Mac government-sponsored enterprises (GSEs) can buy or guarantee.
  • Non-conforming or jumbo loans typically carry a higher mortgage interest rate than a conforming loan and require a higher down payment, increasing the monthly payment and negatively impacting housing affordability for California home buyers.
  • C.A.R. and the NATIONAL ASSOCIATION OF REALTORS® (NAR) have long advocated making permanent higher conforming loan limits.  As a result of C.A.R.’s and NAR’s efforts, in 2008, Congress temporarily raised the conforming loan limits from $417,000 to $729,750 and has extended them annually through fiscal year 2011.
  • To see the impact the lower limits would have on various regions throughout the state, go to the click here

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Real Estate

Many Homeowners Refinancing Mortgages to Shorter Terms


Borrowers who can afford higher mortgage payments, and who meet lenders’ stricter loan guidelines, often opt to replace their 30-year mortgages with shorter term loans at near-record low rates.

  • The latest Freddie Mac quarterly survey of homeowners who refinanced found that more than one in three borrowers who refinanced from a 30-year fixed-rate loan opted to replace it with 15-year or 20-year mortgages at near-record low rates.
  • Homeowners considering refinancing into a shorter-term mortgage must have the income or financial reserves sufficient to pay the extra money each month.
  • Borrowers not only need to have the income or financial reserves, they also have to qualify for a refinance, have the credit score needed, and the home appraisal to support it.
  • For some low-cost refi programs, lenders want to see at least 25 percent equity in the house.  Higher FICO credit score requirements by Fannie Mae and Freddie Mac are another impediment, as both companies reserve their best rates for borrows with FICO scores of 740 or higher.

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