The rush is on for banks to meet a mid-June deadline in offering up plans on how they plan to meet a set of guidelines by U.S. regulators to clean up their foreclosure procedures. The banks will have another 60 days after that deadline to implement the changes.
As part of the rules set by U.S. regulators, 14 financial institutions will be required to provide a single point of contact to borrowers trying to modify a loan or in the foreclosure process as well as set “appropriate deadlines” for deciding whether borrowers can get a loan workout. Regulators are also requiring banks to ensure their staffing levels are on par to handle the flood of foreclosures and loan modifications.
Several banks have already taken steps to implement the changes.
For example, J.P. Morgan says it’s developing a software program to make it easier for employees and borrowers to track loan modification requests. It also has started providing borrowers with a “relationship manager” to help navigate the loan modification or foreclosure process.
Citigroup, which already provides a single point of contact, says in the next few months it'll debut a “concierge" system that will provide a small team of employees to guide delinquent borrowers and home owners at risk of default.
Banks are also making efforts to speed up their loan modifications, after customers have complained of long delays from banks in responding to requests. For example, Los Angeles Neighborhood Housing Services says it takes an average of 141 days for its borrowers to get an answer on an initial loan modification request. Wells Fargo was found to have the fastest turnaround: Initial reviews averaged 79 days. But the bank says now 60 percent of its borrowers receive a decision five days after the company receives the request.
Banks are also increasing their staffing. J.P. Morgan has announced it’ll add up to 3,000 new home-lending jobs, and Bank of America plans to hire about 3,000 employees to focus on its troubled mortgages.
New Incentives From Fannie, Freddie
Banks and mortgage servicers also must meet new guidelines from Fannie Mae and Freddie Mac, announced this week, that aim for more loan modifications and prevent foreclosures from taking too long.
Mortgage servicers will be required to approach borrowers earlier, making contact frequently after just one missed payment.
The GSEs are also offering incentives: They’ll pay $1,600 in incentives depending on how quickly servicers complete a loan workout. They also will impose a $500 compensatory fee on servicers who do not complete loan modification applications within six months after the loan goes delinquent. The changes will go into effect in the second quarter.
Source: “Banks Rush to Improve Foreclosure Practices,” The Wall Street Journal (April 29, 2011)
Friday, April 29, 2011
For Second Straight Week, Mortgage Rates Drop
For the second straight week, mortgage rates continued to inch downward, according to Freddie Mac’s weekly Primary Mortgage Market Survey.
The 15-year fixed-rate mortgage averaged 3.97 percent, the lowest since Dec. 9, 2010. Last week, it averaged 4.02 percent, and a year ago at this time it averaged 4.39 percent.
Meanwhile, the 30-year fixed-rate mortgage, the most popular choice among buyers, averaged 4.78 percent this week, down from last week’s 4.80 percent. Last year at this time, the 30-year fixed-rate mortgage stood at 5.06 percent.
The 5-year adjustable-rate mortgage averaged 3.51 percent this week, down from last week’s 3.61 percent average. A year ago, it stood at 4 percent.
The 15-year fixed-rate mortgage averaged 3.97 percent, the lowest since Dec. 9, 2010. Last week, it averaged 4.02 percent, and a year ago at this time it averaged 4.39 percent.
Meanwhile, the 30-year fixed-rate mortgage, the most popular choice among buyers, averaged 4.78 percent this week, down from last week’s 4.80 percent. Last year at this time, the 30-year fixed-rate mortgage stood at 5.06 percent.
The 5-year adjustable-rate mortgage averaged 3.51 percent this week, down from last week’s 3.61 percent average. A year ago, it stood at 4 percent.
Thursday, April 28, 2011
10 Cities With the Highest-Priced Listings
Last month, the national median list price was $199,500, down 0.25 percent for the year, according to Realtor.com housing data of 146 markets. But in San Francisco, the median list price is more than three times that amount.
The following is a list of the cities that had the highest median list prices in March, based on Realtor.com housing data.
1. San Francisco
Median list price: $639,000
Down 8.45 percent for the year
Median days on the market: 63
2. Santa Barbara-Santa Maria-Lompoc, Calif.
Median list price: $559,000
Down 19.57 percent year-over-year
Median days on the market: 117
3. San Jose, Calif.
Median list price: $470,000
Down 5.05 percent year-over-year
Median days on the market: 71
4. Orange County, Calif.
Median list price: $450,000
Down 5.05 percent year-over-year
Median days on the market: 100
5. Honolulu
Median list price: $444,000
Down 1.11 percent year-over-year
Median days on the market: 112
6. Santa Fe, New Mexico
Median list price: $435,000
Up 4.82 percent year-over-year
Median days on the market: 288
7. Ventura, Calif.
Median list price: $420,000
Down 6.67 percent year-over-year
Median days on the market: 93
8. New York
Median list price: $389,000
Down 2.51 percent year-over-year
Median days on the market: 146
9. Naples, Fla.
Median list price: $389,000
Up 2.40 percent year-over-year
Median days on the market: 225
10. Boulder-Longmont, Colo.
Median list price: $380,000
Up 2.73 percent year-over-year
Median days on the market: 114
Source: REALTOR® Magazine online (April 28, 2011)
The following is a list of the cities that had the highest median list prices in March, based on Realtor.com housing data.
1. San Francisco
Median list price: $639,000
Down 8.45 percent for the year
Median days on the market: 63
2. Santa Barbara-Santa Maria-Lompoc, Calif.
Median list price: $559,000
Down 19.57 percent year-over-year
Median days on the market: 117
3. San Jose, Calif.
Median list price: $470,000
Down 5.05 percent year-over-year
Median days on the market: 71
4. Orange County, Calif.
Median list price: $450,000
Down 5.05 percent year-over-year
Median days on the market: 100
5. Honolulu
Median list price: $444,000
Down 1.11 percent year-over-year
Median days on the market: 112
6. Santa Fe, New Mexico
Median list price: $435,000
Up 4.82 percent year-over-year
Median days on the market: 288
7. Ventura, Calif.
Median list price: $420,000
Down 6.67 percent year-over-year
Median days on the market: 93
8. New York
Median list price: $389,000
Down 2.51 percent year-over-year
Median days on the market: 146
9. Naples, Fla.
Median list price: $389,000
Up 2.40 percent year-over-year
Median days on the market: 225
10. Boulder-Longmont, Colo.
Median list price: $380,000
Up 2.73 percent year-over-year
Median days on the market: 114
Source: REALTOR® Magazine online (April 28, 2011)
Wednesday, April 27, 2011
11 Cities Where Homes Sell the Fastest
California boasted the highest number of cities where homes tended to spend the shortest amount of time on the market last month, based on March housing data from Realtor.com.
In Oakland, Calif., the average days on the market for listings was 50 in March--the least amount of days for median days on the market for the 146 markets reviewed.
Nationally, the median for homes for days on the market was 160 in March, which is an increase of 40 percent in a year.
Here is a list of the cities with the fewest median days on the market from March:
Oakland, Calif.
Median days on the market: 50
Median list price: $319,000
San Francisco
Median days on the market: 63
Median list price: $639,000
Denver
Median days on the market: 66
Median list price: $259,900
Iowa City, Iowa
Median days on the market: 66
Median list price: $187,500
Los Angeles-Long Beach, Calif.
Median days on the market: 70
Median list price: $345,000
Stockton-Lodi, Calif.
Median days on the market: 70
Median list price: $175,000
Bakersfield, Calif.
Median days on the market: 70
Median list price: $141,500
San Jose, Calif.
Median days on the market: 71
Median list price: $470,000
Anchorage, Alaska
Median days on the market: 71
Median list price: $279,975
Fresno, Calif.
Median days on the market: 71
Median list price: $170,000
Tulsa, Okla.
Median days on the market: 71
Median list price: $147,900
In Oakland, Calif., the average days on the market for listings was 50 in March--the least amount of days for median days on the market for the 146 markets reviewed.
Nationally, the median for homes for days on the market was 160 in March, which is an increase of 40 percent in a year.
Here is a list of the cities with the fewest median days on the market from March:
Oakland, Calif.
Median days on the market: 50
Median list price: $319,000
San Francisco
Median days on the market: 63
Median list price: $639,000
Denver
Median days on the market: 66
Median list price: $259,900
Iowa City, Iowa
Median days on the market: 66
Median list price: $187,500
Los Angeles-Long Beach, Calif.
Median days on the market: 70
Median list price: $345,000
Stockton-Lodi, Calif.
Median days on the market: 70
Median list price: $175,000
Bakersfield, Calif.
Median days on the market: 70
Median list price: $141,500
San Jose, Calif.
Median days on the market: 71
Median list price: $470,000
Anchorage, Alaska
Median days on the market: 71
Median list price: $279,975
Fresno, Calif.
Median days on the market: 71
Median list price: $170,000
Tulsa, Okla.
Median days on the market: 71
Median list price: $147,900
Tuesday, April 26, 2011
Is This Really a Buyer's Market?
With falling home prices and higher inventories, most of the public views real estate as a “buyer’s market,” in which buyers hold more of the control and sellers will more eagerly accept lower offers just to sell.
Not so fast, say buyers and sellers. More buyers are finding the sellers in the driver’s seat.
Buyer Young Hammack gave up looking for homes for a while after being outbid on three properties in California. "It's a false buyer's market," Hammack says. "If you think prices are cheap, wait until you start putting offers in."
Many sellers may be unable or unwilling to lower their home prices — mostly because they may be underwater on their mortgage — so buyers are increasingly finding lower offers than list price denied. Buyers, on the other hand, may be reluctant to agree to a deal if they don’t feel like they are getting it at a deep discount, industry insiders say.
Traditional buyers also are finding even buying a foreclosure can be difficult as they’re increasingly outbid by investors who are willing to pay cash.
"There's a shortage of attractive inventory," says Glenn Kelman, chief executive of Redfin Corp. "Customers just keep getting outbid on the houses that they want."
Real estate professional Steve Capen with Keller Williams Realty in St. Petersburg, Fla., says that the homes most in demand among buyers often don’t require much repair work and are located in good school districts and choice neighborhoods near transit hubs.
"What's selling is the cream of the crop, and they sell fast," Capen says. "If it's not cream of the crop, it's getting hammered."
Source: “Buyers' Market? Stressed Sellers Say Not So Fast,” The Wall Street Journal online (April 25, 2011)
Not so fast, say buyers and sellers. More buyers are finding the sellers in the driver’s seat.
Buyer Young Hammack gave up looking for homes for a while after being outbid on three properties in California. "It's a false buyer's market," Hammack says. "If you think prices are cheap, wait until you start putting offers in."
Many sellers may be unable or unwilling to lower their home prices — mostly because they may be underwater on their mortgage — so buyers are increasingly finding lower offers than list price denied. Buyers, on the other hand, may be reluctant to agree to a deal if they don’t feel like they are getting it at a deep discount, industry insiders say.
Traditional buyers also are finding even buying a foreclosure can be difficult as they’re increasingly outbid by investors who are willing to pay cash.
"There's a shortage of attractive inventory," says Glenn Kelman, chief executive of Redfin Corp. "Customers just keep getting outbid on the houses that they want."
Real estate professional Steve Capen with Keller Williams Realty in St. Petersburg, Fla., says that the homes most in demand among buyers often don’t require much repair work and are located in good school districts and choice neighborhoods near transit hubs.
"What's selling is the cream of the crop, and they sell fast," Capen says. "If it's not cream of the crop, it's getting hammered."
Source: “Buyers' Market? Stressed Sellers Say Not So Fast,” The Wall Street Journal online (April 25, 2011)
Monday, April 25, 2011
New-Home Sales Gain Momentum
After three straight months of declines, sales of new homes got a boost last month, jumping 11 percent, according to the Commerce Department’s latest new-home sales report released Monday.
New-home sales rose in March to a seasonally adjusted rate of 300,000 homes, up from February’s 250,000. However, the number is still far from what economists view as a healthy 700,000-a-year pace for the sector.
The median price of a new home increased 3 percent from February to $213,800. New-home prices are about 34 percent higher than the median price of existing homes, according to economists.
Regionally, new-home sales saw the biggest boost in the Northeast, jumping nearly 67 percent in March. The West saw an increase in new-home sales last month by nearly 26 percent; the Midwest posted a 13 percent increase; and in the South, new-home sales dipped 0.6 percent.
The new-home market continues to be battered by a high number of foreclosures that continue to dampen home prices across the country. With 1.2 million foreclosures forecast this year, the new-home sales market may not see a major turnaround for years, according to RealtyTrac Inc.
However, while residential construction has decreased considerably in recent years, reports have recently shown building permits have increased 28 percent for apartment and condo buildings.
New-home sales rose in March to a seasonally adjusted rate of 300,000 homes, up from February’s 250,000. However, the number is still far from what economists view as a healthy 700,000-a-year pace for the sector.
The median price of a new home increased 3 percent from February to $213,800. New-home prices are about 34 percent higher than the median price of existing homes, according to economists.
Regionally, new-home sales saw the biggest boost in the Northeast, jumping nearly 67 percent in March. The West saw an increase in new-home sales last month by nearly 26 percent; the Midwest posted a 13 percent increase; and in the South, new-home sales dipped 0.6 percent.
The new-home market continues to be battered by a high number of foreclosures that continue to dampen home prices across the country. With 1.2 million foreclosures forecast this year, the new-home sales market may not see a major turnaround for years, according to RealtyTrac Inc.
However, while residential construction has decreased considerably in recent years, reports have recently shown building permits have increased 28 percent for apartment and condo buildings.
Thursday, April 21, 2011
Mortgage Rates Drop This Week
fter four straight weeks of rising, mortgage rates dropped this week, according to Freddie Mac’s weekly market survey.
Here are how rates fared for the week:
30-year fixed-rate mortgages: averaged 4.80 percent, down from last week’s 4.91 percent average. Last year at this time, the 30-year fixed-rate mortgage averaged 5.07 percent.
15-year fixed-rate mortgage: averaged 4.02 percent, down from last week’s 4.13 percent. A year ago at this time, the 15-year mortgage averaged 4.39 percent.
5-year adjustable-rate mortgage: averaged 3.61 percent this week, down from last week when it averaged 3.78 percent. Last year at this time, the 5-year ARM stood at 4.03 percent.
"Low inflation is keeping mortgage rates at bay,” says Frank Nothaft, chief economist at Freddie Mac.
Here are how rates fared for the week:
30-year fixed-rate mortgages: averaged 4.80 percent, down from last week’s 4.91 percent average. Last year at this time, the 30-year fixed-rate mortgage averaged 5.07 percent.
15-year fixed-rate mortgage: averaged 4.02 percent, down from last week’s 4.13 percent. A year ago at this time, the 15-year mortgage averaged 4.39 percent.
5-year adjustable-rate mortgage: averaged 3.61 percent this week, down from last week when it averaged 3.78 percent. Last year at this time, the 5-year ARM stood at 4.03 percent.
"Low inflation is keeping mortgage rates at bay,” says Frank Nothaft, chief economist at Freddie Mac.
Wednesday, April 20, 2011
NAR: March Existing-Home Sales Rise 3.7%
Sales of existing-home sales rose in March, continuing an uneven recovery that began after sales bottomed last July, according to the NATIONAL ASSOCIATION OF REALTORS®.
Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, increased 3.7 percent to a seasonally adjusted annual rate of 5.10 million in March from an upwardly revised 4.92 million in February, but are 6.3 percent below the 5.44 million pace in March 2010. Sales were at elevated levels from March through June of 2010 in response to the home buyer tax credit.
Lawrence Yun, NAR chief economist, expects the improving sales pattern to continue. “Existing-home sales have risen in six of the past eight months, so we’re clearly on a recovery path,” he said. “With rising jobs and excellent affordability conditions, we project moderate improvements into 2012, but not every month will show a gain – primarily because some buyers are finding it too difficult to obtain a mortgage. For those fortunate enough to qualify for financing, monthly mortgage payments as a percent of income have been at record lows.”
NAR’s housing affordability index shows the typical monthly mortgage principal and interest payment for the purchase of a median-priced existing home is only 13 percent of gross household income, the lowest since records began in 1970.
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 4.84 percent in March, down from 4.95 percent in February; the rate was 4.97 percent in March 2010.
Data from Freddie Mac and Fannie Mae show requirements to obtain conventional mortgages have been tightened, with the average credit score rising to about 760 in the current market from nearly 720 in 2007; for FHA loans the average credit score is around 700, up from just over 630 in 2007.
“Although home sales are coming back without a federal stimulus, sales would be notably stronger if mortgage lending would return to the normal, safe standards that were in place a decade ago – before the loose lending practices that created the unprecedented boom and bust cycle,” Yun explained.
“Given that FHA and VA government-backed loan programs turned a modest profit over to the U.S. Treasury last year, and have never required a taxpayer bailout, we believe low-downpayment loans should continue to be available for those consumers who have demonstrated financial responsibility and are willing to stay well within their budget. Raising the downpayment requirement would unnecessarily deny credit to many worthy middle-class families and veterans,” Yun said.
A parallel NAR practitioner survey shows first-time buyers purchased 33 percent of homes in March, compared with 34 percent of homes in February; they were 44 percent in March 2010.
Record Share of All-Cash Sales
All-cash sales were at a record market share of 35 percent in March, up from 33 percent in February; they were 27 percent in March 2010. Investors accounted for 22 percent of sales activity in March, up from 19 percent in February; they were 19 percent in March 2010. The balance of sales were to repeat buyers.
The national median existing-home price for all housing types was $159,600 in March, down 5.9 percent from March 2010. Distressed homes – typically sold at discounts in the vicinity of 20 percent – accounted for a 40 percent market share in March, up from 39 percent in February and 35 percent in March 2010.
NAR President Ron Phipps said some renters are looking to home ownership as a hedge against inflation. “The typical buyer today plans to stay in a home for 10 years, while rents are projected to rise at faster rates over the next few years,” he said. “As buyers gain more financial security, the advantages of home ownership become more obvious. Rents will continue to trend up, especially in comparison with a fixed-rate loan which provides financial stability and gradual accumulation of equity over time.”
Total housing inventory at the end of March rose 1.5 percent to 3.55 million existing homes available for sale, which represents an 8.4-month supply at the current sales pace, compared with a 8.5-month supply in February.
Single-family home sales rose 4.0 percent to a seasonally adjusted annual rate of 4.45 million in March from 4.28 million in February, but are 6.5 percent below the 4.76 million level in March 2010. The median existing single-family home price was $160,500 in March, down 5.3 percent from a year ago.
Existing condominium and co-op sales increased 1.6 percent to a seasonally adjusted annual rate of 650,000 in March from 640,000 in February, but are 4.1 percent below the 678,000-unit pace one year ago. The median existing condo price was $153,100 in March, which is 10.1 percent below March 2010.
Regions: Northeast
Regionally, existing-home sales in the Northeast rose 3.9 percent to an annual level of 800,000 in March but are 12.1 percent below March 2010. The median price in the Northeast was $232,900, down 3.0 percent from a year ago.
Midwest
Existing-home sales in the Midwest increased 1.0 percent in March to a pace of 1.06 million but are 13.1 percent lower than a year ago. The median price in the Midwest was $126,100, which is 7.1 percent below March 2010.
South
In the South, existing-home sales rose 8.2 percent to an annual level of 1.99 million in March but are 1.0 percent below March 2010. The median price in the South was $138,200, down 6.6 percent from a year ago.
West
Existing-home sales in the West slipped 0.8 percent to an annual pace of 1.25 million in March and are 3.1 percent below a year ago. The median price in the West was $192,100, which is 11.2 percent lower than March 2010.
—NAR
Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, increased 3.7 percent to a seasonally adjusted annual rate of 5.10 million in March from an upwardly revised 4.92 million in February, but are 6.3 percent below the 5.44 million pace in March 2010. Sales were at elevated levels from March through June of 2010 in response to the home buyer tax credit.
Lawrence Yun, NAR chief economist, expects the improving sales pattern to continue. “Existing-home sales have risen in six of the past eight months, so we’re clearly on a recovery path,” he said. “With rising jobs and excellent affordability conditions, we project moderate improvements into 2012, but not every month will show a gain – primarily because some buyers are finding it too difficult to obtain a mortgage. For those fortunate enough to qualify for financing, monthly mortgage payments as a percent of income have been at record lows.”
NAR’s housing affordability index shows the typical monthly mortgage principal and interest payment for the purchase of a median-priced existing home is only 13 percent of gross household income, the lowest since records began in 1970.
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 4.84 percent in March, down from 4.95 percent in February; the rate was 4.97 percent in March 2010.
Data from Freddie Mac and Fannie Mae show requirements to obtain conventional mortgages have been tightened, with the average credit score rising to about 760 in the current market from nearly 720 in 2007; for FHA loans the average credit score is around 700, up from just over 630 in 2007.
“Although home sales are coming back without a federal stimulus, sales would be notably stronger if mortgage lending would return to the normal, safe standards that were in place a decade ago – before the loose lending practices that created the unprecedented boom and bust cycle,” Yun explained.
“Given that FHA and VA government-backed loan programs turned a modest profit over to the U.S. Treasury last year, and have never required a taxpayer bailout, we believe low-downpayment loans should continue to be available for those consumers who have demonstrated financial responsibility and are willing to stay well within their budget. Raising the downpayment requirement would unnecessarily deny credit to many worthy middle-class families and veterans,” Yun said.
A parallel NAR practitioner survey shows first-time buyers purchased 33 percent of homes in March, compared with 34 percent of homes in February; they were 44 percent in March 2010.
Record Share of All-Cash Sales
All-cash sales were at a record market share of 35 percent in March, up from 33 percent in February; they were 27 percent in March 2010. Investors accounted for 22 percent of sales activity in March, up from 19 percent in February; they were 19 percent in March 2010. The balance of sales were to repeat buyers.
The national median existing-home price for all housing types was $159,600 in March, down 5.9 percent from March 2010. Distressed homes – typically sold at discounts in the vicinity of 20 percent – accounted for a 40 percent market share in March, up from 39 percent in February and 35 percent in March 2010.
NAR President Ron Phipps said some renters are looking to home ownership as a hedge against inflation. “The typical buyer today plans to stay in a home for 10 years, while rents are projected to rise at faster rates over the next few years,” he said. “As buyers gain more financial security, the advantages of home ownership become more obvious. Rents will continue to trend up, especially in comparison with a fixed-rate loan which provides financial stability and gradual accumulation of equity over time.”
Total housing inventory at the end of March rose 1.5 percent to 3.55 million existing homes available for sale, which represents an 8.4-month supply at the current sales pace, compared with a 8.5-month supply in February.
Single-family home sales rose 4.0 percent to a seasonally adjusted annual rate of 4.45 million in March from 4.28 million in February, but are 6.5 percent below the 4.76 million level in March 2010. The median existing single-family home price was $160,500 in March, down 5.3 percent from a year ago.
Existing condominium and co-op sales increased 1.6 percent to a seasonally adjusted annual rate of 650,000 in March from 640,000 in February, but are 4.1 percent below the 678,000-unit pace one year ago. The median existing condo price was $153,100 in March, which is 10.1 percent below March 2010.
Regions: Northeast
Regionally, existing-home sales in the Northeast rose 3.9 percent to an annual level of 800,000 in March but are 12.1 percent below March 2010. The median price in the Northeast was $232,900, down 3.0 percent from a year ago.
Midwest
Existing-home sales in the Midwest increased 1.0 percent in March to a pace of 1.06 million but are 13.1 percent lower than a year ago. The median price in the Midwest was $126,100, which is 7.1 percent below March 2010.
South
In the South, existing-home sales rose 8.2 percent to an annual level of 1.99 million in March but are 1.0 percent below March 2010. The median price in the South was $138,200, down 6.6 percent from a year ago.
West
Existing-home sales in the West slipped 0.8 percent to an annual pace of 1.25 million in March and are 3.1 percent below a year ago. The median price in the West was $192,100, which is 11.2 percent lower than March 2010.
—NAR
Tuesday, April 19, 2011
New-Home Building On the Rise
New home construction is picking up just in time for the spring buying season, according to the latest new-home report released on Tuesday from the Commerce Department. Builders broke ground on more new homes in March than in the last six months.
Another bright spot: Building permits, an indicator of future construction, increased 11.2 percent for the month.
After a dismal winter performance, new-home building bounced back 7.2 percent in March from February to a seasonally adjusted 549,000 units. Yet, the sector is still far below the 1.2 million units a year that economists consider a healthy building pace.
The new-home sector has faced hard times in recent years, competing against a flood of foreclosures and short sales on the market that have pushed housing prices down. In February, construction fell to its lowest level in nearly two years, and requests for building permits to start new projects had dropped to a five-decade low in February.
Builder sentiment also remains low, according to Monday’s release of the National Association of Home Builders’ monthly index of industry sentiment for April.
Builders' views on the market had risen slightly in March to 17 in the index but in April fell back to 16, a level that it had remained at for four straight months prior to March. Any reading below 50 indicates negative sentiment about the market, a level the index hasn’t been above since April 2006.
Source: “U.S. Housing Starts, Permits Rebounded in March,” Associated Press (April 19, 2011) and “Builder Outlook for Home Buying Falls Slightly
Another bright spot: Building permits, an indicator of future construction, increased 11.2 percent for the month.
After a dismal winter performance, new-home building bounced back 7.2 percent in March from February to a seasonally adjusted 549,000 units. Yet, the sector is still far below the 1.2 million units a year that economists consider a healthy building pace.
The new-home sector has faced hard times in recent years, competing against a flood of foreclosures and short sales on the market that have pushed housing prices down. In February, construction fell to its lowest level in nearly two years, and requests for building permits to start new projects had dropped to a five-decade low in February.
Builder sentiment also remains low, according to Monday’s release of the National Association of Home Builders’ monthly index of industry sentiment for April.
Builders' views on the market had risen slightly in March to 17 in the index but in April fell back to 16, a level that it had remained at for four straight months prior to March. Any reading below 50 indicates negative sentiment about the market, a level the index hasn’t been above since April 2006.
Source: “U.S. Housing Starts, Permits Rebounded in March,” Associated Press (April 19, 2011) and “Builder Outlook for Home Buying Falls Slightly
More Americans Flock to the South, West
More Americans are heading to the South and West, according to the 2010 U.S. Census. The latest census data shows the largest population growth in the last decade occurred in areas of the South and West, as Northeast and Midwest residents continued to head toward warmer and less expensive Sun Belt hot-spots.
Populations in the South and West grew 14.3 percent and 13.8 percent, respectively, from 2000 to 2010, while Northeast and Midwest areas grew by only 3.2 percent and 3.9 percent, according to the Census Bureau.
As such, the decade’s hottest housing markets also had the most rapid population growth, including Nevada (35.1 percent growth), Arizona (24.6 percent), and Florida (17.6 percent).
However, demographic factors likely will have less of an impact as it once did in the short-term in driving the housing market and prices, experts say.
Paul Bishop, vice president for research at the National Association of REALTORS®, says he expects much of the short-term housing activity to be mostly centered on low and high ends of the market, rather than driven by merely migration patterns. He says investors likely will continue to target highly discounted homes in growing Sun Belt cities as well as in shrinking Rust Belt areas. He also anticipates an increase in sales of expensive homes.
"The stock market has been doing pretty well, which benefits the wealthy," Bishop told Investor’s Business Daily. "And the wealthy can withstand bad economic times better than others."
Populations in the South and West grew 14.3 percent and 13.8 percent, respectively, from 2000 to 2010, while Northeast and Midwest areas grew by only 3.2 percent and 3.9 percent, according to the Census Bureau.
As such, the decade’s hottest housing markets also had the most rapid population growth, including Nevada (35.1 percent growth), Arizona (24.6 percent), and Florida (17.6 percent).
However, demographic factors likely will have less of an impact as it once did in the short-term in driving the housing market and prices, experts say.
Paul Bishop, vice president for research at the National Association of REALTORS®, says he expects much of the short-term housing activity to be mostly centered on low and high ends of the market, rather than driven by merely migration patterns. He says investors likely will continue to target highly discounted homes in growing Sun Belt cities as well as in shrinking Rust Belt areas. He also anticipates an increase in sales of expensive homes.
"The stock market has been doing pretty well, which benefits the wealthy," Bishop told Investor’s Business Daily. "And the wealthy can withstand bad economic times better than others."
Monday, April 18, 2011
5 'Most Innovative' Mobile Apps
PC World recently released its top picks for most innovative apps for 2011 — mobile apps for tablets and smartphones that have the potential of making your life easier. Here are five free apps that made the list for iPhone or Android:
1. Fring: An upcoming version of this app will offer free video group calls with up to four people at once. (A beta is currently available.)
Platform: Apple’s iOS, Android
Price: Free
2. UpSoundDown: You can put your phone on speakerphone mode automatically by just laying your phone down on a table or turning the phone upside down like you’re using it as a microphone. When you pick the phone back up, you’ll be able to use the handset again.
Platform: Android
Price: Free
3. Zite: This app learns what you like to read and then scans your Facebook and Twitter feeds for news based on your reading habits. It then populates a virtual magazine with content that is tailored to your reading habits.
Platform: Apple iOS
Price: Free
4. Adobe Photoshop Express: You can manipulate photos using this app’s simple features on your iPhone or iPad and then store your photos on the Internet to access from anywhere. Coming soon: Photoshop for iPad, which works like a desktop version of the Photoshop software, which includes layers and effect features (price to be determined for iPad version).
Platform: Apple iOS
Price: Free
5. iSwifter: iPad lovers will appreciate this app, which allows you to watch Flash videos and view Web site animations.
Platform: Apple iOS
Price: Free
Source: “The Top 15 Innovative Mobile Apps in 2011,” InfoWorld (April 2011)
1. Fring: An upcoming version of this app will offer free video group calls with up to four people at once. (A beta is currently available.)
Platform: Apple’s iOS, Android
Price: Free
2. UpSoundDown: You can put your phone on speakerphone mode automatically by just laying your phone down on a table or turning the phone upside down like you’re using it as a microphone. When you pick the phone back up, you’ll be able to use the handset again.
Platform: Android
Price: Free
3. Zite: This app learns what you like to read and then scans your Facebook and Twitter feeds for news based on your reading habits. It then populates a virtual magazine with content that is tailored to your reading habits.
Platform: Apple iOS
Price: Free
4. Adobe Photoshop Express: You can manipulate photos using this app’s simple features on your iPhone or iPad and then store your photos on the Internet to access from anywhere. Coming soon: Photoshop for iPad, which works like a desktop version of the Photoshop software, which includes layers and effect features (price to be determined for iPad version).
Platform: Apple iOS
Price: Free
5. iSwifter: iPad lovers will appreciate this app, which allows you to watch Flash videos and view Web site animations.
Platform: Apple iOS
Price: Free
Source: “The Top 15 Innovative Mobile Apps in 2011,” InfoWorld (April 2011)
House Flippers Return, Still Finding Profits
More investors are taking on the risk of flipping homes, despite falling home prices and sluggish real estate markets across the country. But investors say there are still profits to be made in the house flipping business.
Nearly 1 million homes were bought as investment properties in 2010, according to the National Association of REALTORS®, and a record number of buyers purchasing properties with cash currently are flooding the market.
Flipping homes for profit is easier in rising markets, but not many markets are reporting increases in home prices, analysts say. In Washington, D.C., Justin Konz of RestorationCapital says his clients are going through four of five properties a month and are making gross profit margins of 35 percent or higher.
Where to Find the Deals
Flippers mostly are finding their homes through foreclosures auctions, REOs, and short sales. They seek homes at rock-bottom prices that will have low fix-up costs, no more than about 5 percent or 10 percent of the purchase price.
In Florida, where investors are finding it more difficult to flip homes because of the drastic drop in prices and high inventories, flippers are targeting inner-city properties that are being sold at steep discounts. For example, some of houses are selling for $30,000 when they once sold for $200,000.
Perry Henderson, a real estate agent and investor in Austin, Texas, says the biggest opportunities in flipping are the “ugly” houses that have lingered on the market or "old houses that somebody's grandma lived in for 40 years and didn't do anything to. Now, she's passed away and her family wants to sell quickly."
Real estate investor Brian Fuller, who with partners buys and sells more than 200 properties a year in the San Diego area, says he’s drawn to the “biggest eyesore on the block.” He says they then “ turn it into the best looking house there. We're helping pull up values in the neighborhood."
Nearly 1 million homes were bought as investment properties in 2010, according to the National Association of REALTORS®, and a record number of buyers purchasing properties with cash currently are flooding the market.
Flipping homes for profit is easier in rising markets, but not many markets are reporting increases in home prices, analysts say. In Washington, D.C., Justin Konz of RestorationCapital says his clients are going through four of five properties a month and are making gross profit margins of 35 percent or higher.
Where to Find the Deals
Flippers mostly are finding their homes through foreclosures auctions, REOs, and short sales. They seek homes at rock-bottom prices that will have low fix-up costs, no more than about 5 percent or 10 percent of the purchase price.
In Florida, where investors are finding it more difficult to flip homes because of the drastic drop in prices and high inventories, flippers are targeting inner-city properties that are being sold at steep discounts. For example, some of houses are selling for $30,000 when they once sold for $200,000.
Perry Henderson, a real estate agent and investor in Austin, Texas, says the biggest opportunities in flipping are the “ugly” houses that have lingered on the market or "old houses that somebody's grandma lived in for 40 years and didn't do anything to. Now, she's passed away and her family wants to sell quickly."
Real estate investor Brian Fuller, who with partners buys and sells more than 200 properties a year in the San Diego area, says he’s drawn to the “biggest eyesore on the block.” He says they then “ turn it into the best looking house there. We're helping pull up values in the neighborhood."
Thursday, April 14, 2011
Rising Rents Make Rentals Less Appealing
Apartment bargains once dominated the housing market, but those bargains have slowly faded away. As vacancies decrease and rents rise, renters are finding fewer deals.
Analysts expect vacancies to decrease even more and rents to continue to rise through 2013, as the economy continues to improve.
Rental activity recorded its best start for the year since 1999, according to Reis Inc. Vacancy rates have fallen to mid-2008 levels and rents have increased for the past five quarters, now averaging $991 per month nationwide.
Renters are finding the fewest deals along the coasts, such as New York, Washington, D.C., Boston, Los Angeles, San Francisco, Seattle, and San Jose, Calif. These cities are experiencing low vacancy rates. Also, a boost in these cities’ economies is sending rents higher. New York City alone has seen double rent increases compared to the national average and has the lowest vacancy rate in the nation.
The best rental deals can be found in Las Vegas, Tucson, Ariz., Phoenix, and several cities in Florida--all cities where unemployment and foreclosures remain high. According to Reis, Las Vegas was the only city to see rents fall last year.
However, analysts say that bargains across the country are getting fewer, and renters should expect to see an increase in rents over the next three years.
Analysts expect vacancies to decrease even more and rents to continue to rise through 2013, as the economy continues to improve.
Rental activity recorded its best start for the year since 1999, according to Reis Inc. Vacancy rates have fallen to mid-2008 levels and rents have increased for the past five quarters, now averaging $991 per month nationwide.
Renters are finding the fewest deals along the coasts, such as New York, Washington, D.C., Boston, Los Angeles, San Francisco, Seattle, and San Jose, Calif. These cities are experiencing low vacancy rates. Also, a boost in these cities’ economies is sending rents higher. New York City alone has seen double rent increases compared to the national average and has the lowest vacancy rate in the nation.
The best rental deals can be found in Las Vegas, Tucson, Ariz., Phoenix, and several cities in Florida--all cities where unemployment and foreclosures remain high. According to Reis, Las Vegas was the only city to see rents fall last year.
However, analysts say that bargains across the country are getting fewer, and renters should expect to see an increase in rents over the next three years.
Wednesday, April 13, 2011
4 Financial Reasons to Buy Now
As Dean Hartman said last week, the purchase of a home is a personal decision. However, we want to give everyone four great financial reasons why you should not wait before taking the plunge into homeownership.
Interest Rates Are Increasing
Interest rates have increased almost 3/4 of a point in the last six months. Most experts expect rates to continue to increase through the year. Interest rates along with price determine the overall cost of a home. Even with prices softening, if interest rates rise, it may be less expensive to buy now rather than wait.
The 30-Year Mortgage May Disappear
There has been much debate regarding government’s role in providing support for homeownership. There are several experts who believe If Fannie Mae and Freddie Mac’s roles are eliminated, or even limited, it may be the end to the 30-year mortgage. This concern is addressed in MSN Real Estate’s Is it curtains for the 30-year mortgage?
QRM Requirements Could Be Much More Stringent
Here are proposed changes to the requirements for a ‘qualified residential mortgage’:
Certain mortgage types would be eliminated
You would need to put a minimum of 20% down
You would need a minimum 690 FICO score
The ratios of income to both the mortgage payment and overall debt would become much more conservative (28% and 36%)
There would be loans available to purchasers who don’t qualify under the new rules. However, they will probably be more expensive to the buyer (both in rate and costs).
Rents Are Expected to Increase
The supply of available rentals is decreasing and the demand is increasing. That will lead to an increase in rental costs throughout the year. The Wall Street Journal this week quoted a report by Reis, Inc:
“Expect vacancies to continue declining, and rents rising through the rest of 2011 at an even faster pace.”
Bottom Line
You may be waiting on the sidelines to see if prices will continue to depreciate before you purchase a home. The mortgage expense is a major piece in the overall financial picture of homeownership. Make sure you consider it when timing your decision.
Interest Rates Are Increasing
Interest rates have increased almost 3/4 of a point in the last six months. Most experts expect rates to continue to increase through the year. Interest rates along with price determine the overall cost of a home. Even with prices softening, if interest rates rise, it may be less expensive to buy now rather than wait.
The 30-Year Mortgage May Disappear
There has been much debate regarding government’s role in providing support for homeownership. There are several experts who believe If Fannie Mae and Freddie Mac’s roles are eliminated, or even limited, it may be the end to the 30-year mortgage. This concern is addressed in MSN Real Estate’s Is it curtains for the 30-year mortgage?
QRM Requirements Could Be Much More Stringent
Here are proposed changes to the requirements for a ‘qualified residential mortgage’:
Certain mortgage types would be eliminated
You would need to put a minimum of 20% down
You would need a minimum 690 FICO score
The ratios of income to both the mortgage payment and overall debt would become much more conservative (28% and 36%)
There would be loans available to purchasers who don’t qualify under the new rules. However, they will probably be more expensive to the buyer (both in rate and costs).
Rents Are Expected to Increase
The supply of available rentals is decreasing and the demand is increasing. That will lead to an increase in rental costs throughout the year. The Wall Street Journal this week quoted a report by Reis, Inc:
“Expect vacancies to continue declining, and rents rising through the rest of 2011 at an even faster pace.”
Bottom Line
You may be waiting on the sidelines to see if prices will continue to depreciate before you purchase a home. The mortgage expense is a major piece in the overall financial picture of homeownership. Make sure you consider it when timing your decision.
Tuesday, April 12, 2011
Survey: Americans Still Optimistic About Housing
A sluggish real estate market hasn’t shaken the confidence of the public in how it views home ownership, according to a new study by the Pew Research Center. Eight in 10 adults (or 81 percent) say owning a home is the best long-term investment a person can make, according to the Pew study of about 2,000 adults conducted in March.
“Home owners are not blind to what has happened to home prices, nor are they expecting a speedy recovery,” according to the Pew study. In fact, of the home owners surveyed, about half said their home is worth less now than before the recession, while 31 percent said their home’s value has stayed the same.
Nevertheless, 82 percent of home owners who say their home is worth less now than before the recession either strongly or somewhat agree that home ownership is the best long-term investment a person can make, according to the survey.
The value of home ownership even continues to emerge on top when home owners were surveyed and asked to rate the importance of four long-term financial goals. Home ownership and "being able to live comfortably in retirement" rated the highest--viewed as either extremely or very important by 80 percent of respondents.
Yet, their optimism about home ownership doesn’t mean they're completely happy with their current home. Nearly a quarter of all home owners surveyed said that if they had it to do all over again, they would not buy their current home. Most of the “buyer’s remorse” complaints were about the home itself or its location. Only 31 percent of those surveyed cited financial factors, such as the home losing value or their own changing financial situation.
“Home owners are not blind to what has happened to home prices, nor are they expecting a speedy recovery,” according to the Pew study. In fact, of the home owners surveyed, about half said their home is worth less now than before the recession, while 31 percent said their home’s value has stayed the same.
Nevertheless, 82 percent of home owners who say their home is worth less now than before the recession either strongly or somewhat agree that home ownership is the best long-term investment a person can make, according to the survey.
The value of home ownership even continues to emerge on top when home owners were surveyed and asked to rate the importance of four long-term financial goals. Home ownership and "being able to live comfortably in retirement" rated the highest--viewed as either extremely or very important by 80 percent of respondents.
Yet, their optimism about home ownership doesn’t mean they're completely happy with their current home. Nearly a quarter of all home owners surveyed said that if they had it to do all over again, they would not buy their current home. Most of the “buyer’s remorse” complaints were about the home itself or its location. Only 31 percent of those surveyed cited financial factors, such as the home losing value or their own changing financial situation.
Monday, April 11, 2011
3 Tips for Smart Vacation-Home Buying
Vacation homes are offering plenty of good deals at the moment. In many second-home hot spots, prices are still close to five-year lows. For example, single-home prices in second-home hotspot Napa, Calif., are down 47 percent from their peak in 2006, according to Fiserv.
If you have a buyer looking to cash in on vacation- or second-home values, an article at CNNMoney.com recently offered the following tips:
1. Is it rentable? Even for buyers who aren't planning to rent it out, they may still want to consider the rental aspects of the property, particularly since a home's rental potential can affect its resale value, says Catherine Jeffrey, a real estate professional in Fredericksburg, Texas. Buyers will want to check with the homeowners association or township to ensure that short-term rentals are allowed.
2. How do you plan to use the home? Your loan rate will depend on how you use the property. For example, if buyers intend to use the property primarily as a second home, they’ll pay about the same mortgage rate as a primary residence, says HSH Associates vice president Keith Gumbinger. However, if they plan to get rental income from the property, the property will be treated as an investment, which means they may need to pay as much as 25 percent for the down payment and pay up to one percentage point more in interest, Gumbinger says.
3. Are you eligible for the tax benefits? If the owners rent the house out for two weeks or less, they won't have to report income to the IRS, and they'll still be able to deduct property taxes and mortgage interest, experts say. If the owners stay in the home for less than two weeks or has 10 percent rental days, whichever is greater, they'll be able to deduct operating costs, such as cleaning and maintenance fees, as well as the interest and property tax, says Rick Shapiro, a CPA in West Hartford, Conn. He suggests home owners talk with a tax expert to find out what tax benefits they are eligible for.
If you have a buyer looking to cash in on vacation- or second-home values, an article at CNNMoney.com recently offered the following tips:
1. Is it rentable? Even for buyers who aren't planning to rent it out, they may still want to consider the rental aspects of the property, particularly since a home's rental potential can affect its resale value, says Catherine Jeffrey, a real estate professional in Fredericksburg, Texas. Buyers will want to check with the homeowners association or township to ensure that short-term rentals are allowed.
2. How do you plan to use the home? Your loan rate will depend on how you use the property. For example, if buyers intend to use the property primarily as a second home, they’ll pay about the same mortgage rate as a primary residence, says HSH Associates vice president Keith Gumbinger. However, if they plan to get rental income from the property, the property will be treated as an investment, which means they may need to pay as much as 25 percent for the down payment and pay up to one percentage point more in interest, Gumbinger says.
3. Are you eligible for the tax benefits? If the owners rent the house out for two weeks or less, they won't have to report income to the IRS, and they'll still be able to deduct property taxes and mortgage interest, experts say. If the owners stay in the home for less than two weeks or has 10 percent rental days, whichever is greater, they'll be able to deduct operating costs, such as cleaning and maintenance fees, as well as the interest and property tax, says Rick Shapiro, a CPA in West Hartford, Conn. He suggests home owners talk with a tax expert to find out what tax benefits they are eligible for.
Investors, Foreign Buyers Cashing in on Market
With affordability at an all-time high, the number of investors and international buyers taking advantage of bargains has reached a record number in all-cash purchases — and some experts predict that number will only grow higher.
A record 33 percent of existing-home sales were made to cash buyers in February, the National Association of REALTORS® recently reported. The proportion of cash deals could hit 40 percent by the end of this year, predicts Thomas Popik, research director for Campbell Communications in Washington, which conducts monthly surveys of 3,000 real estate brokers.
"Lenders have only been willing to lend to the cream of the crop in terms of credit scores," says Walter Molony, an NAR spokesman. "As a result, you're seeing a depressed level of traditional buyers."
But it’s not just investors moving in: Many of these cash deals are also coming from a growing number of international buyers. About 55 percent of international buyers paid cash for their U.S. homes, according to an April 2010 report by NAR.
The Cash Buyer Advantage?
Cities where about half of all purchases were done with cash include Detroit, Miami, Las Vegas, and Phoenix, in which prices have dropped considerably and foreclosure rates remain high, says Oliver Chang, a housing market analyst with Morgan Stanley.
Short sales and foreclosures accounted for 59 percent of last year's cash sales, according to a report by Morgan Stanley.
"You buy the house at a discount with cash. Then you flip it almost immediately to the first-time home buyer who's using a mortgage, simply because they were not able to buy at the foreclosure sale," Chang says.
Lenders increasingly reject mortgage applications for foreclosed properties because appraisals are often too far below the agreed-upon price or the transactions take too long to close, says Popik.
With tightened lending standards, cash purchases can provide buyers with more leverage and allow buyers to close properties more quickly.
Mike Simmons Troy, a Detroit real estate investor, says that if a house is listed at $40,000 and a buyer offers $35,000 cash, "nine times out of 10, the bank will take the cash."
Source: “Cashing in on Bargains,” Detroit Free Press (April 10, 2011)
A record 33 percent of existing-home sales were made to cash buyers in February, the National Association of REALTORS® recently reported. The proportion of cash deals could hit 40 percent by the end of this year, predicts Thomas Popik, research director for Campbell Communications in Washington, which conducts monthly surveys of 3,000 real estate brokers.
"Lenders have only been willing to lend to the cream of the crop in terms of credit scores," says Walter Molony, an NAR spokesman. "As a result, you're seeing a depressed level of traditional buyers."
But it’s not just investors moving in: Many of these cash deals are also coming from a growing number of international buyers. About 55 percent of international buyers paid cash for their U.S. homes, according to an April 2010 report by NAR.
The Cash Buyer Advantage?
Cities where about half of all purchases were done with cash include Detroit, Miami, Las Vegas, and Phoenix, in which prices have dropped considerably and foreclosure rates remain high, says Oliver Chang, a housing market analyst with Morgan Stanley.
Short sales and foreclosures accounted for 59 percent of last year's cash sales, according to a report by Morgan Stanley.
"You buy the house at a discount with cash. Then you flip it almost immediately to the first-time home buyer who's using a mortgage, simply because they were not able to buy at the foreclosure sale," Chang says.
Lenders increasingly reject mortgage applications for foreclosed properties because appraisals are often too far below the agreed-upon price or the transactions take too long to close, says Popik.
With tightened lending standards, cash purchases can provide buyers with more leverage and allow buyers to close properties more quickly.
Mike Simmons Troy, a Detroit real estate investor, says that if a house is listed at $40,000 and a buyer offers $35,000 cash, "nine times out of 10, the bank will take the cash."
Source: “Cashing in on Bargains,” Detroit Free Press (April 10, 2011)
Thursday, April 7, 2011
Gov't Shutdown Would Hurt Housing
The Obama administration's threats of a government shutdown if lawmakers can’t soon agree on a budget could hamper the housing market during its peak home buying season.
A government shutdown would limit government-guaranteed mortgages with the Federal Housing Administration halting its guarantees on loans. The FHA accounts for 30 percent of the mortgage market.
The Obama administration warned that the impact of a shutdown to the real estate market would be more severe than the 1995 government shutdown, which lasted 21 days. The FHA accounts for nearly three times the mortgage market than it did back then.
To avoid a shutdown, the administration has given Congressional negotiators until Friday to agree on a budget that would set spending limits through September.
Besides the impact to housing, a government shutdown would affect a number of government programs and services. For example, the processing of tax returns would stop and the government would have to cut staff across the executive branch, possibly 800,000 workers.
A government shutdown would limit government-guaranteed mortgages with the Federal Housing Administration halting its guarantees on loans. The FHA accounts for 30 percent of the mortgage market.
The Obama administration warned that the impact of a shutdown to the real estate market would be more severe than the 1995 government shutdown, which lasted 21 days. The FHA accounts for nearly three times the mortgage market than it did back then.
To avoid a shutdown, the administration has given Congressional negotiators until Friday to agree on a budget that would set spending limits through September.
Besides the impact to housing, a government shutdown would affect a number of government programs and services. For example, the processing of tax returns would stop and the government would have to cut staff across the executive branch, possibly 800,000 workers.
Wednesday, April 6, 2011
OK. You Win. Stop Listening to Real Estate Agents!
Each day we attempt to give truthful insight on the current housing market. If we report what is perceived as negative news, some in the real estate community come down on us hard. However, when we explain that we think now is a great time to buy, we get an avalanche of feedback from the general public attacking us for being nothing more than puppets for real estate agents across the country. Today, we don’t want you to listen to what we think about the opportunities that exist for buyers in this market. Instead, we want to report on what some members of the investment community are saying.
The Wall Street Journal
Jim Woods wrote an article earlier this year for Market Watch, part of the Wall Street Journal’s digital network. Its title: Why your best investment is a house. Mr. Woods compared the investment potential of real estate against other asset classes such as stocks and precious metals. Here was his conclusion.
One reason your best investment right now could be a home has to do with the relative upside of getting in on an asset class while it’s at the bottom versus buying into other asset classes that could be near a top. Consider for a moment the tremendous upside we’ve seen in stocks, precious metals and agricultural commodities over the past 12 months…
If you’re a long-term investor looking to put money to work, now is not really the best time to get into any of these three asset classes. However, with home sales starting to improve, and with prices now possibly forming a bottom, real estate could well be the asset class that represents the best low-risk buying opportunity out there today…
Mr. Woods went on to talk about the financing portion of the purchase:
Yes, mortgage rates still are near historical lows, but if we see these rates rise, then the cost of a new home could climb significantly. So, now could really be the best time to pull the trigger on that home purchase — and it could also be your best investment right now.
Fortune Magazine
Shawn Tully, senior editor at large for Fortune penned an article last week which was titled: Real estate: It’s time to buy again. In the article, Mr. Tully explained:
Forget stocks. Don’t bet on gold. After four years of plunging home prices, the most attractive asset class in America is housing.
Let’s state it simply and forcibly: Housing is back. Two basic factors are laying the foundation for dramatic recovery in residential real estate. The first is the historic drop in new construction … The second is a steep decline in prices, on the order of 30% nationwide since 2006, and as much as 55% in the hardest-hit markets. The story of this downturn has been an astonishing flight from the traditional American approach of buying new houses to an embrace of renting. But the new affordability will gradually lure Americans back to buying homes. And the return of the homeowner will start raising prices in many markets this year.
Bottom Line
Neither of the two media sources mentioned above has ever been accused of cuddling up to the National Association of Realtors. However, both have come to the same conclusion. It’s time to buy real estate. Perhaps we should listen to them.
The Wall Street Journal
Jim Woods wrote an article earlier this year for Market Watch, part of the Wall Street Journal’s digital network. Its title: Why your best investment is a house. Mr. Woods compared the investment potential of real estate against other asset classes such as stocks and precious metals. Here was his conclusion.
One reason your best investment right now could be a home has to do with the relative upside of getting in on an asset class while it’s at the bottom versus buying into other asset classes that could be near a top. Consider for a moment the tremendous upside we’ve seen in stocks, precious metals and agricultural commodities over the past 12 months…
If you’re a long-term investor looking to put money to work, now is not really the best time to get into any of these three asset classes. However, with home sales starting to improve, and with prices now possibly forming a bottom, real estate could well be the asset class that represents the best low-risk buying opportunity out there today…
Mr. Woods went on to talk about the financing portion of the purchase:
Yes, mortgage rates still are near historical lows, but if we see these rates rise, then the cost of a new home could climb significantly. So, now could really be the best time to pull the trigger on that home purchase — and it could also be your best investment right now.
Fortune Magazine
Shawn Tully, senior editor at large for Fortune penned an article last week which was titled: Real estate: It’s time to buy again. In the article, Mr. Tully explained:
Forget stocks. Don’t bet on gold. After four years of plunging home prices, the most attractive asset class in America is housing.
Let’s state it simply and forcibly: Housing is back. Two basic factors are laying the foundation for dramatic recovery in residential real estate. The first is the historic drop in new construction … The second is a steep decline in prices, on the order of 30% nationwide since 2006, and as much as 55% in the hardest-hit markets. The story of this downturn has been an astonishing flight from the traditional American approach of buying new houses to an embrace of renting. But the new affordability will gradually lure Americans back to buying homes. And the return of the homeowner will start raising prices in many markets this year.
Bottom Line
Neither of the two media sources mentioned above has ever been accused of cuddling up to the National Association of Realtors. However, both have come to the same conclusion. It’s time to buy real estate. Perhaps we should listen to them.
Help a Property Appeal to More Buyers
When real estate agent Kathryn Madison listed a vintage home that looks like a traditional ranch house on the outside but meets all the criteria of Midcentury Modern on the inside, she knew some buyers would be put off by the fact that many of the fixtures were the originals from when the home was built in 1948.
She says there is a museum quality to the home; and while some buyers are able to appreciate it, they also cannot bring themselves to remodel it. However, Madison wanted to cater to all three buyer types -- those who would love the home as is, those who would be respectful to the era in their improvements, and those who would alter the home to meet their needs.
She took hundreds of photos of the home and posted them online, many of the photos of the property without furnishings for a virtual staging tool that would enable buyers to see how more contemporary features could spruce up the home.
Such a move helped Madison sell it within a matter of months.
Source: "The Art of Selling a Vintage Home," Inman News (04/04/11)
She says there is a museum quality to the home; and while some buyers are able to appreciate it, they also cannot bring themselves to remodel it. However, Madison wanted to cater to all three buyer types -- those who would love the home as is, those who would be respectful to the era in their improvements, and those who would alter the home to meet their needs.
She took hundreds of photos of the home and posted them online, many of the photos of the property without furnishings for a virtual staging tool that would enable buyers to see how more contemporary features could spruce up the home.
Such a move helped Madison sell it within a matter of months.
Source: "The Art of Selling a Vintage Home," Inman News (04/04/11)
Tuesday, April 5, 2011
Distress Sales Used as Comps: Right or Wrong?
Should residential appraisals use distress sales as comparables? It’s a thorny question that some states are weighing.
In a recent Realty Times article, the author notes that in a normal market using distress sales as comparables is often viewed as inappropriate because such sales are unusual and do not represent the standard market.
However, nowadays in many markets, distress sales may comprise 30 percent to 40 percent of current sales activity and may be impossible to ignore.
Four states are considering laws that would affect how appraisers should consider the sale of distressed properties. Here’s a breakdown of legislation those states are considering:
Illinois: A proposed law says that an appraiser may not "use as a comparable sale the sale price for a residential property that was sold at a judicial sale at any time within 12 months after the date of the judicial sale… ." The Illinois law would sunset after five years, according to the Realty Times article.
Missouri: Legislation says that appraisers must comply with the Uniform Standards of Professional Appraisal Practice (USPAP), but not in cases when a property has been foreclosed. “An appraiser shall not utilize the foreclosure price as a comparable property when developing an appraisal," the legislation states.
Maryland: The proposed law is somewhat vague, but it says in cases of duress or unusual circumstances "such as a foreclosure sale or short sale," the appraiser is to "consider" the property's history (e.g. whether it's being sold at auction or as a short sale) and "consider" the seller's motivation, such as if the home owner was seeking to avoid foreclosure.
Nevada: A pending law covers both short sales and foreclosures: "Except as otherwise required by federal law or regulation, an appraiser shall not include as a comparable sale in an appraisal a short sale or a sale of property which was the subject of a foreclosure sale.”
Appraisers are required to comply with the Uniform Standards of Professional Appraisal Practice guidelines for weighing comparables in federal transactions, which "mandates that appraisers must analyze such comparable sales as are available. Further, the standard cannot be voided by a state or local government." That said, a recent article at Appraiser News Online raises the issue that appraisers have a difficult decision to make when their state has different regulations than USPAP when it comes to weighing distressed sales.
In a recent Realty Times article, the author notes that in a normal market using distress sales as comparables is often viewed as inappropriate because such sales are unusual and do not represent the standard market.
However, nowadays in many markets, distress sales may comprise 30 percent to 40 percent of current sales activity and may be impossible to ignore.
Four states are considering laws that would affect how appraisers should consider the sale of distressed properties. Here’s a breakdown of legislation those states are considering:
Illinois: A proposed law says that an appraiser may not "use as a comparable sale the sale price for a residential property that was sold at a judicial sale at any time within 12 months after the date of the judicial sale… ." The Illinois law would sunset after five years, according to the Realty Times article.
Missouri: Legislation says that appraisers must comply with the Uniform Standards of Professional Appraisal Practice (USPAP), but not in cases when a property has been foreclosed. “An appraiser shall not utilize the foreclosure price as a comparable property when developing an appraisal," the legislation states.
Maryland: The proposed law is somewhat vague, but it says in cases of duress or unusual circumstances "such as a foreclosure sale or short sale," the appraiser is to "consider" the property's history (e.g. whether it's being sold at auction or as a short sale) and "consider" the seller's motivation, such as if the home owner was seeking to avoid foreclosure.
Nevada: A pending law covers both short sales and foreclosures: "Except as otherwise required by federal law or regulation, an appraiser shall not include as a comparable sale in an appraisal a short sale or a sale of property which was the subject of a foreclosure sale.”
Appraisers are required to comply with the Uniform Standards of Professional Appraisal Practice guidelines for weighing comparables in federal transactions, which "mandates that appraisers must analyze such comparable sales as are available. Further, the standard cannot be voided by a state or local government." That said, a recent article at Appraiser News Online raises the issue that appraisers have a difficult decision to make when their state has different regulations than USPAP when it comes to weighing distressed sales.
Monday, April 4, 2011
Flipping Foreclosures Becomes New Game
More investors are finding a sweet spot in flipping foreclosures, but it’s not the same type of house flipping seen during the real estate boom.
During the housing boom, investors would take advantage of skyrocketing real estate prices and loose lending regulations by buying a property, remodeling, and then selling it for profit.
Today’s flippers are buying at ultra-low prices — mostly in cash deals — and are doing mostly only minor repairs, such as repainting, replacing appliances, and sprucing up the landscaping. Their profits aren’t as large when they sell, but they may sell more properties in a year, says Penny Boling, the broker-in-charge of Century 21 Boling and Associates in Myrtle Beach.
The 'Street Sweepers'
Keith Gamble has made foreclosure flipping a full-time job. He purchases properties at a monthly foreclosure sale and usually has about four properties at any given time.
“Some people’s bad fortune is other people’s opportunity,” Gamble says. “I know that sounds callous — I know people doing what I’m doing at the courthouse each month are there to take advantage of that opportunity, but I also feel we provide a backstop to the market.”
The flippers are often taking the neighborhood’s blight and helping to fix up the homes that had been badly trashed from the previous owner. Boling says the investors’ abilities to also pay cash will help the market get through the abundant foreclosures that are plaguing sales.
“They’re kind of like the street sweepers,” Boling says of the property flippers. “They’re part of the cleanup committee of this marketplace.”
During the housing boom, investors would take advantage of skyrocketing real estate prices and loose lending regulations by buying a property, remodeling, and then selling it for profit.
Today’s flippers are buying at ultra-low prices — mostly in cash deals — and are doing mostly only minor repairs, such as repainting, replacing appliances, and sprucing up the landscaping. Their profits aren’t as large when they sell, but they may sell more properties in a year, says Penny Boling, the broker-in-charge of Century 21 Boling and Associates in Myrtle Beach.
The 'Street Sweepers'
Keith Gamble has made foreclosure flipping a full-time job. He purchases properties at a monthly foreclosure sale and usually has about four properties at any given time.
“Some people’s bad fortune is other people’s opportunity,” Gamble says. “I know that sounds callous — I know people doing what I’m doing at the courthouse each month are there to take advantage of that opportunity, but I also feel we provide a backstop to the market.”
The flippers are often taking the neighborhood’s blight and helping to fix up the homes that had been badly trashed from the previous owner. Boling says the investors’ abilities to also pay cash will help the market get through the abundant foreclosures that are plaguing sales.
“They’re kind of like the street sweepers,” Boling says of the property flippers. “They’re part of the cleanup committee of this marketplace.”
Urban Areas See Jump in Young Buyers
Living downtown is becoming increasingly appealing to college-educated 20- and 30-somethings.
In two-thirds of the country's 51 largest cities, the college-educated population in the past decade has grown twice as fast within 3 miles of urban centers when compared to the rest of the metro area, the USA Today reports. That is a jump of 26 percent, on average, compared with 13 percent in other parts.
Young adults with higher education, in particular, seem to be showing a preference for urban living. Young adults with a four-year degree are about 94 percent more likely to live near urban neighborhoods than less-educated young professionals. (In 2000, that number was about 61 percent.)
Even floundering downtowns are attracting more young people. For example, Detroit, which has faced a 25 percent drop in its population since 2000, has added 59 percent (or 2,000) young and educated residents during that time, according to Impresa Inc., an economic consulting firm.
Looking to keep the young vibe going strong, Detroit even has recently launched a campaign — ”15 by 15” — to bring 15,000 young, educated professionals to live in the downtown by 2015. To do that, they are offering cash incentives: A $25,000 forgivable loan to buy a home in downtown and stay there for at least five years or $3,500 on a two-year lease.
In Cleveland — another hard-hit metro area that has lost 17 percent of its population — young professionals are also re-emerging. Cleveland has increased its number of college-educated professionals between ages 25 to 34 who live downtown by 49 percent (or 1,300).
"Clearly, the next generation of Americans is looking for different kinds of lifestyles — walkable, art, culture, entertainment," Carol Coletta, who heads CEOs for Cities, told USA Today.
In two-thirds of the country's 51 largest cities, the college-educated population in the past decade has grown twice as fast within 3 miles of urban centers when compared to the rest of the metro area, the USA Today reports. That is a jump of 26 percent, on average, compared with 13 percent in other parts.
Young adults with higher education, in particular, seem to be showing a preference for urban living. Young adults with a four-year degree are about 94 percent more likely to live near urban neighborhoods than less-educated young professionals. (In 2000, that number was about 61 percent.)
Even floundering downtowns are attracting more young people. For example, Detroit, which has faced a 25 percent drop in its population since 2000, has added 59 percent (or 2,000) young and educated residents during that time, according to Impresa Inc., an economic consulting firm.
Looking to keep the young vibe going strong, Detroit even has recently launched a campaign — ”15 by 15” — to bring 15,000 young, educated professionals to live in the downtown by 2015. To do that, they are offering cash incentives: A $25,000 forgivable loan to buy a home in downtown and stay there for at least five years or $3,500 on a two-year lease.
In Cleveland — another hard-hit metro area that has lost 17 percent of its population — young professionals are also re-emerging. Cleveland has increased its number of college-educated professionals between ages 25 to 34 who live downtown by 49 percent (or 1,300).
"Clearly, the next generation of Americans is looking for different kinds of lifestyles — walkable, art, culture, entertainment," Carol Coletta, who heads CEOs for Cities, told USA Today.
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