Are Fixed-Rate Mortgages the Best Loan?

The think-tank Center for American Progress is questioning the premise that a 30-year, fixed-rate mortgage is the best option for homebuyers.

The reason mortgage-backed securities looked so attractive to banks is that they solved the problem of a mismatch between low rates on mortgages and higher rates for deposits. Banks worried about getting stuck earning low rates on a mortgage for 30 years while having to pay higher rates on bank accounts to attract depositors. Their answer: unload their mortgages to investors and let them worry about the profitability of the loans. Those investors hedged their bets by purchasing interest-rate swaps and other derivatives. Now, even Fannie Mae and Freddie Mac are having a hard time getting a handle on what those hedges are worth.

In other parts of the world, variable rates are the norm. While borrowers face the risk of rates going up, lenders at least can ensure the rates they pay to depositors don't outstrip what they receive in mortgage products. Homeownership rates in Canada and the European Union, where variable rate mortgages are the norm, are about what they are in the U.S.

And in any case, there are ways for borrowers to mitigate their interest-rate risk. They can take out loans with fixed initial period, for example. For homeowners who typically hold their homes for seven years, a five-year fixed rate provides considerable security.

If the country persists in choosing fixed-rate mortgages, some observers say, lenders might consider the Danish model where mortgages are financed through the bond market rather than a separate securities market. That's a system that has worked well for two centuries.

Source: The Wall Street Journal, James R. Hagerty (12/14/2009)

HUD Considers Tightening FHA Requirements

U.S. Housing and Urban Development Secretary Shaun Donovan on Wednesday asked Congress for authority to raise borrower premiums and down payments in order to bring the Federal Housing Administration’s reserves above the mandated 2 percent minimum.

The agency plans to reduce the maximum permissible seller concessions from 6 percent to 3 percent. The minimum borrower FICO score will be raised above the current 500, although the final number has not yet been determined. It also will likely increase the down payment to 5 percent, but that number hasn’t been decided either.

Donovan also wants lenders to take responsibility for losses associated with loans not underwritten to FHA standards and to be accountable for origination quality and compliance.

Critics said tightening up FHA could slow the housing recovery.

"What would cripple the housing market is the FHA changes its down payment requirement," said Rodney Anderson, a broker with Supreme Lending in Plano, Texas, the top individual originator of FHA loans in the country.

Source: Reuters News, Lucia Mutikani (12/02/2009)

Government Announces Short Sales Guidelines

The U.S. Treasury Department announced new guidelines this week designed to make short sales go more smoothly.
To qualify under these new guidelines:

• The property must be the home owner’s principal residence.

• The home owner must be delinquent on the mortgage or close to defaulting.

• The loan must have been made before Jan. 1, 2009, and be for less than 729,750.

• The borrowers’ total monthly mortgage payment must exceed 31 percent of their before-tax income.

Under the plan, borrowers will receive $1,500 from the government for selling homes for less than the amount of their mortgages. Mortgage-servicing companies will get $1,000 for each completed short sale. Second-mortgage holders can receive up to $3,000 of the sales proceeds in exchange for releasing their liens. Investors who hold the first mortgage can collect up to $1,000 from the government for allowing the payments.

Borrowers who complete a short sale under the program must be "fully released" from future liability for the debt, according to the guidelines.

Source: Associated Press, J.W. Elphinstone (11/01/2009) and The Wall Street Journal, Ruth Simon (11/01/2009)

How to Get the Best REO Deal

REO and short-sale properties can be money pits when offers take forever to close and vacant properties are trashed.

Here are some suggestions for expediting the deals:

* The best short-sale deals are those where the bank has pre-approved the sale price. The property may still take a long time to close, but not as long as it would otherwise.
* Buyers of a short-sale should be prepared for multiple offers. If the short-sale property is an attractive one, the lender will continue to market the property even after signing a sales contract. And if it gets a better offer, it may sell the property without giving the original buyers a chance to negotiate.
* Seek out houses protected by the Cash for Keys program, which gives short-sale and foreclosed owners money to prevent them from trashing the place on the way out.
* Inspections are important. If a home has been vacant, get the property re-inspected prior to closing.
* Buyers shouldn't focus on price alone. Homes that are in poor neighborhoods, have serious maintenance issues, or have terrible floor plans aren’t bargains despite the price.


Source: Inman News, Bernice Ross (11/30/2009)

Market Should Be 'Near Normal' in the Spring

Housing industry consultant John Burns says low mortgage
rates and the home buyer tax credit, plus the availability of FHA loans – “the new subprime,” as he calls it – will
combine to keep housing transaction levels at “near normal” through Spring 2010.

First-time homebuyers are about the half the market, he says, while the expansion of the housing tax credit will get
senior buyers “off the fence” and buying retirement properties.

What would have happened if Congress hadn’t extended the tax credit? “I think we would see housing crater,” Burns said.

Burns clients include home builders, lenders, and equity invrstors.

Source: the Wall Street Journal, Nick Timiraos (11/18/2009)

Foreclosures Decline for Third Month

Foreclosures were filed on 332,292 U.S. properties in October, a decrease of 3 percent from September, but still up nearly 19 percent from October 2008, according to foreclosure sales site RealtyTrac.

October marks the third-straight month of declines in foreclosures, which many see as an encouraging sign that the worst of the foreclosures are behind us. Still, some skeptics predict another wave. “The real issue is we don’t know what inventory banks are holding that they have yet to put on the market,” said Stephen Miller, chair of the economics department at the University of Nevada at Las Vegas, during an interview with Bloomberg News.

States with the highest foreclosure rates are Nevada, California, Florida, Arizona, Idaho, Illinois, Michigan, Georgia, Maryland and Utah.

Four states accounted for 52 percent of the nation’s total foreclosure activity in October: California, Florida, Illinois, and Michigan. The rest of the states in the top 10 for actual numbers of foreclosures were Nevada, Arizona, Georgia, Texas, Ohio, and New Jersey.

Source: RealtyTrac (11/12/2009)

Fewer Short Sales Come Up Short

While obstacles to short sales remain, real estate practitioners say the process is becoming more efficient. Rather than waiting six months or more to push through a deal, agents say banks are more willing to negotiate prices up front.

"My gut feeling is that short sales seem to be the preferred avenue for distressed property now," says Cindi Hagley of San Ramon, Calif.-based Windermere Welcome Home. "It's cheaper for [banks] to do a short sale than go all the way to foreclosure."

The short-sale process has become more manageable now that banks are willing to pre-approve prices, reach out to underwater borrowers who have listed their homes for sale, implement Web-based systems that manage the short sale process, and add staff dedicated to short sales.

Additionally, the U.S. Treasury is set to implement a streamlined short sales framework and offer incentive payments of $1,500 to home owners and $1,000 to both loan servicers and second-lien holders.

Borrowers also prefer short sales because Fannie Mae requires them to wait only two years to own another home or even less than that if they were not delinquent. By contrast, those who lost their homes to foreclosure have to wait five years.

Source: San Francisco Chronicle, Carolyn Said (10/21/09)

A Historic Time to Buy

Young people just starting to invest and buying their first homes are potentially the winners in this recession.
First-time homebuyers, most between the ages of 25 and 45, accounted for about 45 percent of home sales from January through July 2009, according to the National Association of REALTORS®
"This is a historic time," says George Jaramillo, a 35-year-old business analyst in Atlanta, who recently bought three homes, two of them foreclosures. "It's a great opportunity to make some great gains in the future."
A study by investment company T. Rowe Price points out that investing when prices are low can result in amazing gains. For instance, between 1970 and 1990, the annualized rate of return for the S&P 500 was 11.5 percent.
"We need to be shouting from the rooftops that this is not the time to get out of the market if you're young," says Christine Fahlund, a senior financial planner with T. Rowe Price. "This is the time to be in the market."
Source: The Associated Press, Chip Cutter (10/05/2009)

Manhattan Prices Fall Year-Over-Year

It is unclear what direction Manhattan real estate prices have moved in during the past three months, but there is no argument that they have fallen significantly in the last year.

Miller Samuel says prices have declined 8.4 percent year-over-year. Halstead Properties and Brown Harris Stevens reported a 14 percent decline. Corcoran Group reported an 18 percent decrease.

"The interesting thing about this was that lower prices drove people back into the market," says Pam Liebman, CEO of Corcoran.

Bill Staniford, CEO of PropertyShark.com, says, "There's still plenty of money sitting on the sidelines … The biggest problem is obtaining financing."

Jonathan Miller of Miller Samuel echoes that. "Underwriting requirements are the most stringent I've ever seen," he says.

Source: CNNMoney.com, Les Christie (10/02/2009)

Which Cities Will See Biggest Rebound?

Which cities are likely to be the hottest post-economic downturn destinations for young, brilliant, and highly mobile workers?
The Wall Street Journal surveyed six trend-spotting experts and they chose cities based on economic diversity, lifestyle and their own personal prejudices.
Here’s the top-10 list:
1. Washington, D.C. (tie)
1. Seattle
2. New York
3. Portland, Ore.
4. Austin, Texas
5. San Jose, Calif.
6. Denver
7. Durham, N.C.
8. Dallas
9. Chicago
10. Boston
Source: The Wall Street Journal, Sue Shellenbarger (09/30/2009)

Buying a Foreclosure Is No Picnic

Buyers seeking a foreclosed property should realize that not every foreclosure is a good deal.

Urge would-be buyers of foreclosures to have the property thoroughly inspected, says Dan Steward, president of the Tampa-based inspection firm, Pillar to Post. Lenders are not held to the same disclosure requirements as sellers.

Steward says damage isn’t always obvious. While it doesn’t take an expert to see that a toilet has been ripped out, it does require someone with knowledge to know that ripping it out damaged a pipe 20 feet down the line.

The best way for the buyer to get the property is to follow the bank’s instructions closely, says Ryan Melvin, co-owner of More Realty Group in Las Vegas, which specializes in foreclosures.

Another quirk that sometimes surprises buyers of real-estate-owned properties, or REOs, is the scrutiny that banks place on the buyers' credit, even though they are using a different lender.

Source: The Wall Street Journal, Amy Hoak (09/27/2009)

Signaling Confidence, Fed Holds Rates Steady

In an announcement that should bolster the housing industry, the Federal Reserve said Wednesday that it intended to keep key lending rates near zero "for an extended period" and continue to buy mortgage-backed securities and debt through March 2010.

That’s the second time the Fed has decided to stretch out its program to encourage spending and stimulate the economy.

Economists predict that the Fed will keep the key lending rate near zero into the first quarter of next year. Holding that rate low means that consumer loans, including mortgages, home-equity loans, and credit-card rates, remain at the lowest point in decades.

Greg McBride, senior financial analyst at Bankrate.com, warned that these low rates will eventually head higher and said home owners interested in refinancing should realize that "it could be a different story 12 months from now," with much higher rates for 30-year fixed-rate mortgages.

Source: The Associated Press, Jeannine Aversa (09/23/2009)

Commercial Prices Fall as Vacancy Rates Rise

The value of commercial property is being driven by vacancy rates—the higher the vacancy rate, the lower the price.
At the height of the boom, a high vacancy rate was sought after because the buyer could fill the space and raise rents. Today, finding tenants is a major challenge in many areas and buyers will pay more if a building has guaranteed tenants for the long term. Robert Von Ancken, the senior appraiser for Grubb & Ellis in New York, estimates that substantial vacancies cost a seller as much as 30 percent of value.
“Investors today are very hesitant to make a mistake by underwriting improvement, decreasing vacancy, or increasing rent,” says Scott A. Singer, the executive vice president of the Singer & Bassuk Organization, a New York company that arranges financing.
Source: The New York Times, Terry Pristin (09/15/2009)

How to Spot Foreclosure-Prevention Scammers

Here’s how the most common foreclosure-prevention scams work:
The desperate home owner gets a letter that says something like, “We know you’re having a hard time. We have a pipeline to your lender and can help you save your home. Call this toll-free number now.
”Home owners call the number and agree to pay $1,200 to $1,500 upfront for help with their mortgage. Nothing happens. Their home still goes into foreclosure.
Harold Kirtz, a lawyer for the Federal Trade Commission who is prosecuting these scammers, says victims are often well educated and financially savvy, but they also are “in a very vulnerable state.

”Here are some red flags that should make a home owner run in the opposite direction:

• If the company guarantees success. Nobody can guarantee a lender won’t foreclose or will modify a loan.
  
• If the company wants money upfront. "We can't say all advance fees are illegal," Kirtz says, “But in most cases they're probably bogus."
  
• If the company wants the home owner to send mortgage checks directly to the modification firm. The only certainty there is that the company will cash the checks.

Source: Washington Post Writers Group, Kenneth R. Harney (09/13/2009)

IRS Changes Rules to Ease Commercial Refis

The U.S. Internal Revenue Service announced changes to tax rules Tuesday that make it easier for commercial property owners to refinance.
The new guidelines allow commercial loans that are part of investment pools known as Real Estate Mortgage Investment Conduits, or REMICs, to be refinanced without penalties for investors.
The new regulations allow investors to keep tax savings that they would have lost under the old rules. The IRS is considering expanding the changes to other investment vehicles like real estate investment trusts (REITs).
"A stalemate now exists on commercial mortgage backed security (CMBS) loans that are not currently in default but need modification," said Jeffrey DeBoer, chief executive of the Real Estate Roundtable, a lobbying body for property owners and investors. "Today's announcement should help break the stalemate."
Sources: The Associated Press, Stephen Ohlemacher (09/15/2009) and The Wall Street Journal, Lingling Wei (09/16/2009)

Most Affordable Markets Ranked

In its annual survey of most- and least-affordable housing markets, BusinessWeek quoted a number of experts who believe that for many people, the current low interest rates and low housing prices have combined to offer a once-in-a-lifetime opportunity to buy a home.
Dennis Torres, executive director of real estate operations at Pepperdine University, says, "People are going to talk about this as 'I could have, I should have' for decades," he said. "If you're confident that you'll stay in the location for seven years and you're confident of your income, don't walk, run."
To calculate the most- and least-affordable areas, BusinessWeek considered the share of homes sold in the second quarter of this year that would have been affordable to a family earning the local median income. Housing costs were calculated using new and existing sales records supplied by First American Real Estate Solutions and include principal, interest, estimated property taxes, and insurance.
Here are the 10 most-affordable areas:
1. Kokomo, Ind.
2. Lansing-East Lansing, Mich.
3. Mansfield, Ohio
4. Elkhart-Goshen, Ind.
5. Lima, Ohio
6. Bay City, Mich.
7. Indianapolis-Carmel, Ind.
8. Saginaw-Saginaw Township North, Mich.
9. Youngstown-Warren-Boardman, Ohio-Pa.
10. Canton-Massillon, Ohio
Here are the 10 that are least affordable:
1. New York-White Plains, N.Y.-Wayne, N.J.
2. San Francisco-San Mateo-Redwood City, Calif.
3. San Luis Obispo-Paso Robles, Calif.
4. Ocean City, N.J.
5. Honolulu
6. Los Angeles-Long Beach-Glendale, Calif.
7. Santa Ana-Anaheim-Irvine, Calif.
8. Santa Cruz-Watsonville, Calif.
9. Nassau-Suffolk (Long Island), N.Y.
10. Flagstaff, Ariz.
Source: Business Week, Prashant Gopal (09/11/2009

Fed's Beige Book Offers Some Positive News

The Federal Reserve says it's “cautiously positive” about the economy in its widely watched regular report called the Beige Book.

Eleven of the Fed’s 12 regions called economic activity in the area “stable,” “showing sings of stabilization,” or “firmed.”

Analysts said the economy is growing in the third quarter at an annual rate of 3 percent to 4 percent because businesses are spending more.

But the market for homes continues to be weak. In most areas, buyers are first timers and others purchasing the lowest-cost properties. Philadelphia was an exception: Sales there are up even for expensive homes.

In the commercial real estate market, sales were down, and construction was off in all parts of the country.

Source: The Associated Press, Jeannine Aversa (09/09/2009)

Will Taxpayers Have to Bail Out FHA?

The Federal Housing Administration stepped up to guarantee low-down-payment mortgages for riskier buyers after the mortgage market crashed. Now with many of them in default, the FHA’s losses have mounted, and it’s possible that its reserves will fall below the 2 percent level required by law. If that happens, taxpayers may have to bail out FHA.

Some housing analysts believe that this will lead to tighter restrictions FHA mortgages. "It absolutely changes the political dynamic once you have to ask taxpayers" for money, says Lisa Marquis Jackson, vice president for John Burns Real Estate Consulting.

The 10 states with the most FHA-insured mortgages are:

1. Texas


2. California


3. Florida


4. Georgia


5. Ohio


6. Illinois


7. Pennsylvania


8. Michigan


9. Virginia


10. North Carolina

Source: The Wall Street Journal, Nick Timiraos (09/05/2009)

Madoff Beach House Is Listed at $8.75 Million

The U.S. Marshals Service announced Tuesday that the Corcoran Group will list imprisoned financier Barnard Madoff’s beach home in Montauk, N.Y., for $8.75 million.

The property sits on a 1.2-acre lot, nestled close to the southeastern tip of Long Island.

Its proximity to the water and the eye-popping view are the grandest aspects of the 3,014-square-foot garageless home, observers say. The house, described by marshals as "simple, stylish and understated," is at the foot of a steep driveway off Old Montauk Highway.

"Our goal is to place the homes on the market soon to minimize the amount of time they remain in our inventory and maximize the return to the victims," U.S. Marshal Joseph R. Guccione said in a statement.

Source: The Associated Press, Tom Hays (09/01/2009)

5 Steps to Financing a Sale

Selling a home and helping the buyer finance may be a good option to getting a house sold, experts say. Yet it is imperative that the seller thoroughly investigate the buyer’s finances before agreeing to the deal.

Here are some important initial steps to take:

• Investigate the buyer by asking him to fill out a Uniform Residential Loan Application.


• Get bankruptcy details by checking out the case through Public Assess to Court Electronic Records (PACER), a service of the U.S. Judiciary.


• Pull the buyer’s credit report and eviction and criminal history via the American Apartment Owners Association Web site.


• Insist on 20 percent down or offer a contract for deed, which only confers full ownership rights after the home is paid off.


• Consider offering a lease-option with part of the payment going toward the purchase price, which gives the buyer time to repair his credit before seeking conventional financing.

Source: The Wall Street Journal, June Fletcher (08/28/2009)

Video: How To Sell A Home (Err...Maybe Not!)...

If Timothy Geithner—the current United States Secretary of the Treasury—can't price his home to sell...what does that say about the ability of your clients to price a home correctly in today's market?
Watch this hilarious outtake of how NOT to sell a home. And this is from the man with a large role in directing the Federal Government's economic response to the financial crisis—unbelievable!!...

http://www.thedailyshow.com/watch/wed-july-29-2009/home-crisis-investigation

IRS Is Scrutinizing Mortgage Deductions

According to published reports, the Internal Revenue Service is more closely examining how taxpayers are reporting mortgage interest deductions.

The IRS is reportedly examining some returns with high deductions for mortgage interest and enforcing obscure rules that most home owners and many accountants could be unfamiliar with.

The calculations are very complex and rely on precise records that some home owners may have trouble producing.

Experts advise home buyers who have borrowed more than $1 million in mortgages and home equity loans since 1987, the year deductibility limits were enacted, to consult a tax expert because the newest loan may not be tax deductible.

Source: Investment News Daily, Art Auerbach (08/25/2009)

Bill Encourages Energy Improvements

A bill that helps home buyers afford energy improvements and encourages banks to offer a discount on loans to pay for reducing energy usage passed the U.S. House in June and could pass the Senate in the fall.
The American Clean Energy and Security Act of 2009 requires Fannie Mae and Freddie Mac to offer discounts on mortgages that include extra cash for making a home more energy efficient.
These discounts, which are already in effect at some lenders like J.P. Morgan Chase & Co. and Bank of America, include savings on closing costs for homes that have Energy Star appliances.
The Federal Housing Administration is offering a plan through its approved lenders that allows borrowers to add the cost of making efficiency improvements into the mortgage, but the extra money doesn’t count toward determining how much loan a borrower can qualify for. For instance, a borrower who adds $5,000 to a $100,000 loan to afford new Energy Star appliances would only have to qualify for $100,000 – not $105,000.
Source: The Wall Street Journal (08/24/2009)

What Has the Housing Crash Cost Americans?

How much real wealth have Americans lost so far in the real estate crash?

The Federal Reserve estimates that the total market value of U.S. homes fell 18 percent from $21.9 trillion to $17.9 trillion or about $13,000 per person from the end of 2006 through March 31, 2009.

The Fed also estimates that homeowner’s equity has declined 40 percent from the peak and now accounts for just 41.4 percent of real estate values. By comparison, after the last slump in the 1990s, home equity levels remained in the high 50s.

This collapse in equity makes it difficult for potential buyers to sell their homes and trade up, which many experts say will weigh heavily on the housing recovery.

Source: The Wall Street Journal, Brett Arends (08/20/2009)

Message to Buyers: You Can Probably Afford It

Housing is remarkably affordable these days.

A family earning the nation’s median income of $64,000 a year could afford to buy 72.3 percent of all homes sold in the United States during the second quarter of 2009, according to the National Association of Home Builders and Wells Fargo.

Sellers are the ones who are paying the price. More than 30 percent of all homes sold during the second quarter sold for less than the sellers paid originally, according to Zillow.com.

A significant percentage of owners who bought within the past five years and sold during the quarter lost money on the deal, according to Stan Humphries, Zillow's vice president in charge of data and analytics.

[Editor's note: Although discussion of trends on a national level can be useful, conditions in a local market can be vastly different from what's happening statistically on a national level. For that reason, conditions for owners who've bought in the last five years might or might not resemble what analysts are seeing statistically on a national basis.]

Source: CNNMoney.com (08/19/2009)

Greenspan Unsure About Recovery

Former Federal Reserve Chair Alan Greenspan said the economy seems to be improving in some areas, but he was dubious that improvement is sustainable.

“I think we’re going to be OK for the next six months,” he says. "We are getting a recovery in (housing) starts and motor vehicles, but the process doesn't have legs to it.

"Greenspan adds that while the decline in construction is reducing inventory, it is unlikely that the percentage of home owners will ever be as high as it was at the peak, and that will result in a reduction of the overall size of the market.

Source: Reuters News, Emily Kaiser (08/17/2009)

FHA Program Offers Purchase, Renovation Aid

The Federal Housing Administration is encouraging use of its little-known 203(k) loan program.

The 203(k) lets an owner-occupant borrow money for both the purchase and renovation in one loan, and put down only 3.5 percent.

The program requires the use of credentialed contractors and can include cosmetic improvements as well as major renovations like replacing plumbing or electrical. Completing the application process requires patience, says Nancy Hammock, an associate with RE/MAX Properties in Western Springs, Ill.

But in this lending environment, more homebuyers are finding 203(k)s worth the hassle. In fiscal 2008, the government insured about 6,700 of the 203(k) loans. This year, more than 11,000 loans have already been insured, according to the Office of the Comptroller of the Currency.

Source: Chicago Tribune, Mary Ellen Podmolik (08/14/2009)

Economists Pronounce the Recession Over

The majority of economists surveyed by the Wall Street Journal say the recession is over and Federal Reserve Chair Ben Bernanke deserves another term.
Of the 47 economists the newspaper surveyed, 27 said the recession has ended and 11 predict another trough this month or next. The rest refused to commit. But they were nearly unanimous is saying that Bernanke should be rehired.
Gross domestic product is expected to grow 2.4 percent in the third quarter at a seasonally adjusted annual rate. Economists were also heartened by a better-than-expected jobless report in July.
Source: The Wall Street Journal, Phil Izzo (08/12/2009)

No Bones About It: This Is a Dog House

Paris Hilton’s Chihuahuas – Tinkerbell, Marilyn Monroe, Prince Baby Bear, Harajuki, Dolce, and Prada – have closed on new digs, reports Life & Style magazine. The property in Hollywood is a $325,000, 300-square-foot canine palace complete with a balcony, a backyard, living room furniture, and a chandelier – plus central air.

“It’s a miniature version of my house,” says Hilton. “I designed it with the help of my interior decorator, Faye Resnick. I wanted it to be fun, cute, comfortable and beautiful. My friends just love it and think it’s so adorable and cool.

”Source: Life & Style (08/05/2009)

Convicted Ponzi Schemer's Properties Hit the Market

The federal government is about to sell off more than $20 million in real estate owned by Ponzi scammer Bernard Madoff. Properties for sale include his Upper East Side Manhattan duplex; valued at $7.5 million; his 3,000-square-foot, Long Island, N.Y., beach house, $7 million; and his 6,475-square-foot Palm Beach, Fla., mansion on the Intracoastal, $7.5 million.

Besides these properties, the Feds are selling Madoff’s 55-foot fishing boat for $1.5 million, approximately $6 million in furniture, and they’ve already unloaded a three-bedroom vacation house on the Cote d'Azur for $1.48 million.

Some observers say the government’s estimate for the Manhattan duplex and the Florida mansion to be high, but they think the Long Island beach house may be bid up beyond the sale price because it is closer to the water than current zoning would allow.

Source: CNNMoney.com (08/03/2009)

6 Real Estate Investment Basics

Miami real estate investor Kenneth D. Rosen outlines his “Big Six” investing guidelines in his new book, Investing in Income Properties.
Here are his six principles in a nutshell. He says all of them need to be present to make a deal worth doing. “If one’s not there, you stop and you don’t buy,” he says.
Location. “A” locations are in areas where there is little land left to build on and the neighborhood has a certain prestige.
No-frills design with quality construction. He looks for three or four parking spaces per 1,000 square feet, no more than 15 percent of space devoted to common areas, and simple but visually pleasing design.
Few or no vacancies. Buildings with lots of small offices are easier to keep full than those that rely on renting out entire floors to one tenant.
Potential for appreciation. Older buildings with lower rents have the most upside potential. As leases expire, the new owner can raise the rent.
Available financing. Find a financial pro to help negotiate the right provisions.
Sale price based on existing income. Avoid buying based on projected income.Source: Miami Herald, Matthew Haggman (08/03/2009)

Don't Abandon Underwater Mortgages

David Bach, author of The Automatic Millionaire Homeowner: A Lifetime Plan to Finish Rich in Real Estate, pooh-poohs the notion that it makes any sense at all to walk away from a property that is underwater.

In an interview with the AOL.com personal finance Web site, Walletpop.com, Bach said about 50 percent of homes in foreclosure are there because their owners walked away from underwater real estate. He calls that “stupid, short-term thinking” and recalls a condo he bought in New York City in 2003. He put down $600,000, then property values dropped and he lost all his equity. “I was bummed,” he said.

But the loss wasn’t permanent. Four years later he sold the condo for $3.65 million – and made a $1.5 million profit, after commissions and taxes.

Some people might have thought it was “logical” to walk away, he said. “But it would have cost me $1.5 million.”

Source: WalletPop, Zac Bissonnette (07/23/2009)

Buyers Shouldn't Wait on Falling Prices

Fear of overpaying for property is common these days, especially in places like New York where prices continue to be unstable.

If you are potential buyer who is frozen because you are concerned that you will pay too much, here are some factors to consider:

• Waiting for the right time can be expensive. Some buyers would have more equity today, despite falling prices, if they had bought when they were first considering it, instead of continuing to pay rent.



• Financing is fickle. Some people who were highly qualified last year can’t find financing this year because the credit market has tightened or their personal financial situation now makes them an undesirable borrower.



• Interest rates are headed up. If prices decline by another 10 percent, but interest rates increase by 1 percentage point, the monthly payment will be the same.

Source: The Wall Street Journal, Douglas Heddings (07/27/2009)

When Will the Housing Market Rebound?

When will the housing slump finally end? Even the experts' crystal balls are hazy.
The Wall Street Journal, which Thursday reported its latest quarterly survey of housing data, says it depends on which city or part of the country you’re talking about.
Home sales were up compared to last year in Washington, D.C., and Northern Virginia, Orlando, Minneapolis, Southern California, and the San Francisco Bay area, according to findings from research firm MDA DataQuick as well as reports from local real estate practitioner organizations.
Sales declined in New York City and nearby Long Island, Chicago, and Charlotte, N.C., and the outlook was particularly bleak in Miami-Fort Lauderdale and much of Florida, Detroit, and Las Vegas.
But Jody Kahn, an analyst at John Burns Real Estate Consulting, a research organization, points out that there are variations even in the hardest-hit metro areas with the most attractive neighborhoods continuing to thrive.
Employment is the most telling factor, says Mark Zandi, chief economist at Moody's Economy.com. "If people don't have jobs or fear losing their jobs, then buying homes is out of the question," he says.
Source: The Wall Street Journal, James R. Hagerty (07/23/2009)

Survey: Most Banks Tighten Lending Standards

About 75 percent of banks tightened their underwriting standards in the year ending March 31, and 20 percent discontinued, or marked for elimination, at least one kind of unconventional mortgage, according to an annual survey by the U.S. Office of the Comptroller of the Currency.
The survey looked at the lending practices of the 59 largest national banks. For the second year in a row, no banks reported easing standards, although 27 percent left them unchanged.
Banks told the government that they were requiring larger downpayments, tightening payment regulations, and increasing loan fees, according to the OCC report.
Source: Inman News (07/22/2009)

Now Is a Perfect Time to Buy

Just a reminder of something that is obvious to real estate professionals: Now is the time to buy, but that opportunity may be slipping away.
For people who have a job and money, a dream house is within reach, writes Marc Roth, founder of Home Warranty of America and a columnist for BusinessWeek.
He points out that mortgage rates remain low, prices are still at historic lows, and the government is offering incentives for first-time homebuyers.
He also adds that the inventory of homes to buy is still large, but it is shrinking. According to the NATIONAL ASSOCIATION OF REALTORS®, the housing inventory peaked in November 2008 at an 11-month supply. At the end of May 2009, it had fallen to a 9.6-month supply.
Roth says anyone who dallies will miss a good opportunity to buy a first home at a terrific price or go shopping for a move-up property that is a great buy.
Source: BusinessWeek.com, Marc Roth

California Home Prices Rise in June

California’s median home prices rose 7 percent in June compared to May, according to MDA DataQuick, a real estate research firm. The statewide median price increased to $246,000 from $230,000, triggered by an increase in sales of higher-priced homes.
"We're just now seeing the beginnings of more normal mortgage lending patterns," DataQuick President John Walsh says. "There's still a long way to go, but it looks like the worst of the grind is over.
"DataQuick also pointed out that foreclosures accounted for 46 percent of sales, the first month since August 2008 that foreclosure sales were less than 50 percent of the total.
Source: The Associated Press, Jacob Adelman (07/16/2009)

First-Time Buyers: Hurry for $8,000 Tax Credit

It’s time to remind first-time home buyers that in order to qualify for the government’s $8,000 gift in the form of a tax credit, the deal must close by Dec. 1.
Buyers should have a purchase contract signed by early October, so they have 45 to 60 days to arrange financing and safely close the deal.
"There's not as much sand in the hourglass as we may think," said Jim Merrion, regional director at RE/MAX Northern Illinois.
Source: Chicago Tribune, Mary Ellen Podmolik (07/11/2009)

Troubled Jumbo Loans Hurt Broader Market

Houses that cost more than $730,000 – the cap for conforming jumbo loans – can be extremely tough to buy, sell, or refinance these days, freezing the high-end market and holding down activity in lower-priced markets, real estate practitioners say.

The slowdown results from lenders’ reluctance to offer mortgages above the amount Fannie Mae and Freddie Mac will insure.

"What you're seeing are those properties sitting on the market for a lot longer because people can't get loans," says David Kerr, an associate with ZipRealty in Marin County, Calif. " All of what we're showing is in the $200,000 to $300,000 price range."

States that are most affected are those where jumbos account for more than 10 percent of all mortgages, including Hawaii, California and New York, as well as Washington, D.C., New Jersey, Maryland, Massachusetts, Virginia, Connecticut, Washington, Nevada, and Florida.

The Obama administration program to refinance underwater mortgages doesn’t offer help to holders of jumbo mortgages, so borrowers who can’t refinance are defaulting in increasing numbers. According to First American CoreLogic, jumbos that are 90 days or more delinquent reached 4.83 percent in March 2009, up from 1.68 percent in March 2008.

"We need to have a market recovery in all segments," says Lawrence Yun, chief economist for the National Association of REALTORS®. "If the high-end market weakens, those in the middle have to reduce prices . . . All of Middle America is undoubtedly impacted."

Source: USAToday, Stephanie Armour (09/15/2009)

Lennar Defends Itself Against Drywall Suits

Homebuilder Lennar Corp. says it has identified faulty Chinese drywall in 400 homes in Florida, but none outside the state. The company says it has set aside about $40 million in insurance reserves to repair homes that have defective drywall.

The drywall is alleged to contain ingredients that corrode metal, emit an odor, and make people sick.

Lennar says it has been named in 41 Florida state court lawsuits and two federal class action suits. It says it has counter sued its entire supply chain, including the manufacturers of the product.

The U.S. Department of Justice has filed lawsuits on behalf of hundreds of homeowners from Louisiana, Florida, Ohio, and other states, and the court has assigned the cases to a U.S. district judge in New Orleans.

Source: The Associated Press, Brian Skoloff (07/13/2009)

Fewer People Form New Households

The recession has more than halved the formation of new households.
Between March 2007 and March 2008, the number of new households grew by 772,000, compared with an increase of 1.63 million a year earlier, according to the U.S. Census Bureau.
New households results in fewer home sales and rentals, less furniture sold, and less work for electricians, carpenters, painters—and real estate professionals. Harvard University's Joint Center for Housing Studies estimates that the glut of 1.5 million new homes created during the housing boom would be gone now if households had been forming at historical levels.The downturn also has pushed down immigration levels. Even inflows of illegal immigrants have stopped rising since 2008, according to the Pew Hispanic Center.
Source: The Miami Herald, Annys Shin (07/11/2009)

Study: Consumers Were Too Optimistic

Lax lending standards can’t be blamed for the housing bubble, according to a study by the New York Federal Reserve.
The study released Thursday contends that it was consumer confidence that persuaded people that they could afford to pay higher prices for housing, not easy money.
The study argues that consumers, who thought they had been working harder since the 1990s, believed that their paychecks would increase. Their optimism continued until 2007, when it was clear that there was no reason for such a rosy view.
“What appears in retrospect to be relatively lax credit conditions in the early part of this decade may have emerged in part because of then-justifiable, although ultimately misplaced, optimism about income growth," says James Kahn, author of the study and a professor of economics at Yeshiva University.
Kahn says that if productivity growth returns, housing prices could bottom out and begin growing again. But if productivity continues to slow or grow only very modestly, prices could continue to stay low or even decline further.
Source: Reuters News (07/09/2009)

Tips for Negotiating a Mortgage Deal

Getting a mortgage loan these days can be a slow and frustrating experience.Here are some things that buyers should know as they go through the application process:

• Ask for the “Good Faith Estimate” early. It won’t be released until it is officially “complete” and all the questions are answered. Find answers right away to all the lender’s questions.


• Read and ask questions about the fine print. Identifying and negotiating all the fees and charges can cut an applicant’s costs.


• Shop title insurance. Go to web sites like Closing.com, where you can comparison shop.


• Get a commitment. Insist that the lender or loan broker agree that there won’t be any other charges on the HUD-1, which most borrowers don’t see until they are at the settlement table. "If [the lender] won't agree to that, you have to be a little suspicious," says Claire Fennessey, senior vice president of Entitle Direct.


• Question flood insurance. If a property requires flood insurance, consult with a civil engineering firm with experience with the Federal Emergency Management Agency’s resources to ensure that you aren’t paying too much. Eligibility for a preferred risk policy can cut costs substantially.

Tips for Parents Buying Homes for Children

With home prices low, now could be a good time for parents to give their children a home or even an investment property.Here are some suggestions for managing the tax consequences from Mark Luscombe, tax analyst with Wolters Kluwer.
Give a cash gift. Individuals are allowed to gift up to $13,000 per person in a given year without incurring gift tax. That means a couple could give their offspring and spouse $52,000 in a single year to go toward a down payment.
Lend money. The government requires that family members meet or exceed minimum loan rates to avoid having the loan be considered a gift. The rates are currently low. One way to handle this is for parent to use the $52,000 gift exclusion to forgive both interest and principal.
Use a trust. Set up a qualified personal residence trust, or QPRT. You’ll need an attorney to handle this transaction, but in a nutshell, parents put the home they want to give their children into a trust. At the end of a pre-set term, the home passes to the children with no taxes due.

Source: The Wall Street Journal, Shelly Banjo (06/25/2009)

5 Factors That Decide Your Credit Score

Credit scores range between 200 and 800, with scores above 620 considered desirable for obtaining a mortgage. The following factors affect your score:
1. Your payment history. Did you pay your credit card obligations on time? If they were late, then how late? Bankruptcy filing, liens, and collection activity also impact your history.
2. How much you owe. If you owe a great deal of money on numerous accounts, it can indicate that you are overextended. However, it’s a good thing if you have a good proportion of balances to total credit limits.
3. The length of your credit history. In general, the longer you have had accounts opened, the better. The average consumer's oldest obligation is 14 years old, indicating that he or she has been managing credit for some time, according to Fair Isaac Corp., and only one in 20 consumers have credit histories shorter than 2 years.
4. How much new credit you have. New credit, either installment payments or new credit cards, are considered more risky, even if you pay them promptly.
5. The types of credit you use. Generally, it’s desirable to have more than one type of credit — installment loans, credit cards, and a mortgage, for example.
For more on evaluating and understanding your credit score, visit http://www.myfico.com/CreditEducation/?fire=1.

Treasury Makes Refinancing More Attractive

The Treasury Department on Wednesday expanded its foreclosure prevention plan, lifting the current 105 percent loan-to-value cap to refinance up to 125 percent of a home’s value.Applications to refinance mortgages have fallen as rates have increased in the last couple of weeks, but this move may bring more borrowers to the table. At the same time, Fannie Mae and Freddie Mac have agreed to reduce the processing fee for borrowers who select a 25-year mortgage. Fannie said in a statement, "The reduction is intended to lure borrowers to select shorter terms and build positive equity in their homes sooner than with a typical 30-year mortgage.”
Source: Reuters News, Patrick Rucker (07/01/2009)

Is Mortgage Forgiveness the Answer?

Some housing experts say the next logical step for helping home owners with negative equity is loan forgiveness.
Home owners with no equity stake and no likelihood of having one anytime soon are increasingly likely to walk away. Some theorize that curbing that trend is the only thing that will stabilize the market.
The nonprofit Milken Institute has devised a plan that would use Fannie Mae to refinance underwater loans with government money. Under the plan, a private lender would provide the money for the value of the home and the U.S. Treasury would issue a second, interest-only loan for the portion of the current mortgage that is underwater. Every year the home owner keeps current with payments, the Treasury would forgive a portion of the loan.
The institute estimates that this would save 1.5 million homes from foreclosure or abandonment and cost taxpayers between $75 billion and $100 billion.
Ken Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at UC Berkeley, approves that plan, but urges returning some of the appreciation to the original lender as a reward for patience.
"The idea that these loans are worth face value is a fiction," says Richard Green, director of the USC Lusk Center for Real Estate. "If we don't deal with [reducing] the balances, we're not really dealing with the problem."
Source: Los Angeles Times, Tom Petruno (06/27/2009)

REALTOR® Magazine-Daily News-Pending Home Sales Rise Again

REALTOR® Magazine-Daily News-Pending Home Sales Rise Again

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PMI to Offer Greater Support for Refinancing

PMI Group Inc. plans to offer greater support for borrowers attempting to refinance, in a move that could lower the risk of default for struggling home owners. The Walnut Creek, Calif.-based private mortgage insurer is allowing borrowers to keep their current PMI policies even if their original loans were not owned or guaranteed by Fannie Mae or Freddie Mac. Also, borrowers will be able to obtain coverage for new, refinanced loans -- even if the value of the property has fallen since the original loan was insured.
Source: American Banker, Kate Berry (06/26/09)

Fed to Keep Short-Term Rates Low

The Federal Reserve announced Wednesday that it expects to keep short-term interest rates “exceptionally low” for the next few months. It also underscored its commitment to make $1.25 trillion in total purchases of mortgage-backed securities by the end of year.
Both actions are likely to keep mortgage rates low through the end of 2009.
The Fed failed to raise a cap of $300 billion in purchases of Treasury securities, which could lead indirectly to higher mortgage rates because mortgage rates tend to rise in conjunction with Treasurys.
In response to the possibility of rising mortgage rates, the Mortgage Bankers Association this week cut its forecast for total 2009 mortgage originations by 27 percent.
Source: Inman News (06/25/2009)

Tax Benefits of Homeownership

The tax deductions you’re eligible to take for mortgage interest and property taxes greatly increase the financial benefits of homeownership. Here’s how it works.

Assume:
$9,877 = Mortgage interest paid (a loan of $150,000 for 30 years, at 7 percent, using year-five interest) $2,700 = Property taxes (at 1.5 percent on $180,000 assessed value)______$12,577 = Total deduction
Then, multiply your total deduction by your tax rate.
For example, at a 28 percent tax rate: 12,577 x 0.28 = $3,521.56
$3,521.56 = Amount you have lowered your federal income tax (at 28 percent tax rate)

Note: Mortgage interest may not be deductible on loans over $1.1 million. In addition, deductions are decreased when total income reaches a certain level.

Todays Mortgage Rates

Mortgage Rate

• 30 Year Fixed: 5.29%
• 15 Year Fixed:4.79%
• 1 Year Adj: 4.81%

(U.S. Weekly Averages)

Home-Sale Hassles of the Rich and Famous

Anybody having trouble selling their home should take comfort in the fact that even celebrities are having the same problem. Here are some celebs who can’t seem to sell their houses:

• Jon and Kate Gosselin, co-stars of the popular TLC show "Jon & Kate Plus 8," have been trying for three months to sell their former home in Elizabethtown, Pa.
• Rapper 50 Cent has given up selling his mansion in Farmington, Conn., after dropping the price from $18.5 million to $14 million.
• Richard Gere and wife Carey Lowell have dropped the price on their home in New York’s Hamptons from $8.8 million to $7.2 million.
• Model Elle Macpherson cut the price of her London Victorian from $9.5 million to $8.5 million, and has since dropped it to $7.5 million.
• Star of "Real Housewives of Orange County" on BRAVO TV Jeana Keough, also a real estate practitioner, is facing foreclosure.

Source: Chicago Tribune, Mary Umberger (06/21/2009)

REALTOR ® Magazine-Daily News-NAR: Existing-Home Sale Continue to Rise

REALTOR ® Magazine-Daily News-NAR: Existing-Home Sale Continue to Rise

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Home Buyer Tax Credit Could Expand

A first-time home buyer tax credit of up to $8,000 has helped to move housing inventory during an otherwise sluggish real estate cycle. Now both legislators and the business community are hoping to build on the incentive's success by expanding it. A number of bills have been introduced in the House and the Senate that lobby for an expansion of the measure. Among the proposed changes:

• Setting a new cap of $15,000.
• Extending the tax break into mid-2010.
• Making the benefit available to all home buyers, not just first-timers.
• Offering a separate tax credit to $3,000 for borrowers who refinance.

USA Today, Stephanie Armour (06/22/09)

Foreign Investors Bullish on U.S. Real Estate

Foreign real estate investors expect the U.S. real estate market to recover by the end of the second quarter of 2010, according to a survey released Wednesday by the Association of Foreign Investors in Real Estate (AFIRE).Survey respondents were optimistic about the prospects for good returns, with more than two-thirds planning to invest in U.S. real estate before the end of the year.About 31 percent said they were more hopeful now about the health of the U.S. real estate market than they were in January, 16 percent said they were more pessimistic, and 53 percent said their opinion had stayed the same.The 200 members surveyed predicted that Washington, D.C., New York City, and San Francisco would be the first cities to recover, followed by Boston and Los Angeles. Source: Association of Foreign Investors in Real Estate (06/17/2009)

REALTOR ® Magazine-Daily News-Fannie Mae Changes Job-Transfer Rules

REALTOR ® Magazine-Daily News-Fannie Mae Changes Job-Transfer Rules

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May 2009 Real Estate Market Report for RBYCC

May 2009 Real Estate Market Report for RBYCC


6 new listings:

• 3 THE ISLANDS OF BAY VISTA RBYCC 3 bed/2.5 bath $2,595,000
• 15 COVENTRY ROAD RBYCC 5 bed/3bath/2 half bath $725,000
• 1 SHERBOURNE RBYCC 3 bed/3.5 bath $699,900
• 56 WEST SIDE DRIVE RBYCC 4 bed/ 3 bath $569,000
• 2 SOMERSET ROAD RBYCC 3 bed/ 2 bath $489,500
• 4 CROYDEN ROAD RBYCC 3 bed/ 2.5 bath $475,000

1 sold

• 161 BUCKINGHAM ROAD RBYCC 6 bed/ 4.5 bath Listed $579,500 sold 05/07/09 $465,000

2 under contract

• 151 E. BUCKINGHAM DRIVE RBYCC 4 bed/ 3.5 bath Listed $475,000
• 50 WINDSOR RD RBYCC 4 bed/4.5 bath Listed $495,000
  

REALTOR® Magazine-Daily News-Can Buying Cheap Foreclosures Make You Rich?

REALTOR® Magazine-Daily News-Can Buying Cheap Foreclosures Make You Rich?

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May 2009 Rehoboth Beach Real Estate Market Activity Report

6 new single family homes listed :

• 23 Columbia Avenue 4 bed/3.5 bath $1,975,000
• 62 Columbia Avenue 4 bed/4.5 bath $1,776,000
• 19 Fourth Street 4 bed/2.5 bath $875,000
• 108 Country Club Rd 5 bed/4 bath $749,500
• 319 Sandalwood Street 3 bed/2 bath $579,000
• 32 Sussex Street 2 bed/1bath $559,000

8 new condo/townhouse listed :

• 419 Henlopen 2 bed/2 bath $1,075,000
• 307 S Boardwalk 2 bed/2 bath $925,000
• One Virginia Ave 1 bed/1 bath $649,000
• 20 Canal Street 4 bed/3.5 bath $609,900
• 21 Ocean Drive 2 bed/1 bath $575,000
• One Virginia Ave 0 bed/1 bath $525,000
• 17 Philadelphia St 1 bed/1 bath $369,900
• 409 Rehoboth Ave 1 bed/1 bath $265,000

No sales or under contract

HB 188 Tourism Bill -5% Excise Tax on Short Term Rentals

This act expands the scope of Delaware's public accomodations lodging tax to include temporary and seasonal rentals for less than 5 month. It also provides for reduction in the amount of the lodging tax imposed to take into consideration any existing tax imposed by a county or municipality as of the effective date of the Act's provisions. Finally, the act requires owners of rental unit to annually obtain a Rental Unit License from the Department of Finance at a cost $50.00.
Just that you know, REALTORS of Sussex County strongly oppose the proposed 5% excise tax.

REALTOR ® Magazine-Daily News-Congress Weighs Buyer Tax Credit Expansion

REALTOR ® Magazine-Daily News-Congress Weighs Buyer Tax Credit Expansion

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