RISMEDIA, June 4, 2009-Real estate investors and vacation home buyers represented 35-40% of all residential property purchases in the years before the market downturn. Yet, many of these same investors are now experiencing serious negative equity and cash flow issues, and they are wondering if and when they will start seeing some relief.
“Although the economic stimulus and housing rescue plans have not been specifically targeted at investors, there are three strategies that can be built around all these new laws that benefit real estate investors,” said Gibran Nicholas, Chairman of the CMPS Institute, an organization that certifies mortgage bankers and brokers.
1. Reverse Mortgage for Purchase Transactions. “Until the end of 2009, an investor who is age 62 or older can purchase a 1-4 unit property worth up to $625,500 with a 30% - 35% down payment, live in one of the units, generate income by renting out the other units, and never have to make a mortgage payment for the rest of their entire life,” Nicholas said. “This opens up a lot of options for seniors and investors who are wondering how to supplement their retirement income now that their house values and retirement accounts have taken such a huge hit.”
The reverse mortgage for home purchase transactions became available on January 1, 2009, and the higher loan limit of $625,500 became available a few months ago as part of the 2009 economic stimulus plan. Investors who are trying to sell their duplexes, triplexes, or four-unit properties can utilize this strategy in their marketing as a way of stimulating potential buyers. “This strategy has been lost in all the noise of the last few months and very few people are aware that it can be done,” Nicholas said. “The $625,500 higher loan limit really opens up a lot of options, but it expires at the end of the year so you need to take action now.”
2. First Time Home Buyer Tax Credit. “The $8,000 first-time home buyer tax credit can also be utilized on one to four family properties,” Nicholas said. “The greatest thing is that not all buyers need to be first time home buyers. This means that an individual who qualifies for the credit can get their parents to co-sign on the loan and/or contribute to the down payment, and this would not disqualify the individual from taking the credit. A group of friends, relatives or investors could get together and buy a duplex, triplex, or four-unit property, and the credit can be claimed by any one or more of the investors as long as the individual(s) claiming the credit live in one of the units as their primary home for at least three years. They could claim the credit even though they are generating income by renting out one or more of the other units.”
The maximum FHA loan-limit on four-unit properties ranges from $521,250 in low cost housing markets up to $1,403,400 in the highest cost markets of the country. An investor who is trying to sell their one to four family unit property can also utilize this strategy to stimulate potential buyers. “This strategy just became a whole lot easier now that the FHA is allowing the credit to be utilized as part of the buyer’s down payment,” Nicholas said. “As of May 29, buyers are now allowed to borrow against the credit or sell it to their lender or another 3rd party as way of helping with their down payment.”
3. Rent-to-Own or Sale-Leaseback Opportunities. “There are a large number of distressed homeowners who will not qualify for the mortgage modification plans announced by the government,” Nicholas said. “These homeowners still need a place to live, and many will not be able to qualify for conventional or government mortgage financing for at least another three to five years.”
A rent-to-own strategy is where an investor or Realtor takes a potential home buyer house shopping even though the buyer can’t qualify for traditional financing. The investor buys the house, rents it to the tenant who picked out the house and wants to live there, and gives the tenant the right to buy the home at a pre-determined price at some point in the future. A sale-leaseback strategy is where a homeowner sells their current property to an investor and then pays the investor rent, with the option to buy back the home at a pre-determined price at some point in the future.
“While most real estate investors are scrambling to find tenants for their vacant properties, savvy investors could utilize either a rent-to-own or a sale-leaseback strategy to find tenants before they commit their investment dollars to a specific property,” Nicholas said. “This is a fantastic opportunity for investors to work with the large population of people who won’t qualify for the government foreclosure prevention plans.”
Even so, there are a few potential landmines to avoid. “If the tenant defaults on their rent or walks away from the deal, the investor could be left holding the bag,” Nicholas said. “Also, if the investor defaults on the mortgage and goes into foreclosure, the tenant may be evicted by the new owner,” said Nicholas. The new federal housing law provides two minimum guidelines that protect tenants in these and other situations:
- Tenants are now allowed to occupy the property until the end of their lease term (even after the landlord goes through foreclosure) as long as the new buyer does not intend to occupy the new home as their own primary residence.- If the new buyer intends to occupy the home as their own primary residence, the tenant must be given a 90 day notice before being forced to leave.
Thursday, June 4, 2009
Wednesday, June 3, 2009
Mortgage Rates Surge Late Last Week; 30-Year Fixed Rates Peak Near 5.40% But Fall Over Weekend
RISMEDIA, June 3, 2009-The weekly average mortgage rate borrowers were quoted on Zillow Mortgage Marketplace for 30-year fixed mortgages increased last week to 5.25%, up from 5.02% the week prior, according to the Zillow Mortgage Rate Monitor, compiled by leading real estate Web site Zillow.com(R). Meanwhile, rates for 15-year fixed mortgages rose to 4.78% from 4.60%, and 5-1 adjustable rate mortgages rose to 4.48% from 4.27% the week prior.
Mortgage Type Average Rate Average Rate % ChangeWeek ending 5/31/09 Week ending 5/24/09
30-year fixed 5.25% 5.02% 4.6%
15-year fixed 4.78% 4.60% 3.7%5-
1 ARM 4.48% 4.27% 4.8%
Rates dipped slightly over the weekend, but were expected to climb again during the week. The rate for a 30-year fixed purchase mortgage was 5.28% on Monday morning.
Thirty-year fixed mortgage rates varied by state. Maryland mortgage rates and Massachusetts mortgage rates were the highest, at 5.35% and 5.30%, respectively. Georgia mortgage rates were the lowest, at 5.15%. California mortgage rates were the most requested among all states.
State Average 30-yr. Average 30-yr. % ChangeFixed Rate
Fixed RateWeek ending 5/31/09 Week ending 5/24/09
Arizona 5.25% 5.04% 4.1%
California 5.24% 5.00% 4.7%
Colorado 5.23% 5.02% 4.1%
Connecticut 5.26% 4.99% 5.4%
Florida 5.19% 4.97% 4.4%
Georgia 5.15% 4.93% 4.5%
Illinois 5.28% 5.08% 4.0%
Maryland 5.35% 5.09% 5.1%
Massachusetts 5.30% 5.11% 3.7%
Michigan 5.21% 5.01% 3.9%
Missouri 5.25% 5.06% 3.8%
New Jersey 5.24% 5.02% 4.4%
New York 5.29% 5.05% 4.7%
North Carolina 5.27% 5.07% 3.9%
Ohio 5.28% 5.11% 3.3%
Oregon 5.27% 5.03% 4.9%
Pennsylvania 5.26% 4.99% 5.3%
Texas 5.25% 5.02% 4.5%
Virginia 5.23% 4.96% 5.5%
Washington 5.24% 4.98% 5.2%
The Zillow Mortgage Rate Monitor is compiled each week using thousands of mortgage rates quoted on Zillow Mortgage Marketplace by mortgage lenders to borrowers who have submitted loan requests. State-level data is gathered for the top 20 states with the highest quote volume on Zillow.
Mortgage Type Average Rate Average Rate % ChangeWeek ending 5/31/09 Week ending 5/24/09
30-year fixed 5.25% 5.02% 4.6%
15-year fixed 4.78% 4.60% 3.7%5-
1 ARM 4.48% 4.27% 4.8%
Rates dipped slightly over the weekend, but were expected to climb again during the week. The rate for a 30-year fixed purchase mortgage was 5.28% on Monday morning.
Thirty-year fixed mortgage rates varied by state. Maryland mortgage rates and Massachusetts mortgage rates were the highest, at 5.35% and 5.30%, respectively. Georgia mortgage rates were the lowest, at 5.15%. California mortgage rates were the most requested among all states.
State Average 30-yr. Average 30-yr. % ChangeFixed Rate
Fixed RateWeek ending 5/31/09 Week ending 5/24/09
Arizona 5.25% 5.04% 4.1%
California 5.24% 5.00% 4.7%
Colorado 5.23% 5.02% 4.1%
Connecticut 5.26% 4.99% 5.4%
Florida 5.19% 4.97% 4.4%
Georgia 5.15% 4.93% 4.5%
Illinois 5.28% 5.08% 4.0%
Maryland 5.35% 5.09% 5.1%
Massachusetts 5.30% 5.11% 3.7%
Michigan 5.21% 5.01% 3.9%
Missouri 5.25% 5.06% 3.8%
New Jersey 5.24% 5.02% 4.4%
New York 5.29% 5.05% 4.7%
North Carolina 5.27% 5.07% 3.9%
Ohio 5.28% 5.11% 3.3%
Oregon 5.27% 5.03% 4.9%
Pennsylvania 5.26% 4.99% 5.3%
Texas 5.25% 5.02% 4.5%
Virginia 5.23% 4.96% 5.5%
Washington 5.24% 4.98% 5.2%
The Zillow Mortgage Rate Monitor is compiled each week using thousands of mortgage rates quoted on Zillow Mortgage Marketplace by mortgage lenders to borrowers who have submitted loan requests. State-level data is gathered for the top 20 states with the highest quote volume on Zillow.
Monday, June 1, 2009
Distressed sales a factor in median price dip
Existing-home sales rose in April with strong buyer activity in lower price ranges, according to the National Association of REALTORS®.
Existing-home sales — including single-family, townhomes, condominiums and co-ops — increased 2.9 percent to a seasonally adjusted annual rate1 of 4.68 million units in April from a downwardly revised pace of 4.55 million units in March, but were 3.5 percent below the 4.85 million-unit level in April 2008.
Lawrence Yun, NAR chief economist, said first-time buyers continue to influence the market but there also is a seasonal rise of repeat buyers. “Most of the sales are taking place in lower price ranges and activity is beginning to pick up in the midprice ranges, but high-end home sales remain sluggish,” he says. “The Federal Reserve needs to help restore liquidity for the jumbo mortgage market by buying these loans under the TALF program.”
“Because foreclosed properties will likely be released into the market over the rest of year, it is critical that distressed homes be quickly cleared from the market,” Yun says. “Fortunately, homebuyers are being attracted to deeply discounted prices and are bidding up many foreclosed listings, particularly in California, Nevada, and Florida — this will set the stage for healthy market conditions going forward.”
An NAR practitioner survey in April showed first-time buyers declined to 40 percent of transactions, implying more repeat buyers are entering the traditional spring home-buying season. It also showed the number of buyers looking at homes has increased 14 percentage points from a year ago. “This is consistent with our forecast for home sales in the latter part of the year to be 10 to 20 percent higher than the second half of 2008,” Yun says.
The national median existing-home price for all housing types was $170,200 in April, which is 15.4 percent below 2008. Distressed properties, which accounted for 45 percent of all sales in April, continue to downwardly distort the median price because they generally sell at a discount relative to traditional homes.
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to a record low 4.81 percent in April from 5.00 percent in March; the rate was 5.92 percent in April 2008; data collection began in 1971. Total housing inventory at the end of April rose 8.8 percent to 3.97 million existing homes available for sale, which represents a 10.2.-month supply3 at the current sales pace, compared with a 9.6-month supply in March.
“The gain in inventory is largely seasonal from sellers entering the spring market. Even with the rise, inventory over the past few months has remained consistently lower in comparison with a year earlier,” Yun notes.
Single-family home sales rose 2.5 percent to a seasonally adjusted annual rate of 4.18 million in April from a level of 4.08 million in March, but are 2.8 percent below the 4.30 million-unit pace in March 2008. The median existing single-family home price was $169,800 in April, which is 14.9 percent below a year ago.
Existing condominium and co-op sales increased 6.4 percent to a seasonally adjusted annual rate of 500,000 units in April from 470,000 in March, but are 9.4 percent lower than the 552,000-unit pace a year ago. The median existing condo price4 was $173,900 in April, down 18.5 percent from April 2008.
Regionally, existing-home sales in the Northeast jumped 11.6 percent to an annual pace of 770,000 in April, but are 10.5 percent below April 2008. The median price in the Northeast was $237,400, which is 9.6 percent lower than a year ago.
Existing-home sales in the Midwest slipped 2.0 percent in April to a level of 1.00 million and are 9.9 percent lower than a year ago. The median price in the Midwest was $138,800, down 11.7 percent from April 2008.
In the South, existing-home sales increased 1.8 percent to an annual pace of 1.74 million in April but are 8.9 percent lower than April 2008. The median price in the South was $148,000, which is 12.8 percent below a year ago.
Existing-home sales — including single-family, townhomes, condominiums and co-ops — increased 2.9 percent to a seasonally adjusted annual rate1 of 4.68 million units in April from a downwardly revised pace of 4.55 million units in March, but were 3.5 percent below the 4.85 million-unit level in April 2008.
Lawrence Yun, NAR chief economist, said first-time buyers continue to influence the market but there also is a seasonal rise of repeat buyers. “Most of the sales are taking place in lower price ranges and activity is beginning to pick up in the midprice ranges, but high-end home sales remain sluggish,” he says. “The Federal Reserve needs to help restore liquidity for the jumbo mortgage market by buying these loans under the TALF program.”
“Because foreclosed properties will likely be released into the market over the rest of year, it is critical that distressed homes be quickly cleared from the market,” Yun says. “Fortunately, homebuyers are being attracted to deeply discounted prices and are bidding up many foreclosed listings, particularly in California, Nevada, and Florida — this will set the stage for healthy market conditions going forward.”
An NAR practitioner survey in April showed first-time buyers declined to 40 percent of transactions, implying more repeat buyers are entering the traditional spring home-buying season. It also showed the number of buyers looking at homes has increased 14 percentage points from a year ago. “This is consistent with our forecast for home sales in the latter part of the year to be 10 to 20 percent higher than the second half of 2008,” Yun says.
The national median existing-home price for all housing types was $170,200 in April, which is 15.4 percent below 2008. Distressed properties, which accounted for 45 percent of all sales in April, continue to downwardly distort the median price because they generally sell at a discount relative to traditional homes.
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to a record low 4.81 percent in April from 5.00 percent in March; the rate was 5.92 percent in April 2008; data collection began in 1971. Total housing inventory at the end of April rose 8.8 percent to 3.97 million existing homes available for sale, which represents a 10.2.-month supply3 at the current sales pace, compared with a 9.6-month supply in March.
“The gain in inventory is largely seasonal from sellers entering the spring market. Even with the rise, inventory over the past few months has remained consistently lower in comparison with a year earlier,” Yun notes.
Single-family home sales rose 2.5 percent to a seasonally adjusted annual rate of 4.18 million in April from a level of 4.08 million in March, but are 2.8 percent below the 4.30 million-unit pace in March 2008. The median existing single-family home price was $169,800 in April, which is 14.9 percent below a year ago.
Existing condominium and co-op sales increased 6.4 percent to a seasonally adjusted annual rate of 500,000 units in April from 470,000 in March, but are 9.4 percent lower than the 552,000-unit pace a year ago. The median existing condo price4 was $173,900 in April, down 18.5 percent from April 2008.
Regionally, existing-home sales in the Northeast jumped 11.6 percent to an annual pace of 770,000 in April, but are 10.5 percent below April 2008. The median price in the Northeast was $237,400, which is 9.6 percent lower than a year ago.
Existing-home sales in the Midwest slipped 2.0 percent in April to a level of 1.00 million and are 9.9 percent lower than a year ago. The median price in the Midwest was $138,800, down 11.7 percent from April 2008.
In the South, existing-home sales increased 1.8 percent to an annual pace of 1.74 million in April but are 8.9 percent lower than April 2008. The median price in the South was $148,000, which is 12.8 percent below a year ago.
Friday, May 29, 2009
HUD: Tax Credit Can Be Used on Closing Costs
FHA-approved lenders received the go-ahead to develop bridge-loan products that enable first-time buyers to use the benefits of the federal tax credit upfront, according to eagerly awaited guidance from the U.S. Department of Housing and Urban Development on so-called home buyer tax credit loans that was released today.
Under the guidance, FHA-approved lenders can develop bridge loans that home buyers can use to help cover their closing costs, buy down their interest rate, or put down more than the minimum 3.5 percent.
The loans can't be used to cover the minimum 3.5 percent, senior HUD officials told reporters on a conference call Friday morning.
Thus, buyers applying for FHA-backed financing with an FHA-approved lender that offers a bridge-loan program can get a bridge loan to bring down the upfront costs of buying a home significantly but would still have to come up with the minimum 3.5 percent downpayment.
There remain many sources of assistance for buyers needing help with the 3.5 percent downpayment, including many state and local government instrumentalities and nonprofit lenders.
In addition, some state housing finance agencies have developed their own tax credit bridge loan programs, so buyers in states whose HFAs offer such programs can monetize the tax credit upfront to cover all or part of their downpayment. These programs are separate from what HUD announced today.
The first-time homebuyer tax credit was enacted last year--and improved upon earlier this year--to help encourage households to enter the housing market while interest rates are low and affordability is high. The credit is worth up to $8,000 and is available to households that haven't owned a home in at least three years. The credit does not have to be repaid, and is fully reimbursable, so households can get their credit returned to them in the form of a payment.
Under the guidance, FHA-approved lenders can develop bridge loans that home buyers can use to help cover their closing costs, buy down their interest rate, or put down more than the minimum 3.5 percent.
The loans can't be used to cover the minimum 3.5 percent, senior HUD officials told reporters on a conference call Friday morning.
Thus, buyers applying for FHA-backed financing with an FHA-approved lender that offers a bridge-loan program can get a bridge loan to bring down the upfront costs of buying a home significantly but would still have to come up with the minimum 3.5 percent downpayment.
There remain many sources of assistance for buyers needing help with the 3.5 percent downpayment, including many state and local government instrumentalities and nonprofit lenders.
In addition, some state housing finance agencies have developed their own tax credit bridge loan programs, so buyers in states whose HFAs offer such programs can monetize the tax credit upfront to cover all or part of their downpayment. These programs are separate from what HUD announced today.
The first-time homebuyer tax credit was enacted last year--and improved upon earlier this year--to help encourage households to enter the housing market while interest rates are low and affordability is high. The credit is worth up to $8,000 and is available to households that haven't owned a home in at least three years. The credit does not have to be repaid, and is fully reimbursable, so households can get their credit returned to them in the form of a payment.
Speeding up foreclosures would help housing market
(Crain’s) — Sam Zell said speeding up the pace of foreclosures would be the quickest cure for the woeful residential market, even as some experts and housing activists say the federal government should slow down the wave of such lawsuits.
During an interview Thursday with Bloomberg TV, the billionaire investor repeated his prediction that the housing market would bottom out, this time by the end of summer, and then bounce along for six to eight months.
“Well, the inventory is going down,” Mr. Zell said, according to a transcript. “The affordability is going up. The government is making serious efforts to provide financing. And I think it’s slowly working. And the best thing that could happen is if we could accelerate all the foreclosures. Because I think they represent a drag on the market.”
Mr. Zell, who is chairman of Chicago-based Equity Residential, an apartment real estate investment trust, has previously offered uncharacteristically optimistic forecasts about the housing market, only to be disappointed. In February 2008, he said he saw the bottom of the housing market just ahead.
He is the former chairman of Equity Office Properties Trust, which he sold in 2007. In commercial real estate, he predicted that the current dearth of investment activity could continue until 2012.
“Well, there’s been a lot of speculation and a lot of journalists have written about the impending demise of commercial real estate,” he said. “First of all, I think that the fact that interest rates are as low as they are means that even if people are under water in commercial real estate, they still can carry it. And if you’re under water and you can carry it, the last thing you’re going to do is sell it, because you don’t get anything.”
“So therefore, that’s why we have no transactions,” he said. “And I think it’s going to take two or three years before we start seeing that happen.”
On other topics, Mr. Zell said:
• Unemployment, which hit 8.9% in April, is close to peaking.
• The federal stimulus package, which Mr. Zell says is working, is also the biggest risk to the economy because of the huge government debt it creates. “Married into that is the creation of all these massive new programs all at once,” he said.
• Asked about the best values in the housing market, Mr. Zell singled out Mexico and Brazil, where he owns stakes in developers focused on lower-cost housing. “In the U.S., I just think that the single-family market is slowly working its way through the morass,” he said.
During an interview Thursday with Bloomberg TV, the billionaire investor repeated his prediction that the housing market would bottom out, this time by the end of summer, and then bounce along for six to eight months.
“Well, the inventory is going down,” Mr. Zell said, according to a transcript. “The affordability is going up. The government is making serious efforts to provide financing. And I think it’s slowly working. And the best thing that could happen is if we could accelerate all the foreclosures. Because I think they represent a drag on the market.”
Mr. Zell, who is chairman of Chicago-based Equity Residential, an apartment real estate investment trust, has previously offered uncharacteristically optimistic forecasts about the housing market, only to be disappointed. In February 2008, he said he saw the bottom of the housing market just ahead.
He is the former chairman of Equity Office Properties Trust, which he sold in 2007. In commercial real estate, he predicted that the current dearth of investment activity could continue until 2012.
“Well, there’s been a lot of speculation and a lot of journalists have written about the impending demise of commercial real estate,” he said. “First of all, I think that the fact that interest rates are as low as they are means that even if people are under water in commercial real estate, they still can carry it. And if you’re under water and you can carry it, the last thing you’re going to do is sell it, because you don’t get anything.”
“So therefore, that’s why we have no transactions,” he said. “And I think it’s going to take two or three years before we start seeing that happen.”
On other topics, Mr. Zell said:
• Unemployment, which hit 8.9% in April, is close to peaking.
• The federal stimulus package, which Mr. Zell says is working, is also the biggest risk to the economy because of the huge government debt it creates. “Married into that is the creation of all these massive new programs all at once,” he said.
• Asked about the best values in the housing market, Mr. Zell singled out Mexico and Brazil, where he owns stakes in developers focused on lower-cost housing. “In the U.S., I just think that the single-family market is slowly working its way through the morass,” he said.
Thursday, May 28, 2009
Will Downpayment Assistance Help the U.S. Housing Market?
RISMEDIA, May 28, 2009-With home prices falling nearly 20% in the first quarter of 2009, Ann Ashburn, president of AmeriDream outlined four reasons why the U.S. economy and the next generation of homeowners would benefit from downpayment assistance funded in part by sellers (DPA). Congress is currently considering H.R. 600, bipartisan legislation that would make DPA an allowable gift source for creditworthy borrowers of Federal Housing Administration loans.
“AmeriDream continues to provide full support to H.R. 600, which will stabilize home values, protect taxpayers, encourage responsible homeownership, and create jobs,” said Ashburn. “These are four compelling reasons to make DPA an important part of our national economic recovery strategy.”
1. Stabilize home values. DPA can help stop the downward spiral in home values across the country by encouraging qualified homebuyers with FHA loans to enter the housing market. An estimated 300,000 homebuyers are eliminated from the housing market every year without DPA programs in place.
2. Protect taxpayers. H.R. 600 allows private partnerships between sellers and non-profits to provide downpayment gifts to qualified homebuyers at no cost to the taxpayer. That makes H.R. 600 a fiscally responsible alternative to government-subsidized downpayment assistance programs being considered by the U.S. Department of Housing & Urban Development.
3. Encourage responsible homeownership. H.R. 600 will enable 300,000 additional families and individuals- all qualified and approved for FHA loans- to become homeowners each year. The bill also requires that DPA recipients be offered homebuyer education courses to help them understand the financial responsibilities of homeownership. Lastly, H.R. 600 implements tougher credit requirements for DPA recipients, strict FHA underwriting guidelines, and stiff penalties for improper home appraisals.
4. Create jobs. DPA will create 235,000 jobs, generate over $4 billion annually in local and state revenues, and provide $2 billion annually in private capital for sustainable homeownership. DPA’s absence prompts fewer home sales, lower home values, more foreclosures, job losses, and lower revenues for cash-strapped local governments. H.R. 600 is a vital mechanism to stabilizing the U.S. housing market.
“AmeriDream continues to provide full support to H.R. 600, which will stabilize home values, protect taxpayers, encourage responsible homeownership, and create jobs,” said Ashburn. “These are four compelling reasons to make DPA an important part of our national economic recovery strategy.”
1. Stabilize home values. DPA can help stop the downward spiral in home values across the country by encouraging qualified homebuyers with FHA loans to enter the housing market. An estimated 300,000 homebuyers are eliminated from the housing market every year without DPA programs in place.
2. Protect taxpayers. H.R. 600 allows private partnerships between sellers and non-profits to provide downpayment gifts to qualified homebuyers at no cost to the taxpayer. That makes H.R. 600 a fiscally responsible alternative to government-subsidized downpayment assistance programs being considered by the U.S. Department of Housing & Urban Development.
3. Encourage responsible homeownership. H.R. 600 will enable 300,000 additional families and individuals- all qualified and approved for FHA loans- to become homeowners each year. The bill also requires that DPA recipients be offered homebuyer education courses to help them understand the financial responsibilities of homeownership. Lastly, H.R. 600 implements tougher credit requirements for DPA recipients, strict FHA underwriting guidelines, and stiff penalties for improper home appraisals.
4. Create jobs. DPA will create 235,000 jobs, generate over $4 billion annually in local and state revenues, and provide $2 billion annually in private capital for sustainable homeownership. DPA’s absence prompts fewer home sales, lower home values, more foreclosures, job losses, and lower revenues for cash-strapped local governments. H.R. 600 is a vital mechanism to stabilizing the U.S. housing market.
Wednesday, May 27, 2009
New Rules Imposed on Credit Card Industry Aim to Help Consumers
RISMEDIA, May 27, 2009-(MCT)-President Obama recently put forth law designed to rein in a credit card industry widely condemned for snaring consumers in financially crippling traps.
When the new law takes full effect next February, card issuers will no longer be able to impose sky-high penalty interest rates on customers whose payments arrive a day or two late.
Consumers will still face late fees, but they will have to be 60 days late to be pushed into default.
Barred, too, will be retroactive changes in terms affecting cardholders who had committed no infractions at all.
In urging Congress to act, Obama sharply criticized those sorts of “any-time, any-reason” rate increases that can suddenly double or triple the interest rate on a customer’s existing balance.
Many consumers complained that such tactics amounted to bait-and-switch.
Critics say the credit card industry’s outrageous practices caused its fall from grace even as it made Visa, MasterCard and American Express into synonyms for the good life and enabled U.S. consumers to build up nearly $1 trillion in balances on revolving credit accounts.
The credit card industry did not accept defeat quietly. To the end, it argued its detractors did not understand the sophisticated business model it had evolved: pricing credit according to risk, and repricing it continually as consumers’ circumstances changed.
One thing both sides agree is the new law reflects a shift in the political pendulum-away from the laissez-faire lending environment that allowed practices that federal regulators and lawmakers ultimately deemed unfair and deceptive, and toward a more regulated marketplace.
Advocates representing consumer groups and lenders both said the bipartisan success of the legislation, which will force credit card companies to revamp their business models, was a sign of the political moment.
They said the credit crisis, economic meltdown and bank bailouts made credit card lenders a politically juicy target and undercut the finance industry’s vaunted ability to get its way in Washington.
“There was a need for Congress and the president to appear tough on banks, and an easy and politically expedient way to do that was to crack down on card issuers,” said Mark J. Furletti, a credit card company attorney at Philadelphia’s Ballard, Spahr, Andrews & Ingersoll L.L.P. and a former researcher at the Philadelphia Federal Reserve Bank’s Payment Card Center.
To be sure, the industry has hardly lost its clout. Less than a month ago, Congress disappointed the same consumer groups that pushed for credit card reforms when it refused to allow bankruptcy judges to adjust, or “cram down,” the principal owed on primary residential mortgages.
Supporters said allowing judges to reduce mortgages to the level of a home’s actual market value-as they already can do with commercial properties, vacation homes and autos-was crucial to stemming the foreclosure crisis and the collapse of housing prices around the country. Bankers said it would reduce the availability of credit and raise its cost for everybody-the same arguments they made against the new credit card rules.
Why the difference? One reason is that the cramdown proposal was opposed by a broad group of lenders, including credit unions and community banks. Far fewer lenders remain in the credit card business, which became increasingly consolidated in the 1980s and ’90s as it turned to costly marketing and pricing models based on the now ubiquitous FICO score. But a bigger distinction was the difference between troubled homeowners and card users.
Rightly or wrongly, opponents of the cramdown proposal portrayed those who would benefit as irresponsible people willing to walk away from their debts. “They were able to paint them as deadbeats,” said Ed Mierzwinski, consumer program director for the U.S. Public Interest Research Group. That did not work in the fight over credit card abuses, because such a wide swath of victims was affected.
Some were responsible citizens who got into trouble with credit card debt because of a personal crisis such as a job loss or medical problem-much like the profile of consumers who get in over their heads and eventually wind up in Bankruptcy Court.
Advocates such as Mierzwinski say the connection is not coincidental. As such borrowers struggled to stay afloat, their credit card lenders may have sounded sympathetic. But the lenders’ risk models showed they were more likely to default, so they were socked with rate increases even if they had managed to stay current on their cards. If treading water is tough at 12%, it is even tougher at 29%.
But it was another category of borrowers who surely became the industry’s worst nightmares. People like Larry Hrebiniak. A management professor at the University of Pennsylvania’s Wharton School, Hrebiniak was among tens of thousands of consumers who complained in recent years about sudden and unexplained changes in interest rates and other credit card traps.
Six years ago, Hrebiniak was a fairly typical “convenience user” of credit cards, like about 4 in 10 Americans, including a MasterCard from MBNA (now part of Bank of America Corp.). He paid off its balance every month, enjoyed an interest rate of 8%, and had a credit limit of $15,000.
His mistake? He decided to use of some of his MBNA credit to pay off some unusually large expenses over several months. His balance went as high as $10,000, and suddenly his rate jumped to 15.99%.
Hrebiniak complained to MBNA and bank regulators. Both reached the same conclusion: It was a contractual matter between Hrebiniak and his bank, and the terms of Hrebiniak’s card allowed MBNA to raise his rates at any time for any reason. All that mattered was whether it was properly disclosed.
But complaints like Hrebiniak’s kept coming, and two years ago key regulators decided it was time to act.
In new rules scheduled to take effect in July 2010, the Federal Reserve finally declared that disclosure was not enough and said it could bar practices such as “any-time, any-reason” rate increases under its authority to stop unfair and deceptive trade practices.
Now Congress and the president have gone further. The 33-page law that Obama signed mostly takes effect in nine months and bars a whole slew of traps that credit cards’ critics have identified over the years-including irritants such as vanishing grace periods, shifting due dates and the imposition of “over-limit” fees on customers who would rather just have a purchase declined.
To Travis Plunkett, who pushed for the new rules on behalf of a coalition of consumer groups, perhaps the most remarkable aspect of the turnaround was how it ended-with protections being added, not taken away.
Plunkett said congressional debate usually “gives industry lobbyists and special interests more time to work their magic” to weaken proposals. “But in this case the dynamic was the opposite. Public anger was so high, and concern in Congress was so broad, that the overall impact was to strengthen the bill.” Hrebiniak said he was happy lawmakers had acted, even if it took a crisis to push them.
“A lot of people have been yelling against the issuers of credit cards for years,” he said. “But I think it all resonated, it all came together, when the economy collapsed.”
Hrebiniak said he expected the market to adapt to the new rules. Despite card issuers’ recent dire warnings, he said he expected competition to keep offers flowing to creditworthy customers. At the same time, he said the new law would not be a panacea for financially stressed borrowers.
“Despite these protections, there are a lot of people who still can’t handle credit,” he said.
New credit card rules include:-Cardholders must be 60 days late before considered in default.-Except in cases of default, rate changes will generally apply only to new purchases, not existing balances.-Banks must send a bill at least 21 days before it’s due.-Payments received by 5 p.m. on the due date must be counted as on time.-Lenders must give 45 days’ notice before raising rates. (Consumers may opt out and pay under the old terms.)-Payments above the minimum must be applied first to highest-interest portion of the balance.-People under 21 must offer proof of income or have a co-signer to obtain a credit card.-”Over-limit” fees cannot be triggered by purchase unless cardholder agrees that lender should permit such a purchase.-Gift cards cannot expire in less than 5 years. Inactivity fees must be prominently disclosed.
When the new law takes full effect next February, card issuers will no longer be able to impose sky-high penalty interest rates on customers whose payments arrive a day or two late.
Consumers will still face late fees, but they will have to be 60 days late to be pushed into default.
Barred, too, will be retroactive changes in terms affecting cardholders who had committed no infractions at all.
In urging Congress to act, Obama sharply criticized those sorts of “any-time, any-reason” rate increases that can suddenly double or triple the interest rate on a customer’s existing balance.
Many consumers complained that such tactics amounted to bait-and-switch.
Critics say the credit card industry’s outrageous practices caused its fall from grace even as it made Visa, MasterCard and American Express into synonyms for the good life and enabled U.S. consumers to build up nearly $1 trillion in balances on revolving credit accounts.
The credit card industry did not accept defeat quietly. To the end, it argued its detractors did not understand the sophisticated business model it had evolved: pricing credit according to risk, and repricing it continually as consumers’ circumstances changed.
One thing both sides agree is the new law reflects a shift in the political pendulum-away from the laissez-faire lending environment that allowed practices that federal regulators and lawmakers ultimately deemed unfair and deceptive, and toward a more regulated marketplace.
Advocates representing consumer groups and lenders both said the bipartisan success of the legislation, which will force credit card companies to revamp their business models, was a sign of the political moment.
They said the credit crisis, economic meltdown and bank bailouts made credit card lenders a politically juicy target and undercut the finance industry’s vaunted ability to get its way in Washington.
“There was a need for Congress and the president to appear tough on banks, and an easy and politically expedient way to do that was to crack down on card issuers,” said Mark J. Furletti, a credit card company attorney at Philadelphia’s Ballard, Spahr, Andrews & Ingersoll L.L.P. and a former researcher at the Philadelphia Federal Reserve Bank’s Payment Card Center.
To be sure, the industry has hardly lost its clout. Less than a month ago, Congress disappointed the same consumer groups that pushed for credit card reforms when it refused to allow bankruptcy judges to adjust, or “cram down,” the principal owed on primary residential mortgages.
Supporters said allowing judges to reduce mortgages to the level of a home’s actual market value-as they already can do with commercial properties, vacation homes and autos-was crucial to stemming the foreclosure crisis and the collapse of housing prices around the country. Bankers said it would reduce the availability of credit and raise its cost for everybody-the same arguments they made against the new credit card rules.
Why the difference? One reason is that the cramdown proposal was opposed by a broad group of lenders, including credit unions and community banks. Far fewer lenders remain in the credit card business, which became increasingly consolidated in the 1980s and ’90s as it turned to costly marketing and pricing models based on the now ubiquitous FICO score. But a bigger distinction was the difference between troubled homeowners and card users.
Rightly or wrongly, opponents of the cramdown proposal portrayed those who would benefit as irresponsible people willing to walk away from their debts. “They were able to paint them as deadbeats,” said Ed Mierzwinski, consumer program director for the U.S. Public Interest Research Group. That did not work in the fight over credit card abuses, because such a wide swath of victims was affected.
Some were responsible citizens who got into trouble with credit card debt because of a personal crisis such as a job loss or medical problem-much like the profile of consumers who get in over their heads and eventually wind up in Bankruptcy Court.
Advocates such as Mierzwinski say the connection is not coincidental. As such borrowers struggled to stay afloat, their credit card lenders may have sounded sympathetic. But the lenders’ risk models showed they were more likely to default, so they were socked with rate increases even if they had managed to stay current on their cards. If treading water is tough at 12%, it is even tougher at 29%.
But it was another category of borrowers who surely became the industry’s worst nightmares. People like Larry Hrebiniak. A management professor at the University of Pennsylvania’s Wharton School, Hrebiniak was among tens of thousands of consumers who complained in recent years about sudden and unexplained changes in interest rates and other credit card traps.
Six years ago, Hrebiniak was a fairly typical “convenience user” of credit cards, like about 4 in 10 Americans, including a MasterCard from MBNA (now part of Bank of America Corp.). He paid off its balance every month, enjoyed an interest rate of 8%, and had a credit limit of $15,000.
His mistake? He decided to use of some of his MBNA credit to pay off some unusually large expenses over several months. His balance went as high as $10,000, and suddenly his rate jumped to 15.99%.
Hrebiniak complained to MBNA and bank regulators. Both reached the same conclusion: It was a contractual matter between Hrebiniak and his bank, and the terms of Hrebiniak’s card allowed MBNA to raise his rates at any time for any reason. All that mattered was whether it was properly disclosed.
But complaints like Hrebiniak’s kept coming, and two years ago key regulators decided it was time to act.
In new rules scheduled to take effect in July 2010, the Federal Reserve finally declared that disclosure was not enough and said it could bar practices such as “any-time, any-reason” rate increases under its authority to stop unfair and deceptive trade practices.
Now Congress and the president have gone further. The 33-page law that Obama signed mostly takes effect in nine months and bars a whole slew of traps that credit cards’ critics have identified over the years-including irritants such as vanishing grace periods, shifting due dates and the imposition of “over-limit” fees on customers who would rather just have a purchase declined.
To Travis Plunkett, who pushed for the new rules on behalf of a coalition of consumer groups, perhaps the most remarkable aspect of the turnaround was how it ended-with protections being added, not taken away.
Plunkett said congressional debate usually “gives industry lobbyists and special interests more time to work their magic” to weaken proposals. “But in this case the dynamic was the opposite. Public anger was so high, and concern in Congress was so broad, that the overall impact was to strengthen the bill.” Hrebiniak said he was happy lawmakers had acted, even if it took a crisis to push them.
“A lot of people have been yelling against the issuers of credit cards for years,” he said. “But I think it all resonated, it all came together, when the economy collapsed.”
Hrebiniak said he expected the market to adapt to the new rules. Despite card issuers’ recent dire warnings, he said he expected competition to keep offers flowing to creditworthy customers. At the same time, he said the new law would not be a panacea for financially stressed borrowers.
“Despite these protections, there are a lot of people who still can’t handle credit,” he said.
New credit card rules include:-Cardholders must be 60 days late before considered in default.-Except in cases of default, rate changes will generally apply only to new purchases, not existing balances.-Banks must send a bill at least 21 days before it’s due.-Payments received by 5 p.m. on the due date must be counted as on time.-Lenders must give 45 days’ notice before raising rates. (Consumers may opt out and pay under the old terms.)-Payments above the minimum must be applied first to highest-interest portion of the balance.-People under 21 must offer proof of income or have a co-signer to obtain a credit card.-”Over-limit” fees cannot be triggered by purchase unless cardholder agrees that lender should permit such a purchase.-Gift cards cannot expire in less than 5 years. Inactivity fees must be prominently disclosed.
Tuesday, May 26, 2009
Lifestyle and Economic Changes May be Permanent - Tips to Adjust and Prosper in ‘Reset’ Economy
RISMEDIA, May 26, 2009-Shock dealt by the market is laying the foundation for deep, long-term change where quick or temporary adjustments won’t do. Rocked to their core, consumers are saying a good-bye to frivolous expenditures. In fact, Americans say that even after the recession ends, their spending will return to just 86% of pre-recession levels, which equates to an approximate 10% drop, according to a new survey by AlixPartners LLP. On the savings front, the survey revealed that once the recession ends, Americans plan to save 14% of their total earnings, with the replenishment of their 401(k) and other retirement savings their biggest long-term concerns. In the end, this financial crisis may be recorded as a “generation-changing moment” where investors chose risk management over risky business.Read more: "Lifestyle and Economic Changes May be Permanent -
Tips to Adjust and Prosper in ‘Reset’ Economy RISMedia" -
1. Focus on personal economy. The quick-fix portfolio move should be replaced with a lengthened perspective by reviewing long-term goals. Instead of reacting to sensational headlines, consumers would do well to run some real numbers to determine where they stand.
Good decision making happens when a person feels confident in their current position. With unemployment soaring as the market slides, it’s more important than ever to maintain an adequate emergency fund. “Rather than the traditional three months of expenses, I suggest people have eight months in an accessible, liquid account - more if the recession puts your job at risk,” says Carbone. Naturally, it’s also crucial to limit consumer debt.
2. Reassess asset allocation. Especially when the stock market is down, it’s necessary to evaluate investment objectives and understand how they relate to risk tolerance and an investment timeline. Many investors are now deciding their portfolio requires additional building blocks. For instance, investors who were over-weighted in equities are looking to cash, real estate, and even alternative investments for the beneficial diversifying role they could play.
Also, whereas decades ago, investors began with equities and then built a defensive wall with fixed income and cash, many investors close to retirement now lead with the need to protect their nest egg. No longer able to count on an up market and rising home values, risk management is now center stage. According to Carbone, “If you first make allocations to cash and fixed income to provide a line of defense, it likely will be easier to commit to the longer time period required to potentially profit from your equity investments.” At the same time, younger investors are hearing that the down market presents an unprecedented buying opportunity. A lot of good companies are on sale right now, so it may be a good time for younger investors to increase their equity exposure from 20% to 40%, or in some cases 40% to 60%.
3. Think long-term. Nowhere is patience more necessary than in the real estate market. Although bargain basement prices and tax credits are dangling in front of renters, the recession has changed the real estate playing field and the home financing market has transformed. Consumers in the market for a mortgage need a secure job and a good FICA score in order to meet lenders’ strict income and credit requirements. Be ready, too, to come up with a higher down payment than was required a few years ago. “And you should buy a home only if you intend to live there for seven to ten years,” says Carbone. “It may now take that long to appreciate in value.”
Tips to Adjust and Prosper in ‘Reset’ Economy RISMedia" -
1. Focus on personal economy. The quick-fix portfolio move should be replaced with a lengthened perspective by reviewing long-term goals. Instead of reacting to sensational headlines, consumers would do well to run some real numbers to determine where they stand.
Good decision making happens when a person feels confident in their current position. With unemployment soaring as the market slides, it’s more important than ever to maintain an adequate emergency fund. “Rather than the traditional three months of expenses, I suggest people have eight months in an accessible, liquid account - more if the recession puts your job at risk,” says Carbone. Naturally, it’s also crucial to limit consumer debt.
2. Reassess asset allocation. Especially when the stock market is down, it’s necessary to evaluate investment objectives and understand how they relate to risk tolerance and an investment timeline. Many investors are now deciding their portfolio requires additional building blocks. For instance, investors who were over-weighted in equities are looking to cash, real estate, and even alternative investments for the beneficial diversifying role they could play.
Also, whereas decades ago, investors began with equities and then built a defensive wall with fixed income and cash, many investors close to retirement now lead with the need to protect their nest egg. No longer able to count on an up market and rising home values, risk management is now center stage. According to Carbone, “If you first make allocations to cash and fixed income to provide a line of defense, it likely will be easier to commit to the longer time period required to potentially profit from your equity investments.” At the same time, younger investors are hearing that the down market presents an unprecedented buying opportunity. A lot of good companies are on sale right now, so it may be a good time for younger investors to increase their equity exposure from 20% to 40%, or in some cases 40% to 60%.
3. Think long-term. Nowhere is patience more necessary than in the real estate market. Although bargain basement prices and tax credits are dangling in front of renters, the recession has changed the real estate playing field and the home financing market has transformed. Consumers in the market for a mortgage need a secure job and a good FICA score in order to meet lenders’ strict income and credit requirements. Be ready, too, to come up with a higher down payment than was required a few years ago. “And you should buy a home only if you intend to live there for seven to ten years,” says Carbone. “It may now take that long to appreciate in value.”
Friday, May 22, 2009
HUD: Homebuyer Tax Credit Loans Still on Track
News reports that the federal government is backing away from its plan to permit eligible borrowers to monetize the first-time homebuyer tax credit are off the mark, a spokesperson for the U.S. Department of Housing and Urban Development says.
"The technical details are still being finalized and will soon be published in a mortgagee letter and posted on our Web site," Lemar Wooley, a HUD spokesperson, told REALTOR® magazine Wednesday afternoon.
Under the guidance that's under development, state agencies and other HUD-approved entities would be able to provide short-term bridge loans that households could use to help with their downpayment.
The loans would be repaid with the proceeds from the households' federal tax credit.
The loans were announced on the opening day of NAR's 2009 Midyear Legislative Meetings in Washington, D.C., last week.
In his announcement, HUD Secretary Shaun Donovan said guidance would be issued shortly.
When the guidance is released, it is expected to cover eligible lenders and set parameters for loan terms and repayment.
"The technical details are still being finalized and will soon be published in a mortgagee letter and posted on our Web site," Lemar Wooley, a HUD spokesperson, told REALTOR® magazine Wednesday afternoon.
Under the guidance that's under development, state agencies and other HUD-approved entities would be able to provide short-term bridge loans that households could use to help with their downpayment.
The loans would be repaid with the proceeds from the households' federal tax credit.
The loans were announced on the opening day of NAR's 2009 Midyear Legislative Meetings in Washington, D.C., last week.
In his announcement, HUD Secretary Shaun Donovan said guidance would be issued shortly.
When the guidance is released, it is expected to cover eligible lenders and set parameters for loan terms and repayment.
Thursday, May 21, 2009
Bankers brace for FDIC hit
Proposed assessment may ding banks’ bottom lines
Area bankers are waiting to see if they will take a hit from a major one-time assessment from the Federal Deposit Insurance Corp. to insure their deposits.
Charles Brown III, president of Insignia Bank in Sarasota, says the special assessment proposed to help shore up the FDIC’s insurance fund would translate to a six-figure payout from his bank.
“We pay about $70,000 (annually) right now, and it could be anywhere from $200,000 to $300,000,” Brown says. “It would have a significantly negative impact in a banker’s eyes.”
Not surprisingly, the move has been controversial. And it is still up in the air.
The FDIC will discuss the proposed assessment of 20 cents on every dollar of deposits at a meeting Friday.
In late February, the FDIC declared an emergency in its insurance fund, which reimburses deposits to consumers in the event of a bank closure. The fund fell nearly 50 percent in the fourth quarter to $18.9 billion.
FDIC Chairwoman Sheila Bair announced that the FDIC would impose a one-time increase on insurance premiums equivalent to $15 billion on the nation’s roughly 8,300 banks.
The move brought protests from bankers, who are already struggling with non-performing loans and the financial damage caused by the subprime mortgage crisis and current recession.
Critics also said the move would further stifle lending, seen as important to jumpstart the economy again.
Others, like Barney Frank, chairman of the House Financial Services Committee, have suggested that the fees should be tiered based on the size of the banks, with the largest banks bearing more of the burden.
Since then, the FDIC has said it would reduce the special assessment if Congress expands its borrowing power to shore up reserves.
“Our chairman has indicated that there would be a meaningful reduction if Congress approves an increase in our borrowing power from $30 billion to $100 billion,” said David Barr, an FDIC spokesman. “The reason we came up with that number is the $30 billion number was put into place in 1991 and over the last 18 years, the amount of deposits at banks has tripled. So we’re essentially looking at a tripling of the borrowing authority.”
Barr said the FDIC would meet Friday to discuss how much of a reduction in the assessment would be given if Congress approves the expanded borrowing power.
Allen Langford, president of Manatee River Community Bank, said he’s still waiting to see what action the FDIC will take.
Langford said he would see a tripling of his fees if the FDIC implemented the 20-basis-point assessment.
Currently, banks already pay an average of 10 to 14 cents per dollar of deposits, depending on their deposit mix.
The increase would come at a time when all banks are struggling with declining real estate values on their books, Langford said.
But the FDIC may have no other choice but to impose an assessment, he added.
“Unfortunately, I think it (an assessment) is going to be necessary,” Langford said. “But I think the FDIC insurance is the most important thing a bank can have.”
Area bankers are waiting to see if they will take a hit from a major one-time assessment from the Federal Deposit Insurance Corp. to insure their deposits.
Charles Brown III, president of Insignia Bank in Sarasota, says the special assessment proposed to help shore up the FDIC’s insurance fund would translate to a six-figure payout from his bank.
“We pay about $70,000 (annually) right now, and it could be anywhere from $200,000 to $300,000,” Brown says. “It would have a significantly negative impact in a banker’s eyes.”
Not surprisingly, the move has been controversial. And it is still up in the air.
The FDIC will discuss the proposed assessment of 20 cents on every dollar of deposits at a meeting Friday.
In late February, the FDIC declared an emergency in its insurance fund, which reimburses deposits to consumers in the event of a bank closure. The fund fell nearly 50 percent in the fourth quarter to $18.9 billion.
FDIC Chairwoman Sheila Bair announced that the FDIC would impose a one-time increase on insurance premiums equivalent to $15 billion on the nation’s roughly 8,300 banks.
The move brought protests from bankers, who are already struggling with non-performing loans and the financial damage caused by the subprime mortgage crisis and current recession.
Critics also said the move would further stifle lending, seen as important to jumpstart the economy again.
Others, like Barney Frank, chairman of the House Financial Services Committee, have suggested that the fees should be tiered based on the size of the banks, with the largest banks bearing more of the burden.
Since then, the FDIC has said it would reduce the special assessment if Congress expands its borrowing power to shore up reserves.
“Our chairman has indicated that there would be a meaningful reduction if Congress approves an increase in our borrowing power from $30 billion to $100 billion,” said David Barr, an FDIC spokesman. “The reason we came up with that number is the $30 billion number was put into place in 1991 and over the last 18 years, the amount of deposits at banks has tripled. So we’re essentially looking at a tripling of the borrowing authority.”
Barr said the FDIC would meet Friday to discuss how much of a reduction in the assessment would be given if Congress approves the expanded borrowing power.
Allen Langford, president of Manatee River Community Bank, said he’s still waiting to see what action the FDIC will take.
Langford said he would see a tripling of his fees if the FDIC implemented the 20-basis-point assessment.
Currently, banks already pay an average of 10 to 14 cents per dollar of deposits, depending on their deposit mix.
The increase would come at a time when all banks are struggling with declining real estate values on their books, Langford said.
But the FDIC may have no other choice but to impose an assessment, he added.
“Unfortunately, I think it (an assessment) is going to be necessary,” Langford said. “But I think the FDIC insurance is the most important thing a bank can have.”
Tuesday, May 19, 2009
Foreclosure Tsunami Expected in Second Quarter of 2009
RISMEDIA, May 14, 2009-National Short Sale Center, a short sale company, has announced that the nation is on track to experience record-setting amounts of foreclosures and bank-owned properties in the second quarter of 2009. After the first quarter of 2009 set a new record with 803,489 foreclosure filings, the company is predicting a first-ever quarter with more than one million foreclosure filings.
“We’re returning to pre-moratorium percentages, with a rather large initial increase in the second quarter as properties that have been in the moratorium flood through,” says Travis Hamel Olsen, president of National Short Sale Center. “From our data, we are forecasting more than one million foreclosure filings in the second quarter of 2009.”
After a 10% decrease in foreclosures for January, foreclosure activity across the nation increased 6% in February. The so-called “Sand States”-California, Florida, Nevada, and Arizona-top the lists of foreclosure rates.
“The dam is breaking for foreclosures and bank-owned properties,” added Olsen. “In the next three months, we are going to see more than one million foreclosures hit as the foreclosure moratorium is lifted.”
For more information, visit www.shortsalecenter.com.
“We’re returning to pre-moratorium percentages, with a rather large initial increase in the second quarter as properties that have been in the moratorium flood through,” says Travis Hamel Olsen, president of National Short Sale Center. “From our data, we are forecasting more than one million foreclosure filings in the second quarter of 2009.”
After a 10% decrease in foreclosures for January, foreclosure activity across the nation increased 6% in February. The so-called “Sand States”-California, Florida, Nevada, and Arizona-top the lists of foreclosure rates.
“The dam is breaking for foreclosures and bank-owned properties,” added Olsen. “In the next three months, we are going to see more than one million foreclosures hit as the foreclosure moratorium is lifted.”
For more information, visit www.shortsalecenter.com.
Foreclosure and Short Sale Discounts Weigh Down Metro Area Median Prices
First-time home buyers responding to improved affordability conditions, and lower prices of foreclosures and short sales, impacted metropolitan area median home prices in the first quarter, while existing-home sales remained sluggish in many parts of the country, according to the latest survey by the National Association of Realtors®.
With first-time buyers accounting for half of all purchases during the first quarter, 134 out of 152 metropolitan statistical areas1 reported lower median existing single-family home prices in comparison with the first quarter of 2008, while 18 metros had price gains.
Many buyers sought deeply discounted distressed sales – foreclosures and short sales – which accounted for nearly half of transactions in the first quarter and weighed down median home prices in most markets.
The national median existing single-family price was $169,000, which is 13.8 percent below the first quarter of 2008 when conditions were closer to normal. The median is where half sold for more and half sold for less, but distressed homes typically are selling for 20 percent less than traditional homes and are downwardly skewing median prices.
NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said there are two levels of pricing in the current market. “Traditional homes in good condition have held their value much better, so owners shouldn’t be overly concerned about median prices. Most sellers can expect a good return if they’ve been in their home for a normal period of homeownership and haven’t excessively tapped their equity,” he said.
“Given the unusual mix of conditions around the country, the expertise and negotiating skills of a Realtor® have never been more important,” McMillan said. “Unparalleled knowledge of local markets is crucial for consumers.”
Total state existing-home sales, including single-family and condo, were at a seasonally adjusted annual rate2 of 4.59 million units in the first quarter, down 3.2 percent from 4.74 million units in the fourth quarter, and are 6.8 percent below the 4.93 million-unit pace in the first quarter of 2008.
Seventeen states experienced sales increases from the fourth quarter, and six states were higher than a year ago; complete data for one state was not available. Sales in the first quarter do not reflect an impact from the first-time home buyer tax credit.
Lawrence Yun, NAR chief economist, sees the market in a lull before an upturn. “Over the past couple months, contract activity for home sales, buyer traffic and inquiries about the $8,000 tax credit have all increased,” he said.
“Close to 455,000 buyers purchased their first home during the first quarter, and those are likely just the first wave of new buyers coming into the market – they’re critical for a housing recovery,” Yun said. “Housing affordability conditions are at record high levels and we expect a measurable increase in home sales during the second half of the year, which would help stabilize prices in most areas.”
According to Freddie Mac, the national average commitment rate on a 30-year conventional fixed-rate mortgage fell to a record low 5.06 percent in the first quarter from 5.86 percent in the fourth quarter; the rate was 5.88 percent in the first quarter of 2008.
Yun said some areas showed dramatic drops in home prices. “In areas with the biggest price declines, we also see much higher levels of distressed sales which are distorting the data,” Yun said. “We are very much in a bifurcated market with sharp differences between foreclosures and short sales on one hand, and traditional homes on the other. In many cases homes are selling below replacement construction costs, which speaks to great value in the current market.”
There were bright spots in the first quarter. The largest sales gain from a year ago was in Nevada, up 116.8 percent, followed by California which rose 80.6 percent, Arizona, up 50.2 percent, and Florida with a 25.0 percent increase. Virginia and Minnesota also experienced double-digit sales increases.
The largest single-family home price increase in the first quarter was in the Cumberland area of Maryland and West Virginia, where the median price of $114,900 rose 21.1 percent from a year ago. Next was the Davenport-Moline-Rock Island area of Iowa and Illinois at $100,300, up 13.8 percent from the first quarter of 2008, followed by Columbia, Mo., where the median price increased 6.0 percent to $152,600.
Median first-quarter metro area single-family home prices ranged from a very affordable $30,300 in the Saginaw-Saginaw Township North area of Michigan to $570,000 in Honolulu. The second most expensive area was the San Jose-Sunnyvale-Santa Clara area of California, at $450,000, followed by the Anaheim-Santa Ana-Irvine area of California at $435,800.
Other affordable markets include Akron, Ohio, at $50,100, and the Youngstown-Warren-Boardman area of Ohio and Pennsylvania at $51,200.
In the condo sector, metro area condominium and cooperative prices – covering changes in 56 metro areas – showed the national median existing-condo price was $172,800 in the first quarter, down 20.2 percent from the first quarter of 2008. Five metros showed annual increases in the median condo price and 51 areas had declines.
The strongest condo price increases were in Portland-South Portland-Biddeford, Maine, at $196,900, up 11.2 percent, followed by the Wichita, Kan., area, where the median condo price of $113,900 rose 6.8 percent from the first quarter of 2008, and Bismarck, N.D., at $132,400, up 6.0 percent.
Metro area median existing-condo prices in the first quarter ranged from $75,200 in Las Vegas-Paradise, Nev., to $345,900 in San Francisco-Oakland-Fremont. The second most expensive reported condo market was Honolulu at $300,000, followed by the New York-Wayne-White Plains area of New York and New Jersey at $282,300.
Other affordable condo markets include the Palm Bay-Melbourne-Titusville area of Florida at $90,600 in the first quarter, and the Sacramento-Arden-Arcade-Roseville area of California at $93,800.
Regionally, existing-home sales in the Northeast fell 10.3 percent in the first quarter to a pace of 693,000 units and are 20.1 percent below a year ago.
The median existing single-family home price in the Northeast declined 15.9 percent to $235,500 in the first quarter from the same period in 2008. The best gain in the region was in Syracuse, N.Y., where the median price of $113,700 rose 3.1 percent from the first quarter of 2008, followed by Buffalo-Niagara Falls, N.Y., at $99,200, up 2.7 percent, and Binghamton, N.Y., where the median rose 0.5 percent to $110,300.
In the Midwest, existing-home sales slipped 2.2 percent in the first quarter to a pace of 1.04 million and are 13.1 percent below a year ago.
The median existing single-family home price in the Midwest was down 6.8 percent to $132,400 in the first quarter from the same period in 2008. After Davenport-Moline-Rock Island and Columbia, the next strongest metro price increase in the region was in Springfield, Ill., where the median price of $111,400 was 3.9 percent higher than a year ago, followed by Topeka, Kan., at $106,500, up 3.1 percent, and Bloomington-Normal, Ill., at $153,800, up 1.9 percent.
In the South, existing-home sales declined 2.5 percent in the first quarter to an annual rate of 1.70 million and are 12.7 percent lower than the same period in 2008.
The median existing single-family home price in the South was $146,600 in the first quarter, down 10.8 percent from a year earlier. After Cumberland, the strongest price increase in the region was in Beaumont-Port Arthur, Texas, with a 5.0 percent gain to $129,100, followed by Oklahoma City, at $129,900, up 4.0 percent, and Shreveport-Bossier City, La., at $136,000, up 3.4 percent.
Existing-home sales in the West slipped 0.9 percent in the first quarter to an annual rate of 1.16 million but are 24.3 percent above a year ago.
The median existing single-family home price in the West was $237,600 in the first quarter, which is 19.8 percent below the first quarter of 2008. The strongest price gain in the West was in the Salt Lake City area, where the median price of $230,100 rose 1.9 percent from a year earlier, followed by Farmington, N.M., at $191,200, up 0.7 percent.
# # #
Data tables for both metro area home prices and state existing-home sales are posted at: www.realtor.org/research/research/metroprice. For areas not covered in the tables, contact your local association of Realtors®.
1Areas are generally metropolitan statistical areas as defined by the U.S. Office of Management and Budget. A list of counties included in MSA definitions is available at: www.census.gov/population/estimates/metro-city/0312msa.txt
Regional median home prices include rural areas and samples of many smaller metros that are not included in this report; the regional percentage changes do not necessarily parallel changes in the larger metro areas. The only valid comparisons for median prices are with the same period a year earlier due to seasonality in buying patterns. Quarter-to-quartercomparisons do not compensate for seasonal changes, especially for the timing of familybuying patterns.
NAR began tracking of metropolitan area median single-family home prices in 1979; the metro area condo price series was launched at the beginning of 2006, with several years of historic data.
Because there is a concentration of condos in high-cost metro areas, the national median condo price sometimes is higher than the median single-family price. In a given market area, condos typically cost less than single-family homes. As the reporting sample expands in the future, additional areas will be included in the condo price report.
2The seasonally adjusted annual rate for a particular quarter represents what the total number of actual sales for a year would be if the relative sales pace for that quarter was maintained for four consecutive quarters. Total home sales include single family, townhomes, condominiums and co-operative housing. NAR began tracking the state sales series in 1981.
Seasonally adjusted rates are used in reporting quarterly data to factor out seasonal variations in resale activity. For example, sales volume normally is higher in the summer and relatively light in winter, primarily because of differences in the weather and household buying patterns.
Each May when first quarter data is published, NAR Research incorporates a review of seasonal activity factors and fine-tunes historic data for the previous three years based on the most recent findings. Revisions have been made to quarterly seasonally adjusted annual sales rates for 2006 through 2008; there are no revisions to price data beyond the normal quarterly revisions.
With first-time buyers accounting for half of all purchases during the first quarter, 134 out of 152 metropolitan statistical areas1 reported lower median existing single-family home prices in comparison with the first quarter of 2008, while 18 metros had price gains.
Many buyers sought deeply discounted distressed sales – foreclosures and short sales – which accounted for nearly half of transactions in the first quarter and weighed down median home prices in most markets.
The national median existing single-family price was $169,000, which is 13.8 percent below the first quarter of 2008 when conditions were closer to normal. The median is where half sold for more and half sold for less, but distressed homes typically are selling for 20 percent less than traditional homes and are downwardly skewing median prices.
NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said there are two levels of pricing in the current market. “Traditional homes in good condition have held their value much better, so owners shouldn’t be overly concerned about median prices. Most sellers can expect a good return if they’ve been in their home for a normal period of homeownership and haven’t excessively tapped their equity,” he said.
“Given the unusual mix of conditions around the country, the expertise and negotiating skills of a Realtor® have never been more important,” McMillan said. “Unparalleled knowledge of local markets is crucial for consumers.”
Total state existing-home sales, including single-family and condo, were at a seasonally adjusted annual rate2 of 4.59 million units in the first quarter, down 3.2 percent from 4.74 million units in the fourth quarter, and are 6.8 percent below the 4.93 million-unit pace in the first quarter of 2008.
Seventeen states experienced sales increases from the fourth quarter, and six states were higher than a year ago; complete data for one state was not available. Sales in the first quarter do not reflect an impact from the first-time home buyer tax credit.
Lawrence Yun, NAR chief economist, sees the market in a lull before an upturn. “Over the past couple months, contract activity for home sales, buyer traffic and inquiries about the $8,000 tax credit have all increased,” he said.
“Close to 455,000 buyers purchased their first home during the first quarter, and those are likely just the first wave of new buyers coming into the market – they’re critical for a housing recovery,” Yun said. “Housing affordability conditions are at record high levels and we expect a measurable increase in home sales during the second half of the year, which would help stabilize prices in most areas.”
According to Freddie Mac, the national average commitment rate on a 30-year conventional fixed-rate mortgage fell to a record low 5.06 percent in the first quarter from 5.86 percent in the fourth quarter; the rate was 5.88 percent in the first quarter of 2008.
Yun said some areas showed dramatic drops in home prices. “In areas with the biggest price declines, we also see much higher levels of distressed sales which are distorting the data,” Yun said. “We are very much in a bifurcated market with sharp differences between foreclosures and short sales on one hand, and traditional homes on the other. In many cases homes are selling below replacement construction costs, which speaks to great value in the current market.”
There were bright spots in the first quarter. The largest sales gain from a year ago was in Nevada, up 116.8 percent, followed by California which rose 80.6 percent, Arizona, up 50.2 percent, and Florida with a 25.0 percent increase. Virginia and Minnesota also experienced double-digit sales increases.
The largest single-family home price increase in the first quarter was in the Cumberland area of Maryland and West Virginia, where the median price of $114,900 rose 21.1 percent from a year ago. Next was the Davenport-Moline-Rock Island area of Iowa and Illinois at $100,300, up 13.8 percent from the first quarter of 2008, followed by Columbia, Mo., where the median price increased 6.0 percent to $152,600.
Median first-quarter metro area single-family home prices ranged from a very affordable $30,300 in the Saginaw-Saginaw Township North area of Michigan to $570,000 in Honolulu. The second most expensive area was the San Jose-Sunnyvale-Santa Clara area of California, at $450,000, followed by the Anaheim-Santa Ana-Irvine area of California at $435,800.
Other affordable markets include Akron, Ohio, at $50,100, and the Youngstown-Warren-Boardman area of Ohio and Pennsylvania at $51,200.
In the condo sector, metro area condominium and cooperative prices – covering changes in 56 metro areas – showed the national median existing-condo price was $172,800 in the first quarter, down 20.2 percent from the first quarter of 2008. Five metros showed annual increases in the median condo price and 51 areas had declines.
The strongest condo price increases were in Portland-South Portland-Biddeford, Maine, at $196,900, up 11.2 percent, followed by the Wichita, Kan., area, where the median condo price of $113,900 rose 6.8 percent from the first quarter of 2008, and Bismarck, N.D., at $132,400, up 6.0 percent.
Metro area median existing-condo prices in the first quarter ranged from $75,200 in Las Vegas-Paradise, Nev., to $345,900 in San Francisco-Oakland-Fremont. The second most expensive reported condo market was Honolulu at $300,000, followed by the New York-Wayne-White Plains area of New York and New Jersey at $282,300.
Other affordable condo markets include the Palm Bay-Melbourne-Titusville area of Florida at $90,600 in the first quarter, and the Sacramento-Arden-Arcade-Roseville area of California at $93,800.
Regionally, existing-home sales in the Northeast fell 10.3 percent in the first quarter to a pace of 693,000 units and are 20.1 percent below a year ago.
The median existing single-family home price in the Northeast declined 15.9 percent to $235,500 in the first quarter from the same period in 2008. The best gain in the region was in Syracuse, N.Y., where the median price of $113,700 rose 3.1 percent from the first quarter of 2008, followed by Buffalo-Niagara Falls, N.Y., at $99,200, up 2.7 percent, and Binghamton, N.Y., where the median rose 0.5 percent to $110,300.
In the Midwest, existing-home sales slipped 2.2 percent in the first quarter to a pace of 1.04 million and are 13.1 percent below a year ago.
The median existing single-family home price in the Midwest was down 6.8 percent to $132,400 in the first quarter from the same period in 2008. After Davenport-Moline-Rock Island and Columbia, the next strongest metro price increase in the region was in Springfield, Ill., where the median price of $111,400 was 3.9 percent higher than a year ago, followed by Topeka, Kan., at $106,500, up 3.1 percent, and Bloomington-Normal, Ill., at $153,800, up 1.9 percent.
In the South, existing-home sales declined 2.5 percent in the first quarter to an annual rate of 1.70 million and are 12.7 percent lower than the same period in 2008.
The median existing single-family home price in the South was $146,600 in the first quarter, down 10.8 percent from a year earlier. After Cumberland, the strongest price increase in the region was in Beaumont-Port Arthur, Texas, with a 5.0 percent gain to $129,100, followed by Oklahoma City, at $129,900, up 4.0 percent, and Shreveport-Bossier City, La., at $136,000, up 3.4 percent.
Existing-home sales in the West slipped 0.9 percent in the first quarter to an annual rate of 1.16 million but are 24.3 percent above a year ago.
The median existing single-family home price in the West was $237,600 in the first quarter, which is 19.8 percent below the first quarter of 2008. The strongest price gain in the West was in the Salt Lake City area, where the median price of $230,100 rose 1.9 percent from a year earlier, followed by Farmington, N.M., at $191,200, up 0.7 percent.
# # #
Data tables for both metro area home prices and state existing-home sales are posted at: www.realtor.org/research/research/metroprice. For areas not covered in the tables, contact your local association of Realtors®.
1Areas are generally metropolitan statistical areas as defined by the U.S. Office of Management and Budget. A list of counties included in MSA definitions is available at: www.census.gov/population/estimates/metro-city/0312msa.txt
Regional median home prices include rural areas and samples of many smaller metros that are not included in this report; the regional percentage changes do not necessarily parallel changes in the larger metro areas. The only valid comparisons for median prices are with the same period a year earlier due to seasonality in buying patterns. Quarter-to-quartercomparisons do not compensate for seasonal changes, especially for the timing of familybuying patterns.
NAR began tracking of metropolitan area median single-family home prices in 1979; the metro area condo price series was launched at the beginning of 2006, with several years of historic data.
Because there is a concentration of condos in high-cost metro areas, the national median condo price sometimes is higher than the median single-family price. In a given market area, condos typically cost less than single-family homes. As the reporting sample expands in the future, additional areas will be included in the condo price report.
2The seasonally adjusted annual rate for a particular quarter represents what the total number of actual sales for a year would be if the relative sales pace for that quarter was maintained for four consecutive quarters. Total home sales include single family, townhomes, condominiums and co-operative housing. NAR began tracking the state sales series in 1981.
Seasonally adjusted rates are used in reporting quarterly data to factor out seasonal variations in resale activity. For example, sales volume normally is higher in the summer and relatively light in winter, primarily because of differences in the weather and household buying patterns.
Each May when first quarter data is published, NAR Research incorporates a review of seasonal activity factors and fine-tunes historic data for the previous three years based on the most recent findings. Revisions have been made to quarterly seasonally adjusted annual sales rates for 2006 through 2008; there are no revisions to price data beyond the normal quarterly revisions.
Friday, May 15, 2009
Greenspan: Dangers of Further Price Drops
Even with hopeful signs in the economy, afternoon panelists at the NATIONAL ASSOCIATION OF REALTORS®’ Real Estate Summit, “Advancing the U.S. Economy,” here today agreed that:
Stabilizing housing prices is essential to a recovery.
The federal government needs to inject great consumer protection into home lending.
Financial industry reforms should address and protect against systemic risk from institutions deemed “too large to fail.”
Home prices are one of the biggest question marks in the economic recovery. How low can they go? Nationally, on average, prices have declined 30 percent. That’s been great for affordability, but it has been a blow to home owners who find themselves in a position of needing to sell while significantly underwater on their mortgages.
The Danger of Further Price Declines
To exacerbate the problem, increased inventory of unsold single-family homes continues to depress prices, said former Federal Reserve Chairman Alan Greenspan, whose keynote address led off an afternoon of speakers discussing the future of real estate finance.
If prices fall beyond another 5 percent or so, problems in the subprime and Alt-A categories will spill over into the conforming loan category, where defaults are still relatively low, Greenspan warned.
“After September 15—the date of Lehman was allowed to fail—equities fell off a cliff,” he said, losing $35 trillion in value. But in recent weeks, Greenspan said he has seen reasons for optimism.
Since March 9, he said, investors have added $10 trillion of value back into the global system. Real estate markets, he said, are at the beginning of a major liquidization of excess inventories.
“As a result, I expect, I hope, we’ll see stabilization,” Greenspan said. “While there are still great concerns, we’re beginning to see the seeds of bottoming, not in prices yet, but in sales.”
Asked about the future of Fannie Mae and Freddie Mac, Greenspan sounded the theme heard often here today. Organizations that grow “too large to fail” are a danger to the country’s economic health. During the boom, Fannie and Freddie became overlarge and overleveraged. To protect the “very important role of mortgage securitization,” they should be split into smaller organizations, he said. “I don’t think the existing structure is sustainable.”
Stabilizing housing prices is essential to a recovery.
The federal government needs to inject great consumer protection into home lending.
Financial industry reforms should address and protect against systemic risk from institutions deemed “too large to fail.”
Home prices are one of the biggest question marks in the economic recovery. How low can they go? Nationally, on average, prices have declined 30 percent. That’s been great for affordability, but it has been a blow to home owners who find themselves in a position of needing to sell while significantly underwater on their mortgages.
The Danger of Further Price Declines
To exacerbate the problem, increased inventory of unsold single-family homes continues to depress prices, said former Federal Reserve Chairman Alan Greenspan, whose keynote address led off an afternoon of speakers discussing the future of real estate finance.
If prices fall beyond another 5 percent or so, problems in the subprime and Alt-A categories will spill over into the conforming loan category, where defaults are still relatively low, Greenspan warned.
“After September 15—the date of Lehman was allowed to fail—equities fell off a cliff,” he said, losing $35 trillion in value. But in recent weeks, Greenspan said he has seen reasons for optimism.
Since March 9, he said, investors have added $10 trillion of value back into the global system. Real estate markets, he said, are at the beginning of a major liquidization of excess inventories.
“As a result, I expect, I hope, we’ll see stabilization,” Greenspan said. “While there are still great concerns, we’re beginning to see the seeds of bottoming, not in prices yet, but in sales.”
Asked about the future of Fannie Mae and Freddie Mac, Greenspan sounded the theme heard often here today. Organizations that grow “too large to fail” are a danger to the country’s economic health. During the boom, Fannie and Freddie became overlarge and overleveraged. To protect the “very important role of mortgage securitization,” they should be split into smaller organizations, he said. “I don’t think the existing structure is sustainable.”
Thursday, May 14, 2009
Home Sales May Get a Push
First-time homebuyers soon could get even more incentive to buy a house this year, officials for the U.S. Department of Housing and Urban Development said Tuesday.
HUD Secretary Shaun Donovan said the department is days away from finalizing a plan that would allow first-time homebuyers to use the federal government's $8,000 tax credit on a down payment and closing costs instead of waiting until they file their tax returns to get it.
Under the proposed plan, HUD-approved lenders, nonprofit groups and government entities would issue bridge loans to borrowers before their closings. The loans would be paid back from the borrower's tax credit.
Real estate and homebuilding groups have been pushing for the change and say it will spur home sales and lead to a quicker recovery of the troubled housing market.
"This will help homebuyers who are a little short on down payment but want to get into the market," said Paul Bishop, an economist with the National Association of Realtors.
"That's a pretty substantial segment of the market, and they'll be able to obtain a more affordable loan since they'll now have a larger down payment," Bishop said.
About 50 percent of the nation's homebuyers are first-timers and would qualify for the tax credit, according to the real estate group.
The new tax credit will stimulate an estimated 160,000 home sales across the nation - 101,000 of which would be first-time buyers who will receive the credit, he said.
An additional 59,000 homeowners would be able to buy another home if a first-time buyer purchases their home.
States such as Florida, which have been hard-hit by foreclosures and dropping home prices, really could benefit from the change, said Cynthia Shelton, president of the Florida Association of Realtors.
Enticing people to act now would help work off the backlog of homes, Shelton said.
HUD Secretary Shaun Donovan said the department is days away from finalizing a plan that would allow first-time homebuyers to use the federal government's $8,000 tax credit on a down payment and closing costs instead of waiting until they file their tax returns to get it.
Under the proposed plan, HUD-approved lenders, nonprofit groups and government entities would issue bridge loans to borrowers before their closings. The loans would be paid back from the borrower's tax credit.
Real estate and homebuilding groups have been pushing for the change and say it will spur home sales and lead to a quicker recovery of the troubled housing market.
"This will help homebuyers who are a little short on down payment but want to get into the market," said Paul Bishop, an economist with the National Association of Realtors.
"That's a pretty substantial segment of the market, and they'll be able to obtain a more affordable loan since they'll now have a larger down payment," Bishop said.
About 50 percent of the nation's homebuyers are first-timers and would qualify for the tax credit, according to the real estate group.
The new tax credit will stimulate an estimated 160,000 home sales across the nation - 101,000 of which would be first-time buyers who will receive the credit, he said.
An additional 59,000 homeowners would be able to buy another home if a first-time buyer purchases their home.
States such as Florida, which have been hard-hit by foreclosures and dropping home prices, really could benefit from the change, said Cynthia Shelton, president of the Florida Association of Realtors.
Enticing people to act now would help work off the backlog of homes, Shelton said.
Thursday, May 7, 2009
What's up in Real Estate??
It appears as though there are many buyers on the street. There are some serious ones and alot of curious seekers. Pricing is the key right now, many of them are looking for those good deals $100,000 and under. There are some of those out there trust me.
Others are still fence sitting and not sure whether to act now or wait.
No one can tell when the bubble will burst so to speak. It will happen over night and the values will start to rise again for the market to recover.
We do still have some time before that will happen. With an inventory of 24 months or more, it is going to take some time to sell it all.
If buyers would "Act" then we could deplete the inventory. Otherwise, it will sit here stagnant.
Buyers the $8000 free money is out there, all you have to do is "buy now"!
Others are still fence sitting and not sure whether to act now or wait.
No one can tell when the bubble will burst so to speak. It will happen over night and the values will start to rise again for the market to recover.
We do still have some time before that will happen. With an inventory of 24 months or more, it is going to take some time to sell it all.
If buyers would "Act" then we could deplete the inventory. Otherwise, it will sit here stagnant.
Buyers the $8000 free money is out there, all you have to do is "buy now"!
Friday, May 1, 2009
Selling in a Slow Market
If your local real estate market is slow, consider offering buyer incentives. They don't have to cost you a lot, but they will give your home the edge over similar homes on the market.
Offer a home warranty.
Offer to buy down the buyer's mortgage interest rate. This may cost a couple of thousand dollars, but that's likely to be less than what it will cost you if your house languishes on the market.
Offer to pre-pay a year's worth of association fees.
Offer a year's worth of professional lawn mowing.
Offer credit toward the buyer's closing costs.
Offer a weekend getaway at an attractive lodge or hotel.
Lower your asking price.
Offer a home warranty.
Offer to buy down the buyer's mortgage interest rate. This may cost a couple of thousand dollars, but that's likely to be less than what it will cost you if your house languishes on the market.
Offer to pre-pay a year's worth of association fees.
Offer a year's worth of professional lawn mowing.
Offer credit toward the buyer's closing costs.
Offer a weekend getaway at an attractive lodge or hotel.
Lower your asking price.
Thursday, April 30, 2009
100% Financing
The United States Department of Agriculture offers a little-known financing program that can help lower-income families purchase homes. With funding up to 100% of the purchase price, mortgage payments would be based on the household's adjusted gross income.
Commonly called Section 502 loans, the program offers some advantages for those who are unable to obtain conventional financing.
A few advantages include:
• 100% financing with no down payment
• No maximum purchase price
• Buyer's closings costs may come from any source, including gift money
• Home repair and improvement monies can be included in the loan
• 30-year fixed rates
• No minimum credit score
• Mobile homes on land may be eligible
Typically, the properties would need to be in a rural area with modest prices for the area. Buyer's income typically will need to be below the median income for the area. The link below will take you to the USDA Rural Development website to search for eligible properties by address. You can also find the maximum income allowed based on geography and family size. Go ahead and take a look. You might be surprised at how many homes can qualify just minutes outside of town.
Commonly called Section 502 loans, the program offers some advantages for those who are unable to obtain conventional financing.
A few advantages include:
• 100% financing with no down payment
• No maximum purchase price
• Buyer's closings costs may come from any source, including gift money
• Home repair and improvement monies can be included in the loan
• 30-year fixed rates
• No minimum credit score
• Mobile homes on land may be eligible
Typically, the properties would need to be in a rural area with modest prices for the area. Buyer's income typically will need to be below the median income for the area. The link below will take you to the USDA Rural Development website to search for eligible properties by address. You can also find the maximum income allowed based on geography and family size. Go ahead and take a look. You might be surprised at how many homes can qualify just minutes outside of town.
Thursday, April 23, 2009
Orlando Home Values
Did you hear on the news this morning that Orlando is the number one city in the country with decreasing home values and it is only gonna get worse. Second is Miami, Jacksonville, Tampa and so on.
This cannot be good news for current homeowners who are not in trouble with their loans.
This continues to be an excellent time and an opportune time for buyers to snatch up some deals and why not. Buyers you have to act now and take advantage of the $8000.00 the government is handing to you for buying a home in this market.
Cindy Adkins, GRI, Realtor
Grace Realty, Inc.
407-921-5541
email: madkins5@cfl.rr.com
www.lakebrantleyarea.com
This cannot be good news for current homeowners who are not in trouble with their loans.
This continues to be an excellent time and an opportune time for buyers to snatch up some deals and why not. Buyers you have to act now and take advantage of the $8000.00 the government is handing to you for buying a home in this market.
Cindy Adkins, GRI, Realtor
Grace Realty, Inc.
407-921-5541
email: madkins5@cfl.rr.com
www.lakebrantleyarea.com
Wednesday, April 22, 2009
Buyers of Real Estate
Attention buyers: Don't sit on the fence too long before buying a home in 2009. The government is offering you $8000.00 to buy a home if you are a first time homebuyer or if you have not owned for 3 years or more. There is nothing like free money given to you.
I have a customer that just closed on a townhome in Sanford and she was a qualified veteran, so she took advantage of her VA Eligibility and got into this townhome for 100% financing, the seller paid all her closing costs, she even got money back at closing. She also filed her taxes shortley after closing on her townhome and she is getting the $8000.00 back in cold hard cash. So it does work.
I encourage all of you to take advantage of this stimulus money and I can help you.
As a 20 + year veteran in the real estate field as a professional realtor, I have helped many families over my years. I am here and ready to help you buy.
If you are a seller, I can help you sell and let your buyer take advantage of this $8000.00 money.
Don't hesitate, now is the time to act.
Call Cindy Adkins, GRI, Realtor
with Grace Realty, Inc. in Winter Park, FL
at 407-921-5541 or email me at cindy@grace-realty.com.
Visit me at www.lakebrantleyarea.com or feel free to search for homes at the following link:
http://www.myfloridahomesmls.com/cindyadkins
I have a customer that just closed on a townhome in Sanford and she was a qualified veteran, so she took advantage of her VA Eligibility and got into this townhome for 100% financing, the seller paid all her closing costs, she even got money back at closing. She also filed her taxes shortley after closing on her townhome and she is getting the $8000.00 back in cold hard cash. So it does work.
I encourage all of you to take advantage of this stimulus money and I can help you.
As a 20 + year veteran in the real estate field as a professional realtor, I have helped many families over my years. I am here and ready to help you buy.
If you are a seller, I can help you sell and let your buyer take advantage of this $8000.00 money.
Don't hesitate, now is the time to act.
Call Cindy Adkins, GRI, Realtor
with Grace Realty, Inc. in Winter Park, FL
at 407-921-5541 or email me at cindy@grace-realty.com.
Visit me at www.lakebrantleyarea.com or feel free to search for homes at the following link:
http://www.myfloridahomesmls.com/cindyadkins
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