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.
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