Archive for the 'National Real Estate Trends' Category
December 4th, 2009 Categories: Default News, Loan Modification, Mortgage and Loans, National Real Estate Trends, Real Estate News, Shortsales
…The Coming ARM Storm
First it was the sub-prime market and now experts agree, adjustable rate mortgages combined with rising unemployment and falling property values could create another economic storm capable of ravaging the weak economic recovery. Here’s a quick breakdown of the ARM Storm-Tracker for those savvy short sale investors to beginning their planning:
Resetting Rates: Current interest rates are at or near historic lows with 30 year fixed mortgages below 5 percent while ARM’s are likely to readjust and drive the cost of monthly mortgage payments to double their former payments. Unfortunately, many current ARM holders do not qualify for refinancing due to changes in employment status, high loan to value ratios and increased debt to income percentages.
Evaporating Equity: Not only did millions of Americans take out Adjustable rate mortgages but they built additions and over-improved their homes based upon loans. As home values fell, so did the equity reserves required to refinance their ARM mortgages. Whether it was a first mortgage with minimal down payment or a second (and even third) mortgage, lower property values have all but erased excess equity from a large number of buyers.
Cheaper to Walk: Many homeowners are finding it less expensive to simply walk away from rapidly rising mortgage, rent for awhile then repurchase. According to industry experts, a significant number of homeowners are capable of making the mortgage payment but simply don’t desire to do so given the cost of purchasing the same home after foreclosure. Current homeowners are eligible for FHA loans in as few as three years after default – creating an inverse incentive to continuing paying on a property worth tens (or even hundreds) of thousands dollars less than the existing mortgage.
Renting an Increased Option: Throughout the nation lenders are getting creative in order to reduce the inflow of defaulting properties on their portfolio; one of the more popular options among existing homeowners is the ability to rent your current property for a specified period of time.
ReFi with an ARM? It’s true, the FHA has a 3.87 five year adjustable rate mortgage option designed to help keep payments affordable. Unfortunately, it may simply delay the pain until interest rates continue to rise later. However, with a 2 percent cap on each adjustment/rate increase, it could conceivably buy time for those in unusual short term situations such as temporary illness, job loss of other large expenses. It also has the benefit of “buying time” for the banks and lenders who are in no hurry to acquire even more properties given the current backlog of non-performing properties in their portfolio.
What is a savvy short sale investor to do? Get ready for the coming wave of ARM properties to hit the market. Be sure your credit is in place and position yourself to solve problems for both homeowners and lenders in need of a new start.
See you at the top!
Another article courtesy Chris McLaughlin
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December 4th, 2009 Categories: National Real Estate Trends, Pre Foreclosures, Real Estate News
- More than 1.5 million homes have been lost to foreclosure, according to the Center for Responsible Lending.
- Goldman Sachs is projecting 13 million foreclosures of all types during the next five years.
- One in 10 homeowners are late with mortgage payments, according to the Mortgage Bankers Association.
- Owners owe more than the home is worth in nearly one in five homes, according to First American Core Logic.
More Scary Headllines:
• Banks braced for record debt defaults in the New Year
• Friday’s Jobs Report Will Set December Treasurys Tone
• Treasury to meet with mortgage servicers Monday
• Dubai Debt Woes Deliver Commodities Wake-Up Call
Around the world people are wondering where to park their hard earned cash during the coming year. So, what does the new year have in store for short sale investors? It depends who you ask…
According to the National Association of Realtors, prices are expected to rise 4 percent while home sales will rise by 700,000 to 5.7 million. Foreclosures will top out in the first six months of 2010 and the “fear factor” will fade to create a sunnier outlook for real estate by the end of the year.
On the other hand, less than optimistic projects are expected globally as the shock waves of recent Dubai debt hits the market creating a mini-panic among financials and bankers around the world. Loans to non financial business owners continue to decline and debt deflation combined with credit contraction continues well beyond 2010 according to the popular website “Seeking Alpha”.
Fox News reports commercial real estate is expected to continue to decline until later in 2010 at which point there is hope for optimism as the economy improves. Of course, should unemployment continue to rise that could be stalled for some time however, commercial property values are beginning to steady in many areas of the nation.
REIT’s are expecting a promising year and a record number of trusts are seeing large gains. In fact, they are considered downright affordable in some cases while a rash of new REIT’s have recently hit the market as desperate stockholders seek investments backed by tangible assets.
Interest rates will remain low according to the majority of experts; the general consensus reflects the risk of rising interest rates to negatively impact real estate before a full recovery can get underway. With so much capital sitting on the sidelines, there is little incentive to raise rates prematurely.
Inflation will remain low throughout 2010 and perhaps through 2012 however, tightening credit will make it increasingly difficult to finance properties despite low rates and bargain prices.
Additionally, investors expect the Fed to stop purchasing mortgage bonds creating additional stressors on the market. Finally, new housing starts are expected to rise but continue to lag behind former highs for several years to come.
Courtesy Chris McLaughlin
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November 18th, 2009 Categories: First Time Buyers, National Real Estate Trends, Real Estate News
The Worker, Homeownership, and Business Assistance Act of 2009 has established a tax credit of up to $6,500 for qualified move-up/repeat home buyers (existing home owners) purchasing a principal residence after November 6, 2009 and on or before April 30, 2010 (or purchased by June 30, 2010 with a binding sales contract signed by April 30, 2010). The following questions and answers provide basic information about the tax credit. If you have more specific questions, we strongly encourage you to consult a qualified tax advisor or legal professional about your unique situation.
1.Who is eligible to claim the $6,500 tax credit?
Qualified move-up or repeat home buyers purchasing any kind of home are eligible to claim this credit.
2.What is the definition of a move-up or repeat home buyer?
The law defines a tax credit qualified move-up home buyer (“long-time resident”) as a home owner who has owned and resided in a home for at least five consecutive years of the eight years prior to the purchase date. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse. Repeat home buyers do not have to purchase a home that is more expensive than their previous home to qualify for the tax credit.
3.How is the amount of the tax credit determined?
The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $6,500. Purchases of homes priced above $800,000 are not eligible for the tax credit.
4.Are there any income limits for claiming the tax credit?
Yes. The income limit for single taxpayers is $125,000; the limit is $225,000 for married taxpayers filing a joint return. The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) above those limits. The phaseout range for the tax credit program is equal to $20,000. That is, the tax credit amount is reduced to zero for taxpayers with MAGI of more than $145,000 (single) or $245,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts.
5. What is “modified adjusted gross income”?
Modified adjusted gross income or MAGI is defined by the IRS. To find it, a taxpayer must first determine “adjusted gross income” or AGI. AGI is total income for a year minus certain deductions (known as “adjustments” or “above-theline deductions”), but before itemized deductions from Schedule A or personal exemptions are subtracted. On Forms 1040 and 1040A, AGI is the last number on page 1 and the first number on page 2 of the form. For Form 1040-EZ, AGI appears on line 4 (as of 2007). Note that AGI includes all forms of income including wages, salaries, interest income, dividends and capital gains.
To determine modified adjusted gross income (MAGI), add to AGI certain amounts of foreign-earned income. See IRS Form 5405 for more details.
6. If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?
Possibly. It depends on your income. Partial credits of less than $6,500 are available for some taxpayers whose MAGI exceeds the phaseout limits.
7.Can you give me an example of how the partial tax credit is determined?
Just as an example, assume that a married couple has a modified adjusted gross income of $235,000. The applicable phaseout to qualify for the tax credit is $225,000, and the couple is $10,000 over this amount. Dividing $10,000 by the phaseout range of $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time home buyer tax credit that is available to this couple, multiply $6,500 by 0.5. The result is $3,250. Here’s another example: assume that an individual home buyer has a modified adjusted gross income of $138,000. The buyer’s income exceeds $125,000 by $13,000. Dividing $13,000 by the phaseout range of $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $6,500 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,275.
Please remember that these examples are intended to provide a general idea of how the tax credit might be applied in different circumstances. You should always consult your tax advisor for information relating to your specific circumstances.
8. How is this home buyer tax credit different from the tax credit that Congress enacted in July of 2008? How is this different than the rules established in early 2009?
The previous tax credits applied only to first-time home buyers and were for different amounts of money.
9.How do I claim the tax credit? Do I need to complete a form or application? Are there documentation requirements?
You claim the tax credit on your federal income tax return. Specifically, home buyers should complete IRS Form 5405 to determine their tax credit amount, and then claim this amount on line 67 of the 1040 income tax form for 2009 returns (line 69 of the 1040 income tax form for 2008 returns).
No other applications are required, and no pre-approval is necessary. However, you will want to be sure that you qualify for the credit under the income limits and repeat home buyer tests. Note that you cannot claim the credit on Form 5405 for an intended purchase for some future date; it must be a completed purchase. Home buyers must attach a copy of their HUD-1 settlement form (closing statement) to Form 5405 as proof of the completed home purchase.
10. What types of homes will qualify for the tax credit?
Any home that will be used as a principal residence will qualify for the credit, provided the home is purchased for a price less than or equal to $800,000. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats. The definition of principal residence is identical to the one used to determine whether you may qualify for the $250,000 / $500,000 capital gain tax exclusion for principal residences.
It is important to note that you cannot purchase a home from, among other family members, your ancestors (parents, grandparents, etc.), your lineal descendants (children, grandchildren, etc.) or your spouse or your spouse’s family members. Please consult with your tax advisor for more information. Also see IRS Form 5405.
11.I read that the tax credit is “refundable.” What does that mean?
The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit.
For example, if a qualified home buyer expected, notwithstanding the tax credit, federal income tax liability of $5,000 and had tax withholding of $4,000 for the year, then without the tax credit the taxpayer would owe the IRS $1,000 on April 15th. Suppose now that the taxpayer qualified for the $6,500 home buyer tax credit. As a result, the taxpayer would receive a check for $5,500 ($6,500 minus the $1,000 owed).
!2. Instead of buying a new home from a home builder, I hired a contractor to construct a home on a lot that I already own. Do I still qualify for the tax credit?
Yes. For the purposes of the home buyer tax credit, a principal residence that is constructed by the home owner is treated by the tax code as having been “purchased” on the date the owner first occupies the house. In this situation, the date of first occupancy must be after November 6, 2009 and on or before April 30, 2010 (or by June 30, 2010, provided a binding sales contract was in force by April 30, 2010).
In contrast, for newly-constructed homes bought from a home builder, eligibility for the tax credit is determined by the settlement date. Be sure to check with a tax advisor in cases where a HUD-1 form is not used at settlement to be sure you have sufficient documentation to attach to IRS Form 5405.
13. Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?
Yes. The tax credit can be combined with an MRB home buyer program.
14. I am not a U.S. citizen. Can I claim the tax credit?
Perhaps. Anyone who is not a nonresident alien (as defined by the IRS) and who has owned and resided in a principal residence in the United States for at least five consecutive years of the eight years prior to the purchase date can claim the tax credit if they meet the income limits. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse. The IRS provides a definition of “nonresident alien” in IRS Publication 519.
15. Is a tax credit the same as a tax deduction?
No. A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. That means that a taxpayer who owes $6,500 in income taxes and who receives an $6,500 tax credit would owe nothing to the IRS.
A tax deduction is subtracted from the amount of income that is taxed. Using the same example, assume the taxpayer is in the 15 percent tax bracket and owes $6,500 in income taxes. If the taxpayer receives a $6,500 deduction, the taxpayer’s tax liability would be reduced by $975 (15 percent of $6,500), or lowered from $6,500 to $5,525.
16. Is there a way for a home buyer to access the money allocable to the credit sooner than waiting to file their 2009 or 2010 tax return?
Yes. Prospective home buyers who believe they qualify for the tax credit are permitted to reduce their income tax withholding. Reducing tax withholding (up to the amount of the credit) will enable the buyer to accumulate cash byraising his/her take home pay. This money can then be applied to the downpayment.
Buyers should adjust the withholding amount on their W-4 via their employer or through their quarterly estimated tax payment. IRS Publication 919 contains rules and guidelines or income tax withholding. Prospective home buyers should note that if income tax withholding is reduced and the tax credit qualified purchase does not occur, then the individual would be liable for repayment to the IRS of income tax and possible interest charges and penalties.
In addition, rule changes made as part of the economic stimulus legislation allow home buyers to claim the tax credit
and participate in a program financed by tax-exempt bonds. As a result, some state housing finance agencies have
introduced programs that provide short-term second mortgage loans that may be used to fund a downpayment.
Prospective home buyers should check with their state housing finance agency to see if such a program is available in
their community. To date, 18 state agencies have announced tax credit assistance programs, and more are expected to
follow suit. The National Council of State Housing Agencies (NCSHA) has compiled a list of such programs, which can
be found here.
17. HUD allows “monetization” of the tax credit. What does that mean?
It means that HUD will allow buyers using FHA-insured mortgages to apply their anticipated tax credit toward their home purchase immediately rather than waiting until they file their 2009 or 2010 income taxes to receive a refund. These funds may be used for certain downpayment and closing cost expenses.
Under the guidelines announced by HUD, non-profits and FHA-approved lenders are allowed to give home buyers short -term loans. The guidelines also allow government agencies, such as state housing finance agencies, to facilitate home sales by providing longer term loans secured by second mortgages.
Housing finance agencies and other government entities may also issue tax credit loans, which home buyers may use to satisfy the FHA 3.5 percent downpayment requirement.
In addition, approved FHA lenders can purchase a home buyer’s anticipated tax credit to pay closing costs and ownpayment costs above the 3.5 percent downpayment that is required for FHA-insured homes.
More information about the guidelines is available on the NAHB web site. Read the HUD mortgagee letter (pdf) and an explanation of the FHA Mortgagee Letter on Tax Credit Monetization (pdf). An FAQ about monetization (pdf) is available at the NAHB web site.
18.If I’m qualified for the tax credit and buy a home in 2009 (or 2010), can I apply the tax credit against my 2008 (or 2009) tax return?
Yes. The law allows taxpayers to choose (“elect”) to treat qualified home purchases in 2009 (or 2010) as if the purchase occurred on December 31, 2008 (or if in 2010, December 31, 2009). This means that the previous year’s income limit (MAGI) applies and the election accelerates when the credit can be claimed. A benefit of this election is that a home buyer in 2009 or 2010 will know their prior year MAGI with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount. Taxpayers buying a home who wish to claim it on their prior year tax return, but who have already submitted their tax return to the IRS, may file an amended return claiming the tax credit using Form 1040X. You should consult with a tax professional to determine how to arrange this.
19.For a home purchase in 2009 or 2010, can I choose whether to treat the purchase as occurring in the prior or present year, depending on in which year my credit amount is the largest?
Yes. If the applicable income phase out would reduce your home buyer tax credit amount in the present year and a larger credit would be available using the prior year MAGI amounts, then you can choose the year that yields the largest credit amount.
Copyright © 2009 National Association of Home Builders. All rights reserved.
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November 18th, 2009 Categories: Default News, Graphs and Charts, National Real Estate Trends, Pre Foreclosures, Real Estate Trends
According to Centralvalleybusinesstimes.com:
Sacramento:
Foreclosure rates in Sacramento-Arden-Arcade-Roseville-Woodland metropolitan area increased for the month of September over the same period last year, according to First American CoreLogic.
The rate of foreclosures among outstanding mortgage loans was 3.61 percent for the month of September, an increase of 1.58 percentage points compared to September 2008 when the rate was 2.03 percent.
Foreclosure activity in Sacramento-Arden-Arcade-Roseville-Woodland was higher than the national foreclosure rate, which was 2.93 percent for September 2009, representing a 0.68 percentage point difference.
Also in Sacramento-Arden-Arcade-Roseville-Woodland, the mortgage delinquency rate has increased. According to First American CoreLogic data for September 2009, 10.29 percent of mortgage loans were 90 days or more delinquent compared to 6.35 percent for the same period last year, representing an increase of 3.94 percentage points.
Courtesy of Real Estate News & Commentary by Chris McLaughlin, November 17, 2009
3Q09 – Delinquencies up, rate slows
According to credit reporting agency TransUnion, delinquent mortgages were up 58% from 3.96% a year ago, and as of Sept. 30, 6.25% of U.S. mortgage loans were 60 or more days past due. Two months delinquency is considered a first step toward foreclosure because it’s hard for homeowners to catch up with payments at that point. The rate of delinquency is slowing, however. The rate was up 7.6% from the second quarter — a much smaller jump than the 11.3% rise in the second quarter and a 14% rise seen in the quarter before that. F.J. Guarrera, vice president of TransUnion’s financial services division, says that while the slower rate is encouraging, the co9ntinual increase shows there are still a lot of problematic mortgages out there.
Mortgage delinquencies remain highest in the four states where the crisis has hit the worst: in Nevada, the rate reached 14.5%, up from 7.7% a year ago; in Florida, the rate was 13.3%, up from 7.8% last year; in Arizona, the rate hit 10.4%, up from 5.5% in 2008; and in California, the rate jumped to 10.2%, from 5.8% last year. Two things have to get better before mortgage delinquency rates start reversing themselves: home values and unemployment. “Until we see improvement in both of those areas, it’s possible that it will take longer for delinquency to improve,” Guarrera said.
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November 4th, 2009 Categories: National Real Estate Trends, Sacramento Foreclosures, Sacramento Real Estate
Sacramento Valley and San Juaquin Valley small towns that have been hit hard by unemployment are seeing a dramatic increase lately in foreclosure filings.
I came across this article today and though I’d pass it along…
The foreclosure crisis in the US is moving into small towns and suburbs which have previously been untouched by the economic downturn, according to new research.
A new report from RealtyTrac show a dramatic increase in foreclosures from a year ago in suburban areas previously believed to be more stable, such as Boise, Idaho, up nearly 22% from the second quarter of the year and Provo, Utah, which saw foreclosures up almost 11% in the same period.
In several states foreclosure activities have reached smaller towns with previously self-sustaining industries such as Chico in the Sacramento Valley, California, which has seen a staggering 98% increase in foreclosures from the third quarter of 2008.
The Las Vegas metro area had the highest percentage of foreclosures among its housing units in the third quarter, up 5.13% followed by Merced, California, up 3.72% and Cape Coral in Florida up 3.67%.
‘We are seeing migration into secondary markets and a migration into formerly stable areas and areas that have been wracked by unemployment,’ explained Rick Sharga, the vice president of marketing at RealtyTrac.
Sharga said that he expects a peak in foreclosures in 2010, only a marginal improvement in 2011 and a return to normal monthly foreclosure activity sometime in 2012.
‘Rising unemployment and a new variety of mortgage resets continued to gradually shift the nation’s foreclosure epicenters in the third quarter away from the hot spots of the last two years and toward some metro areas that had avoided the brunt of the first foreclosure wave,’ added chief executive James Saccacio.
‘While toxic subprime mortgages drove much of that first wave of foreclosures, high unemployment and exotic Alt-A Option ARMs are spreading the foreclosure flood to more metro areas in 2009,’ he said.
Meanwhile, a rush of property buyers is pushing up real estate transactions as they try to beat the government’s deadline at the end of November for the $8,000 tax credit for first time buyers.
The latest figures from the National Association of Realtors (NAR) show that its Pending Home Sales Index rose to 110.1 in September, its eight consecutive monthly rise.
The index now stands at the highest level since December 2006 when it was 112.8 and is 21.2% higher than September last year, marking the largest annual gain on record.
It could be a short lived blip though, as many analysts believe that the recovery in the US housing market is being propped up by the first-time buyer tax credit that was introduced by the Government to boost demand for houses.
‘What we’re witnessing is a rush of first-time buyers trying to beat the expiration of the tax credit at the end of this month,’ said Lawrence Yun, NAR chief economist.
Wednesday, 04 November 2009 courtesy10:03 Ray Clancy USA – US Property News
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November 3rd, 2009 Categories: National Real Estate Trends, Pre Foreclosures
A report from RealtyTrac says dramatic increases in foreclosures in Q3 ‘09 came in suburban areas previously believed to be stable, such as Boise, Idaho, up nearly 22% from Q209, and Provo, Utah, which rose nearly 11% in the same period. In several states, foreclosure activities drifted toward smaller towns with previously self-sustaining industries. Chico, California in Sacramento Valley, an agricultural hub, had a 98% increase in foreclosures from Q3 ‘08, according to the report. “You’re moving from Phoenix to Prescott, you’re moving from Las Vegas to Reno,” said Rick Sharga, the vice president of marketing at RealtyTrac.
Sharga sees the foreclosure crisis coming in three waves, and with this new data, the market is showing signs of the second one. “That first wave of foreclosures cratered the economy, which created job losses, which created the second wave. Now, we’re seeing prime rate loans affected by unemployment. And the third wave will be really a repeat of wave one, except this time we’re going to see a switch of Option ARM and Alt-A loans out for the subprime loans. It will probably be as big but somewhat shorter lived.” Sharga said that he expects a peak in foreclosures in 2010, only a marginal improvement in 2011 and a return to normal monthly foreclosure activity sometime in 2012.
Courtesy Chris McLaughlin
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October 31st, 2009 Categories: National Real Estate Trends, Real Estate News
Sacramento has had more than one real estate bubble and this won’t be the last– Supply and demand will always prevail. Our area is not the only one that seems to have a short memory…
Found this great article today and thought I’d share it.
by Randy Bright
Bubba was a manager overseeing maintenance work on his city’s sewers. The description of his oversight might have been a bit of a stretch, since most of what Bubba did on the job was walk around and look busy, while some other poor saps were down in the manholes doing the dirty work.
One day Bubba was walking from manhole to manhole, “inspecting” the work, and after making his rounds he sat down in the shade and lit up a cigar. After taking a few puffs, he thought it made for a better appearance to keep moving, so he began his rounds again. Stuffing his still-burning cigar deep into his cheek, he walked over to a nearby manhole.
This manhole was kind of deep, and kind of dark, so he leaned over to get a better look. Suddenly, there was a loud boom. Workers who were in the next manhole heard the noise and looked down the pipe, only to see a fireball hurtling down the pipe in their direction. In inspired panic, they scrambled out just in time to escape the explosion and to see several other manholes down the line blow their covers off.
Although Bubba’s hair was singed off and his cartoon-like exploded-cigar appearance was a bit embarrassing, he was otherwise unhurt by the explosion.
Bubba, who took his supervisory role a bit too seriously, did something he should have known better than to do. Anyone with a lick of common sense would know better than to stick his face, complete with an ignition source, into a manhole full of methane. Bubba’s arrogance led him to a life-altering experience. You can bet he never did that again.
The point of this story is when we mess around with the natural way of things, nature will always win, and one of those natural things is the simple law of supply and demand.
A lot of cities have been messing around with the law of supply and demand for the past thirty to forty years. But the housing bubble that occurred last year wasn’t the first one. There have been several, one about every ten years beginning in the early 1980s, and each one has been more intense than the last.
A housing bubble can be described as an increase in the value of homes until some trigger causes the values to fall, but the values don’t fall nearly as far as they had previously risen. The problem occurs when home values stay relatively high, but incomes fall far more than the home value rises. This becomes the classic “affordability” problem.
So if the law of supply and demand really works, why would not the lower demand (by people whose incomes have fallen) also cause prices to fall in proportion?
Randal O’Toole addresses this issue in a Policy Analysis paper entitled “How Urban Planners Caused the Housing Bubble”, released on October 1 of this year by the Cato Institute. It is his contention that the root cause of the problem was not the Community Reinvestment Act, Fannie Mae or Freddie Mac (although all of those played a role). He makes a strong case that it was growth management policies leading to land shortages that have triggered all of the housing bubbles that have occurred since the early 1970s, when Los Angeles, San Diego, San Jose and San Francisco were among the first in the nation to impose urban-growth boundaries in an effort to curb and control growth. Much of the data that O’Toole presents shows a strong correlation between areas where growth management policies had been enacted and how severely the housing bubble affected those areas.
Correlation does not necessarily mean causation, and although the global warming crowd doesn’t mind equating the two terms when it serves their purpose, the urban planning crowd will likely scream bloody murder over O’Toole’s use of correlation to prove his point. Only in this case, the circumstantial evidence, or the correlation between growth management and housing bubbles, is a bit overwhelming to dismiss out of hand. O’Toole, as he always does, makes a very methodical presentation of many anecdotal and statistical examples to prove his theory to be correct.
He wrote, “Between 2000 and the bubble’s peak, inflation-adjusted housing prices in California and Florida more than doubled, and since the peak they have fallen by 20 to 30 percent. In contrast, housing prices in Georgia and Texas grew by about 20 to 25 percent, and they haven’t significantly declined. In other words, California and Florida housing bubbled, but Georgia and Texas did not…This suggests that local factors, not national policies, were a necessary condition for the housing bubbles where they took place…The most important factor…(is) a regulatory system known as growth management.”
Like Bubba, Tulsa is about to get burned, that is unless we are smart enough not to impose growth management policies. I’ll explain more next week.
©2009 Randy W. Bright
Courtesey the Tulsa Beacon
Randy W. Bright, AIA, NCARB, is an architect who specializes in church and church-related projects. You may contact him at 918-664-7957, rwbrightchurcharch@sbcglobal.net or www.churcharchitect.net.
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October 28th, 2009 Categories: First Time Buyers, National Real Estate Trends, Sacramento Home Buyers
This will be HUGE for our Sacramento Housing Market!! I’ve beeen watching this closely…
Oct. 27 (Bloomberg) — U.S. Senate leaders moved closer to an agreement replacing an expiring $8,000 tax credit for first- time homebuyers with a smaller one that would expand access to so-called step-up purchasers, two people familiar with the matter said.
The deal would reduce the size of the tax credit to 10 percent of the sale’s price, capped at $7,290, the people said. The credit would be available on home purchases that are under contract by April 30, and borrowers would have 60 days more to close the sale. The existing credit is due to end Nov. 30.
The new agreement, which is still being negotiated and may change, would grant the credit to borrowers who have lived in their current home for at least five years. Lawmakers want to keep home sales from slipping as the economy struggles to recover from the worst drop in home prices since the Great Depression.
The demand for new homes and condominiums may increase by “more than two times because you’re allowing step-up buyers into the equation,” said Andrew Parmentier, a managing partner at Height Analytics, a research firm in Washington. “ You just opened up a whole new pool of people who can buy into those empty homes and empty condos that were built out.”
The income eligibility for first-time homebuyers would remain the same at $75,000 for individuals and $150,000 for couples. The income criteria for step-up buyers would be $125,000 for individuals and $250,000 for couples.
The credit would be limited to homes costing $800,000 or less. There is currently no price cap on home purchases.
Unemployment-Benefits Bill
Lawmakers are trying to attach the legislation, which is also being considered by leaders in the House, to a bill extending unemployment benefits under debate on the Senate floor, said Richard Durbin of Illinois, the Senate’s No. 2 Democrat.
Senator Bill Nelson, a Florida Democrat, told reporters yesterday of the tax credit that “we should be able to extend that later this week.” Nelson was traveling with President Barack Obama on Air Force One to a speech in Jacksonville, Florida.
Lawmakers are also considering pairing the new homebuyer credit with a broader tax benefit for businesses with net operating losses, and passing that as a separate bill. The tax break, a priority for homebuilders, would allow companies to apply losses incurred in 2008 and 2009 to amend up to five years worth of earlier tax returns to get a refund of taxes paid in years when they were profitable.
That provision, along with the step-up, would be “extremely positive for the homebuilders,” Parmentier said.
A version of the benefit was included in February’s economic stimulus bill, though it was limited to companies with receipts under $15 million. Business groups, including the Washington-based National Association of Manufacturers and National Association of Home Builders, lobbied unsuccessfully to have the benefit expanded to larger companies.
To contact the reporters on this story: Dawn Kopecki in Washington at dkopecki@bloomberg.com; To contact the reporters on this story: Ryan J. Donmoyer in Washington at rdonmoyer@bloomberg.net.
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October 28th, 2009 Categories: Loan Modification, Mortgage and Loans, National Real Estate Trends, Real Estate News
MINNEAPOLIS–(Business Wire)–
Wolters Kluwer Financial Services announced today the company has expanded its comprehensive Loss Mitigation Service to include fair lending compliance consulting. The company`s experts with strong experience and knowledge in helping financial institutions avoid discriminatory lending practices can now be deployed on-site at mortgage servicers to help them meet all state and federal fair lending requirements when modifying loans for distressed borrowers.
As U.S. mortgage servicers ramp up their loan modification efforts to help slow the exploding number of home foreclosures, the primary focus on doing so is mitigating financial losses for both the financial institution and borrower. However, the Treasury Department recently issued guidelines reinforcing the importance of compliance with fair lending requirements when modifying loans within its Home Affordable Modification Program (HAMP).
Wolters Kluwer Financial Services` compliance consultants can evaluate a
servicer`s loan modification policies and procedures to help determine how they can address fair lending risks more thoroughly and rapidly. Next, they can review a representative sample of loan modifications the servicer has completed and denied to determine if any disparate treatment of borrowers exists. And inally, the consultants can conduct a statistical analysis of all completed modifications and denied applications, identifying certain modification criteria that might lead the servicer to violate fair lending laws.
Wolters Kluwer Financial Services is also offering financial institutions a free
Webinar on how to prevent discrimination in the loan modification process and mitigate associated fair lending risk on Nov. 12.
“While modifying loans at risk of default as quickly as possible is paramount
for servicers and their borrowers, so is making sure everyone is treated fairly and equally in the process,” said Don Morrow, Ph.D., senior consultant and statistician, for Wolters Kluwer Financial Services. “Regulators have put forth notice they`ll intensify their scrutiny of servicers` fair lending compliance.”
“Wolters Kluwer Financial Services` fair lending compliance experts possess
decades of experience analyzing loan data. They have the skills and knowledge necessary to help servicers begin addressing emerging fair lending concerns immediately,” said Kurt Sames, vice president and general manager of Consumer Compliance for the company.
Wolters Kluwer Financial Services Loss Mitigation Service also helps servicers ensure compliance with requirements surrounding various loan modification rograms, including the government`s Home Affordability Refinance Program (HARP), HAMP and HOPE for Homeowners programs, and meet Freddie Mac, Fannie Mae, Treasury and Department of Housing and Urban Development guidelines, through its expansive library of mortgage compliance documents. In addition, the company can help servicers make the settlement process easier and faster through a complete,
online suite of settlement services. And Wolters Kluwer Financial Services can elp servicers record loan modification packages within any U.S. jurisdiction through a partnership with CT Lien Solutions, another Wolters Kluwer company.
For more information on Wolters Kluwer Financial Services` fair lending
consulting services tied to loan modifications, visit ww.pciwiz.com/consulting/loanmodifications.asp. For more information on the company`s comprehensive Loss Mitigation Service, visit it`s Loss Mitigation Resource Center at www.WoltersKluwerFS.com/LossMit.
About Wolters Kluwer Financial Services
Wolters Kluwer Financial Services provides best-in-class compliance, content, and technology solutions and services that help financial organizations manage risk and improve efficiency and effectiveness across their enterprise. The organization`s prominent brands include Bankers Systems, VMP Mortgage Solutions, PCi, AppOne, GainsKeeper, Capital Changes, NILS, AuthenticWeb and Uniform Forms.
Wolters Kluwer Financial Services is part of Wolters Kluwer, a leading global
information services and publishing company with annual revenues of (2008) €3.4
billion ($4.9 billion) and approximately 20,000 employees worldwide. Please
visit our Web site for more information.
Wolters Kluwer Financial Services
Jennifer Marso, 612-852-7912
Director of Corporate Communications
Jennifer.marso@wolterskluwer.com
On Twitter: @JenniferMarso
or
Charles Miller, 320-240-5457
Senior Public Relations Specialist
Charles.miller@wolterskluwer.com
On Twitter: @CharlesWMiller
Copyright Business Wire 2009
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October 8th, 2009 Categories: Default News, National Real Estate Trends, Pre Foreclosures, Real Estate News, Real Estate Trends
Perspective: More convinced of ‘W’-shaped recovery
By John Burns, Thursday, October 8, 2009.
From Inman News
While both the media and stock investors believe that housing has bottomed, they are unaware of the massive supply of homes that are already in the foreclosure process that will certainly drive home prices down even further when they are sold. We have been projecting a “W”-shaped recovery for some time, and we are becoming even more convinced that we are right. The shape of the second leg down is almost completely dependent on the level of government intervention that will take place.
For a number of reasons, banks have not been aggressively taking title to homes and selling them, which has resulted in very few distressed sales in comparison to the actual level of distress in the market. This delay in bank-owned home (REO) sales, along with historically low mortgage rates and an $8,000 tax credit, has helped to stabilize the housing market — temporarily.
It is very clear that price stabilization is temporary unless something is done. Here are some facts to help project what housing will be like in 2010:
- 13.54 percent of the 44.7 million mortgages tracked by the Mortgage Bankers Association are delinquent.
- 7.57 million homeowners are delinquent, applying the same percentage to the 11.2 million mortgages not tracked by the MBA (55.9 million total mortgages in the U.S.). That means that 10 percent of all homeowners in the country are delinquent.
- Based on historical trend analysis by Amherst Securities, 6.94 million homes that are already delinquent will be liquidated, which is more than a one-year supply of distressed sales poised to hit the market sometime in 2010 and 2011. During first-quarter 2005 that figure was only 1.27 million.
- Defaults continue to grow at the rate of approximately 300,000 per month, assuring that the number of distressed sales will grow and will continue through 2012.
2009 government intervention
Government intervention to date has been extremely helpful in preventing an even more dramatic decline in home prices. As shown in the chart below, housing demand has fallen only to “normal” levels and stabilized there. Without historically low mortgage rates, support for Freddie Mac, Fannie Mae and FHA, and an $8,000 tax credit, how far would sales have fallen this year and what would that decline in demand have done to pricing?
Conclusion
Demand needs to continue to be stimulated to bring down supply, particularly while the country continues to lose jobs. Without continued government intervention, home prices will plummet, banks and the government-sponsored entities (GSEs) will continue to lose money, and the economy has virtually no chance of increasing overall employment in 2010.
Our grading system of the economy and the housing market is a “bell curve” model, with statistics at an all-time high receiving an “A,” statistics near the long-term average receiving a “C,” and the worst times ever receiving an “F.” In this grading system, it is OK to be a “C” student.
Here is our current report card:
Economic Growth: D
Economic growth deteriorated in September as the economy remained very weak. Annual job losses continued, marking one of the worst losses in 60 years. The headline unemployment rate increased to 9.8 percent last month, after reaching 9.7 percent in August. Mass layoff events — defined as a cut of 50 or more jobs from a single employer — also increased this month, and are up nearly 43 percent year-over-year. Currently, it takes job seekers twice the normal length of time to find employment.
The Consumer Price Index, or CPI (all items), decreased at a slower rate in August, recording a decline of 1.5 percent, while the core CPI (minus food and energy) showed an increase of 1.4 percent.
The final second-quarter gross domestic product (GDP) growth rate is at -0.7 percent, which is a significant improvement from the -6.4 percent decline in the first quarter.
Leading Indicators: C-
Many leading indicators continue to improve, and suggest that the worst of the recession is behind us. The Leading Economic Index six-month growth rate rose in August to its highest level since early 2004. The ECRI Leading Index — an indicator of future U.S. growth — has increased almost 21 percent since the beginning of the year — the largest growth rate since 1971. Stocks continued to rise through September and the four major indices now range from -10 percent to up 2 percent year-over-year. The Standad & Poor’s Homebuilding Index rose in August, increasing 14 percent from the previous month, but remains down 5 percent year-over-year and down 72 percent from its peak in July 2005.
The Net Employment Outlook turned negative for only the second time in the 20-year history of the index (the first was last quarter), as more employers that were surveyed foresaw staff levels decreasing than increasing. The average hours worked per week by Americans declined slightly in September, reaching its lowest levels on record, partly due to furloughs forced upon both government and private sector employees.
The price of crude oil declined to a monthly average of $69.46 per barrel in September, representing a 2 percent month-over-month decline.
Affordability: C-
Affordability improved in September as both mortgage rates and the median resale price fell compared to August. Currently, our housing-cost-to-income ratio has fallen to 26.7 percent, which is near the lowest level since we began calculating the index in 1981. Due to the correction in home prices and low mortgage rates, owning a home is now essentially the same cost as renting, making it favorable for first-time homebuyers to purchase a home. Household income has fallen 6 percent year-over-year to $52,856 as a result of job losses and furloughs. Despite the decline, the median-home-price-to-income ratio has fallen to 3.3, which is now equal to the historical average.
The 30-year fixed mortgage rate fell again in September, reaching 5.04 percent by month-end, while adjustable mortgage rates reached 4.52 percent at September month-end. The Fed’s overnight lending target rate remains at a range of 0 percent to 0.25 percent, which is the lowest level on record. The share of adjustable-rate mortgage (ARM) applications increased to 5.6 percent in the last week of August, according to the Mortgage Bankers Association. However, the share of ARM applications remains extremely low when compared to peak levels above 35 percent of total applications in early 2005.
Consumer Behavior: D-
Consumer behavior was mixed in September. Consumer confidence declined after increasing in August, falling to 53 — far below the historical average of 97. Consumer sentiment increased in September to 73.5, reaching its highest level since January 2008. The Consumer Comfort Index also increased in August to -46.4. The personal savings rate has fallen in the last two months after spiking at 6.9 percent in May.
The U.S. net worth increased by nearly $2 trillion in the second quarter compared to the first quarter. This represents the first increase in net worth in almost two years, and is largely due to recent large gains experienced in the stock market. Despite the recent improvement, the second quarter year-over-year decline is the third worst on record in the 50-year history of this data point, losing $7.4 trillion of wealth in the past year. Both unemployment and inflation increased in September, resulting in a rising Misery Index (the sum of the two rates).
Existing-Home Market: D+
The existing-home market remains weak yet seems to be stabilizing. Seasonally adjusted annual resale activity in August declined almost 3 percent from July to 5.1 million homes, an improvement of 3 percent compared to one year ago, according to the National Association of Realtors (NAR). The rolling 12-month count of resale sales activity has increased for the second month in a row. The national median resale price fell to $177,500, and has declined 12 percent year-over-year. Weak consumer confidence and increased foreclosure sales continue to put downward pressure on resale prices.
The S&P/Case-Shiller index, which tracks paired sales, fell 15 percent in the second quarter of 2009 compared to second-quarter 2008. In August, the number of unsold homes declined sharply to 8.5 months of supply yet remains elevated compared to history.
Pending home sales volume increased this month, and represents a 12 percent year-over-year gain.
As of the second quarter, 32 percent of all homes with a mortgage were worth less than the original value of the mortgage.
New-Home Market: D
A few components of the new-home market improved in September. Builder confidence increased last month to a Housing Market Index rating of 19 — the third consecutive month of an increasing index. The inventory of unsold homes continued to improve and has fallen to 7.3 months of supply. Seasonally adjusted new-home sales are down 3 percent year-over-year and are down 69 percent from a peak of nearly 1.4 million annual sales in July 2005.
The rolling 12-month count of new-home sales was flat compared to last month — the first time since 2005 it hasn’t declined from the previous month. The median single-family new-home price dropped sharply to $195,200 in August from July’s $215,600 median — representing an 11.7 percent year-over-year decline.
Housing Supply: F
Seasonally adjusted total permits increased to 579,000 as a result of a large jump in multifamily permits, while single-family permits declined slightly. Seasonally adjusted total new-home starts decreased in August to 479,000, due to a 3 percent drop in single-family starts, and are down 22 percent from one year ago.
John Burns is the founder of Real Estate Consulting in Irvine, Calif., which monitors changes in real estate market conditions and provides consulting services, including strategic planning, market research and financial analysis. He can be reached at jbrec@realestateconsulting.com.
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