Saturday, October 3, 2009

Credit Crunch Stalls Affordable Housing

Credit Crunch Stalls Affordable Housing
Tougher Federal Housing Administration standards and falling investor interest in the federal Low Income Housing Tax Credit program has stalled construction of affordable housing. And even when it is built or rehabilitated, it's become difficult for potential buyers to get financing.

"This is a national tragedy," said Judith A. Kennedy, president and chief executive of the National Association of Affordable Housing Lenders.

Affordable-housing giant Enterprise Community Partners and other nonprofit community development leaders have been lobbying Congress to change tax rules to broaden the appeal of the tax credits.

Sandy Marenberg, a real estate practitioner who owns Marenberg Enterprises, has found it particularly frustrating that he’s unable to find buyers able to qualify for loans to buy energy-efficient properties selling for about half their cost to build.

"The pendulum's gone from giving loans to everybody, whether they deserve it or not, to only giving loans to the overqualified. The folks in between are getting turned down, and many of them would be fine home owners," he said.

Source: The Baltimore Sun, Jamie Smith Hopkins (09/28/2009)

Housing Economists Predict Slow Growth

The fundamentals that drove the increase in housing values for the last century – increasing population, incomes, and household wealth – may not follow in the United States in the future. Some housing experts speculate this will change the economics of homeownership.

Over the next few decades, "We can expect a gradual rise [in home values], but not the bonanza we've become accustomed to between the end of World War II and 2006, and especially the last 20 years," says Robert Reich, public policy professor at UC Berkeley and U.S. Labor secretary in the Clinton administration.

The reasons for the change include the absence of pent-up demand that followed the Great Depression and World War II and the aging of the baby boomers who carried that housing demand forward, says housing consultant Thomas Lawler.

Source: Los Angeles Times, Peter Y. Hong (09/27/2009)

Fed Seeks More Financial System Oversight

Fed Seeks More Financial System Oversight
Federal Reserve Chair Ben Bernanke made a case to Congress on Thursday that the Fed needed additional powers to oversee banks, insurance companies, hedge funds, and others. He also admitted that the Fed hasn’t done a good job protecting consumers but said improvements are being made.

"We are competent and have the skills ... I think we can do that," he said.

Bernanke called for the formation of a council of regulators to police the financial system and pointed to “no-doc loans” as an example of a risky product that should be monitored by the council.

He expressed doubt that the commercial real-estate market is likely to face problems serious enough to further upset the economy.

He also warned Congress that even if the economy grows at 3 percent during each of the upcoming quarters, unemployment will still be above 9 percent at the end of 2010.

Source: The Associated Press, Jeannine Aversa (10/01/2009)

Guess Who's Ditching Their Mortgages

Guess Who's Ditching Their Mortgages
A study of 24 million credit files by national credit bureau Experian and consulting company Oliver Wyman has shown that home owners with high credit scores are 50 percent more likely to deliberately walk away from a mortgage than lower-scoring borrowers.

The industry calls these “strategic defaults” and their numbers grew to 588,000 in 2008, double the total in 2007, and well beyond most earlier estimates.

The study determined:
  • Strategic defaulters tend to go straight from paying their mortgages dependably to not paying at all.
  • Strategic defaulters are heavily concentrated in negative-equity markets like California and Florida.
  • Two-thirds of strategic defaulters have only one mortgage.
  • Most likely to default are home owners with large balances and the highest credit ratings.

Piyush Tantia, an Oliver Wyman partner and a principal researcher on the study, said strategic defaulters "are clearly sophisticated” and look on the decision to default as a business strategy. "Well, I'm $200,000 in the hole on my house, and yes, I'll damage my credit," Tantia says of defaulters.

Source: Washington Post Writers Group, Kenneth R. Harney (09/27/2009)

Sunday, September 27, 2009

Survey Shows Huge Gap in Markets

Survey Shows Huge Gap in Markets
A comparison of similar 2,200-square-foot, 4-bedroom, 2.5 bath homes in 310 U.S. markets byColdwell Banker found an enormous price disparity between the lowest- and highest-cost areas.

Grayling, in north-central Michigan, ranked as the most affordable market in America, where a home of that size costs $112,675.

La Jolla, north of San Diego, Calif., led the list as the most expensive real estate market in the country with a comparable home costs $2.125 million.

La Jolla was joined on the most expensive list by 13 other California markets, while Grayling was one of 20 Midwest communities on the most affordable list.

Internationally, Singapore was the most expensive market for the same type of home, $1.9 million, compared with Salinas, Ecuador, which at $69,375 was the most affordable international market.

“Half of the markets surveyed showed an average price for this very nice type of home to be less than $300,000 showcasing the affordability of homeownership across our nation,” Coldwell Banker CEO Jim Gillespie says.

The 10 most affordable U.S. markets were:
  • Grayling, Mich., $112,675
  • Akron, Ohio, $121,885
  • Fayetteville, N.C., $130,875
  • Canton, Ohio, $131,867
  • Detroit, $132,000
  • Arlington, Texas, $138,775
  • Macon, Ga., $139,007
  • Eau Claire, Wis., $141,270
  • Port Charlotte, Fla., $142,750
  • Wichita, Kan., $144,625

Source: Coldwell Banker (09/23/2009)

How to Beat the Tax Credit Deadline

How to Beat the Tax Credit Deadline
It's not too late for a determined first-time home buyer to take advantage of the $8,000 federal tax credit, which expires Nov. 30.

Scott Voak, a San Diego practitioner specializing in first-time buyers, helps potential buyers target homes that can close quickly. To identify those properties without touring them, contact the listing agent with blunt but important questions that aren't likely addressed in the listing. These can include:
  • Is there mold?
  • A need for extensive repairs?
  • Aging systems or appliances?
  • Troublesome neighbors?

Buyers should factor in these questions before making an offer:
  • How long has the property been on the market?
  • Have there been any price reductions?
  • Are there any offers written on the property?
  • Do the home owners need to move by a specific date?

Other recommendations include:
  • Provide buyers with as much information about financing as they need and that you can offer.
  • Encourage buyers to begin the process right away.
  • Make sure buyers are aware of who is responsible for closing costs since state requirements vary.

Source:, Scott Voak (09/23/2009)

Signaling Confidence, Fed Holds Rates Steady

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

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

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

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

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

NAR: Existing-Home Sales Fall

NAR: Existing-Home Sales Fall
Existing-home sales in August gave back some of their strong gain in July but remain above year-ago levels, according to the National Association of REALTORS®.

Existing-home sales—including single-family, townhomes, condominiums and co-ops—declined 2.7 percent to a seasonally adjusted annual rate of 5.10 million units in August from a pace of 5.24 million in July, but remain 3.4 percent above the 4.93 million-unit level in August 2008. In the previous four months, sales had risen a total of 15.2 percent.

Lawrence Yun, NAR chief economist, says the tax credit is working. “Home sales retrenched from a very strong improvement in July but continue to be much higher than before the stimulus. The first-time buyer tax credit is having the intended impact of bringing buyers into the market, allowing them to take advantage of very favorable affordability conditions,” he says. “Some of the give-back in closed sales appears to result from rising numbers of contracts entering the system, with some fallouts and a backlog contributing to a longer closing process, but the decline demonstrates we can’t take a housing rebound for granted.”

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to 5.19 percent in August from 5.22 percent in July; the rate was 6.48 percent in August 2008.

First-Time Buyer Tax Credit

An NAR practitioner survey shows first-time buyers purchased 30 percent of homes in August, and that distressed homes accounted for 31 percent of transactions; both were unchanged from July.

“The recent trend shows broad improvement in most of the country, but with an expected rise in foreclosures over the next 12 months we need to maintain a healthy level of ready buyers to absorb the inventory. An extension of the tax credit is critical to preserve incentives for financially qualified buyers to enter the market,” Yun says.

He adds that many buyers have been on the sidelines during the past few years, waiting for signs of stabilization. “Now that the market is showing some momentum, we have an opportunity to achieve a more rapid and broader stabilization in home prices. Extending and expanding the tax credit also would help to keep other families from becoming upside down in their mortgages or risk foreclosure,” Yun says.

NAR President Charles McMillan says time is running very short for the existing tax credit. “Because it’s generally taking 60 days to close on a home after a contract is offered, buyers have little time to act to complete a purchase by the November 30 deadline,” he says.

Inventory Falls

Total housing inventory at the end of August fell 10.8 percent to 3.62 million existing homes available for sale, which represents an 8.5-month supply at the current sales pace, down from a 9.3-month supply in July. Unsold inventory totals are 16.4 percent lower than a year ago.

The national median existing-home price for all housing types was $177,700 in August, down 12.5 percent from August 2008. Distressed properties continue to downwardly distort the median price because they generally sell for 15 to 20 percent less than traditional homes.

Single-family home sales fell 2.8 percent to a seasonally adjusted annual rate of 4.48 million in August from a level of 4.61 million in July, but are 2.5 percent higher than the 4.37 million-unit pace in August 2008. The median existing single-family home price was $177,500 in August, down 12.1 percent from a year ago.

Existing condominium and co-op sales slipped 1.6 percent to a seasonally adjusted annual rate of 620,000 units in August from a spike of 630,000 in July, but are 10.1 percent higher than the 563,000-unit level a year ago. The median existing condo price was $179,300 in August, which is 15.7 percent below August 2008.

Northeast: Regionally, existing-home sales in the Northeast declined 2.2 percent to an annual pace of 910,000 in August, but are 5.8 percent above August 2008. The median price in the Northeast was $241,100, which is 10.5 percent below a year ago.

Midwest: Existing-home sales in the Midwest fell 6.6 percent in August to a level of 1.14 million but are unchanged from a year ago. The median price in the Midwest was $149,900, down 10.4 percent from August 2008.

South: In the South, existing-home sales were down 3.1 percent to an annual pace of 1.89 million in August but are 1.6 percent above August 2008. The median price in the South was $157,400, which is 11.0 percent below a year ago.

West: Existing-home sales in the West declined 2.7 percent to an annual rate of 1.16 million in August but are 7.4 percent higher than a year ago. The median price in the West was $220,500, down 12.2 percent from August 2008.