Friday, March 30, 2012

30-Year Mortgage Rates Slide Back Below 4%

Mortgage rates were down across the board this week compared to last week, according to a Freddie Mac weekly mortgage market survey.
After posting a big jump last week, 30-year mortgage rates were back below the 4 percent mark this week, offering another boost in home affordability for buyers.
Here’s a closer look at rates for the week ending March 29.
• 30-year fixed-rate mortgages: averaged 3.99 percent, with an average 0.7 point, falling back from last week’s 4.08 percent average. A year ago at this time, 30-year rates averaged 4.86 percent.
• 15-year fixed-rate mortgages: averaged 3.23 percent, with an average 0.8 point, also slipping from last week’s 3.30 percent average. Last year, 15-year rates averaged 4.09 percent at this time.
• 5-year adjustable-rate mortgages: averaged 2.90 percent this week, with an average 0.8 point, dropping from last week’s 2.96 percent average. The 5-year ARM averaged 3.70 percent last year at this time.
• 1-year ARMs: averaged 2.78 percent this week, with an average 0.6 point, dropping from last week’s 2.84 percent average. A year ago, 1-year ARMs averaged 3.26 percent.
Source : Freddie Mac

National Foreclosures Drop in February

According to CoreLogic, an estimated 65,000 completed foreclosures were reported in the United States last month versus 71,000 in January and 66,000 in February 2011.
The number of completed foreclosures for the 12 months ended Feb. 29 was 862,000. The study further determined that about 3.4 percent of all homes with a mortgage — 1.4 million residences — were in the foreclosure inventory as of February.
Source : "Business Briefs: National Foreclosures Drop in Feb." Bradenton (Fla.) Herald (March 30, 2012)

Home Owners Planning Remodeling Projects This Year

Many home owners who have no plans to move this year are opting to tackle improvement projects around the House , according to a new survey of 1,500 adults by American Express Spending and Saving Tracker.
Seventy percent of home owners surveyed say they intend to take on a home improvement project this year, and they plan to spend about $3,500 on sprucing up their home, according to the survey. That’s an increase of about $100 compared to last year.
The projects will primarily concentrate on the indoors, according to the survey. More than one-third of those polled say they are devoting some of that budget to home accessories, such as throw pillows, or on appliances and new furniture.
The top home project they have lined up? Painting, which 37 percent of those surveyed say they plan to do this year. Twenty-four percent said they will do landscaping projects.
Also, more home owners this year compared to last year say they’re going the do-it-yourself route, with plans to refurbish their houses themselves rather than hiring a professional to do it. In the survey, 43 percent of owners say they’ve been inspired to tackle home projects themselves by watching design shows on television, followed by seeing in-store displays or from viewing online design and do-it-yourself Web sites.
Source : “Home Decision 2012: Improving or Moving?” American Express (March 2012)

FHA Loan Apps Rise as Borrowers Try to Beat Fee Hikes

As Mortgage applications for Federal Housing Administration loans soared 11 percent from the previous week as borrowers try to rush their applications in to beat the higher FHA costs that will start rolling out on Monday, according to the U.S. Mortgage Market Index report released from Mortech Inc. and Mortgage Daily.
Starting April 1, the FHA will be increasing its annual mortgage insurance premiums on all FHA loans. The annual premium is paid with the monthly mortgage payment. The FHA also will be increasing the FHA mortgage insurance premium that is paid up front during closing, also starting April 1.
Borrowers who are trying to avoid the higher fees are trying to get their FHA mortgage applications approved before the changes take effect. The new fees also will apply to home owners who refinance their mortgages.
FHA loans have soared in popularity in recent years since they allow for smaller down payments, as low as 3.5 percent compared to traditional loans , and often carry less stringent credit requirements.
Source : “Mortgage Applications for FHA Loans Increase Ahead of Higher Fees,” Realty Times (March 28, 2012)

Housing Is ‘Awakening From Hibernation,’ Freddie Says

An improving economy is contributing to a gradual rebound in home prices across the country, according to mortgage giant Freddie Mac’s 2012 Economic Outlook report, released Wednesday. But there is still a way to go in the road to recovery for the housing market , the report noted.
“The housing market is showing some signs of shaking off the depression-like conditions that have plagued it for much of the past few years,” according to the report. “As if awakening from hibernation, housing starts and home sales moved to higher levels of activity.”
In fact, the signs have prompted Freddie Mac to revise its forecast upwards for home sales and originations. One economic contributor that’s helping to stabilize housing: The drop in the unemployment rate to 8.3 percent, its lowest level in three years, according to the report.
“A variety of encouraging indicators suggest that the housing market may be feeling a nascent recovery ... and more neighborhoods may see a stabilization in overall demand and housing values this spring,” says Frank Nothaft, Freddie Mac’s chief economist.
Median home sale prices are up, despite a slight drop in new and existing home sales, Freddie Mac reports. About a half of the increase in housing starts has been for construction of rental apartments in multi-unit buildings to meet the increasing demand, the report notes. New rental construction, at its current pace, is expected to reach its highest level since 2005.
“Housing starts continue to run below net household formations [and will allow for absorption of existing vacant homes],” according to the report.
Source : “Freddie Mac: Economic Growth Expected to Stabilize Housing Market,” Dow Jones Newswires (March 28, 2012)

$362B of Commercial Debt Matures in 2012

Trepp, which recently updated its Commercial Mortgage Maturities outlook with data from last year's October-through-December period, now estimates that $362 billion of commercial real estate debt will mature this year — an
increase from $346 billion in 2011.
Trepp estimates $1.73 trillion in commercial real estate maturities for the five-year period stretching from 2012 to 2016.
"Liquidity has improved in the last two years, but this will still be a tall order for the market to fill with the CMBS market not yet hitting its full stride and many balance-sheet lenders [banks] looking to trim their CRE exposure," Trepp's Matt Anderson says.
Source : "Trepp: $362B of Commercial Real Estate Debt Matures in 2012," Citybizlist Baltimore (March 26, 2012)

Bernanke Stands Firm on Interest Rates

The economy still has a long way to go, Federal Reserve Chairman Ben Bernanke said Monday.
Bernanke continued to assert that the Fed intends to hold short-term interest rates near zero through 2014, which will help keep mortgage rates low. He also said the Fed has been investing in government debt that will possibly reduce long-term interest rates even more.
With the economy showing some signs of improvement — including a drop in the jobless rate to 8.3 percent in February (compared to 9.1 percent last summer) — many investors had assumed the Fed would reverse course and announce a raise in interest rates starting in July 2013.
But Bernanke stood firm Monday on the Fed’s vow to keep key rates low until 2014. Bernanke cited continued concerns over long-term unemployment.
“Recent improvements are encouraging,” Bernanke said. However, “millions of families continue to suffer the day-to-day hardships associated with not being able to find suitable employment.”
Unemployment particularly remains high for those who have been unable to find a job for six months or more. Research has shown those who are out of work for an extended period of time are more likely to see permanent declines in wealth, health, and earnings potential.
Source : “Bernanke Says Faster Growth Is Needed to Bolster Job Market,” The New York Times (March 26, 2012) and “Bernanke: U.S. Needs Faster Growth to Lower Unemployment,” Reuters News (March 26, 2012)

Low Interest Rates Help Americans Save Money

Ultra-low interest rates have helped the average American to save more than $3,000 a year, according to a USA Today analysis.
Interest payments on mortgages have contributed to some of the largest savings. USA Today reports that mortgage interest payments have fallen 30 percent since peaking in 2007.
According to the Bureau of Economic Analysis, Americans spent 5.8 percent of their after-tax income paying interest on mortgages, credit cards, car loans, and on other debts — the smallest share since 1977.
Indeed, interest payments have fallen drastically on debt. Interest payments averaged $469 per month at the end of last year compared to the $728 per month peak in 2007.
Low interest rates are expected to continue too. The Fed has made a rare vow to keep key interest rates low through 2014.
Source : “Low Interest Rates Put Cash in Americans’ Pockets,” USA Today (March 26, 2012)

New FHA Rule to 'Kick Some Buyers Out'?

The Federal Housing Administration announced that starting April 1 it will not insure mortgages to borrowers who have an ongoing credit dispute of $1,000 or more on their file.
To be considered for an FHA-backed loan, borrowers will either have to pay the remaining balance on the credit dispute or enter into a payment plan, making at least three payments on it. Any payment plans will need to be documented and submitted to , and which will then figure it into the debt-to-income ratio for FHA new mortgage.
FHA’s new rule does not include disputed credit accounts from more than two years ago or any related to reported identity theft.
Still, the new rule has some in the housing industry worried that it’s going to keep more potential home buyers from securing a mortgage.
"We expect this revision will certainly kick some buyers out of the marketplace, and we’re in ongoing efforts to quantify how extreme the impact will be," Lisa Jackson, senior vice president of research at John Burns Real Estate Consulting, told HousingWire.
Jeremy Radack, a real estate attorney in Houston who assists with financing, estimated FHA originations may be reduced by 33 percent to 50 percent this year due to the new rule.
FHA says the rule is aimed at protecting the FHA’s emergency fund, which has fallen below the mandated amount Congress requires.
"We found that many borrowers with mortgage payment delinquencies had prior credit deficiencies including unpaid collections and unresolved disputed accounts prior to the approval of their loan," the spokesman said. "This change was made to eliminate this layer of risk to FHA-insured loans and help protect our insurance fund."
Also in reimbursing the emergency fund*, FHA announced it would raise its insurance premiums starting April 1 too.
: Source “FHA to Deny Mortgage Backing for Credit Disputes Above $1,000,” HousingWire (March 26, 2012) and “Tougher Requirements Start Monday for FHA Mortgages,” Tampa Bay Times (March 27, 2012)

Monday, March 26, 2012

The Next New Wave of Construction?

Rising gas prices will likely push more post-housing bubble home seekers in search of smaller homes closer to urban areas, according to speakers at the “What’s Next: Real Estate in the New Economy” conference sponsored by the Urban Land Institute of North Texas.

More home buyers may be looking for shorter commutes, cheaper mortgages, and to decrease car expenses, which living closer to the city may offer.

“For every car you do not own, you save $8,000 to $10,000 a year,” says keynote speaker Maureen McAvey, ULI’s executive vice president of policy & practice. “That can often increase the mortgage you can afford by $100,000.”

Urban and smaller homes may be most appealing to the twenty-something generation and young married couples, she notes.

McAvey predicts the size of homes will shrink about 20 percent in the future, bringing the home prices more in line with home purchaser’s smaller budgets.

Source: “Smaller Homes, Urban Lifestyles Attractive to New Home Buyers: ULI,” HousingWire (March 21, 2012)

More Real Estate Pros Optimistic About Home Prices

The number of real estate professionals who say home prices will rise in the next six months has more than doubled in one quarter, according to a new survey by HomeGain.

Indeed, 37 percent of those surveyed in 2012 by HomeGain say prices will rise in the next six months--compared to 15 percent who said they expected a rise in the fourth quarter of 2011.

A growing confidence among real estate professionals is emerging, housing experts say. The growing confidence coincides with the nationwide housing inventory falling to its lowest level since March 2005 and home sales steadily rising over the last few months.

"What is consistently being represented out there today is that there is a sense of optimism in the real estate business that has not been seen in the last five to six years," Budge Huskey, chief operating officer of Coldwell Banker Real Estate, told AOL Real Estate.

Even in particularly hard-hit housing markets, real estate pros are expressing more optimism. For example, 80 percent of Arizona real estate professionals and home owners and 75 percent in Nevada say home prices will rise in the next six months, according to the survey. However, many caution that any price increases will be gradual.

Source: “Home Value Survey Sees Sharp Rise in REALTOR Optimism,” AOL Real Estate (March 21, 2012)

Home Builder Stocks Soar, Reaching 2-Year Highs

An increase in housing construction and sales has been helping home builder stocks grow the last six months, reaching the highest levels in two years, The New York Times reports. In fact, 11 home builder stocks have increased 80 percent since October alone, according to a Standard & Poor’s index.

It’s been a rough road for the home building industry in recent years: Home builder stock shares lost about half of their value when the market dramatically slowed in 2007, and stocks dropped even more during 2008 and 2009.

Stock shares for home builders typically rise before spring and summer, which are viewed as the busiest seasons for home buying.

But “if you were looking for a home run kind of move, you needed to have bought when the stocks were significantly undervalued six months ago,” says Philip J. Orlando, Federated’s chief equities market strategist. “But we are starting to see fundamental improvement. So you may have a situation where instead of stocks falling, maybe they drift sideways. We are not looking for a collapse. We are just not looking for a move up.”

Source: “Home Builder Stocks at Highest Point in 2 Years After 6-Month Rise,” The New York Times (March 22, 2012)

Shadow Inventory Falls 10%, Threat Remains

Shadow inventory--distressed properties not yet listed for sale--has decreased about 10 percent compared to a year earlier, according to CoreLogic.

While the decrease has been viewed as a welcome sign to housing experts, shadow inventory still remains a threat to a housing recovery, even at a time when the housing market has shown other signs of improvement in recent weeks.

For every two homes available for sale in the country, one home awaits in the “shadows,” HousingWire reports about the data.

In January, shadow inventory accounted for 1.6 million units, which is a six-month supply. In January 2011, that number stood at 1.8 million units, an eight-month supply.

“Almost half of the shadow inventory is not yet in the foreclosure process,” says Mark Fleming, CoreLogic’s chief economist. “Shadow inventory also remains concentrated in states impacted by sharp price declines and states with long foreclosure timelines.”

The top six states that account for most of the nation’s shadow inventory:

•New York
•New Jersey
Source: “U.S. Shadow Inventory Levels Down From Year Ago,” HousingWire (March 21, 2012)

Buying is Cheaper Than Renting in Nearly All Major Cities

Home buying is the smarter choice than renting, according to Trulia’s Winter 2012 Rent vs. Buy Index.

Buying a home is more affordable than renting in 98 of the nation’s 100 largest metro areas, according to the index, which tracks asking prices for rental units compared to for-sale homes in major metro areas.

The only two metros out of the 100 tracked where renting was found to be the better deal: Honolulu and San Francisco. Still, the index notes that if you plan to stay in those markets more than five years, you might still be better off owning than renting in those markets too.

Falling home values and low mortgage rates have made home ownership more affordable. Meanwhile, rents have been on the rise.

“As rents rise and prices stagnate, home ownership is becoming even more affordable, but rising rents create a dilemma for people who can’t afford to buy yet,” says Jed Kolko, Trulia’s chief economist. “Rising rents make it harder for people to save for a down payment, which is the biggest barrier to buying a home that aspiring home owners face.”

Top 10 Metros to Buy vs. Rent

1. Detroit

2. Oklahoma City, Okla.

3. Dayton, Ohio

4. Warren-Troy-Farmington Hills, Mich.

5. Toledo, Ohio

6. Grand Rapids, Mich.

7. Cleveland, Ohio

8. Atlanta

9. Gary, Ind.

10. Memphis, Tenn.

By Melissa Dittmann Tracey, REALTOR® Magazine Daily News

Supreme Court Sides with Property Owners in EPA Appeals Case

The U.S. Supreme Court handed private property owners a victory yesterday with a decision allowing a couple to appeal an EPA ruling that their property contains a wetlands.
The court's decision is supported by the National Association of REALTORS®, which along with other organizations submitted a friend-of-the-court brief in the case.
The ruling is on a narrow procedural issue: whether the owners have the right to appeal the EPA's wetlands determination or wait until they first restore the property to its original state and then institute expensive and time-consuming monitoring activities, as EPA directed them to. Noncompliance with the directive can subject violators to fines of up to $75,000 a day.
Lower courts have sided with the EPA, saying the agency's compliance orders aren't subject to judicial review. Only when the agency goes before a judge to assess a fine for noncompliance is the order reviewable by a court. But the Supreme Court in its unanimous decision said it's appropriate to allow parties to contest agency decisions before having to first comply with the order.
NAR argued in its brief that the property owners in this case were being denied due process because the compliance procedures take years to work through and the costs are significant — all before the main question of whether the property contains a wetlands is even considered.
In this case, Mike and Chantell Sackett bought a piece of property in an already developed subdivision near Priest Lake in Idaho with sewer infrastructure already in place. After they started to prepare the property for construction of their house, they were directed by the EPA to stop and mitigate the changes they had made to the land out of a concern that the property contained a wetland — even though the property was adjacent to other developed properties and there was no water on the site at the time.
The Sacketts sought a hearing for their case to determine whether the property contained a wetlands, but EPA said that question couldn't be decided until after they undertook the restoration and monitoring activities, or refused to do that and were levied a fine.
With the Supreme Court decision, the Sacketts can now get their day in court.
By Robert Freedman, REALTOR® Magazine