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)

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: Move.com, 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 Bankrate.com, 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)