The housing industry hasnt developed a reliable way of breaking down green versus conventional homes sales figures. But its clearly a hot button issue and will even become more important, perhaps mandatory, as we begin to seriously deal with global warming.
What Others are Saying....
Developers Those builders are seeing that they'll get more buyers coming to their developments when they have solar. They sell like hot cakes, Bernadette del Chiaro, an energy specialist at the advocacy group Environment California, told the Los Angeles Times. The Times also quoted Julie Blumden, a vice president at San Jose-based solar tile maker SunPower Corp., as pointing out that the increase in sales velocity is actually paying for the solar systems. (LA Times via the Daily Gre
NAR
According to a recent NAR survey, 90 percent of recent home buyers thought energy efficiency was a very important consideration when searching for a home, and the demand for green buildings and environmentally sensitive home features is growing.
Ris Media
Way back in 2007, Ris Media reported that the market for true green homes is expected to rise from $2 billion to up to $20 billion over the next five years. Green homeowners are happy with their homes because they are concerned about the health of their families, as well as energy savings and operating costs. Homeowners are buying green homes
National Association of Home Builders.
According to the National Association of Home Builders, the green homes market is expected to increase to 10 percent by 2010. The NAHB hits a new milestone this month, it just green certified its 500th home builder project.
Green Tools You Can Use
Appraisal
Congress may require all appraisers to consider energy efficient improvements in appraisals. Appraisal standards would be uniformly revised to include all energy efficient improvements, typically including double paned windows, extra insulation and solar hot water heaters.
EEM Mortgages
Buy more house. Fannie Mae, Freddie Mac, FHA, and VA all permit borrowers to qualify for larger mortgages using projected energy savings. Every home with retrofitted energy-efficient (EPA approved energy star rated) features is eligible.Green mortgage products may also include low down payments effectively increasing buying power. Generally lenders require a professional auditor to certify the energy efficient improvements before you can qualify for mortgage breaks.
Get Audited
A seller with a good energy audit is a plus. Sellers can call their local utility company for an energy audit. The audit includes the furnace, the water heater, and major appliances, windows, insulation and the heat seal in general. There is a small cost of about $100, but good results are a good marketing tool. A poor audit can be also be a good support tool for the selling agent. An independent third party recommendation to upgrade can be a powerful argument towards convincing sellers to invest in sale process. More on cost savings of green homes and how they boost equity
30-year fixed-rate mortgage: Averaged 4.98 percent with an average 0.7 point for the week ending November 5, 2009, down from last week when it averaged 5.03 percent. Last year at this time, the 30-year FRM averaged 6.20 percent
The 15-year fixed-rate mortgage: Averaged 4.40 percent with an average 0.6 point, down from last week when it averaged 4.46 percent. A year ago at this time, the 15-year FRM averaged 5.88 percent.
Five-year indexed hybrid adjustable-rate mortgages ARMs: Averaged 4.35 percent this week, with an average 0.6 point, down from last week when it averaged 4.42 percent. A year ago, the 5-year ARM averaged 6.19 percent.
One-year Treasury-indexed ARMs: Averaged 4.47 percent this week with an average 0.5 point, down from last week when it averaged 4.57 percent. At this time last year, the 1-year ARM averaged 5.25 percent.
Freddie Sayz
Mortgage rates fell back this week pulling interest rates on 30-year fixed mortgages under 5 percent, said Frank Nothaft, Freddie Mac vice president and chief economist. Lower mortgage rates should help homeowners lower their monthly payments and feed the ongoing recovery in the housing market. For instance, the Federal Housing Finance Agency reported that Freddie Mac and Fannie Mae have financed more than 3.5 million refinance loans during the first nine months of 2009.
Freddie Mac estimates that borrowers who refinanced their conventional loan during the third quarter reduced their interest rate by a median of 1.1 percentage points, which will save these borrowers an aggregate of $3 billion in mortgage payments over the next 12 months. Further, pending sales for existing homes rose for the eighth straight month in September to the strongest pace since December 2006, while spending on private residential construction jumped 3.9 percent and represented the largest gain since July 2003. In the third quarter of this year, residential fixed investment added almost a full percentage point to economic growth
Most of the occupants are homeowners, who must scramble to find housing with little notice. They're being joined by scores of renters who discover, often with no warning, that their rented house or apartment is now owned by a bank, which wants them out.
Federal legislation signed in May 2009 gives important rights to tenants whose landlords have lost their properties through foreclosure Owners Typically, foreclosed home were owner-occupied, but often it's owned by investors and speculators who were hoping to profit from the rents and rising equity. They got caught between falling housing values and rising mortgage interest rates. Many speculators were not cash heavy and couldnt sell or cover their monthly costs. In short, they lost their investments
The Bank as Property Manager
If the bank becomes the owner, it may pay a property management company to handle the property. But don't expect service. These properties are an albatross and wont get much attention. Many tenants have no idea that their building has been taken at foreclosure. They continue to pay rent to the former owner, who often pockets the money but isnt inclined to maintain the building they no longer own. Because the banks are stuck with so many foreclosed properties that they can't sell, they were not committed to maintaining the property making life impossible for their tenants until those tenants are evicted.
How it Was
Before May 20, 2009, most renters lost their leases upon foreclosure. The rule in most states was that if the mortgage was recorded before the lease was signed, a foreclosure wiped out the lease (this rule is known as "first in time, first in right
May 20 2009
The rules changed dramatically on May 20, 2009, when President Obama signed the Protecting Tenants at Foreclosure Act of 2009. This legislation allowed the lease to survive a foreclosure. That means the tenant could stay at least until the end of the lease, and that month-to-month tenants would be entitled to 90 days' notice before having to move out Not perfect, but at least we are beginning to pay attention to the hidden victims in this mess, the tenants that pay rent on time and do no wrong.
The US economy grew at an annual pace of 3.5% between July and September,its first expansion in more than a year, helped by a substantial government spending. Durable manufactured products soared at an annualized rate of 22.3%, led primarily by the cash for clunkers scheme lifting car sales.
The housing market also improved, with spending on housing products up 23.4%, its largest quarterly jump in 23 years. Thanks to the home buyers tax credit.The trickle down effect of a new home often means new appliances, lumber and roofing as new owners upgrade. Work. The whole downstream home industry was given a boost.
Your Economy On Steroids
The big picture is great, but is it sustainable.
The massive stimulus of the past year was enough to lift the US economy up and into the sunlight.The Obama Administration is pulling back from the enormous stimulus of the past year. This recovery has been propped and it was a job well done.... now the economy has to find its own footing.
1. Credit Markets: The mortgage purchase program is almost over and the Fed is phasing out its purchase plan. To what extent the banks and other lenders are willing and able to buy and sell credit remains to be seen. see chart here
2. Commercial Property: Banks are still facing increasing residential foreclosures and now commercial property failures. Office buildings as well as shopping malls and many apartment buildings that were bought in the last five years, will be looking to refinance. High vacancy rates, renegotiated rents and evaporated equity make these prospects look bleak as they step up to lenders, hat in hand. Many properties are now underwater and the banks are not likely to want more bad paper.
3. Manufacturing: The big car firms have already reported a sharp fall in September sales following the conclusion of the popular $3bn cash for clunkers scheme at the end of August and helped by a cheap dollar.
4. Home Buyers Tax Credit: Congress is considering extending the program due to expire Nov 1. Without it, I think we will see more price drops and fewer sales. Happily, the Mortgage Bankers Association feels sure it will be extended and perhaps increased to $15,000.
The conclusion is that we still have strong headwinds and that any recovery will be a feeble at first. The case for another leg down, or a W recession, looks weaker now. The challenge looking foreward is to get organic growth. If we dont pull back to too fast and the Govt remains vigilant and ready to re-stimulate if necessary, we will emerge lean and ready to forever forgo that bloated debt driven demand that got us here in the first place.
Bill Gross, who runs the Pimco Bond Fund is considered one of the gurus of the bond markets. Investors know this and so the Pimco Bond Fund is huge. If Pimco buys or sells bonds or mortgage backed securities, it can move the market. Recently, Gross sold off 30 billion dollars of mortgage backed securities. He notes that mortgage backed securities have been increasing in value (good to hear) and he thinks that now is the time to take profit.
Chart: The Fed has now purchased about $945 billion in agency-backed MBS through the week ended October 14.
Federal Reserve's Mortgage Purchase Program
The secondary mortgage markets have been frozen and thats a big reason why there has been little money available for home loans. To keep the markets moving the Obama Administration has been buying up mortgages to keep the markets liquid. The Fed started buying agency-backed mortgages in January in to bring down mortgage rates. Since then, it has bought the majority of agency MBS on the market. Recently the Fed has decided to wind down the mortgage purchase programs.Once the Fed stops buying mortgages, the fall in demand will lead to a drop in MBS prices.
Why Do We Care
Expect interest and mortgage rates to rise. Too much supply and not enough demand means prices go down, and yields had to go up to attract investors. Basically, this is a test to see if the banks and the marketplace have reached a point where they can begin to function without Govt stimulus. Lets hope the Fed stays close to the exits. The Home Buyers tax credit is due to expire. Congress is considering extending and possibly expanding this program. Its been a help by soaking up supply. Home resales in September showed the largest monthly increase in 26 years as buyers bought before the tax credit for first-time owners expires. Sales jumped 9.4%, according to NAR. The FHAA index measures repeat sales on homes financed through Fannie Mae or Freddie Mac. Although Prices were down 3.6% in the past year, and were down 10.7% from the peak, they rose in four of nine regions, fell in four and were flat in the other
Momentum
If we can offset the higher rates which are likely to tamp down sales with a $15,000 home buyers tax credit, we may be able to keep homes moving. At 20% of the economy, its crucial that the real estate markets remain on a positive track.
30-year fixed-rate mortgage: Averaged 5.03 percent with an average 0.7 point for the week ending October 29, 2009, up from last week when it averaged 5.00 percent. Last year at this time, the 30-year FRM averaged 6.46 percent.
The 15-year fixed-rate mortgage: Averaged 4.46 percent with an average 0.6 point , up from last week when it averaged 4.43 percent. A year ago at this time, the 15-year FRM averaged 6.19 percent.
Five-year indexed hybrid adjustable-rate mortgages ARMs: Averaged 4.42 percent this week, with an average 0.6 point, up from last week when it averaged 4.40 percent. A year ago, the 5-year ARM averaged 6.36 percent.
One-year Treasury-indexed ARMs: Averaged 4.57 percent this week with an average 0.6 point, up from last week when it averaged 4.54 percent. At this time last year, the 1-year ARM averaged 5.38 percent.
Freddie Sayz
Interest rates for 30-year fixed mortgages have averaged just below 5 percent this year, which is the lowest 10-month average since the survey began in 1971, said Frank Nothaft, Freddie Mac vice president and chief economist. As a result, refinance activity has accounted for almost seven out of 10 mortgage applications on average this year, according to Freddie Mac's survey.
Economic data releases this week offered mixed signals as to the current state of the housing market. For example, total existing home sales jumped 9.4 percent to an annualized rate of 5.57 million homes in September, the strongest pace since July 2007, according to the National Association of Realtors®. However, new home sales unexpectedly fell 3.6 percent to 402,000 houses, the weakest since June of this year, based on figures from the Department of Commerce. Nonetheless, stronger housing demand has lowered the inventory of unsold existing homes in September to the lowest since January of this year and for new homes the lowest since November 1982, which should help stabilize falling house price
Mortgage Bankers Association for the week of October 28, 2009
Market Composite Index: (loan application volume) decreased 12.3 percent on a seasonally adjusted basis from one week earlier see chart here
Refinance Index: decreased 16.2 percent from the previous week
Purchase Index: decreased 5.2 percent from one week earlier.
Refinance Share of Mortgage Activity: decreased to 62.3 percent of total applications from 65.0 percent the previous week.
ARM Refinance Activity: increased to 6.9 percent from 6.4 percent of total applications from the previous week.
MBA outlook: (Excerpted from mbaa.org)
New home sales increased in August, for the fifth consecutive monthly increase. The first-time homebuyer tax credit likely helped boost sales since a larger share of home sales tended to be concentrated in lower-priced homes. New home sales have been up about 30 percent since reaching a record low in January. Total existing home sales fell slightly for August but were still about 13 percent higher than their record low in January despite the decrease.
For existing homes, the number of homes available for sale has declined about 16 percent from a year ago. The months’ supply decreased to 8.5 in August from 9.4 months in July, which makes this the lowest level since April 2007 and a significant decrease from the 11.3 months observed in April 2008. However, rising foreclosures continue to add to inventories, and many owners and investors who, after holding these properties off the market for the past year, may start listing their properties if the market begins to recover
The report, released last week is another green shoot pushing upwards. Home prices in the U.S., as measured by the S&P Case-Shiller home price indexes, rose in July over the previous month, as 18 of the 20 metropolitan areas comprising the benchmark saw saw a boost to real estate values. see chart here For the 16th consecutive month, every region saw year-over-year declines, but the pace of those declines continues to decelerate, according to the Wall Street Journal.
The ten-city index is down 33.5% from its mid-2006 high, while the 20-city index has declined 32.6%. UMM and DMM Confirming the stats market shares built to be reflective of moves in home prices acted as they should. These market tools are investments in their own right, but they are also trend confirming tools. Two new investments based on the Case Shiller indexes allow pwople to invest in the direction of home prices.MacroShares Major Metro Housing Up Trust (UMM) and Major Metro Housing Down Trust (DMM).
Last week, UMM had gained more than 3%, while DMM was down by about the same amount. Since their inception in June 2009, UMM has jumped by nearly 35%, while DMM is down nearly 25%. see chart here Reflecting investor expectations for the U.S. housing market( home prices will continue to rise over the next five years).
If you look at the price action of the UMM vs the DMM, you can see investors think that homes will continue to rise. Looking at the Dow REIT index, you see similar strong moves to the upside. Personally, I think the markets are ahead of themselves but they are a strong confirmation that people are beginning to look past the bust and are betting on the future.
Early?
Yes. We have the commercial recasts and the option ARMs to get through. The markets enthusiasm is emotional, we raised the flag because we avoided a great depression, but now there is more reality to face. The good news, The Economist made an observation I loved. American is brilliant at fixing itself.
The tax credit has been a significant boost to sales.
NAR reports that sales have jump to 5.1 million from about 4.5 million annualized home sold in the past few months prior to the stimulus. The tax credit has been a significant boost to sales. NAR reports that sales have jump to 5.1 million from about 4.5 million annualized home sold in the past few months prior to the stimulus. see chart New home sales are also up from mid 300,000 to 400,000. The median existing home price as of August was down 12.5% compared to nearly 20% fall early in the year. Unfortunately the housing stimulus package is set to expire.
*A settlement, and not the contract signing to buy, must occur by the end of November. Consider that it was Bernanke that said one of the causes of the great depression was stimulus and Government supports being pulled too soon. We still have too big problems first bginning to show.
First the Option ARMs. These are mortgages taken during boom times and designed to allow people to pay interest only or principal only monthly payments. These mortgages will reset to market rates between now and 2012. They can double the monthly payment and more foreclosures are expected to come from this area, expected to be at least as large as the sub prime market that imploded.
Second, many shopping centers and high rise office space is also being recast between now and 2012. Same problem, evaporated equity made worse by declining rental income. When we loss jobs companys either shrink expenses or simply go out of business.
Realtytrac reports that foreclosure filings totaled nearly 938,000 in the third quarter, up 23% from the year-earlier quarter and up 5% from the second quarter. 1 in every 136 U.S. housing units received a foreclosure filing during the quarter. California accounted for more than a quarter of the country's foreclosure filings in the quarter, up 19% from the year-earlier quarter. Some commercial indexes are off 50% and the banks are not really in a position to refinance these properties.
Extend the Home Buyers Tax Credit
It Worked NAR thinks the cost is about $10 billion if it was extended trough the middle of next year. This would coincide with the expected recovery of housing prices and help put a solid floor under that projection. see chart 10 Billion isnt much when you think about the amount of money thrown at the banks and insurance companies. NAR rightfully points out that this doesnt include the job growth or taxes collected from rising sales spurring more economic activity. NAR expects that the total picture is a revenue positive income source for the federal and local governments. I dont argue the need for the TARP to float the financial system, but I would like to see a little come our way too.
Market Composite Index: (loan application volume) i increased 16.4 percent on a seasonally adjusted basis from one week earlier.
Refinance Index: Increased 18.2 percent from the previous week, following the third consecutive week where the 30-year fixed mortgage rate was below 5 percent, and is at its highest level since mid-May.
Conventional Purchase Index: Increased 13.2 percent from one week earlier, which puts the index at its highest level since January
Refinance Share of Mortgage Activity: Increased to 66.3 percent of total applications from 65.3 percent the previous week. ARM Refinance Activity: Decreased to 6.1 percent from 6.2 percent of total applications from the previous week.
MBA outlook: (Excerpted from mbaa.org) Third quarter real gross domestic product (GDP) is now expected to increase to almost 3.0 percent annually, with inventory investment and residential construction playing critical roles. Together, these two sectors contributed -2.0 percentage points to the annual rate of change of real GDP in the second quarter. In the third quarter, their contribution will probably add about 1-1/2 percentage points, thus accounting for the bulk of the expected turnaround in economic growth from the second to the third quarters.
The MBA outlook indicates we will likely shed jobs even as real gross domestic product starts growing in the third quarter. In the 2001 recession, I believe it was 18 months after the teechnical end of the recession before we saw job growth. The near-term prospects for solid growth in consumer spending, therefore, are not bright, and that constitutes the major downside risk to this months forecast.Given that consumer spending is about 70% of the US economy, we will be looking at lowered expectations for a while longer.
Disclaimer: ActiveRain Corp. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house. ActiveRain Corp. takes no responsibility for the content in these profiles, that are written by the members of this community.
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