Your Property Path

NAR Reports on Pending Sales

Howard Bell (www.yourpropertypath.com) — Wed, 02 Dec 2009 20:55:41 -0600

NAR Report is Mixed

NAR reported Tuesday that its index measure of pending sales of resale homes gained for the ninth month in a row in October with a 31.8% gain over the same month last year.

NAR expects 5.15 million sales of resale homes this year, compared with 4.91 million in 2008 and 5.65 million in 2007.

New single-family home sales will drop an estimated 18.7 percent this year following a 37.5 percent decline in 2008 and a 26.3 percent decline in 2007. according to the NAR forecast.

Distressed sales and foreclosures accounted for 40 to 45 % of the sales. That coupled with the national median price down 15.5% from last year and its clear that its not strong out there. The market is selling excess inventory, now at 10 months rather than the healthier 6 month forward supply NAR defines as a good market. Yet we are moving towards inventory reduction and price stabilization. I guess we will have to be satisfied with slow and steady and hope that 2010 is the rebound year.

2010 Is The Year
Lawrence Yun, Chief Economist at NAR indicates, that as inventories continue to decline and balance is gradually restored between buyers and sellers, we should reach self-sustaining housing conditions and firming home prices in most areas around the middle of 2010. That would mean broad wealth stabilization for the vast number of middle-class families. (Via realtor.org).
Chart Source: The Commerce Dept.

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Fannie Launches the First look Program

Howard Bell (www.yourpropertypath.com) — Sun, 29 Nov 2009 17:18:09 -0600

Fannies supply of foreclosed homes keeps growing. The First Look program is designed to help owner occupants buy homes. Its a new program aimed at toward stabilizing neighborhoods and building stronger communities in tough times.

The idea is to give the owner occupant an advantage over the investor. generally, investors are professionals and cash heavy. They get to the property first and can buy in full. Fannie and Freddie have launched initiatives that give an edge to the owner who will occupy the home, thereby helping to preserve the neighborhood.

With First Look, only offers from owner occupants and buyers using public funds are considered during the first 15 days a property is on the market. Offers from investors will be considered only after the first 15 days have passed.

Direct from the Fannie Mae web site:

1. A First Look at properties for buyers using public funds
2. A reserved contract period that gives buyers a chance to renegotiate after obtaining an appraisal
3. An initiative designed to work with HUDs Neighborhood Stabilization Program (NSP)
4. An earnest money waiver for public entities and a discount for individuals (can be as little as $500 for an individual using NSP funds)
5. Extra time for due diligence and closing
6. Freddie Mac has a similar pilot program.

For more information about Fannie Maes First Look initiative contact publicentity_reosales@fanniemae.com or go to the Fannie press release

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Citigroup Suggests Mortgage Debt Forgiveness

Howard Bell (www.yourpropertypath.com) — Sat, 28 Nov 2009 22:28:05 -0600

Nearly one in four U.S. borrowers owe more on their mortgage than their home is worth, indicating that the housing recovery could see another wave of defaults. 23% of mortgage holders, were underwater in the third quarter, and 5.3 million have mortgages that are 20% higher than the value of their home since the recession began. Analysts expect prices to dip again this winter as foreclosures increase and economic growth remains modest. The Wall Street Journal reports.

Its not a new idea and many have always clamored for the banks to take some responsibility for loose lending practices that helped fuel the boom. But now it seems that a major institution is on board and will spearhead a push for mortgage debt forgiveness.

Citigroups quarterly reports on mortgage borrowers

As unemployment rises, more borrowers need principal forgiveness on their mortgages, not just restructured loans, Citigroup Inc.'s mortgage chief said. To date, Citigroup helped 130,000 homeowners with $20 billion in mortgages outstanding avoid potential foreclosure last quarter. But that number increased 20% from the second quarter. The sub prime debacle is behind us, the culprit now is unemployment.

Unemployment
The Main Cause of Delinquencies

The main problem of the mortgage industry changes from house-price depreciation to unemployment, the mortgage market needs more programs where there is principal reduction for borrowers with negative equity in their home, as opposed to just a loan restructure, Mr. Das said. (Via Wall street Journal).

Loan mods alone are not enough to avoid another tsunami of foreclosures. The housing recovery's momentum has slowed, and it seems likely that house prices will now resume their fall. Re-default rates on loans that had already been modified in the quarter were nearly 39 percent, up 10 percent from the second quarter. High unemployment coupled with a loss of home equity are too big a burden for many home owners and the temptation to walk away, may begin to look like good business sense.

Foreclosures initiated in the third quarter rose about 10% from the second quarter but fell about 11% from a year earlier. Completed foreclosures fell less than 1% from the second quarter and about 48% from a year earlier. Things appear to be moderating, although I dont think Citigroup is addressing the Alt A recasts, which are expected to add to the problem, in a big way, beginning this year and into 2012.

Citigroup Speaks Out

Citi proposes new programs to forestall impending foreclosures. Recognizing that existing programs are not enough, the bank wants to reduce the principal owed and to bring this down to a number homeowners could cover. In return for forgiveness of some debt, Citi wants to share any potential upside. Banks step up and take a hit along with the home owner, home owner gets to stay in the house, Home stays off the market helping home prices stabilize and bank gets equity share for the effort. Having the lenders in an equity share position with home owners is a solid idea.

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Foreign Real Estate Investors Return To The Market

Howard Bell (www.yourpropertypath.com) — Sat, 28 Nov 2009 22:22:43 -0600

The 17th annual survey shows strong Interest In US Real Estate.

1. Foreign real estate lenders say they plan to increase lending by 58% in the U.S. in 2009.
2. Equity investors plan to increase investment activity by 40 percent globally and by 73% in the U.S. according to the results of the 17th annual survey

Preferences

D.C. trumps New York as the top global city for foreign investment. London and New York were second and third position for foreign investment interest. Five of the top ten cities were American and the U.S. was ranked as the country with the most opportunity for capital appreciation.

US Real Estate Trends

Our system certainly can surprise, but politically, we are very stable. There is a great deal of faith in our ability to adjust and change. AFIRE members surveyed find the U.S. continues to provide both the most stable and secure real estate investment environment and the best opportunity for capital appreciation.

This year, foreign investors are eying the multi family sector, followed by offices, industrial, retail, and hotel properties. US property is showing signs of an approaching price equilibrium and the dollars decline has made real estate even cheaper for foreign investors. Fed assurances that interest rates will remain low until a full blown recovery virtually assures an inexpensive dollar and once in a generation opportunity for foreign investment.

NAR reports International investors bought 154,000 homes and condos in the 12-month period ending in May, down nearly 10% from 170,000 for the same period a year earlier.But Since June, the dollar has tumbled by 9 to 11% against currencies like the Japanese yen, the Euro and the Canadian dollar. Florida leads the country accounting for 25% of foreign purchases, followed by California, Texas, and Arizona.(via AFIRE)

Green Matters

When asked to what extent a buildings green attributes influenced their decision to purchase a property, 11 percent said significantly so, and 60 percent said somewhat so. In almost the exact same percentages, investors said that green attributes were worth a greater rental premium. This was the first survey in which these two questions were asked. (Via AFIRE)

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Mortgage Bankers Weekly Survey

Howard Bell (www.yourpropertypath.com) — Fri, 27 Nov 2009 12:11:10 -0600

Mortgage Bankers Association for the week of 11/25/2009

Market Composite Index: (loan application volume) decreased 4.5 percent on a seasonally adjusted basis from one week earlier.

Refinance Index: decreased 9.5 percent from the previous week

Purchase Index: increased 9.6 percent from one week earlier.

Refinance Share of Mortgage Activity: decreased to 71.7 percent of total applications from 74.6 percent the previous week.
increased to 5.3 percent from 5.1 percent of total applications from the previous week.
ARM Refinance Activity: decreased to 5.4 percent from 5.5 percent of total applications from the previous week.

MBA outlook: (Excerpted from mbaa.org)

In summary the MBAA sees another year of high employment, rising home sales and prices beginning to stabilize. But continued weakness in the job market and excess supply and shadow inventory will slow any recovery in the housing market.

The Federal Reserve will extend their agency MBS purchase program through the end of the first quarter of 2010. However, Fed and Treasury purchases have accounted for the vast majority of all new issuance in this sector in recent months, and rates will increase when the Fed steps out of the market completely.

Freddie Mac Weekly Update

Howard Bell (www.yourpropertypath.com) — Fri, 27 Nov 2009 12:08:22 -0600

30-year fixed-rate mortgage: Averaged 4.78 percent with an average 0.7 point for the week ending November 25, 2009, down from last week when it averaged 4.83 percent. Last year at this time, the 30-year FRM averaged 5.97 percent. The 30-year has not been this low since the week ending April 30, 2009, when it averaged 4.78 percent.

The 15-year fixed-rate mortgage: Averaged 4.29 percent with an average 0.6 point, down from last week when it averaged 4.32 percent. A year ago at this time, the 15-year FRM averaged 5.74 percent. The 15-year FRM has never been this low since Freddie Mac started tracking it in 1991.

Five-year indexed hybrid adjustable-rate mortgages ARMs: Averaged 4.18 percent this week, with an average 0.6 point, down from last week when it averaged 4.25 percent . A year ago, the 5-year ARM averaged 5.86 percent. The 5-year ARM has never been this low since Freddie Mac started tracking it in 2005.

One-year Treasury-indexed ARMs: Average 0.7 point, unchanged from last week when it averaged 4.35 percent. At this time last year, the 1-year ARM averaged 5.18 percent . The 1-year ARM has not been this low since the week ending July 7, 2005, when it averaged 4.33 percent

Freddie Sayz

Long term mortgage rates eased for the fourth consecutive week to record levels, said Frank Nothaft, Freddie Mac vice president and chief economist. Interest rates for 30 year fixed mortgage loans tied an all-time record low while both 15-year fixed mortgages and 5-year ARMs broke their corresponding records. Interest rates for 30-year fixed-rate loans are currently 0.8 percentage points below this years peak set in mid June, which shaves roughly $100 off the monthly payments on a $200,000 mortgage. House prices are slowly beginning to firm now.

For instance, annual house price declines slowed for the sixth consecutive month in September, down only 3 percent, and represented the smallest decline since February 2008, according the Federal Housing Finance Agency's purchase-only house price index. [PDF] Moreover, 11 of the 20 major metropolitan areas experienced monthly house price increases between August and September, based on the S&P/Case-ShillerÂ® 20-city house price indexes

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Mortgage Bankers weekly Update

Howard Bell (www.yourpropertypath.com) — Sat, 21 Nov 2009 17:58:53 -0600

Mortgage Bankers Association for the week of November 18, 2009

Market Composite Index: (loan application volume) decreased 2.5 percent on a seasonally adjusted basis from one week earlier. . Refinance Index: decreased 1.4 percent from the previous week

Purchase Index: decreased 7.9 percent compared with the previous week and was 14.7 percent lower than the same week one year ago.

Refinance Share of Mortgage Activity: increased to 72.9 percent of total applications from 71.5 percent the previous week. This refinance share is the highest share since the week ending May 15, 2009

ARM Refinance Activity: decreased to 5.4 percent from 5.5 percent of total applications from the previous week.

MBA outlook: (Excerpted from mbaa.org) The delinquency rate for mortgage loans on one-to-four-unit residential properties rose to a seasonally adjusted rate of 9.64 percent of all loans outstanding as of the end of the third quarter of 2009. Its job loss that is now hurting people. Job losses continue to increase and drive up delinquencies and foreclosures because mortgages are paid with paychecks, not percentage point increases in GDP. A perfect observation by Jay Brinkmann, MBAs Chief Economist.

According to the MBAA.org site: T he outlook is that delinquency rates and foreclosure rates will continue to worsen before they improve. First, it is unlikely the employment picture will get better until sometime next year and even then jobs will increase at a very slow pace. Perhaps more importantly, there is no reason to expect that when the economy begins to add more jobs, those jobs will be in areas with the biggest excess housing inventory and the highest delinquency rates.

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Freddie Mac weekly Update

Howard Bell (www.yourpropertypath.com) — Sat, 21 Nov 2009 17:55:11 -0600

30 Year Fixed Rate Falls Below 5 Percent

30-year fixed-rate mortgage: Averaged 4.83 percent with an average 0.7 point for the week ending November 19, 2009, down from last week when it averaged 4.91 percent. Last year at this time, the 30-year FRM averaged 6.04 percent.

The 15-year fixed-rate mortgage: Averaged 4.32 percent with an average 0.6 point, down from last week when it averaged 4.36 percent. A year ago at this time, the 15-year FRM averaged 5.73 percent.

Five-year indexed hybrid adjustable-rate mortgages ARMs: Averaged 4.25 percent this week, with an average 0.6 point, down from last week when it averaged 4.29 percent. A year ago, the 5-year ARM averaged 5.87 percent.

One-year Treasury-indexed ARMs: Averaged 4.35 percent this week with an average 0.6 point, down from last week when it averaged 4.46 percent. At this time last year, the 1-year ARM averaged 5.29 percent.

Freddie Sayz

Interest rate on 30 year fixed-rate mortgage loans fell for the third consecutive week to the lowest since the week ending May 21st, while 15 year fixed rates were the lowest since our records began in 1991, said Frank Nothaft, Freddie Mac vice president and chief economist. Low fixed rates throughout the third quarter prompted an estimated $1.1 trillion in refinancing activity, saving homeowners about $10 billion in aggregate monthly payments over the first 12 months of their new loan.

Moreover, for the fourth consecutive quarter, more than 95 percent of prime borrowers who originally had an ARM selected a conventional fixed rate mortgage in the third quarter of this year. Meanwhile, new home building showed some weakness in recent months. Residential construction eased 10.6 percent (annualized) between September and October, largely driven by a 33.3 percent decline in new condominium and apartment buildings and represented the slowest pace since records began in 1959. And homebuilder confidence in November remained a relatively low level, according to the National Association of Home Builders

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Fannie Mae Allows renters to Stay in Foreclosed Homes

Howard Bell (www.yourpropertypath.com) — Thu, 19 Nov 2009 18:06:30 -0600

A National Crises

There was so much interest in this new Fannie program that I dug a little deeper and wanted to share some of this. The problem is that many renters who pay rent on time are finding themselves under eviction, because their landlord has lost his property. Its made victims of well intentioned people who played by the rules. The magnitude of the problem is really quite sad.

More than 20% of the properties facing foreclosure nationwide are rentals. The Mortgage Bankers Association thinks as many as 20% of all foreclosed homes are not owner occupied. Many speculators did not have the deep pockets and couldnt hang on. The result is really a national tragedy.

Fannie Maes National REO Rental Policy

Now a National Landlord

Here are some of the highlights

1. The new policy applies only to renters occupying the home at the time of foreclosure or deed in lieu of foreclosure

2. You are the property's primary occupant, and it isnt an investment property.

3. You can't be in bankruptcy.

4. The rent cannot exceed 31% of your monthly gross income.

5. Family detached homes, and manufactured housing, where the homeowners associations (HOAs) do not prohibit rentals. The policy applies to all renter-occupied single-family Fannie Mae REO

6. Renters will be charged market rate rent under the new lease

7. No security deposit will be required

8. The occupant agrees to be responsible for regular maintenance, to keep the property in good condition, and to permit marketing of the property for sale.

9. Fannie Mae reserves the right to market the property while a tenant is occupying the property. The property may be sold to an investor subject to the lease.

So, Fannie Mae will allow renters to stay for one year with the possibility of month to month extensions. Fannie gets some needed rental income, the real estate community hopes to see some price stabilization in the market place. Fannie clearly hopes that one year down the banks and housing markets will be viable and prices higher. This is a good program, it will be interesting to see whether the private markets will institute similar programs and begin to tighten the supply flow and help homes recover.

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FHA Losses: What it Means

Howard Bell (www.yourpropertypath.com) — Thu, 19 Nov 2009 17:54:17 -0600

What Do They Do
FHA loan options make it easier to qualify for a home mortgage. Your loan is guaranteed by the government, making your application more attractive to lenders.

The FHA mortgage requires a low 3.5% down payment, and that money can come from a variety of sources including HUD down payment assistance grants. Typical closing costs for FHA home loans are around 2% or 3% of the total mortgage.

Loan Loss is Below Govt Mandate
Its capital reserves have fallen below the threshold mandated by Congress. The FHA has no recourse but to find ways to reduce their portfolio risk. Generally, when an investment portfolio needs to lower its risk profile, it means that requirements will tighten and costs will rise until the risk profile is better balanced.

What it Means To You
Harder to Qualify

The FHA is considering a variety of changes like requiring larger down payments for FHA insured mortgages, demanding higher credit scores and raising mortgage premiums. The FHA has taken on an enormous role in the marketplace. It dominates the new mortgage business. The FHA is one of the tools the Obama administration is using to take up the vacuum left by the banks. Generally, they are not lenders of such magnitude. In the second quarter, nearly 50% of all first-time buyers in the market used a loan insured by the FHA (via cbsmarketwatch.com).

Normally, a low risk lender because FHA home loans have income requirements, maximum loan amounts and most loans are 30 year fully amortizing fixed-rate mortgages. But the FHA has had its neck out since the housing crises began. They like many other Govt institutions are filling the gap left by private lenders. And will continue to do so until the market normalizes, but it clearly is taking a toll.

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NAR Report Third Quarter

Howard Bell (www.yourpropertypath.com) — Sat, 14 Nov 2009 14:55:05 -0600

Sales Up Prices Down

This same story has been playing our for quite a while now. The trend towards lower prices will probably continue even as the recession winds down. Continuing job loss, a weak recovery and real problems in all real estate sectors, now focused on commercial property and Alt A high end homes, should keep a lid on prices. That said people are beginning to feel good again, or at least less wary. They are stepping out and buying homes and that is a good good sign.

Existing-Home Sales Surge While Price Moderate

Most states saw rising existing-home sales in the third quarter, with price declines in many metro areas, according to the latest survey by the National Association of Realtors. NAR reports that total state existing-home sales of single-family and condos, increased 11.4 percent and are now 5.9 percent higher than the third quarter of 2008. Sales increased in 45 states and 28 states saw double-digit gains. Year over year sales were higher in 32 states and D.C. Buyers are coming back and in some parts of California we are seeing multiple bids and homes selling for more than list.

During the third quarter, 123 out of 153 metropolitan statistical areas, 2 reported lower median existing single-family home prices while 30 areas had price gains NAR chief economist,Lawrence Yun spoke of the the tax credit. The NAR cheif economist goes on to say: We cant underestimate just how powerful a catalyst the first-time home buyer tax credit has been for the housing sector. Its given buyers the confidence they needed to get off the fence and take advantage of extremely affordable housing conditions. The buying conditions this year are the most favorable on record dating back to 1970, but the tax credit is allowing buyers to set aside any reservations about waiting for a better deal. (via cbsmarketwatch.com)

The decline in the national median price has moderated recently, and a shrinking supply of unsold inventory suggests we are getting closer to price stabilization in many areas, but we need a steady stream of financially qualified buyers to further reduce inventory and get us to a self-sustaining market, Yun said. (via cbsmarketwatch.com)

Soaking up supply Foreclosures will continue to come on the market, but rising sales from the expanded tax credit should stabilize home prices by next spring and help to stem future foreclosures. To be sure the numbers are mixed and some areas are experiencing reversals, but over all we are beginning to pull ourselves up out of this slump. As long as we continue to see a Fed willing to support the markets until they are strong enough to stand on their own, we should be able top avoid a double dip. Encouraging was to hear the G20 come out with a continuation of supports. This recovery is still in the hands of policy makers.

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Obama Extends the Home Buyers Tax Credit

Howard Bell (www.yourpropertypath.com) — Sat, 14 Nov 2009 14:47:56 -0600

Obama Extends the Home Buyers Tax Credit The home buyers' tax credit has been extended to April 30, 2010. Obama approved the extension as part of a $24 billion economic stimulus bill.

The housing tax credit
Qualifiers

The measure limits the purchase price of the home to $800,000.
It also imposes income caps so that people who make more than $125,000 annually and couples who make more than $225,000 would not be eligible for a refund.
Anyone who collects the tax credit but sells their home within three years of buying it must return the refund.
Current homeowners who are buying a new primary residence would be eligible for a $6,500 tax credit starting Dec. 1 if they owned their home for five consecutive years in the previous eight.
Military families who have been deployed overseas for 90 days or more in 2008 or 2009, would have until April 30, 2011 to sign a contract.
The program is estimated at $11 billion

Double Bubble Trouble

Dr Shiller, co-developer of the Case Shiller home price index and Yale economist points out that the price recovery of the last few months is the sharpest snap back he has ever seen. he is concerned that that in supporting a real estate recovery we may again be fueling a bubble.

NAR reports that total state existing-home sales of single-family and condos, increased 11.4 percent and are now 5.9 percent higher than the third quarter of 2008. Sales increased in 45 states and 28 states saw double-digit gains. Year over year sales were higher in 32 states and D.C. Buyers are coming back and in some parts of California we are seeing multiple bids and homes selling for more than list.

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Howard Bell (www.yourpropertypath.com) — Sat, 14 Nov 2009 14:41:14 -0600

Good News for foreclosure victims

Some homeowners will get an option to rent the home that they just lost. Its possible to stay in your home as a renter. Fannie Mae will give borrowers facing foreclosure an option to rent their homes for a year. Foreclosed home owners will be able to sign a one year lease, with possible month to month extensions with Fannie Mae. Good for everybody.

Homeowners get a little relief and are able to remain in their homes for a year or more. This will buy them the time they need to regroup. It will also help keep neighborhoods from going missing. Rather than rows of abandoned homes with all the crime and destruction that vandals create.. Neighbors that have not lost their homes will not see more equity loss as squatters and criminals move into vacant homes. The banks are reluctant landlords and they are allowing property to decline.

It will keep supply off the market for at least another year and that is good for all the handlers, Fanne Mae because it can put off the expense of a foreclosure, the banks because less supply will protect equity in homes they are off loading and everyone one because it will help stabilize home prices. I dont think we can have a strong recovery without real estate.

To qualify, homeowners have to live in the home as the primary residence and prove that they can afford the market rent, which will be established by the management company running the program. In many cases, rents will be less than the mortgage because properties that are now worth far less than they originally paid.

The downside is seems to be that homes that might normally have been foreclosed and sold will now remain owned by taxpayers. Homes, according to Dr Shiller have risen faster in the last few months than he has ever seen. Perhaps Fannie will profit a little while doing a good thing for families that must be a little traumatized by it all. And even if prices don't rebound quickly. Fannie Mae gets rental income, avoids foreclosure expenses gets to helps people.

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Green Homes and Sales Trends

Howard Bell (www.yourpropertypath.com) — Sat, 07 Nov 2009 17:28:03 -0600

Green is the New Black

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

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Freddie Mac Weekly Update

Howard Bell (www.yourpropertypath.com) — Sat, 07 Nov 2009 17:18:09 -0600

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

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Renters who lose their homes to foreclosures

Howard Bell (www.yourpropertypath.com) — Thu, 05 Nov 2009 21:10:25 -0600

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.

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The official figures indicate the Recession has ended

Howard Bell (www.yourpropertypath.com) — Sat, 31 Oct 2009 15:43:18 -0500

From the Commerce Department

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.

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Tracking The Bond Markets for Direction

Howard Bell (www.yourpropertypath.com) — Thu, 29 Oct 2009 19:31:11 -0500

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.

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Freddie Mac Weekly Mortgage Rate Commentary

Howard Bell (www.yourpropertypath.com) — Thu, 29 Oct 2009 19:20:56 -0500

Mortgage Rates Low, Increasing Affordability

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 RealtorsÂ®. 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

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Howard Bell (www.yourpropertypath.com) — Thu, 29 Oct 2009 19:11:40 -0500

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

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Are the Stock Markets Tekling Us Something

Howard Bell (www.yourpropertypath.com) — Wed, 21 Oct 2009 12:35:30 -0500

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.

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Howard Bell (www.yourpropertypath.com) — Tue, 20 Oct 2009 17:22:23 -0500

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.

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Weekly Mortgage Market Update; Mortgage Bankers Association for the week of October 7, 2009

Howard Bell (www.yourpropertypath.com) — Thu, 08 Oct 2009 13:21:53 -0500

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.

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Howard Bell (www.yourpropertypath.com) — Thu, 01 Oct 2009 16:07:05 -0500

Mortgage Bankers Association for the week of September 23, 2009

Market Composite Index: (loan application volume) decreased 2.8 percent on a seasonally adjusted basis from one week earlier.

Refinance Index: decreased 0.8 percent from the previous week

Conventional Purchase Index: decreased 6.9 percent compared with the previous week and was 10.6 percent lower than the same period one year ago.

Refinance Share of Mortgage Activity: increased to 65.3 percent of total applications from 63.8 percent the previous week. decreased to 6.2 percent from 6.7 percent of total applications from the previous week.

ARM Refinance Activity: increased to 6.7 percent from 6.0 percent of total applications from the previous week.

MBA outlook: Payroll losses trimmed to 216,000 jobs lost. Thats the smallest drop since August of 2008. Unfortunately the unemployment rate has increased from 9.4 to 9.7%, the highest level of unemployment since 1983, according to the MBA press release. It has just about doubled since the beginning of the recession in 2007.

The MBA outlook indicates the economy will likely shed jobs for the coming months even as real gross domestic product (GDP) may have started growing in the third quarter, implying another surge in productivity growth during the quarter. The unemployment rate is not expected to peak until next year.

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Howard Bell (www.yourpropertypath.com) — Thu, 01 Oct 2009 16:00:35 -0500

30-year fixed-rate mortgage: Aaveraged 4.94 percent with an average 0.7 point for the week ending October 1, 2009, down from last week when it averaged 5.04 percent. Last year at this time, the 30-year FRM averaged 6.10 percent. The last time the 30-year FRM was below 5 percent was the week ending May 28, 2009, when it averaged 4.91 percent.

The 15-year fixed-rate mortgage: Averaged 4.36 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 5.78 percent. This is the lowest the 15-year FRM has been since Freddie Mac started tracking it in 1991.

Five-year indexed hybrid adjustable-rate mortgages ARMs: Averaged 4.42 percent this week, with an average 0.6 point, down from last week when it averaged 4.51 percent. A year ago, the 5-year ARM averaged 6.00 percent.

One-year Treasury-indexed ARMs: Averaged 4.49 percent this week with an average 0.5 point, down from last week when it averaged 4.52 percent. At this time last year, the 1-year ARM averaged 5.12 percent.

Freddie Sayz

Low mortgage rates are helping to stabilize home sales, said Frank Nothaft, Freddie Mac vice president and chief economist. New home sales in August rose to the highest annualized pace since September 2008 and the inventory of unsold houses fell to the lowest level since February 1983. Although existing home sales fell somewhat in August, it was still the second strongest showing in 23 months.

Furthermore, house prices increased for the second month in a row in July, after adjusting for seasonality, based on the 20-city composite S&P/Case-Shiller Home Price indexÂ®. Moreover, the increases were more broad-based in July with house prices rising in 17 of these metropolitan areas, compared to 16 in June

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