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NAR STATISTICS DO NOT IDENTIFY THE REAL CAUSE OF INCREASED PENDING SALES.

* * * * WARNING, HARD CORE REAL ESTATE TALK * * * *

PENDING HOME SALES UP STRONGLY says NAR

NAR Chief Economist Lawrence Yun says that home buyers are responding to more affordability.

NONSENSE!

I disagree with Mr. Yun. I believe that the 8.8 percent rise in pending home sales for August simply reflects the rush of home buyers, agents and lenders to beat the clock ticking down on the Charitable Gift Programs which provided down payment assistance to home buyers.

NUMBERS DON'T LIE. Many builders attributed up to 25% of their home sales to the down payment assistance programs, Nehemiah and Ameridream. The deadline was September 30, 2008. None of the efforts to persuade Congress and HUD to keep their hands off the programs were successful.

LOAN OFFICERS KNOW. ActiveRain member Jeff Belonger put his money and time where his mouth is and traveled to Washington DC to petition Congress to preserve these valuable programs. Jeff was relentless in educating ActiveRain members about the pending demise of these valuable programs. However, the Down Payment Assistance programs are gone, at least those the relied on a contribution from the seller, and that, in my opinion is the cause of the uptick in pending home sales for August.

OUR MARKET IS PRIMARILY FIRST TIME HOME BUYERS. Far too of what in past years would have been "move up buyers" are not in the market because they can't sell their existing home. So, the First Time Home Buyers has become more important to the market. I spend a lot of time looking for help for First Time Home Buyers.

Prices are down in my area, one of the markets identified by Mr. Yun, but speaking from experience, of the many prospective home buyers with whom I speak daily, the loss of the Down Payment Assistance programs ending September 30, 2008 is the cause of the rise in pending home sales in August 2008. I would estimate that 90% of the contacts I receive from prospective home buyers in moderate price ranges, under $350,000, their #1 need is down payment. This is the biggest barrier to home ownership in my market. The VA borrower has an advantage over FHA or Conventional home buyers these days. The VA buyer can still buy with no down payment. However, FHA and conventional borrowers have to meet some cash minimum to buy. I have identified one program in Maryland that requires $1,000 of the purchase price from the buyer. If the meet income and credit score requirements, we can help. In VA, there is a program that limits the buyer's cash needs to about 15 of the purchase price.

We'll see. Prices are still down so we should see another rise for September, which I'm sure we will. After all, the Down Payment Assistance programs didn't die until September 30, 2008. Let's see how October, November turns out.

With mortgage loans harder and harder to qualify for by moderate income families, the new FHA minimum down payment of 3.5% simply added another burden to an already stretched family budget. Higher credit scores and higher down payments needed?? How can that help??

Of course, I hope Mr. Yun is right.

Courtesy, Lenn Harley, Broker, Homefinders.com. 800-711-7988, E-Mail Homefinders. Real Estate Talk

Visit our Martin County Florida Home Site

Posted by Lenn Harley, Real Estate Broker, Maryland & Virginia on 10/14/2008 03:54 PM

Comments (72)

Down Payment Assistance in the Mortgage / Finance Channel

home buying

Post is included in group: Realtors®
Post is included in group: The Ninety-ninth Percentile

72 Comments on NAR STATISTICS DO NOT IDENTIFY THE REAL CAUSE OF INCREASED PENDING SALES.

OCT

2008

Lenn,

You've hit the nail on the head. NAR's Yun is dead wrong on this.

Mike in Tucson

Agreed Lenn, We had 2 sales close this Summer using buyers assistance. In one instance the appraisal came in $3000 light and the builder adjusted the price. Frankly, I was surprised the appraisals covered all the closing costs plus the 3% and assistance fee...

Lenn--Mr Yun will be speaking at our association forum next week. I will be interested to hear his take on the market. I had attributed much of the rush of sales to the fact that prices have finally become affordable but your reasoning makes much more sense as I know buying activity dropped substantially when those programs expired. If we don't have any first time buyers, we are going to sell less of the bigger homes. Nothing is making that first domino fall right now.

Lenn, I also operate somewhat in your market area and I agree. I'm constantly amazed at the number of buyers, especially first time home buyers, who make excellent wages, have good credit scores...and no money in the bank. Without a grant or a gift they won't be buying a home any time soon. I hope Mr. Yun is right too, but sometimes you have to step away from the spreadsheets and get down and dirty.

Lenn, excellent analysis! We had such a small percentage here in Northwest DC of buyers using the assistance programs - usually recent college and law school graduates in their first jobs buying condos. In most cases, homes that qualified on price did not qualify on condition.

I thought pendings here were leveling in mid July, put my opinion on the line. Then the banned the DPA end of July, I retracted that statement and said September may be one of our area's best months.

I was close. It was one of our best months in over 3 1/2 years (not bad AT ALL.) NOW pendings are having a hard time rebounding post end of month (Sept 2008) closes.

I am not an economist nor a brain surgeon, but I do buy more stock in what Lenn Harley has to say about this situation!

Mike. We'll see. I hope I remember to track this.

Frank and Jodi. Good you had two close. I hate to see buyers and agents lose this opportunity.

Teri. Larger home buyers are having a hard enough time selling. Many are perfectly willing to contribute 3% to the down payment.

Richard. Mr. Yun doesn't speak with real live home buyers. He doels with numbers, trends and statistics. I deal with live folks.

Patricia. The DPA programs often helped young families with children. It's difficult for them to save cash for down payments.

Renee. Thanks. That's funny. Peaks in performance is a number to Mr. Yun. We on the ground can usually figure out the reason behind the trends.

Lenn - good point. I've seen the numbers, but wasn't clear on the reason - this unfortunately makes a lot of sense.

Penny. It makes sense to me. We'll see.

Lenn.... excellent point, in which case, this has been flagged... we need more of these posts written and be sent to the congress people and to the media. The 3 important things that need to be sent to congress, to the media, and to the average consumer.

There is still money to lend. Stop listening to the media.
We need the seller funded downpayment assistance programs back... Lenn, you make some excellent points.
Lastly, we need education on how to shop for a mortgage. Knowing how to read a good faith estimate and what to look for, not the bottom line. But first, your lender should give you one.

Overall, I hate inflated figures and states, just because of a certain program or other issues.. We will see a big decrease nationally in the next 1 1/2 months. I have already spoken to many realtors and loan officers... they are slow now. And it's not just because of the DPA's, but because of the crapy media.... there is mortgage money to be lent people...

On another note, thanks for the polite mention and kind words. Keep fighting the fight..

jeff belonger

Lenn, great point. Glad that Jeff flagged this for a feature. Maybe Mr. Yun should ride along with an agent for a week and then with a mortgage broker then he may be singing a different tune.

I will second Patty's statement and like to add that maybe the new administration (whomever that may be) should consider having their housing and economics department work with some area market leaders to help keep this ship from sinking.

HI LENN!!

I love HARD CORE REAL ESTATE talk!! Nobody does it like you though!!

Lenn, my local market would support your opinions. Our pending sales are down but we truly don't have much of a first-time buyer niche since our lake property starts a bit higher in price. These are important points...I hope NAR and the powers that be listen!

Lenn -

We won't know if it's a trend unless it continues in subsequent months.

Based on everything else we have heard and seen the last few weeks - I would think not!

But let's see!

DEAN & DEAN'S TEAM CHICAGO

Hi Lenn. Does anyone believe anything Lawrence Yun says?

Just curious.

Ken

One wonders where on earth he gets his data! I believe he had the decimal point in the wrong place.

As always Lenn, nothing but straight talk from you and I love it. Thanks for telling it like it is.

Thanks for the insight . It is always a good thing to see something through others eyes. I tried to help support the programs for DPA. I actually got in to a debate with Lem Marshall with VAR. He was pretty compelling with the stats of buyers who are foreclosing from these programs I understand but I still think if they change the regulations they would still be able to get buyers in to homes that can afford them based on good credit and payments they can afford

I just thought these pending were all the dang short-sales that they bank wont approve for close !!!!!

Alison Creamer

RE/MAX Allegiance

www.bzibee.com

Marlene. The way it is??? At least it's the way I see it. Since Mr. Yun was silent on the Charitible Gift programs, perhaps he is unaware of that piece of the puzzle.

Corinne. I'll have to check that. Wouldn't that be a kick?

Ken. I haven't for a long time. I have wondered if he's on Thorazine.

Dean. We'll see. We'll see.

Diane. HA! I suspect that they listen to each other.

Yvette. Thanks. It's fun.

Renee. Wouldn't that be unique? Listening to folks on the front lines rather than their cronies??

Patty. I agree. Mr. Yun looks at stats from MLSs and HUD. I doubt if he understands matters that are not a part of the statistical models written long ago.

The reason I suspect that he may not be aware of the impact of the end of the Charitible Gift programs is because his piece was silent on them. Sometime what isn't said speaks volumes.

Thanks Jeff. Hey, a Gold Star. You know I love Gold Stars.

Lenn, nothing like a ticking clock. I too had loans that had to close by the deadline. I am still missing the program. Hopefully, someone will see the value and bring it back.

Lenn,

You are so right. Last month in Orlando, I saw a 22% increase in closed sales for September compared to August and a whopping 39% increase compared to a year ago.

As of today, the 30-days-back total for closed sales is down 9%.

Judy

I think sometimes we are so desperate to put a good spin on the real estate stats we lose some credibility with the public!

Lenn,

I think you are speaking wisdom. Mr Yun must know that too, but NAR always wants to paint a happy face on everything, making them look foolish at times.

Fran. Isn't that the truth. The NAR logo should be changed to a happy face.

Jean. I agree completely. What the NAR tries to do is always push home prices up and up and up, like that was always a good thing.

Where were they in 2005 when the consumer put their foot down and said. NO!

Judy. There you go.

Fred. I haven't figured out why HUD was so against it in the first place. I know what they said, higher defaults, but that's what MIP is for.

Lenn, Not only are you right about the last minute race to get SADPA but the figure Yun is stating is for PENDING transactions not closed. If what happened in my market is any indicator a HUGE chunk of these pendings will not make it to closing.

Now I have seen sales increase the last 2 months. Mostly due to the large amount of REOs that have hit themarket at incredible prices. Invetsors are buying multiple properties.

I think we need to see several months of increased sales activity AND declining inventory before I start to get excited.

Lenn, in this area the majority of buyers aren't first time- too price prohibitive, in addition to catering to a vacation crowd. Where my daughter lives, however, a program eliminated that creates a buyer for HER home has plugged up the market there. Without the HUGE swings that NY enjoyed, the Colorado losses are still calculable when the all-important minnow isn't jumping into pond- the kids are ready to move, but there's no one for their $194k home. No one gets fed without the minnow. Eliminating this contribution to home sales by eliminating programs to provide buyers with great credit/jobs/ratios but NO DOWN PAYMENT is insanity.

Think you are right -- the down payment assistance programs made a difference.

Bryant. I had the same thought about PENDING sales. There will be some fall out. Most will be new homes and they are not all in the MLS, but we will have fall outs.

Laurie. Ah! The dominoes. Mr. Yun doesn't know about them.

Bob & Carolin. I believe so too.

Lenn, I have surely come to value your opinions much more than those of NAR

We talked about the rise in the pending sales in August. Interesting that he didn't touch on the end of the DPA. I am going to have to get on to him tomorrow. His take on the slow down of sales for September was all of the bad financial news.

The NAR report states that the index is up 8.8%, not the number of pending home sales. Those are two completely different statistics. On a regional basis, the West is up 37.8% over last year, while the Northeast is up only 2%. There's a lot more involved in these numbers besides the end of down payment assistance.

They are SO wrong and you are SO right. I wish it wasn't so -

We have seen an increase in cash buyers. This tells me the investors are out there. We are also lucky to have CHFA a money lending authority to assist buyers in obtaining a home. They have generous guidlines but still the buyer must come up with at least $1000 of their own money AND attend a class BEFORE signing a contract. We are seeing many first time home buyers in the market. Hopefully that trend will continue and filter up to the higher end of the market.

The financial institutions need to get liquid and make good loans to people who know what the heck they are doing. Don't get me started now....

Lenn, I admire you for speaking the truth.

Lenn, once again, you wrote it...I was thinking it. I was just talking about this to another colleague a couple of days ago.

Please send some of that buyers rush to Atlanta. No increase here.

Lenn, Unfortunately, Mr. Yun, hasn't been right about too many things since he's been so busy espousing NAR's stance. While I do agree that some of the increase can be attributed to the affordability index being better, I think as you that the majority can be attributed to closing before the end of Sept so that they can utilize the down-payment assistance programs.

Not only are pending sales down but showings have slowed to a crawl also. With an announcement of another GM plant closing in the area we are ready for some good news.

Lenn know what you mean we had an awesome 3rd quarter thanks to the gifted programs and 1st time buyers. Our deal drawer has only a few left to close. So we have moved onto VA loans and we're hoping with FHA moving to 3/5% we can snag a few more before the snow flies.

Lenn, you could be right. Typically sales are down in October and November as compared to the previous months so it might be difficult to determine. But, I do think you are right.

and this is why showing have stopped dead in their tracks since the end of september. no first time buyer means no second time buyers means no third time buyers & so on & so on.

First times make up 48% of the market.

Yun has been our Baghdad Bob over the last few years. Frankly, I cringe when I see him quoted in the media.

I know that I rushed to get a couple buyers though before October 1st, and now I have one person to work with if she can borrow money from her mom for downpayment. Most of my buyershave always been first time home buyers with good jobs and good credit, they just couldn't save a lot of money because schools( baby sitters, student loans) and medical costs are so high. None of them have been foreclosed on!

You are right on. And also I am seeing homes sit pending for longer as the buyers have issues with closing the sale.

Numbers are what you want them to be. Who should know that better than Realtors. ome fudge their numbers so much they start to believe em themselves.

Cherimie,

I often comment "Great Post, Lenn," even when the author isn't Lenn Harley. Keeps people on their toes in the Rain.

Mike in Tucson

10/14/2008 09:45 PM

by Mike Jones (Tucson Mortgage Company, LLC)

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VERY good point -- I hate the the Nehemiah program is going away. That's how I was able to buy my first house years ago.

Lenn, again you are too much common sense for this soundbite spin-happy world!

Our office did $11,000,000 this Sept. vs. $7,000,000 Sept. 07. My buyers weren't ones who needed assistance, so guess I lost sight of the hoards scrambling toward the Sept. 30 date. So the government can bail out irresponsible institutions but they can't see the logic in helping qualified buyers who may be a little cash strapped?

Nehemiah and Ameridream programs were not the norm here in South Central Missouri. We cater to the military buyer and to the retiree.

The trend we are seeing is similar to Lane and Bryant - longer times to close, if the deals close at all, and investors beginning to buy what few foreclosures we have. Even a VA loan is becoming much more difficult to obtain.

I had a closing shortly into October, and the title company was stressed and snappy. I'm friends with their scheduler who said that they were absolutely inundated with closings that absolutely had to occur before October 1st.

I too believe that a rush on DPA was a big factor in the Sept increase. I had a couple of clients who HAD to buy before that happened too. It'll be interesting to see how pending sales are now after the DPA death.

Like Lane, we're having many delays in closings, extensions have become the norm. But about 40% are falling through entirely.

Lenn - Your timing in writing this post today speaks volumes to those who are absolutely clueless and out of touch with the realities of what is really taking place in our own indvidual markets today. It just so happens that I sent an email to Senator Chris Dodd a while back expressing my concern about the need to continue the DPA programs and just received his reply today extolling their so called reasons and statistics for not extending this benefits.

You said:

I'd like to refer you to this post which makes a compelling argument that the right to homeownership and buying into the American Dream has become so pervasive in all of us due to the government mandated policies of lowering barriers to homeownership. These barriers such as eliminating downpayments and credit requirements and this belief that everyone should own a home, even if they couldn't afford it, is what led to the crisis we are in now. The lending standards and qualifications are tightening in attempt to reverse this, which probably means fewer home sales.

http://activerain.com/blogsview/729270/LENN-HAD-AN-EPIPHANY-THIS-MORNING-MY-APOLOGIES-TO-ALL-LOAN-OFFICERS

Michelle

Lenn,

Your take on the marke is right on, I have been saying this to many people for the last 2 months. I currently work with banks selling their properties and it was crazy in August and September, my phone did not stop ringing and it seemed everyone wantd to get their assisted deals done. - That being said it has been very quite the last 3 weeks, I knew this was going to happen but hoped otherwise.

I believe that we are going to see a very slow (bad) 4th quarter for real estate, this is usually the slowest time of the year anyway and with the down paymnt assistance programs gone I think that the #'s are going to fall dramatically. - I wish it were not so, but I believe that after this happens Washington will hopefully see the need to reinstate these programs, for with foreclosures mounting we need to absorb the suply of homes to be able to stabalize the market.

Again great artcle.

David Blank

www.nationalrealtybrokers.com

Hi Lenn, I would say you know your market better than our national association and the data that they collect. They do quick speak and can not account for all the variations of the local markets. It is the 30 second sound bite , meant to be a positive as in "Act as if ". Basic principle of newbie real estate. The problem is when you aren't a newbie and have the data and the history and the particular nuances of the communities, the basic principal stuff is totally useless. All real estate is 'local' and in all actuality should not conform to the generalizations often spoken by economists. Great Post Lenn and right on the money!

OCT

2008

Lenn,

Just a reminder--don't forget to track this! Reminders go a long way toward achieving goals at my age. LOL

Mike in Tucson

Mike. I'm game. Just remember to remind me.

William. I do not believe that the NAR should be perpetuating myths on the membership or the public. When the NAR speaks, the national press listens. People, particularly NAR members, make inferences and the inference from this statement is the the real estate market is rebounding and it's time to buy a home, all based on August stats. I discounted August stats because I believe that they are not representative of a trend.

David B. I polled 11 loan officers whom I've known for years and they were one voice on the impact of the loss of the DPA. I'm afraid that Mr. Yun is overexposed to national statistics and not in tune with the real world of moderate income home buyers.

Michelle. The home owner who choses to donate 3% of the value of their property to a home buyer can hardly be compared to the Wall Street crowd that pocketed gross profits for phony securities and the perfidy of the management of Fannie and Freddie who presented fraudulent financials to fatten their own bank accounts.

The fact that HUD and Congress would impete a property owner's use of his own money is an outrage.

Donna. Thanks very much. A letter to Senator Dodd??? Good try. Unless it came with a few $$$$$ in campaign contributions, it's a wonder his staff even read it.

Sheree. That 40% fall out should be reduced with the $250,000,000,000 pumped in the big banks to loosen credit. OR NOT!!!!

Debbie. We're seeing an uptick of VA buyers too. We are a BRAC destination. We're making sure that we're only working with LAPP lenders for our VA buyers.

Sharon. We'll see what happens for the Oct. stats. If the NAR is right, October should be a blow-out.

Actually, my support for the DPA is because I believe that the seller/owner/equity owner/property owner should have the right to contribute his money where he wishes. If he choses to gift a home buyer that should be none of the government's business.

Kerry. Interesting. According to the Congress and HUD, you should have defaulted by now. Geez. Those guys don't know what time it is.

Mike. I'm fine with short comments. I just love comments. I remember the names too.

Charles. Indeed. I remember about this time last year when the NAR was touting real estate as a good investment. Goodness, I cringed at that one. Folks have lost about 10-20% on that "investment" since then.

Lane. It appears that the loss of the DPA just could not have come at a worse time. I believe that Congress and HUD live in a cave.

Jennie. Borrow money from MOM??? Wash your mouth out with soap. Folks can't "borrow". They must be "gifted" from family members. However, the Congress and HUD says that buyers can't be "gifted" by sellers.

Makes no sense.

Pete. Pete. Pete. Bagdad Bob. I remember him well. That is so funny!!!!

Michael. You understand something that Congress and HUD do not. When you put barriers in the way of first time buyers, you reduce the buying pool for move up buyers. I know many new home builders that would gladly contribute the down payment for good buyers. If they could. The government says that they can't.

Gena. We'll know by the percentage spread.

Ed and Cindy. I'm focusing on VA too. It's about the only 100% financing left. I have a few low down payment things up my sleve, but it's getting tougher.

Terry. I heard that news. They accelerated the closing by about a year. Not good news in an already depressed area.

Marc. Agreed. If the increase in sale for August had been a trend, it wouldn't have been so dramatic because prices didn't decrease 8.8% in a month. What happened was a "spike" and that had to be, I believe, attributed to an anomaly, the rush to close DPA sales.

Lenn, one more thing I've noticed in my area (along with the higher sales because of DPA buyers getting in before it runs out) is that the leases/rental homes going pending is added in to the sales.

Sold? No.

My 2 cents: They should be weeded out of the data.

Kris. Our MLS has separate categories for "Contract" which would be "Pending" in other areas and "Rented".

I don't believe that they are mixed here.

Len, I think they will bring back those programs some time in the future. They will be packed differently but basically the same product.

OCT

2008

I'm sorry to say, I find NAR wrong on a lot of things, and sometimes completely useless. I wonder if they've outgrown their use.

Lenn what was the reason for getting rid of these programs?

OCT

2008

Lenn,

Why do these figures keep clouding the real deal to consumers. Would it hurt consumers to know the real deal AND how to join the movement to bring downpayment assistance back and what programs are still out there on a local level?

Haven't we learned it's not a good message to falsely empower the consumer?

Sorry....not meaning to go on a tangent. And really I should be directing these questions at NAR and the local REALTOR board associations.

Liked the frank hard core talk, thanks.

Scott. I don't know. Until we find out why the program was really pulled, we can't really predict the future.

Bill. The stated reasons were:

1. The defaults on the DPA loans had a higher default rate.

Since the FHA loans are insured and MIP is, even with recent increase in premiums, the premiums are still lower than in the early 1980s. I recalle when they MIP was 2.25%, which is lower than today.

2. The appraisals were artificially inflated to cover the DPA, added to the price.

Seems to me that punishing the home buyers for inflated appraisals is not a fair penalty. If appraisals were inflated, they should enforce the FHA appraisals guidelines.

Everytime I wrote a contract with DPA, the seller always countered to raise the price to cover the gift. We simply countered back to list. We either got the house or we did not. Just because a seller/listing agent wants to add the 3.4% to the price, doesn't mean that the buyer has to agree. Nor does it mean that the appraiser has to play. Appraisals should be based on market, not list plus whatever.

Fact is, they had no reason, IMO, to end the program.

Lisa. I believe we need a national organization. They just need to stop the propaganda.

OCT

2008

Lenn, I am with you, I surely hope he is right too!

OCT

2008

Lenn

We all know Mr. Yun is the eternal optimist. He may be right, but the response time may take longer. At least mortgages are still being written, and certainly homes sales are n the rise. Itis hard to fathom a first time homebuyer in a high end market but in the Northeast the pay is better than compared to Florida for example. Here too, however first time homebuyers are making a move into affordable housing. Along with working women. Overall sales are up over the three previous years and I hope they continue despite the changes in down payment assistance and increase in FHA requirements. Let's keep our fingers crossed!

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