FHA Loans Set Record

The Federal Housing Administration guaranteed 186,000 mortgages in June, a record number in its 75-year history.

FHA loans are popular because they are one of the few sources of low downpayment mortgages. In the last year, they have accounted for about 46 percent of all mortgage applications.

Along with increasing numbers of FHA activity comes a rising number of delinquent loans, with the level of FHA mortgages in some stage of foreclosure reaching 7.4 percent in May.

Source: The Wall Street Journal, Nick Timiraos (07/20/2009)

Home Lending Rates Falling Again

Rates on 30-year fixed mortgages fell to 5.14 percent for the week ended July 16, down from 5.20 percent a week before and 6.26 percent a year earlier, Freddie Mac reports.

Interest on fixed home loans has fallen in four of the past five weeks, and Freddie Mac economist Frank Nothaft says rate activity during that time has lowered the monthly payment on a $200,000 loan by $56.

Here’s a look at how other mortgage rates performed this week:

• 15-year fixed loans fell to 4.63 percent from 4.69 percent.
• One-year adjustable-rate mortgages fell to 4.76 percent from 4.82 percent.
• Five-year hybrid ARMs bumped up a notch to 4.83 percent from 4.82 percent.

Report: New-Home Construction Increasing

Despite high unemployment and general concerns of too much existing inventory, new-home construction appears to be rising.

According to Friday’s report from the U.S. Commerce Department, construction of new homes rose 3.6 percent in June compared to May. Building permits climbed 8.7 percent, and single-family home starts jumped 14.4 percent to 470,000, after rising 5.9 percent in May.

In real numbers, ground was broken for an estimated 58,300 houses nationwide in June, and an estimated 58,400 building permits were issued.

Here’s a look at housing starts in different U.S. regions:

• Midwest: up 33.3 percent
• Northeast: up 28.6 percent
• South: down 1.4 percent
• West: down 14.8 percent

Source: The Wall Street Journal, Jeff Bater (06/17/2009)

First-Time Buyers: Hurry for $8,000 Tax Credit

It’s time to remind first-time home buyers that in order to qualify for the government’s $8,000 gift in the form of a tax credit, the deal must close by Dec. 1.

Buyers should have a purchase contract signed by early October, so they have 45 to 60 days to arrange financing and safely close the deal.

Source: Chicago Tribune, Mary Ellen Podmolik (07/11/2009)

Clarification on Carbon Monoxide Detectors

Downpayment, Closing Costs Biggest Obstacles

Most Americans still consider having enough money for downpayment and closing costs to be the biggest obstacles to buying a home, according to the 2009 National Housing Pulse Survey, an annual survey released Thursday by the NATIONAL ASSOCIATION OF REALTORS®.

The survey, which measures how affordable housing issues affect consumers, also found job security concerns to be the highest in seven years of sampling. Two-thirds of Americans think job layoffs and unemployment are a big problem; eight in 10 cite these issues as a barrier to homeownership.

“Homeownership is an investment in your future; however, saving for a downpayment and closing costs is still too great of an obstacle for 82 percent of house hunters looking to take advantage of the current market,” says NAR President Charles McMillan. “Monetizing the $8,000 first-time buyer tax credit for downpayment or closing costs on FHA-insured mortgages is a positive first step. Our hope is that the tax credit will be extended and expanded to all home buyers and will help bring stability to the housing market and enable more Americans to achieve the dream of homeownership."

Survey: Consumers Still Believe in Homeownership

Despite the challenges with the economy and housing market, 83 percent of Americans still believe buying a home is a good financial decision.

Three-fourths of those surveyed also believe now is a good time to buy a home, a number that has increased steadily the past two years. In fact, one-third of renters are thinking more about buying home than they were a year ago.

While Americans are seeing more stability in the real estate market, uncertainty persists. The number of those who feel buying and selling activity has stabilized or stayed nearly the same has grown significantly, from 18 percent last year to 26 percent this year. However the majority (58 percent) report that activity in their market has slowed.

Regarding home sales, nearly eight in 10 say it’s harder to sell a home in their area today than it was a year ago, despite the fact that nearly three-fourths of respondents say home prices are less expensive. Large home inventories could be to blame; 44 percent cite concerns about the high number of homes and condos for sale in their area.

While nearly three-fourths of Americans are concerned about the local drop in home values, respondents expect to see more stability in the near future. Nearly seven in 10 expect local home prices to remain about the same in the next three months; only 18 percent expect prices to further decrease. The drop in prices has improved affordability, and consequently, concerns about the lack of affordable housing are the lowest they’ve been in seven years of polling – 34 percent say it’s one of their biggest worries, down from 41 percent two years ago.

Foreclosures Among Top Concerns

Foreclosures remain a real concern among survey respondents. Slightly more than half (51 percent) say foreclosures are a big to moderate problem in their area. However, the rate of foreclosures is generally seen as stabilizing; 41 percent say the rate of foreclosures in their area is about the same as last year.

Ninety-two percent of respondents said neither they nor members of their immediate family have experienced a foreclosure in the past year, yet it is still a personal concern for many. One in five respondents said they are very or fairly worried that they will have difficulty making their mortgage payments over the next year. Thirty-two percent say it’s a big or moderate worry that they, or a member of their family, may have their home repossessed or foreclosed because they are unable to pay rising monthly mortgage payments.

In 2008, more than half of respondents (54 percent) were open to the federal government taking a more active role in overseeing mortgage and lending practices – the number dropped this year to 47 percent. This could be because 42 percent of Americans believe the country is back on the right track, more than double the number last year (16 percent).

Obtaining Financing Another Obstacle

Regarding financing, seven in 10 Americans cite a lack of confidence in their ability to be approved for a home loan as an obstacle to homeownership. The same number also say that banks are making it too hard to qualify for a loan (71 percent) and that fewer mortgage options offered by banks have made it harder for them to buy a home (71 percent). The perception of qualifying for a loan as a huge obstacle is especially high among minorities.

“Home buyers need protection from risky lending products but also need access to mortgages at a reasonable cost. While there has been some easing of credit in the mortgage market, the availability of credit continues to be an issue for many qualified home buyers,” says McMillan.

The 2009 National Housing Pulse Survey is conducted by American Strategies and Myers Research & Strategic Services for NAR’s Housing Opportunity Program. The telephone survey was among 1,250 adults living in the 25 most populous metropolitan statistical areas.

Source: NAR

Jumbos Getting Easier to Find, Negotiate

It’s still difficult for buyers to get jumbo mortgages, but it appears to be easier than it was six months ago.

Bank of America, Wells Fargo, and JPMorgan Chase & Co. are cutting rates somewhat, buying jumbo loans made by other lenders and purchasing them from brokers. One factor is that jumbo loans are not subject to new appraisal rules that are slowing much of the lending market.

"The whole jumbo market has improved in the last 90 days," says Terry Erwin, chief lending officer for KeyPoint Credit Union, a jumbo lender founded in 1979 to serve electronics industry workers in California's Silicon Valley.

Erwin says the most frequently selected loans at his company are 5/1 hybrid ARMs, which carry a fixed rate for five years before converting to a loan that adjusts annually.

Source: Inman News, Matt Carter (07/06/2009)

Is Mortgage Forgiveness the Answer?

Some housing experts say the next logical step for helping home owners with negative equity is loan forgiveness.

Home owners with no equity stake and no likelihood of having one anytime soon are increasingly likely to walk away. Some theorize that curbing that trend is the only thing that will stabilize the market.

The nonprofit Milken Institute has devised a plan that would use Fannie Mae to refinance underwater loans with government money. Under the plan, a private lender would provide the money for the value of the home and the U.S. Treasury would issue a second, interest-only loan for the portion of the current mortgage that is underwater. Every year the home owner keeps current with payments, the Treasury would forgive a portion of the loan.

The institute estimates that this would save 1.5 million homes from foreclosure or abandonment and cost taxpayers between $75 billion and $100 billion.

Ken Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at UC Berkeley, approves that plan, but urges returning some of the appreciation to the original lender as a reward for patience.

"The idea that these loans are worth face value is a fiction," says Richard Green, director of the USC Lusk Center for Real Estate. "If we don't deal with [reducing] the balances, we're not really dealing with the problem."

Source: Los Angeles Times, Tom Petruno (06/27/2009)

Pending Home Sales Rise Again

Pending home sales show a sustained uptrend, rising for four consecutive months with very favorable housing affordability and a first-time buyer tax credit boosting activity, according to the National Association of REALTORS®.

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in May, increased 0.1 percent to 90.7 from an upwardly revised reading of 90.6 in April, and is 6.7 percent higher than May 2008 when it was 85.0. The last time there were four consecutive monthly gains was in October 2004.

Lawrence Yun, NAR chief economist, cautions that there could be delays in the number of contracts that go to closing.

“Closed existing-home sales have improved but are coming in lower than expected because some contracts are delayed or falling through from the application of new appraisal rules for many transactions,” he says. “Rises in contract activity show buyers are becoming more active even as they face much more stringent loan underwriting standards. Speedy clarification of the appraisal rules could smooth a housing market recovery and support the overall economy.”

Region

• Northeast: The Pending Home Sales Index in the Northeast rose 3.1 percent to 80.9 in May and is 6.8 percent above a year ago.
• Midwest : In the Midwest, the index slipped 1.3 percent to 89.2 but is 11.4 percent above May 2008.
• South: The index in the South declined 1.7 percent to 92.6 in May but is 7.9 percent higher than a year ago.
• West: In the West, the index rose 2.2 percent to 96.9 and is 0.7 percent above May 2008.

The Effects of Appraisals

NAR President Charles McMillan says the appraisal issue is complicated. “We see that distressed homes often are selling for 20 percent less than normal homes in the same area, but some appraisals don’t distinguish between traditional homes and distressed property,” he says. “In many cases appraisers from outside the area are being used, but as everyone knows real estate is local and appraisals should be done by an expert with local expertise.”

McMillan says sellers shouldn’t hesitate to speak with an appraiser about their home. “Sellers should feel free to tell an appraiser about improvements and renovations to their home, and how it compares with other homes in the neighborhood,” he adds.

“Also, if recent sales in the neighborhood were discounted, but not similar to your home in terms of quality or condition, that should be pointed out. It wouldn’t hurt to put all this in writing, especially if an appraiser is not familiar with your area. "

Affordability at a high

NAR’s Housing Affordability Index remains at historic highs. The affordability index fell to 171.6 in May from an upwardly revised 178.8 in April, which was the highest on record dating back to 1970. “Under these conditions the typical family would devote only 14.6 percent of gross income to mortgage principal and interest, which is one of the lowest percentages on record,” Yun says.

The HAI is a broad measure of housing affordability using consistent values and assumptions over time, which examines the relationship between home prices, mortgage interest rates, and family income.

A median-income family, earning $60,800, could afford a home costing $296,700 in May with a 20 percent down payment, assuming 25 percent of gross income is devoted to mortgage principal and interest. Affordability conditions for first-time buyers with the same income and small down payments are roughly 80 percent of what a median-income family can afford. The affordable price was significantly higher than the median existing single-family home price in May, which was $172,900.

First-time buyer tax credits offers a boost
The first-time buyer tax credit also is benefiting the market. “Strong activity by entry-level buyers is helping to absorb inventory and allow some existing owners to make a trade,” Yun says

Existing-home sales should trend up through the end of the year, with normal local market differences. “The big question is how much the appraisal issue will impact the ability of contracts to go to closing,” Yun says. “We are currently conducting a study to assess the degree to which new appraisal rules are impacting home sales.”

— NAR

5 Ways to Expedite a Sale

Selling a home quickly remains a challenge in many markets across the country. Heidi Cole, an associate with the Corcoran Group in Palm Beach, Fla., offers this advice for anyone who wants to expedite a sale:

1. Cut the asking price to 10 percent to 15 percent below what comparable properties in the neighborhood are selling for.
2. Spruce up the outside. Update the landscaping. Power-wash the exterior and paint the door.
3. Appeal to first-time buyers. Advertise on younger consumers' favorite Web sites, such as Facebook and Twitter. Hire a photographer to shoot the house with a wide-angle lens so the rooms look bigger in online photos.
4. Price the house in the lower end of the range. A $299,000 house is in the high end of the $250,000 to $300,000 range but a $301,000 home is in the low-end of the $300,000 to $400,000 range.
5. Do what you can to make the deal close quickly. Be ready to move, offer to pay part of the closing costs, and/or throw in a year’s worth of association fees.