Source: Fannie Mae
Attitudes About Homeownership as an Investment, Financial Constraints, and Mortgage Accessibility May Stand in the Way of Americans' Purchase Decisions
WASHINGTON, DC – Fannie Mae's (FNMA/OTC) latest quarterly National Housing Survey focuses on the state of homeownership aspirations among Americans across all demographic groups. The survey finds that despite the recent housing crisis, most Americans continue to believe that owning their home is preferable to renting it. The data also indicate that while financial constraints and employment concerns may be keeping potential homebuyers on the sidelines in the near term, future improvements in employment and personal finances, a pickup in interest rates in response to stronger economic growth, and stabilizing home prices may move Americans to act on their aspirations in coming years.
•Across all education levels, Americans say owing makes more sense than renting. This belief is held consistently across all demographic groups.
•Nearly two-thirds of current renters say that they will buy a house at some point in the future.
•Non-financial factors such as safety and quality of local schools continue to be the top reasons for buying a home across all income groups.
•African-Americans and Hispanics are more likely to cite various benefits, such as buying a home as a way to build wealth, homeownership as a symbol of success, and civic benefits.
“In spite of the impact of the housing crisis on home values and homeownership rates across the country, Americans by and large still hope to become homeowners,” said Doug Duncan, vice president and chief economist of Fannie Mae. “Some may not be financially positioned to own a home in the near future, but Americans may begin to revisit that aspiration as employment and household balance sheets improve over the coming years.”
“A point of concern for the industry is that some consumers find the mortgage shopping process difficult to navigate,” Duncan continued. “If potential homeowners avoid the process because they believe it to be too complex, we will likely see a continued impact on homeownership rates.”
Overall, certain groups (renters, those with lower levels of education, people with lower incomes, African-Americans, and Hispanics) cite potential difficulties in getting a mortgage. Specifically, those renting today are most likely to cite poor credit, complexity of process, and bad economic times as major reasons not to buy a home.
•Renters are consistently more likely than mortgage borrowers to think it would be difficult for them to get a home.
•African-Americans and Hispanics are more likely to indicate that getting a mortgage is difficult, regardless of income level.
•Groups with lower levels of education are more likely to say it would be difficult for them to get a mortgage than groups with higher levels of education.
•Renters cite financial reasons as the major factors for not buying a home.
•Hispanic and African-American renters are most likely to cite bad economic times and overall complexity of process as major reasons not to buy a home.
•Lower income Americans also are consistently more likely to cite income and credit history as obstacles to getting a mortgage, and are less confident they are getting adequate home loan information.
•Hispanics are less confident than other groups about receiving information they need to choose the right mortgage.
Moreover, attitudes about homeownership as an investment, financial constraints, and mortgage accessibility may mean that more Americans choose not to act on their aspiration for homeownership, thus potentially leading to lower homeownership rates.
•The margin of Americans believing homeownership has the highest investment potential has declined over the past several years.
•At the same time, the perceived safety of owning a home as an investment has trended downward, reaching a low of 63 percent in the fourth quarter of 2011.
•In turn, groups with higher levels of education and higher incomes are more likely to think buying a home is a safe investment.
The fourth-quarter 2011 National Housing Survey focus on the state of homeownership aspiration is based on more than 3,000 interviews from October 3, 2011 to December 20, 2011 among homeowners and renters to assess their attitudes toward owning and renting a home, confidence in homeownership as an investment, the current state of their household finances, views on the U.S. housing finance system, and overall confidence in the economy. Data findings for this topic also are based on similar surveys conducted throughout 2011, 2010, and in December 2003. Interviews were conducted by Penn Schoen Berland, in coordination with Fannie Mae.
URL to original article: http://www.fanniemae.com/portal/about-us/media/corporate-news/2012/5683.html
For further information on Fresno Real Estate check: http://www.londonproperties.com
Friday, March 30, 2012
Investors, vacation home buyers stoke up the market
Source: CNN/Money
NEW YORK (CNNMoney) -- Sales of investment properties and vacation homes soared last year as investors snapped up homes that were selling at beaten down prices.
Homes purchased by investors skyrocketed 64.5% to 1.23 million in 2011, up from 749,000 the year before, according to the National Association of Realtors.
Vacation home buyers also came out in larger numbers, with sales climbing 7% year-over-year to 502,000. Meanwhile, sales to ordinary home buyers, who plan on living in the home full-time, fell 15.5% to 2.78 million, NAR said.
"Investors have been swooping into the market to take advantage of bargain home prices," said Lawrence Yun, NAR's chief economist. "Rising rental income easily beat cash sitting in banks."
Many investors were on a shopping spree, with 41% of buyers picking up more than one property during the year, compared with 34% in 2010, according to NAR. The median number of properties they bought rose to three from two during that time.
Buying much cheaper than renting
And almost half of all investors paid for the properties with cash. Even buyers who secured a mortgage to finance the purchase offered hefty down payments. The median down payment for both investment and vacation-home buyers was 27%.
"Clearly we're looking at investors with financial resources who see real estate as a good investment and who aren't hesitant to use cash," said Yun.
Foreclosures have helped fuel the second-home sales surge. Half of the investment purchases made last year were distressed sales, either foreclosures or short sales, as were 39% of vacation home purchases.
According to NAR, the median home price for investment properties was $100,000, a bargain compared to 2005 when the median investment property sold for $150,000. Meanwhile, the median vacation home sold for $121,300, down 19% from 2010 and a significant decline from the median price of $200,000 six years earlier.
Most investors said they intend to hang on to the properties instead of flipping them for a quick profit. The typical investor said they plan to hold the home for 5 years, with half of them reporting that they purchased the property mainly to generate rental income.
A tycoon in the making buying vacation homes
In nearly every market in the nation right now, buying is more affordable than renting. Continued tight mortgage financing, however, makes it difficult for some buyers with less than stellar credit history to buy homes.
For real estate investors, that means a steady supply of bargain properties -- and potential renters.
URL to original article: http://www.builderonline.com/builder-pulse/investors--vacation-home-buyers-stoke-up-the-market.aspx?cid=BP:033012:JUMP
For further information on Fresno Real Estate check: http://www.londonproperties.com
NEW YORK (CNNMoney) -- Sales of investment properties and vacation homes soared last year as investors snapped up homes that were selling at beaten down prices.
Homes purchased by investors skyrocketed 64.5% to 1.23 million in 2011, up from 749,000 the year before, according to the National Association of Realtors.
Vacation home buyers also came out in larger numbers, with sales climbing 7% year-over-year to 502,000. Meanwhile, sales to ordinary home buyers, who plan on living in the home full-time, fell 15.5% to 2.78 million, NAR said.
"Investors have been swooping into the market to take advantage of bargain home prices," said Lawrence Yun, NAR's chief economist. "Rising rental income easily beat cash sitting in banks."
Many investors were on a shopping spree, with 41% of buyers picking up more than one property during the year, compared with 34% in 2010, according to NAR. The median number of properties they bought rose to three from two during that time.
Buying much cheaper than renting
And almost half of all investors paid for the properties with cash. Even buyers who secured a mortgage to finance the purchase offered hefty down payments. The median down payment for both investment and vacation-home buyers was 27%.
"Clearly we're looking at investors with financial resources who see real estate as a good investment and who aren't hesitant to use cash," said Yun.
Foreclosures have helped fuel the second-home sales surge. Half of the investment purchases made last year were distressed sales, either foreclosures or short sales, as were 39% of vacation home purchases.
According to NAR, the median home price for investment properties was $100,000, a bargain compared to 2005 when the median investment property sold for $150,000. Meanwhile, the median vacation home sold for $121,300, down 19% from 2010 and a significant decline from the median price of $200,000 six years earlier.
Most investors said they intend to hang on to the properties instead of flipping them for a quick profit. The typical investor said they plan to hold the home for 5 years, with half of them reporting that they purchased the property mainly to generate rental income.
A tycoon in the making buying vacation homes
In nearly every market in the nation right now, buying is more affordable than renting. Continued tight mortgage financing, however, makes it difficult for some buyers with less than stellar credit history to buy homes.
For real estate investors, that means a steady supply of bargain properties -- and potential renters.
URL to original article: http://www.builderonline.com/builder-pulse/investors--vacation-home-buyers-stoke-up-the-market.aspx?cid=BP:033012:JUMP
For further information on Fresno Real Estate check: http://www.londonproperties.com
Where Are New-Home Sizes Going?
From: BUILDER 2012
Much has been made of the death of the McMansion, but new trends are questioning whether that pronouncement was made too early.
As the housing market entered its steep decline during the latter part of the past decade, it took home sizes with it. While there was much to bemoan about the state of the industry, among designers and architects it seemed the one bright spot was what appeared to be the demise of the McMansion and an increased focus on efficient functionality. Between 2007 and 2010, the average size of a new, single-family home in the U.S. fell from 2,504 square feet to 2,381 square feet, according to U.S. Census data. It was the rise of smaller and smarter.
Or was it?
"For all these years, the trend was going [down], and then in 2011 it got reversed," says Rose Quint, assistant vice president of survey research at the National Association of Home Builders. "Everything we had heard from builders, from architects, from consumers … was all pointing to a smaller home. But then in 2011 that all seemed to go under the bus."
Between 2010 and 2011, average new, single-family home sizes spiked to 2,522 square feet—larger than during the height of the boom, leaving the industry wondering whether smaller homes were ever truly in vogue or if they were simply a necessity due to tight credit, high unemployment, and a lack of equity.
In an effort to find the answer, Builder analyzed data from 12 metro areas around the country—including Boise, Idaho; Boston; Chicago; Denver; Houston; Orlando, Fla.; Philadelphia; Phoenix; Raleigh, N.C.; Salt Lake City; Seattle; and Washington, D.C.—looking at a range of data from home sizes to financing to unemployment and others, between 2005 and 2011. (Most regional data was provided by Hanley Wood Market Intelligence, a division of Hanley Wood, Builder’s parent company.)
Among the 12 MSAs analyzed, all but one saw average home sizes fall over the six-year period, and all saw a decline in price per square foot.
The one metro that bucked the trend for shrinking sizes was Philadelphia, which saw a small uptick in home sizes between the years, moving up 0.61% to an average of 1,829 square feet among all housing types. The market also saw the smallest decline in price per square foot, which dropped only 1.4%. Much of that trend has to do with who is buying the homes, says Greg Lingo, president at Media, Pa.–based Cornell Homes. "We’re generally seeing over the last year that people buying single-family homes are much more qualified in the ability to get a mortgage. It’s truly a move-up buyer."
But even at the other end of the market, Lingo says Philadelphia buyers are turning to attached townhomes in order to get more space at a price they can afford. "It’s not a preference for the long term, but with family changes and economic changes, it’s a better value for the square footage," he says. "Nobody wants a smaller home, necessarily. It’s really what they need. In this economy, people are weighing wants versus needs."
As things get better for the less-expensive end of the market, Lingo expects to see the reverse of the trend he saw going into the downturn. "On the way down, we were delivering the same size house with fewer features and then reducing the size of the home." Now, he says, "we’re seeing people put more custom features in their homes, and I think that will be the first step back. They’ll make the same home nicer, and then start going up."
Orlando saw the largest decline in average new-home sizes, with a drop of 6.7% to 1,836 square feet, and according to custom builder Anthony Lightman of Orlando-based Osprey Custom Homes, "a lot of it has to do with affordability." Osprey specializes in homes that sell for upwards of a million dollars, and four years ago, he says, "I couldn’t do anything for less than two million dollars, but construction loans are so tight that it’s really changing the face of the market." Now, he says, new-home buyers in Orlando are being forced to opt for smaller floor plans or lay out more cash to get loan values down.
Indeed, the average percent financed among new-home sales in the area fell from 81% in 2005 to 73% in 2011. Mortgage financing fell by 88% over the same period, a trend likely related to the metro areas’ unemployment rate, which stood at 9.5 at the end of 2011—the highest of the 13 areas studied, according to the U.S. Bureau of Labor Statistics. During the same six-year period, average price per square foot costs fell by 34.6%.
"I do think there’s still a big market for a big house, but it’s just a problem of getting the loan," Lightman says.
Boise saw the group’s second-largest decline in home sizes, which Lars Hansen, president at Boise-based Brighton Homes, partially attributes to the now-expired home buyer tax credit, which he says incentivized builders to build smaller homes in an attempt to lure tax-credit buyers.
But since the program ended, builders have turned their attention to larger homes, he says, to adapt to the market’s top-down recovery. These days "downsizing [in Boise] is a bit of a myth," he says. "After the tax credit expired, we jumped to things over $300,000. … Some builders are rebranding divisions as move-up, rather than entry-level, buying lots in communities that are somewhat distressed but have larger lots."
However, just as tight credit contributed to the precipitous fall in home sizes during the housing market’s decline, it may once again be lack of credit driving the trend—this time skewing sizes by keeping first-time buyers out of the market. "We see a trend emerging now where lower price points are coming back," Hansen says. People are calling and asking about new construction under $200,000. … I do anticipate that smaller homes and lower price points will become more a part of our mix at the end of the year."
That top-heavy recovery is also what Quint says is behind the national numbers. "The people who were able to buy a home last year had super good credit, super good savings, super good employment—otherwise you would not be able to get a loan. New single-family home starts were 75% lower [in 2011 compared to 2005], so it’s such a tiny market now that this small group of buyers’ preferences are dominating the market."
But like Hansen, she is betting things will adjust as the pool of buyers becomes more diverse. "The moment first-time buyers are able to come back into the market, and both buyers and builders regain access to credit, we expect sizes to ease again," she says. "That’s very odd for those jumps to have taken place in one year."
URL to original article: http://www.builderonline.com/housing-trends/where-are-new-home-sizes-going.aspx?cid=BP:033012:FULL
For further information on Fresno Real Estate check: http://www.londonproperties.com
Much has been made of the death of the McMansion, but new trends are questioning whether that pronouncement was made too early.
As the housing market entered its steep decline during the latter part of the past decade, it took home sizes with it. While there was much to bemoan about the state of the industry, among designers and architects it seemed the one bright spot was what appeared to be the demise of the McMansion and an increased focus on efficient functionality. Between 2007 and 2010, the average size of a new, single-family home in the U.S. fell from 2,504 square feet to 2,381 square feet, according to U.S. Census data. It was the rise of smaller and smarter.
Or was it?
"For all these years, the trend was going [down], and then in 2011 it got reversed," says Rose Quint, assistant vice president of survey research at the National Association of Home Builders. "Everything we had heard from builders, from architects, from consumers … was all pointing to a smaller home. But then in 2011 that all seemed to go under the bus."
Between 2010 and 2011, average new, single-family home sizes spiked to 2,522 square feet—larger than during the height of the boom, leaving the industry wondering whether smaller homes were ever truly in vogue or if they were simply a necessity due to tight credit, high unemployment, and a lack of equity.
In an effort to find the answer, Builder analyzed data from 12 metro areas around the country—including Boise, Idaho; Boston; Chicago; Denver; Houston; Orlando, Fla.; Philadelphia; Phoenix; Raleigh, N.C.; Salt Lake City; Seattle; and Washington, D.C.—looking at a range of data from home sizes to financing to unemployment and others, between 2005 and 2011. (Most regional data was provided by Hanley Wood Market Intelligence, a division of Hanley Wood, Builder’s parent company.)
Among the 12 MSAs analyzed, all but one saw average home sizes fall over the six-year period, and all saw a decline in price per square foot.
The one metro that bucked the trend for shrinking sizes was Philadelphia, which saw a small uptick in home sizes between the years, moving up 0.61% to an average of 1,829 square feet among all housing types. The market also saw the smallest decline in price per square foot, which dropped only 1.4%. Much of that trend has to do with who is buying the homes, says Greg Lingo, president at Media, Pa.–based Cornell Homes. "We’re generally seeing over the last year that people buying single-family homes are much more qualified in the ability to get a mortgage. It’s truly a move-up buyer."
But even at the other end of the market, Lingo says Philadelphia buyers are turning to attached townhomes in order to get more space at a price they can afford. "It’s not a preference for the long term, but with family changes and economic changes, it’s a better value for the square footage," he says. "Nobody wants a smaller home, necessarily. It’s really what they need. In this economy, people are weighing wants versus needs."
As things get better for the less-expensive end of the market, Lingo expects to see the reverse of the trend he saw going into the downturn. "On the way down, we were delivering the same size house with fewer features and then reducing the size of the home." Now, he says, "we’re seeing people put more custom features in their homes, and I think that will be the first step back. They’ll make the same home nicer, and then start going up."
Orlando saw the largest decline in average new-home sizes, with a drop of 6.7% to 1,836 square feet, and according to custom builder Anthony Lightman of Orlando-based Osprey Custom Homes, "a lot of it has to do with affordability." Osprey specializes in homes that sell for upwards of a million dollars, and four years ago, he says, "I couldn’t do anything for less than two million dollars, but construction loans are so tight that it’s really changing the face of the market." Now, he says, new-home buyers in Orlando are being forced to opt for smaller floor plans or lay out more cash to get loan values down.
Indeed, the average percent financed among new-home sales in the area fell from 81% in 2005 to 73% in 2011. Mortgage financing fell by 88% over the same period, a trend likely related to the metro areas’ unemployment rate, which stood at 9.5 at the end of 2011—the highest of the 13 areas studied, according to the U.S. Bureau of Labor Statistics. During the same six-year period, average price per square foot costs fell by 34.6%.
"I do think there’s still a big market for a big house, but it’s just a problem of getting the loan," Lightman says.
Boise saw the group’s second-largest decline in home sizes, which Lars Hansen, president at Boise-based Brighton Homes, partially attributes to the now-expired home buyer tax credit, which he says incentivized builders to build smaller homes in an attempt to lure tax-credit buyers.
But since the program ended, builders have turned their attention to larger homes, he says, to adapt to the market’s top-down recovery. These days "downsizing [in Boise] is a bit of a myth," he says. "After the tax credit expired, we jumped to things over $300,000. … Some builders are rebranding divisions as move-up, rather than entry-level, buying lots in communities that are somewhat distressed but have larger lots."
However, just as tight credit contributed to the precipitous fall in home sizes during the housing market’s decline, it may once again be lack of credit driving the trend—this time skewing sizes by keeping first-time buyers out of the market. "We see a trend emerging now where lower price points are coming back," Hansen says. People are calling and asking about new construction under $200,000. … I do anticipate that smaller homes and lower price points will become more a part of our mix at the end of the year."
That top-heavy recovery is also what Quint says is behind the national numbers. "The people who were able to buy a home last year had super good credit, super good savings, super good employment—otherwise you would not be able to get a loan. New single-family home starts were 75% lower [in 2011 compared to 2005], so it’s such a tiny market now that this small group of buyers’ preferences are dominating the market."
But like Hansen, she is betting things will adjust as the pool of buyers becomes more diverse. "The moment first-time buyers are able to come back into the market, and both buyers and builders regain access to credit, we expect sizes to ease again," she says. "That’s very odd for those jumps to have taken place in one year."
URL to original article: http://www.builderonline.com/housing-trends/where-are-new-home-sizes-going.aspx?cid=BP:033012:FULL
For further information on Fresno Real Estate check: http://www.londonproperties.com
Thursday, March 29, 2012
Among Latinos, dream of homeownership thrives
Source: US News & World Report
Still saddled with a huge overhang of distressed properties and lackluster demand, it seems the housing market could really use a knight in shining armor to slay the metaphorical dragons choking its growth.
According to a study released this month, that white knight could come in the form of Latino homebuyers who are expected to provide a deep well of housing interest over the next decade, propelling demand for condos, starter homes, and trade-up homes.
[See the latest political cartoons.]
"The demographic trends all line up for Hispanics to be a prime demographic for homeownership," says Gary Acosta, co-founder and acting executive director of the National Association of Hispanic Real Estate Professionals. "We're seeing very strong indicators that Hispanics are going to be 40 to 50 percent of all new homebuyers for the foreseeable future."
There are a few factors that make Acosta and other industry experts think that. For starters, Hispanics have been a huge engine of population growth over the past decade, and over the next decade they're expected to account for 40 percent of the estimated 12 million net new U.S. households, a huge predictor of future housing demand.
[Read Housing Slump Hits Hispanics Hard.]
Hispanics also have the highest labor force participation rate in the nation, according to the report, with nearly two thirds of all working-age Latinos employed.
Even considering the scourge of subprime lending and foreclosure crisis, which disproportionately hurt Hispanics especially in states such as California, heightened housing demand among Latinos is already starting to materialize, Acosta says.
"It was sort of surprising to us. The resilience within the Latino community for homeownership seems as strong or stronger than ever," Acosta says. "They view homeownership as a vehicle for stabilization to create a better living environment for their family and not as much as an investment. Because of that, the enthusiasm for homeownership hasn't waned a whole lot."
During the third quarter of 2011, the Hispanic homeownership rate rose to almost 48 percent, accounting for more than half of the total growth in homeownership over that period. Drilling down to the raw numbers, Hispanics bought almost 300,000 housing units in the third quarter of 2011, compared with 190,000 units bought by African-Americans, 66,000 by Asians, and just 18,000 by non-Hispanic white households.
[Read Why Mitt Romney May Suffer if SCOTUS Rules Against Mandate.]
Still, many obstacles confront would-be Hispanic buyers, not least of all difficulty getting a mortgage.
"I would say the desire [for homeownership] is there, but if there are any limitations around demand it's really due to, in our view, the lack of affordable mortgage credit," Acosta says. "The pendulum, quite frankly, has swung a little too far the other way."
And it could make the difference between a housing market that continues to limp along and one that starts seeing more signs of life.
"FHA is really the only game in town when it comes to anybody who has less than 20 percent to put down on a mortgage, and that has made it much more difficult for folks that we believe have not only the desire but the capacity to be successful homeowners," Acosta says. That's especially true when it comes to Hispanics, who as a whole are relatively light consumers of credit. "It's not that these folks necessarily have bad credit, they just have little credit."
Hispanics also tend to be concentrated in areas particularly hard hit by the housing crash—California, Nevada, Arizona—which means a good chunk of the housing stock on the market is distressed properties. That's set up an environment of competition between prospective buyers and cash investors, Acosta says, and it's usually the cash investors who win out with banks in the end.
"Banks, servicers, [and] GSEs have shown a pretty strong bias toward cash buyers even if [the average buyer] is willing to pay more than a cash investor," Acosta says. "The lenders are taking those cash deals [because] there's much less risk for fallout and they'll probably get a faster close on the transaction."
"It's a challenging environment in those states right now for that reason," he adds.
URL to original article: http://www.builderonline.com/builder-pulse/among-latinos--dream-of-homeownership-thrives.aspx?cid=BP:032912:JUMP
For further information on Fresno Real Estate check: http://www.londonproperties.com
Still saddled with a huge overhang of distressed properties and lackluster demand, it seems the housing market could really use a knight in shining armor to slay the metaphorical dragons choking its growth.
According to a study released this month, that white knight could come in the form of Latino homebuyers who are expected to provide a deep well of housing interest over the next decade, propelling demand for condos, starter homes, and trade-up homes.
[See the latest political cartoons.]
"The demographic trends all line up for Hispanics to be a prime demographic for homeownership," says Gary Acosta, co-founder and acting executive director of the National Association of Hispanic Real Estate Professionals. "We're seeing very strong indicators that Hispanics are going to be 40 to 50 percent of all new homebuyers for the foreseeable future."
There are a few factors that make Acosta and other industry experts think that. For starters, Hispanics have been a huge engine of population growth over the past decade, and over the next decade they're expected to account for 40 percent of the estimated 12 million net new U.S. households, a huge predictor of future housing demand.
[Read Housing Slump Hits Hispanics Hard.]
Hispanics also have the highest labor force participation rate in the nation, according to the report, with nearly two thirds of all working-age Latinos employed.
Even considering the scourge of subprime lending and foreclosure crisis, which disproportionately hurt Hispanics especially in states such as California, heightened housing demand among Latinos is already starting to materialize, Acosta says.
"It was sort of surprising to us. The resilience within the Latino community for homeownership seems as strong or stronger than ever," Acosta says. "They view homeownership as a vehicle for stabilization to create a better living environment for their family and not as much as an investment. Because of that, the enthusiasm for homeownership hasn't waned a whole lot."
During the third quarter of 2011, the Hispanic homeownership rate rose to almost 48 percent, accounting for more than half of the total growth in homeownership over that period. Drilling down to the raw numbers, Hispanics bought almost 300,000 housing units in the third quarter of 2011, compared with 190,000 units bought by African-Americans, 66,000 by Asians, and just 18,000 by non-Hispanic white households.
[Read Why Mitt Romney May Suffer if SCOTUS Rules Against Mandate.]
Still, many obstacles confront would-be Hispanic buyers, not least of all difficulty getting a mortgage.
"I would say the desire [for homeownership] is there, but if there are any limitations around demand it's really due to, in our view, the lack of affordable mortgage credit," Acosta says. "The pendulum, quite frankly, has swung a little too far the other way."
And it could make the difference between a housing market that continues to limp along and one that starts seeing more signs of life.
"FHA is really the only game in town when it comes to anybody who has less than 20 percent to put down on a mortgage, and that has made it much more difficult for folks that we believe have not only the desire but the capacity to be successful homeowners," Acosta says. That's especially true when it comes to Hispanics, who as a whole are relatively light consumers of credit. "It's not that these folks necessarily have bad credit, they just have little credit."
Hispanics also tend to be concentrated in areas particularly hard hit by the housing crash—California, Nevada, Arizona—which means a good chunk of the housing stock on the market is distressed properties. That's set up an environment of competition between prospective buyers and cash investors, Acosta says, and it's usually the cash investors who win out with banks in the end.
"Banks, servicers, [and] GSEs have shown a pretty strong bias toward cash buyers even if [the average buyer] is willing to pay more than a cash investor," Acosta says. "The lenders are taking those cash deals [because] there's much less risk for fallout and they'll probably get a faster close on the transaction."
"It's a challenging environment in those states right now for that reason," he adds.
URL to original article: http://www.builderonline.com/builder-pulse/among-latinos--dream-of-homeownership-thrives.aspx?cid=BP:032912:JUMP
For further information on Fresno Real Estate check: http://www.londonproperties.com
Define 'shadow' inventory
Source: Orange County [Calif.] Register
For every two homes on the U.S. housing market, there’s one foreclosure or potential foreclosure yet to be listed, housing tracker CoreLogic reported in its latest “shadow inventory” report.
As of January, the nation’s shadow inventory leveled off at 1.6 million U.S. homes.
“The shadow inventory remains persistent even though many other metrics of the housing market show signs of improvements,” said Anand Nallathambi, president and CEO of the O.C.-based real estate date firm.
Shadow inventory consists of homes whose owners have failed to make monthly mortgage payments for 90 days or more, homes in some stage of foreclosure or bank-owned homes. Economists follow shadow inventory because it amounts to a hidden segment of the distressed market that pulls down prices for all homes and hampers the recovery.
CoreLogic reported:
As of January, there were 1.6 million housing units in the shadow inventory, roughly half of the 3 million homes currently seriously delinquent, in foreclosure or bank owned.
That’s unchanged from the previous shadow inventory report based on October data. The amount of shadow inventory has remained virtually unchanged since the spring. (See chart)
It would take six months to sell all the homes in the shadow inventory based on the current sales pace.
However, the latest figures are down from January 2011 levels, when there were 1.8 million units in the shadow inventory, which would in theory take eight months to sell.
Of the 1.6 million properties in the shadows, 800,000 are seriously delinquent, 410,000 are in some stage of foreclosure and 400,000 are bank-owned.
More than 510,000 homes in the shadow inventory are in California, Florida and Illinois, making up more than a third of the national total.
URL to original article: http://www.builderonline.com/builder-pulse/define--shadow--inventory.aspx?cid=BP:032912:JUMP
For further information on Fresno Real Estate check: http://www.londonproperties.com
For every two homes on the U.S. housing market, there’s one foreclosure or potential foreclosure yet to be listed, housing tracker CoreLogic reported in its latest “shadow inventory” report.
As of January, the nation’s shadow inventory leveled off at 1.6 million U.S. homes.
“The shadow inventory remains persistent even though many other metrics of the housing market show signs of improvements,” said Anand Nallathambi, president and CEO of the O.C.-based real estate date firm.
Shadow inventory consists of homes whose owners have failed to make monthly mortgage payments for 90 days or more, homes in some stage of foreclosure or bank-owned homes. Economists follow shadow inventory because it amounts to a hidden segment of the distressed market that pulls down prices for all homes and hampers the recovery.
CoreLogic reported:
As of January, there were 1.6 million housing units in the shadow inventory, roughly half of the 3 million homes currently seriously delinquent, in foreclosure or bank owned.
That’s unchanged from the previous shadow inventory report based on October data. The amount of shadow inventory has remained virtually unchanged since the spring. (See chart)
It would take six months to sell all the homes in the shadow inventory based on the current sales pace.
However, the latest figures are down from January 2011 levels, when there were 1.8 million units in the shadow inventory, which would in theory take eight months to sell.
Of the 1.6 million properties in the shadows, 800,000 are seriously delinquent, 410,000 are in some stage of foreclosure and 400,000 are bank-owned.
More than 510,000 homes in the shadow inventory are in California, Florida and Illinois, making up more than a third of the national total.
URL to original article: http://www.builderonline.com/builder-pulse/define--shadow--inventory.aspx?cid=BP:032912:JUMP
For further information on Fresno Real Estate check: http://www.londonproperties.com
Wednesday, March 28, 2012
Economic mood hits a 4-year high
Source: Gallup
PRINCETON, NJ -- U.S. economic confidence improved to -17 in the week ending March 25 from -21 the prior week. Economic confidence is now by one point at the highest weekly level Gallup has recorded since it started Daily tracking of confidence in January 2008.
Americans' economic confidence matched its previous high of -18 during the week ending March 11, 2012. Economic confidence was also at -18 during the week ending Feb. 13, 2011. A week ago, Gallup reported that economic confidence fell back to -21, perhaps signaling that concerns over soaring gas prices more than offset the lingering positive effects of the government's positive February unemployment report released on Friday, March 9.
While -17 is a marginal improvement in terms of a new high, it does place current economic confidence at its best weekly level of the past four years. Economic confidence also improved in early 2011, climbing to a weekly high of -18 in February. However, that enthusiasm dissipated quickly. Economic confidence plunged to -33 during the comparable week in March of a year ago.
The Gallup Economic Confidence Index includes two components: Americans' ratings of current economic conditions and their perceptions of whether the economy is getting better or getting worse. Slight improvements on both dimensions led to last week's increase in overall economic confidence.
The percentage of Americans saying the economy is "getting better" increased to 44% last week, while the percentage saying it is "getting worse" fell to 52%. This is the best weekly "getting better" level since Gallup Daily tracking began in January 2008.
Also, consumers' "poor" ratings of the economy are now at 41%, compared with 42% the prior week. This is one of Americans' more positive "poor" ratings of current economic conditions over the past four years.
Bottom Line
Americans' confidence in the economy is at its best level in four years, despite high gas prices. This suggests that the moderately improving economy and, in particular, the improving job situation are offsetting, at least in part, the drag of gas prices on consumer perceptions of the economy.
If U.S. economic confidence continues to improve and breaks out to higher levels not seen over the past four years, that could be good news for President Obama. Gallup analysis suggests that higher economic confidence is linked to higher presidential approval ratings in early 2012. Thus, relatively small gains in economic confidence from here on out could send the president's approval rating above 50%, much improving his chances for re-election.
However, Federal Reserve Board Chairman Ben Bernanke, addressing the National Association for Business Economics on Monday, noted that while the jobs situation has clearly improved, "conditions remain far from normal." He went on to point out that "jobs and hours worked remain well below pre-crisis peaks, even without adjusting for growth in the labor force."
Right now, Gallup's behavioral economic measures reflect the modestly improving economy. Gallup's Job Creation Index and consumer spending measure are also up this month.
Still, as the chairman suggested, reducing the jobless rate further will probably require "a more rapid expansion of production and demand from consumers and businesses." That is, it seems unlikely that the U.S. economy can continue to make progress in reducing the unemployment rate without stronger economic growth. If there is more rapid economic growth, however, it would mean good things for jobs and the economy.
URL to original article: http://www.builderonline.com/builder-pulse/economic-mood-hits-a-4-year-high.aspx?cid=BP:032812:JUMP
For further information on Fresno Real Estate check: http://www.londonproperties.com
PRINCETON, NJ -- U.S. economic confidence improved to -17 in the week ending March 25 from -21 the prior week. Economic confidence is now by one point at the highest weekly level Gallup has recorded since it started Daily tracking of confidence in January 2008.
Americans' economic confidence matched its previous high of -18 during the week ending March 11, 2012. Economic confidence was also at -18 during the week ending Feb. 13, 2011. A week ago, Gallup reported that economic confidence fell back to -21, perhaps signaling that concerns over soaring gas prices more than offset the lingering positive effects of the government's positive February unemployment report released on Friday, March 9.
While -17 is a marginal improvement in terms of a new high, it does place current economic confidence at its best weekly level of the past four years. Economic confidence also improved in early 2011, climbing to a weekly high of -18 in February. However, that enthusiasm dissipated quickly. Economic confidence plunged to -33 during the comparable week in March of a year ago.
The Gallup Economic Confidence Index includes two components: Americans' ratings of current economic conditions and their perceptions of whether the economy is getting better or getting worse. Slight improvements on both dimensions led to last week's increase in overall economic confidence.
The percentage of Americans saying the economy is "getting better" increased to 44% last week, while the percentage saying it is "getting worse" fell to 52%. This is the best weekly "getting better" level since Gallup Daily tracking began in January 2008.
Also, consumers' "poor" ratings of the economy are now at 41%, compared with 42% the prior week. This is one of Americans' more positive "poor" ratings of current economic conditions over the past four years.
Bottom Line
Americans' confidence in the economy is at its best level in four years, despite high gas prices. This suggests that the moderately improving economy and, in particular, the improving job situation are offsetting, at least in part, the drag of gas prices on consumer perceptions of the economy.
If U.S. economic confidence continues to improve and breaks out to higher levels not seen over the past four years, that could be good news for President Obama. Gallup analysis suggests that higher economic confidence is linked to higher presidential approval ratings in early 2012. Thus, relatively small gains in economic confidence from here on out could send the president's approval rating above 50%, much improving his chances for re-election.
However, Federal Reserve Board Chairman Ben Bernanke, addressing the National Association for Business Economics on Monday, noted that while the jobs situation has clearly improved, "conditions remain far from normal." He went on to point out that "jobs and hours worked remain well below pre-crisis peaks, even without adjusting for growth in the labor force."
Right now, Gallup's behavioral economic measures reflect the modestly improving economy. Gallup's Job Creation Index and consumer spending measure are also up this month.
Still, as the chairman suggested, reducing the jobless rate further will probably require "a more rapid expansion of production and demand from consumers and businesses." That is, it seems unlikely that the U.S. economy can continue to make progress in reducing the unemployment rate without stronger economic growth. If there is more rapid economic growth, however, it would mean good things for jobs and the economy.
URL to original article: http://www.builderonline.com/builder-pulse/economic-mood-hits-a-4-year-high.aspx?cid=BP:032812:JUMP
For further information on Fresno Real Estate check: http://www.londonproperties.com
The Kolko recover-o-meter
Source: Trulia
On the long road of housing recovery, we’re all kids in the back seat wondering: are we there yet? After years of bad news about the housing market, it’s hard to remember what “normal” looks like.
This month Trulia kicks off the Housing Barometer, a quick review of three key monthly indicators of housing recovery: new construction starts (Census), existing-home sales (NAR), and the delinquency-plus-foreclosure rate (LPS). For each indicator, we checked how bad the numbers got at their worst, and then looked even further back in time, before the bubble, to remind ourselves what “normal” looked like. We’re not trying to predict what the new normal will be in the future – we’re just eyeballing the past in order to put this month’s housing data into context.
Here’s what the February data, released last week, show:
— Construction starts: 22% of the way back from their low in Apr 2009 toward their normal level.
— Existing home sales: 47% of the way back from their low in Nov 2008 toward normal.
— Delinquency + foreclosure rate: 32% of the way back from their high in Jan 2010 toward normal.
To get to a single number that’s easy to remember and track over time, we just average these three percentages together. If all three indicators were at their worst, the barometer would be at 0%; if all were back to normal, the barometer would be at 100%. The February 2012 data puts us at 34%: in other words, the housing market is one-third of the way back to normal.
So, are we there yet? No. We still have a long way to go. How long will it take us to get there? Using the same method and measures, one year ago the market was 16% of the way back to normal, which means we’ve ticked up 18 points in the past year. If we continue to drive at this same pace of 18 points a year, we’ll get from 34% today to 100% in late 2015. Kids, sit tight…it’s going to be awhile.
URL to original article: http://www.builderonline.com/builder-pulse/the-kolko-recover-o-meter.aspx?cid=BP:032812:JUMP
For further information on Fresno Real Estate check: http://www.londonproperties.com
On the long road of housing recovery, we’re all kids in the back seat wondering: are we there yet? After years of bad news about the housing market, it’s hard to remember what “normal” looks like.
This month Trulia kicks off the Housing Barometer, a quick review of three key monthly indicators of housing recovery: new construction starts (Census), existing-home sales (NAR), and the delinquency-plus-foreclosure rate (LPS). For each indicator, we checked how bad the numbers got at their worst, and then looked even further back in time, before the bubble, to remind ourselves what “normal” looked like. We’re not trying to predict what the new normal will be in the future – we’re just eyeballing the past in order to put this month’s housing data into context.
Here’s what the February data, released last week, show:
— Construction starts: 22% of the way back from their low in Apr 2009 toward their normal level.
— Existing home sales: 47% of the way back from their low in Nov 2008 toward normal.
— Delinquency + foreclosure rate: 32% of the way back from their high in Jan 2010 toward normal.
To get to a single number that’s easy to remember and track over time, we just average these three percentages together. If all three indicators were at their worst, the barometer would be at 0%; if all were back to normal, the barometer would be at 100%. The February 2012 data puts us at 34%: in other words, the housing market is one-third of the way back to normal.
So, are we there yet? No. We still have a long way to go. How long will it take us to get there? Using the same method and measures, one year ago the market was 16% of the way back to normal, which means we’ve ticked up 18 points in the past year. If we continue to drive at this same pace of 18 points a year, we’ll get from 34% today to 100% in late 2015. Kids, sit tight…it’s going to be awhile.
URL to original article: http://www.builderonline.com/builder-pulse/the-kolko-recover-o-meter.aspx?cid=BP:032812:JUMP
For further information on Fresno Real Estate check: http://www.londonproperties.com
Home Prices in U.S. Cities Fell at Slower Pace in January
By Timothy R. Homan
The S&P/Case-Shiller index (SPX) of property values in 20 cities fell 3.8 percent from a year earlier, matching the median forecast of 32 economists surveyed by Bloomberg News, after decreasing 4.1 percent in December, a report from the group showed today in New York. Prices were little changed in January from the prior month, the best performance since July.
Property values are steadying as a strengthening labor market underpins housing demand, which may allow the industry that precipitated the recession to contribute to growth this year. Nonetheless, the recovery in sales may be restrained by foreclosures that are putting more properties onto the market.
“We are starting to see a slightly less-negative picture,” said Sean Incremona, a senior economist at 4Cast Inc. in New York, who correctly projected the decline. “We have seen some slight progress from very depressed levels, but there’s still a long, long way to go.”
Stocks were little changed. The Standard & Poor 500 Index rose 0.1 percent to 1,417.66 at 9:42 a.m. in New York, after yesterday reaching the highest level since 2008.
Home prices adjusted for seasonal variations were little changed in January from the prior month, following a decrease of 0.5 percent in December. Unadjusted prices fell 0.8 percent from the prior month.
Survey Results
Economists’ estimates for the year-over-year change in the home price index for December ranged from declines of 4.5 percent to 3.3 percent, according to the survey. The Case- Shiller index is based on a three-month average, which means the January data were influenced by transactions in November and December.
The December reading was previously reported as a year- over-year drop of 4 percent.
The year-over-year gauge, begun in 2001, provides better indications of trends in prices, the group has said. The panel includes Karl Case and Robert Shiller, the economists who created the index.
Sixteen of the 20 cities in the index showed a year-over- year decline, led by a 15 percent drop in Atlanta. Detroit showed the biggest increase, with prices rising 1.7 percent in January. There were no data available for Charlotte, North Carolina, due to delays in reporting, according to the release.
Eight cities made new post-slump lows, the report said, including Atlanta, Chicago, Cleveland, Las Vegas, New York, Portland, Seattle and Tampa.
Confidence Improving
Recent reports indicate builder confidence is improving even as sales stabilize. The National Association of Home Builders/Wells Fargo sentiment index in March held at the highest level since June 2007 as the sales outlook climbed for a sixth straight month.
Sales of previously owned houses held in February near an almost two-year high, the real-estate agents’ group reported last week. Purchases dropped 0.9 percent to a 4.59 million annual rate from a revised 4.63 million pace in January that was faster than previously estimated and the highest since May 2010.
Even with the decline last month, January and February sales of existing homes marked the strongest start to a year since 2007.
The number of Americans signing contracts to buy previously owned homes fell 0.5 percent in February to 96.5 after a 2 percent increase the prior month, the National Association of Realtors said yesterday in Washington. January’s reading of 97 was the highest since April 2010.
Bernanke’s View
Federal Reserve Chairman Ben S. Bernanke yesterday said that while he’s encouraged by the decline in unemployment, the central bank still needs to keep interest rates low to make further progress.
Recent “better news” on the economy has also included a “slight bit of encouraging news here and there in the housing market” and strength in manufacturing, Bernanke said in response to audience questions following a speech in Arlington, Virginia.
Home foreclosures remain a concern for builders. Filings fell 8 percent in February, the smallest year-over-year decrease since October 2010, as lenders began working through a backlog of seized properties, RealtyTrac Inc. said this month.
More Foreclosures
“February’s numbers point to a gradually rising foreclosure tide,” Brandon Moore, RealtyTrac’s chief executive officer, said in a statement. “That should result in more states posting annual increases in the coming months.”
Delinquencies are hurting sellers of both new and existing homes.
KB Home (KBH), the Los Angeles-based homebuilder that targets first-time buyers, fell the most in almost nine months after it reported a decline in orders and government data showed new-home sales dropped in February.
“We are seeing signs that the overall housing market is stabilizing and beginning to recover,” Jeffrey Mezger, president and chief executive officer of KB Home, said in a March 23 statement. “The pace of the recovery is uneven, however. We expect that the housing market in general will gradually strengthen as the economy continues to advance.”
URL to original article: http://www.bloomberg.com/news/2012-03-27/home-prices-in-u-s-cities-decreased-at-slower-pace-in-january.html
For further information on Fresno Real Estate check: http://www.londonproperties.com
The S&P/Case-Shiller index (SPX) of property values in 20 cities fell 3.8 percent from a year earlier, matching the median forecast of 32 economists surveyed by Bloomberg News, after decreasing 4.1 percent in December, a report from the group showed today in New York. Prices were little changed in January from the prior month, the best performance since July.
Property values are steadying as a strengthening labor market underpins housing demand, which may allow the industry that precipitated the recession to contribute to growth this year. Nonetheless, the recovery in sales may be restrained by foreclosures that are putting more properties onto the market.
“We are starting to see a slightly less-negative picture,” said Sean Incremona, a senior economist at 4Cast Inc. in New York, who correctly projected the decline. “We have seen some slight progress from very depressed levels, but there’s still a long, long way to go.”
Stocks were little changed. The Standard & Poor 500 Index rose 0.1 percent to 1,417.66 at 9:42 a.m. in New York, after yesterday reaching the highest level since 2008.
Home prices adjusted for seasonal variations were little changed in January from the prior month, following a decrease of 0.5 percent in December. Unadjusted prices fell 0.8 percent from the prior month.
Survey Results
Economists’ estimates for the year-over-year change in the home price index for December ranged from declines of 4.5 percent to 3.3 percent, according to the survey. The Case- Shiller index is based on a three-month average, which means the January data were influenced by transactions in November and December.
The December reading was previously reported as a year- over-year drop of 4 percent.
The year-over-year gauge, begun in 2001, provides better indications of trends in prices, the group has said. The panel includes Karl Case and Robert Shiller, the economists who created the index.
Sixteen of the 20 cities in the index showed a year-over- year decline, led by a 15 percent drop in Atlanta. Detroit showed the biggest increase, with prices rising 1.7 percent in January. There were no data available for Charlotte, North Carolina, due to delays in reporting, according to the release.
Eight cities made new post-slump lows, the report said, including Atlanta, Chicago, Cleveland, Las Vegas, New York, Portland, Seattle and Tampa.
Confidence Improving
Recent reports indicate builder confidence is improving even as sales stabilize. The National Association of Home Builders/Wells Fargo sentiment index in March held at the highest level since June 2007 as the sales outlook climbed for a sixth straight month.
Sales of previously owned houses held in February near an almost two-year high, the real-estate agents’ group reported last week. Purchases dropped 0.9 percent to a 4.59 million annual rate from a revised 4.63 million pace in January that was faster than previously estimated and the highest since May 2010.
Even with the decline last month, January and February sales of existing homes marked the strongest start to a year since 2007.
The number of Americans signing contracts to buy previously owned homes fell 0.5 percent in February to 96.5 after a 2 percent increase the prior month, the National Association of Realtors said yesterday in Washington. January’s reading of 97 was the highest since April 2010.
Bernanke’s View
Federal Reserve Chairman Ben S. Bernanke yesterday said that while he’s encouraged by the decline in unemployment, the central bank still needs to keep interest rates low to make further progress.
Recent “better news” on the economy has also included a “slight bit of encouraging news here and there in the housing market” and strength in manufacturing, Bernanke said in response to audience questions following a speech in Arlington, Virginia.
Home foreclosures remain a concern for builders. Filings fell 8 percent in February, the smallest year-over-year decrease since October 2010, as lenders began working through a backlog of seized properties, RealtyTrac Inc. said this month.
More Foreclosures
“February’s numbers point to a gradually rising foreclosure tide,” Brandon Moore, RealtyTrac’s chief executive officer, said in a statement. “That should result in more states posting annual increases in the coming months.”
Delinquencies are hurting sellers of both new and existing homes.
KB Home (KBH), the Los Angeles-based homebuilder that targets first-time buyers, fell the most in almost nine months after it reported a decline in orders and government data showed new-home sales dropped in February.
“We are seeing signs that the overall housing market is stabilizing and beginning to recover,” Jeffrey Mezger, president and chief executive officer of KB Home, said in a March 23 statement. “The pace of the recovery is uneven, however. We expect that the housing market in general will gradually strengthen as the economy continues to advance.”
URL to original article: http://www.bloomberg.com/news/2012-03-27/home-prices-in-u-s-cities-decreased-at-slower-pace-in-january.html
For further information on Fresno Real Estate check: http://www.londonproperties.com
Tuesday, March 27, 2012
A grayer nation's risks outlined
Source: The Atlantic
In the future, U.S. growth will be slower. Recessions will be deeper. Recoveries will be weaker. And there's exactly one thing to blame.
Demographics.
That's the stark conclusion from James Stock and Mark Watson in this fascinating, and occasionally depressing, new paper. In fact, they say, the future is now. For the last few years, we've weathered the beginning of what demographers have called the grey tsunami. "Most of the slow recovery [in today's job market] is attributable to a long-term slowdown in trend employment growth," Stock and Watson write.
The authors blame two demographic demons for our uncertain future: (1) the plateau in the female labor force participation rate, and (2) the aging of the U.S. workforce. Their underlying logic is that without continued growth in female workers or a significant boost in population, employment and GDP growth will slow, leaving us vulnerable to recessions with "steeper declines and slower recoveries." In such a future, jobless recoveries will be the only recoveries we know.
Demographic Demon #1
WOMEN'S PARTICIPATION RATE
In the first half of the 20th century, female employment wasn't exactly a high-priority concern for policy makers. For the first 20 years of the century, women didn't have the right to vote. For the next 30 years, they barely made up a fifth of the labor force. Then everything changed.
The ascendance of women in the workforce was perhaps the singular cultural/economic triumph of the second half of the 20th century. In 1960, just four in ten working-age women were active in the labor force. By 1990, it was more like six in ten (see graph below of female participation rates). By 2010, women made up a majority of the workforce. But that growth appears to have hit a ceiling. The female participation rate in early 2011 was the same as in 1994. In that time, the male participation has fallen. That's not good news for a country that will require more workers to both grow the national pot of money and provide for an aging population transitioning out of the workplace.
Famous economic worrywart Thomas Malthus famously predicted that population growth would get in the way of economic growth, because we wouldn't be able to make enough stuff to keep everybody healthy and happy. What's fascinating about the threat of a gray society is that it turns Malthusian pessimism on its head. In fact, the more reasonable threat we face is that an aging population will require more resources that can be -- and must be -- provided by more people.
Let's take the long view. In 1950, there were more Americans under 25 than over 45. By 2050, the share of seniors will nearly treble while the country's portion of twentysomethings will decline. Here's a look at 100 years of America aging, from a National Journal/Atlantic special report:
"People [used to take] dynamism and economic growth for granted and saw population growth as a problem," David Brooks wrote last week. "Now we've gone to the other extreme, and it's clear that young people are the scarce resource. In the 21st century, the U.S. could be the slowly aging leader of a rapidly aging world."
Here's another way to see what Brooks, Stock, and Watson are concerned about. In the late 1990s, a remarkable 67% of the country (16 and over) was working or seeking work. That number has fallen steadily in the last decade for two reasons. First, there's the Great Recession, which pushed people out of the labor force. But as you can see in the graph below, demographers were already expected labor participation to decline due to demographics. As 80 million Boomers move into retirement, a smaller share of our population will be working ... and a rising share will be seeking increasingly expensive medical attention from the workforce that is left over. That adds up to a less dynamic economy.
Some of the implications of the Boomers' retirement are predictable. If medical inflation continues apace, either the government or families (or both) will face rising budget pressures to pay for increasingly expensive treatments. As retirees live longer, Social Security will have to be mildly reformed or else we'll have to dip into general tax funds to fulfill our promise to seniors. One hopes that the transition to a service economy will allow older people to work longer than they have in the past. But one of the advantage of being old and affluent is that you don't have to work until the day you die. Sixty- and seventy-somethings who can work desk jobs might choose not to.
The aging of the Baby Boomers could have more unpredictable effects, too. Various studies have attributed stock booms in 1980s and 1990s "to the fact that baby boomers were entering their middle ages, the prime period for accumulating financial assets," the San Francisco Federal Reserve reported. If those studies are right -- and if demographic changes aren't already priced into the stock market -- it implies that we could see worse equity performance coinciding with an unfavorable worker-retiree ratio and slower economic growth. Not a good formula for the future.
DON'T WORRY, BE ... PROACTIVE
The fact that the United States is getting older is good news. Longer lives are good news. Healthier people are good news. Declining child mortality rates and a modern post-industrial service economy requires smaller families and fewer children are also good news. But this kind of affluence has a price.
Two centuries ago, Malthus predicted that growing populations would act as a tax on growing economies. In fact, the opposite might be true. Stagnating populations are taxing economic growth in rich economies , and we're only beginning to feel the implication of a historic graying of affluent nations. The United States got rich off young workers. Transfers to the old and sick might be the necessary price of a wealthy modern society. But too many of those transfers from the pockets of too few workers isn't a smart plan for growth.
If the most significant barrier to growth is our supply of workers, there are low-hanging solutions to creating more working Americans. One solution would be to reform immigration laws to let smart foreigners stay here after they graduate from college. Another would be to reform housing policy in our most high-productivity metros to encourage more people to cluster around our most successful industries. Another would be to allow innovations in K-12 and higher education to bring down the cost of school and the implicit cost of having children. Another might be to reform our corporate income tax laws to encourage more foreigners to start businesses here. Another would be to cure medical inflation to reduce the financial burden of caring for older Americans. This is all much easier typed than done. The upshot is that demographics can be dangerous, but they aren't destiny.
URL to original article: http://www.theatlantic.com/business/archive/2012/03/gray-nation-the-very-real-economic-dangers-of-an-aging-america/254937/
For further information on Fresno Real Estate check: http://www.londonproperties.com
In the future, U.S. growth will be slower. Recessions will be deeper. Recoveries will be weaker. And there's exactly one thing to blame.
Demographics.
That's the stark conclusion from James Stock and Mark Watson in this fascinating, and occasionally depressing, new paper. In fact, they say, the future is now. For the last few years, we've weathered the beginning of what demographers have called the grey tsunami. "Most of the slow recovery [in today's job market] is attributable to a long-term slowdown in trend employment growth," Stock and Watson write.
The authors blame two demographic demons for our uncertain future: (1) the plateau in the female labor force participation rate, and (2) the aging of the U.S. workforce. Their underlying logic is that without continued growth in female workers or a significant boost in population, employment and GDP growth will slow, leaving us vulnerable to recessions with "steeper declines and slower recoveries." In such a future, jobless recoveries will be the only recoveries we know.
Demographic Demon #1
WOMEN'S PARTICIPATION RATE
In the first half of the 20th century, female employment wasn't exactly a high-priority concern for policy makers. For the first 20 years of the century, women didn't have the right to vote. For the next 30 years, they barely made up a fifth of the labor force. Then everything changed.
The ascendance of women in the workforce was perhaps the singular cultural/economic triumph of the second half of the 20th century. In 1960, just four in ten working-age women were active in the labor force. By 1990, it was more like six in ten (see graph below of female participation rates). By 2010, women made up a majority of the workforce. But that growth appears to have hit a ceiling. The female participation rate in early 2011 was the same as in 1994. In that time, the male participation has fallen. That's not good news for a country that will require more workers to both grow the national pot of money and provide for an aging population transitioning out of the workplace.
Famous economic worrywart Thomas Malthus famously predicted that population growth would get in the way of economic growth, because we wouldn't be able to make enough stuff to keep everybody healthy and happy. What's fascinating about the threat of a gray society is that it turns Malthusian pessimism on its head. In fact, the more reasonable threat we face is that an aging population will require more resources that can be -- and must be -- provided by more people.
Let's take the long view. In 1950, there were more Americans under 25 than over 45. By 2050, the share of seniors will nearly treble while the country's portion of twentysomethings will decline. Here's a look at 100 years of America aging, from a National Journal/Atlantic special report:
"People [used to take] dynamism and economic growth for granted and saw population growth as a problem," David Brooks wrote last week. "Now we've gone to the other extreme, and it's clear that young people are the scarce resource. In the 21st century, the U.S. could be the slowly aging leader of a rapidly aging world."
Here's another way to see what Brooks, Stock, and Watson are concerned about. In the late 1990s, a remarkable 67% of the country (16 and over) was working or seeking work. That number has fallen steadily in the last decade for two reasons. First, there's the Great Recession, which pushed people out of the labor force. But as you can see in the graph below, demographers were already expected labor participation to decline due to demographics. As 80 million Boomers move into retirement, a smaller share of our population will be working ... and a rising share will be seeking increasingly expensive medical attention from the workforce that is left over. That adds up to a less dynamic economy.
Some of the implications of the Boomers' retirement are predictable. If medical inflation continues apace, either the government or families (or both) will face rising budget pressures to pay for increasingly expensive treatments. As retirees live longer, Social Security will have to be mildly reformed or else we'll have to dip into general tax funds to fulfill our promise to seniors. One hopes that the transition to a service economy will allow older people to work longer than they have in the past. But one of the advantage of being old and affluent is that you don't have to work until the day you die. Sixty- and seventy-somethings who can work desk jobs might choose not to.
The aging of the Baby Boomers could have more unpredictable effects, too. Various studies have attributed stock booms in 1980s and 1990s "to the fact that baby boomers were entering their middle ages, the prime period for accumulating financial assets," the San Francisco Federal Reserve reported. If those studies are right -- and if demographic changes aren't already priced into the stock market -- it implies that we could see worse equity performance coinciding with an unfavorable worker-retiree ratio and slower economic growth. Not a good formula for the future.
DON'T WORRY, BE ... PROACTIVE
The fact that the United States is getting older is good news. Longer lives are good news. Healthier people are good news. Declining child mortality rates and a modern post-industrial service economy requires smaller families and fewer children are also good news. But this kind of affluence has a price.
Two centuries ago, Malthus predicted that growing populations would act as a tax on growing economies. In fact, the opposite might be true. Stagnating populations are taxing economic growth in rich economies , and we're only beginning to feel the implication of a historic graying of affluent nations. The United States got rich off young workers. Transfers to the old and sick might be the necessary price of a wealthy modern society. But too many of those transfers from the pockets of too few workers isn't a smart plan for growth.
If the most significant barrier to growth is our supply of workers, there are low-hanging solutions to creating more working Americans. One solution would be to reform immigration laws to let smart foreigners stay here after they graduate from college. Another would be to reform housing policy in our most high-productivity metros to encourage more people to cluster around our most successful industries. Another would be to allow innovations in K-12 and higher education to bring down the cost of school and the implicit cost of having children. Another might be to reform our corporate income tax laws to encourage more foreigners to start businesses here. Another would be to cure medical inflation to reduce the financial burden of caring for older Americans. This is all much easier typed than done. The upshot is that demographics can be dangerous, but they aren't destiny.
URL to original article: http://www.theatlantic.com/business/archive/2012/03/gray-nation-the-very-real-economic-dangers-of-an-aging-america/254937/
For further information on Fresno Real Estate check: http://www.londonproperties.com
Monday, March 26, 2012
Property Taxes Remain Historically High
Source: NAHB Eye on Housing
Property taxes are an important source of revenue for state and local governments to finance government services, particularly education.
And despite claims to the contrary, property tax payments continue to provide an outsized share of state and local tax collections.
In fact, Census data of state and local government tax collections for the final quarter of 2011 indicate a small increase in property taxes paid on a year-over-year basis. For 2011, approximately $469 billion of such tax was paid by property owners. This total is less than a half a percent smaller than the 2010 total of $468 billion.
While there has been some decline in the share of total state and local tax collections due to property tax receipts, the share remains high compared to historic norms. The average share for property taxes since 2000 is 32%, while the current share stands at 34.6%. Consequently, housing and other real estate owners are still paying a higher than average percentage of state and local government tax receipts.
This elevated tax burden is significant, especially when one considers the decline in housing prices since 2006 – a decline that has led many to incorrectly conclude that property tax payments have also significantly fallen. According to the Case-Shiller house price index of the 20 largest metropolitan areas, housing prices are down a little more than 33% over the last 5 years.
Yet the decline of property taxes paid from the peak is negligible thus far (1.6%). This means that the effective tax homeowners pay on their homes remains high. Nonetheless, as assessments in some areas catch-up to accurately reflect current market values of owner-occupied homes, property taxes are expected to decline – but this has not happened yet.
Taxes paid by homeowners and other real estate owners remain the largest single source of taxes for state and local governments. At 35%, property taxes represent a significantly larger share than the next largest sources: sales and gross receipt taxes and individual income taxes, each at 22%.
* Data footnote: Census data for property tax collections include taxes paid for all real estate assets (as well as personal property), including owner-occupied homes, rental housing, commercial real estate, and agriculture. However, housing’s share is by far the largest when considering the stock of both owner-occupied and rental housing units.
URL to original article: http://www.builderonline.com/builder-pulse/property-taxes-hold-even-as-values-drop.aspx?cid=BP:032612:JUMP
For further information on Fresno Real Estate check: http://www.londonproperties.com
Property taxes are an important source of revenue for state and local governments to finance government services, particularly education.
And despite claims to the contrary, property tax payments continue to provide an outsized share of state and local tax collections.
In fact, Census data of state and local government tax collections for the final quarter of 2011 indicate a small increase in property taxes paid on a year-over-year basis. For 2011, approximately $469 billion of such tax was paid by property owners. This total is less than a half a percent smaller than the 2010 total of $468 billion.
While there has been some decline in the share of total state and local tax collections due to property tax receipts, the share remains high compared to historic norms. The average share for property taxes since 2000 is 32%, while the current share stands at 34.6%. Consequently, housing and other real estate owners are still paying a higher than average percentage of state and local government tax receipts.
This elevated tax burden is significant, especially when one considers the decline in housing prices since 2006 – a decline that has led many to incorrectly conclude that property tax payments have also significantly fallen. According to the Case-Shiller house price index of the 20 largest metropolitan areas, housing prices are down a little more than 33% over the last 5 years.
Yet the decline of property taxes paid from the peak is negligible thus far (1.6%). This means that the effective tax homeowners pay on their homes remains high. Nonetheless, as assessments in some areas catch-up to accurately reflect current market values of owner-occupied homes, property taxes are expected to decline – but this has not happened yet.
Taxes paid by homeowners and other real estate owners remain the largest single source of taxes for state and local governments. At 35%, property taxes represent a significantly larger share than the next largest sources: sales and gross receipt taxes and individual income taxes, each at 22%.
* Data footnote: Census data for property tax collections include taxes paid for all real estate assets (as well as personal property), including owner-occupied homes, rental housing, commercial real estate, and agriculture. However, housing’s share is by far the largest when considering the stock of both owner-occupied and rental housing units.
URL to original article: http://www.builderonline.com/builder-pulse/property-taxes-hold-even-as-values-drop.aspx?cid=BP:032612:JUMP
For further information on Fresno Real Estate check: http://www.londonproperties.com
Mobility may be more of an option than it seems
Source: CareerBuilder.com
More workers are willing to move than it may appear from recent mobility trends, and more employers may be willing to relocate people, according to this analysis from CareerRelocate and CareerBuilder.com. Here's a heat map for where jobs are by varying skills.
URL to original article: http://www.builderonline.com/builder-pulse/mobility-may-be-more-of-an-option-than-it-seems.aspx?cid=BP:032612:JUMP
For further information on Fresno Real Estate check: http://www.londonproperties.com
More workers are willing to move than it may appear from recent mobility trends, and more employers may be willing to relocate people, according to this analysis from CareerRelocate and CareerBuilder.com. Here's a heat map for where jobs are by varying skills.
URL to original article: http://www.builderonline.com/builder-pulse/mobility-may-be-more-of-an-option-than-it-seems.aspx?cid=BP:032612:JUMP
For further information on Fresno Real Estate check: http://www.londonproperties.com
Fannie and Freddie could reverse course on principal reductions
Source: Housingwire
News exploded recently of Fannie Mae and Freddie Mac seemingly reversing course on their opposition to principal write-downs. After months of emphatic “no’s,” the mortgage giants may finally be considering them.
But why the change? Because incentives from the Treasury Department would triple the incentive payments to mortgage investors who allow principal write-downs. Previously the payouts ranged between six and 21 cents to the investors for each dollar forgiven under HAMP, but that will balloon to between 18 and 63 cents.
"I have to say recently the Treasury sweetened the program and tremendously increased the incentive payments in their offer to us," Freddie Mac CEO Charles "Ed" Haldeman said at HousingWire's REThink Symposium. "We will reevaluate that to see what may be in our economic best interest. If there are very large incentive payments — which could be 50% of what you could write down — it may be in our economic self-interest to participate in that."
This blog previously evaluated the pros and cons of the GSEs doing principal write-downs, and then the immediate call for Federal Housing Finance Agency Acting Director Edward DeMarco’s head when he opposed them.
But the offer from the Treasury Department changes things. If it is going to reimburse Fannie and Freddie up to 50% of the write-down, the mortgage giants don’t hold near the amount of risk, and it’s a smarter business decision than it used to be.
DeMarco has yet to fully comment since reporting about potential GSE write-downs by NPR and ProPublica, but he issued the following statement:
“As I have stated previously, FHFA is considering HAMP incentives for principal reduction, and we have been having discussions with (Freddie and Fannie) and Treasury regarding our analysis.”
While the offer to triple incentive payments was made back in January, the GSEs' analysis of their effectiveness was only performed recently. As recently as Feb. 28, DeMarco told the Senate Banking Committee that Fannie and Freddie execs had did “not believe it is in the best interest of the companies to do so.”
It is unclear how DeMarco will respond, nor is it clear how this will eventually play out.
On Friday, top Democratic members of the House Committee on Oversight and Government Reform called on DeMarco to provide Congress with the new analysis.
“We are encouraged by reports that Mr. DeMarco may be reconsidering his opposition, but we remain concerned that he has failed to provide us all of the analyses related to his decision to prohibit principal reduction programs at Fannie and Freddie,” Rep. Elijah E. Cummings, ranking member of the House committee, said in the statement.
Until the analyses are released, we won’t know exactly how effective the principal write-downs will be by Fannie and Freddie’s standards, nor will we have a better idea where DeMarco will stand. As of Friday, he’d given no indication that the analyses in any way changed his mind.
All of this comes after Treasury Secretary Timothy Geitner told Cummings that he and DeMarco were working on sorting out their differences over principal reduction. Whether or not these analyses were part of that equation is unclear.
URL to original article: http://www.housingwire.com/blog/why-quick-change-fannie-and-freddie-reverse-course-principal-reductions
For further information on Fresno Real Estate check: http://www.londonproperties.com
News exploded recently of Fannie Mae and Freddie Mac seemingly reversing course on their opposition to principal write-downs. After months of emphatic “no’s,” the mortgage giants may finally be considering them.
But why the change? Because incentives from the Treasury Department would triple the incentive payments to mortgage investors who allow principal write-downs. Previously the payouts ranged between six and 21 cents to the investors for each dollar forgiven under HAMP, but that will balloon to between 18 and 63 cents.
"I have to say recently the Treasury sweetened the program and tremendously increased the incentive payments in their offer to us," Freddie Mac CEO Charles "Ed" Haldeman said at HousingWire's REThink Symposium. "We will reevaluate that to see what may be in our economic best interest. If there are very large incentive payments — which could be 50% of what you could write down — it may be in our economic self-interest to participate in that."
This blog previously evaluated the pros and cons of the GSEs doing principal write-downs, and then the immediate call for Federal Housing Finance Agency Acting Director Edward DeMarco’s head when he opposed them.
But the offer from the Treasury Department changes things. If it is going to reimburse Fannie and Freddie up to 50% of the write-down, the mortgage giants don’t hold near the amount of risk, and it’s a smarter business decision than it used to be.
DeMarco has yet to fully comment since reporting about potential GSE write-downs by NPR and ProPublica, but he issued the following statement:
“As I have stated previously, FHFA is considering HAMP incentives for principal reduction, and we have been having discussions with (Freddie and Fannie) and Treasury regarding our analysis.”
While the offer to triple incentive payments was made back in January, the GSEs' analysis of their effectiveness was only performed recently. As recently as Feb. 28, DeMarco told the Senate Banking Committee that Fannie and Freddie execs had did “not believe it is in the best interest of the companies to do so.”
It is unclear how DeMarco will respond, nor is it clear how this will eventually play out.
On Friday, top Democratic members of the House Committee on Oversight and Government Reform called on DeMarco to provide Congress with the new analysis.
“We are encouraged by reports that Mr. DeMarco may be reconsidering his opposition, but we remain concerned that he has failed to provide us all of the analyses related to his decision to prohibit principal reduction programs at Fannie and Freddie,” Rep. Elijah E. Cummings, ranking member of the House committee, said in the statement.
Until the analyses are released, we won’t know exactly how effective the principal write-downs will be by Fannie and Freddie’s standards, nor will we have a better idea where DeMarco will stand. As of Friday, he’d given no indication that the analyses in any way changed his mind.
All of this comes after Treasury Secretary Timothy Geitner told Cummings that he and DeMarco were working on sorting out their differences over principal reduction. Whether or not these analyses were part of that equation is unclear.
URL to original article: http://www.housingwire.com/blog/why-quick-change-fannie-and-freddie-reverse-course-principal-reductions
For further information on Fresno Real Estate check: http://www.londonproperties.com
Friday, March 23, 2012
Of Jobs, Loans and Timing
Source: The New York Times
IF searching for a new job and refinancing a home are both on the agenda, you might be wondering which task you should finish first.
Mortgage experts generally recommend that homeowners complete their refinancing before making any major career changes, especially if they are planning to start their own business or become an independent contractor, in which case income may fluctuate.
“There’s no real reason to wait unless you don’t qualify” with current income, said Matt Hackett, the underwriting manager for Equity Now, a direct mortgage lender in New York City.
The job market has been steadily improving. The unemployment rate fell to 8.3 percent in February from 9.0 percent in February 2011. And data released this month from the Bureau of Labor Statistics shows that more people quitting their jobs this year are doing so voluntarily.
But depending on work history and mortgage lender, just being in the market for a new job might hinder a person’s ability to refinance or buy a home.
“If you’re actively looking to leave your job, it will impact how the bank views giving you a mortgage,” said Jason Auerbach, a divisional manager of First Choice Loan Services in Manhattan. The search raises “a question mark about their future employment” and income, he added.
In addition to checking employment at the start of the application process, many lenders will verify such information as late as the last 72 hours before mortgage closing. If they learn a borrower is starting a new job in the very near future, the mortgage can be delayed or even derailed. And borrowers who withhold such information could be committing income fraud, Mr. Auerbach said.
Other lenders, however, say they make loans based on a moment-in-time snapshot of a borrower’s finances.
“As long as the time when you’re closing that loan that you’re gainfully employed in the job that you said you were, you’re telling the truth,” said Heidi Yanavich, who trains mortgage loan originators at the McCue Mortgage Company, a direct lender in New Britain, Conn.
Still, Mrs. Yanavich said, the best path is to refinance first and change jobs afterward — especially if a borrower is changing careers. “Your success in a new field is not established,” she said.
An advantage to refinancing first is that “you are freeing up additional cash flow” by reducing your monthly payment, said Jodi Glickman, the founder of Great on the Job, a career-training company based in Chicago. Some job changers may earn less at first. “They are going to be assuming more risk,” she said, pointing out that they therefore need to reduce their financial risks.
All that said, however, there are advantages to refinancing later, especially for those who might have to relocate when they change jobs, Ms. Glickman said.
A person may well get a new job with more income and responsibility, or in an especially robust industry. That may help him or her qualify for a larger mortgage, or even better terms. According to Mr. Auerbach, you could be able to borrow up to four times your annual income.
Taking a new job right in the middle of a mortgage refinancing, though, could mean extra time and paperwork. Mr. Auerbach, for one, says he will very likely want to see an employment contract or a job offer letter.
Other lenders may want you to wait. Mrs. Yanavich says borrowers may need to provide 30 days of pay stubs and have their employer verify their employment and the time frame of any probationary period.
The Federal Housing Administration, along with Fannie Mae and Freddie Mac, requires 30 days’ pay stubs if the loans are going to be insured by or resold to those entities.
If you’re counting on a future bonus, expect to be asked for a letter from your employer verifying that, too.
“Today’s lending is pretty conservative,” Mrs. Yanavich said. “Incomes need to be documented.”
URL to original article: http://www.nytimes.com/2012/03/18/realestate/mortgages-of-jobs-loans-and-timing.html?_r=1
For further information on Fresno Real Estate check: http://www.londonproperties.com
IF searching for a new job and refinancing a home are both on the agenda, you might be wondering which task you should finish first.
Mortgage experts generally recommend that homeowners complete their refinancing before making any major career changes, especially if they are planning to start their own business or become an independent contractor, in which case income may fluctuate.
“There’s no real reason to wait unless you don’t qualify” with current income, said Matt Hackett, the underwriting manager for Equity Now, a direct mortgage lender in New York City.
The job market has been steadily improving. The unemployment rate fell to 8.3 percent in February from 9.0 percent in February 2011. And data released this month from the Bureau of Labor Statistics shows that more people quitting their jobs this year are doing so voluntarily.
But depending on work history and mortgage lender, just being in the market for a new job might hinder a person’s ability to refinance or buy a home.
“If you’re actively looking to leave your job, it will impact how the bank views giving you a mortgage,” said Jason Auerbach, a divisional manager of First Choice Loan Services in Manhattan. The search raises “a question mark about their future employment” and income, he added.
In addition to checking employment at the start of the application process, many lenders will verify such information as late as the last 72 hours before mortgage closing. If they learn a borrower is starting a new job in the very near future, the mortgage can be delayed or even derailed. And borrowers who withhold such information could be committing income fraud, Mr. Auerbach said.
Other lenders, however, say they make loans based on a moment-in-time snapshot of a borrower’s finances.
“As long as the time when you’re closing that loan that you’re gainfully employed in the job that you said you were, you’re telling the truth,” said Heidi Yanavich, who trains mortgage loan originators at the McCue Mortgage Company, a direct lender in New Britain, Conn.
Still, Mrs. Yanavich said, the best path is to refinance first and change jobs afterward — especially if a borrower is changing careers. “Your success in a new field is not established,” she said.
An advantage to refinancing first is that “you are freeing up additional cash flow” by reducing your monthly payment, said Jodi Glickman, the founder of Great on the Job, a career-training company based in Chicago. Some job changers may earn less at first. “They are going to be assuming more risk,” she said, pointing out that they therefore need to reduce their financial risks.
All that said, however, there are advantages to refinancing later, especially for those who might have to relocate when they change jobs, Ms. Glickman said.
A person may well get a new job with more income and responsibility, or in an especially robust industry. That may help him or her qualify for a larger mortgage, or even better terms. According to Mr. Auerbach, you could be able to borrow up to four times your annual income.
Taking a new job right in the middle of a mortgage refinancing, though, could mean extra time and paperwork. Mr. Auerbach, for one, says he will very likely want to see an employment contract or a job offer letter.
Other lenders may want you to wait. Mrs. Yanavich says borrowers may need to provide 30 days of pay stubs and have their employer verify their employment and the time frame of any probationary period.
The Federal Housing Administration, along with Fannie Mae and Freddie Mac, requires 30 days’ pay stubs if the loans are going to be insured by or resold to those entities.
If you’re counting on a future bonus, expect to be asked for a letter from your employer verifying that, too.
“Today’s lending is pretty conservative,” Mrs. Yanavich said. “Incomes need to be documented.”
URL to original article: http://www.nytimes.com/2012/03/18/realestate/mortgages-of-jobs-loans-and-timing.html?_r=1
For further information on Fresno Real Estate check: http://www.londonproperties.com
Thursday, March 22, 2012
February sales and price report
Source: California Association of Realtors
California home sales post higher in February; inventory remains low
LOS ANGELES (March 15) – Recent improvements in the overall economy, combined with extremely low interest rates lifted California home sales from both the prior month and year in February, according to data from the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.). The median price dipped from January but is beginning to show signs of stabilization.
“While the median home price dipped in February, the year-over-year decline was the smallest recorded since December 2010,” said C.A.R. President LeFrancis Arnold. “This may be a signal of a possible stabilization in home prices, which should bode well for prospective buyers who have been on the sidelines waiting for prices to level out and may entice them to jump into the market.”
Closed escrow sales of existing, single-family detached homes in California totaled a seasonally adjusted annualized rate of 528,010 in February, according to information collected by C.A.R. from more than 90 local REALTOR® associations and MLSs statewide. February’s sales were up 2.1 percent from January’s revised pace of 517,120 and up 5.5 percent from the revised 500,480 sales pace recorded in February 2011. The statewide sales figure represents what would be the total number of homes sold during 2012 if sales maintained the February pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales.
“February sales posted a stronger than usual performance with sales in major metropolitan areas such as Los Angeles, Orange County, San Diego, and San Francisco all logging double-digit gains from the previous year,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. “Recent encouraging signs in the GDP, employment picture, and consumer confidence suggest that a growing economy is in the making. All this, combined with continued-low mortgage rates, lays out a good foundation for the housing market to continue to grow as we enter the spring home buying season.”
The statewide median price of an existing, single-family detached home dipped 0.6 percent to $266,660 in February from January’s $268,280 median price. The median price was down 1.7 percent from the revised $271,370 median price recorded in February 2011.
Other key facts of C.A.R.’s February 2012 resale housing report include:
• California’s housing inventory declined in February, with the Unsold Inventory Index for existing, single-family detached homes decreasing to 5.3 months in February, down from a revised 5.7 months in January and down from the 7.5-month supply in February 2011. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.
• Interest rates fell to record lows again in February. Thirty-year fixed-mortgage interest rates averaged 3.89 percent during February 2012, down from 4.95 percent in February 2011, according to Freddie Mac. Adjustable-mortgage interest rates averaged 2.78 percent in February 2012, compared with 3.35 percent in February 2011.
• The median number of days it took to sell a single-family home fell to 58.9 days in February 2012 and was down from a revised 64.7 days for the same period a year ago.
• View Unsold Inventory by price range.
Note: The County MLS median price and sales data in the tables are generated from a survey of more than 90 associations of REALTORS® throughout the state, and represent statistics of existing single-family detached homes only. County sales data are not adjusted to account for seasonal factors that can influence home sales. Movements in sales prices should not be interpreted as changes in the cost of a standard home. Median prices can be influenced by changes in cost, as well as changes in the characteristics and the size of homes sold. Due to the low sales volume in some areas, median price changes in December may exhibit unusual fluctuation.
Leading the way...® in California real estate for more than 100 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States with 160,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.
URL to original article: http://www.car.org/newsstand/newsreleases/2012releases/Febsales
For further information on Fresno Real Estate check: http://www.londonproperties.com
California home sales post higher in February; inventory remains low
LOS ANGELES (March 15) – Recent improvements in the overall economy, combined with extremely low interest rates lifted California home sales from both the prior month and year in February, according to data from the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.). The median price dipped from January but is beginning to show signs of stabilization.
“While the median home price dipped in February, the year-over-year decline was the smallest recorded since December 2010,” said C.A.R. President LeFrancis Arnold. “This may be a signal of a possible stabilization in home prices, which should bode well for prospective buyers who have been on the sidelines waiting for prices to level out and may entice them to jump into the market.”
Closed escrow sales of existing, single-family detached homes in California totaled a seasonally adjusted annualized rate of 528,010 in February, according to information collected by C.A.R. from more than 90 local REALTOR® associations and MLSs statewide. February’s sales were up 2.1 percent from January’s revised pace of 517,120 and up 5.5 percent from the revised 500,480 sales pace recorded in February 2011. The statewide sales figure represents what would be the total number of homes sold during 2012 if sales maintained the February pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales.
“February sales posted a stronger than usual performance with sales in major metropolitan areas such as Los Angeles, Orange County, San Diego, and San Francisco all logging double-digit gains from the previous year,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. “Recent encouraging signs in the GDP, employment picture, and consumer confidence suggest that a growing economy is in the making. All this, combined with continued-low mortgage rates, lays out a good foundation for the housing market to continue to grow as we enter the spring home buying season.”
The statewide median price of an existing, single-family detached home dipped 0.6 percent to $266,660 in February from January’s $268,280 median price. The median price was down 1.7 percent from the revised $271,370 median price recorded in February 2011.
Other key facts of C.A.R.’s February 2012 resale housing report include:
• California’s housing inventory declined in February, with the Unsold Inventory Index for existing, single-family detached homes decreasing to 5.3 months in February, down from a revised 5.7 months in January and down from the 7.5-month supply in February 2011. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.
• Interest rates fell to record lows again in February. Thirty-year fixed-mortgage interest rates averaged 3.89 percent during February 2012, down from 4.95 percent in February 2011, according to Freddie Mac. Adjustable-mortgage interest rates averaged 2.78 percent in February 2012, compared with 3.35 percent in February 2011.
• The median number of days it took to sell a single-family home fell to 58.9 days in February 2012 and was down from a revised 64.7 days for the same period a year ago.
• View Unsold Inventory by price range.
Note: The County MLS median price and sales data in the tables are generated from a survey of more than 90 associations of REALTORS® throughout the state, and represent statistics of existing single-family detached homes only. County sales data are not adjusted to account for seasonal factors that can influence home sales. Movements in sales prices should not be interpreted as changes in the cost of a standard home. Median prices can be influenced by changes in cost, as well as changes in the characteristics and the size of homes sold. Due to the low sales volume in some areas, median price changes in December may exhibit unusual fluctuation.
Leading the way...® in California real estate for more than 100 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States with 160,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.
URL to original article: http://www.car.org/newsstand/newsreleases/2012releases/Febsales
For further information on Fresno Real Estate check: http://www.londonproperties.com
C.A.R. Opposes Transfer Tax Legislation
Source: California Association of Realtors
C.A.R. is opposing SB 1220 (DeSaulnier), which imposes a transfer tax to generate funds for affordable housing. C.A.R. is opposing SB 1220 because it will add to the cost of buying a home at a time when the housing market is struggling to recover. C.A.R. is an aggressive advocate for affordable housing, but believes it is bad policy to fund affordable housing by making housing less affordable and to fund affordable housing at the expense of homebuyers.
Sen. DeSaulnier has introduced SB 1220 to permanently fund an affordable housing trust fund. Unfortunately, SB 1220 creates a real estate transfer tax of $75 per document to fund this program. In virtually all transactions, a minimum of three documents are recorded – the grant deed, the release and reconveyance, and a trust deed. SB 1220 will create a minimum $225 transfer tax, and the amount could be even higher, depending on the total number of documents recorded.
C.A.R. opposes SB 1220 because it targets one group (homebuyers) to pay for affordable housing, which is an issue of broad social concern. While there may be a need for affordable housing funds, it is unfair to require only those individuals recording real estate documents to be the sources of that funding. The lack of sufficient affordable housing is a statewide concern. As such, if it is deemed necessary to implement some type of funding mechanism to generate funds for affordable housing, that mechanism should be as broad based as possible.
C.A.R. is also troubled that SB 1220 increases the already-substantial cost of buying a home. Many cities already have local transfer taxes. SB 1220 creates an additional transfer tax of at least $225 on almost all real estate transactions, including refinances, adding to the costly existing fees and taxes already paid by homebuyers. Keep in mind that every $1,000-increase in the median price of a home disqualifies almost 20,000 California households from affording a home.
Certain nonprofit groups are attempting to mobilize our members to garner support for this bill, despite CAR’s opposition. Please be aware of these communications, and if you received any, please forward to DeAnn Kerr at deannk@car.org .
While C.A.R. adamantly supports the creation of homeownership opportunities, SB 1220 is clearly not the way to achieve this goal. SB 1220 is expected to have a hearing in the Senate in April.
URL to original article: http://www.car.org/governmentaffairs/getinvolved/sb1220opposetransfertax/
For further information on Fresno Real Estate check: http://www.londonproperties.com
C.A.R. is opposing SB 1220 (DeSaulnier), which imposes a transfer tax to generate funds for affordable housing. C.A.R. is opposing SB 1220 because it will add to the cost of buying a home at a time when the housing market is struggling to recover. C.A.R. is an aggressive advocate for affordable housing, but believes it is bad policy to fund affordable housing by making housing less affordable and to fund affordable housing at the expense of homebuyers.
Sen. DeSaulnier has introduced SB 1220 to permanently fund an affordable housing trust fund. Unfortunately, SB 1220 creates a real estate transfer tax of $75 per document to fund this program. In virtually all transactions, a minimum of three documents are recorded – the grant deed, the release and reconveyance, and a trust deed. SB 1220 will create a minimum $225 transfer tax, and the amount could be even higher, depending on the total number of documents recorded.
C.A.R. opposes SB 1220 because it targets one group (homebuyers) to pay for affordable housing, which is an issue of broad social concern. While there may be a need for affordable housing funds, it is unfair to require only those individuals recording real estate documents to be the sources of that funding. The lack of sufficient affordable housing is a statewide concern. As such, if it is deemed necessary to implement some type of funding mechanism to generate funds for affordable housing, that mechanism should be as broad based as possible.
C.A.R. is also troubled that SB 1220 increases the already-substantial cost of buying a home. Many cities already have local transfer taxes. SB 1220 creates an additional transfer tax of at least $225 on almost all real estate transactions, including refinances, adding to the costly existing fees and taxes already paid by homebuyers. Keep in mind that every $1,000-increase in the median price of a home disqualifies almost 20,000 California households from affording a home.
Certain nonprofit groups are attempting to mobilize our members to garner support for this bill, despite CAR’s opposition. Please be aware of these communications, and if you received any, please forward to DeAnn Kerr at deannk@car.org .
While C.A.R. adamantly supports the creation of homeownership opportunities, SB 1220 is clearly not the way to achieve this goal. SB 1220 is expected to have a hearing in the Senate in April.
URL to original article: http://www.car.org/governmentaffairs/getinvolved/sb1220opposetransfertax/
For further information on Fresno Real Estate check: http://www.londonproperties.com
Freddie Mac: Mortgage rates on the rise
Written by Business Journal Staff
It looks like home mortgage rates are creeping up after months of dwelling at historically low levels.
The average U.S. rate on a 30-year fixed mortgage recently rose above 4 percent for the first time in five months. In Fresno, 30-year fixed mortgage rates currently vary from 3.94 percent to 4.14 percent.
The sharp increase could indicate the window to buy or refinance a home at rock-bottom levels is closing.
Mortgage buyer Freddie Mac reported on March 22 that the rate on the 30-year loan jumped to 4.08 percent, up from 3.92 percent the previous week. A month ago it fell to 3.87 percent, the lowest percentage since long-term mortgages began in the 1950s.
Experts report that mortgage rates are rising because they tend to track the yield on the 10-year Treasury note. Improvements in the economy have driven yields on long-term U.S. Treasury bonds higher in recent weeks.
The average rate on the 30-year mortgage had been at or below 4 percent since last October. Then rates gradually declined until a jump to 3.98 percent on Jan. 27.
They then held steady for several months.
URL to original article: http://www.thebusinessjournal.com/news/real-estate/1250-mortgage-rates-start-to-rise
For further information on Fresno Real Estate check: http://www.londonproperties.com
It looks like home mortgage rates are creeping up after months of dwelling at historically low levels.
The average U.S. rate on a 30-year fixed mortgage recently rose above 4 percent for the first time in five months. In Fresno, 30-year fixed mortgage rates currently vary from 3.94 percent to 4.14 percent.
The sharp increase could indicate the window to buy or refinance a home at rock-bottom levels is closing.
Mortgage buyer Freddie Mac reported on March 22 that the rate on the 30-year loan jumped to 4.08 percent, up from 3.92 percent the previous week. A month ago it fell to 3.87 percent, the lowest percentage since long-term mortgages began in the 1950s.
Experts report that mortgage rates are rising because they tend to track the yield on the 10-year Treasury note. Improvements in the economy have driven yields on long-term U.S. Treasury bonds higher in recent weeks.
The average rate on the 30-year mortgage had been at or below 4 percent since last October. Then rates gradually declined until a jump to 3.98 percent on Jan. 27.
They then held steady for several months.
URL to original article: http://www.thebusinessjournal.com/news/real-estate/1250-mortgage-rates-start-to-rise
For further information on Fresno Real Estate check: http://www.londonproperties.com
Wednesday, March 21, 2012
US home re-sales complete best winter in 5 years
Written by DEREK KRAVITZ, AP Real Estate Writer
(AP) — U.S. home sales are gradually coming back. A mild winter and a stronger job market have helped boost sales ahead of the crucial spring buying season.
The past two months made up the best winter for sales of previously occupied homes in five years, when the housing crisis began. And the sales pace in January was the highest since May 2010, the last month that buyers could qualify for a federal home-buying tax credit.
February sales dipped only slightly to a seasonally adjusted 4.59 million, the National Association of Realtors said Wednesday. That's 13 percent higher than the sales pace last July and just below the revised 4.63 million in January.
Ian Shepherdson, chief U.S. economist at High Frequency Economics, said the lower February's numbers "should not detract from the key point, which is that sales are trending upward."
The pace remains far below the 6 million that economists equate with healthy markets. And the number of first-time buyers, who are critical to a housing recovery, continues to lag normal levels, while foreclosures remain high.
Still, Chris Jones, economist at TD Economics, said the "economic environment is ripe for home sales to keep gaining pace."
The median sales prices of homes rose for the first time in four months in February, to $156,600. And the supply of homes on the market increased more than 4 percent in February to 2.43 million, which could signal that more homeowners became confident in the housing market.
There have been other signs of improvement in the depressed housing market.
Homebuilders have grown more confident in the past six months after seeing more people express interest in buying a home. In February, they requested the most permits to build homes since October 2008.
Mortgage rates are near record lows. And the supply of homes fell in January to its lowest level in seven years.
A lower supply helps push up prices, which lures more sellers onto the market and generally improves the quality of homes for sale. Rising prices also boost sales because buyers want to invest in homes that are appreciating in value.
A key reason for the brighter housing outlook is the job market has strengthened. From December through February, employers added an average of 245,000 jobs a month. The unemployment rate has fallen to 8.3 percent, the lowest in three years.
Still, economists caution that the damage from the housing bust is deep and the industry is years away from fully recovering.
Sales among first-time buyers, who are critical to a housing recovery, fell slightly last month to 32 percent of all purchases. That's down from 33 percent in January. In healthy markets, first-time buyers make up at least 40 percent.
And homes at risk of foreclosure made up 34 percent of sales, down only slightly from 35 percent in January. In more stable markets, foreclosures make up less than 10 percent of sales.
For the past few years, the market has been saturated for years with foreclosures. That has put downward pressure on prices and driven away buyers.
Many can't qualify for loans or meet higher down-payment requirements. Even those with excellent credit and stable jobs are holding off because they fear that home prices will keep falling.
Sales are measured when buyers close on homes. Some deals have been scuttled before the closing after banks declined mortgage applications, home inspectors found problems, appraisals showed a home was worth less than the bid, or a buyer lost a job.
One-third of Realtors say they've had at least one contract scuttled in each of the past five months. That's up from just 18 percent in September.
Sales were mixed across the country. They rose on a seasonal basis 1 percent in the Midwest and 0.6 percent in the South. They dropped 3.2 percent in the West and 3.3 percent in the Northeast.
URL to original article: http://thebusinessjournal.com/news/national/1232-us-home-re-sales-complete-best-winter-in-5-years
For further information on Fresno Real Estate check: http://www.londonproperties.com
(AP) — U.S. home sales are gradually coming back. A mild winter and a stronger job market have helped boost sales ahead of the crucial spring buying season.
The past two months made up the best winter for sales of previously occupied homes in five years, when the housing crisis began. And the sales pace in January was the highest since May 2010, the last month that buyers could qualify for a federal home-buying tax credit.
February sales dipped only slightly to a seasonally adjusted 4.59 million, the National Association of Realtors said Wednesday. That's 13 percent higher than the sales pace last July and just below the revised 4.63 million in January.
Ian Shepherdson, chief U.S. economist at High Frequency Economics, said the lower February's numbers "should not detract from the key point, which is that sales are trending upward."
The pace remains far below the 6 million that economists equate with healthy markets. And the number of first-time buyers, who are critical to a housing recovery, continues to lag normal levels, while foreclosures remain high.
Still, Chris Jones, economist at TD Economics, said the "economic environment is ripe for home sales to keep gaining pace."
The median sales prices of homes rose for the first time in four months in February, to $156,600. And the supply of homes on the market increased more than 4 percent in February to 2.43 million, which could signal that more homeowners became confident in the housing market.
There have been other signs of improvement in the depressed housing market.
Homebuilders have grown more confident in the past six months after seeing more people express interest in buying a home. In February, they requested the most permits to build homes since October 2008.
Mortgage rates are near record lows. And the supply of homes fell in January to its lowest level in seven years.
A lower supply helps push up prices, which lures more sellers onto the market and generally improves the quality of homes for sale. Rising prices also boost sales because buyers want to invest in homes that are appreciating in value.
A key reason for the brighter housing outlook is the job market has strengthened. From December through February, employers added an average of 245,000 jobs a month. The unemployment rate has fallen to 8.3 percent, the lowest in three years.
Still, economists caution that the damage from the housing bust is deep and the industry is years away from fully recovering.
Sales among first-time buyers, who are critical to a housing recovery, fell slightly last month to 32 percent of all purchases. That's down from 33 percent in January. In healthy markets, first-time buyers make up at least 40 percent.
And homes at risk of foreclosure made up 34 percent of sales, down only slightly from 35 percent in January. In more stable markets, foreclosures make up less than 10 percent of sales.
For the past few years, the market has been saturated for years with foreclosures. That has put downward pressure on prices and driven away buyers.
Many can't qualify for loans or meet higher down-payment requirements. Even those with excellent credit and stable jobs are holding off because they fear that home prices will keep falling.
Sales are measured when buyers close on homes. Some deals have been scuttled before the closing after banks declined mortgage applications, home inspectors found problems, appraisals showed a home was worth less than the bid, or a buyer lost a job.
One-third of Realtors say they've had at least one contract scuttled in each of the past five months. That's up from just 18 percent in September.
Sales were mixed across the country. They rose on a seasonal basis 1 percent in the Midwest and 0.6 percent in the South. They dropped 3.2 percent in the West and 3.3 percent in the Northeast.
URL to original article: http://thebusinessjournal.com/news/national/1232-us-home-re-sales-complete-best-winter-in-5-years
For further information on Fresno Real Estate check: http://www.londonproperties.com
Tuesday, March 20, 2012
Haircuts 101: how mispriced foreclosures lead to a REO glut
Source: Federal Reserve Bank of Cleveland
Swelling REO inventories are the latest fallout of the housing crisis, costing lenders money and contributing to neighborhood blight. Yet lenders could avoid taking on so much REO if they could more accurately estimate the value of the homes they foreclose on, especially in weak housing markets. Correcting this apparent misunderstanding of the market could speed the clearing of REO inventories, save lenders money, and help stabilize housing markets.
Because foreclosure rates have been elevated for so long and housing demand has been weak, the number of properties repossessed by lenders has ballooned. The growth of these real-estate-owned (REO) inventories has shifted much of the national policy focus from preventing foreclosure to shedding REO inventory.
As REO inventories grow, a number of problems grow with them. For one thing, property sitting in REO is expensive for lenders. Lenders must keep their REO properties secure, bring them up to local housing codes, maintain them, pay property taxes, and market them for resale. Meanwhile, neighborhoods wrestle with increased vacancy and its consequences, as the vast majority of REO properties are vacant.
These problems are worse in weak housing markets, where the supply of housing exceeds the demand for it. Several factors combine to increase the odds that REO homes will actually cost more to maintain than lenders can expect to sell them for. For example, carrying costs are likely to be higher. Homes entering foreclosure and lingering in REO in weak markets tend to be older and of lower quality than homes entering REO in strong markets. Property in weak markets is more likely to be vandalized while sitting in REO, and older housing stock tends to deteriorate more rapidly. To top it off, weak demand for housing depresses overall housing prices.
In weak markets, lenders may be better served by not taking properties into REO in the first place, or minimizing the time properties spend in REO by donating them to land banks (see “How Modern Land Banking Can Be Used to Solve REO Acquisition Problems” in the Recommended Reading).
Why this is not occurring more often may be explained by the systematic overestimation of property values in weak housing markets by appraisers, investors, and lenders. Overestimating the value of a foreclosed home leads lenders to set too high a minimum bid at the sheriff’s sale, which lowers the chance that someone will buy the home at the auction and take it off the lender’s hands.
We analyzed sales data from Cuyahoga County, Ohio, and found signs that appraisers, lenders, and investors could be routinely overestimating the property values of foreclosed homes there. We suggest some simple identifiers that can help lenders better estimate home values in weak housing markets. And though we have focused on one county, we believe the situation could be the same in other places. The factors we identify as possible causes of overestimation in Cuyahoga County are likely to be found in many other weak housing markets around the country.
Estimated Property Values and the Reality Check
To investigate how accurately lenders are valuing properties prior to taking them into REO, we turned to a relatively weak housing market: Cuyahoga County, Ohio (home to Cleveland). We analyzed property transaction data from the county auditor from January 2006 to June 2011, comparing the auction price paid by the lender and the subsequent sale price of the home. If the sale price is less than the minimum that was set, we say the lender took a “loss.”
Ohio is a judicial foreclosure state, which means that once a property has been foreclosed upon, it is seized by the county sheriff and auctioned off. Once the property has been seized, the sheriff pays for appraisers to go out and value the property. By state law, the minimum bid (or auction reserve) at the first auction is set at two-thirds of the appraised price. If there are no bids at the first auction, the lender can set the minimum bid for subsequent auctions, which are held weekly, at any amount up to the amount of the unpaid loan. For example, if a borrower had $100,000 of loan principal outstanding at the time of foreclosure, the lender could set the minimum bid at $100,000 plus foreclosure costs.
In theory, the lender should be setting the minimum bid based upon what it could obtain by selling the property, less carrying and transaction costs. Lenders typically obtain a real estate broker’s price opinion or a “walk around” appraisal, and then they calculate expected costs and value the property accordingly. In Cuyahoga County, it is unclear if lenders are relying on the foreclosure appraisal or if they are obtaining additional valuations of the property. If no buyer, including the lender, offers the minimum bid at the auction, the property is re-auctioned the following week.
Table 1 summarizes the losses that lenders appear to take in the data we analyzed. Lenders’ losses are compared to the losses taken by other major participants in sheriff’s sales: investors and federal agencies such as Fannie Mae, Freddie Mac, and the Federal Housing Administration. Most major participants are either lenders who hold the mortgages and take ownership of property that is not purchased at auction, or investors who purchase property at auction.
Purchasers of property at Cuyahoga County foreclosure auctions tend to resell the property for less than they paid. Investors tend to do the best, selling properties for an average of 26.5 percent less than they paid at auction. Federal agencies do worse on average than investors, but better than lenders, selling properties out of REO for about 30 percent less than their auction reserves. Lenders tend to sell property out of REO for 42 percent less than the auction price.
There are three forces that very likely combine to create the trend of higher losses the longer properties stay in REO. First, the higher-quality REO properties in any price range exit REO within the first few months. Those that take longer to sell are probably the ones that were in relatively poor condition when repossessed. Second, the homes may be rapidly deteriorating while the lenders own them. The lower-value homes in distressed neighborhoods are often vandalized and stripped of metals. Despite winterization, homes may suffer weather-related damage without an attentive occupant to immediately address problems when they arise. A third, potentially contributing factor, is any downward trend in home prices that occurs while homes sit in REO. Certainly, such a trend occurred in Cuyahoga County over the period we studied, owing to the growing supply of REO and recently foreclosed homes, along with weakening demand for property in distressed areas. In any case, what lingers is worth far less than the price the lender pays at auction.
Lenders might be overvaluing property in weak housing markets because they are using a uniform process that works well in most areas. For example, a drive-by appraisal of new housing stock is more likely to produce an accurate market price than it would for older, distressed housing stock. With few exceptions, newer homes will be in good condition inside and out. However, the age distribution of REO homes in weak markets is much older than most of the housing stock in the United States. In the Cuyahoga data, 86 percent of the homes in REO are at least a half-century old. Over the decades, some older homes were well maintained and others were neglected, leading to a very wide range of conditions and values.
The inaccuracies may also be due to appraisers or brokers not having enough comparable arms-length property sales (regular market-based sales) in extremely distressed markets, where most sales in the last five years have involved recent foreclosures. Looking to older arms-length sales at stale prices for a drive-by appraisal or broker price opinion may also overestimate the sale price in these markets.
Some Simple Ways to Improve Accuracy
A sorting out of REO properties is bound to happen because lenders do not have perfect information about their collateral to assign the perfect reserve price. However, dividing up the data suggests that the issue is not inadequate inspections of individual homes, but possibly misunderstanding entire market segments. We can observe that auction prices are much closer to the eventual sales prices in the part of the market that is closer to “normal.”
Nationally and regionally, the bulk of arms-length home sale prices exceed $100,000. As seen in figure 2, for homes with auction prices over $100,000, the auction price is close to the eventual sale price in at least half of the instances. For homes with reserves below $50,000 (57 percent of the REO inventory), the auction prices are substantially above what the house is eventually sold for. One possible reason for this systemic bias in auction prices in the below-$50,000 market segment is that lenders are calibrating valuation methods based on normal markets, not recognizing the unique situation of inflated appraisal values in the areas where most of their foreclosures have occurred.
The gap between the lender’s auction reserve and the price received for selling the property out of REO seems to vary with a few easily observed characteristics. The age of the home being auctioned off contains a lot of information that lenders may find useful to incorporate into their auction reserve calculations. As mentioned above, older housing deteriorates more rapidly than new housing and may be concentrated in less desirable neighborhoods. Table 2 shows lenders’ losses by the age of the home. While the method used by lenders to value property seems to be fairly accurate for newer homes, it again appears to grossly overestimate the value of homes constructed before 1941.
Neither the appraised value nor the lender’s auction reserve seems to be factoring in the property’s location. Table 2 contains lenders’ losses by location of the property. Again, the method used by lenders to determine property values seems relatively accurate for properties located in either low-poverty census tracts or in the outer ring suburbs of Cuyahoga County, while auction reserves seem to be set too high in medium- and high-poverty census tracts and in Cleveland or Cuyahoga County’s inner-ring suburbs.
Lenders do not seem to be consistently refining their methods for estimating the value of homes in weak markets. Estimates seem to be improving for only the lowest-poverty areas. Figure 3 shows the losses taken by lenders based on the year the property was taken into REO and the poverty level of the neighborhood.
From 2007 to 2009, losses dropped across the board, which could reflect appraisals becoming more accurate. (However, these drops may also be explained by other factors, such as the first-time-homebuyer tax credit propping up housing demand in 2009 and 2010.) If the reduction in losses resulted from refining property-valuation techniques, losses should have remained the same or continued to shrink in 2010. It appears that the only area in which lenders are modifying their property-valuation techniques—either to lower auction reserves or foreclose more selectively—are the high-poverty areas of Cuyahoga County. In medium- and low-poverty areas, losses shot up in 2010.
Data for 2010 is not complete. The calculations for figure 3 are based on homes that exit REO within two years, and we have not yet observed two years of sales for all of the homes foreclosed in 2010. Updating these calculations will include the lower-quality properties that take longer to sell, thereby increasing the estimated losses on 2010 foreclosures.
Policy Implications
There are three reasons lenders may be overvaluing foreclosed properties. The first is that they may not actually be overvaluing property at all, but rather placing the minimum bid knowing the property is not worth it. Anecdotally, some lenders report placing the minimum bid just to obtain control of the property, even when they know it is worth less. However, it is unclear why lenders would want control of these properties.
On one hand, lenders might want to gain control at the auction to get higher prices for the home later. Buyers should pay more for REO homes, which they can inspect, than they would for a home at a sheriff’s sale, where inspections are limited or impossible. Bidding on a home without inspecting it is risky, and the prices would have to be very low to entice bidders. Collecting the higher sale price after buyers inspect the property could justify setting auction reserve prices higher.
On the other hand, this strategy can work in the opposite direction. If a home is found to be uninhabitable and beyond repair after the sheriff’s sale, the lender has foregone any proceeds from another bidder. Many of the REO homes eventually sell for prices so low that the proceeds would barely cover the maintenance and transaction expenses. If the lenders lowered the auction reserve to these prices, the same buyers might take more of the homes at the sheriff’s sale, and the lender would not incur the expenses.
Lenders may be overvaluing properties because their valuation methods—which they use because they work well in most markets—don’t happen to work well in weak ones. The evidence supports this explanation, since it is not only lenders that overestimate the value of properties acquired in the sheriff’s sale, but all parties, including federal agencies and investors. Proper valuation methods would substantially discount the appraised value of homes in weak markets, bringing the estimates of value more in line with what the property will sell for on the open market. It is important to remember that lenders usually cannot legally enter the home and inspect the interior prior to foreclosure, which would prevent them from detecting hidden defects. But even when they are allowed to inspect the interior, it may not be feasible to inspect each property prior to foreclosure, given the number of foreclosures initiated every year.
Finally, there may be incentives that encourage lenders to overvalue foreclosed properties. Doing so would allow them to shift accounting losses from their loan portfolio to their REO portfolio. Solvency tests and supervisors of financial institutions place less emphasis on REO portfolios than on loan portfolios. This is a function of banks having relatively small REO portfolios in normal times, but always having an active loan portfolio that can be analyzed.
Regardless of why it is occurring, correcting the systematic overestimation of property values in weak housing markets appears to be relatively simple and has large potential ramifications. Our analysis suggests that if lenders place more weight on simple property characteristics—the age of the home and its location—in their value estimates, they will more accurately price property in weak housing markets.
More accurate pricing could lower REO carrying costs in a few ways. As discussed above, lenders could avoid taking on REO altogether by setting their auction reserves lower and allowing others to purchase more properties at auction. Additionally, more accurate prices might help lenders reduce the number of foreclosures they initiate by making more loan modifications look sensible. The more successful loan modifications the lender initiates, the fewer homes that will end up in REO, and the lower the lender’s carrying costs will be. But if lenders are overestimating the value of weak-market property at foreclosure, then they are likely overestimating the value of the same property when determining whether to offer loan modifications through their net present-value calculations. If the current value of the property is overestimated, it is less likely that a loan modification will be offered, and when one is offered, it will be less generous than if the property’s value is not overestimated.
Another way in which more accurate pricing could lower carrying costs is by helping lenders identify the properties that have the least value early in the foreclosure process. Knowing which properties aren’t worth holding onto will facilitate their disposition to land banks, local governments, or community development corporations seeking to remediate blight. The Cuyahoga County Land Bank, for example, takes low-value REO property in exchange for contributions towards demolition costs. Transferring REO property to organizations dedicated to disposing of it lowers lenders’ carrying costs for distressed properties that could have lingered in REO, hastens blight removal, and helps stabilize distressed housing markets.
URL to original article: http://www.builderonline.com/builder-pulse/haircuts-101--how-mispriced-foreclosures-lead-to-a-reo-glut.aspx?cid=BP:032012:JUMP
For further information on Fresno Real Estate check: http://www.londonproperties.com
Swelling REO inventories are the latest fallout of the housing crisis, costing lenders money and contributing to neighborhood blight. Yet lenders could avoid taking on so much REO if they could more accurately estimate the value of the homes they foreclose on, especially in weak housing markets. Correcting this apparent misunderstanding of the market could speed the clearing of REO inventories, save lenders money, and help stabilize housing markets.
Because foreclosure rates have been elevated for so long and housing demand has been weak, the number of properties repossessed by lenders has ballooned. The growth of these real-estate-owned (REO) inventories has shifted much of the national policy focus from preventing foreclosure to shedding REO inventory.
As REO inventories grow, a number of problems grow with them. For one thing, property sitting in REO is expensive for lenders. Lenders must keep their REO properties secure, bring them up to local housing codes, maintain them, pay property taxes, and market them for resale. Meanwhile, neighborhoods wrestle with increased vacancy and its consequences, as the vast majority of REO properties are vacant.
These problems are worse in weak housing markets, where the supply of housing exceeds the demand for it. Several factors combine to increase the odds that REO homes will actually cost more to maintain than lenders can expect to sell them for. For example, carrying costs are likely to be higher. Homes entering foreclosure and lingering in REO in weak markets tend to be older and of lower quality than homes entering REO in strong markets. Property in weak markets is more likely to be vandalized while sitting in REO, and older housing stock tends to deteriorate more rapidly. To top it off, weak demand for housing depresses overall housing prices.
In weak markets, lenders may be better served by not taking properties into REO in the first place, or minimizing the time properties spend in REO by donating them to land banks (see “How Modern Land Banking Can Be Used to Solve REO Acquisition Problems” in the Recommended Reading).
Why this is not occurring more often may be explained by the systematic overestimation of property values in weak housing markets by appraisers, investors, and lenders. Overestimating the value of a foreclosed home leads lenders to set too high a minimum bid at the sheriff’s sale, which lowers the chance that someone will buy the home at the auction and take it off the lender’s hands.
We analyzed sales data from Cuyahoga County, Ohio, and found signs that appraisers, lenders, and investors could be routinely overestimating the property values of foreclosed homes there. We suggest some simple identifiers that can help lenders better estimate home values in weak housing markets. And though we have focused on one county, we believe the situation could be the same in other places. The factors we identify as possible causes of overestimation in Cuyahoga County are likely to be found in many other weak housing markets around the country.
Estimated Property Values and the Reality Check
To investigate how accurately lenders are valuing properties prior to taking them into REO, we turned to a relatively weak housing market: Cuyahoga County, Ohio (home to Cleveland). We analyzed property transaction data from the county auditor from January 2006 to June 2011, comparing the auction price paid by the lender and the subsequent sale price of the home. If the sale price is less than the minimum that was set, we say the lender took a “loss.”
Ohio is a judicial foreclosure state, which means that once a property has been foreclosed upon, it is seized by the county sheriff and auctioned off. Once the property has been seized, the sheriff pays for appraisers to go out and value the property. By state law, the minimum bid (or auction reserve) at the first auction is set at two-thirds of the appraised price. If there are no bids at the first auction, the lender can set the minimum bid for subsequent auctions, which are held weekly, at any amount up to the amount of the unpaid loan. For example, if a borrower had $100,000 of loan principal outstanding at the time of foreclosure, the lender could set the minimum bid at $100,000 plus foreclosure costs.
In theory, the lender should be setting the minimum bid based upon what it could obtain by selling the property, less carrying and transaction costs. Lenders typically obtain a real estate broker’s price opinion or a “walk around” appraisal, and then they calculate expected costs and value the property accordingly. In Cuyahoga County, it is unclear if lenders are relying on the foreclosure appraisal or if they are obtaining additional valuations of the property. If no buyer, including the lender, offers the minimum bid at the auction, the property is re-auctioned the following week.
Table 1 summarizes the losses that lenders appear to take in the data we analyzed. Lenders’ losses are compared to the losses taken by other major participants in sheriff’s sales: investors and federal agencies such as Fannie Mae, Freddie Mac, and the Federal Housing Administration. Most major participants are either lenders who hold the mortgages and take ownership of property that is not purchased at auction, or investors who purchase property at auction.
Purchasers of property at Cuyahoga County foreclosure auctions tend to resell the property for less than they paid. Investors tend to do the best, selling properties for an average of 26.5 percent less than they paid at auction. Federal agencies do worse on average than investors, but better than lenders, selling properties out of REO for about 30 percent less than their auction reserves. Lenders tend to sell property out of REO for 42 percent less than the auction price.
There are three forces that very likely combine to create the trend of higher losses the longer properties stay in REO. First, the higher-quality REO properties in any price range exit REO within the first few months. Those that take longer to sell are probably the ones that were in relatively poor condition when repossessed. Second, the homes may be rapidly deteriorating while the lenders own them. The lower-value homes in distressed neighborhoods are often vandalized and stripped of metals. Despite winterization, homes may suffer weather-related damage without an attentive occupant to immediately address problems when they arise. A third, potentially contributing factor, is any downward trend in home prices that occurs while homes sit in REO. Certainly, such a trend occurred in Cuyahoga County over the period we studied, owing to the growing supply of REO and recently foreclosed homes, along with weakening demand for property in distressed areas. In any case, what lingers is worth far less than the price the lender pays at auction.
Lenders might be overvaluing property in weak housing markets because they are using a uniform process that works well in most areas. For example, a drive-by appraisal of new housing stock is more likely to produce an accurate market price than it would for older, distressed housing stock. With few exceptions, newer homes will be in good condition inside and out. However, the age distribution of REO homes in weak markets is much older than most of the housing stock in the United States. In the Cuyahoga data, 86 percent of the homes in REO are at least a half-century old. Over the decades, some older homes were well maintained and others were neglected, leading to a very wide range of conditions and values.
The inaccuracies may also be due to appraisers or brokers not having enough comparable arms-length property sales (regular market-based sales) in extremely distressed markets, where most sales in the last five years have involved recent foreclosures. Looking to older arms-length sales at stale prices for a drive-by appraisal or broker price opinion may also overestimate the sale price in these markets.
Some Simple Ways to Improve Accuracy
A sorting out of REO properties is bound to happen because lenders do not have perfect information about their collateral to assign the perfect reserve price. However, dividing up the data suggests that the issue is not inadequate inspections of individual homes, but possibly misunderstanding entire market segments. We can observe that auction prices are much closer to the eventual sales prices in the part of the market that is closer to “normal.”
Nationally and regionally, the bulk of arms-length home sale prices exceed $100,000. As seen in figure 2, for homes with auction prices over $100,000, the auction price is close to the eventual sale price in at least half of the instances. For homes with reserves below $50,000 (57 percent of the REO inventory), the auction prices are substantially above what the house is eventually sold for. One possible reason for this systemic bias in auction prices in the below-$50,000 market segment is that lenders are calibrating valuation methods based on normal markets, not recognizing the unique situation of inflated appraisal values in the areas where most of their foreclosures have occurred.
The gap between the lender’s auction reserve and the price received for selling the property out of REO seems to vary with a few easily observed characteristics. The age of the home being auctioned off contains a lot of information that lenders may find useful to incorporate into their auction reserve calculations. As mentioned above, older housing deteriorates more rapidly than new housing and may be concentrated in less desirable neighborhoods. Table 2 shows lenders’ losses by the age of the home. While the method used by lenders to value property seems to be fairly accurate for newer homes, it again appears to grossly overestimate the value of homes constructed before 1941.
Neither the appraised value nor the lender’s auction reserve seems to be factoring in the property’s location. Table 2 contains lenders’ losses by location of the property. Again, the method used by lenders to determine property values seems relatively accurate for properties located in either low-poverty census tracts or in the outer ring suburbs of Cuyahoga County, while auction reserves seem to be set too high in medium- and high-poverty census tracts and in Cleveland or Cuyahoga County’s inner-ring suburbs.
Lenders do not seem to be consistently refining their methods for estimating the value of homes in weak markets. Estimates seem to be improving for only the lowest-poverty areas. Figure 3 shows the losses taken by lenders based on the year the property was taken into REO and the poverty level of the neighborhood.
From 2007 to 2009, losses dropped across the board, which could reflect appraisals becoming more accurate. (However, these drops may also be explained by other factors, such as the first-time-homebuyer tax credit propping up housing demand in 2009 and 2010.) If the reduction in losses resulted from refining property-valuation techniques, losses should have remained the same or continued to shrink in 2010. It appears that the only area in which lenders are modifying their property-valuation techniques—either to lower auction reserves or foreclose more selectively—are the high-poverty areas of Cuyahoga County. In medium- and low-poverty areas, losses shot up in 2010.
Data for 2010 is not complete. The calculations for figure 3 are based on homes that exit REO within two years, and we have not yet observed two years of sales for all of the homes foreclosed in 2010. Updating these calculations will include the lower-quality properties that take longer to sell, thereby increasing the estimated losses on 2010 foreclosures.
Policy Implications
There are three reasons lenders may be overvaluing foreclosed properties. The first is that they may not actually be overvaluing property at all, but rather placing the minimum bid knowing the property is not worth it. Anecdotally, some lenders report placing the minimum bid just to obtain control of the property, even when they know it is worth less. However, it is unclear why lenders would want control of these properties.
On one hand, lenders might want to gain control at the auction to get higher prices for the home later. Buyers should pay more for REO homes, which they can inspect, than they would for a home at a sheriff’s sale, where inspections are limited or impossible. Bidding on a home without inspecting it is risky, and the prices would have to be very low to entice bidders. Collecting the higher sale price after buyers inspect the property could justify setting auction reserve prices higher.
On the other hand, this strategy can work in the opposite direction. If a home is found to be uninhabitable and beyond repair after the sheriff’s sale, the lender has foregone any proceeds from another bidder. Many of the REO homes eventually sell for prices so low that the proceeds would barely cover the maintenance and transaction expenses. If the lenders lowered the auction reserve to these prices, the same buyers might take more of the homes at the sheriff’s sale, and the lender would not incur the expenses.
Lenders may be overvaluing properties because their valuation methods—which they use because they work well in most markets—don’t happen to work well in weak ones. The evidence supports this explanation, since it is not only lenders that overestimate the value of properties acquired in the sheriff’s sale, but all parties, including federal agencies and investors. Proper valuation methods would substantially discount the appraised value of homes in weak markets, bringing the estimates of value more in line with what the property will sell for on the open market. It is important to remember that lenders usually cannot legally enter the home and inspect the interior prior to foreclosure, which would prevent them from detecting hidden defects. But even when they are allowed to inspect the interior, it may not be feasible to inspect each property prior to foreclosure, given the number of foreclosures initiated every year.
Finally, there may be incentives that encourage lenders to overvalue foreclosed properties. Doing so would allow them to shift accounting losses from their loan portfolio to their REO portfolio. Solvency tests and supervisors of financial institutions place less emphasis on REO portfolios than on loan portfolios. This is a function of banks having relatively small REO portfolios in normal times, but always having an active loan portfolio that can be analyzed.
Regardless of why it is occurring, correcting the systematic overestimation of property values in weak housing markets appears to be relatively simple and has large potential ramifications. Our analysis suggests that if lenders place more weight on simple property characteristics—the age of the home and its location—in their value estimates, they will more accurately price property in weak housing markets.
More accurate pricing could lower REO carrying costs in a few ways. As discussed above, lenders could avoid taking on REO altogether by setting their auction reserves lower and allowing others to purchase more properties at auction. Additionally, more accurate prices might help lenders reduce the number of foreclosures they initiate by making more loan modifications look sensible. The more successful loan modifications the lender initiates, the fewer homes that will end up in REO, and the lower the lender’s carrying costs will be. But if lenders are overestimating the value of weak-market property at foreclosure, then they are likely overestimating the value of the same property when determining whether to offer loan modifications through their net present-value calculations. If the current value of the property is overestimated, it is less likely that a loan modification will be offered, and when one is offered, it will be less generous than if the property’s value is not overestimated.
Another way in which more accurate pricing could lower carrying costs is by helping lenders identify the properties that have the least value early in the foreclosure process. Knowing which properties aren’t worth holding onto will facilitate their disposition to land banks, local governments, or community development corporations seeking to remediate blight. The Cuyahoga County Land Bank, for example, takes low-value REO property in exchange for contributions towards demolition costs. Transferring REO property to organizations dedicated to disposing of it lowers lenders’ carrying costs for distressed properties that could have lingered in REO, hastens blight removal, and helps stabilize distressed housing markets.
URL to original article: http://www.builderonline.com/builder-pulse/haircuts-101--how-mispriced-foreclosures-lead-to-a-reo-glut.aspx?cid=BP:032012:JUMP
For further information on Fresno Real Estate check: http://www.londonproperties.com
'Intent to buy a home' stats claw out of their hole
Source: Forbes
The traditional American dream is to have a home, a house, an abode. Whatever you call it, your residence represents stability, maturity, and financial growth. At the end of a long day in the trenches, Americans always count on relaxing at home. The 2008 economic meltdown during the new millennium changed this scenario. Many parents watch as their children’s homes are foreclosed, downsized, or subsidized with multiple mortgages. The era of huge houses, living up to the neighbors’ standards, and purchasing on credit are gone.
Most Americans are grateful to be at work not sitting on the porch at home. Being at work means you (a) are employed, (b) earn money to help pay for the jumbo mortgage payment you couldn’t afford in the first place, (c) avoid looking at all the “stuff” inside your jumbo mini-castle that was paid using a credit card, or (d) avoid—at least temporarily—foreclosure on your house of the sort that had plagued your neighbors.
“Home” is now a concept not a structure. Americans are learning to make an apartment, condo, or living space a feeling of “home.” Many grown children are no longer financially better than their parents. Rising gas, food and clothing prices challenge the family budget; raises are non-existent. Still, life is good when a family member has gainful employment.
Anyone who owns a house understands the ramifications of the housing market since 2008. More likely than not, the value of your house is lower today than in 2008. If you want to sell your home, you may postpone the action due to a low selling price. If you must sell, it may take nine months or more for an offer and you probably won’t obtain the asking price.
At BIGinsight we asked consumers their intention to purchase a house. In February 2007, 4.6% of the respondents planned to purchase a house; one year later the number fell to 4.2%. Over the next two years, intentions to purchase continued to decline to 3.5%. As the economy brightened so too did home sales. In February 2011, 4.0% of the respondents indicated purchase intentions; 4.3% did the same during February 2012.
I am acquainted with a lot of realtors. To paraphrase the theme stated from the realtors…“the market is looking up.” According to the figures, yes the market is looking up. Some consumers will always want to live in a single family dwelling; I suspect I am one such consumer. The facts cannot be ignored however that (a) the number of foreclosures, (b) teens and older children moving back with their parents, (c) consumers choosing to live in their existing homes longer and (d) increasing number of consumers choosing alternate structures to call home (e.g., apartments) impacts the real estate market. The real estate landscape continues to evolve as the economy shifts.
URL to original article: http://www.builderonline.com/builder-pulse/-intent-to-buy-a-home--stats-claw-out-of-their-hole.aspx?cid=BP:032012:JUMP
For further information on Fresno Real Estate check: http://www.londonproperties.com
The traditional American dream is to have a home, a house, an abode. Whatever you call it, your residence represents stability, maturity, and financial growth. At the end of a long day in the trenches, Americans always count on relaxing at home. The 2008 economic meltdown during the new millennium changed this scenario. Many parents watch as their children’s homes are foreclosed, downsized, or subsidized with multiple mortgages. The era of huge houses, living up to the neighbors’ standards, and purchasing on credit are gone.
Most Americans are grateful to be at work not sitting on the porch at home. Being at work means you (a) are employed, (b) earn money to help pay for the jumbo mortgage payment you couldn’t afford in the first place, (c) avoid looking at all the “stuff” inside your jumbo mini-castle that was paid using a credit card, or (d) avoid—at least temporarily—foreclosure on your house of the sort that had plagued your neighbors.
“Home” is now a concept not a structure. Americans are learning to make an apartment, condo, or living space a feeling of “home.” Many grown children are no longer financially better than their parents. Rising gas, food and clothing prices challenge the family budget; raises are non-existent. Still, life is good when a family member has gainful employment.
Anyone who owns a house understands the ramifications of the housing market since 2008. More likely than not, the value of your house is lower today than in 2008. If you want to sell your home, you may postpone the action due to a low selling price. If you must sell, it may take nine months or more for an offer and you probably won’t obtain the asking price.
At BIGinsight we asked consumers their intention to purchase a house. In February 2007, 4.6% of the respondents planned to purchase a house; one year later the number fell to 4.2%. Over the next two years, intentions to purchase continued to decline to 3.5%. As the economy brightened so too did home sales. In February 2011, 4.0% of the respondents indicated purchase intentions; 4.3% did the same during February 2012.
I am acquainted with a lot of realtors. To paraphrase the theme stated from the realtors…“the market is looking up.” According to the figures, yes the market is looking up. Some consumers will always want to live in a single family dwelling; I suspect I am one such consumer. The facts cannot be ignored however that (a) the number of foreclosures, (b) teens and older children moving back with their parents, (c) consumers choosing to live in their existing homes longer and (d) increasing number of consumers choosing alternate structures to call home (e.g., apartments) impacts the real estate market. The real estate landscape continues to evolve as the economy shifts.
URL to original article: http://www.builderonline.com/builder-pulse/-intent-to-buy-a-home--stats-claw-out-of-their-hole.aspx?cid=BP:032012:JUMP
For further information on Fresno Real Estate check: http://www.londonproperties.com
Monday, March 19, 2012
When to sell ... to every thing, there is a season
Source: The Atlantic Cities
So when is the best time to sell your home? Kolko writes:
Depends on where you are. If you want to buy when inventory swells (or want to avoid those months for selling), inventory peaks in the summer across most of the country, but not in the Sunbelt. In Miami, Tampa, and Orlando, inventory peaks in March; Las Vegas inventory peaks in October, and Phoenix inventory peaks in December – just in time to buy a home for Christmas.
Looking to buy low or sell high? Nationally, asking prices peak in May and bottom in December, so sellers can get top dollar in the spring, while buyers can find bargains later in the year. In other words, buyers should be more patient than they are, while sellers should move faster to get their home on the market. But prices tend to peak earlier in the South, as the map below shows, and later in the North, so the best deals come later in the year the farther North you are. And the harshest climates create the biggest swings: prices for similar homes vary more with the seasons in Minnesota, Illinois and Maine than in any other state.
URL to original article: http://www.builderonline.com/builder-pulse/when-to-sell-----to-every-thing--there-is-a-season.aspx?cid=BP:031912:JUMP
For further information on Fresno Real Estate check: http://www.londonproperties.com
So when is the best time to sell your home? Kolko writes:
Depends on where you are. If you want to buy when inventory swells (or want to avoid those months for selling), inventory peaks in the summer across most of the country, but not in the Sunbelt. In Miami, Tampa, and Orlando, inventory peaks in March; Las Vegas inventory peaks in October, and Phoenix inventory peaks in December – just in time to buy a home for Christmas.
Looking to buy low or sell high? Nationally, asking prices peak in May and bottom in December, so sellers can get top dollar in the spring, while buyers can find bargains later in the year. In other words, buyers should be more patient than they are, while sellers should move faster to get their home on the market. But prices tend to peak earlier in the South, as the map below shows, and later in the North, so the best deals come later in the year the farther North you are. And the harshest climates create the biggest swings: prices for similar homes vary more with the seasons in Minnesota, Illinois and Maine than in any other state.
URL to original article: http://www.builderonline.com/builder-pulse/when-to-sell-----to-every-thing--there-is-a-season.aspx?cid=BP:031912:JUMP
For further information on Fresno Real Estate check: http://www.londonproperties.com
Mood stabilized
Source: Calculated Risk
The National Association of Home Builders (NAHB) reports the housing market index (HMI) was unchanged in March at 28 (February was revised dwon from 29). Any number under 50 indicates that more builders view sales conditions as poor than good.
From the NAHB: Builder Confidence Unchanged in March
Builder confidence in the market for newly built, single-family homes was unchanged in March from a revised level of 28 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today. This means that following five consecutive months of gains, the HMI is now holding at its highest level since June of 2007.
“While builders are still very cautious at this time, there is a sense that many local housing markets have started to move in the right direction and that prospects for future sales are improving,” said Barry Rutenberg, chairman of the National Association of Home Builders (NAHB) and a home builder from Gainesville, Florida. “This is demonstrated by the fact that the HMI component measuring builder expectations continued climbing for a sixth straight month in March, to its highest level in more than four years.”
“Builder confidence is now twice as strong as it was six months ago, and the West was the only region to experience a decline this month following an unusual spike in February,” observed NAHB Chief Economist David Crowe. “That said, many of our members continue to cite obstacles on the road to recovery, including persistently tight builder and buyer credit and the ongoing inventory of distressed properties in some markets.”
While the HMI component gauging current sales conditions declined one point to 29 in March, the component gauging sales expectations in the next six months gained two points to 36 and the component gauging traffic of prospective buyers held unchanged at 22.
Both confidence and housing starts had been moving sideways at a very depressed level for several years - but confidence has been moving up recently, and it appears starts are increasing a little too.
This is still very low, but this is the highest level since June 2007.
URL to original article: http://www.builderonline.com/builder-pulse/mood-stabilized.aspx?cid=BP:031912:JUMP
For further information on Fresno Real Estate check: http://www.londonproperties.com
The National Association of Home Builders (NAHB) reports the housing market index (HMI) was unchanged in March at 28 (February was revised dwon from 29). Any number under 50 indicates that more builders view sales conditions as poor than good.
From the NAHB: Builder Confidence Unchanged in March
Builder confidence in the market for newly built, single-family homes was unchanged in March from a revised level of 28 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today. This means that following five consecutive months of gains, the HMI is now holding at its highest level since June of 2007.
“While builders are still very cautious at this time, there is a sense that many local housing markets have started to move in the right direction and that prospects for future sales are improving,” said Barry Rutenberg, chairman of the National Association of Home Builders (NAHB) and a home builder from Gainesville, Florida. “This is demonstrated by the fact that the HMI component measuring builder expectations continued climbing for a sixth straight month in March, to its highest level in more than four years.”
“Builder confidence is now twice as strong as it was six months ago, and the West was the only region to experience a decline this month following an unusual spike in February,” observed NAHB Chief Economist David Crowe. “That said, many of our members continue to cite obstacles on the road to recovery, including persistently tight builder and buyer credit and the ongoing inventory of distressed properties in some markets.”
While the HMI component gauging current sales conditions declined one point to 29 in March, the component gauging sales expectations in the next six months gained two points to 36 and the component gauging traffic of prospective buyers held unchanged at 22.
Both confidence and housing starts had been moving sideways at a very depressed level for several years - but confidence has been moving up recently, and it appears starts are increasing a little too.
This is still very low, but this is the highest level since June 2007.
URL to original article: http://www.builderonline.com/builder-pulse/mood-stabilized.aspx?cid=BP:031912:JUMP
For further information on Fresno Real Estate check: http://www.londonproperties.com
Friday, March 16, 2012
Deeply underwater homeowners to get most aid from foreclosure deal
Source: The LA Times
The $25-billion settlement gives the nation's largest mortgage servicers more incentives to help those who owe 40% to 75% more than the value of their homes.
Reporting from Washington and Los Angeles— Homeowners more deeply underwater on mortgages handled by five major U.S. banking firms are prime candidates for getting help from a $25-billion nationwide settlement over alleged foreclosure abuses.
That's because the settlement gives the nation's largest mortgage servicers more incentives to help those who owe 40% to 75% more than the value of their homes, according to details of the settlement filed Monday in U.S. District Court in Washington.
In a complex series of formulas designed to maximize the effect of the deal reached last month, banks will get more than six times the credit for reducing loans for severely underwater borrowers than they would for helping those who owe 5% to 15% more than the value of their homes.
The settlement, which is expected to be approved by a federal judge, would end nearly a year and a half of investigations by the Justice Department, the Housing and Urban Development Department and attorneys general in 49 states into botched foreclosure paperwork and mortgage servicing problems.
The agreement includes close oversight of bank compliance by a special monitor, with penalties of up to $1 million for first violations and up to $5 million for second infractions stemming from widespread failure to comply with specific terms.
Many details about the settlement with Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co., Citigroup Inc. and Ally Financial Inc. were not available until the paperwork was submitted to the court Monday.
California Atty. Gen. Kamala D. Harris called the settlement "one important stride in our ongoing efforts to address the mortgage and foreclosure crisis that has devastated too many California communities."
She estimated that it would provide $18 billion in benefits to Californians, including $8.9 billion in principal write-downs for 250,000 troubled homeowners, $3.5 billion in forgiveness of missed mortgage payments and penalties for 32,000 borrowers, and $3.1 billion in forgiven debt to 23,000 borrowers who will be allowed to sell their homes for less than the mortgage amount.
Even so, the settlement's effect on the housing market could be limited. Only customers of the five largest servicers are eligible for principal reductions, and only if their loan is not owned or backed by government-controlled mortgage financing firms Fannie Mae or Freddie Mac.
Those and other limitations mean that fewer than 5% of the nation's 11.1 million underwater homeowners would be eligible, according to an analysis by Ted Gayer, co-director of economic studies at the Brookings Institution.
The federal court filing revealed how the banks will be able to fulfill their requirements under the settlement, which focuses much more heavily on assisting struggling homeowners than on direct compensation to people who lost their homes through foreclosure.
Under the nationwide agreement, the banks will pay a combined $1.5 billion to people who lost their homes through the foreclosure process from 2008 through 2011 at least partly because of botched paperwork or other problems. About 750,000 homeowners would receive about $1,500 to $2,000 each.
The banks will provide about $20 billion worth of assistance to homeowners — $17 billion in principal reductions and $3 billion for refinancing.
The settlement provides credits for the banks toward fulfilling their settlement requirements for completing different types of assistance. Often, the banks would get less than $1 in credit for $1 in principal reduction, which state and federal officials said could amplify the amount of assistance actually provided to homeowners to about $35 billion.
The mortgage settlement filings also revealed that the allegations of wrongdoing by the banks went beyond the practice of so-called robo-signing, or pushing homes for foreclosure without properly processing or even sometimes reading the documents.
The documents filed Monday included a complaint alleging that the banks "engaged in a pattern of unfair and deceptive practices" in servicing mortgages, including failing to apply mortgage payments correctly, charging excessive fees and lying to borrowers.
The settlement outlines new mortgage servicing standards designed to prevent robo-signing and other problems.
The terms bind all the banks, but their effects tend to help some hard-hit states like California, Florida, Arizona and Nevada more than others because they have so many people with mortgages far greater than what their homes are worth.
Bank and government officials said California played a huge role in the final settlement by digging in its heels last spring when the banks were offering just $5 billion toward a settlement, with no principal reduction as a component.
Threatening to take its case to court, California refused to sign an agreement that did not contain substantial principal reduction, helping to create the pressure that led to the final settlement.
State and federal officials also demanded that Bank of America be part of the settlement because its handling of troubled borrowers was the most flawed among the major banks.
Officials said the BofA-serviced loans generated an outsized share of complaints about lost paperwork, unresponsiveness to homeowners and such tactics as telling borrowers they were good candidates for loan modifications while pressing at the same time for foreclosures.
Bank of America will reach out to about 200,000 underwater borrowers who may be eligible to have their mortgage balance reduced, BofA mortgage spokesman Rick Simon said.
The banks will be able to offset some of the costs of the settlement by passing losses on mortgage principal reductions on to investors holding the loans in securities. The banks own less than half the loans that they service, said Bert Ely, an independent banking analyst. But investors might not accept those losses without a fight, he said.
"I just wonder how much litigation is going to come out of this from the investor community. I think it's going to be huge," Ely said.
The Assn. of Mortgage Investors, a trade group representing institutional investors and others with stakes in mortgage-backed securities, complained Monday that they were not involved in the settlement negotiations.
"It is unfair to settle claims against the robo-signers with other people's funds," the group said. It wants the court to make changes to the settlement, including a limit on losses by "innocent parties."
URL to original article: http://www.latimes.com/business/la-fi-foreclosure-terms-20120313,0,3388434.story
For further information on Fresno Real Estate check: http://www.londonproperties.com
The $25-billion settlement gives the nation's largest mortgage servicers more incentives to help those who owe 40% to 75% more than the value of their homes.
Reporting from Washington and Los Angeles— Homeowners more deeply underwater on mortgages handled by five major U.S. banking firms are prime candidates for getting help from a $25-billion nationwide settlement over alleged foreclosure abuses.
That's because the settlement gives the nation's largest mortgage servicers more incentives to help those who owe 40% to 75% more than the value of their homes, according to details of the settlement filed Monday in U.S. District Court in Washington.
In a complex series of formulas designed to maximize the effect of the deal reached last month, banks will get more than six times the credit for reducing loans for severely underwater borrowers than they would for helping those who owe 5% to 15% more than the value of their homes.
The settlement, which is expected to be approved by a federal judge, would end nearly a year and a half of investigations by the Justice Department, the Housing and Urban Development Department and attorneys general in 49 states into botched foreclosure paperwork and mortgage servicing problems.
The agreement includes close oversight of bank compliance by a special monitor, with penalties of up to $1 million for first violations and up to $5 million for second infractions stemming from widespread failure to comply with specific terms.
Many details about the settlement with Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co., Citigroup Inc. and Ally Financial Inc. were not available until the paperwork was submitted to the court Monday.
California Atty. Gen. Kamala D. Harris called the settlement "one important stride in our ongoing efforts to address the mortgage and foreclosure crisis that has devastated too many California communities."
She estimated that it would provide $18 billion in benefits to Californians, including $8.9 billion in principal write-downs for 250,000 troubled homeowners, $3.5 billion in forgiveness of missed mortgage payments and penalties for 32,000 borrowers, and $3.1 billion in forgiven debt to 23,000 borrowers who will be allowed to sell their homes for less than the mortgage amount.
Even so, the settlement's effect on the housing market could be limited. Only customers of the five largest servicers are eligible for principal reductions, and only if their loan is not owned or backed by government-controlled mortgage financing firms Fannie Mae or Freddie Mac.
Those and other limitations mean that fewer than 5% of the nation's 11.1 million underwater homeowners would be eligible, according to an analysis by Ted Gayer, co-director of economic studies at the Brookings Institution.
The federal court filing revealed how the banks will be able to fulfill their requirements under the settlement, which focuses much more heavily on assisting struggling homeowners than on direct compensation to people who lost their homes through foreclosure.
Under the nationwide agreement, the banks will pay a combined $1.5 billion to people who lost their homes through the foreclosure process from 2008 through 2011 at least partly because of botched paperwork or other problems. About 750,000 homeowners would receive about $1,500 to $2,000 each.
The banks will provide about $20 billion worth of assistance to homeowners — $17 billion in principal reductions and $3 billion for refinancing.
The settlement provides credits for the banks toward fulfilling their settlement requirements for completing different types of assistance. Often, the banks would get less than $1 in credit for $1 in principal reduction, which state and federal officials said could amplify the amount of assistance actually provided to homeowners to about $35 billion.
The mortgage settlement filings also revealed that the allegations of wrongdoing by the banks went beyond the practice of so-called robo-signing, or pushing homes for foreclosure without properly processing or even sometimes reading the documents.
The documents filed Monday included a complaint alleging that the banks "engaged in a pattern of unfair and deceptive practices" in servicing mortgages, including failing to apply mortgage payments correctly, charging excessive fees and lying to borrowers.
The settlement outlines new mortgage servicing standards designed to prevent robo-signing and other problems.
The terms bind all the banks, but their effects tend to help some hard-hit states like California, Florida, Arizona and Nevada more than others because they have so many people with mortgages far greater than what their homes are worth.
Bank and government officials said California played a huge role in the final settlement by digging in its heels last spring when the banks were offering just $5 billion toward a settlement, with no principal reduction as a component.
Threatening to take its case to court, California refused to sign an agreement that did not contain substantial principal reduction, helping to create the pressure that led to the final settlement.
State and federal officials also demanded that Bank of America be part of the settlement because its handling of troubled borrowers was the most flawed among the major banks.
Officials said the BofA-serviced loans generated an outsized share of complaints about lost paperwork, unresponsiveness to homeowners and such tactics as telling borrowers they were good candidates for loan modifications while pressing at the same time for foreclosures.
Bank of America will reach out to about 200,000 underwater borrowers who may be eligible to have their mortgage balance reduced, BofA mortgage spokesman Rick Simon said.
The banks will be able to offset some of the costs of the settlement by passing losses on mortgage principal reductions on to investors holding the loans in securities. The banks own less than half the loans that they service, said Bert Ely, an independent banking analyst. But investors might not accept those losses without a fight, he said.
"I just wonder how much litigation is going to come out of this from the investor community. I think it's going to be huge," Ely said.
The Assn. of Mortgage Investors, a trade group representing institutional investors and others with stakes in mortgage-backed securities, complained Monday that they were not involved in the settlement negotiations.
"It is unfair to settle claims against the robo-signers with other people's funds," the group said. It wants the court to make changes to the settlement, including a limit on losses by "innocent parties."
URL to original article: http://www.latimes.com/business/la-fi-foreclosure-terms-20120313,0,3388434.story
For further information on Fresno Real Estate check: http://www.londonproperties.com
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