RISMEDIA, April 8, 2009-Thanks to record low mortgage rates and declining home prices, 55 million families - or half of all U.S. households - can afford today’s $200,000 median-priced new home, according to figures released by the National Association of Home Builders (NAHB). “That’s an increase of 17 million households from conditions just two years ago and the best housing affordability number we have seen in years,” said NAHB Chairman Joe Robson, a home builder from Tulsa, Okla. “We are now seeing the first signs that buyers are returning to the marketplace.”
Based on data from the U.S. Census Bureau comparing home prices, mortgage rates and minimum income needed to purchase a median-priced home in February 2007 and February 2009, a typical family today can purchase a house with $20,000 less in household income and save nearly $500 per month on their principal, interest, taxes and insurance. The number of households that can afford to purchase a home today is 55.4 million, compared with 38.4 million two years ago, according to figures compiled by NAHB.
“With affordability up dramatically, reports from our builders in the field indicate that foot traffic in new homes is on the rise and consumer interest is increasing with each passing day. These are encouraging signs that the housing market may be finally reaching a bottom,” said Robson.
Entering the crucial spring home buying season, there are other signs that buyers are starting to return to the market.
Single-family permits were up 11% in February 2009, new and existing home sales also posted gains and the huge inventory backlog is being slowly whittled down. In a survey for Century 21 Real Estate last month among prospective first-time home buyers who indicated they were likely to purchase a home in the next two years, a majority - 78% - said that now is a good time to buy a home. Of those responding to the online poll, 68% said that now is a better time to buy than six months ago.
Another sign that consumers are considering jumping back into the housing market is the growing interest in the $8,000 first-time home buyer tax credit included in the recently enacted economic stimulus package. During February and March 2009, 1.5 million visitors logged on to NAHB’s consumer website, www.federalhousingtaxcredit.com, to learn more about the tax credit. Further, a new survey commissioned by Move, Inc. found that nearly 20% of those who plan to purchase a home this year are doing so to take advantage of the tax credit, which expires at the end of November.
“With home values in many markets at the lowest level since 2003, an $8,000 tax credit available to first-time home buyers, fixed-rate mortgages under 5%, and an outstanding selection of homes to choose from, buyers are starting to recognize that this has the makings for a one-time opportunity to break into the market,” said Robson.
Housing is a critical component of the U.S. economy, accounting for about 15 cents of every dollar spent in this country, so any upturn in the housing market should be viewed as good news for the overall economy, said Robson.
Construction of an additional 500,000 single-family homes - the difference between today’s anemic construction rate and one that would move closer to meeting the underlying demand for housing - would generate 734,000 jobs and $35 billion in wages in the construction industry and another 790,000 jobs and $37.7 billion wages in manufacturing, trade, and service sector jobs, he noted.
Additionally, another half-million housing starts would bolster the tax base for government, generating $45 billion in federal, state and local tax revenues. And the benefits go well beyond the completion of each home. Within the first year after buying a home, those half million households will spend about $2.5 billion more on appliances, furnishings and property alterations.
“Clearly, housing will be central to any economic recovery we experience in the months ahead,” said Robson.
Wednesday, April 8, 2009
Friday, April 3, 2009
NAR Warns of Rental Property Scam
WASHINGTON , March 27, 2009
The National Association of Realtors®’ name is being used as part of a property rental scam in which rental property is offered to consumers, who are led to believe that NAR is functioning as an intermediary to receive rental deposits from prospective tenants.“NAR is not involved in this business and has contacted law enforcement officials to request that the matter be investigated. We encourage any consumers who may be affected to file a complaint,” said NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth.The scam claims that on receipt of a deposit, NAR will deliver the keys to the property to the tenant. Prospective tenants are instructed to send money via Western Union to NAR’s purported agent in the United Kingdom.Some of the listings have been posted on Craigslist, which reportedly has had difficulty in tracing the original listings. NAR does not have an escrow service, or function as an intermediary to receive rental deposits.
Some of the scam listings also refer to or propose using a “Residential Lease Package” that includes a form lease that purports to be a document prepared by or otherwise associated with NAR. NAR was not involved in creating or producing the “Residential Lease Package” or other lease form, and does not recommend, support, or encourage use of those documents.Consumers who have encountered this scam may file a complaint with the Internet Crime Complaint Center, sponsored by the Federal Bureau of Investigation and the National White Collar Crime Center.“Our mission is not only to protect consumers in the real estate transaction, but also guard them against fraud,” McMillan said.The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.2 million members involved in all aspects of the residential and commercial real estate industries.
The National Association of Realtors®’ name is being used as part of a property rental scam in which rental property is offered to consumers, who are led to believe that NAR is functioning as an intermediary to receive rental deposits from prospective tenants.“NAR is not involved in this business and has contacted law enforcement officials to request that the matter be investigated. We encourage any consumers who may be affected to file a complaint,” said NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth.The scam claims that on receipt of a deposit, NAR will deliver the keys to the property to the tenant. Prospective tenants are instructed to send money via Western Union to NAR’s purported agent in the United Kingdom.Some of the listings have been posted on Craigslist, which reportedly has had difficulty in tracing the original listings. NAR does not have an escrow service, or function as an intermediary to receive rental deposits.
Some of the scam listings also refer to or propose using a “Residential Lease Package” that includes a form lease that purports to be a document prepared by or otherwise associated with NAR. NAR was not involved in creating or producing the “Residential Lease Package” or other lease form, and does not recommend, support, or encourage use of those documents.Consumers who have encountered this scam may file a complaint with the Internet Crime Complaint Center, sponsored by the Federal Bureau of Investigation and the National White Collar Crime Center.“Our mission is not only to protect consumers in the real estate transaction, but also guard them against fraud,” McMillan said.The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.2 million members involved in all aspects of the residential and commercial real estate industries.
FHA Key to Housing Rebound
WASHINGTON, April 02, 2009
The Federal Housing Administration is a primary source of mortgage financing for millions of America’s families and plays a key role in helping bring stability to the housing market. This is the message that the National Association of Realtors® delivered to the Senate Appropriations Subcommittee today.
“Without FHA financing, families would be unable to purchase homes and communities would suffer from continued foreclosures and blight,” said Lennox Scott, a member of NAR’s Real Estate Advisory Board and CEO of John L. Scott Real Estate in Bellevue, Washington. In his testimony, Scott shared NAR’s belief in the importance of FHA and concern for the safety and soundness of its programs due to its dramatic growth over a short period of time.
“We believe that FHA has done a good job stepping up to today’s market challenges. However, along with the dramatic growth in market share comes greater responsibility and the need for increased infrastructure and staff,” Scott said. Over the past 18 months, FHA has handled an increase in volume four times greater than 2007 levels, increasing its market share to over 30 percent.
NAR suggests a number of FHA improvements that will help maintain safe and affordable FHA loan products. These improvements include investment in staff and technology improvements; increased oversight and risk management; technical correction to help implement FHA programs; and monetizing the $8,000 first-time home buyer tax credit to allow buyers to apply it toward downpayment requirements.
“The U.S. Department of Housing and Urban Development has made a number of important and valuable changes to FHA over the years that has enabled it to stand up to the challenges of today’s mortgage market,” Scott said. “FHA is now a principal source of financing for millions of America’s families, and without it, the economic crisis would be significantly prolonged. This is why it is so important to invest in FHA improvements and advancements.”
NAR pledged to continue to work for FHA reforms that will ensure the continued success, availability and safety of FHA mortgage insurance programs.
The Federal Housing Administration is a primary source of mortgage financing for millions of America’s families and plays a key role in helping bring stability to the housing market. This is the message that the National Association of Realtors® delivered to the Senate Appropriations Subcommittee today.
“Without FHA financing, families would be unable to purchase homes and communities would suffer from continued foreclosures and blight,” said Lennox Scott, a member of NAR’s Real Estate Advisory Board and CEO of John L. Scott Real Estate in Bellevue, Washington. In his testimony, Scott shared NAR’s belief in the importance of FHA and concern for the safety and soundness of its programs due to its dramatic growth over a short period of time.
“We believe that FHA has done a good job stepping up to today’s market challenges. However, along with the dramatic growth in market share comes greater responsibility and the need for increased infrastructure and staff,” Scott said. Over the past 18 months, FHA has handled an increase in volume four times greater than 2007 levels, increasing its market share to over 30 percent.
NAR suggests a number of FHA improvements that will help maintain safe and affordable FHA loan products. These improvements include investment in staff and technology improvements; increased oversight and risk management; technical correction to help implement FHA programs; and monetizing the $8,000 first-time home buyer tax credit to allow buyers to apply it toward downpayment requirements.
“The U.S. Department of Housing and Urban Development has made a number of important and valuable changes to FHA over the years that has enabled it to stand up to the challenges of today’s mortgage market,” Scott said. “FHA is now a principal source of financing for millions of America’s families, and without it, the economic crisis would be significantly prolonged. This is why it is so important to invest in FHA improvements and advancements.”
NAR pledged to continue to work for FHA reforms that will ensure the continued success, availability and safety of FHA mortgage insurance programs.
Monday, March 30, 2009
Upbeat Economic Indicators Give Americans Hope That The Worst May Be Over
RISMEDIA, March 28, 2009-(MCT)-A run of encouraging economic reports that have recently been released may mean the worst, panic-inducing stage of the economic downturn is over. Emphasis on the word may. “I think there are signs of economic life,” Mark Zandi, chief economist at Moody’s Economy.com in West Chester, PA, said. “The downturn is no longer intensifying, and the clearest evidence of this can be found in the retail sector as retail sales have turned since the beginning of the year,” Zandi said.
Upbeat economic indicators, including government reports showing gains in durable-goods orders and new-homes sales, may not mean the economy has struck bottom, however. Job losses will continue, and growth is not expected until late this year, economists said.
Gloomier economic forecasts, by the likes of Martin Feldstein, a Harvard University economics professor and a member of President Obama’s Economic Recovery Advisory Board, have pushed the turnaround well into next year, according to a Reuter’s interview.
Even relatively optimistic economists are quick to warn that not too much should be read into reports like these released by the Commerce Department on new-home sales and durable-goods orders.
New-home sales in February jumped 4.7% to an annual pace of 337,000 from a record low in January. February marked the first increase in sales since the summer, and the report added to a string of “better-than-expected” housing data, according to Wachovia Bank economist Adam G. York.
New orders for computers, machinery, and other durable goods climbed an unexpectedly strong 3.4% in February as well. “This was a surprisingly strong bounce in view of the severe global recession,” said Brian Bethune, chief U.S. financial economist at IHS Global Insight Inc., “but we would not read too much into it,” as he said he expected the overall downward trend to continue for several more months.
Zandi called the climb in durable-goods orders a hopeful sign and pointed to other reasons for optimism, including the rally in the stock market. “That’s important in terms of the collective psyche,” he said.
The Standard & Poor’s 500 stock index has gained 20% since March 9 - when it closed at a level last seen more than a decade before and The Dow Jones industrial average has risen 18.4% in the same amount of time.
The tax portion of the federal-stimulus program is kicking in, as a decline in tax withholding is starting to boost take-home pay, Zandi said, which could bolster the positive trend in consumer spending seen earlier this year.
William C. Dunkelberg, an economics professor at Temple University, said pent-up demand in the economy was huge because consumers had reduced spending out of fear. “As confidence returns,” he said, “they’ll spend.”Dunkelberg went out on a limb and said that the economy had bottomed, citing the gain in construction, the upturn in new-home sales, and the decline in inventories to record lows.
An executive at National Penn Bancshares Inc. is not ready to go that far. “I think our stance here is to prepare for the worst and be pleasantly surprised if things turn out better,” said Michael R. Reinhard, the Boyertown, Pa., bank’s chief financial officer. “We’re not ready to call this the bottom, and everything’s uphill from here.”
Copyright © 2009, The Philadelphia InquirerDistributed by McClatchy-Tribune Information Services.
Upbeat economic indicators, including government reports showing gains in durable-goods orders and new-homes sales, may not mean the economy has struck bottom, however. Job losses will continue, and growth is not expected until late this year, economists said.
Gloomier economic forecasts, by the likes of Martin Feldstein, a Harvard University economics professor and a member of President Obama’s Economic Recovery Advisory Board, have pushed the turnaround well into next year, according to a Reuter’s interview.
Even relatively optimistic economists are quick to warn that not too much should be read into reports like these released by the Commerce Department on new-home sales and durable-goods orders.
New-home sales in February jumped 4.7% to an annual pace of 337,000 from a record low in January. February marked the first increase in sales since the summer, and the report added to a string of “better-than-expected” housing data, according to Wachovia Bank economist Adam G. York.
New orders for computers, machinery, and other durable goods climbed an unexpectedly strong 3.4% in February as well. “This was a surprisingly strong bounce in view of the severe global recession,” said Brian Bethune, chief U.S. financial economist at IHS Global Insight Inc., “but we would not read too much into it,” as he said he expected the overall downward trend to continue for several more months.
Zandi called the climb in durable-goods orders a hopeful sign and pointed to other reasons for optimism, including the rally in the stock market. “That’s important in terms of the collective psyche,” he said.
The Standard & Poor’s 500 stock index has gained 20% since March 9 - when it closed at a level last seen more than a decade before and The Dow Jones industrial average has risen 18.4% in the same amount of time.
The tax portion of the federal-stimulus program is kicking in, as a decline in tax withholding is starting to boost take-home pay, Zandi said, which could bolster the positive trend in consumer spending seen earlier this year.
William C. Dunkelberg, an economics professor at Temple University, said pent-up demand in the economy was huge because consumers had reduced spending out of fear. “As confidence returns,” he said, “they’ll spend.”Dunkelberg went out on a limb and said that the economy had bottomed, citing the gain in construction, the upturn in new-home sales, and the decline in inventories to record lows.
An executive at National Penn Bancshares Inc. is not ready to go that far. “I think our stance here is to prepare for the worst and be pleasantly surprised if things turn out better,” said Michael R. Reinhard, the Boyertown, Pa., bank’s chief financial officer. “We’re not ready to call this the bottom, and everything’s uphill from here.”
Copyright © 2009, The Philadelphia InquirerDistributed by McClatchy-Tribune Information Services.
Monday, March 23, 2009
Existing-Home Sales Rise in February
WASHINGTON , March 23, 2009
Existing-home sales increased in February, reversing losses in January. Even so, sales activity remains relatively soft, reflecting additional layoffs and buyers waiting for housing provisions in the economic stimulus package to take effect, according to the National Association of Realtors®.
Existing-home sales – including single-family, townhomes, condominiums and co-ops – rose 5.1 percent to a seasonally adjusted annual rate1 of 4.72 million units in February from a pace of 4.49 million units in January, but are 4.6 percent below the 4.95 million-unit level in February 2008. Seasonal adjustment factors are more volatile in winter months, but sales rates over the past few months show dampened sales activity.
Lawrence Yun, NAR chief economist, said first-time buyers accounted for half of all home sales last month, with activity concentrated in lower price ranges. “Because entry level buyers are shopping for bargains, distressed sales accounted for 40 to 45 percent of transactions in February,” he said. “Our analysis shows that distressed homes typically are selling for 20 percent less than the normal market price, and this naturally is drawing down the overall median price.”
The national median existing-home price2 for all housing types was $165,400 in February, down 15.5 percent from a year ago when the median was $195,800 and conditions were close to normal; the median is where half of the homes sold for more and half sold for less. “Given the downward distortion in price comparisons due to distressed sales, it’s important for owners to keep in mind that this doesn’t equate to a similar loss of value for traditional homes in good condition,” Yun explained.
Yun said a recovery in the West is much stronger than expected. “Strong sales gains in the West are led by California, where the median listing price is beginning to rise for the first time in three years,” he said.
NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said home shopping activity has picked up with housing affordability at a record high. “The number of buyers looking for homes rose 5 percent in February, and also was 5 percent above a year ago,” he said. “It appears most of the increase in buyer traffic occurred in the latter part of the month after the $8,000 first-time buyer tax credit was put in place. At the same time, mortgage purchase applications have risen, so we expect to see sales picking up around late spring.”
McMillan noted that more potential buyers are learning about the tax credit, just as the traditional spring home-buying season begins. “In this changing market, smart buyers and sellers consult with Realtors® who can advise them about current conditions in their area, and counsel them on the best way to move forward,” he said.
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage edged up to 5.13 percent in February from a record low 5.05 percent in January; the rate was 5.92 percent in February 2008. Last month’s average mortgage rate was the second lowest since data collection began in 1971. Last week the rate further declined to 4.98 percent.
Total housing inventory at the end of February rose 5.2 percent to 3.80 million existing homes available for sale, which represents a 9.7-month supply3 at the current sales pace, unchanged from January. In the six months prior to February, the total number of homes for sale had steadily declined from a record level last July.
Single-family home sales rose 4.4 percent to a seasonally adjusted annual rate of 4.23 million in February from a level of 4.05 million in January, but are 3.6 percent below the 4.39 million-unit pace in February 2008. The median existing single-family home price was $164,600 in February, down 15.0 percent from a year ago.
Existing condominium and co-op sales increased 11.4 percent to a seasonally adjusted annual rate of 490,000 units in February from 440,000 units in January, but are 13.1 percent lower than the 564,000-unit pace a year ago. The median existing condo price4 was $172,200 in February, which is 18.7 percent lower than February 2008.
Regionally, existing-home sales in the Northeast jumped 15.6 percent to an annual pace of 740,000 in February, but are 14.9 percent below February 2008. The median price in the Northeast was $251,200, down 4.8 percent from a year ago.
Existing-home sales in the Midwest increased 1.0 percent in February to a pace of 1.04 million but are 14.0 percent lower than a year ago. The median price in the Midwest was $131,000, which is 7.8 percent below February 2008.
In the South, existing-home sales rose 6.1 percent to an annual pace of 1.74 million in February but are 11.2 percent below February 2008. The median price in the South was $146,700, down 10.0 percent from a year ago.
Existing-home sales in the West increased 2.6 percent to an annual rate of 1.20 million in February and remain 30.4 percent higher than a year ago. The median price in the West was $204,600, which is 30.3 percent below February 2008.
Existing-home sales increased in February, reversing losses in January. Even so, sales activity remains relatively soft, reflecting additional layoffs and buyers waiting for housing provisions in the economic stimulus package to take effect, according to the National Association of Realtors®.
Existing-home sales – including single-family, townhomes, condominiums and co-ops – rose 5.1 percent to a seasonally adjusted annual rate1 of 4.72 million units in February from a pace of 4.49 million units in January, but are 4.6 percent below the 4.95 million-unit level in February 2008. Seasonal adjustment factors are more volatile in winter months, but sales rates over the past few months show dampened sales activity.
Lawrence Yun, NAR chief economist, said first-time buyers accounted for half of all home sales last month, with activity concentrated in lower price ranges. “Because entry level buyers are shopping for bargains, distressed sales accounted for 40 to 45 percent of transactions in February,” he said. “Our analysis shows that distressed homes typically are selling for 20 percent less than the normal market price, and this naturally is drawing down the overall median price.”
The national median existing-home price2 for all housing types was $165,400 in February, down 15.5 percent from a year ago when the median was $195,800 and conditions were close to normal; the median is where half of the homes sold for more and half sold for less. “Given the downward distortion in price comparisons due to distressed sales, it’s important for owners to keep in mind that this doesn’t equate to a similar loss of value for traditional homes in good condition,” Yun explained.
Yun said a recovery in the West is much stronger than expected. “Strong sales gains in the West are led by California, where the median listing price is beginning to rise for the first time in three years,” he said.
NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said home shopping activity has picked up with housing affordability at a record high. “The number of buyers looking for homes rose 5 percent in February, and also was 5 percent above a year ago,” he said. “It appears most of the increase in buyer traffic occurred in the latter part of the month after the $8,000 first-time buyer tax credit was put in place. At the same time, mortgage purchase applications have risen, so we expect to see sales picking up around late spring.”
McMillan noted that more potential buyers are learning about the tax credit, just as the traditional spring home-buying season begins. “In this changing market, smart buyers and sellers consult with Realtors® who can advise them about current conditions in their area, and counsel them on the best way to move forward,” he said.
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage edged up to 5.13 percent in February from a record low 5.05 percent in January; the rate was 5.92 percent in February 2008. Last month’s average mortgage rate was the second lowest since data collection began in 1971. Last week the rate further declined to 4.98 percent.
Total housing inventory at the end of February rose 5.2 percent to 3.80 million existing homes available for sale, which represents a 9.7-month supply3 at the current sales pace, unchanged from January. In the six months prior to February, the total number of homes for sale had steadily declined from a record level last July.
Single-family home sales rose 4.4 percent to a seasonally adjusted annual rate of 4.23 million in February from a level of 4.05 million in January, but are 3.6 percent below the 4.39 million-unit pace in February 2008. The median existing single-family home price was $164,600 in February, down 15.0 percent from a year ago.
Existing condominium and co-op sales increased 11.4 percent to a seasonally adjusted annual rate of 490,000 units in February from 440,000 units in January, but are 13.1 percent lower than the 564,000-unit pace a year ago. The median existing condo price4 was $172,200 in February, which is 18.7 percent lower than February 2008.
Regionally, existing-home sales in the Northeast jumped 15.6 percent to an annual pace of 740,000 in February, but are 14.9 percent below February 2008. The median price in the Northeast was $251,200, down 4.8 percent from a year ago.
Existing-home sales in the Midwest increased 1.0 percent in February to a pace of 1.04 million but are 14.0 percent lower than a year ago. The median price in the Midwest was $131,000, which is 7.8 percent below February 2008.
In the South, existing-home sales rose 6.1 percent to an annual pace of 1.74 million in February but are 11.2 percent below February 2008. The median price in the South was $146,700, down 10.0 percent from a year ago.
Existing-home sales in the West increased 2.6 percent to an annual rate of 1.20 million in February and remain 30.4 percent higher than a year ago. The median price in the West was $204,600, which is 30.3 percent below February 2008.
Thursday, March 19, 2009
Hope Springs Eternal by Rusty MacLachlan
Posted: 18 Mar 2009 04:58 PM PDT
Good News! Good News! Good News! The St. Louis Cardinals are still in first place. Well so are the Cubs for that matter. But, opening day is just around the corner and our beloved redbirds are sure to have a banner year.Wow, a little good weather does great wonders for our spirits.
We just cannot help but believe that winter is over. The grass is greening up, the trees are budding, the flowers are beginning to bloom. The signs are all there. To be sure, there are still a few cold days ahead, but there is just no disputing that spring is pushing winter aside.
We also are seeing early signs that the housing slump is losing steam as well. Just this week the Wall Street Journal reported that “Home prices are closer to stabilizing today than at any time in the past nine years.” The data points to a housing affordability index that is at the exact ratio that we last saw in the hay days of the 1980’s. Of course the hot news on the national press in the last few days celebrated the 22% uptick in national housing starts from January 2009 to February 2009. This ended 18 consecutive months of decline. Encouraging news on the national scene!
Locally we can expect our market to rebound even sooner than most. Zanola Research Group suggests that we need to build 666 homes this year in Greene county alone just to keep pace with demand. The report went on to point out that southwest Missouri is continuing on a long pattern of job growth. We see all the reports of job losses but research shows that new jobs outpace job losses in our area. Add growing wages and a steady climb in population and we are three for three in those areas that matter most for a housing rebound.
Three for Three, that reminds me of baseball. Yes, opening day is almost here. Looks like busy days ahead. God bless!
Keeping the Faith
Rusty MacLachlan
HBA President
Rusty MacLachlan is the President of The Greater Springfield HBA. Follow his blog at: http://www.greaterozarkshba.com/
Good News! Good News! Good News! The St. Louis Cardinals are still in first place. Well so are the Cubs for that matter. But, opening day is just around the corner and our beloved redbirds are sure to have a banner year.Wow, a little good weather does great wonders for our spirits.
We just cannot help but believe that winter is over. The grass is greening up, the trees are budding, the flowers are beginning to bloom. The signs are all there. To be sure, there are still a few cold days ahead, but there is just no disputing that spring is pushing winter aside.
We also are seeing early signs that the housing slump is losing steam as well. Just this week the Wall Street Journal reported that “Home prices are closer to stabilizing today than at any time in the past nine years.” The data points to a housing affordability index that is at the exact ratio that we last saw in the hay days of the 1980’s. Of course the hot news on the national press in the last few days celebrated the 22% uptick in national housing starts from January 2009 to February 2009. This ended 18 consecutive months of decline. Encouraging news on the national scene!
Locally we can expect our market to rebound even sooner than most. Zanola Research Group suggests that we need to build 666 homes this year in Greene county alone just to keep pace with demand. The report went on to point out that southwest Missouri is continuing on a long pattern of job growth. We see all the reports of job losses but research shows that new jobs outpace job losses in our area. Add growing wages and a steady climb in population and we are three for three in those areas that matter most for a housing rebound.
Three for Three, that reminds me of baseball. Yes, opening day is almost here. Looks like busy days ahead. God bless!
Keeping the Faith
Rusty MacLachlan
HBA President
Rusty MacLachlan is the President of The Greater Springfield HBA. Follow his blog at: http://www.greaterozarkshba.com/
Friday, March 6, 2009
Ambitious Foreclosure Plan Revealed - How Will It Help?
RISMEDIA, March 6, 2009-(MCT/RISMedia)-The Obama administration on Wednesday detailed its ambitious $275 billion plan to halt soaring foreclosures nationwide, outlining the financial incentives it’s offering investors, lenders and their bill collectors to lure them into modifying distressed mortgages to keep Americans in their homes. The slump in home prices is the root cause of the global financial meltdown, so the success or failure of the administration’s housing plan is vital to ending the deepening economic recession.
Shortly before financial markets opened, the Treasury Department provided its long-awaited update to the Making Home Affordable program, which the administration thinks can help up to 9 million homeowners.
“It’s a major break with the past because it really takes up a multifaceted approach. It used several different carrots and a stick to come at a comprehensive plan to reduce the number of foreclosures,” said Kathleen Day, a spokeswoman for the advocacy group Center for Responsible Lending in Durham, N.C. “That’s the only way you’re going to stabilize the financial system.”
The plan’s details came out a day before the House of Representatives is expected to pass compromise legislation giving bankruptcy judges power that they now lack to modify the terms of certain mortgages. Bankruptcy changes are the stick to go along with the carrots-new financial incentives for lenders to modify mortgages instead of moving to foreclosure.
The Obama housing plan attacks two problems that are creating a vicious cycle in the nation’s housing market.
First, it offers $200 billion to provide refinancing for some homeowners who owe more than their homes are now worth-shorthanded as being “underwater” on their mortgages. To qualify, these homeowners-5 million of them by administration estimates-must have their mortgages in the hands of Fannie Mae or Freddie Mac, the mortgage finance giants that the government seized last September.
“We have been advocating for one unified approach to help modify or refinance delinquent and underwater loans and thus we think this program will undoubtedly help servicers keep more at-risk borrowers in their homes, which is a crucial step to helping stabilize the mortgage and housing markets,” stated John A. Courson, president and CEO of the Mortgage Bankers Association (MBA).
Many of these homeowners would like to take advantage of today’s historically low interest rates and refinance but can’t, since the law prohibits refinancing if the current mortgages reflects less than 80% of the homes’ values. These homeowners now can seek to refinance if their mortgages are up to 5% higher than the present-day values of their homes. That helps some, but it won’t reach lots of homeowners in California, Florida and elsewhere whose homes are now worth substantially less than their mortgages.
Because most mortgages are bundled into securities and sold into a secondary market, it’s often difficult for homeowners to find out whether Fannie or Freddie owns their loans or whether they’ve been pooled with other loans and sold by an investment bank to other investors.
The other pillar of Obama’s plan attacks the problem of affordability. The administration provides another $75 billion in incentives to help prevent foreclosures in cases in which the homeowners, up to 4 million of them, are about to lose their homes. The money comes from the $700 billion bailout fund approved last October.
Under this complex portion of the plan, the president offers a stream of financial incentives to mortgage servicers, who are essentially bill collectors for private investors who own pools of U.S. mortgages. Some incentives stay with the servicers while others flow through to investors.
In exchange for the incentives, a servicer would modify a mortgage so that no more than 38% of a homeowner’s monthly after-tax income was taken by the monthly mortgage payment. The government then would step in and share the cost of reworking that mortgage so that no more than 31% of the borrower’s monthly income was tied up in the payment.
This could result in some mortgages carrying interest rates as low as 2% for five years. Critics think that this mortgage subsidy interferes with the natural process of letting the marketplace find the floor on home prices.
“Not only do these gimmicks prevent home prices from falling to the market-clearing levels that would give private lenders the confidence to loan, but the continued specter of subsequent government-mandated modification will keep lenders out of the game,” said Peter Schiff, the president of investment strategist Euro Pacific Capital.
Treasury Secretary Timothy Geithner told lawmakers Wednesday that the administration plan offers “a powerful set of incentives” and “persuasive force and some economic inducements to provide substantial improvements in affordability. With those changes you will be put in an economically viable position and stay in your home.”
Although lenders have worked over the past year to freeze mortgage rates that were about to adjust to higher monthly payments, few have been willing to take losses and significantly rework the loan terms. This has led to a high percentage of re-defaults on modified mortgages and avoided tackling the problem of affordability.
Federal Deposit Insurance Corp. Chairman Sheila Bair pushed unsuccessfully during the Bush administration to rework loans with an eye toward affordability, and the Obama administration is implementing her ideas.
Any lender that takes new taxpayer bailout money under the administration’s Financial Stability Plan will be required to participate. The Obama team also is betting that requiring a standard guideline for mortgage modification will provide more protection to mortgage servicers, who are bound by contract to investors, not homeowners, and can be sued if they modify mortgages.
The Obama plan got a strong endorsement Wednesday from the Financial Services Roundtable, which represents many of the largest mortgage lenders.
“Our member companies intend to implement the program for all at-risk borrowers consistent with program guidelines and contractual requirements,” the group said in a statement. “For the benefit of at-risk borrowers who are facing the loss of their homes, for communities and for our nation in this time of extraordinary economic challenges, it is imperative that investors and servicers that choose to participate in the program adopt a national standard model.”
In an administration background briefing that was conducted under the administration’s insistence on anonymity in order to speak freely, it was clear that the plan is far from a panacea.
Senior government and industry officials confirmed that homeowners who seek to refinance to the new low interest rates will have to foot the bill for a range of new fees that Fannie and Freddie require. It’s not clear whether these will have to be paid upfront or can be folded into the loans.
The officials also confirmed that there’s no standard procedure for lenders under the Fannie and Freddie portion of the plan. It will be up to each lender to determine whether the refinances go through them or whether mortgage brokers and other intermediaries can help homeowners seek refinanced loans under the program.
Officials were also careful to note that mortgage servicers won’t be able to modify mortgages if the terms of their contracts with the investors who own the pools of mortgages don’t allow it. That leaves matters at square one for many homeowners, since many investors, like lenders, have been reluctant to take losses in hopes of an eventual government bailout.
Officials confirmed that they have no reliable data on how many of these investors are on the other ends of contracts that prohibit mortgage modifications. That question is important, since many of the weakest loans underwritten during the height of the housing boom, from 2004 to 2006, were sold by now-defunct investment banks to investors abroad, many in Europe.
These pools of mortgages, called mortgage-backed securities, are the so-called toxic assets that are at the heart of the global banking meltdown. This unresolved question about their contract terms is relevant to recovery in housing and the financial sector.
So, who qualifies for help of what kind? Here are some answers for consumers:
Q: How do I know if I qualify?
A: Your mortgage must predate the start of 2009, you must live in the home and you’ll have to provide proof of income. Then ask two questions. First, are you already behind on payments or even in the foreclosure process? If the answer is no, then ask yourself whether your current mortgage rate is high enough to make it worth your while to refinance to take advantage of today’s low rates for 15-year and 30-year fixed-rate mortgages.
Q: That’s it?
A: No. If you think it’s advantageous to refinance, you must find out who owns your loan. Most mortgages are bundled together and sold into a secondary market, where investors technically own them. If Fannie Mae or Freddie Mac placed your loan into the secondary market, you can contact the company that sends your monthly mortgage statement to discuss the new program. If your mortgage is in the portion of the secondary market where the private sector issued the mortgage-backed securities, you don’t qualify.
Q: How do I know who owns my loan?
A: You’ll have to ask the company that sends your monthly statement. These companies are sure to be swamped with calls this week, so be patient. And be warned: Borrowers have found in the past that mortgage-bill collectors-called servicers-often are less than forthcoming with answers as to who owns the loans.
Q: What if my loan is owned by Fannie or Freddie but I have negative equity?
A: You’re not alone. Researcher First American CoreLogic reported Wednesday that one in five homeowners nationwide now owes more than his or her home is worth. To qualify under the refinance portion of the Obama plan, you can owe up to 5% more than your home is now worth. Thus, many homeowners in California, Florida, Arizona and Nevada, where home prices have plunged, won’t qualify.
Homeowners in 250 high-cost U.S. counties can seek help under either track, however, provided that they qualify, even if the mortgage is worth up to $729,750. This could help high-income homeowners in Middle America and the Northeast, where home prices haven’t fallen as much.
Q: What about those of us who are about to lose our homes?
A: A lot will depend on whether the mortgage bill collectors, the servicers, think that they have leeway from investors to modify the loans. They’re being offered an upfront fee of $1,000 and will get “pay for success” fees for three years if a borrower’s modified loan remains in good standing. They’re being offered even more fees if they get homeowners into this program before they fall behind on payments.
Q: What happens if the servicer agrees to modify my mortgage?
A: First, the servicer has to get your monthly payment down to 38% of your monthly after-tax income. It can do this by taking a loss on the loan or stretching a 30-year loan into a 40-year, for example. It’s allowed to reduce interest rates as low as 2%.
Once the 38% threshold is met, the government matches lenders dollar for dollar to get the payment even lower, to 31% of monthly after-tax income.
This percentage is calculated on the value of a first-lien mortgage. If a home carries a second lien-often called a second, or junior, lien-the servicer will get another $250 if it extinguishes the second mortgage.
Q: Is the modification a permanent fix?
A: The new interest rate would be valid for five years. Afterward, it can rise 1% a year until the lending rate hits the conforming loan survey rate at the time of the modification. Given that mortgage rates today are low by historical standards, the loan survey rate is likely to be well below the punishing adjustable rates that are at the heart of many distressed mortgages.
Q: Do lenders have to participate in Making Home Affordable?
A: If they’re getting Wall Street bailout money and hope to get any more, then they have to play ball. Many mortgage servicers are outside this realm, however, and their trade group, the American Securitization Forum, gave only lukewarm, qualified support to the Obama administration’s plan.
Q: Is there any way to force servicers to help homeowners?
A: The House of Representatives is expected to pass legislation this week that would allow bankruptcy judges to modify mortgages. This measure, which seems to have support in the Senate, too, would let judges shave off of mortgages the difference between what homeowners owe and what their homes are now worth. This would give homeowners some leverage in negotiations.
Q: But don’t these homeowners deserve what they get for overextending themselves?
A: Some think so. There are two parties to a bad deal, however-people who bought too much home and lenders who let their underwriting standards fail in lending to them. Somebody has to lose. The Obama administration is betting that keeping owners in their homes helps set a floor under prices. Critics think that only the marketplace can find a floor for home prices.
Shortly before financial markets opened, the Treasury Department provided its long-awaited update to the Making Home Affordable program, which the administration thinks can help up to 9 million homeowners.
“It’s a major break with the past because it really takes up a multifaceted approach. It used several different carrots and a stick to come at a comprehensive plan to reduce the number of foreclosures,” said Kathleen Day, a spokeswoman for the advocacy group Center for Responsible Lending in Durham, N.C. “That’s the only way you’re going to stabilize the financial system.”
The plan’s details came out a day before the House of Representatives is expected to pass compromise legislation giving bankruptcy judges power that they now lack to modify the terms of certain mortgages. Bankruptcy changes are the stick to go along with the carrots-new financial incentives for lenders to modify mortgages instead of moving to foreclosure.
The Obama housing plan attacks two problems that are creating a vicious cycle in the nation’s housing market.
First, it offers $200 billion to provide refinancing for some homeowners who owe more than their homes are now worth-shorthanded as being “underwater” on their mortgages. To qualify, these homeowners-5 million of them by administration estimates-must have their mortgages in the hands of Fannie Mae or Freddie Mac, the mortgage finance giants that the government seized last September.
“We have been advocating for one unified approach to help modify or refinance delinquent and underwater loans and thus we think this program will undoubtedly help servicers keep more at-risk borrowers in their homes, which is a crucial step to helping stabilize the mortgage and housing markets,” stated John A. Courson, president and CEO of the Mortgage Bankers Association (MBA).
Many of these homeowners would like to take advantage of today’s historically low interest rates and refinance but can’t, since the law prohibits refinancing if the current mortgages reflects less than 80% of the homes’ values. These homeowners now can seek to refinance if their mortgages are up to 5% higher than the present-day values of their homes. That helps some, but it won’t reach lots of homeowners in California, Florida and elsewhere whose homes are now worth substantially less than their mortgages.
Because most mortgages are bundled into securities and sold into a secondary market, it’s often difficult for homeowners to find out whether Fannie or Freddie owns their loans or whether they’ve been pooled with other loans and sold by an investment bank to other investors.
The other pillar of Obama’s plan attacks the problem of affordability. The administration provides another $75 billion in incentives to help prevent foreclosures in cases in which the homeowners, up to 4 million of them, are about to lose their homes. The money comes from the $700 billion bailout fund approved last October.
Under this complex portion of the plan, the president offers a stream of financial incentives to mortgage servicers, who are essentially bill collectors for private investors who own pools of U.S. mortgages. Some incentives stay with the servicers while others flow through to investors.
In exchange for the incentives, a servicer would modify a mortgage so that no more than 38% of a homeowner’s monthly after-tax income was taken by the monthly mortgage payment. The government then would step in and share the cost of reworking that mortgage so that no more than 31% of the borrower’s monthly income was tied up in the payment.
This could result in some mortgages carrying interest rates as low as 2% for five years. Critics think that this mortgage subsidy interferes with the natural process of letting the marketplace find the floor on home prices.
“Not only do these gimmicks prevent home prices from falling to the market-clearing levels that would give private lenders the confidence to loan, but the continued specter of subsequent government-mandated modification will keep lenders out of the game,” said Peter Schiff, the president of investment strategist Euro Pacific Capital.
Treasury Secretary Timothy Geithner told lawmakers Wednesday that the administration plan offers “a powerful set of incentives” and “persuasive force and some economic inducements to provide substantial improvements in affordability. With those changes you will be put in an economically viable position and stay in your home.”
Although lenders have worked over the past year to freeze mortgage rates that were about to adjust to higher monthly payments, few have been willing to take losses and significantly rework the loan terms. This has led to a high percentage of re-defaults on modified mortgages and avoided tackling the problem of affordability.
Federal Deposit Insurance Corp. Chairman Sheila Bair pushed unsuccessfully during the Bush administration to rework loans with an eye toward affordability, and the Obama administration is implementing her ideas.
Any lender that takes new taxpayer bailout money under the administration’s Financial Stability Plan will be required to participate. The Obama team also is betting that requiring a standard guideline for mortgage modification will provide more protection to mortgage servicers, who are bound by contract to investors, not homeowners, and can be sued if they modify mortgages.
The Obama plan got a strong endorsement Wednesday from the Financial Services Roundtable, which represents many of the largest mortgage lenders.
“Our member companies intend to implement the program for all at-risk borrowers consistent with program guidelines and contractual requirements,” the group said in a statement. “For the benefit of at-risk borrowers who are facing the loss of their homes, for communities and for our nation in this time of extraordinary economic challenges, it is imperative that investors and servicers that choose to participate in the program adopt a national standard model.”
In an administration background briefing that was conducted under the administration’s insistence on anonymity in order to speak freely, it was clear that the plan is far from a panacea.
Senior government and industry officials confirmed that homeowners who seek to refinance to the new low interest rates will have to foot the bill for a range of new fees that Fannie and Freddie require. It’s not clear whether these will have to be paid upfront or can be folded into the loans.
The officials also confirmed that there’s no standard procedure for lenders under the Fannie and Freddie portion of the plan. It will be up to each lender to determine whether the refinances go through them or whether mortgage brokers and other intermediaries can help homeowners seek refinanced loans under the program.
Officials were also careful to note that mortgage servicers won’t be able to modify mortgages if the terms of their contracts with the investors who own the pools of mortgages don’t allow it. That leaves matters at square one for many homeowners, since many investors, like lenders, have been reluctant to take losses in hopes of an eventual government bailout.
Officials confirmed that they have no reliable data on how many of these investors are on the other ends of contracts that prohibit mortgage modifications. That question is important, since many of the weakest loans underwritten during the height of the housing boom, from 2004 to 2006, were sold by now-defunct investment banks to investors abroad, many in Europe.
These pools of mortgages, called mortgage-backed securities, are the so-called toxic assets that are at the heart of the global banking meltdown. This unresolved question about their contract terms is relevant to recovery in housing and the financial sector.
So, who qualifies for help of what kind? Here are some answers for consumers:
Q: How do I know if I qualify?
A: Your mortgage must predate the start of 2009, you must live in the home and you’ll have to provide proof of income. Then ask two questions. First, are you already behind on payments or even in the foreclosure process? If the answer is no, then ask yourself whether your current mortgage rate is high enough to make it worth your while to refinance to take advantage of today’s low rates for 15-year and 30-year fixed-rate mortgages.
Q: That’s it?
A: No. If you think it’s advantageous to refinance, you must find out who owns your loan. Most mortgages are bundled together and sold into a secondary market, where investors technically own them. If Fannie Mae or Freddie Mac placed your loan into the secondary market, you can contact the company that sends your monthly mortgage statement to discuss the new program. If your mortgage is in the portion of the secondary market where the private sector issued the mortgage-backed securities, you don’t qualify.
Q: How do I know who owns my loan?
A: You’ll have to ask the company that sends your monthly statement. These companies are sure to be swamped with calls this week, so be patient. And be warned: Borrowers have found in the past that mortgage-bill collectors-called servicers-often are less than forthcoming with answers as to who owns the loans.
Q: What if my loan is owned by Fannie or Freddie but I have negative equity?
A: You’re not alone. Researcher First American CoreLogic reported Wednesday that one in five homeowners nationwide now owes more than his or her home is worth. To qualify under the refinance portion of the Obama plan, you can owe up to 5% more than your home is now worth. Thus, many homeowners in California, Florida, Arizona and Nevada, where home prices have plunged, won’t qualify.
Homeowners in 250 high-cost U.S. counties can seek help under either track, however, provided that they qualify, even if the mortgage is worth up to $729,750. This could help high-income homeowners in Middle America and the Northeast, where home prices haven’t fallen as much.
Q: What about those of us who are about to lose our homes?
A: A lot will depend on whether the mortgage bill collectors, the servicers, think that they have leeway from investors to modify the loans. They’re being offered an upfront fee of $1,000 and will get “pay for success” fees for three years if a borrower’s modified loan remains in good standing. They’re being offered even more fees if they get homeowners into this program before they fall behind on payments.
Q: What happens if the servicer agrees to modify my mortgage?
A: First, the servicer has to get your monthly payment down to 38% of your monthly after-tax income. It can do this by taking a loss on the loan or stretching a 30-year loan into a 40-year, for example. It’s allowed to reduce interest rates as low as 2%.
Once the 38% threshold is met, the government matches lenders dollar for dollar to get the payment even lower, to 31% of monthly after-tax income.
This percentage is calculated on the value of a first-lien mortgage. If a home carries a second lien-often called a second, or junior, lien-the servicer will get another $250 if it extinguishes the second mortgage.
Q: Is the modification a permanent fix?
A: The new interest rate would be valid for five years. Afterward, it can rise 1% a year until the lending rate hits the conforming loan survey rate at the time of the modification. Given that mortgage rates today are low by historical standards, the loan survey rate is likely to be well below the punishing adjustable rates that are at the heart of many distressed mortgages.
Q: Do lenders have to participate in Making Home Affordable?
A: If they’re getting Wall Street bailout money and hope to get any more, then they have to play ball. Many mortgage servicers are outside this realm, however, and their trade group, the American Securitization Forum, gave only lukewarm, qualified support to the Obama administration’s plan.
Q: Is there any way to force servicers to help homeowners?
A: The House of Representatives is expected to pass legislation this week that would allow bankruptcy judges to modify mortgages. This measure, which seems to have support in the Senate, too, would let judges shave off of mortgages the difference between what homeowners owe and what their homes are now worth. This would give homeowners some leverage in negotiations.
Q: But don’t these homeowners deserve what they get for overextending themselves?
A: Some think so. There are two parties to a bad deal, however-people who bought too much home and lenders who let their underwriting standards fail in lending to them. Somebody has to lose. The Obama administration is betting that keeping owners in their homes helps set a floor under prices. Critics think that only the marketplace can find a floor for home prices.
Subscribe to:
Posts (Atom)
