South Florida Realty News

Five market opportunities for 2010

2010-01-11T06:43:00.000-08:00

What’s hot in the state? Florida Realtor Magazine compiled the top five niches noted by leading brokers and Realtors. They include:

Short sales and foreclosures
Real estate professionals have a great opportunity dealing with distressed properties, says John Tuccillo, president of Tuccillo and Associates (JTA) in Sarasota.

“These are difficult transactions, and real expertise in getting them done is gold in the marketplace,” Tuccillo says. Remember that foreclosures happen at all price points, including the luxury segment.

“Associates who are experts at short sales in the more moderately priced properties will be able to move this skill set to luxury and commercial real estate as well,” says Mike Pappas, broker of The Keyes Co. in Miami.

Property management
Many investors of income-producing residential properties, including individual condominium units, need effective leasing and management services. “Individual unit property management is blossoming,” says Pappas, “and it’s clear the need is great.”

Another advantage to managing an investor’s property: Agents who do a good job are likely to get the listing if the investor decides to sell in the future.

Bank-owned properties
It takes time to develop relationships with the “real estate owned” (REO) departments at Florida financial institutions. But the investment can pay off, says Brad Hunter, chief economist of Metrostudy in Boca Raton. “I expect 2010 will most likely be a good year for real estate professionals who can get involved with the REO deal flow,” he says. “I expect the inventory of bank-owned property to be very high in 2010.” While that creates negative pricing pressure in the market, it also creates opportunities for professionals specializing in this niche.

First-time buyers
Low sale prices and low mortgage rates create an ideal market environment for first-time buyers, according to Robert T. McDugald, broker/owner of Future Home Realty in Tampa. Add to that the extension of the first-time homebuyer’s $8,000 federal tax credit through May 1, 2010, and you’ve got a market ready to rock.

“We believe that first-time homebuyers are well positioned to take advantage of this market,” McDugald says, “and we have highly encouraged our agents and adjusted our training to gear to these opportunities.” For real estate professionals, that means paying specific attention to residents in rental communities, recent college graduates, newly married couples and adults in their 20s who are now entering the workforce.

Move-up buyers
After several years of relative quiet, the move-up market will begin to take hold in 2010, says Pappas. Price stability and a higher sales pace in the lower price ranges will make it easier for current owners to sell their homes and purchase a more expensive property. Also, the recent addition of a $6,500 tax credit for repeat buyers who purchase between Nov. 7, 2009, and April 30, 2010, will encourage activity in this market. Repeat buyers must have lived in their homes consecutively for five of the previous eight years.

“The low prices at the high end, combined with low interest rates, will allow many homeowners to jump to their dream home and ideal neighborhood,” Pappas says. “The affordability factor will never be better than it is now.”

Real Estate Faces Tough Recovery Slog

2010-01-04T09:51:00.000-08:00

Real estate, which sparked the global economic downturn in 2008, struggled to recover in 2009. But the path to a full return to health is littered with land mines that could send the sector spiraling downward again, possibly upending the nascent economic revival.

The past year's progress in the housing market has relied on government programs that are scheduled to be phased out. The commercial real-estate market is faced with huge amounts of unoccupied space and a deluge of defaults and foreclosures that are putting new stresses on banks and other financial institutions that already are on life support.

The outlook for 2010 is uncertain, at best.

On the bright side, housing markets stabilized in 2009 as the Federal Reserve's policies drove mortgage rates to 50-year lows for much of the spring and fall. Home prices posted six consecutive months of modest gains through October. The supply of foreclosed homes for sale has declined, in part the result of an ambitious program the Obama administration launched in February designed to keep at-risk borrowers in their homes.

But the underpinnings of the positive trends are fragile. The Fed brought down mortgage rates by committing to purchase up to $1.25 trillion in mortgage-backed securities. That program, already extended once, is set to expire in March.

Rates could rise by a full percentage point after those purchases end, sapping any housing recovery, says Ronald Temple, portfolio manager at Lazard Asset Management. He predicts that prices could fall by 15% to 20% if the program ends as planned in March.

Home sales also have been supported by an $8,000 tax credit for first-time buyers. It, too, was set to expire in 2009 but was extended by Congress through the first half of 2010.

On the foreclosure front, the government's battle is far from won. Loan servicers signed up 728,000 borrowers through November for trial loan modifications under the Obama program. Just 31,000 have received a permanent fix so far, or fewer than 5% of those eligible.

Adding to the problem, the number of struggling homeowners is steadily mounting. One in seven households with mortgages was either in foreclosure or delinquent on payments at the end of September, the most recent data available from the Mortgage Bankers Association. Some owners are defaulting because they have lost their jobs.

Some are giving up their homes because the value has fallen below what they owe. Prices have fallen 29% from their July 2006 peak to October 2009, based on the S&P/Case-Shiller Home Price Index, which tracks home values in 20 cities. Nearly one in four mortgage holders owe more than their homes are worth, according to First American CoreLogic, leaving many potential "move up" buyers trapped in homes they can't sell.

"You don't see the normal food chain working," says Ivy Zelman, chief executive of Zelman & Associates, a housing-research firm.

More foreclosures are expected next year as loan delinquencies climb. "It's really hard to envision a positive scenario of home prices going up when you've got this huge overhang," Lazard's Mr. Temple says.

Meanwhile, the pain is just beginning for commercial-property markets. Deal makers who took out huge loans to buy property during the boom often justified the sky-high prices they paid by assuming that rents and occupancy rates would keep rising. Instead, both have plummeted.

Take Midtown Manhattan, the most expensive office market in the U.S. The amount of available space has increased by 16 million square feet since the beginning of 2008, according to brokerage CB Richard Ellis Group Inc. That is roughly equivalent to 16 empty 40-story office towers. Midtown building owners have dropped their asking rents by more than 30% since November 2008.

As rents and property values fell and the extent to which banks are exposed to commercial-real-estate losses became increasingly clear, the government scrambled to contain the damage. The Federal Deposit Insurance Corp., which has been seizing banks hurt by bad property loans, is offering private investors lucrative financing to buy and work out those loans.

In the biggest such deal, Barry Sternlicht's Starwood Capital Group last fall led a group of investors who paid $2.8 billion for a portfolio of 112 construction loans made by Chicago's Corus Bank with a face value of $5 billion. Small and midsize banks are particularly vulnerable to being dragged down by their real-estate portfolios.

"There are going to be huge losses and a huge number of banks failing," says Deutsche Bank commercial-real-estate analyst Richard Parkus. "This is just the tip of the iceberg."

More than $1.4 billion in commercial mortgages will come due by 2013, and as much as 65% of those will have trouble getting refinanced, Mr. Parkus says.

One major wild card in 2010: When will big investors get back into the market?

For now, institutions that control more than $100 billion in unspent capital earmarked for real-estate deals have been gun-shy, waiting for prices to drop and more distress to come.

Research firm Real Capital Analytics recorded only $42 billion in U.S. commercial-real-estate transactions through November 2009, compared with $136 billion in the same period in 2008 and $489 billion in 2007. But optimists believe that all that money on the sidelines will make for a quick rebound when investor sentiment improves.

"When confidence returns to the markets," says Dan Fasulo, Real Capital's head of research, "I think things are going to spiral upwards again very quickly."

Half-built homes can be bargains, but with strings attached

2010-01-02T07:21:00.000-08:00

First came foreclosure sales, then short sales. Now we are seeing more half-finished homes for sale: bare-stud, bare-yard houses abandoned by their builders and left to languish on the market.

Purchasing a partially built home is nothing new; during the housing boom, many new-home contracts were signed before even a slab had been poured. The difference now is that the builder might no longer be around to finish the job, particularly if it's a house started by a custom builder who subsequently lost clients, financing ... or its entire business.

"If I had known three years ago that my business would be based on selling short sales, foreclosures and half-built houses, I would have told you you were smoking crack," said Kelly Price, a veteran real-estate broker based in Winter Park, Fla. She is trying to sell three partly built houses for banks that took possession of them from a builder or owner in financial trouble.

Officials in Orange County, Fla., say they aren't sure how many partly built homes are in such limbo because in March they gave builders a one-year extension on their building permits. Also, builders often deliberately delay work on new homes, putting off completion until the new year for tax purposes.

Nationally, the percentage of incomplete houses among new homes listed for sale rose this year from 39 percent in January to 43 percent as of October, according to the U.S. census. Though those numbers included homes under contract and still under construction, they also included unfinished homes abandoned by builders and placed on the market by banks.

One of the houses listed by Kelly Price & Co. is about a half-mile past the guarded gates of Lake Nona Country Club, in southeast Orlando. The ivory-colored, Tuscan-style fortress looks as though its subcontractors left for lunch one day and never returned.

Near the entry, a worker's face mask dangles from a nail at the entrance to what was to be the underground wine cellar. Light shines through designer windows onto bare plyboard floors. The master suite - complete with the framework for a two-story closet - is bare except for a drafting table. And the table is bare, too, because the blueprints recently disappeared from the former work site. The custom-built kitchen and bathroom cabinets are stored in a Seminole County warehouse to ensure they don't disappear as well.

In the center of the property's residential compound is a concrete hole - the beginnings of a courtyard pool that was to feature a hot tub and concrete bridge. Most of the walls around the pool are painted ivory, but some still have a raw, stucco finish. Piles of clay-colored, barrel-roof tiles are stacked behind the guest house, which overlooks the golf course and a retention pond. A weathered wooden worktable still sits on the guest-house patio. Throughout the property, hand-hewn doors, beams and banisters, some with elaborate carvings of lizards on them, hint at the architect's uncompleted vision.

"I've never seen anything like this," said Price, a certified distressed-property expert. "It's kind of like finish your own castle. ... You have to bring your own vision."

Price has had the property listed for months at $1.3 million, or $118 a square foot. Though it's difficult to find a comparable sale to assess the partially built home's value, the five closest sales in Lake Nona Country Club during the past year fetched $311 to $758 a square foot. Price said she has presented all offers from prospective buyers to the bank that owns the house, but so far it hasn't accepted any of them.

Such sales can take time, she noted. Kelly Price & Co. has a similar house listed for sale in Winter Park for $1.7 million, and it has been on the market through various real-estate companies for years, she said.

Many more small, custom-home builders have had to walk away from projects than have large, production-home builders, said Jim Lewis, president of Charles Wayne Consulting in Maitland. Still, several sizable homebuilding companies with financial problems, including Levitt and Sons and America's First Home, have left clusters of partially built houses across Central Florida since the bursting of the housing bubble. In some cases, other builders have stepped in to complete the work on those homes, Lewis said.

He noted that prospective homebuyers should take some precautions when considering the purchase of a half-built home.

"The new owner is certainly buying a lot of unknowns and would have to get someone in there - a construction type - and see what remains to be completed and, in some cases, to repair the damage that has been done because the house has not been completed," Lewis said.

Such houses typically aren't heated or cooled, so if they are carpeted, they could have mold problems. If roof shingles are not all in place, the structure may have some wood rot.

Buying an incomplete construction project is not for everyone, Price said. Buyers who haven't had a house built for them before may be leery of such an undertaking, and out-of-town buyers may conclude they don't have the right kind of local contacts to get the work finished right.

Price said she wasn't sure about the kinds of liens on file against the Lake Nona home, but she noted that any buyer would have to pay them or negotiate with the bank. She advised buyers to fully explore a property's title before purchasing an incomplete house - and be doubly cautious about liens involving the Internal Revenue Service, because those can be difficult to clear.

Looking beyond the complications, though, Price said "shell" homes can be a bargain.

"I just want people to know that there are opportunities out there," she said.

POSSIBLE DRAWBACKS OF 'SHELL HOMES'

Any liens against the home, including those held by banks or the IRS, would need to be paid or negotiated.

Homes that weren't heated or cooled while vacant might have mold damage.

Buyers might think they don't have the right kind of contacts to get the work finished correctly.

The property's title ought to be researched, a real-estate broker suggests.

Beyond the Mortgage Payment

2009-12-31T16:47:00.000-08:00

On his road to homeownership, Scott Leibfried has learned one thing: Expect the unexpected.

He and his wife had an offer accepted on a home, only to later find that foreclosure proceedings were about to begin on it. That's after they considered another home that was aesthetically pleasing but had major issues that came to light upon closer inspection.

In the meantime, they're trying to estimate the money they will need for closing costs and any future expenses, hoping that they won't eat too much into their financial cushion.

"There are always going to be things that come up," Mr. Leibfried says.

That statement could describe homeownership in general.

Allan Glass, a Los Angeles-based real-estate agent who works with the couple, says "the biggest mistake buyers make is underestimating the costs" of buying a house and maintaining it over time.

Homeowners should have 1% of the purchase price of their home in savings for improvements and surprise expenses, he says. "That is the absolute minimum. It's better to have 2% to 3% socked away somewhere."

The cushion often isn't easy for first-time home buyers to have–especially after they've scrimped and saved for their down payment. And there are many first-time buyers in the market now, due to affordable prices, low interest rates and a federal tax credit.

"Some people walk away from closing with a nickel and a stick of gum, and that's probably not going to be a good idea," says Dale Robyn Siegel, president of Circle Mortgage Group, in Harrison, N.Y. She recommends having at least six months of mortgage payments in the bank after closing on a house "especially now, with such an iffy job market."

A five-year budget
To get a better handle on where the house stands, buyers should attend a home inspection and ask questions, says Bill Richardson, a home inspector in New Mexico and president of the American Society of Home Inspectors. That way, they can get tips and recommendations from the inspector as he or she is working. They should keep the inspection report handy for reference.

For existing homes, an inspector will estimate the age of major components, giving the home buyer a sense of when items will need replacing. A furnace, for example, often lasts between 12 and 15 years; a water heater from 10 to 12 years, he says.

A list of approximate life expectancies of home components–as well as cost estimates– can be found at LivingWithMyHome.com, a Web site sponsored by home-inspection company Pillar to Post.

Once you know what you're dealing with–and perhaps what the sellers will repair or pay for before the sale is final–look five years out and make a list of big-ticket home issues that you'll need to address, says Kelly Rogers, director of education for the Consumer Credit Counseling Service of Orange County, based in Santa Ana, Calif. Make a timeline for those expenses.

And don't count on borrowing money needed for repairs. "The banks have really tightened up, so it's harder and harder to get a home-equity line of credit," Mr. Richardson says. "If you don't budget for repairs, you will never get the repairs done when you need it."

When small problems pop up, it's important to address them before they become large-scale projects. Consider the tile in the bathroom: As soon as there's deterioration or cracking, address it, Mr. Richardson says.

"If the toilet is loose to the floor... it doesn't seem like a big deal, but it can leak and rot the floor," he says. "What could be a $15 repair could [end up being] a $700 repair or more."

Mr. Richardson suggests planning for a $500 to $1,000 annual general maintenance budget for most starter homes, which would cover everything from painting a room to caulking the bathtub.

"Buying a home is one of the largest investments you're going to make," he says, "If it's done wisely and with lots of thought, it can be a huge asset. If it's not well thought out, it can become a huge burden to you."

Monthly surprises
Estimating monthly expenses can often trip up new home buyers as well.

As renters, people are accustomed to paying rent and likely utilities–phone, Internet service and cable.

As a homeowner, however, there will be other utility costs such as water, sewer and trash collection. Then there are property taxes, homeowner's insurance and possible homeowner's association dues.

There also can be expenses unique to your location. In Los Angeles, for example, water restrictions are such that if you go over a certain cap of usage, you face a penalty, according to Mr. Glass.

Remember, you also can have miscellaneous expenses such as snow removal and lawn service, if you don't plan on doing them yourself, Ms. Siegel says

Foreclosure Rescue Still Bogged Down

2009-12-21T14:09:00.000-08:00

Fewer than 5% of borrowers participating in the Obama administration's foreclosure-prevention program, about 31,000 in all, have received permanent loan modifications, the Treasury Department said Thursday.

The new numbers were the latest sign of trouble in the $75 billion foreclosure-rescue plan launched in February. The program provides financial incentives for mortgage companies and investors to reduce loan payments to affordable levels for struggling borrowers. But it has proved difficult to move borrowers from a trial phase to permanent mortgage fixes.

"We agree that servicer performance in converting trial modifications to permanent ones has been unsatisfactory," a Treasury Department spokeswoman said. The department last week said it was stepping up pressure on mortgage companies to complete more loan modifications.

Through November, more than 728,000 borrowers had begun making trial payments under the plan, up from 651,000 in October, with modifications saving borrowers an average of more than $550 a month, the Treasury Department said.

Bank of America Corp. had 156,864 borrowers in the trial program and 98 other borrowers had received permanent fixes. Citigroup Inc. had completed 271 permanent modifications and had 100,124 active trial modifications.

A Bank of America spokesman said the company had "the highest number of...active trial modifications" and expected to gain momentum in converting borrowers to permanent fixes in December.

A spokesman for Citigroup's mortgage unit said the bank was beginning to see "greater success" thanks to "recent improvements in documentation requirements and increased borrower awareness."

The program calls for borrowers to make three trial payments to qualify for a permanent modification. They must also provide a hardship affidavit and other documents.

The administration has been successful in getting borrowers into trial modifications, said Thomas Lawler, an independent housing economist. But its results on permanent modifications has been "discouraging," he said. Officials "clearly didn't think enough about what would happen on the back end," he said.

The administration had set a goal of 500,000 trial modifications by November 1. Many mortgage-servicing companies began the trial process based on verbal information provided by borrowers. But getting borrowers to turn in required documents has been challenging. Many borrowers, meanwhile, complain they are asked repeatedly for forms they have already filed.

Some companies have required borrowers to provide most or all of the needed paperwork before they begin the trial process. Two such firms, Ocwen Financial Corp. and GMAC Mortgage Inc., account for more than 11,000 permanent modifications -- more than 36% of the total.

"Deciding to get the documentation up front has been key," a GMAC spokeswoman said. Despite financial pressures, GMAC has boosted staffing in loss mitigation by 35%, she said.

J.P. Morgan Chase & Co. has 136,686 active trial modifications and 4,302 permanent modifications. In testimony before Congress this week, Chase said that 29% of borrowers who entered the program between April and September didn't make the required payments; 20% hadn't provided all of the required documents. "Our focus has been on getting the documents we need from customers," a Chase spokesman said.

At Wells Fargo & Co., 96,137 borrowers were in the trial plan and 3,537 had received permanent fixes. About 14,000 additional borrowers had provided all required documents and most should receive permanent modifications in the next month or so, said Cara Heiden, co-president of Wells Fargo Home Mortgage.

More than half of Wells Fargo customers in the program hadn't yet made all their trial payments because they hadn't been participating long enough, she said.

Related Group Expects Banks to Take Over Miami Condo Project

2009-12-20T06:25:00.000-08:00

A group of lenders led by HSBC Holdings PLC and Bank of America Corp. are likely to take ownership of Icon Brickell, a Miami condominium and hotel complex, according to Jorge Pérez, chairman of Related Group, the current owner of the project.

"The negotiations are almost finished," Mr. Pérez said in an interview Wednesday. He said he hoped the agreement would allow Related Group to remain the manager of the three-tower complex near downtown Miami, featuring décor and sculptures designed by Philippe Starck. Representatives of HSBC and Bank of America declined to comment on the talks.

Related Cos., a New York-based real estate developer, owns a minority stake in Related Group.

The negotiations over the Icon Brickell, one of the highest-profile developments in the Miami area, are among hundreds of similar discussions between real estate developers and banks stuck with a glut of condos in South Florida. "We're in for a very exciting 2010," said Ron Kriss, chairman of the distressed property group at the law firm Akerman Senterfitt in Miami.

In the downtown Miami and neighboring Brickell areas, more than 22,000 condos have been built in the past four years, or more than twice the number added over the previous four decades, says Holliday Fenoglio Fowler LP, which advises real-estate developers and investors.

Because of that glut, condo developers have had to slash prices as much as 50% in the past year to spur buying, and some of them aren't getting the cash flow they need to meet loan payments.

Mr. Pérez said Related Group has invested about $1 billion in the Icon Brickell, including $15 million for giant statues of heads that resemble those on Easter Island. He said loans secured by the three buildings total around $700 million.

Mr. Pérez said he expects "a friendly agreement" with the lenders but declined to say whether they would take possession of the buildings through a foreclosure. Alternatives would include various other legal arrangements under which Related could pass ownership to the lenders, said Mr. Kriss, a lawyer who isn't involved in the talks.

Most of the Icon Brickell was completed in 2008 and 2009 but presales of the units began in 2006. Related says buyers put down deposits on most of the nearly 1,800 condo units. So far, though, only 117 of the purchases have been completed, said Ken Smuts, a vice president at Related. He said he expects hundreds of more completions in coming months.

The average price was cut in October to $419 per square foot from a peak of about $650, Mr. Smuts said. A typical two-bedroom unit now would cost about $550,000, down 30% from the peak, he said.

Most of the recent buyers have been Latin Americans, Mr. Pérez said, and many are paying cash.

Finding residents to pay monthly condo fees is vital; Mr. Pérez said maintenance costs on the three buildings are running at about $12 million a year and the property tax bill will be about $9 million for 2009. But rather than selling empty units in bulk to investors at a deep discount, the lenders for now have elected to sell them one by one at higher prices. It may take a couple of years to sell all the units, Mr. Pérez said

Report criticizes mortgage program

2009-12-20T06:20:00.000-08:00

A federal program that has cut mortgage payments for more than 500,000 homeowners since spring is falling well short of what’s needed to fix the nation’s foreclosure crisis, warns a congressional panel’s report out today.

“We’re concerned that not enough foreclosures will be prevented,” said Elizabeth Warren, who chairs the Congressional Oversight Panel for the $700 billion financial bailout program approved last year.

The panel’s report says the government’s mortgage modification program has three key problems:

*The kinds of mortgages that will make up growing numbers of foreclosures exceed the program’s eligibility requirements.

*With a goal of modifying only 25,000 to 30,000 loans a week, fewer than half of the predicted foreclosures would be avoided. One in eight homes are currently in foreclosure or default and 250,000 additional foreclosures are initiated monthly.

*Many modifications so far are still in a three-month trial period. As of Sept. 1, only 1,711 homeowners had received permanent modifications under the federal program. And after five years, many will see higher payments.

“The result for many homeowners could be that foreclosure is delayed, not avoided,” the report says.

Warren noted that the foreclosure problem has moved beyond subprime mortgages and that rising unemployment will cause more foreclosures.

The government’s program “appears to be targeted at the housing crisis as it existed six months ago rather than as it exists today,” she says.

Her panel’s cautionary report follows a more positive assessment Thursday by administration officials.

Under the federal program, the pace of trial modifications now exceeds the weekly pace of completed foreclosures, said Housing and Urban Development Secretary Shaun Donovan.

That means there are more families getting modifications through the federal program each month than families losing their homes to foreclosure, officials say.

“The fact we now have a pace of trial modifications that exceeds the pace of weekly foreclosures is a very important milestone,” Donovan said. “We believe we’ve reached an important turning point.”

Administration officials acknowledge that the start of a housing turnaround could still sour.

“We’re still living with the risk that housing is going to be a source of weakness in the economy,” says Treasury Secretary Timothy Geithner

Financial woes for homeowners associations

2009-12-04T20:34:00.000-08:00

A recent survey of Florida homeowners associations found them feeling beleaguered and discouraged.

More than 90 percent of the 777 associations surveyed by the Community Association Leadership Lobby say they expect their financial troubles will continue or deepen in 2010.

About 60 percent of survey respondents increased assessments to cover budget shortfalls caused by delinquent owners. And about 66 percent of respondents say there has been an increase in the number of property owners who are more than 60 days late paying fees and assessments.

The results of this survey are likely to support calls for legislation that would allow associations to collect more late fees from investor-owned properties and collect payments directly from tenants renting properties.

Fla. 2009 Profile of Homebuyers and Sellers

2009-12-04T20:32:00.000-08:00

The real estate market constantly evolves, and Realtors must continually have a clear picture of today’s homebuyers and sellers. The “2009 Profile of Homebuyers and Sellers, Florida Report” describes the characteristics and motivations of the state’s recent homebuyers and sellers.

The complete 211-page report, compiled by the National Association of Realtors, is available on the research page of floridarealtors.org at: http://www.floridarealtors.org/Research/Index.cfm

Highlights:

Characteristics of homebuyers

• Forty-one percent of recent homebuyers were first-timers, compared to 47 percent nationwide.
• The typical first-time homebuyer was 31 years old, while the typical repeat buyer was 54 years old. Nationwide, first-time buyers were typically 30 and repeat buyers were typically 48 years old.
• The 2008 median household income of buyers was $71,100 – lower than the median income of buyers nationwide at $73,100.
• The median income was $59,300 for first-time buyers and $83,300 for repeat buyers.
• Single females made up 18 percent of recent homebuyers, and single males made up 11 percent. Nationwide, 21 percent were single females, and 10 percent were single males.
• For 29 percent of buyers, a desire to own a home was the primary reason for the home purchase.

Characteristics of homes purchased

• New home purchases dropped to their lowest level in eight years nationwide –18 percent of all recent home purchases. But in Florida, new homes made up 26 percent of purchases.
• The typical home purchased was 1,850 square feet in size and built in 2000.
• Seventy-eight percent of homebuyers purchased a detached single-family home.
• The median price of a Florida home purchased was $176,500, compared to $185,000 nationwide.
• Three in four buyers (77 percent) considered commuting costs as “very” or “somewhat” important.

The home search process

• More than one-third of homebuyers started their home search process by looking online for listings.
• Seventy-five percent of buyers used the Internet to search for homes.
• Buyers had a high opinion of real estate agents, with 81 percent of those who used an agent saying they received very useful information.
• The typical homebuyer searched for 12 weeks and viewed 15 homes, compared to 12 weeks and 12 homes nationwide.

Homebuying and real estate professionals

• Sixty-seven percent of buyers purchased their home through a real estate agent or broker.
• Sixteen percent of buyers purchased a home in foreclosure. Nationally, 10 percent of buyers purchased a home in foreclosure.
• Thirty-nine percent of buyers found their agent through a referral from a friend or family member.
• Sixty-four percent of buyers would definitely use their real estate again or recommend the same agent to others.

Financing the home purchase

• Florida had more cash sales, with 81 percent of buyers financing their recent home purchase. Nationwide, 92 percent financed their recent home purchase.
• The typical buyer financed 93 percent of the home purchase price.
• Nearly half (45 percent) of homebuyers reported they made some sacrifices to buy the home, such as reducing spending on luxury items, entertainment or clothing.
• Thirty-one percent of first-time buyers reported their mortgage application and approval process was “somewhat” more difficult than they expected, and about one-in-ten reported it was “much more” difficult than expected.

Home sellers and their selling experience

• Real estate agents assisted 85 percent of sellers in Florida, the same percentage nationally.
• Recent sellers typically sold their homes for 93 percent of the listing price, and 65 percent reported they reduced the asking price at least once. Among all sellers nationally, sellers typically sold their homes for 95 percent of the listing price, and 60 percent reported they reduced the asking price at least once.
• Forty-two percent of sellers offered incentives to attract buyers, most often assistance with home warranty policies and closing costs.

Home selling and real estate professionals

• Thirty-four percent of sellers who used a real estate agent found their agents through a referral by friends or family, and 24 percent used the agent they worked with previously to buy or sell a home.
• Eighty-six percent of sellers reported that their home was listed or advertised on the Internet.
• Among recent sellers who used an agent, 84 percent reported they would definitely (57 percent) or probably (27 percent) use that real estate agent again or recommend that person to others.

For-Sale-by-Owner (FSBO) sellers

• FSBOs made up 10 percent of Florida sales, which is slightly less than the national rate of 11 percent.
• Almost half of the FSBO sellers (40 percent) knew the buyer prior to the home sale.
• If a seller wasn’t dealing with a buyer he already knew, the primary reason (62 percent) for going FSBO is that the seller did not want to pay a fee or commission.
• Over half of FSBO sellers took no action to market their home, and 58 percent did not offer any incentives to attract buyers.
• Fifteen percent of FSBO sellers reported that completing a transaction within their planned timeframe was the hardest part of selling their home.

Priced to sell: South Florida housing market shows signs of life

2009-11-24T06:00:00.000-08:00

Miguel and Emma Aguilar have had their lakefront house in Southwest Miami-Dade on the market for two years. Given that they are asking $375,000 for the peach stucco property, the couple expect it to be another two years before it sells.

While South Florida home sales continue registering strong gains, roughly three-quarters of the properties changing hands are priced at less than $300,000. Homes offered for less than $100,000 are sparking bidding wars and now routinely selling for more than their list prices.

In October, the median single-family home price in Miami-Dade was down 28 percent to $178,500 compared with a year ago, according to figures released Monday by the Florida Association of Realtors. In Broward, the median sale price fell 16 percent to $211,600. The median condo price in Miami-Dade was down 30 percent to $138,400 and 28 percent in Broward to $83,200. Since the first of the year, however, median prices for both homes and condos have bounced within a range of roughly $30,000, suggesting a bottoming out, at least at the lower end. While the median may be stabilizing, recovery may still be a long way off for homes in higher price categories.

As values have fallen, those homes have stacked up, as first-time buyers and investors gobble up the steals while others are sidelined by difficulties in getting loans for pricier properties.

In Miami-Dade, sales of homes priced at $300,000 or more were down by more than 25 percent between August and October, compared with the same three months a year ago.

The market for so-called jumbo loans, or those worth more than $423,750 in South Florida, dried up more than two years ago, said mortgage broker Grant Stern.

Ron Shuffield, president of Esslinger-Wooten-Maxwell Realtors in Coral Gables, said three-quarters of houses sold between August through October in Miami-Dade were priced under $300,000. Twenty-three precent of sales were for homes listed under $100,000, even though they represented only 8 percent of all listings, he said.

``Price trends at the low end of the market have been positive, absolutely,'' said Chris Vlad, president of Alpha One Real Estate, a Hollywood-based appraisal company that mainly works for lenders. ``If you move into the higher price ranges, those are areas that are still very weak.''

Vlad said he expected higher-priced homes to depreciate another 12 to 24 percent during the next year.

Sales of existing single-family homes were up 26 percent in Miami-Dade County and 32 percent in Broward County in October compared with a year ago. Month-to-month, sales fell 8 percent in Miami from 619 in September to 571 in October, however. In Broward, the number rose from 800 to 826, a 3 percent increase.

Condo sales exceeded single-family sales in October, however. In Miami-Dade, they were up 47 percent over a year ago and 68 percent in Broward. Month-to-month sales in Miami-Dade rose 5 percent. In Broward, they rose 7 percent.

That compares with a national increase of 10 percent from September to October in home sales overall. Realtors credited the unexpected pop to the pending expiration of the $8,000 first-time home buyer tax credit, as buyers hurried to close before the deadline. Earlier this month, Congress extended the credit to April 30 and expanded it to include a $6,500 credit for existing homeowners who qualify.

To understand the pricing dynamic, Shuffield said, analysts look at the supply of homes for sale as the most important indicator of market health, because it gauges demand relative to supply. It's calculated by dividing the number of homes listed for sale by the number of homes sold in the most recent month.

Typically, when the supply of homes for sale stands at a year or more, prices tend to fall. With a six- to nine-month supply, prices remain flat. When the supply drops below six months, sales activity begins to spur price appreciation, as it has for recent homes priced under $100,000.

The recession caveat: the bulging pipeline of homes not yet listed for sale by banks and homes still snaking through the foreclosure process will likely continue delivering tens of thousands of properties to the market over the next year.

Below is sampling of the supply of houses listed for sale in Miami-Dade in October, according to the MLS:

• Under $100,000: four-month supply;

• Under $300,000: eight-month supply;

• $300,000 to $1 million: 21-month supply;

• Over $1 million: four-year supply.

The supply of condos for sale is much greater in each category in Miami-Dade, indicative of the condo glut. In Broward, the supply in each group is smaller, but roughly proportionate.

Shari Olefson, a real estate attorney with Fowler White Boggs in Fort Lauderdale and author of Foreclosure Nation: Mortgaging the American Dream, said would-be buyers of higher-priced homes don't have the same incentive to enter the market as first-timers, since many presumably already own properties. And more of those homeowners are facing foreclosure as the job market worsens.

The Aguilars, owners of the peach stucco house offered for $375,000, said they're hanging on and riding out the storm.

``We've gotten more questions -- mainly from buyers from other countries, but potential buyers are finding something cheaper,'' Miguel Aguilar said.

Citizens gets OK to raise rates

2009-11-23T14:03:00.000-08:00

Homeowners living in high risk areas and getting their insurance from state-run Citizens Property Insurance will see their rates increase 5.2 percent beginning in January, state regulators ruled Friday.

Ten days after getting public input on the request, the Office of Insurance Regulation approved rate hike increases for Citizens high risk accounts, a pool of more than 300,000 policies for homeowners, condominium owners and commercial property owners.

The rate filings begin what company officials and lawmakers envision as a “glide path” toward higher rates for Citizens, the state’s property insurer of last resort. Those rates have been capped the last couple years because of increases after two heavy hurricane seasons that lawmakers thought were too difficult for home owners. Now, policymakers are trying to get rates back to where the actuaries say they should be.

Along with homeowners’ rates, Insurance Commissioner Kevin McCarty approved premium increases for commercial residential policies of 9.4 percent, commercial non-residential, 9.3 percent and mobile homes, 11 percent.

While lawmakers this year approved increases for Citizens, they limited annual adjustments at 10 percent increases for most policyholders. Citizens is Florida's largest property insurer with more than 1 million policyholders.

The 10 percent cap, however, does not include a provision to accelerate cash build up in the hurricane insurance pools. That’s why the mobile home rate increase will exceed 10 percent on average.

Friday’s approved rates were lower than what had previously been requested by Citizens.

Posted several weeks ago, the original proposed rate hikes would have increased homeowners’ insurance rates by 7.5 percent. Other increases included 9.6 percent for commercial residential, 9.9 percent for commercial non-residential property, and 11.8 percent for mobile home owners in the state-run pool.

McCarty also said the agency would look into claims by Monroe County residents that their rates are too high. During public testimony, a cadre of Monroe County homeowners said the Florida Keys represent a unique landscape and operate under a stricter building code. The combination renders inappropriate the model used by the state to set insurance rates for policyholders of Citizens Property Insurance Corp.

Citizens, the only insurer that provides wind insurance for the 100-mile strip from Key Largo to Key West, is charging too much for coverage residents don’t need, they say.

Fear of Double Dip in Housing

2009-11-19T08:33:00.000-08:00

The U.S. housing market is sputtering again, adding to doubts about the vigor of the economic recovery.

Just a few months after housing showed signs of leveling off, bad weather and uncertainty over the extension of a home-buyer tax credit sent new-home starts in October tumbling 10.6% from the previous month. They fell to the lowest level since April, the Commerce Department said Wednesday. Starts of single-family houses fell 6.8%.

Earlier this month, Congress expanded the tax credit and extended it through April, so building should improve. Still, the latest data portend poorly for the economy overall, and for fourth-quarter growth.

On Wednesday Pulte Homes Inc., the nation's largest home builder, warned investors of a grim outlook. "As we look out to 2010, we are expecting difficult conditions to continue," said chief executive Richard Dugas.

Meanwhile, more Americans who bought homes during the boom are falling into mortgage limbo. About 3.4% of U.S. households -- or about 1.9 million homeowners -- are 120 days or more overdue on their payments, but not yet in foreclosure, according to LPS Applied Analytics, a research firm in Denver. That is up from 1.5% a year earlier.

Many of these people are likely to lose their homes over the next few years. That means more bank-owned homes will hit a market already suffering from oversupply.

The housing-supply picture is tricky to read. The number of homes listed for sale was 3.63 million in September, down 15% from a year earlier, according to the National Association of Realtors. That is enough to last about eight months at the current rate of sales. Anything above about six months is considered a buyer's market, in which prices may come under downward pressure.

But those numbers don't reflect the millions of homes expected to go through foreclosure over the next few years, adding to supply. Amherst Securities Group in September estimated seven million homes are headed for foreclosure in the next few years -- more than a year's home sales at the current rate.

"Housing faces important problems, including continuing high foreclosure rates," Federal Reserve Chairman Ben Bernanke said in a speech Monday. "But residential investment should become a small positive for growth next year rather than a significant drag, as has been the case for the past several years."

For borrowers with strong credit records, 30-year home mortgages are available for fixed rates of just under 5%, near the lowest levels in 50 years. That is helping demand, but many people can't get such loans because they have too much debt or are unemployed.

One measure of the role of housing in the economy earlier this decade: During the boom, residential investment peaked to make up 6.3% of gross domestic product. That number fell to 2.5% in the third quarter, according to Macroeconomic Advisers.

The average U.S. home price nearly doubled between January 2000 and April 2006, according to the First American LoanPerformance index. Since then, the average has dropped about 30%. In most parts of the U.S., prices are still down from year-ago levels, but prices in some markets, including San Diego and Orange County, Calif., have leveled off, at least temporarily.

Wednesday's data prompted some economists to revise their fourth-quarter forecasts down slightly. Macroeconomic Advisers moved its GDP estimate down to 3% from 3.2% and Nomura Securities is predicting 3.4% growth, down from 3.6%. The data adds to the suggestion "that the recovery is a little bit rickety," said Zach Pandl, a Nomura economist.

Eventually, the steep drop in construction of new homes should help reduce the number of unsold vacant homes to the point where builders need to step up production. But the latest data highlight the fragility of the housing market, which has been propped up by the tax credit and the Fed's efforts to push down mortgage rates.

With the tax credit set to expire in April and the Fed scheduled to wind down its purchases of mortgage-backed securities by the end of March, housing faces a test of its ability to sustain a recovery without as much government aid.

Potential homebuyers are frustrated by the complications of a market dominated by distressed sellers. Tim Kolstad, a financial consultant renting in Scottsdale, Ariz., has been trying to buy a home for more than a year. But the homes he likes are all either foreclosed or being offered for less than the loan balance due -- which means any offer from a potential buyer must be cleared by the lender, and lenders often are slow to respond.

"The offers just sit out there forever," Mr. Kolstad said.

Credit standards are "definitely tighter than they were" in previous years, said Bryan Mitchell, an agent Re/Max Associates in Las Vegas. At least two years of job history, low debt and a good credit score are essential to securing a loan. "You have to have all three, you can't be missing one," he said.

But some economists see signs of better demand ahead. "I think that there's been a lot of doubling up in this recession," said Patrick Newport, an IHS Global Insight economist. "People lose their jobs so they move in with relatives. Your kid graduates from college, he can't get a job, so he stays at home. That's going to start going the other way."

Single family home-building is still 10.9% below year-ago levels. New homebuilding fell to a seasonally adjusted annual rate of 529,000 units, the lowest since April. And apartment-complex construction fell as high vacancy rates, declining rents and borrowing difficulties have deterred builders. Building permits, a sign of future construction, also decreased 4%.

The number of people awaiting foreclosure action has ballooned partly because the government has prodded lenders to consider reducing payments for many distressed borrowers in an effort to avert foreclosures. At the same time, loan-servicing companies, the firms that collect mortgage payments and handle foreclosures, are overwhelmed by the millions of distressed borrowers. "There is only so much volume that can be processed by the servicers each month," said Herb Blecher, a vice president at LPS.

Overall, about 12.4% of American households with mortgages in October were 30 days or more overdue or in the foreclosure process, according to LPS. That's up from 12.3% in September and 8.6% in October 2008. In the latest month, about 6.9 million households fell into this category.

Realtors® Help Buyers Attain Short Sales Success

2009-11-17T06:54:00.000-08:00

Not all buyers are suited for a short sale. This was one of the messages delivered at “Short Sales from the Buyer’s Perspective” during the 2009 REALTORS® Conference & Expo today.

According to the latest Realtors® Confidence Index, one out of 10 recent buyers purchased a home through a short sale. The survey also showed that Realtors® are concerned about the hurdles buyers face in short sales.

“As short sales become more commonplace, both buyers and sellers need the help of seasoned, experienced professionals to help them navigate the complexities of a short sale transaction,” said National Association of Realtors® President Charles McMillan. “As the first, best source for real estate information, Realtors® provide valuable insights and experience that can help buyers realize their homeownership goals, whether through a short sale or other means.”

During the session, Realtor® Lynn Madison, who co-authored NAR’s new Short Sales and Foreclosure Resource (SFR) Certification Program, detailed the primary reasons that short sales fail, including an incomplete short sale package, an offer that is too low, and inaccurate appraisals. According to Madison, buyers who are good candidates for short sales are very patient – it can take some lenders four months or longer to approve a short sale – have their financing in order, and don’t have any contingencies in their purchase offer.

“Short sale buyers need to have the time to be able to wait for the lender’s approval; some lenders get several hundred contacts every day,” said Madison. “Buyers must also be willing to make an offer that has a reasonable chance of closing and take guidance from their agent. If the offered price is too low, there is a good chance the lender won’t approve the contract.”

To help Realtors® address the evolving short sales market, NAR launched the SFR Certification Program earlier this year. Offered by the Real Estate Buyer’s Agent Council of NAR, the program includes training on how to manage short-sale, foreclosure, and real-estate owned transactions, and provides resources to help Realtors® stay current on national and state-specific information. More than 250 Realtors® have earned the SFR certification since the program was first offered in September.

First-time homebuyers set record in past year

2009-11-16T19:32:00.000-08:00

As a percentage of all buyers, first-time homebuyers reached 47 percent during the past year, its highest market share on record, according to a study released at the 2009 Realtors® Conference & Expo.

The 2009 National Association of Realtors® Profile of Home Buyers and Sellers is the latest in a series of national NAR surveys evaluating demographics, preferences, marketing and experiences of recent homebuyers and sellers.

Paul Bishop, NAR vice president of research, said several factors have been at play.

“Tax incentives, record high affordability conditions and pent-up demand brought a record share of first-time homebuyers into the market,” Bishop says. “These buyers are critical to housing and a general economic recovery because the market always heals from the bottom up – they absorb inventory, free existing owners to make a trade, and stimulate related goods and services.”

The number of first-time homebuyers rose to 47 percent of all home sales from 41 percent of transactions in last year’s study, and was the highest on record dating back to 1981. The previous high was 44 percent in 1991.

“It’s interesting to note the last cyclical peak of first-time homebuyers was during the last noteworthy economic downturn, with first-time buyers starting the chain reaction that led the nation out of recession,” Bishop says.

The profile shows the median age of first-time buyers was 30, and the median income was $61,600. The typical first-time buyer purchased a home costing $156,000, down from $165,000 in the 2008 study; and he or she plans to stay in that home for 10 years.

Fifty-five percent of entry-level buyers reported financing their purchase with an FHA loan, while another 8 percent used the VA loan program.

First-time buyers who made a downpayment used a variety of sources: 61 percent used savings and 22 percent received a gift from a friend or relative, typically from their parents. Six percent received a loan from a relative or friend, 6 percent tapped into a 401(k) fund, and 6 percent sold stocks or bonds. Ninety-six percent chose a fixed-rate mortgage.

First-time buyers often make financial sacrifices to purchase a home: 39 percent cut spending on luxury items, 38 percent cut back on entertainment and 30 percent cut spending on clothes.

Only 12 percent said financing their first home was more difficult than expected, but 13 percent of successful buyers said they had experienced a purchase agreement that was canceled, terminated or fell through; and 8 percent had been rejected by a lender.

“This raises the question of how many potential buyers were unsuccessful because of problems with appraisals or loan qualifications,” Bishop says. “The market would be even stronger without these problems.”

“Some people were taking a housing recovery for granted, but we must acknowledge the abnormal situation from toxic loans that will keep foreclosures coming into the market over the coming year,” says NAR 2009 President Charles McMillan. “To help stem foreclosures we must first stabilize home prices, and the expansion of tax incentives should absorb enough inventory to restore balance. As the leading advocate for homeownership, NAR commends Congress for extending and expanding the tax credit because placing financially qualified buyers into affordable homes is the soundest way to heal our economy as fast as possible.”

Buyers searched a median of 12 weeks and viewed 12 homes. Among buyers who used an agent, 63 percent selected a buyer’s representative. Eighty-seven percent consider their home a good investment, and more than half see it as a better investment than stocks. Twelve percent of buyers own two homes, while another three percent own three or more homes.

The typical repeat buyer was 48 years old, earned $88,100, purchased a home costing $224,500 and plans to stay in that home for 12 years.

The median downpayment of all homebuyers was 8 percent, and the number purchasing with no money down fell from 23 percent in 2008 to 15 percent in the current survey; 8 percent of buyers paid all cash for their home.

The median age of home sellers was 46 and their income was $91,100. Typical sellers had been in their home for seven years, up from six years in the 2008 survey, moved a median distance of 19 miles, and their home was on the market for 10 weeks. Nearly half traded up in size, 30 percent bought a comparable home and 22 percent traded down.

Eighty-five percent of sellers used a real estate professional, and 64 percent of sellers chose their agent based on a referral or because they had used the same agent in the past. Eighty-one percent of sellers are likely to use the same agent again or recommend her to others.

Forty-two percent of sellers offered incentives to attract buyers, such as home warranties or assistance with closing costs. The typical home sold for 95 percent of the listing price, with a median increase over the seller’s original purchase price of $36,000. “Even with price declines in recent years, the typical home seller saw their equity increase 27 percent,” McMillan says.

Of sellers working with real estate agents, the study found that 80 percent used full-service brokerage, in which agents provide a range of services that include managing most of the process of selling a home from listing to closing. Nine percent of sellers chose limited services, which may include discount brokerage, and 11 percent used minimal service, such as simply listing a property on a multiple listing service.

All of these types of services are provided by Realtors as well as non-member agents and brokers, with comparable findings for each year since questions about brokerage services were added in 2006. Less than 1 percent of sellers chose an agent based on his or her commission.

Sellers largely want agents to price their home competitively, find a buyer, market the property and sell within a specific timeframe. Reputation was the most important factor in choosing an agent, cited by 36 percent of respondents, followed by trustworthiness at 21 percent.

Homebuyers thought the most important services agents offer are helping find the right house, and negotiating sales terms and price. The most commonly cited benefits of using an agent are helping buyers understand the process, pointing out unnoticed features or faults, negotiating better contract terms, and providing a better list of service providers. Comparable to sellers, buyers chose agents based on a referral or had used them in a previous transaction, with trustworthiness and reputation being the biggest factors in selecting an agent.

Buyers use a wide variety of resources in searching for a home: 90 percent use the Internet, 87 percent rely on real estate agents, 59 percent yard signs, 46 percent attend open houses and 40 percent look at print or newspaper ads. Although buyers also use other resources, they generally start the search process online and then contact an agent.

When asked where they first learned about the home purchased, 36 percent of buyers said a real estate agent; 36 percent the Internet; 12 percent from yard signs; 6 percent from a friend, neighbor or relative; 5 percent home builders; 2 percent a print or newspaper ad; 2 percent directly from the seller; and less than 1 percent a home book or magazine.

Eight out of 10 home buyers who used the Internet to search for a home purchased through a real estate agent, in contrast with 63 percent of non-Internet users who were more likely to purchase directly from a builder or from an owner they already knew in a private transaction.

Local metropolitan multiple listing service (MLS) Web sites were the most popular Internet resource, used by 60 percent of buyers; followed by Realtor.com and real estate company sites, each with 46 percent; real estate agent Web sites, 45 percent; other Web sites with real estate listings, 30 percent; for-sale-by-owner sites, 17 percent; and local newspaper sites, 9 percent; other categories were smaller.

Sixty percent of buyers are married couples, 21 percent are single women, 10 percent single men, 8 percent unmarried couples and 1 percent other. Fifteen percent are non-white, 9 percent were born outside of the United States, and 4 percent primarily speak a language other than English.

Seventy-eight percent of all respondents purchased a detached single-family home, 9 percent a condo, 8 percent a townhouse or rowhouse, and 5 percent some other kind of housing. Environmentally friendly features remain a significant factor: 88 percent of buyers said that heating and cooling costs were important, 72 percent desired energy efficient appliances, and 69 percent wanted energy efficient lighting.

Commuting costs continue to factor greatly in neighborhood selection, with 36 percent of buyers saying they were very important and another 42 percent saying transportation costs were somewhat important.

Fifty-four percent of all homes purchased were in a suburb or subdivision, 18 percent were in an urban area, 17 percent in a small town, 10 percent in a rural area and 1 percent in a resort or recreation area. The median distance from the previous residence was 12 miles. The typical home size was 1,800 square feet, ranging from 1,600 for first-time buyers to 2,100 square feet for repeat buyers.

The biggest factors influencing neighborhood choice were quality of the neighborhood, cited by 64 percent of respondents; convenience to jobs, 50 percent; overall affordability of homes, 43 percent; and convenience to family and friends, 37 percent. Other factors with relatively high responses include quality of the school district, 26 percent; convenience to shopping, 26 percent; neighborhood design, 23 percent; and convenience to schools, 21 percent.

The difficulty of for-sale-by-owner transactions increased with challenging market conditions over the past year. The level of FSBOs was a record low 11 percent, down from 13 percent in 2008. The share of homes sold without professional representation has trended down since reaching a cyclical peak of 18 percent in 1997.

Many of these properties were not placed on the open market – 42 percent were “closely held” between parties who knew each other in advance, such as family or acquaintances. Factoring out properties that were not placed on the open market, the actual number of homes sold without professional assistance was a record low 6 percent – the rest were unrepresented sellers in private transactions. The market share of open-market FSBOs is nearly half of what it was five years ago – 10 percent were sold on the open market in 2004.

The median home price for sellers who used an agent was $215,000 vs. $172,000 for a home sold directly by an owner, but there were important differences. The median income of unassisted sellers was $76,900, in contrast with $94,200 for agent-assisted sellers, and the homes were more likely to be in a rural area. Unassisted sellers also were more likely to be selling a mobile or manufactured home. These factors suggest a somewhat lower value for FSBO properties.

The most difficult tasks reported by unrepresented sellers are preparing and fixing the home for sale, getting the right price, understanding and performing paperwork, and selling within the planned length of time.

To conduct the study, NAR mailed an eight-page questionnaire in July 2009 to a national sample of 120,038 homebuyers and sellers who purchased their homes between July 2008 and June 2009, according to county records. It generated 9,138 usable responses; the adjusted response rate was 7.9 percent. All information is characteristic of the 12-month period ending in June 2009 with the exception of income data, which are for 2008. Because of rounding and omissions for space, percentage distributions for some findings may not add up to 100 percent.

Florida homeowners walking away from underwater mortgages

2009-10-26T18:39:00.001-07:00

Andres Duque thought he got a real steal when he paid $125,000 for his Little Haiti condo. But four years later, similar units are selling for $35,000 and even less.

And so, faced with the prospect of being underwater on his mortgage – owing more than the unit is worth – for the next 20 years, Duque, 33, made what seemed to him like a rational choice: to cut and run.

He stopped paying the mortgage, basically forcing the lender to take the condo off his hands through foreclosure.

“I was able to pay off all my credit cards,” said Duque, who is biding his time in the condo, waiting until they come and evict him. “In a way, it was the best thing that happened to me because all my income is not being consumed by this freaking monster of a debt.”

Duque’s game plan is known as a strategic default – when borrowers walk away from loans, even if they can afford the payments. Here is a look at the benefits, the risks and the ethics of such a move.

As property values have plummeted by an average of 50 percent, such strategic defaults now make up a sizable chunk of South Florida’s foreclosures. In the fourth quarter of last year, they accounted for an estimated 28 percent of all defaults in Miami-Dade and Broward counties, according to recent research from the credit bureau Experian and Oliver Wyman, a New York-based international consulting firm.

That’s up from 8 percent in the same quarter two years ago. With property values down even further now, researchers are certain the numbers have risen even more.

With the social stigma of foreclosure eroding, experts say it is becoming easier for discouraged borrowers to justify throwing in the towel.

“People are saying, ‘Everyone is doing this, and I do not feel any compunction in fashioning my own bailout,’” said Roy Oppenheim, a Weston real-estate and foreclosure defense attorney who conducts weekly seminars that discuss strategic defaults and other financial options for distressed borrowers.

South Florida is already a veritable Atlantis of underwater borrowers. In September, homeowners here collectively owed $62.7 billion more than their homes were worth, according to an analysis by First American CoreLogic. The analysis found that about half of all outstanding mortgages in Miami-Dade and Broward are underwater.

Among those who bought in Broward in 2006, the median negative equity was $75,000 as of March. In Miami-Dade, the figure was $63,000, the Web-based real-estate service firm Zillow.com reports. Negative equity refers to the difference between a loan balance and the market value of a home.

“I wouldn’t blame borrowers who knew they were facing significant losses even if they could afford to stay,” said Andrea Heuson, a finance professor at the University of Miami. “Every day you wake up, you are reminded how much you paid for something, and then you read every day in the newspaper how much prices have fallen.”

The many consequences

Walking away, however, is fraught with financial, legal and ethical dilemmas. Lenders, government and the credit industry are starting to pay more attention to how strategic defaulters think and behave – in an effort to convince them to tough it out.

“It’s a huge problem, and it doesn’t get addressed in the process right now,” said Ron Kaniuk, a Boca Raton foreclosure and bankruptcy attorney. He said lenders are encouraging the trend by primarily offering loan modifications only to those who have fallen behind or are seriously at risk of foreclosure.

Duque, in fact, said he shunned a modification because it didn’t reduce his balance.

“It’s really a social change in the way debtors think, and it’s taking creditors some time to absorb that,” said Mark King, an attorney with the Miami office of Jones Walker who represents banks in commercial foreclosures. Commercial property owners also have started walking away.

William Hardin, a real-estate professor at Florida International University, said people have a moral obligation to honor their mortgages when they can.

“The vast majority knew what they were doing and were taking a risk, and the fact of the matter is [the mortgage] is a contract. We live in a world where contracts have to be honored. It’s the way our economy works.”

High default rates have already meant higher loan costs and tougher underwriting standards for all borrowers.

Tracking strategic defaults is an inexact science. Experian researchers identified possible strategic defaulters as homeowners who have gone straight from current on their payments to not paying at all, but remained in good standing on other credit obligations. Nationally, Experian estimated 588,000 borrowers defaulted on purpose in 2008.

Also fueling the phenomenon has been a shift from viewing a home as a place to live to an investment, valued insofar as its potential resale price goes up.

Frustration with the tax-funded bailout of banks and Wall Street may have also emboldened depressed borrowers to default out of anger and a desire to stick it to the banks. Duque’s resolve, for example, hardened after watching Michael Moore’s movie Capitalism: A Love Story. In the movie, Moore makes a case that corporations preying on consumers led to the housing crisis and recession.

“In the movie, there were Congress people telling the American public to stay in their homes, to squat and do what you have to do to fight. A lot of it struck home in many, many, many ways, and I am going to stay here until [my bank] comes to get me out,” Duque said.

Aside from the new philosophical justification for stopping his payments, Duque said his decision was fundamentally an economic one. “My mortgage was killing me, even before things went to hell. I was being choked by the property,” said Duque, who works at the Mondrian Hotel in Miami Beach.

Most strategic defaulters find themselves weighing whether the hit to their credit scores is easier to bear than paying underwater mortgages for years to come.

The most optimistic analysts say it could be three years before prices begin to appreciate. Others say prices have another 30 percent-plus to fall before flat-lining.

Prepared for the worst, Duque has been surprised by the seemingly minimal consequences so far. His credit limits on two cards were slashed by a few thousand dollars, but they were not canceled.

“I went to BrandsMart and applied for a card, and they denied me, so my credit score must be pretty low,” he said. “That’s fine with me, as long as I have a couple of credit cards.”

Surprisingly, strategic defaulters with good credit scores who remain current on their other credit lines can quickly rehabilitate their credit scores after foreclosure – faster than many realize, according to Sarah Davies, a senior vice president at VantageScore, a credit scoring and consumer analytics firm owned jointly by the nation’s three major credit reporting agencies. “You can pull yourself out of any major impact from foreclosure in 24 months,” she said.

And five years down the road?

“A foreclosure is going to be very easy to explain, seeing there are thousands of others who have also defaulted. So, there is a safety-in-numbers issue there,” Heuson said, referring to a possible borrower rationale.

Consumers are essentially putting a price on their credit score, said Piyush Tantia, a partner in the retail and business banking practice of Oliver Wyman.

But there are other risks.

Foreclosure defense attorneys warn of the growing threat that lenders will obtain deficiency judgments against borrowers. Such judgments allow them to collect the difference between the loan balance and the market value of the properties. They also allow lenders to garnish wages and seize assets.

While the risk is not great now statistically, Marc Ben Ezra, a Fort Lauderdale attorney who files foreclosures for banks, said it’s possible that lenders may begin pursuing legal rights to collect.

Jim Angleton, senior vice president of Miami-based Republic Federal Bank, estimated lenders are going after borrowers 15 percent of the time. “You know they are not being forthright with you about their assets when they are keeping their credit cards, their very fine cars and other assets current.”

Oppenheim recommends homeowners bulletproof themselves by hiring a lawyer and perhaps an accountant to explore the possible consequences.

Other real-estate experts say walking away may not be worth it in the short term, when you factor in the cost of finding new shelter and the increased consumer interest rates that stem from any foreclosure.

Tactic not for everyone

Defaulting, though, is not for everybody whose mortgage is underwater, and plenty of people stick with their homes out of a sense of financial responsibility, integrity and faith that prices will recover eventually. There are also people who forked over tens of thousands of dollars in down payments and face a real financial loss by walking away.

Analia Vence, who is renting her underwater town house in Homestead to a tenant for less than the monthly mortgage payment, said she has no intention of walking away. She paid $170,000 in 2006, and now nearby foreclosed homes are selling for $80,000.

“We bought the property as an investment, and we never thought to sell it immediately. We’re only paying $200 or $300 for the mortgage, so it doesn’t make sense to hurt our credit for that much,” Vence said

Moving from recession to recovery: What can we really expect?

2009-10-17T19:59:00.000-07:00

“One year later, the National Association for Business Economics (NABE) group is calmer but hardly happy,” says Diane Swonk, chief economist of Mesirow Financial. “Talk of a depression has been replaced with debate over the strength of the recovery. The economy looks like it bottomed around July, and is growing at a little more than 3 percent in the second half of 2009. No one, however, is popping champagne corks. The crisis took years – if not decades – to create and will take more than a few quarters of growth to fix.”

Swonk says that financial markets have improved. “The supply of credit, however, remains incredibly inhibited,” she adds. “This is to say nothing of the secondary tightening of credit that is likely to emerge as cyclical defaults and bankruptcies take their toll on the banking system in 2010.”

NABE’s 51st annual meeting concluded on Oct. 13, 2009. According to the 2009 NABE Consensus:

• Over 80 percent of NABE’s forecast panel believes that the “Great Recession” has ended and that the economy is now in the early stages of a recovery. Growth is forecast to increase at an average rate of 3 percent in 2010.

• Employment is not expected to exceed previous highs until 2012 or later.

• Inflation is expected to remain tame through the end of 2010, inhibited by high unemployment and a large amount of slack.

• The dollar is expected to further soften but not lose its status as a reserve currency.

• Corporate profits are expected to bounce back and the NABE group is uniformly optimistic that the broader stock indices will continue to rally.

• The availability of credit (or lack thereof) remains the primary risk to the outlook in the near-term.

• Concerns span the spectrum from a secondary round of credit tightening associated with the sharp rise in unemployment and accompanying defaults, to the losses that banks will have to absorb as commercial construction crashes.

• The Federal Open Market Committee (FOMC) will reverse course and raise rates by mid-2010.

Investors stymie blight-fighting program

2009-10-15T18:48:00.000-07:00

Anne Melton is looking to buy, renovate and rent out two foreclosed duplexes, but she’s not your typical real-estate investor.

She’s in the market on behalf of Family Resources Inc., a nonprofit group of which she is executive director. Armed with a $400,000 grant from the federal Neighborhood Stabilization Program, the agency hopes to buy the duplexes and rent them to young adults transitioning out of the foster-care system.

But its search has been fruitless so far.

“There are a lot of properties out there, and nothing I’ve seen that I thought was just right for us,” Melton said.

Officials of other agencies participating in the federal program echo her predicament.

Despite the glut of foreclosures on the market, they say they’re having difficulty finding suitable properties to buy, rehabilitate and then sell or rent to qualified low-income people. They say they’re being outbid by investors who are snapping up foreclosed homes, especially at the lower end of the price spectrum.

“There’s a lot of availability, but it’s difficult because there’s multiple bids and we’re not an immediate cash buyer,” said Laura Taylor, project manager for Goodwill Industries’ GoodHomes Manasota program, which also is participating in the federal program. “We’ve lost some nice places to investors.”

Other cities that implemented their programs earlier – including Orlando and Phoenix – have encountered similar problems, according to news reports.

Investors grabbing best

The investor influx has left slimmer pickings for the local programs, which already are constrained by limited funding, tight spending deadlines and restrictions on where the money can be spent.

“We’re seeing the investors and first-time homebuyers picking the choice properties, which means we’ll probably be looking at the second or lower tier,” said Suzie Dobbs, the county’s community development manager.

That could limit how many local homes are ultimately bought through the program, which awarded $5.28 million to the county, distributing it among several nonprofit agencies, and $2.57 million to Bradenton, which is implementing its own program.

Neither the city nor the agencies likely will be able to engage in protracted bidding wars, as the federal program limits how much they can offer for a property. And while passed-over homes might be less expensive to buy, they also might be in worse shape and require more money to repair.

Taylor said GoodHomes Manasota has passed on a few prospective purchases because the rehabilitation costs were prohibitive.

As a result, local officials are setting modest goals for their programs.

“We’ll probably find the choice foreclosed properties snapped up by investors,” said Tom Cookingham, Bradenton’s deputy director of planning and community development. “We figured we probably would be in that situation and, given our limited resources, we aimed for the low side in the number of units we want to do.”

Bradenton hopes to buy, fix up and resell as many as seven homes and already is in negotiations to buy one property, he said. Some of the money also will be used for down-payment assistance to buyers.

The city plans to buy another seven foreclosed properties and sell them to a nonprofit agency that would turn them into rentals. Those units would be leased to those meeting annual income requirements that range from $21,800 for a single person to $41,100 for an eight-person household. For a family of four, the limit is $31,150.

County officials hope their allocation will be enough to buy 25 bank-owned homes in areas hardest-hit by foreclosures, including the Oneco, Samoset and Washington Park neighborhoods.

After they’re fixed up, the homes will be sold to qualifying buyers who meet income limits ranging from $52,350 for a single person to $97,800 for a family of eight. The limit is $74,750 for a family of four.

Manatee has signed agreements with Family Resources, GoodHomes Manasota and Volunteers of America of Florida to carry out the program, and agreements with five other agencies are pending, Dobbs said.

“It’s their responsibility to purchase the properties, get them rehabbed and resell them,” she said. “We’re just providing the funding.”

Deadline is looming

They will have to do it quickly, as the first three agencies face January deadlines to have final offers accepted on properties or risk losing the money. Bradenton’s deadline is Jan. 10.

But they might get some help from lenders. Several banks have launched initiatives aimed at boosting the national effort.

Bank of America, for example, is offering local programs the “first look” at properties it has repossessed before they are put on the general market, spokeswoman Colleen Haggerty said. The bank sends weekly listings of such properties to more than 150 local programs.

The bank also offers private access to a Web site with real-time listings of its foreclosed holdings, and assigns a dedicated servicing associate to work with each local program, Haggerty said.

SunTrust and Wells Fargo/Wachovia have similar initiatives.

“We’re hoping this will help, but this is something the banks have just come up with,” said Dobbs, noting that the county has encouraged its nonprofit partners to participate in the bank programs.

Despite the hurdles, local officials remain optimistic they can make the federal program a success.

Cookingham said his city’s program plans to avoid competing with investors “for the low-hanging fruit properties that are in good shape in better neighborhoods.”

Instead, the city will focus on homes that investors likely will bypass – those that need more renovation or upgrades or are in less-desirable neighborhoods.

“We’ve identified a different niche than the investor community,” he said. “I think we’ll be all right.”

2nd Florida insurer drops policy over Chinese drywall

2009-10-15T18:43:00.000-07:00

A homeowner in Hallandale Beach lost his property insurance coverage because the house was built with suspect Chinese drywall, making Universal North America the second insurer in Florida to take action against residences that have the imported material.

In a letter last month, Universal said it would cancel the policy – not set to expire until next July – because the home had an “unacceptable condition.”

The homeowner, who didn’t want his name used, had filed a claim over the summer because of damage suspected to have been caused by drywall. In September, the owner got a letter that said “the dwelling was built with Chinese drywall, which has been shown to have adverse long-term effects on the plumbing and other dwelling components.”

Universal, a subsidiary of Universal Group Inc. in Puerto Rico, is the 12th-largest residential insurer in Florida, with about 105,000 policies. The company did not return phone calls Wednesday.

The townhome won’t have coverage from Universal after Monday, but the homeowner has a new policy from Citizens Property Insurance.

It might not do much good, said Coral Gables attorney David Durkee, who represents the homeowner. State-run Citizens, like other insurers, is denying claims because homeowners policies don’t cover contamination or building material defects. But once a claim is filed, Citizens is giving homeowners six months’ notice that their policies won’t be renewed if they don’t fix the problems.

If homeowners don’t report the problems, they could end up without coverage in the future anyway.

“If an insurance company can prove you had a condition in the home that changed the risk, you didn’t tell them about it and they can prove they would either have not continued to write that policy or they would have increased the premium, they can rescind your policy after the fact,” Durkee said. “There is no place for these folks to turn.”

Florida Department of Health tests show the imported drywall contains sulfur compounds that could cause an odor. But there is no direct link so far between drywall and health and corrosion problems homeowners are experiencing.

Last month, Citizens told a Punta Gorda homeowner with Chinese drywall that his policy would not be renewed when it expires next March because the company has no proof that damage attributed to the drywall has been repaired.

For homeowners who have filed claims related to imported wallboard, “it’s an unfortunate Catch-22,” Citizens spokesman John Kuczwanski said. The nonprofit insurer has received 24 claims for repairs from property owners with Chinese drywall.

There is no single proven method of fixing homes affected by Chinese-made drywall.

A few builders have taken on repairs, including Miami-based Lennar, and GL Homes, by stripping homes to their studs and rebuilding.

Homeowners should be going after builders and suppliers, Kuczwanski said, acknowledging that many have, so far to no avail.

“If you buy a new car and it has a faulty switch,” he said, “you’re going to go back to the manufacturer.

Florida insurer taken over by state regulators

2009-10-14T08:53:00.000-07:00

State insurance regulators announced Monday that they’ve taken over a troubled Ponte Vedra Beach-based property insurer formed in 2007 to insure higher value homes and condominiums.

Following a circuit court ruling issued Friday, American Keystone Insurance Co. was placed in receivership and will be liquidated following unsuccessful attempts to shore up the two-year-old company that has about 7,618 policyholders.

“We worked with the company to resolve the outstanding issues,” says Florida Insurance Commissioner Kevin McCarty. “However, when it became evident the issues could not be remedied, I had to take action to protect their policyholders.”

Leon County Circuit Court Judge John C. Cooper on Friday appointed the Florida Department of Financial Services as receiver. The designation gives the agency authority to sell assets, pay debts, salaries and small claims as it shuts company doors.

Policyholders should immediately contact their insurance agent to secure coverage with a new company. All policies will be cancelled effective 11:59 p.m. on Nov. 8, 2009.

“Given that this liquidation order comes during hurricane season, it is imperative that homeowners who have coverage with American Keystone immediately contact their agents to secure new coverage,” says Florida CFO Alex Sink. “We will continue working diligently to help make the transition as smooth as possible for policyholders.”

In a letter to Sink, McCarty said the agency had been working with the company since early 2009 to find ways to keep its corporate head above water. Financial records, however, showed that by Aug. 30, the company was about $12.3 million in the hole and could not cover its obligations. Attempts to add capital were unsuccessful. McCarty said, leaving the agency to begin liquidation proceedings. Allowing the company to continue writing policies would be “hazardous” to policyholders.

“It became apparent … that American Keystone would not be able to meet its financial obligations nor were there viable options to transfer the company’s book of business,” McCarty wrote.

Court rules against lender’s attempt to cut short sale commission

2009-10-07T17:47:00.000-07:00

Residential property agents often are loath to handle short sales, which may generate a lower commission for them. Even though an agent’s compensation may be spelled out in the listing contract, the lender’s demand for a certain share of net proceeds can reduce the practitioner’s cut.

In a positive development, however, Fannie Mae and Freddie Mac recently forbid servicers from slashing short-sale commissions below 6 percent, though that policy doesn’t apply to loans the two federally chartered mortgage buyers don’t oversee.

The outcome of a recent court case also offers some encouragement to agents, including those not working on short sales involving Fannie Mae or Freddie Mac financing. In the case of Stewart v. All States Quality Foods, an Iowa appellate court upheld a lower-court ruling on broker Larry Stewart’s entitlement to a commission after providing a buyer ready, willing, and able to pay $120,000 for a property owned by All States. The deal collapsed when, after making a counteroffer for $140,000, All States’ lender, Highland Crusader Offshore Partners, declared that it would not accept net proceeds from the sale of less than $130,000. The broker offered to lower the commission; but, after Highland refused to negotiate, he sued the lender for breach of contract and intentional interference with contract.

The appellate court agreed, noting that Highland was aware of the broker compensation amount dictated in the listing agreement and had no right to seek a lower commission after making a counteroffer. By failing to disclose its demand for net proceeds of at least $130,000 at that time, the court determined, it deceived Stewart into continuing to work on the deal.

While the ruling applies to one case in only Iowa, it has many of the elements common to short sales; and thus, it may provide a strategy that legal counsel for brokers and agents may find useful when the other party in a realty transaction attempts to cut the commission at the last minute

Firms are getting billions, yet aren’t averting foreclosures

2009-10-06T11:47:00.000-07:00

The federal government is engaged in a massive mortgage modification program that’s on track to send billions in tax dollars to many of the very companies that judges or regulators have cited in recent years for abusive mortgage practices.

The firms, called mortgage servicers, have been cited for badgering, manipulating or lying to their customers, sticking them with bogus fees, or improperly foreclosing on them.

Mortgage servicers are the middlemen between homeowners and the investors that hold their mortgages, collect homeowners’ checks and disburse payments for the mortgages, property tax and insurance. They’re a necessary player for any modification.

The reliance on such companies points to an ironic paradox for federal regulators: Cleaning up the nation’s financial crisis often rewards the firms that helped create the mess. Those Wall Street banks and mortgage servicing companies argue that they’re best positioned to repair the damage they’ve helped cause. In the case of the mortgage program, the firms getting the taxpayers’ money are, after all, the firms that control the troubled mortgages.

To make matters worse, the Government Accountability Office, Congress’ watchdog, has said that the Treasury Department hasn’t done enough to oversee the companies participating in what’s known as the Home Affordable Modification Program, which emerged from the bank bailout bill Congress passed last fall.

The modification program has been slow to get off the ground. Since it began this spring, only 12 percent of a potential 3 million delinquent mortgages have begun the process of being reworked, or put into “a trial modification,” according to Treasury Department data through August, the most recent available.

“We’ve consistently been behind this problem,” said Mark Pearce, North Carolina’s chief deputy commissioner of banks, who works with a state-level group of attorneys general from across the country. “Two years ago, maybe some were caught by surprise. But we still haven’t gotten to a point where the servicers have demonstrated an ability to handle the problem.”

Housing advocates say homeowners still face “reluctant lenders,” said Irwin Trauss, an attorney who represents low-income homeowners for Philadelphia Legal Assistance. He recently testified at a hearing of the Congressional Oversight Panel, the watchdog that monitors the Treasury’s Troubled Asset Relief Program, better known as TARP, or the bank bailout bill.

Trauss said that Bank of America, at least through July, told homeowners that they couldn’t participate in the program when they should’ve been allowed to do so, and he alleges that Saxon Mortgage forced one of his clients into bankruptcy without providing a valid reason for turning down her modification request. Trauss’ comments were echoed by other housing advocates, who’ve found mortgage servicers slow to respond and confused about modification rules.

“Servicers look for reasons to avoid making the modifications when they are most needed, rather than for opportunities to make them,” Trauss said.

Saxon Mortgage said it couldn’t comment on Trauss’ testimony because it wasn’t provided with specific details of the account in question. Bank of America said there could have been instances in which improperly trained employees were confused about the modification rules, but the vast majority of customers have been given proper information.

Although it’s early in the Treasury Department’s program, housing advocates say the servicer industry for years has resisted helping customers with modifications. Donna and Ronnie Fruia, of Troutman, N.C., learned firsthand how difficult it can be.

The couple was in the midst of a series of health crises, and three members of the family – the couple’s son, Donna’s mother and Ronnie – were in the hospital.

It was then that Donna got an urgent call that somebody from her mortgage company, CitiFinancial, had just showed up in her husband’s hospital room, where he was recovering from a stroke.

“They said, ‘Some guy’s in there aggravating him,’ “ she said.

“At the time, I couldn’t even really talk that good,” Ronnie said. “But he wanted me to sign a bunch of papers.”

The Fruias had been trying to get a mortgage modification from CitiFinancial. The company, however, was pushing the Fruias to accept a modification that wouldn’t have cut their interest rate, they said.

Only after the episode in the hospital room and the involvement of state regulators did CitiFinancial cut the mortgage’s interest rate from 11.5 percent to 5 percent, lowering their monthly payment from $985 to $602. The process took from the start of the year until July.

“They were the perfect candidate for someone with a subprime rate getting a modification,” said Henrietta Thompson, who as housing coordinator for United Family Services, a United Way-funded organization in Charlotte, helped the Fruias. “I know if the banking commissioner hadn’t gotten involved, it wouldn’t have happened.”

While CitiFinancial, a unit of Citigroup Inc. – one of the largest recipients of TARP bailout funds – said it couldn’t talk about specific customers, it’s “pleased” that the case was resolved.

“We have strict guidelines concerning the behavior of our representatives, and the incident you described would not be acceptable under our policies, even if well-intentioned,” said Mark Rodgers, a spokesman.

It shouldn’t have been a surprise that the mortgage service companies would have trouble executing wide-scale mortgage modifications. They generally aren’t set up for the complicated business of reworking loans.

In 2007, an assistant attorney general in Iowa, Patrick Madigan, analyzed the looming mortgage meltdown and found that mortgage service companies have a “highly automated process, spending as little time as possible on an individual loan and preferably no time actually talking to the customer.”

“Loan modifications, by contrast, are a time-intensive process that requires a great deal of individualized attention,” he wrote. “In some situations, it may be easier and cheaper for a servicer to simply foreclose on a borrower than to try to fix the underlying problem.”

Service companies had high turnover and employees who saw their jobs as akin to that of collection agents. Some were known to hang up on callers if they started to get tough questions, Madigan wrote. He urged mortgage service companies to hire far more staff and boost training.

That year, Iowa Attorney General Tom Miller convened a group of state officials (Iowa’s Madigan helped coordinate the effort), who then contacted the nation’s 20 largest servicers of risky subprime mortgages.

By September 2008, however, as the economy went into free fall, the mortgage industry’s efforts had been “profoundly disappointing.”

“Too many homeowners face foreclosure without receiving any meaningful assistance by their mortgage servicer, a reality that is growing worse rather than better,” said a report from the State Foreclosure Prevention Working Group.

By this year, more federal and private efforts were under way to modify millions of troubled mortgages, and customer service was beginning to improve. Companies, though, were still having trouble getting the job done.

“It is difficult for homeowners to initiate productive discussions with lenders because many servicers lack the capacity to deal with a large volume of modifications,” the Congressional Oversight Panel reported. “Servicers are generally understaffed for handling a large volume of consumer loan workouts.”

The panel found that it’s “unlikely” that mortgage servicers will be able to do all they’re being asked to do: “Servicers are simply in the wrong line of business for doing modifications en masse,” it said.

Madigan, the assistant Iowa attorney general, said in an interview that “the mortgage industry has responded to this crisis with a series of half steps based on a notion that a turnaround in the housing market was just around the corner.”

Under the Treasury Department’s mortgage modification program, three parties can participate: the company that owns the loan, the company that services the loan, and the homeowner. All get a portion of the more than $20 billion that the federal government currently estimates it could spend to keep homes out of foreclosure.

While the Treasury said it’s necessary to take in as many mortgage service companies as possible, the GAO found that the department wasn’t doing enough to monitor the process.

In a July report, the GAO said that the department had “significant gaps in its oversight structure,” and was short-staffed in the office monitoring the modification program. As of July – eight months into the program – the Treasury had filled fewer than half the positions in a key modification office. (Many of those jobs have since been filled, the department said.)

Beyond that, the government had conducted “readiness reviews” of only seven of 27 mortgage servicers the GAO examined; no more were planned. The reviews only included interviews with senior executives – and the information gathered wasn’t verified.

“Treasury cannot identify, assess and address risks associated with servicers that lack the capacity to fulfill all program requirements,” the GAO said.

Treasury said it’s beefing up its review procedures and also said it recognizes many of the problems and has been working to correct them. “Clearly, we’re not there yet,” said Seth Wheeler, one of the Treasury officials who oversees the modification effort. “Clearly there’s still inconsistent application of the program, even though we have made progress.”

Several companies in the Treasury program have been cited by judges or regulators for engaging in improper behavior with their customers.

They include Select Portfolio Servicing Inc., a Utah-based company formerly known as Fairbanks Capital Corp.; Countrywide Home Loan Servicing, now a unit of Bank of America Corp.; Carrington Mortgage Services LLC, based in California; Saxon Mortgage Services Inc., a unit of Morgan Stanley; EMC Mortgage Corp., now a subsidiary of JPMorgan Chase & Co.; and Green Tree Servicing, a Minnesota company.

Ocwen Financial Corp., a Florida-based company that services more than 300,000 mortgages nationwide, could receive more than $200 million in TARP payments.

“Ocwen has screwed up my finances so bad you can’t believe it,” said Brad Rhoton, whose rental properties in the Houston suburbs are part of a nationwide lawsuit against Ocwen. “It’s been the most maddening process you can imagine.”

Rhoton’s lawsuit charges that Ocwen constantly misapplied Rhoton’s mortgage payments and tacked on unnecessary fees and insurance, causing his accounts to fall behind.

So far under the Treasury’s modification program, Ocwen has started trial modifications in 8 percent of potential mortgages – below the national average and well below some other servicers.

Paul Koches, a company spokesman, said the number is misleadingly low. Ocwen, he said, has set rigorous standards in documenting its modifications and is therefore likely to have a far higher share of its modifications stick than other companies. He said that Ocwen undertook its own loan modification program in 2007 and has beefed up its staff substantially since then.

As for the suits against it, Koches said they represent a fraction of the firm’s customer base, and many were copycat lawsuits that tried to paint Ocwen with the same brush as other mortgage servicer firms. He said the company continues to vigorously defend itself against lawsuits.

Over the years, Ocwen has lost other lawsuits and has been slapped down by a federal judge for its conduct.

In one Texas bankruptcy case, for example, a federal judge blasted Ocwen after it tried to pass the cost of a $1,000 sanction onto the customer it was cited for mistreating. When the judge found out, he said, “Ocwen’s course of conduct in this proceeding bordered on the outrageous.” He fined the company an additional $27,500.

The case was far from isolated, however. A jury in Galveston, Texas, ordered the company to pay $11.5 million, and one down the coast in Corpus Christi ordered it to pay $3 million for unfairly foreclosing on homeowners (both cases were then settled in the appeals process for undisclosed amounts).

In both cases, the plaintiffs were on the edge financially, and so when Ocwen added extra fees to their accounts, they quickly fell behind.

That was part of their strategy, plaintiffs’ attorneys said. One of the key witnesses before both juries was a former Ocwen account officer who said the company trained its sights on customers who had substantial equity in their homes. In those cases, the company had the most to gain if customers lost their homes in foreclosure.

“We didn’t treat the people very well, but the money was pretty good,” the former account officer, Ron Davis, testified during one of the trials. (Davis couldn’t be reached for further comment.)

The motive, he said, was simple: force people into foreclosure as a way to earn higher bonuses.

“We would call the customers and ask them what bridge they were going to live under,” Davis testified.

Ocwen lost that lawsuit. A Texas jury found that the company engaged in “fraudulent, deceptive, or misleading” tactics that it called “unconscionable.” The case involved an elderly Texas woman the bank tried to evict from her home even after a local judge had ordered it not to. The jury awarded her $11.5 million, which was reduced to $1.8 million, according to Ocwen’s Securities and Exchange Commission filings; the case was settled during appeals.

Outside the courts, federal regulators in 2004 approached Ocwen to request that the company enter into a formal supervisory agreement under which it promised to improve its customer service. It required, for example, that Ocwen beef up its ombudsman to take customer complaints; adopt a “borrower-oriented customer service commitment plan”; take reasonable actions to see if homeowners already have hazard insurance before adding it to customers’ accounts; and regularly report to federal regulators about outstanding customer complaints.

Koches of Ocwen said the agreement was merely an attempt to formalize many of the steps the company was already taking – and that the company and federal regulators wanted to avoid the kind of problems other firms had experienced.

Later that year, however, Ocwen took steps to ensure that such regulatory findings wouldn’t come again.

By successfully petitioning to have itself removed from the oversight of the Office of Thrift Supervision, the supervisory agreement hatched just months before was ended, according to Ocwen’s regulatory filings. Ocwen said it removed itself from OTS oversight for business reasons unrelated to the supervisory agreement and that it continues to follow the intent of the agreement.

Real estate prices could climb slowly

2009-10-06T11:46:00.000-07:00

With the population aging and fewer young people to take the place of baby boomers, the demand for housing may slow for years to come, keeping home values from increasing as they have done since World War II, according to at least one well-known housing expert.

“We can no longer assume that housing will be as good an investment for the future as it has been,” said Robert Reich, public policy professor at the University of California-Berkeley and U.S. Labor Secretary in the Clinton administration.

Reich isn’t predicting that buying a home will no longer be a good financial strategy, just that the value of real estate won’t climb as rapidly.

“People in the middle class, although stressed, will still want homes, and homeownership will still be part of the American dream,” he said. “House prices will continue to rise, just more slowly than they did in the past 70 years.”

Homeowners in financial trouble often re-default

2009-10-05T07:54:00.000-07:00

Lenders are ramping up efforts to avoid home foreclosures, but a report by bank regulators says more than half of borrowers who get help fall behind again.

More than 50 percent of homeowners with loans modified in the first half of last year had missed at least two months of payments a year later, the federal Office of the Comptroller of the Currency and the Office of Thrift Supervision said Wednesday.

But the results were better among those who saw their payments drop substantially.

About one in three borrowers whose monthly payments were reduced by 20 percent or more had fallen behind again within a year. That compares with more than 60 percent for borrowers whose loan payments were left unchanged or increased.

The report highlights a significant challenge for the Obama administration’s plan to tackle the foreclosure crisis, backed by $50 billion in money from the financial industry bailout fund.

The administration’s effort got off to a slow start, but has picked up speed in recent months. As of last month, about 360,000 borrowers, or 12 percent of those eligible, have signed up for three-month trial modifications. They are supposed to be extended for five years if the homeowners make their payments on time. There is currently no data on redefaults within the plan.

Traditionally, most lenders have offered payment plans that allowed borrowers to catch up on missed payments. But those modifications often do not involve an interest rate reduction and result in a higher monthly payment.

All that does is set the borrower up for failure, said Kristi Cahoon, an attorney and housing counselor with Legal Services of Northern Virginia. “A lot of them aren’t true modifications,” she said.

By contrast, under the Obama plan, she believes the loans will be sustainable for the homeowners she counsels. Borrowers’ interest rates, for example, can go as low as 2 percent for five years under the Obama plan.

Bank regulators say they have pressed lenders to shift their focus to modifications that reduced borrowers’ payments. They made up nearly 80 percent of new modifications in the April-June quarter, up from about half in the first three months of the year.

The report covers 34 million loans, representing more than 60 percent of primary home mortgages. Consistent with other reports, it showed borrowers are continuing to fall behind as job losses mount. More than 11 percent of borrowers covered by the report had missed at least one payment as of June 30, up from 10 percent in April.

It also highlighted mounting problems with an especially troubling category of loans –s “pick-a-payment” or option ARM loans, which allowed borrowers to defer some of their interest payments and add them to the principal. At the end of June, 10 percent of these loans were in foreclosure, more than triple the rate for all mortgages in the survey.

The lenders included in the report offered help to about 440,000 borrowers in the April-June period, they started foreclosure on about 370,000 homes, unchanged from the January-March period.

Win a property-tax reduction

2009-10-02T10:47:00.000-07:00

Communities are feeling the sting of tumbling property values as more taxpayers appeal their assessments — and successfully lower their tax liabilities.

Take the Las Vegas area, an area hard-hit by price declines. More than 6,000 taxpayers — including both residential and commercial property owners — filed appeals in Clark County, Nev., after receiving a notice-of-value card in December, up from nearly 1,400 appeals received the year before, said Michele Shafe, the county’s assistant director for assessment services. Of the 6,000 who filed appeals this time around, more than 4,500 received reductions to their assessed value, she said.

"That's about a 76% success rate for all the appeals that were filed," she said. Many of the reductions hovered around a 30% to 40% range, she said.

That represents a substantial hit for local taxing bodies, which have already suffered because of a sharp decrease in sales-tax revenue as consumers scale back their spending. One way government is making up for it: County departments will be required to cut 5% out of their budgets as less money makes its way into government coffers, she said.

And what is happening in Vegas isn't staying in Vegas: Many local governments around the country are experiencing similar revenue declines — especially those hardest hit by the housing downturn.

"The property tax is the main source of revenue in a lot of these places," said Chris Hoene, director of policy and research for the National League of Cities. "So any hit to the property tax means that there will be some cuts in services somewhere."

Communities are making cuts to libraries, parks and special events, he said. Many also are instituting hiring freezes in response to lower revenues. And Hoene said this is only the first or second year of a three- to four-year cycle of declining revenues for local governments.

How much home can you afford?
In general, many communities aren't raising taxes to combat the shortfalls, at least in part because of the political fallout that would come with it, Hoene said.

"The majority are not raising taxes, simply because it's a difficult time to do so," he said. Instead, he's seeing a bigger use of fees, which are "much smaller and more incremental... and much more politically palatable to the public."

Why now?
While some areas reassess property values annually, others do only a portion of homes each year, said Jacqueline Byers, director of research for the National Association of Counties. So some homeowners may still have assessed values that reflect, say, 2007 values — and the discrepancy is evident in rapidly declining markets.

"They're watching the value of their property go down, and their assessment is on a two- or three-year-old value. That's why they're appealing," Byers said. "People are waking up to it and trying to save money."

California's system is somewhat unlike the rest of the country’s; reappraisals for property-tax purposes typically occur when properties change owners or when substantial improvements have been made. But in Los Angeles County, the assessor's office has done a proactive review of assessed values, based on market trends in the area — a process that also cuts down on the number of appeals, said assessor Rick Auerbach.

The review of 473,000 homes — bought between July 1, 2003, and June 30, 2008 — resulted in lower assessments on 334,000 single-family residences and condo units, according to a recent release. The new assessed values reflected an average $1,400 in property-tax savings for single-family homes and an average $1,100 in savings for condo units, the release said. Yet Auerbach acknowledged that other areas in the state have seen even more of an impact.

"Home values have declined and foreclosures are up," he said in the release, "but not to the same extent as in some neighboring counties." And, he indicated, the relief is temporary: "My staff is ready to act quickly and efficiently in reflecting the inevitable turnaround, as it did in processing reduced home values," he said.

What to do
Think your assessed value needs adjusting? Areas have different protocols and timelines for appealing an assessment. Here are some tips:

Start with the county assessor's office. In some places, you may be able to appeal online; others might require a trip to the assessor's office. Some might require an inspection of the property; others might rely on computer models, Hoene said. The process could be relatively quick if it's obvious that a change needs to be made, Auerbach said.
Know what homes in the neighborhood have sold for. Prices of comparable homes that have sold in the past six months to a year will be most helpful to build your case, Byers said. Information can be tracked down online, or get assistance from a local real-estate agent, Auerbach said.
Remember, assessed value is often not equal to market value. Many times, an assessment is only a percentage of what the home could actually be sold for, so appealing might not be as financially advantageous as you might think, Hoene said. "Find out what it's going to take (to appeal) and what is involved, and judge that against the potential payoff," he added.

Housing market stabilizes

2009-10-01T08:01:00.000-07:00

Home prices rose for the third-consecutive month in July, bolstering the view that the long free fall in the housing market may be history. But consumer confidence fell unexpectedly, modestly pushing down stocks.

Housing prices ticked up 1.6 percent from June, according to the Standard & Poor’s/Case-Shiller home price index, which tracks 20 large cities. Low mortgage rates and bargains on foreclosed homes are attracting buyers.

Home prices rose for the first time in three years in May. And after falling 12 percent from October through April, prices climbed 3.6 percent from May to June.

“I think we’ve made the turn,” says Joel Naroff of Naroff Economic Advisors.

Values rose in 18 of the 20 cities, with only Las Vegas and Seattle posting monthly declines, of 1.1 percent and 0.1 percent, respectively. Thirteen cities have had at least three consecutive monthly gains.

The residential real estate market is still weak. Home values in the 20 cities are off 13.3 percent from July 2008 and 33.5 percent from their 2006 peak. Prices are now about where they were in fall 2003. But the year-over-year declines have been steadily shrinking in each of the past six months.

In some cities, the housing market is almost stable year-over-year, with prices in Cleveland, Dallas and Denver dipping 1.3 percent, 1.6 percent and 2.9 percent, respectively.

Yet some economists say the recent run-up is a brief reprieve, and home prices have yet to hit bottom. Patrick Newport of IHS Global Insight says the market will swoon again after housing inventories are fattened by a new wave of foreclosures and an $8,000 tax credit for first-time home buyers expires Nov. 30. Newport says prices will likely fall 6 percent before mounting a more sustainable rebound in mid-2010.

David Blitzer, chairman of Standard & Poor’s index committee, says, “The numbers are very encouraging, but it will probably take some time before we have convincing data that we’re past the bottom.”

Meanwhile, a closely watched consumer confidence index dipped to 53.1 in September from 54.5 in August, the Conference Board said. Analysts expected it to rise to 57.

Ian Shepherdson of High Frequency Economics noted most of the drop stemmed from consumer attitudes about current conditions, which reflects high unemployment. The more critical “expectations index” was stable, sliding to 73.3 from 73.8. The overall index is up from a record low of about 25 in February.

Still, “With the holiday season quickly approaching, this is not very encouraging news,” says Lynn Franco, head of the board’s consumer research center. The Dow Jones industrial average closed down 47 points at 9742

Florida home sales up, prices down

2009-09-30T06:41:00.001-07:00

Activity is picking up at a number of real estate firms in Southwest Florida and the rest of the state.

“We’re busy,” said Laurie Zobel, owner of Zobel Real Estate, located in Port Charlotte since 1979. “We’re getting a lot of calls on various types of real estate. We’re getting calls on vacant land from people who want to build in the future. We are busy selling homes.”

The situation is similar for Cynthia Logan of Coldwell Banker Sunstar Realty in Port Charlotte.

“I’m getting a heightened amount of calls from people who want to retire here after reading some of the recent publicity about it being an affordable place to live,” said Logan, president of the Punta Gorda, Port Charlotte, North Port Multi Listing Service.

Across the state, sales are up but prices are down. Sales of existing homes in Florida rose 28 percent in August, compared to August 2008.

Some 13,850 homes sold statewide last month, compared to 10,813 a year ago, according to data released by Florida Realtors, a trade association that represents Realtors.

The association also reports a 45 percent increase in sales of existing condominiums statewide, compared to last year. Sixteen of Florida’s 20 metropolitan statistical areas reported increased existing home sales in August while 18 showed increases in condo sales, the FR release said.

It’s the 12th straight month that sales have increased statewide and the 14th consecutive month that the majority of the state’s MSAs have reported increased sales.

There are encouraging signs locally. Some 230 existing homes were sold in Punta Gorda and surrounding areas in August, compared to 176 last year, a 31 percent increase. Some 678 existing homes were sold in the Sarasota-Bradenton area (including North Port and Venice), compared to 551 in August 2008, a 23 percent increase.

Zobel, who runs a one-person office, operates primarily in Charlotte County and North Port. She is writing at least one contract per week for an existing home sale.

Zobel has worked on three contracts for land sales this week. “That’s up and that’s encouraging,” she said.

Success is relative. In 2004-05, Zobel says she was writing 40 vacant lot contracts and selling approximately 20 homes per month.

Meanwhile, the sales of existing condos increased in August, up 186 percent in the Punta Gorda area (from 14 last year to 40 now) and up 34 percent in the Sarasota MSA (from 126 to 169).

The median sales price for condos was $98,000 in Punta Gorda (down 42 percent from $170,000) and $185,600 in the Sarasota MSA (down 16 percent from $220,000).

Median sales prices of existing single-family homes decreased in August compared to last year. Statewide, the median sales price for existing homes in August was $147,400, down 22 percent from a year ago, when it was $188,500. Sales of foreclosures and other “distressed” properties continue to reduce the median price “because they generally sell at a discount relative to traditional homes,” according to Florida Realtors.

The national median sales price for existing homes was $178,300 in July, down 14.6 percent from a year earlier, according to the National Association of Realtors.

The median sales price of an existing home in the Punta Gorda area last month was $103,300, down from $138,100, a 25 percent decrease. The sales price in the Sarasota MSA was $164,200, down 25 percent from $218,200.

But the “sales up/prices down” mantra doesn’t fly for some in Charlotte County.

“You can’t say that across the board,” said Logan, who has worked in real estate in Florida since 1975. “There is some stabilization to the pricing. We are a declining market, in general.”

Zobel also sees prices stabilizing.

“We’re not having to reduce prices as much as we did in the past,” she said. Right now she’s showing homes priced from $80,000 – a three-bedroom home built in 2006 – and up.

Logan handles a lot of bank-owned properties, but she says those listings “have slowed up somewhat. The banks seem to be holding them back.”

Most of Zobel’s sales are short sales and foreclosures, “but I’m seeing more and more sales where you have a regular buyer and a regular seller,” she said. A short sale is a real estate transaction wherein a bank agrees to accept less than the balance owed on the property.

“We are getting the short sales to closing,” Zobel said. “There are fantastic deals, but you have to be patient.

$1 million going further in many housing markets

2009-09-29T08:15:00.000-07:00

A million dollars doesn’t buy you what it once did. In most U.S. neighborhoods, it now gets you a lot more.

During the housing boom, prices rose so high and so fast that even cookie-cutter homes in the paved suburbs of South Florida and California could cost a cool million. In Santa Clara, Calif., a high-tech hot spot, the median price hit $836,780 in 2007.

That was a long way from the days when a million-dollar home evoked images of marble columns and swimming pools with vanishing edges. Subprime loans allowed more people than ever to buy houses that were once above their means. Higher demand fueled ever-higher prices until the spigot of cheap money was turned off and the housing bubble burst. The recession forced many well-heeled buyers into unemployment lines. And sales of homes over $1 million cratered by more than 50 percent from the peak four years ago.

“Everyone has less money than they once had,” said Amy Wright, an agent with The Real Estate Office in Rancho Santa Fe, Calif. “That has certainly affected the nouveau riche, and that’s definitely in that $1 million price point.”

For people who do have the money, however, it’s the best time in years to buy luxury real estate.

Rancho Santa Fe is a luxury enclave in San Diego County that has over the years lured the likes of Howard Hughes and Bill Gates. Equestrian trails border golf courses, and the most expensive home on the market is listed for $29.9 million.

A couple of years ago, the idea of getting a house in Rancho Santa Fe for a paltry $1 million was laughable. Now, foreclosures and financially distressed homeowners account for about 15 percent of sales, and home prices are down 30 percent.

In one golf-course community in the town, a 2,200-square-foot home is listed for $800,000. Residents live in a gated community where Spanish style homes surround a 250-acre Rees Jones-designed golf course and an accompanying 35,000-square foot clubhouse.

In the 20 largest U.S. metro areas, about 2,800 homes sold for more than $1 million in July – down by more than half from July 2005, according to MDA DataQuick. Nationwide, overall home sales were down about 27 percent, according to the National Association of Realtors.

In the month of August, sellers with homes priced above $2 million were cutting prices by an average of 14 percent, compared with the national average of 10 percent, according to Trulia.com.

The good news for luxury homebuyers is that they’re getting about 20 percent “more house” than they did two years ago, and the prestige of owning a $1 million home is returning, said John Brian Losh, CEO of luxuryrealestate.com.

That is, if they can afford the payments.

On Friday, the average interest rate for a 30-year “jumbo loan” (defined as a mortgage over $729,750) was 6.18 percent – about a point higher than a conventional fixed-rate mortgage, according to Bankrate.com. That means the mortgage payment for a $1 million home (with a down payment of 20 percent) would run about $4,900 a month, not including property taxes.

A buyer would have to earn at least $200,000 a year to make the payment plus taxes – and only about 4 percent of Americans fall into that tax bracket, 2007 Census data shows.

In Fort Myers, Fla., Pat and Dennis Tyeryar are trying to sell their four-bedroom, 3,795-square-foot house on three acres for $999,700. The property is a rare slice of lush Old Florida, with moss cascading off shade trees and views of a river and lagoon.

The property, valued at $1.4 million four years ago, is unique for the area because it sits on a peninsula: Every room in the house has a water view.

So far, no offers.

In a recession-battered place like Saginaw, Mich., however, a person can scoop up almost 18 houses for $1 million. Or, a buyer can get a 6,360-square-foot, two-story brick palace that sits on a five-acre estate.

The house is priced at $995,000. It has an indoor swimming pool and six bedrooms, but the property has been a hard sell in a market where a 2,300-square-foot home can go for $160,000, real estate agent Bruce Shaw said.

Shaw said the home would have been listed for about $1.3 million during the boom.

“It’s not like I get a lot of calls on it, not unless someone is moving from Southern California,” he said.

In Toledo, Ohio, agent Nancy Kabat has two listings that add up to $1 million – a six-bedroom, $635,000 house in suburban Ottawa Hills, and a three-story, two-bedroom condo on the Maumee River for $360,000.

The house has detailed crown molding and a renovated kitchen with granite countertops. It’s also near good schools. The condo has a view of Toledo’s landmark Anthony Wayne Bridge and is a short ride to an area with upscale restaurants and a vibrant nightlife.

“You could have a house in the suburbs for the winter and have a condo on the river in the summer and use your boat,” Kabat said.

If that approach doesn’t work, a buyer can pursue a three-bedroom, Mediterranean-style home in Toledo for $969,177, according to realtor.com. The 4,800-square-foot property was built in 2007 and has a three-car garage and upscale kitchen appliances like a stainless steel refrigerator and a dual-temperature wine cooler.

“We don’t have that many million dollar houses here, so it seems that they’re holding their value,” said Betty Lazzaro, an agent with Sulfur Springs Realty Inc.

Demand grows for smaller homes

2009-09-12T04:55:00.000-07:00

Census Bureau data shows that the median size of a new single-family home in the United States shrank to 2,215 square feet in 2008 from 2,277 square feet the year before.

The change represents the first decrease in median size in almost 14 years, as single-family housing had been growing larger on a consistent basis since 1991.

“That’s reflective of the economy back then: the stock market, the egos, people trying to compete with their neighbors and people trying to keep up with the Joneses,” according to Cindy Ariosa, an executive for the Baltimore and Southern Pennsylvania division of Long & Foster.

In recent years, however, the implosion in the residential property market has steered more buyers toward smaller homes.

“When the economy is weak, unemployment is high, income gain is slower or nonexistent, people tend to focus on simpler things, less expensive things,” explains American Institute of Architects chief economist Kermit Baker.

In addition, the sales market is being driven largely by first-time homebuyers, who lean toward townhouses and other smaller properties. Moreover, many of today’s consumers see smaller homes as a good fit with their environmental and ecological values.

In response to the trend toward less space, nearly nine of 10 builders polled by the National Association of Home Builders are erecting smaller units.

23% of Florida home loans past due or in foreclosure in second quarter

2009-08-22T07:00:00.000-07:00

As home prices fell and the job picture worsened, the percentage of Florida home loans either past due or in foreclosure hit 23 percent in the second quarter, outpacing any other state in the nation.

The figure represents 807,000 loans, a staggering sum of the roughly 3.5 million mortgages outstanding in Florida.

“Florida deserves special mention as the worst state in the country,” said Jay Brinkmann, chief economist of the Mortgage Bankers Association that released the numbers Thursday. “Nevada is a close second, but everyone else is far behind.”

Florida, along with California, Arizona and Nevada – states that saw some of the headiest home price increases during the boom – represented 44 percent of the total number of loans in foreclosure nationally.

Twelve percent of all Florida loans were in some stage of the foreclosure process as of June 30, with 10.8 percent past due by a month or more.

Nationwide, 4.3 percent were in foreclosure and 9.2 percent were 30 or more days delinquent.

Barring loan modifications that would help homeowners stay in their properties, the high number of foreclosures will likely result in more homes being put on the market for resale by lenders, potentially contributing to further price declines.

Florida’s mortgage hardships swept across all loan categories, with so-called prime borrowers, or those with good credit, showing the biggest increases in delinquencies. This indicates job losses and falling home prices are taking a toll on a new set of homeowners.

Between the first and second quarter, the percentage increase in delinquencies and foreclosures among borrowers with fixed loans even outpaced borrowers with subprime loans – or those sold to borrowers with spotty credit histories and staggering default rates.

Delinquencies and foreclosures among prime borrowers rose from 10.7 percent to 12.42 percent in the second quarter.

Among subprime loans, 52 percent of roughly 536,000 subprime loans tracked by the MBA were past due or in foreclosure in the second quarter, up from 51 percent in the previous three-month period.

Delinquencies among prime-fixed borrowers are key because they reflect problems with the underlying economy rather than problems arising from the structure or underwriting of loans.

“This is further confirmation of what we have been saying and expecting for the last year or more,” that these problems are being driven by fundamental issues in the economy, Brinkmann said.

Falling real estate values often lead borrowers to walk away from their homes rather than continue to pay off loans worth far more than the properties. Until the employment picture improves – sometime in the middle of next year, Brinkmann predicted – delinquencies will continue to rise.

Foreclosures should start tapering off about six months after that as the foreclosures cases are worked through the system and the homes are taken back by lenders or sold at auction.

High-end homes: Is the tide turning?

2009-08-16T06:40:00.000-07:00

High-end homes appear to be selling better than analysts thought.

Toll Brothers (TOL), the nation’s largest luxury homebuilder, on Aug. 12 announced its first year-over-year increase in signed home contracts since 2005, suggesting that first-time buyers might not be alone in driving improving U.S. home sales.

The Horsham [Pa.]-based builder said that signed contracts in the quarter ended July 31 – though still low by historic standards – rose 3 percent, to 837, compared with the same period a year ago. But revenues fell 42 percent in the quarter, to $461.3 million. The company also said it has been able to reduce buyer incentives in several markets as demand and contract cancellations improve.

“Mood has changed”

No other major builder has matched Toll Brothers’ 3 percent increase in contracts signed, though a few reported a 2 percent improvement in the most recent quarter, said Barclays Capital analyst Megan McGrath in New York. The average quarterly decline in new home contracts for major public builders was about 14 percent, she said.

Toll Brothers attributed the improvement to low interest rates, government homebuyer incentives, the recent stock market surge, and decreased competition from smaller and midsize builders now frozen out of credit markets. “The mood has changed,” Chief Executive Robert Toll told analysts during a conference call. “Our traffic still stinks but those people that are coming in are more serious. They’re not just fishing any longer. Now, there’s fear on both sides. We fear not selling and they fear missing.”

McGrath said Toll Brothers is selling homes for an average of $582,000 – far below the multimillion-dollar price tags for the estates of the rich and famous commonly referred to as “luxury real estate.” The market for million-dollar homes is weak, but Toll Brothers’ homes are more modestly priced and generally don’t require “jumbo” mortgages. Those are loans that generally exceed $417,000. Toll said the company’s strongest markets are in the Northeast, particularly Connecticut, the New York suburbs, and New Jersey. But sales are also strong in the Virginia suburbs of Washington, D.C.; Delaware; Raleigh, N.C.; Orlando; Northern California; and Naples, Fla.

Too soon to tell

Shares of Toll Brothers closed 14 percent higher Wednesday, at 23.42. “There are a lot of stories in the press about how poor the luxury market has been doing,” McGrath said. “Some of it is a misunderstanding about what is luxury and Toll’s actual business.”

Michael Widner, vice-president of Stifel Nicolaus Research (SF), said it’s too early to say whether Toll Brothers’ performance represents a change in the market because the small improvement in contracts signed might be a temporary blip. “If we have seen a rebound in something other than the first-time homebuyer market, this is the first real sign of it,” Widner said. “It’s a little early to celebrate too much.”

You didn’t really lose in housing free fall

2009-08-12T08:03:00.000-07:00

Stan Smith has some news for longtime homeowners having a pity party over falling house prices in Central Florida: New research shows that current home values are just about where they would have been if the real-estate bubble had never inflated and burst.

A long-term view of the market reveals that, even though prices rose and fell dramatically in recent years, they appear to have settled back into historic patterns, according to an analysis by Smith, a University of Central Florida finance professor.

“Most homeowners are within 6 percent of where they would have been had there not been a bubble. The people who have been here since before 2005, they should not have been hurt,” Smith said, though he added: “... A lot of people did buy in 2005 and 2006, and obviously they have been hurt significantly.”

For about a quarter-century, starting in the late 1970s, home prices in Metropolitan Orlando increased 4.7 percent a year on average, according to Smith’s analysis of data from a federal housing-price index. Then the bubble emerged, with prices rising 20 percent in 2005 and 32 percent the following year. Homeowners were elated about their fast-growing equity – at least until the bubble burst in mid-2007.

The sharp drop in prices since then – 22 percent from the 2007 high – may have left the impression that the bursting bubble set back even long-term homeowners for many years to come. Yet prices now are about where you would have expected them to be had the dramatic rise and fall never occurred.

Steve Shapiro, who is trying to sell his Lake Mary home, hadn’t really thought about it before but said it makes sense that the price he is asking for his home of 10 years tracks the area’s long-term pricing trends.

“I think I’m about where it should be with the price,” said the retiree, who has listed his house for $269,000 with Exit Realty Central agent Julie Elrod-Boyd – the same agent who helped him buy it in 1999 for $161,000. He estimated the house would have sold for more than $300,000 about 18 months ago, so the price has retreated 10 percent since then.

“It was nice to think it was worth so much a year and a half ago, but I felt like it was a little inflated,” he said. “All the homes were.”

Volusia County Property Appraiser Morgan Gilreath has obtained results similar to Smith’s in his county.

Gilreath recently plotted home prices from 1996 to the present and concluded they are not far below where they would have been without the bubble. The mid-point, or median, for home prices in Volusia in May was $124,900 – down about $20,000 from where they would have been if they had continued on their long-range trajectory rather than inflating and deflating in recent years, he said.

A year ago, the median in Volusia was about $50,000 above the historic trend line, he said; two years ago, it was flying about $100,000 above that line.

Gilreath said his analysis was not as thorough as Smith’s research at UCF, but both indicate the residential market is not likely to decline much further.

“The point that the charts are telling us is that we’re close to where we think the bottom is going to be,” he said. “The question is: When is it going to turn around? I have evidence that it is turning around here [in Volusia].”

Smith said prices in the region may continue to fall but are less likely to do so now that they are so near the long-term trend line – a “positive indicator” for coming months.

Les Simmonds, president of the Orlando Regional Realtor Association, said people generally measure their home’s current value against what it was worth a year ago – a short-term view of the market.” I feel strongly that, had we not had this bubble, that the median price of the properties would be a little better than they are now, because of the way they’ve been pushed down [in the post-bubble market] by ... [distressed] properties,” he said.

“I said to my wife last week that, when the market was really high, if we had sold then, we could have made four times what we paid for the house.” The problem, he added, is that most of the people who sold at the peak usually then bought near the top of the market. Shapiro said that, once he sells his Lake Mary house, he is ready to retire to a log cabin in north Georgia and forget about the whims of the real-estate market for a while.

The only thing that will rise and fall on his cabin, he said, will be the runners on his front-porch rocking chair

Countrywide Financial to begin making settlement payments

2009-08-08T06:20:00.000-07:00

Countrywide Financial, now owned by Bank of America, will soon begin making cash payments of at least $3,000 to each of its Florida customers who have experienced a foreclosure or fallen behind on mortgage payments within four months of getting their loan.

The cash payments are part of a $1 billion settlement the company reached last year with the Florida attorney general to avoid prosecution for allegedly hoodwinking customers into taking out subprime mortgages and other risky, high-cost loans. Ten other states also reached agreements with the company for a combined $8.4 billion in mortgage relief, which also includes loan modifications.

In all, about 5,700 Florida borrowers are entitled to about $17 million under a Foreclosure Relief Program established as part of the settlement. Countrywide will pay another $4 million to the attorney general’s office. Last month, the office announced it would use the money to fund a foreclosure defense grant program through the Florida Bar Foundation. Letters notifying borrowers eligible for the payments began going out last month.

In the letters, Countrywide told borrowers that in agreeing to accept the settlement payment, they were also agreeing to give up any legal claims against the company and its affiliates, including joining any class-action lawsuits. To receive a payment, borrowers have to sign and return the claim form and release by Oct. 22.

Each eligible borrower will get at least $3,000, and possibly more, depending on how many people mail in the claim and release forms.

Checks will start being mailed in early 2010, the company said.

If someone thinks they maybe be eligible for a payment, but did not receive a letter, the attorney general said they should call the office’s fraud hot line at (866) 966-7226. They can also try Countrywide’s settlement administrator at (866) 411-6987, or, for the hearing impaired, (866) 494-8397. They can also visit www.countrywidesettlementinfo.com.

Probe freezes major lender

2009-08-08T06:15:00.000-07:00

Ocala-based Taylor, Bean & Whitaker Mortgage Corp. (TBW) said Wednesday it is stopping its mortgage-lending operations after federal agencies suspended it from making loans, according to a statement sent to mortgage brokers, regulators and a bank trade group.

Wednesday’s shutdown is another major blow to Florida’s struggling real estate market. Taylor, Bean & Whitaker is one of the largest providers of FHA (Federal Housing Administration) loans in the Sunshine State, and loans in its pipeline won’t close, said Valaire Saunders, president of the Tallahassee-based Florida Association of Mortgage Brokers.

“It’s definitely going to be detrimental to our state’s economic recovery,” she said. “This will delay Florida’s housing recovery, and we can’t afford that.”

The firm, ranked among the largest U.S. home lenders, was barred this week from selling or servicing loans by the Department of Housing and Urban Development, Freddie Mac and Ginnie Mae, the statement says.

“TBW must cease all origination operations effective immediately,” the statement says. “Regrettably, TBW will not be able to close or fund any mortgage loans currently pending in its pipeline.”

The closing came after an announcement Tuesday by the Federal Housing Administration that it found possible fraud and had decided to suspend business with the lender. Calls to Taylor, Bean & Whitaker were not returned.

Taylor, Bean & Whitaker was a major lender of FHA loans, typically used by first-time buyers, and one of the few lenders who funded FHA loans on manufactured housing, Saunders said.

“I have three colleagues with loans set to close this month, and they’re scrambling,” she said.

Taylor, Bean & Whitaker was FHA’s third-largest lender. It ranked 12th among U.S. mortgage originators in the first half of this year.

The lender didn’t submit a required annual financial report and “misrepresented that there were no unresolved issues with its independent auditor,” the FHA says in a statement. The auditor discovered “irregular transactions that raised concerns of fraud,” the FHA says.

An October 2006 investigative report by the Tampa Tribune found that at least four of 36 suspicious loans involving a Tampa real estate agent and mortgage broker had been funded by the lender.

The story found that the homes sold, on average, for $60,000 above the asking price. At least $2 million collectively was paid to third parties, and in some cases, two sets of documents were used to secure the loan.

At the time, Lee Farkas, chairman of Taylor, Bean & Whitaker, said his institution did not realize the property had sold for more than originally listed. “There’s no way we would do a loan structured like that,” he said. Farkas said his company had policies against such loans and said he would investigate the deals.

Jane Floyd, a Tampa mortgage broker with Diversified Home Mortgage, said the closure will negatively affect the area’s pending home sales.

“I’ve worked with them for years and had a good relationship with the people there,” Floyd said. “This is very sad.

Pending home sales: Upward trend continues

2009-08-05T07:07:00.000-07:00

Pending home sales are up for the fifth consecutive month, the first time in six years for such a streak, according to the National Association of Realtors® (NAR).

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in June, rose 3.6 percent to 94.6 from an upwardly revised reading of 91.3 in May; and it’s 6.7 percent above June 2008 when it was 88.7. The last time there were five consecutive monthly gains was July 2003.

“Historically low mortgage interest rates, affordable home prices and large selection are encouraging buyers who’ve been on the sidelines,” says Lawrence Yun, NAR chief economist. “Activity has been consistently much stronger for lower priced homes. Because it may take as long as two months to close on a home after signing a contract, first-time buyers must act fairly soon to take advantage of the $8,000 tax credit because they must close on the sale by Nov. 30.”

The Pending Home Sales Index in the Northeast rose 0.4 percent to 81.2 in June and is 5.8 percent above a year ago. In the Midwest the index increased 0.8 percent to 89.9 and is 11.6 percent above June 2008. The index in the South jumped 7.1 percent to 100.7 in June and is 8.9 percent higher than a year ago. In the West the index rose 2.9 percent to 100.4 but is 0.2 percent below June 2008.

NAR President Charles McMillan is hopeful that a recently elevated level of contract cancellations will ease. “Last month, Freddie Mac and Fannie Mae clarified that appraisals should be done by professionals with clear local expertise,” he said. “This should mitigate the situation of many valuations done by out-of-area appraisers coming in below the price negotiated between buyers and sellers. Hopefully, in the months ahead, we’ll see an even closer relationship between contract activity and closed transactions.”

McMillan said NAR is continuing to press the appraisal issue. “We have asked Congress and the Federal Housing Finance Agency to immediately implement an 18-month moratorium on the new appraisal rules to further address unintended consequences of the new guidelines,” he said.

NAR’s Housing Affordability Index remains very favorable. The affordability index stood at 159.2 in July, down from record peaks in recent months but it remains 36.6 percentage points above a year ago. Under these conditions, the typical family would devote 15.7 percent of gross income to mortgage principal and interest, well below the standard allowance of 25 percent.

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

“A monthly rise in home prices and somewhat higher mortgage interest rates led to a modest decline in affordability in June, but it was still the sixth highest index on record dating back to 1970,” Yun said. “Because housing is so affordable in today’s market, job security and the first-time buyer tax credit are bigger factors in influencing home sales.”

A median-income family earning $60,700 could afford a home costing $289,100 in June with a 20 percent downpayment, assuming 25 percent of gross income is devoted to mortgage principal and interest. Affordability conditions for first-time buyers with the same income and small downpayments are roughly 80 percent of what a median-income family can afford. The affordable price was much higher than the median existing single-family home price in June, which was $181,600.

Yun expects existing-home sales to gradually rise over the balance of the year, with conditions varying around the country. “It appears home sales are on a sounder footing and inventory is gradually being absorbed.

Fla. tax collections take hit, but it could be worse

2009-08-02T09:55:00.000-07:00

Florida’s school districts could have a half-billion dollars less to spend in 2010 under gloomy new forecasts approved by state economists on Thursday.

While there are glimmers of hope in the national economy, the meltdown in the real estate market continues to drag down property values in Florida. Economists forecast that Florida’s total property values in 2010 will decline to $1.88 trillion compared to $2.52 trillion in 2007 when the market peaked.

The one piece of good news: In March, economists had predicted a much steeper decline this year and in 2010, saying property values subject to school taxes would decline by 12 percent this year and 6.6 percent next year. Instead, this year’s decline is now projected at 10.7 percent, and the decline next year will be roughly 5.5 percent.

“We’re slightly less pessimistic than we were,” says Amy Baker, coordinator of the Office of Economic and Demographic Research.

But economists warned that foreclosures and other problems in the real estate market could take a while to work themselves out before it results in an upswing in property values. The new estimates forecast that taxable values for schools won’t fully rebound until 2013.

“We’re still trying to figure out a very dynamic market,” said Bob McKee, staff director of the Senate Finance and Tax committee.

It also takes time for changes in the economy to be fully accounted for because annual tax rolls adopted in July are based on property values as of Jan. 1. The estimates adopted on Thursday could require budget cuts for school districts in 2010 unless tax rates are raised or state lawmakers pour in more state aid.

The drop in real estate values is also having another effect: A dramatic decline in the difference between what homes are worth and how much is counted toward property taxes.

Homeowners in Florida get a break on their property taxes because voters can shield some of the value of their home from taxes due to the Save Our Homes constitutional amendment passed in 1992. Annual assessment increases are capped at 3 percent or the increase in the consumer price index, whichever is lower.

Out-of-state residents and business owners in the past have complained that Save Our Homes has created an unfair taxing system that penalizes those who don’t have a homestead here.

But the gap between what homes were worth and how much is counted for tax purposes was $427 billion in 2007. Now it is just $168 billion and that gap is expected to drop to $115 billion in 2010. The gap is expected to creep back up once the economy begins to recover.

30-year mortgage rates rise for 2nd-straight week

2009-08-02T09:49:00.000-07:00

Rates for 30-year mortgages rose for the second-straight week, Freddie Mac said Thursday.

The average rate for a 30-year fixed mortgage was 5.25 percent this week, up from 5.2 percent last week. Last year at this time, 30-year mortgages averaged 6.52 percent, Freddie Mac said.

Earlier this year, rates on 30-year mortgages fell to a record low of 4.78 percent, kick-starting refinancing activity. Last month, rates rose to nearly 5.6 percent after yields on long-term government debt, which are closely tied to mortgage rates, climbed.

The yield on the benchmark 10-year Treasury note rose to 3.70 percent from 3.67 percent late Wednesday.

“Bond yields rose slightly higher this week on market optimism that the economy may be stabilizing somewhat, and mortgage rates followed those yields,” said Frank Nothaft, Freddie Mac's chief economist.

Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day.

The average rate on a 15-year fixed-rate mortgage rose to 4.69 percent, up from 4.68 percent last week, according to Freddie Mac.

Rates on five-year, adjustable-rate mortgages averaged 4.75 percent, up slightly from 4.74 percent last week. Rates on one-year, adjustable-rate mortgages increased to 4.8 percent from 4.77 percent.

The rates do not include add-on fees known as points. The nationwide fee averaged 0.7 point for 30-year and 15-year fixed mortgages. Five-year, adjustable-rate mortgages averaged a fee of 0.6 point, and one-year adjustable rate mortgages averaged 0.5 point.

Economists: Slow recovery on tap

2009-07-27T12:38:00.000-07:00

The beginning of an economic recovery appears to be just a few months away but unemployment will continue to rise past 10 percent into next year, say economists surveyed by USA Today.

The results lend support to growing forecasts for a sluggish and jobless start to the recovery. The jobless rate will peak at 10.2 percent, according to the median estimate of the 49 economists surveyed July 16-22. That’s up nearly a half-percentage point from the previous survey in April. The nation’s unemployment rate hit 9.5 percent in June, a 26-year high.

About half of those surveyed said unemployment will peak in the first half of next year, while 16 percent said jobless rolls will swell into the latter part of 2010. The Federal Reserve forecasts unemployment peaking late this year at 9.8 percent to 10.1 percent.

The economy is expected to grow again during the second half of this year, and slightly more robustly than the April survey projected. Yet, the median growth-rate estimate of 2 percent for the fourth quarter is weak by historical standards.

“I think (the recovery) is going to be anemic,” says Allen Sinai, chief economist at Decision Economics. He cites debt-laden consumers as the main obstacle.

“Households have to save a lot to fix their balance sheets before they can spend more,” he adds. “I don’t think consumers have the wherewithal to buy a lot of cars and a lot of houses.”

Another factor slowing the turnaround is still-tight credit markets that will limit business expansion, UBS chief economist Maury Harris says.

Overall, 63 percent of the economists say the recovery will be slow and gradual. Those surveyed expect businesses to continue to cut spending until early next year. As a result, Sinai says, unemployment will continue to rise.

There are some bright spots.

Two-thirds of economists say existing-home sales have hit bottom. Consumer spending has stabilized. And CEO confidence shot up in the second quarter, the Conference Board said recently. Such signals are prompting 37 percent of economists to predict a moderate or fast recovery.

Bill Cheney, chief economist at MFC Global Investment, says the housing and automobile markets plunged so sharply that “both have the potential to generate some quite large percentage increases.” Consumers could be moved to open their wallets because of rising values on the stock market, he says.

Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi, is also fairly bullish, expecting unemployment to top out at 9.7 percent this year.

“I think the key to a turnaround is that job losses stop quicker than people are expecting,” he says.

Mortgage rates rise after falling for 3 weeks

2009-07-26T07:37:00.000-07:00

Rates for 30-year mortgages have edged up after falling for three-consecutive weeks.

The average rate for a 30-year fixed mortgage this week was 5.2 percent, up from 5.14 percent a week earlier, mortgage company Freddie Mac said Thursday.

Rates on 30-year mortgages fell to a record low of 4.78 percent earlier this year, but then rose to nearly 5.6 percent last month after yields on long-term government debt, which are closely tied to mortgage rates, climbed.

Though the troubled U.S. housing market is beginning to stabilize, higher rates could threaten or slow down any recovery, since prospective buyers would be able to borrow less money and might decide to hold off on their purchases.

Sales of previously occupied homes rose for the third month in a row in June, the National Association of Realtors reported Thursday. That hasn’t happened since early 2004, during the boom.

“The worst may be behind us,” said Frank Nothaft, Freddie Mac’s chief economist, in a statement.

Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day.

The average rate on a 15-year fixed-rate mortgage rose to 4.68 percent, up from 4.63 percent last week, according to Freddie Mac.

Rates on five-year, adjustable-rate mortgages averaged 4.74 percent, down from 4.83 percent a week earlier. Rates on one-year, adjustable-rate mortgages edged up to 4.77 percent from 4.76 percent.

The rates do not include add-on fees known as points. The nationwide fee averaged 0.7 point for all loans in Freddie Mac’s survey except for one-year adjustable rate mortgages, which averaged a fee of 0.6 percent.

Banks accused of slowing foreclosure sales to keep home prices aloft

2009-07-25T08:54:00.001-07:00

On the surface, South Florida’s home prices appear to be bottoming out, but a dip in the number of bank-owned properties for sale is leading analysts to conclude that lenders may be slowing the flow of foreclosures to the market as a way of stanching further price declines.

Monthly numbers from the Florida Association of Realtors show that South Florida existing-home sales continued to rise in June, as bank-owned homes and short-sales attracted bargain hunters from across the country. Figures released Thursday showed single-family home sales were up by 54 percent in Miami-Dade and 35 percent in Broward, compared to last year.

Median single-family home prices were down again since June of last year, falling 28 percent in Miami-Dade and 33 percent in Broward. But they have strengthened from April prices. The median price is the point at which half the homes sold for more and half for less.

The apparent leveling out of prices is being attributed to two things: a shrinking number of distressed homes entering the market and a larger share of high-priced homes changing hands, according to real-estate analysts and brokers.

Condo sales were up in both counties, too – by 19 percent in Miami-Dade and 58 percent in Broward. Median condo prices, however, fell by 49 percent in Miami-Dade to $141,000 from $275,600 the previous year and by 46 percent in Broward to $83,900 from $156,200 a year ago.

Over the past six months, however, intriguing trends have begun to emerge in the month-to-month numbers.

The median single-family home price in Miami-Dade has, in fact, risen for the past three months, climbing from $177,000 in April to $194,700 in May and $211,400 in June. In Broward, the median in April was $191,300, followed by $190,000 in May and $204,800 in June.

Beneath the surface

On the condo front, the median price in Broward has bounced between $85,000 and $80,000 since January and between $149,000 and $140,000 in Miami-Dade, a trend that would appear to suggest prices may be hitting a bottom.

However, listings of bank-owned homes and short-sales – in which a home is sold for less than the mortgage owed – fell from 44 percent in May to 39 percent in June, according to Ron Shuffield, a Coral Gables-based real-estate analyst and president of Esslinger Wooten Maxwell Realtors.

And sales of these so-called distressed properties dropped from roughly 60 percent in May to 54 percent in June.

Brokers say fewer well-priced foreclosures on the market are now routinely sparking bidding wars. Bank-owned homes in hot condos and neighborhoods are going under contract within days.

Anthony Askowitz, a real-estate broker in Kendall, said his bank-owned listings had fallen from about 150 last June to just 37 today.

“I am getting less foreclosure listings, but, at the same, time, I am selling them so much faster. I can’t replace them as fast as I am selling them,” said Askowitz, adding that he had listed a unit in the Club at Brickell Bay at $174,900 on Thursday and received an all-cash offer the same day.

Lenders, some real-estate lawyers and analysts believe, may be behind the trend as they either inadvertently drag out the foreclosure process or hold back the release of foreclosures for sale to the public.

Either way, the smaller numbers could be curbing further price declines, since analysts say home prices will not recover until the high numbers of distressed properties are cleared from the market.

Lenders repossessed 756 homes in Miami-Dade in June, up from 434 in May, according to foreclosure tracking firm RealtyTrac. In Broward, they took back 1,365 homes last month and 738 in May. But properties don’t necessarily hit the market immediately.

“There is less distressed inventory being distributed to brokers for sale,” said Doug DeWitt, a Miami-based real-estate broker. “I think they are trying to establish a bottom by not flooding the market, which seems to have worked a little bit.”

Julian Dominguez, owner of Foreclosure Information Systems, a company that publishes reports about foreclosure auction sales in Miami-Dade, said he is seeing the hold-back firsthand.

“They are canceling a lot of sales at the auction. That’s mainly because they don’t want to take title,” said Dominguez, who has been attending the now thrice-weekly auction sales.

Ross Toyne, a Miami-based lawyer who represents condo associations in disputes with lenders, said he thinks lenders are deliberately dragging their feet – both in the foreclosure process and in bringing the properties to market for resale.

“They are doing themselves a favor. They’re afraid they would have to drop the price not enormously, but ginormously to get the market to clear,” Toyne said.

Condo associations have alleged that the feet-dragging is a ruse to avoid having to assume the maintenance cost of properties – including association fees.

Speculations

Ken Thomas, a Miami-based banking analyst, said it all makes sense. Once a bank takes back a home at the end of the foreclosure process, it has to value the property at its current market value – and take a hit to its bottom line. Some banks, he said, may be holding off that day of reckoning.

“Some of them simply can’t afford to recognize the loss,” Thomas said. He also said there was no rule or law requiring banks to immediately sell a property once it had been taken back through foreclosure.

Not everyone is convinced that’s the case.

Mark King, an attorney with the Miami office of Jones Walker who represents banks in commercial foreclosures, attributed any decrease in bank-owned inventory more to the inability of lenders to effectively manage the huge volume of homes being reclaimed through foreclosure. They don’t have the manpower or know-how to handle the volume.

“To say banks have a devious, brilliant strategy for controlling the market is probably giving them more credit than they deserve,” King said, adding that it may differ from lender to lender. “Maybe some are doing it for strategic reasons. When you digest so many of these assets so quickly, inevitably there will be some indigestion and you may not want to continue consuming at the same pace.”

But foreclosures certainly haven’t been worked out of the system. Rising unemployment will only exacerbate the trend, analysts predict.

There are more than 750 auction sales scheduled for the first two weeks in August.

“We just put out our [foreclosure listing] book for August and it has 216 pages; normally, it’s 170 pages long,” Dominguez said.

Fed plans consumer-friendly changes to mortgage rules

2009-07-25T08:51:00.000-07:00

Federal Reserve governors Thursday unanimously proposed tough new consumer-friendly disclosure rules for mortgages and home equity loans, tackling one of the less-appreciated causes of the nation’s deep financial crisis.

After 18 months of study and consumer testing, the Fed’s division of consumer affairs proposed, and governors accepted, a change to how finance charges and the annual percentage rate would be calculated. They also proposed restricting some bonus compensation from lenders to those who originate loans.

The action by the Fed’s Board of Governors, which requires a four-month comment period before becoming final, came as Congress is weighing an Obama administration proposal to strip the central bank of some of its regulatory authority over consumer credit products such as mortgages and credit cards.

The administration favors giving those powers to a new Consumer Financial Protection Agency, which would have the sole mandate of protecting consumers from abusive practices such as the weakened lending standards that triggered a collapse of the housing sector. This crisis in mortgage lending quickly morphed into a global financial crisis.

Thursday’s Fed vote also came hours after the National Association of Realtors reported that sales of existing homes rose 3.6 percent in June, the third consecutive month of increasing sales. All regions of the country posted growth, and the percentage of distress sales fell to 31 percent from 33 percent in May.

“This report provides further evidence that activity in the housing market is stabilizing and that price declines are slowing,” the New York forecasting firm RDQ Economics said in a note to investors. “The increase in home sales over the last three months was the fastest since May 2004 (in percentage terms) and the NAR reports that the share of distressed sales is declining. This report, along with recent data on housing starts, building permits ... suggests that we may have seen the bottom in home sales and housing construction.”

Wall Street cheered the housing news.

The Dow Jones Industrial Average closed up 188.03 points to 9069.29, crossing the psychological threshold of 9,000. The S&P 500 finished up 22.22 points to 976.29, and the Nasdaq wrapped up the day with a gain of 47.22 points to 1973.60.

Under the Fed proposal, lenders or other originators of mortgages – such as mortgage brokers – would have to provide borrowers with clear one-page explanations of how adjustable-rate mortgages, like those that triggered the housing crisis, differ from fixed-rate products. They’d have to provide clearer examples of what borrowers’ true costs would be, using the loans themselves rather than generic examples. In doing so, they’d have to include things such as title insurance and pest inspection that aren’t factored in now.

Lenders also would have to notify borrowers of payment changes 60 days beforehand, rather than the current 25 days. Similarly, for home-equity lines of credit, the notification period would be 45 days instead of 15.

Those moves are decidedly more consumer-friendly, giving borrowers more notice to adjust to pending changes and perhaps seek refinancing in the case of adjustable-rate loans.

The proposed rules also would allow home-equity lenders to suspend or reduce lines of credit when the prices of the properties involved decline by 5 percent and the borrowers have paid off no more than 10 percent of the loans. This gives lenders more legal cover to pull back credit, something they’ve done of late – to the ire of consumers – without clear guidance from federal regulation.

The most controversial proposed change is restricting special compensation from lenders when mortgage brokers get borrowers into higher-priced loans when they qualified for lower rates. This bonus, called a yield-spread premium, was a factor in the explosion of sub-prime lending, which involved high-cost loans given to the weakest borrowers.

“This measure would be significant in restoring fairness to home lending, particularly in communities of color, which were targeted disproportionately for expensive, wealth-draining” yield-spread premiums, Michael Calhoun, the director of the Durham, N.C.-based advocacy group Center for Responsible Lending, said in a statement.

The National Association of Mortgage Brokers has defended these special commissions but it declined immediate comment on the proposed rule change, which expressly would prohibit steering consumers to higher-priced products in pursuit of personal gain.

During the comment period, the Fed will work to create similar disclosures at the Department of Housing and Urban Development, which has jurisdiction over the settlement documents involved in home purchases.

“It is a complex and comprehensive proposal, so I think an extended comment period is appropriate,” Fed Chairman Ben Bernanke said.

Rent plan may keep people in homes

2009-07-22T10:27:00.000-07:00

Losing your home to foreclosure may no longer mean you have to leave.

Congress and the Obama administration are considering a controversial plan that would allow homeowners to rent their foreclosed home for at least five years. The proposal is setting the real estate community abuzz.

“It’s clear that the modification plans have not been as successful as Congress had hoped,” said Dean Baker, co-director of the Center for Economics and Policy Research. “We need something that will make more of an impact.”

The program could reshape Florida’s real estate market and the overall economy. Experts disagree on whether the effects would be positive or negative. One thing everyone agrees on is this: Florida doesn’t need any more vacant homes.

The Sunshine State’s foreclosure rate remains the third highest in the nation. During the first six months of the year, foreclosure filings jumped 50 percent from the same period last year. One in every 33 households received a default notice, auction notice or bank repossession.

Details of the rental plan are sketchy, but the idea is gaining momentum, according to U.S. Treasury Assistant Secretary Herbert Allison. He told the Senate Banking Committee last week that the proposal was being considered for homeowners whose mortgages did not qualify for modification programs to make them affordable.

Some versions of the plan involve lenders selling foreclosed homes to approved professional landlords. In other versions, the lenders would sell to private investors or keep the home and hire a management firm to handle the rental arrangement.

The rent would be determined by the market-rate rent in the area, determined by a professional appraiser.

Jack Rodriguez, president of the Greater Tampa Association of Realtors, said the plan would “tinker with the free-market enterprise.”

“I know where Congress is coming from,” he said. “But my gut tells me investors would shy away from this, and banks will end up stuck in the real estate market.”

Baker, who first proposed the plan two years ago, said it has evolved and continues to be tweaked. Even though people who take advantage of the plan would still lose their homes, Baker said, the plan could keep that from happening to others.

“The lender would have more of an incentive to work something out through a modification because the home would be worth less,” Baker said.

Under the plan, the lender still could sell the home but, Baker said, “The homeowner would come with the home.”

The homeowner, turned renter, would be allowed to stay until the lease runs out, which could last as long as 10 years.

One potential problem, however, is that many homeowners who lose their properties aren’t interested in staying as renters, according to William Apgar, senior mortgage advisor for the Department of Housing an Urban Development.

The program could have an unintended consequence, Rodriguez said. Lenders would feel pressure to shed properties to avoid becoming a landlord. Investors, who would have to give up some property rights, would low-ball lenders. The result could drag down housing prices even more. (The median sales price in the Tampa, St. Petersburg, Clearwater area was $141,100 in May, down 20 percent from $176,100 in May 2008, according to the Florida Association of Realtors.) Others think the plan is a win-win for everyone involved.

Don Burnham, a real estate investor in the Tampa area and co-founder of the Wealth Restoration Institute LLC, said the plan could be a hit.

Investors, he said, would want to buy the homes because they will know they have a long-term tenant and a steady revenue source. Lenders will like the plan, he said, because they’ll be able to find buyers faster. Homeowners would be happy because they’ll have a secure lease and not have to foot the bill to move.

Mike Larson, a real estate analyst with Weiss Research in Jupiter, said the plan is one of several the Obama administration is hoping will keep more homes from becoming vacant.

“We don’t yet know fully how the plan would work,” he said. “But if you have a warm body in the house who will keep it from going into disrepair and keep the lawn mowed, that will be at least somewhat helpful.”

Create a sanctuary for house guests

2009-07-21T19:51:00.000-07:00

House guests are a fact of life for residents of Central Florida, what with the world's No.1 tourist mecca in our midst.

Creating a welcoming space for those overnight visitors doesn't require a complete remodel, a big budget or even a special room — though a separate room is ideal, says Jackie Hirschhaut, vice president of the American Home Furnishings Alliance. Aside from investing in a really comfortable bed, all you need are "thoughtful and creative changes."

A guest room, no matter its size or style, should provide "a sense of privacy, a place to write, read, check e-mail, watch TV and just relax and enjoy the view," says Rob Turner, owner of CRT Studio Design in Winter Park.

To establish a warm ambience, he suggests using soft, neutral colors for the walls, carpet and draperies. For accent pieces, choose a bold, contrasting shade such as coral, or pull in colors from the landscape outside the windows. Select comfortable but tailored furnishings, and personalize the room with favorite art pieces.

Here are additional tips for making your guest room feel like a home-away-from-home for visitors.

•Invest in a good mattress, quality linens and comfort items such as a featherbed mattress topper, down and hypoallergenic pillows, a light comforter and extra blanket.

•Provide bright lights for reading, writing and makeup, a chandelier or lamps for soft ambient lighting, and a night light. Make sure curtains or blinds shut out exterior light at night.

•Install a comfortable chair, a writing table or desk, magazines and books (short stories are ideal), and a tray with wrapped snacks, fruit and bottled water.

•Supply conveniences such as a folding luggage rack, drawers and hanging space, sturdy hangers, door hooks for bathrobes, mirrors, a local map and brochures featuring area attractions.

•Try to provide a TV (with favorite DVDs), an alarm clock or clock radio, and access to an iron and computer. Stock the bathroom with extra towels and toilet paper, travel-size toiletries and a hair dryer.

•If the room is small or multipurpose, consider installing a fold-up Murphy bed and replacing bulky armoires and bookcases with space-saving built-ins. If the room is used as a home office, sewing room or general "catch-all," clear the decks before guests arrive. Store extra linens, out-of-season clothing or craft supplies in bags, boxes or baskets that can easily be whisked away to the den or garage during the visit.

Downpayment, Closing Costs Still Greatest Obstacles to Homeownership

2009-07-20T09:25:00.001-07:00

Most Americans still consider having enough money for downpayment and closing costs to be the biggest obstacles to buying a home. That’s according to the 2009 National Housing Pulse Survey, an annual survey released today by the National Association of Realtors®.

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

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

Despite the challenges with the economy and housing market, 83 percent of Americans still believe buying a home is a good financial decision. Three-fourths of those surveyed also believe now is a good time to buy a home, a number that has increased steadily the past two years. In fact, one-third of renters are thinking more about buying a home than they were a year ago.

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

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

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

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

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

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

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

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

Condo associations forced into bankruptcy as fees dry up

2009-07-18T23:10:00.000-07:00

At least seven Florida condo associations have filed for bankruptcy since the real estate market took a nose dive – and there may be more on the way.

For a growing number of strapped condo associations, bankruptcy could be the last defense against their hallways going dark and their spigots running dry.

In one of the most recent Chapter 11 filings, the creditors of Maison Grande in Miami Beach are planning to meet Tuesday to discuss the bankruptcy.

A rare occurrence in better days, such filings now are seen as a last-ditch bid by associations to shield themselves from bill collectors and find a way out of mounting financial problems. While an association is in bankruptcy, utilities can’t cut off the power or turn off the water, problems that have already surfaced at some South Florida condos.

“Without question it’s being talked about and asked about,” said Robert White, a managing director for KW Property Management in Coral Gables, “especially in some of these associations that have delinquencies that exceed 30 percent. They’re looking for options about how to solve the problem.”

Maison Grande, a complex of 502 luxury condos in Miami Beach at 6039 Collins Ave., filed for Chapter 11 protection in June after Dorten developers sued the association for about $658,000 in back payments on a recreational lease for the pool and parking areas. Chapter 11 bankruptcy offers private companies protection from creditors while they reorganize their debts, restructure contracts and find new sources of revenue.

Forty-four units are in foreclosure at the Maison Grande, and about 165 owners are two months or more past due on association payments.

Also last month, the Legacy Park town home association in the Central Florida city of Davenport filed for Chapter 11. Among its biggest creditors: Comcast, which says the association owes $105,305 for a past-due cable bill.

With the weak economy, many condo associations – which are classified as not-for-profit corporations – find bills are piling up as units enter foreclosure and homeowners stop paying association fees, putting enormous financial strain on residents left holding the bill.

A risky alternative

Still, filing for bankruptcy is a costly endeavor – and may not be a cure. It’s unclear whether any Florida association has successfully reorganized in bankruptcy in recent years.

Bankruptcy attorney Thomas Lehman with Tew Cardenas in Miami said he wasn’t sure how bankruptcy could benefit associations, because their only assets are the property’s common areas and, possibly, their ability to assess individual unit owners.

Corporations need an exit strategy when filing Chapter 11, Lehman said. He added it wasn’t clear how an association having trouble covering basic monthly services could reorganize. They also have nothing to sell off, except common areas such as the lobby and rec room.

“They’re better off trying to negotiate with vendors to come up with an out-of-court restructuring plan,” Lehman said.

Last month a Miami bankruptcy court dismissed a bankruptcy petition by View West Condo in Kendall essentially because its creditor, Z Roofing, won a state case upholding its lien and forcing a special assessment on unit owners to pay a balance of more than $100,000 for repairs.

“The thing about a condo association is that often times their main asset is really only its accounts receivable from unit owners paying maintenance fees or assessments,” said Carla Barrow, an attorney who represented Z Roofing in the matter.

The company also won approval from a state court to foreclose on individual unit owners who failed to pay their share of the assessment.

Filing of the petition did little to protect the association, Barrow said, because it still owed the roofing company for the work, as well as $50,000 in legal fees and court costs – not to mention fees owed to its own attorney.

Punishing the payers

While a condo association’s ability to repay creditors by levying special assessments could be a stumbling block, Lisa Magill, an attorney with condo firm Becker & Poliakoff, said a high rate of fee delinquencies could make that less of an issue.

“If you have nonpayers, and those who are paying don’t have the ability to pay more and you have a significant number of owners that have abandoned the property, your ability to levy assessments is limited,” Magill said. There comes a point when paying owners may also throw in the towel and stop payments if their assessments rise too much.

Despite the potential pitfalls, Magill said there are benefits to be gained by filing.

Bankruptcy protection allows debtors to renegotiate onerous leases, like the one saddling Maison Grande. It could also delay, and even prevent, creditors from seizing assets and garnishing bank accounts.

Utilities and other vendors would have to get court permission to drop services, said Robert Kaye, a partner with Kaye & Bender law firm in Fort Lauderdale, which represents close to 700 homeowner associations.

After several months of investigating the matter, residents of St. Andrews condo in Miramar decided against filing bankruptcy earlier this year, even though nearly half its unit owners at the time were in foreclosure and the association had fallen behind on several bills.

William Quigley, who served on his association’s budget advisory committee, said the association determined that filing for bankruptcy would cost more money than it would save. They were told, he said, it would cost about $30,000 to pay lawyers just to file the petition, not to mention costs going forward.

“Now you are going to have to assess the community to file rather than working out what you owe to your vendors,” Quigley said.

In the end, the association decided to level with vendors and find ways to begin slowly paying off past due balances.

Mortgage rates fall again

2009-07-18T21:06:00.000-07:00

Rates for 30-year home loans dropped for the third-straight week, inching toward a record low reached earlier this year, Freddie Mac said Thursday.

The average rate for 30-year fixed mortgages was 5.14 percent this week, down from 5.2 percent last week. Last year at this time, the rate for a 30-year mortgage averaged 6.26 percent, Freddie Mac said.

Falling mortgage rates can spur refinance activity, which increased as rates on 30-year mortgages fell to a record low of 4.78 percent in April.

But rates then rose as high as 5.6 percent in June after yields on long-term government debt – closely tied to mortgage rates – climbed as investors worried that the huge surplus of government debt hitting the market could trigger inflation.

Since then, the yield on the 10-year Treasury note has fallen back from an eight-month high of 4.01 percent reached in June to 3.53 percent on Thursday.

Frank Nothaft, Freddie Mac’s chief economist, said rate reductions over the past five weeks translate into monthly savings of $56 on a $200,000 mortgage.

Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day.

This week, the average rate on a 15-year fixed-rate mortgage fell to 4.63 percent, down from 4.69 percent last week, according to Freddie Mac.

Average rates on five-year, adjustable-rate mortgages were 4.83 percent, up just a bit from 4.82 percent a week earlier. Rates on one-year, adjustable-rate mortgages fell to 4.76 percent from 4.82 percent.

The rates do not include add-on fees known as points. The nationwide fee averaged 0.7 point for 30-year and 15-year fixed rate mortgages, and five year adjustable rate mortgages. The fee for one-year adjustable rate mortgages was 0.5 point.

Foreclosures rise 15 percent in first half of 2009

2009-07-16T13:43:00.000-07:00

The number of U.S. households on the verge of losing their homes soared by nearly 15 percent in the first half of the year as more people lost their jobs and were unable to pay their monthly mortgage bills.

The mushrooming foreclosure crisis affected more than 1.5 million homes in the first six months of the year, according to a report released Thursday by foreclosure listing service RealtyTrac Inc.

The data show that, despite the Obama administration’s plan to encourage the lending industry to prevent foreclosures by handing out $50 billion in subsidies, the nation’s housing woes continue to spread. Experts don’t expect foreclosures to peak until the middle of next year.

Foreclosure filings rose more than 33 percent in June compared with the same month last year and were up nearly 5 percent from May, RealtyTrac said.

“Despite all the efforts to date, we clearly haven’t got a handle on how to address the situation,” said Rick Sharga, RealtyTrac’s senior vice president for marketing.

More than 336,000 households received at least one foreclosure-related notice in June, according to the foreclosure listing firm’s report. That works out to one in every 380 U.S. homes.

It was the fourth-straight month in which more than 300,000 households received a foreclosure filing, which includes default notices and several other legal notices that homeowners receive before they finally lose their homes. Banks repossessed more than 79,000 homes in June, up from about 65,000 a month earlier.

On a state-by-state basis, Nevada had the nation’s highest foreclosure rate in the first half of the year, with more than 6 percent of all households receiving a filing. Arizona was No. 2, followed by Florida, California and Utah. Rounding out the top 10 were Georgia, Michigan, Illinois, Idaho and Colorado.

The Obama administration in March launched a $50 billion plan to give the lending industry financial incentives to modify mortgages to lower payments, but it’s off to a slow start.

As of early July, about 130,000 borrowers were enrolled in three-month trial modifications under the plan, and 25 mortgage companies have signed up to receive potential payments of up to $18.6 billion, according to the Treasury Department. But analysts and housing counselors say it isn’t having much of an impact.

“The plan isn’t going well, at least not yet,” said Mark Zandi, chief economist at Moody’s Economy.com. “It’s a creative plan with lots of incentives, but it’s very complex.”

In testimony prepared for delivery at a Senate hearing on Thursday, Bank of America executive Allen Jones said the company has about 80,000 loan modifications in the works under the new government guidelines, including some that aren’t in the three-month trial phase yet.

“We have achieved this level of success by devoting substantial resources to this effort,” Jones said, noting that the company has more than 7,000 employees handling calls and working on modifications. Industry experts, however, say the response from most mortgage companies has been lackluster.

“They’ve been slow to make sure they understand it and put all the processes and people in place,” said Joel Lewis, vice president of financial services at Convergys Corp., which runs call centers for the financial industry and other companies.

A week ago, Treasury Secretary Timothy Geithner and Housing Secretary Shaun Donovan sought to ramp up pressure on the industry, saying in a letter to participating mortgage companies that the industry needs to “devote substantially more resources to this program for it to fully succeed.” They also summoned mortgage executives to a July 28 meeting with top government officials.

Though the program was launched months ago, few companies are upgrading their computer systems to process loans rapidly, said Bill Kelvie, chairman of Overture Technologies in Bethesda, Md.

“They need to automate the process, and they need better technology, and they need to do this quickly,” he said.

Mortgages: More rules and longer waits

2009-07-13T09:56:00.000-07:00

People trying to buy or sell a home may be seeing the process drag out longer than expected and wondering why.

Until recently, a real estate deal could close, on average, in 30 days, real estate agents said. But, bankers and real estate agents said increased scrutiny and tighter restrictions following the subprime mortgage meltdown, and an increased demand for government insured FHA loans has pushed closing times to 45-60 days.

Or longer.

Ask Morgantown, W. Va., resident Denny Vac, who tried to sell his house to a friend. It took 85 days for the loan to close.

That “is a long time,” Vac said. “It seems to me if they’re trying to get an economic recovery going, they’d be trying to make this a little easier to get through.”

Jerry Hall, a broker at Morgantown’s RE/MAX office, said he’s experienced the delays.

“Underwriters have been looking at properties with a microscope,” he said. They’re scrutinizing the loans, too. Properties may drop out the day before closing.

He had one sale hit a snag the day before closing because of the underwriter, he said. It was a bungalow with minor foundation problems. Two inspectors said it needed monitoring but not immediate repair. However, the underwriters wanted it fixed before the money was released. The sale took an extra month. Asked if he also considered the problem counterproductive to economic stimulus, Hall said “very much so.”

There are two distinct issues affecting the home loan process, bankers told The Dominion Post, depending on whether buyers are working with a conventional loan or an FHA loan.

FHA loans

Vac’s friend is pursuing a Federal Housing Administration (FHA) loan through BB&T, Vac said.

FHA says its loans can be good for several types of homebuyers: first-timers, those with little money for a down payment, and those with less-than-perfect credit, among others.

Jane Haines, vice president for mortgage sales at Clear Mountain Bank, said homebuyers putting less than 20 percent down on their homes are required to obtain mortgage insurance to protect against default in the event of foreclosure. Private mortgage insurance firms provide the insurance for homebuyers using conventional loans.

For FHA loans, the FHA doesn’t lend the money, but it insures the loans against defaults, said U.S. Department of Housing and Urban Development spokesman Lemar Wooley. This can make lenders more willing to part with their money.

And, while underwriters for conventional home loans are requiring at least 5 percent down, bankers said, the FHA requires only 3.5 percent and the rules are less strict about where that money can come from.

Vac put his house on the market with a realty firm for $180,000, he said, but listed it with the exception his friend could buy it for $150,000 without involving a real estate commission. His friend was pre-approved by BB&T and they signed a contract between April 16-20, expecting the deal to close not later than June 20.

Vac encountered various frustrations and problems during his long wait. The bank sent the wrong appraiser, and there have been communication problems.

When the deal started dragging out, he said, he considered renegotiating the contract at a higher price, but because of the way the appraisal system works, the house was appraised at $155,000, so he and his friend would have to start the whole process over again.

So he waited. His accountant told him the delay was costing him about $120 a day to hold onto the unoccupied, unrented house – more than $3,000 all told. Meanwhile, the buyer had to rent an apartment for an extra month, costing him more money, too.

BB&T media relations manager A.C. McGraw couldn’t address Vac’s specific situation, but said BB&T has a “longer processing time [on FHA loans] because of increasing volume. ... We’re literally pushing more loans through the pipeline.”

There are also more documentation requirements, she said.

McGraw said BB&T doesn’t keep separate statistics for closing times on conventional and FHA loans, but overall they’re averaging 45-60 days.

In cases like Vac’s, she said, “I’m sure other factors are involved.”

McGraw said BB&T is trying to prioritize home loan processing “to meet sales contract deadlines.”

Wooley said the FHA has noted “no appreciable increase in time for closures,” but the weak economy, the subprime mortgage market meltdown and tightened lending practices produced an “absolute increase in demand” for FHA-insured loans. The market share ballooned from less than 4 percent of all home loans in 2004, to 18 percent now.

“More and more people are turning to FHA as a safe product,” he said.

But Haines is among the local bankers who has seen “a lot longer turnaround” time for FHA loans – because of their growing popularity.

“It may take three weeks to hear back” from the FHA, she said, “and they want more information.”

“It is frustrating for the customer, the Realtor and the banker,” she said.

Another appealing factor for FHA loans, she said, is credit scores. FHA requires only a 620.

Credit scores can range from about 300 to 850, as rated by the credit-scoring system Fair Isaac Co. (FICO), according to various banking sources, and major lenders like to see scores at 700 or above, but typically offer “prime” loans (best interest rates) to folks at 650 or above. A score below 620 is considered bad credit, with a high risk for default.

Despite the increased lag time, Haines said, FHA is still the best route for many people. “Without FHA, more people would be unable to get into homes.”

Conventional loans

Jeff Stewart, associate broker at Pat Stewart Realtors, said, “There are more hoops to jump through. ... It’s just been difficult.” Underwriters will sign off sometimes, he said, and then come back with more requirements.

Another problem he and Hall have observed is appraisals. They’re taking longer, and sometimes homes are getting evaluated by nonlocal appraisers. Hall said that stems from a new regulation designed to prevent conflicts of interest. Banks are no longer permitted to contact the appraiser – the job has to be set up by someone not connected to the loan. For some banks, Hall said, that means bringing in people less qualified who don’t know the area or the market.

Haines and Centra Bank President and CEO Doug Leech said their banks are still using local appraisers. “We know our appraisers,” Leech said, but he’s aware it’s an issue elsewhere.

Centra, he said, has about $1.2 billion in assets, and lent out more than $500 million in 2008. Lending at that rate means Centra would exhaust its assets in about two years. So Centra and other banks sell their mortgages on the “secondary market.” This means Centra approves the mortgage and issues the money to the borrower. But then it packages its mortgages and sells them to megalenders such as Freddie Mac, Fannie Mae, Citibank or GMAC. In this way, Centra gets its money back and puts it back into the lending pot.

Leech said Centra is still closing 99 percent of its loans in 30 days. Haines said Clear Mountain’s in-house loans are going as quickly as ever, while there is a “slightly longer turnaround” for conventional mortgage loans.

But, Leech said, since the economic meltdown, requirements for conventional mortgages are more stringent. He ticked off a number of issues:

“Appraisals are scrutinized like never before.” An appraiser may say a home is worth $200,000, but the underwriter may mark it down.

They focus on the neighborhood and “comparables” – similar homes within the local geographic area.

They want higher downpayments.

“The days of the 100-percent loan are gone,” he said. The secondary lenders want a minimum of 5 percent down, but some don’t like that little.

People with credit scores at 680 or higher could at one time get a loan for 100 percent of the home’s value, he said, but now they want a near-perfect 720 or higher to even consider it.

They want a lower debt-to-income ratio. It used to be 50 percent to 60 percent, he said. That means 60 percent of a borrower’s income could be committed to debt payments. But now they want 36 percent to 40 percent.

They want to make sure the buyer has sufficient assets after closing, he said, to provide padding in case of job loss, income cut or other issues.

“Any one [factor] makes it difficult, but the combination makes it more difficult,” he said.

Customers are also more cautious, he said.

When housing prices rose, some people expected incomes to rise, too, but that didn’t happen.

“People don’t have the confidence to go out on a limb quite as much.”

State Farm may keep property insurance in Florida, commissioner says

2009-07-13T09:53:00.000-07:00

State Farm, the largest private property insurer in Florida, may decide not to leave the state, Insurance Commissioner Kevin McCarty said Thursday.

“I don’t know that they’re going to stay,” McCarty said. “Part of it is a gut feeling.”

State Farm may be reluctant to give up on a market as big as Florida, McCarty said, and the insurer could find it “very difficult” to maintain auto and other policies without offering property insurance.

McCarty’s optimism was not matched by the insurance company.

State Farm said in January it would exit the property-insurance business in Florida after regulators and an administrative law judge rejected its request to raise rates by up to 67 percent.

The insurer, which has 1.2 million Florida policies covering homes, condominiums, apartments, boats and businesses, had said it might reconsider its decision if Gov. Charlie Crist permitted a sharply contested property insurance bill to become law.

But Crist last month vetoed the bill that would have allowed about 40 of the largest property insurers to charge virtually any price for policies with hurricane coverage.

State Farm hopes for an override of the veto, McCarty said. That would require a special session of the legislature this year, which is considered unlikely.

State Farm spokeswoman Michal Connolly said the insurer still plans to leave the property-insurance business in Florida within two years.

“We really don’t have any other choice with the financial picture we’re facing,” Connolly said. The insurance company has said it will become financially insolvent in a few years if it doesn’t drop its property insurance policies in Florida.

Also in Thursday’s interview with the Sun Sentinel editorial board, McCarty said property insurance companies in Florida will continue to cut policies and reduce their risk along the coast.

“There is a finite amount of appetite for Florida exposure, at any risk,” he said.

McCarty said there isn’t one solution to the problem, but he said a national catastrophe fund would help. The fund would pool money from states coast to coast to help cover property damage when a large natural disaster strikes.

When he vetoed the property-insurance bill, Crist said smaller insurers have brought a “significant amount” of new capital into the state and assumed more than 400,000 homeowner policies that formerly were in the state-subsidized Citizens Property Insurance Corp. pool.

Legislators fear that Citizens, which has more windstorm policies than any other insurer, is underfinanced and may not be strong enough to weather a major hurricane. On Wednesday, the Citizens board approved a 10 percent increase in premiums for roughly 1 million customers.

Fed says recession easing, inflation is tame

2009-06-25T13:17:00.000-07:00

The Federal Reserve sought Wednesday to defuse fears that the trillions it’s spending to revive the economy could spark inflation later on. But Wall Street didn’t seem to buy it.

Fed Chairman Ben Bernanke and his colleagues said that despite an easing of the recession, the economy remains frail enough to keep inflation at bay.

Fed policymakers held a key bank lending rate at a record low of between zero and 0.25 percent and pledged to keep it there for “an extended period”‘ to help brace the economy. The Fed made no new commitment to expand its purchases of government bonds and mortgage securities, to try to drive down rates on consumer debt. That rattled bond investors who fear the prospect of higher interest rates.

But Wall Street zeroed in on the Fed’s new observations about the risks of deflation and inflation.

Fed policymakers dropped language they had used in the statement at their last meeting in April that the weak economy could trigger deflation — a destabilizing and prolonged bout of falling prices and wages. This also spooked bond investors, who took the Fed’s decision not to mention deflation to mean inflation might arise later.

The Fed acknowledged that energy and other commodity prices have risen recently. But policymakers predicted that idle factories and the weak employment market would make it hard for companies to ratchet up prices. The Fed said it expects inflation will “remain subdued for some time.”‘

The mere mention of higher prices, though, hit the Treasury market because the value of returns on fixed-income investments can erode quickly if inflation occurs. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.69 percent from 3.63 percent Tuesday.

Stocks also lost ground after the Fed’s announcement. The Dow Jones, which had been up, closed down 23.05 points.

T.J. Marta, market strategist and founder of Marta on the Markets, a financial research firm, said the Fed’s words “disappoints (inflation) hawks and “angers bond vigilantes.”‘

Overall, though, Fed policymakers delivered a slightly more encouraging assessment of the economy.

“The Fed is sending the message that the economy is making progress toward a path of recovery, that the credit markets appear to be healing and inflation is not going to be a problem,”‘ said economist Lynn Reaser, vice president of the National Association for Business Economics. “The bogeyman of deflation also was removed from the Fed’s primary risk list.”‘

The Fed in March launched a $1.2 trillion effort to drive down interest rates to try to revive lending and get Americans to spend more freely again. It said it would spend up to $300 billion to buy long-term government bonds over six months and boost its purchases of mortgage securities. So far, the Fed has bought about $177.5 billion in Treasury bonds.

The Fed is on track to buy up to $1.25 trillion worth of securities issued by Fannie Mae and Freddie Mac by the end of this year. Nearly $456 billion worth of those securities have been purchased.

With signs economic and financial conditions are stabilizing, the Fed is wise to keep a steady-as-she goes course, said Sung Won Sohn, economist at the Martin Smith School of Business at California State University, Channel Islands. The Fed’s actions are “bearing fruit,”‘ he said.

Fed policymakers noted that the “pace of economic contraction is slowing”‘ and that conditions in financial markets have “generally improved in recent months.”‘ Those observations about the recession and financial conditions were stronger than after the Fed’s last meeting in April.

Economists predict the economy is sinking in the April-June quarter but not nearly as much as it had in the prior six months, which marked the worst performance in 50 years. The economy is contracting at a pace of between 1 and 3 percent, according to various projections.

Fed policymakers said its forceful actions, along with President Barack Obama’s stimulus of tax cuts and increased government spending will contribute to a “gradual “return to economic growth.

Bernanke has predicted the recession will end later this year. Some analysts say the economy will start growing again as soon as the July-September quarter.

Fed policymakers noted that consumer spending — the lifeblood of the economy — has shown signs of stabilizing but remains constrained by ongoing job losses, falling home values and hard-to-get credit.

Economists predict the Fed will hold its key banking rates at a record low through this year and into part of next year to spur lending and boost spending Americans. If so, that means commercial banks’ prime lending rate, used to peg rates on home equity loans, certain credit cards and other consumer loans, will stay around 3.25 percent, the lowest in decades.

Even after the recession ends, the recovery is likely to be tepid, which will push unemployment higher.

The nation’s unemployment rate — now at 9.4 percent — is expected to keep climbing into 2010. Acknowledging that the jobless rate is going to climb over 10 percent, President Barack Obama said Tuesday he’s not satisfied with the progress his administration has made on the economy. He defended his recovery package but said the aid must get out faster.

Some analysts say the rate could rise as high as 11 percent by the next summer before it starts to decline. The highest rate since World War II was 10.8 percent at the end of 1982.

The weak economy has put a damper on inflation.

Consumer prices inched up 0.1 percent in May, but are down 1.3 percent over the last 12 months, the weakest annual showing since the 1950s. The Fed suggested companies won’t be in any position to jack up prices given cautious consumers, big production cuts at factories and the weak employment climate.

Florida’s existing home, condo sales up in May 2009

2009-06-23T13:44:00.000-07:00

Florida’s existing home sales rose in May – the ninth month in a row that sales activity increased in the year-to-year comparison, according to the latest housing data released by the Florida Association of Realtors® (FAR). Statewide sales showed gains over the previous month’s sales level in both the existing home and existing condominium markets. Also, for the first time in many months, the statewide median sales price in May for existing homes and for existing condos rose over the previous month’s figure.

Existing home sales rose 16 percent last month with a total of 13,921 homes sold statewide compared to 12,044 homes sold in May 2008, according to FAR. Statewide existing home sales in May increased 6.2 percent over April’s statewide activity. Florida Realtors also reported a 21 percent rise in statewide sales of existing condos in May; existing condo sales last month rose 3.8 percent over the total units sold in April.

“The improving sales of existing single family homes and condos is a trend we have been seeing for several months in Florida. What is new in this month’s data release is that we are seeing evidence of prices beginning to firm,” says Dr. Sean Snaith, director for the University of Central Florida’s Institute for Economic Competitiveness. “While one month of data does not a trend make, it is the first green shoot we have seen in some time as far as prices are concerned. Until prices stop declining, we cannot state with confidence that the housing market has stabilized. Sales have risen to levels we have not seen since 2006, though the economy still faces headwinds. As credit markets begin to thaw this will help speed along this process of recovery in the housing market.”

Thirteen of Florida's metropolitan statistical areas (MSAs) reported increased existing-home sales in May and 13 MSAs also showed gains in condo sales. A majority of the state's MSAs have reported increased sales for 11 consecutive months.

Florida’s median sales price for existing homes last month was $144,400; a year ago, it was $203,800 for a 29 percent decrease. However, the statewide existing home median price in May was higher than the statewide median price reported in each of the previous four months. According to housing industry analysts with the National Association of Realtors® (NAR), sales of foreclosures and other distressed properties continue to lower the median price because they generally sell at a discount relative to traditional homes. The median is the midpoint; half the homes sold for more, half for less.

The national median sales price for existing single-family homes in April 2009 was $169,800, down 14.9 percent from a year earlier, according to NAR. In California, the statewide median resales price was $256,700 in April; in Massachusetts, it was $275,000; in Maryland, it was $255,587; and in New York, it was $185,000.

According to NAR’s latest housing industry outlook, buyers are responding to favorable market conditions. “The $8,000 first-time buyer tax credit is beginning to impact the market,” said NAR Chief Economist Lawrence Yun. “Since first-time buyers must finalize their purchase by Nov. 30 to get the credit, we expect greater activity in the months ahead and that should spark more sales by repeat buyers.” Many homebuyers are taking advantage of the bargain prices offered on foreclosed listings in states like Florida, California and Nevada, Yun noted, which should “set the stage for healthy market conditions going forward.”

In Florida’s year-to-year comparison for condos, 4,839 units sold statewide compared to 3,998 units in May 2008 for a 21 percent increase. The statewide existing condo median sales price last month was $113,400; in May 2008 it was $181,700 for a 38 percent decrease. May’s statewide existing condo median price was the same as January’s statewide median, and was higher than the median reported in February, March or April. The national median existing condo price was $173,900 in April 2009, according to NAR.

Interest rates for a 30-year fixed-rate mortgage averaged 4.86 percent last month, down significantly from the average rate of 6.04 percent in May 2008, according to Freddie Mac. FAR’s sales figures reflect closings, which typically occur 30 to 90 days after sales contracts are written.

Among the state’s smaller markets, the Melbourne-Titusville-Palm Bay MSA reported a total of 584 homes sold in May compared to 491 homes a year ago for a 19 percent increase. The existing home median sales price was $123,700; a year ago, it was $163,100 for a 24 percent decrease. In the year-to-year comparison for the existing condo market, 123 units sold in the MSA last month, up 6 percent compared to 116 condos sold the previous May. The market’s existing condo median price last month was $134,400; a year earlier, it was $144,300 for a 7 percent decrease.

Home sellers say new appraisal rules make deals harder

2009-06-18T09:29:00.000-07:00

BOCA RATON, Fla. – June 18, 2009 – New rules to safeguard the integrity of home appraisals are complicating the deals they’re supposed to protect.

Real estate agents, mortgage brokers and buyers, as well as homeowners who want to refinance their loans, are feeling the effects of rules designed to prevent inflationary appraisals that helped fuel the housing boom.

“The intentions were good, but the execution was very poor,” said Louis Spagnuolo, vice president of mortgage banking for WCS Lending in Boca Raton.

Since May 1, home appraisals must be ordered at an arm’s length, often through a national management company. Gone are the days when a mortgage broker or lender could hire a familiar appraiser to close a deal. Now, communication between the appraiser and real estate agents is discouraged.

South Florida real estate professionals and their clients say the rules contribute to low appraisals, which jeopardize home sales and refinancing applications. They’re worried that the recent uptick in sales could slow as a result.

Chuck Luciano of Keller Williams Realty recently represented a client who agreed to sell a five-bedroom Boca Raton home for $1.085 million. An appraiser from Miami estimated the value at $1.025 million.

“The seller didn’t want to drop the price, and the buyer said, ‘Why should I pay more than the bank says it’s worth?’” Luciano said. “I lost the deal.”

The new rules were proposed by New York Attorney General Andrew Cuomo, who pushed for the standards after spending more than a year investigating industry appraisal practices. They govern only loans that will be sold to Fannie Mae and Freddie Mac, government run mortgage companies that buy most of the nation’s home loans, and not loans guaranteed by the FHA or VA.

One problem, real estate agents and mortgage brokers say, is that the management companies assign appraisers who don’t know the area and lose experienced appraisers by taking a large percentage of the fees.

Another common complaint: appraisers value properties on the low end to appease lenders, which are scrutinizing appraisals now after suffering large loan losses in recent years.

Bill Burton of Boca Raton was trying to refinance into a loan with a 4.75 percent interest rate. Burton has a high credit score and lives in an upscale development. But his Deerfield Beach mortgage broker said the bank turned him down after insisting that the appraiser include in his report two sales from a less-desirable community nearby.

“I can’t fathom not being approved,” Burton said. “It’s a disgrace.”

But appraisers and the management companies blame the flood of foreclosures and short sales for skewing the value estimates downward.

Mortgage brokers and real estate agents are upset because they’ve lost control of appraisals, said Dan Morden, an appraiser in Broward and Palm Beach counties. “That’s a bitter pill for them,” Morden said.

Two management companies that do business in South Florida say the complaints are unfounded.

Charles Ware of Elite Appraisal Management in Michigan said his firm grades appraisers and assigns them to nearby properties. Valuation Logistics in Oregon typically keeps $25 of the average $450 appraisal fee, chief executive Scott Olson said.

“Our appraisers are getting almost all of their money,” Olson said.

The livelihood of real estate agents and mortgage brokers depends on sales, said Guy Cecala, publisher of the Inside Mortgage Finance newsletter. Changes that appear to stand in the way of that are sure to draw criticism.

Regardless, more conservative appraisals likely are here to stay, he said.

“It’s a political reality.”

Treasury provides $3B more for foreclosure program

2009-06-17T10:59:00.000-07:00

WASHINGTON – June 17, 2009 – The government will provide another $3.1 billion to a group of mortgage servicing companies as an incentive to modify loans to combat record levels of foreclosures.

The Treasury Department said Tuesday that the modifications, which included reductions in projected payments for some companies, pushed the total amount for the program to $18.3 billion, from $15.2 billion.

The department also added one company, Residential Credit Solutions of Fort Worth, Texas, to the program. It is scheduled to receive up to $19.4 million, and joins 15 other mortgage companies approved to participate in the program.

The biggest adjustment was made for Countrywide Home Loans Servicing LP, part of Bank of America Corp., which received an increase of $3.3 billion, bringing its total to $5.2 billion.

Treasury spokeswoman Meg Reilly said the original estimates were based on publicly available information. The revised estimates were calculated using more accurate data supplied by the companies. Further adjustments in the amounts available to the companies will be made on a quarterly basis, she said.

The administration announced in March that it would provide $50 billion from the $700 billion financial rescue fund as an incentive for the mortgage industry to modify loans at lower monthly payments. But the effectiveness of the relief plan remains in doubt, with questions lingering about how much the lending industry is cooperating. Many housing counselors say it hasn't made much of a difference.

As of last week, more than 32,000 borrowers were enrolled in three-month trial modifications under the plan, according to the Treasury Department.

The administration last month expanded the program to provide incentives for lenders who streamline the process of selling a home that is worth less than the mortgage, or transfer ownership of a home to the lender. Both options will still ding the homeowner's credit score, but less than a foreclosure.

The modifications announced on Tuesday were made last Friday. Under the law that created the rescue program last October, Treasury has two business days to disclose any changes in the rescue fund.

Young homeowners gain despite stagnant economy

2009-06-16T09:14:00.000-07:00

If the real estate bust has a bright side, it’s this: People like Lilly Thomas, Stephanie Driskell and Dexter Wuller can finally afford homes.

Falling home prices and an $8,000 federal tax credit are putting homes in reach of young people who couldn’t afford them a few years ago. As a result, real estate agents say starter homes are the only part of the real estate market that’s showing some life.

It’s not a lot of life. House sales this year are down by a third from the boom year of 2006, and the bust spans all price classes. But the lower end of the market – houses priced under $200,000 – is suffering less, and there’s some evidence that a comeback could be beginning.

Now, real estate agents are starting to worry that rising mortgage interest rates may dampen buyers’ enthusiasm. Rates on 30-year mortgages jumped to an average of 5.59 percent last week, up from 4.84 percent a month ago. Meanwhile, many FHA lenders have raised their credit score requirements to 620 from 580, which will seal some people out of the home market.

House prices in St. Louis dropped 4 percent in the last year, and they’re down nearly 9 percent from their high of 2007, according to the Federal Housing Finance Agency’s index, which excludes the most expensive houses.

‘We got a steal’

Those falling prices prompted newlyweds Lilly and Stephen Thomas to finally make an offer on a house in O’Fallon, Mo.

“As the market fell, we were looking at a $200,000 house that we could get for $170,000,” said Lilly Thomas, 29. “My dad thinks we got a steal.”

They also got a gift from Uncle Sam. The $8,000 “first-time homebuyer” credit is available to people who buy homes before Dec. 1. Buyers qualify if they haven’t owned a house for three years.

The credit may prompt an exodus from Mom and Dad’s house. Dexter Wuller, 23, left behind Mom’s cooking when he paid $88,000 for a century-old two-bedroom house in Belleville. “Once I started looking, I started liking houses. The idea of being out on my own and owning something was pretty good,” he said.

Stephanie Driskell, 28, saved money while living at home for free. That, plus the $8,000 credit, let her to buy a $138,000 home in Affton with her boyfriend. “We’re trying to live the American dream like they want you to do,” she said.

Scott Cottrell, of the Cottrell Realty Group in Ballwin, studies real estate statistics. He sees signs of a reviving market, led entirely by low-end home sales.

In St. Louis County, the monthly count of new sales contracts has gradually caught up to last year’s levels, which he calls a hopeful sign. That improvement comes entirely from the starter home market, he says. Completed sales in the region as a whole still lag last year’s levels.

Sellers may re-emerge

Buyers are in the catbird’s seat today, but Cottrell thinks the situation may reverse this fall. He thinks buyers will slowly reduce the inventory of moderately priced homes through the summer. Then he expects to see a rush of buyers in the fall as the December tax credit deadline nears. “We could get a supply and demand imbalance that favors the seller,” he says.

Things are sadder for sellers of upper-end homes. They suffer from two extra handicaps, says Cottrell. Fewer upscale buyers can get the federal credit because they own other houses or exceed the $170,000 income limit for married couples.

But the biggest hindrance is the $281,250 limit on FHA-backed loans. The FHA has filled some of the hole left by the collapse of subprime lending. The agency permits loans with 3.5 percent down payments to people with some blemishes on their credit.

Bankers slow market

Meanwhile, indecisiveness in the banking industry sometimes stymies sales at all price ranges. Brian Hunt learned that when he bid on two vacant houses in O’Fallon, Mo., but couldn’t get a reply at the bank.

Hunt knows construction work, so he went looking for a deal on a fixer-upper. As a result, he found himself looking at properties in foreclosure or threatened by it.

On one, he offered a “short sale.” He offered a price less than the current owner owes on his mortgage. In other words, the bank that held the mortgage would have to take a loss. Such deals are becoming more common as prices fall and foreclosures loom.

“It’s very difficult to do because you can’t get the bank to call you back,” said Hunt. He waited a month without a response, then withdrew his offer. He made a short-sale offer at another house and got the same non-response.

Real estate agents say that’s a common story. Cottrell, for instance, says he has hired a full-time short-sale negotiator, and still waits 3 1/2 weeks to 5 months for an answer from overwhelmed bank real estate officials.

Hunt finally bought a $115,000 O’Fallon home from an owner who had retired to Florida.

The most active part of the market is at the very bottom. Of 5,500 homes sold in St. Louis city and county this year, 1,079 have been worth $30,000 and less, or 19 percent of sales, according to figures from the St. Louis Association of Realtors. In 2006, these low-value properties represented only 3 percent of sales.

Some of those are “bulk sales” in which banks sell several foreclosed properties to a single investor, who then resells them or repairs and rents them.

Mark Scatizzi has watched the phenomenon firsthand as a real estate agent specializing in selling foreclosed and distressed property.

“What was selling two years ago for the $50,000s and $60,000s has been pushed down into the $30,000s,” says Scatizzi, of the RealtyNet Kratky Team.

International buyers confident of Florida recovery

2009-06-16T09:13:00.000-07:00

MIAMI – June 15, 2009 – Gerson Lehman Group reports that international realty buyers believe the Florida housing market is poised for recovery, and they are paying close attention to distressed properties in the state. The report says these international buyers view homes in the United States as “desirable, profitable and secure” investments.

“Those who delay buying their dream home in Florida may soon find that they have to pay considerably more for the same property in just a few months,” advises the report’s author, Howard Liggett, president of Distressed Real Estate Consulting Services.

Liggett cites data from the National Association of Realtors® and the Florida Association of Realtors® indicating that 25 percent of international buyers are Canadian, 21 percent are British, and 21 percent are western European.

Highlights from the Fed's latest economic survey

2009-06-15T14:07:00.000-07:00

Highlights from the Federal Reserve's survey of economic conditions. The survey, released Wednesday and known as the Beige Book, is based on information collected from the Fed's 12 regional bank districts.

ATLANTA

(This region covers Georgia, Alabama, Florida, and parts of Louisiana, Mississippi and Tennessee.)

The pace of decline moderated in some industries and most noted an improved outlook. Retail sales were sluggish but largely in line with expectations. Tourism-related spending weakened. Theme park attendance and cruise booking were relatively stable, with promotions and discounting playing a significant role. Vacationers overall were said to be spending less.

Sales of existing homes were "stabilizing overall." Homebuilders noted that inventories were trending down on a year-over-year basis. Home prices continued to drop. Commercial real-estate activity was weak. The rate of decline in factory activity moderated. The jobs market stayed weak.

Home buying tips

2009-06-09T13:04:00.001-07:00

The National Association of Realtors says increase your chances of getting your dream house instead of losing it to another buyer, with these easy steps.

• Get pre-approved for a mortgage. This is a lender's guarantee that you have a mortgage in hand, once you find the home of your dreams. With a pre-approved mortgage, you'll be able to make a firm commitment to buy and make your offer more desirable to the seller.

• Stay in close touch with your real estate agent to find out first about new listings that come on the market. And be ready to go see a house as soon as it goes on the market.

• Scout out new listings yourself. Look at Internet sites, newspaper ads, and drive by the neighborhood frequently. Maybe you'll see a brand-new "for sale" sign before anyone else.

• Be ready to make a decision. Spend lots of time in advance deciding what you must have so you won't be unsure when you have the chance to make an offer.

• Bid competitively. You may not want to start out offering the absolutely highest price you can afford, but don't try to go too low to make a deal. In a tight market, you'll lose out.

• Keep contingencies to a minimum. Restrictions such as needing to sell your home before you move or wanting to delay the closing until a certain date can make your offer unappealing. In a tight market, you'll probably be able to sell you house rapidly. Consider talking to your lender about getting a bridge loan to cover both mortgages for a short period.

• Don't get caught in a buying frenzy. Just because there's competition doesn't mean you should just buy anything. And even though you want to make your offer attractive, don't neglect inspections that help ensure that your house is sound.

Broward county may be raising taxes soon!

2009-06-09T12:57:00.001-07:00

In the wake of Broward's decreasing property tax values, top county officials are seriously considering raising the county tax rate, which is something Broward commissioners haven't done in a decade. Talks of a potential rise in property taxes comes less than a week after Broward Property Appraiser Lori Parrish released figures showing property tax rolls fell by a staggering 10.7 percent countywide. That does not mean that Broward residents should expect a similar drop in their taxes. Whether homeowners' tax bills ultimately rise, fall or stay the same depends on how much their property values changed and on tax rates set by multiple jurisdictions. The biggest chunk of a homeowners' tax bill in Broward -- about one-third -- goes to the school district. Some school board members have said they won't raise the tax rate, but it is unclear if a majority will go along. The school district has yet to release its proposed budget. The county also represents a large share of a homeowners' tax bill -- about 25 percent. Cities and other taxing authorities, including the hospital districts, make up the balance. Some cities, including Fort Lauderdale, won't release a proposed budget until July.

Home prices are up in South Florida 9 months straight!

2009-06-01T10:28:00.000-07:00

Sales of homes and condos in both Miami-Dade and Broward counties surged in April for the ninth month in a row. Buyers found prices on single-family homes as low as 39 percent in Miami-Dade from the same month last year and 36 percent in Broward County. In Miami-Dade the median house price was $177,000, down from $291,900 a year ago. Of 690 homes sold in Broward, the median price settled at $191,300, down from $298,100 last year. The national median house price, by way of comparison, was $170,200, down from $201,300 last April. South Florida sales, however, bounded for the ninth month in a row compared to the year-ago period and easily outpaced the increase at the national level of 2.9 percent, as super bargains drew investors and first-time home buyers into the market. Sales of previously lived in houses were up in Miami-Dade by 98 percent and by 33 percent in Broward. Condo sales also rose -- by 70 percent in Miami-Dade and 39 percent in Broward, on median prices that fell by 51 percent and 47 percent, respectively. The median condo price in Miami-Dade fell to $133,500 from $275,000 last year. In Broward, the median price fell to $79,900 from $150,000.

Use Your First-Time Home Buyer Tax Credit As The Home Down Payment!

2009-05-18T20:18:00.000-07:00

If you're thinking about making a home purchase in South Florida, the federal government might be able to help you get started with your purchase. On Tuesday, Shaun Donovan, Secretary of Housing And Urban Development, said that the Federal Housing Administration (FHA) informed lenders to allow first-time home buyers to use an $8,000 tax credit as a down payment on their purchase. Prior to this announcement, the tax credit wouldn't appear until after the home buyer filed their tax return. The National Association of Realtors fought for the change saying the old policy might have prevented some people from taking advantage of the credit.

South Florida Housing Industry

2009-05-12T06:14:00.000-07:00

Has President Barack Obama's aim at the housing crisis helped South Florida? A little bit according to real estate analysts.

Sales have increased a little by the interest rates and lower prices, but many borrowers have kept from refinancing due to the steep fall in South Florida home values. Causing homeowners who at one-time were solvent but now are abandoning their homes. Banks are probably the biggest roadblock to a recovery as they still aren't lending! Falling prices and the lowest interest rates seen in 50 years have unleashed the demand amoung buyers. But if the banks do not start lending soon the rise from this foreclosure pit will continue to only stay on a slow rise.

This is the market for first-time home buyers!

2009-05-11T09:05:00.000-07:00

First-time buyers are dominating the real estate market right now. They have snapped up 53 percent of all properties sold during March 2009, up from the usual 40 percent or less, according to data from the National Association of Realtors. While declining home values have brought havoc on home sellers, owners and lenders, first-time buyers can celebrate the housing market bust, and may even help fix it. The Realtors' group expects first-timers to account for the majority of home sales through the remainder of 2009. In addition, federal tax credits for first-time homebuyers are motivating many to get off the sidelines, The Internal Revenue Service extended $7,500 tax credits to first-time buyers last year and has raised that to $8,000 or 10% of the purchase price for 2009. The market peaked at different times in different markets, buying a median-priced home in cities like Oakland, Calif., or Miami would have consumed more than 75 percent of the median income at the market peak. Now a typical home would consume 28 percent of average income in Oakland and 34 percent in Miami.

Home Sales Slip, But First-Time Buyers Rise

2009-04-26T06:46:00.000-07:00

Existing-home sales eased in March but first-time buyers are responding to low mortgage interest rates and tax credits, according to the NATIONAL ASSOCIATION OF REALTORS®.

Existing-home sales – including single-family, townhomes, condominiums and co-ops – declined 3 percent to a seasonally adjusted annual rate of 4.57 million units in March from a downwardly revised level of 4.71 million in February, and were 7.1 percent lower than the 4.92 million-unit pace in March 2008.

Lawrence Yun, NAR chief economist, said the market appears to be stabilizing with modest monthly ups and downs, and that first-time buyers are driving the market. “The share of lower priced home sales has trended up, indicating a return of many first-time buyers, which we also see in a parallel member survey,” he said. “Sales in the upper price ranges remain stalled because of higher interest rates on jumbo loans.”

Although prices rose from February to March, the national median existing-home price for all housing types was $175,200, down 12.4 percent from March 2008. The price increase from February to March was 4.2 percent, which is much higher than the typical 1.8 percent seasonal increase between those two months. Distressed properties, which accounted for just over half of all transactions in March, typically are selling for 20 percent less than traditional homes.

First-Time Buyers Drive Market

An NAR practitioner survey in March showed first-time buyers accounted for 53 percent of transactions, based largely on contracts offered before the $8,000 first-time home buyer tax credit became available. “Buyer traffic has been rising, and real estate offices are getting phone inquires about the tax credit,” Yun said. “By early summer we should be seeing a positive impact on home sales from record-low mortgage interest rates in addition to the stimulus provisions.”

NAR President Charles McMillan said first-time buyers are crucial at this stage of a housing recovery. “The housing market always heals from the bottom up, and with large numbers of first-time buyers entering the market it will become a little easier for sellers to trade up or down, according to their needs,” he said.

“Although homeownership builds wealth over the long term, buyers need to evaluate their options. In this market, buyers and sellers who use a REALTOR® to represent them are making a smart move,” McMillan said.

Affordability Looking Good

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to a record low 5.00 percent in March from 5.13 percent in February; the rate was 5.97 percent in March 2008; data collection began in 1971.

“Record-high housing affordability conditions are helping markets recover, with home sales higher than a year ago in Minneapolis, Northern Virginia, Las Vegas, Phoenix and most areas of California and Florida.”

Total housing inventory at the end of March fell 1.6 percent to 3.74 million existing homes available for sale, which represents a 9.8-month supply at the current sales pace, compared with a 9.7-month supply in February.

Single-family home sales slipped 2.8 percent to a seasonally adjusted annual rate of 4.10 million in March from a pace of 4.22 million in February, and are 5.7 percent below the 4.35 million-unit pace in March 2008. The median existing single-family home price was $174,900 in March, which is 11.5 percent lower than a year ago.

Existing condominium and co-op sales fell 4.1 percent to a seasonally adjusted annual rate of 470,000 units in March from 490,000 in February, and are 17.8 percent below the 572,000-unit pace a year ago. The median existing condo price was $177,600 in March, down 18.7 percent from March 2008.

Federal Housing Rescue Plan Launches

2009-04-19T06:50:00.000-07:00

The Obama Administration’s program to rescue distressed home owners got off the ground this week. The program was announced on Feb. 18, but it took several weeks to put the bureaucracy in place.

Six of the nation’s largest banks signed up to participate, the Treasury Department announced Wednesday. They are JPMorgan Chase, Wells Fargo, Citigroup, GMAC Mortgage, Saxon Mortgage Services, and Select Portfolio Servicing.

Treasury says it is allocating $50 billion to the program. The Department of Housing and Urban Development will provide the rest.

The plan calls for loan servicers to reduce interest rates so a family’s monthly mortgage obligation is no more than 38 percent of its pre-tax income. Loan servicers also can reduce loan balances. After the loans are modified, the government then provides enough money to reduce payments to 31 percent of income.

Participating servicers get $1,000 a year for each modification and another $1,000 a year for three years if the borrower remains current. Servicers get an extra $500 if they do the modifications before the borrower falls behind in his payments—and the borrower gets $1,500. Also, homeowners get $1,000 a year for five years if they remain current on their payments. The money must be used to reduce their principal balances.

Crist urges that now is the time to buy real estate

2009-04-17T19:34:00.000-07:00

Within a year and a half or two, people will regret not having snapped up Florida real estate at current bargain basement prices. At the Greater Tampa Chamber of Commerce Gov. Charlie Crist spoke about the economy stating, "When is the last time you can recall Florida real estate being a bargain?" Crist said. The land-preservation program known as Florida Forever faces possible extinction in this excruciatingly tough budget year. He said friends up north are buying property in places like Fisher Island in Miami.

How Escrow Works

2009-04-07T04:03:00.000-07:00

If you've ever made an informal bet with a friend, you may have asked a third person to hold the money until the wager was resolved. When you take out a mortgage to buy a home, you're doing something similar by opening an escrow account.

How it works

When you put money in escrow it is held by a neutral third party (called an escrow agent) who works for both the lender and the borrower. The agent's role is to carry out the instructions agreed upon by both parties. The money is released when all the terms of the agreement are met. Escrow can be involved in anything from multimillion-dollar building projects to purchases made on online auction sites.

When it's used

When your mortgage closes, your lender will usually require you to open an escrow account to cover property taxes and homeowner's insurance. You'll make an initial deposit, followed by payments to the account every month. (Usually these are added to your regular mortgage payment.) The escrow agent will then release these funds as your taxes and insurance premiums come due.

Its purpose

The idea is to protect the lender by ensuring that you pay your taxes and insurance on time. If you default on your property tax, for example, your municipality can put a lien on the house, which would make it difficult to sell. Or if your house burns down and you've neglected to pay the insurance, the lender would be left with no collateral.

How you benefit

Escrow can benefit borrowers by helping them spread insurance and tax expenses evenly over 12 payments. For example, assume your yearly property taxes are two payments of $1,000 each, and your insurance is $400 annually. If you paid these directly, it would mean three large payments a year; your escrow costs, however, would be a manageable $200 a month.

Escrow payments

Your escrow account will have a built-in cushion -- if you miss a payment, the lender must still be able to pay your accounts on time. However, federal law prohibits lenders from requiring more than two months. expenses in escrow. And because your tax and insurance costs will change slightly from year to year, the lender will review and adjust your escrow payments annually.

When escrow may be waived

In most states, the money you place in an escrow account earns no interest for you. For that reason, many borrowers prefer to pay their taxes and insurance directly. Lenders may agree to this if your down payment is more than 20 percent, although some will raise your interest rate slightly to compensate. Once you agree to putting funds into an escrow account, however, it is difficult to cancel it, so make sure you fully understand the arrangement before your mortgage closes.

Real Estate Comeback in 2009!

2009-04-01T17:13:00.000-07:00

For 2008 we witnessed many changes to the real estate market across the United States. Many of our neighbors are suffering from foreclosures and short sales. Bad loans have made a mess of our market. Here is the good news! The housing and real estate market will turn around and make a comeback once the lenders get their ducks in a row. And the best news remains that this upcoming market will see less exorbitant prices and more affordable homes and lots. The markets, real estate and stock, have always had their ups and downs. That being said with the declining of the market and economy, a upturn should soon follow suit. Upcoming markets of 2009 should prove that real estate is still a solid investment!

Scam artists preying on those in need...

2009-03-28T17:35:00.000-07:00

With the continued rise of economic instability scam artists are coming out of the woodwork claiming to be saviors and providing foreclosure relief. Concerns are swirling around the idea that the $75 billion plan Obama unveiled to help borrowers modify their current mortgages may lure more foreclosure hucksters onto the scene. Illegitimate companies take fees from homeowners often with promises that federal bailout money will provide a quick fix. Scammers then make off with the fees, leaving homeowners worse than before. "If an offer sounds too good to be true, it probably is", is a common mantra providing an easy test for homeowners. About a dozen companies have been sued as more than 100 complaints of foreclosure rescue scams have come into the Florida Attorney General's office in recent weeks. For genuine assistance homeowners can contact their current lender and can often negotiate a loan restructure.

Broward County Home Sales Spike

2009-03-27T15:23:00.000-07:00

Existing home sales skyrocketed for February as irresistible prices and low mortgage rates continued to win out over a declining economy. Broward County sales rose to 500 from 360 a year ago, which is a 39 percent increase per the Florida Association of Realtors. Houses now cost what they did in 2003 as the median price fell 30 percent, to $214,400 from $307,700.
More affordable homes ultimately will help the market rebound sometime next year, analysts say even though the region's housing slump lingers in its fourth year. Mounting foreclosures and short sales are expected to depress prices through 2009 and most likely into 2010.

Pool Maintenance Tips

2009-03-24T15:46:00.000-07:00

Algae and disease carrying micro organisms thrive in water—so it is essential to sanitize your pool regularly.

First you need to know how many gallons of water your pool holds. The size of the pool will determine the amount of chemicals to be added to the water. The directions included with pool chemicals will tell you the amount to add for the number of gallons of water in the pool. You will need to choose which system you want to use from the two types available, Chlorine and non-chlorine. Do not mix products from the two systems.

It is important to maintain the pH of your water. The pH tells you the degree of acidity in the water. Water that is too acidic can corrode your pool liner over time. A low pH can cause scaly build up on your liner and steps. The pH level should be checked about every month. Your pool supply store can tell you the proper chemicals to add to correct the level of the chemical system you use.

Smart Shopper's Guide

2009-03-24T15:43:00.001-07:00

We are currently in a “buyer’s market” since prices have fallen substantially nationwide and owners are willing to make further reductions and negotiate transaction expenses, like paying for closing costs, in order to seal the deal. Prices of homes tend to fall in the winter when fewer people are able or willing to move. The high season for home purchases is during the spring and early summer, when families plan their move before the school year begins.
Watch out for the following when considering a foreclosure or short sale:

- Research the history of the property through public records.
- Investigate with a title company to verify there are no pending claims on the property.
- Hire a home inspector to look over the property for damage.
- Make sure you have sufficient funds to cover the costs of purchasing the property in addition to the necessary repairs.
- Get a licensed realtor to help you with the transaction and verify the realtor’s credentials with professional boards in your state.

If you do your research well then a foreclosure/short sale can be a viable option for getting a house at below-market prices.

Statewide Existing Home Sales

2009-02-05T17:59:00.000-08:00

December's statewide existing home sales were 28.9 percent higher than state wide sales in November. In December existing condo sales rose 37.7 percent over the total units sold in November. Sales of existing homes rose 6.5 percent nationally. This is the time for homebuyers to take advantage of lower home prices. Experts in the business are foreseeing positive improvements for home sales in the near future.

Existing-Home Sales Show Surprising Gain

2009-01-30T20:02:00.000-08:00

Existing-home sales rose unexpectedly while inventory declined, led by a surge of sales in the West, according to the National Association of Realtors®.

Existing-home sales – including single-family, townhomes, condominiums and co-ops – jumped 6.5 percent to a seasonally adjusted annual rate of 4.74 million units in December. The number compares to a downwardly revised pace of 4.45 million units in November, but 3.5 percent below the 4.91 million-unit pace in December 2007.

For all of 2008, there were about 4.9 million existing-home sales -- 13.1 percent below the 5.65 million transactions recorded in 2007. This is the lowest volume since 1997 when there were 4,371,000 sales.

Lawrence Yun, NAR chief economist, said home prices continue to fall significantly.

“It appears some buyers are taking advantage of much lower home prices,” he said. “The higher monthly sales gain and falling inventory are steps in the right direction, but the market is still far from normal balanced conditions. Buyers will continue to have an edge over sellers for the foreseeable future.”

Total housing inventory at the end of December fell 11.7 percent to 3.68 million existing homes available for sale, which represents a 9.3-month supply at the current sales pace, down from a 11.2-month supply in November.

Yun said the market is underperforming and hurting the broader economy.

“We’ve added 25 million people to our population over the past decade and housing affordability conditions are the best we’ve seen since 1973, but household formation is much lower than expected,” he said. “Consequently, there is a pent-up demand which could be unleashed with the right stimulus, including a non-repayable home buyer tax credit. The Obama administration and Congress need to move fast to stimulate a spring sales upturn which will help to stabilize home prices and set the foundation for a sustainable economic recovery.”

Housing Stats

National median existing-home price: (for all housing types) was $175,400 in December, which is 15.3 percent below December 2007 when the median was $207,000. There remains a significant downward distortion in the current median from a large number of distress sales at discounted prices, currently 45 percent of transactions; the median is where half of the homes sold for more and half sold for less. For all of 2008, the median price was $198,600, down 9.3 percent from $219,000 in 2007.

Single-family home sales: rose 7 percent to a seasonally adjusted annual rate of 4.26 million in December from a level of 3.98 million in November, but are 1.4 percent below a 4.32 million-unit pace in December 2007. For all of 2008, single-family sales fell 11.9 percent to 4,349,000.

Median existing single-family home price: dropped to $174,700 in December, down 14.8 percent from a year ago. For all of 2008, the single-family median was $197,100, which is 9.5 percent below 2007.

Existing condominium and co-op sales: increased 2.1 percent to a seasonally adjusted annual rate of 480,000 units in December from 470,000 in November, but are 18.4 percent below the 588,000-unit level a year ago. For all of 2008, condo sales dropped 21.0 percent to 563,000 units.

Median existing condo price: slipped to $181,400 in December, down 18.3 percent from December 2007. For all of 2008, the median condo price was $210,000, which is 7.2 percent below 2007.

Existing-Home Sales By Region

* Northeast: slipped 1.4 percent to an annual pace of 720,000 in December, and are 14.3 percent below December 2007. The median price in the Northeast was $235,000, which is 7.8 percent lower than a year ago.

* Midwest: increased 4.0 percent in December to a level of 1.04 million but are 10.3 percent below a year ago. The median price in the Midwest was $140,800, down 11.4 percent from December 2007.

* South: rose 7.4 percent to an annual pace of 1.74 million in December, but are 11.2 percent lower than December 2007. The median price in the South was $158,600, which is down 8 percent from a year ago.

* West: jumped 13.6 percent to an annual rate of 1.25 million in December and are 31.6 percent higher than a year ago. The median price in the West was $213,100, down 31.5 percent from December 2007.

A Good Time to Buy

NAR President Charles McMillan said it’s an excellent time for first-time home buyers with good jobs.

“The typical buyer plans to stay in their home for 10 years, which is the correct approach in today’s market,” he said. “With historically low mortgage interest rates, flexible sellers, a large inventory, and homes that are selling for less than replacement construction costs in much of the country, buyers who’ve been on the fence should take a closer look at today’s market.”

McMillan added that first-time buyers may want to consider an FHA loan, which offers downpayments of 3.5 percent on a safe 30-year fixed-rate mortgage.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to 5.29 percent in December from 6.09 percent in November; the rate was 6.10 percent in December 2007. Last week, Freddie Mac reported the 30-year rate was 5.12 percent.

Source: NAR

30-year mortgage rates rise

2009-01-24T20:28:00.000-08:00

Rates on 30-year mortgages rose above 5 percent this week, ending a five-week run at record low levels, Freddie Mac reported Thursday.

Mortgage rates have been in decline since the Federal Reserve said in late November it would buy up to $500 billion in mortgage-backed securities to get banks to lend more money in hopes of bolstering the troubled U.S. housing market.

Freddie Mac reported Thursday that average rates on 30-year fixed mortgages rose to 5.12 percent this week from a record low of 4.96 percent established last week. At this time last year, the 30-year fixed rate mortgage averaged 5.48 percent.

Last week’s mark of 4.96 percent was the lowest since Freddie Mac started its survey in April 1971, Freddie Mac said.

The lower rates also kick-started mortgage refinancing activity. Frank Nothaft, Freddie Mac’s chief economist, said refinancing applications totaled about 86 percent of all conventional loans in the first three weeks of 2009. Nothaft said this week’s rise in average mortgage rates followed increases in bond yields.

The average rate on a 15-year fixed-rate mortgage rose to 4.8 percent from 4.65 percent last week. The 15-year fixed rate averaged 4.95 percent at this time last year.

Average rates on five-year, adjustable-rate mortgages fell to 5.24 percent, their lowest level since the week ending Sept. 8, 2005, Freddie Mac said. Rates on one-year, adjustable-rate mortgages rose to 4.92 percent from 4.89 percent last week.

The rates do not include add-on fees known as points. The nationwide fee for 30-year, 15-year and one-year adjustable-rate mortgages averaged 0.7 point for this week. Fees for five-year adjustable rate mortgages averaged sixth-tenths of a point.

Freddie Mac and sibling company Fannie Mae own or guarantee about half of the $11.5 trillion in U.S. outstanding home loan debt. The government seized control of the companies in September.

Many Home Buyers Need Higher Loan Limits, Upper-End Stalled

2009-01-23T21:23:00.000-08:00

The drop in mortgage loan limits for conventional financing at the end of 2008 is hurting home sales and trade-up activity in higher price ranges across the country, according to the National Association of Realtors®.

The latest existing-home sales data shows transactions under $400,000 are 3 percent below a year ago. However, sales of homes priced at $750,000 or more have declined a whopping 47 percent.

Outside of FHA, Fannie Mae and Freddie Mac, mortgages that do not have government backing are still experiencing a credit crunch. Buyers who need jumbo mortgages must pay interest rates that are nearly 2 percentage points higher than conventional financing; as a result, the high-end market is not moving.

Lawrence Yun, NAR chief economist, said restoring higher mortgage loan limits is critical to this part of the market. “Buyers in higher price ranges are at a severe disadvantage because they have to pay higher interest rates,” he said. “Lower loan limits are having a pronounced impact on trade-up activity at the upper end of the market, which depends more on large downpayments to keep mortgage amounts below the maximums for conventional financing.”

While homes above $750,000 are considered luxurious in many areas, they are modestly sized homes in the midprice ranges of many high-cost markets. “However, the lower mortgage limits for conventional loans mean upper middle-class home buyers in much of the country, including many areas in the Midwest and South, also have to pay higher interest rates,” Yun said. “As a result, we are seeing a universal stalling of sales in higher price ranges across the country.”

To illustrate in dollar terms, if mortgage limits are permanently raised to $729,750, the maximum limit that expired at the end of December, the mortgage payment on such a loan would drop by $942 per month by lowering interest rates 2 percentage points. Over the life of a 30-year loan, the homeowner would save $338,000.

NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said all consumers should have access to today’s historically low mortgage interest rates. “It’s only fair that all hard-working, tax-paying, successful people who want to purchase a home have equal access to low interest rates regardless of where they live or where they want to buy,” he said.

“Every segment of the housing market needs a turnaround to spark an overall housing recovery, which will help the economy to begin to recover,” McMillan said.

Recent Foreclosure Trends

2009-01-22T16:48:00.000-08:00

Foreclosure filings jumped 81% last year. More than 2 million properties received a default notice or were seized by the lender last year. This number is expected to rise unless we adopt a comprehensive national policy. Making credit available for the average person is a must. Foreclosure prevention programs offered by U.S. banks have not had REAL success in slowing down this foreclosure trend. Foreclosure Filings rose 17% in December from November.

How to Prevent Foreclosure

2009-01-05T22:20:00.000-08:00

Here are some foreclosure prevention tips offered by the U.S. Housing and Urban Development and Brothers Redevelopment Inc. of Denver:

-- Contact your mortgage company as soon as you realize there may be a problem with making payments. Make sure to respond to all mail and other correspondence from the company.

-- Educate yourself about homeowner's rights, foreclosure prevention options and foreclosure laws.

-- Read mortgage documents carefully to become familiar with what would be required if you are unable to make payments.

-- Prepare and follow a household budget to keep spending in line. Try to cut costs on non-essential items such as television subscription services and other entertainment.

-- Look for ways to make extra money by selling non-essential assets, taking an additional job or even renting out a room.

-- Make an appointment with a non-profit housing counselor to review your situation and provide any assistance that's needed.

Ten Real Estate Predictions for 2009

2009-01-05T22:13:00.000-08:00

2009 is likely to be a year of continuing adjustment to a changing real estate marketplace. Here are predictions from HGTV’s FrontDoor.com Web site.

• Sellers will continue to face falling home values in the new year because they’ll be competing with banks and builders who are slashing prices to sell off the still-huge inventory of foreclosures and new homes.

• The Obama administration will act on its plan to crack down on abusive lending practices.

• Mortgage holders in danger of losing their homes will receive more assistance from a variety of programs since the Senate’s Joint Economic Committee has predicted two million foreclosures in 2009.

• Banks’ restructuring should bring increasing calm, making loan modifications and short sales easier to obtain. Eventually this will lead to a decrease in the number of bank-owned properties on the market.

• Mortgage applications will continue to receive a comprehensive review, requiring borrowers to provide extensive income and debt documentation. Those with the best credit will get the best rates.

• The foreclosure crisis has created wiser consumers, with a deeper understanding of real estate, mortgages and credit, enabling better decision-making going forward.

• Green is good with increasing numbers of buyers opting for smaller homes that are within walking distance of school and work.

• Prices will be low as will interest rates, creating great buying opportunities, and likely, inspiring reluctant buyers to make their move.

• The recession will end and buyers will regain confidence in the market.
Happy New Year!

A Brighter Tomorrow

2008-12-18T19:58:00.000-08:00

We are really excited about the days to come. We are experiencing an amazing amount of growth throughout our team. Perhaps, nothing has been more exciting over the past couple of weeks than the addition of Rich Lombari as Team Leader to the Keller Williams / Miami Shores office. In his short tenure at the "shores office" Rich has already been able to foster a spirit of positivity and re-ignite the flame that at times seems to dwindle to flicker in us all.

It is truly refreshing to be a part of something that is so wonderful that it cannot be put into words. I am where I am because I choose to be here....daily! I have come to understand that success is not an event, but a journey. One that begins every morning that I am blessed enough to open my eyes. Success is a journey full of obstacles, setbacks, frustrations, and fear. But on the journey to success we also encounter breakthroughs, self-confidence, freedom, and come to the realization that "impossible is nothing."

Let today be the first day of your new journey towards success. You are the only one who can decide daily "where you want to be."

Are Florida Real Estate Experts Panicking in Response to National Economic Crisis?

2008-11-11T12:30:00.000-08:00

Florida real estate experts are not panicking in response to the national economic crisis, according to a recent survey by the University of Florida.

The most recent quarterly survey, completed in September, shows the investment outlook remains steady, said Wayne Archer, executive director of UF’s Bergstrom Center for Real Estate Studies.

Florida’s housing crisis is worse than in other states. But respondents to the survey think the state will benefit the same way it has in the past, by capitalizing on retirees. But the recent drops in the stock market and the tightening of credit will probably delay the plans of retiring baby boomers.

The survey is based on 392 responses. About 51 percent of those responding are property appraisers, followed by brokers and other service providers

Homeowners in Denial about Declining Home Values

2008-11-10T12:15:00.000-08:00

Nearly half of U.S. homeowners live in a state of denial about falling home values, according to a third quarter homeowner confidence survey released by real estate information providers Zillow.com. The survey found that while 74 percent of homes have lost value during the past year, 49 percent of homeowners said they believe their home had either maintained or gained value during that time.

The survey showed that Zillow’s Home Value Misperception Index, which measures homeowners’ perceptions of their home’s value over time, decreased to 16 in the third quarter, down 50 percent from 32 in the second quarter. An index of zero would mean homeowners’ perceptions agreed with actual values, so the lower the number, and the more realistic the perception.

Southern and western homeowners showed the most accurate home value perceptions, according to the report. The southern states showed 67 percent of homes decreased in value and western states showed 85 percent of homes declined in value. Homeowners in both areas demonstrated a Misperception Index of 13.

Homeowners in northeastern states showed perceptions most out of line with reality, Zillow said. While 71 percent of homes in the northeast lost value, the Misperception Index came in at 20.

A slim majority of U.S. homeowners — 51 percent — said they believed their home values had decreased. Only 40 percent said they think home values will continue to decrease, however; but 57 percent did say they expect home values in their local market will continue to decline during the next six months.

While homeowners appear to understand the reality of today’s economy and are curbing their household spending, they still aren’t ready to admit that the declining economy has an impact on their own home value.

REGIONAL SUMMITS TO BE HELD BY THE FEDS TO DISCUSS FORECLOSURE PREVENTION

2008-10-15T13:53:00.000-07:00

Federal housing officials will host three regional summits this month to discuss foreclosure prevention efforts, including a program that's providing nearly $4 billion in grant funding to help state and local governments purchase and rehabilitate foreclosed homes.

The Neighborhood Stabilization Program -- created as part of HR 3221, the sweeping housing bill signed into law July 30 -- helps state and local governments acquire land and property, demolish or rehabilitate abandoned properties, and offer down-payment and closing-cost assistance to low- to moderate-income home buyers.

Grant recipients can also create "land banks" to assemble, temporarily manage, and dispose of vacant land for the purpose of stabilizing neighborhoods and encouraging re-use or redevelopment of urban property.

The summits will include discussion of the Neighborhood Stabilization Program and other federal, state and local foreclosure prevention programs. They are also intended to cultivate public-private partnerships and serve as forums for discussion of best practices

Will Citizens Property Insurance Be Able to Pay Claims if a Hurricane Strikes South Florida?

2008-08-08T08:47:00.000-07:00

Citizens Property Insurance Corporation plans to redo windstorm policies statewide, in an effort to make sure customers pay premiums that cover the full replacement value of their homes. This process will start early next year when policies renew and policyholders will give six months notice starting this week.

Citizens will drop approximately 350,000 policyholders who have coverage only for windstorms and have them reapply for policies. Almost all will be approved for new policies but premiums will be adjusted to allow Citizens to ensure policies are covering the full replacement value of homes. These values may have increased in the past few years as construction costs have jumped and as homeowners made additions to their homes. The Legislature has frozen the state-backed insurer’s premiums until 2010.

About half of Citizens customers affected are in South Florida. Some policyholders with roofs older than 50 years or shingle roofs older than 25 years, which are considered most prone to damage, may not qualify for wind-only coverage. The change signals a shift in the perception of Citizens as an insurer of last resort to more like a private insurer, industry analysts said.
Premium quotes will be available two months before renewals next year, but policyholders with old roofs are encouraged to contact their agents immediately.

Five Mortgage Fees to Watch Out for and How to Avoid Paying Them

2008-08-02T06:18:00.000-07:00

Faced with plunging property values and rising defaults, lenders are charging borrowers higher mortgage rates and adding fees. However, not all these added costs are mandatory. Vigilant shopping and a little haggling can go a long way toward landing a fairer price.
Here are five fees to watch out for and how to avoid paying them:

Application Fees
Just because the ad says "no application fee" doesn't mean there's no fee at the time you submit a mortgage application. Each lender gives different names to its fees, which makes it hard to comparison shop. Fees paid outside of closing typically include an application fee, upfront property appraisal and credit check. They may be listed separately or lumped together as a "document-processing fee." To avoid overpaying, ask lenders for a good-faith estimate of mortgage costs.

Yield Spread Premiums
The yield spread premium is a payment some brokers receive from lenders in return for arranging loans with inflated interest rates.
To avoid getting suckered, ask your broker whether the lender pays them a flat rate or percentage commission based on loan terms. Also, obtain a copy of your credit score and use Fair Isaac Corporation's MyFICO.com to get a realistic estimate for a 30-year fixed mortgage rate based on your score.

Risk-Adjusted Rates
Getting deemed a risky borrower is no longer just a matter of a low credit score. Lenders now consider other risk factors. Buy in an area that's seen values drop precipitously — such as Florida or Las Vegas — and you can expect a higher rate. The good news is that each lender gives different weight to individual risk factors. So make sure to collect bids from various lenders.

Down Payment Penalties
Without a down payment of at least 20%, prospective home buyers will undoubtedly get hit with a higher interest rate and need to pay for more points. Also, if a buyer can't put 20% down, they'll need to get private mortgage insurance, which typically costs 0.5% of the loan. Again, shopping around for lenders who charge more favorable points and PMI charges can help lessen the blow.

Closing Costs
Ask potential lenders for a good-faith estimate of closing costs. Follow up weekly with whoever is handling the closing to see if there are any changes in either lender or third-party fees. Here's how to keep these fees under control:
Lender fees. Ask which expenses go into each fee and challenge anything that seems unnecessary or inflated, like overly pricey charges for faxing documents or overnight delivery. Be particularly cautious about fees prorated based on the closing date. Such fees are easily miscalculated, especially if the closing date changes.

Third-party fees
Home buyers also have to deal with title insurance companies, surveyors and inspectors, all of which have their own fees. Comparison shop at other local companies to ensure you're getting a competitive bid. If you find a better rate, ask the lender to use that vendor instead.

House Passes Legislation to Assistance Troubled Homeowners

2008-07-31T07:23:00.000-07:00

The House recently voted 272-152 to pass sweeping legislation that will offer up to $300 billion in assistance to troubled homeowners and throw government support behind mortgage finance giants Fannie Mae and Freddie Mac.
The nearly 700-page measure will now go back to the Senate, where final passage is expected. It's not clear when the vote will occur because of a Republican filibuster threat.
The legislation has won the support from key senators in both parties, and President Bush has withdrawn his long-standing veto threat.
The legislation is Washington's efforts to address the nation's housing meltdown.
Critics argue, the bill gives "a blank check" to the Treasury to spend on helping Fannie and Freddie, despite assurances from the Treasury Secretary and some congressional leaders that the authority granted Treasury by the bill is unlikely to be used.
Supporters note that while no one likes every provision in the bill, the housing crisis and market instability demand action.
The bill has received support from a broad coalition, including lenders, housing advocates and state and local politicians struggling with the foreclosure crisis.
Over the past year, housing prices have fallen more than 15% nationwide, according to the S&P/Case-Shiller Home Price Index. More than 340,000 have had their homes repossessed by banks during the first six months of the year, up 136% from the same period in 2007. The number of delinquent mortgage holders during the same period has risen to 1.4 million, up 56% from a year earlier.

5 Recession Proof Tips to Sell Your Home

2008-07-24T12:39:00.000-07:00

Times are tough. Gone are the days when a home in Miami sells in a matter of days and often at well above asking price. Nowadays, many properties stay on the market for months before selling, and some just don’t sell.
To sell a home in today's market, you have to be willing to invest some time and sweat in prepping your place for sale. Long gone are the days of simply calling a Realtor and waiting for buyers to outbid each other. Here are some proactive steps a seller can take to attract serious buyers:
ENHANCE CURB APPEAL. First impressions are lasting. Put yourself in the shoes of a prospective buyer. Stand near the street and look with an objective eye at your house, yard, driveway and gardens. Make note of all items that need to be fixed, painted, cleaned or removed. For example, fertilize the lawn and cut it. Trim the edges along all sidewalks and other paved surfaces. Remove leaves and fallen debris, such as twigs, pine cones and seed pods. Trim shrubs and hedges, and remove dead limbs from trees. Fill flowerbeds with fresh mulch and plant brightly colored flowers.
CREATE A NEUTRAL CLEAN INTERIOR. Paint walls in soft, neutral colors, and remove wallpaper with bright colors or overly elaborate patterns. Replace the threadbare rugs, refinish hardwood floors, and install new light switch and wall outlet cover plates.
Don’t forget to clean the windows and window sills.
DE-CLUTTER. Start by removing one or two pieces of furniture from each room. Thin out items from all closets, shelves and tabletops. Then remove family photos, portraits and other personal effects. You want home-buyers to see the house as theirs, not yours. If you end up removing a lot of stuff, rent a self-storage space to hold the items until the property has sold.

Consider hiring a professional home stager to prep your home for sale. Stagers will thin out much of your stuff, rearrange furniture and add room accessories, such as rugs, paintings and pillows.

INSPECT YOUR KITCHEN AND BATHROOM. Few homebuyers will give serious consideration to a home with a kitchen or bathroom that's dirty and in disrepair. Start by cleaning all kitchen appliances—inside and out—and remove or replace any that aren't fully operational or that are seriously outdated. Wash dirt and grease from the cabinets and range hood. Scrub the sink clean and polish the faucet. And never allow a buyer see the sink filled with dirty dishes. Clear the refrigerator of photos, calendars and school projects.

Scrub all bathroom surfaces spotless, including the floors, walls, vanity, sink, toilet, tub and shower. Organize linen closets and hang a new shower curtain liner. Fix leaky ffaucets, clean stained tile grout, and check to be sure that all toilets flush properly. Clear the vanity top of all small bottles, cups and toiletries and clean smudges and water spots from shower doors.

HIRE A HOME INSPECTOR. Having your home inspected prior to putting it on the market is a very smart strategy. First, the inspection will reveal trouble spots, giving you the opportunity to fix them before listing the home.

Also, being able to show a recent inspection report to prospective buyers will be proof-positive that the home is in good shape. Most buyers will still want to hire their own inspector, but at least you'll have the peace of mind in knowing that there's little chance of something major popping up

Facts You Need to Know Before Buying a Foreclosed Property

2008-07-16T14:10:00.000-07:00

Traditionally, buying foreclosures is mostly the turf of investors looking to purchase properties at below-market-value prices, fix them up and then sell for a profit — a practice commonly referred to as "flipping." But with home prices in some parts of the country still prohibitively expensive, many first-time home buyers are looking into foreclosures, as well.

Foreclosures are an excellent opportunity to buy a house at a lower than market-value price. It is possible for buyers to shave anywhere between 10% and 30% off the market value of a house, but some will have to put in a bit of "sweat equity," as these homes can come in varying conditions. Currently, you can actually buy a home significantly below appraised value.

Buying foreclosure properties is more complicated — and entails more risk — than going the regular home-buying route. Here are some facts you need to know to make the process less stressful:

Pre-Foreclosures Deals
Buying property in a pre-foreclosure stage — the period between receiving a Notice of Default from the lender and the day the lender puts the property up for an auction — may offer the best bargains, but it's also the most difficult. Pre-foreclosures tend to be more for the seasoned investors.

For starters, you have to deal directly with the owner of the house, who may not even be aware that the house was made public in a foreclosure listing. And then, even if you come to an agreement with the owner, you may have very little time to complete the transaction. Depending on which state they call home, the owners may only have a month before the bank puts it up for auction. In New York, for example, a foreclosure could take as long as 15 months. Others states require less time. You can find foreclosure laws by state on RealtyTrac.com .

The Risks of Auctions
Auctioning the property, which usually happens on the local courthouse steps, is the next stage in foreclosures. And if buying pre-foreclosures is tough for the regular home buyer, buying at an auction can be downright impossible. For starters, you have to pay cash — financing auctioned properties isn't allowed. You're also expected to buy the house sight unseen. And on top of that, you're not allowed to get title insurance: If the house has a $100,000 tax lien attached, the new owner will have to pay it off. The auction is the most risky way to buy.

REO Deals
If no one shows up on the courthouse steps or there are no bids high enough to cover the outstanding loan, the bank will take ownership of the property and put it up for sale through a real-estate broker. This is the easiest way to buy foreclosed properties, but you are also least likely to get a discount, as the bank will typically put it up for sale at or close to market value. However, the prices are still negotiable.

Bank-owned properties — also known as REO, or real estate owned properties — are usually sold through real-estate brokers. To find a REO broker in your area, search the REO Network's database, which represents over 8,000 brokers, agents and vendors (such as appraisers and contractors).

HUD Foreclosures
When homes that were bought with loans guaranteed by the Federal Housing Administration (FHA) or Department of Veterans Affairs (VA) go into foreclosure, they're put up for sale by the government itself. The listings are free and updated daily, but only HUD-registered brokers can place bids. Each listing comes with a detailed property inspection report and outdoor pictures of the house — along with the contact information for local HUD brokers.

For the first 45 days, a listing is available only for homeowner occupancy, which means you don't have competition from seasoned foreclosure investors.

What's the Difference Between a Mortgage Pre-Approval Letter and Mortgage Pre-Qualification Letter?

2008-07-14T17:38:00.001-07:00

The difference between the two terms is that the Pre-Qualification letter is issued without verification of information and Pre-Approval starts with the buyer providing written documentation of all information provided. While neither is a considered to be a mortgage commitment, nor a written mortgage guarantee, obtaining a Mortgage Pre-Approval letter is more preferred than obtaining a Mortgage Pre-Qualification letter.

For example, Pre-Qualification is a process where a buyer contacts a Mortgage Lender/Mortgage Representative, often on the telephone, who then asks the buyer to provide some information. The information requested involves a current address and how long living there, a social security number and permission to order a credit report, annual income and hopefully the amount of down payment.

After the credit check is ordered and received by the Mortgage Lender, the Mortgage Rep then estimates the amount of mortgage the buyer can afford and sends (via fax or email) a letter to the buyer with the title You Are Pre-Qualified, for a mortgage loan in the amount of $..... and a purchase price of $..... This is usually done shortly after the initial phone call, and can be described as an estimate of potential mortgage ability and purchasing power, and not Mortgage Pre-Approval.

A pre-qualification letter always includes varying type disclaimer information, such as: Subject to a formal mortgage application and payment of an application fee, subject to verification of employment, subject to verification of assets, subject to credit review, subject to mortgage underwriting guidelines, interest rate to be the prevailing rate of interest for the mortgage type applied for, among many other "subject to"-like statements.

Certain problems may arise when a formal mortgage application is submitted by a buyer after they've obtained a Mortgage Pre-Qualification letter. Although the buyer has provided correct information, there may be circumstances where even though the verbal information provided is accurate, certain other details are not mentioned which may have a negative impact on the mortgage approval process. Such circumstances may include, details like down payment being borrowed (not gifted from a family member), undocumented income and inconsistency in work history.

In regard to process in providing a Mortgage Pre-Approval, many Mortgage Lenders require a more thorough process. In addition to obtaining a credit report, many Lenders require the buyer to provide proof of two years of work history, pay-stubs or income tax forms, copies of bank statements for source of funds verification and copies of charge card statements. Once the documentation is provided, it is then submitted to the Mortgage Underwriter for review and approval.

Once Pre-Approval is received, the buyer and Realtor will have confidence in a price range and obtaining final mortgage approval. In submitting offers, sellers will know they have a serious buyer who has been proactive, and arranged for mortgage financing. Also, the buyer will be more relaxed in providing earnest money deposit, spending money on due diligence, paying for the mortgage application and appraisal fees.

Pre-Qualification versus Pre-Approval, although these terms appear to be similar, they are really quite different.

New Florida Law Protects Homeowners from Unscrupulous Foreclose Rescue Firms

2008-07-10T17:32:00.001-07:00

Recently, Gov. Charlie Crist signed into law a measure passed by the Legislature designed to protect homeowners facing financial trouble from unscrupulous foreclosure "rescue" outfits.

The Foreclosure Rescue Fraud Prevention Act of 2008, which goes into effect Oct. 1, ensures that homeowners are properly informed about their rights before signing a contract with a foreclosure rescue firm.

The action comes as foreclosure fillings are soaring in South Florida and nationwide.

Here are the key aspects of the issue and new law:

The new law will benefit homeowners facing foreclosure who may be tempted to work with an independent rescue firm.

The law requires a foreclosure rescue consultant — a person who tries to arrange a new payment plan with a lender or other alternative to home foreclosure — to provide a written agreement to homeowners before beginning any services.

The agreement must include a specific notice of the homeowners' right to cancel the contract, detail the procedure for canceling and a disclosure that the consumer should contact his lender first before signing a contract because the lender may be willing to negotiate a payment plan free of charge.

Violators would face up to $15,000 in fines for each infraction.

The new regulations require specific legal definitions for job titles such as "equity purchaser" or "foreclosure consultant," and prohibit foreclosure consultants from accepting payment until all services are completed.

A five-day waiting period in which consumers can cancel a foreclosure-rescue contract is required. Furthermore, before any instrument that transfers title to the property can be executed, the homeowner must execute a separate contract with all the terms and conditions of the proposed property transfer.

How Can I Sell My Home in a Slow Market???

2008-07-07T19:56:00.000-07:00

The market slowdown doesn't mean your home won't sell, but it demands a different approach. Here are some tips that will help your property sell in a slow market:

Make those necessary repairs. In previous markets it was enough just to cut the grass and retouch the paint. In today’s market, sellers will have to take care of those more onerous repair projects as well.

Price realistically. Unfortunate, the demand for real estate has softened significantly. This means, sellers will have to adjust the asking price to below what the house might have fetched a year ago. When setting an asking price above market value, homeowners risk driving potential buyers away. There is a buyer for every property if the pricing is right.

Be flexible. Ensuring that your house is ready to show at all times will make it easier for prospective buyers to see it. So make your bed each morning and clean up the dishes before heading off to work, just in case someone may want to come by at the last minute. In addition, homeowners should be willing to disappear on Saturday and Sunday afternoons if potential buyers are free to see the property.

Bite your tongue: If a potential buyer comes in with an offer you consider too low, resist the urge to turn up your nose. Remember, even a low bid signals interest.

Maximum Internet exposure: Your home should be placed on the Multiple Listing Service. The MLS is a complete inventory of homes on the market. Also, online property listings should have multiple high quality, digital photographs of the home's interior and exterior. In addition, a yard sign will attract people driving by the home.

Arson Rates Up On Foreclosed Homes

2008-07-05T19:17:00.000-07:00

There is a link between the high foreclosure rates in some states and the increase of arson incidents involving foreclosed homes, officials say.

According to fire safety officials in Nevada, Massachusetts and Ohio, the seventy year rise in the number of mortgage defaults is connected to the increase of blazes which destroyed the empty homes.

In 2006, when the median price of a U.S. home peaked to $221,900 based on data from the National Association of Realtors, 31,000 arson cases were recorded the same year by the U.S. Fire Administration. In Ohio, fires that razed vacant units rose by 18 percent in 2006, at about the same time that one in 161 households got a foreclosure notice during the first quarter.

James Quiggle, spokesman of the Coalition Against Insurance Fraud, said profit is usually not the only motive behind the deliberate burning of foreclosed homes since the former owner becomes a suspect and the replacement cost paid by the insurance company is normally below the value of the property.

Some fires were caused by accidents like toppled candles of intruders or neighborhood kids. But two-thirds of fires in unsecured vacant buildings were done on purpose, said John Hall, research head at the National Fire Protection Association. The arson rate went down to 32 percent for empty buildings and 7 percent for occupied units.

James Wright, chief of the Nevada State Fire Marshal Division said battling empty and foreclosed homes is more dangerous for firefighters because they are not aware of the conditions of the burning structures.

As the economy slows due to rising oil prices and declining home prices, will firefighters need to be on red alert for more arson incidents involving foreclosed houses?

How Good Is Your Listing Agent?

2008-07-02T04:01:00.000-07:00

What level of service would you expect from someone you paid $9000? For that kind of money, you'd probably demand personal attention, prompt responses to inquiries and expert insight.

That's what you should expect from a real estate agent, since he or she stands to make a profit once the transaction is complete.

So, what are the characteristics of agents earning their keep? An excellent agent:

Stays on top of deadlines with home repairs, inspections, appraisals, and paperwork.
Helps prepare your home for sale. The agent provides honest and helpful insight about what will be a turn-off to potential buyers and offers to help spruce up the place.
Returns calls and emails quickly and answers questions completely.
Evaluates all aspects of a house you're interested in, including the size of the water heater, the type of heating source, the ages of the appliances, and suspicious stains.
Continues working for you even after the deal is done. The agent makes sure you get your checks from escrow, gets you copies of all important documents, and answers questions.
Is a vigorous but fair advocate. A real estate agent is your guide and counsel during what can be a complicated process. This person defends your interests without offending the other party.

Does your agent fit this description? If not, strongly consider hiring someone else. There is a large pool of real estate agents, why pay thousands of dollars for anything but the best?

FHA Revises Anti-Flipping Rules

2008-07-01T19:21:00.000-07:00

Here's some really good news for anyone involved in acquiring, rehabilitating and reselling foreclosed houses: The Federal Housing Administration is temporarily waiving its "anti-flipping" rules and will now insure mortgages on properties that have been owned by the current seller for less than 90 days.

The policy change opens ups the FHA fixed-rate mortgage program to investors and property disposition companies looking to move houses quickly off their books at a profit. The temporary waiver will expire in June 2009.

The 90-day rule was adopted by HUD after it found that scam artists were buying up central city and suburban foreclosures at rock bottom prices, and then flipping them at inflated resale prices within days to home buyers using low-down payment FHA-backed loans.

Many buyers were inexperienced, unaware of the artificial increase in the price, and couldn't afford the high mortgage amounts. They defaulted in large numbers, ended up in foreclosure, and lenders hit the FHA insurance fund for claims.

Under the revised policy, FHA will require purchasers to be financially capable of handling the mortgage, and underwriters will scrutinize appraisals. However, the agency no longer will rule out insuring a mortgage simply because title to the property had changed hands within the previous three months.

FHA's return to the foreclosure resale market segment through its waiver of the 90-day anti-flipping rule should give those investors and property disposition firms working with lenders' "REO" departments an important resource to use immediately.