Real Estate Experts Say Mess Could Be Solved If Government Would Stop Helping

By Harvey S. Jacobs

Last month, in the blistering heat of Denver, participants ranging from economists to  green architects addressed some of the most pressing real estate issues at the National Association of Real Estate Editors annual conference.

After hearing from more than two dozen speakers over three days, I took away three points:

Despite a strengthening market, the real estate mess that we are experiencing will last for another two to three years. The solution to this seemingly intractable problem lies with market forces and not government action. And the recovery, now in its third year, by all accounts, certainly has been prolonged by the government’s interference in the market.

Re/Max LLC CEO Margaret M. Kelly pointed out that 4 million seriously delinquent homes have already gone through the foreclosure process, but that there were “4 million to go.” Thus, if it has taken three years to get 4 million homes through the foreclosure process, it may take another three years for the remainder of the so-called “shadow inventory” to make it into the hands of non-bank owners.

Lawrence Yun, chief economist for the National Association of Realtors, said that distressed property sales had peaked and were trending down. In 2011, distressed properties accounted for 50 percent of all sales. So far in 2012, that figure is 25 percent, and Yun predicted that distressed sales will account for only 15 percent of sales in 2013.

On the other end of the spectrum, Yun projected that 2013 could bring an average price appreciation of 10 percent. This rosy scenario is based on the assumptions that the supply of new homes remains static and that federal policymakers do not exacerbate the economy’s problems. Industry overreaction to previous abuses in the appraisal and mortgage underwriting areas were also cited as two significant factors holding back the recovery. Yun even quantified these problems, saying that home prices would be 10 to 20 percent higher with accurate appraisals and 15 percent higher with appropriate mortgage underwriting scrutiny. But since cash transactions account for 33 percent of all transactions, these “frictions are hiding the dysfunction in the real estate market,” Yun added.

Who is buying all these homes? Mark Obrinsky, chief economist for the National Multi Housing Council, said Generation Y (those born 1980-1995) appears to be oriented more  toward rent than ownership. As examples, he cited the popularity of services like Netflix, Zipcars and the cloud. The generation’s desire for mobility and its sizeable student loans, he said, also support the conclusion that many 20- and 30-somethings may not be ready to buy a house any time soon.

Still, investors are more than happy to provide them with smaller, more reasonably priced rental units. After all, renting even a small apartment is better than living in their parents’ basement. Renting their own apartment provides the coveted independent feeling that Generation Y’ers seem to crave.

All indications are that investment in rental units will be a fairly good sector in the real estate market for the next few years. “We will have to wait and see if there will be a permanent shift” to a nation of renters, Obrinsky said.

Kelly describes the makeup of homebuyers in the current market as 40 percent who already own a home, 35 percent who are first-time purchasers, and 25 percent who are investors. Those investors are buying 60 percent properties owned by lenders and 33 percent short sales. Seventy-eight percent of these investors are cash purchasers.

Perhaps because no government officials were speaking and the conference was 1,671 miles from the nation’s capital, a decidedly anti-Washington theme emerged. Many participants expressed the belief that the recovery would be further along but for governmental interference.

“Washington is the biggest obstacle to our recovery,” said Robert Jacobs, chief investment officer of Broe Group, a Denver-based real estate investment and development firm. “The best thing they can do is to stop doing anything. The economy wants to grow. Washington is not the solution, it’s the problem.”

Yun of NAR stated that in judicial foreclosure states — where a lender has to seek court approval before completing a foreclosure — seriously delinquent loan inventories remain high.

“Supply is not connecting with demand, so prices are not healing,” Yun said. Echoing this view was Stan Humphries, chief economist at Zillow. “Artificial suppression [of foreclosures] is not helpful,” Humphries said. “Moratoriums are not helpful. These actions have definitely not helped and are keeping home prices down.”

Indeed, Re/Max’s Kelly pointed to the administration’s one-time homebuyer credit as merely accelerating sales into the year of the credit, at the expense of sales in the year after the credit expired. “Stop the artificial stimulus. Let the market settle where it needs to settle,” Kelly added.


Multiple Offers Return As Buyers Are Back

By Steve Cook

RISMEDIA, Monday, July 09, 2012— Record tight inventories are making it increasingly difficult for growing numbers of buyers, who are creating multiple-bid environments in markets that haven’t seen buyers battle over homes in six years.

Buyers are back but sellers aren’t, especially in Western markets recovering from large volumes of foreclosures. The result is that inventories are still tightening as the spring buying season ends. Buyers are fighting over what’s available, often to the benefit of those sellers who took a risk in this year’s evolving marketplace.

Prices are reported to be on the uptrend with 62 percent of REALTORS® reporting constant or increasing prices compared to the same time a year ago, according to the National Association of REALTORS’®  (NAR) REALTOR®  Confidence Index for May29 -June 8, 2012 that was released recently.

Buyer demand is reported to be growing faster than supply, and many REALTORS® are reporting multiple offers. However, buyer foot traffic slowed in May compared to last year, perhaps as buyers grew discouraged by slim pickings.

However, buyer traffic is still well above the moderate level, but seller traffic is flat, according to the NAR survey. First-time homebuyers accounted for 34 percent of total buyers. Normally first-time buyers are in the neighborhood of 40 percent of total residential sales, according to NAR’s Profile of Home Buyers and Sellers.

A majority of the 145 markets monitored by NAR Research experienced slower foot traffic in May of this year relative to the same time in 2011. The data, provided by SentriLock, LLC., is based on the total number of visits to properties as recorded on electronic clock boxes. Foot traffic was lower over the 12 months ending in May in 60 percent of the markets, while 35 percent expanded and 5 percent were unchanged. This moderating pattern suggests a broad based decline in the late spring following an equally broad-based expansion in the late spring/summer of 2011 and early spring of this year.

Multiple bids are changing the playing field in a number of markets this spring and summer. Many agents new to the business who have little experience with them are dealing with a sudden and unexpected competition for homes brought about by inventors more than 20 percent below those of a year ago.

“Remember the “Roaring ’90s?” Those days when you could list your house on Friday and on Saturday people would be parked in your driveway writing offers and good faith checks on the hood of their cars? Multiple offers were the norm and offered sellers a generous selection of offers from which to choose. Believe it or not. we are experiencing a trend toward multiple offers even in this still difficult market and there is evidence that this trend will continue as buyers compete in a market with limited inventory,” reported REALTOR®  Noel Crider of Auburn, Calif.

“The Phoenix Metro Area Housing Market faces multiple offers even in the higher end and luxury market as buyers try to snag homes before the market rises further. We have seen multiple offers for quite some time in the lower price ranges, but now as the market is returning, and returning strong, we are seeing multiple offers in the higher price ranges. We are now seeing multiple offers on homes in the move-up and luxury home market. We are seeing offers that are $50,000 over asking that are not the winning bid. This is causing quite a bit of frustration as buyers are trying to get into a home before the market prices go up further,” reported Brenda & Ron Cunningham, real estate professionals in Arizona.

In Seattle, multiple offers on beginner houses in Seattle are common again reports Phil Leng of Kirkland, Wash. and in Austin, broker Gwynn Teal Carpenter reports, “It’s happened again! We are in one of those real estate markets where we are seeing homes with multiple offers. In Austin Texas, the market is so sizzling hot that it isn’t unusual to have more than 2 offers on a fantastic priced and conditioned home.”


Steady Mortgage Rates Contribute to Housing Market Improvements

by Ed Ferrara

An application for REALTORS® –>It was good news this past week for housing when data for pending home sales showed an unexpected jump in May.

According to the National Association of Realtors, pending homes sales, which represents the number of contracts signed, increased 5.9% to 101.1 from 95.5 in April. Construction Spending also rose 0.9% in May, according to the Commerce Department, which was the biggest gain since December. While some area markets are stabilizing, S&P/Case-Shiller Index of Property Values showed that the decline in home prices during the month of April was at the lowest since November, 2010. Home prices are still down even as the housing market sees some improvement.’s survey of wholesale and direct lenders shows that mortgage rates have remained steady with 30 year fixed mortgage rates at 3.375%, 15 year fixed mortgage rates at 2.750% and 5/1 adjustable mortgage rates at 2.125%, all available with 0.7 to 1% origination fee for well qualified borrowers. As these mortgage rates continue at historic lows, home affordability is still high which is helping those who wish to purchase a home. It is necessary to have good credit and qualifications for conforming mortgage approval and many consumers have taken the time to clean up their credit so that they could take advantage of this opportunity.

Even with a low 5% down payment, obtaining a conforming mortgage with private mortgage insurance is possible and available. With mortgage rates this low, it is a really good time to obtain a mortgage refinance, and now existing borrowers who have mortgages that were sold to Fannie Mae or Freddie Mac prior to June 1, 2009, have HARP 2.0 available for those underwater mortgages. In many instances, HARP will not require an appraisal or other detailed information since it has been expanded to include unlimited loan to values.

Although HARP guidelines do differ from lender to lender due to overlays, many borrowers have been receiving successful approvals. There are still millions of borrowers who are eligible for HARP which is available until the end of 2013. Seeking a HARP refinance with an online inquiry can bring more success since it opens the door to a variety of lenders who are willing to assist.

The FHA Streamline Refinance is now another popular mortgage product for borrowers who have existing FHA mortgages that were endorsed prior to June 1, 2009. With no cash out, there is no need for an appraisal or other documentation and verifications. The biggest perk for this program is the extremely low upfront mortgage insurance premium at .01% which gives all eligible borrowers the opportunity to refinance to lower FHA mortgage rates. Current FHA 30 year fixed mortgage rates are at 3.125%, FHA 15 year fixed mortgage rates are at 2.625% and FHA 5/1 adjustable mortgage rates are at 2.625%.

FHA mortgages for home buyers are still available with different programs to fill a variety of needs. The FHA rehab mortgage is now a favorite especially when purchasing foreclosures or short sales. Borrowers who use the FHA rehab mortgage are able to complete the home improvements and repairs without the need of a second loan. Even though FHA closing costs are high because of the upfront mortgage insurance premium and other FHA fees, FHA still offers one of the lowest down payment requirements and flexible credit qualifying, which is not found with other mortgages. Since any FHA approved and participating lender can handle FHA loans, including the FHA streamline refinance, seeking information online has become very popular and successful for many borrowers.

Jumbo 30 year fixed mortgage rates dropped .125% this week and are currently at 4.125%. Jumbo 15 year fixed mortgage rates are at 3.125% and jumbo 5/1 adjustable mortgage rates are at 2.250%. Excellent credit is required in order to receive these lowest jumbo mortgage rates with 0.7 to 1% origination fee. The jumbo mortgage market is still somewhat tight right now, but is starting to see some improvements. Private mortgage insurance companies, such as Radian, are beginning to expand their involvement with jumbo mortgages which will help make these loans more readily available for suitable borrowers. Since jumbo mortgages are private loans that are held within a lender’s portfolio, they are usually stricter, although high end borrowers usually have the means to meet the guidelines.

This past week, even though stocks took back some of their losses, MBS prices were able to hold on which kept mortgage rates steady. MBS prices affect mortgage rates which move in the opposite direction. Consumer sentiment was reported as weaker than expected, but personal income matched predictions.

The Conference Board’s Sentiment Index fell to 62 as consumers express increased concern over jobs and income, although the Commerce Department reported that the economy grew at a 1.9% annual pace for the first quarter. Core PCE inflation came in lower than expected rising at a 1.8% annual rate. While Durable Orders for May increased 1.1%, ISM Manufacturing was weaker for May. Jobless claims were 386,000 and close to expectations. The Euro zone continues to be a major global issue as Euro leaders have now turned to the European Central Bank for help to keep markets calm. surveys more than two dozen wholesale and direct lenders’ rate sheets to determine the most accurate mortgage rates available to well qualified consumers at a standard 0.7 to 1% point origination fee.

Published: July 4, 2012

10 Home Improvements That Are A Waste Of Money

By Jason Notte

Want a summer home improvement project? Dig a big hole on your property, throw a bunch of money in it, throw a match in and bury it once the flames subside.

This is basically what a select, wrongheaded number of Americans do every year when they see the sun peek out in June and head to Home Depot, Lowe’s or Sears without much of a plan. That yard may seem like it’s begging for a pool and your front porch may look inferior to a sunroom, but that doesn’t necessarily make them good ideas.

In some cases, it’s never a good year to make those ideas happen. We asked those in the know which projects homeowners should stay away from this summer. The following is a list of home “improvements” in which the return on the investment is at best subjective and, at worst, a money- and time-draining waste of warm weather:

A pool
An in-ground pool is a $25,000 to $50,000 gamble before a homeowner even considers tucking into their first cannonball.

That same pool costs about $2,000 more a year to maintain, hundreds more to heat and insure and hundreds more in filter and pump repairs within less than a decade. When cracks inevitably appear, resurfacing can cost upward of $10,000 shortly after that first decade.

Sure, the National Association of Realtors’ National Center for Real Estate Research says an in-ground pool can add about 8 percent to a home’s resale price, but that value swings from 6 percent in the frosty Midwest to 11 percent in the most toasty Sun Belt. An above-ground pool with have cheaper upfront costs, but the Center for Real Estate Research says it adds no value to a house and can actually subtract 1.9 percent of a house’s value if the buyer decides the eyesore needs to come down.

An outdoor kitchen
Installing steel grills and gourmet pizza ovens outside in a fenced-in area in Arizona or California adds to your square footage and optimizes great year-round weather. In Traverse City, Mich., it does neither. If your outdoor kitchen is considered an actual kitchen, the return on a major remodel — in this case, 65.7 percent — would be roughly the same. While such things as range hoods and portable heaters make outdoor kitchens year-round propositions in markets as seasonally chilly as Nantucket and Northern Michigan, it’s never quite as comfortable and can cut your returns in half if residents start to shiver during a February pig roast.

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