By Robbie Whelan
The recovery in real-estate values is accelerating, as more and more markets post gains in median home sale prices.
The National Association of Realtors reported Monday that the U.S. median home price rose 10% to $178,900 between the fourth quarter of 2011 and the fourth quarter of 2012. That’s the biggest yearly gain in the median price since the fourth quarter of 2005.
Of the 152 metro areas examined by the NAR, 133 posted yearly gains in median home price, while prices fell in 19 markets. In the third quarter of 2012, 120 markets showed yearly gains, while a year ago, in the fourth quarter of 2011, just 29 markets nationwide had posted annual median price gains.
“Home sales are on a sustained uptrend,” said Lawrence Yun, the trade group’s chief economist. “Home sales are being fueled by a pent-up demand and job creation, along with still favorable affordability conditions and rents rising at faster rates. Our population has been growing faster than overall housing stock, so supply and demand dynamics are very much at play.”
Housing markets in Western states and markets that were coming off of a low bottom after steep home price declines saw the biggest gains. Phoenix, which fits both of those descriptions, led the gainers, with prices rising 33.9%, followed by Detroit (31.3%), San Francisco (28.3%), Cape Coral, Fla. (25.8%) and San Jose (24.8%).
Of the handful of markets where prices still falling, the upstate New York town of Kingston was the worst (-7.9%), followed by Kankakee, Ill. (-7.0%), Erie, Penn. (-6.1%), Binghamton, N.Y., (-5.7%) and Rockford, Ill. (-4.8%).
Overall, median prices in the West region rose the most–by 20.1%–followed by the Midwest (9.2%), the South (9.1%) and the Northeast (0.7%).
Borrowers who want to get a mortgage insured by the Federal Housing Administration should act quickly to avoid changes the agency is making to shore up its faltering insurance fund.
The U.S. Department of Housing and Administration announced the changes on Wednesday but didn’t announce the effective dates until Thursday.
Here’s the timing: FHA will raise the annual mortgage insurance premium on most loans that have a case number starting April 1 or later. To get a case number before the April 1 deadline and avoid the increase, borrowers should apply with a lender no later than March 25, says Julian Hebron, vice president with RPM Mortgage in San Francisco.
On most FHA loans, the annual premium will increase by 0.10 percentage point, or $100 per year for each $100,000 in loan amount.
For loans greater than $625,000 with a term longer than 15 years, the increase will be 0.05 percentage point, or $50 per year for each $100,000 in loan amount.
The premium itself varies depending on the loan size, term and loan-to-value ratio, but here’s an example:
For a $500,000, 30-year loan with a loan-to-value ratio greater than 95 percent, the new premium will be 1.35 percent, or $6,750 per year, up from 1.25 percent, or $6,250 per year. On a monthly basis, the premium increase amounts to about $42.
For a chart showing premiums increases for various loan types, check out Hebron’s blog at tinyurl.com/as4xsqb. These premium increases do not apply if a borrower refinances an existing FHA loan that was endorsed on or before May 31, 2009, into a new FHA loan under the streamline refinancing program.
FHA is not changing the one-time premium borrowers pay up front; it remains at 1.75 percent of the loan amount.
In a potentially bigger hit, FHA borrowers will have to continue paying annual mortgage insurance premiums for a longer period of time – in most cases for the life of the loan.
This change will apply to new loans with case numbers starting June 3. To avoid this change, borrowers should try to apply by May 24, Hebron says.
In the past, FHA automatically canceled mortgage insurance on most loans when a borrower, anytime after five years, had made enough payments to reduce the balance to 78 percent of the original loan amount.
A borrower taking out a 30-year loan with 10 percent down could usually eliminate mortgage insurance after about six years making normal payments, or after five years if they made extra principal payments, Hebron says.
(If the original loan term was 15 years or less, the five-year rule didn’t apply; FHA would cancel the insurance when the balance dropped to 78 percent.)
In the future, if the borrower starts off with a loan-to-value ratio above 90 percent, FHA will collect the premium for the life of the loan. If the original ratio is between 78 and 90 percent, FHA will cancel the premium if the balance drops below 78 percent of the original loan amount anytime after 11 years.
Program for school employees
The California Housing Finance Agency is planning to reinstate a program that provided down-payment assistance for teachers and other employees working in low-performing schools.
To help with a down payment, the program provided what’s known as a sleeping second mortgage of up to $15,000 in high-cost areas and $7,500 in the rest of the state. The second mortgage did not require payments until the borrower refinanced or paid off the first mortgage, or sold the home.
Borrowers had to be first-time home buyers, live in the house and meet income requirements. Interest on the second accrued at a rate that was reduced to zero over three years if the borrower remained employed at an eligible school.
The program was designed to recruit teachers and administrators to the worst schools, but participation was limited and it was later expanded to include more schools and other employees such as janitors and bus drivers.
When it was suspended in December 2008, borrowers had to work at a school in the bottom half of those ranked by Academic Performance Index (API ranking of 1 of through 5).
The program was originally funded with bond proceeds but was suspended after that money ran out.
When borrowers repay their loans, that money goes back into the fund and can be recycled into new loans. With interest rates plummeting, many borrowers have refinanced their loans, and that has provided enough money to reactivate the program within the next two months, says Kenneth Giebel, a spokesman for the agency.
By Maureen Farrell @CNNMoneyInvest February 4, 2013: 6:52 AM ET
Investors are betting big on the housing recovery.
Hedge funds and private equity firms have been rushing in to buy up companies and assets in every part of the housing supply chain, including undeveloped land, homebuilders, foreclosed homes, and building parts manufacturers.
One of the most notable moves is coming from hedge fund manager John Paulson, best known for his big (and lucrative) bets against subprime mortgages in 2006 and 2007.
Now, he’s turned his attention to snapping up undeveloped land in areas hardest hit by the housing crisis. “Land is the accordion in the home building equation,” said Michael Barr, who runs Paulson’s real estate investments. “It falls the most in a downturn, but also rises the most in an upturn.”
Over the past two years, Paulson & Co has bought up enough land in California, Arizona and Nevada to build up to 25,000 homes and is aggressively scouting for more, according to Barr.
Private equity firms are also getting in on the game.
Blackstone Group (BX) spent $2.7 billion last year to buy 17,000 single family homes, post-foreclosure, around the United States and plans to continue ramping up those efforts in 2013.
Pine River Capital Management took real estate investment trust Silver Bay Realty Trust (SBY) public in December. Silver Bay, which acquires, renovates, leases and manages single family homes, has already purchased more than 2,500 homes in areas hard hit by the housing crisis. In a recent SEC filing, Silver Bay said that it plans to purchase 3,100 more homes.
And in a sign of investors’ growing appetite for a piece of the housing market, shares of publicly traded homebuilders have been soaring. PulteGroup (PHM), KB Home (KBH), and Lennar (LEN) are all trading near 52-week highs. Pulte’s shares have more than doubled over the past year, while the KB Home and Lennar’s shares have nearly doubled.
And for the first time since 2004, homebuilders are testing the IPO waters.
Tri Pointe Homes (TPH), which builds single family homes in California and Colorado raised $232 million through an IPO last week. Shares of the company, owned by Starwood Capital, rallied 20% on their first day of trading.
Others are lining up.
Scottsdale, Ariz., homebuilder Taylor Morison has filed to go public and is expected to kick off its investor roadshow in the next few weeks. And building supply company Boise Cascade, jointly owned by PE firm Madison Dearborn and OfficeMax (OMX, Fortune 500), plans to make its public debut next week.
Investment bankers and IPO investors say they expect more homebuilders to go public this year. “As the sector rotates back into favor again, it makes sense for housing companies to monetize,” said Brad Miller, co-head of global equity syndicates at Deutsche Bank.
Brad Geisen, CEO of Foreclosure.com, which keeps a database of foreclosures around the nation, said he’s been seeing a lot of interest from investors looking to buy up large numbers of foreclosed properties over the past three months.
“A lot of investors see a short window of opportunity where there’s good inventory on the market at bottom market prices,” said Geisen. “No one knows how long it will last, so these investors are trying to buy as much as they can right now.”