Real Estate Information

Banker: Foreclosures, unemployment to peak in 2010

SAN DIEGO (AP) – Oct. 15, 2009 – Foreclosures will peak by the end of next year and unemployment will climb above 10 percent as the housing market and U.S. economy grapple with the aftermath of the recession, the Mortgage Bankers Association’s chief economist said Tuesday.

Jay Brinkmann’s forecast, released at the trade association’s annual convention and expo in San Diego, envisions a slowly growing economy and improving housing market, with home price declines abating and fixed mortgage interest rates remaining below 6 percent.

But the strength of any rebound will hinge on whether consumers – many still concerned about job security – will ramp up spending, the economist noted.

“The recession is behind us but the effects of the recession will linger for some time in the form of higher unemployment and lower levels of business investment and home construction,” Brinkmann said.

The economist forecasts economic activity will slow again in the first half of next year but pick up in the second half. That won’t be enough to slow unemployment, which is expected to peak at 10.2 percent by mid-2010 and not fall below 8 percent until late 2012.

At a panel session on Monday, Charles Haldeman Jr., CEO of mortgage giant Freddie Mac, noted that the speed at which businesses are rehiring is lagging. Unemployment is the main reason homes are now being lost to foreclosure, as borrowers struggle without income and lenders are left with fewer options for reworking troubled loans.

Haldeman stressed that lenders’ efforts to modify mortgages to help stave off foreclosure must continue, despite some signs this year that the housing market is stabilizing.

“I think it would be a real mistake for the industry to take some of the glimmers of hope that some might be pointing to in terms of housing prices and housing activity and reduce our efforts,” he said. “I think we ought to assume that there’s no improvement, that we don’t have enough certainty about what might happen.”

Many lenders have issued a moratorium on foreclosures, causing a drop in the number of discounted, bank-owned properties hitting the market this year. But some economists expect that a wave of foreclosed properties could hit the market in 2010, dampening home prices again.

Those delayed bank-owned properties aside, rising unemployment will lead to a growing number of foreclosures at least through the end of next year, Brinkmann said.

Foreclosures have helped power sales in many ravaged markets, particularly in the West and Florida.

“We still see a concentration in the lower end of the market,” Brinkmann said. “The entry level homes are in demand.”

Brinkmann forecasts home resales will increase by about 11 percent over 2009 levels. He sees sales of new homes, which bottomed out in the first quarter of this year, climbing about 21 percent.

The forecast calls for median home prices for existing homes to decline in the next two quarters, reaching $164,200 in the first quarter of next year.

David Stevens, commissioner of the Federal Housing Administration, echoed that outlook while speaking on a panel of government executives on Monday.

“We’re forecasting about another 10 percent, roughly, price decline between now and the first quarter next year,” he said.

Mortgage rates, meanwhile, will average about 5 percent through the end of this year, then rise to 5.6 percent by the end of 2010. That should help fuel a 12 percent increase in home mortgages next year, but home refinancing will decline as mortgage rates edge higher, he said.

“We’re assuming, in a sense, weak or little inflation here,” Brinkmann said.

Mortgage plan gaining steam

WASHINGTON – Oct. 9, 2009 – The Obama administration touted progress on its foreclosure-prevention program Thursday after hitting an interim target of signing up 500,000 borrowers three weeks ahead of schedule. But in a report to be released Friday, a congressionally appointed oversight panel questioned whether reaching that goal would be enough to slow down the foreclosure crisis.

The program, known as Making Home Affordable, got off to a bumpy start when it was launched in March with homeowners and consumer advocates complaining about the difficulty of reaching lenders, long telephone wait times and documents that were repeatedly lost. But senior administration officials said Thursday that the program is now gaining momentum.

Under the $75 billion government program, lenders are paid to lower borrowers’ mortgage payments; the administration has said the program was aimed at helping up to 4 million borrowers before expiring in 2012. It is part of a larger government effort to revive the housing market that senior administration officials said has also kept mortgage rates low and prompted millions of borrowers to refinance their loans.

“The broad signs that you see in the housing market … are encouraging,” said Treasury Secretary Timothy F. Geithner. It is still early, and “we’re still living with some risks that housing is going to be a source of weakness for the broader economy and that you still face a … large number of families across the country still at risk of losing a home they can afford to stay in.”

The industry trumpeted its progress so far. Wells Fargo nearly doubled the number of modifications it started last month to 62,989, or about 20 percent of its delinquent borrowers eligible for the program, according to government data released Thursday. Bank of America helped about 95,000, or 11 percent of its eligible borrowers, and company officials said the bank is on track to help 125,000 by November.

“We feel really good about the momentum,” said Steve Bailey, Bank of America’s home retention strategies and policy executive.

Despite the recent progress, economists expect millions of borrowers to lose their homes over the next few years. The government program has likely reduced the number of foreclosures by about 7 percent to 8 percent during the past six months, said Paul Dales, U.S. economist for Capital Economics. But some of the borrowers helped by the program may have been able to avoid foreclosure on their own while others may still default on their loans later, said Dales.

“What it won’t do is stop foreclosures from rising,” Dales said. “It will just rise by less.”

A draft report by the Congressional Oversight Panel, which is monitoring the government’s Troubled Assets Relief Program, noted that the foreclosure effort is not set up to tackle two of the most pressing causes of mortgage delinquencies: rising unemployment and risky home loans known as option adjustable-rate mortgages, which reset to significantly higher payments. Over the next few years, millions of those loans are scheduled to shift to potentially higher interest rates, creating the prospect of a new wave of foreclosures.

“It increasingly appears that [the government program] is targeted at the housing crisis as it existed six months ago, rather than as it exists now,” the report said. Acknowledging the Treasury’s near-term goal of reaching 500,000 borrowers, the report said, “The achievement is relatively small in relation to the magnitude of the foreclosure crisis.”

The modifications started so far have lowered borrowers’ median interest rates to about 2 percent from 6.85 percent, according to the report, and reduced their payments by $500, to $849.31.

In a statement, Treasury spokeswoman Meg Reilly said “constructive feedback” from the panel is welcome and noted that the administration is already studying more ways to help unemployed homeowners. “The housing crisis was never going to be fixed overnight. Instead, it requires a comprehensive strategy focused on providing sustained support for American homeowners,” she said. “We believe that the Making Home Affordable program is an important part of that strategy.”

Not all parts of the government program are operational. After announcing in April that borrowers with a second mortgage could see payments on those loans reduced significantly as part of the program, the administration has yet to sign contracts with lenders to implement it. Homeowners and consumer groups continue to complain that qualified borrowers are being rejected by lenders and that there isn’t a clear appeals process.

The government program “had many obstacles, problems, and operational and technological challenges getting started and . . . is just now gaining momentum,” Richard H. Neiman, superintendent of banks for the New York State Banking Department, said in a statement included in the report.

It is also unclear how many borrowers will make enough payments to survive the trial period of a modification, the first three months, or might redefault on their loans later. The conversion rate to permanent modifications has been low so far, according to the report, and the Treasury has not released data on how many redefaults it expects.

“Redefaults mean that foreclosures have been delayed, rather than prevented,” the report said.

Florida’s existing home, condo sales up in August 2009

ORLANDO, Fla. – Sept. 24, 2009 – Florida’s existing home sales rose in August – marking a full calendar year (12 months) that sales activity increased in the year-to-year comparison, according to the latest housing data released by Florida Realtors®.

Existing home sales rose 28 percent last month with a total of 13,850 homes sold statewide compared to 10,813 homes sold in August 2008, according to Florida Realtors. The state association also reported a 45 percent increase in last month’s statewide sales of existing condos compared to the previous year’s sales figure.

Sixteen of Florida’s metropolitan statistical areas (MSAs) reported increased existing home sales in August; 18 MSAs also showed gains in condo sales. A majority of the state’s MSAs have reported increased sales for 14 consecutive months.

“For a year now, statewide sales of existing single-family homes in Florida have increased each month compared to the year-ago figures,” says 2009 Florida Realtors® President Cynthia Shelton, CCIM, CRE, a broker and director of investment sales with Colliers Arnold in Orlando. (CCIM stands for Certified Commercial Investment Member and CRE is the Counselor of Real Estate designation). “This is encouraging news, and while it shows the beginnings of recovery, the housing market still needs time to continue its gradual absorption of housing inventory that will help stabilize home prices. That is why it is critical for Congress to extend the first-time homebuyer tax credit into 2010. And, because it’s now taking longer to finalize a home sale, first-time buyers who want to take advantage of the $8,000 federal tax credit need to act quickly, or they may miss the closing deadline of Nov. 30, 2009.”

Florida’s median sales price for existing homes last month was $147,400; a year ago, it was $188,500 for a 22 percent decrease. Housing industry analysts with the National Association of Realtors® (NAR) note that sales of foreclosures and other distressed properties continue to downwardly distort 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 July 2009 was $178,300, down 14.6 percent from a year earlier, according to NAR. In Massachusetts, the statewide median resales price was $310,000 in July; in California, it was $285,480; in Maryland, it was $273,769; and in New York, it was $205,000.

Signs point toward continued positive momentum in the housing sector, according to NAR’s latest industry outlook. NAR Chief Economist Lawrence Yun predicts existing home sales will rise through the fourth quarter. “Unless the tax credit is extended, no one should be surprised to see home sales drop in the first quarter of next year,” he said. “However, the fundamentals of the housing market and the economy are trending up, and we expect home sales to generally pick up in the second quarter of 2010. The buyer psychology may be shifting from, ‘Why buy now when I can purchase later,’ to ‘I don’t want to miss out on a recovery.’”

In Florida’s year-to-year comparison for condos, 4,674 units sold statewide compared to 3,222 units in August 2008 for a 45 percent increase. The statewide existing condo median sales price last month was $107,500; in August 2008 it was $158,100 for a 32 percent decrease. The national median existing condo price was $178,800 in July 2009, according to NAR.

Interest rates for a 30-year fixed-rate mortgage averaged 5.19 percent last month, down significantly from the average rate of 6.48 percent in August 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 larger markets, the Daytona Beach MSA reported a total of 686 homes sold in August compared to 573 homes a year earlier for a 20 percent increase. The market’s existing home median sales price last month was $132,700; a year ago it was $164,200 for a 19 percent decrease. A total of 135 condos sold in the MSA in August, up 27 percent over the 106 units sold in August 2008. The existing condo median price last month remained level compared to a year ago at $184,300.

© 2009 Florida Realtors®

Report: 1 in 3 loan applications denied

WASHINGTON – Oct. 1, 2009 – Nearly one in three borrowers who applied for a mortgage last year was denied as lenders kept their standards tight as the mortgage crisis accelerated, the government reported Wednesday.

In its annual look at mortgage practices among lending institutions, Federal Reserve said the denial rate for all home loans was about 32 percent last year – about the same as in 2007, but up from 29 percent in 2006. The denial rates for blacks and Hispanics were more than twice as high as the rate for white borrowers.

The report highlights massive changes in the lending industry after the housing market bust. Overall loan applications were down by a third from a year earlier, and were half the level in 2006.

Loans backed by the Federal Housing Administration soared to 21 percent of all loans made last year from less than 5 percent in both 2005 and 2006.

For black borrowers, more than half of all loans were FHA-insured, more than triple a year earlier. For Hispanics, that number shot up to 45 percent, more than four times as high as in 2007. That was troubling news for consumer advocates.

“I’m hard-pressed to believe that many of those borrowers couldn’t have been served by the private sector,” said John Taylor, chief executive of the National Community Reinvestment Coalition, a consumer group in Washington. “It implies that the industry has shut down in serving this population.”

High-priced loans with rates at least 3 percentage points above the rate for prime loans shrunk to nearly 12 percent of the market from a high of 29 percent in 2006. But that figure mainly reflects unusually low interest rates during the recession, the report said, and understates the disappearance from the market of high-priced subprime loans made to borrowers with poor credit.

Last year, about 17 percent of blacks and 15 percent of Hispanics got high-priced loans, compared with about 7 percent of whites. Even controlling for factors that might widen that discrepancy, there is still a gap of almost 8 percentage points between the number of blacks and whites who got high-cost loans.

The mortgage industry says lenders are not discriminating by race, and are making adjustments based on borrowers’ risk profile – such as their credit score and the size of their down payments.

“You still have a certain degree of risk-based pricing in the market,” said Jay Brinkmann, the Mortgage Bankers Association’s chief economist.

Lenders also scaled back dramatically on the amount of so-called “piggyback” mortgages, in which borrowers used second mortgages to avoid making a 20 percent down payment. Those loans have virtually disappeared from the market: Only 98,000 were made last year, down from 1.3 million annually in 2006.

Tampa Florida Real Estate Market Trends

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GO TO THE GARDEN!

The human mind is like a garden. It directly reflects the care and attention given to it. Consider two gardens side-by-side, in the same soil.

The first is bursting with color, gives off the most delicate of fragrances, is free of weeds, and forest green. New buds continually replace each other, and it's a delightful place to spend a sunny day.

Just a few feet away, you encounter a musty patch of stunted leaves, few blooms, parched soil, and insect infestation. The few plants remaining beg for a kind word and attention of any kind. They look sad from their days of inattention.

Why is there such a disparity between the two gardens? The first has a gardener, while the second has been totally ignored. And just as an untended garden will fail to prosper, so will an untended mind.

Imagine how easy it is for the mind to wither and atrophy when attention is not paid to its simplest needs. The mind can be so creative, unless it is fed passive TV drivel hour after hour. The mind can be so enthusiastic, unless powered by a body nourished by fast food, chips, sugar-filled cereal, and caffeine-packed soft drinks.

Just as a vibrant garden inspires, a well-tended mind can bring forth the best in others. It deserves our attention. It should be watered and fertilized with foods filled with the proper nutrients. It can be expanded greatly through the stimulation of education. It can remain viable only through the practice and application of solid principles.

When the care given is incongruous with the results desired, the garden is a disaster. When the mind's actions do not match its stated objectives, chaos is the result. Our minds have the potential to bloom more abundantly than any garden. They deserve our utmost attention.

With three months until the $8,000 first-time homebuyer tax credit is set to expire, many real estate markets are starting to heat up again as buyers rush to close their deals before the deadline. The credit, created earlier this year as part of the economic recovery stimulus package, has had a visible impact on the housing markets, and many are wondering what will happen when the credit disappears on December 1, 2009.

By the time the program ends, according to estimates from the National Association of Realtors, roughly 1.8 million homebuyers will apply for the tax credit, and 350,000 of those would not have been able to afford to buy without the help. The pressure to file before the deadline has also likely helped boost recent sales increases of new and existing homes, an important economic indicator of the market bottom and revival.

How Does It Work?

Anyone who has not owned a primary home in the past three years can qualify for this credit, as long as they fit within the income requirements. For single taxpayers, the income limit is $75,000 and married couples can earn up to $150,000 together. For homes purchased between the set period of January 1, 2009 and December 1, 2009, this tax credit is the greater of 10 percent of the home's price or $8,000, and unlike previous credit it does not need to be repaid.

What Will Happen When It Expires?

Congressman Johnny Isakson, R-GA., has been working to extend the tax credit into next year as well as make it more accessible by allowing all homebuyers to participate, regardless of income or current ownership, and by increasing the credit amount to $15,000. His plan is certainly very popular with many inside the housing sector. In a recent interview with U.S. News & World Report, Jerry Howard, President and CEO of the National Association of Home Builders, said he was worried about digression in the markets when the credit ends.

"It is the first-time homebuyer market that represents any positive signs in the industry, and if this credit expires at the end of November," Howard said, "we're really concerned about what that will mean to the market going forward."

He believes Isakson's extension plan would finally allow the market to bottom out, creating price stability and decreasing the number of foreclosures. He also thinks an expanded tax credit would help move inventory at the middle and top levels of the market, not just the starter and fixer-upper homes, leading to a need for more home building.

Home Sales Pace

July was another great month for existing U.S. home sales. For the fourth month in a row sales rose, climbing 7.2 percent to 5.24 million units, up from 4.89 million in June. Sales were even up on a yearly basis, rising 5.0 percent from the 4.99 million homes sold in July 2008.