To All The Wonderful Mothers…Happy Mothers Day From Zackry Cooper & Team Empowerment

 

 

“He who enjoys good health is rich, though he knows it not” – by Italian Proverb

NEWS & HEADLINES

Rates are improving, and agency MBS prices yesterday improved by .375-.50. Fannie & Freddie 4’s closed yesterday about 100.375. By and large, these securities are filled with 4.25-4.625% 30-yr mortgages. Let’s be conservative and add a point (1.0) for the value of servicing, and suddenly “the market” is paying nearly 101.50 (1.50 rebate) for a 4.50% 30-yr agency mortgage. Below that there will be some buy-downs, and above it will be some buy-ups, and it depends on rate lock period, but that’s about the pricing. This leads into…

Rates are about the best they’ve been all year. Remember all those sparkly clean 5% or even 5.50% 30-yr agency loans that the originators were producing in the last 6 months? Many of them may be coming back as refi’s. But keep in mind that loan-level price adjustments (LLPA’s) have changed, as has the FHA MIP’s, so recent prepayment speeds have been in transition over the past few months due to those, and due to servicers prioritizing loan processing for one agency over the other. And if you think components such as LLPA’s, MIP’s, and increased documentation impact the borrower’s ability to refinance, just wait and see what comes out of the QRM public comment period.

Mortgage security traders hardly know which way to turn, and I read several divergent ideas about what is going on and where investors should place their bets – any of which can be confusing to anyone not well versed in MBS lingo. But this is more relevant for originators: “Freddie Mac reported that 30-year fixed mortgage rates averaged 4.71% this week which matches the lowest level seen this year. Refi activity is likely to have increased this week as more of the 5% coupon enters into the refi window; however, a significant pickup is not expected unless mortgage rates rally to 4.50%, said a Credit Suisse report.”

Yesterday I mentioned the latest from Freddie Mac about not requesting government funds given the quarterly results. I received a helpful note: “Thanks for earnings update. One small correction, which is that this is actually the fourth time since the government took Freddie over that it reported quarterly earnings and did not ask for a Treasury draw (not the first as you reported). Freddie’s earnings are up, delinquencies down, and even its REO inventory dropped 10% in the last quarter – good things.”

Last month the government reported that the economy added 216,000 jobs in March, and the unemployment rate dipped to 8.8%. But although the number of unemployed has declined by 1 million since November, hourly earnings growth remains anemic, having been flat in four of the past five months, and don’t expect high gas prices to help the retail and leisure/hospitality industries and therefore job counts.

As mentioned above, Treasuries and MBS’s rallied yesterday. The 10-year note closed better by nearly .5 at a yield of 3.17%. Some of the commodities are coming off of their high levels, so perhaps we’ll see some better prices at the gas pump which would tend to help the consumer’s outlook. The expectations were for this morning’s numbers to show that job growth slowed in April (+185k) and that the unemployment rate was unchanged (8.8%). But nonfarm payrolls came out at +244,000, and the Unemployment Rate was 9.0% for April. The 10-yr shot up to 3.21% and MBS prices are worse by roughly .250.

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THE IMPACT OF DISTRESSED PROPERTIES ON NEIGHBORING VALUES

The banks are finally getting their foreclosure paperwork in order. They will start bringing larger numbers of distressed properties to market over the next six months. We must realize that this influx of discounted inventory will have an impact on the values of neighboring homes. How large an impact?

According to RealtyTrac a foreclosure sells for 59% of the value of a similar non-distressed property. Therefore, this foreclosure inventory will affect values in two ways:

1.) As Discounted Competition

Obviously, a segment of purchasers will prefer the discounted property based on price alone. Even if the distressed property is in need of substantial repair, the buyer is getting the property at a 41% discount. Price is determined by supply and demand. Distressed properties will eat up a portion of the demand for housing and that will put downward pressure on all values.

2.) As Comparable Sales on Your Appraisal

Even after you put your house into contract, this distressed inventory can still impact your transaction. Unless your purchaser is paying all cash, there will be an appraisal of your property by the bank who is giving the mortgage to your buyer to complete the purchase. Because of the volume of distressed properties selling in almost every market, banks are instructing appraisers to use these discounted sales in determining values of non-distressed sales. We can argue the logic of this some other time. At this point, we must simply be aware that this is taking place.

Bottom Line

Over the next several months, banks will be moving substantial numbers of foreclosures onto the market. This will impact values of other homes in the region. If you are considering selling, now might be the best time. You want to be sold and closed before these properties come to market and impact your price.

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‘HOME RESCUE FAIR’ TRIES TO CURB FORECLOSURES

With foreclosures up nearly 42 percent last month, the city of Las Vegas is hosting a Home Rescue Fair to help teach home owners how they can save their homes.

At the event, home owners facing foreclosure or financial hardship will be able to have face-to-face sessions with loan specialists, housing counselors, and attorneys and attend workshops to learn how they can keep their home. Several local services – such as in education, job placement, and public benefits – will also be available at the Home Rescue Fair, which runs May 20-21.

Las Vegas’ real estate market continues to be one of the most plagued in the country by a high number of distressed sales, which is bringing its housing prices down. Home prices in the Las Vegas metro dropped to $117,000 in March, which is the lowest level since January 1996. Distressed sales accounted for 69 percent of all market transactions in March, according to DataQuick.

The foreclosure problem doesn’t seem to be easing either. Lenders foreclosed on 3,331 single-family homes and condos in March, which is up 41.6 percent from February, according to DataQuick.

However, high inventories are slowly being chipped away. Nearly 5,000 homes sold in the Las Vegas-Paradise metro area in March, the highest volume in five years, DataQuick reports. Sales increased 27.3 percent compared to one month prior, with demand mostly coming from investors and cash buyers who were snatching up bargain-priced distressed properties.

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DO YOU NEED A BUYER’S AGENT?

After years of trepidation, home buyers are finally beginning to wade back into the housing market. But as they do, many are making the surprising choice to hunt alone, rejecting the assistance of what’s known in real estate as a buyer’s agent.

For years, house-hunters have had the option to work with a real estate agent who shows them properties and may ultimately negotiate the price – a counterbalance to the agent who almost invariably represents the seller. But now fewer buyers are taking it. Of the buyers who purchased a property through a real estate agent, just 57% had buyer representation, according to a 2010 report by the National Association of Realtors. That’s down from 62% in 2009 and 64% in 2006, before the housing bust. Also, fewer buyers are first learning about the home they purchase from real estate agents: just 37% are reporting real estate agents as their first source of information on the home they purchased, down from 50% a decade ago, according to NAR.

Many experts think this is a bad move – worse, for example, than trying to sell a house without an agent. For one thing, in most cases, a buyer doesn’t pay an agent; the buyer’s agent splits the commission with the seller’s agent, so the services are essentially free to the buyer. Also, a buyer’s agent can usually access historical price data for home sales in the area, which means he can recommend a bidding strategy that targets comparable properties that sold for less, rather than the mid-range. John Vogel, adjunct professor of real estate at the Tuck School of Business at Dartmouth College, calls going through this process alone “a mistake.”

There are lots of reasons buyers may choose to represent themselves. The real estate listings and detailed information that was once only available to real estate agents – like median sales prices in a neighborhood, the amount of days a home has been on the market, and how many price cuts it has endured – are now online. And because most buyers’ agents don’t get paid until a home is purchased, they have a strong incentive to see you buy something quickly, Vogel says: They may not tell a client to wait for prices to fall further.

On the other hand, some house-hunters may think they are working with a buyer’s agent, when in reality, they’re actually dealing with a seller’s agent. Many buyers contact the agent listed with the property or walk into an open house thinking the agent is working in their favor, says Paul Howard, a buyer’s-only broker licensed in New Jersey and Pennsylvania. Or some buyers may start working with an agent who has their interest at hand, but the house they want to buy is listed with the real estate company the agent works for; at that point, buyers should have the option to find an agent not tied to the property. Some seller’s agents may also discourage prospective buyers at the beginning of their search from seeking out a buyer’s agent. Commissions are already lower due to declining home values, and some would prefer not to split it, says Ginger Wilcox, head of training for buyers’ and sellers’ agents at Trulia.com. “Agents are fighting for their commissions.”

Still, in many cases buyers may be at an advantage when they work with a buyer’s agent – at least compared to relying on a seller’s agent for advice or guidance. A seller’s agent is contractually obligated to help make the sale happen in the seller’s favor, often as close to the asking price as possible. Buyers’ agents can also suggest home inspectors and financing companies they’ve worked with before, says David Kent, president of the National Buyer’s Agent Association; they’re not supposed to make money off the referrals.

When searching for a buyer’s agent, experts recommend putting a few through their paces first. The most helpful agents won’t just rely on what’s listed online, says Vogel. Instead, they might drive around a neighborhood looking for signs of properties that are for sale by owners or mail letters to existing homeowners alerting them to a buyer who’s interested in a similar property to theirs. And by the time a buyer enters into a contract, his agent should be there to look for red flags.

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5 WAYS TO KEEP YOUR CLIENT DATA SECURE

You can’t run your business without collecting personal and financial information about your clients. Yet, if sensitive data falls into the wrong hands, it can lead to fraud and identity theft.

Given the cost of a security breach – losing your customers’ trust and perhaps even defending yourself against a lawsuit – safeguarding personal information is just plain good business.

1. Take stock of what you have.

Know what personal information you have in your files and on your computers. Understanding how personal information moves into and out of your business and who has access to it is essential to assessing security vulnerabilities.

2. Secure your Web applications.

Pay particular attention to the applications on your Web site through which you collect information and consumers request information. These can be vulnerable to a form of hacking known as injection attacks, in which a hacker inserts malicious commands into your online form. Once the commands are in your system, the hacker can grab your data.

3. Secure your points of connection.

It’s one thing to secure your computer system; it’s another to secure the devices and applications that connect to it. These include laptops, cell phones, and your Web site. If your laptop has been compromised, it can open a door into your system.

The same thing applies to vendors who provide data processing or other services on a contract basis. If their computer is compromised, they can infect yours when they access your system. You’ll also want to limit storage of your sensitive information to only computers that don’t connect to the Internet.

4. Don’t trust just anyone.

Your security measures are only as thorough as the people who work with you. Assistants and team members must agree to uphold the confidentiality of your sensitive information and participate in training on keeping your data secure. If there’s ever any doubt, withhold their access to sensitive data.

5. Think about physical security too.

Many data compromises happen the old-fashioned way – through lost or stolen paper documents. Often, the best defense is a locked door or an alert employee. Store paper documents, sensitive files, and backups in a locked room or file cabinet.

“I do not think there is any other quality so essential to success of any kind as the quality of perseverance. It overcomes almost everything, even nature. “ – John D. Rockefeller

NEWS & HEADLINES

Freddie Mac’s employees may want a margarita tonight after reporting a $676 million quarterly profit, and indicated it would not seek additional funds from the US Treasury this quarter for the first time since it was taken over by the government nearly three years ago. But Freddie said that over the long term it was unlikely to earn more than the dividends owed to the Treasury on preferred stock issued as part of its bail-out and therefore expected to request additional funds in future periods. The CEO said, “Continued improvements on the employment front and in early-stage delinquencies were positive signs during the quarter, but we believe large inventories of unsold homes and a high number of distressed sales will continue to put downward pressure on home prices in many neighborhoods.”

Importantly for the industry, Freddie Mac also said that its requests to banks to repurchase faulty loans declined to $3.4 billion at the end of the first quarter, compared with $3.8bn at the end of the fourth quarter of 2010. More than 40% of loans owned by Freddie Mac were originated after 2009 and those loans have far higher equity and lower delinquency rates than those issued in 2006 and 2007.

A segment of the population looks forward to the Special Swimsuit Edition of Sports Illustrated, or Time Magazine’s Man of the Year Edition. Somehow, I don’t think that the FDIC’s answer will garner quite the attention, but it is useful to servicers nonetheless. “Supervisory Insights Special Foreclosure Edition” can be found at FDIC.

This is not good news, but it is not unexpected, for anyone following shadow inventory numbers. The report shows the FHA REO inventory was at 68,801 at the end of February, up 54.2% from February 2010! HUDREO

Yesterday the MBA reported what lock desks everywhere already knew, and that was that residential mortgage applications increased 4% from one week earlier. Refinancing apps picked up 6% and purchases were up .3%. With these lower rates refi’s are accounting for nearly 63% of apps, and ARM share is up to 6.7%.

And yesterday rates continued to drop, with the ADP private payroll employment numbers yesterday coming in weaker than expected (179k versus 200k) and the ISM Service coming in at their weakest levels since last August (“slumped” is the word one report used). The US continues to need to finance its deficit, which includes selling $72 billion next week ($32 billion 3-yr on the 10th, $24 billion in 10-yr’s on the 11th, and $16 billion in 30-yr’s on the 12th).

How about these rates this morning? The yield on the 10-yr this is below 3.20%, down to 3.17%. Jobless Claims this morning came out up 43,000 to 474,000 claims last week. Productivity numbers also showed an increase, which is helpful, but stocks and bonds are reacting to the Jobless Claims increase. Agency MBS prices are better by between .125-.250.

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THE 4 C’S OF MORTGAGE UNDERWRITING

With Spring upon us, and new buyers out looking for houses, I thought today might be a good time to review the basics of what lenders look for as they decide to approve (or deny) mortgage applications. For at least 25 years, I have heard them called – The 4 C’s of Underwriting – Capacity, Credit, Cash, and Collateral. Guidelines and risk tolerances change, but the core criteria do not.

CAPACITY

CAPACITY is the analysis of comparing a borrower’s income to their proposed debt. It considers the borrower’s ability to repay the mortgage. Lenders look at two calculations (we call ratios). The first is your Housing Ratio. It simply is the percentage of your proposed total mortgage payment (principal & interest, real estate taxes, homeowner’s insurance and, if applicable, flood insurance and mortgage insurance – like PMI or the FHA MIP) divided by your monthly, pre-tax income. A solid Housing Ratio (often called the front end ratio) would be 28% or less; although, many times loans are approved at a significantly higher number. That’s because your front end ratio is looked at in conjunction with your back end ratio. The back end ratio (referred to as your Debt Ratio) starts with that mortgage payment calculation from the Housing Ratio and adds to it your recurring debts that would show up on your credit report (auto loans, student loans, minimum credit card payments, etc.) without taking into consideration some other debts (phone bills, utility bills, cable TV). A good back ratio would be 40% or less. However, many loans are granted with higher debt ratios. Understand that every application is different. Income can be impacted by overtime, night differential, bonuses, job history, unreimbursed expenses, commission, as well as other factors. Similarly, how your debts are considered can vary. Consult an experienced loan officer to determine how the underwriter will calculate your numbers.

CREDIT

CREDIT is the statistical prediction of a borrower’s future payment likelihood. By reviewing the past factors (payment history, total debt compared to total available debt, the types of monies: revolving credit vs. installment debt outstanding) a credit score is assigned each borrower which reflects the anticipated repayment. The higher your score, the lower the risk to the lender which usually results in better loan terms for the borrower. Scores below 620 are difficult (though not impossible); scores from 620-660 are mediocre; those from 660-720 are considered good; and above 720 are very good. Your loan officer will look to run your credit early on to see what challenges may (or may not) present themselves.

CASH

CASH is a review of your asset picture after you close. There are really two components – cash in the deal and cash in reserves. Simply put, the bigger your down payment (the more of your own money at risk) the stronger the loan application. At the same time, the more money you have in reserve after closing the less likely you are to default. Two borrowers with the same profile as far as income ratios and credit scores have different risk levels if one has $50,000 in the bank after closing and the other has $50. There is logic here. The source of your assets will be examined. Is it savings? Was it a gift? Was it a one-time settlement/lottery victory/bonus? Discuss how much money you have and its origins with your loan officer.

COLLATERAL

COLLATERAL refers to the appraisal of your home. It considers many factors – sales of comparable homes, location of the home, size of the home, condition of the home, cost to rebuild the home, and even rental income options. Understand the lender does not want to foreclose (they aren’t in the real estate business), but they do need to have something to secure the loan against, in case of default. In today’s market, appraisers tend to be conservative in their evaluations. Appraisals are really the only one of the 4 C’s that can’t be determined ahead of time in most cases.

Now, each of the 4 C’s are important, but it’s really the combination of them that is key. Strong income ratios and a large down payment with strong reserves can offset some credit issues. Similarly, long and strong credit histories help higher ratios…and good credit and income can overcome lesser down payments. Talk openly and freely with your loan officer. They are on your side, advocating for you and looking to structure your file as favorably as possible.

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REO INVENTORY REACHES ALL-TIME HIGH

The national inventory of REO properties rose in March to a record high of 2.2 million. Foreclosure starts also increased by 33 percent month-over-month, according to the March Mortgage Monitor report by Lending Processing Services Inc.

However, it’s not all doom and gloom for the housing market. The report revealed a significant increase in foreclosure sales, which is helping to chip away at the swelling inventories that are battering many markets.

Also, delinquencies continue to decline, which is a sign of fewer foreclosures brewing in the pipeline. Delinquencies fell more than 11 percent in March from February – the lowest level since 2008 and a nearly 20 percent year-over-year decline, according to Lender Processing Services Inc. The total U.S. loan delinquency rate, which is for loans 30 or more days past due (but not in foreclosure), is 7.78 percent.

States with the highest percentage of loans where home owners have fallen behind are Florida, Nevada, Mississippi, New Jersey, and Georgia.

On the other hand, states that boast the lowest percentage of delinquent loans are Montana, Wyoming, Alaska, South Dakota, and North Dakota.

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GALLUP POLL:AMERICANS SAY BUY NOW

With dropping home values in many markets mixed with interest rates at historical lows, homes are more affordable now than they’ve been in the last 35 years, reports Zillow.com.

The average buyer nowadays can expect to spend about 17 percent of her monthly gross income on a mortgage, which compares to a 25 percent average since 1975, Zillow reports.

With affordability high, Americans seem to be getting the message about the value of home ownership. Nearly 70 percent of Americans say now is a good time to buy a home, according to a recent Gallup poll.

Men are about 16 percent more likely to say now is a good time to buy a home than women. And Americans living in the West are most favorable toward buying (75 percent), which compares to 64 percent of Americans who live in the South who say now is a good time to buy.

Americans with higher incomes also expressed more of an interest in home ownership, according to the Gallup poll. Americans who make $75,000 or more a year are 18 percent more likely to say that 2011 is a good time to buy a home than those making $30,000-$75,000.

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 HOW TO REACH A CAMOUFLAGE BUYER

More buyers today are trying to camouflage themselves and downplay their interest in real estate, often telling agents they’re “just looking,” observes Scott DiGregorio, sales manager at Primary Residential Mortgage in Fort Myers.

“The buyers have changed, the times have changed and the market has changed, yet real estate agents are taught to do things the way they did 35 years ago. It’s insane,” DiGregorio says.

The key today is to use your marketing to educate customers, not sell them. DiGregorio features reports on his Web site to download, hosts webinars, and uses drip campaigns to periodically send e-mail reports that he says addresses buyers’ main fears when it comes to buying a home.

“Do not try to sell in these e-mails,” says DiGregorio. “Do not try to close in these e-mails. Make sure you’re doing nothing but educating.”

Drip e-mail campaigns, social media, and other marketing strategies all can help agents build trust with customers, DiGregorio says.

But in building trust and educating the buyer about home ownership, DiGregorio says that may sometimes require agents to walkaway from prospects.

“I firmly believe some people shouldn’t buy a house right now,” DiGregorio says. “We have to be OK with that and we have to help people make that decision.”

“You are much grander than you think you are.” — Asara Lovejoy: Human potential author and coach

 

IS SHORT SALE OR FORECLOSURE MY BEST OPTION?

We get asked this question quite often. In a rapidly changing market, it is difficult to give absolute answers. Much depends on your family’s personal situation. However, if you realize that you can no longer make the payments, you may have to decide between doing a short sale or letting the home go to foreclosure. Here are three things you may wish to consider:

1.) Impact on Your Future Ability to Get a Mortgage

There are many different lending institutions, each with their own requirements when it comes to your ability to obtain a mortgage in the future. However, a common trend is to be much more lenient with someone working through a short sale rather than letting the house go to foreclosure. As an example, the Fannie Mae site, Know Your Options explains you:

May be able to get a Fannie Mae mortgage to purchase a home sooner (in as little as 2 years) than if you went through foreclosure (at least 7 years)

You can get further information here. However, in a rapidly changing environment, make sure you get the latest information available from the actual lending institutions mentioned.

2.) Impact on Your Credit Score

There has been much dialogue on this issue. The question is whether or not a foreclosure will have a more severe impact on your credit score than a short sale. A recent FICO study sheds needed light on this question. Here is a chart from that report.

The first chart shows the impact on the score for each stage of delinquency, and the second shows how long it takes the score to fully “recover” after the fact.

We can see that there is very little difference in impact on your credit score whether you choose a short sale or a foreclosure.

3.) Impact on Your Family during the Move

Usually a family asking this question is already experiencing major financial difficulties. This may be putting immense pressure on both parents and the children. If you allow your home to go to foreclosure, you move and leave it vacant or you stay waiting for an official to knock on your door demanding you move. That added burden can cause even more stress for a family.

In the short sale process, you work with the bank and pre-determine the day you will move. The new purchasers usually move in the same day. Your family moves with a plan and you don’t leave the neighborhood with a vacant house to deal with. There is a level of dignity in this type of move that does not always take place in a foreclosure situation.

Bottom Line

For several reasons, a short sale may be the better option for your family. It is best to get professional advice if faced with this decision.

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 4 KEYS TO SELLING IN TODAY’S MARKET

Home sales and prices are still dropping around the country as huge inventories of foreclosures and short sales continue to weigh on many markets. So how can traditional sellers stand out in a crowded real estate marketplace? CNNMoney.com recently highlighted several keys to getting a home sold in a tough real estate market.

1. Cut your price by a lot. Buyers nowadays want to feel they are getting a “steal,” real estate experts say. But some sellers may be tempted to list a property above fair market value just to test out the market and see if they can get a taker. In the past year, about 25 percent of sellers who initially listed their homes too high ended up having to reduce the price, according to Trulia.com.

“The first 30 days on the market are the most important,” says Elizabeth Kamar, a real estate professional in Norwalk, Conn. That crucial time is when the home gets the most attention and showings. For sellers who aren’t realistic about the price from the get-go, they often end up with less than they would have if they priced it right initially, Kamar says.

Experts also note that if after 30 days on the market there are still no buyers, sellers may need to make a big move.

“When a property sits, people start thinking it must be listed too high,” says Ellen Klein, a real estate professional in Rockaway, N.J. She suggests making a giant price cut–as much as 10 percent of the asking price–which may be extra motivation for buyers to take a second look or attract a new pool of potential buyers seeking a lower price range.

2. Play hardball in negotiations. Sellers shouldn’t feel they have to accept any lowball offer that comes their way. However, if a buyer is willing to negotiate, that’s when sellers need to try to set aside feelings of anger or insult and start to counteroffer, says Mabel Guzman, president of the Chicago Association of REALTORS®. Guzman says the ideal is that you’ll be able to negotiate within $10,000 to $20,000 of an acceptable offer. Using incentives–such as agreeing to leave the appliances–may get buyers to budge in agreeing to a higher price.

3. Stage it. Staging is becoming popular in trying to sell mid-range homes. Professional stagers will help home owners highlight key areas of a home and often rearranges furniture or bring new furniture in, repaint, and get the home looking like it’s ripped from a catalog. Real estate brokers say that proper staging can actually speed up a sale and increase the final sales price too.

4. Get the home in front of as many buyers as possible. The real estate professional needs to get creative in the marketing to make sure the home gets a lot of attention from buyers. “The more eyeballs that get on the listing, the better,” says Katie Curnutte of the real estate information web site Zillow.com.

One key: Boosting the home’s online presence. Having 20 instead of five photos will nearly double the number of hits the property gets on the Web, according to Zillow.com. Incentives can also draw out buyers, such as with offers to cover a buyer’s closing costs, pay the first year’s property taxes, or even a $1,000 gift card (and maybe one for the buyer’s agent too). (Note: You must disclose any such gifts or payments when the offer is agreed on.)

Source: CNNMoney.com

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 BUYING BEATS RENTING IN 80 PRECENT OF U.S. CITIES

Thanks to falling home prices and rising rents, would-be home buyers have the upper hand this house-hunting season. In nearly 4 out of 5 major U.S. cities, it’s now cheaper to buy a home than to rent. That’s up from 72 percent of cities last quarter, based on the Rent vs. Buy Index released by online real estate resource Trulia.

“With home prices nearing a double-dip and more foreclosures expected to flood the housing market over the next two years, the decision between renting and buying a home across most of the country has clearly moved in favor of buying,” said Ken Shuman, head of communications at Trulia, in a press release. “As we head into the summer buying season, those looking to buy a home should be encouraged by improvements in the market and feel optimistic about their chances of finding an affordable home, much more so than in previous years.”

Areas with the most affordable housing market conditions tend to be cities hardest hit by the foreclosure crisis, including Las Vegas, Phoenix, and Miami. Meanwhile, those with more affordable rental markets included New York City, Los Angeles, and Seattle. Omaha, San Jose, and Detroit had some of the largest quarter-over-quarter jumps in favor of homeownership.

The time factor is one of many stumbling blocks preventing house hunters from making the jump from window shoppers to homeowners, Miller says. During the housing boom, homeowners were virtually guaranteed to make money or at least break even on their home sales, regardless of the period they owned the home. In today’s market, experts see home prices appreciating much slower, therefore home owners will have to make a longer commitment to their housing investments than in previous years. “The future upside is much farther down the road,” he says. “You’re looking at five, maybe 10 years out of this sort of rocky bottom.”

Until consumers regain confidence in the housing market and economy, Miller and others expect the rental market will continue to benefit from apprehensive house hunters. “There’s been some erosion in attitudes toward homeownership,” says Eric Belsky, managing director of the Joint Center for Housing Studies at Harvard University. “There’s two parts to the home buying decision: the will and the way.”

Despite the numerous obstacles for prospective home buyers, experts remain confident that improving employment and economic data will breathe life into the housing market this spring and summer. More Americans signed contracts to buy homes in March, according to the National Association of Realtors’ pending homes sales index–up 5.1 percent–a signal that could mean more house hunters are snapping up bargains. “We’re sort of in that in-between phase,” says Heather Fernandez, vice president of marketing at Trulia. “People aren’t running out to buy that dream house yet because they’re not that confident. But we’re starting to see consumer confidence shift, people are more interested in home buying, rental rates are still high, and therefore, just based on the numbers, increasingly homeownership is becoming more affordable across the U.S.”

Source: CNNMoney

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 SURVEY SHOWS POTENTIAL FOR GROWTH IN ONLINE AD SPENDING

One in four Realtors spent less than 10 percent of their advertising budget online last year, suggesting there’s still plenty of room for growth in 2011, according to a survey by ThinkEquity LLC.

The online survey of 162 Realtors found 47 percent spent more than half of their advertising budget online last year, and that 58 percent of agents were planning to increase their online ad spending in 2011. One in three said they spent 61 percent or more of their advertising budget online.

“Compared to print advertising, our survey results show respondents overwhelmingly believe Internet advertising is much more valuable,” ThinkEquity analysts said in a report on the survey.

Among those surveyed, 68 percent said print advertising is of little or no value for classified listings, and 60 percent said print was of little or no value for lead generation. A majority of agents said print ads are still useful for brand building, including 17 percent who said print ads were “high value” when used for that purpose.

In contrast, the percentage of agents who believed Internet advertising was of little or no value for classified listings, lead generation and brand building was below 20 percent.

Most of those surveyed — 58 percent — said they plan to increase their online ad spending in 2011, while 39 percent said they plan to decrease print ad spending.

The vast majority of agents said their listings appear on their multiple listing service’s public-facing website (92 percent), Realtor.com (86 percent), their broker’s site (74 percent), their own website (72 percent) and Trulia (70 percent).

Just over half of Realtors say they or their broker pay for enhanced listings on Realtor.com, and the survey found that Realtor.com’s enhanced listings are considered to be of greater value than featured home and featured agent advertising.

While 70 percent said they saw at least some value in enhanced listings — including 18 percent who rated them as “high value” — 48 percent of agents found Realtor.com’s “Find a Realtor” search tool to be of little or no value. Featured homes and featured agent ads were rated of little or no value by 43 percent of those surveyed.

With 11 percent of agents saying they had previously paid for enhanced listings but no longer do — and only 2.6 percent saying they are considering paying for enhanced listings in the future — Realtor.com “may need to look to additional products to significantly expand revenues,” the report’s authors concluded.

According to Williamsburg, Va.-based research and consulting firm Borrell Associates, companies in the real estate industry spent an estimated $20.2 billion on advertising in 2010.

Borrell estimates that real estate agents and brokers accounted for 42 percent of that spending ($8.43 billion), followed by mortgage providers ($8.26 billion), rental property managers ($1.89 billion), and real estate developers ($1.6 billion).

Within the real estate category, agents and brokers spent the highest percentage of their ad budgets online (64 percent), followed by newspapers and other print (24.7 percent), direct mail (5.3 percent) and broadcast and cable TV (3.3 percent).

“The share of ad budgets that the real estate industry is spending on the Internet is obscene and may actually be a bit out of kilter,” said CEO Gordon Borrell. “Only one other advertising category that I know of — job recruiters — spends half its ad budget on one medium.”

Borrell said successful marketers employ “a more equitable mix of media” that includes print, broadcast, online and mail.

The biggest chunk of the $5.39 billion that Borrell estimates agents and brokers spent on online ads in 2010 was for email advertising ($2.16 billion), followed by paid search ($1.29 billion), targeted display ads ($1 billion) and so-called “run of site” display ads that rotate in less prominent spots ($783 million). Borrell estimates that agents and brokers spent an estimated $136 million on streaming video ads and $17 million on streaming audio.

“I suspect that real estate advertisers have just begun figuring out that they’ve put too much money into buying keywords and online banners,” Borrell said. Those advertisers are likely to “adjust the dials somewhat and may even shift a little ad spending toward broadcast, particularly TV.”

But Borrell said that because real estate is proximity-based and mobile devices can serve as home locators, it could also become “the biggest category of all for mobile marketing.”

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 BUYERS BYPASS ‘FIXER-UPPER’, WANT MOVE-IN READY

More buyers are shunning “as-is” properties in favor of homes that are in move-in condition, according to real estate professionals and recent surveys.

For example, a Coldwell Banker survey recently found that 87 percent of first-time buyers say they desire a “move-in” ready home.

“This is absolutely the story of this market. It seems buyers will pay a premium, engage in a bidding war, and even overpay just to avoid buying a “project” house,” says Beth Freed of Terrie O’Connor REALTORS® in Ridgewood, N.J.

As such, real estate pros are advising their sellers to fix up their homes for quicker sales. “There is no question homes that have been spruced up for the market sell quicker,” says Kate Conover with RE/MAX in Saddle River, N.J.

That doesn’t mean major, costly renovations that sellers won’t likely get back on the sale price either, she says. Instead of a major kitchen or bath renovation, just repainting the home or removing the clutter can go a long way in freshening up a home. Also, don’t forget about curb appeal: Freshen up the flowerpots, trim the bushes, and paint the front door, if it’s starting to show wear and tear.

Also with buyers wanting “move-in” ready homes, real estate pros say it’s crucial that sellers address any major maintenance and safety issues – such as leaky roofs – before the home even goes on the market.

Do You Google Places? Check Out Zackry Cooper on Google Places & write a review today!

 

“You can have brilliant ideas, but if you cannot get themacross, your ideas will not get you anywhere.” — Lee Iacocca: Businessman, author, former CEO of Chrysler Corporation

 

ALMOST 14,000 HOUSES SOLD YESTERDAY

One of the biggest misconceptions in today’s housing market is that homes are not selling. That is simply not true. Last month’s Existing Sales Report from the National Association of Realtors (NAR) showed that homes were selling at an “annual rate of 5.10 million”. That’s an average of 13,973 every day – 365 days a year!

And the monthly Pending Sales Report, which measures the number of houses going into contract each month, has showed increases in six of the last nine months prompting Lawrence Yun, NAR’s chief economist to say:

“Since reaching a cyclical bottom last June, pending home sales have posted an overall gain of 24 percent and demonstrate the market is recovering on its own. The index means modest near-term gains in existing-home sales are likely.”

We realize that 40% of the sales are distressed properties and that 22% of buyers are investors. Yet, that still doesn’t negate the fact that homes are in fact selling… and 60% of them are NOT foreclosures or short sales.

And Yun believes this uptick will continue:

“Based on the current uptrend with very favorable affordability conditions, rising apartment rents and ongoing job creation, existing-home sales should rise around 5 to 10 percent this year.”

Bottom Line

Homes are selling. You probably will need to offer a compelling price if you put your house on the market. But if you do, it will sell.

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 HOME OWNERS TO CONGRESS: LEAVE MID ALONE

More than half – 53 percent – of home owners recently surveyed say they want Congress to leave the federal tax credit for home owners alone, according to a recent opinion poll at http://www.HousingPredictor.com . Those surveyed also say they want Congress to instead focus its efforts on instituting other tax advantages to stimulate the real estate market.

Some congressional leaders have raised the issue of trimming the mortgage interest deduction as a way to increase federal taxes and alleviate the ongoing budget crisis.

The mortgage interest deduction allows home owners to write off the mortgage interest and state taxes paid as itemized deductions on their personal federal income taxes.

The National Association of REALTORS® has strongly opposed any cut to the mortgage interest deduction and has lobbied Congress to protect it.

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BAILING ON MORTGAGE NOT A GOOD IDEA

An estimated 11 million home owners owe more on their mortgage than their property is currently worth. That’s made more home owners consider walking away from their mortgage and home ownership, even those who can still comfortably afford to make their payments (known as “strategic default”).

Walking away from a mortgage usually results in either a short sale or foreclosure. So what are the consequences of walking away? There may be far more consequences than what most home owners ever considered.

The consequences include everything from badly affected credit to potential tax consequences and deficiency risks. There are even possible professional implications, Justin McHood with Academy Mortgage in Chandler, Ariz., warns in an article at Zillow.com.

Home owners’ credit scores will be badly hit regardless of whether they attempt a short sale or have their property foreclosed on. (See How Missed Mortgage Payments Hurt Credit Scores)

There also could be the potential for deficiency risks when walking away from a home, which largely varies from state to state. (View anti-deficiency laws by state.) In some states, lenders may sue you for the difference between what you owe and what your short-sale or foreclosure proceeds are, McHood notes.

Home owners considering walking away also should weigh the potential difficulty they may face from moving too. For example, if moving into a rental property, they’ll have to convince a landlord to rent to them after they have the red flag of missed mortgage payments on their credit record. And paying for moving expenses – which many walkaways fail to consider – can quickly add up too.

Plus, home owners may find professional consequences from walking away from a mortgage, as the number of employers eyeing employees’ credit profiles continues to grow.

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 3 WAYS TO AVOID LEGAL TROUBLE IN REAL ESTATE

Real estate transactions can be a gold mine for legal disputes. Inman News columnist and real estate coach Bernice Ross recently highlighted common sources of real estate litigation and behaviors you’ll want to avoid to keep yourself out of legal trouble. Here are three:

1. Don’t speculate on the property’s condition. Ross cautions real estate pros in diagnosing any issue regarding the property’s condition when you don’t know the exact cause. For example, she recalls an incident when buyers asked her about a brown spot on the ceiling, which, unknowingly, ended up being caused by a beehive that contained tons of pounds of leaking honey.

When buyers ask about a property’s condition, such as in the case of that brown stain on the ceiling, Ross suggests responding this way: “I don’t know what caused the stain on the ceiling. If you are interested in the property, then it’s extremely important to hire a competent roofer and physical inspection service to thoroughly investigate the condition of the property.”

2. Don’t guess on how much a seller will take for a property. If a buyer asks you how much the seller will take on an offer for the home, you’d be best to respond: “The only way to know for sure is to write an offer,” Ross says. After all, she adds, you don’t even know if the seller will sell for the asking price, so speculating on any price isn’t a good move.

3. Watch what you reveal about the characteristics of a neighborhood. Buyers might ask you if the home they’re interested in is located in a “good family neighborhood that has a low crime rate,” but be careful how you respond to that, Ross warns, or you could violate Fair Housing laws.

Whenever buyers ask about crime, a neighborhood’s ethnic composition, and about the families who live there, provide the buyers with resources to view online, such as school, demographic, and crime data. They can judge it for themselves and then you won’t risk providing inaccurate information or appear steering your buyers away from a particular area, Ross says.

RPM NOW ALLOWS FLIPS WITHIN 90 DAYS WITH NO MORE THAN 20% INCREASE IN RESALE PRICE

“There are no accidents… there is only some purpose that we haven’t yet understood.” — Deepak Chopra: Speaker and writer on spirituality and mind-body topics

 

NEWS & HEADLINES

Ask the person standing next to you, “In the first quarter of 2011, how many housing units are there in the US?” The answer is 131 million. Of those, about 86% are occupied, 57% by owners, 29% by renters, and 14% (nearly 19 million units) are vacant. In this country the home ownership rate is about 66%, down slightly from the previous quarter and year. The Census Bureau reports that the homeownership rates were highest for those householders ages 65 years and over (81%) and lowest for those under 35 years of age (38%) – no surprise there. Lastly, the homeownership rate for non-Hispanic Whites was highest at 74%, while “Black Alone householders” was lowest at 45%. CensusHouseholds

Borrowers can obtain their IRS Transcripts within minutes, many times before they are available to lender. They can just call 800-908-9946, press (1) for English, give their social security number when prompted, and give the street numbers of their address on their tax returns. The borrower should then listen to the automated message and when it prompts to submit an order by pressing (1) don’t – the borrower should hit zero (0) until it brings them to the operator. At that time the borrower can verbally request a faxed copy of the years’ transcripts needed, but remember that the borrower will be asked personal questions for all people on returns will be asked such as: what form they filed, address, SSN’s, names, number of people on returns, whether it is a business or personal fax, etc.

Who has been buying securities backed by mortgages? Over the three week period ending on April 13, domestic bank holdings of agency MBS have increased by $26 billion (from $1,093bn to $1,119bn). This sharp rise occurred after bank holdings of agency MBS remained nearly flat for about 3-4 months. In addition, a major portion of the recent spike in bank holdings of agency MBS can be attributed to the purchases of large banks instead of small banks (large bank holdings are up $21.5bn over the three week period ending on 4/13). This is unlike with the prior 3-4 months when agency MBS holdings of small banks continued to increase while those of large banks remained flat or even declined. It is also apparent that domestic banks that were aggressively growing their Treasury holdings (and agency debt) instead of agency MBS holdings in 2009 and 1H’10 are preferring agency MBS over Treasuries over the past several months.

Things seem pretty slow out there, with a light day in Asia, Europe wrapped up with the wedding holiday today and Bank Day coming up on Monday, and the devastation in the South from the tornadoes. 170 tornadoes through 6 states! (Japan’s markets were closed today, and next Tuesday through Thursday as the Golden Week holidays begin.)

Yesterday rates improved as Initial Jobless Claims jumped 25K last week with continuing claims posting a decrease. Pending Home Sales for March came in much stronger than expected, possibly due to buying ahead of the FHA MIP change. The 1st quarter GDP printed worse than expectations at +1.8% (is the economy slowing back down, or did it pick up in the first place?), and a weak 7-yr auction. The 10-year note closed higher by 14+/32s (3.314%) and rate-sheet MBS prices were better by about .250-.375.

Today we have/had had the Employment Cost Index, Personal Income & Spending, the Chicago PMI, and a Michigan Sentiment number. Personal income and spending both posted larger-than-expected gains in March. After Exxon produced a 1Q profit of $10.7B earlier this week, Chevron announced net income of $6.21B (last year’s first quarter: $4.55B) due to higher oil prices. Remember that we have more news ahead of us, MBS prices are better by about .125.

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SHOULD YOU GET A 2ND OPINION?

Buying and/or financing a home are major decisions for anyone. We all look for referrals from friends, family and co-workers who have gone through the process successfully. But we wonder….

“Are there geographical differences?”

“Has the market changed since they did their transaction?”

“How has the ever-changing technology impacted real estate since their closing?”

“Are my personal circumstances (income, assets, and credit) the same as the person who is giving the referral?”

So, how do you know if the agent and/or loan officer you are working with (regardless of how you found them) is a “keeper”? It got to be more than a personality match in the current environment. It’s about effectiveness and leadership. I believe that you need to judge them by three criteria:

1. Are they an EXPERT?

Do they know everything about the home, the neighborhood, the other available homes, the pricing trends, the loan product and qualification thresholds, etc.? Are they able to target a likely buyer, if you are selling? Are they certified or have specific designations? What formal training have they had (say, in the art of negotiating, as an example). Do they know anything about quality of construction or when you are likely to need to replace a roof or boiler?

2. Are they looking to serve?

Unfortunately, many sales people operate in their personal best interests. Today, more than ever, you need someone who puts your needs ahead of their own. Whether you are looking to sell quickly or for the most money, you need an agent who acts in the best ways to help you achieve those objectives. Likewise, when looking to buy, is your agent asking you the right questions and listening, so that they can streamline your search?

3. Do they have creative solutions to your challenges?

Are their presentations to you basically the same as every other agent? Do their print ads, postcards, open house plans, and promises of fifty websites sing as monotonous? You need an agent with unique approaches though marketing plans that are comprehensive with online and offline components that speaks to a targeted buyer pool (Gen X, Gen Y, Baby Boomers, certain employment groups, particular cultural components, and so on).

If you believe you are working with a great agent and/or loan officer, thank your lucky stars and be loyal to them because they are worth their weight in gold. On the other hand, if you’re concerned that you have a run-of-the-mill person, don’t settle! Go on a search for excellence. It’s too important not to.

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 RENTING: TRULY A BETTER OPTION?

After the last five years, more and more people are hesitant about purchasing a home. We definitely understand their concern. However, is the alternative option actually a better choice? Renting in the current housing market might not make good financial sense. Just this week the Harvard University Joint Center for Housing Studies released a report analyzing conditions in the rental market. The study found:

Rental markets are now tightening, with vacancy rates falling and rents climbing. With little new supply of multifamily units in the pipeline, rents could rise sharply as demand increases.

This increase in rental costs is already taking place. In their

Spring 2011 Housing Report released earlier this week, hotpads.com stated:

…that rental listing prices across the US climbed 7.4 percent while for sale listing prices retreated 8.8 percent since this time last year (April 2010 – April 2011).

Just yesterday, Trulia released its second quarter

2011 Rent vs. Buy Index. In the report, they stated that buying a home has become more affordable than renting in nearly four out of five (78%) major cities.

“With home prices nearing a double dip and more foreclosures expected to flood the housing market over the next two years, the decision between renting and buying a home across most of the country has clearly moved in favor of buying,” says Ken Shuman, Head of Communications at Trulia. “As we head into the summer buying season, those looking to buy a home should be encouraged by improvements in the market and feel optimistic about their chances of finding an affordable home, much more so than in previous years.”

“Aspiring homeowners should focus their energies on locking down a low mortgage rate sooner than later. While home prices are unlikely to return to pre-crash levels, today’s low interest rates will likely rise thanks to inflation and spikes in the Fed rates,” notes Shuman. “As the government wind downs its role in the mortgage markets higher mortgage interest rates will be inevitable.”

Bottom Line

Though purchasing a home is not an easy decision after what has taken place in the market over the last five years, realize rental prices are about to soar. You should probably take this into consideration when determining your best housing choice.

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NAR: RESALE REAL ESTATE PRICES TO FALL 2% IN 2011

A National Association of Realtors index that tracks pending sales of existing homes rose 5.1 percent in March but dropped 11.4 percent compared to the same month last year.

Also today, NAR released its latest annual forecast, which anticipates a 1.8 percent drop in the median price of U.S. existing homes — the previous forecast, released in March, had anticipated a 1 percent drop in the median U.S. existing-home price.

Regionally, the Pending Home Sales Index — which is based on sales for which the contract has been signed but the transaction has not yet closed — rose 10.3 percent in the South, 3.1 percent in the West and 3 percent in the Midwest while dipping 3.2 percent in the Northeast from February to March.

And the index dropped 18.4 percent in the Northeast, 16.6 percent in the Midwest, 10.5 percent in the South and 4.1 percent in the West on a year-over-year basis in March.

An index score of 100 is equal to the average level of contract activity during 2001, according to NAR, which was the first year of data to be examined for the index. The index stood at 94.1 in March 2011, compared to 89.5 in February and 106.2 in March 2010. Regionally, the index score was 63.4 in the Northeast, 83.5 in the Midwest, 103.7 in the West and 110.2 in the South in March 2011.

In its economic forecast, NAR anticipates the median existing-home price will be $169,800 this year, down from $172,900 in 2010, and is expected to rise 3.9 percent, to $176,500, in 2012. Sales of existing homes are expected to climb 7.7 percent this year, to 5.28 million, and to climb another 5.9 percent in 2012, to 5.6 million.

NAR expects the median new-home price will climb 1.4 percent this year, to $224,100, and to rise another 3.1 percent in 2012, to $231,000. In its previous outlook, released last month, NAR had forecast a new-home price of $222,300 in 2011.

New single-family home sales are expected to dip 0.5 percent this year, to 320,000, according to the latest economic outlook, and to rise a whopping 52 percent in 2012, to 487,000.

NAR also expects the national unemployment rate to average 8.8 percent in 2011, an improvement from the 9.6 percent rate in 2010, and to improve to 8.6 percent in 2012. The interest rate for a 30-year fixed-rate mortgage is expected to average 5.2 percent this year, and to climb to 6 percent in 2011.

“Change your thoughts and you change your world.” — Norman Vincent Peale: Was a minister and author of inspirational books

  

YOUR RETIREMENT HOME: IS NOW THE TIME TO BUY?

The last several years have wreaked havoc on many people’s plans for retirement. They have seen their nest egg dwindle and in some cases disappear. Many have pushed back the date they will stop working and some have stopped even thinking about what part of the country to which they plan to relocate. For some however, this may be the time to again begin putting their retirement plan together.

There is a tremendous opportunity right now to buy a home at a sensational price in certain traditional retirement destinations. Couple that with the fact that in other parts of the country the housing market is still experiencing falling prices and we may be looking at a perfect window of opportunity to buy your retirement home.

Example: If you currently live in New Jersey, you are probably well aware of two things:

there was a lot of snow there this past winter and

the local housing market is struggling

Point number one might have you dreaming of spending your retirement years in a place like Las Vegas or Tucson or San Diego. However, point number two might have you believing this is not the time to even consider the move: If I can’t get top value for my house, why sell now? Actually, this may be a very opportune time.

What caused prices to tumble throughout the country was the emergence of distressed properties (foreclosures and short sales). These discounted properties put tremendous downward pressure on the values of the other homes in the region. The states that are clearing this inventory rapidly are the states where prices will recover more quickly. The states that were first hit with the housing crisis (Arizona, Nevada, California and Florida) are now the first to show signs of a recovery because they are selling off their distressed properties at a faster pace than many other parts of the country. New Jersey, on the other hand (along with much of the Northeast), is seeing their inventory of distressed properties growing. That is why prices are continuing to soften.

What does this have to do with my retirement plans?

If you own a home where prices are falling and plan to buy a retirement home in one of the areas that are beginning to recover, you are sitting on an asset that is losing value and waiting to purchase an asset that is about to increase in value. That doesn’t make sense financially. Even if you are not 100% ready to move right now, it might make sense to sell the 4 bedroom colonial you currently own in New Jersey (or in NY, MA or WA) and buy a smaller home or condo in town. With the additional money from the sale, you could probably buy a beautiful retirement home in the area you always dreamed about relocating to. Even if you needed some extra financing to buy the perfect home, you are borrowing while mortgage money is very inexpensive.

How do I know if this applies to me?

As mentioned above, the primary factor determining where prices are headed is the number of distressed properties in the area. Look at the map below from NAR. It shows the amount of distressed properties about to come to market in each state in the country. If the state you currently live in is red, yellow or orange and the state to which you plan to retire is a shade of green, you should at least consider the move.

Bottom Line

There are definitely challenges for many in the current housing market. At the same time, opportunities exist for others. Sit with a real estate professional who can give you the right data to help determine whether such an opportunity currently exists for you.

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IS IT TIME TO DIVERSIFY YOUR INVESTMENT PORTFOLIO?

Studies now show that over 20% of the houses with mortgages in the country are underwater (where the loan amount exceeds the value of the property). Some bought their house at the top of the market and saw prices come tumbling down over the last few years. Losing this value has caused challenges for many in this category.

Other homeowners are underwater because they refinanced their homes at the height of the market and cashed out some of their equity. Some did this several times as values continued to rise and interest rates continued to fall. When prices dropped, they too found themselves in a negative equity situation. But not everyone in this category is in a worse position financially. Let’s break down this category.

Some Used Their House as an ATM

Some homeowners took cash out of their home to finance a lifestyle they desired. They bought a new car or a new boat. Some used the cash for fabulous vacations to locations they had always dreamed about. This group didn’t lose their equity. They spent it. Maybe these purchases were worth the price that these homeowners are now paying. Only the individual person can answer that question.

Some Used Their House to Finance an Education or Start a Business

It has long been a tradition in this country that people tap the equity in their home to finance their children’s college education or to gather together the start-up capital necessary to open their own business. These people didn’t lose their equity. They invested it in their children or their business. Was it worth it? For the couple who refinanced their home for their son or daughter’s education in 2007, a good time to ask may be next month as they are attending their children’s college graduation. For those who started a business with the money, whether it was a good idea was determined by their business plan not the housing market.

Some Used Their Home to Diversify Their Investment Portfolio

Some savvy homeowners, upon seeing their home values skyrocketing, decided to pull cash out and invest in other asset classes. At the height of the market (2006), some took $100,000 out of their home and invested in the stock market or in precious metals. Instead of sitting on their equity, they decided to put it to work for them. How did this group do? If they invested in the Dow, that $100,000 is now worth approximately $115,000. If they invested in gold, that $100,000 is now worth $290,000. (We never read about these people in the thousands of stories on the housing bubble. Good news just doesn’t seem to sell papers.)

Bottom Line

In every challenge there is an opportunity. Perhaps the opportunity in housing today is to use some of the equity in other assets we currently own to purchase real estate while it is low and mortgage money remains cheap. The Wall Street Journal and Forbes Magazine both suggested this exact strategy to their readers in the last three months.

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 GOP/FANNIE MAE & FREDDIE MAC

Shutting down Fannie Mae and Freddie Mac should fit seamlessly into the Republican drive to shrink government. After all, keeping the ailing mortgage giants afloat has cost taxpayers $150 billion and many in both parties want private lenders to finance a bigger share of the nation’s $11.3 trillion residential mortgage market.

But House and Senate Republicans pushing bills to phase out both federally run companies are learning how fear, politics, and old-fashioned lobbying can trump ideology.

Even in the GOP-run House, leading proponents of doing away with Fannie and Freddie are not predicting victory. As a precaution, they are advancing eight bills taking bite-sized swipes at the issue. In the Democrat-led Senate, a sister measure by 2008 presidential candidate Senator John McCain, Republican of Arizona, faces long odds, and the Banking Committee’s top Democrat and Republican are wary of quickly reshaping the market for financing home purchases.

Fannie and Freddie do not issue mortgages but buy them from the original lenders, thus providing cash for more loans. They then package many mortgages into securities that they resell to investors, using a government guarantee that lets them pay a lower yield than their few competitors.

With housing still staggering from foreclosures and low prices, some Republicans worry that erasing the federal role in the mortgage market could rattle the housing industry and perhaps the entire economy. Without the government guarantee of mortgage products that Fannie and Freddie enjoy, the cost of mortgages would likely rise, making homes less affordable.

Though Democrats, including President Obama, agree that Fannie and Freddie should be eased aside to get private lenders back in the market, Republicans generally want to move faster and further.

For many in the GOP, Fannie and Freddie epitomize government waste run amok. Under President George W. Bush, the government took them over in September 2008 as they teetered near collapse as the housing market crumbled. Taxpayers have since shoveled $154 billion at the two companies to keep them alive – which resonates at a time when efforts to trim record budget deficits are a premier national issue.

Working against the changes are the National Association of Realtors, the National Association of Home Builders, and the Mortgage Bankers Association. While all are major Washington players, the realtors are especially potent: The $3.8 million they donated to more than 500 congressional candidates in the 2010 election was tops among all political action committees, according to the nonpartisan Center for Responsive Politics.

The Obama administration has offered three options for phasing out Fannie and Freddie, with varying degrees of continued federal involvement, but left subsequent decisions to Congress.

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 3 RED FLAGS FOR BUYER CONTRACTS

Writing a home purchase contract is crucial. Otherwise, it can easily derail a deal.

Here are some common contract mistakes:

1. Buyers don’t secure financing by deadline.

Many contracts are contingent upon the buyer securing financing by a particular date. However, in today’s tight lending environment, you’ll want to ensure you allow extra time for buyers to get mortgage approval. Otherwise, sellers may terminate the contract altogether and even keep the earnest money deposit if a buyer doesn’t meet the deadline in getting financing.

Be realistic about your closing date and don’t try to close too quickly, Patti Lawton, a broker with Welcome Home Realty in Brunswick, Maine, told Bankrate.com. “There are a lot of things that need to be done properly, and you must give lenders, title companies, and others time,” Lawton says.

2. Not being clear on what stays with the house.

Clearly state in the contract what stays with the home. You don’t want buyers to walk into their new home after closing to unexpectedly find the chandeliers missing.

3. Missing signatures.

“Sometimes the home is owned by both spouses, other owners or an entity such as corporation,” says lawyer Jeff Marks, a partner with Ryan and Marks Attorneys LLP in Jacksonville, Fla. “Make sure all of the parties sign the contract. If a party to the transaction fails to sign, they’re not bound to perform the contract.”

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 IS IT REALLY A BUYER’S MARKET

With falling home prices and higher inventories, most of the public views real estate as a “buyer’s market,” in which buyers hold more of the control and sellers will more eagerly accept lower offers just to sell.

Not so fast, say buyers and sellers. More buyers are finding the sellers in the driver’s seat.

Buyer Young Hammack gave up looking for homes for a while after being outbid on three properties in California. “It’s a false buyer’s market,” Hammack says. “If you think prices are cheap, wait until you start putting offers in.”

Many sellers may be unable or unwilling to lower their home prices – mostly because they may be underwater on their mortgage – so buyers are increasingly finding lower offers than list price denied. Buyers, on the other hand, may be reluctant to agree to a deal if they don’t feel like they are getting it at a deep discount, industry insiders say.

Traditional buyers also are finding even buying a foreclosure can be difficult as they’re increasingly outbid by investors who are willing to pay cash.

“There’s a shortage of attractive inventory,” says Glenn Kelman, chief executive of Redfin Corp. “Customers just keep getting outbid on the houses that they want.”

Real estate professional Steve Capen with Keller Williams Realty in St. Petersburg, Fla., says that the homes most in demand among buyers often don’t require much repair work and are located in good school districts and choice neighborhoods near transit hubs.

“What’s selling is the cream of the crop, and they sell fast,” Capen says. “If it’s not cream of the crop, it’s getting hammered.”

Happy Easter Weekend!  Loan Questions?  Have your “Peeps” call me & lets get them into a home today!

 

“The less you open your heart to others, the more your heart suffers.” — Deepak Chopra: Speaker and writer on spirituality and mind-body topics

 

FORECLOSURES: BRINGING CLARITY TO THE CONFUSION

Headlines created by the numerous foreclosure reports often contradict each other. One headline announces foreclosures are rising while the next talks about the decrease in foreclosure numbers. This has led to tremendous confusion regarding the issue. Let’s bring some clarity to the data. There are five individual stages of the foreclosure process that are reported:

1.) 90+ Day Delinquencies

Once a homeowner falls three months behind on their payments, most financial institutions count them in their foreclosure numbers. Why? Less than 2% of those who fall that far behind ever catch up in their payments. The other 98% will end up as a distressed property (foreclosure or short sale). Homeowners in this category don’t always receive a foreclosure notice immediately. In some cases, homeowners who have not paid their mortgage in 12 months have not yet received a notice of foreclosure.

2.) Homes in the foreclosure process

These homes have received a formal notice which officially starts the foreclosure process. In different states, because of court procedures, it takes varying time frames to complete this process.

3.) Homes repossessed by the bank

These homes have finished the foreclosure process and are now owned by the bank. These homes are known as REOs (Real Estate Owned).

4.) REOs placed on the market

These are the REOs that banks bring to market. Many come to market quickly. Others must be refurbished before being put up for sale.

5.) REOs Sold

Obviously, these are the REOs that actually sell.

This seems very straight forward. Why is there so much confusion?

Here’s an example. Just a few weeks ago the major daily newspaper on Long Island, NY had a headline that announced delinquencies were up to over 10% of all homes. One-in-ten homes on Long Island were 90+ days delinquent. That was a major increase from the year before. Exactly seven days later, the same newspaper headlined a story that foreclosures on Long Island were down dramatically. That seems a contradiction. Though both headlines were accurate, they led to confusion.

Let’s dig a little deeper into the data. Yes, the percentage of homes being foreclosed on has decreased. Why? The court systems in NY are now taking almost a year to process a foreclosure. There are not less homes eligible for foreclosure. They are just caught in a slow moving pipeline. Likewise, there are not a growing number of delinquencies. These homes are just not working their way through the process. The delinquency numbers would be much lower if there wasn’t a logjam in the court systems.

Bottom Line

To truly understand the distressed property situation in your market and what impact it may have on prices, contact a local real estate professional. They should be able to simply and effectively explain with the use of strong visuals (charts & graphs) what is happening in your area and how it impacts you.

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HAS HOUSING REACHED A ‘RECOVERY PATH’?

Sales of existing homes rose slightly in March, marking the sixth consecutive monthly rise for existing home sales in the last eight months, the National Association of REALTORS reported Wednesday.

“We’re clearly on a recovery path,” says Lawrence Yun, NAR chief economist.

Existing home sales rose 3.7 percent in March from February, as distressed sales, such as those in foreclosure, continued to make up a big bulk of home sales (40 percent of all purchases).

“At this point, we’re likely to see a steady improvement in sales,” says economist Joel Naroff of Naroff Economic Advisors.

So just in time for the spring buying season, here’s what economists have to say about who’s buying and currently driving the market:

Investors: All-cash deals last month made up a record number of sales, accounting for 35 percent of all resold homes. Investors continue to make up a big part of those cash deals. Investors are buying distressed homes and flipping them for a slight profit or turning them into rentals, says Patrick Newport, economist at IHS Global Insight.

Luxury consumers: Some real estate professionals are reporting a pick up in luxury markets in some cities too. “The confidence is back in the market,” says Neil Palmer, CEO at Christie’s International Real Estate.

Foreign buyers: Coastal markets, in particular, are seeing a surge of foreign buyers, such as in New York, Palm Beach, Fla., and San Francisco, AOL Real Estate news reports.

Traditional buyers: Traditional buyers are also re-emerging. Mortgage applications to buy homes rose 10 percent over a seven-week period, according to the Mortgage Bankers Association’s most recent report. “This pickup in demand should show up in improved existing home sales in April and May, unless lending conditions tighten,” Newport says.

The market is making “slow, steady progress” and demand in housing is rising even with higher mortgage rates “so that’s encouraging,” Pierre Ellis, an economist at Decision Economics in New York, told The New York Times.

“It’s the new financial psychology,” says Jarvis Slade Jr., Christie’s managing director for the Americas. “We’ve had two years of hesitation, the sellers are realistic, the buyers confident and cautious, but Americans are starting to feel better.”

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 5 CRAIGSLIST TIPS TO GENERATE FREE REAL ESTATE LEADS

Are you using Craigslist as a part of your lead generation and conversion system? If not, there’s no better time to start than now.

A webinar with Josh Schoenly of ReTechulous.com. Schoenly also manages a real estate brokerage office in Mechanicsville, Pa., and is a self-proclaimed “lead generation junkie.” One of the best lead generation tools for his business is Craigslist.

Many agents use Craigslist, yet very few systematically generate and convert leads from this highly visited site. Schoenly says most agents fail in this attempt because they don’t understand the dynamics of online lead generation. Also, they don’t know how to make their ads stand out from the competition.

If you want to generate more leads from working with Craigslist, the first step is to avoid these five most common mistakes:

1. Posting at the wrong time of day

Have you ever given any thought to the best time of day to post on Craigslist? Schoenly cites research that shows people visit Craigslist in the morning between 8:30 a.m. and 9 a.m., just before they begin work. They also visit Craigslist around lunchtime.

Nighttime visits to Craigslist peak at different times depending upon the season. In the wintertime, it’s usually after dinner, from 7 p.m. to 7:30 p.m. In the summertime, it’s more likely to be later, usually between 9 p.m. and 10 p.m.

Rather than flooding Craigslist with a lot of ads, Schoenly recommends posting one or two strategic ads at the peak times of day.

2. Writing boring headlines and boring ads

A major challenge on Craigslist is how to make your ad stand out. In order to “cut through the clutter,” Schoenly recommends making your ads intriguing.

For example, most agents write ads like this: “123 Lakeview Terrace $605,000: 4 bedroom, 3 bath, with breathtaking lake view. Updated kitchen with granite countertops, new appliances, two offices, master suite with double walk-in closets.”

The ad above is completely feature based. To have more people click to view your ads, write an ad with an attention-grabbing headline and intriguing text. Here’s an example that cuts through the clutter to capture the reader’s attention: “$206,900. LAKE it? You’ll LOVE it! (Can you believe the price on this gem?) Click here to see other JUICY deals like this one in the Houston area. INCLUDES FORECLOSURES.”

3. No call to action

The boring ad in the example above also has another major mistake. There is no call to action.

In contrast, the “LAKE it” ad has a clear call to action for the reader to “see other JUICY deals.” Everyone wants a great deal. This ad taps into that emotion, especially because the list includes foreclosure properties.

4. No lead capture trap

There is little point in spending money on Web advertising unless you have a lead capture strategy. A major mistake most advertisers make is driving consumers to a branded website. A branded website is your primary website that has all of your normal listing information and other resources.

What works best is a simple unbranded website devoted exclusively to the property you are marketing. (Please note you must still follow your state, local and MLS rules in terms of what you post on these sites regarding the fact that you are an agent.)

Schoenly’s unbranded website normally converts 15 percent to 35 percent of the people who visit it into actual leads. This type of page is often called a “squeeze page.” In contrast, when he used a branded website, the conversion rate was only a pitiful 1 percent.

Here’s what Schoenly uses for one of his most effective squeeze pages: The headline, “Free weekly list of foreclosure and bank-owned properties.”

Beneath the headline is a picture of a house with a foreclosure sign in front of it. Next to the picture, there is a bright green arrow pointing to the box where the reader can enter their email address. Directly below there is another box that states, “Phone number: We’ll Call You and Tell You about the Hot Buys We Know about Right Now.” The final box says, “Get the Weekly List and See Local Foreclosures Now.”

For this to work in your business, you must be willing to compile and maintain an up-to-date foreclosure list. You must also be willing to respond quickly with a return phone call when someone decides to use the telephone option. Finally, you will also need an “autoresponder” system that automatically sends out the list to anyone who clicks on the link.

5. No consistency

The biggest mistake that agents make when using Craigslist is a lack of consistency. Schoenly suggests setting up a recurring appointment with yourself so that you always remember to do your posts three times per day.

Avoid being “flagged”

Craigslist and its community are very vigilant about ads that don’t meet the site’s criteria. Triggers that can cause your ads to be “flagged” (i.e., that will cause your ads to be removed), include being overly “sales-y,” overhyping, using all caps, posting ads in the wrong categories or posting the same ads multiple times in a short period of time, and using the word “free.”

You can be flagged if two or more people report your ads. It could be market competitors seek to remove your ads from the site. If this does happen, Schoenly’s recommendation is to post your ads at night. Most ad “snipers” hang out at the office during the day, and that’s when they’re most likely to be online.

Consequently, to succeed on Craigslist, post at the busiest times of days, write intriguing headlines and ad copy, include a call to action, use a lead capture or squeeze page, and be consistent. These five simple steps work for Schoenly and they can work for you as well.

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Top Twitter Tips for Real Estate Agents

There’s some overlap in ideas but hopefully some good tidbits you have yet to consider. We’ll assume you’re already sold on Twitter but here’s some tips to help step up your game.

Customize Everything

Twitter makes it really easy to customize your profile with your company logo and an image of yourself-so take advantage of that! It just takes a few seconds and it will mean a world of difference in getting prospective customers to click “follow.”

Network Locally

It’s fun to have a big audience and befriend agents across the country, but don’t forget the purpose of your marketing. Your goal is to sell more homes so it does not really matter if Ted in England is following you, unless of course he has friends in your area. Do local searches to begin the conversation with other real estate professionals and consumers.

Do Some Automation

Many real estate agents hesitate to get involved with social networking because it can all become overwhelming. I know the feeling! The nice thing about Twitter is all the applications that you can use to automate certain functions. EasyTweets alerts you any time someone uses one of your target keywords. For instance, it would send you an email when someone says “I’m buying a home in Kansas City. Know any agents?” Boom, you’re in! Some other great tools to look into are TweetBacks, TwitterFon, and Twitterfeed.

Keep the User in Mind

It’s tempting to stuff your feed constantly with keyword heavy tweets and follow everybody under the sun, hoping they will follow you back. Like any marketing tactic, don’t forget about the real goal and what effect your actions will have on your prospective customers.

Hopefully this post will encourage you to join Twitter if you haven’t already or take it to the next level if you’re already tweeting.

“You, too, can determine what you want. You can decide on your major objectives, targets, aims, and destination. “ – W. Clement Stone

 

NEWS & HEADLINES

In the first quarter the four largest banks here in the US saw average loans outstanding drop 7% from a year earlier, but deposits increase by 5%. From a bank’s point of view, the demand for credit has dropped and may not pick up again until the economy shows more improvement.

Fannie Mae has recently announced a special incentive effective with offers submitted on or after April 11th…Fannie Mae is currently offering buyers up to 3.5% in closing cost assistance through June 30, 2011. The HomePath property buyer must meet the following qualifications to be eligible: Buyers and/or selling agents (the agent representing the buyer) must request the incentive upon submission of initial offer in order to be eligible. The initial offer must be submitted on or after April 11, 2011 and close by June 30, 2011. If an initial offer was made prior to the effective date, the offer is not eligible for the incentive. The sale must close on or before June 30, 2011. No exceptions will be made to this deadline. Only buyers purchasing a HomePath property as their primary residence may receive up to 3.5% in closing cost assistance. Second homes and investment properties are excluded from the incentive. Buyer must sign the Owner Occupant Certification Rider to the Real Estate Purchase Addendum. If a buyer’s total closing costs are under 3.5%, the difference will not be available as a credit to the buyer.”

Today we had Jobless Claims, and two weeks ago we had the release of the employment numbers. A story from the Wall Street Journal recently noted, “If you want to understand better why so many states-from New York to Wisconsin to California-are teetering on the brink of bankruptcy, consider this depressing statistic: Today in America there are nearly twice as many people working for the government (22.5 million) than in all of manufacturing (11.5 million). This is an almost exact reversal of the situation in 1960, when there were 15 million workers in manufacturing and 8.7 million collecting a paycheck from the government. More Americans work for the government than work in construction, farming, fishing, forestry, manufacturing, mining and utilities combined. We have moved decisively from a nation of makers to a nation of takers. Nearly half of the $2.2 trillion cost of state and local governments are the $1 trillion-a-year tab for pay and benefits of state and local employees.

By the time the dust settled yesterday, not much had happened – again. Volatility is dying down, usually a good thing. The 10-yr ended around 3.40%, and current coupon MBS prices were worse by .125. Per the NAR numbers, sales of previously owned U.S. homes rose more than expected in March, +3.7%. All-cash sales set a record market share at 35% in March; investors accounted for 22% of sales activity, while distressed homes accounted for 40%. Sales rose in the Northeast, South and Midwest, and were down slightly in the West.

Later today we have the Leading Economic Indicators, a measure that tracks changes in the business cycle. In February it rose 0.8%, the seventh consecutive month of improvement in the index. Nine of the 10 components of the indicator were in positive territory for the month. Most economists feel that the LEI is supporting the notion of slow, albeit uneven, growth in the US economy. For today, expectations are for a slight improvement again. With the early bond market close and ahead of tomorrow’s market holiday, we had the usual Initial Jobless Claims (which moved from 416k down to 403k), Leading Economic Indicators, the Philly Fed, and another housing price index – the FHFA HPI. We also will have the Treasury’s announcement for next week’s auction of 2, 5, and 7-yr notes. So far the 10-yr yield is slightly better at 3.38% and agency MBS prices are also a shade better.

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EXISTING-HOME SALES UP IN MARCH

After stumbling in February, sales of existing homes rose 3.7 percent in March from the month before, according to a National Association of Realtors report released today.

Completed sales of existing single-family homes, townhomes, condominiums and co-ops fell 6.3 percent compared to March 2010 — when a federal homebuyer tax credit program elevated sales — to a seasonally adjusted annual rate of 5.1 million units.

“With rising jobs and excellent affordability conditions, we project moderate improvements into 2012, but not every month will show a gain — primarily because some buyers are finding it too difficult to obtain a mortgage,” said Lawrence Yun, NAR’s chief economist, in a statement.

He said the generally upward trend in monthly existing-home sales suggests the housing market is “clearly on a recovery path.”

The median price for existing homes nationwide fell 5.9 percent year-over-year in March, to $159,600. Distressed properties, typically sold at a discount, made up 40 percent of sales last month, compared with 35 percent in March 2010.

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5 REASONS TO HURRY UP & GET YOUR FHA MORTGAGE

With the likely installation of QRM looming, it is clear that FHA mortgages will clearly become more popular merely because of the lesser down payment requirements. And as we have all learned, when the demand for something goes up, and the supply remains constant, prices go UP…that is, it becomes more expensive.

Talking Point One

The FHA is permitted each year to insure a specific dollar amount of loans by Congress. I find it unlikely that anyone has factored the increased demand for FHA that QRM will create. Further, getting Congress to allocate more money to HUD in these days of deficits is not a sure thing. I could see a fourth quarter of 2011 with little financing available (or much more expensive financing) to people with less than 20% down.

Talking Point Two

We hear, almost daily, that FHA is only semi-solvent…that they don’t have sufficient reserves. Foolishly, the MIP schedule was altered to give them less cash today (lowering the Up Front MIP) and increasing the longer term collection of monies (the Monthly MIP). To me, that almost insures another MIP change this year…one in which the UFMIP is hiked to get more money in the reserves now, making mortgages more expensive.

Talking Point Three

The FHA is floating rumors about tightening guidelines. Maybe it will be an increase in minimum down payment from 3.5% to 5%. Maybe a cut in seller paid closing costs from 6% to 3%. Maybe both. Regardless, it is going to get harder to qualify. Understand with increased demand and steady supply, lenders will be choosier.

Talking Point Four

Rates are creeping up anyway. With inflation making a strong comeback (fueled by high gas prices), the Fed will look to hike rates to control inflation.

Talking Point Five

The current loan limits are going to be slashed. Presently, FHA will insure loans up to $729,250 in high cost areas. That number is huge when compared to historic loan limits and was instituted when desperate times called for desperate measures. And while we still might be semi-desperate, look for those loan limits to be lowered by at least $100,000 come the end of the year (when Congress sets them for the next year).

For buyers, waiting can be expensive, or worse. You might not even get a loan. For sellers, more expensive loans and less buyers who qualify, will force you to lower your prices even further. ACT NOW!

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MORTGAGE APPLICATIONS BOUNCE BACK, UP 5.3%

The number of mortgage applications are back on the rise again after a monthlong decline in filings, according to the Mortgage Bankers Association.

Mortgage applications increased 5.3 percent the past week, with most of the increase attributed to a surge in applications for government loans. Government loan applications increased 17.6 percent.

“Purchase application volume jumped last week largely due to another sharp increase in applications for government loans,” said Michael Fratantoni, MBA’s Vice President of Research and Economics. “Borrowers were likely motivated to apply for loans before the scheduled increase in FHA insurance premiums.”

The seasonally adjusted purchase index rose by 10 percent, while applications for refinancing increased 2.7 percent from the previous week, MBA reports.

“Refinance activity increased somewhat, as rates dropped to their lowest level in a month towards the end of the week,” Fratantoni said.

“Any idea, plan, or purpose may be placed in the mind through repetition of thought.” — Napoleon Hill: Was a lecturer and author of books on achieving success

NEWS & HEADLINES

Dodd Frank is indeed the gift that keeps on giving. Earlier this week the Federal Reserve Board (FRB) requested public comment on a proposed rule under Regulation Z that would require creditors to determine a consumer’s ability to repay a mortgage before making the loan and would establish minimum mortgage underwriting standards. (So let’s take away Fannie & Freddie, and have regulators set underwriting guidelines for private mortgage bankers?) The proposal would apply to all consumer mortgages (except home equity lines of credit, timeshare plans, reverse mortgages, or temporary loans). The proposal would also implement the Dodd-Frank Act’s limits on prepayment penalties.

Housing Starts and Building Permits were both a little stronger than expected – good news for the housing biz although they remain low by historical standards. Today at 9AM CST we have Existing Home Sales, which in February fell 9.6% with declines in every region of the country. Distressed transactions accounted for 39% of all transactions for the month and the median price of an existing single-family home down about 4% over the last year. But analysts are calling for a slight improvement in this morning’s number.

The MBA came out with its weekly index, shopping a little pop last week of 5.3%. Refi’s were up almost 3%, and purchases were up 10% (driven by FHA/VA production). The percentage that refi’s constitute of overall business continues to drop, and is now about 58% – the lowest in almost a year. And ARM share increased to 6.5%.

Rate-wise, yesterday was uneventful. The data was limited to Housing Starts, not a big market-moving number. Agency MBS prices closed around unchanged and the Treasury’s 10-yr settled around 3.36%. A trader reported that “mortgage banker supply remained minimal.” This morning rates are a shade higher, with the 10-yr at 3.40% and agency MBS prices worse by about .125.

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WILL THE COST OF BUYING INCREASE EVEN IF PRICES FALL?

We have discussed the proposed modifications to the mortgage process several times in this blog already. We want to make sure our readers understand the potential impact to the cost of financing a home these changes will have. The cost of buying a home may increase even if prices continue to soften. The total cost of a home is determined by two factors:

• the price of the property
• the expense of financing the purchase (assuming you are not paying all cash)

Check with a local real estate professional to determine where prices are headed in your region for the type of home you are considering. However, even if prices are predicted to soften further in your area, the COST of the home may rise because of increased expenses in financing. These expenses could increase rather dramatically.

Interest Rates

Interest rates have remained at historic lows for over a year. As the economy improves, there will be less need for the government to keep rates low. Many are predicting interest rates will increase from 1/2 point to 3/4 of a point before the end of the year. We may also see an additional increase in rate for loans deemed “less qualified”.

New Mortgage Standards

The government has proposed a new definition for a “qualified residential mortgage”. The new standard would set a bar much higher than we have today. Anyone not meeting these requirements would not be eligible for the “best” rates available. What could be the difference in interest rate? In a white paper released last week by a group that included the Center for Responsible Lending and the National Association of Realtors:

Some private estimates have concluded that 5 percent risk retention could result in a three-percentage point rise in interest rates for loans funded through securitization. In other words, today’s 5 percent market would become an 8 percent interest-rate market.

Even if the rates for these loans are only one percentage point higher than the best rate, the additional cost to a buyer could be dramatic.

Impact of Interest Rates on Mortgage Payment

The interest rate you receive obviously plays a big role in determining your monthly mortgage payment. How big a role? Here is a chart showing how your payment is impacted even if home prices fall:

Bottom Line

You may have delayed your home purchase decision because of concern over where PRICES may be headed. To make the best financial decision for you and your family, also take into consideration where the overall COST of the purchase may be headed.

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BILL WOULD ALLOW REO PURCHASES WITH RETIREMENT FUNDS

A bill introduced in the U.S. House of Representatives would waive withdrawal penalties on certain retirement plans if the funds were used to buy a house that has been in foreclosure for a year or more, HousingWire reports.

The bill, introduced recently by congressman and real estate professional Bill Posey, R-Fla, is expected to apply to Roth IRAs, 401(k) plans, and company pension plans.

The legislation’s aim is to promote REO home purchases by owner occupants or second home owners rather than investors just looking to “flip” a foreclosure for fast money. According to the bill, purchasers must agree to hold the property for at least two years to be exempt from early retirement plan withdrawal penalties.

“It’s just another idea to help the housing market,” says press secretary George Cecala.

The bill has been sent to committee for further consideration.

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ZILLOW GOES PUBLIC, FILES FOR $52 MILLION IPO

You may soon be able to buy stock in Zillow. The Seattle-based real estate Web site filed on Monday preliminary documents for an initial public offering. The company hopes to raise about $51.75 million for its IPO.

Zillow has not yet disclosed how many shares it intends to sell or the price for each share.

Technology Crossover Ventures and PAR Investment Partners have already agreed to buy a total of $5.5 million of common stock from Zillow, CNNMoney.com reports.

Zillow, founded in 2004 and originally known for its popular “Zestimates” home value estimates on homes across the U.S., has seen its Web traffic quickly grow. In March, it boasted 19.4 million unique users from its Web site and mobile app, a more than 90 percent year-over-year increase in traffic. Its revenue has also increased significantly. In 2010, Zillow’s revenue increased by 74 percent to $30.5 million, according to the Securities and Exchange Commission filing.

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INVESTORS DROVE HOME SALES UP 3.7% IN MARCH

Investors drove up U.S. home sales last month, plunking down cash to grab cheap homes at risk of foreclosure. But purchases made by first-time homebuyers, who are crucial to a housing recovery, fell.

Sales of previously occupied homes rose in March to a seasonally adjusted annual rate of 5.1 million, the National Association of Realtors said Wednesday. That’s up 3.7 percent from 4.92 million in February. The pace is far below the 6 million homes a year that economists say represents a healthy market.

Foreclosures or short sales, when the lender agrees to accept less than is owed on the mortgage, rose to 40 percent of all purchases. And deals paid for entirely in cash accounted for 35 percent of all sales. The Realtors group says that’s the biggest percentage since they have been tracking all-cash sales.

Many of those purchases are being made by investors, who are targeting cheap properties in areas hit hardest by foreclosures. The trade group’s data only accounts for individual investors and does not include homes sold in bulk at auction or on courthouse steps. So many of the foreclosure sales are likely being picked up en masse by private equity firms.

Another sign of the investor activity is that sales of homes priced under $100,000 have risen 10 percent from a year ago. In that same period, sales of mid-priced homes, between $100,000 and $500,000, have fallen more than 14 percent.

Fewer first-time homebuyers, the types of people who set down roots and raise families, are entering the market. Sales among that group fell to 33 percent in March. A more healthy percentage of first-time buyers is 40 percent, according to the trade group.

One major obstacle to a housing recovery is the glut of unsold homes on the market. There were 3.55 million unsold homes in March. It would take 8.4 months to clear them off the market at today’s sales pace. Analysts say a six-month supply represents a healthy supply of homes.

“It is unlikely that home prices can recover on a sustained basis until the inventory-to-sales balance improves further and the number of distressed properties is significantly reduced,” said Steven A. Wood, chief economist at Insight Economics.

Foreclosures are also playing a big role in weakening the housing industry. A record 1 million homes were lost to foreclosure last year and foreclosure tracker RealtyTrac Inc. said it expects 1.2 million more will be lost to foreclosures this year.

For March, sales rose 8.2 percent in the South, 3.9 percent in the Northeast and 1 percent in the Midwest. Sales fell 0.8 percent in the West.

Sales of single-family homes rose 4 percent to an annual rate of 4.45 million units. Sales of condominiums rose 1.6 percent to a rate of 650,000 units.

We’ve got grey clouds, but don’t forget about the beauty nature brings.  Stop during your busy day and just soak it in…

 

“If you put off everything till you’re sure of it, you’ll never get anything done.” — Norman Vincent Peale: Was a minister and author of inspirational books

NEWS & HEADLINES

Auditing has become so bad that many large companies set aside a room, or block of them, for revolving teams of auditors from investors, Fannie, Freddie, the OTS, OTC, the FDIC, FRB, AA. Last week the servicing biz was in the headlines, with the first official “enforcement.” But in addition to those 14 servicing companies, LPS and MERS were both cited for “significant compliance failures” and “unsafe and unsound business practices” related to foreclosures. Regulators are requiring both companies to hire independent consultants, take remedial steps to address past failures and hire additional staff. LPS “faces the possibility of having to reimburse servicers and borrowers if an independent review finds anyone was financially harmed by its failure to properly execute mortgage documents” per an article by Kate Berry of American Banker. MERS said it is “already implementing changes to tighten corporate governance, improve internal controls and address quality-assurance issues identified by federal regulators.”

A few months ago MERS, with its 31 million residential mortgages on its system, told members not to foreclose in its name since borrowers have filed so many suits claiming the company has no standing to foreclose even though MERS has been listed as the lienholder in many foreclosure filings. MERS has 30 days to hire a third party to analyze and assess its directors, officers, management and staffing needs, and 90 days to create a plan to establish adequate internal control, risk management, audit and reporting requirements. But regulators never questioned the underlying business model of MERS, or attempt to answer the question, “Does MERS have the legal right to foreclose on a borrower?” This has led industry watchers to suggest that MERS has, in effect, had its procedures and processes validated.

For the 14 servicers, the implementation of the steps necessary to comply with the consent orders will further weigh in on timelines and increase servicing costs. Companies already have to reallocate resources away from production and into developing and implementing the plans. The order contained more than 25 action items and detailed over 50 sets of new policies, processes, and measures that need to be developed and implemented over the next 120 days. The biggest change will be the establishment of a single point of contact for borrowers. In addition, servicers will need to hire and train additional staff. Longer term, the additional staff should help to work through the backlog of foreclosures in the pipeline. And the state attorneys general are still negotiating with servicers over a potentially more far reaching agreement. The consent orders may give servicers some leverage in their negotiations. However, until an agreement with the AGs is completed, a cloud is expected to remain over the foreclosure process.

These thoughts all went through the market yesterday, as interest rates actually dropped. The Treasury’s10-yr closed better by about .250 and at a yield of 3.37%, and agency MBS prices improved by about .250. Stocks dropped, but Moody’s reaffirmed its positive outlook on the United States. Today, as mentioned, we had Housing Starts at 549k, up from a revised 512k, and Building Permits for March went from a revised 534k to 594k, both higher as expected. And we already had Goldman Sachs’ earnings, stronger than expected pretty much all the way around. The 10-yr is slightly worse at 3.39% and MBS prices are roughly unchanged.

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WHAT DO HOMEOWNERS SAY ABOUT HOMEOWNERSHIP?

There is no shortage of experts that want to let us know how Americans feel about owning a home after the collapse of the residential market in the last five years. They MUST be devastated. They MUST feel trapped like prisoners in their own homes. They MUST be sorry they ever bought the house. These assumptions seem logical at times and can occasionally be supported by anecdotal evidence.

However, we want to go to the only people who truly understand how homeowners feel – the homeowners themselves. There have been three major surveys done this year that can shed light on the issue:

The National Housing Survey

This survey conducted by Fannie Mae showed:

96% of all homeowners said homeownership has been a positive experience.

64% consider buying a home as a safe investment. Buying a home was considered safer than buying stocks by over three times the number of people (64% vs 17%).

The top four reasons to buy:

1. It means having a good place to raise children and provide a good education
2. You have a physical structure where you and your family feel safe
3. It allows you to have more space for your family
4. It gives you control over what you do with your living space (renovations & updates)

American Attitudes About Home Ownership

According to this survey conducted by Harris Interactive for the National Association of Realtors, home owners believe that home ownership benefits individuals and families and strengthens our communities.

The vast majority of home owners say that owning a home is a smart decision over the long term. Even in today’s challenging economy, 95% of owners believe that over a period of several years, it makes more sense to own a home.

Home owners are much more likely to be satisfied with the quality of their family and community life than renters. While more than half of owners (56%) are “very” or “extremely” satisfied with the overall quality of their family life, only about one-third (36%) of renters report the same levels of satisfaction. Also, 43% of home owners are “very” or “extremely” satisfied with their community life, compared with 30% of renters.

An overwhelming majority of home owners are happy with their decision to own a home. A full 93% of owners surveyed would buy again.

Pew Research Center Survey

This recent survey titled “Home Sweet Home. Still” delves into homeowners’ current belief in homeownership as a long term investment:

Homeowners whose home value has fallen only a little are equally enthusiastic about housing as a long-term investment: 85% say buying a home is the best long-term investment a person can make. Among those who say their home has maintained it value or increased in value, 88% agree…

Even those who have seen their home values plummet are still committed to the idea that buying a home is a solid, long-term investment. Among those who say their home has lost a lot of its value, 80% agree that buying a home is the best long-term investment (36% strongly agree, 44% agree somewhat).

Bottom Line

There have been families that have been devastated by the current economy. However, through it all, homeowners have not wavered in their belief in homeownership as the best long-term investment.

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HUD OFFERS GRANTS TO REMOVE HOME HAZARDS

The U.S. Department of Housing and Urban Development announced it will offer several grants to help remove housing-related health hazards – such as lead-based paint removal – from low-income homes.

“These grants are critical for states, counties, and cities who are on the front lines of protecting our children from lead hazards and other residential hazards,” says Jon Gant, director of the Office of Healthy Homes and Lead Hazard Control. “We look forward to communities applying for these grants so that they can help make older housing safer and healthier for children.”

The grants available include:

Lead-Based Paint Hazard Control (LHC) and the Lead Hazard Reduction (LHRD) grant programs: These grants will help identify and control lead-based paint hazards in privately owned housing for rental or owner-occupants.

Healthy Homes Production: A grant program that aims to help public and private entities address several housing-related hazards at the same time.

Asthma Interventions in Public and Assisted Multifamily Housing Grant: Grants that will help to evaluate programs for the control of asthma among residents of federally assisted multifamily housing.

HUD is making the grants available through its Lead-Based Paint Hazard Control, Lead Hazard Reduction Demonstration, Healthy Homes Production, and Asthma Interventions in Public and Assisted Multifamily Housing Grant Programs.

The application deadline for all of the grants above is June 9, 2011. For more information, visit www.grants.gov  or www.hud.gov .

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NAR ANNOUNCES INSURANCE BENEFIT FOR MEMBERS

REALTORS® now have access to an errors and omissions insurance program from the National Association of REALTORS® newest REALTOR Benefits® Partner, Victor O. Schinnerer & Company Inc.

“REALTORS® help consumers invest in their future through home ownership,” said NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I. “E&O insurance helps REALTORS® protect their own business investment while they’re helping buyers, sellers and investors achieve their real estate goals.”

Coverage is available to members in all 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands through Continental Casualty (CNA), a top-rated insurance carrier. Rates vary based on the type of coverage needed, area of specialty, and previous claims history.

The program offers a wide range of deductibles and claim limits as well as several premium credits, as allowed by state law. This includes a credit for being a REALTOR®, holding select NAR designations, continuing education, use of standard contracts, use of home warranties, and risk management programs. Schinnerer’s program also supports a broad range of real estate specialties including residential and commercial, property management, appraisal, and more.

Coverage was recently updated to include use of the Internet, such as Web sites, social networking, video hosting, and blogging. In addition, educational pieces and risk management services are available to policyholders. Schinnerer has developed a toolbox that includes a risk management newsletter, blog updates, webinars, and a toll-free hotline to discuss potential claims with a real estate claims specialist.

To sign up for the program and get more information, visit www.realtor.org/realtor_benefits/benefits_partners/eoinsurance .

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9 ITEMS HOMEBUYERS DESIRE IN 2011

Today’s homebuyers want it all. Some items on the shopping list: a home in great condition with rooms that can do double duty. Areas that mingle indoor and outdoor living — patios, porches, decks and outdoor rooms — are always a plus. And so are those features that offer a little luxury, like garden tubs, first-rate appliances and high-dollar countertops.

They’re also going back to basics: searching for solid, well-maintained properties that will give them their money’s worth. “I think this year they’re buying properties that are in good mechanical condition that have inherent value,” says Ron Phipps, president of the National Association of Realtors. But more than anything, buyers want to drive a hard bargain. They want “great deals,” says Patricia Szot, president of the MetroTex Association of Realtors. “And no matter where a seller prices their property, they’re looking to negotiate.”

Here are nine items popular with buyers this year:

Homes in Good Condition

Buyers demand homes that are well maintained, Phipps says. “There’s not a lot of flexibility in that.” The attitude is: “I’d rather spend the money getting into the house” and not have to spend more money later, he says. Buyers don’t want an unknown expense hanging over their heads.

Rock-Bottom Bargains

Buyers “are more focused on negotiating, drawing limits in their mind and focusing on the strategy,” says Justin Knoll, president of the Denver Board of Realtors.

Some of it is a point of pride, he says. “They want to tell their friends and family that they really got a smokin’ deal.”

They “want value,” says Alice Walker, president of the Greater Nashville Association of Realtors. “They are very picky. They’re just a lot more critical. They are not going to settle because they know they don’t have to.”

Her advice to sellers: Repair, update, clean and stage. “You have got to remove every obstacle possible for the buyers,” Walker says.

Outdoor Living Areas

“The thing that we’ve seen over the past couple of years is more outdoor living areas,” says Laurie Knudsen, president of the Charlotte Regional Realtor Association. Some popular features: Screen porches, outdoor kitchens, two-way fireplaces.

IncentivesCall it “Rock-bottom deals, part two.”

Along with pricing, “it’s all about incentives,” says Mabel Guzman, president of the Chicago Association of Realtors. To pique buyer interest, sellers offer everything from gift cards for new furniture and paint to financial assistance at closing.

Practical Green Features

Call it “Yankee frugality,” says Phipps. But what he sees on buyer shopping lists is a home that is easy on the planet because it’s easy on the wallet.

Buyers are looking for things like triple-glazed windows, high-efficiency boilers and energy-efficient appliances. “The buyer of today wants to make sure that the ongoing operating costs of the house are as controlled and economical as possible,” he says.

Open Kitchens

“The wall between the kitchen and the family room is evaporating,” Phipps says.

“The kitchen is becoming part of the gathering space,” he says. “And it’s ironic — it’s the way it was 300 years ago. We’ve come full circle.”

Repurposed Materials

Buyers like a material that looks or feels natural, even if it’s not the genuine article, Phipps says. For example, “granite (for counters) is still popular, but it doesn’t have to be granite,” he says. “It can be stone, another natural material or something that looks like stone.”

Smaller, Less-Formal Homes

Buyers are buying smaller homes, but they want to be able to use and reuse every inch of space, Phipps says. “They are being much more strategic and efficient with how they use it.”

Formal spaces that might only be used three or four times per year are disappearing. “The slipcover rooms are gone,” says Phipps.

That’s “led to a repurposing of space,” he says. Formal living rooms have been added to great rooms or converted into home offices or entertainment rooms.

Touches of Luxury

Buyers like luxury. And sometimes the amenities that convey that feeling of living large are relatively simple or inexpensive.

One example: coffee bars in the master bedroom. “It’s like a butler’s pantry in your bedroom,” Pratt says. “An area for your coffee pot and accoutrements and a little fridge.”