The Marion-Chicagoland Real Estate Notes

Mortgage Rates Fall Below 4%

2011-10-18T17:42:00.000-07:00

The average 30-year mortgage dropped to 3.94% for the week ending Wednesday, according to Freddie Mac’s weekly rate survey released on Thursday.

Reflecting both tight credit standards and anemic demand, applications for mortgages actually fell last week, according to a separate report from the Mortgage Bankers Association on Wednesday. The MBA said overall mortgage application volume was down by a seasonally adjusted 4.3% from the prior week. Read More...

The Right Time to Buy or Sell

2010-10-29T09:01:00.001-07:00

With winter approaching, many homebuyers and sellers assume now is the time to put real estate matters on hold. That logic may have held true in years past, but in the current market the idea of hibernating for the winter may not be the best decision. Following are a few reasons why right now is the right time for both buyers and sellers to be in the market.

Good Time to Buy
1. Price - The #1 reason qualified individuals are reluctant to buy today is a fear that prices will fall. And they may. But according to a recent story on MSN.com, "it doesn't really matter in the long haul." Housing affordability is near an all-time high, and according to the S&P/Case Shiller Home Price Index, local prices have increased for six consecutive months through August.
2. Interest Rates - Mortgage interest rates are 30% lower than they were four years ago. When you layer today's rates on top of prices that are 30% lower, you get monthly principal and interest that is only slightly more than half of what it was four years ago. That's a big deal.
3. Less Expensive Than Renting - According to the latest Trulia.com Rent vs. Buy Index, it is less expensive to own a home in Chicago than it is to rent. The 50-city index is calculated using the average list price compared with the average rent on two-bedroom apartments, condos, townhomes and co-ops listed on Trulia.com.

Good Time to Sell
1. Buyers Are Serious - It may be fun to drive around and look at open houses on a beautiful summer day, but when the weather starts to turn and people get busy with holiday schedules, kicking the tires on a new home is usually the last thing on someone's mind...unless, of course, they actually need to buy. Sure, there are fewer buyers in the fall and winter, but the ones who are out there are serious.
2. You're Moving Up - The thought of losing equity on a sale doesn't appeal to anyone, but in this market, sellers who trade up have more to gain than to lose. That's because, dollar for dollar, the more expensive home they're buying almost certainly has come down in price more than the home they're selling, which means move-up buyers will actually come out ahead provided they have the finances to complete a transaction.
3. Less Competition - While inventories remain high relative to past markets, the number of homes for sale in the fall and winter is generally about 25% less than in the spring. In addition, the recent moratorium on foreclosures has kept thousands of homes off the market. Those homes will eventually be put up for sale. So if you can capture the last few weeks of fall, you will face less competition than if you wait until next spring.

If you're considering buying or selling, there are many more reasons why it makes sense to do so now. To talk about your specific real estate needs, e-mail diannah@themariongrp today!

HAPPY HOLIDAYS!

2009-12-16T09:17:00.000-08:00

Buying - Selling - Investing - Professional Property Management Services - & Leasing: Contact The Marion Group - Marion Real Estate Services at 773-384-7256.

FROM OUR FAMILY TO YOURS...ENJOY YOUR HOLIDAY SEASON.

Real Estate News Brief....

2009-10-07T16:30:00.000-07:00

Buying - Selling - Investing - Professional Property Management Services - Vacation Rentals & Leasing: Contact The Marion Group - Marion Real Estate Services at 773-384-7256.
Record Streak Continues for Pending Home Sales...
Pending home sales continue record streak; up for seventh straight month...
Pending home sales have increased for seven straight months, the longest in the series of the index which began in 2001. The Pending Home Sales Index,* a forward-looking indicator based on contracts signed in August, rose 6.4 percent to 103.8 from a reading of 97.6 in July, and is 12.4 percent above August 2008 when it was 92.4. The index is at the highest level since March 2007 when it was 104.5.

30-YEAR FIXED-RATE MORTGAGE LOWEST IN FOUR MONTHS, NEARING ALL-TIME LOW SET IN SURVEY IN APRIL...
5-Year Fixed Mortgage Rates Are The Lowest Since Freddie Mac Records Began In 1991; 5-Year ARM Rates Also Hits Record Low....Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey® (PMMS®) in which the 30-year fixed-rate mortgage (FRM) averaged 4.94 percent with an average 0.7 point for the week ending October 1, 2009, down from last week when it averaged 5.04 percent. Last year at this time, the 30-year FRM averaged 6.10 percent. The last time the 30-year FRM was below 5 percent was the week ending May 28, 2009, when it averaged 4.91 percent.
The 15-year FRM this week averaged 4.36 percent with an average 0.6 point, down from last week when it averaged 4.46 percent. A year ago at this time, the 15-year FRM averaged 5.78 percent. This is the lowest the 15-year FRM has been since Freddie Mac started tracking it in 1991.
The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.42 percent this week, with an average 0.6 point, down from last week when it averaged 4.51 percent. A year ago, the 5-year ARM averaged 6.00 percent.
The one-year Treasury-indexed ARM averaged 4.49 percent this week with an average 0.5 point, down from last week when it averaged 4.52 percent. At this time last year, the 1-year ARM averaged 5.12 percent...more

We Welcome Referrals!

Real Estate News Brief....

2009-07-09T15:03:00.000-07:00

The Marion Group - Marion Real Estate Services
Your Full-Scale, High-Performance Real Estate Brokerage
Diannah Evans, Owner/Broker, GRI
http://www.buyinchicago.com/
http://www.marionpropertymanagement.com/
Telephone : 773-384-7256

We hope you and your family & friends enjoyed a Safe and Happy 4th of July!!

The Marion Group offers free listing services for your property (for a limited time!). Weather buying , selling ,investing , leasing, vacation rentals or professional property management , contact us for a professional consultation to meet your real estate needs. To receive our up to date real estate newsletter, visit http://www.buyinchicago.com/or any one of our websites with the request;or contact us at 773-384-7256!
Buyers:
Six tips that tell you it's time ... 1. familiar with the market.. Contact Us... 2.Have the money for a down payment and closing costs 3.Know how much you can afford. 4. Know what additional expenses will come with owning a home. 5.Have your credit in good shape and make sure your credit report is accurate. 6.You haven't made any recent major purchases, particularly a vehicle.

Mortgage news Mortgage loan now requires higher down payment, credit score
You may think that having a credit score of at least 700 and a down payment of almost 5 percent will help you buy a home in this home buying environment. But lenders have tightened credit requirements for obtaining a mortgage when you're buying a home.You may still be able to get an affordable mortgage through the FHA, which has lower down payment requirements, or that you're better off waiting until you have improved your credit score and saved more money for a down payment.more...
When you decide to purchase property now, speak with a mortgage lender to see what options you may have. You may be pleasantly surprised to find that you will qualify. Then, contact The Marion Group-Marion Real Estate Services,and speak with one of our agents!

Sellers: Contact Marion Real Estate Services to list your property to Sale! 773-384-7256. ( Services also include professional property management, leasing, vacation rentals.)
Step 1. Plan & prepare to sell your property 2. Get A Skilled, Experienced & Knowledgeable Brokerage, Diannah Evans, Broker, GRI 3. Set the price 4. Market It 5. Sell It 6. Closing!

Have the advantage and access to state of the art inventory that consists of buyers, sellers & investors. Contact 773-384-7256 and speak with one of our agents today about services customized to fit your real estate needs.

Memberships: National Association of Realtors (NAR), Graduate Realtor Institute (GRI), Illinois Association of Realtors (IAR), Chicago Association of Realtors (CAR), REBAC, Cambridge Who's Who

Real Estate News Brief...

2009-06-22T20:23:00.000-07:00

The Marion Group - Marion Real Estate Services...
Thinking of buying, selling, or investment? Interested in vacation rentals, leasing? Contact us today for a professional, consultation, at 773-384-7256.
www.buyinchicago.com
www.marionpropertymanagement.com
The Marion-Chicagoland Real Estate Notes
For a limited time, owners can list their property for free on our website(s). Whether you are a seller, buyer, investor, interested in rental, vacation rentals or property management. www.marionpropertymanagement.com Contact us for details!..

Sellers:A federal tax credit of up to $8,000 is nudging many Americans into buying a home for the first time -- good news for those trying to sell one. . more

Buyers: Home Ownership: Buying a home is the largest purchase most people will ever make. Homeownership has great benefits. Homeownership also comes with certain responsibilities. more ..

The American Recovery and Reinvestment Act of 2009 features $8,000 first-time buyer tax credit for first-time buyers who purchase a home on or after Jan. 1, 2009 and before Dec. 1, 2009.more

Mortgage Rates: Freddie Mac (NYSE:FRE) released the results of its Primary Mortgage Market Survey® (PMMS®) in which the 30-year fixed-rate mortgage (FRM) averaged 5.38 percent with an average 0.7 point for the week ending June 18, 2009, down from last week when it averaged 5.59 percent. Last year at this time, the 30-year FRM averaged 6.42 percent. more ..

If you are interested in Selling, Buying, Investing or need Professional Property Management Services, including leasing and vacation rentals, Contact Marion Real Estate Services at 773-384-7256 for a free market analysis and consultation to meet your specific real estate needs.

* Buyer/Investment Division *Sales Division * Property Management Division including leasing and vacation rentals

Memberships:
National Association of Realtors
Illinois Association of Realtors
Chicago Association of Realtors
Graduate Realtor Institute (GRI)
Cambridge's Who's Who
REBAC

Marion Real Estate Services - Your Premium, High Performance Real Estate Brokerage!

U.S. Median House Price Declines 14%...

2009-05-16T01:26:00.000-07:00

The median price for a single-family house fell 14% to $169,000 in the first quarter from a year earlier, the National Association of Realtors reported.
The trade group said first-time home buyers accounted for half of all purchases in the quarter, and many of them zeroed in on foreclosed homes. The median price for the latest quarter is down 26% from a peak of $227,600 in the third quarter of 2005. The latest median price was down from a year earlier in 134 of the 152 metro areas included in the survey.
The biggest increase was in the Cumberland area of Maryland and West Virginia, where the median price climbed 21% to $114,900. Debbie Grimm, manager of the Long & Foster real-estate brokerage in Cumberland, Md., said the area is attracting retirees and second-home buyers, particularly from Washington and Baltimore.
The lowest median price among the metro areas was $30,300 in Saginaw, Mich., and the highest was $570,000 in Honolulu. Most of the areas with the lowest prices are in troubled parts of the industrial Midwest. But a glut of homes in Cape Coral-Fort Myers, Fla., pushed the median down 59% from a year earlier to $87,300 -- ranking it just below Gary, Ind., which, at $92,000, was down 26%.
Sales of single-family homes and condominiums declined 6.8% from a year earlier to a seasonally adjusted annual rate of 4.6 million units. But sales were up sharply in some areas hardest hit by the housing bust, largely because bargain hunters were out in force. States with big sales increases from the depressed levels of a year before included Nevada (up 117%), California (81%) and Arizona (50%) and Florida (25%)....more

Challenges rise in developing Olympic Village..

2009-05-16T01:18:00.000-07:00

Real estate developers are starting to get a glimpse of the challenges they’ll face in developing the athletes’ village if Chicago is chosen to host the 2016 Summer Olympics.
Among them is building up to 2,500 residential units that will hit the market all at once, obtaining financing and meeting the needs of the Olympics and those of the private market, which is the final destination for the project. Cassandra Francis, who is spearheading the project for the Chicago 2016 bid committee, offered some details during a luncheon Wednesday sponsored by the Chicago School of Real Estate at Roosevelt University.

The village is the highest-priced item to be built for the games. It’s a nearly $1-billion project on the site of the former Michael Reese Hospital on the city’s South Side. Although Chicago is buying the site for $86 million, the city and the Olympics organizing community are counting on private developers to construct and finance the housing project. That has become an increasingly dicey proposition since London and Vancouver, British Columbia, sites of the next two Olympics, have needed government help to keep privately developed villages on track.
Financing could be hard to line up because banks are no longer lending as generously as they did before, raising questions about whether private developers can handle the project alone.

“That’s one of the concerns the (International Olympic Committee) has,” Ms. Francis said. “We do believe we can get traditional financing.” She said the bid committee also is looking into federal financing for portions of the project that involve affordable housing, housing for seniors and student housing. ..more

Federal Housing Rescue Plan Launches ...

2009-05-16T01:08:00.000-07:00

The Obama Administration’s program to rescue distressed home owners got off the ground this week. The program was announced on Feb. 18, but it took several weeks to put the bureaucracy in place.Six of the nation’s largest banks signed up to participate, the Treasury Department announced Wednesday. They are JPMorgan Chase, Wells Fargo, Citigroup, GMAC Mortgage, Saxon Mortgage Services, and Select Portfolio Servicing.Treasury says it is allocating $50 billion to the program. The Department of Housing and Urban Development will provide the rest.The plan calls for loan servicers to reduce interest rates so a family’s monthly mortgage obligation is no more than 38 percent of its pre-tax income. Loan servicers also can reduce loan balances. After the loans are modified, the government then provides enough money to reduce payments to 31 percent of income.Participating servicers get $1,000 a year for each modification and another $1,000 a year for three years if the borrower remains current. Servicers get an extra $500 if they do the modifications before the borrower falls behind in his payments—and the borrower gets $1,500. Also, homeowners get $1,000 a year for five years if they remain current on their payments. The money must be used to reduce their principal balances.
Source: CNN, Tami Luhby (04/16/2009)

10 Happiest States in the U.S. ...

2009-05-16T01:07:00.000-07:00

MainStreet.com’s Happiness Index examined household income, debt, employment, and foreclosures to choose the states that are surviving the current economic crisis with the most panache.The analysis discovered that despite disastrous conditions in parts of Michigan and Ohio, overall, the Midwest is navigating the financial meltdown with the highest average salaries, lowest unemployment, and fewest foreclosures. In fact, Nebraska, in the center of the corn belt, scores highest on MainStreet’s Happiness Index.Here are the rest of the top-10 happiest states:
Nebraska
Iowa
Kansas
Hawaii
Louisiana
Oklahoma
Wyoming
South Dakota
West Virginia
Wisconsin
Source: MainStreet.com, Stephen Dalton (04/06/2009)

10 Riskiest U.S. Housing Markets...

2009-05-16T01:04:00.000-07:00

Even with hints of a housing recovery in some places, risky markets, dominated by nonprime mortgages, still prevail in a number of areas. Forbes magazine and Moody’s Economy.com surveyed the 200 largest metropolitan areas, adding up the number of loans to low-rated borrowers and dividing that sum by the total number of mortgages to calculate the percentage of each area’s market that is below prime. Here are the 10 metro areas with the highest percentages of nonprime mortgages, which makes them susceptible to defaults as unemployment rates continue to rise.
Mission, Texas
Detroit
Miami
Brownsville, Texas
Merced, Calif.
Lakeland, Fla.
Bakersfield, Calif.
Fort Lauderdale, Fla.
San Bernardino, Calif.
Visalia, Calif.
Source: Forbes, Maha Atal (03/31/2009)

Big Improvement to First-Time Buyer Tax Credit ...

2009-05-16T00:54:00.000-07:00

Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, on Tuesday said that the Federal Housing Administration is going to permit its lenders to allow home buyers to use the $8,000 tax credit as a down payment.Previously, most buyers wouldn't receive the funds until after they filed their tax return, and that deterred some people from using the credit. The NATIONAL ASSOCIATION OF REALTORS® has been calling for the change. “We all want to enable FHA consumers to access the home buyer tax credit funds when they close on their home loans so that the cash can be used as a down payment.” Mr. Donovan says FHA’s approved lenders will be permitted to “monetize” the tax credit through short-term bridge loans. This will allow eligible home buyers to access the funds immediately at the closing table.
courtesy NAR

Thirty-Year Mortgage Hits a Low of 4.85% ...

2009-03-30T12:27:00.000-07:00

The average rate on 30-year fixed-rate home mortgages hit a record low this week, after the Federal Reserve announced it would purchase Treasury securities over the next six months, Freddie Mac's chief economist said on Thursday.
The 30-year mortgage averaged 4.85% in the week ended March 26, the lowest point since Freddie Mac's weekly survey began in 1971. Last week, the mortgage averaged 4.98%; the mortgage averaged 5.85% a year ago.
Fifteen-year fixed-rate mortgages and five-year adjustable-rate mortgages also hit record lows. The 15-year fixed-rate mortgage averaged 4.58% and hasn't been lower since 1991, when the survey began tracking the mortgage. The 15-year mortgage averaged 4.61% last week and 5.34% a year ago.
Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 4.96%, the lowest since the survey began tracking the ARM in 2005. The ARM averaged 4.98% last week and 5.67% a year ago.more...

FAQ’s Regarding the 2009 Federal First-TimeHomebuyers Tax Credit...

2009-02-28T20:59:00.000-08:00

The American Recovery and Reinvestment Act of 2009 was signed on February 17, 2009. The Act includes a few revisions for the First-Time Homebuyers Tax Credit.
The bill provides for a $8,000 tax credit that would be available to first-time home buyers for the purchase of a principal residence on or after January 1, 2009 and before December 1, 2009. The credit does not require repayment. Most of the mechanics of the credit will be the same as under the 2008 rules: the credit will be claimed on a tax return to reduce the purchaser's income tax liability. If any credit amount remains unused, then the unused amount will be refunded as a check to the purchaser.

Q What is the amount of the new tax
credit?
A $8,000
Q Who is eligible for the $8,000 tax
credit?
A First time homebuyers who closed (or will close)
on homes between January 1, 2009 and November
30, 2009.
Q What are the details of the new tax
credit?
A Thenewtaxcredit isan $8,000 refundabletax credit
(orupto10%of thepurchaseprice). Thismeans that if your
total tax liability in the given year is less than $8,000 the IRS
will send a refund for the balance.
Q Do I have to pay back the credit?
A If you occupy your home for three years you will
not have to pay back the credit.
Q Who qualifies for the credit?
A •First-time homebuyers (Taxpayers who owned
a main home at any time during the three years prior
to the date of purchase are not eligible).
• Purchasers of a “main home.” i.e. principal
residence. The home must be a home located in the
United States and is generally considered to be the
home where you spend 50% or more of your time. It
can be a condo, single family detached, co-op,
townhouse or something similar. Vacation homes and
rental properties are not eligible. For new
construction, the “purchase date” is the date you
occupy the home.
Q What if I purchased a home between
April 8, 2008 and January 1, 2009?
A Purchasers who bought between 4/8/08 and
1/1/2009 are subject to the terms of the $7,500
repayable credit.
Q What are the income limits?
A The credit is reduced or eliminated for higherincome
taxpayers. Joint filers with a MAGI of $170,000
and above and single filers with a MAGI of $95,000 and
above are ineligible for the credit. Singles making
between $75,000 and $95,000 and joint filerswith aMAGI
of between $150,000 and $170,000 are in the “phase-out”
range, meaning you will only receive a fraction for the
$8,000 tax credit.
Q When/How can I claim the credit?
A It can be claimed on your 2008 tax return (to be
filed by April 15, 2009), an amended 2008 Tax Return,
or your 2009 Tax Return.
Q Who do I contact if I have more
questions about this credit?
A Contact your tax preparer, or
call the IRS toll-free at (800) 829-1040 for more
information on the tax credit. This information is
accurate based on the information available as of
February 19, 2009. As with any tax law change, check
with a tax advisor if there are any question regarding
using this provision.
courtesy, CAR

Low Mortgage Rates Will Cost You ...

2009-02-28T20:37:00.000-08:00

Mortgage rates are low, but getting a home loan is going to cost you.
New rules by Freddie Mac and Fannie Mae are upping the fees for borrowers with less than perfect credit, those in the mortgage industry say. Other increased costs reflect the uncertainty in the mortgage market as lenders try to reduce their risk and anticipate rates.
"It's an interesting time, in that mortgage rates are historically low," says Amy Bohutinsky, vice president of communications for Zillow.com, a real-estate Web site. "But at the same time, while rates are low, lending standards are still really tight. What that means is that people who qualify for these really good rates … fall under a strict set of guidelines."
Even borrowers with decent credit aren't immune to higher fees and mortgage costs. In general, to get the low rates that make the headlines, borrowers also are often paying more points, or prepaid interest, that bring the mortgage rate down.
Pricing Changes
If you look at where mortgage pricing was a year and a half ago, and where it is now, "there have been a slew of changes, mostly negative from a borrower's perspective," says Rick Allen, vice president of MortgageMarvel.com, a mortgage Web site.
The most recent changes started to show up in lenders' rate sheets this year. New risk-based pricing from Freddie Mac and Fannie Mae adds fees to mortgages based on a borrower's credit score. In order to avoid the extra fees, borrowers need to have a FICO score of 740 or higher, says Dan Green, loan officer with Mobium Mortgage in Cincinnati and author of TheMortgageReports.com.
The new rules take effect in April at Fannie and Freddie, but many lenders have already incorporated them.
The new fees, called loan-level price adjustments, have been an unwelcome surprise for some homeowners interested in taking advantage of low rates. "It has created a different pricing scenario from one consumer to the next," Mr. Allen says. "What you see in the Sunday paper could be perfectly close for one borrower. The guy next door could be 1% higher."
Charges have also gone up for those who extract equity from their home through a cash-out refinance. Condo financing could also cost more.
According to Freddie Mac's weekly rate survey, the average rate on a 30-year fixed-rate conforming mortgage was 5.05% in January, and a payment of an average 0.7 point was required to obtain the rate. A year ago, the average rate was 5.76%, but it took just 0.4 point to get it.
There's an inverse relationship between points and rates; the more points you pay, the lower the rate becomes. A point is 1% of the mortgage amount, charged as prepaid interest.more...

Prices to fall here less than other cities: forecast..

2009-02-18T18:58:00.000-08:00

Prices of single-family homes in the Chicago-area will hit bottom in early 2010 after a three-year, 17.1% drop, according to a new forecast. That may not sound like good news, but it is considering how much more prices are projected to plunge in other big metropolitan areas. And prices here had already declined by 13.3% through the third quarter of 2008, meaning they don’t have much further to fall, according to the forecast by Moody’s Economy.com.
Still, it could be a while before prices here and nationwide rebound as the economy struggles to get back on its feet after the worst recession in a generation.
“We’re not really going to see a recovery before 2011 or 2012,” says Sophia Koropeckyj, managing director of industry economics at Moody’s Economy.com.
The West Chester, Pa.-based research firm developed its price forecast by using projections for key economic indicators, like unemployment and foreclosures, to estimate the future direction of the S&P/Case-Shiller index, a widely cited home-price survey based on repeat sales of the same properties. The study looked at 369 U.S. metro areas, focusing only on single-family homes. more...

Report: Some Home Prices to Bottom Out in 2009 ...

2009-02-08T09:50:00.000-08:00

House prices in much of the U.S. will bottom out in this year's fourth quarter, Moody's Economy.com says in a new report.
In some of the hardest hit markets, however, prices won't reach a bottom until 2010 or 2011, the research firm says in a report written by its chief economist, Mark Zandi.
"Despite the darkening national economic outlook and the weak conditions in the housing market, some positive signs give hope that a bottom in the housing market is coming into view," the report says.
It cites signs that home sales are stabilizing as people snap up bargains on foreclosures, a decline in the supply of unsold homes in many areas and expectations of moves by the Obama administration "that will help place a floor under the housing downturn." Those measures could include lowering mortgage rates further, preventing more foreclosures and generating jobs through higher federal spending.
On average, house prices nationwide will hit bottom in this year's fourth quarter at a level 36% below the peak reached in the first quarter of 2006, the report says. The price measure is based on the Fiserv Case-Shiller index.
But some areas will be hit much harder. For instance, the Naples-Marco Island, Fla., area is expected to bottom out in the fourth quarter of 2010 with prices 70% below the peak. The report projects that peak-to-trough declines for metro areas will be 66% in Miami, Fla., 63% in Riverside-San Bernardino, Calif., 58% in Phoenix, 56% in Las Vegas, 53% in Los Angeles, 38% in Washington and 33% in New York. Within those metro areas, different neighborhoods are likely to show very divergent performances; the most desirable areas near good schools and jobs are faring much better than other places.more...

Chicago home prices down less than U.S. in Nov

2009-01-29T09:26:00.000-08:00

Chicago home prices fell in November but not as much as prices nationwide, which a widely watched index shows dropped by the sharpest annual rate on record.
But the silver lining might be that more families can finally buy a home for the first time in years. Falling home prices coupled with lower interest rates have shaved hundreds of dollars off monthly mortgage payments, and that is luring buyers back into the market, new data this week showed.
The Standard & Poor's/Case-Shiller 20-city housing index released Tuesday tumbled by a record 18.2 percent from November 2007, the largest decline since its inception in 2000.
Chicago prices fell 12.5 percent compared with November 2007 and 2.8 percent compared with October 2008, the S&P/Case-Shiller data show.
Both the 20- and 10-city indices have recorded year-over-year declines for 23 straight months. Prices are at levels not seen since February 2004.
But the numbers may not be as ugly at second glance, according to Patrick Newport, an economist with IHS Global Insight.
"If you adjust for inflation, they're not record declines," Newport said. "Home prices are still dropping at about a 20-percent clip, but it's not as bad as it's been in last six months."
But the recession and sweeping job losses don't bode well for a near-term turnaround in housing prices. Newport estimates prices will drop another 10 percent to 15 percent this year.
In fact, Americans' mood about the economy darkened further in January, sending a widely watched barometer of consumer sentiment to a new low, the Conference Board said Tuesday.

The National Association of Realtors said Monday that the median home price fell a record 15 percent last month to $175,400, down from $207,000 a year ago. That led to a surprising jump in sales from November's level.
With current interest rates and a 10 percent down payment, anyone who buys a median-priced home now would save $254 a month compared with the median price and interest rate of a year ago. more...

10 Cities Boasting Mini Sales Booms ...

2009-01-18T06:28:00.000-08:00

Some cities that were hardest hit by the real downturn are experiencing mini sales booms.Las Vegas real estate properties are down 28 percent in price, but sales of homes are up 15 percent.Motivated buyers accounted for 64 percent of Las Vegas sales in October, says Radar Logic, a derivatives firm. That’s the highest rate in the country."There's a pretty active housing market, it's simply at a lower-priced inventory," says Michael Feder, chief executive of Radar Logic. "And there are now bidding wars taking place over homes in foreclosure."Phoenix and San Diego are reporting similar experiences. "We're clearing out the bad news," says Kiva Patten, a director at Merrill Lynch specializing in housing derivatives."By the end of 2010 – that's where we're calling the bottom in the forward market. You're going to get a small price appreciation in 2011," says Patten. "It's not like the turn is 10 percent per year, it'll be something like 3 percent or 4 percent."Here are the cities where experts say it makes the most sense to buy now.
Las Vegas
Sacramento, Calif.
San Diego, Calif.
Los Angeles
Detroit
Phoenix
San Francisco
Washington, D.C.
San Jose
AtlantaSource: Forbes, Matt Woolsey (01/12/09)

Short Sale v. Foreclosure

2009-01-10T07:45:00.000-08:00

Both short sales and bank-owned homes you are negotiating with lenders rather than sellers. In a short sale, the seller might be desperate to accept any offer to avoid foreclosure, but that doesn't matter if the primary and junior lien holders don't agree to it. With bank-owned properties, you will be dealing with the "real-estate owned" or REO department of the lender who took ownership of the house at the auction. In both cases, you should be prepared to be patient, since lenders are overwhelmed with distress sales these days and may take weeks to respond to your offer. According to a survey of real-estate agents conducted in November by Campbell Communications the average wait time to get an answer from a lender on a short sale is 8.1 weeks, up from 4.5 weeks in a survey conducted earlier in 2008.
While it isn't unusual to see both short sales and bank-owned properties listed at prices far below those offered by traditional sellers, don't expect them to sell for much more than 20% below asking price, says Fort Lauderdale, Fla., broker Scott Coloney, who has assembled a "foreclosure response team" of financial and legal partners to facilitate distress sales. In fact, properties in good condition and in desirable locations may even spark bidding wars...more

With Rates This Low...

2008-12-15T07:52:00.000-08:00

The Treasury Department is considering a plan to push down 30-year fixed-rate rates for home purchases to as low as 4.5%, in the hopes that it will stimulate sales, stop the freefall of prices, and allow homeowners to afford bigger loans.
But the proposed plan only helps those who buy homes, not those who want to refinance. Furthermore, you must have a steady job and good credit to qualify -- and you must not owe more on the house than it's worth.
Assuming the plan comes to fruition and you're in the market for a new home, should you take the bait?
Let's look at the pros and cons:
Pros: Unless a seller or builder bought down your rate, it's likely that you've never had the chance to buy a home with a 4.5% fixed-rate mortgage (see 30 Year FRM 1971-2008 graph at (mortgage-x.com). It's so tempting a rate that it may entice fence-sitters who have been waiting for home prices to hit bottom to jump anyway, since it (and other stimulus measures like it) are likely to evaporate once the economy starts to improve.
If the government succeeds in cutting rates to these levels, it will boost buying power considerably. If you bought a resale home at the current median price of $183,300 and took out a loan for 80% of the purchase price, you'd pay $879 a month at a 6% rate, but only $743 a month at 4.5%. Assuming that you don't try to buy more house than you can afford, presumably you will have more money to buy other goods, like a car or washing machine. Boosting the bottom line of retailers will help save jobs, which must happen before the economy can get back on track.
Cons: If, tempted by low rates, you take on a bigger loan than you can afford, at a time when jobs are being erased, you're not just putting your financial future at risk -- you're reaffirming the whole free-spending, McMansion-loving culture that created this mess in the first place.
Employers have cut 1.2 million jobs this year, sending the unemployment rate to a 14-year high of 6.5%, and economists expect that the rate will be higher when the Labor Department announces November's numbers on Friday.

The bottom line: If you can get a lower fixed-rate loan than you have now, either for a new purchase or a refinance, you'd be foolish not to take it. But there's no reason that you have to use the money for a bigger house, or a bigger loan. Downsize your expectations, your home and your debt, and you'll be better prepared if you yourself are downsized...more

Investors Not Happy With 4-Loan Limit...

2008-12-13T07:10:00.000-08:00

Some real estate investors are up in arms over a new Fannie Mae-Freddie Mac policy that limits to four the number of real estate loans that can be held by a single person.
The rule, which took effect Dec. 1, prohibits an investor from obtaining even a fifth mortgage no matter how much money he puts down or how much income documentation he provides. It offers no exceptions for assets or history of success as a real estate investor.
“The four-house rule is going to keep us in a recession longer,” said Tom Hutchens, an Atlanta-area investor. “It’s going to keep qualified buyers out of the market.”

Some investors are trying to work around the rule by partnering with other investors to either buy in cash or use their eligibility to borrow.

Source: The Atlanta Journal-Constitution, D.L. Bennett (12/05/08)

Mortgage Rates Take a Big Dip

2008-12-13T07:06:00.000-08:00

For the week ended Dec. 3, Freddie Mac reported the lowest interest on 30-year fixed home loans since late January.
The rate came in at an average of 5.53 percent, down from 5.97 percent the previous week and 5.96 percent a year ago; while 15-year fixed mortgages settled at 5.33 percent compared to 5.74 percent last week and 5.65 percent in the year-earlier period.

Borrowing costs for short-term loans also were lower, with one-year adjustable-rate mortgages dipping to 5.02 percent from 5.18 percent a week ago and 5.46 percent a year ago.
Five-year hybrid ARMs, meanwhile, fell to 5.77 percent from 5.86 percent last week and 5.75 percent during the same period of last year.

Source: Realty Times (12/05/08)

Existing-Home Sales Down as Buyers Hesitate

2008-11-26T18:04:00.000-08:00

Existing-home sales declined on the heels of a strong gain in September as uncertainty and economic concerns increased in October, according to the NATIONAL ASSOCIATION OF REALTORS®.
Existing-home sales—including single-family, townhomes, condominiums and co-ops—fell 3.1 percent to a seasonally adjusted annual rate of 4.98 million units in October from a downwardly revised pace of 5.14 million in September. Sales and are 1.6 percent below the 5.06 million-unit level in October 2007
Single-family home sales declined 3.3 percent to a seasonally adjusted annual rate of 4.43 million in October from a level of 4.58 million in September, but are unchanged from a 4.43 million-unit pace in October 2007.
Condominium and co-op sales eased by 1.8 percent to a seasonally adjusted annual rate of 550,000 units in October from 560,000 in September, and are 12.0 percent below the 625,000-unit pace a year ago.
Lawrence Yun, NAR chief economist, said consumer hesitation is understandable.
“Many potential home buyers appear to have withdrawn from the market due to the stock market collapse and deteriorating economic conditions,” he said. “We have favorable affordability conditions, but we need more than that to give buyers with jobs the confidence they need. This is why a housing stimulus is so critical now to encourage more buyers to draw down the inventory and stabilize home prices. Without home price stabilization, there will not be an economic recovery.”
Regional Data
Midwest. Existing-home sales in the Midwest fell 6.0 percent in October to a pace of 1.10 million and remain 9.1 percent below October 2007. The median price in the Midwest was $149,400, down 6.7 percent from a year ago.

—NAR

Slow Mortgage Start ...

2008-11-09T21:29:00.000-08:00

The federal government's latest effort to help financially distressed homeowners is getting off to a slow start.
Lenders filed just 42 applications to refinance troubled mortgages under the federal Hope for Homeowners program in the two weeks after the program's Oct. 1 launch, according to the Federal Housing Administration. Some estimates have suggested that it could eventually help as many as 400,000 homeowners.
The program allows mortgage companies to refinance delinquent borrowers into affordable, government-backed loans, provided the mortgage company writes down a portion of the loan balance. To qualify for a new loan, homeowners must agree to share future appreciation with the federal government. In addition, the new loan amount -- including a 3% upfront mortgage insurance premium -- can't exceed 90% of the current appraised value, which is likely to mean a significant reduction in the loan balance....more

Local real estate outlook...

2008-11-09T21:19:00.000-08:00

The Chicago real estate market has moved up in an annual popularity contest, but it still gets a lukewarm reception from investors.
Chicago ranks 10th for commercial and multifamily residential investment in the 2009 "Emerging Trends in Real Estate" survey released last month by the Urban Land Institute and PricewaterhouseCoopers LLP. That's up from 12th in the 2008 survey.
Critics cite a glut in office space and coInvestors are concerned about Chicago's overbuilt condo market, which is having a negative spillover effect on apartments as more condo investors, unable to sell their units, rent them out instead. About 28% said they would buy into the local apartment market.ndominiums as big negatives for the market, while fans like the transportation and infrastructure and the buzz surrounding the city's 2016 Olympics bid.
Respondents gave Chicago a rating of 5.1 on a 9-point scale, down from 5.5 in the 2008 survey and the lowest score since 1994. With the economy heading into a recession and the credit markets locked up, investors gave most big markets lower ratings than they did in the last survey.
Chicago's "not doing great, but it's doing much better than other Midwestern markets," says Jonathan Miller, principal author of the "Emerging Trends" report....more
Crains Chicago Business

2009 Economic Outlook

2008-11-01T19:06:00.000-07:00

The U.S. economy has entered a recession and will contract for the next three quarters, and the recovery, from the second half of 2009, will be tepid. The unemployment rate will peak at 6.7 percent by midyear next year before steadily heading down. However, existing home sales will be rising despite challenging economic times.
The most important factor driving home sales is affordability. With home prices falling in many parts of the country and mortgage rates still near historic lows, affordability conditions have markedly improved. Even with rising unemployment, nearly 93 percent of households will have jobs. This 93 percent of working households (rather than 95 percent during good economic times) respond to incentives. Added measures, from the first-time homebuyer tax credit to a larger number of mortgage loans qualifying to be purchased by Fannie and Freddie and through the FHA program, will further bring homebuyers to the marketplace.
Back in the previous recession, the economy shed nearly 2 million net jobs from 2001 to 2003. All the while, existing home sales rose from 5.2 million to 6.2 million just as jobs were being cut. New home sales likewise rose from 900,000 to 1.1 million. Mortgage rates were falling and housing affordability was rising during these years. The 2 million job cuts were painful, but the economy still had 130 million job hOn the economic front, recession in itself is not a positive for the housing market because there are fewer job holders. But if a recession is accompanied by rising housing affordability, then home sales can trend higher - as is now. A prolonged deep recession, however - certainly a possibility in light of the most severely tested financial market stress since the Great Depression - can dampen consumer confidence and put up barriers to home buying.
An early indication that buyers are responding to incentives was the solid jump in the pending home sales in August to the highest level in over a year. The biggest increases were in areas with rising affordability from sharp reductions in home prices in California, Nevada, and Florida. The expansion will broaden to other markets where home prices have markedly fallen, including Rhode Island, Virginia, and Minnesota. Existing home sales, therefore, will likely breakout from the narrow trading range of 4.8 to 5 million of the past 12 months to 5.2 million by the year end and to 5.4 million in 2009. Even with the improvement, the next year's sales level will still be well below the 7.1 million peak sales achieved with rampant speculative buying in 2005.
The Bottom Line
Put it all together and what do we have? A recovering economy will help consumer and business spending to turn the corner and the economy to move to a self-sustaining pace. But it requires a catalyst to get things started. The tumbling housing market and subprime mortgage defaults have caused financial markets to freeze and have pushed the economy into a recession. However, recent rising home sales and some sustained momentum will bring the economy back into the fold. Rising home sales will also thin out the housing inventory and begin stabilizing home prices. The credit market will start to unfreeze once home prices have passed bottom. Simply, the economy will not recover without a housing market recovery.
Fortunately, policymakers and both Presidential candidates clearly recognize the need to get the housing market moving. The two housing stimulus bills (homebuyer tax credit and higher loan limits), $700 billion Treasury plan and the Federal Reserve's actions are designed to assure steady mortgage flow and help revive the housing sector. With it, the economy will expand and create jobs. America and its exceptional ingenuity always find a way to move past crises and back to economic prosperity.
Lawrence Yun, Chief Economist

A short sale's long journey...

2008-10-16T20:17:00.000-07:00

With home values falling and a rough economy denting people's wallets, it doesn't take much for a homeowner to get underwater on a mortgage, owing more on the loan than the home is worth. Toss in a personal dilemma or two and the situation can become even more bleak.During the year's second quarter (the most recent data available), one in seven homeowners, regardless of when they bought, had negative equity in their homes, according to Zillow.com. The statistics were worse for people who bought their homes during the market's peak in 2006; 45 percent of those homeowners were upside down.
Kenneth Baldwin is one of those statistics, and it took him months to decide that it was better to walk away from his home with his dignity and credit-worthiness relatively intact than to continue struggling to keep it.In July 2006, with a good credit history but no down payment to make, the then-42-year-old bought a $236,500 three-bedroom, bi-level home in Lake in the Hills for himself and his fiancé. He received an interest-only 80/20 loan. An 80/20 loan is typically two loans—a primary loan for 80 percent of the value of your home, and a secondary loan, sometimes called a piggybank loan, in lieu of a down payment that covers the remaining 20 percent at a much higher interest rate than the first.Then his relationship soured and the terms of the loan reset. Instead of a $1,800 monthly payment covered by two incomes, Baldwin had to fund a monthly payment of $2,200 by himself. He tried to make it work, and found himself stressed when he couldn't make a payment.By the spring, he'd had enough of the stress and decided to sell his home, with his lender's permission, for less than the amount he owed on it in a short sale.

Delinquent borrowers whose homes are listed for sale at a discount and carry the "lender approval required" caveat. Despite what can be a time-consuming approval process, the transactions have become an increasingly popular option.
In May, Baldwin's lender, IndyMac Bank, agreed to let him sell his house for $214,000, forgiving $49,659.60 of the loan. The transaction still will dent his credit record but nowhere to the extent it would have, had he let the house lapse into foreclosure. After the closing, Baldwin received a $5,000 check as a sort of "thank-you" from the lender.
courtesy of Chicago Tribune 10/17/08

No Quick Fix for Housing Prices

2008-10-16T20:00:00.000-07:00

The Treasury Department's rescue plan for the U.S. financial industry doesn't directly address the root cause of the crisis: falling home prices.
The government's plan, which includes taking stakes in major financial institutions and temporarily guaranteeing certain new bank debt, could cushion the economy and thus the housing market from further blows. But many economists say additional measures are needed to stimulate demand for homes and to reduce mortgage delinquencies and foreclosures.
At the heart of the rescue plan is an effort to keep the credit crunch from sending the economy into a tailspin. "If the financial system doesn't get working again, then the economic downturn is going to be much worse, and that means the housing market will be a lot worse than it otherwise would be," says Frederic Mishkin, a Columbia University economist who stepped down as a Federal Reserve Board governor in August.
But some economists say the government needs to do more to address the underlying problems that triggered the credit crisis. "It's very disappointing" that the plan doesn't do anything "to stop the spiral in home prices," which is reducing net worth and creating a falloff in consumer spending, says Harvard University economist Martin Feldstein. He proposes that the federal government offer low-interest loans to replace 20% of homeowners' mortgages.
The government's latest intervention comes as mortgage delinquencies continue to climb and home prices are plummeting in many markets. Some 5% of mortgages were at least 30 days past due at the end of the third quarter, according to Equifax and Moody's Economy.com, up from 4.6% in the second quarter and 3.5% a year earlier. In Florida and Nevada, delinquency rates now top 8%.
Nationwide, house prices have fallen 18% from their peak in the first quarter of 2006, according to Case Shiller. By another measure, from the National Association of Realtors, home prices are off 12% from their peak. They are expected to fall an additional 10% to 15% between now and mid-2009, says Mark Zandi, chief economist at Moody's Economy.com.
Falling prices are feeding a vicious cycle that leads to more mortgage delinquencies and foreclosures. As more Americans end up "under water," or owing more on homes than they are currently worth, more people are likely to walk away from mortgages, causing foreclosures to rise further and adding to negative market psychology.
The rescue effort could buy the government some time to get other measures up and running -- and to see whether they will help stabilize home prices. Some analysts say one government initiative that appears to be bearing fruit is the increase in loan limits of mortgages backed by the Federal Housing Administration -- to as high as $729,000 in some cities. In September, FHA mortgages financed 28% of home purchases, up from 19% in August, according to Zelman & Associates, a housing research firm, and the number of buyers seeking government-backed mortgages more than doubled from last year, as houses have become affordable again....more

Tumultuous Times...Credit Crisis Information & Summary...

2008-10-16T18:49:00.000-07:00

Summary
The Emergency Economic Stabilization Act of 2008 was signed by President Bush into law on October 3. NAR closely monitored the Federal Government response to the credit crisis, and our Washington D.C. Policy staff worked with regulatory agencies and elected officials on Capitol Hill to assure a robust secondary mortgage market. Liquidity in the mortgage market is essential to the health of the economy.

The Bill Will Help Homeowners and Borrowers
The Senate legislation responded to the criticisms that lenders have been slow and/or unwilling to work with homeowners and borrowers. It encouraged negotiation in short sales and consumer efforts to refinance or reconfigure existing mortgages: When the Treasury (or other federal agency that holds mortgages) acquires troubled existing mortgages from financial institutions, agencies are required to work with lenders and mortgage servicers to find ways to avoid foreclosures. All federal agencies are required to work with servicers to facilitate loan modifications that will consider the net present value of the mortgage. Similar refinancing and foreclosure prevention requirements apply to mortgages involving owners of multi-family properties and owners of commercial properties. Policy goal is to assure that tenants don’t lose their residence or their place of business when an owner has problems with the mortgage. Changes to existing mortgages can include (but are not limited to) revisions in principal, interest rate and period for repayment.

The Bill Will Get Money into the Financial System Quickly
The credit markets are nearly frozen. Lenders can’t lend because they are receiving no payments on existing loans. The legislation allowed the government to buy troubled loans and mortgage securities. The funds that the institutions received when the government purchased the existing portfolios were to be available to issue new mortgages with more carefully specified and monitored lending standards. Provisions include:
Create a Troubled Asset Relief Program (TARP) to purchase and guarantee the troubled assets from the financial institutions that hold mortgages and/or mortgage-backed securities.
A new Office of Financial Stability within the Treasury to operate TARP, with input from the Federal Reserve, Federal Deposit Insurance Corp (FDIC – the agency that works with failed and failing financial institutions to insure and protect consumers), the Comptroller of the Currency (bank regulator), Office of Thrift Supervision (regulator of former savings and loan companies) and the Secretary of Housing and Urban Development.
Don’t give out all the money at one time. First release of funds to purchase troubled assets will be $250 Billion. Second release of up to $100 Billion must be authorized by the President. Final $350 Billion can be issued only on Congressional approval. Congress given 15 days to act.
courtesy of IAR

Ill. foreclosures rise in August

2008-09-12T15:12:00.000-07:00

Foreclosure filings in August increased 27 percent compared to the same month a year ago, a significantly slower pace than in previous months, according to data released Thursday.
Nationwide, 303,800 homes received at least one foreclosure-related notice in August, up 12 percent from July, RealtyTrac Inc. said. That means one in every 416 U.S. households received a foreclosure filing last month.
Illinois ranked ninth in the nation in foreclosure filings in August, with one filing for every 483 households, according to RealtyTrac. That's up 20.7% from July and 72.9% from August 2007.
August's nationwide increase was smaller than the two prior months. June and July both had year-over year increases in foreclosure filings of 50 percent or more. Still, the total number of foreclosure filings is still the highest since RealtyTrac began issuing its report in January 2005.
Irvine, Calif.-based RealtyTrac monitors default notices, auction sale notices and bank repossessions. More than 90,893 properties were repossessed by lenders nationwide last month — up more than half from 43,141 in August 2007, the company said.
The top three states in foreclosure rates were Nevada, California and Arizona, in that order, RealtyTrac said. Florida, Michigan, Georgia, Ohio, Colorado, Illinois and Indiana rounded out the top 10, though Michigan, Georgia, Ohio and Colorado all reported rate decreases year-over-year.
Weak sales, sinking home values, tighter home loan lending practices and a slowing U.S. economy hamstrung by high fuel prices has left some homeowners with few options to avoid foreclosure. Many can't find buyers or owe more than their home is worth and can't refinance into an affordable loan.
Banks and mortgage investors are also holding a glut of foreclosed properties and are slashing prices to get them off the books. more...

Mortgage Bailout Is Greeted With Relief, Fresh Questions

2008-09-12T15:03:00.000-07:00

Investors cheered the U.S. government's seizure of the nation's two troubled mortgage giants, with stock markets rallying in the U.S. and abroad and mortgage rates falling. But obstacles remain if the Treasury's takeover of Fannie Mae and Freddie Mac is to succeed.
Meanwhile, new details emerged of the pressures that led up to Treasury's plan to take the reins of the troubled companies. In the weeks before the government's intervention, nervous foreign finance officials barraged Treasury Secretary Henry Paulson and Federal Reserve officials to find out what was happening with the mortgage giants, according to people familiar with the matter.Among those expressing concern were Asian investors, including the Chinese, say two people familiar with the matter. Foreign banks' concerns were among the factors that helped prompt the government's move on Sunday to take over Fannie and Freddie, these people say.
Monday's performance of short-term financial indicators -- from mortgage rates to stock prices -- suggests the Bush administration's seizure of Fannie and Freddie might work. At the same time, Treasury and its banking advisers were bombarded with questions about their big gamble. Many in the market warned that it will do little to salve the deeper wounds in the American economy and financial markets.
Wild swings in the Dow Jones Industrial Average betrayed this tension. The blue-chip index soared 347 points in the opening minutes of trading, then fell back 253 points from that peak by lunchtime before rising another 197 points. The Dow industrials finished the day at 11510.74, up 289.78.
Sweeping Intervention
Mr. Paulson's weekend announcement represented one of the most sweeping interventions in financial markets since the Depression, essentially putting the government in charge of helping finance American mortgages. Fannie and Freddie are vital cogs in the housing market, backing three-quarters of all mortgages being made in the U.S. now that bruised Wall Street banks have withdrawn from that market. They hold or back more than $5 trillion in mortgage debt. But as the housing market cratered, investors grew nervous about the companies' capital positions and their ability to weather the storm.
Under the takeover, the government replaced the companies' chief executives and shifted management control to their regulator, the Federal Housing Finance Agency, or FHFA. The government pledged to provide as much as $200 billion to help both firms ride through their expected mortgage-related losses. Mr. Paulson outlined his desire to see both companies begin to reduce the size of their mortgage portfolios beginning in 2010.
The challenges that remain are formidable, ranging from whether Wall Street banks can step into the housing-finance void that the two firms will eventually leave behind, to whether Congress can put aside years of bitter fighting to craft a future for the two mortgage giants it initially created.
If Treasury's intervention is working, mortgage rates should fall. Fannie and Freddie could begin backing more mortgages, at least temporarily. The two companies might loosen their very stringent underwriting rules. And housing demand should get a marginal boost, putting a dent in the nation's glut of unsold homes by enticing potential buyers who have been sitting on the fence because of higher interest rates.
The Treasury will be watching closely to see if the companies need a cash infusion. Under the plan announced Sunday, Treasury can make a capital injection if it determines that the companies' assets have fallen below their liabilities. Most market watchers expect that to happen eventually.
Credit markets reacted positively to the move, as spreads -- the difference between the yields on ultrasafe U.S. Treasury bonds and corporate and mortgage debt -- narrowed. As expected, spreads fell dramatically Monday on Fannie and Freddie's own bonds, as well as on those backed by pools of loans that conform to Fannie and Freddie's standards....more

Government Bails Out Fannie Mae and Freddie Mac

2008-09-12T14:57:00.000-07:00

closely following the government bailout of Fannie Mae and Freddie Mac. In taking over the two mortgage giants, the U.S. government is taking responsibility for the two firms, which provide funding for around three-quarters of new home mortgages.
James Hagerty, Ruth Simon and Damian Paletta examine the takeover and how it enables the Treasury to acquire $1 billion of preferred shares in each company and has pledged to provide as much as $200 billion to help the two companies deal with heavy losses on their mortgage defaults. All of this action could mean a greater burden placed on American taxpayers.
The bailout has also led to activity on the stock market this morning as investors hope the government’s actions will help bring the Wall Street credit crisis to an end, as Peter McKay reports. He adds that dangers do remain for stock investors, including the spread of job losses and slowing growth overseas, as well as the low prices of homes in the U.S. combined with high unsold inventory.
Heidi Moore examines the winners and losers of the bailout on the Deal Journal blog. Among the winners, she writes, are homeowners, Hank Paulson and Republicans, while lobbyists, Congress and management make the list of losers.
Presidential candidates Barack Obama and John McCain have both agreed that it is certainly time for government action on Fannie Mae and Freddie Mac, as Moore writes in a separate piece. Both candidates agree that the two mortgage companies are not properly structured. Obama expressed that he had “no sympathy” for the now-ousted CEOs of Fannie and Freddie, while McCain said he would “[make] them go away” if he is elected....more

Ban on Down-Payment Aid Is Fought...

2008-09-12T14:50:00.000-07:00

Members of Congress are making a last-ditch effort to head off an Oct. 1 ban on the use of seller-assisted down payments on federally insured mortgages with a compromise measure designed to win over skeptical federal housing officials.

The proposed bill would resurrect the programs, which Congress, with the backing of the Department of Housing and Urban Development, axed earlier this year. The compromise measure would limit their use to borrowers with higher credit scores. In exchange, HUD would be able to institute risk-based pricing for federally insured mortgages, allowing the agency to charge higher premiums for less-creditworthy borrowers.
Supporters of the measure face an uphill battle, with just weeks before the Oct. 1 deadline and with Congress focused on other matters in the weeks before an election recess. Rep. Barney Frank (D., Mass.), the chairman of the House Financial Services Committee, said that HUD has appeared receptive to the proposal, but a HUD spokesman said the agency had "deep reservations about the legislation in its current form."
Under the programs, a third party, usually a nonprofit, provides a down payment to the buyer and is reimbursed by the seller, often a home builder. That allows buyers to qualify for a mortgage backed by the Federal Housing Administration, which requires a down payment of at least 3% -- which will increase to 3.5% on Oct. 1.
The programs had largely filled the void left by the subprime-mortgage market that all but vanished in 2007. Federal officials renewed an effort to end seller-funded assistance earlier this year, arguing that borrowers were two to three times as likely to default on their loans if they received their down payment from a nonprofit. Other critics say that builders simply increase the price of a new home by the price of the down payment....more

Chicago-area home sales down 25% in July...

2008-08-25T19:15:00.000-07:00

Home sales in the Chicago area fell 25% in July, according to the Illinois Assn. of Realtors.
The decrease over July 2007, while steep, marked a slight improvement over recent periods. In the second quarter, Chicago-area home sales were down 29% compared with the second quarter last year.
"While most housing-related indicators reveal continued problems, there is some increasing evidence the supply and demand may be moving more into balance, especially in many metropolitan markets in Illinois," Dr. Geoffrey J.D. Hewings, director of the Regional Economics Applications Laboratory (REAL) of the University of Illinois, said in a Realtors’ release Monday.
In the nine-county Chicago region, single-family and condominium sales totaled 7,274 in July, a drop of 25.2% compared with 9,730 sales in July 2007, the Realtors’ group said in the release.
In the city of Chicago, home sales fell 20.9% in July, to 2,167 compared with 2,738 in July 2007.
The median home sale price in the Chicago area was $254,900 in July, down from $262,500 in the same period last year. The median price in the city of Chicago was $299,000 in July, down 0.3% compared with $300,000 in July 2007.
The median is the price where half the homes sold for more and half sold for less.
Statewide sales also fell 25.2% in July, to 11,021, compared with 14,738 in July 2007, the Realtors’ group said. The median sale price statewide was $199,900, a decrease of 4.8% compared with the same month last year.
“While July typically is the slower summer month for home sales in Illinois, this year the drag on the housing market is amplified by overall economic uncertainty among consumers," Kay Wirth, president of the Illinois Assn. of Realtors, said in the release.
The Realtors group's sales figures include new and existing homes. The nine-county Chicago Primary Metropolitan Statistical Area consists of Cook, DeKalb, DuPage, Grundy, Kane, Kendall, Lake, McHenry and Will.
Meanwhile, sales of existing homes rose 3.1% in the U.S. in July, easily beating Wall Street's expectations, as buyers snapped up deeply discounted properties in parts of the country hit hardest by the housing bust....more

Help for Home Buyers..

2008-08-17T09:51:00.000-07:00

When it comes to housing, it's a buyer's market -- especially for first-time home buyers eligible for new tax breaks.
The American Housing Rescue and Foreclosure Prevention Act of 2008, passed by Congress at the end of July with hopes of shoring up the ailing housing market, also includes an important tax break. First-time home buyers who purchase a home after April 8, 2008, and before July 1, 2009, are eligible for a $7,500 tax credit (or, if the home costs less than $75,000, a credit equal to 10% of the purchase price).
This credit, however, comes with a catch. You'll have to pay it back.
Here's the good part: The credit reduces your tax liability on a dollar-for-dollar basis and can even boost your refund. If you owe $10,000 in taxes, you can take the credit and pay just $2,500. Or if you owe $5,000 in taxes and have paid it over the year, you can take the credit and receive all your money back with an additional $2,500.
But unlike other federal tax credits, the new credit must be paid back to the government over a period of 15 years.
Income Limits
"It's the equivalent of an interest-free loan from the government," says Bob Trinz, senior tax analyst at the tax and accounting business of Thomson Reuters.
To qualify for the credit, you (and if married, your spouse) must not have owned a principal residence during the three-year period before you buy the home. In general, the credit is available in full only if your adjusted gross income doesn't exceed $75,000 ($150,000 if you file a joint return).
The credit phases out over the $150,000 to $170,000 adjusted gross income range for joint filers ($75,000 to $95,000 for individual filers).
If you claim a $7,500 credit, you'll have to start paying it back as an extra tax amount on your federal returns at the rate of $500 per year, beginning with the tax return for the second year after you buy the new home. That is, if you buy a home this year and claim the credit, you'll have to start paying back the money when you file your 2010 return in 2011.
For more details and examples of how the new law works, visit the Web site of Congress's Joint Committee on Taxation at www.jct.gov and look for publication JCX-63-08 on the home page. For additional information on tax breaks from the Internal Revenue Service, see Publication 530 at irs.gov...more

Who qualifies for mortgage help and how to get it...

2008-07-30T06:46:00.000-07:00

Questions and answers about the Hope for Homeowners Act of 2008, passed by Congress last weekend to try to steer as many as 400,000 struggling homeowners away from foreclosure:
Q: What exactly will the legislation do?
A: It will allow those who qualify to cancel their old mortgage loans and replace them with 30-year fixed-rate loans for up to 90 percent of the home's current value. The FHA will insure a total of $300 billion of the loans over a three-year period.
But the decision on whether to write such a loan remains up to banks, which would have to be willing to take a loss on the existing loans in exchange for avoiding an often-costly foreclosure.
Q: Who is eligible?
A: Eligible borrowers must have spent more than 31 percent of their monthly incomes on their mortgages as of March 1, 2008. The troubled loan must have originated no later than Jan. 1, 2008, and be on the borrower's primary residence. And the borrower's income must be verified.
Q: When does the program start?
A: It takes effect Oct. 1 and runs through September 2011, although the FHA isn't likely to have it operating at full capacity until next year.
Q: Since lenders can pick and choose which loans to refinance, how can consumers determine if theirs will be selected?
A: Check with the bank or financial company servicing your mortgage, but it may be weeks before they make decisions concerning the new guidelines and assess individual loans.
Even then, keep expectations limited.
"Servicers are going to be reluctant to take the government up on their offer," predicted Mark Zandi, chief economist at Moody's Economy.com. "The earliest they'll start taking them up on it is early next year. And even then it's likely to be modest."
Q: Is there anything a homeowner can do to improve chances of benefiting from the program, such as crunching numbers to make a case for the bank?
A: Not really. The best step is to keep up your payments as best you can.
Q: But doesn't this provide an incentive to NOT pay your mortgage, if you're barely ahead of bills and are underwater on your house, so you can qualify?
A: No. If your situation deteriorates enough, the bank may reject any possible new loan.
"Turning yourself into a financial basket case is not going to work," said Dan Seiver, a finance professor at San Diego State University. "If you turn into a complete deadbeat, the servicer is going to just foreclose and dump it....more

House OKs rescue for homeowners, Freddie, Fannie

2008-07-23T17:36:00.000-07:00

The 272-152 vote reflected a congressional push to send election-year help to struggling borrowers and to reassure jittery financial markets about the health of two pillars of the mortgage market.
Hours before the vote, President Bush dropped his opposition to the measure, which now is on track to pass the Senate and become law within days.
The White House swallowed its distaste for $3.9 billion in grants for devastated neighborhoods. In return, the administration got both the power to throw Fannie Mae and Freddie Mac a lifeline and the legislation Republicans long have advocated to rein in the government-sponsored mortgage companies.
Treasury Secretary Henry M. Paulson and lawmakers in both parties negotiated the final deal. It accomplishes several Democratic priorities, including aid for homeowners, a permanent affordable housing fund financed by the two mortgage companies and the money for hard-hit neighborhoods. The grants are for buying and fixing up foreclosed properties.
The bill would let the Federal Housing Administration back $300 billion in new loans so an estimated 400,000 homeowners who cannot afford their house payments could try to escape foreclosure by refinancing into safer, more affordable mortgages. Lenders would have to agree to take a substantial loss on the existing loans, and in return, they would walk away with at least some payoff and avoid the often-costly foreclosure process.
"The industry really has to step up and use it," said Bruce Dorpalen, director of housing counseling for Acorn Housing Corp., a nonprofit housing group based in Philadelphia.
The plan also creates a new regulator with tighter controls for Fannie Mae and Freddie Mac and modernizes the agency. It includes about $15 billion in housing tax breaks, including a credit of up to $7,500 for first-time buyers, and increases the statutory limit on the national debt by $800 billion, to $10.6 trillion.

US spells out Fannie-Freddie backstop plan

2008-07-14T01:20:00.000-07:00

WASHINGTON - The Federal Reserve and the Treasury announced steps Sunday to shore up mortgage giants Fannie Mae and Freddie Mac, whose shares have plunged as losses from their mortgage holdings threatened their financial survival. The steps are also intended to send a signal to nervous investors worldwide that the government is prepared to take all necessary steps to prevent the credit market troubles that started last year with losses from subprime mortgages from engulfing financial markets and further weakening the economy and housing markets.
The Fed said it granted the Federal Reserve Bank of New York authority to lend to the two companies "should such lending prove necessary." They would pay 2.25 percent for any borrowed funds — the same rate given to commercial banks and Big Wall Street firms.
The Fed said this should help the companies' ability to "promote the availability of home mortgage credit during a period of stress in financial markets."
Secretary Henry Paulson said the Treasury is seeking expedited authority from Congress to expand its current line of credit to the two companies should they need to tap it and to make an equity investment in the companies — if needed.
"Fannie Mae and Freddie Mac play a central role in our housing finance system and must continue to do so in their current form as shareholder-owner companies," Paulson said Sunday. "Their support for the housing market is particularly important as we work through the current housing correction."
The Treasury's plan also seeks a "consultative role" for the Fed in any new regulatory framework eventually decided by Congress for Fannie and Freddie. The Fed's role would be to weigh in on setting capital requirements for the companies.
The White House, in a statement, said President Bush directed Paulson to "immediately work with Congress" to get the plan enacted. It also said it believed the plan outlined by Paulson "will help add stability during this period." more...

Home Supply Fell Over Past Year

2008-07-10T16:55:00.000-07:00

The supply of homes available for sale in 18 major metropolitan areas in June was down 2.4% from a year earlier, according to figures compiled by ZipRealty Inc., a real-estate brokerage firm based in Emeryville, Calif.
The data cover listings of single-family homes, condominiums and town houses on local multiple-listing services in those areas. It was the first decline for the 18 markets since Zip began collecting the inventory data in mid-2006.
Zip said inventory totals in June were about even with those a month earlier in the 18 metro areas.
Though the supply of homes listed for sale has leveled off after soaring in recent years, it remains plentiful. Nationwide, about 4.5 million previously occupied homes were listed for sale at the end of May, according to the National Association of Realtors. That is enough to last nearly 11 months at the current sales rate, the trade group says. The market is considered roughly in balance between supply and demand when the inventory is enough to last around six months...more

Illinois foreclosure filings down in June

2008-07-10T16:43:00.000-07:00

Real estate foreclosure filings in Illinois fell 16% in June from May, and the state had the 13th-highest foreclosure rate in the country, according to a report released Thursday.
The 8,157 foreclosure filings in Illinois last month was still 42% higher than the total for June 2007, according to the report by RealtyTrac, an Irvine, Calif.-based research firm. The filings, which includes default notices, auction sales and bank repossessions, covers both residential and commercial properties.
Foreclosure filings nationally fell 3% in June from the previous month but were still 53% higher than June 2007, a sign “we have not yet reached the top of this foreclosure cycle,” RealtyTrac CEO James Saccacio says in a news release.
With one filing per 637 households, Illinois’ June foreclosure rate ranked 13th in the country. Nevada had the highest foreclosure rate for the month, with one filing per 122 households, followed by California at 192 and Arizona at 201. The U.S. foreclosure rate was one filing per 501 households....more

FINANCING: What's old is new again in buying...

2008-06-15T09:21:00.000-07:00

Here's what to expect in summer 2008: •Certain loans will require a second look in Cook County.

No one would take a loan they soon would not be able to afford unless they didn't know what they were getting into, according to Illinois lawmakers, who've backed a law that will require first-time buyers and all refinancers in Cook County to get counseling before signing up for a loan with certain features. Starting July 1, every mortgage closed and recorded in Cook County must carry a "certificate of exemption" or a "certificate of compliance." The exemption signifies that the mortgage carries no features that require counseling: three-year adjustables and the like. Certificates of exemption are also attached to mortgages made by banks or credit unions not regulated by Illinois. Certificates of compliance indicate that the borrower was counseled on his loan and wants to take it. It's up to the firm conducting the closing—usually a title company—to ensure that the appropriate certificate is attached to the mortgage when it's recorded.
The term, "lease-to-purchase option," is making a modest comeback after nearly disappearing. Sellers running out of patience—and money—waiting for a buyer are inclined to consider it, says Margie Thorgesen, president of the Aurora Tri-County Association of Realtors. These options can be structured differently, with the exact terms worked out between the parties. But basically, someone can rent for a term and then have the opportunity to purchase the home at a set price. Some lease-option agreements allow part of the rent to be used as a down payment.

Buyers stall, lenders pull back and sellers can't plan. In cooperation with the Illinois Association of Realtors, the Regional Economics Applications Laboratory at the University of Illinois recently began using regional economic data to forecast the market about a month out, says REAL director Geoffrey Hewings. After slight price increases in May and June, prices will decline slightly in July—about 2 percent—in the Chicago area, says Hewings. That would put the median price in July at $254,397, down from $256,346 in June. The June issue of Money magazine ventures further, predicting a 6.8 price decline in Chicago from through May 2009, and a 0.8 percent decline in Lake County home prices in the period.more...

Foreclosures Rise 48% in May As U.S. Housing Woes Deepen..

2008-06-15T09:15:00.000-07:00

The number of U.S. homeowners swept up in the housing crisis rose further last month, with foreclosure filings up nearly 50% from a year earlier, a foreclosure listing company said Friday.
Across the U.S., 261,255 homes received at least one foreclosure-related filing in May, up 48% from 176,137 a year earlier and up 7% from April, RealtyTrac Inc. said.

The combination of weak housing sales, falling home values, tighter mortgage lending criteria and a slowing U.S. economy has left financially strapped homeowners with few options to avoid foreclosure. Many can't find buyers or owe more than their home is worth and can't get refinanced into an affordable loan.
Mortgage rates have been rising, reflecting increased concerns about what the Federal Reserve might do to battle inflation. Freddie Mac reported Thursday that 30-year fixed-rate mortgages averaged 6.32% this week, the highest level in nearly eight months and up sharply from 6.09% last week.
As foreclosed properties pile up, they are adding to the inventory of homes on the market and dragging down home prices. The trend is most dramatic in parts of California, Florida, Nevada and Arizona, where prices skyrocketed during the housing boom and are now falling precipitously.
Lehman Brothers economist Michelle Meyer said in a report Thursday that U.S. home sales are likely to hit bottom at the end of this summer, but said a recovery in sales is likely to be "feeble." Home prices, she wrote, are still expected to fall another 10% by the end of 2009. more...

Home-Price Declines Accelerate

2008-05-23T05:36:00.000-07:00

Home prices are falling faster as the economy slows and turmoil in the mortgage markets continues.
Prices fell an average of 1.7% nationwide in the first quarter from the final three months of 2007, according to the Office of Federal Housing Enterprise Oversight. The decline was the largest in the index's 17-year history. The government index, which is seasonally adjusted and based on data for home purchases, had dropped 1.4% in the prior quarter. Compared with a year earlier, home prices dropped 3.1% in the first quarter.
The price drops, which occurred in 43 states, "spell further erosion in home-equity levels and potentially more trouble for mortgage markets," said the agency's director, James Lockhart, who added that the declines may help potential home buyers. Areas that had the biggest price gains over the past decade now are experiencing the sharpest declines. Prices in California and Nevada declined more than 8% from the prior quarter.more...

Why Lenders Are Leery Of Short Sales

2008-04-20T06:04:00.000-07:00

As more people fall behind on their mortgages, lenders have been slow to take advantage of a longstanding alternative to foreclosure -- a so-called short sale.
At first glance, a short sale might seem like a win-win for everyone involved. In such an arrangement, the borrower sells the home for less than the amount owed, with the lender forgiving the difference. The sale releases borrowers from their obligations. For mortgage Short sales -- which were rare when the housing market was booming -- can also be a good way for lenders and investors to minimize losses. They typically result in losses of 19% of the loan amount, compared with an average loss of 40% for homes that are sold after foreclosure, according to a recent analysis by Clayton Holdings Inc., which tracks more than $500 billion in mortgage loans monthly for investors. The costs of foreclosure can include not only legal fees, but also taxes, insurance and the expense of maintaining the home until the property is sold and repairing any property damage.
As the housing market continues to weaken, the number of short sales is edging upward. Short sales currently account for about 18% of home sales, according to the National Association of Realtors. But it can be extremely difficult to get these deals completed. Unlike a traditional real-estate sale, a short sale requires the approval of not only the buyer and the seller, but also the mortgage-servicing company. In many cases, loans have been packaged into securities -- which means that the mortgage servicer must consider the interests of the investors who own the loans.holders, it can be less costly than foreclosing -- and could provide protection against future price drops. For buyers, it can be a chance to buy a home at an attractive price.more....

Multifamily Deals Multiply

2008-04-16T19:30:00.000-07:00

As the pace of commercial real-estate sales grinds almost to a halt amid financial-market instability and concerns about property values, deal activity is still brisk in one corner of the industry: multifamily housing.
Fueling the deals and buoying apartment values is the rare availability of financing, thanks to government-sponsored Fannie Mae and Freddie Mac. Prompted by their mandate to provide market liquidity and funding for affordable housing, but also driven by a fresh opportunity for profit, both firms are expanding in the multifamily market to fill a vacuum left by private lenders.
"It's a good time in our business," says Thomas Toomey, president and chief executive of UDR Inc., a Denver-based multifamily real-estate investment trust. "We have access to capital."
UDR recently benefited from that capital availability in its $1.71 billion sale of 25,684 apartments -- nearly 40% of its portfolio -- to a joint venture of DRA Advisors LLC and Steven D. Bell & Co. Fannie provided the vast bulk of financing, reflecting its new aggressiveness in the sector. Mr. Toomey says six months ago the deal would have been impossible because of the dearth of financing...more

New Tax Forms Give Homeowners Relief...

2008-03-05T15:51:00.000-08:00

It's shaping up to be a less-painful year for many taxpayers who are preparing their 2007 returns.
For one thing, most filers will be getting a special payment from the government, thanks to the economic stimulus package enacted last week. Additionally, some taxpayers who may have been puzzled trying to claim certain deductions a year ago -- including one for state and local sales taxes -- shouldn't have any problem this year because those deductions are clearly marked on the 2007 forms. There's also a new deduction for mortgage insurance.

Another twist: a new law that will benefit strapped homeowners whose mortgage debt was forgiven, in part or in whole, during 2007. On the downside, there are tough new record-keeping rules for charitable donations. For an overview of the major changes and how they might affect your pocketbook..more....

Homeowners Need Extra Help on Mortgages, According to Bernanke..

2008-03-05T15:34:00.000-08:00

More needs to be done to help troubled homeowners, including a broader effort to write down the principal of some problem loans, Federal Reserve Chairman Ben Bernanke said Tuesday.
"In this environment, principal reductions that restore some equity for the homeowner may be a relatively more effective means of avoiding delinquency and foreclosure," Mr. Bernanke said in prepared remarks. (Read the full speech.)
Speaking at the Independent Community Bankers of America conference in Orlando, Fla., Mr. Bernanke said the current turmoil in the housing market "calls for a vigorous response."
"Efforts by both government and private-sector entities to reduce unnecessary foreclosures are helping, but more can, and should, be done," Mr. Bernanke said.
Though most loan modifications by lenders have focused on reducing the interest rate on a borrower's loan, Mr. Bernanke said a reduction in the principal might be more appropriate. Specifically, with many borrowers owing more on their home than the value of their mortgage, "a reduction in principal may increase the expected payoff by reducing the risk of default."more...

Understanding Points, Rates and Fees
Not only do you have to understand what type of mortgage you should choose, you have to understand the costs associated with your mortgage. All of these costs will be paid upon closing your mortgage.
Purchase Points
Purchase points, also known as a "buy-down" or "discount points," are an up-front fee paid to the lender at closing to buy-down or lower your interest rate over the life of the loan. Each point is equal to one percent of your total loan amount. If you have a $100,000 loan, one point would equal $1,000. The more points you buy, the lower your interest rate, but the more money you'll need at closing.Interest Rate
When you get a mortgage, you are charged an interest rate.this is the rate which the lender charges you for using their money to buy a home. It determines how much your monthly payments will be. Generally speaking, the higher the interest rate, the higher your monthly payment.
Fees
There are always fees associated with getting a mortgage, these fees cover the cost of processing and underwriting the loan. These fees can include charges for ensuring the title to the home is free and clear; paying for a land survey; or paying for a home appraisal which gives you the estimated value of the property (lenders require an appraisal to close on your mortgage).
..more..

Federal Reserve Reduces Federal Funds Rate by 1/2 Point to 3 Percent

2008-01-30T13:06:00.000-08:00

The Federal Reserve on Wednesday cut a key interest rate for the second time in just over a week, reducing the federal funds rate by a half point. It signaled that further rate cuts were possible. The Fed action pushed the funds rate to 3 percent. It followed a three-fourths of a percentage point cut on Jan. 22, a day after financial markets around the world had plummeted on fears that the U.S. economy was heading into a recession. That decrease had been the biggest one-day move in more than two decades.
The half-point cut Wednesday followed news that the economy had slowed significantly in the final three months of last year with the gross domestic product expanding at a barely discernible pace of 0.6 percent, less than half what had been expected. The report came amid increased concern from several quarters about a possible recession.
In a brief statement explaining their decision, Federal Reserve Chairman Ben Bernanke and his colleagues said that "financial markets remain under considerable stress."
The Fed move was approved on a 9 to 1 vote. Richard Fisher, president of the Fed's Dallas regional bank, dissented, preferring no change in rates.
The rate cut marked the fifth time that the Fed has cut the funds rate since it started with a half-point cut on Sept. 18 in response to the severe credit crisis which hit global markets in August.
Financial markets, which had been hoping for a bolder half-point move, rallied on the announcement. The Dow Jones industrial average, which had been in negative territory shortly before the Fed action, climbed back into the positive range in the minutes following the statement, with the Dow Jones industrial average up by more than 70 points in the first half-hour of trading.
Economists said the Fed decided to move a half-point rather than a quarter-point because it did not want an adverse reaction on Wall Street....more

Fed Cuts Interest Rate

2008-01-22T08:33:00.000-08:00

WASHINGTON (AP) -- The Federal Reserve, confronted with a global stock sell-off fanned by increased fears of a recession, slashed a key interest rate by three-quarters of a percentage point on Tuesday and indicated further rate cuts were likely.The surprise reduction in the federal funds rate from 4.25 down to 3.5 percent marked the biggest funds rate cut on records going back to 1990.
Federal Reserve Chairman Ben Bernanke and his colleagues took the action after an emergency video conference on Monday night, a day when global markets had been pounded by rising concerns that weakness in the world's largest economy was spreading worldwide.
Despite the Fed's bold move, Wall Street plunged at the opening. The Dow Jones industrial average was down 311.99 points in the first hour of trading.
In a brief statement explaining its move, the Fed said that "appreciable downside risks to growth remain" and officials pledged to "act in a timely manner" to deal with the risks facing the economy. The action was approved on an 8-1 vote.
Analysts said the fact that the Fed did not wait until its meeting next week to cut rates underscored the seriousness of the situation.
"The world's stock markets are in meltdown so the Fed came in with an inter-meeting move to try to stop the panic," Christopher Rupkey, senior economist at Bank of Tokyo-Mitsubishi.
The Bush administration, which had announced on Friday that President Bush supported a $150 billion economic stimulus package, said Tuesday that it was not ruling out doing more than the $150 billion proposal if necessary....more

Bush to Revive Push For Housing Remedy

2008-01-06T08:41:00.000-08:00

Shoring up public sentiment on the economy -- especially the battered housing sector -- could be vital to staving off a recession as Mr. Bush enters his last year in office. Pollsters say many people who aren't directly affected by rising defaults on subprime-mortgage loans are feeling the effects anyway, as they see the values of their homes drift downward. Even if Mr. Bush fails to get much more action out of lawmakers, White House pressure could help Republicans' political fortunes by reinforcing negative public perceptions of inaction in the Democratic-led Congress.
The administration and the Federal Reserve have taken several steps to attempt to address credit-market problems caused by rising mortgage defaults, including an administration-brokered industry effort to help people avoid foreclosure.
Mr. Gillespie and other aides didn't offer new specifics for how Congress could address the housing problems. There are at least two significant pieces of legislation that Congress left unfinished last year. One would bring relief to more low-income borrowers, allowing them to refinance adjustable-rate mortgages through the Federal Housing Administration. A second initiative could help ease a credit crunch for many middle- and upper-middle-income borrowers, in part by allowing government-sponsored mortgage companies such as Fannie Mae to securitize more large loans. Currently, those companies can't take on loans with values of more than $417,000. The administration supports a temporary increase in that limit but only in connection with comprehensive reform of the agencies' oversight, including a strong regulator with authority to limit the size of the mortgage portfolios they hold.
A third possible element in a housing initiative would give states authority to issue more tax-exempt bonds to help troubled homeowners refinance their homes.
Last month, the White House announced a voluntary initiative that encourages mortgage-servicing companies to freeze interest rates for people with adjustable-rate mortgages who are running into problems as their rates rise. As many as 1.2 million homeowners with subprime loans, or those to borrowers with poor credit, theoretically could get either rate freezes or expedited refinancing.
But some observers expect the actual impact of that program to be more limited. Meanwhile, estimates of the overall number of homeowners who might go into default has risen to three million. That is creating a need for further help from state and local governments.
"Changing the tax code can also help state and local government do their part to help homeowners," Mr. Bush said in December. "This temporary measure would make it easier for state housing authorities to help troubled borrowers -- and Congress should approve it quickly."
"If Treasury is looking for something to put pressure on Congress, [enabling states to issue more tax-exempt bonds] is something they can point to," said Steve O'Connor, senior vice president of the Mortgage Bankers Association.
Mr. Gillespie suggested that Mr. Bush also will make a push for energy-policy changes, despite last month's signing of an energy bill. A possible focus this time is opening controversial new supply sources such as the Arctic National Wildlife Refuge and the outer continental shelf. Mr. Gillespie also mentioned pending trade agreements, renewal of Mr. Bush's intelligence-gathering authority, and renewal of the No Child Left Behind education initiative as top legislative priorities for 2008. The White House and Treasury also have been weighing various plans for boosting the overall economy, not just the housing sector, possibly through additional tax cuts...more

Real Estate: How Far Will It Fall in 2008?

2008-01-06T08:33:00.000-08:00

There is one big question looming for homeowners and commercial real-estate investors this year: How much worse will it get?
The past year was the most painful in decades for residential real estate, as defaults on loans to less-creditworthy borrowers created a broader credit squeeze. House prices fell, home ownership dropped, foreclosures soared, and the housing market emerged as the soft underbelly of the economy.
Commercial real estate hit its peak early in 2007, when private-equity firm Blackstone Group LP paid $23 billion for office giant Equity Office Properties Trust, and then did an about-face. As credit tightened throughout the economy, commercial-property values tilted downward for the first time in several years.
Housing prices are likely to slide further this year, as credit remains tight and interest rates on many mortgages are set to rise, or "reset," and could trigger more defaults.
The commercial real-estate market, which includes properties such as offices, apartment buildings and shopping centers, could continue to soften as slower economic expansion causes rents to rise more slowly than in the past.
Residential Blues
Relief from the housing woes is unlikely anytime soon. "It will be another very bleak year with the worst of it occurring in the first half," predicts Mark Zandi, chief economist at economic-research site Moody's Economy.com. "Inventory is only growing and needs to be worked off before the market finds some stability," he said.
Through the third quarter of 2007, slightly more than 2.5% of all houses, or more than two million, were for sale and vacant, according to the U.S. Census Bureau. Since the first records were kept in 1965, that figure had never been higher than 2%, until the fourth quarter of 2005.
Demand is likely to stay depressed, keeping prices low, as high-risk borrowers who in the past would have qualified for subprime loans find themselves locked out of the market. Borrowers with little, if any, money for a down payment and those who don't want to document their finances also are likely to find the going tough.
House prices have fallen 6.5% as of October, since peaking in June 2006, according to the S&P/Case-Shiller Home Price index, which measures home values in 20 cities. Daniel Mudd, chief executive of government-sponsored mortgage investor Fannie Mae, expects prices to decline another 4% to 5% in 2008....more

Battle Lines Form Over Mortgage Plan...

2007-12-21T07:55:00.000-08:00

In unveiling a plan to help more than one million struggling homeowners, the Bush administration and the mortgage industry have embarked on a controversial project: picking winners and losers from the rubble of the subprime-mortgage meltdown.
Under the deal, formally released yesterday, the industry would voluntarily help as many as 1.2 million homeowners who are heading for trouble paying their subprime mortgages but aren't yet lost causes. For some homeowners, loan-servicing companies will agree to freeze mortgages at their low introductory rates. In other cases, credit counselors or loan servicers will walk mortgage holders through refinancing processes.
The deal won't provide relief to many subprime-mortgage holders: These include borrowers who are now in foreclosure, have already refinanced their homes or are more than 60 days delinquent on more than one payment over the past year. In some cases, people with good credit scores will be excluded. Also left out are those deemed able to afford the higher interest rates scheduled to replace their introductory rates over the next The initiative could help stabilize falling home prices and rising foreclosure rates, buoy the mortgage market and provide a modicum of comfort to investors watching the housing crisis bleed into the broader economy.
But it also sets what promises to become a battle line as the subprime crisis plays out over the coming election year. Some critics, especially Democrats, say the plan doesn't go far enough to protect vulnerable homeowners against foreclosure. Others, including some homeowners, as well as those who have watched from the sidelines as home prices have soared in recent years, charge that the plan amounts to a bailout for financially reckless borrowers.
The agreement covers homeowners who have taken out subprime mortgages, those offered typically to high-risk borrowers. About 1.8 million subprime loans are adjustable-rate mortgages, or ARMs, that carry low introductory rates that are set to expire in the next two years and adjust upward. These ballooning mortgage payments would threaten to produce a wave of foreclosures and a spiral of lower home prices and tightening credit.
The housing crisis is spreading beyond this relatively small subprime universe, causing turmoil on Wall Street and raising the specter of an economic slowdown. In the third quarter, home foreclosures hit their highest rate since at least 1972, according to the Mortgage Bankers Association. Prime adjustable-rate loans -- not covered in the industry's rescue plan -- accounted for 18.7% of mortgages starting foreclosure, the second-highest proportion behind subprime adjustable-rate loans. The overall delinquency rate is the highest since 1986, with some 2.64 million borrowers nationwide behind on payments for their first-lien mortgages for residences. more...

Greenspan Says Forcing Lenders To Alter Terms Would 'Tax' Economy

2007-12-21T07:51:00.000-08:00

Former Federal Reserve Chairman Alan Greenspan said that compelling lenders to alter mortgage contracts would be a damaging tax on the economy and it would be less harmful to simply give the homeowners money.
Mr. Greenspan, clarifying remarks he made on television Sunday, said in an interview with The Wall Street Journal yesterday, "I'm saying instead of in effect 'taxing' financial institutions and giving the funds to the homeowners, we'd be far better off, as far as the future structure of our financial markets are concerned, to do it strictly with cash. Do it out in the open. Do it cleanly and with transparency, not by hidden processes."
Mr. Greenspan said on ABC News's "This Week" that "cash is available and we should use that in larger amounts, as is necessary, to solve the problems." But he wasn't specific about what form that cash would take, and some have interpreted his comments as advocating a massive fiscal bailout, a stance at odds with his longstanding reputation as a fiscal hawk.
Assuming the government is going to act to help out homeowners, Mr. Greenspan clarified that he would like it to do so in a way that minimizes the distortions to private behavior, which economists say can result in the misallocation of resources, less efficient markets and a lower standard of living.
He said, "Emergency aid is what I'm talking about, similar to what government does in natural disasters. I would make the criteria for who gets payments exactly the same for who would get rate relief. You still have the problem of drawing a line between those who were irresponsible and those who are innocent victims. That's a tough political value judgment to make." But once that judgment is made, "it is far less damaging to the economy and far simpler, without the ongoing consequences for the markets, if you give homeowners cash." more...

U.S. Mortgage Crisis Rivals Savings and Loan Meltdown

2007-12-11T06:32:00.000-08:00

To ease the pain, the Federal Reserve has cut short-term interest rates twice and is expected to cut them further tomorrow. The Bush administration has also pressed for private-sector curative measures. First, it urged big banks to create a new entity to buy some mortgage-linked securities that don't have a ready market now. And a plan finalized last week calls for freezing interest payments on perhaps hundreds of thousands of qualifying homeowners whose mortgage notes are set to rise. (See a primer: Will the Rate Freeze Help You?) Both ideas are controversial. They are hailed by some as well-conceived financial first aid and criticized by others as inadequate -- or an impediment to crisis resolution.

Buying Time
When the Fed began to raise interest rates in 2004, mortgage rates also began to climb. Initially, home prices kept rising as home buyers turned to mortgages with low initial payments, assuming they could sell or refinance before the mortgage rate adjusted higher. Borrowers who had trouble making payments could easily buy more time by refinancing into bigger loans, thanks to higher prices. That kept defaults low and encouraged rating agencies to continue blessing securities backed by such mortgages with high ratings.
Then, in places like Florida, buyers stopped coming. Mr. Delzio listed one home, on which he spent $203,000, at $210,000. He then cut the price repeatedly, finally to $175,000, barely more than the mortgage. He now rents it for $800 month, well short of the $1,400 monthly carrying cost.
Selling is made all the more difficult by the ample supply of homes and vacant land for sale in the area. Nationally, there were 2.1 million vacant homes for sale in the third quarter, equal to 1.6% of all the homes in the country -- a record.
At the end of 2006, the value of all homes in the U.S., excluding rentals, peaked at 153% of gross domestic product (or about $21 trillion) -- the highest level in at least six decades. By Sept. 30, that had edged down to 150% of GDP as home prices began to drop. With huge inventories of unsold homes soon to swell with foreclosed properties, that is likely to continue.
Falling home prices make consumers poorer and less ready to spend, and they make it harder to borrow against home values -- even if consumers are current on their payments....more

U.S., Banks Near a Plan to Freeze Subprime Rates for Borrowers

2007-12-03T18:59:00.000-08:00

WASHINGTON -- The Bush administration and major financial institutions are close to agreeing on a plan that would temporarily freeze interest rates on certain troubled subprime home loans, according to people familiar with the negotiations.
An accord could reassure investors and strapped homeowners, both of whom are anxious as interest rates on more than two million adjustable mortgages are scheduled to jump over the next two years. It could also give a boost to the Bush administration, which is facing criticism for inaction amid the recent housing turmoil.
The plan is being negotiated between regulators including the Treasury Department and a coalition of mortgage-related companies including Citigroup Inc., Wells Fargo & Co., Washington Mutual Inc. and Countrywide Financial Corp. People familiar with the talks say the individual members have agreed to follow any agreement reached by the coalition, which is called the Hope Now Alliance.

Details of the plan, which could be announced as early as next week, are still being worked out. In general, the government and the coalition have largely agreed to extend the lower introductory rate on home loans for certain borrowers who will have trouble making payments once their mortgages increase.
Many subprime loans carry a low "teaser" interest rate for the first two or three years, then reset to a higher rate for the remainder of the term, which is typically 30 years in total. In a typical case, the rate would rise to around 9.5% to 11% from 7% or 8%. That would boost an average borrower's payment by several hundred dollars a month.
Exactly which borrowers will qualify for the freeze and how long the freeze would last are yet to be determined. Under one scenario, the freeze could run as long as seven years. The parties are developing standard criteria that would determine eligibility. The criteria should be finalized by the end of year. more...

The foreclosure market continues to boom as no relief appears in sight for stretched subprime mortgage holders.

2007-11-28T07:01:00.000-08:00

As the economy shows more signs of a slowdown, this trend is likely to continue.

Although the real estate industry would prefer otherwise, foreclosures continue to make headlines. The latest data showed superficial relief, with September foreclosures down 8% from some 243,000 in August, but still more than double last year -- and still with more to come.
It may be a harsh analogy, but I often think of foreclosure buyers as the forest-floor ants consuming the dead wood to clean the forest. That means three things. First, as I see it, the sooner we get through this credit mess, the better. Second, the faster properties get through the foreclosure process and find buyers, the sooner we'll get through the mess. So third, foreclosure buyers clean out the dead wood (I like) and get great bargains in the process (I also like)....more

Interest Rates Defy Fed's Recent Cuts...

2007-11-08T18:08:00.000-08:00

Interest-rate cuts by the Federal Reserve are normally bad news for savers and good news for borrowers. But that scenario hasn't been playing out fully since the central bank began cutting rates in September.
The Fed has trimmed a total of three-quarters of a percentage point from short-term rates in recent weeks. However, rates on such popular savings products as money-market funds, savings accounts and certificates of deposit haven't fallen anywhere near that much, and some have even held steady. Meanwhile, rates on certain types of borrowings, including home-equity loans and auto loans, remain stubbornly high.
Behind the discrepancies is continuing tightness in credit markets, where many banks raise much of their capital. Instead, banks remain especially eager to attract consumers' deposits, and are willing to pay savers handsomely to keep the money coming in the door. At the same time, banks' higher cost of raising capital is keeping many of them from lowering rates on some kinds of loans

"Even though the Fed has eased three-quarters of a percentage point since September, the market has only gotten between 0.25% and 0.50% of that easing," says James Bianco, president of Bianco Research LLC, a market-research firm in Chicago. "If you look at it from a saver's and borrower's side, it shows you that the market is still not functioning properly."
That's fine with savers. Average yields on money-market mutual funds, for example, whose yields typically move in line with changes in the Fed funds rate, are hovering at 4.76%, compared with 5.06% in mid-September -- roughly half the amount they'd be expected to drop, says Peter Crane of Crane Data LLC.
Declines in CD rates also are relatively modest. One-year CDs currently average 3.61%, down from 3.78% in mid-July, and five-year CDs are at 3.92%, down from 4%, according to Greg McBride, a senior financial analyst at Bankrate.com. By contrast, he says, comparable Treasurys have dropped a full percentage point over the same period. "Normally, CD yields would drop like a stone, and now, they've been dropping like a feather," he says.
To be sure, banks may still trim yields on deposits in the wake of this past Wednesday's Fed cut in the federal-funds rate, charged on overnight loans between banks. The move, aimed at bolstering the economy amid plunging home construction and eroding real-estate values, pushed the Fed rate down a quarter point to 4.5%. However, market experts expect consumers will continue to enjoy favorable yields on many savings products in the 4% to 5% range, with the highest yields on savings products still above 5%. "Yields are going to drop a little bit, but won't drop as much as we would expect in normal circumstances," Mr. McBride says. more...

Selling Your Property In A Slow Market

2007-11-08T17:32:00.000-08:00

Look at the prices of homes getting sold, and the property market's decline seems no worse than a rough day in the stock market. Look at the number of unsold homes, and you realize there's a world of financial pain out there.
True, these unsold homes may eventually get bought at decent prices. But in the meantime, the owners are often bleeding money -- and many of them would be smart to slash their asking price and go for the quick sale.
• home prices are down just 4.5% from their July 2006 peak.
Yet even as prices appear pretty much unchanged, the number of unsold homes has soared. At the current pace of sales, it would take more than 10 months to clear this backlog, according to the National Association of Realtors.

Sure, it would be emotionally draining to have your home on the market for more than 10 months. But it probably wouldn't be a financial disaster -- as long as you're still in the house and you can comfortably cover the mortgage.
Maybe, however, you have an adjustable-rate loan that's now unaffordable. Maybe you're trying to unload a vacation home. Maybe you moved cross-country for a new job, but your old house still hasn't sold.
The monthly cost of carrying a vacant home could equal 1% of a home's value, figures Charles Farrell, an adviser with Denver's Northstar Investment Advisors. After all, you still have to pay utilities, insurance, property taxes, maintenance and, of course, the mortgage.
What if the mortgage is paid off? There's still an opportunity cost. The equity in your home could instead be invested in, say, bonds yielding 5%.
To make matters worse, "prices could be lower a year from now," Mr. Farrell warns. "There's also the risk of owning a physical asset. I'm thinking about things like fire, broken pipes, theft." more...

The United States of Sub-Prime Loans

2007-10-13T11:21:00.000-07:00

As America's mortgage markets began unraveling this year, economists seeking explanations pointed to "subprime" mortgages issued to low-income, minority and urban borrowers. But an analysis of more than 130 million home loans made over the past decade reveals that risky mortgages were made in nearly every corner of the nation, from small towns in the middle of nowhere to inner cities to affluent suburbs.
The analysis of loan data by The Wall Street Journal indicates that from 2004 to 2006, when home prices peaked in many parts of the country, more than 2,500 banks, thrifts, credit unions and mortgage companies made a combined $1.5 trillion in high-interest-rate loans. Most subprime loans, which are extended to borrowers with sketchy credit or stretched finances, fall into this basket.
High-rate mortgages accounted for 29% of the total number of home loans originated last year, up from 16% in 2004. About 10.3 million high-rate loans were made in the past three years, out of a total of 43.6 million mortgages. High-rate lending jumped by an even larger percentage in 68 metropolitan areas, from Lewiston, Maine, to Ocala, Fla., to Tacoma, Wash

To examine the surge in subprime lending, the Journal analyzed more than 250 million records on mortgage applications and originations filed by lenders under the federal Home Mortgage Disclosure Act. Subprime mortgages were initially aimed at lower-income consumers with spotty credit. But the data contradict the conventional wisdom that subprime borrowers are overwhelmingly low-income residents of inner cities. Although the concentration of high-rate loans is higher in poorer communities, the numbers show that high-rate lending also rose sharply in middle-class and wealthier communities.
Banks and other mortgage lenders have long charged higher rates to borrowers considered high-risk, either because of their credit histories or their small down payments. As home prices accelerated across the country over the past decade, more affluent families turned to high-rate loans to buy expensive homes they could not have qualified for under conventional lending standards. High-rate loans are those that carry interest rates of three percentage points or more over U.S. Treasurys of comparable durations...more

Where Are All the Real Estate Deals?

2007-10-13T07:57:00.000-07:00

During a housing downturn, buyers may start looking out for big bargains, but for reliable investments consider the whole economic picture...

You may have heard that now is the time to buy real estate—if you can afford to. As contrarians point out, demand is weak, sales are slow, and inventory is high. Homeowners and homebuilders are slashing prices desperately, and savvy investors are snatching up cheap foreclosure properties. The real estate market is teeming with bargain-priced homes, just waiting for that next lucky buyer to come along.
Or so it seems. Most experts agree the era of home flipping is over and believe homes should be looked at foremost as shelter and secondarily as a long-term investment. But, as always, there are some areas of the country where homes are affordable, price appreciation is imminent, and the underlying economy is strong. In these places, you might just have an easy time finding a great bargain.
Along with economists at Fiserv (FISV), Lending Solutions, and Moody's (MCO) Economy.com, BusinessWeek put together a list of the best metropolitan areas for bargain homes by looking at affordability, forecasts for price appreciation and job growth, and recent price fluctuations. These areas are not for high-risk investors; they are perfect hunting grounds for smart buyers looking for decent home price appreciation and a pleasant place to live at a discount. ..more

U.S. Housing Chill Grows

2007-09-29T05:49:00.000-07:00

Overall, sales of existing homes tumbled 4.3% in August to an annual pace of 5.5 million, the slowest in five years, the National Association of Realtors said yesterday. More worrisome: The number of homes for sale is enough to satisfy 10 months of demand at the current pace. Two years ago the figure was below five months. Analysts cite excess supply in forecasting that an upturn in sales and prices may not come until 2009.
Home prices in July fell 3.9% from a year earlier, according to the S&P/Case-Shiller home-price index. The index, which tracks prices in 20 U.S. metropolitan areas, hadn't measured that big of a decline since just after the 1990-91 recession.

The bottom is "not yet in sight" for housing, said Mr. Shapiro, the economist. He said the growing number of unsold homes "argues for accelerating declines of prices."
The worsening housing slump and turmoil in the credit markets is beginning to take a toll on retailers. Lowe's Chief Executive Robert Niblock, addressing analysts and investors at a conference in Charlotte, N.C., yesterday, refused to hazard a guess on when the housing slowdown will bottom. "The only thing that is consistent is the inaccuracies of the economic forecasts," he said. Late Monday, Lowe's reduced its earnings outlook for this year and 2008. Its shares fell 6.7% yesterday. more

Despite data, Fed leaves rates steady

2007-08-07T19:31:00.000-07:00

Wall Street turbulence, Main Street credit problems and a nationwide housing slump pose increasing risks to the economy, the Federal Reserve said Tuesday, even as it left interest rates unchanged.
Although Federal Reserve Chairman Ben Bernanke and his central bank colleagues acknowledged challenges that have intensified since their last meeting in late June, they nonetheless expressed hope that the economy will safely make its way.
The policymakers also clung to their belief that the biggest potential danger to the economy is that inflation won't recede as they anticipate.
Against these economic crosscurrents, the Fed left an important interest rate at 5.25 percent on Tuesday. In turn, commercial banks' prime interest rate for certain credit cards, home equity lines of credit and other loans -- would stay at 8.25 percent.
The central bank's key rate hasn't budged for more than a year. Before that, the Fed had raised rates for two years to fend off inflation.
On Wall Street, investors overcame their initial disappointment and bid stocks higher. The Dow Jones industrials gained 35.52 points to close at 13,504.30.
The Fed policymakers didn't signal that a rate cut -- as an insurance policy against undue economic weakness -- would be imminent. Analysts believe the Fed probably will leave rates alone at its next meeting on Sept. 18. But economists and investors think the odds are growing that the Fed might lower rates by the end of this year, if the economy shows signs of faltering and if inflation isn't worrisome.
"Financial markets have been volatile in recent weeks, credit conditions have become tighter for some households and businesses and the housing correction is ongoing," the Fed said. "Downside risks to growth have increased somewhat," it added...more

No Housing Turnaround for Two Years?

2007-08-06T22:24:00.000-07:00

First, it was the second half of 2007. Then it was 2008. Now analysts are saying the national housing market may not rebound until 2009. On July 25, the National Association of Realtors reported that sales of existing homes fell 3.8% in June to a seasonally adjusted annual rate of 5.75 million units, contributing to the bleak-and-getting-bleaker outlook.
Mixed Signals Confuse Buyers. The NAR believes consumer psychology is to blame. "Homebuyers have been getting mixed signals about the housing market, which is causing some of them to hesitate," said NAR Senior Economist Lawrence Yun in a statement. Rising mortgage rates and tighter lending standards aren't helping, either, Yun said. According to Freddie Mac (FRE), the national average commitment rate for a 30-year fixed-rate mortgage rose to 6.66% in June, from 6.26% in May.
Two "bright spots" in June, Yun said, are the decline in housing inventory and the "modest gain" in home prices. Total housing inventory fell 4.2% in the month, to 4.2 million existing homes for sale, representing a supply of 8.8 months. In the same period, the national median existing-home price edged up 0.3% year-over-year, to $230,100. For single-family homes, the median price rose only 0.1%.
"This increase is an aberration," says Patrick Newport, an economist with Global Insight in Waltham, Mass. "Current inventory levels make it almost a sure thing that prices will continue to slide." On July 11 the NAR said existing-home prices would recover in 2008, rising 1.8%, to a median of $222,700 after a 1.4% decline this year. But Newport thinks otherwise. "Our view is that the downturn [in sales] will continue into 2008," he says. "Given the level of unsold homes, however, nominal home prices will probably not rebound until 2009." ...more

The new exit strategy: A short sale

2007-08-06T22:20:00.000-07:00

For all the homeowners who are upside down and can no longer make their mortgage payment (because of either a job loss, divorce, or an option ARM that's resetting higher), up to now the only option was, well, letting the bank foreclose. That's not a good option since a foreclosure sticks on your credit record for at least 10 years. But some experts are now advocating a "short sale." This is a case of a distinction with a difference: If your bank agrees to a short sale, you then hire an agent to find a buyer for the house, you sell the house for a loss, and with the bank's blessing, they agree to eat the loss (although they could still demand the homeowner make some kind of payment or share the loss).
That's the really short version of how it works. ..more

Home prices fall at fastest rate in 16 years

2007-06-28T05:38:00.000-07:00

WASHINGTON (MarketWatch) -- Home prices in 10 major U.S. cities dropped at the fastest pace in 16 years during the 12 months ending in April, according to Standard & Poor's Case-Shiller home price index released Tuesday.
Home prices in the 10 cities fell 2.7% on a year-over-year basis, the largest decline since September 1991. Meanwhile, prices in 20 cities dropped a record 2.1% year over year...more

Mortgage Brokers: Are They Friends or Foes for Borrowers?

2007-06-11T05:33:00.000-07:00

The political debate over how to deal with a surge in defaults on home loans is raising a question that consumers ought to consider: Is my mortgage broker really working for me?

Borrowers often see mortgage brokers as their allies, searching far and wide for just the right home loan at an attractively low price. But many brokers are making it clear they don't see things that way. They are fighting efforts by federal and state politicians to impose a fiduciary duty on them to put their customers' interests first, as lawyers, real-estate agents and financial planners generally are required to do with their clients.

To protect yourself, one strategy is to shop for a home loan directly at a few lenders and then see whether a broker can find a better deal. When choosing a broker, borrowers should ask tough questions first. Among them: In searching for loans, do you feel obliged to put my interests ahead of yours? Exactly how much will you earn on this loan? And how many lenders do you check regularly for rates and terms?lanners generally are required to do with their clients....more...

U.S. Home Prices Fall For First Time Since 1991

2007-06-02T11:06:00.000-07:00

U.S. home prices dropped 1.4% in the first quarter compared with a year earlier, the first year-over-year decline in national home prices since 1991, according to the S&P/Case-Shiller index released Tuesday. A year ago, home prices were rising at an 11.5% pace. Prices have been falling for the past three quarters. The Case-Shiller indexes cover three geographical areas. The national index is released quarterly, while the 10-city and 20-city indexes are released each month.

The national decline "is reaffirmation of the pullback in the U.S. residential real estate market," said Robert Shiller, chief economist for MacroMarkets LLC, and co-inventor of the index.
"This fall is consistent with the ongoing trend that has developed over the past year," wrote Goldman Sachs economists, who said they believe the Case-Shiller index is the best gauge of home values. "We remain comfortable with our forecast of house prices falling by 5% over 2007." more...

New-home sales soared in April!

2007-05-25T04:41:00.000-07:00

New-home sales soared in April, an unexpected surge marking the biggest climb in 14 years, according to a report that showed declining inventories and signaled hope for the long-suffering housing sector.

Separately, demand for expensive goods rose mildly in April, according to a government report Thursday that also showed capital spending by businesses grew again.
Sales of single-family homes increased for the first time in four months, rising by 16% to a seasonally adjusted annual rate of 981,000, the Commerce Department said Thursday. March new-home sales decreased 1.4% to an annual rate to 844,000, a figure revised down from an earlier estimated 858,000. Sales fell 3.8% in February and 13% in January. Year-to-year, new-home sales were 11% lower than the level in April 2006.

The average price of a home last month decreased to $299,100, down from $324,700 in March and $310,300 in April 2006. The median price was $229,100, lower than $257,600 in March and $257,000 in April 2006. more....

Where Home Prices Are Hot Now Despite the Housing Slowdown

2007-05-19T19:57:00.000-07:00

The housing news isn't all grim. Even as prices sag nationwide, there are several cities in the country where home values are climbing smartly.
Portland, Ore., Boise, Idaho, Seattle, Salt Lake City, Houston, Austin, and Charlotte and Raleigh, N.C., are among the cities bucking the national trend. Homes' appreciation there between the fourth quarters of 2005 and 2006 far exceeded the national average of 5.9%, according to the Office of Federal Housing Enterprise Oversight. In some markets, like Boise and Seattle, the appreciation jumped well into the double digits.

There's no single secret of these cities' apparent success, but many of them missed the housing boom of the past five years. From 2001 to 2005, annual appreciation in these cities was between 2% and 5%, far slower than the 7% to 12% national average, according to the Office of Federal Housing Enterprise Oversight. (OFHEO calculates appreciation based on repeat sales or refinancings of the same single-family properties.) Now, prices are playing catch-up.
Location, Location
• In Portland, Ore., Seattle, Salt Lake City, Boise, Idaho, Houston, Austin, Charlotte and Raleigh, appreciation has exceeded the U.S. average.
• These areas missed out on the recent housing boom and are now playing catch-up.
• Most of the cities have educated workers and solid economies with strong central industries. All seem to be luring buyers from depreciating markets. more...

Securing a Loan Gets Tougher....

2007-05-19T19:52:00.000-07:00

Mortgage lenders are beginning to scrutinize borrowers more closely, causing some loan applicants, even those with good credit, to face higher costs and more hassles.
As the number of delinquent mortgages climbs, lenders have tightened their standards for issuing loans, including such well-publicized moves as raising minimum credit scores and cutting back on 100% financing and low-documentation loans. Now, some lenders are probing more intently would-be borrowers' finances. They are taking a tougher look at how much the property a borrower wants to buy is worth.

Tighter lending standards are adding pressure to an already soft housing market. Last week, the National Association of Realtors forecast the first annual decline in the median price of an existing home since the group began tracking home prices in the late 1960s, in part because mortgages are more difficult to get. more...

Spring Is In the Air! and Love is Everyhere!

2007-05-13T05:01:00.000-07:00

It must be spring. Love is in the air.
"O! how this spring of love resemblethThe uncertain glory of an April day!"
--William Shakespeare

Supply of Homes Continues to Grow, Reflecting Weak Sales

2007-05-13T04:41:00.000-07:00

The supply of houses and condominiums available for sale continues to grow quickly in much of the U.S., reflecting weak sales. The number of homes listed for sale in 18 major metropolitan areas at the end of April was up 7% from March, according to data compiled by ZipRealty Inc., a national real-estate brokerage firm in Emeryville, Calif. The data cover listings of single-family homes, condos and town houses on local multiple-listing services.

The increase was above the seasonal norm. Over the past 22 years, home inventories nationwide have increased an average of 4.5% in April from March, according to Credit Suisse Group. Spring is the busiest time of year for home shopping, as families with children try to get settled ahead of the next school year.

The National Association of Realtors yesterday again lowered its forecast, predicting that sales of previously occupied homes will total 6.29 million, down 2.9% from 2006. A month ago, the trade group projected that sales this year would slip 2.2%. Lawrence Yun, a senior economist for the Realtors, said many speculators have fled the market. more....

Happy Mothers Day!

2007-05-13T04:16:00.000-07:00

Oh, mama! You've treated us so well. You hauled our friends to gymnastics class, iced one-hundred sugar cookies for the school's bake sale and even paid for all those extraneous classes toward our liberal arts degrees. Yep, we owe you a big one this Mother's Day, so that's why we're going to treat you to these sumptuous brunches and divine dinners. Need some brunch ideas...try these...more...

They Do Love their Mommies

2007-05-13T04:09:00.000-07:00

NEW YORK -- MOTHER'S DAY Vicious toward the rest of mankind, mobsters from Capone on down have always had one fierce loyalty -- and this is their holiday

Each and every Mother's Day until he landed behind bars, mobster Jimmy ''The Gent'' Burke performed a sacrosanct ritual.
Burke, the mastermind behind the $5.8 million Lufthansa heist immortalized in ''Goodfellas,'' dropped a few C-notes on dozens of red roses. He then toured the homes of his jailed Luchese crime family pals, providing their mothers with a bouquet and a kiss. He never missed a year, or a mom. more....

U.S. House Prices Slide

2007-05-01T07:06:00.000-07:00

Tighter credit and a growing glut of properties are depressing an already weak U.S. housing market, wrecking the industry's hopes for an early rebound.
That leaves buyers in a strong position to negotiate for bargains during the spring home-shopping season, the busiest time of the year for housing sales.
Yesterday, the National Association of Realtors reported that sales of previously occupied homes in March dropped 8.4% from the prior month to a seasonally adjusted annual rate of 6.12 million units -- the largest monthly drop since 1989. The trade group said the median price for homes was $217,000 in March, down 0.3% from a year earlier.

The data reflect sales that closed in March; most of those were negotiated in January and February. The Realtors said bad weather in February hurt March sales. The drop in March followed three months when home sales increased nationally.
Since March, the market appears to have deteriorated further in many parts of the country. Reports from builders show that sales in the past few weeks "have really plunged," says Ivy Zelman, a Cleveland-based housing analyst for Credit Suisse Group. She says prices of new homes also are falling as tighter credit eliminates some potential buyers and builders struggle to shed excess inventory.

Stricter lending standards will reduce demand for housing by 10% this year from where it would have been had credit remained loose, estimates Thomas Lawler, a housing economist in Vienna, Va. He expects housing prices, as measured by the national S&P/Case-Shiller index, to fall 7% in the fourth quarter of 2007 from the year-earlier level.

Standard & Poor's reported yesterday that the S&P/Case-Shiller 20-city composite index in February was down 1% from a year earlier. The metro-area price changes ranged from drops of 7.8% in Detroit and 5% in San Diego to rises of 10.6% in Seattle and 7.7% in Portland, Ore. In 15 of the 20 cities, March prices were down from a month before.

Not all delinquent payments or defaults lead to foreclosures, of course, but most experts are expecting a sizable increase in foreclosures over the next year or two as home prices weaken. That will add to the glut of homes for sale.
In areas near new construction, sellers of older homes are up against builders determined to cut prices as much as necessary to shed inventory. "We're marking our inventory to market across the country," Donald Tomnitz, chief executive of D.R. Horton Inc., said in a conference call with analysts last week. more...

Go Bulls!

2007-05-01T05:10:00.000-07:00

They're not Done doing the rounds...

When the Washington Wizards ousted the Bulls to advance in the 2004-05 postseason, the team had buttons made up that read, ''2nd Round.'' No need for the Bulls' promotions staff to worry about such fluff. This team wants to add another trophy to the six that sit in the case at the Berto Center. more...

Sub-Prime Lenders Rescued...

2007-04-19T15:48:00.000-07:00

The risky-mortgage meltdown appears to be heading for a softer landing thanks to a new $20 billion safety net thrown up by Freddie Mac yesterday. As foreclosures on home mortgages peaked - soaring 47 percent in March - leaders in Congress and the banking industry applauded the aggressive rescue move, the largest yet to curb the crisis for slow-paying mortgage holders.
Freddie Mac - a government-created money pool that finances most American mortgages - said it would buy at least $20 billion of troubled mortgages to curb their collapse, and give homeowners a chance at keeping up with mortgage payments.

Washington Mutual also said yesterday it would refinance $2 billion in shaky mortgages to prevent borrowers from losing their homes. Fannie Mae, the No. 1 mortgage financer, announced it also is offering new options so that lenders can help subprime borrowers refinance out of high-interest adjustable-rate mortgages or other difficult loans.

More than 149,000 of the risky mortgages went into foreclosure last month - triple the level of a year earlier and the highest mark since market watchers began collecting such data in 2005. more... PAUL THARP,April 19, 2007

Looking Ahead at Morgage Rates

2007-03-29T19:19:00.000-07:00

Mortgage rates are coming in, making it a good time to get a fix, so to speak, and so says John Crudele in the New York Post. Crudele has won more than a few awards for his Business reporting over the years, and that means being right, even if it's out of step with the main line press.
He writes:
"Since late January the rate on the government's 30-year bond, the one that most resembles long-term mortgages, has dropped from 5 percent to around 4.80 percent. Many things could go wrong, but unless something changes dramatically that should translate into good news for mortgage seekers in the months ahead. So this time around the less than perfect economy could really be better for the housing market than a strong one."

Million Dollar Babies - The Market for Jumbo Homes

2007-03-29T19:11:00.000-07:00

June Fletcher, writing for the WSJ.com sorted out the recent data dump of housing figures to draw a few conclusions about markets and what I am calling "Million Dollar Babies", or jumbo, starter Luxury homes. These homes are said to be sitting in a market niche that is suffering greater price declines than other segments. Writing about Chicago and the mid west, she wrote:
"The Sunbelt cities that attracted droves of buyers and builders during the boom have fared poorly. Overheated and overbuilt markets finally slowed down by the end of 2006: prices fell 4.2 percent, to $876,250, in Miami and flattened in Phoenix at $887,660 and in Charleston, S.C., at $937,500. Some Midwestern markets also performed badly. Prices were down 3.3 percent in Chicago, due in part to the loss of manufacturing jobs there. Things were even worse in St. Louis, which lost 3,300 jobs in the year ending November, second nationally only to Detroit. Prices in St. Louis were down 7.2 percent, the largest decline in the survey."
With all due respect (she does a great job reporting on real estate markets), I always wonder just how much research goes into such broad statements about price moves as "due to the loss of manufacturing jobs".
For example, how much speculative buying and selling, or lack of actual sales, factor into that 3.3 percent decline? Fletcher went on to explain how speculation meshes with Chicago Real Estate market trends with an anecdote about a family who traded down in a falling market for homes in the 1 million dollars range. She observed that the market seems fueled more by need than speculation, which was the trend until now.
During the boom, many buyers bought the biggest house that they could because they saw that as a way to increase their investment in real estate without buying rental property. But now that the market is softening, that strategy no longer makes much sense. Lawyer Beth Joffe and her husband, a physician, recently sold their three-bedroom Chicago home for $760,000 and have moved to a much smaller two-bedroom condo in Madison, Wis., that they bought for $300,000. Though both are far from retirement age, neither wants the hassle or added expense of a bigger place. "We don't need that any more," Ms. Joffe says.
The view from 30,000 feet is that it appears that sellers are in a sort of race to the bottom mode, where they price their houses lower right out of the gate in order to make sure they are getting a good number of bids from the start, whereas, up to now, sellers listed just above current comp. prices with the expectation that they would get plenty of offers. As she put it:
"Agents say that in many cities, the shifting psychology is causing sellers to reverse their tactics. During the run-up, sellers usually priced their homes slightly above the market knowing that someone would buy them, even if the price tag later had to be lowered somewhat. Now sellers are trying to undercut the market to sell while their listings are still fresh."
Again, every seller's situation is unique, just as every property has its' own special features or challenges, and "result will vary" as they say. However, it helps to look at the big pictures when trying to make sense of the conditions when buying and selling real estate. And according to Fletcher's report, that big picture is as follows.

In the fourth quarter of 2006, only 32 metro markets had 100 or more sales in the "starter luxury" category -- new and existing single-family homes costing between $750,000 and $1.25 million -- down from 65 markets in 2005. Here's what's happened to the median prices of starter luxury homes in selected metro areas.

4TH QTR 4TH QTR METRO AREA(1) 2006 2005 percent CHANGE
St. Louis $858,500 $925,000 -7.2
Edison, N.J. $875,000 $937,500 -6.7
Miami-Miami Beach-Kendall, Fla. $876,250 $915,000 -4.2
Chicago-Naperville-Joliet, Ill. $870,000 $900,000 -3.3
San Francisco-San Mateo-Redwood City, Calif. $870,000 $880,000 -2.0
Richmond, Va. $990,000 $960,000 +3.1
Salt Lake City, Utah $929,670 $896,420 +3.7
Minneapolis-St. Paul, Bloomington, Minn. $935,000 $899,000 +4.0
New York-White Plains, N.Y.-Wayne, N.J. $906,750 $870,000 +4.2
Santa Ana-Anaheim-Irvine, Calif. $917,750 $880,000 +4.3(1)
Areas with 100 or more "starter luxury" sales.

It's Official-- The Buyer's Market is Here

2007-03-24T23:10:00.000-07:00

It's Official-- The Buyer's Market is Here

Ellen Florian Kratz, reporting for Fortune and syndicated... everywhere, asserts that it is now, officially a "buyer's market". In recent weeks, the national media reported that "drama pricing" was sweeping large markets such as Washington, DC, where sellers are being advised to cut their asking prices dramatically (and we have heard the phrase used a few times here in the Chicago real estate market).
The "buyer's market" theory stems from the notion that the cost to carry real estate is too great for new home builders, and other holding mortgages beyond a point where it makes sense to wait for the best price, making it favorable for buyers who want to low ball seller for a good deal. Large builders have been spotted giving between 6 to 33 percent off asking prices, and some are including way new cars, closing costs, and even vacations (just be sure to research your destinations). So, perhaps it Tis' the season for deep discounts, but I'm telling my buyers to be sure to research neighborhood prices, and talk to an appraiser before locking in that package home purchase with a trip to a condo in Mexico for New Years.
The "buyer's market" theory is turning up more and more, full on.

www.buyinchicago.com - Search the MLS Free
List Your Property For Sale; chicago real estate home buying, sellers/investors income. Including relocation services.
www.marionpropertymanagement- Specializing in off-site condominium management
posted by Diannah Evans, Broker
January, 2007