October 2, 2009—According to a recent survey of real estate agents, the first-time homebuyer tax credit has been extremely successful in stimulating the housing market and the overall economy. However, the overwhelming majority of agents polled, see challenges for real estate if the tax credit is allowed to expire on Nov. 30, 2009.
Of the nearly 1,000 agents surveyed in a study conducted by Weichert, one of the nation’s largest independently-owned real estate companies, 71% reported that the $8,000 tax credit was the single largest factor motivating the buyers they have worked with in 2009 far surpassing affordable home prices (20%) and low interest rates (8%).
While the tax credit has helped stimulate the market since being passed by Congress in February, it appears real estate agents feel more support is needed. The vast majority of respondents (92%) think the market will decline if the tax credit is allowed to expire this year. Given that expectation, it’s not surprising that 97% favor extending the tax credit with the majority wanting to continue the credit until Dec. 31, 2010.
“The tax credit is working to restore confidence and stimulating the overall economy but we still have a long way to go before we return to a normal market,” said James M. Weichert, president and founder of Weichert, Realtors. “As this survey shows, many in our industry are concerned that we will lose much of the ground that has been made toward a recovery if the tax credit is not extended.”
The survey further revealed that agents think expanding the tax credit to include current homeowners would help expedite the recovery for higher-priced homes–something that has yet to happen as a result of the first-time buyer tax credit. Respondents felt nearly nine times more confident in saying that we are very likely to see a recovery in mid- to high-priced homes in the next one to two years if existing homeowners could also receive the tax credit (61% to 7%).
Beyond aiding the housing market, the tax credit appears to have had a stimulating impact on other sectors of the economy as intended. Agents reported that 39% of buyers used the money they received from the tax credit for renovations and remodeling while another 20% purchased household items such as electronics, appliances and furniture with the financial incentive they received for purchasing a home.
The survey also revealed that agents feel the tax credit is vital to stabilizing the national economy. Of those polled, 84% felt extending and/or expanding the credit is very important in the ongoing recovery effort.
Friday, October 02, 2009
Tuesday, September 29, 2009
More Rough Times Ahead for U.S. Economy, despite Recent Improvements
September 29, 2009—Despite recent signs of improvement, more rough times are ahead for the U.S. economy, according to several prominent experts in real estate and the economy who attended a recent forum at the Nixon Presidential Library.
“You look at the numbers and everything points to the fact that we not only have bottomed, but things seem to be improving,” said Christopher Thornberg of Beacon Economics, citing increases in durable goods orders, exports and auto sales. He added, “When you think about the problems we’ve been through and what government has done, in many ways, they have, in fact, stabilized the economy. But you know what? They haven’t actually solved the underlying problems in the economy.” Thornberg cited real estate as a case in point. While home sales are up in some areas of the country, 6 to 7% of home mortgages nationally are 60 to 90 days delinquent. In California alone, 250,000 mortgages are 60 to 90 days late. And there’s more economic trouble on the horizon, he said, with rising unemployment and additional waves of foreclosures. “The second half of 2010 will be very weak,” he said, adding, “2011 will be very grim.”
Thornberg was one of several nationally known experts in real estate and the economy who shared their perspectives during a Sept. 11 forum and charity event for the Orange County affiliate of Susan G. Komen for the Cure, one of the world’s largest grassroots organizations dedicated to finding a cure for breast cancer.
Real estate analyst and investor Bruce Norris of The Norris Group in Riverside organized and moderated the event, which included experts from the California Building Industry Association, the National Association of Realtors, the Mortgage Bankers Association, RealtyTrac, The Appraisal Institute and the National Auctioneers Association.
While all of the panelists agreed that the economy will rebound in another two or three years, several pointed to tough economic conditions in the interim. John Young, vice president of the California Building Industry Association, said new housing starts are at their lowest levels since the early 1950s. He added that new home sales are often stymied by appraisals coming in lower than contracted home sale amounts. Meanwhile, foreclosures continue to mount. Rick Sharga, senior vice president of RealtyTrac, one of the leading online marketplaces for foreclosure properties, said the nation has had 43 consecutive months of foreclosures. “We’re dealing with foreclosure activity that is six times what it would be in a normal market,” he said. Sharga added that legal and legislative efforts aimed at helping consumers modify the terms of their loans “merely delay the inevitable.” After all, he said, modified loan terms are not going to help someone who loses their job. Sharga also sees another big wave of foreclosures hitting the market next year, which will reflect rising unemployment rates, which are expected to peak during the first quarter, as well as the resetting of adjustable rate mortgages to higher rates. The real estate market is also negatively affected by a “shadow inventory” of perhaps 400,000 to 500,000 homes, which have been taken back by banks, but haven’t been put back on the market for resale, Sharga said.
Home sales are also being frustrated by appraisals that underestimate true market value of properties being sold, said Joseph Magdziarz, vice president of The Appraisal Institute, the Chicago-based trade association that promotes the highest standards of professionalism and ethics in the appraisal business. Many problematic appraisals are coming from appraisal management companies that use unqualified appraisers who lack geographic competency in the markets where they are accepting assignments. Banks, for their part, won’t lend money on appraisals they can’t trust, Sharga said.
Despite these negative assessments, the panelists said there are many things that Congress, consumers and the real estate industry can do to facilitate our nation’s economic recovery. Magdziarz, for his part, said The Appraisal Institute has been trying to warn Congress for years to take action to better regulate the appraisal business. One pending bill, HR 1728, includes many of the Appraisal Institute’s recommendations, has passed the House and is currently in a Senate committee with bipartisan support. The Appraisal Institute has also alerted its 26,000 members that it will take aggressive enforcement action against any members who accept assignments they are not qualified for. “We cannot sit back and allow bad appraisals to prevent deals from going forward,” Magdziarz said, adding that investors should work only with appraisers that belong to professional appraisal associations. He also encouraged consumers and investors to report incidents of substandard or incomplete appraisal work to state authorities as well as to The Appraisal Institute. While Congress considers HR 1728 to improve appraisal industry, another pending bill, Senate Bill 1230, would nearly double home purchase tax credit to $15,000.
For his part, David Kittle, chairman of the Mortgage Bankers Association, said it is up to consumers, investors and the mortgage industry itself to weed out bad apples and not to count on Congress to solve the problem. “The people in Congress making laws don’t understand our business,” he said, adding, “When somebody’s doing something wrong, call them out and get them out of our business.” Pat Vredevoogd Combs, 2007 president of the National Association of Realtors, also recommended that Congress make tax credits available to all homebuyers and not just first-timers. Tommy Williams, 2008 president of the National Auctioneers Association, said professional auctioneers could also help market recovery by selling real estate at real market values. He added that auction participants already have their financing in place before they bid on properties.
Norris, for his part, recommended that Congress do several things to boost the real estate market. These include:
Increase the number of loans made available to well capitalized investors: Expand Fannie and Freddie loan programs from a maximum of 10 loans per investor to an unlimited number of loans for qualified investors.
Make the 203K FHA loan program available to investors: A 203K loan allows a property needing work to be purchased “as is,” but included in the loan amount is money for repairs. The loan funds both the purchase and rehab of the property. Investors need this loan now, but this loan is currently only available to owner occupants. FHA previously made this loan available to investors, but stopped the practice in 1996 when HUD ran out of lender owned, fixer uppers. Banks could solve the vacant house problem by giving investors back the 203K loan program.
Eliminate the 90-day waiting period before a repaired property can be sold to a buyer using an FHA loan: Investors who purchase fixer uppers can often completely repair the property in a matter of weeks. But the current law prohibits investors from reselling the property within 90 days. The assumption is that fraud must be taking place if a property is resold within 90 days. It’s ridiculous to assume that every investor who purchases a property, improves and resells it is committing fraud. All this policy does is increase investors’ costs of purchasing and rehabbing vacant homes.
Allow loans to be taken over by credit-qualified new buyers with no down payment. Through this process, which was successfully used in the 1980s, new buyers simply step in and take over the loan payments. The only stipulation is that the loan has to be made current at the close of escrow. The U.S. currently has about one million owners who will not be capable of keeping their homes without a huge discount on the principle balance. Many of these properties have fixed rates at very favorable rates. Allowing willing and capable buyers to come in and take over these loans would help contain the spread of foreclosures across the country.
Thornberg, for his part, said it’s not realistic to assume that our nation’s economic problems will be solved by increased regulation or by presidential action. The economy simply needs some time to heal itself, he said. But despite the near term trouble, Thornberg remains optimistic about the future. “I have tremendous faith in the U.S. economy rebounding again in the future,” he said. “And when we come out of this in two or three years, we’re going to have cheap housing and a weak dollar, which will be good for exports.”
“You look at the numbers and everything points to the fact that we not only have bottomed, but things seem to be improving,” said Christopher Thornberg of Beacon Economics, citing increases in durable goods orders, exports and auto sales. He added, “When you think about the problems we’ve been through and what government has done, in many ways, they have, in fact, stabilized the economy. But you know what? They haven’t actually solved the underlying problems in the economy.” Thornberg cited real estate as a case in point. While home sales are up in some areas of the country, 6 to 7% of home mortgages nationally are 60 to 90 days delinquent. In California alone, 250,000 mortgages are 60 to 90 days late. And there’s more economic trouble on the horizon, he said, with rising unemployment and additional waves of foreclosures. “The second half of 2010 will be very weak,” he said, adding, “2011 will be very grim.”
Thornberg was one of several nationally known experts in real estate and the economy who shared their perspectives during a Sept. 11 forum and charity event for the Orange County affiliate of Susan G. Komen for the Cure, one of the world’s largest grassroots organizations dedicated to finding a cure for breast cancer.
Real estate analyst and investor Bruce Norris of The Norris Group in Riverside organized and moderated the event, which included experts from the California Building Industry Association, the National Association of Realtors, the Mortgage Bankers Association, RealtyTrac, The Appraisal Institute and the National Auctioneers Association.
While all of the panelists agreed that the economy will rebound in another two or three years, several pointed to tough economic conditions in the interim. John Young, vice president of the California Building Industry Association, said new housing starts are at their lowest levels since the early 1950s. He added that new home sales are often stymied by appraisals coming in lower than contracted home sale amounts. Meanwhile, foreclosures continue to mount. Rick Sharga, senior vice president of RealtyTrac, one of the leading online marketplaces for foreclosure properties, said the nation has had 43 consecutive months of foreclosures. “We’re dealing with foreclosure activity that is six times what it would be in a normal market,” he said. Sharga added that legal and legislative efforts aimed at helping consumers modify the terms of their loans “merely delay the inevitable.” After all, he said, modified loan terms are not going to help someone who loses their job. Sharga also sees another big wave of foreclosures hitting the market next year, which will reflect rising unemployment rates, which are expected to peak during the first quarter, as well as the resetting of adjustable rate mortgages to higher rates. The real estate market is also negatively affected by a “shadow inventory” of perhaps 400,000 to 500,000 homes, which have been taken back by banks, but haven’t been put back on the market for resale, Sharga said.
Home sales are also being frustrated by appraisals that underestimate true market value of properties being sold, said Joseph Magdziarz, vice president of The Appraisal Institute, the Chicago-based trade association that promotes the highest standards of professionalism and ethics in the appraisal business. Many problematic appraisals are coming from appraisal management companies that use unqualified appraisers who lack geographic competency in the markets where they are accepting assignments. Banks, for their part, won’t lend money on appraisals they can’t trust, Sharga said.
Despite these negative assessments, the panelists said there are many things that Congress, consumers and the real estate industry can do to facilitate our nation’s economic recovery. Magdziarz, for his part, said The Appraisal Institute has been trying to warn Congress for years to take action to better regulate the appraisal business. One pending bill, HR 1728, includes many of the Appraisal Institute’s recommendations, has passed the House and is currently in a Senate committee with bipartisan support. The Appraisal Institute has also alerted its 26,000 members that it will take aggressive enforcement action against any members who accept assignments they are not qualified for. “We cannot sit back and allow bad appraisals to prevent deals from going forward,” Magdziarz said, adding that investors should work only with appraisers that belong to professional appraisal associations. He also encouraged consumers and investors to report incidents of substandard or incomplete appraisal work to state authorities as well as to The Appraisal Institute. While Congress considers HR 1728 to improve appraisal industry, another pending bill, Senate Bill 1230, would nearly double home purchase tax credit to $15,000.
For his part, David Kittle, chairman of the Mortgage Bankers Association, said it is up to consumers, investors and the mortgage industry itself to weed out bad apples and not to count on Congress to solve the problem. “The people in Congress making laws don’t understand our business,” he said, adding, “When somebody’s doing something wrong, call them out and get them out of our business.” Pat Vredevoogd Combs, 2007 president of the National Association of Realtors, also recommended that Congress make tax credits available to all homebuyers and not just first-timers. Tommy Williams, 2008 president of the National Auctioneers Association, said professional auctioneers could also help market recovery by selling real estate at real market values. He added that auction participants already have their financing in place before they bid on properties.
Norris, for his part, recommended that Congress do several things to boost the real estate market. These include:
Increase the number of loans made available to well capitalized investors: Expand Fannie and Freddie loan programs from a maximum of 10 loans per investor to an unlimited number of loans for qualified investors.
Make the 203K FHA loan program available to investors: A 203K loan allows a property needing work to be purchased “as is,” but included in the loan amount is money for repairs. The loan funds both the purchase and rehab of the property. Investors need this loan now, but this loan is currently only available to owner occupants. FHA previously made this loan available to investors, but stopped the practice in 1996 when HUD ran out of lender owned, fixer uppers. Banks could solve the vacant house problem by giving investors back the 203K loan program.
Eliminate the 90-day waiting period before a repaired property can be sold to a buyer using an FHA loan: Investors who purchase fixer uppers can often completely repair the property in a matter of weeks. But the current law prohibits investors from reselling the property within 90 days. The assumption is that fraud must be taking place if a property is resold within 90 days. It’s ridiculous to assume that every investor who purchases a property, improves and resells it is committing fraud. All this policy does is increase investors’ costs of purchasing and rehabbing vacant homes.
Allow loans to be taken over by credit-qualified new buyers with no down payment. Through this process, which was successfully used in the 1980s, new buyers simply step in and take over the loan payments. The only stipulation is that the loan has to be made current at the close of escrow. The U.S. currently has about one million owners who will not be capable of keeping their homes without a huge discount on the principle balance. Many of these properties have fixed rates at very favorable rates. Allowing willing and capable buyers to come in and take over these loans would help contain the spread of foreclosures across the country.
Thornberg, for his part, said it’s not realistic to assume that our nation’s economic problems will be solved by increased regulation or by presidential action. The economy simply needs some time to heal itself, he said. But despite the near term trouble, Thornberg remains optimistic about the future. “I have tremendous faith in the U.S. economy rebounding again in the future,” he said. “And when we come out of this in two or three years, we’re going to have cheap housing and a weak dollar, which will be good for exports.”
Wednesday, September 23, 2009
State of the Real Estate Industry
“It’s premature to say we’ve hit the bottom of the housing market,” Perriello said. “We’ve seen encouraging signs but when we dig down, those transaction volumes are confined to a narrow band of home sales at the lower end of the market, such as REO, short sales and first-time buyers. We haven’t seen any evidence of spillover to the move-up buyer, second-home buyer and luxury segment.”
He added, “Is what we’re seeing in the market sustainable, and when will we see that spillover occur? Until those questions are answered—with operating results, I feel it’s too early to call a bottom to the market.”
He added, “Is what we’re seeing in the market sustainable, and when will we see that spillover occur? Until those questions are answered—with operating results, I feel it’s too early to call a bottom to the market.”
Friday, September 18, 2009
The Clock Is Ticking as First-Time Buyers Intensify Their House Hunting
Tired of paying rent and enticed by first-time home buyer tax credit, 25-year-old Garrett Rebel began his search for a home in August, scouring the suburbs of Dallas for a house to meet his current and future needs. And he’s already running out of time.
The federal tax credit for first-time buyers is “a huge motivator” for Rebel, and he may end his search if the Nov. 30 deadline arrives and he still hasn’t closed on a deal. He unsuccessfully submitted an offer on one house; after going back and forth with the seller couldn’t come to a price agreeable to both parties. “I haven’t found anything that I’ve fallen in love with,” Rebel said.
Timing is everything for many first-time buyers today. For those who purchase a home this year, the tax credit is for 10% of the purchase price, up to $8,000. Those who have owned a home in the past three years aren’t eligible. Buyers also have to meet eligibility requirements regarding income; the current credit begins to phase out for singles who make more than $75,000 and couples who make more than $150,000.
Unless it is extended, this credit will expire on Nov. 30. “We are seeing an increase in buyers wanting to get closed prior to the tax credit closing deadline,” said real-estate agent Amy Downs, who represents Rebel. “We are seeing an increase in sellers wanting to get their homes on the market and closed by this deadline. I feel that if we can get the homes priced accordingly and a strong offer by mid-October, we can beat this deadline with a reputable lender working the buy side.”
Some real-estate agents and mortgage brokers are recommending that first-time buyers close no later than the week before Thanksgiving to ensure that no holiday-related office closings or abbreviated schedules interfere with the process. That means finalizing a purchase on or before Nov. 20. In fact, to make sure you can take advantage of the credit, it’s probably best to go under contract no later than the first or second week of October, said Jim Sahnger, mortgage planner with Palm Beach Financial Network in Florida.
The National Association of Realtors reports that it’s taking about two months to complete a home sale in the current market, as lenders scrutinize borrower paperwork and issues with appraisals pop up. In short, first-time buyers probably need to select a property and make an offer by the end of this month. But rushing to meet the deadline is a double-edged sword. The purchase of a home—let alone your first one—isn’t a decision that should be taken lightly.
“For anyone, the decision to buy a house has to be a right one,” Sahnger said. “While the $8,000 can be great to have, I wouldn’t let that force you into a decision. But there is something that works and you want to take advantage of the credit, you can’t afford to delay the decision.”
For buyers who don’t make the deadline, there is a chance the credit will be extended. There are at least 20 bills drafted regarding the credit; one-third of them have been introduced recently, said Lucien Salvant, managing director of public affairs for NAR. Some proposals would not only extend the first-time buyer credit into next year, but would also expand it to include all home buyers, remove income restrictions and raise the maximum amount of the credit, up to $15,000.
By including all buyers, there could be more of a ripple effect as more Americans spend money on moving vans, lawn equipment — any items or services associated with making a move, said Jerry Howard, president and CEO of the National Association of Home Builders. NAHB and NAR have been lobbying heavily for the extension. “The first priority is going to be to renew the $8,000 credit, but we have some good arguments for expanding it,” said Jerry Giovaniello, senior vice president and chief lobbyist for NAR. He argues that the credit doesn’t cost much but has a huge impact.
If you’re a first-time buyer, however, waiting is a gamble. “What you have in front of you now is a tax credit. After that, you don’t know what you have,” Salvant said. “This thing can go all different kinds of ways.”
NAR estimates that about 1.8 million to 2 million first-time buyers will take advantage of the tax credit this year, and says that roughly 350,000 sales wouldn’t have taken place without the credit.
But the effectiveness of the credit will eventually peter out because there are only so many potential first-time buyers, said Richard Green, director of the Lusk Center for Real Estate at the University of Southern California. He said that the credit is likely getting many first-time buyers to make their purchases six months to a year earlier than they would have anyway. “In terms of how effective it is, I don’t think it does any harm at this point. It’s pushing sales forward that would have happened anyway,” he said. “You’re giving money to people who were going to buy anyway.” Increasing the credit amount to $15,000 and expanding it to everyone, however, could end up translating to higher home prices, he added.
Still, there is growing Capitol Hill support for the extension of the credit. Senate Majority Leader Harry Reid, D-Nev., said it needs to be extended by the end of the year, according to a spokesman from his office. And Washington Research Group, a unit of securities firm Concept Capital, recently put the chance of extension at 60 percent.
Yet with Congress currently focusing on other issues, and concerns about the country’s rising deficit, some wonder how difficult it will be for housing to garner attention anytime soon. “All eyes are on health care,” said Bruce Hahn, president of the American Homeowners Grassroots Alliance.
According to Realtor.com, first-time buyers on average search 12 weeks to find a home. But there are ways for buyers to expedite their journey to closing: Sign up for automatic alerts for properties that fit your criteria. Many buyers start their search online, and it’s possible to sign up for e-mail alerts when properties that meet your criteria are added, Realtor.com points out. If you’re working with a real estate agent, he or she also may be able to register you for automatic alerts when homes are listed. But make sure the information you receive is fresh — you don’t have time to look at unavailable homes.
Do all you can to ensure a smooth mortgage process. Collect pay stubs, bank statements and tax returns to prove income. Get prequalified. And while your loan is in process, don’t make major purchases on credit cards — that could delay closing, said Julie Reynolds, a spokeswoman for Realtor.com.
Prepare for closing costs early. Get your insurance company and, if applicable, your homeowner association, to forward a cost estimate to the escrow company early, Realtor.com recommended in a news release. In many states, closing costs must be paid — in cash — at closing.
The federal tax credit for first-time buyers is “a huge motivator” for Rebel, and he may end his search if the Nov. 30 deadline arrives and he still hasn’t closed on a deal. He unsuccessfully submitted an offer on one house; after going back and forth with the seller couldn’t come to a price agreeable to both parties. “I haven’t found anything that I’ve fallen in love with,” Rebel said.
Timing is everything for many first-time buyers today. For those who purchase a home this year, the tax credit is for 10% of the purchase price, up to $8,000. Those who have owned a home in the past three years aren’t eligible. Buyers also have to meet eligibility requirements regarding income; the current credit begins to phase out for singles who make more than $75,000 and couples who make more than $150,000.
Unless it is extended, this credit will expire on Nov. 30. “We are seeing an increase in buyers wanting to get closed prior to the tax credit closing deadline,” said real-estate agent Amy Downs, who represents Rebel. “We are seeing an increase in sellers wanting to get their homes on the market and closed by this deadline. I feel that if we can get the homes priced accordingly and a strong offer by mid-October, we can beat this deadline with a reputable lender working the buy side.”
Some real-estate agents and mortgage brokers are recommending that first-time buyers close no later than the week before Thanksgiving to ensure that no holiday-related office closings or abbreviated schedules interfere with the process. That means finalizing a purchase on or before Nov. 20. In fact, to make sure you can take advantage of the credit, it’s probably best to go under contract no later than the first or second week of October, said Jim Sahnger, mortgage planner with Palm Beach Financial Network in Florida.
The National Association of Realtors reports that it’s taking about two months to complete a home sale in the current market, as lenders scrutinize borrower paperwork and issues with appraisals pop up. In short, first-time buyers probably need to select a property and make an offer by the end of this month. But rushing to meet the deadline is a double-edged sword. The purchase of a home—let alone your first one—isn’t a decision that should be taken lightly.
“For anyone, the decision to buy a house has to be a right one,” Sahnger said. “While the $8,000 can be great to have, I wouldn’t let that force you into a decision. But there is something that works and you want to take advantage of the credit, you can’t afford to delay the decision.”
For buyers who don’t make the deadline, there is a chance the credit will be extended. There are at least 20 bills drafted regarding the credit; one-third of them have been introduced recently, said Lucien Salvant, managing director of public affairs for NAR. Some proposals would not only extend the first-time buyer credit into next year, but would also expand it to include all home buyers, remove income restrictions and raise the maximum amount of the credit, up to $15,000.
By including all buyers, there could be more of a ripple effect as more Americans spend money on moving vans, lawn equipment — any items or services associated with making a move, said Jerry Howard, president and CEO of the National Association of Home Builders. NAHB and NAR have been lobbying heavily for the extension. “The first priority is going to be to renew the $8,000 credit, but we have some good arguments for expanding it,” said Jerry Giovaniello, senior vice president and chief lobbyist for NAR. He argues that the credit doesn’t cost much but has a huge impact.
If you’re a first-time buyer, however, waiting is a gamble. “What you have in front of you now is a tax credit. After that, you don’t know what you have,” Salvant said. “This thing can go all different kinds of ways.”
NAR estimates that about 1.8 million to 2 million first-time buyers will take advantage of the tax credit this year, and says that roughly 350,000 sales wouldn’t have taken place without the credit.
But the effectiveness of the credit will eventually peter out because there are only so many potential first-time buyers, said Richard Green, director of the Lusk Center for Real Estate at the University of Southern California. He said that the credit is likely getting many first-time buyers to make their purchases six months to a year earlier than they would have anyway. “In terms of how effective it is, I don’t think it does any harm at this point. It’s pushing sales forward that would have happened anyway,” he said. “You’re giving money to people who were going to buy anyway.” Increasing the credit amount to $15,000 and expanding it to everyone, however, could end up translating to higher home prices, he added.
Still, there is growing Capitol Hill support for the extension of the credit. Senate Majority Leader Harry Reid, D-Nev., said it needs to be extended by the end of the year, according to a spokesman from his office. And Washington Research Group, a unit of securities firm Concept Capital, recently put the chance of extension at 60 percent.
Yet with Congress currently focusing on other issues, and concerns about the country’s rising deficit, some wonder how difficult it will be for housing to garner attention anytime soon. “All eyes are on health care,” said Bruce Hahn, president of the American Homeowners Grassroots Alliance.
According to Realtor.com, first-time buyers on average search 12 weeks to find a home. But there are ways for buyers to expedite their journey to closing: Sign up for automatic alerts for properties that fit your criteria. Many buyers start their search online, and it’s possible to sign up for e-mail alerts when properties that meet your criteria are added, Realtor.com points out. If you’re working with a real estate agent, he or she also may be able to register you for automatic alerts when homes are listed. But make sure the information you receive is fresh — you don’t have time to look at unavailable homes.
Do all you can to ensure a smooth mortgage process. Collect pay stubs, bank statements and tax returns to prove income. Get prequalified. And while your loan is in process, don’t make major purchases on credit cards — that could delay closing, said Julie Reynolds, a spokeswoman for Realtor.com.
Prepare for closing costs early. Get your insurance company and, if applicable, your homeowner association, to forward a cost estimate to the escrow company early, Realtor.com recommended in a news release. In many states, closing costs must be paid — in cash — at closing.
Thursday, September 17, 2009
Treasury Says Millions More in Foreclosures are Coming; Are You Ready?
September 17, 2009—According to recent announcements by the U.S. Treasury Department, another wave of foreclosures is on the way in 2010. For over a year, now, we’ve been digesting foreclosures and distressed properties and it looks like we’ll all be doing it for another year or so. It’s too large a market segment to ignore: in some parts of the country, distressed properties account for about 65% of sales these days.
Wednesday, September 16, 2009
Home Price Reduction Levels Rise for Fourth Straight Month
RISMEDIA, September 16, 2009—Trulia, Inc., a leading place to start your real estate search, announced that 26% of homes currently on the market in the United States as of September 1, 2009 have experienced at least one price cut. Price reduction levels have increased for the fourth straight month and have seen a 10% overall increase compared to June of this year. During the summer months of June to September, the total amount slashed from home prices has increased by more than $1.1 billion from $27.4 billion to $28.5 billion. The average discount for price-reduced homes remains at ten percent off of the original listing price.
Jacksonville experienced the highest level of price reductions for the fourth straight month with 37% of current listings seeing at least one round of discounts. Additionally, several cities continue to experience high levels of price reductions with Albuquerque, Indianapolis, Milwaukee Minneapolis, Portland and Raleigh all earning spots in the top ten for the second straight month.
The steady rise in price reductions is a signal that sellers are still trying to adjust to the ever changing market conditions,” said Pete Flint, Trulia co-founder and CEO. “We expect the $8,000 federal tax incentive to extend the peak home purchasing season beyond the summer months, continuing to drive competition amongst sellers and ultimately leading to more price reductions, giving consumers a great opportunity to find the home of their dreams.”
Several cities have seen four consecutive months where the percent of homes that have seen a price reduction has increased month-over-month, underscoring that sellers across the country might not be fully adjusting their home value expectations to the current real estate market.
Luxury Market Getting Hit Hard
Luxury homes (those listed at two million dollars and above) continue to bear the brunt of discounts being offered with an average of 14% being slashed from the original asking price compared to the national average of 10%. Additionally, luxury homes represent barely 2% of all current listings on Trulia, but are responsible for 25% of the $28.5 billion in home price reductions.
Jacksonville experienced the highest level of price reductions for the fourth straight month with 37% of current listings seeing at least one round of discounts. Additionally, several cities continue to experience high levels of price reductions with Albuquerque, Indianapolis, Milwaukee Minneapolis, Portland and Raleigh all earning spots in the top ten for the second straight month.
The steady rise in price reductions is a signal that sellers are still trying to adjust to the ever changing market conditions,” said Pete Flint, Trulia co-founder and CEO. “We expect the $8,000 federal tax incentive to extend the peak home purchasing season beyond the summer months, continuing to drive competition amongst sellers and ultimately leading to more price reductions, giving consumers a great opportunity to find the home of their dreams.”
Several cities have seen four consecutive months where the percent of homes that have seen a price reduction has increased month-over-month, underscoring that sellers across the country might not be fully adjusting their home value expectations to the current real estate market.
Luxury Market Getting Hit Hard
Luxury homes (those listed at two million dollars and above) continue to bear the brunt of discounts being offered with an average of 14% being slashed from the original asking price compared to the national average of 10%. Additionally, luxury homes represent barely 2% of all current listings on Trulia, but are responsible for 25% of the $28.5 billion in home price reductions.
Wednesday, September 09, 2009
First-Time Home Buyers Urged to Choose Qualified Home Inspector Now to Meet $8,000 Tax Credit Deadline
RISMEDIA, September 9, 2009—HouseMaster, one of the first and largest home inspection organizations in North America, urges first-time home buyers to be proactive in finding a qualified home inspector in order to meet the November 30, 2009 deadline for the $8,000 federal government tax credit. Identifying a qualified home inspector in advance helps to expedite the buying process since first-time home buyers must close on the home prior to the deadline. HouseMaster is pleased to offer buyers some guidance in evaluating and selecting the most qualified home inspection company.
“Buyers, especially first-time home buyers should never forgo a home inspection,” said Kathleen Kuhn, President of HouseMaster. “Looking for the right home inspection company while you look for the right home will not only save time but can help ensure that first-time buyers meet the deadline to receive the $8,000 federal tax credit and are confident in their decision.
Accordingly, we’ve compiled a list of “must have” credentials to help consumers evaluate and select the most qualified home inspection service.”
According to the company, HouseMaster offers buyers a list of credentials to look for and corresponding questions to ask when selecting a home inspection service. While licensing requirements and trade association memberships are a good start when selecting a home inspector, they are not the only qualifications to look for. Below are four things that should serve as the cornerstone to the level of service expected from a home inspector.
1. Inspection Guarantee: A home inspection company should stand by their service and provide a written guarantee to document how post-inspection issues will be addressed should they arise, demonstrating the company’s confidence in the quality and thoroughness of their inspections.
Question to ask:
-Does the company stand behind their inspection reports in writing?
-Does the company include a complimentary limited guarantee with each inspection report?
-Can I get a copy of the guarantee’s terms and conditions?
2. Formally Trained or Certified Inspectors: Regardless of previous technical experience, all home inspectors should be required to be trained and tested in the field of home inspections and have access to on-going technical support.
Questions to ask:
-What kind of formal training has the inspector received?
-What is the extent of his/her on-going training?
-Is the inspector tested annually?
One of the most important credentials to look for when selecting a home inspection company is whether or not they carry Professional Liability Insurance, also known as E&O Insurance. Inspectors who don’t make the investment in insurance are rolling the dice at their client’s expense. Additionally, if the inspector does not carry insurance it could be a sign that they are new to the business or have a poor track record.
Questions to ask:
-How many inspections has the company performed?
-Are your inspectors covered by E&O Insurance?
-Does the company carry General Liability Insurance?
4. Report Quality and Access: The home inspection company should provide a written report on all the findings of the inspections and give the approximate ages of all the major elements of the home, as well as an estimated life span of those elements. The report should also include detailed information and images of the major systems inspected and conditions found.
Questions to ask:
-Can I accompany the inspector on the inspection and ask questions?
-Will the report reflect estimated ages of all the major elements?
-Can I get a sample of a report?
“Buyers, especially first-time home buyers should never forgo a home inspection,” said Kathleen Kuhn, President of HouseMaster. “Looking for the right home inspection company while you look for the right home will not only save time but can help ensure that first-time buyers meet the deadline to receive the $8,000 federal tax credit and are confident in their decision.
Accordingly, we’ve compiled a list of “must have” credentials to help consumers evaluate and select the most qualified home inspection service.”
According to the company, HouseMaster offers buyers a list of credentials to look for and corresponding questions to ask when selecting a home inspection service. While licensing requirements and trade association memberships are a good start when selecting a home inspector, they are not the only qualifications to look for. Below are four things that should serve as the cornerstone to the level of service expected from a home inspector.
1. Inspection Guarantee: A home inspection company should stand by their service and provide a written guarantee to document how post-inspection issues will be addressed should they arise, demonstrating the company’s confidence in the quality and thoroughness of their inspections.
Question to ask:
-Does the company stand behind their inspection reports in writing?
-Does the company include a complimentary limited guarantee with each inspection report?
-Can I get a copy of the guarantee’s terms and conditions?
2. Formally Trained or Certified Inspectors: Regardless of previous technical experience, all home inspectors should be required to be trained and tested in the field of home inspections and have access to on-going technical support.
Questions to ask:
-What kind of formal training has the inspector received?
-What is the extent of his/her on-going training?
-Is the inspector tested annually?
One of the most important credentials to look for when selecting a home inspection company is whether or not they carry Professional Liability Insurance, also known as E&O Insurance. Inspectors who don’t make the investment in insurance are rolling the dice at their client’s expense. Additionally, if the inspector does not carry insurance it could be a sign that they are new to the business or have a poor track record.
Questions to ask:
-How many inspections has the company performed?
-Are your inspectors covered by E&O Insurance?
-Does the company carry General Liability Insurance?
4. Report Quality and Access: The home inspection company should provide a written report on all the findings of the inspections and give the approximate ages of all the major elements of the home, as well as an estimated life span of those elements. The report should also include detailed information and images of the major systems inspected and conditions found.
Questions to ask:
-Can I accompany the inspector on the inspection and ask questions?
-Will the report reflect estimated ages of all the major elements?
-Can I get a sample of a report?
Tuesday, June 23, 2009
Will Consumers Come Out of Hiding for 4th of July?
RISMEDIA, June 23, 2009-Even in the midst of an economic downturn, Americans plan to show their patriotism on July 4. According to the National Retail Federation’s 2009 Independence Day Consumer Intentions and Actions Survey, conducted by BIGresearch, more people will celebrate the July 4 holiday this year than last year. With the holiday falling on a Saturday, many Americans are planning a memorable celebration: 62.6%-or 144 million people- will host or attend a cookout, barbecue or picnic, compared to 61.2% (139 million people) in 2008.
The survey also found that more people will attend their local fireworks or community celebration (42.7% vs. 40.2% in 2008). Other popular celebrations include attending a parade (11.5%) or traveling/taking a vacation (11.4%).
“Americans are ready to kick-start summer and celebrate Independence Day,” said NRF President and CEO Tracy Mullin. “Retailers will be stocked with supplies for every celebration, from large family cookouts to trips to the beach.”
When it comes to the patriotic merchandise consumers already own, 121 million Americans own an American flag, 89 million have patriotic apparel, 58 million own decorations and 25 million have bumper stickers or car decals. According to the survey, 14% of consumers plan to purchase additional patriotic merchandise this month.
Though gas prices are still far below last year’s levels, a recent uptick in costs is causing some Americans to reconsider their plans. According to the survey, 44.5% of Americans will change their Independence Day plans on account of higher gas prices.
“With July 4 falling on Saturday this year, many Americans will use the holiday as the perfect excuse to relax with family and friends,” said Phil Rist, Executive Vice President, Strategic Initiatives, BIGresearch. “With gas prices on the rise again, some Americans will opt to spend the weekend close to home, taking advantage of neighborhood gatherings and local celebrations.”
The survey also found that more people will attend their local fireworks or community celebration (42.7% vs. 40.2% in 2008). Other popular celebrations include attending a parade (11.5%) or traveling/taking a vacation (11.4%).
“Americans are ready to kick-start summer and celebrate Independence Day,” said NRF President and CEO Tracy Mullin. “Retailers will be stocked with supplies for every celebration, from large family cookouts to trips to the beach.”
When it comes to the patriotic merchandise consumers already own, 121 million Americans own an American flag, 89 million have patriotic apparel, 58 million own decorations and 25 million have bumper stickers or car decals. According to the survey, 14% of consumers plan to purchase additional patriotic merchandise this month.
Though gas prices are still far below last year’s levels, a recent uptick in costs is causing some Americans to reconsider their plans. According to the survey, 44.5% of Americans will change their Independence Day plans on account of higher gas prices.
“With July 4 falling on Saturday this year, many Americans will use the holiday as the perfect excuse to relax with family and friends,” said Phil Rist, Executive Vice President, Strategic Initiatives, BIGresearch. “With gas prices on the rise again, some Americans will opt to spend the weekend close to home, taking advantage of neighborhood gatherings and local celebrations.”
Monday, June 22, 2009
Are Tighter Appraisals Hurting Home Sales?
RISMEDIA, June 22, 2009-(MCT)-Less than a week after putting his newly renovated house in Idylwood, Texas, on the market, Derrick DeCristofaro accepted a full-price offer of $242,900 on the 1940 bungalow.
But the appraisal on the 1,780-square-foot home came in at just $206,000. The buyer couldn’t come up with enough cash to make up the difference and DeCristofaro wasn’t willing to drop the price, so the deal fell through.
On top of already sluggish home sales, are appraisals becoming the newest threat to the local housing market?
Real estate experts said sales are collapsing because appraisers are being more conservative and valuing homes for less than what buyers have agreed to pay. Some owners can’t refinance because appraisers say their homes are worth less than they had counted on.
In DeCristofaro’s case, the low appraisal affected the would-be buyer’s ability to get a mortgage for the contracted price.
“Their lender naturally wouldn’t approve that,” DeCristofaro said.
His house is under contract again to a backup buyer, but because of new rules regulating appraisals, and a more conservative lending environment in general, DeCristofaro is worried about the new sale closing as well.
“It’s shocking. If we just pulled a buyer out of thin air, it would be a different story, but we had multiple offers coming in. It seems strange the lenders wouldn’t support that,” said DeCristofaro, an interior designer who is an investor in the home, which has two other owners.
Real estate broker Robert Searcy has seen a number of sales fall through because of low appraisals.
And that has the potential to hurt property values, too, he said.
“The biggest challenge isn’t the economy, or buyers who can’t qualify for loans. It’s appraisers coming in with ridiculously low appraisals,” said Searcy, who is listing DeCristofaro’s house.
Part of what’s at issue is a new rule that went into effect May 1 prohibiting loan officers, mortgage brokers and real estate agents from selecting appraisers.
New rules for lenders
The rule falls under the new Home Valuation Code of Conduct, the result of an agreement between Freddie Mac, Fannie Mae, the Federal Housing Finance Agency and the New York state attorney general to enhance the independence and accuracy of the appraisal process. It applies to lenders that sell single-family mortgage loans to the government-sponsored enterprises.
The rule was meant to prevent inflated appraisals like those that proliferated during the housing boom.
Houston appraiser Chris Catechis said there were a couple of times in recent years when he felt pressure from mortgage brokers to “hit a value” on a property. If it didn’t, they threatened to take their business elsewhere, which is what he said he advised them to do.While the appraiser, a partner in Catechis, Campbell & Associates, understands why the new rules were implemented, it has cost him business.
Lenders are now using more appraisal management companies when they select appraisers. These companies often charge a fee to the lender and pay an outside appraiser like Catechis a portion of that fee.
Unfamiliar with the area
One of the unintended consequences of this system, however, is the chance that a management company will hire an appraiser who isn’t familiar with the neighborhood where the house is being evaluated, said Catechis.
“When you have appraisers coming from different parts of town and not knowing areas, they aren’t doing justice to the people that are trying to refinance or sell,” Catechis said. “It really skews the whole appraisal process.”
The appraisal business, in general, has become more difficult in today’s residential real estate market because there are fewer sales — many of which are foreclosures.
Some OK with caution
Catechis said he’s now often required to get two comparable sales that took place within the past 90 days. If there are none, he’ll have to look at similar subdivisions nearby.“There’s a lot more detail involved in an appraisal for a lesser price,” he said.
Not everyone is as concerned about appraisers taking a more cautious tack.
David Zugheri, of Envoy Mortgage in Houston, said he hasn’t seen a high percentage of homes for sale not appraising.
While the industry is more conservative, “if the value is less than the sales price there’s a strong case that the value really is less than the sales price,” he said.
But the appraisal on the 1,780-square-foot home came in at just $206,000. The buyer couldn’t come up with enough cash to make up the difference and DeCristofaro wasn’t willing to drop the price, so the deal fell through.
On top of already sluggish home sales, are appraisals becoming the newest threat to the local housing market?
Real estate experts said sales are collapsing because appraisers are being more conservative and valuing homes for less than what buyers have agreed to pay. Some owners can’t refinance because appraisers say their homes are worth less than they had counted on.
In DeCristofaro’s case, the low appraisal affected the would-be buyer’s ability to get a mortgage for the contracted price.
“Their lender naturally wouldn’t approve that,” DeCristofaro said.
His house is under contract again to a backup buyer, but because of new rules regulating appraisals, and a more conservative lending environment in general, DeCristofaro is worried about the new sale closing as well.
“It’s shocking. If we just pulled a buyer out of thin air, it would be a different story, but we had multiple offers coming in. It seems strange the lenders wouldn’t support that,” said DeCristofaro, an interior designer who is an investor in the home, which has two other owners.
Real estate broker Robert Searcy has seen a number of sales fall through because of low appraisals.
And that has the potential to hurt property values, too, he said.
“The biggest challenge isn’t the economy, or buyers who can’t qualify for loans. It’s appraisers coming in with ridiculously low appraisals,” said Searcy, who is listing DeCristofaro’s house.
Part of what’s at issue is a new rule that went into effect May 1 prohibiting loan officers, mortgage brokers and real estate agents from selecting appraisers.
New rules for lenders
The rule falls under the new Home Valuation Code of Conduct, the result of an agreement between Freddie Mac, Fannie Mae, the Federal Housing Finance Agency and the New York state attorney general to enhance the independence and accuracy of the appraisal process. It applies to lenders that sell single-family mortgage loans to the government-sponsored enterprises.
The rule was meant to prevent inflated appraisals like those that proliferated during the housing boom.
Houston appraiser Chris Catechis said there were a couple of times in recent years when he felt pressure from mortgage brokers to “hit a value” on a property. If it didn’t, they threatened to take their business elsewhere, which is what he said he advised them to do.While the appraiser, a partner in Catechis, Campbell & Associates, understands why the new rules were implemented, it has cost him business.
Lenders are now using more appraisal management companies when they select appraisers. These companies often charge a fee to the lender and pay an outside appraiser like Catechis a portion of that fee.
Unfamiliar with the area
One of the unintended consequences of this system, however, is the chance that a management company will hire an appraiser who isn’t familiar with the neighborhood where the house is being evaluated, said Catechis.
“When you have appraisers coming from different parts of town and not knowing areas, they aren’t doing justice to the people that are trying to refinance or sell,” Catechis said. “It really skews the whole appraisal process.”
The appraisal business, in general, has become more difficult in today’s residential real estate market because there are fewer sales — many of which are foreclosures.
Some OK with caution
Catechis said he’s now often required to get two comparable sales that took place within the past 90 days. If there are none, he’ll have to look at similar subdivisions nearby.“There’s a lot more detail involved in an appraisal for a lesser price,” he said.
Not everyone is as concerned about appraisers taking a more cautious tack.
David Zugheri, of Envoy Mortgage in Houston, said he hasn’t seen a high percentage of homes for sale not appraising.
While the industry is more conservative, “if the value is less than the sales price there’s a strong case that the value really is less than the sales price,” he said.
Wednesday, June 17, 2009
Sustainability Is the New Economy
This is way more than another trough or recession; this is a great upheaval, the dawn of an entirely new economy. The new economy is about innovation that seeks to preserve rather than consume; protect rather than destroy; nurture rather than exploit; and with a sense of stewardship rather than a sense of entitlement. The truth is that none of us is entitled to anything, and we seem to be learning that lesson now.
We are off on a whole new adventure. A hundred years ago we were an agrarian economy about to shift into the industrial revolution. We never saw it coming and we never went back to the farms. But, just 50 years later we were transitioning from a manufacturing to knowledge-based economy. IBM, Honeywell and Control Data were the new frontiers.
The first computers were the size of houses, but more and more of the products we were producing were being influenced by technological knowledge. Think how many simple items now have some sort of computer in them.
In the last four decades, we have been witness to an almost mind-numbing number of previously unimagined gizmos, and I am sure that there are more to come.
The old economy was all about making stuff. It was about creating products for which no demand yet existed. It was about making stuff better, faster, smaller and cheaper. Technology itself is all about obsolescence, and so the products themselves weren’t made to last.
We might have the option to replace some parts or a new battery, but eventually, we will be forced to buy a replacement. Technological advances create their own repeat customers, but that’s only part of it. When the power source dies, the cost of replacing it is often close to the cost of the current upgrade. And then, of course, there is Billy Mays; perhaps, the all time King-daddy shill for cheap, disposable crap.
It hit its peak for me when I ditched my $7,000 IBM PS 2 Model 50Z and bought a $4,000 Toshiba notebook. Since then, I have had more computers than I can recall, 7 two-line telephones with voice mail, three video cameras, two iPods, and a whole bunch of cell phones since my first one in 1989. Each smaller and more fully featured than the one before.
And, it’s all good…except for this: along the way we burned through a lot of natural resources and we made a mountain of regular waste, “e-waste” and toxic waste, and we recently discovered that we have no away in which to throw it all.
During this downturn, demand for replacement items and parts has been deferred, not eliminated, so consumers will soon be forced to spend again and that alone could rally the economy. But the long-term opportunities are in sustainability. That means rethinking how we approach meeting our needs, as well as, developing passive renewable energy opportunities, sustainable and reusable materials, and investing in our infrastructure.
We should repair and maintain the great national treasures gifted to us by the sweat of our fathers, grandfathers, and great grandfathers. For decades, we have deferred maintenance. Rails, roads, wastewater treatment plants, dams, and other structures were given a D grade from the American Society of Civil Engineers in 2005. Those are our assets, bought and paid for with our taxes and then left to deteriorate.
In San Diego, we have developed a sparkling modern waterfront city on top of regularly collapsing water and sewer lines. Inadequate distribution methods and a willful failure on the part of local leadership to get behind desalinization have led to water rationing. We deserve more for our taxes.
Across the country we have monuments crumbling, bridges collapsing, and parks that cannot be enjoyed by the people who own them-us. It makes me angry that there is always plenty of money for destruction, but no money to rebuild our own country. Now is the time. We need jobs in construction, and we have bridges to stabilize and maintain into the future and a laundry list of infrastructure issues to address. Spend a tax dollar there and everybody wins.
When we are done spending, we will have something more to show for it than the goodwill of the Iraqi people.
Bailing out the banks and yesterdays manufacturers won’t change anything. The new economy is inevitable; cooperation is optional. But, change is good and necessary and well overdo.
Like most other Americans, I have been absolutely gob-smacked by the speed at which my prosperity vanished. However, we may look back on this as the best thing that ever happened to us. If it changes our attitudes, it will at least be better for those who follow after us. We will have tried to leave them adequate resources with which to sustain themselves and perhaps created a new economy to support ourselves today.
We are off on a whole new adventure. A hundred years ago we were an agrarian economy about to shift into the industrial revolution. We never saw it coming and we never went back to the farms. But, just 50 years later we were transitioning from a manufacturing to knowledge-based economy. IBM, Honeywell and Control Data were the new frontiers.
The first computers were the size of houses, but more and more of the products we were producing were being influenced by technological knowledge. Think how many simple items now have some sort of computer in them.
In the last four decades, we have been witness to an almost mind-numbing number of previously unimagined gizmos, and I am sure that there are more to come.
The old economy was all about making stuff. It was about creating products for which no demand yet existed. It was about making stuff better, faster, smaller and cheaper. Technology itself is all about obsolescence, and so the products themselves weren’t made to last.
We might have the option to replace some parts or a new battery, but eventually, we will be forced to buy a replacement. Technological advances create their own repeat customers, but that’s only part of it. When the power source dies, the cost of replacing it is often close to the cost of the current upgrade. And then, of course, there is Billy Mays; perhaps, the all time King-daddy shill for cheap, disposable crap.
It hit its peak for me when I ditched my $7,000 IBM PS 2 Model 50Z and bought a $4,000 Toshiba notebook. Since then, I have had more computers than I can recall, 7 two-line telephones with voice mail, three video cameras, two iPods, and a whole bunch of cell phones since my first one in 1989. Each smaller and more fully featured than the one before.
And, it’s all good…except for this: along the way we burned through a lot of natural resources and we made a mountain of regular waste, “e-waste” and toxic waste, and we recently discovered that we have no away in which to throw it all.
During this downturn, demand for replacement items and parts has been deferred, not eliminated, so consumers will soon be forced to spend again and that alone could rally the economy. But the long-term opportunities are in sustainability. That means rethinking how we approach meeting our needs, as well as, developing passive renewable energy opportunities, sustainable and reusable materials, and investing in our infrastructure.
We should repair and maintain the great national treasures gifted to us by the sweat of our fathers, grandfathers, and great grandfathers. For decades, we have deferred maintenance. Rails, roads, wastewater treatment plants, dams, and other structures were given a D grade from the American Society of Civil Engineers in 2005. Those are our assets, bought and paid for with our taxes and then left to deteriorate.
In San Diego, we have developed a sparkling modern waterfront city on top of regularly collapsing water and sewer lines. Inadequate distribution methods and a willful failure on the part of local leadership to get behind desalinization have led to water rationing. We deserve more for our taxes.
Across the country we have monuments crumbling, bridges collapsing, and parks that cannot be enjoyed by the people who own them-us. It makes me angry that there is always plenty of money for destruction, but no money to rebuild our own country. Now is the time. We need jobs in construction, and we have bridges to stabilize and maintain into the future and a laundry list of infrastructure issues to address. Spend a tax dollar there and everybody wins.
When we are done spending, we will have something more to show for it than the goodwill of the Iraqi people.
Bailing out the banks and yesterdays manufacturers won’t change anything. The new economy is inevitable; cooperation is optional. But, change is good and necessary and well overdo.
Like most other Americans, I have been absolutely gob-smacked by the speed at which my prosperity vanished. However, we may look back on this as the best thing that ever happened to us. If it changes our attitudes, it will at least be better for those who follow after us. We will have tried to leave them adequate resources with which to sustain themselves and perhaps created a new economy to support ourselves today.
Monday, June 15, 2009
Florida Economic Outlook
U.S. economic conditions deteriorated significantly late last year, after the financial crisis intensified. Real GDP fell at a 5.7 percent annual rate during the first quarter of 2009, following a 6.3 percent annual rate decline in the fourth quarter. Output has fallen 2.5 percent over the past year, marking the sharpest drop in output since the third quarter of 1982. Weakness is extraordinarily broad-based throughout the economy, with even the historically recession-resistant education, healthcare and government sectors seeing signs of strain.
We believe the fourth quarter of last year and the first quarter of 2009 will mark the darkest hours of this recession. Successive quarters should see conditions gradually improve. The recession, however, will likely drag on through this summer, but the worst has likely passed. This means the current recession will be the longest and deepest since the 1930s. Afterward, we expect a recovery to gradually build momentum. Many of the hardest-hit sectors, including housing, financial services and commercial real estate, will take longer to recover to historically healthy levels, but the recovery will eventually reach every corner of the economy.
Florida faces an even more difficult road to recovery. The Sunshine State went into recession a full nine months ahead of the nation, and excesses in housing and commercial real estate are considerably worse than the nation as a whole. Nonfarm employment is on pace to decline by nearly nine percent peak-to-trough, producing an aggregate loss of close to 720,000 jobs, including a net loss of 430,000 jobs this year. The unemployment rate is expected to top out at around 11 percent and would rise even further if not for the significant out-migration of prime working-age adults to neighboring states and Texas.
Housing Remains Front and Center
The housing bust is clearly Florida’s largest immediate problem. Single-family housing is extremely overbuilt, particularly along Florida’s central Atlantic coast, in southwestern Florida, in central Florida, in the outlying areas around Orlando and in many other of the outlying areas around the state’s other major employment centers. Permits for new single-family homes have tumbled 90 percent from their peaks nearly four years ago and the inventory of vacant, developed lots remains excessive throughout much of the state. Condominium development also got considerably out of balance, with far too many high-end units built in Miami, the Florida panhandle and many other metropolitan areas.
The median sales price of an existing home shot up to $255,000 at the peak of the housing boom in November 2005, as measured by the Florida Association of Realtors. Prices are currently down roughly 45 percent from that peak. Some markets, including areas around Fort Myers, Tampa and Fort Walton Beach, will see peak-to-trough price declines of 60 percent or more. Sales of existing homes are off 45 percent from their peak but have shown signs of stabilization recently. A large proportion of recent transactions, however, have been foreclosure sales or distressed transactions.
We believe the fourth quarter of last year and the first quarter of 2009 will mark the darkest hours of this recession. Successive quarters should see conditions gradually improve. The recession, however, will likely drag on through this summer, but the worst has likely passed. This means the current recession will be the longest and deepest since the 1930s. Afterward, we expect a recovery to gradually build momentum. Many of the hardest-hit sectors, including housing, financial services and commercial real estate, will take longer to recover to historically healthy levels, but the recovery will eventually reach every corner of the economy.
Florida faces an even more difficult road to recovery. The Sunshine State went into recession a full nine months ahead of the nation, and excesses in housing and commercial real estate are considerably worse than the nation as a whole. Nonfarm employment is on pace to decline by nearly nine percent peak-to-trough, producing an aggregate loss of close to 720,000 jobs, including a net loss of 430,000 jobs this year. The unemployment rate is expected to top out at around 11 percent and would rise even further if not for the significant out-migration of prime working-age adults to neighboring states and Texas.
Housing Remains Front and Center
The housing bust is clearly Florida’s largest immediate problem. Single-family housing is extremely overbuilt, particularly along Florida’s central Atlantic coast, in southwestern Florida, in central Florida, in the outlying areas around Orlando and in many other of the outlying areas around the state’s other major employment centers. Permits for new single-family homes have tumbled 90 percent from their peaks nearly four years ago and the inventory of vacant, developed lots remains excessive throughout much of the state. Condominium development also got considerably out of balance, with far too many high-end units built in Miami, the Florida panhandle and many other metropolitan areas.
The median sales price of an existing home shot up to $255,000 at the peak of the housing boom in November 2005, as measured by the Florida Association of Realtors. Prices are currently down roughly 45 percent from that peak. Some markets, including areas around Fort Myers, Tampa and Fort Walton Beach, will see peak-to-trough price declines of 60 percent or more. Sales of existing homes are off 45 percent from their peak but have shown signs of stabilization recently. A large proportion of recent transactions, however, have been foreclosure sales or distressed transactions.
Wednesday, June 10, 2009
Consumer Spending Index Continues Downward
RISMEDIA, June 10, 2009-The Deloitte Consumer Spending Index declined again in May, driven downward primarily by the housing market. The Index attempts to track consumer cash flow as an indicator of future consumer spending.
“The year over year pace of decline in real consumer spending appears to have stabilized, however, recovery is being delayed by a sharp increase in consumer savings, which has risen to 5.7% from zero a year ago,” said Carl Steidtmann, chief economist with Deloitte Research, a subsidiary of Deloitte Services LP, and author of the monthly Index. “However, the weakness in the Index was driven almost entirely by falling home prices, which are down nearly 14% over the past year, undermining small gains in real wages, a declining tax burden and current stabilization in new unemployment claims.”
The Index, comprising four components-tax burden, initial unemployment claims, real wages and real home prices-fell to 1.35% from an downwardly revised gain of 1.44% a month ago.
“The lack of improvement in the index suggests that consumers are still feeling the pressures of the economy,” said Stacy Janiak, vice chairman and U.S. Retail leader, Deloitte LLP. “Additionally, even when a recovery takes hold and spending strengthens, consumers will likely remain focused on value. Retailers should consider strategies that strike a connection with customers looking to keep expenditures down without trading down. That might mean expanding or reinventing a private label brand in a way that not only offers the right price point, but a certain amount of cache as well.”
Highlights of the Index include:
Tax Burden: The tax burden continues to fall with the weakening of the economy. The tax burden is at a level only seen on a few occasions over the past 50 years during brief periods following tax rebates. Continued decline is expected.
Initial Unemployment Claims: Claims appear to have stabilized for the moment and in recent weeks have come down. While still at very elevated levels, the future direction of claims remains uncertain given sizable layoffs that are expected from the auto and auto dealer sectors of the economy.
Real Wages: Real wage growth continues to post small gains due in large part to falling prices for energy. Real wages are up 4.3% from a year ago and on an annualized basis are up 8.0% over the last nine months as energy prices have given a big boost to consumer purchasing power.
Real Home Prices: Home prices continue to fall. Renewed efforts to forestall foreclosures coupled with a tax credit for home buyers may bring some stability to this market. The decline in home prices has made home buying much more affordable. What is lacking is mortgage financing and stable prices.
“The year over year pace of decline in real consumer spending appears to have stabilized, however, recovery is being delayed by a sharp increase in consumer savings, which has risen to 5.7% from zero a year ago,” said Carl Steidtmann, chief economist with Deloitte Research, a subsidiary of Deloitte Services LP, and author of the monthly Index. “However, the weakness in the Index was driven almost entirely by falling home prices, which are down nearly 14% over the past year, undermining small gains in real wages, a declining tax burden and current stabilization in new unemployment claims.”
The Index, comprising four components-tax burden, initial unemployment claims, real wages and real home prices-fell to 1.35% from an downwardly revised gain of 1.44% a month ago.
“The lack of improvement in the index suggests that consumers are still feeling the pressures of the economy,” said Stacy Janiak, vice chairman and U.S. Retail leader, Deloitte LLP. “Additionally, even when a recovery takes hold and spending strengthens, consumers will likely remain focused on value. Retailers should consider strategies that strike a connection with customers looking to keep expenditures down without trading down. That might mean expanding or reinventing a private label brand in a way that not only offers the right price point, but a certain amount of cache as well.”
Highlights of the Index include:
Tax Burden: The tax burden continues to fall with the weakening of the economy. The tax burden is at a level only seen on a few occasions over the past 50 years during brief periods following tax rebates. Continued decline is expected.
Initial Unemployment Claims: Claims appear to have stabilized for the moment and in recent weeks have come down. While still at very elevated levels, the future direction of claims remains uncertain given sizable layoffs that are expected from the auto and auto dealer sectors of the economy.
Real Wages: Real wage growth continues to post small gains due in large part to falling prices for energy. Real wages are up 4.3% from a year ago and on an annualized basis are up 8.0% over the last nine months as energy prices have given a big boost to consumer purchasing power.
Real Home Prices: Home prices continue to fall. Renewed efforts to forestall foreclosures coupled with a tax credit for home buyers may bring some stability to this market. The decline in home prices has made home buying much more affordable. What is lacking is mortgage financing and stable prices.
Tuesday, June 09, 2009
Are Increasing Numbers of Homeowners Withholding Their Mortgage Payments?
RISMEDIA, June 9, 2009-One of the reasons that it is hard to get a handle on the depths of the foreclosure crisis is that much of the information is hidden beneath the surface, like an iceberg. We are seeing only a small part of what may turn out to be a much bigger disaster than ever imagined because so much is hidden from view. And so, we are left to wonder-is the worst yet to come?
There is, for example, wide speculation that banks have been holding back significant numbers of REO properties in order not to flood the market.
A cursory review of local tax records suggests that there are far more properties in default than there are in either the auction or bank owned phase. Are these temporary defaults that will ultimately be cured, or are these the first waves of what alarmists like to call the Tsunami? Are the majority of these early stage defaults inevitably going to make their way to auction?
If homeowner equity was rising, the majority of defaults would likely be cured before auction. Now, the only options are to sell or forfeit the home. But, a hard target search of specific defaulted property sold between 2005 and 2007 revealed that most are not listed through the local MLS which suggests that they are not really trying to sell and most appear to be well maintained.
And, if lenders fearful of flooding the market are delaying auctions, why not further limit the damage by not recording the notice of default? That way there is no public record for people like me to uncover and question.
Trying to read the tea leaves may reveal many things but, perhaps, no definitive answer to where we are headed.
The uncertainty about the future of the economy is threatening even those jobs once thought to be recession proof and has caused many people to adopt an almost survivalist approach to short term life planning. If your job goes away, what would you wish you had more of, cash, or the good will of the mortgage company?
People who can pay their mortgages have stopped, and their number is growing. Among probable reasons are the following:
- The decreasing stigma of such an action compared to the widespread fraud underlying our economic collapse. When GM is synonymous with bankruptcy, it’s clear that the game has changed.- The uncertainty of the revival of the economy and the corresponding fear of loss of income if the recession deepens or lengthens has many people waiting for a signal regarding the economy in general or the security of their job in particular.- Belief that, if they are current, they will not qualify for a mortgage modification.- Chaos theory is yet another reason that some aren’t paying their mortgages. There has been a persistent rumor that behind the bank bailouts and the bankruptcies, the Federal Government is working on a plan B for dealing with a complete economic collapse and the ensuing anarchy.
People who believe this argue that there wouldn’t be anyone coming to see about the mortgage. And, if everyone who had a mortgage began to withhold their payments, that could happen. Those working short sales and REOs have discovered that the banks and servicing companies are already overwhelmed.
And, because the revenue stream of mortgage servicers is entirely dependent on collecting mortgage payments, when those stop coming, they won’t be able to make payroll or keep the lights on. And, it will be lights out for the banks next. Unlike GM, they don’t have many assets and make nothing.
The government can only bailout so many things with our money before we hit a tipping point. California is facing an unprecedented financial crisis, and other states are facing similar revenue shortfalls. If the choice comes down to saving the banks or saving our neighborhoods, the politicians need voters more than they need banks. Or, so say the chaos theorists.
There are many different reasons why certain homeowners might be withholding their mortgage payments to preserve their cash. Fear of job loss or economic collapse, loathing for the high-flying financiers who are getting bailout funds, the lessoning stigma associated with bankruptcy and default, or to qualify for a mortgage modification.
Some are fully intending to make up the payments and pay the late fees if the economy shows signs of improving soon. Others think that banks might make concessions so why not wait and see what happens? But, as the number of non-payers grows, whether by choice or necessity, they further imperil the survival of many financial institutions.
There is, for example, wide speculation that banks have been holding back significant numbers of REO properties in order not to flood the market.
A cursory review of local tax records suggests that there are far more properties in default than there are in either the auction or bank owned phase. Are these temporary defaults that will ultimately be cured, or are these the first waves of what alarmists like to call the Tsunami? Are the majority of these early stage defaults inevitably going to make their way to auction?
If homeowner equity was rising, the majority of defaults would likely be cured before auction. Now, the only options are to sell or forfeit the home. But, a hard target search of specific defaulted property sold between 2005 and 2007 revealed that most are not listed through the local MLS which suggests that they are not really trying to sell and most appear to be well maintained.
And, if lenders fearful of flooding the market are delaying auctions, why not further limit the damage by not recording the notice of default? That way there is no public record for people like me to uncover and question.
Trying to read the tea leaves may reveal many things but, perhaps, no definitive answer to where we are headed.
The uncertainty about the future of the economy is threatening even those jobs once thought to be recession proof and has caused many people to adopt an almost survivalist approach to short term life planning. If your job goes away, what would you wish you had more of, cash, or the good will of the mortgage company?
People who can pay their mortgages have stopped, and their number is growing. Among probable reasons are the following:
- The decreasing stigma of such an action compared to the widespread fraud underlying our economic collapse. When GM is synonymous with bankruptcy, it’s clear that the game has changed.- The uncertainty of the revival of the economy and the corresponding fear of loss of income if the recession deepens or lengthens has many people waiting for a signal regarding the economy in general or the security of their job in particular.- Belief that, if they are current, they will not qualify for a mortgage modification.- Chaos theory is yet another reason that some aren’t paying their mortgages. There has been a persistent rumor that behind the bank bailouts and the bankruptcies, the Federal Government is working on a plan B for dealing with a complete economic collapse and the ensuing anarchy.
People who believe this argue that there wouldn’t be anyone coming to see about the mortgage. And, if everyone who had a mortgage began to withhold their payments, that could happen. Those working short sales and REOs have discovered that the banks and servicing companies are already overwhelmed.
And, because the revenue stream of mortgage servicers is entirely dependent on collecting mortgage payments, when those stop coming, they won’t be able to make payroll or keep the lights on. And, it will be lights out for the banks next. Unlike GM, they don’t have many assets and make nothing.
The government can only bailout so many things with our money before we hit a tipping point. California is facing an unprecedented financial crisis, and other states are facing similar revenue shortfalls. If the choice comes down to saving the banks or saving our neighborhoods, the politicians need voters more than they need banks. Or, so say the chaos theorists.
There are many different reasons why certain homeowners might be withholding their mortgage payments to preserve their cash. Fear of job loss or economic collapse, loathing for the high-flying financiers who are getting bailout funds, the lessoning stigma associated with bankruptcy and default, or to qualify for a mortgage modification.
Some are fully intending to make up the payments and pay the late fees if the economy shows signs of improving soon. Others think that banks might make concessions so why not wait and see what happens? But, as the number of non-payers grows, whether by choice or necessity, they further imperil the survival of many financial institutions.
Friday, June 05, 2009
Florida Officials Consider Used Foreclosed Homes Emergency Housing
RISMEDIA, June 5, 2009-(MCT)-If a major hurricane strikes Florida, authorities may take advantage of the foreclosure crisis to place displaced residents in vacant homes seized by banks.
Ruben Almaguer, interim director of the Florida Division of Emergency Management, has proposed that the Federal Emergency Management Agency use foreclosed homes-which are particularly abundant in Florida-as an alternative to placing people in trailers or scattering them around the country.
“Historically, no one has ever used foreclosed properties,” Almaguer said. “If they have 1,000 foreclosed properties in the area, why not? It may be cheaper, especially if they have to drive a trailer down from Kansas. The cost of driving that down, setting it up, now they’ve got to connect water, sewer, electricity, get permits pulled for it.
That’s resolved when you already have in place a fixed property. And what happens a month later when the second hurricane comes through the same area? Would you rather be in a foreclosed home or a travel trailer? I’d rather be in a foreclosed home.”
FEMA released a non-committal statement Wednesday describing the option as one of many “what-ifs” that could be considered in a major catastrophe and stating that currently there is no such policy in place.
Chuck Lanza, Broward County’s emergency management director, said the idea was worth exploring. In addition to its merits as a housing alternative, it would address a source of concern among emergency specialists in Florida: the growing number of vacant homes that could be splintered into construction debris by a hurricane if no one secures them with shutters and plywood. And unlike foreclosed homes, trailers would take time to get to where they’re needed.
“If we have houses we could move people in quickly,” he said. “To us to have extra houses would be great. It makes a lot of sense to have those houses on hand.”
It’s unclear whether banks will have any enthusiasm for allowing hurricane refugees into homes they’re trying to sell.
Alex Sanchez, president of the Florida Bankers Association, said the proposal sounds good in theory but faces several obstacles.
Houses in foreclosure, for example, technically are owned by the debtor until the end of the process, when title passes to the lender. If hurricane victims are placed in the house before the title is transferred, who would get the rent payments, he asked, the debtor who defaulted on the mortgage?
Although banks don’t particularly want to go into the rental property business, he said, they would want to do their share in an emergency.
“After a hurricane, we want to help,” he said. “If the house is livable and the house is vacant, it’s the compassionate thing to do. Why not put a Florida family in it for a transition stage?”
Ultimately, however, he said, “We want to get that house back into productive use by a Florida family who will buy it and get that community happy again with a family back in the house. Our industry’s not in the rental property maintenance business.”
Nancy Norris, Florida spokeswoman for JPMorgan Chase, said she couldn’t say yet whether the bank would be interested. But she said it takes care of its houses.
“Yes we do have a lot of homes now in our possession because they’re in foreclosure. We are actively trying to resell these homes, so we take every precaution to make sure they’re protected from hurricanes and from vandals. We treat it just as if we are homeowners, because we are homeowners.”
Isabel Ulrich, 70, who lived in a FEMA trailer after Hurricane Francis devastated her house in West Palm Beach, Fla., said the temporary accommodations actually were very nice.
“It had everything,” she said. “A bedroom, a nice kitchen, a microwave. I was very satisfied.”
And as a former landlord, she said she worried that temporary hurricane refugees would trash private homes.
“I don’t think it’s a good idea to put people in houses,” she said. “They’ll ruin the houses. There’s not much to ruin in a trailer.”
The proposal came the day U.S. Rep. Alcee Hastings, D-Florida, sent a letter Wednesday to FEMA complaining of a “lack of quality housing” for hurricane victims, particularly poor ones.
State emergency chief Almaguer said he understands the proposal to use foreclosed homes has legal and financial challenges. But Hurricane Katrina showed that when people leave an area for temporary housing, they often don’t come back. And he said any difficulties are outweighed by the practical advantages.
“I want to pull this off for this hurricane season,” he said. “It’s probably cheaper, it’s definitely quicker.”
Ruben Almaguer, interim director of the Florida Division of Emergency Management, has proposed that the Federal Emergency Management Agency use foreclosed homes-which are particularly abundant in Florida-as an alternative to placing people in trailers or scattering them around the country.
“Historically, no one has ever used foreclosed properties,” Almaguer said. “If they have 1,000 foreclosed properties in the area, why not? It may be cheaper, especially if they have to drive a trailer down from Kansas. The cost of driving that down, setting it up, now they’ve got to connect water, sewer, electricity, get permits pulled for it.
That’s resolved when you already have in place a fixed property. And what happens a month later when the second hurricane comes through the same area? Would you rather be in a foreclosed home or a travel trailer? I’d rather be in a foreclosed home.”
FEMA released a non-committal statement Wednesday describing the option as one of many “what-ifs” that could be considered in a major catastrophe and stating that currently there is no such policy in place.
Chuck Lanza, Broward County’s emergency management director, said the idea was worth exploring. In addition to its merits as a housing alternative, it would address a source of concern among emergency specialists in Florida: the growing number of vacant homes that could be splintered into construction debris by a hurricane if no one secures them with shutters and plywood. And unlike foreclosed homes, trailers would take time to get to where they’re needed.
“If we have houses we could move people in quickly,” he said. “To us to have extra houses would be great. It makes a lot of sense to have those houses on hand.”
It’s unclear whether banks will have any enthusiasm for allowing hurricane refugees into homes they’re trying to sell.
Alex Sanchez, president of the Florida Bankers Association, said the proposal sounds good in theory but faces several obstacles.
Houses in foreclosure, for example, technically are owned by the debtor until the end of the process, when title passes to the lender. If hurricane victims are placed in the house before the title is transferred, who would get the rent payments, he asked, the debtor who defaulted on the mortgage?
Although banks don’t particularly want to go into the rental property business, he said, they would want to do their share in an emergency.
“After a hurricane, we want to help,” he said. “If the house is livable and the house is vacant, it’s the compassionate thing to do. Why not put a Florida family in it for a transition stage?”
Ultimately, however, he said, “We want to get that house back into productive use by a Florida family who will buy it and get that community happy again with a family back in the house. Our industry’s not in the rental property maintenance business.”
Nancy Norris, Florida spokeswoman for JPMorgan Chase, said she couldn’t say yet whether the bank would be interested. But she said it takes care of its houses.
“Yes we do have a lot of homes now in our possession because they’re in foreclosure. We are actively trying to resell these homes, so we take every precaution to make sure they’re protected from hurricanes and from vandals. We treat it just as if we are homeowners, because we are homeowners.”
Isabel Ulrich, 70, who lived in a FEMA trailer after Hurricane Francis devastated her house in West Palm Beach, Fla., said the temporary accommodations actually were very nice.
“It had everything,” she said. “A bedroom, a nice kitchen, a microwave. I was very satisfied.”
And as a former landlord, she said she worried that temporary hurricane refugees would trash private homes.
“I don’t think it’s a good idea to put people in houses,” she said. “They’ll ruin the houses. There’s not much to ruin in a trailer.”
The proposal came the day U.S. Rep. Alcee Hastings, D-Florida, sent a letter Wednesday to FEMA complaining of a “lack of quality housing” for hurricane victims, particularly poor ones.
State emergency chief Almaguer said he understands the proposal to use foreclosed homes has legal and financial challenges. But Hurricane Katrina showed that when people leave an area for temporary housing, they often don’t come back. And he said any difficulties are outweighed by the practical advantages.
“I want to pull this off for this hurricane season,” he said. “It’s probably cheaper, it’s definitely quicker.”
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