VA Loans Still Don't Require Down Payment

The U.S. Department of Veterans Affairs, whose loans remain one of the few no-down-payment options in this tight market, have made more than 162,000 home loan guaranties this year, an increase of more than 31 percent over the same period last year.

The VA has tried to streamline the loan process by allowing veterans to apply for a loan before they obtain a VA Certificate of Eligibility.

Once the borrowers have demonstrated that they are otherwise eligible, lenders can access the program's Web portal to use VA's online Automated Certificate of Eligibility (ACE) system and obtain the certificate for the veteran.

Many times, lenders can receive the certificate within seconds. The VA can process the application in less than 24 hours.

VA-guaranteed home loans are made to eligible veterans, service members, and surviving spouses through private mortgage lenders throughout the United States.

Source: U.S. Department of Veterans Affairs (09/21/2008)

5/19/2008

Advice for Anyone Facing Foreclosure

Jacob Benaroya, president and managing partner of Biltmore Capital Group, which purchases distressed loans from a wide array of lending companies, offers these seven tips for home owners facing foreclosure.

• Don’t hide. Open the mail; answer the phone. Respond.
• Be proactive. Contact the bank or lending institution and discuss your financial situation.
• Know your mortgage rights. Review loan documents so you know what your lender may do if you can't make payments.
• Avoid foreclosure prevention companies. Don’t pay money for foreclosure advice..
• Contact a HUD-approved housing counselor. The U.S. Department of Housing and Urban Development (HUD) funds free or very low cost housing counseling nationwide. They’ll help you understand the law and your options, organize your finances and represent you in negotiations with your lender if assistance is required.
• Prioritize spending. After health care, keeping your home should be your first priority. Review your finances and see what spending can be cut in order to make your mortgage payment. Look for optional expenses - cable TV, memberships, entertainment - that can be eliminated. Delay payments on credit cards and other "unsecured" debt until you have paid your mortgage.
• Use other assets. Do you have assets such as a second car, jewelry, a whole life insurance policy-that can be sold to help reinstate the loan? Can anyone in the household bring in additional income?

5/16/2008

Home Sales, Prices Seen Rising in Late '08

First, the good news: home sales have stabilized over the last seven months and should increase slightly in the second half of 2008, NAR Chief Economist Lawrence Yun told a crowd of REALTORS® at NAR’s Midyear Legislative Meetings & Trade Expo Thursday.

The other good news is that the subprime lending crisis is becoming a thing of the past. “I believe 2008 will be the year when we have to clean up and recover from the subprime mess,” said Yun.

The bad news is that the numbers are in, and 2007’s annual sales volume of about 5.30 million homes was the lowest in 10 years. Luckily, the economy is stronger overall than it was a decade ago. “The difference is that we have 25 million more people and 13 million more jobs than we did 10 years ago,” he said.

And while sales should begin to grow later this year, real improvement in the housing market won’t happen until 2009, when sales should climb to 5.71 million units, Yun said.

Price Gains to Vary by Market

Prices also are expected to begin a turnaround later this year, although recovery will vary by market.

Middle-America cities that performed evenly over the past few years – like Cincinnati, Milwaukee and the Kansas City, Mo., area – are likely to experience home price gains in the 20 to 30 percent range over the next five years, while markets like Miami, Las Vegas and Phoenix could see prices go up as much as 50 percent during that time period, Yun said.

Healthier Mortgage Market Makes a Difference

A brighter credit picture is a major contributor to this improvement, Yun said.

If you look at where home prices fell the most, it’s the markets were subprime loans were prevalent,” Yun said. Cape Coral, Fla.; Detroit; Las Vegas; Miami; Orlando, Fla.; Phoenix and Riverside, Calif. were among the cities with a high percentage of subprime lending and where the markets suffered the biggest downturns, he explained.

These markets should get a boost from a more stable mortgage market. FHA lending doubled to 6 percent of all loans 2007 and should grow to 10 percent in 2008. It should reach near-historic norms of 15 percent in 2009, said Yun.

The increase will be slow because many lenders will have to be certified by the U.S. Department of Housing and Urban Development before they can issue FHA mortgages. Higher conforming loan limits at Fannie Mae and Freddie Mac have also helped lower interest rates and unlock the lending log jam for jumbo loans.

Even current borrowers with adjustable mortgages are in better shape, thanks to Fed rate cuts. In fact, some adjustable loan borrowers may actually see their resets produce lower payments. “The Fed has done its job on resets; now it’s up to Congress to encourage the home buying that will help stabilize prices,” Yun said.

Other Reasons to Be Optimistic

The home buyer tax credit currently being considered by Congress would also encourage uncertain buyers to act. Stabilized prices will not only encourage sales but could help reduce defaults, he added.

The foreclosures aren’t all in the past, warned Yun, though he believes that many investors and speculators already have exited the market. He expects foreclosures to rise throughout 2008 and perhaps into 2009, primarily among subprime borrowers, where foreclosure rates were near 20 percent in the third quarter of 2007.

Still, Yun notes, it’s important to remember that only 9 percent of home owners have subprime loans. Foreclosure rates for all loan types are much lower — currently, around 2 percent.

— By Mariwyn Evans for REALTOR® magazine online

5/16/2008

Fannie Mae Scraps Declining Markets Policy

Fannie Mae will no longer require borrowers to put up an extra 5 percent down payment when purchasing homes in areas deemed "declining markets," the country’s largest secondary mortgage market company said Friday.

Fannie Mae had been hearing concerns from REALTORS® and others for months that its declining-markets policy was bad for the housing market because it discouraged consumers from buying homes in markets hardest-hit by foreclosures.

"It stigmatized communities with lower sales and prices," said Dick Gaylord, president of the NATIONAL ASSOCIATION OF REALTORS®.

NAR met several times this spring with Fannie Mae officials and sent letters reflecting members' unease with the policy. “We heard the concerns of NAR and we reviewed and determined that changes in our policy were needed,” Gwen MuseEvans, Fannie Mae vice president for credit policy and controls, said in a statement Friday.

Fannie Mae's announcement comes as more than 8,000 REALTORS® are gathered in Washington, D.C., where Fannie Mae is headquartered, for NAR's 2008 Midyear Legislative Meetings & Trade Expo.

Under the policy change, borrowers can get loans up to 95 percent loan-to-value, even in markets in which prices have been falling. Prior to the change, borrowers could only get loans up to 90 percent to give lenders a 5-percentage-point cushion to protect against possible price declines in the future.

“This new down payment policy reinforces our goal to support successful home-owning,” says Marianne Sullivan, Fannie Mae's senior vice president of credit policy and risk management for single-family homes.

The new policy takes effect June 1.

— By Robert Freedman for REALTOR® magazine online

5/12/2005

Drop Price and Sell, or Find a Renter?

Home owners who are having a tough time selling their homes face a hard decision – should they drop the price in hopes of attracting a bargain hunter, or should they find a renter and hold on until prices go back up?

Benny L. Kass, real estate attorney and columnist for the Washington Post, offers these reasons why selling now is better than waiting it out.

• Tax implications. Living in a home has its tax benefits. A home owner who has lived in a house for at least two of the five years before it is sold and files a joint income tax return can exclude up to $500,000 of the gain from taxation. Single people can exclude up to $250,000.

• Tenants can make a sale tough. Some tenants don’t keep a home in the same condition as an owner would. Also they may not cooperate with showings, even if the lease says they must.

• Being a landlord can be a challenge. Calls in the middle of the night with demands to repair the toilet are tough.

• Carrying costs are daunting. Some months the house will be vacant, but the owner still has to pay the mortgage, real estate tax and insurance. Maintenance bills don’t stop either.

• No one has a crystal ball. The real estate market may take a long time to recover.

5/12/2008

Self-Storage Bills Get Out of Control

The self-storage center is the latest to get a taste of the foreclosure crisis.

People who lose their home to foreclosure often rely on self-storage for their belongings. But some people cannot keep up with their storage bills any better than they could handle their mortgage payments. The result: storage companies auction off their property for a pittance.

''You tell yourself, 'I'm only going to put my things in for a short time,' '' says Wayne Blair, the owner of Blair Auction & Appraisal, which has been conducting sales at self-storage facilities in the Midwest for more than a decade. ''Before you know it, you're behind. Then you have to pay penalties and interest."

Blair says he's seen an increase in auctions in light of the foreclosure crisis: "If a site used to have 10 auctions, these days it has 15 or 20.''

When renters default on their monthly payments, facilities replace the lock with one of their own. That way, the renter cannot come around at the last minute and empty out his unit. Eventually, after the bills pile up, auctions are the only option.

Auction companies like Blair's drive bidders from site to site. The bidders can't enter the unit or touch anything; they must make their offers based on a glimpse. The contents of some units can sell for $1,000 or more; in other cases, bidders won't even offer $1.

Source: The New York Times, David Streitfeld (05/11/08)

5/7/2008

Expect a Summer Rise in Home Sales

A flat pattern in home sales activity should continue for the next couple of months before improving over the summer, according to the latest forecast by the NATIONAL ASSOCIATION OF REALTORS®.

Lawrence Yun, NAR chief economist, said the extent of an expected recovery hinges on better access to affordable loans. “Things are beginning to improve, but the availability of affordable mortgages is uneven around the country and sometimes within metropolitan areas,” he says. “As anticipated, we continue to look for a soft first half of the year, for both housing and the economy, before notable improvements in the second half. Some time is needed for FHA and new conforming jumbo loans to become widely available.”

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in March, edged down 1.0 percent to 83.0 from a downwardly revised level of 83.8 in February, and was 20.1 percent lower than the March 2007 index of 103.9.

NAR President Richard F. Gaylord says additional costs in many markets are hindering a recovery. “Our members are telling us that more buyers are looking at homes but are slow in signing contracts, and that’s contributing to the weakness in pending home sales,” he says. “In many cases buyers are waiting for greater access to affordable credit, especially in higher cost areas, but some are disappointed with what appears to be unnecessarily restrictive lending requirements. The good news this week is there is some discussion toward relaxing some of the burdensome lending practices.”

The PHSI in the Northeast jumped 12.5 percent in March to 80.8 but remains 15.4 percent below a year ago. In the South, the index slipped 0.1 percent to 84.9 and is 26.7 percent lower than March 2007. The index in the West declined 1.4 percent in March to 91.2 and is 9.5 percent below a year ago. In the Midwest, the index fell 10.4 percent in March to 74.1 and is 22.3 percent below March 2007.

Existing-home sales are projected to rise from an annual pace of 4.95 million in the first quarter to 5.82 million in the fourth quarter. For all of 2008, existing-home sales are likely to total 5.39 million, and then rise 6.1 percent to 5.72 million next year. “Although more than half of local markets are expected to see price growth this year, the aggregate existing-home price will decline 2.4 percent in 2008, driven by a relatively few markets that are very oversupplied,” Yun says. The median price is forecast at $213,700 this year before rising 4.1 percent to $222,600 in 2009.

Some areas already are seeing sales increases, underscoring that all real estate is local. In March, unpublished snapshot data shows sales in Bakersfield, Calif., and Jackson, Miss., were higher than a year ago. At the same time, price gains were noted in markets such as Buffalo-Niagara Falls, and Cedar Rapids, Iowa.

On May 13, NAR will report first-quarter data on metropolitan area home prices, covering about 150 metro areas, and state home sales. “Although some market adjustments are necessary, a downward overshooting of the housing market would cause unnecessary loss in economic output, income, and jobs,” Yun says. “It is critical to stimulate housing demand by inducing fence sitters back into the market. A home buyer tax credit on any home purchase would accomplish that.”

Here are some highlights from NAR's report:

• New-homes. Sales of new homes are expected to fall 30.9 percent to 536,000 this year before rising 10.1 percent to 590,000 in 2009. Housing starts, including multifamily units, will probably drop 29.5 percent to 955,000 in 2008, and then rise 1.3 percent to 967,000 next year. The median new-home price is estimated to fall 3.7 percent to $238,000 this year, and then rise 5.4 percent in 2009 to $250,900.

• Rates. The 30-year fixed-rate mortgage is likely to rise gradually to 6.2 percent by the end of the year, and then average 6.3 percent in 2009.

• Affordability. NAR’s housing affordability index is expected to rise 10 percentage points to 127.0 for all of 2008.

• GDP. Growth in the U.S. gross domestic product (GDP) should be 1.5 percent this year and 2.3 percent in 2009. The unemployment rate is projected to average 5.3 percent in 2008 and 5.5 percent next year.

• Inflation. Inflation, as measured by the Consumer Price Index, is seen at 3.4 percent this year and 2.2 percent in 2009. Inflation-adjusted disposable personal income is forecast to grow 1.2 percent in 2008 and 3.0 percent next year.

5/6/2008

Home Gyms: Remodeling Not Required

Equipping a home with an exercise area can increase its appeal to buyers.

Despite the current economic slowdown, retail sales of home gym equipment continue to grow, topping $5 billion in 2006 and rising another 3 percent in 2007, according to the National Sporting Goods Association.

Designating a spare room as an exercise area doesn’t necessarily require the purchase of expensive equipment, says exercise physiologist Bob Greene, certified personal trainer to Oprah Winfrey. He proposes simple, lower-cost alternatives to expensive exercise equipment.

No remodeling is required, but the equipment will suggest the possibilities to potential buyers.

• Yoga mat: A cushion for floor exercises and easily rolls up
• Small free weights
• Exercise ball
• Jump rope

4/15/2008

Smaller Floor Plans in Big Demand
American’s appetite for big homes and over-sized furniture appears to be shrinking.

New-home buyers began asking builder KB Home for smaller floor plans right after the collapse in subprime lending last year, says CEO Jeffrey Mezger.

The demand for a huge, high-ceilinged great room is giving way to the desire for special-purpose rooms, including media rooms and home offices, says a spokesman for luxury specialist Pulte Homes.

In three of its four new sofa collections, Younger Furniture is offering "apartment size" sofas, which are about 10 inches shorter than full-sized ones. Citing a trend toward smaller homes, Rowe Fine Furniture says it expects its Mini Mod line will account for a quarter of its collection this fall.

"They're finally getting it," says Jodi FitzGerald, owner of Door Store Furniture, an 11-store retail chain in metropolitan New York that specializes in small-scale furniture. She estimates the number of smaller offerings has grown by about a third over the past year.

Source: The Wall Street Journal, Nancy Keates (03/21/2008)

4/04/2008

States Enact Roadblocks to Foreclosure
States are responding aggressively and ahead of the federal government in helping home owners avoid foreclosure.

Here's what some states have been doing:

• Ohio has contracted with more than 1,000 attorneys to work with borrowers free of charge to block foreclosures.

• Illinois is considering a bill that would impose a 60-day moratorium on some foreclosures.

• Maryland has enacted emergency legislation to give borrowers at least 150 days to cure defaults, effectively creating a short-term moratorium on foreclosures.

• Minnesota is considering requiring lenders to honor a borrower’s request for a 12-month deferment.

• Beginning May 1, borrowers in Massachusetts will have 90 days to cure any defaults before their mortgage company can foreclose.

3/31/2008

OFHEO Director: Markets Shows Improvement
There are "some good signs" that the severe downturn in U.S. housing markets might be approaching an end, says James Lockhart, director of the Office of Federal Housing Enterprise Oversight.

"It's going to take a while, but we're starting to see some bottoms," Lockhart says. "It may take another six months or so, but hopefully we'll start pulling out of it."

But, Lockhart says, the idea of freezing mortgage rates would be a mistake to recovery. Presidential candidate Sen. Hillary Clinton had proposed the idea of a rate freeze.

"You'd really cause market dislocation. … I think we're going to have to let the market work," Lockhart told CNBC television in response. "Interest rates have come down dramatically, and people are going to be able to refinance."

Source: Reuters News (03/28/08)

3/25/2008

Daily Real Estate News  |  March 11, 2008

Why Now is a Smart Time to Buy
Now is a great time to buy a home, say the financial gurus at the Wall Street Journal.

The Journal calls it a buyers market and offers these suggestions for first-timers getting their feet wet. While their advice is solid, it’s not revolutionary, but some potential customers might find it reassuring.

Remember this is a place to live not a stock market investment, they say. Lenders want buyers to spend no more than 28 percent of their gross monthly income on mortgage payments, real estate taxes, and home insurance. Buyers shouldn’t count on stretching further because lenders won’t approve their loans.

• Cash is king. Having enough money in the bank to pay closing costs that are typically an additional 2 percent to 3 percent of the price of the home is necessary.

• Location. Location, location. As any good real estate professional knows, homes in good school districts where the crime is low are much more likely to hold or increase their value.

• Compare. Besides just looking at the comps, buyers should examine what it would cost to rent a similar house in the same area and they might consider what it would cost to buy land and build a comparable home.

• Think long haul. It will probably take at least six or seven years of living in the house to be able to sell and come out ahead.

Source: The Wall Street Journal, Shelly Banjo (03/11/08)

3/24/2008

Sales of existing homes increased in February and remain within a fairly stable range, according to the NATIONAL ASSOCIATION OF REALTORS®.

Existing-home sales – including single-family, townhomes, condominiums and co-ops – rose 2.9 percent to a seasonally adjusted annual rate of 5.03 million units in February from a pace of 4.89 million in January, but remain 23.8 percent below the 6.60 million-unit level in February 2007. The sales pace has been in a fairly narrow range since last September.

Lawrence Yun, NAR chief economist, said the gain is encouraging. “We’re not expecting a notable gain in existing-home sales until the second half of this year, but the improvement is another sign that the market is stabilizing,” he said. “Buyers taking advantage of higher loan limits for both FHA and conventional mortgages will unleash some pent-up demand. As inventories are drawn down, prices in many markets should go positive later this year.”

The national median existing-home price for all housing types was $195,900 in February, down 8.2 percent from a year earlier when the median was $213,500. Because the slowdown in sales from a year ago is greater in high-cost areas, there is a downward pull to the national median with relatively fewer sales in higher priced markets.