NAR President Moe Veissi praises new help for struggling homeowners. The Federal Housing Finance Agency on Tuesday announced measures to make “short sales” of underwater homes easier for homeowners, including extending help to people who have financial difficulties but haven’t missed mortgage payments.
Mortgage debt is on the decline, according to a new report by the New York Federal Reserve Bank. The New York Fed credits the decrease, as well as the fact that fewer Americans are late on their mortgage payments, to an increase in home owners who have refinanced into ultra-low mortgage rates.
“The continuing decrease in delinquency rates suggests that consumers are managing their debts better,” says Wilbert van Der Klaauw, an economist at the New York Fed. “As they continue to pay down debt and take advantage of low interest rates, Americans are moving forward with rebalancing their household finances.”
While Americans are getting a better grip over their mortgages, they are doing worse in keeping up with their debts on student loans and home equity lines of credit. Student loan delinquencies grew to 8.9 percent and HELOC delinquencies increased to 4.9 percent in the second quarter.
Meanwhile, delinquencies on auto loans and credit cards dropped in the second quarter. Mortgage delinquencies dropped to 6.9 percent, according to the report.
The New York Fed also reported that mortgage originations increased to $463 billion in the second quarter.
If it wasn’t the two failed offers or the missed opportunities, it was a tape measure that convinced potential homebuyers Brian McCord and Jamie Blondin that they just weren’t moving fast enough.
When they went to see a two-flat in Chicago’s Bucktown neighborhood earlier this summer, they liked everything they saw, except for the other potential buyers also looking at the house.
“Not only were they looking, they had a measuring tape,” McCord said. “And that made us much more nervous,” Blondin added.
The couple promptly offered $626,000 for the $649,000 house, 96 percent of the asking price. This time, they were successful. The transaction closed earlier this month.
The circumstances that McCord and Blondin encountered — shorter marketing times, multiple offers and bidding wars — are popping up with increasing frequency in the Chicago area and creating a new class of anxious home shoppers forced out of their comfort zones.
Buyers still have the advantage in the local housing market, and there are still properties desperate for any buyer interest. But a confluence of factors is accelerating the pace of transactions in both choice and more stressed neighborhoods.
Mortgage interest rates, while they have ticked up the past four weeks, remain well under 4 percent for a 30-year, fixed-rate mortgage. More sellers are setting realistic list prices. Meanwhile, about 95 percent of apartments in downtown Chicago and the suburbs are occupied. That is pushing up average rents and prompting a harder look at the merits of buying.
Six years into the housing crisis, consumers who have sat on the sidelines are trying to take advantage of it all, as are investors who are scouring the market for properties to turn into rentals.
The market trends are forcing a re-education of clients and real estate agents alike. It used to be that when agents told each other there were competing aggressive offers on a listing, the agents might call each other’s bluff.
But at least three times this year, clients of Warren Davis, a real estate consultant at Urban Real Estate, have lost deals to offers that he thought were just bluffs. Now Davis has taken to role-playing with clients, pretending that they find a property and training them to make a decision quickly.
“No one likes to rush,” Davis said. “I tell them when you find a good opportunity, you have to pounce. You can’t hesitate. When you go back and see it under contract, you go through an emotional loss.”
Some of the quickened sales pace is seasonal, but it’s also due to a lack of inventory. At the end of July there were 34,816 residential for-sale listings in the nine-county Chicago area, according to Midwest Real Estate Data LLC, the local multiple-listing provider. A year ago, in July 2011, there were more than 46,000 active listings. Likewise, the number of condominium and town home listings, 18,349 in July, was a 38 percent decline from a year ago.
Some homeowners who would like to sell their homes can’t do so because they are underwater, owing more on their mortgage than the property is worth. Others may be waiting for true appreciation in the market to net a real profit. As a result, the average marketing time for homes in July was 16 to 20 percent shorter than it was a year ago, 122 days for houses and 134 days for attached homes.
“The serious buyers are all looking at the same thing,” said Mark Reitman, regional manager at Redfin. “A couple of years ago, there was more inventory so there was more choice.”
Some listings come onto the market and are gone within days. A Naperville homeowner let Kay Russell, an agent at Keller Williams Fox Valley, place his home on the multiple-listing service on a recent Saturday evening but didn’t want any showings until Monday so he could finish a few last projects.
“My phone starting ringing off the wall Sunday,” Russell said. “People were hopping all over their agents, saying, ‘We want to see that house.'”
Russell appealed to her seller, who agreed to showings after 6 p.m. Sunday. One potential buyer made an offer, a low offer, that night. The other potential buyer made a higher offer, closer to list price, on Monday which the seller accepted. It is now under contract.
“We didn’t price it for a fire sale,” Russell said. “We priced it right at market. A couple years ago, we didn’t know what the right prices were. We finally know what the right prices are. We don’t like the prices, but it is what it is.”
While the rising interest in home purchases is encouraging, it would be a mistake to think the Chicago area is headed for a repeat performance of inflated home values and bidding wars far above asking price. Area home prices rose in June, for the fourth consecutive month, but remain below their year-ago levels, according to the S&P/Case-Shiller home index released Tuesday.
Appraisals remain conservative, so any buyer who bids far above market value either is unable to secure mortgage financing or has to bring more money to the table. That is creating an advantage for cash buyers, many of whom are investors.
Demand for distressed properties is driving up prices for the first time in two years as investors from Blackstone Group LP to Colony Capital LLC chase shrinking inventory.
The average sales price on homes in the process of foreclosure or already owned by banks rose 7 percent in the second quarter from a year earlier, the biggest annual increase since 2006, RealtyTrac Inc. reported today. The number of those deals dropped 22 percent, the most since 2010, the Irvine, California-based data provider said in a statement.
“There’s virtually no supply in a lot of markets right now,” Michael Krein, president of the National REO Brokers Association said in a telephone interview. “What we’re finding nationally is that 50 percent of all purchasers are investors because they can outbid the owner occupant buyers. Investors are bidding up anywhere from 5 to 25 percent over the list prices.”
Investors are taking advantage of home prices that are about 31 percent below the 2006 peak and growing demand for rentals from people with damaged credit, limited savings or lack of confidence in owning a house. Firms including Blackstone, Colony and Oaktree Capital Group LLC plan to spend about $8 billion buying single-family homes to rent, according to company statements and interviews.
Investment in rentals, most of which is coming from small groups rather than Wall Street funds, is filling vacant homes and improving rundown properties while spurring demand for construction jobs, said Tom Shapiro, chairman of GTIS Partners, a New York-based investment fund that plans to spend $1 billion in the next five years on rental housing.
“The housing market is turning around,” Shapiro said. “Maybe the silver bullet for housing is the single-family-for- rent, because it’s underpinning the market. It’s sopping up the excess.”
Government-controlled mortgage guarantors Fannie Mae and Freddie Mac have been slow to unload foreclosed homes, also known as real estate owned or REOs, through bulk sales. That has limited the number of properties available for private-equity firms, hedge funds and pension systems to purchase.
Krein said he receives about 20 phone calls a week from large investors and hedge funds interested in Nevada properties.
“There’s almost no product left to buy right now,” he said. “A couple of years ago you might have had four or five major players that would bid on non-performing loans and REO pools. Now there are probably 50 or 60 that can bid on these.”
Compounding the shortage is fewer bank-owned homes coming to market as lenders comply with terms of a $25 billion February settlement with state and federal regulators to resolve allegations with the five-largest home lenders over faulty practices. In the first quarter, foreclosure filings in the U.S. fell to the lowest level since 2007, RealtyTrac said in April.
Banks increasingly approve transactions for less than the amount owed on the mortgage, known as a short sale, or modify loans for borrowers struggling to keep up payments, including by reducing the principle owed.
The gap between short sale prices and prices obtained by banks selling seized properties narrowed to the smallest in almost five years, RealtyTrac said today.
“The shift we’ve been seeing in the last few quarters that continued in the second quarter is short sales are catching up with bank-owned sales,” said Daren Blomquist, a RealtyTrac spokesman.
Despite widespread flooding in western Palm Beach County during Tropical Storm Isaac, a relatively small number of homes sustained water damage — which is fortunate, because few homes in the hardest-hit areas are insured for flood losses.
Streets, parking lots, driveways and docks were under water, but in most cases, the waters didn’t rise enough to enter houses. County officials said Wednesday morning that they received reports of only 62 homes that were flooded. Officials in Wellington — which was inundated with 18 inches of rain — said Wednesday afternoon that they know of no homes that were flooded.
If those numbers hold, homeowners in western communities dodged potentially devastating damage. That’s because only a fraction of property owners in Wellington, Royal Palm Beach and Greenacres buy federal flood insurance.
Standard homeowners insurance policies have excluded flood damage for years. The only carrier to cover losses caused by rising waters is Uncle Sam, through the National Flood Insurance Program.
If you live in a high-risk flood area and have a mortgage, your lender requires you to carry flood insurance. That explains why many property owners in coastal communities buy the coverage. In Palm Beach (population 8,445), there are 7,661 flood insurance policies on residential and commercial properties, according to the National Flood Insurance Program.
But if you live in a so-called low-to-moderate risk flood zone, your lender doesn’t require the coverage. So in Wellington (population 57,163), only 612 flood policies are in effect. Royal Palm Beach (655 flood policies in force) and Greenacres (387 policies) combined have fewer flood policies in force than tiny Ocean Ridge (1,302 policies).
A spokeswoman for the National Flood Insurance Program said it’s too early to tell how many claims will come from Tropical Storm Isaac.
Flood damage can be costly. The federal government says the average flood claim over the past five years was $34,000.
Insurance industry officials say the flooding serves as a reminder that a federal policy can be a wise investment.
“People see they’re in a low-to-moderate risk zone, and they think that means zero risk,” said Lynne McChristian, Florida representative for the Insurance Information Institute, an industry trade group. “If there’s no severe weather, people let their guard down.”
Flood insurance is less expensive for homes in lower-risk zones.
Meanwhile, Citizens Property Insurance, the state’s largest insurer, said it had received 2,235 claims for Isaac damage as of 5 p.m. Wednesday. That includes 520 claims in Palm Beach County, 914 in Broward County and 630 in Miami-Dade County.
Five of the biggest U.S. lenders have provided $10.6 billion in relief under a landmark settlement over foreclosure abuses, including reducing struggling homeowners’ loan balances by $1.3 billion.
The monitor overseeing the $25 billion settlement says the banks provided the relief in the first four months of the three-year program. In his first progress report, Joseph Smith Jr. disclosed Wednesday that $8.7 billion of the $10.6 billion in relief was in the form of short sales, in which lenders agree to accept less than what the owes on the mortgage.
Lenders are increasingly favoring short sales rather than waiting for troubled loans to go through the foreclosure process.
In Michigan, according to the report, homeowners have received $185 million in all types of relief so far, covering 4,355 cases. That includes 1,805 short sales that averaged savings of $68,950 per homeowner.
Michigan residents are expected to receive about $785 million in benefits from the settlement, including a $97.2 million direct cash payment to the state. That money arrived on Aug. 16 and will be allocated to investigations of mortgage fraud, clean up blighted properties, refund up to $3,000 to victims of foreclosure rescue scams, foreclosure counseling for homeowners and other assistance.
Those efforts are still being established, said Joy Yearout, spokeswoman for state Attorney General Bill Schuette. The Attorney General’s Office hasn’t received complaints from homeowners, she added. The office is reviewing the monitor’s report.
“It’s too early to say if we’re satisfied with the level of progress,” Yearout said.
This week’s images of Hurricane Isaac’s rampage along the Gulf Coast are a reminder that measures taken to prepare for big storms can reduce the damage they cause.
Just a year ago, Hurricane Irene demonstrated that this region is hardly exempt from nature’s wrath. (Hurricane Kirk is forming in the Atlantic now, heading northwest.)
So this column is the first of two, with an emphasis on getting ready for a storm. Next week, we’ll tackle cleaning up after a storm.
Even so, there are too many topics to be covered. An excellent source for information is http://www.ready.gov/hurricanes, created by the National Hurricane Center of the National Weather Service.
Are you covered? Severe storms have the potential to destroy your financial well-being, so knowing what you’re insured for is essential.
Check your homeowners’ insurance policy to determine your hurricane-coverage deductible. Many insurers require one, depending on the location of the insured property. Insurers in New Jersey and Delaware do, but they don’t in Pennsylvania.
Hurricane deductibles are higher than those for other perils or causes of loss. They are calculated as a percentage of the dollar amount of coverage on a dwelling.
The “trigger,” or point at which these deductibles apply, varies among insurers, according to the Insurance Information Institute in New York. Triggers generally are effective only when the National Weather Service issues a hurricane watch or warning, and they remain in effect for a specified time after the storm has passed.
Hurricane intensity also may affect the trigger. If a policy has mandatory deductibles, that means the insurer will not sell homeowners coverage without a hurricane deductible.
In New Jersey, hurricane deductibles approved by the Department of Banking and Insurance apply to losses from a storm that is at any time designated a hurricane by the weather service.
Flood warning. Remember this if you remember nothing else: Standard homeowners’ policies do not cover flooding.
Structures in high-risk flood areas that have mortgages from federally regulated or insured lenders (Fannie Mae, Freddie Mac, FHA and VA) are required to carry flood insurance. According to the National Flood Insurance Program, such areas have a 1 percent or greater chance of flooding in any given year.
Homes and businesses in moderate- to low-risk areas with mortgages from federally regulated or insured lenders are not usually required to have flood insurance.
Such coverage is recommended, however, because anyone can be financially vulnerable to floods, according to the flood-insurance program: People outside high-risk areas file more than one-fifth of claims and receive one-third of disaster assistance (typically loans that must be repaid with interest).
There are waiting periods for flood-insurance coverage. Details are available from FloodSmart.gov.
Walk around your house. Physical preparation for storms is important. Look around the yard and the perimeter of your property for weak points, such as trees with branches hanging over utility lines. Remove them before they cause trouble.
Experts have pinpointed four areas that should be checked for weakness before a hurricane strikes: the roof, the windows, the doors, and the garage door.
Roof reinforcement from the wind – hurricane straps, for example – require a professional, and if a storm is bearing down, there may not be time to do that work. But you can clean gutters and downspouts so water flows away from the foundation.
In this region, basement flooding is a big concern among homeowners who have spent thousands of dollars creating family rooms downstairs, only to have heavy rains ruin those spaces, as well as their furnaces, washers and dryers.
If you have a sump pump, make sure it works, and check the outflow pipe to be sure it’s free of debris.
Improper grading can cause major problems, said Harris Gross, owner of Engineers for Home Inspection in Cherry Hill, resulting in stormwater flowing toward the house, into the basement.
“It is an issue that needs to be addressed,” he said, even if a hurricane isn’t on its way.
If a big storm is imminent, however, protect windows and doors by installing plywood shutters or at least placing large strips of masking tape or adhesive tape on the glass, to reduce the risk of breakage and flying pieces.
Add bracing to a shore up a weak garage door.
If authorities urge you to evacuate your home, do it. Know the routes well and be sure your family is well-versed in what to do in the event of an emergency.
FXstreet.com (Barcelona) – UK Nationwide Housing Prices n.s.a. slid for the sixth running month by 0.7% in August, following -2.6% in July, Nationwide reported on Friday. Market consensus pointed to a 2.2% decline.
On a monthly basis UK Nationwide House Prices s.a. edged up 1.3%, after falling 0.8% and against forecasts of remaining unchanged.
Hong Kong will boost the supply of homes and give preference to local buyers as it seeks to cool housing prices that have surged to the world’s most expensive, fueled by record-low interest rates and Chinese investment.
Chief Executive Leung Chun-ying announced a 10-point package yesterday that included speeding up the approval of permits for private project sales, selling public units that were originally intended for rent, and drafting policies that will give preference to local buyers.
The measures are the toughest since the government in June last year increased down-payment requirements, and the strongest move yet to quell concerns about a surge in non-local purchases, particularly by mainland investors that account for a third of new home buying in the city and helped drive prices up 85 percent since the beginning of 2009. The measures don’t go far enough, said Wong Leung-sing, associate research director at Centaline Property Agency Ltd.
“It’s a nice gesture, but it won’t have a real impact on prices,” said Wong. “Accelerating sales and increasing supply wouldn’t solve the problems. They haven’t addressed the real issue and that’s the market is flush with cash.”
The seven-member Hang Seng Property Index (HSP), which tracks developers, including Sun Hung Kai (16) Properties Ltd. and Cheung Kong (Holdings) Ltd., rose 1.1 percent at the close of trading in Hong Kong. The benchmark Hang Seng Index fell 0.4 percent.
Sun Hung Kai, the city’s biggest builder, rose 1.5 percent to HK$100.60, while Cheung Kong (1), controlled by Li Ka-shing, Hong Kong’s richest man, gained 1.6 percent to HK$105.50. Henderson Land Development Co., controlled by billionaire Lee Shau-kee, gained 2.1 percent to HK$47.70.
“These policies will help stabilize prices,” said Lee Wee Liat, a Hong Kong-based analyst at BNP Paribas. “They’re focusing on flushing out the supply to the market. Developers will try and speed up sales but will be moderate with pricing. The important thing is they’re not trying to stifle demand.”
Leung, a surveyor, took over as Hong Kong’s leader last month on a pledge to address a widening income gap and housing affordability.
Home prices have increased 12 percent this year, bringing the gain to 47 percent since October 2009, when Leung’s predecessor, Donald Tsang, first introduced measures to prevent the formation of an asset bubble. Prices recovered from the second half of last year even as the government lowered its growth forecast for 2012 and as China’s economy slows.