Daily Archives: August 26, 2012

Latest Housing Price Data Confirm Housing Bottom Is Underway | Pound Ridge Realtor

The last earnings reports from homebuilders like Toll Brothers (TOL) and KB Home (KBH) have delivered very positive outlooks on the current housing market: see “A Swell Of Pent Up Demand Supports The Surge In Toll Brothers” and “KB Home Going ‘On Offense’ As Its Housing Markets And Pricing Power Strengthen.”

The latest housing price data from the Federal Housing Finance Agency (FHFA), released August 23, seem to corroborate this bullishness. The FHFA report shows what looks like a firming in pricing power for sellers. If this bottoming in prices is sustained, then the housing market is well on target for the bottom in 2013 that I have anticipated since 2009 (for example, see 2010 article “Still Expecting Housing to Bounce Along the Bottom Until 2013“).

According to the FHFA data, the first and second quarter of this year delivered the first year-over-year increase in the seasonally adjusted purchase-only house price index ()HPI)( since the first and second quarters of 2007. The second quarter registered a 1.3% inflation-adjusted price increase. Forty-three states experienced price increases. The two FHFA charts below show a distinct stabilization in prices. The chart of price changes shows an encouraging pattern of higher highs and higher lows that signifies a sustained trend upward from the bottom. The price index indicates downward momentum came to a screeching halt last yearת with 2012 building off that base.

(click to enlarge)FHFA HOUSE PRICE INDEX HISTORY FOR USA: Seasonally Adjusted Price Change Measured in Purchase-Only Index

FHFA HOUSE PRICE INDEX HISTORY FOR U.S.A.: Seasonally Adjusted Price Change Measured in Purchase-Only Index

(click to enlarge)

Monthly House Price Index for USA: Purchase-Only, Seasonally Adjusted Index, January 1991 - Present

Monthly House Price Index for U.S.A.: Purchase-Only, Seasonally Adjusted Index, January 1991 – Present

(Download data here)

The FHFA also released its new “distress-free” measures for the purchase-only HPI. As the FHFA explains:

“The Highlights article in the 2012Q1 HPI release noted that FHFA was evaluating various options for producing “distress-free” house price indexes. These indexes would remove the effect of short sales and real estate owned ((REO() transactions (bank sales of foreclosed property) from the HPI. The article indicated that, in some situations, distress-free measures might be less noisy than the traditional HPI and might provide more relevant measures of changes in house prices.”

The FHFA uses three databases to construct this new measure of housing prices:

“…To identify short sales and REO sales in this analysis, three different databases are being used. The…mortgage performance data from the Enterprises and FHA comprise the first database. As indicated earlier, these data can be used to directly identify mortgage distress and REO sales where the sellers had Enterprise or FHA loans…

The second database includes information on foreclosure deeds recorded at county recorder offices. FHFA has licensed county deed recordations from DataQuick Information Systems for many counties throughout the country and, because the foreclosure process often culminates with certain types of deeds being recorded, deed information can be used to flag REO sales…

The third database that can be used is a dataset FHFA recently licensed from CoreLogic. The dataset includes specific types of earlier-stage foreclosure filings that have been recorded at county recorder offices. In many jurisdictions across the country-including many counties in the twelve metropolitan areas analyzed here-certain types for formal notifications must be filed at the county recorder offices before the final phases of foreclosure can be completed.”

I like this measure because it can provide more supporting evidence for the sustainability in price changes. For example, if the distress-free HPI is bottoming along with the full sample, then I can assume that distressed homes are having a lower impact on pricing. This of course says nothing about the potential future changes in inventory of distressed homes.

NAR Reports Existing Home Sales in U.S. Improved in July, Prices Keep Rising | Bedford Hills Realtor

A new report released today by the National Association of Realtors (NAR), sales of existing homes rose in July even with constraints of affordable inventory, and the national median price is showing five consecutive months of year-over-year increases. Monthly sales rose in every region but the West, where inventory is very tight.

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, grew 2.3 percent to a seasonally adjusted annual rate of 4.47 million in July from 4.37 million in June, and are 10.4 percent above the 4.05 million-unit pace in July 2011.

Lawrence Yun, NAR chief economist, said housing affordability conditions are very good.  “Mortgage interest rates have been at record lows this year while rents have been rising at faster rates.  Combined, these factors are helping to unleash a pent-up demand,” he said.  “However, the market is constrained by unnecessarily tight lending standards and shrinking inventory supplies, so housing could easily be much stronger without these abnormal frictions.”

NAR is asking the government to expeditiously release the foreclosed properties it owns in inventory-constrained markets.

Given population and demographic demand, Yun said existing-home sales could be in a normal range of 5 to 5.5 million if all conditions were optimal.  “Sales may reach 5 million next year, but it will require more sensible lending standards and stronger job creation to push beyond that,” he said.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to a record low 3.55 percent in July from 3.68 percent in June; the rate was 4.55 percent in July 2011; recordkeeping began in 1971.

“Fewer sales in the lower price ranges are contributing to stronger increases in the median price, but all of the home price measures now are showing positive movement and that is building confidence in the market,” Yun said.  “Furthermore, the higher median price naturally means more housing contribution to economic growth.”

The Big Decision For Home Sellers Who Fail To Sell In This Market | Bedford NY Realtor

If you have recently left the real estate market with a home that failed to sell, it is time for you to make a tough decision.

The wave of foreclosures that has been forming in the sea of distressed properties in Tallahassee will be hitting the market soon, and the competition will be far too fierce for people who are trying to pull equity from their homes. The race is on to beat them to the market.

The one thought you do not need to have is whether or not to wait until next year. A home that failed to sell this year will very likely fetch far less money next year than it would have brought in today’s real estate market, as banks dump inventory with liquidation pricing.

No, the real decision is whether to immediately sell a home that failed to sell previously, or to decide to put the sale off for five or more years.

Marketing A Home That Failed To Sell

A Home That Did Not Sell Is ExpiredMarketing a home that failed to sell during a recent effort in the Tallahassee MLS requires more effort than marketing a home that is new to the market. Why?

Because the home has been rejected by the real estate agents in the market.

You might be wondering “Why is my home not selling,” but real estate professionals have already moved on to the thousands of others homes available. The key to marketing a home that failed to sell is to make it “new” all over again.

This takes a lot of daily work to put the property in front of people who are ready to make a buying decision.

Selling A Home That Failed To Sell

So the race is on. Foreclosures are going to be rolling into the market heavily for several years. Banks must liquidate, thus they will be lowering prices to sell-out the inventory.

These offerings for buyers are in direct competition with anybody putting a home on the market, so the best thing to do is make a choice. Sell your home fast, or plan on waiting out the market for five or more years.

If you own a home that failed to sell during a recent marketing attempt, just drop me a note and we can schedule a time to help you review your specific situation and help you evaluate your options.

Foreclosure mediation angers bankers, pleases housing advocates | Pound Ridge Realtor

The mortgage industry is in an uproar over a proposal that would require banks to participate in professional mediation before foreclosing on St. Louis County homeowners.

Bankers predict big problems if the St. Louis County Council approves the measure, which they say would burden lenders, discourage mortgage lending and drive up interest rates.

“You would have to do something entirely different when servicing properties in St. Louis County. If every municipality tried to impose their own guidelines, imagine the havoc,” said Keith Thornburg, general counsel of the Missouri Bankers Association.“It’s very chilling for home buyers trying to get a loan.”

Baloney, say mediation advocates.

“I don’t see any data anywhere in the country that supports that,” said Karen Tokarz, a law professor who studies mediation at Washington University.

Indeed, such mediation is required with foreclosures in parts of more than 20 states, including Illinois, without reports of problems. And a local mediation program, right across the river in Madison County, has been running without major issue since June of last year, supporters say.

Mediation seeks to offer a last chance for a homeowner to stave off foreclosure, which advocates say benefits both borrower and lender.

Still, it remains unclear how many of St. Louis County’s homeowners facing foreclosure might participate or benefit from the proposal. Under the proposed plan, homeowners facing foreclosure could opt for a mediator – with the bank paying the bill. A professional would try to work out a compromise – most often a payment reduction – to keep the borrower at home.

Banks wouldn’t have to agree to a deal. They could still foreclose. But they’d face a $1,000 fine if they refuse to mediate or if the mediator felt they acted in bad faith.

In Madison County, the program has put a small dent in foreclosures. Linda Jun, who ran the program until last week, said only 10 to 20 percent of borrowers opt for mediation, although it’s offered to everyone in foreclosure.

Of the 291 who signed up, 61 homeowners reached a deal with their creditors so far, according to court figures. Of those, all but two kept their homes. About 100 cases are still working through the system, so the number of averted foreclosures could increase.

Madison County’s experience seems on par with other mediation programs around the country.

The St. Louis County Council passed its own mediation plan by 5-to-2 on a preliminary test vote on Aug. 14; a final vote is expected on Tuesday. But bankers are mobilizing and threatening lawsuits if it wins final approval.

The bill was introduced by Councilwoman Hazel Erby, a Democrat who represents some inner-ring suburbs where foreclosure rates are high. As of July, 805 homes in St. Louis County were in some phase of foreclosure, according to figures from RealtyTrac.

Property insurance a lingering concern | Bedford Corners Realtor

As our region prepares for the possibility of a hurricane impact, it seems so long ago that Hurricane Charley ravaged Charlotte County. But to those who lived through it, I am sure the bad memories are flooding back.

And for all of us, windstorm insurance is once again brought to mind, along with checking batteries in flashlights and stocking up on food that does not require cooking.

It is all part of living here, as illustrated by a reader’s response to my July 14 column, about Florida home builders rallying in Tampa in support of housing by urging preservation of the home mortgage-interest tax deduction and less stringent lending standards:

“While eliminating the mortgage-interest deduction is definitely a bad move, the second blow in the 1-2 punch definitely will be the increased insurance rates if Citizens bows to Gov. Scott’s desire to raise rates.

“Just when housing is showing a good recovery, this stands to derail the process. For any monthly PITI (principal, interest, taxes and insurance) payment, the same payment will be able to contain much less principal/interest to accommodate the much-higher insurance rates. This will result in significantly less purchasing power.

“I do not understand bolstering the cost of insurance if few can afford it. Things are tough enough. This should be a front-burner issue, along with the mortgage-interest deduction.”

Fort Lauderdale considers affordable housing requirements | Chappaqua Realtor

When South Florida’s housing bubble burst and home prices plummeted, they never fell far enough to make rents or single-family homes affordable for the average family.

The median home price in Broward County last year was still $47,611 more than the median household could afford, according to an assessment performed by Florida International University’s Metropolitan Center. The gap was $47,263 in Palm Beach County and $60,243 in Miami-Dade County, the report said.

More than half the renters in Broward County – 107,107 in 2010 – are “extremely cost-burdened,” spending more than half their income on rent, the report showed.

“For people that are lower-income, even with low interest rates and low payments, they still can’t come up with the down payments that are now required,” said Ralph Stone, director of Broward County‘s Housing Finance and Community Development Division. “The foreclosure inventory is not making any kind of dent in the affordable rent housing.”

South Florida efforts to require new residential developments to include affordable or workforce housing haven’t paid off yet.

Palm Beach and Broward counties both passed rules in 2006, and each has received commitments for more than 1,500 affordable houses, condos or apartments. So far, none of the homes has been built in either county, although Palm Beach County has 168 of the reduced-rent apartments on the market or under construction.

Coral Springs, Boynton Beach and Davie, three cities that created their own workforce housing requirements before the stock market collapse in 2008, have each temporarily suspended their programs in the past year. Coral Springs and Boynton Beach have had no projects come through since passing their ordinances in 2006 and 2007, respectively, and Davie officials complained the regulation was stifling development.

Despite those setbacks, Fort Lauderdale is considering making its own affordable housing requirements — six years after former Mayor Jim Naugle said a similar plan reeked of communism.

The city’s Affordable Housing Advisory Committee says the affordability gap will continue to widen as the housing market rebounds.

“I think Fort Lauderdale is a different community than Coral Springs and Davie. It’s the urban center of Broward County. There’s a greater need,” developer and committee member Peter Henn said.

“When people’s kids can’t come back to Fort Lauderdale because they can’t afford to live here, that’s when [people] realize there’s a problem,” Henn said.

The committee last week presented commissioners with a recommendation that the city require residential developments with at least 10 units to have 10 percent of the units set aside for affordable housing, or for the developer to pay $100,000 into a trust fund for each required affordable housing unit.

Industry representative worry about the impact of such regulations.

“Something like this would dramatically discourage construction, especially rental apartments,” developer Jack Loos said.

Developer Dev Motwani said it wouldn’t be hard for developers of luxury homes and condos to write a check, but it would be for less-upscale projects.

“What this will do is end a lot of development in the middle market,” Motwani said.

Committee members said the city could offer increased density, reduced parking or other measures as incentives to offset the cost to developers.