Banks and lenders are easing back on lending, putting more drag on the economy, according to The Wall Street Journal.
The decline in lending follows lenders uncertainty about rising health-care costs, fear of another economic downturn and a brutal winter in the Midwest that delayed new investment, the article says.
The Federal Reserve voiced concerns over whether banks can withstand an eventual increase in interest rates after a long, low-interest-rate environment, according to an article in The Wall Street Journal.
A panel of federal regulators charged with observing market risk met on Thursday and warned that a sudden surge in interest rates could have a destabilizing effect on financial markets, the WSJ said.
The Fed’s chairman, Ben Bernanke, sits on the Financial Stability Oversight Council. Using detailed data that the central bank started collecting after the financial crisis, Fed officials are regularly running big banks’ portfolio holdings through models to gauge their exposure to various changes in interest rates, according to Fed officials.
Author’s note: Early in the year, I traveled to Missoula, Montana, for a winter vacation, but a contact put me in touch with a few people in the real estate industry and much to my surprise I came away with a couple of interesting stories. This column is the first of two.
For a while it seemed that anyone with a lot of money, from Hollywood stars to business moguls, wanted a piece — make that a very large piece of — America, and they came west looking to buy their own ranches. Many, following the lead of flamboyant media entrepreneur, Ted Turner, looked to acquire in Montana.
During the bubble years, investors couldn’t acquire Montana ranches fast enough.
William McDavid, who opened the Missoula office of Hall and Hall in 1996, remembers those years fondly.
“Before the recession, people were standing in line to buy,” McDavid says. “There were bidding wars for multimillion-dollar properties.”
Hall and Hall does a lot of different things as a real estate company, but to this day it is known as the premier brokerage for ranch lands with offices mostly throughout the west.
Arnab Chakraborty, a professor of urban and regional planning at the University of Illinois, has identified another factor in the crisis – neighborhood zoning. According to a study published in the journal Housing Policy Debate, communities that zoned too strictly for the development of large, single-family homes have a higher risk for foreclosure when compared to areas that accommodate a broader spectrum of housing options.
“It intuitively makes sense,” Chakraborty said. “If you push too much housing in the high-price sector, then people who would otherwise buy cheaper housing would either be forced to buy more expensive housing or move elsewhere. It is, ultimately, a question of choice for the homebuyers.”
Chakraborty and two doctoral students, Dustin Allred and Robert H. Boyer, focused on mortgages that had entered the foreclosure process from 2005 through 2008, the period of the housing bubble. The study used data from six metropolitan areas across the United States – Baltimore-Washington, D.C.; Boston; Miami; Minneapolis-St. Paul; Portland, Ore.; and Sacramento, Calif. – chosen to represent a variety of real estate markets and regulatory approaches.
These six metro areas included 129 municipalities and a wide range of zoning types. To determine what proportion of land each community reserved for large homes, the researchers created four broad zoning classifications based on the maximum number of households allowed per acre, ranging from a high of more than eight units per acre down to the least dense category – less than one unit per acre.
The researchers adopted a similarly broad definition of foreclosure risk, counting any mortgage that entered the foreclosure process, regardless of the ultimate outcome. “We did that for a very specific reason, which is that foreclosure regulations vary a great deal state to state,” Chakraborty said. “The fact that the mortgage loan entered foreclosure was an indicator that the homeowner was under some vulnerability.”
It’s always hard to predict how long it will take to find a home to buy. Given the current low-inventory environment, it may take you longer than it would in a balanced market that has enough homes for sale to satisfy the current buyer demand.
Patience needs to be a key component of your home search mentality. Even if a home you like a lot comes along quickly in your search, other buyers may have the same idea. You could end up in competition. If you aren’t the winning bidder, don’t let disappointment immobilize you.
To prepare yourself to buy in this market, plan to look at every new listing that comes close to satisfying your wish list. Accept that you won’t find everything on your wish list. Successful buyers make sacrifices. Just make sure to make intelligent compromises.
For example, don’t get so overwhelmed by the urge to buy now that you overlook that a home you like won’t work for you for long. Buying and selling is expensive; you don’t want to do it often. Make sure that a home you buy will suit your needs for years to come.
There are benefits to seeing a new listing that’s a possibility for you in person rather than looking at it only online or having your agent describe it to you. In a low-inventory market, it’s vitally important to become an expert on local pricing. Follow up with your agent on every listing you liked and find out how much it sold for and how many offers were made.
On the first day of April each year, communities, businesses and news outlets come up with stories intended to fool, amuse, and, sometimes, satirize. Here’s a roundup of the posts Inman News came across in the residential real estate space today.
National Association of Realtors shutters Realtors Property Resource: If you’re a member of the National Association of Realtors, as of today, you no longer have access to, or are paying for, the funds-draining national property database Realtors Property Resource, according to Greg Robertson on his blog at Vendor Alley.
“Our long national nightmare is over,” said NAR CEO Dale Stinton, via a “quote” in a purported NAR press release shown on the blog.
Never fear, Realtors, the post says that NAR has decided to invest in another industry important to agents — cars. “Today’s cars aren’t designed for the average Realtor, so we thought we needed to do something about it,” said NAR President Gary Thomas in a “statement.”
Seattle broker launches homebuying tournament platform for listings: For those home sellers in Seattle who know that a playoff system is the best way to determine a winner (see college football), Seattle brokerage Findwell has launched a new “March Madness”-like bracket system that will help them find the best buyers.
Eight buyers –- six chosen based solely on ranking of initial offer price and two at-large bids — will be pitted against each other in three single-elimination rounds, Findwell explained in a blog post.
The 9.2 percent jump in home sales last year and record refinancings translated into a 21 percent increase for the nation’s title industry and $504 million in profits.
The American Land Title Association (ALTA) reported $11.4 billion in title insurance premiums written during 2012, up nearly 21 percent from 2011, according to the association’s Year-End and Fourth-Quarter Market Share Analysis.
“Positive operating results in 2012 further strengthened the industry’s already strong financial position”
Title insurance premium volume has steadily increased the past two years since 2010 snapped four consecutive years of declining premium volume. The improved market conditions resulted in the land title industry reporting a net operating gain of $504 million in 2012, compared to a $20-million loss in 2011.
“Positive operating results in 2012 further strengthened the industry’s already strong financial position,” said Michelle Korsmo, chief executive officer of ALTA. “The land title industry has come out of the real estate crisis well positioned to meet the needs of homeowners and homebuyers in the future.”
The industry’s total assets exceed $8.8 billion, with cash and invested assets at more than $7.8 million. While statutory surplus increased 33 percent to $3.5 billion, statutory reserves are down $372 million as a result of claims settlements, but remain at over $4.4 billion.
The industry paid $908 million in claims during 2012, compared to $1.02 billion in claims paid during 2011. These payments were made to, or on behalf of, insured homeowners for losses they experienced under policies issued to them or their lender, or to defend those titles from the claims of others
Compared with a year ago, March sales in the Washington metropolitan area increased 9.9 percent, while average prices rose 9.7 percent.
The year-over-year price appreciation in March is a continuation of a 16-month trend of price growth in the metropolitan area. Year-over-year average prices were up 12.7 percent for single-family detached houses, 9.8 percent for townhouses and 6.7 percent for condominiums. The March data can provide an early indication of the strength of the housing market going into the rest of the year.
Sales activity tends to be much brisker in March than in February, and this year is no exception, with the number of sales in the metropolitan area increasing by 33.4 percent between February and March, an increase that is in line with the 10-year average increase. (Home sales data are from MRIS, the region’s multiple listing service.) Sales were up in March over February in all 22 jurisdictions in the Washington metropolitan area.
However, compared with last year, the February-to-March uptick was lower in the District and in Fairfax County and the independent cities of Fairfax, Falls Church and Alexandria. The relatively slower sales in March in these jurisdictions can be at least partially explained by the very low inventories; potential buyers have little to choose from in these locations.
Realtor John Gonnello can attest to the fact that rising demand for low and moderately priced single-family homes and condos, coupled with falling supply, continue to push prices higher in the Coachella Valley.
Of the 22 Sun City Palm Desert homes he had listed featuring everything from vaulted ceilings and great rooms to open floor plans and golf course and mountain views, all but six have sold.
“There was a surge for about three weeks where it was just crazy,” said Gonnello, an agent with Windermere Real Estate. “It’s quieted down a bit, but now we’re starting to see activity build again.”
Gonnello’s experience is in line with two new real estate reports that show the valley’s median price rose by double-digits last month, the ninth straight month with such robust increases.
The valley’s median home price — half sold for more, half for less — jumped 17.9 percent year-over-year to $247,500 in March, following a 15.9 percent increase to $226,000 in February, San Diego-based real estate information provider DataQuick reported.
Tom and Sarah Kotowski got all the turnout they could have hoped for at their open house.
Close to 100 people showed up last Sunday to take a look at their three-bedroom Cape listed for $299,900 on a quiet East Weymouth cul-de-sac. Four made offers. By Tuesday, the couple had an agreement.
“For a seller, it’s excellent right now,” Sarah Kotowski said. “Inventory is flying.”
But as the couple looks for a home closer to Tom’s workplace west of Boston, they face the same dynamic.
“I can’t tell you how many open houses we go to and then the next day they’re gone (off the market),” Sarah said.
The strong seller’s market that has emerged this spring is a double-edged sword for families like the Kotowskis, whose house was on the market for less than a week.
Home prices are rising across Massachusetts this spring in a reflection of demand that is outstripping supply. There are fewer than 20,000 single-family homes on the market, down 30 percent from