Fixed-Rate Mortgages Remain Strong, Affordable
RISMEDIA, Sept. 27, 2007-Traditional home loans, such as the 30-year fixed-rate mortgage, have survived the so-called “mortgage meltdown” and home buyers are seeking them out in large numbers, according to Dr. Susan M. Wachter, Professor of Real Estate and Finance at the University of Pennsylvania’s Wharton School.
With support by Genworth Financial, Dr. Wachter released her third quarter 2007 U.S.
Mortgage Payment Index, reminding buyers that safe home financing options still exist despite widespread fluctuation in the mortgage market.
“It’s encouraging to see that consumers have not been scared off by the ‘credit crunch’ and ‘mortgage meltdown’ talk, and are returning to secure, tried-and-true home financing,” Wachter said. “This trend emerged in the first half of 2007, and I expect it to continue as home buyers become more informed about their mortgage options and lenders reign in risky products.”
Dr. Wachter’s Index shows that both borrowers and lenders steered clear of risk and opted for safer mortgages in the first half of 2007. Adjustable-rate mortgage applications dropped 46.9% from September 2006 to September 2007, while applications for fixed-rate loans climbed 30.2% in the same period. Borrowers who put down less than 20% on a home are flocking to insured, single mortgages rather than risky piggyback loans. The number of borrowers using private mortgage insurance jumped 36% in the second quarter, and is up 69% since the outset of 2006.
“There is particularly good news for first-time and low down payment home buyers in the second half of 2007,” said Wachter. “Long-term, fixed-rate mortgages are still widely available and affordable, even in today’s market. My advice to these borrowers is to stick with a traditional fixed-rate loan with mortgage insurance. That way, they will be sure to keep their payments stable and affordable over time.”
Published quarterly by Dr. Wachter, and in association with Genworth Financial Inc., the U.S. Mortgage Payment Index evaluates which mortgage products offer borrowers the best value, comparing payments for various mortgage options. Wachter’s third quarter analysis finds that monthly payments on long-term, fixed-rate loans with mortgage insurance remain steady over five years — with one product dropping by 9.3%. Since combination, or piggyback, loans are subject to rate resets, payments can jump as much as 148% in five years.
“By locking in an affordable rate now with a fixed-rate mortgage, new buyers and refinancing borrowers can avoid the payment shock that is imminent for an estimated 2 million American homeowners, as their adjustable-rate loans reset in the coming months,” Wachter said.
The following mortgages are featured in the new Index for September. The first amount reflects the payment in month one, the second amount reflects the payment in month 61:
– 30-year Fixed with monthly mortgage insurance: $1,400 / $1,270 (drops
9.3%)
– 30-year Fixed with Single Financed Premium mortgage insurance: $1,306 /
$1,306 (no change)
– Combo: 30-year Fixed and HELOC: $1,321 / $1,428 (rises 8.1%)
– Combo: 30-year Fixed and Closed-End Second: $1,327 / $1,327 (no change)
– Combo: 10/1 Interest-Only ARM and HELOC: $1,196 / $1,303 (rises 8.9%)
– Combo: Pay Option ARM and HELOC: $714 / $1,771 (rises 148%)
For more information, visit http://www.genworth.com/mortgageinfo
Thursday, September 27, 2007
Tuesday, September 18, 2007
Sensationalism and the Housing Bubble
by Rich Levin
This makes me mad every time I see it. Either the National Association of Business Economists is full of people with no real business experience or fools.
This is a headline from a major online Real Estate publication,
"Economists See Credit Problems as Bigger Threat than Terrorism."
I know they were all alive just seven years ago when terrorism cost the lives of three thousand American citizens. That headline goes beyond sensationalism. It is rude and insensitive.
The article goes on to say that one in three members of the NABE, "...Said the housing boom can be described as a 'serious National bubble." Then later in the article three in four said they would "buy a house today if they intended to use it as their primary residence."
Would someone please tell these academic fools that housing is local in nature? While many major markets suffered and are suffering from the over-zealousness of investors followed by the over-zealousness of foolish sub prime lenders; there are many markets that are healthy and many more that are suffering a softening but nothing close to a collapse.
These gloom and doom headlines supported by a minority of questionable economist opinions feed the problem they are describing. While the facts support the opposite conclusion. Even the economists own research supports the opposite conclusion.
In the same article, "Asked to look five years into the future, 42 percent expected US home prices to remain flat, 41 percent said prices would rise." How did 34 percent of the same group call this a bubble that is fed by a threat bigger than terrorism.
Let's give credit where it is due. "59 percent still say there is no national housing bubble, only significant local bubbles. Another 8 percent said there's no bubble at all and that the market is functioning correctly."
Hooray for those groups. They got it right. There are some local bubbles where there were hundreds and thousands of development parcels and homes developed and built in anticipation of future sales and the sales that were feeding that demand was investor speculation (Boise and Sarasota to name two).
In late 2005 and through 2006 the investors realized that the boom was being fed by their own demand so withdrew. This left a tremendous inventory in some cities or areas of cities.
Unfortunately, in 2006, the secondary market lenders realizing that they had allowed a foolish combination of underwriting standards for the previous five years or so immediately followed this. They were buying loans that allowed buyers to have both, little or no down payment and marginal credit. How this happened (and who should be prosecuted for it) is a mystery that will likely to remain such.
The result was that in some communities around the country, particularly where there were high priced homes and with less sophisticated buyers; many of these mortgages were used to purchase homes. That created additional pockets of excess inventory which stalled prices in those areas.
Now in the fall of 2007 the majority of lenders loaning jumbo loans, over $417,000 have stopped funding these high-end loans for some period. This will further increase inventory and dampen prices in some areas.
Notice the language, dampen prices in some areas. Most of the country is experiencing a normal buyer's market that normally follows a long healthy seller's market.
The latter group of economists put it perfectly. The market is functioning correctly. In 1986 after two to three years of a soft buyer's market not unlike what we are experiencing now (Although it was driven by different causes.) there was a long strong period of a healthy seller's market with steady appreciation.
There was a momentary softer buyer's market around the Gulf War in 1991 (although not caused by it) followed by over a decade of a healthy buyers market that lasted until 2006. If we learn from history strong seller's markets last longer than softer buyer's markets.
So again, the economists got this right. The same article said 58% of the economists predicted a 'meaningful' recovery in U.S. housing markets before the second half of 2008 or in the second half of 2008. The majority of the other 42% predicted the recovery in 2009.
This is completely consistent with history. This two or three years of soft buyer's market with slightly flattening prices will likely be followed by five or more years of a healthy seller's market with equally healthy price appreciation.
REALTORS® all learned in their first Real Estate class that the market is driven by supply and demand. As long as there is an increasing population of people with reasonable or better incomes, the demand will keep the market healthy.
Add to that the fact that the Federal government repeatedly states that they realize that the Real Estate market is critical to the health of the economy and they will do whatever is necessary to keep mortgage money available.
It all adds up to a principle residence continuing to be the safest and smartest investment for a person living in this fabulous nation. (Just be careful of areas that have experienced rapid appreciation for more than twenty-four months. There could be a windfall or just a fall looming.)
If you are associated with Real Estate, please separate the sensationalism from the truth. If you are in most communities in this country, everything is pretty normal. Prices are appreciating a little slower but still appreciating. Houses are on the market longer. Buyers are fussier. Yes, it is tougher to sell Real Estate. But you still have one of the best jobs in the world with more personal freedom and opportunity for success than any other business person or professional on earth.
If you are in one of those tougher markets, my heart is with you. You do have an uphill battle for another twelve to twenty four months. You have my strongest wish that you can survive and succeed through this. If not, come back to the business in a couple of years. I feel comfortable promising you that the good times will roll again in the not too distant future.
I love this business for what it provides to our society, the people in it, and the strong bright professionals that make me proud to be a part of it.
by Rich Levin
This makes me mad every time I see it. Either the National Association of Business Economists is full of people with no real business experience or fools.
This is a headline from a major online Real Estate publication,
"Economists See Credit Problems as Bigger Threat than Terrorism."
I know they were all alive just seven years ago when terrorism cost the lives of three thousand American citizens. That headline goes beyond sensationalism. It is rude and insensitive.
The article goes on to say that one in three members of the NABE, "...Said the housing boom can be described as a 'serious National bubble." Then later in the article three in four said they would "buy a house today if they intended to use it as their primary residence."
Would someone please tell these academic fools that housing is local in nature? While many major markets suffered and are suffering from the over-zealousness of investors followed by the over-zealousness of foolish sub prime lenders; there are many markets that are healthy and many more that are suffering a softening but nothing close to a collapse.
These gloom and doom headlines supported by a minority of questionable economist opinions feed the problem they are describing. While the facts support the opposite conclusion. Even the economists own research supports the opposite conclusion.
In the same article, "Asked to look five years into the future, 42 percent expected US home prices to remain flat, 41 percent said prices would rise." How did 34 percent of the same group call this a bubble that is fed by a threat bigger than terrorism.
Let's give credit where it is due. "59 percent still say there is no national housing bubble, only significant local bubbles. Another 8 percent said there's no bubble at all and that the market is functioning correctly."
Hooray for those groups. They got it right. There are some local bubbles where there were hundreds and thousands of development parcels and homes developed and built in anticipation of future sales and the sales that were feeding that demand was investor speculation (Boise and Sarasota to name two).
In late 2005 and through 2006 the investors realized that the boom was being fed by their own demand so withdrew. This left a tremendous inventory in some cities or areas of cities.
Unfortunately, in 2006, the secondary market lenders realizing that they had allowed a foolish combination of underwriting standards for the previous five years or so immediately followed this. They were buying loans that allowed buyers to have both, little or no down payment and marginal credit. How this happened (and who should be prosecuted for it) is a mystery that will likely to remain such.
The result was that in some communities around the country, particularly where there were high priced homes and with less sophisticated buyers; many of these mortgages were used to purchase homes. That created additional pockets of excess inventory which stalled prices in those areas.
Now in the fall of 2007 the majority of lenders loaning jumbo loans, over $417,000 have stopped funding these high-end loans for some period. This will further increase inventory and dampen prices in some areas.
Notice the language, dampen prices in some areas. Most of the country is experiencing a normal buyer's market that normally follows a long healthy seller's market.
The latter group of economists put it perfectly. The market is functioning correctly. In 1986 after two to three years of a soft buyer's market not unlike what we are experiencing now (Although it was driven by different causes.) there was a long strong period of a healthy seller's market with steady appreciation.
There was a momentary softer buyer's market around the Gulf War in 1991 (although not caused by it) followed by over a decade of a healthy buyers market that lasted until 2006. If we learn from history strong seller's markets last longer than softer buyer's markets.
So again, the economists got this right. The same article said 58% of the economists predicted a 'meaningful' recovery in U.S. housing markets before the second half of 2008 or in the second half of 2008. The majority of the other 42% predicted the recovery in 2009.
This is completely consistent with history. This two or three years of soft buyer's market with slightly flattening prices will likely be followed by five or more years of a healthy seller's market with equally healthy price appreciation.
REALTORS® all learned in their first Real Estate class that the market is driven by supply and demand. As long as there is an increasing population of people with reasonable or better incomes, the demand will keep the market healthy.
Add to that the fact that the Federal government repeatedly states that they realize that the Real Estate market is critical to the health of the economy and they will do whatever is necessary to keep mortgage money available.
It all adds up to a principle residence continuing to be the safest and smartest investment for a person living in this fabulous nation. (Just be careful of areas that have experienced rapid appreciation for more than twenty-four months. There could be a windfall or just a fall looming.)
If you are associated with Real Estate, please separate the sensationalism from the truth. If you are in most communities in this country, everything is pretty normal. Prices are appreciating a little slower but still appreciating. Houses are on the market longer. Buyers are fussier. Yes, it is tougher to sell Real Estate. But you still have one of the best jobs in the world with more personal freedom and opportunity for success than any other business person or professional on earth.
If you are in one of those tougher markets, my heart is with you. You do have an uphill battle for another twelve to twenty four months. You have my strongest wish that you can survive and succeed through this. If not, come back to the business in a couple of years. I feel comfortable promising you that the good times will roll again in the not too distant future.
I love this business for what it provides to our society, the people in it, and the strong bright professionals that make me proud to be a part of it.
Monday, September 17, 2007
The Hamptons' Split Housing Personality
By DAN DORFMANSeptember 7, 2007
Call it a $5 million housing blunder in the Hamptons, New York's premier summer playground for the rich and famous.
Last month, when the stock market was repeatedly bombed with triple-digit losses in the Dow, a city hedge fund trader bemoaned the fact he had committed himself to the purchase of an $18.7 million home in the Hamptons. The trader was so worried, in fact, that in early August, when the market continued to languish, he walked away from the transaction and lost the $150,000 good-faith deposit he had put down.
It was a dumb decision. Despite the national housing slump, that same home just sold for nearly $24 million.
But while large Hampton estates such as this continue to see prices rise, for smaller homes, for sale signs are rife.
"I've never seen so many Hamptons homes on the block," says Marcia Wolf, who, along with her husband, Norman, president of the women's sportswear producer Carole Wrenn Corp., have owned a house in Westhampton since 1979. "We see an awful lot of homes for sale and they're sitting for longer and longer periods."
By DAN DORFMANSeptember 7, 2007
Call it a $5 million housing blunder in the Hamptons, New York's premier summer playground for the rich and famous.
Last month, when the stock market was repeatedly bombed with triple-digit losses in the Dow, a city hedge fund trader bemoaned the fact he had committed himself to the purchase of an $18.7 million home in the Hamptons. The trader was so worried, in fact, that in early August, when the market continued to languish, he walked away from the transaction and lost the $150,000 good-faith deposit he had put down.
It was a dumb decision. Despite the national housing slump, that same home just sold for nearly $24 million.
But while large Hampton estates such as this continue to see prices rise, for smaller homes, for sale signs are rife.
"I've never seen so many Hamptons homes on the block," says Marcia Wolf, who, along with her husband, Norman, president of the women's sportswear producer Carole Wrenn Corp., have owned a house in Westhampton since 1979. "We see an awful lot of homes for sale and they're sitting for longer and longer periods."
Most of these homes, Mr. Wolf says, are in the $1 million to $3 million range.
Why the disparity? "Because you now have a split real estate personality in the Hamptons," Denise Lefrak Calicchio, tells me. "The high end of the market [$15 million and up] is off the charts, while you can't give away homes in the $2 million range."
It's a buyer's market in the low and medium ranges and a seller's market at the high end, she says. Mrs. Calicchio, daughter of the late real estate mogul Samuel Lefrak and the author of "High Rise Low Down," a colorful look at New York City residences of the rich and powerful, cites one conspicuous example: The owner of a luxury beach home in Southampton put the property on the market for $70 million. Within a week, the seller received a $65 million offer but refused to budge. It may be, Mrs. Calicchio speculates, that if the seller is patient, she could get more than she's asking for.
One of the drivers of all the high-end real estate sales is buyers from abroad. In fact, Mrs. Calicchio sees the Hamptons increasingly evolving into an international summer paradise, as foreign buyers take advantage of the rising value in the euro against the weak dollar.
There are a lot more global buyers, a leading Hamptons real estate appraiser, John Watson, tells me. He points in particular to potential buyers from such countries as Spain, Britain, Ireland, France, and Russia.
Not everyone thinks the low end of the Hamptons real estate market is slumbering. While August and September are traditionally a sleepy period for Hamptons home sales, this year is different, Mr. Watson says. He currently has 102 pending contracts, ranging from small condos at $250,000 to homes at around $18 million.
Why the disparity? "Because you now have a split real estate personality in the Hamptons," Denise Lefrak Calicchio, tells me. "The high end of the market [$15 million and up] is off the charts, while you can't give away homes in the $2 million range."
It's a buyer's market in the low and medium ranges and a seller's market at the high end, she says. Mrs. Calicchio, daughter of the late real estate mogul Samuel Lefrak and the author of "High Rise Low Down," a colorful look at New York City residences of the rich and powerful, cites one conspicuous example: The owner of a luxury beach home in Southampton put the property on the market for $70 million. Within a week, the seller received a $65 million offer but refused to budge. It may be, Mrs. Calicchio speculates, that if the seller is patient, she could get more than she's asking for.
One of the drivers of all the high-end real estate sales is buyers from abroad. In fact, Mrs. Calicchio sees the Hamptons increasingly evolving into an international summer paradise, as foreign buyers take advantage of the rising value in the euro against the weak dollar.
There are a lot more global buyers, a leading Hamptons real estate appraiser, John Watson, tells me. He points in particular to potential buyers from such countries as Spain, Britain, Ireland, France, and Russia.
Not everyone thinks the low end of the Hamptons real estate market is slumbering. While August and September are traditionally a sleepy period for Hamptons home sales, this year is different, Mr. Watson says. He currently has 102 pending contracts, ranging from small condos at $250,000 to homes at around $18 million.
Business is not as frenetic as it was a few years ago, but it's healthy and moving along, he says. He rates inventories — which he notes were never that big to begin with — about on par with a year ago. As for prices, he says the median value is up a bit from last year.
Mr. Watson credits the ongoing solid housing Hamptons demand to low mortgage rates and the fact that people are still making a lot of money. He notes, too, that while this year's Wall Street bonuses, normally a major catalyst for sales, may be down from last year, they should still be substantial. In addition, he says, the Hamptons, like fine art or a yacht, remains a strong status symbol.
One of the Hamptons' most successful real estate brokers is Sotheby's Harold Grant, who over the past 12 months has sold homes valued at about $200 million. It makes no sense he says, to equate a credit crunch in middle America with the Hamptons high-end luxury market, where there is such a lack of supply.
Likewise, he points out, the middle market has graduated from the $2 million to $4 million range to the $4 million to $8 million range. The low end, he notes, now runs from $500,000 to $2 million. The Hamptons sales story, as he sees it, remains a strong story because demand continues to outstrip supply.
The Corcoran Group's leading Hamptons broker, senior vice president Susan Breitenbach, characterizes the high end (above $10 million) as "crazy busy." If you're in the market for such a home and love to paint, she thinks she has just the property for you: Christie Brinkley's $30 million Bridgehampton estate, 20 acres all told, replete with the usual swimming pool, tennis court, and guest house, plus a large artist's studio.
Too steep? Ms. Breitenbach will be happy to show you one of her cheapest offerings, a 6-acre parcel of land in Water Mill for $2.1 million. If you want to live there, figure another $1.6 million for, say, a 4,000-square-foot house.
Mr. Watson credits the ongoing solid housing Hamptons demand to low mortgage rates and the fact that people are still making a lot of money. He notes, too, that while this year's Wall Street bonuses, normally a major catalyst for sales, may be down from last year, they should still be substantial. In addition, he says, the Hamptons, like fine art or a yacht, remains a strong status symbol.
One of the Hamptons' most successful real estate brokers is Sotheby's Harold Grant, who over the past 12 months has sold homes valued at about $200 million. It makes no sense he says, to equate a credit crunch in middle America with the Hamptons high-end luxury market, where there is such a lack of supply.
Likewise, he points out, the middle market has graduated from the $2 million to $4 million range to the $4 million to $8 million range. The low end, he notes, now runs from $500,000 to $2 million. The Hamptons sales story, as he sees it, remains a strong story because demand continues to outstrip supply.
The Corcoran Group's leading Hamptons broker, senior vice president Susan Breitenbach, characterizes the high end (above $10 million) as "crazy busy." If you're in the market for such a home and love to paint, she thinks she has just the property for you: Christie Brinkley's $30 million Bridgehampton estate, 20 acres all told, replete with the usual swimming pool, tennis court, and guest house, plus a large artist's studio.
Too steep? Ms. Breitenbach will be happy to show you one of her cheapest offerings, a 6-acre parcel of land in Water Mill for $2.1 million. If you want to live there, figure another $1.6 million for, say, a 4,000-square-foot house.
Thursday, September 13, 2007
Mortgage rates drop swiftly this week
Borrowers facing resetting rates hope lull will offer refi opportunity
Thursday, September 13, 2007Inman News
Long-term mortgage rates dropped considerably this week following the release of August's dismal employment report, according to surveys conducted by Freddie Mac and Bankrate.com.
In Freddie Mac's survey, the rate on 30-year fixed-rate mortgages fell to an average 6.31 percent from 6.46 percent last week, and the 15-year fixed rate declined to 5.97 percent from 6.15 percent. Points, which are fees lenders charge for loan processing expressed as a percent of the loan, averaged 0.5 and 0.4, respectively, on the 30- and 15-year loans.
Adjustable-rate mortgages (ARMs) also saw a drop in rates, as the five-year Treasury-indexed hybrid ARM was down at an average 6.17 percent from 6.32 percent a week ago and the rate on one-year Treasury-indexed ARMs sank to 5.66 percent from 5.74 percent. Points on the five-year and one-year loans averaged 0.6 and 0.8, respectively.
"Interest rates on prime conforming loans fell across the board in the past week, with rates on 30-year fixed mortgages averaging 0.15 percentage points below the previous week's level," Frank Nothaft, Freddie Mac vice president and chief economist, said in a statement. "The drop in mortgage rates may give some relief to borrowers who are looking to refinance or purchase a home."
In Bankrate.com's survey, fixed mortgage rates plunged this week to four-month lows, with the average conforming 30-year fixed mortgage rate falling to 6.28 percent. Discount and origination points on these loans averaged 0.43.
The average 15-year fixed-rate mortgage popular for refinancing dropped by the same amount to 5.96 percent, according to Bankrate.com. Adjustable mortgage rates were lower as well, with the average one-year ARM inching lower to 6.2 percent and the average 5/1 ARM retreating to 6.3 percent.
Mortgage rates plunged following last Friday's lackluster employment report, Bankrate.com reported. Poor job growth figures raised concerns about economic health and helped push mortgage rates to the lowest point since May 2. Nervousness about the economy often drives investors toward the safe haven of Treasury securities, pushing both bond yields and mortgage rates lower. Rates for jumbo mortgages -- those above $417,000 -- declined by a similar amount, settling at 7.2 percent. While the spread between jumbo and conforming mortgage rates remains uncharacteristically wide, this spread has stabilized in the past two weeks.
Amid the turbulence in mortgage markets, fixed mortgage rates are still an attractive option for borrowers. Just two months ago, the average 30-year fixed mortgage rate was 6.82 percent, meaning that a $200,000 loan would have carried a monthly payment of $1,307. Now that the average conforming 30-year fixed rate is 6.28 percent, the same $200,000 loan carries a monthly payment of $1,235.
The following is a sampling of Bankrate.com's average 30-year-mortgage interest rates this week in some U.S. metropolitan areas:
New York - 6.31 percent with 0.28 point
Los Angeles - 6.41 percent with 0.66 point
Chicago - 6.31 percent with 0.13 point
San Francisco - 6.25 percent with 0.7 point
Philadelphia - 6.31 percent with 0.36 point
Detroit - 6.28 percent with 0.09 point
Boston - 6.38 percent with 0.22 point
Houston - 6.17 percent with 0.7 point
Dallas - 6.18 percent with 0.54 point
Washington, D.C. - 6.25 percent with 0.62 point
Borrowers facing resetting rates hope lull will offer refi opportunity
Thursday, September 13, 2007Inman News
Long-term mortgage rates dropped considerably this week following the release of August's dismal employment report, according to surveys conducted by Freddie Mac and Bankrate.com.
In Freddie Mac's survey, the rate on 30-year fixed-rate mortgages fell to an average 6.31 percent from 6.46 percent last week, and the 15-year fixed rate declined to 5.97 percent from 6.15 percent. Points, which are fees lenders charge for loan processing expressed as a percent of the loan, averaged 0.5 and 0.4, respectively, on the 30- and 15-year loans.
Adjustable-rate mortgages (ARMs) also saw a drop in rates, as the five-year Treasury-indexed hybrid ARM was down at an average 6.17 percent from 6.32 percent a week ago and the rate on one-year Treasury-indexed ARMs sank to 5.66 percent from 5.74 percent. Points on the five-year and one-year loans averaged 0.6 and 0.8, respectively.
"Interest rates on prime conforming loans fell across the board in the past week, with rates on 30-year fixed mortgages averaging 0.15 percentage points below the previous week's level," Frank Nothaft, Freddie Mac vice president and chief economist, said in a statement. "The drop in mortgage rates may give some relief to borrowers who are looking to refinance or purchase a home."
In Bankrate.com's survey, fixed mortgage rates plunged this week to four-month lows, with the average conforming 30-year fixed mortgage rate falling to 6.28 percent. Discount and origination points on these loans averaged 0.43.
The average 15-year fixed-rate mortgage popular for refinancing dropped by the same amount to 5.96 percent, according to Bankrate.com. Adjustable mortgage rates were lower as well, with the average one-year ARM inching lower to 6.2 percent and the average 5/1 ARM retreating to 6.3 percent.
Mortgage rates plunged following last Friday's lackluster employment report, Bankrate.com reported. Poor job growth figures raised concerns about economic health and helped push mortgage rates to the lowest point since May 2. Nervousness about the economy often drives investors toward the safe haven of Treasury securities, pushing both bond yields and mortgage rates lower. Rates for jumbo mortgages -- those above $417,000 -- declined by a similar amount, settling at 7.2 percent. While the spread between jumbo and conforming mortgage rates remains uncharacteristically wide, this spread has stabilized in the past two weeks.
Amid the turbulence in mortgage markets, fixed mortgage rates are still an attractive option for borrowers. Just two months ago, the average 30-year fixed mortgage rate was 6.82 percent, meaning that a $200,000 loan would have carried a monthly payment of $1,307. Now that the average conforming 30-year fixed rate is 6.28 percent, the same $200,000 loan carries a monthly payment of $1,235.
The following is a sampling of Bankrate.com's average 30-year-mortgage interest rates this week in some U.S. metropolitan areas:
New York - 6.31 percent with 0.28 point
Los Angeles - 6.41 percent with 0.66 point
Chicago - 6.31 percent with 0.13 point
San Francisco - 6.25 percent with 0.7 point
Philadelphia - 6.31 percent with 0.36 point
Detroit - 6.28 percent with 0.09 point
Boston - 6.38 percent with 0.22 point
Houston - 6.17 percent with 0.7 point
Dallas - 6.18 percent with 0.54 point
Washington, D.C. - 6.25 percent with 0.62 point
Real Estate Articles from Inman News
Countrywide lines up $12 billion in financing
August loan production falls 17% year-over-year
Thursday, September 13, 2007Inman News
Countrywide Financial Corp. said Thursday it had secured $12 billion in additional financing, even as loan fundings in August fell by 17 percent from a year ago and the company moves forward with plans to lay off up to 12,000 workers.
Countrywide, which received a $2 billion cash infusion from Bank of America in August after drawing down an $11.5 billion line of credit from 40 banks, said that since then it has arranged for $12 billion in additional secured borrowing capacity "through new or existing credit facilities."
The Calabasas, Calif.-based lender's stock was up nearly 8 percent shortly after noon on the news.
But the announcement came as Countrywide reported August loan fundings fell 17 percent from a year ago, to $34.3 billion, down from a recent peak of $45.3 billion in June. The 192,211 residential mortgage loans funded in August represented a 13 percent decline from July but surpassed a recent low hit in February, when 177,806 loans were funded.
In a Sept. 7 announcement of plans to lay off up to 20 percent of the company's workers, Countrywide said it expected loan volume to decline by 25 percent in 2008.
Average daily mortgage loan applications in August were $2.3 billion, down 12 percent from July and August 2006. The mortgage loan pipeline was $52 billion at the end of August, compared with $64 billion at the same time last year.
Countrywide said it grew its mortgage loan servicing portfolio by 18 percent in the last 12 months, to $1.5 trillion.
The latest numbers show foreclosures pending as a percentage of unpaid principal balance continued to climb, hitting 1.2 percent at the end of August. That's a 16-basis-point increase from July and more than double the 0.48 percent pending foreclosure rate of a year ago. Delinquencies as a percentage of unpaid principal balance were essentially flat at 4.9 percent compared to the previous month, but up from 3.65 percent a year ago.
As secondary market investors continue to shy away from securities backed by most nonprime mortgage loans, Countrywide said it was accelerating plans to migrate the funding of its mortgage originations to Countrywide Bank. The company said it has tightened product and underwriting guidelines so that all of the loans it originates are eligible for Fannie Mae, Freddie Mac or Ginnie Mae securitization programs, or meet Countrywide Bank's investment criteria.
At $8.69 billion, August fundings of adjustable-rate mortgages were down from $11 billion in July and $19.3 billion a year ago. Subprime loan fundings totaled $1.27 billion, compared with $1.8 billion in July and $3.7 billion a year ago. At $2.2 billion, government fundings were down slightly from June and July, but nearly twice as great as the $1.61 billion tallied in August 2006.
Countrywide's announcement of a possible 20 percent reduction in its workforce was preceded by smaller cuts, which showed up in the company's August numbers.
Countrywide employed 33,658 workers in loan originations at the end of August, down 688 from a peak of 34,326 in July but up from 32,310 a year ago. Employment in loan servicing increased slightly, to 8,182, up 123 from the previous month, while the 1,984 workers employed in loan closing services represented a reduction of 45 positions from July. The company's total workforce headcount stood at 60,867, down 719 from the previous month but up from 55,909 a year ago.
Countrywide lines up $12 billion in financing
August loan production falls 17% year-over-year
Thursday, September 13, 2007Inman News
Countrywide Financial Corp. said Thursday it had secured $12 billion in additional financing, even as loan fundings in August fell by 17 percent from a year ago and the company moves forward with plans to lay off up to 12,000 workers.
Countrywide, which received a $2 billion cash infusion from Bank of America in August after drawing down an $11.5 billion line of credit from 40 banks, said that since then it has arranged for $12 billion in additional secured borrowing capacity "through new or existing credit facilities."
The Calabasas, Calif.-based lender's stock was up nearly 8 percent shortly after noon on the news.
But the announcement came as Countrywide reported August loan fundings fell 17 percent from a year ago, to $34.3 billion, down from a recent peak of $45.3 billion in June. The 192,211 residential mortgage loans funded in August represented a 13 percent decline from July but surpassed a recent low hit in February, when 177,806 loans were funded.
In a Sept. 7 announcement of plans to lay off up to 20 percent of the company's workers, Countrywide said it expected loan volume to decline by 25 percent in 2008.
Average daily mortgage loan applications in August were $2.3 billion, down 12 percent from July and August 2006. The mortgage loan pipeline was $52 billion at the end of August, compared with $64 billion at the same time last year.
Countrywide said it grew its mortgage loan servicing portfolio by 18 percent in the last 12 months, to $1.5 trillion.
The latest numbers show foreclosures pending as a percentage of unpaid principal balance continued to climb, hitting 1.2 percent at the end of August. That's a 16-basis-point increase from July and more than double the 0.48 percent pending foreclosure rate of a year ago. Delinquencies as a percentage of unpaid principal balance were essentially flat at 4.9 percent compared to the previous month, but up from 3.65 percent a year ago.
As secondary market investors continue to shy away from securities backed by most nonprime mortgage loans, Countrywide said it was accelerating plans to migrate the funding of its mortgage originations to Countrywide Bank. The company said it has tightened product and underwriting guidelines so that all of the loans it originates are eligible for Fannie Mae, Freddie Mac or Ginnie Mae securitization programs, or meet Countrywide Bank's investment criteria.
At $8.69 billion, August fundings of adjustable-rate mortgages were down from $11 billion in July and $19.3 billion a year ago. Subprime loan fundings totaled $1.27 billion, compared with $1.8 billion in July and $3.7 billion a year ago. At $2.2 billion, government fundings were down slightly from June and July, but nearly twice as great as the $1.61 billion tallied in August 2006.
Countrywide's announcement of a possible 20 percent reduction in its workforce was preceded by smaller cuts, which showed up in the company's August numbers.
Countrywide employed 33,658 workers in loan originations at the end of August, down 688 from a peak of 34,326 in July but up from 32,310 a year ago. Employment in loan servicing increased slightly, to 8,182, up 123 from the previous month, while the 1,984 workers employed in loan closing services represented a reduction of 45 positions from July. The company's total workforce headcount stood at 60,867, down 719 from the previous month but up from 55,909 a year ago.
Wednesday, September 12, 2007
A villa fit for cosmetics queen, Barney's creatorBy Susan NovaSpecial Correspondent Greenwich Time
Across from the pond in Greenwich's Bruce Park is a 1909 Mediterranean villa that was once the country home of cosmetics empress Helena Rubinstein and later the creator of the purple dinosaur Barney.The land belonged to the founding Mead family until 1906, when Whitman and Charles Mead sold the property to Laurance Timmons.
Up a circular, Belgian block-lined driveway on a soft slope is the more than 4,800-square-foot house in Mediterranean style, with a creamy stucco exterior and a red tile roof. Columns on fieldstone piers frame the front portico at the top of a flight of slate-and-brick steps.Renovated in 2003, the house has four bedrooms, four baths, two powder rooms and four fireplaces, according to Marjorie Marianacci and Marge Haskins of Weichert Realtors' Greenwich office, who have listed the house for $5 million.The living room has a floor-to-ceiling oak library niche, a fireplace and a window seat and leads to a solarium with arched windows and views of the pond and park. The formal dining room has a large window seat and, nearby, French doors open to an elevated brick-and-slate patio and the rear garden with lacecap hydrangeas and boxwood hedges.The revamped kitchen has green granite on the counters, a large center island with cooktop, double wall ovens and a built-in desk. A window seat embraces a cosy eating area, and a fireplace crowns a sitting area. Off the kitchen is a family room or den.Halfway up the front stairs is a large landing with a window that overlooks the pond and a decorative balcony fronted with black wrought-iron swirls.The master bedroom boasts a tray ceiling, a large marble-and-tile bath and five closets, one a large walk-in. Interior French doors access an alcove that could be a nursery or office. The master bath is crafted of white marble and tile.There are three other bedrooms, with accompanying baths. One could be a library, with its walls lined with bookshelves, a fireplace and William Morris wallpaper and drapes.(William Morris, a poet, fantasy novelist, socialist and one of the founders of the Arts and Crafts movement in England, was perhaps best known for his patterned fabrics and wallpapers in deep colors.)In addition to the main house, s a 1,340-square-foot, two-story cottage is attached to a two-car garage. Inside are a family room, living room with dining area, kitchen, two bedrooms and a bath with shower.Born Chaja Rubinstein on Christmas Day in 1870 in Krakow - now in Poland, then part of the Austro-Hungarian Empire - Helena Rubenstein was the eldest of eight children and destined to become one of the world's richest women.In 1902, after briefly studying medicine in Switzerland, she moved to Australia, changed her first name and opened a shop in Melbourne to sell her skin-care concoctions of sheep oil disguised with the scents of lavender, pine bark and water lilies.Six years later, her sister, Ceska, took over the shop. With $100,000 in profit, she moved to London to add to her empire.Rubinstein first married an American journalist, Edward William Titus, who published "Lady Chatterley's Lover" by D.H. Lawrence, a sensation for its explicit sex scenes.Moving to Paris with Titus, Rubenstein opened a beauty care salon for which her husband wrote the publicity. After World War I broke out, they moved to Greenwich in 1915 and soon another salon was created in New York City.Two years later, she began to manufacture and distribute her own cosmetic products. In 1928, she sold the company for $7.3 million to Lehman Brothers, but after the Great Depression bought back the stock for $1.5 million. Her salons and outlets soon went nationwide. The Manhattan salon on Fifth Avenue was a star, with a restaurant, gym and rugs by artist Joan Miro.After divorcing the unfaithful Titus in 1938, the 4-foot-10-inch cosmetics giant married Prince Artchil Gourielli-Tchkonia, who was more than 20 years her junior and a self-declared prince of Georgian royalty.A trailblazer, she was known for her effective advertising and marketing, luxury packaging, the neatly uniformed salon beauticians, the use of celebrity endorsements and the "Day of Beauty" she sold in her salons.Rubinstein remained active in the company all her life, outliving her second husband by 10 years.Also a philanthropist, she founded the Helena Rubenstein Pavilion of Contemporary Art in Tel Aviv and a foundation to provide funds to the America-Israel Cultural Foundation and to organizations specializing in health, rehabilitation and medical research. The foundation distributes more than $2 million annually.Rubenstein bought the Greenwich house in 1924 and held it for more than 40 years. After her death in 1965, her estate sold the property, then 2.99 acres, to James and Ann Leary of Greenwich for $70,000.The current homeowner, Sheryl Leach, the creator of Barney, launched the 6-foot purple dinosaur in the United States and 100 countries. One of the highest-rated children's series on television, Barney has been a best-selling video brand and an international record-breaking licensing and publishing phenomenon.Leach, a teacher, writer, administrator, bilingual education consultant and public relations director, has also been an educational computer software sales and marketing director.With co-founder Howard Rosenfeld, she began the nonprofit Shei'rah Foundation, supporting media projects and entertainment channels. The foundation backs projects with LinkTV, Connecticut Public Television, NextNext Entertainment and the Foundation for Conscious Evolution and supports youth-based media projects.Leach also is developing a feature film, "The Unicorn Sonata," through her company, SL Productions LLC.
Up a circular, Belgian block-lined driveway on a soft slope is the more than 4,800-square-foot house in Mediterranean style, with a creamy stucco exterior and a red tile roof. Columns on fieldstone piers frame the front portico at the top of a flight of slate-and-brick steps.Renovated in 2003, the house has four bedrooms, four baths, two powder rooms and four fireplaces, according to Marjorie Marianacci and Marge Haskins of Weichert Realtors' Greenwich office, who have listed the house for $5 million.The living room has a floor-to-ceiling oak library niche, a fireplace and a window seat and leads to a solarium with arched windows and views of the pond and park. The formal dining room has a large window seat and, nearby, French doors open to an elevated brick-and-slate patio and the rear garden with lacecap hydrangeas and boxwood hedges.The revamped kitchen has green granite on the counters, a large center island with cooktop, double wall ovens and a built-in desk. A window seat embraces a cosy eating area, and a fireplace crowns a sitting area. Off the kitchen is a family room or den.Halfway up the front stairs is a large landing with a window that overlooks the pond and a decorative balcony fronted with black wrought-iron swirls.The master bedroom boasts a tray ceiling, a large marble-and-tile bath and five closets, one a large walk-in. Interior French doors access an alcove that could be a nursery or office. The master bath is crafted of white marble and tile.There are three other bedrooms, with accompanying baths. One could be a library, with its walls lined with bookshelves, a fireplace and William Morris wallpaper and drapes.(William Morris, a poet, fantasy novelist, socialist and one of the founders of the Arts and Crafts movement in England, was perhaps best known for his patterned fabrics and wallpapers in deep colors.)In addition to the main house, s a 1,340-square-foot, two-story cottage is attached to a two-car garage. Inside are a family room, living room with dining area, kitchen, two bedrooms and a bath with shower.Born Chaja Rubinstein on Christmas Day in 1870 in Krakow - now in Poland, then part of the Austro-Hungarian Empire - Helena Rubenstein was the eldest of eight children and destined to become one of the world's richest women.In 1902, after briefly studying medicine in Switzerland, she moved to Australia, changed her first name and opened a shop in Melbourne to sell her skin-care concoctions of sheep oil disguised with the scents of lavender, pine bark and water lilies.Six years later, her sister, Ceska, took over the shop. With $100,000 in profit, she moved to London to add to her empire.Rubinstein first married an American journalist, Edward William Titus, who published "Lady Chatterley's Lover" by D.H. Lawrence, a sensation for its explicit sex scenes.Moving to Paris with Titus, Rubenstein opened a beauty care salon for which her husband wrote the publicity. After World War I broke out, they moved to Greenwich in 1915 and soon another salon was created in New York City.Two years later, she began to manufacture and distribute her own cosmetic products. In 1928, she sold the company for $7.3 million to Lehman Brothers, but after the Great Depression bought back the stock for $1.5 million. Her salons and outlets soon went nationwide. The Manhattan salon on Fifth Avenue was a star, with a restaurant, gym and rugs by artist Joan Miro.After divorcing the unfaithful Titus in 1938, the 4-foot-10-inch cosmetics giant married Prince Artchil Gourielli-Tchkonia, who was more than 20 years her junior and a self-declared prince of Georgian royalty.A trailblazer, she was known for her effective advertising and marketing, luxury packaging, the neatly uniformed salon beauticians, the use of celebrity endorsements and the "Day of Beauty" she sold in her salons.Rubinstein remained active in the company all her life, outliving her second husband by 10 years.Also a philanthropist, she founded the Helena Rubenstein Pavilion of Contemporary Art in Tel Aviv and a foundation to provide funds to the America-Israel Cultural Foundation and to organizations specializing in health, rehabilitation and medical research. The foundation distributes more than $2 million annually.Rubenstein bought the Greenwich house in 1924 and held it for more than 40 years. After her death in 1965, her estate sold the property, then 2.99 acres, to James and Ann Leary of Greenwich for $70,000.The current homeowner, Sheryl Leach, the creator of Barney, launched the 6-foot purple dinosaur in the United States and 100 countries. One of the highest-rated children's series on television, Barney has been a best-selling video brand and an international record-breaking licensing and publishing phenomenon.Leach, a teacher, writer, administrator, bilingual education consultant and public relations director, has also been an educational computer software sales and marketing director.With co-founder Howard Rosenfeld, she began the nonprofit Shei'rah Foundation, supporting media projects and entertainment channels. The foundation backs projects with LinkTV, Connecticut Public Television, NextNext Entertainment and the Foundation for Conscious Evolution and supports youth-based media projects.Leach also is developing a feature film, "The Unicorn Sonata," through her company, SL Productions LLC.
Copyright © 2007, Southern Connecticut Newspapers, Inc.
Agents & Agencies
September 7, 2007
Drew Peterson of Weichert Realtors Greenwich office led in listings and sold listings in June. He is a member of the company's Executive's Club, the Top 1 percent of 19,300 agents. Peterson recently earned the e-PRO REALTOR certification from the National Association of Realtors. The course is designed to provide the tools needed to assist consumers in the purchase or sale of a home. Presented entirely online, it certifies agents as Internet professionals. The content and the delivery platform were created by San Diego-based technology company, Internet Crusade.
September 7, 2007
Drew Peterson of Weichert Realtors Greenwich office led in listings and sold listings in June. He is a member of the company's Executive's Club, the Top 1 percent of 19,300 agents. Peterson recently earned the e-PRO REALTOR certification from the National Association of Realtors. The course is designed to provide the tools needed to assist consumers in the purchase or sale of a home. Presented entirely online, it certifies agents as Internet professionals. The content and the delivery platform were created by San Diego-based technology company, Internet Crusade.
For Sale By Owner Tips
From Elizabeth Weintraub,Your Guide to Home Buying / Selling.
Selling Without Representation as a FSBO
Doing a For Sale By Owner (also known as FSBO), without representation, is not terribly difficult if the market is moving fast and inventory is snapped up as soon as it becomes available for sale. However, for most FSBOs, finding buyers is typically a challenge.
The National Association of Realtors reports that the majority of for sale by owners end up listing with a Realtor. Part of the reason is because most buyers are represented by an agent. Other reasons are because owners who sell by themselves lack the expertise to price a home to sell and fall short on marketing knowledge.
Here are tips on how to do a sale by owner:
How Much is My Home Worth?
Pricing a home to sell is part intuition, part research and part market timing.
You can't always depend on an agent's opinion of value because sometimes agents take overpriced listings just to lure your business away from the competitors.
However, you do not want fall victim to a seller's biggest mistake and not price your home correctly, because the first two weeks on the market are crucial. That's when buyers' interest levels are the highest.
Preparing Your Home to Sell
Gone are the days of selling homes with unmade beds, dishes in the sink and toys scattered throughout. Today's homes must be spotless and resemble a model home.
Before you begin to prepare your house for sale, examine the home from a stranger's viewpoint. Ask a friend to help, who might be more removed from your attachment.
Consider spending money on improvements, fixing things that don't work and making repairs before selling to improve your profit.
Do not underestimate the power of home staging. It can mean the difference between selling now for more money or not at all.
Pets in the home present its own set of challenges. It's harder to sell a home where pets live.
Marketing Your Home
With all the money you will be saving over hiring an agent, spend a big chunk on advertising. Figure out your target audience and get the message to them.
Choose several or all of these house marketing tips, from how to do photographs, print advertising, direct mail and eflyers to hosting tours.
All marketing should be geared toward making your phone ring and increasing traffic to your home.
Avoid marketing mistakes by being flexible with showings, offering incentives to buyers and obtaining buyer feedback.
Seasonal sales require unique approaches. The way you would sell in spring is very different than selling in winter.
If you decide to offer a commission to selling agents, you will want to put a lockbox on your premises for easy access by agents when you are not home.
Follow these tips for how to hold an open house, and remember that in some areas, Saturdays are just as popular as Sundays.
Hire a good photographer to shoot a virtual tour with at least two to four spins of your house, and advertise the virtual tour link in your marketing materials.
From Elizabeth Weintraub,Your Guide to Home Buying / Selling.
Selling Without Representation as a FSBO
Doing a For Sale By Owner (also known as FSBO), without representation, is not terribly difficult if the market is moving fast and inventory is snapped up as soon as it becomes available for sale. However, for most FSBOs, finding buyers is typically a challenge.
The National Association of Realtors reports that the majority of for sale by owners end up listing with a Realtor. Part of the reason is because most buyers are represented by an agent. Other reasons are because owners who sell by themselves lack the expertise to price a home to sell and fall short on marketing knowledge.
Here are tips on how to do a sale by owner:
How Much is My Home Worth?
Pricing a home to sell is part intuition, part research and part market timing.
You can't always depend on an agent's opinion of value because sometimes agents take overpriced listings just to lure your business away from the competitors.
However, you do not want fall victim to a seller's biggest mistake and not price your home correctly, because the first two weeks on the market are crucial. That's when buyers' interest levels are the highest.
Preparing Your Home to Sell
Gone are the days of selling homes with unmade beds, dishes in the sink and toys scattered throughout. Today's homes must be spotless and resemble a model home.
Before you begin to prepare your house for sale, examine the home from a stranger's viewpoint. Ask a friend to help, who might be more removed from your attachment.
Consider spending money on improvements, fixing things that don't work and making repairs before selling to improve your profit.
Do not underestimate the power of home staging. It can mean the difference between selling now for more money or not at all.
Pets in the home present its own set of challenges. It's harder to sell a home where pets live.
Marketing Your Home
With all the money you will be saving over hiring an agent, spend a big chunk on advertising. Figure out your target audience and get the message to them.
Choose several or all of these house marketing tips, from how to do photographs, print advertising, direct mail and eflyers to hosting tours.
All marketing should be geared toward making your phone ring and increasing traffic to your home.
Avoid marketing mistakes by being flexible with showings, offering incentives to buyers and obtaining buyer feedback.
Seasonal sales require unique approaches. The way you would sell in spring is very different than selling in winter.
If you decide to offer a commission to selling agents, you will want to put a lockbox on your premises for easy access by agents when you are not home.
Follow these tips for how to hold an open house, and remember that in some areas, Saturdays are just as popular as Sundays.
Hire a good photographer to shoot a virtual tour with at least two to four spins of your house, and advertise the virtual tour link in your marketing materials.
What Mortgage Crisis? Financial Ads Keep Pouring Online.
From Silicon Alley Insider: We've argued that the mortgage crisis is likely to trigger a slowdown in online ads that could have ugly repercussions. One of the many counter-arguments is that even as the home loan business blows up, both mortgage companies and other financial advertisers will continue to pour money into web advertising -- because they need to keep lending money and because it's cheaper to attract customers online than anywhere else.
Well, a new report from Nielsen/NetRatings on U.S. Web advertising appears to support the more sanguine thesis. In July, four mortgage/financial advertisers showed up on Nielsen's list of the top 10 Web advertisers (PDF). All four show up in the August list released today, and three of the four increased their ad budgets -- including imploding Countrywide Financial, which increased its ad spend from $34.8 million to $35.4 million.
So are we wrong about the risk the mortgage crisis represents for the Web advertising business? We hope so. But we're not abandoning the gloomy thesis just yet. Countrywide's implosion did not begin until mid-August, when Merrill Lynch downgraded the stock to SELL and Countrywide sucked down an emergency $11.5 billion on its credit lines. (And it wasn't until last week that the company began firing employees). The month-to-month rate of growth of Countrywide's online ads (per Nielsen) slowed in August, with a $30 to $35 million jump from June to July, which could be the first sign of a change in trend. Lastly, we continue to worry less about what has happened than about what is yet to come. But all that said, Nielsen's August report certainly did not provide additional cause for alarm.
From Silicon Alley Insider: We've argued that the mortgage crisis is likely to trigger a slowdown in online ads that could have ugly repercussions. One of the many counter-arguments is that even as the home loan business blows up, both mortgage companies and other financial advertisers will continue to pour money into web advertising -- because they need to keep lending money and because it's cheaper to attract customers online than anywhere else.
Well, a new report from Nielsen/NetRatings on U.S. Web advertising appears to support the more sanguine thesis. In July, four mortgage/financial advertisers showed up on Nielsen's list of the top 10 Web advertisers (PDF). All four show up in the August list released today, and three of the four increased their ad budgets -- including imploding Countrywide Financial, which increased its ad spend from $34.8 million to $35.4 million.
So are we wrong about the risk the mortgage crisis represents for the Web advertising business? We hope so. But we're not abandoning the gloomy thesis just yet. Countrywide's implosion did not begin until mid-August, when Merrill Lynch downgraded the stock to SELL and Countrywide sucked down an emergency $11.5 billion on its credit lines. (And it wasn't until last week that the company began firing employees). The month-to-month rate of growth of Countrywide's online ads (per Nielsen) slowed in August, with a $30 to $35 million jump from June to July, which could be the first sign of a change in trend. Lastly, we continue to worry less about what has happened than about what is yet to come. But all that said, Nielsen's August report certainly did not provide additional cause for alarm.
Property Values
What You Get for... $550,000
By ANNA BAHNEY
Published: September 12, 2007
Chicago
WHAT: Two-bedroom, two-bath condominium in the 101 West Superior building
HOW MUCH: $559,000
PER SQUARE FOOT: $421
SETTING: Built in 2004, this 12-story 48-unit condo building is in the River North area of Chicago. The building is within walking distance of the Lake Michigan waterfront and restaurants, shops, theaters and art galleries.
COMMON SPACES: This 1,325-square-foot contemporary condo has 10-foot-high ceilings and walls of glass in the combined living and dining area. The corner view faces north and west. The kitchen, with stainless steel appliances and a granite counter, has a breakfast bar and is open to the great room.
PERSONAL SPACES: The bedrooms are on opposite sides of the apartment. The two full baths have stone vanities.
OUTDOOR SPACE: A balcony, with space for a table and chairs, can be accessed from the living room.
AMENITIES: There is a gas fireplace in the living room. The building has a full-time doorman, and the unit comes with one indoor parking space.
TAXES AND FEES: Taxes are $8,342 a year and maintenance is $753 a month; both figures include fees for the parking spot.
CONTACT: Anna Pesce, Rubloff Residential Properties (312) 368-5300; http://www.rubloff.com/
Lihue Kauai, Hawaii
WHAT: One-bath waterfront studio in a condo-hotel in the Hilton Kauai Beach Resort
HOW MUCH: $470,000 (reduced from $550,000)
PER SQUARE FOOT: $1,530
SETTING: This oceanfront condo in the Hilton Kauai Beach Resort has unobstructed views of the Pacific. The resort, on the southeast side of Kauai, has a white sand beach and is near lagoons and waterfalls.
COMMON SPACES: This second-story 307-square-foot condo is sold furnished, and with a king-size bed.
PERSONAL SPACES: One full bath.
OUTDOOR SPACE: A lanai with views of the ocean.
AMENITIES: The resort has three pools, two outdoor spas, fitness center, business center, two restaurants and two bars.
TAXES AND FEES: Taxes are $3,511 a year and maintenance is $740 a month.
CONTACT: Lynda Charlson, Sleeping Giant Sotheby’s International Realty (808) 635-7110; http://www.sleepinggiant.com/
Wiscasset, Me.
WHAT: Two-bedroom two-bath condo in the Point East Maritime Village Square, a residential development.
HOW MUCH: $549,000
PER SQUARE FOOT: $450
SETTING: This soon-to-be-built 1,218-square-foot condominium will be in an 18-unit brick and granite building overlooking the Sheepscot River. The development, an hour north of Portland, will have 140 condos in five midrise piers, custom-built single-family detached cottages, a 239-slip marina, and a commercial area with restaurants, shops, galleries and outdoor outfitters.
COMMON SPACES: The layout has a combined living and dining area with views of the river.
PERSONAL SPACES: Both bedrooms have river views. The master bedroom has a walk-in closet.
OUTDOOR SPACE: A balcony, with river views, will be accessible from the master bedroom and living room.
AMENITIES: The development will have walking trails and a fitness center.
TAXES AND FEES: Taxes and fees have not been assessed. This unit will be in the first 18-unit waterfront building, Pier One. Once 50 percent of the units are sold, ground will be broken.
CONTACT: Poe Cilley, Legacy Properties Sotheby’s International Realty (207) 882-8098; http://www.pointeastmaine.com/
What You Get for... $550,000
By ANNA BAHNEY
Published: September 12, 2007
Chicago
WHAT: Two-bedroom, two-bath condominium in the 101 West Superior building
HOW MUCH: $559,000
PER SQUARE FOOT: $421
SETTING: Built in 2004, this 12-story 48-unit condo building is in the River North area of Chicago. The building is within walking distance of the Lake Michigan waterfront and restaurants, shops, theaters and art galleries.
COMMON SPACES: This 1,325-square-foot contemporary condo has 10-foot-high ceilings and walls of glass in the combined living and dining area. The corner view faces north and west. The kitchen, with stainless steel appliances and a granite counter, has a breakfast bar and is open to the great room.
PERSONAL SPACES: The bedrooms are on opposite sides of the apartment. The two full baths have stone vanities.
OUTDOOR SPACE: A balcony, with space for a table and chairs, can be accessed from the living room.
AMENITIES: There is a gas fireplace in the living room. The building has a full-time doorman, and the unit comes with one indoor parking space.
TAXES AND FEES: Taxes are $8,342 a year and maintenance is $753 a month; both figures include fees for the parking spot.
CONTACT: Anna Pesce, Rubloff Residential Properties (312) 368-5300; http://www.rubloff.com/
Lihue Kauai, Hawaii
WHAT: One-bath waterfront studio in a condo-hotel in the Hilton Kauai Beach Resort
HOW MUCH: $470,000 (reduced from $550,000)
PER SQUARE FOOT: $1,530
SETTING: This oceanfront condo in the Hilton Kauai Beach Resort has unobstructed views of the Pacific. The resort, on the southeast side of Kauai, has a white sand beach and is near lagoons and waterfalls.
COMMON SPACES: This second-story 307-square-foot condo is sold furnished, and with a king-size bed.
PERSONAL SPACES: One full bath.
OUTDOOR SPACE: A lanai with views of the ocean.
AMENITIES: The resort has three pools, two outdoor spas, fitness center, business center, two restaurants and two bars.
TAXES AND FEES: Taxes are $3,511 a year and maintenance is $740 a month.
CONTACT: Lynda Charlson, Sleeping Giant Sotheby’s International Realty (808) 635-7110; http://www.sleepinggiant.com/
Wiscasset, Me.
WHAT: Two-bedroom two-bath condo in the Point East Maritime Village Square, a residential development.
HOW MUCH: $549,000
PER SQUARE FOOT: $450
SETTING: This soon-to-be-built 1,218-square-foot condominium will be in an 18-unit brick and granite building overlooking the Sheepscot River. The development, an hour north of Portland, will have 140 condos in five midrise piers, custom-built single-family detached cottages, a 239-slip marina, and a commercial area with restaurants, shops, galleries and outdoor outfitters.
COMMON SPACES: The layout has a combined living and dining area with views of the river.
PERSONAL SPACES: Both bedrooms have river views. The master bedroom has a walk-in closet.
OUTDOOR SPACE: A balcony, with river views, will be accessible from the master bedroom and living room.
AMENITIES: The development will have walking trails and a fitness center.
TAXES AND FEES: Taxes and fees have not been assessed. This unit will be in the first 18-unit waterfront building, Pier One. Once 50 percent of the units are sold, ground will be broken.
CONTACT: Poe Cilley, Legacy Properties Sotheby’s International Realty (207) 882-8098; http://www.pointeastmaine.com/
Thursday, September 06, 2007
Pure Real Estate Drama!
But...what a great time for QUALIFIED BUYERS!
Our 2007 Fall Market will be hot!
Don't despair with recent headlines...
There are always people divorcing, marrying,dying,relocating, retiring,downsizing-even lottery winners that MUST move!
Glut of homes hits 16-year high
Sales slip, but supply of homes on the market jumps to 9.6 months, pushing prices down for 12th straight month.
By Chris Isidore, CNNMoney.com senior writer
August 28 2007: 5:49 PM EDT
NEW YORK (CNNMoney.com) -- Homeowners trying to sell last month faced the biggest glut of homes on the market in about 16 years, as declining sales and growing problems in the mortgage market helped push home prices down for the 12th straight month.
The National Association of Realtors said sales by homeowners slipped to an annual rate of 5.75 million last month, down 0.2 percent from the revised 5.76 million pace in June. Economists surveyed by Briefing.com had forecast the sales rate would fall to 5.7 million in the latest reading.
Not only did sales slip but the number of homes for sale jumped 5.1 percent, the group said, meaning there is now a 9.6-month supply of homes for sale, up from 9.1-months in the June reading. It was the biggest supply of homes by that measure since October 1991.
Foreclosure rescue scams
"Forget 'location, location, location.' The most important factor in today's real estate market is 'supply, supply, supply,'" said Mike Larson, a real estate analyst at independent research firm Weiss Research.
"We are literally swimming in an ocean of homes for sale. In fact, at 4.59 million units, we have the most raw inventory for sale in history," he said. "Until we work through this extremely large inventory glut, we're not going to see any momentum in home prices."
Even the Realtors' own economist admitted that problems in the mortgage market will continue to take a toll on home sales.
"Home sales probably would be rising in the absence of the mortgage liquidity issues of the past two months," said Lawrence Yun, the trade group's senior economist.
A $200,000 'loss' - and happy with it
"Some buyers with contracts have been scrambling when loan commitments did not materialize at the last moment, while other potential buyers are simply waiting for the mortgage market to stabilize."
August has seen problems in the mortgage market cut deeply into the availability of financing for many buyers, particularly those needing subprime mortgages due to credit rating issues or a jumbo mortgage of more than $417,000.
The existing home sale numbers track sales that closed in the month. Closings typically occur a month or two after buyers lock in financing.
"These are 'PC' figures - pre-crunch," said Larson. "The mortgage credit crunch that began very late in July and picked up steam in August will likely put more downward pressure on home sales and prices this month and into the fall."
Add curb appeal to sell your home in down market
The report comes after Friday's government reading that showed new homes selling at a better-than-expected pace. But the reports showed more weakness in prices - which have become a major concern for the U.S. economy as a whole.
The median price of an existing home sold in the month fell 0.6 percent from a year earlier to $228,900. It marked the 12th straight month that prices have been down on that basis, after the June reading was revised lower as well. The July 2006 median price was a record high for that reading, which measures the point at which half the homes sold go for more and half go for less.
Experts have tied weak auto sales at least partly to concerns among consumers about the decline in equity in their homes. Some fear that weakness in home values and reduced access to home equity lines of credit could soon affect a broader range of retail sales.
In addition, the downturn in housing has also fed investor concern about mortgage-backed securities, which in turn has created a credit crunch in financial markets, and sent stocks into a tailspin, as a number of corporate deals have run into financing problems.
Where the growth is - and isn't
Not surprisingly, results at the nation's home builders have been among the hardest hit.
While luxury home builder Toll Brothers (Charts, Fortune 500) managed to report a narrow profit last week that topped forecasts of a loss, it still saw earnings fall 85 percent from year-earlier levels. And the six publicly traded builders who are larger than Toll have all reported losses recently.
Lennar (Charts, Fortune 500), the nation's No. 1 builder, and No. 5 KB Home (Charts, Fortune 500) both reported a loss in the latest quarter. No. 2 home builder D.R. Horton (Charts, Fortune 500) and No. 3 Centex (Charts, Fortune 500) both reported losses far bigger than Wall Street had expected, while No. 6 Pulte Homes (Charts, Fortune 500) and Hovnanian Enterprises (Charts, Fortune 500) have reported losses for the last two quarters and analysts project losses for at least the next year.
New home sales post surprise gainThe mad dash for housing helpForeclosures: No relief in siteHousing starts at decade low
Our 2007 Fall Market will be hot!
Don't despair with recent headlines...
There are always people divorcing, marrying,dying,relocating, retiring,downsizing-even lottery winners that MUST move!
Glut of homes hits 16-year high
Sales slip, but supply of homes on the market jumps to 9.6 months, pushing prices down for 12th straight month.
By Chris Isidore, CNNMoney.com senior writer
August 28 2007: 5:49 PM EDT
NEW YORK (CNNMoney.com) -- Homeowners trying to sell last month faced the biggest glut of homes on the market in about 16 years, as declining sales and growing problems in the mortgage market helped push home prices down for the 12th straight month.
The National Association of Realtors said sales by homeowners slipped to an annual rate of 5.75 million last month, down 0.2 percent from the revised 5.76 million pace in June. Economists surveyed by Briefing.com had forecast the sales rate would fall to 5.7 million in the latest reading.
Not only did sales slip but the number of homes for sale jumped 5.1 percent, the group said, meaning there is now a 9.6-month supply of homes for sale, up from 9.1-months in the June reading. It was the biggest supply of homes by that measure since October 1991.
Foreclosure rescue scams
"Forget 'location, location, location.' The most important factor in today's real estate market is 'supply, supply, supply,'" said Mike Larson, a real estate analyst at independent research firm Weiss Research.
"We are literally swimming in an ocean of homes for sale. In fact, at 4.59 million units, we have the most raw inventory for sale in history," he said. "Until we work through this extremely large inventory glut, we're not going to see any momentum in home prices."
Even the Realtors' own economist admitted that problems in the mortgage market will continue to take a toll on home sales.
"Home sales probably would be rising in the absence of the mortgage liquidity issues of the past two months," said Lawrence Yun, the trade group's senior economist.
A $200,000 'loss' - and happy with it
"Some buyers with contracts have been scrambling when loan commitments did not materialize at the last moment, while other potential buyers are simply waiting for the mortgage market to stabilize."
August has seen problems in the mortgage market cut deeply into the availability of financing for many buyers, particularly those needing subprime mortgages due to credit rating issues or a jumbo mortgage of more than $417,000.
The existing home sale numbers track sales that closed in the month. Closings typically occur a month or two after buyers lock in financing.
"These are 'PC' figures - pre-crunch," said Larson. "The mortgage credit crunch that began very late in July and picked up steam in August will likely put more downward pressure on home sales and prices this month and into the fall."
Add curb appeal to sell your home in down market
The report comes after Friday's government reading that showed new homes selling at a better-than-expected pace. But the reports showed more weakness in prices - which have become a major concern for the U.S. economy as a whole.
The median price of an existing home sold in the month fell 0.6 percent from a year earlier to $228,900. It marked the 12th straight month that prices have been down on that basis, after the June reading was revised lower as well. The July 2006 median price was a record high for that reading, which measures the point at which half the homes sold go for more and half go for less.
Experts have tied weak auto sales at least partly to concerns among consumers about the decline in equity in their homes. Some fear that weakness in home values and reduced access to home equity lines of credit could soon affect a broader range of retail sales.
In addition, the downturn in housing has also fed investor concern about mortgage-backed securities, which in turn has created a credit crunch in financial markets, and sent stocks into a tailspin, as a number of corporate deals have run into financing problems.
Where the growth is - and isn't
Not surprisingly, results at the nation's home builders have been among the hardest hit.
While luxury home builder Toll Brothers (Charts, Fortune 500) managed to report a narrow profit last week that topped forecasts of a loss, it still saw earnings fall 85 percent from year-earlier levels. And the six publicly traded builders who are larger than Toll have all reported losses recently.
Lennar (Charts, Fortune 500), the nation's No. 1 builder, and No. 5 KB Home (Charts, Fortune 500) both reported a loss in the latest quarter. No. 2 home builder D.R. Horton (Charts, Fortune 500) and No. 3 Centex (Charts, Fortune 500) both reported losses far bigger than Wall Street had expected, while No. 6 Pulte Homes (Charts, Fortune 500) and Hovnanian Enterprises (Charts, Fortune 500) have reported losses for the last two quarters and analysts project losses for at least the next year.
New home sales post surprise gainThe mad dash for housing helpForeclosures: No relief in siteHousing starts at decade low
Wednesday, September 05, 2007
When Helping People Achieve the American Dream Becomes a Personal Nightmare:
National Association of Realtors Observes Realtor® Safety Week
WASHINGTON, September 04, 2007 - Would you welcome a complete stranger into your home or get into a car alone with someone you had just met? For Realtors® and other real estate professionals, these are everyday occurrences. Every job that requires interaction with the public involves some risk, which is why the National Association of Realtors® is reaching out to its 1.3 million members next week as part of its fifth annual REALTOR® Safety Week.
According to the U.S. Department of Labor in its most recent Survey of Workplace Violence Prevention, 2.5 percent of real estate businesses reported an incident of workplace violence in 2005. Although not common, real estate professionals across the country have been assaulted, robbed, even killed in the course of doing their jobs.
“Given their dedication to helping families achieve their dreams of homeownership, Realtors® believe that their profession’s rewards far outweigh the risks,” said NAR President Pat V. Combs of Grand Rapids, Mich., and vice president of Coldwell Banker-AJS-Schmidt. “NAR’s ongoing commitment to Realtor® safety education and awareness helps our members minimize those risks and, in the process, protect their customers and clients, as well. It’s one more way Realtors® add value to the real estate transaction.”
In advance of REALTOR® Safety Week, NAR distributed an education and awareness kit to all of its more than 1400 local and state associations, as well as the top 500 brokerages across the country. The REALTOR® Safety Week Kit includes a video, which has been revised and updated for 2007; support materials for safety presentations and awareness outreach; and a wallet-size card of safety tips, such as:
Keep a charged cell phone with you at all times.
Meet potential clients for the first time in your office.
Never advertise a home as “vacant.”
Don’t put your home phone number on your business card.
Always take your own car for showings.
The annual awareness week is just one of many ways NAR helps Realtors® recognize potential threats and protect themselves throughout their careers. This year for the first time, NAR is offering an innovative, scenario-based 3D online safety course through REALTOR® University at www.REALTOR.org/RealtorUniversity. The course provides personal, professional and client safety information that is critical for all Realtors®. Brokers can purchase course passes at a savings for their entire office to ensure that their agents practice sound safety techniques.
For more information about NAR’s REALTOR® Safety Week and other safety initiatives, visit www.REALTOR.org/Safety.
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries.
National Association of Realtors Observes Realtor® Safety Week
WASHINGTON, September 04, 2007 - Would you welcome a complete stranger into your home or get into a car alone with someone you had just met? For Realtors® and other real estate professionals, these are everyday occurrences. Every job that requires interaction with the public involves some risk, which is why the National Association of Realtors® is reaching out to its 1.3 million members next week as part of its fifth annual REALTOR® Safety Week.
According to the U.S. Department of Labor in its most recent Survey of Workplace Violence Prevention, 2.5 percent of real estate businesses reported an incident of workplace violence in 2005. Although not common, real estate professionals across the country have been assaulted, robbed, even killed in the course of doing their jobs.
“Given their dedication to helping families achieve their dreams of homeownership, Realtors® believe that their profession’s rewards far outweigh the risks,” said NAR President Pat V. Combs of Grand Rapids, Mich., and vice president of Coldwell Banker-AJS-Schmidt. “NAR’s ongoing commitment to Realtor® safety education and awareness helps our members minimize those risks and, in the process, protect their customers and clients, as well. It’s one more way Realtors® add value to the real estate transaction.”
In advance of REALTOR® Safety Week, NAR distributed an education and awareness kit to all of its more than 1400 local and state associations, as well as the top 500 brokerages across the country. The REALTOR® Safety Week Kit includes a video, which has been revised and updated for 2007; support materials for safety presentations and awareness outreach; and a wallet-size card of safety tips, such as:
Keep a charged cell phone with you at all times.
Meet potential clients for the first time in your office.
Never advertise a home as “vacant.”
Don’t put your home phone number on your business card.
Always take your own car for showings.
The annual awareness week is just one of many ways NAR helps Realtors® recognize potential threats and protect themselves throughout their careers. This year for the first time, NAR is offering an innovative, scenario-based 3D online safety course through REALTOR® University at www.REALTOR.org/RealtorUniversity. The course provides personal, professional and client safety information that is critical for all Realtors®. Brokers can purchase course passes at a savings for their entire office to ensure that their agents practice sound safety techniques.
For more information about NAR’s REALTOR® Safety Week and other safety initiatives, visit www.REALTOR.org/Safety.
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries.
Saturday, September 01, 2007
Q: What does it mean when a listing says a seller is willing to "carry back paper"?
A: Seller Carry Back, Owner Will Carry, OWC. A Seller Carry is a Seller Loan.
All of the above terms indicate that the seller is willing to assist in the financing of the property for the buyer by not requiring all of the seller's equity in cash when the purchase closes. This is usually done in the form of a Second or Third Loan, secured by the remaining equity in the property using a security device such as a mortgage or trust deed. If a seller owns a property "free and clear," a seller carry back could be a First Loan.
Example:Buyer contracts to buy a home for $100,000. Buyer will put $10,000 down, get a new loan in the amount of $80,000 and the seller will "Carry" the remaining $10,000 in equity in the form of a note and deed of trust payable monthly, Interest Only at 10% for 5 years, all due and payable at the end of 5 years.
Purchase Price:
$100,000
New Loan:
$80,000
Down Payment:
$10,000
Seller gets the $80,000 from the new loan, and the $10,000 down payment and takes interest on the remaining $10,000 for 5 years at which time the seller receives from the buyer the last $10,000.
A: Seller Carry Back, Owner Will Carry, OWC. A Seller Carry is a Seller Loan.
All of the above terms indicate that the seller is willing to assist in the financing of the property for the buyer by not requiring all of the seller's equity in cash when the purchase closes. This is usually done in the form of a Second or Third Loan, secured by the remaining equity in the property using a security device such as a mortgage or trust deed. If a seller owns a property "free and clear," a seller carry back could be a First Loan.
Example:Buyer contracts to buy a home for $100,000. Buyer will put $10,000 down, get a new loan in the amount of $80,000 and the seller will "Carry" the remaining $10,000 in equity in the form of a note and deed of trust payable monthly, Interest Only at 10% for 5 years, all due and payable at the end of 5 years.
Purchase Price:
$100,000
New Loan:
$80,000
Down Payment:
$10,000
Seller gets the $80,000 from the new loan, and the $10,000 down payment and takes interest on the remaining $10,000 for 5 years at which time the seller receives from the buyer the last $10,000.
Housing: Bush Rides to the Rescue, Sort Of
The President's plan to allow distressed homeowners to switch into FHA guaranteed loans stops well short of a full-scale bailout
by Peter Coy
President George Bush waded into a political swamp on Aug. 31 when he announced a plan to help homeowners who can't afford their mortgages. There's no clean solution to this mess, and Bush and his advisers know it (see BusinessWeek.com, 8/28/07, "What Will Fix the Mortgage Mess? "). The President was aware that he had to do something about the plight of homeowners facing foreclosure, but he also knew that if he did too much, he would bail out people who didn't deserve to be bailed out.
In the end, the President announced a plan that attempts to strike a balance between help for the distressed and adherence to free-market principles. The key sentence in his statement was this: "The government has got a role to play—but it is limited."
The two key ideas are:
—Give a bigger role to the Federal Housing Administration, which was created in 1934 during the Depression to make houses affordable to lower-income families but shrank in recent years as it was elbowed aside by aggressive private-sector subprime lenders.
—Temporarily suspend the income tax that families face on the portions of their mortgage debts that are forgiven by lenders.
Steering a Middle Course
Bush is also jawboning lenders to voluntarily give relief to their borrowers. He's getting the federal government to publicize the options that hard-pressed homeowners have. And he's advocating a variety of measures to improve disclosure of loan information so fewer bad loans get made in the future.
This plan steers a middle course: more government involvement than Bush previously favored but not as much as some Democrats had hoped for. Bush chose not to advocate an idea that has been widely floated, which is to let government-sponsored mortgage purchasers Fannie Mae (FNM) and Freddie Mac (FRE) buy mortgages above $417,000. The White House apparently decided that since the subprime mess is concentrated in smaller mortgages, raising the so-called conforming loan limit wouldn't do much to deal with the core issue.
The President also shied away from various kinds of direct financial aid to distressed homeowners, which could have become expensive. He didn't put a price tag on his program and didn't take questions after his statement to the news media. The Mortgage Bankers Assn. saluted the Bush plan, saying: "Every foreclosure is a tragedy."
Borrower-Friendly
In expressing concern about the plight of families facing disclosure, Bush is "starting to sound like a Democrat," teased Senator Charles Schumer (D-N.Y.). Indeed, the Bush plan is bound to encounter criticism from conservatives who say that people should bear the costs of their own mistakes, and who argue that giving the FHA a bigger role in lending will unnecessarily expand the role of government in the economy.
But while the plan has borrower-friendly elements, it's far from harsh toward business and wealthy individuals. For example, part of the plan is to allow people who borrowed from private-sector lenders to switch into lower-cost FHA-insured loans. So the lenders would get fully paid off, and the risk of default would be transferred to the FHA—and thus to taxpayers.
Well-to-do speculators could also benefit from the tax break for forgiven debt. The way the tax code works now, if you fall behind on a $300,000 loan, and your lender agrees to cut the amount you owe to $250,000, the $50,000 you saved is treated as income, and you have to pay tax on it. Bush wants to waive that tax liability temporarily. Dean Baker of the liberal Center for Economic & Policy Research says that this break will be of little value to low-income families that face relatively low tax rates, but of great value to affluent speculators. White House spokesman Tony Fratto told BusinessWeek.com that there would be a limit on the size of mortgage loan eligible for the tax waiver, though the amount hasn't been set yet.
Looking at Payment History
The big winner, if the plan is adopted, would be the FHA, a government agency that until recently seemed in danger of withering away because of restrictions on its ability to compete for business with freewheeling subprime lenders. The FHA provides mortgage insurance through a network of private lenders. Bush called on Congress to pass an FHA "modernization" bill that would enable the FHA to insure loans with lower down-payment requirements and higher loan limits.
He also announced an FHASecure plan, which apparently does not require congressional approval, that according to the FHA "will allow families with strong credit histories who had been making timely mortgage payments before their loans reset—but are now in default—to qualify for refinancing."
Until now, the FHA wasn't allowed to give refinancing loans to people in default because it was seen as too risky. And for the first time, starting Jan. 1, 2008, the FHA will charge higher rates for riskier borrowers instead of giving the same rate on all loans.
Expect more jockeying over what to do. In an Aug. 31 press conference, New York's Schumer said that Treasury Secretary Henry Paulson had indicated interest in allowing Fannie Mae and Freddie Mac to exceed federal limits on the size of their mortgage portfolios as long as they used the breathing room to help borrowers refinance and avoid foreclosure. But a Treasury spokesman, when asked about Schumer's statement, said that while Paulson is interested in hearing all ideas, "Treasury continues to believe that raising Fannie and Freddie's portfolio cap will not address the concerns in the subprime market."
Coy is BusinessWeek's Economics Editor.
The President's plan to allow distressed homeowners to switch into FHA guaranteed loans stops well short of a full-scale bailout
by Peter Coy
President George Bush waded into a political swamp on Aug. 31 when he announced a plan to help homeowners who can't afford their mortgages. There's no clean solution to this mess, and Bush and his advisers know it (see BusinessWeek.com, 8/28/07, "What Will Fix the Mortgage Mess? "). The President was aware that he had to do something about the plight of homeowners facing foreclosure, but he also knew that if he did too much, he would bail out people who didn't deserve to be bailed out.
In the end, the President announced a plan that attempts to strike a balance between help for the distressed and adherence to free-market principles. The key sentence in his statement was this: "The government has got a role to play—but it is limited."
The two key ideas are:
—Give a bigger role to the Federal Housing Administration, which was created in 1934 during the Depression to make houses affordable to lower-income families but shrank in recent years as it was elbowed aside by aggressive private-sector subprime lenders.
—Temporarily suspend the income tax that families face on the portions of their mortgage debts that are forgiven by lenders.
Steering a Middle Course
Bush is also jawboning lenders to voluntarily give relief to their borrowers. He's getting the federal government to publicize the options that hard-pressed homeowners have. And he's advocating a variety of measures to improve disclosure of loan information so fewer bad loans get made in the future.
This plan steers a middle course: more government involvement than Bush previously favored but not as much as some Democrats had hoped for. Bush chose not to advocate an idea that has been widely floated, which is to let government-sponsored mortgage purchasers Fannie Mae (FNM) and Freddie Mac (FRE) buy mortgages above $417,000. The White House apparently decided that since the subprime mess is concentrated in smaller mortgages, raising the so-called conforming loan limit wouldn't do much to deal with the core issue.
The President also shied away from various kinds of direct financial aid to distressed homeowners, which could have become expensive. He didn't put a price tag on his program and didn't take questions after his statement to the news media. The Mortgage Bankers Assn. saluted the Bush plan, saying: "Every foreclosure is a tragedy."
Borrower-Friendly
In expressing concern about the plight of families facing disclosure, Bush is "starting to sound like a Democrat," teased Senator Charles Schumer (D-N.Y.). Indeed, the Bush plan is bound to encounter criticism from conservatives who say that people should bear the costs of their own mistakes, and who argue that giving the FHA a bigger role in lending will unnecessarily expand the role of government in the economy.
But while the plan has borrower-friendly elements, it's far from harsh toward business and wealthy individuals. For example, part of the plan is to allow people who borrowed from private-sector lenders to switch into lower-cost FHA-insured loans. So the lenders would get fully paid off, and the risk of default would be transferred to the FHA—and thus to taxpayers.
Well-to-do speculators could also benefit from the tax break for forgiven debt. The way the tax code works now, if you fall behind on a $300,000 loan, and your lender agrees to cut the amount you owe to $250,000, the $50,000 you saved is treated as income, and you have to pay tax on it. Bush wants to waive that tax liability temporarily. Dean Baker of the liberal Center for Economic & Policy Research says that this break will be of little value to low-income families that face relatively low tax rates, but of great value to affluent speculators. White House spokesman Tony Fratto told BusinessWeek.com that there would be a limit on the size of mortgage loan eligible for the tax waiver, though the amount hasn't been set yet.
Looking at Payment History
The big winner, if the plan is adopted, would be the FHA, a government agency that until recently seemed in danger of withering away because of restrictions on its ability to compete for business with freewheeling subprime lenders. The FHA provides mortgage insurance through a network of private lenders. Bush called on Congress to pass an FHA "modernization" bill that would enable the FHA to insure loans with lower down-payment requirements and higher loan limits.
He also announced an FHASecure plan, which apparently does not require congressional approval, that according to the FHA "will allow families with strong credit histories who had been making timely mortgage payments before their loans reset—but are now in default—to qualify for refinancing."
Until now, the FHA wasn't allowed to give refinancing loans to people in default because it was seen as too risky. And for the first time, starting Jan. 1, 2008, the FHA will charge higher rates for riskier borrowers instead of giving the same rate on all loans.
Expect more jockeying over what to do. In an Aug. 31 press conference, New York's Schumer said that Treasury Secretary Henry Paulson had indicated interest in allowing Fannie Mae and Freddie Mac to exceed federal limits on the size of their mortgage portfolios as long as they used the breathing room to help borrowers refinance and avoid foreclosure. But a Treasury spokesman, when asked about Schumer's statement, said that while Paulson is interested in hearing all ideas, "Treasury continues to believe that raising Fannie and Freddie's portfolio cap will not address the concerns in the subprime market."
Coy is BusinessWeek's Economics Editor.
Subscribe to:
Posts (Atom)