Sarasota Real Estate Market News

NAR: Bring back sensible lending standards

WASHINGTON – Sept. 17, 2012 – According to the National Association of Realtors® (NAR), new survey findings, combined with an analysis of historic credit scores and loan performance, show home sales could be notably higher by returning to reasonably safe and sound lending standards. The change would also create new jobs.

“Sensible lending standards would permit 500,000 to 700,000 additional home sales in the coming year,” says Lawrence Yun, NAR chief economist. “The economic activity created through these additional home sales would add 250,000 to 350,000 jobs in related trades and services almost immediately, and without a cost impact.”

A monthly survey of Realtors shows widespread concern over unreasonably tight credit conditions for residential mortgages. Respondents say lenders take too long in approving applications, and that they require excessive information from borrowers. Some respondents expressed frustration that lenders appear to be focusing only on loans to individuals with the highest credit scores.

Even though profits in the financial industry have climbed back to pre-recession levels, lending standards still remain unreasonably tight.

All it takes is a willingness to recognize that market conditions have turned in the wake of an over-correction in home prices, with all of the price measures now showing sustained gains, says Yun. “There is an unnecessarily high level of risk aversion among mortgage lenders and regulators, although many are sitting on large volumes of cash which could go a long way toward speeding our economic recovery. A loosening of the overly restrictive lending standards is very much in order,” he says.

According to the NAR survey, 53 percent of August loans went to borrowers with credit scores above 740. In comparison, only 41 percent of loans backed by Fannie Mae had FICO scores above 740 during the 2001 to 2004 time period, while 43 percent of Freddie Mac-backed loans were above 740.

In 2011, about 75 percent of total loans purchased by Fannie Mae and Freddie Mac, which is now a smaller market share, had credit scores of 740 or above.

There is a similar pattern for FHA loans. The Office of the Comptroller of the Currency has defined a prime loan as having a FICO score of 660 and above. However, the average FICO score for denied applications on FHA loans was 669 in May of this year, well above the 656 average for loans actually originated in 2001.

Loan performance over the past decade shows the 12-month default rate averaged just under 0.4 percent of mortgages in 2002 and 2003, which is considered normal. Twelve-month default rates peaked in 2007 at 3.0 percent for Fannie Mae loans and 2.5 percent for Freddie Mac loans, clearly showing the devastating impact of risky mortgages.

Yun says, however, the 12-month default rates have been abnormally low since 2009. Fannie Mae default rates have averaged 0.2 percent while Freddie Mac’s averaged 0.1 percent, which are notable given higher unemployment in the timeframe.

“Sales this year are projected to rise 8 to 10 percent. Although welcoming, this still represents a sub-par performance of about 4.6 million sales,” Yun says. “These findings show we need to return to the sound underwriting standards that existed before the aberrations of the housing boom and bust cycle, and thoroughly re-examine current and impending regulatory rules that may cause excessively tight standards.”

© 2012 Florida Realtors®

October 23, 2012 Posted by | News related to Buyers, News related to Financing | Leave a comment

20% downpayment not a QM requirement

WASHINGTON – Sept. 17, 2012 – Realtors and other housing groups worry that new rules now under development will make it more difficult for homebuyers, particularly first-time buyers, to obtain a mortgage. However, at least one fear seems to be unwarranted for the moment.

The Consumer Financial Protection Bureau (CFPB), created to oversee credit companies in the U.S., is developing a QM (qualified mortgage) code. An industry fear voiced by the National Association of Realtors® (NAR) and others was that the rules, once announced, would require a mandatory 20 percent downpayment, which would bump many homebuyers from the market and force others to wait years to qualify for a home.

In testimony before the Senate Banking Committee on Sept 13, however, CFPB Director Richard Corday said a 20 percent downpayment was not under consideration.

The issue is not yet finalized. Two federal groups are working independently on separate mortgage qualification rules. The Federal Reserve plans to issue its own qualified residential (QRM) code that, while similar, is unrelated to the QM code. In the past, Fed regulators have suggested a 20 percent downpayment rule.

© 2012 Florida Realtors®

October 23, 2012 Posted by | News related to Buyers, News related to Financing | Leave a comment

Starting Jan. 1, short sales may carry hidden cost

WASHINGTON – Sept. 17, 2012 – According to the U.S. Internal Revenue Service (IRS), a homeowner who owes money to a mortgage lender is given something akin to a gift when the lender cancels out some mortgage debt through a short sale. As a result, the IRS sees that forgiven money as income and could tax it accordingly.

A 2007 law designed to help homeowners specifically forbids the IRS from taxing forgiven money on a principal residence, however, since people who can’t afford to keep their home generally can’t afford higher taxes less than a year later. But that law expires on Dec. 31, 2012.

Any short sale that occurs on or after Jan. 1, 2013 – barring further action by Congress – would face a federal income tax on the forgiven portion of their mortgage.

While Congress could agree to extend the tax forgiveness and most experts see bipartisan support to do so, a presidential election and looming end-of-the-year fiscal crisis will capture most lawmakers’ attention. An extension, even if it occurs, is not considered a sure thing by the Dec. 31 deadline.

That leaves at-risk homeowners with a dilemma. They can hope Congress extends the tax forgiveness or they can list their home as a short sale soon.

Since many short sale transactions take longer than non-short sales, a home needs to be listed – and ideally pre-approved by the lender as a short sale – while it still has enough to time to attract a buyer and close. With only three-and-a-half months remaining in 2012, the window for a new listing has started to close.

If the end of the year looms and the short-sale tax forgiveness deadline has not been extended, Realtors and others involved in home sales could find their holidays curtailed by end-of-the-year closings as sellers rush to beat the clock.

“I’m not making any plans for Dec. 31,” Sunrise real estate lawyer Gary Singer told the Fort Lauderdale Sun Sentinel. “I expect to be in the office very late.”

For more information on the Mortgage Forgiveness Debt Relief Act, visit the IRS’s website.

© 2012 Florida Realtors®

October 23, 2012 Posted by | News related to Short Sales and Foreclosures | Leave a comment

New guidelines to help condos get FHA loans

WASHINGTON – Sept. 17, 2012 – Many first-time homebuyers consider condos a good home when starting out, but loans issued by the Federal Housing Administration (FHA) that come with relatively low downpayments have not been offered in many condo buildings.

FHA approval for a condo is more complicated the FHA approval for a single-family home. To minimize its risk, FHA looks at more than the unit requesting a loan – it also considers traits of the association itself. Associations can help individual condo sellers get an FHA loan by becoming certified, but fairly stringent rules kept many from applying.

That may change and, according to the Community Associations Institute (CAI) Chief Executive Officer Thomas Skiba, it’s “excellent news for sellers, buyers, condominium communities and the housing market across the country.”

In creating its certification system, FHA listed traits considered desirable. Certification was denied, for example, if an association had too many rental condominiums or too much commercial space.

According to real estate writer Kenneth Harney, the previous certification process also presented considerable risk to associations. During the application process, Harney says, they were asked to “accept broad legal liability on matters they couldn’t totally be certain about, such as disputes among tenants in the building, litigation filed with courts” and more.

CAI says the FHA made “temporary adjustments.” While it applauded FHA’s guidelines, it says it will continuing pushing for “long-term certainty of process, flexibility and support for the future of condominium housing, and to resolve critical policy areas not addressed by today’s announcement.”

Major changes

• FHA looks at the percent of current condo owners who are delinquent on mortgage payments. The cutoff is 15 percent, but the individual standard was 30 days late; it’s now 60 days late.

• New rules require at least 50 percent of units to be inhabited by owner-occupants or under contract, while the other 50 percent may be owned by investors. A single investor can own up to 50 percent of the units; previously, single investors could not own more than 10 percent.

• The amount of commercial space is limited now, as it was before, to 25 percent. However, a new rule gives associations a little wiggle room. In certain circumstances, they can request a variance up to 35 percent for commercial space, providing the development remains “primarily residential.”

FHA’s new guidelines are outlined in Mortgagee Letter 2012-18 issued by the Department of Housing and Urban Development.

© 2012 Florida Realtors®

October 23, 2012 Posted by | News related to Buyers, News related to Financing, News related to Sellers, News related to the Market | Leave a comment

CoreLogic: Fewer homes underwater

SANTA ANA, Calif. – Sept. 12, 2012 – CoreLogic says 10.8 million (22.3 percent) of all residential properties with a mortgage had negative equity (underwater) at the end of the second quarter 2012. That’s down from 11.4 million properties (23.7 percent) at the end of the first quarter.

An additional 2.3 million borrowers had less than 5 percent equity in their home, referred to as near-negative equity, at the end of the second quarter.

So far in 2012, 1.3 million homeowners have moved from underwater status into positive equity.

Negative equity, often referred to as “underwater” or “upside down,” means that borrowers owe more on their mortgages than their homes are worth. Negative equity can occur because of a decline in value, an increase in mortgage debt or a combination of both.

About one in four homeowners with a mortgage in the U.S. (27 percent) had negative or near-negative equity in the second quarter, a drop from 28.5 percent in the first quarter.

Most borrowers in negative equity continue to pay their mortgages; 84.9 percent of underwater homeowner were current on their mortgage payments, up from 84.8 percent at the end of the first quarter.

“Surging home prices this spring and summer, lower levels of inventory, and declining REO sale shares are all contributing to the nascent housing recovery and declining negative equity,” says Mark Fleming, chief economist for CoreLogic.

“Nearly 2 million more borrowers in negative equity would be above water if house prices nationally increased by 5 percent,” adds Anand Nallathambi, president and CEO of CoreLogic. “We currently expect home prices to continue to trend up in August. Were this trend to be sustained, we could see significant reductions in the number of borrowers in negative equity by next year.”

Highlights as of Q2 2012

• Nevada had the highest percentage of mortgaged properties in negative equity at 59 percent, followed by Florida (43 percent), Arizona (40 percent), Georgia (36 percent) and Michigan (33 percent). These top five states combined account for 34.1 percent of the total amount of negative equity in the U.S.

• Of the total $689 billion in aggregate negative equity, first liens without home equity loans accounted for $339 billion aggregate negative equity, while first liens with home equity loans accounted for $353 billion.

• Of the 10.8 million upside-down borrowers, 6.6 million hold first liens without home equity loans. The average mortgage balance for this group of borrowers is $216,000, the average underwater amount is $51,000, and 18 percent of the 6.6 million are in negative equity.

• 4.2 million upside-down borrowers have both first and second liens. The average mortgage balance for this group of borrowers is $300,000, the average underwater amount is $84,000 and 38 percent of the 4.2 million are in negative equity.
 
• Approximately 41 percent of borrowers with first liens without home equity loans had loan-to-value (LTV) ratios of 80 percent or higher and approximately 60 percent of borrowers with first liens and home equity loans had combined LTVs of 80 percent or higher.
 
• At the end of the second quarter 2012, just over 17 million borrowers possessed qualifying LTVs between 80 and 125 percent for the Home Affordable Refinance Program (HARP) under the original requirements first introduced in March 2009. The lifting of the 125 percent LTV cap via HARP 2.0 opens the door to another 5 million borrowers.

• The bulk of negative equity is concentrated in the low end of the housing market. For example, for low-to-mid value homes (less than $200,000), the negative equity share is 32 percent, almost twice the 17 percent for borrowers with home values greater than $200,000.

• As of Q2 2012, there were 1.8 million borrowers who were only 5 percent underwater. If home prices continue increasing over the next year, these borrowers could move out of a negative equity position.

© 2012 Florida Realtors®

October 23, 2012 Posted by | News related to Short Sales and Foreclosures, News related to the Market | Leave a comment

FHFA sells 699 Fla. REOs to investor

WASHINGTON – Sept. 11, 2012 – A controversial move to sell 699 Fannie Mae- and Freddie Mac-owned homes in bulk to an investor was closed last week, according to the Federal Housing Finance Agency (FHFA). Pacifica Companies LLC purchased the homes as part of a real estate owned (REO) pilot initiative.

Pacifica has not released details on how it will oversee the properties. Based in San Diego, the company’s website claims it has an office in Tampa, as well as Austin, Texas; Riverside, Calif.; and four cities in India.

Pacifica paid $12.3 million upfront in a joint venture agreement. It will pay an additional $49.3 million by sending Fannie Mae 90 percent of future proceeds. After that, Pacifica will collect a 20 percent management fee and pay Fannie Mae 50 percent of future proceeds. FHFA projects the total value of all payments to be $78.1 million. The total price paid by Pacifica doesn’t represent a significant discount; however, the relatively low downpayment and profit-split deal would make it attractive to most investors.

“When FHFA proposed this program, the nation was worried about an onslaught of distressed home sales and too few buyers,” says Florida Realtors’ Senior Vice President of Public Policy John Sebree. “However, NAR and Florida Realtors have always taken the position that Realtors know their neighborhoods and are in the best position to move REOs into the hands of buyers.”

The Florida REO sales impacted homes throughout the state, including Central and Northwest Florida, Southeast Florida and the West Coast. It’s still unclear if Pacifica agreed to rules regarding a future sale. NAR says it’s setting up a meeting with FHFA to find out more details.

“Going forward, FHFA, Fannie Mae and Freddie Mac may decide that we no longer need bulk sales to investors,” Sebree adds. “Florida buyers are coming out in force and many say they now face multiple bids and a limited inventory of homes to consider. If we do discover any problems with the current deal, it will hopefully be an isolated incident.”

Alan Zibel, a writer for The Wall Street Journal, thinks Fannie Mae may focus now on sales to single buyers because it’s more profitable. “In the second quarter of this year, (Fannie Mae) recovered 59 percent of outstanding mortgage balances” when it sold a REO, Zibel says, “compared to 54 percent a year earlier.”

© 2012 Florida Realtors®

October 23, 2012 Posted by | News related to Investors, News related to Short Sales and Foreclosures, News related to the Market | Leave a comment

‘No pets’ may be deal breaker for renters

NEW YORK – Sept. 7, 2012 – If a rental unit doesn’t allow pets, more renters say they don’t want it.

A recent survey by Apartments.com found that 43 percent of respondents said that they currently own pets and more than a quarter said they plan to get a pet within the next year. Even among those who aren’t pet owners, however, 34 percent still said that they want the option and enjoy living in a pet-friendly building.

“Renters have made it clear that not accommodating a pet could be a deal breaker in their apartment search, and many apartment managers have taken this feedback into consideration and adjusted pet policies,” says Tammy Kotula, a spokeswoman with Apartments.com.

Only 20 percent of non-pet owning renters said they avoid buildings that allow pets.

The most popular pets renters own, according to the survey are: a small dog under 25 pounds (35.5 percent); a cat (24.2 percent), a large dog that weighs more than 50 pounds (13.6 percent), and a medium dog that weighs between 26 to 50 pounds (11 percent).

Source: “National Survey Reveals Trends in Pet-Friendly Renting,” RISMedia (July 29, 2012)

© Copyright 2012 INFORMATION, INC. Bethesda, MD (301) 215-4688

October 23, 2012 Posted by | News related to Investors | Leave a comment

Home asking prices up 2.3% in Aug. over year ago, claims Trulia

SAN FRANCISCO – Sept. 6, 2012 – Nationally, asking prices on for-sale homes increased 2.3 percent in August compared to the previous year, according to data compiled for the Trulia Price Monitor.

According to Trulia, asking prices on for-sale homes in the Cape Coral-Fort Myers metro area rose 16.5 percent year-over-year; in the West Palm Beach metro area, 10.4 percent; in the Miami metro area, 9.6 percent; and in the Orlando metro area, 8.6 percent.

In 68 of the 100 largest metros, asking prices on for-sale homes rose year-over-year in August. Excluding foreclosures, asking prices rose 3.8 percent year-over-year. These are the largest year-over-year gains since the recession, according to Trulia.

Meanwhile, asking prices rose nationally 1.8 percent quarter-over-quarter, seasonally adjusted. Looking month-over-month, asking prices rose by 0.8 percent – the seventh consecutive month of increases, according to Trulia.

Nationally, rents rose 4.7 percent year-over-year in August, compared to 5.8 percent year-over-year in May – making it the slowest rise since March, according to Trulia.

The Trulia Price Monitor and Trulia Rent Monitor are based on the for-sale homes and rentals listed on Trulia. The monitors take into account changes in the mix of listed homes and reflect trends in prices and rents for similar homes in similar neighborhoods through Aug. 31, 2012.

© Florida Realtors®

October 23, 2012 Posted by | News related to Sellers, News related to the Market | Leave a comment

More banks open to short sales

ALAMEDA, Calif. – Sept. 6, 2012 – To meet the terms of the $26 billion mortgage settlement, the nation’s five largest banks are becoming more agreeable to short sales, Inman News reports.

The five banks – Bank of America, Citi, JPMorgan Chase, Ally Financial and Wells Fargo – have issued most of their relief from the settlement so far in the form of short sales or deeds in lieu of foreclosure.

Under the settlement, the five banks are required to provide $17 billion in aid to homeowners, either through loan modifications, principal reductions or short sales.

To date, 74,614 homeowners have received an average of $116,200 each as either a short sale or deed in lieu of foreclosure.

Since January, sales of homes in the pre-foreclosure process – usually taking the form of short sales – have been rising. In fact, they reached a three-year high in the first quarter, RealtyTrac reports. Meanwhile, the number of foreclosure sales has been declining.

Besides short sales and deed in lieu of foreclosure, mortgage servicers are also increasingly offering first-lien loan modifications to struggling homeowners. According to a progress report on the settlement, 7,093 borrowers received first-lien loan modifications, averaging about $105,650 per borrower.

Source: “Banks Using Short Sales to Meet Robo-signing Obligations,” Inman News (Sept. 4, 2012)

© Copyright 2012 INFORMATION, INC. Bethesda, MD (301) 215-4688

October 23, 2012 Posted by | News related to Sellers, News related to Short Sales and Foreclosures | Leave a comment

Homes selling quickly, time on market down

WASHINGTON – Sept. 5, 2012 – A new measure shows the typical amount of time it takes to sell a home is shrinking.

The time it takes to sell a home currently – 69 days in July, down 29.6 percent from 98 days in July 2011 – is in the range of historic norms for a balanced market, according to NAR. It’s also well below the cyclical peak reached in 2009.

The median reflects a wide spectrum; one-third of homes purchased in July were on the market for less than a month, while one in five was on the market for at least six months.

“As inventory has tightened, homes have been selling more quickly,” says Lawrence Yun, NAR chief economist. “A notable shortening of time on market began this spring, and this has created a general balance between home buyers and sellers in much of the country. This equilibrium is supporting sustained price growth, and homes that are correctly priced tend to sell quickly, while those that aren’t often languish on the market.”

At the end July, there was a 6.4-month supply of homes on the market at the current sales pace, which is 31.2 percent below a year ago when there was a 9.3-month supply.

NAR says that its research has determined that a balanced market generally has a median selling time of slightly more than six weeks, making the current market appear balanced.

In balanced market conditions, home prices generally rise 1 to 2 percentage points above the overall rate of inflation as measured by the Consumer Price Index.

“Our current forecast is for the median existing home price to rise 4.5 to 5 percent this year, and about 5 percent in 2013, which is somewhat stronger than historic norms because of the inventory shortfall most pronounced in the low price ranges,” Yun says.

Inflation (CPI growth) is projected at 2.1 percent for 2012 and 2.3 percent next year.

From 1987 through 2011, analysis of the NAR Profile of Home Buyers and Sellers series showed the typical time on market was 6.9 weeks, while the existing-home sales series showed an average supply of 7.0 months – just above the high end for a balanced market.

NAR’s new measure of days on market shows a longer selling time than earlier findings that measured traditional sellers of non-distressed homes. The new series includes short sales that typically took three months or longer to sell.

“Factoring out short sales, the median time on market for traditional sellers appears to be in the balanced range of six to seven weeks,” Yun says.

During the peak of the housing boom in 2004 and 2005, when inventory supplies were historically low at an average 4.3 months, the median selling time was 4 weeks. Prices in that time rose at an annual rate of 10.3 percent.

In the economic downturn, time on market for non-distressed sellers peaked at 10 weeks in 2009 with a 10-month annualized supply. The median price fell 12.9 percent that year, the biggest annual decline on record.

“Ironically, if housing construction doesn’t pick up to normal levels within two years, supply shortages could be sustained for an extended period and lead to above average appreciation,” Yun says. “Therefore, any unnecessary hindrance to housing starts, such as excessive local zoning regulations or stringent bank capital rules for construction loans, should be carefully re-examined.”

NAR’s new days-on-market figures will be included in future existing-home sales releases. It’s derived from a monthly survey for the Realtors Confidence Index.

The median time on market can be misleading at times, however. If an abundance of fresh listings enters the market, it could skew the average downward.

© 2012 Florida Realtors®

October 23, 2012 Posted by | News related to Buyers, News related to Sellers, News related to the Market | Leave a comment