After the Fed Move, New Records for Rates, Barely

A week has passed since the Fed’s latest bold move to stimulate the economy and nurture the housing recovery, but anyone expecting a huge downturn in mortgage rates would be disappointed by the initial response. Mortgage rates did trickle lower this week, enough to step into new record low territory, but it was by just a whisker for the most popular kind of loan.

The Fed’s influence in the market should produce lower rates, but gently, and over time. We believe that the cumulative benefit of the Fed’s action to be valued at perhaps a quarter of a percentage point.  Of course, this is a moving target, since at any time it is relative to where rates would be, absent the Fed’s manipulation of the market.

Mortgage Rates Nudge Lower

HSH.com’s broad-market mortgage tracker — our weekly Fixed-Rate Mortgage Indicator (FRMI) — found that the overall average rate for 30-year fixed-rate mortgages declined by a single basis point (0.01%) to 3.82%, a new record low for the series; as well, the FRMI’s 15-year companion held at a record low of 3.10% for the week. FHA-backed 30-year FRMs downshifted by seven basis points, and the most viable option for credit- or equity-impaired borrowers dipped to a new low of 3.35%, while the overall average rate for 5/1 Hybrid ARMs finished the weekly survey at 2.70%, shedding three hundredths of a percentage point to establish a new record low.

Homebuilding is improving…

Troubled though it is, housing has been one of the brighter spots in the economy this year. Refinancing has lowered household obligations and is supporting both savings and spending, while home sales have perked up enough to produce at least some wide-ranging economic benefit.

Reflecting the improving market, the National Association of Homebuilders index of member sentiment continues to edge higher, with the reading of 40 for September the highest such value since June of 2006. Even with the continued gains, readings here below 50 indicate a sub-par climate, although considerably less so than at any time in more than six years. Sub-indexes in the report covering present single-family sales levels moved up (+4 points, to 42), but traffic at showrooms and model homes climbed just a single point to a still-weak 31. Given these minor rises, it is hard to reckon how the measure covering expectations for the next six months jumped eight points to 51, indicating actual optimism about the future, but it is an encouraging sign, regardless.

… and home sales, too

Construction and sales of new homes compete to some degree with sales of existing homes. Existing home sales increased by a stout 7.8% in August, rising to an annualized rate of 4.82 million units. This was a substantially better pace than was expected, and the rise in sales was accompanied by other encouraging news, too. Despite a 2.9% rise in listings for the month, inventory levels held at a fairly normal 6.1 months of units available, and prices continue to show signs of recovering, with August’s median home price some 9.5% above year-ago marks.

FHA eases condo rules, but is it enough?

Many borrowers who have tried to purchase a condo with an FHA mortgage in the past couple of years have bumped up against a frustrating dilemma: the condo they want to buy is not approved for FHA financing.

FHA condo buyers face a double application process: both the borrower and the condominium must meet the lender’s requirements. The FHA maintains a list of approved condominiums and recently revised its guidelines for placing developments on that list. Borrowers can only use FHA loans in buildings that already have FHA approval.

Carol Galante, acting FHA commissioner, said at the recent Northern Virginia Association of Realtors’ 2012 Economic Summit in Fairfax, Va., that the new guidelines should make it easier for condo buyers, particularly buyers of newly built condos, to obtain an FHA mortgage.

Here are some of the main changes to the FHA condo lending rules:

• Condo fee delinquency rule. While FHA loans still cannot be approved for developments where 15 percent or more of owners are delinquent on their condo association dues, Galante said that the FHA has “redefined delinquency to 60 days past-due rather than 30 days.” This should increase the number of eligible condo developments and allows homeowners more time to bring their dues up-to-date.
• Clarification of investor ratios. FHA rules say that 50 percent or more of the units within a condo development must be owner-occupied for the development to be on the approved list. The new guidelines still stick to the 50 percent rule, but that ratio may be easier to achieve.
“People who own a condo as a second home, which I know is popular in places like San Francisco and in resort areas, are not counted as investors in that investor/homeowner ratio,” said Galante. “Also, for new developments we’re not counting the units that have yet to be sold by the developer as investor-owned. We’re also looking at projects on a phase-by-phase basis rather than expecting 50 percent of the units to be sold before FHA financing is available.”
A single investor or several investors can now own up to 50 percent of the units within a development, when previously any one investor could only own 10 percent of a condo community. However, this applies only when at least 50 percent of the homes are either already owned or are under contract to owner-occupants.

• Making mixed-use development easier. “Right now our rules say that only 25 percent of the space in a condominium development can be used for commercial space rather than residential use, but that doesn’t work very well for smaller developments,” said Galante. “We want to support mixed-use developments, so we’ve put in place a process for exemption requests for developments with up to 35 percent of their spaced used for commercial purposes.”

While these changes can ease the way for some condo buyers, one FHA rule that impacts many borrowers has not been adjusted: only 50 percent of the units within a condo development can be financed with FHA loans. So even if you find an FHA-approved building, if your loan will put the FHA total over the 50 percent limit, your application will be denied.

While any easier condo financing rules are welcome, the FHA may need to make some more changes before FHA condo financing becomes widely available again.

Green Real Estate and Education Go Hand and Hand and the Timing Couldn't Be Better

What a better time to think of value in residential real estate than in the present challenging times. Most are still wondering if the projections of a turn around in the current marketplace are just fiction or truth. Five steps forward and two back, then three forward and three back. So what is really going to drive value for the buyer to buy again? What does a buyer consider in today's economic climate for the decision to buy a home? Do they think of a home for their family in terms of how their parents looked at the purchase? Do they still think a home is the American Dream where investment returns will be offered in the 6-8% in annual growth patterns as in the past?

The current climate offers a new sales technique for mortgage and real estate companies in moving property. The "short sale" market is of value to the investor, but counter productive for future community values. So, if you want to sell a home in this market, what are your options? The appraiser will always look at recent sales, and there have been several homes foreclosed and resold as short sales in your neighborhood. The bad thing is the family that wants to move across town into a nicer home, but the short sales will affect the value of their home dramatically. Appraisers will look at the most recent sales using the cost approach to determine value. This gives you only one real option to take less for your home, and hopefully buy a short sale across town if any are available. I mean why should we take such a loose; we were always on time with our mortgage and taxes, why are we being so affected by others hard times.

So you don't sell, because you do not want to take such a loss and there are no foreclosures in the area you want to go. What do you do to build value for the future? What do you honestly think will help your home stand out in front of the others? What do you think a buyer is thinking about today? Low utility bills? Are they considering looking into solar or energy savings? Are they curious about green building and green renovation products? Here is an idea. Put $15,000 in energy efficient upgrades in your existing home, taking advantage of the tax incentives and rebates. Now, depending on the upgrades you have chosen, the property stands out in this development. With offering up to 65% lower energy bills alone a buyer desiring your neighborhood may lean towards your home even if there is a short sale for less money. The timing couldn't be better as most are curious on how to renovate to lower utility bills. Green renovations, can make a difference in real estate values. Using healthy materials and installing more high efficiency systems will making a difference in quality of life. While economic times are challenging those involved in the energy sector hold promise for growth. Our company, Green Real Estate Education is educating all sectors in the real estate industry to bring these points to those is there markets. Our educational programs are in demand even in these economic times.

Energy Efficient Homes and proper marketing especially if they offer the added benefit of being green certified properties are some of the most sought after residences and gaining strength daily. The entire building industry is changing towards sustainable and green techniques; it's about time we embrace the new green revolution.

Home sales, prices post gains

Home sales and prices were on the rise in August.

That’s according to the National Association of Realtors (NAR), a Chicago-based trade group that represents 1 million realty brokers and salespeople.

More homes sold

Home sales hit an annualized and seasonally adjusted pace of 4.82 million units for the month, up 7.8 percent compared with 4.47 million in July and 9.3 percent compared with 4.41 million in August 2011, NAR said in a statement.

Annualized sales figures project totals for the entire year while seasonal adjustments account for variations in sales, but don’t compensate for abnormal weather patterns. The totals include single-family homes, townhomes, condominiums and co-ops, but not newly constructed houses sold by builders.

Home prices rise

The national median price of homes sold climbed to $187,400 in August, up 9.5 percent compared with August 2011.

The median price is the midway point at which half of the homes sold at higher prices and half sold at lower prices. Median prices can be distorted by changes in the mix of homes sold.

NAR Chief Economist Lawrence Yun attributed the results to favorable home-buying factors. Homes today are more affordable due to low mortgage interest rates and depreciated values.

Fewer homes for sale

Housing markets are also strengthening due to fewer homes being for sale. NAR reported that 2.47 million existing homes were on the market at the end of August. That represented a 6.1-month supply at the then-current pace of sales, down 18.2 percent compared with the 8.2-month supply at the end of August 2011.

A six-month supply is generally viewed as a balanced market, favoring neither buyers nor sellers. However, local market conditions can and often do vary considerably from the national picture.

Other August statistics: First-time home buyers accounted for 31 percent of purchases, all-cash sales made up 27 percent of transactions, and investors, who account for most cash sales, purchased 18 percent of the homes sold.

Tight lending conditions

In a separate statement, NAR also said an additional 500,000 to 700,000 homes could be sold annually if mortgage lending standards were eased.

A survey of Realtors found widespread concern over what NAR characterized as “unreasonably” tight credit for residential mortgages. Realtors said lenders required excessive information from borrowers and took too long to approve loan applications.

Green Real Estate - Interest Grows in California

I grew up in North Hollywood, California. I remember attending Monlux elementary school in Van Nuys when "Ecology" became big news. That's 40+ years ago! Back then it was about recyling. We'd have huge newspaper drives to divert some of that trash for re-use. I didn't really understand what was happening back then but now I realize that I was witnessing the birth of something important. California really was the birthplace of the "Green" movement. Sometimes it seems like the rest of the country is just catching up. And now that we are reaching the onset of the economic recovery we are beginning to see emerging technologies leading the way, and in the forefront of these technologies will be the development of green building products and real estate practices. Nowhere in the United States are they more focused on developing environmentally responsible practices than in California. This focus will create a growing opportunity for green real estate in California that will be something people will want to be a part of in the years to come.

As a seller of homes or commercial properties, environmentally sound additions are always a major selling point. Being able to point out the smaller carbon footprint of one home compared to another will be a desirable feature to a homebuyer. Californians have led the way in developing green practices such as solar and wind generated power and energy saving building materials and techniques. Any property in California that can state the energy efficient inclusions in the home is far more likely to sell before homes that have no environmental awareness at all. Taking into account the importance of environmental responsibility is imperative if a seller wishes to be successful in the state of California.

As a buyer in California, green real estate is just another of the enormous number of incentives to purchase a home in 2010. As if the extraordinary home prices and interest rates together with the tax incentives to purchase a primary residence were not enough, there will now be added seller competitiveness to offer green options in the homes they are selling. The climate of environmental concern is prevalent in California. Many homes have either been built or retrofitted with more environmentally friendly features and products than in any other state. If the choice comes down to two homes in the same price range, it would make more sense for a buyer to purchase a home that will save them money continuously with the energy savings that are provided in a green home. With California's awareness of the need to become ecologically responsible, there is no reason for a buyer to choose a home that is not environmentally sound.

Spanish housing market shows signs of finding a floor

The Spanish property market shrank by just 3pc in July compared to the same time last year, and shows signs of finding a floor, in transaction terms at least.

There were 24,005 home sales in July (excluding social housing), 3pc less than the same month last year, and 8pc more than the previous month, according to the latest figures from the INE.

July’s annualised fall was the smallest of the year by a wide margin, and it now looks as if the market has found a floor in transaction terms, as illustrated by the chart above. We will have to wait a few more months to see if the trend is confirmed.

There were roughly 275,000 homes sold over 12 months to the end of July, which might turn out to be the minimum number and turning point in this cycle. In a country of more than 47 million people, and some 16 million households, not to mention European demand for holiday-homes, there comes a point when the housing market will have to start growing again.

The following table provides all the key data on Spanish home sales over the last 5 years (click to enlarge).

The Department of Housing also recently published housing market transaction data for Q2, broken down by region in the following table.