Tuesday, January 27, 2009

Existing-Home Sales Post Surprising Gain Last Month

Existing-Home Sales Post Surprising Gain Last Month

The National Association of Realtors reported that sales of existing homes rose to an annual rate of 4.74 million in December, from a downwardly revised pace of 4.45 million in November.

December's sales had been expected to fall to a pace of 4.4 million units. according to Thomson Reuters.

The median sales price plunged to $175,400, down 15.3 percent from $207,000 a year ago.

Analysts saw hope in the apparent pickup in housing sales and attributed the gain to lower mortgage rates.

But they cautioned that the trend would need to continue to represent a real move for the market off its low point.

"This is the first time in a while that we have seen a return to normalcy in the relationship between lower mortgage rates and increased sales. That's good news, but it may be too soon to get really excited yet," said Michael Schenk, senior economist at Credit Union National Association in Madison, Wisc.

"The problem is that the labor markets will weaken going forward. That might not completely overwhelm the effect of lower interest rates, but people are reluctant to buy a home when they think their job prospects are not so great," Schenk said.

The price drop represented the largest decline since the NAR started keeping records and probably the largest since the Great Depression, Lawrence Yun, NAR chief economist told reporters.

Economists looked at the price move as critical toward a possible housing recovery.

"While further liquidations are likely in the months ahead, the price adjustments now underway represent a crucial step toward stabilization of the housing market," David Resler, chief economist at Nomura Securities, wrote in a research note.

Analysts polled by Reuters had expected existing home sales to set a 4.40 million unit pace in December.

That was the lowest price since May 2003 and the biggest year-over-year drop on records going back to 1968.

The sales news lifted shares of home builders broadly, with Hovnanian [HOV 1.71 -0.13 (-7.07%) ] getting a 14 percent spike immediately after the report came out.

"It appears some buyers are taking advantage of much lower prices," said Yun. "The higher monthly sales gain and falling inventory are steps in the right direction, but the market is still far from normal balance conditions."

Wednesday, January 21, 2009

Real Estate Outlook: Change Anticipated

The national economic headlines continue to be bearish, but some of the underlying fundamentals for real estate are pointing to better days ahead.

Take home mortgage rates: Last week thirty year fixed rates dropped below the seemingly-unbreakable five percent barrier for the first time on record, according to the Mortgage Bankers Association.

New thirty year loans went for an average 4.89 percent, while fifteen year loans were just above 4.6 percent.

Equally important, the outlines of the Obama administration's and Congress's plans to turn around the housing markets just became clearer. Tops on their list: Ending the foreclosure epidemics in some parts of the country through ambitious new programs designed to rework the terms of hundreds of thousands of mortgages that are now unaffordable.

In a letter to Congress last week, Lawrence Summers, Obama's nominee to head the National Economic Council, said the incoming administration plans to use portions of the remaining $350 billion in "TARP" -- or "Troubled Asset Relief Program" -- money to rework monthly payments for what Summers called "responsible home owners" now facing economic challenges in the recession.

Though Summers did not go into detail, the program is likely to be based on FDIC chairman Sheila Bair's proposed "mass-modification" concept that the Bush administration rejected last Fall.

Versions of that program might include widespread principal write-downs -- outright reductions in home owners' mortgage balances -- and guarantees to lenders in the event borrowers re-default.

The Obama administration is also likely to institute an immediate ban on all foreclosure actions, possibly for three months, and is certain to enact bankruptcy reform legislation allowing judges to modify mortgage terms to forestall foreclosures.

Why's this important for anyone involved in real estate? The key to stabilizing local markets, say most economists, is reducing the numbers of new foreclosures and other distressed-price transactions.

Foreclosures lower property values in surrounding neighborhoods, wherever they occur. That discourages potential buyers -- who don't want to plunge in as long as prices are still declining.

If the new administration and Congress can successfully reduce the numbers of new foreclosures, there's an excellent chance that the current combination of low prices and record low mortgage rates can have the effect they should be having: Spurring new sales.

Add in still another factor: Congress may create a new and improved tax credit -- one that's not repayable and covers all home purchases, not simply first-time buyers -- and we just might be looking at a FAR more positive outlook than a lot of people could imagine.

by Kenneth R. Harney

Monday, January 19, 2009

Obama on Track to Win $350 Billion from Congress for Bailout

Realtors Reiterate Keys to Housing Recovery

RISMEDIA, January 15, 2009-(MCT/RISMedia)-A week before taking office, President-elect Barack Obama worked Tuesday to ensure that he’ll have more than a trillion dollars at his disposal within weeks to shore up the still-sinking economy. He appeared on track to win a quick $350 billion down payment from Congress, with more to come later. Also Tuesday in other economic efforts, National Association of Realtors President Charles McMillan addressed the House Financial Services Committee, saying that in order to move the country out of this economic crisis, Congress and the next administration must place significant emphasis on restoring confidence in the housing market.

“The housing sector is at the core of the current economic crisis,” McMillan said. “A renewed, revitalized and robust housing market is essential to generating commerce and helping families build wealth.”

Obama, with top aides in tow, worked at what one aide called a continuing high-stakes effort to assure rapid congressional support for an unprecedented outpouring of money to reverse the country’s downward economic spiral.

First, he’s trying to convince Congress to let him have the second half of the $700 billion Wall Street bailout package created last fall. Senate Democrats signaled afterward that, while they still have questions about how he’ll spend the money, they will give their OK this week so he can start tapping into the money within days of becoming president.

Second, he’s still working to convince lawmakers to approve a stimulus package that would allow him to spend upward of $800 billion over two years to create more than 3 million jobs, many of them in construction and manufacturing.

Democrats were hopeful that they could pass a bipartisan bill by mid-February, but they said that questions remained and the bill was still being negotiated. They said that Obama was willing to bargain, apparently ready to drop a proposed $3,000-per-job tax credit to businesses for jobs created or saved, for example, and to expand an energy tax credit.

“Did he close the deal? Well, he did a lot of closing today,” said Sen. Debbie Stabenow, D-Mich. “There’s no better closer.”

The more pressing issue was Obama’s urgent request, formally made by President George W. Bush on his behalf, for the remaining $350 billion in the Troubled Asset Relief Program.

Obama told Democrats that he will use the money differently from how Bush and Treasury Secretary Henry Paulson used the first half, a critically important offer to win over members of Congress who don’t think the first $350 billion was well spent or monitored.

Most notably, Obama said he’d focus more on helping homeowners avoid foreclosures, work more to help people get student loans and car loans, and make sure that the taxpayers’ money didn’t go to high salaries or bonuses for Wall Street executives.

Meanwhile, during McMillan’s testimony, he congratulated Chairman Barney Frank, D-Mass., on H.R. 384, the TARP Reform and Accountability Act, which was introduced last week. Many points in this bill reinforce NAR’s proposed recovery plan to stimulate housing investment, mitigate foreclosures, help current homeowners, and provide needed liquidity to commercial mortgage markets to ensure that financing is available.

The principle focus of NAR’s plan is to ensure that the Troubled Asset Relief Program does what it was originally intended to do - end the credit crisis and jumpstart mortgage lending. “It is imperative to get TARP back on track by targeting funds for mortgage relief, which will help lower mortgage rates and reduce foreclosures,” said McMillan. “In addition, eliminating the repayment feature of the first-time home buyer tax credit and expanding it to all home buyers; reinstating the higher mortgage loan limits for FHA, Fannie Mae and Freddie Mac; and lowering mortgage interest rates through a buy-down program will meaningfully impact the housing industry.”

“We are pleased that Congress is moving forward on these important issues. Together these actions will build a solid foundation for a housing recovery,” said McMillan.

NAR’s plan also includes keeping mortgage interest rates low, boosting home buyer confidence, and reducing the current foreclosure rate. NAR has also asked that regulators be encouraged to help financial institutions resolve problems in the short-sale process, make it easier for servicers to modify existing loans, remove unreasonable underwriting guidelines and insist that credit reporting agencies correct errors promptly.

“Low interest rates are only effective if people can get a loan. We hear every day from our members that even home buyers with good credit are having trouble getting mortgage loans. We must all work together to unclog the housing and financial system,” said McMillan.

NAR called on Congress to use current TARP dollars to not only reduce interest rates, but also fix operational issues that are preventing consumers from getting or modifying home loans. “These are critical steps that must be undertaken quickly if we are to right our nation’s housing and financial markets,” McMillan said.

NAR hailed the House of Representatives’ actions and called on the Senate to move quickly in adopting its proposal. NAR also expressed hope that the new administration will focus on a housing recovery as it moves forward with a larger stimulus package.

On Tuesday, the No. 2 official at the Federal Reserve also told Congress that it’s essential that Congress allow the second $350 billion to be spent. Federal Reserve Vice Chairman Donald Kohn also endorsed Obama’s idea of using some of the money to ward off more home foreclosures.

“Preventable foreclosures harm not only the affected borrowers and their communities but also, through their effects on the housing market, the broader economy and the financial system as well,” Kohn told the House Financial Services Committee.

While most Democrats at the lunch meeting welcomed the push against foreclosures and other changes, they told Obama that they want to see more details.

Obama, said Sen. Ben Nelson, D-Neb., “wants us to trust and verify, but I’m not sure yet what we’re supposed to verify.”

Republicans had similar thoughts: “Too general,” said Sen. John Cornyn, R-Texas.

“The American people have a lot of questions about how additional funds would be used,” said Sen. Mitch McConnell, R-Ky., his party’s leader in the Senate.

“The current administration used these funds for the auto industry, a move that I opposed,” he said. “Now congressional Democrats are urging more of the same. The American people still don’t have assurances that this money will not be wasted or misused to play favorites. So far, the incoming administration has not said whether it plans to limit funds to their original purpose or to expand their use to help specific industries.”

Obama spoke with McConnell on Monday, seeking broad bipartisan support even though he doesn’t need it. He planned to meet with other Senate Republicans later.

“We’ll be happy to listen,” McConnell said. “They’ll have a receptive albeit cautious audience.”

Ultimately, Obama doesn’t need much to get the money. Congress gave itself the power to block the second installment, but that would take majority votes in the House of Representatives and the Senate, both of which Democrats control.

10 Real Estate Resolutions For Buyers and Sellers

RISMEDIA, January 12, 2009-The New Year is here, and many are more resolved than ever to achieve real estate goals that went by the wayside in 2008 due to economic and other concerns. But, what’s one to do to optimize their chances of success amid what’s still a tumultuous, highly demanding marketplace?

“While tricks of the trade abound to give buyers and sellers a leg up on the competition, there are also a number of basic pitfalls buyers and sellers should be sure to avoid lest they commence their real estate venture on shaky ground,” notes Robert Jenson, CEO of luxury Las Vegas real estate purveyor The Jenson Group.

With this in mind, Jenson offers these New Year’s Real Estate Resolutions to help buyers and sellers avoid common blunders and get the deal done:

Buyer Resolutions:

1. I Will Get Loan Pre-Approval: Many buyers want to find the “perfect” home before having their credit pulled, which can backfire when an offer is on the table and time is of the essence. It’s wise to get pre-approved for a loan even before you view your first home. Your credit report may contain inaccurate information that you were not aware of, which can be a time consuming process to rectify. Or, you might not like what loan program you qualify for, or you might qualify for a higher loan value than you thought. Ultimately, you will need a pre-approval letter with your offer, so do yourself a favor and do this in advance. It’s free, after all.

2. I Will Have Clear Goals. Create a realistic idea of the property you’d like to buy. What features are most important to you? Make two lists: one of the items you can’t live without and one of the features you would enjoy. Refine the lists as the house hunt progresses, but remember that no place is going to be 100% perfect. It is going to be up to you to put the finishing touches on and call it home.

3. I Will Not Forego Home Inspections. After your offer is accepted, set up a home inspection. It’s not uncommon to find problems, including leaky roofs, cracked walls, insect infestations and foundation problems. Hire a reputable inspector, and negotiate to get you the most for your money once the inspector’s report is final. If you negotiate repairs as part of the purchase, ask for a “walk through” before finalizing the paperwork to assure all issues are resolved to your satisfaction. Also inquire about home protection plans as part of the purchase, which may save you money in the short and long-term future.

4. I Will Diligently Shop Mortgages. A difference of even half a percentage point can mean a considerable savings over the life of a loan. For example, the difference in the monthly payment on a $100,000 mortgage at 8% vs. 7.5% is about $35 per month. Over 30 years, that’s $12,600. Be a smart consumer and comparison shop for the most favorable mortgage rates and terms.

5. I Will Use a Buyer’s Agent. Purchasing a home could be the most important and complex financial transaction you engage in, and going it alone is risky. Indeed, a buyer’s agent can save you time, hassle and thousands of dollars. Take time and care when selecting a real estate buyer’s agent - find someone you can trust, and that you have a good rapport with.

Seller Resolutions:

1. I Will Not Overprice My Home. Every seller naturally wants to get the most money for his or her product. The most common mistake that causes sellers to get less than they hope for, however, is listing too high. Listings reach the greatest proportion of potential buyers shortly after they reach the market. If a property is dismissed as being overpriced early on, it can result in later price reductions, which reflect poorly on the listing. Overpriced properties tend to take an unusually long time to sell, and they end up being sold at a lower price than they likely would have had they been priced properly in the first place.

2. I Will Not Limit Showings. Are you serious about selling your home? Then you need an open door policy and to ensure the home is ready to be shown at the drop of a hat…even if you’re not around. Pack up your valuables and provide an outdoor lockbox that real estate agents may access at their discretion. Most showings are fairly spur of the moment, and you don’t want to miss out on any qualified prospect.

3. I Will Properly Stage My Home. When attempting to sell your home to prospective buyers, do not forget to make your home look as pleasant and fresh as possible. Plant flowers, wash the windows and screens, put on a coat of new paint, lay new carpet, add furnishings and d├ęcor items, eliminate clutter and remove personal photographs from around the house. It’s time to show off your beautiful home and make someone else feel completely at home in it. First impressions are critical, so ensure the junk is packed in boxes, and all boxes are put in storage vs. the garage so the prospective buyer can properly evaluate and appreciate that part of the house, too. Clean out the closets, so they look bigger.

4. I Will Not Wait for an Offer Before Making Needed Repairs. Would you buy a Ferrari with bent rims, stained rugs and cigarette burns in the seats, even if the seller was offering a “repair credit”? Doubtful, as the buyer would have an understandable poor impression of how the vehicle was treated and assume the worst. When selling a home, eliminate any need for such credits in advance. Even before you list it for sale, hire professionals to inspect the roof, pool, and other structural elements, and for termites and other important buyer considerations. Make ALL repairs before you list the house on the market to thwart anticipated objections in advance.

5. I Will Be Aware of All Contract Terms. It is extremely detrimental to be ill-informed regarding the details of your real estate contract. Real estate contracts are legally binding documents, and they can often be complex and confusing. Not being aware of the terms in your contract could cost you thousands for repairs and inspections. Know what you are responsible for before signing any contract. Can the property be sold “as is”? How will deed restrictions and local zoning laws affect your transaction? Your real estate professional should ensure you know the answers to these kinds of questions, which can save you a considerable amount of money.

Inman News Headlines