Case Shiller Real Estate Trends And More

This report released yesterday, confirms that the housing markets are in a firming process. Hardly a recovery at this point. We are still in the numbers are bad, but
not as bad stage. Typical of the early and therefore fragile stages of a housing recovery. Case Shiller reports that home prices have increased for the third month and that the decline in prices continues to shrink. No bottom yet and we can do this for quite a while before we see an end to this. Never the less, this is good news and the 20 MSA composite index shows improvement. The year over year change of home price has declined 13.3%, less that the 15.4% decline last year. We may be seeing the emergence of a trend towards higher home prices.

In any market as complex as real estate there are always trends and counter trends. As the economy continues to unfold, some of these trends will be strengthened and others weakened. Why Its never a straight line and so hard to predict direction.

In Our Favor
Prevailing Positive trends

We have an increasingly strong economy. As someone recently said, we have the turn
signal on but havent yet turned the corner.

1. Real Estate: The real estate sector is looking better.
2. The stock market is actually bullish. The Dow has gone from a annual low of to 6440 to over 9500 today
3. Manufacturing: National figures show factory output has actually expanded. The ISM index is over 50 a positive number indicating manufacturing is growing and expanding.
4. TARP: The Obama administration is about to put a lot of money to correct some of the excesses still holding the financial system back from functioning properly. The toxic asset program is launching one year after Congress approved the $700 billion financial rescue legislation for Troubled Assets Relief Program
5. Treasury Department: Treasury has been working with private groups to build investment funds, combining public and private money to buy toxic paper still on the books. Ive read that Treasury is committing 2.5 billion is a dollar for dollar match for funds raised by private firms, eventually reaching 40 billion dollars in new investment money for bad paper.
6. REITS are raising money as we approach a real bottom in the commercial and mortgage sectors. New stock issues have raised between 15-20 billion dollars. The REIT indexes are up handsomely, in anticipation of bargain prices when the dust settles on commercial property now feeling the pain of a great recession.

Prevailing Counter Trends

1. Long Road Back: By historical standards this collapse is deep. The chart to the right compares the red bubble of today to the last bubble of the 1980-1990s . It took almost 97 months for home prices to turn positive and this collapse is much larger
   
2. Homes Foreclosure: Reatlty Trac reports that there is still ample supply in the foreclosure pipeline. "record 138,224 properties entered the foreclosure process in August when they were subjected to notices of default or lis pendens, up 3 percent from July and a 16 percent increase from a year ago. The number of properties subjected to auction notices in August, 144,113, was also a new record, rising 4 percent from July and 53 percent from a year ago."
3. Option ARMs: Option ARM mortgages will begin to readjust, slamming borrowers with higher monthly mortgage payments. Analysts say that could unleash the next big wave of foreclosures
4. Commercial Property: All of those developers and owners of office buildings and big apartment complexes that have bought or built in the last five years, will be looking to refinance their loans. Some commercial indexes show property off 50% nationally. The banks will be hard pressed to refinance and many properties will be significantly underwater. Why the REITs have raised money is in expectation of foreclosures as owners and developers walk away from loans they know now will never recoup the initial investment
5. Federal Tax Credit: The Federal tax credit and the phase out of treasury bond purchases will put some pressure on the housing markets.
6. Tighter Loan Standards: FHA has joined the banks in tightening up their standards. This coupled with the expectation of higher interest rates because the Treasury will phase out bond purchases. Its a test to see if the bond markets are healthy enough to stand on their own.

Clearly its still a long road complete with speed bumps. I think the best take away
now is that its a mixed bag...we have good news to talk about too.

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The Fed and the Housing Recovery

The government is not ready to start raising interest rates. Bernanke is increasingly confident of recovery in 2010 and the recent FMOC meeting has agreed to leave interest rates at historic lows.

Fed To Phase Out Bond Purchases
The Federal Reserve has been a significant purchaser of Treasury bonds buying as much as $7 billion per auction. As the Fed begins to phase out , you can expect long term yields to rise. The Fed, with increasing confidence in the system is now beginning to hand the economic levers back to the system. Leaving it to the banks and the borrowers to work it out.

FHA Also Tightens the Rules
If you didnt have a 20% down then the FHA was likely on your short list of lenders. FHA as well as Freddie Mac and Fannie Mae had an unspoken political mandate to make home ownership affordable for all. For the first time in 75 years FHA will tighten up its lending structure. This will cause a slowdown in the condo markets as they become more expensive and complicated to finance. There is an article about the new FHA guidelines here


The Recovery
There will be a recovery, but housing wont lead. The banks still have major problems on the horizon and that will keep sectors that rely on borrowed capital weak until the last of the bad debt is out of the system, we have job growth and the secondary markets function. As the Federal agencies begin to pull back from the huge stimulus programs we are likely to see a rise in interest rates as more supply lingers in the bond markets and a slowing in housing markets as the tax credit no longer supports first time home buyers.

The Fed will move to the sidelines and monitor the markets, ready to step back in if it moved too soon. In the meantime it hopes that we are at a point were the system can mend itself, where market forces can begin to take on the job - off life support.

The focus will be on the secondary markets.The Fed will stay the course and purchase $1.25 trillion in mortgage-backed securities to support the mortgage market until the end of 2010, when the program expires. The Fed will begin a phase out to test the markets and see if investor interest is strong enough to sustain a housing recovery.

The Fed will stay the course and purchase $1.25 trillion in mortgage-backed securities to support the mortgage market until the end of 2010, when the program expires. The Fed is expected to phase out and test the markets and see if investor interest is strong enough to sustain a housing recovery.

Bringing foreign money back into the system is necessary so that we dont create even more inflationary pressure is a key strategy. The Fed invited sovereign investment funds to partner up with the Treasury to buy toxic mortgages to give banks more room to recapitalize.

China and other foreign investors are being wooed to step in and take a chance, in partnership with the Treasury. The other big pool of money is public, the stock markets. The REITS have been issuing new stock to raise money, 15 billion to date, getting cash heavy and waiting for the bottom to show. Some REIT indexes are up 30-50% in anticipation of the final unwinding of this great housing bust. Then, as always... a new beginning.

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Banks and the Housing Recovery

Banks Tightened Credit in Second Quarter

Loan Standards
Banks tightened standards on all major types of loans to businesses and households during the second quarter, mainly to reduce risk during what is still an uncertain economic outlook. The banks are weak and they are looking at big problems on the horizon. The foreclosure pipeline is stacked and will continue to be a problem until we see job growth. Declining job loss is good news, but its not growth.

Commercial Recasts
They are also facing a big commercial mortgage recast. All of those developers and owners of office buildings and big apartment complexes that have bought or built in the last five years, will be looking to refinance their loans. The banks are anxious, after all, business have felt the brunt of this recession. The result for owners are higher vacancy rates and lower rent rates, a recipe for evaporating equity.

Option ARMs
Next year, many option ARM payments will begin to readjust, slamming borrowers with dramatically higher monthly mortgage payments. Analysts say that could unleash the next big wave of foreclosures. Nationally, close to one in ten who bought homes between 2004-2008 used an option arm mortgage. In the San Francisco bay area the number is closer to one in five.

After five years the mortgages reset and become market rate principal and interest mortgages. This can more than double the monthly payment, putting a lot of home owners out of business fast. Option ARMs were common choices for large loans and luxery homes will be hard hit. Borrowers who bought at the height of the market will be facing mortgage recasts around 2010, at the same time the banks will be facing commercial mortgage recasts.

The Recovery
The Federal tax credit and the phase out of treasury bond purchases will put some pressure on the housing markets. Tighter loan standards by the FHA and banks in general will also cause to quiet any push towards a meaningful recovery in the short term.

Sales of previously owned homes fell 2.7 percent from July to August, ending a run of four consecutive months of increases. NAR echoes the point, Nevertheless, the decline demonstrates "we can't take a housing rebound for granted," Yun, economist for NAR said

The Good News
Most of the foreclosure problem is still contained to four states, California, Arizona, Florida and Nevada. Much of the rest of the country is making mortgage payments on time. Same can be said for the apartment sector. Generally, the sector didnt overbuild and the expectation is that renter demand, now slack, will overtake supply in the next few years. As the Fed removes the training wheels and the system begins to stand on its own, you can expect it to be a little wobbly at first

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FHA Has New Rules

The FHA has often been the lender of last resort. It doesnt have the same stringent lending requirements that other lenders have and it only required 3% down and light on junk fees as well.

If you didnt have a 20% down then the FHA was likely on your short list of lenders. FHA as well as Freddie Mac and Fannie Mae had an unspoken political mandate to make home ownership affordable to those with less than perfect credit or resources. This is a small part of why it all backfired, Congress did want the American Dream to trickle down and risk was taken in part because of a political mandate to democratize home ownership.

For the first time in 75 years FHA will tighten up its lending structure. They are the first time home buyers answer to a prayer until now. But now FHA is staring at five million mortgages and significant losses as home prices continue to go south.. Unable to control their losses coupled with the expectation that home prices will continue to fall through at least the first half of 2010, they instituted more restrictive rules to limit risk.

New Rules

Better Risk Management

1. Lenders will have to show a net worth of one million dollars up from 250,000.
2. The down payment requirement has increased from 3% to 3.5%
3. Mortgage insurance premiums have increased
4. Banned the use of third party DPA's. This amounts to almost 15% of outstanding loans in the FHA portfolio

Condos
Beginning January 1 2010

If you have a condo to refi with a FHA insured loan it just got tougher.
1. Ineligible properties include, time shares house boats and multi unit condos where:
a. Less than 50% of the units are owner occupied or sold to owners that do not intend to live in the unit.
b. No more than 15% of all units can be in arrears of HOA fees
c. Projects with 3 or less units may have only one encumbered with FHA insurance
d. For or more units can have up to 30% FHA insured, no more
e. No more than 10 percent of the units may be owned by one investor. This will apply to developers/builders that subsequently rent vacant and unsold units.
f. FHA insurance will be unavailable when properties are within 1,000 feet of a highway, freeway, or heavily traveled road; 3,000 feet of a railroad; one mile of an airport; or five miles of a military airfield


Market Impact on Condos

Certainly cant be a boost for Condo sales. This is a direct hit to evaluation, since less people will be able to finance. That translates into less sales and it will hurt the entire transaction chain from developers to real estate agents, , from condo insurance to lenders. More downward pressure, we did not need. But the FHA has been a key player buying up 23% of all new mortgages. Clearly with home prices expected to continue to retreat, FHA is cutting its exposure and trying to limit losses. Congress is not looking for another taxpayer bail out. Taxpayers might be a little tired of that

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Long Term Rates Down for Third Consecutive Week

30-year fixed-rate mortgage: Averaged 5.04 percent with an average 0.7 point for the week ending September 17, 2009, down from last week when it averaged 5.07 percent. Last year at this time, the 30-year FRM averaged 5.78 percent. The last time the 30-year FRM was lower was the week ending May 28, 2009, when it averaged 4.91 percent.


The 15-year fixed-rate mortgage: Averaged 4.47 percent with an average 0.6 point, down from last week when it averaged 4.50 percent. A year ago at this time, the 15-year FRM averaged 5.35 percent. This is the lowest the 15-year FRM has been since Freddie Mac started tracking it in 1991.

Five-year indexed hybrid adjustable-rate mortgages ARMs: Averaged 4.51 percent this week, with an average 0.5 point, up from last week when it averaged 4.51 percent. A year ago, the 5-year ARM averaged 5.67 percent.

One-year Treasury-indexed ARMs: Averaged 4.58 percent this week with an average 0.5 point, down from last week when it averaged 4.64 percent. At this time last year, the 1-year ARM averaged 5.03 percent.


Freddie Sayz

Interest rates for fixed-rate mortgages eased for the third consecutive week and remained at 3-month lows,said Frank Nothaft, Freddie Mac vice president and chief economist.

Interest rates for 30-year fixed-rate mortgages have averaged just above 5 percent through mid-September, which is roughly a percentage point below last year’s average and suggests that 2009 may reach a record annual low since the survey began in 1971.

Low mortgage rates are aiding new home construction. Housing starts for single family homes have increased consecutively over the five past months ending in July, although starts eased slightly in August. Moreover, homebuilder confidence improved for the third straight month in September, with all four regions showing positive gains, according the National Association of Home Builder’s Housing Market Index.

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Mortgage Bankers Weekly Mortgage Update

Market Composite Index: (loan application volume) On an unadjusted basis, the Index increased 95.7 percent compared with the previous week and was up 52.4 percent compared with the same week one year earlier.

Refinance Index: Increased 25.6 percent. The Refinance Index is at its highest level since the week ending June 27, 2003

Conventional Purchase Index: Decreased 10.3 percent while the Government Purchase Index (largely FHA) decreased 21.8 percent.

Refinance Share of Mortgage Activity: Increased 25.6 percent. The Refinance Index is at its highest level since the week ending June 27, 2003

ARM Refinance Activity: Increased to 1.1 percent from 0.9 percent of total applications from the previous week.

MBA outlook: Total mortgage production will be up about 17 percent to $1.90 trillion this year from an estimated $1.62 trillion in 2008. Total originations should see a decline of about 15 percent in 2010 to $1.62 trillion as a drop in refinance originations outweighs an increase in purchase originations.

Median home prices for new and existing homes are expected to continue their decline this year, falling about nine percent and 13.0 percent, respectively. Prices should stabilize by mid-2010 and post a slight increase for all of 2010..

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Real Estate Trends: Rental Markets

Proverbs 20:14 - “Its no good, its no good!” says the buyer; then off he goes and boasts about his purchase.

The economy has been wreaking havoc on on rental owners as well as home owners. The great unwinding of the debt economy and the collapse of available credit has caused job loss, underemployment and a recession psychology causing consumers to pull back, not being sure if they are next to loss work. Afraid of catching a falling knife, prospective buyers are waiting on the sidelines.

The housing industry has been pinging property owners to try and get a sense of the degree of difficulty out there. I wanted to share with you some of what these surveys reveal.

Rent.com
Rent.com surveyed more than 3200 apartment owners and found that 88% of property owners who participated said that job losses are contributing to vacancy rates. 50% said would-be tenants can’t afford rent or are trying to save, and 45% said that the trend of more people doubling up with roommates is causing units to sit vacant. Rent.com general manager, Peggy Abkemeier, points out that many homeowners that would normally sell are finding themselves reluctant landlords, bring even more inventory to market

Reacting to soaring vacancies, 68% of landlords said they were lowering rents and 68% also said they were giving one or more months of rent free; 38% said they were reducing deposits; and 18% were offering upgrades or allowing more leniency for breaking leases or changing status, according to the Rent.com survey. Fifteen percent are offering storage or parking at reduced rates, and 8% are relaxing pet policies.

Move.com
Another survey, from Move Inc., which operates Realtor.com, found that 39% of people would sign a 12-month lease if it came with 2 months of free rent, and 18% would sign for free utilities for two months including water, electricity and gas. Fourteen percent said a free flat screen or LCD television would get them to commit to a lease for a year.

LoopNet.com
Loopnet surveyed 2,000 members in July. 10% of the surveyed participants expect a recovery in property sales this year, down from 33% in the May, while those who expect a recovery in property transactions in 2011 is up from 25% to 33%. Almost 60% expect prices to bottom between fourth quarter of 2009 and third quarter of 2010

Afire.org
AFIRE is a non profit of international investors. Their 2009 Mid-Year Survey indicates that international investors are turning their attention back to US real estate. 75% of those surveyed had not yet invested in 2009. However, 66% planned to invest in US real estate before years end. Equity investors expect to place seven times more equity in the remainder of 2009. Debt investors expect to place three times more debt. 31% surveyed, said they were more optimistic than they were at the beginning of the year; 16% were more pessimistic; and 53% said they felt about the same. All in all, it looks like foreign investment money is revisiting and I hope it is further confirmation that we are building a base for an upturn.

Transunion.com
And yet another survey by TransUnion, which screens credit for property-management companies, found that half of property managers are having difficulty locating qualified renters, compared with last year. 81% are concerned they won’t find reliable tenants for the rest of 2009.

Looking Past the Problem

Income property, whether it be a duplex or a 20 unit building does makes sense in the long term, if you can ride it out. True, job loss has put a cap on rents and equity is declining for now. In fact vacancies climbed to 7.6% in the second quarter, and the apartment sector may not begin to see positive growth until late 2010 or 2011. But if you check the REIT commercial property index you will see its up better than 35%, because the commercial property difficulty we are in the midst of will end and there will be good investment opportunities. Buyers are waiting for the dust to settle and judging by the extraordinary price move of the index, its on the horizon. Read more...

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Mortgage Bankers Weekly Mortgage Update

Weekly Mortgage Market Update; Mortgage Bankers Association for the week of Sept. 9, 2009.

Market Composite Index: (loan application volume) I ncreased 17.0 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 15.8 percent compared with the previous week and 64.5 percent compared with the same week one year earlier.

Refinance Index: Increased 22.5 percent from the previous week, the biggest jump since mid-March.

Government Purchase Index: The four week moving average is up 3.3 percent

Refinance Share of Mortgage Activity: Increased to 59.8 percent of total applications from 56.5 percent the previous week

ARM Refinance Activity: Increased to 5.8 percent from 5.6 percent of total applications from the previous week.

MBA outlook: Existing home sales have stabilized but home prices continue to decline. MBA reports that median existing home prices fell 15.1 percent in July from a year ago. New home median prices were down 11.5 percent in July from a year ago.

The Mortgage Bankers Association has lowered projections for purchase originations in 2009. Home sales are expected to be stronger but price declines will continue and they are expected to be steeper.


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Freddie Mac Weekly Mortgage Rate Commentary: Bond Yields Push Mortgage Rates Down

30-year fixed-rate mortgage: Averaged 5.07 percent with an average 0.7 point for the week ending September 10, 2009, down from last week when it averaged 5.08 percent. Last year at this time, the 30-year FRM averaged 5.93 percent.


The 15-year fixed-rate mortgage: Averaged 4.50 percent with an average 0.7 point, down from last week when it averaged 4.54 percent. A year ago at this time, the 15-year FRM averaged 5.54 percent.

Five-year indexed hybrid adjustable-rate mortgages ARMs: Averaged 4.51 percent this week, with an average 0.5 point, down from last week when it averaged 4.59 percent. A year ago, the 5-year ARM averaged 5.87 percent.

One-year Treasury-indexed ARMs: Average 0.6 point, down from last week when it averaged 4.62 percent. At this time last year, the 1-year ARM averaged 5.21 percent.

Freddie Sayz

Mortgage rates remained historically low over the past two weeks, keeping housing very affordable, said Frank Nothaft, Freddie Mac vice president and chief economist. As a result, mortgage applications leapt 17 percent over the week ending September 4, led by a 23 percent jump in refinancing demand, according the Mortgage Bankers Association. In fact, nearly three out of five applications were for refinancing current loans.

While the economy lost 216,000 jobs during August, it was the smallest monthly job loss since August 2008. This and the Federal Reserves latest Beige Book suggest that the economy may be on the road to recovery. Based on information up through late August, most Federal Reserve Bank districts noted that their business contacts remained cautiously positive that economic activity was stabilizing in July and August. Two out of the 12 districts also indicated that local house prices were firming

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Freddie Mac Weekly Update: Bond Yields Push Mortgage Rates Down

30-year fixed-rate mortgage: Averaged 5.08 percent with an average 0.7 point for the week ending September 3, 2009, down from last week when it averaged 5.14 percent. Last year at this time, the 30-year FRM averaged 6.35 percent.


The 15-year fixed-rate mortgage: Averaged 4.54 percent with an average 0.6 point, down from last week when it averaged 4.58 percent. A year ago at this time, the 15-year FRM averaged 5.90 percent.

Five-year indexed hybrid adjustable-rate mortgages ARMs: Average 0.6 point, down from last week when it averaged 4.67 percent. A year ago, the 5-year ARM averaged 5.97 percent.

One-year Treasury-indexed ARMs:Average 0.6 point, down from last week when it averaged 4.69 percent. At this time last year, the 1-year ARM averaged 5.15 percent.

Freddie Sayz

Bond yields pushed mortgage rates slightly lower this week, said Frank Nothaft, Freddie Mac vice president and chief economist. Low mortgage rates are helping to keep housing very affordable. Seven of the top eight most affordable months occurred during this year, according to the National Association of Realtors’® (NAR) Housing Affordability Index, which dates back to 1971. As a result, pending sales of existing homes rose for the sixth straight month in July, a trend not seen since the NAR began reporting data in 2001. Moreover, July’s sales were the strongest since June 2007.

Overall, inflation remains in check while certain sectors of the economy are experiencing some improvement. The core price index on consumer expenditures, a key indicator tracked by the Federal Reserve, rose 1.4 percent in July from the same time a year earlier and represented the smallest 12-month increase since October 2003. Meanwhile, the manufacturing industry expanded for the first time in 19 months, according to the Institute of Supply Management

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Weekly Mortgage Market Update; Mortgage Bankers Association

Weekly Mortgage Market Update; Mortgage Bankers Association for the week of August 28, 2009.

Market Composite Index: (loan application volume) decreased 2.2 percent

Refinance Index: Decreased 3.1 percent from the previous week

Government Purchase Index: Rose 0.5 percent from the prior week for its 7th consecutive gain

Refinance Activity: Unchanged this week at 56.5 percent.

ARM Refinance Activity: decreased to 5.6 percent from 6.5 percent of total applications from the previous week.

The delinquency rate on one-to-four-unit residential properties: Rose to a seasonally adjusted rate of 9.24 percent of all loans outstanding as of the end of the second quarter of 2009, up 283 basis points from one year ago,
The rate of new foreclosures: unchanged from last quarter.

MBA outlook: It is unlikely we will see meaningful reductions in the foreclosure and delinquency rates until employment improves. Its no longer a sub prime debacle, its good mortgages going bad because people have lost work. However, MBA sees manufacturing growth, residential investment, and consumer spending turning positive in the third quarter...perhaps confirming that the recession may have ended.

Federal Reserve Activity - Weekly Report

Its become the Feds job to keep the secondary market alive until investors begin to trust the secondary markets and liquidity returns as they trust and buy these mortgage bundles. That will allow the banks to resell their mortgages to investors and use the cash to provide more loans for business and home purchases. Until that happens, there will be less money and more lending restrictions, prolonging the recovery.

Fed Mortgage Backed Securities Purchases Increase for Fifth Consecutive Week as Feds bought upwards of 25 billion dollars of Mortgage Backed Securities. Since inception of the program the Federal Reserve has spent $818 billion of the $1.25 trillion made available for mortgage purchases, effectively making the Govt. the biggest mortgage holder in the land.

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30-year fixed-rate mortgage: Averaged 5.14 percent with an average 0.7 point for the week ending August 27, 2009, up from last week when it averaged 5.12 percent. Last year at this time, the 30-year FRM averaged 6.40 percent.

The 15-year fixed-rate mortgage: Averaged 4.58 percent with an average 0.7 point, up from last week when it averaged 4.56 percent. A year ago at this time, the 15-year FRM averaged 5.93 percent.

Five-year indexed hybrid adjustable-rate mortgages ARMs: Averaged 4.67 percent this week, with an average 0.6 point, down from last week when it averaged 4.57 percent. A year ago, the 5-year ARM averaged 6.03 percent.

One-year Treasury-indexed ARMs: Averaged 4.69 percent this week with an average 0.6 point, unchanged from last week when it averaged 4.69 percent. At this time last year, the 1-year ARM averaged 5.33 percent. U.S. Treasury bond yields fell nearly a quarter of a percentage point over the week, and other long-term yields followed suit, said Frank Nothaft, Freddie Mac vice president and chief economist. Interest rates on 30-year and 15-year fixed-rate mortgages fell to the lowest level since the end of May, while initial rates on 5/1 hybrid ARMs declined to levels not seen since January 2005.

Freddie Sayz

Long-term mortgage rates were barely changed this week, remaining historically low, which is helping to sustain a high level of affordability in the home-purchase market, said Frank Nothaft, Freddie Mac vice president and chief economist. Low rates contributed to existing home sales rising for the fourth consecutive month to an annual pace of 5.24 million in July, the most since August 2007, according to the National Association of Realtors®.

Similarly, new home sales rose for the fourth month in a row to 0.4 million, the strongest pace since September 2008, the Commerce Department reported. The sales gain helped to reduce the number of new unsold houses on the market to the lowest amount since March 1993. In addition, house prices in June rose nationally for the second consecutive month, according to the Federal Housing Finance Agency's purchase-only house price index.

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Weekly Freddie Mac Update:

30-year fixed-rate mortgage: Averaged 5.14 percent with an average 0.7 point for the week ending August 27, 2009, up from last week when it averaged 5.12 percent. Last year at this time, the 30-year FRM averaged 6.40 percent.


The 15-year fixed-rate mortgage: Averaged 4.58 percent with an average 0.7 point, up from last week when it averaged 4.56 percent. A year ago at this time, the 15-year FRM averaged 5.93 percent.

Five-year indexed hybrid adjustable-rate mortgages ARMs: Averaged 4.67 percent this week, with an average 0.6 point, down from last week when it averaged 4.57 percent. A year ago, the 5-year ARM averaged 6.03 percent.

One-year Treasury-indexed ARMs: Averaged 4.69 percent this week with an average 0.6 point, unchanged from last week when it averaged 4.69 percent. At this time last year, the 1-year ARM averaged 5.33 percent.
U.S. Treasury bond yields fell nearly a quarter of a percentage point over the week, and other long-term yields followed suit, said Frank Nothaft, Freddie Mac vice president and chief economist. Interest rates on 30-year and 15-year fixed-rate mortgages fell to the lowest level since the end of May, while initial rates on 5/1 hybrid ARMs declined to levels not seen since January 2005.

Freddie Sayz

Long-term mortgage rates were barely changed this week, remaining historically low, which is helping to sustain a high level of affordability in the home-purchase market, said Frank Nothaft, Freddie Mac vice president and chief economist. Low rates contributed to existing home sales rising for the fourth consecutive month to an annual pace of 5.24 million in July, the most since August 2007, according to the National Association of Realtors®.

Similarly, new home sales rose for the fourth month in a row to 0.4 million, the strongest pace since September 2008, the Commerce Department reported. The sales gain helped to reduce the number of new unsold houses on the market to the lowest amount since March 1993. In addition, house prices in June rose nationally for the second consecutive month, according to the Federal Housing Finance Agency's purchase-only house price index.

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Multifamily Apartments: Get Higher Rents and Lower Your Vacancy

In keeping with the article on walkability and the recent survey showing how convenience can increase home value, I thought that checking out what renters value now would help owners rent faster. All in the name of know your market. Renters today are looking for apartment living that can encompass all their lifestyle needs.

Some of the new developments are competing with single family homes, in that they are providing the space and amenities of a single family home without the maintenance. The idea is to combine family style living with apartment community and to bring lifestyle choices into the living community.

On Site Services
Many of us are either telecommuting or tethered to some digital device....in other words we are always working. Its become part of our lifestyle. Multifamily is tuned into this change in our behavior and is bringing business related facilities into the home space. The highest rents and lowest vacancy rates are going to multifamilies that are responding by building:

1.Business centers or private meeting rooms, so that groups can meet at a members home facility rather than a coffee shop. These conference rooms are plugged! They have video feeds and big plasma screens
2.Small gym facilities. I have seen smaller rooms built out with some weights and a handful of Nautilus machines really do the trick
3.Billiards and games tables
4. ATMs on site will also yield a revenue, but may be a safety issue
5. A public internet network for all tenants
6. A communal space, perhaps a garden area for neighbors to get together.
7. Get wired! As units become vacant, add cable, more phone lines and high speed internet connections
8. Go Green: As units become vacant install low flow shower heads, energy efficient lighting and low flow toilets. The water savings to the owner is well worth it and good Eco citizenship is desirable. Programmable thermostats can save as much as $160 annually per unit. Its a tenant savings, but worth mentioning to new renters, it will be appreciated.

Re-purpose Existing Space to Increase Income
1. Revenue Sharing Arrangements. Consider leasing your washer dryer machines for a revenue share. The company will maintain the machines and share income with you.
2. Consider fencing off some basement for bicycle storage or other storage for a monthly fee.
3. Vending Machines and other ancillary services. You can affiliate with local dry cleaners etc to provide a service for a small fee.

Get Tenant Centric
Keeping it simple for the renter is good business. It generally means it will be simpler for management too.
1. A good web site template with slide shows and online apartment applications for new rentals. Add the ability for maintenance issues to save phone time and have the paper trail you need to stay on top.
2. Online rent payments include tenant accounts with individual passwords. Train your tenants to go there before calling for any rent discrepancies.
3. Building wide on line calendar for all events and whatever you can think of that creates a go to place for communications. Its a good idea to have important phone numbers such as fire and gas and electric on line. The more information you can put on line reduces nuisance phone calls

The idea is to create a sense of community. Taking a page from the retirement community, apartment living is being reimagined to include more and more lifestyle living. This kind of community bond can reduce churn. In these tough times tenant retention is just good business.

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Increase Your Rental Income

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