Yale economist Robert Shiller believes that housing prices will slip below the historic drop during the great depression. The average home for sale dropped 30% during the depression and we have already seen a 15% decline beginning in 2008.
Of course there are different views out there, but he is the guy who coined the phrase "irrational Exuberance" and picked the peak of the last bubble - the internet boom to bust of the late 1990's. Most people were not paying attention then either and finally the bubble collapsed. That bubble caused Nasadaq to lose 85% of its value from peak to trough. All these years later we are only about half way back from that great decline.
Consider that the new programs designed to buy back mortgages and renegotiate them down to a level that keeps families in their homes has two drawbacks.
When these mortgages are re evaluated downwards thats is actually a price reduction. The home is devalued and that number will never show up on an index. The housing drop will in fact be worse than measured.
According to NAR's economist, Lawrence Yun "The unusual mix of market conditions around the country continues, but areas showing healthy price gains include Greenville, S.C., and Springfield, Mo., both with solid local economies. “On the other hand, some markets like San Diego, Calif., and Fort Myers, Fla., are experiencing rising sales after sudden double-digit drops in local home prices, so lower prices and low interest rates are starting to generate results.”
My guess is that we have a few more shocks before all this stabilizes and then we will see a change in perception. Real estate will no longer be a ticket to great and immediate wealth. That will be left to something else.
Thanks for Reading
Howard Bell
www.yourpropertypath.com
A web site of over 450 articles related to real estate focused primarily on property management.
Your Property PathSF
http://yourpropertypath.blogspot.com/
Trade talk for the San Francisco real estate industry. Your source for property management tips, policies and market trends.
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May 24, 2008
Existing-Home Sales Ease As Some Markets Rise
Restrictive lending practices, as expected, have caused home sales to ease. However, according to NAR, some markets are beginning to show signs of a turn-around.
April existing home sales declined 1.0 percent from 4.94 million homes sold in March to 4.89 million homes in April. Freddie Mae and Fannie Mac have installed a new home buyer policy designed to ease some of the restrictions, helping a buyer into a new home. The new rules mean consumers will see more affordable financing. Down payments of 3-5 percent on most mortgages and 100 percent financing on some loan products. The press release on the Fannie Mae site explains that the new policy is designed to increase liquidity by establishing a new national down payment policy will supersede the policy the company adopted in December 2007 that required higher down payments in markets where home prices are declining. If you were in the Market for a loan you might try again.
The West: Existing-home sales in the West rose 6.4 percent in April to a level of 1.00 million but are 15.3 percent below a year ago. The median price in the West was $285,700, which is 16.7 percent lower than April 2007.
The South: Existing-home sales were unchanged from March at an annual rate of 1.92 million in April, but are 18.6 percent below April 2007. The median price in the South was $170,800, down 5.1 percent from a year ago.
The Northeast: Existing-home sales fell 4.4 percent to an annual pace of 870,000 in April, and are 14.7 percent below a year ago. The median price in the Northeast was $262,000, which is 7.7 percent below April 2007.
The Midwest: Existing-home sales were at an annual rate of 1.10 million in April, which is 6.0 below March and 19.7 percent lower than April 2007. The median price in the Midwest was $159,100, down 2.9 percent from April 2007.
Excerpted from NAR site, representing 1.2 million members involved in all aspects of the residential and commercial real estate industries.
Thanks for Reading
Howard Bell
www.yourpropertypath.com
A web site of over 450 articles related to real estate focused primarily on property management.
Your Property PathSF
http://yourpropertypath.blogspot.com/
Trade talk for the San Francisco real estate industry. Your source for property management tips, policies and market trends.
You can add this page to your favorite Social Bookmark site:
April existing home sales declined 1.0 percent from 4.94 million homes sold in March to 4.89 million homes in April. Freddie Mae and Fannie Mac have installed a new home buyer policy designed to ease some of the restrictions, helping a buyer into a new home. The new rules mean consumers will see more affordable financing. Down payments of 3-5 percent on most mortgages and 100 percent financing on some loan products. The press release on the Fannie Mae site explains that the new policy is designed to increase liquidity by establishing a new national down payment policy will supersede the policy the company adopted in December 2007 that required higher down payments in markets where home prices are declining. If you were in the Market for a loan you might try again.
Regional Markets
The West: Existing-home sales in the West rose 6.4 percent in April to a level of 1.00 million but are 15.3 percent below a year ago. The median price in the West was $285,700, which is 16.7 percent lower than April 2007.
The South: Existing-home sales were unchanged from March at an annual rate of 1.92 million in April, but are 18.6 percent below April 2007. The median price in the South was $170,800, down 5.1 percent from a year ago.
The Northeast: Existing-home sales fell 4.4 percent to an annual pace of 870,000 in April, and are 14.7 percent below a year ago. The median price in the Northeast was $262,000, which is 7.7 percent below April 2007.
The Midwest: Existing-home sales were at an annual rate of 1.10 million in April, which is 6.0 below March and 19.7 percent lower than April 2007. The median price in the Midwest was $159,100, down 2.9 percent from April 2007.
Excerpted from NAR site, representing 1.2 million members involved in all aspects of the residential and commercial real estate industries.
Thanks for Reading
Howard Bell
www.yourpropertypath.com
A web site of over 450 articles related to real estate focused primarily on property management.
Your Property PathSF
http://yourpropertypath.blogspot.com/
Trade talk for the San Francisco real estate industry. Your source for property management tips, policies and market trends.
You can add this page to your favorite Social Bookmark site:
Long-Term Rates Slip on Weak Economic
News Short-Term Rates Pick Up on Hints of the End to Rate Cuts.
Frank Nothaft, Freddie Mac vice president and chief economist. "ARM rates, however, rose slightly on market forecasts that the Federal Reserve (Fed) may not pursue any more rate cuts over the near term. For instance, the federal funds futures market suggests virtually no change in monetary policy over the next few months and the Fed viewed the last rate cut to be a "close call," according to the minutes of its most recent policy Committee meeting. "Housing woes still plague the economy. Although housing starts unexpectedly rose in April, all of the gains were in multifamily properties. New construction on one-unit homes fell to 692,000 homes (annualized), which was the least since January 1991 and almost 62 percent below the peak set in November 2005. In addition, homebuilder confidence matched an all-time record low in May."
30-year Fixed Rate Mortgage: Averaged 5.98 percent with an average 0.5 point for the week ending May 22, 2008. Last year at this time, the 30-year FRM averaged 6.37 percent.
15-year Fixed Rate Mortgage: Averaged 5.55 percent with an average 0.6 point.A year ago at this time, the 15-year FRM averaged 6.06 percent.
Five-year ARMs: Averaged 5.61 percent this week.A year ago, the 5-year ARM averaged 6.02 percent.
One-year ARMs: Averaged 5.24 percent this week. At this time last year, the 1-year ARM averaged 5.64 percent.
Thanks for Reading
Howard Bell
www.yourpropertypath.com
A web site of over 450 articles related to real estate focused primarily on property management.
Your Property Path New Brief
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Snap News updates real estate markets and all things of interest to property owners and real estate professionals.
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May 18, 2008
Fannie Mae Now Accepts 3% Down Payments
A short note to new home buyers....it just got easier
According to the Fannie Mae press release of 05.16.08, they will now accept a 3-5% down payment on a new home. This range depends on whether you use their computer driven appraisal software or whether you hire an outside appraiser. Hmmmm....is there now a risk premium for human appraisers or is this just a reflection of how tainted the profession has become after all those liar loans were helped along by easy appraisals.Fannie Mae says it is doing away with higher minimum down payment requirements for borrowers in distressed real estate markets.
Fannie Mae said Friday the new minimum down payments of between 3 percent and 5 percent for all loans that it guarantee for conventional, conforming mortgages processed through its Desktop Underwriter® (DU®) automated underwriting system, and 95 percent loan-to-value ratios for loans underwritten outside of DU, in all geographic locations.
Thanks for Reading
Howard Bell
www.yourpropertypath.com
A web site of over 450 articles related to real estate focused primarily on property management.
Your Property PathSF
http://yourpropertypath.blogspot.com/
A trades talk blog focused on property management for San Francisco
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May 14, 2008
Close to Retiring: Need a Home Equity Loan and Cant Get it.
Many banks are so damaged by the mortgage mess and how its morphed into all areas of operations. People that have had home inquiry loans and with good credit are beginning to receive notices that their revolving loans are no longer valid. A bank can withdraw its agreement, and many are beginning to suspect these equity lines are no longer the wise channel they once were.
Many areas of the country can be designated risky markets using zip codes to outline declining home values. If your home equity HELO was based on a home whose value is no longer what it was, you may find yourself reading a letter that goes something like this.....
Because of declining home values in your area we no longer can provide any money based on home equity from this date forward. The lenders are using automated (computer driven) models to determine the new vcalue of your home and are declining to continue your revolving credit line with the home as collateral.
When the value of a home is reduced, the amount of money you have as mortgage or HELO debt as a percentage of the value of a home rises. This is the loan to value ratio and the industry standard for a loan is a LTV of around 80%. That is 20% of the home is debt and the rest is yours. If your home value has declined your debt as a percentage of value has increased.
In a conventional mortgage, you make monthly payments to the lender. But in a “reverse” mortgage, you receive money from the lender and generally don’t have to pay it back for as long as you live in your home. Instead, the loan must be repaid when you die, sell your home, or no longer live there as your principal residence. Reverse mortgages can help homeowners who are house-rich but cash-poor stay in their homes and still meet their financial obligations.
To qualify for most reverse mortgages, you must be at least 62 and live in your home. The proceeds of a reverse mortgage (without other features, like an annuity) are generally tax-free, and many reverse mortgages have no income restrictions.
Reverse mortgage loan advances are not taxable, and generally do not affect Social Security or Medicare benefits. You retain the title to your home and do not have to make monthly repayments. The loan must be repaid when the last surviving borrower dies, sells the home, or no longer lives in the home as a principal residence.
Reverse mortgages can use up all or some of the equity in your home, leaving fewer assets for you and your heirs. A “nonrecourse” clause, found in most reverse mortgages, prevents either you or your estate from owing more than the value of your home when the loan is repaid.
Because you retain title to your home, you remain responsible for property taxes, insurance, utilities, fuel, maintenance, and other expenses. So, for example, if you don’t pay property taxes or maintain home owner’s insurance, you risk the loan becoming due and payable.
Thanks for Reading
Howard Bell
www.yourpropertypath.com
A web site of over 450 articles related to real estate focused primarily on property management.
Your Property PathSF
A blog for San Francisco owners and managers of real property
You can add this page to your favorite Social Bookmark site:
If Your Equity has Declined
Many areas of the country can be designated risky markets using zip codes to outline declining home values. If your home equity HELO was based on a home whose value is no longer what it was, you may find yourself reading a letter that goes something like this.....
Because of declining home values in your area we no longer can provide any money based on home equity from this date forward. The lenders are using automated (computer driven) models to determine the new vcalue of your home and are declining to continue your revolving credit line with the home as collateral.
How it Works
When the value of a home is reduced, the amount of money you have as mortgage or HELO debt as a percentage of the value of a home rises. This is the loan to value ratio and the industry standard for a loan is a LTV of around 80%. That is 20% of the home is debt and the rest is yours. If your home value has declined your debt as a percentage of value has increased.
Reverse Mortgages: What is it
In a conventional mortgage, you make monthly payments to the lender. But in a “reverse” mortgage, you receive money from the lender and generally don’t have to pay it back for as long as you live in your home. Instead, the loan must be repaid when you die, sell your home, or no longer live there as your principal residence. Reverse mortgages can help homeowners who are house-rich but cash-poor stay in their homes and still meet their financial obligations.
To qualify for most reverse mortgages, you must be at least 62 and live in your home. The proceeds of a reverse mortgage (without other features, like an annuity) are generally tax-free, and many reverse mortgages have no income restrictions.
Reverse mortgage loan advances are not taxable, and generally do not affect Social Security or Medicare benefits. You retain the title to your home and do not have to make monthly repayments. The loan must be repaid when the last surviving borrower dies, sells the home, or no longer lives in the home as a principal residence.
What You Should Know
Reverse mortgages can use up all or some of the equity in your home, leaving fewer assets for you and your heirs. A “nonrecourse” clause, found in most reverse mortgages, prevents either you or your estate from owing more than the value of your home when the loan is repaid.
Because you retain title to your home, you remain responsible for property taxes, insurance, utilities, fuel, maintenance, and other expenses. So, for example, if you don’t pay property taxes or maintain home owner’s insurance, you risk the loan becoming due and payable.
Thanks for Reading
Howard Bell
www.yourpropertypath.com
A web site of over 450 articles related to real estate focused primarily on property management.
Your Property PathSF
A blog for San Francisco owners and managers of real property
You can add this page to your favorite Social Bookmark site:
May 11, 2008
Appraisal Process under Fire
Fannie Mae and Freddie Mac have certainly been busy. First (see my blog below) we see new programs designed to help the home owner to the tune of $300 billion dollars.
Now we see them tackle part of why the mortgage mess got so bad. Appraisals designed to facilitate the liers loan process, amounting to certainly unprofessional, if not fraudulent practices. This is not a done deal, because many of the players in the industry such as the Mortgage Bankers Association, are howling because it will be more costly and time consuming to institute the changes.
Now we see them tackle part of why the mortgage mess got so bad. Appraisals designed to facilitate the liers loan process, amounting to certainly unprofessional, if not fraudulent practices. This is not a done deal, because many of the players in the industry such as the Mortgage Bankers Association, are howling because it will be more costly and time consuming to institute the changes.
Here is What Fannie and Freddie Want to Do
1. Mortgage brokers originate more than half of all new loans, will no longer be allowed to choose or pay appraisers. This should help eliminate some of the collusion that took place where some independent appraisers could not give a fair evaluation if they wanted to work.
2. Appraisers working for lenders such as banks or mortgage bankers can no longer do appraisals for loans handled by their employers.
3. Lenders would not be able to use appraisals generated by management companies that have associations with lenders
This will slow down the process because in house appraisers will no longer be doing the work on loans. Lenders will have to hire outside appraisers. It may even require more than one appraiser, if you have more than one lender. True its more cost, but not as costly as all those people who really shouldnt have been approved. Now they have foreclosed and are driving the price down after having been part of a over stimulated and ultimately false demand that drove prices up. The fight for better and more accurate appraisals without pressure from lenders who want the commission and to hell with what happens later is good for the consumer.
Thanks for Reading
Howard Bell
www.yourpropertypath.com
A web site of over 450 articles related to real estate focused primarily on property management.
Your Property PathSF
A blog for San Francisco owners and managers of real property
You can add this page to your favorite Social Bookmark site:
2. Appraisers working for lenders such as banks or mortgage bankers can no longer do appraisals for loans handled by their employers.
3. Lenders would not be able to use appraisals generated by management companies that have associations with lenders
This will slow down the process because in house appraisers will no longer be doing the work on loans. Lenders will have to hire outside appraisers. It may even require more than one appraiser, if you have more than one lender. True its more cost, but not as costly as all those people who really shouldnt have been approved. Now they have foreclosed and are driving the price down after having been part of a over stimulated and ultimately false demand that drove prices up. The fight for better and more accurate appraisals without pressure from lenders who want the commission and to hell with what happens later is good for the consumer.
Thanks for Reading
Howard Bell
www.yourpropertypath.com
A web site of over 450 articles related to real estate focused primarily on property management.
Your Property PathSF
A blog for San Francisco owners and managers of real property
You can add this page to your favorite Social Bookmark site:
May 8, 2008
Fannie Mae Steps Up: Housing Recovery Initiatives
New programs designed to help the home owner should increase liquidity in the market place to the tune of $300 billion dollars. Banks are still not lending to each other and nothing stalls an economy like no money to loan. Fannie Mae will use the temporary increase in conforming loan limits to purchase jumbo-conforming mortgages under the same pricing structure accorded portfolio purchases of regular conforming loans. The higher limits will serve to include all those markets that are highly priced and add some liquidity for those folks in San Francisco, Manhattan, San Jose and other areas of highly priced markets. This is far from settling the more serious forclosure problem but it does nick away at real estate sales lows. Im guessing that the buyers in high priced areas have a better financial profile and that will help boost the overall portfolio of lenders, just a little.
Fannie Mae will increase its refinancing program for borrowers whose mortgage exceeds the current value of their home and purchase more loans from state housing finance agencies. In order to do this Fannie Mae will seek $10 billion in new money from stock and bond offerings. Market analysts wonder if this isnt balanced in a very delicate way, its possible for the se organizations to become top heavy with poor or non performing loans and actually further threaten the markets, since they are such an esseentioal part of the liquidity equation. Keep in mind that althougH Fannie Mae is a favored organization, the government is not obligated to come to their rescue. They are not government organizations and Fannie reported a $2.2 billion first-quarter loss and predicted losses will grow in 2009.
Thanks for Reading
Howard Bell
www.yourpropertypath.com
A web site of over 450 articles related to real estate focused primarily on property management.
Your Property PathSF
A blog for San Francisco owners and managers of real property
You can add this page to your favorite Social Bookmark site:
Fannie Mae will increase its refinancing program for borrowers whose mortgage exceeds the current value of their home and purchase more loans from state housing finance agencies. In order to do this Fannie Mae will seek $10 billion in new money from stock and bond offerings. Market analysts wonder if this isnt balanced in a very delicate way, its possible for the se organizations to become top heavy with poor or non performing loans and actually further threaten the markets, since they are such an esseentioal part of the liquidity equation. Keep in mind that althougH Fannie Mae is a favored organization, the government is not obligated to come to their rescue. They are not government organizations and Fannie reported a $2.2 billion first-quarter loss and predicted losses will grow in 2009.
Thanks for Reading
Howard Bell
www.yourpropertypath.com
A web site of over 450 articles related to real estate focused primarily on property management.
Your Property PathSF
A blog for San Francisco owners and managers of real property
You can add this page to your favorite Social Bookmark site:
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