February 25th, 2012
Posted by Thomas Wolter
Bellevue Real Estate Report
NEW YORK (CNNMoney) — Federal officials hope to launch a pilot program in early 2012 to convert government-owned foreclosures into rental properties.
The program, which was cited by Federal Reserve Chairman Ben Bernanke last week as one way to address the housing crisis, would sell foreclosed homes now owned by Fannie Mae (FNMA, Fortune 500) and Freddie Mac (FMCC, Fortune 500) to investors in bulk. The properties would then be converted into rentals.
The initiative began back in August, when the Federal Housing Finance Agency, the Treasury Department and the U.S. Department of Housing and Urban Development announced they were seeking suggestions on ways to dispose of repossessed homes now owned by Fannie Mae, Freddie Mac and the Federal Housing Administration.
In addition to getting the properties off the government’s books, officials are hoping putting the homes back into productive use will stabilize neighborhoods and housing values. Also, it is looking to expand the supply of rentals, which are increasingly in demand.
The agency is not releasing details on how the rental program would work, instead saying it is “proceeding prudently but with a sense of urgency to lay the groundwork for the development of good initial transactions in early 2012.”
Administration officials said they are continuing to work with the agency to develop the program.
Until now, most foreclosed homes have been sold individually because investors have demanded bigger discounts to buy large numbers of properties.
But federal officials are warily eyeing the expected surge in foreclosures as banks ramp up their action against delinquent homeowners. The process had been stalled since late 2010 when banks’ shoddy paperwork practices came to light.
There are close to 2 million homes in the late stages of delinquency, according to Lender Processing Services. Since foreclosed properties often sell below market value, they can wreak havoc on home prices.
Converting these homes to rentals can both help the neighborhood and minimize losses to Fannie, Freddie and the FHA, which hold about 250,000 properties, Bernanke told lawmakers last week.
He urged lawmakers to ramp up their efforts to fix the housing market, placing particular emphasis on the problem of vacant homes on the market.
“Restoring the health of the housing market is a necessary part of a broader strategy for economic recovery,” he said.
Bernanke’s comments launched a full-court press by Federal Reserve officials last week to raise awareness of the continuing problems plaguing the housing market.
His proposals were quickly followed by Fed Governors Sarah Bloom Raskin, who spoke on ramping up enforcement of mortgage servicers, and Elizabeth Duke, who said Fannie Mae and Freddie Mac could do more to help heal the housing market.
Meanwhile, New York Fed President William Dudley gave a speech that touched on a wide range of housing policies — including principal reduction and mortgage refinancing — that he believes will boost the economy.
The Fed has already tried to boost real estate sales by pushing mortgage rates down to record lows through massive bond-buying programs.
But the renewed push for housing help indicates that the Fed, which has basically run out of monetary policy ammunition to revive the real estate market, is urging the federal government to ramp up its efforts.
“The Federal Reserve is signaling in even stronger terms the need for the government to do more to help housing,” said Jaret Seiberg, a policy analyst with the Washington Research Group
Bellevue Real Estate Report
February 23rd, 2012
Posted by Thomas Wolter
Top 5 Reasons to Buy a Home in 2012
by Jonathan Slappey on January 6, 2012 in Home Buying
The American dream of homeownership is a very feasible aspiration for 2012.
There are many benefits of owning a home. Yet some first-time buyers are skeptical of purchasing with the uncertainty surrounding the housing market.
The uncertainty many reference when speaking about the housing market involves a specific date when home values will increase. Since no one can pinpoint this date, the word uncertainty (when paired with the housing market) often reveals a negative connotation.
There are some factors we can be certain about in this housing market such as home values rebounding. This is true; the housing market often moves in cycles.
It’s safe to assume that many Americans harbored the same uncertainty during the George H. W. Bush administration in the early 1990s when the national homeownership rate fell from its previous historic high of 64.4 percent in 1980 to a low of 64.1 percent in 1991.
In the 1960s Lyndon Johnson illustrated a correlation between homeownership and accountability by stating “owning a home can increase responsibility and stake out a man’s place in his community…The man who owns a home has something to be proud of and reason to protect and preserve it.”
This statement is still true more than 50 years later. There are many reasons to take pride in homeownership such as:
•Appreciation – Buying a home now (at the current rates) can almost ensure your home’s appreciation in the future. Mortgage rates are near historic lows and home prices in many parts of the country are down. This is the perfect recipe for home appreciation. Additionally, many foreclosed homes are available for a fraction of the original cost. This can translate to a higher profit if you decide to sell once the market rebounds.
•Property Tax Deductions – For income tax purposes, real estate property taxes for a vacation home and first home are fully deductible. The IRS (Publication 530) provides detailed tax information for first-time buyers that may answer many questions about what deductions homeowners are eligible for.
•Preferential Tax Treatment – If you own your home for more than a year and receive more profit than the allowable exclusion after the sale of your home, the profit will be considered a capital asset. Capital assets are given preferential tax treatment.
•Equity Building – Many factors such as credit qualification, loan flexibility, and annual percentage rate (APR) contribute to the final decision of what type of mortgage loan best fits your goals. Yet, a new trend being used by some homeowners is to actually add money to their monthly payment to decrease the principal balance of their loans at a much faster pace. This trend is called equity building. Equity builders usually select a home loan with a lower interest rate (and a shorter term loan such as a 15-year fixed) to help build equity faster. This rapid payment process allows borrowers to:
•Pay off the principal balance faster
•Lock in near-record-low interest rates
•Shorten the length of their home loan
•Own their home faster
•Pay substantially less mortgage interest
Equity building is a beneficial trend that’s becoming more and more popular with fiscally responsible homeowners. Also, home equity is the largest single source of household wealth for most Americans.
•Pride – Homeownership offers many benefits to many different types of people. For some homeowners, playing your music as loud as you want and painting the walls the color of your choice is a perk. For me, homeownership will permit me to build an NBA regulation size basketball court on my own property. For my coworker Joel Jarvi, home ownership may allow him to build the indoor slide of his dreams. No matter who you are, homeownership is a purchase, commitment, and journey that’s sure to bring you pride.
Furthermore, when the uncertainty surrounding the housing market fades and the market rebounds, homeownership may in fact transform that pride to profit through a home sale.
Bellevue Real Estate Report
February 20th, 2012
Posted by Thomas Wolter
Here is the Bellevue Real Estate Report for Feb. 20, 2012:
Rates Improve This Week Until Thursday When Rumors of a Greece Agreement Are Coming On Monday: Improving economic data at the end of the week plus speculation that Greece will receive another round of bailouts caused rates to move slightly higher from earlier in the week. The movements equaled about .500 in discount points higher. US and European stock markets have an increasing belief Greece and Europe’s officials will actually get a deal completed at the summit meeting on Monday. Inflation rates in the US continue to creep above the Federal Reserve target which is also putting pressure on interest rates. Many analysts believe the lows in US rates have been achieved; unless Greece defaults or the economic outlook reverses from the positive outlook that is driving stocks higher; interest rates will not fall much.
A tale of three stories. That’s a great way to describe last week’s news, as a string of positive economic reports, news out of Greece, and hints that inflation is heating up all worked together to impact Bonds and home loan rates. Here are the details!
A breakfast buffet of better than expected economic data hit the wires last week. In the housing arena, Housing Starts came in better than expected, while both the New York Empire State Index and the Philadelphia Fed Index reported positive manufacturing news. There was also decent labor market news, as Weekly Initial Jobless Claims fell by 13,000 in the latest week to 348,000 – the lowest level since March 2008! Meanwhile, Retail Sales rose in January by 0.4%, the largest gain since October.
Remember, strong economic news often cause money to flow out of Bonds and into Stocks, as investors hope to take advantage of gains. That’s partly what caused Bonds (including Mortgage Bonds, to which home loan rates are tied) to worsen late last week.
Also weighing on Bonds and home loan rates was the news that inflation is heating up. Despite the Fed’s claim that inflation is moderating, the Core Consumer Price Index (CPI), which strips out volatile food and energy, rose to its highest levels since October 2008. Meanwhile, as you can see in the chart, the wholesale measuring Core Producer Price Index (PPI) rose double the expectations of 0.2%, coming in at 0.4%. Any hints of inflation can serve to spook Bond investors – causing both Bonds and home loan rates to worsen – as inflation can reduce the value of fixed investments like Bonds. This is one story to keep a close eye on in the weeks ahead.
The drama in Greece is another key story to monitor, as it also impacted Bonds and home loan rates last week. Greece sent the markets into the weekend with assuring messages that a deal for them to avoid default is close, and this sense of optimism weighed on Bonds and home loan rates. Our Bonds and home loan rates have benefitted from all the uncertainty in Greece, as investors have seen our Bond Market as a safe haven for their money. Time will tell whether this uncertainty and safe haven trading will continue.
The bottom line is that now is a great time to purchase or refinance, as home loan rates remain near historic lows. Let me know if I can answer any questions at all for you or your clients.
Will Greece get its money to avoid default? That question has been dominating markets since last July, on again-off again for six months with no resolution. The clock is ticking now, Greece has until March 20th to find the funds needed to pay for maturing debt (actual default would occur on March 27th). With all the comments coming from every official in Europe it is very difficult and sometimes confusing trying to follow the events as they unfold, however we believe Greece will get its bailout this go-round, what happens when the next maturities occur another bailout is unlikely. Presently markets in Europe and the US are betting on a deal being completed. Italian Prime Minister Mario Monti, German Chancellor Angela Merkel and Greek Prime Minister Lucas Papademos expressed optimism that an agreement on Greece can be reached at a Feb. 20 meeting of euro-area finance ministers.
In this global economy, markets pay a lot of attention to what is occurring in Europe and China; China’s industrial output growth will probably slow this quarter as the world economy cools and the euro area’s crisis worsens, the Ministry of Industry and Information Technology said today. “The global economy is slowing down, Europe’s sovereign-debt crisis is deepening and the downside risks to the world economy are rising with international demand still slack and global commodities and financial markets continuing to be volatile,” the ministry said. German industrial output unexpectedly dropped the most in three years in December as Europe’s debt crisis weighed on confidence and the global economic slowdown damped demand. Production fell 2.9% from November, when it stagnated, the Economy Ministry in Berlin said today. Economists had expected output to remain unchanged.
Real Estate Miscellaneous Stats:
Feb NAHB housing market index was expected at 26 from 25 in Jan, increased to 29; single family sales at 30 from 25 in Jan, six month out sales index at 34 from 29 in Jan. A better report but no reaction to it in financial markets.
Mortgage applications decreased 1.0% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending February 10, 2012. The Refinance Index increased 0.8% from the previous week to its highest level since August 8, 2011. The seasonally adjusted Purchase Index decreased 8.4% from one week earlier. The refinance share of mortgage activity increased to 81.1% of total applications from 80.5% the previous week. This is the highest refinance share since January 20, 2012.
Jan housing starts were in line, up 1.5% to 699K annualized units; single family starts though fell 1.0%. Jan building permits were expected down 0.6% but actually increased 0.7%.
Loan Program Of The Month. My Community Loan: This is a conventional loan product that allows 3% down payment on purchase transactions. One of the main features allowed on this program is financed single premium mortgage insurance. The single premium fee is around 2.2 to 2.8% of the loan amount. It can be paid for by seller contributions. This structure can lower a borrower’s payment by a significant amount as compared to an FHA loan. Call for details.
Rates Improve This Week Until Thursday When Rumors of a Greece Agreement Are Coming On Monday: Improving economic data at the end of the week plus speculation that Greece will receive another round of bailouts caused rates to move slightly higher from earlier in the week. The movements equaled about .500 in discount points higher. US and European stock markets have an increasing belief Greece and Europe’s officials will actually get a deal completed at the summit meeting on Monday. Inflation rates in the US continue to creep above the Federal Reserve target which is also putting pressure on interest rates. Many analysts believe the lows in US rates have been achieved; unless Greece defaults or the economic outlook reverses from the positive outlook that is driving stocks higher; interest rates will not fall much.
Bellevue Real Estate Report
February 17th, 2012
Posted by Thomas Wolter
Here is an additional article to my weekly Bellevue Real Estate Market Report.
This year’s designated New American Home is being featured as part of the International Builder’s Show.
Modern gets the thumbs up.
Spa-like and eco-sensitive, the “New American Home 2012” being unveiled in Orlando this week by the National Association of Home Builders in conjunction with the International Builders’ Show, is a warmer take on the classic “White Box” of mid-20th century modern design.
“A lot of people want a spa feeling and a spa look that’s very analogous to modern,” said Luis Juaregui, a Texas-based American Institute of Architects accredited architect. The 4,200 square foot, $3.5 million gray stone and glass home has free flowing entertaining spaces, floor to ceiling sliding glass doors, a stone staircase with open risers, clear glass balustrades and clean geometric lines, tempered by dark wood cabinets, area rugs and soft furnishings.
Still, to fit into more traditional looking neighborhoods, architects are increasingly going hybrid, mixing distinctly modern, techno-savvy interiors with colonial details, Tudor-style roofs or Craftsman-inspired touches on the exterior.
A home to call one’s own has long been part of the American Dream. But as tastes, technologies and regional preferences change, propelled by demographics and the socio-economic climate, the style, scale and comforts of that coveted real estate evolve.
During the bigger- is-better 1980s and 1990s, homes ballooned in size. Compact single story ranch and cape cod styles gave way to ever grander two-story neo-colonials. When the economic bubble burst, they retrenched. These days, downsizing is cool; supersized McMansions towering over smaller homes are not.
Stephen Melman, director of economic services at the National Association of Home Builders said that houses shrank about 10 percent from their 2,500 square foot peak in 2007, and are expected “to get smaller and more efficient” with open floor plans, master bedrooms on the first floor and dining rooms distinguished only by a chandelier or architectural detail.
One-story ranch homes, post World War II suburbia’s signature easy style, are slowly regaining favor, thanks to first time buyers with tiny tots and aging baby boomers seeking accessibility.
Craftsman style homes, popular before World War II, are also enjoying a revival, said Gary D. Cannella, an architect in Bohemia, N.Y. “It’s the style not the size.” Adaptable to sizable abodes or small bungalows, these one or one and a half story homes boast low-pitched rooflines, tapered columns, oversized eaves, gables and the front porches “that everyone wants and no one sits on.”
The split level, a hallmark of suburbia in the Brady Bunch era, is nearly obsolete. Despite the aerobic benefits of tri-level living, “all you do is walk up and down stairs all day long,” Cannella says. “You can’t go anywhere without steps.”
Description: Aligned with the mid 20th-century counter classic design movement, modern is characterized by no fuss floor plans with combined dining, relaxing and entertaining spaces, clean, geometric lines, low slung roofs, and technologically advanced materials like concrete, steel and glass.
Why They Are Appealing: Easy, functional and bright, with walls of glass and open spaces, today’s modern is eco-sensitive and forward thinking, with state of the art kitchens and “smart house” technologies, though developers often prefer modern interiors with more traditional skins.
Where You’ll Find Them: Nationwide, with striking examples in the Hamptons, Santa Monica and other tony beach environs.
Style: Neo-Mediterranean: Neo-Mediterranean home styles are becoming the Sun Belt standard.
Description: Red tile roofs, stucco walls, archways, towers and heavy wooden doors with a Spanish or Tuscan flavor. Why It’s Appealing: The Southern European style and materials work well in warmer climates and match the landscape.
Where You’ll Find It: California, Florida, Texas, Southwest
The Flip Side: While northern European style homes are vanishing from the Sun Belt, in chillier climates such as the Northeast, two story center hall colonials still reign.
Style: Craftsman: Craftsman-style homes have become an American classic.
Description: Often referred to as Arts and Crafts bungalows, Craftsman-style homes have low-pitched roof lines, overhanging eaves supported by decorative brackets, gables, front porches with tapered square columns, exposed roof rafters, handcrafted wood and stone flourishes.
Why They are Appealing: This one to one and a half story style shouts cozy. With an emphasis on natural materials and decorative details, it works well for larger homes and small bungalows.
Where You’ll Find Them: coast to coast
What’s Not So Hot in 2012:
Style: McMansions: McMansion’s were a sign of success before the bubble burst.
Description: Sometimes called colonials on steroids or oversized neo-eclectic houses, these super-sized jumbles of styles and decorative details from colonial to Victorian, have brick, stone, vinyl or composite veneers. A product of the latter part of the 20th century and the knock-down era of the bubble before the burst, they often replaced smaller homes on lots not suited to their hulking size.
Why they are not appealing: Pretentious, over-sized energy guzzlers, overshadow surrounding homes and out of sync with the economic climate’s downsizing trend.
The Flip Side: Well-designed mansions on properly sized lots and in appropriate settings such as golf course or lakefront communities are still hot.
Style: Split Levels: Split-level homes, with many steps, have lost market appeal.
Description: A Ranch style house divided into at least three parts by short flights of stairs leading up on one side, down on another, dividing entertaining spaces from private areas such as bedrooms and separating formal rooms from more casual playrooms and dens.
Why they are not appealing: This darling of the 1950s, 60s and 70s is outdated and complicated to maneuver with steps at nearly every turn.
Style: Victorian: Victorian homes are charming, but almost no one builds them like this anymore.
Description: Turrets and towers, wraparound or granny porches and gingerbread trim with Queen Anne, Gothic or Italianate flourishes are the hallmark of these turn- of-the-20th-century two and three story homes with plenty of nooks and crannies.
Why They Are Not Appealing: While it’s hard not to love their colorful eccentricities, Victorians are challenging to rehabilitate or maintain. Their warrens of small rooms aren’t conducive to 21st century lifestyles.
Where You’ll Find Them: Urban neighborhoods, historic districts, small towns, older suburbs
The Flip Side: Newer neo-eclectic homes borrow whimsical features from true Victorians, touting turrets, towers and porches in maintenance free materials.
Bellevue Real Estate Market Report
February 11th, 2012
Posted by Thomas Wolter
Here is the Bellevue Real Estate Report for 2/11/12:
Some Hint That Greece May Live Within Their Means Causes Rates To Move Up: Interest rate pricing moved up a small amount this week as it seemed Greece and the EU were close to an agreement. Announcements out of Greece indicated they were agreeable to conditions of further help with their crisis. It all seems like a stall tactic now as sentiments reversed course dramatically today. Rates are up in price for the week. As for lower rates ahead, the 10 year Treasury Bond yr has heavy lifting to do when it moves below 2.00%, there is huge resistance to improvements when it sits at 1.80%. Mortgage rates don’t have much more improvement left at the moment, however there is not much likelihood mortgage rates will increase much either. Long term looking out a few months the trends suggest we could get more rate improvements but that can change quickly.
It’s been said that no news is good news. But last week, the Jobs Report brought some good news for the labor market. Read on for the details…and what they mean for home loan rates.
The headline Jobs Report showed 243,000 jobs created, which was much better than expected. Meanwhile, a whopping 257,000 private jobs were created, also much higher than expected. Upward revisions to November and December added another 60,000 jobs to what was previously reported for those months. And adding to the euphoria was a 0.2% decline in the Unemployment Rate, bringing it to 8.3%…the lowest since February 2009.
Despite all this good news, the report did show a pretty sharp decline in the labor participation rate from 64% to 63.7%. We really need to have more people “participating,” or working to help pay down our debt. Understandably, the demographics of baby boomers retiring does account for some of the decline. But is it the entire 0.3%? And the U-6 Unemployment Rate (which counts all persons marginally attached to the labor force, including those who are employed part-time but would prefer full-time) remains at a lofty 15.1%, with that figure dropping just 0.1% for the month.
And there was other good news to note last week as well: The Commerce Department reported that Personal Incomes rose in December by 0.5%, above expectations and well above the 0.1% reported in November. This marked the largest increase in nine months!
So what does all of this mean for the housing market and home loan rates?
While Bonds and home loan rates did worsen on the good Jobs Report news (remember good economic news often causes money to flow out of Bonds and into Stocks, as investor try to take advantage of gains), home loan rates remain near historic best levels. In addition, the problems in Europe remain…and as uncertainty reemerges, US Bonds (including Mortgage Bonds, to which home loan rates are tied) will benefit.
The takeaway from all of last week’s news is that the pace of improvement in the labor market is choppy and muddled at best. But the trend is improving over time, and this is welcome news for the struggling housing market because as people feel more secure in their jobs, they are more willing to consider making major purchases like a home.
Many have questions and frustrations questioning why there is so much attention to Greece. If Greece defaults the fear is that it will spread through the European Union with other countries teetering on the edge of default. Greece defaulting is seen as a huge problem from Europe’s banks as well as the implications for Europe falling back into deep recession; a domino effect. For all the talk about Greece’s austerity budget, unless Germany and France step up with more financing there is no plan that will end the crisis. Austerity plans are not being welcomed by the Greek public. Demands on their government to lower minimum wage, cut government employment as well as overall spending is being demanded by Germany and other countries before more funds are loaned before a default in March. Today many politicians resigned and the police threatened to arrest EU officials. Many a German flag went up in smoke as well. The markets are concerned that Greece is headed for a messy default and possible exit from the EU.
In this global economy, markets pay a lot of attention to what is occurring in Europe and China; China’s industrial output growth will probably slow this quarter as the world economy cools and the euro area’s crisis worsens, the Ministry of Industry and Information Technology said today. “The global economy is slowing down, Europe’s sovereign-debt crisis is deepening and the downside risks to the world economy are rising with international demand still slack and global commodities and financial markets continuing to be volatile,” the ministry said. German industrial output unexpectedly dropped the most in three years in December as Europe’s debt crisis weighed on confidence and the global economic slowdown damped demand. Production fell 2.9% from November, when it stagnated, the Economy Ministry in Berlin said today. Economists had expected output to remain unchanged.
Real Estate Miscellaneous Stats:
Mortgage Relief Settlement Reached: It was announced today that 50 States, multiple federal agencies and the 5 largest US banks that have been in negotiations for about a year to finalize terms of a massive $25 billion settlement to rewrite mortgages for struggling homeowners, came to an agreement. Government officials have come to the conclusion that a partial settlement is better than nothing and that they can offer relief to homeowners with non-Fannie Mae and Freddy Mac loans. Up to this point, the Making home Affordable refinance and modification programs have not provided the amount of relief intended. Involved in the negotiations are bank officials, the head of HUD, US Treasury, the White House and all 50 Attorney General offices in the US. Up until today it was reported that AGs from 2 states had not agreed to terms as they are concerned that the banks are being let off the hook to easily for the ‘robo signing’ scandal that left out proper processes for the transfer of Title and created uncertainty as to who actually owned mortgage notes that were in foreclosure. The trade off is promised principle reductions for home owners who do not have access to special refinance programs available on Fannie and Freddy loans. Currently there are an estimated 11million households with homes that are underwater. The $25 billion program will be divided in to $17 billion toward principle reduction of about 1 million eligible loans, $5 billion who were victimized by deceptive practices ( which only comes to $1800.00 for each household ) and $3 billion to pay for refinancing underwater borrowers at 5.250%. This is much higher than current rates but many people with Jumbo loans are currently above 6%. The banks are interested as the deal would remove the exposure to civil litigation over the improper practices of foreclosing on homes they did not technically have a Deed of Trust against. The banks would be required to grant a minimum principle reduction or rate reduction in exchange for government counting all or part of those amounts toward the $17 billion total. Up until this point banks have balked at a program that would keep them accountable to real modifications while taking bail out funds to support their solvency. With this program the banks will have to execute on $17 billion in a certain amount of time. This is said to turn in to actually $32 billion in bank write downs. Fannie and Freddy have refused to participate in a large principle reduction program as it would cost the tax payers and estimated $100 billion after already taking over $300 billion in taxpayer assistance.
Americans still sold on homeownership
A Market Watch Report by Steve Kerch reports that despite price declines, owning a home still ranks high in U.S.
Despite the historic upheaval in Real Estate the last 5 years, Americans are still optimistic about their own housing situation, a new poll shows.
Seventy-eight percent of Americans, identified as likely to vote in the 2012 presidential election, said that owning their own home was one of the most important things in their lives, according to the survey by Lake Research Partners done for the National Association of Home Builders. Survey results show 74% agreed, with 43% strongly agreeing, that owning a home was worth it even with all the ups and downs of the housing market. People are looking at home ownership from a more traditional perspective of stability and family environment rather that investments. Sentiments are shifting toward 401Ks as a better investment than Real Estate but respondents still considered a home a good use of money.
Current homeowners were not discouraged by the pitfalls of paying for and maintaining a house: 96% said they were happy with their decision to own a home and 85% said they were very happy with that decision. The NAHB commissioned the election-year survey in the hopes of backing up its lobbying effort on Capitol Hill with data that could show Congress and the Obama administration that housing is still a valued commodity in the country and that Americans want the government to provide supportive housing policies. Respondents said it is appropriate for the government to be in support of housing. Two-thirds said it was OK for the government to ensure the availability of 30-year mortgages and 75% said it was all right to use the tax code to support homeownership. What about the proposal to cut the mortgage-interest tax deduction as part of the deficit-reduction debate, 65% said they would be less likely to vote for a candidate who supported that position.
Loan Program Of The Month. My Community Loan: This is a conventional loan product that allows 3% down payment on purchase transactions. One of the main features allowed on this program is financed single premium mortgage insurance. The single premium fee is around 2.2 to 2.8% of the loan amount. It can be paid for by seller contributions. This structure can lower a borrower’s payment by a significant amount as compared to an FHA loan. Call for details.
Bellevue Real Estate Report
February 6th, 2012
Posted by Thomas Wolter
Here is an additional Bellevue Real Estate Report for Feb 6, 2012:
For the second year in a row, the Federal Housing Administration is extending a temporary waiver of its “anti-flipping” rule, meaning homebuyers relying on FHA-insured financing will continue to be able to buy homes that have changed hands in the last 90 days.
The waiver is a boon for investors seeking to rehab and flip properties, because it expands the pool of eligible borrowers to include those relying on FHA-backed loans, popular with first-time homebuyers and others who lack the cash to make large down payments.
In extending the waiver through 2012, FHA said all transactions must continue to be arms-length. In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the waiver will apply only if the lender can document the justification for the increase in value, FHA said.
FHA instituted the anti-flipping rule in 2003 to protect its mutual mortgage insurance program from losses on homes that were merely flipped, rather than rehabbed. Homes repossessed by Fannie Mae, Freddie Mac, and state- and federally chartered financial institutions were exempt from the rule.
In February 2010, the Obama administration waived the waiting period for resales — including homes purchased and rehabbed by private investors — in the hopes of stabilizing home prices and revitalizing communities hit by foreclosures.
It often takes less than 90 days to acquire, rehabilitate and sell properties, the Department of Housing and Urban Development said at the time. Some sellers of rehabbed properties had been reluctant to enter into contracts with FHA buyers because of the cost of holding a property for 90 days, HUD said.
In extending the waiver through 2011, FHA said it insured 21,000 90-day property flip loans worth more than $3.6 billion in 2010 that would otherwise not have qualified for financing.
That number has since grown to nearly 42,000 mortgages worth more than $7 billion on properties resold within 90 days of acquisition.
Bellevue Real Estate Report
February 5th, 2012
Posted by Thomas Wolter
Here is the Bellevue Real Estate Report for Feb 5, 2012:
Interest Rates Stay Down At Historic Lows Until The End of The Week: Mortgage Backed Securities have testing all time best levels again this week. Typical movements in the markets demand that the pricing moves one direction or another. Investors continue to watch news coming out of Europe and indicators of improvements in the US economy. Bad news out of Europe would drive rates lower but it would have to be significantly bad news. Good news on the US economy will move rates higher. This is what happened on Friday when the job numbers came out better than expected. The unemployment number dropped as well. While it was a decent number the details are not a mood changer. New data shows that the economy has lost a significant number of higher paying jobs and has added low paying jobs. Labor market participation rates are still very low meaning that many who have lost jobs have given up their job search. GDP growth continues to be very low after a significant recession. A recovery would historically have GDP growth in the 5% range. We are currently close to 2%. For now the market got a little sunshine in the jobs number.
Industry News
State of the Economy:
Last Week in Review
It’s been said that no news is good news. But last week, the Jobs Report brought some good news for the labor market. Read on for the details…and what they mean for home loan rates.
The headline Jobs Report showed 243,000 jobs created, which was much better than expected. Meanwhile, a whopping 257,000 private jobs were created, also much higher than expected. Upward revisions to November and December added another 60,000 jobs to what was previously reported for those months. And adding to the euphoria was a 0.2% decline in the Unemployment Rate, bringing it to 8.3%…the lowest since February 2009.
Despite all this good news, the report did show a pretty sharp decline in the labor participation rate from 64% to 63.7%. We really need to have more people “participating,” or working to help pay down our debt. Understandably, the demographics of baby boomers retiring does account for some of the decline. But is it the entire 0.3%? And the U-6 Unemployment Rate (which counts all persons marginally attached to the labor force, including those who are employed part-time but would prefer full-time) remains at a lofty 15.1%, with that figure dropping just 0.1% for the month.
And there was other good news to note last week as well: The Commerce Department reported that Personal Incomes rose in December by 0.5%, above expectations and well above the 0.1% reported in November. This marked the largest increase in nine months!
So what does all of this mean for the housing market and home loan rates?
While Bonds and home loan rates did worsen on the good Jobs Report news (remember good economic news often causes money to flow out of Bonds and into Stocks, as investor try to take advantage of gains), home loan rates remain near historic best levels. In addition, the problems in Europe remain…and as uncertainty reemerges, US Bonds (including Mortgage Bonds, to which home loan rates are tied) will benefit.
The takeaway from all of last week’s news is that the pace of improvement in the labor market is choppy and muddled at best. But the trend is improving over time, and this is welcome news for the struggling housing market because as people feel more secure in their jobs, they are more willing to consider making major purchases like a home.
Europe Update. ; The world is waiting patiently for how Greece will dodge the default bullet. Greece and its creditors are locked in talks over a debt-swap deal for the nation. Bondholders last week lowered their demands for an average coupon on the new debt they would get after European officials demanded they take steeper losses. The ECB is likely to refuse to show its hand on how it will help cut Greece’s debt burden until the deal is reached. Two weeks ago Greece officials were saying a deal would be finalized quickly, now as it continues to drag on with nothing resolved we have to question just how close a deal is. Close is good in horseshoes but is a little tenuous when nothing happens day in and day out. The EU completed a fiscal-discipline treaty that speeds sanctions on high-deficit states, requiring euro countries to anchor balanced-budget rules in national law. Eight countries outside the euro backed the pact, while Britain and the Czech Republic boycotted it. The meeting ended with German Chancellor Angela Merkel voicing frustration that Athens has failed to overhaul the Greek economy. “Greece’s debt sustainability is especially bad,” Merkel told reporters. “You have to find a way through more action by the Greek government, more contributions by private creditors, for example, in order to close this gap.”
GDP Growth Disappoints: Expected at a growth rate of 3.1%, as reported +2.8%. A 3% growth rate is an encouraging number the real news is in the details which were not as positive. As a result investors moved in to safe bond securities and stock indexes declined. The report is the first of three over the next three months and usually gets revised when the preliminary report hits next month; nevertheless after the Fed released its weaker forecasts for growth in 2012, and 2013 on Wednesday the softer Q4 growth is getting a lot of attention this morning. If inventory builds are removed GDP was up just 0.8%. For all of 2012 growth up 1.7% compared with +3.0% in 2010. Consumer spending in Q4 was up 2.0%, economists were projecting +2.4%, Q3 up 1.7%—holiday shopping was less than estimates. Q4 savings rate declined to +3.7%, the lowest in years
Real Estate Miscellaneous Stats:
King County Real Estate Sales Rebound in 2011 but Values Slip: Total sales in King County were up in 2011 compared with 2010 as low prices attract buyers. Sales volume was up 9% while median values were down an average of $35,000.00 to $340,000.00. The enemy of home valuations continues to be distressed sales. Short sales continue to make up a large percentage of total sales and bank sales of foreclosed homes were up 73% from 2010. Bank sales accounted for nearly half of all sales in South King County where increased sales volume accounted for the bulk of the sales increases last year. While these numbers drive down overall King County numbers the central market areas of Seattle and Bellevue showed increased sales volumes with only a 1 and 4% drop in value respectively. Individuals selling real estate dropped in 2011 which reinforces the idea that when distressed inventory dries up we will see a rebound in values. We still have a long way to go to recover as Seattle area homes are 31% below their peak values in 2007. Values are now equal to what they were in June of 2004. For those who bought after that date you are feeling the effects of the large appreciation rates after that time. Area values are 32% higher than January 2000.
Loan Program Of The Month. My Community Loan: This is a conventional loan product that allows 3% down payment on purchase transactions. One of the main features allowed on this program is financed single premium mortgage insurance. The single premium fee is around 2.2 to 2.8% of the loan amount. It can be paid for by seller contributions. This structure can lower a borrower’s payment by a significant amount as compared to an FHA loan. Call for details.
Bellevue Real Estate Report
January 28th, 2012
Posted by Thomas Wolter
The economy is improving, the Federal Reserve said Wednesday, but not enough to warrant higher interest rates for at least two-and-a-half more years.
The central bank indicated that it expects to keep the federal funds rate near historic lows until late 2014 — an extension from the Fed’s original pledge to keep rates low through mid 2013.
The “economy has been expanding moderately, notwithstanding some slowing in global growth,” the Fed said in a statement Wednesday.
More details will be released at 2 p.m. ET, when the Fed will release forecasts for the federal funds rate for the first time ever.
The Fed’s main tool for stimulating the economy, the federal funds rate is the interest rate banks charge one another for overnight loans. Keeping it at historic lows as the Fed has done since 2008, is meant to stimulate spending by lowering interest rates on everything from mortgages to car and student loans.
The statement follows a two-day policymaking meeting, at which the central bank shuffled its voting members as it does at the beginning of every year.
The rotation brings four new regional Fed presidents into voting roles: Jeffrey Lacker of Richmond, Sandra Pianalto of Cleveland, Dennis Lockhart of Atlanta and John Williams of San Francisco.
All but Lacker are considered either moderates or inflation doves, meaning they’re more likely to favor stimulative policies that promote economic growth, even at the risk of higher inflation.
Lacker was the sole Fed member to dissent against the policy decision Wednesday. He would have preferred the central bank not to release an actual timeframe for “exceptionally low” rates.
Besides the roster change, the Fed’s first meeting of the year is also noteworthy because it marks the first time the central bank will release forecasts, estimating where the federal funds rate will stand over the next few years.
While the Fed already alluded to those forecasts in its statement, the projections from each of its members are scheduled to be released later Wednesday, along with projections on economic growth, inflation and unemployment.
January 16th, 2012
Posted by Thomas Wolter
Here is the Bellevue Real Estate Report for Jan 16, 2012:
Interest Rates Bouncing Along Resistance: Interest rate markets have been unable to break through levels that equal historic lows. As experts continue to analyze all the market forces the consensus is that we will not see significant rate improvements unless a catastrophic event creates new and historic circumstances. At the same time there is no indication that rates will be moving up. The rumors regarding QE3 are the only thing that we can see would cause rates to increase in the near future. Although many analysts and Wall Street firms are improving their forecasts for the US economy this year, and some are actually recommending moving out of fixed income treasuries, the bond and mortgage markets have so far been able to resist moving higher in rates. US interest rates have been generally unchanged for over a week now; Europe’s debt problems keeping a minor bid in US treasuries while improved economic outlooks are weighing on the markets. A balance between the two forces has stabilized rates for the moment. The pending fee increases for all Conforming loans will certainly result in rate increases. See below.
“Happy days are here again.” Milton Ager and Jack Yellen. And while it seems that consumers are certainly feeling happier, not everything that happened last week was cause for song.
There was good news last Friday, as the first look at Consumer Sentiment for January came in at 74.0, which is the highest level since May 2011. However, there was also news last week that the holiday shopping season may not have been as robust as previously thought.
Retail Sales in December rose by a meager 0.1% from 0.4% in November, and when stripping out autos, sales actually fell 0.2%. Why did this happen? It seems that steep holiday discounting held down the value of goods sold, so sales were big, but only because of the heavy discounting.
The news out of Europe last week also wasn’t too happy. German Chancellor Angela Merkel and International Monetary Fund Managing Director Christine Lagarde met to discuss and finalize the debt restructuring deal for Greece. Back in October, a deal called for Bondholders to “accept” a 50% haircut on the face value of the Greek debt – but as creditors and authorities have started to forge a final deal, the actual haircut back to investors is looking quite likely to be larger than 50%. This is simply because worsening financial conditions in the Greek economy make paying the debt back with “just” a 50% haircut highly unlikely…maybe impossible. What’s more, the next reasonable question to consider is will Ireland, Portugal and even Italy ask for a similar haircut or deal on what may be unsustainable debt in their countries?
The happy news is that these problems are finally being addressed to make things better in the future. And in the short term, the uncertainty should keep money flowing into the relative safe haven of the US Dollar and US Bonds – including Mortgage Bonds, to which home loan rates are tied. In addition, Mortgage Bonds continue to be supported by the Fed’s purchases, which are also helping to keep home loan rates at record low levels.
All of this means that now continues to remain a great time to purchase or refinance a home. Let me know if I can answer any questions at all for you or your clients.
Europe still has major influence in US markets, however for the present the worries over defaults and safe haven moves into US treasuries has waned somewhat. The 10 yr German bund underperformed all their euro-area peers as European stocks rose, curbing demand for the safest fixed-income assets. Angela Merkel said yesterday that euro-area nations are considering accelerating capital contributions to the region’s bailout fund. French bonds rose after Fitch Ratings said the nation will probably retain its credit grade unless the European debt crisis worsens. Merkel will meet IMFs Lagarde today after discussions with French President Nicolas Sarkozy yesterday. The leaders said they plan to drive forward their agenda for stricter budget rules as they seek to craft a master plan for rescuing the euro.
Real Estate Miscellaneous Stats:
Market Analysts See Real Estate Recovery by 2013: While there is still negativity around Real Estate nationwide, there are some that think we are close to being out of the woods. Case Shiller reports that home values have dropped 31% since their peak in 2006 nationwide. A Bloomberg News report quotes Scott Simon of PIMCO saying values will likely drop another 7%. The good news is this makes housing very cheap. Zillow reports that housing declines in 2011 were the smallest in 4 years. This is consistent with most analysts views of a recovery. They predict appreciation will return in 2016 and will be at 3% through that time. Freddy Mac’s chief economist predicts a 1% decline in 2012 and 2% appreciation in 2013. Existing-home sales rose to an annualized 4.42 million in November, the highest in 10 months after figures were revised, the National Association of Realtors said this past week. Moody’s Analytics Inc. expects home prices to drop about 3 percent in 2012 as more foreclosed homes go on sale.
REO Solutions: The Obama Administration is preparing a plan to try and unload foreclosed properties held by Fannie, Freddie and FHA; the plan calls for packaging bundles of REOs with the goal of selling blocks of homes to private investors as income properties (rentals). It is a plan that has been kicked around for a while but until now, only talk. Every key agency frm the Fed to FHFA appears to be involved with the plan. Rental income is up, prices for homes still falling; if the prices are right maybe some of the REOs can be sold—depends mostly on how much the agencies are willing to give up when prices are set. There is little reason to expect the plan will be successful, but is worth a try; what lender will step up to finance a huge pool of foreclosed houses without a huge infusion of up-front cash?
New Mortgage Fees “Go Live” In Late-January: Fannie Mae and Freddie Mac have been instructed to start collecting the new, higher guarantee fees effective April 1, 2012.However, mortgage applicants will notice new fees appearing sooner than that. This is because loans that land with Fannie or Freddie can take 75 days or more to get there. Fannie and Freddie will increase their guarantee fee on all residential loans being pooled by 10bp on April’s Fool’s Day, but most believe that this increase should start to reflect on mortgage applications in February, if not sooner. Other increases might be needed over the next couple years, especially if g-fees are raised to match what a non-government institution would charge for the risk. Some estimates that I have seen on this are another 15-35 basis points over the next two years (on top of the 10bp increase effective 4/1). This could equal in increase in rates of about .125%.
Other changes are set for HARP. As part of the HARP 2.0 program changes, 30-year HARP loans will have an LLPA cap of 75bps (loans with terms of 20 years or less will have a cap of 0. This presents a significant restriction on how many additional fees can be collected from those loans.
Loan Program Of The Week. My Community Loan: This is a conventional loan product that allows 3% down payment on purchase transactions. One of the main features allowed on this program is financed single premium mortgage insurance. The single premium fee is around 2.2 to 2.8% of the loan amount. It can be paid for by seller contributions. This structure can lower a borrower’s payment by a significant amount as compared to an FHA loan. Call for details.
Bellevue Real Estate Report
January 12th, 2012
Posted by Thomas Wolter
Today’s buyers are looking for turnkey homes. That is, they want to move right in without having to do a lot of work. Buyers with busy lifestyles pay a premium for listings that are in prime condition. Staging can make the difference between a listing selling or not, the time it takes to sell, and the ultimate sale price.
Sellers who are financially strapped often have a hard time accepting that they’ll need to invest in preparing a house for sale even though they may sell for less than they paid. Fix-up costs can mount up; your agent can help you prioritize so that you don’t waste money. It’s important to keep your goal in mind, which is to sell your house in a difficult market.
Recently, a home in Piedmont, Calif., an affluent city neighboring Oakland, came on the market in “as is” condition. It had been lived in for decades without much upgrading. Although located in a desirable area, the listing was vacant, dark and showed poorly. The sellers refused to do any work to improve its appeal.
After months on the market with no significant interest, the sellers pulled the house off the market and made improvements. The wall-to-wall carpet was pulled up to reveal hardwood floors that were then refinished. Painters lightened the interior and a professional stager was hired to bring in furniture, artwork, house plants and accessories. The listing was put back on the market with a fresh look and sold right away.
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