Mortgage Applications Jump From Prior Week

Mortgage applications rose last week after hitting an eight-year low the previous week.

The Mortgage Bankers Association’s seasonally adjusted mortgage applications index rose 16.8 percent from 408.1 the prior week to 476.6 last week. On an unadjusted basis, the index increased 29.6 percent compared with the previous week, but was down 30 percent compared with the same week last year.

Much of the increase was in refinance applications, which rose 28.5 percent compared with the previous week. The index of conventional purchases rose only 7.9 percent.

Falling mortgage rates encouraged the increase in applications:

• 30-year fixed-rate mortgages decreased to 6.26 percent from 6.28 percent
• 15-year fixed-rate mortgages decreased to 6.01 percent from 6.05 percent
• 1-year ARMs decreased to 6.90 percent from 6.97 percent

Source: Mortgage Bankers Association (10/29/2008)

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Fed Expected to Trim Key Rates Again

The Federal Reserve is expected to lower interest rates before the end of their two-day meeting, which starts today.

If they do, this will be the second time in a month. The Fed is expected to lower the rate by either half a percentage point to 1 percent or, conservatively, make a smaller quarter-percentage reduction to 1.25 percent.

The prime rate, which is used to set home equity loans, certain credit cards, and other floating rate loans, is now at 4.5 percent. These rates will fall commensurately based on the size of the cut. Mortgage rates aren’t so directly affected, but may slip as other rates decline.

Source: The Associated Press, Jeannine Aversa (10/28/08)

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NAR Makes Big Push for ‘Four-Point Plan’

Can the federal government afford to pass yet another stimulus measure, this one aimed directly at getting the housing market moving? NATIONAL ASSOCIATION OF REALTORS® leaders say the government can’t afford not to.

The association has crafted a four-point housing recovery plan and is making an all-out push to get it through Congress. At the REALTORS® Conference & Expo in Orlando next week, NAR members will be wearing “I support the four-point plan” buttons to voice their support.

The House That NAR Built

In addition, REALTORS® will have the opportunity to sign a giant model house on the Expo floor emblazoned with the slogan, "We support the NAR housing stimulus plan."

After the conference, the house will be dismantled, shipped to Washington, D.C., and reconstructed in an as-yet-unnamed spot. It’s a publicity stunt, to be sure, but one that REALTORS® are hoping will get legislators’ attention.
Banks begin receiving cash injections this week as part of the massive $700 billion federal rescue bill, and REALTORS® want that money used for lending to qualified home buyers.

Outrage from Lawmakers

REALTORS® aren’t the only ones concerned about how the banks will use those funds. Senate Banking Committee Chair Christopher Dodd (D-Conn.), who helped fashion the rescue package expressed outrage at a credit-crisis hearing last week, saying: "Those lenders who will be receiving billions of dollars from U.S. taxpayers are considering using those dollars not to make loans, but rather to pursue ’some acquisition opportunities’ and to create a capital ‘cushion’ on which they will comfortably sit while the American consumer and small business person struggles."

The desire to restart bank lending was core to the government’s goal in passing its rescue bill.
In addition to the provision calling on banks to use the funds for lending, NAR’s four-point plan calls for:

• Expanding the $7,500 first-time home buyer tax credit to all buyers and eliminating that program’s repayment requirement.
• Making permanent the prohibition against banks entering real estate brokerage and management.
• Making permanent the high-cost conforming loan limit of $729,750. That limit has been in effect for less than a year and is scheduled to drop to $625,500 on Jan. 1, 2009. NAR analysts say the higher limit, to be effective, needs more time to work.

— By Robert Freedman

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NAR: Home Sales Rise as Affordability Improves

Existing-home sales increased last month as buyers responded to improved housing affordability conditions, according to the National Association of Realtors®.

Existing-home sales – including single-family, townhomes, condominiums and co-ops – rose 5.5 percent to a seasonally adjusted annual rate of 5.18 million units in September from a level of 4.91 million in August. Home sales are 1.4 percent higher than the 5.11 million-unit pace in September 2007.

Lawrence Yun, NAR chief economist, said more markets are seeing year-over-year gains.
“The sales turnaround which began in California several months ago is broadening now to Colorado, Kansas, Minnesota, Missouri, and Rhode Island,” he says. “The South was hampered by much lower home sales in Houston in the aftermath of Hurricane Ike.”

NAR President Richard F. Gaylord says low home prices and low interest rates have helped attract buyers.
“This is the first time since November 2005 that home sales have been above year-ago levels,” Gaylord says. “Credit tightened at the end of September, but the improvement demonstrates that buyers who’ve been on the sidelines want to get into the market to make a long-term investment in their future.”

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to 6.04 percent in September from 6.48 percent in August; the rate was 6.38 percent in September 2007.
Yun says there may still be market disruptions.

“The credit markets are not settled yet, although the mortgage market stabilized with the government takeover of Fannie Mae and Freddie Mac," Yun says. "Inventory remains high, and price declines are pressuring owners."
Yun says that an additional housing stimulus would stabilize prices more quickly and help bring faster stability to Wall Street.

"Removing the repayment feature on the [$7,500] first-time buyer tax credit and permanently raising loan limits would bring more buyers into the market and further reduce inventory,” Yun says.

A Closer Look at the Numbers

• Total housing inventory: at the end of September fell 1.6 percent to 4.27 million existing homes available for sale, which represents a 9.9-month supply at the current sales pace, down from a 10.6-month supply in August. This marks two consecutive monthly declines since inventories peaked in July.

• National median existing-home price: $191,600 in September, for all housing types. That’s down 9 percent from a year ago when the median was $210,500.

“Compared to a fairly small share of foreclosures or short sales a year ago, distressed sales are currently 35 to 40 percent of transactions," Yun says. "These are pulling the median price down because many are being sold at discounted prices. The current market is not being dominated by speculative investors. Rather, 80 percent of current buyers are purchasing a primary residence, which is a bit higher than historic norms.”

• Single-family home sales: increased 6.2 percent to a seasonally adjusted annual rate of 4.62 million in September from a pace of 4.35 million in August, and are 3.8 percent above the 4.45 million-unit level a year ago. The median existing single-family home price was $190,600 in September, which is 8.6 percent below September 2007.

• Existing condominium and co-op sales: were unchanged at a seasonally adjusted annual rate of 560,000 units in September, but are 15.7 percent below the 664,000-unit pace in September 2007. The median existing condo price was $199,400 in September, down 10.2 percent from a year ago.

By Region
Here’s a breakdown across the country of existing-home in September:

• West: sting-home sales in the West jumped 16.8 percent to an annual rate of 1.25 million in September, and are 34.4 percent higher than September 2007. Median price: $253,600, down 18.5 percent from a year ago.

• Midwest: sales increased 4.4 percent to an annual pace of 1.19 million in September, but are 2.5 percent below a year ago. Median price: $152,500, which is 7.9 percent lower than September 2007.

• South: sales rose 2.2 percent in September to a pace of 1.9 million but remain 7.8 percent below September 2007. Median price:$167,200, down 4.1 percent from a year ago.

• Northeast: sales slipped 1.2 percent to an annual pace of 840,000 in September, and are 7.7 percent lower than a year ago. Median price: $246,800, down 5.4 percent from September 2007.

Source: NAR

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Reverse Mortgages Get Boost from Uncle Sam

Starting on Nov. 1, the limit on FHA-backed reverse mortgages, dubbed Home Equity Conversion Mortgages (HECMs), will rise to $417,000 nationwide.

The new rules also will institute a 2-percent cap on origination fees for the first $200,000 of the loan amount or a 1-percent ceiling for higher amounts, with a $6,000 inflation-adjustable limit.

Additionally, seniors will be allowed to use such loans to purchase a new property and extract equity from co-operative properties, and lenders will no longer be allowed to sell annuities and other financial products along with the mortgage.

Presently, 99 percent of new reverse mortgages are HECMs.

Source: Christian Science Monitor, Margaret Price (10/27/08)

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Six Rules for Selling Fast in a Slow Market

Anyone looking for advice on how to close a deal in a tough market might get some inspiration from William Bronchick and Ray Cooper, authors of How To Sell A House Fast In A Slow Real Estate Market(2008: John A. Wiley & Sons).

Here are some of their most useful ideas:

Position the house in the right price range. Buyers search by price range. Positioning a property in the middle of the range increases the likelihood people will see it.

Have info available. Deals fall apart when the buyer has unanswered questions. Work with the seller to have key information available, including cost of utilities and taxes, neighborhood liens and covenants, and an evaluation of the schools.

Put out a good flier. People are much more likely to read the flier than they are to call the number on the “For Sale” sign.

Market to the neighbors. Market to people who have just listed their own homes in the same areas. Chances are they like the neighborhood and could be persuaded to stay in the area by the right property.

Talk to the seller about offering creative financing. For many people these days finding money is the biggest stumbling block.

Explain the first-offer rule to clients. In this market holding out for a better offer is a big mistake.

Source: Forbes, William Bronchick and Ray Cooper (10/21/2008)

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More Leeway in Revised FHA Refi Program

Hope for Homeowners, the program put in place in July that was supposed to refinance failing home loans, hasn’t proven to be very workable, critics say.
Now it’s being improved.

The program gives the U.S. Department of Housing and Urban Development $300 billion to refinance failing home loans. But the original plan didn’t take into account that first and second lien holders, on mortgages where multiple lien holders apply, would in some cases fight over letting the buyer walk away.

The original legislation demanded that the lender have the property reappraised and then write off 10 percent of the new value. Now the rules have been modified to give HUD more flexibility to set the new loan level, including giving the second lien holder a buyout.

HUD Secretary Steve Preston says the original plan left lenders dealing with uncertainty. The revised version gives them more control. "It will give them an opportunity to have a bird in the hand rather than something possible down the road," Preston says.

Source: Reuters News, Patrick Rucker (10/21/2008)

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Fed Considers More Steps to Bolster Economy

Federal Reserve chairman Ben Bernanke urged the House Budget Committee to support another government stimulus package, particularly one that would encourage consumers to buy houses and cars.

"If the Congress proceeds with a fiscal package, it should consider including measures to help improve access to credit by consumers, homebuyers, businesses and other borrowers," Bernanke said.

Many economists believe members of the Fed will again lower its key rate – now at 1.5 percent – when it meets Oct. 28-29.
Source: The Associated Press, Jeannine Aversa (10/20/08)

 

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Southern California Home Sales Jump 65 Percent, Tracking Firm Says

LOS ANGELES —

Southern California home sales jumped 65 percent in September from a year ago, as plummeting prices fueled by foreclosures lured more buyers, a real estate tracking firm said Monday.

Last month’s median home price in the six-county region fell 33.2 percent to $308,500, compared to $462,000 in September 2007, according to San Diego-based MDA DataQuick.

The September median price was 38.9 percent below the peak $505,000 median posted in spring and summer of last year.

John Husing, an economist with Economics & Politics Inc., a consulting firm, said the ample supply of discounted, foreclosed homes has kept downward pressure on prices.

Once foreclosures start drying up, prices will stabilize, but that could take another year, he said.

"The flow of foreclosures is enough to meet demand," he said.

Foreclosure resales amounted to half of all transactions last month, easily pushing sales beyond the dismal, record lows of a year ago, when a credit crunch began slamming the brakes on home financing.

"The pitifully low September 2007 sales numbers weren’t tough to beat," said John Walsh, MDA DataQuick president.

Andrew LePage, an analyst with MDA DataQuick, said it’s hard to estimate how many mortgage defaults were still in the pipeline. Some lenders are simply jammed with a backlog of paperwork, and the number of defaults by prime mortgage holders is increasing, he said.

The September sales figures largely reflect purchase decisions made during the summer, making it hard for analysts to predict how the recent meltdown in the financial markets will affect the housing market.

"The numbers don’t reflect the sheer terror of the last three weeks," Husing said.

Tom Adams, a broker with Century 21 Adams & Barnes in Monrovia, a Los Angeles suburb, said the rocky stock market may have driven more people to real estate. He said his October sales have increased significantly.

"I think people may be seeing real estate as a safer investment than paper," he said.

Steep price declines, especially inland, could keep sales levels well above the record lows seen late last year and early this year, Walsh said. However, future sales will be affected by the severity of this economic downturn, he said.

The price drop is luring more first-time home buyers, but mortgages are hard to find, said Doug Shepherd, owner/broker of Coldwell Banker Shepherd Group in Riverside.

A total of 20,497 new and resale houses and condos closed escrow in the region last month, up 5.8 percent from 19,366 in August and up 64.6 percent from 12,455 in September 2007.

Last month’s sales were the highest for any month since December 2006, and the year-over-year gain was the highest for any month in DataQuick’s statistics, which go back to 1988.

 

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Dump Your Credit Card Debt, But Keep Your House

If you’re feeling overwhelmed by debt — credit cards, medical bills, mortgage payments, etc.– andespecially if you’re being hounded by collection companies, your best option is to make an appointment with a nonprofit credit counseling service. In exchange for agreeing to a budget plan, they’ll contact creditors for you and hopefully buy you more time to pay your bills.

Warning! As I wrote in a previous column, due to the number of for-profit scammers out there, look for an organization affiliated with the National Foundation for Credit Counseling (nfcc.org).

Don’t expect a miracle. “Counseling isn’t for everyone,” says Travis Plunkett with the Consumer Federation of America. He says that while a credit counseling agency “can provide some breathing room” by negotiating reduced payments with your creditors, “if you’re really in serious financial trouble, they can’t provide enough breathing room to help.”

Both Plunkett and Gerri Detweiler, author of several books on consumer credit, say that if your situation is especially dire, filing for bankruptcy may be your only recourse. If you think you might be headed down that path, she recommends making an appointment with a bankruptcy attorney as soon as possible.

While a bankruptcy filing is public record and remains on your credit history for 10 years, attorney Stephen Elias says it may not be as painful as you think — especially if most of your debt is unsecured, i.e. not backed by a tangible asset such as real estate or a car that can be seized. He points out that if you’ve already missed several payments, “your credit is in the tank, anyway, and that stays on your record for seven years.”

Elias, who has authored several file-your-own-bankruptcy books, describes it as an “amazing” process. He says, “First you have to file your papers. Thirty days later you go to a creditors meeting and under oath swear that your paperwork is correct. A minute later you walk out.”

Creditors then have 60 days to object to having your debt erased. But according to Elias, in his 25 years of practice, he’s never seen a creditor do this. He recalls one extreme case where clients had traveled the world, running up a $50,000 bill on their Bank of America credit card. Although he expected B of A to object, there was “not a peep. I was really surprised.”

If the court doesn’t hear from your creditors within the 60-day window, your debts are discharged.

Surprisingly, seniors are often more creditor-proof than younger debtors, especially if they don’t own their home or many tangible assets. That’s because much, if not all, of their income cannot be seized in bankruptcy. Even after it’s in your bank account, Social Security is strictly off-limits, says Elias. So are your company retirement plan, IRA, and pension. There’s also a chance that the income from these accounts is exempt. And, under the Fair Debt Collections Practices Act, anyone can demand that creditors stop harassing them.

But what if you’re middle-aged, have a couple of kids, a mortgage, health problems that have kept one spouse from working, and $30,000 in credit card and medical bills you can’t afford to pay?

Under the revised bankruptcy regulations enacted in 2005, if your income exceeds a certain threshold (set by each state), you cannot qualify for Chapter 7 bankruptcy, which allows you to essentially walk away from your debts. Your only option is to file under Chapter 13, where the court creates a five-year plan for you to pay back a portion of your debts.

But Chapter 13 can be a much better solution for many people, especially if you own a home and want to keep it. Instead of foreclosure, the court allows you to make up the mortgage payments you missed by adding a little extra to each payment left on your schedule.

Elias, who has just written “The Foreclosure Survival Guide,” says an option under Chapter 13 will allow you to keep your house while having your unsecured debt wiped out. He calls the “zero percent plan” the best choice “for most people who went way over on credit card or medical debt.”

Keep in mind that regardless which type of bankruptcy you file, you must complete a credit counseling course given by a federally-approved organization. And your bankruptcy filing will remain on your record for 10 years. That means you will find it next-to-impossible to get a loan. “Sure, they don’t have access to credit,” says Elias, “but that’s not necessarily a bad thing for many people.”

If you feel your current financial problems are temporary and you really, really want to hang on to your home, don’t give up. “The challenge is what when you’re under financial stress, it’s harder and harder to make the calls, handle the rejections, and be willing to keep going,” says Detweiler. As she put it, you have to “be a bulldog about it.”

 

Read the story here.

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