Loan Apps Rise as Rates Dip Below 5 Percent

Average mortgage rates dipped below 5 percent last week, driving mortgage application volume up 11.3 percent to 723.4 from 649.7 the previous week on an adjusted basis, according to the Mortgage Bankers Association weekly survey.

On an unadjusted basis, the index increased 11.6 percent compared with the previous week and was up 5.7 percent compared with the same week a year ago.
The increase was reflected in the government purchase index (mostly FHA), which rose 10.4 percent. The overall purchase index was up 7.1 percent. The refinance share increased to 67.9 percent, up slightly from the previous week when it was at 66.9 percent.

Mortgage rates were down to the second-lowest rate in the history of the survey, with the record low being 4.89 percent for the week ending Jan. 9, 2009.

30-year fixed-rate mortgages decreased to 4.96 percent from 5.14 percent

15-year fixed-rate mortgages decreased to 4.54 percent from 4.73 percent

1-year ARMs increased to 6.21 percent

Source: Mortgage Bankers Association (03/11/2009)

Pricing Disagreement: What Is a Home Worth?

Homebuyers and the real estate professionals they choose to sell their homes don’t always agree over what the property is worth, and many buyers think both of them are setting prices too high, according to a survey by HomeGain.com Inc.

The survey found that 63 percent of homeowners believe the price their practitioner recommended is too low. About 45 percent of sellers think prices should be 20 percent to 30 percent higher, while 14 percent believe their home should be priced a whopping 30 percent higher.

Meanwhile, 21 percent of homebuyers say the homes they are considering are overpriced by up to 10 percent; 32 percent say prices are 10 percent to 20 percent too high; and 6 percent say homes are more than 21 percent over priced. Only 18 percent believe homes are priced fairly.

“Homeowners know that prices have fallen, but that somehow doesn’t apply to them because they have ‘upgraded vinyl’” or something, Pamela Frey-Primiani of Keller Williams Realty in Sicklerville, N.J., says. “Sellers have got to be realistic in their expectations. An overpriced home in these times does nothing — no showings, no offers, just whining from sellers that it’s all someone else’s fault that the home hasn’t sold.”

Source: HomeGain.com Inc. (03/05/2009)

Fed Prepares for Commercial Market Bailout

Real estate experts agree that the best hope for avoiding a commercial real estate crisis similar to the residential one is another bailout from the federal government.

Last week, Federal Reserve Chair Ben Bernanke suggested at least $1 trillion in credit would be forthcoming in order to avoid a “looming crisis.”

Analysts say that while delinquencies are few, office vacancy rates are nearing record levels. This leaves banks holding $1.72 trillion in outstanding commercial loans and many of them are on buildings that are nearly empty. In 2009, $300 billion of these loans are due to be refinanced by commercial banks, but the banks are reluctant to refinance because the properties are dropping in value.

Since both insurance companies and pension funds are heavily invested in commercial real estate, they, too, are at risk.

“The need is urgent,” says Kenneth Rosen, a professor of real estate at the University of California in Berkeley. “It is important to get this done before we have another problem.”

Source: Christian Science Monitor, Ron Scherer (03/09/2009)

Experts Weigh Rent-to-Buy Pros and Cons

The weak housing market has prompted some home sellers to offer rent-to-buy agreements to prospective buyers.

These buyers pay an up-front fee of approximately 1 percent of the sales price for the option to buy, and all the payments they make during the rental period go toward the principal.

Most rent-to-buy agreements last for two to five years; and if the occupants decide not to go through with the purchase, they lose the option fee plus the rental payments. Those that agree to purchase the home at the price specified when the agreement was signed also lose money if property prices have since fallen.

Moreover, buyers who make late rental payments often find that these do not count toward the home purchase. According to Arizona State University finance professor Anthony Sanders, “A good rule of thumb [is to] separate the rental decision from the purchase decision.”

Source: Forbes 03/02/09

Is Now the Best Time to Invest in Apartments?

Industry experts say consider investing in a duplex, triplex or small apartment building.

“Smaller units are typically older … and during a downturn people prefer lower-quality properties with fewer amenities,” says Hessam Nadji, managing director of research at real estate brokerage Marcus & Millichap.

Nadji also pointed out that young people are the most likely tenants in these older units and that segment of the population is growing. The baby boom peaked in the 1950s and those boomers’ children, born in the 1980s, are just going out on their own. While they have one of the highest unemployment rates now – 12 percent – they will likely be the first hired when the economy improves, says Reis Research Director Victor Calanog.

Reis identifies San Diego and Sacramento as areas expecting strong growth, as well as San Antonio, Texas, and Fairfield County, Conn., a suburb of New York City.

Nadji urged investors to buy now while prices are down. “There is a good chance that if an investor waits for a recovery to materialize, they’ll see prices go up again,” Nadji says.

Source: Investor’s Business Daily, Amy Reeves (02/26/2009)

6 Tips for Home Owners Who Turn Into Landlords

Home owners who decide to rent out their properties have to stop thinking of themselves as home owners and instead consider themselves as running a small business, experts say.

Thinking like a businessperson means focusing on the monthly cost of maintenance, mortgage and taxes, as well as being aware of landlord-tenant regulations and avoiding liabilities.

Here are key issues to consider:

• Set a fair rent. Setting the right price will make it more likely that a landlord will be able to keep the place rented.
• Understand landlord-tenant rules. Running afoul of landlord-tenant regulations and rules regarding security deposits can be costly.
• Screen applicants. Eliminating potential tenants who can’t pay or who won’t take care of the property is very important.
• Lay out the rules in a lease. Widely available sample leases can help. If you have questions, ask an attorney.
• Consider a property manager. Despite the expense, turning the job over to experts can help a landlord come out ahead.
• Talk to the condo association. If the property is a condominium, be prepared to deal with a host of regulations.

Source: The Washington Post, Renae Merle (02/28/2009)

Green Building: Housing’s Few Bright Spots

Energy-efficient home manufacturing could be one of the few industries to grow and thrive in the present economy, according to the U.S. Green Building Council (USGBC).

Consumers are looking for dwellings that are both affordable and sustainable, while manufacturers are eager to reduce production costs as well as reliance on foreign energy.

In Turner Construction Company’s survey of real estate developers, agents, brokers, builders, and other industry experts, 83 percent said they would be “extremely” or “likely” to pursue the USGBC’s LEED certification for upcoming building projects, despite the credit freeze.

Findings from other studies conducted over the past year include:

• Seven in 10 home buyers are likely to buy an energy-efficient home in an economic downturn.
• More than 80 percent of commercial builders will invest in green building practices this year.
• 60 percent of commercial developers provide seminars to tenants to show them how to reduce costs and maximize efficiency.

Source: RISMedia (02/26/09)

How the Stimulus Can Help Your Business

Time will tell if the newly passed economic stimulus package and the components related to the real estate industry will have a positive impact on the housing market in the country, says Wendy Forsythe, vice president of broker services at the Better Homes and Gardens Real Estate franchise network.

She believes that real estate professionals across the U.S. can affect the ultimate outcome of this government initiative. Forsythe offers three ways that real estate salespeople can take advantage of the housing stimulus plan.

1. Become an expert on every element of the plan as it relates to the housing market in general and my market specifically. Have information on your Web site. Blog about it. Become the go to person for the local media. (Learn about the impact of the stimulus package at REALTOR.org)

2. Personally pick up the telephone and call all past clients, perspective clients, friends, family, and acquaintances.Make it a mission to talk to every single person you know about the housing stimulus package and its effects on each and every one of them. Consider it your responsibility as a real estate professional to educate them on the elements, how they could potentially use some of the incentives to their advantage and generally answer any questions they have.

3. Reach out to people you don’t know by offering free information seminars in your market. Consider partnering up with a related professional in your market to host these, but you should be front and center meeting people and educating them on the housing stimulus package and your local market area.

Source: bhrealestateblog.com, Wendy Forsythe (02/23/2009)

What’s Next for Fannie, Freddie?

What’s to become of Fannie Mae and Freddie Mac, which are bleeding red ink as home owner defaults continue to increase?

The rising losses will force the government to decide whether to keep putting money into the firms to keep them operating or divide them into smaller businesses and remove government support.

Daniel Mudd, a former Marine, was Fannie Mae’s CEO before the government fired him and put James Lockhart, director of the Federal Housing Finance Agency, in charge. He likened the situation to the U.S. invasion of Iran. “The troops got to Falluja in a couple of weeks and seized the radio towers, but there was no plan to run the country once the shooting stopped,” he said.

Under the Obama plan, Fannie and Freddie are expected to refinance as many as 5 million underwater mortgages.

Fannie’s government-appointed CEO, Herbert Allison, said: “It’s not about maximizing returns on equity or profits. It’s really about being of use to the country during this very difficult period.”

Source: The Wall Street Journal, James R. Hagerty and Damian Paletta (02/27/2009)