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Home ownership lowest in a decade

2010-02-21T13:52:00.001-05:00

According to US Census Bureau data, the homeownership rate dipped in Q409, bringing the rate of homeowners at its lowest point since the second quarter of the year 2000. The Q409 rate of 67.2% is down slightly from Q309’s rate of 67.6%, and is also down from Q408, when the homeownership rate was 67.5%. Seasonally adjusted, the Q409 rate was 67.3%, down from the seasonally adjusted rate of 67.4% in Q309 and 67.6% in Q408. The seasonally adjusted homeownership rate is also at its lowest level since Q200. Regionally, The biggest drop was in the South, where the rate declined to 69.1% from 69.7% in Q309 and 69.8% in Q408. The West declined to 62.3% from 62.7% in both Q309 and Q408. Homeownership in the Midwest decreased to 71.3% from 71.6% in Q309 and 71.4% in Q408. In the Northeast, homeownership declined to 63.9% from 64% in both Q309 and Q408.

Housing prices to drop 5% more?

In normal times, people won't pay much less to lease a house than to own it. After all, if you're paying rent instead of a mortgage and taxes, you still get to enjoy the same rec room, chef's kitchen, and casita for visiting grandparents. So the surest sign of a frenzy appears when owning becomes far more expensive than renting. That's precisely what happened during the last bubble. And the surest sign that prices have fully adjusted arrives when the ratio of what people pay in rent versus what owners spend on the same property returns to its historic average. "If you look at the trend in rents to see where housing prices are headed, you're looking at the right measure," says Yale economist Robert Shiller. In recent reports, Deutsche Bank (DB) demonstrates how steady or even falling rents have pulled down housing prices, to the point where in many markets it costs about the same amount to own as to lease. That's a golden mean that America hasn't seen in almost a decade. Th
e DB research also offers convincing evidence that the wrenching adjustment in housing prices is finished for much of the nation, with a bit more pain to come in selected areas.

On average, DB found that families across America were spending about 87% as much to rent as to own in 1999. Hence, they were traditionally willing to pay a premium as homeowners, though not a big one. But by mid-2006, with the craze in full swing, the figure fell below 60%. At that point, Americans were spending an incredible 66% more to own than to rent. It was far worse in the bubble markets: In Las Vegas, Phoenix and Miami, homeowners were paying twice as much as renters, and in San Francisco and Orange Country, owners' monthly payments were triple those of their neighbors with leases instead of mortgages from 1999 to 2007, apartment rents increased only 32%, but home prices jumped more than three times as fast, around 105%. DB reckoned that housing prices are more or less reasonable when the ratio returns to its 1999 level. Why 1999? Because the ratio was relatively stable throughout the 1990s, and it was the year the steep rise in prices began in earnest.. At the end of the third quarter of 2009, the overall number stood at 83%, meaning renting was just a tad more attractive than owning. Given that analysis, it's likely that prices will fall another 5% or so nationwide. The drop could even be slightly greater. One reason: Rents, the force that govern housing prices, are still falling. In 2009, apartment rents dropped 2.3%, and the fall continues. And enormous adjustments are needed in still-exorbitant markets such as New York and Baltimore. Thankfully, the improving economy and decline in the rate of job losses means that rents should soon stabilize and could even start increasing by the end of 2010.

Favorable home buying conditions

2010-02-17T10:43:00.001-05:00

Builder Confidence Improves in February

February 16, 2010 - Builder confidence in the market for newly built, single-family homes rose two points to 17 in February as favorable home buying conditions and signs of healing in the job market helped boost the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today.

“Continued low interest rates, very attractive home prices that appear to have stabilized in many markets, and the availability of the home buyer tax credit make this an opportune time for potential purchasers,” said NAHB Chairman Bob Jones, a home builder from Bloomfield Hills, Mich. “As a result, builders are slightly more optimistic that the housing recovery is finally beginning to take root.”

“Builders are just beginning to see the anticipated effects of the home buyer tax credit on consumer demand,” said NAHB Chief Economist David Crowe. “Meanwhile, another source of encouragement is the improving employment market, which is key to any sustainable economic or housing recovery. That said, several limiting factors are still weighing down builder expectations, including the large number of foreclosed homes on the market, the lack of available credit for new and existing projects, and inappropriately low appraisals tied to the use of distressed properties as comps.”

Derived from a monthly survey that NAHB has been conducting for more than 20 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view sales conditions as good than poor.

The HMI for February gained two points to 17, its highest level since November of 2009, with two out of three of its component indexes also rising. The component gauging current sales conditions rose two points to 17, while the component gauging sales expectations in the next six months rose a single point to 27. Meanwhile, the component gauging traffic of prospective buyers remained flat, at 12.

Regionally, February’s HMI results were mixed. While the Midwest and South each registered two-point gains, to 13 and 19, respectively, the Northeast and West each registered one-point declines, to 19 and 14, respectively.

Editor’s Note: The NAHB/Wells Fargo Housing Market Index is strictly the product of NAHB Economics, and is not seen or influenced by any outside party prior to being released to the public. HMI tables can be accessed online at: www.nahb.org/hmi. More information on housing statistics is also available at: www.housingeconomics.com.

Harder To Get an Uncle Sam Mortgage

2010-01-20T08:34:00.001-05:00

By Tami Luhby, senior writerJanuary 19, 2010: 11:47 PM ET

NEW YORK (CNNMoney.com) -- It's going to be harder to get a government-backed mortgage from now on.

Looking to shore up its weakening finances, the Federal Housing Administration is set to announce stricter standards on Wednesday.

The agency, which insured nearly a third of new mortgages in 2009, will increase the premium it charges for its mortgage insurance and require those with weaker credit scores to come up with larger downpayments.

The FHA will also reduce the amount of money a seller can provide a homebuyer for closing costs, as well as tighten its enforcement of lenders.

"Striking the right balance between managing the FHA's risk, continuing to provide access to underserved communities, and supporting the nation's economic recovery is critically important," FHA Commissioner David Stevens said in a statement. "Importantly, FHA will remain the largest source of home purchase financing for underserved communities."

FHA loans have skyrocketed in popularity during the mortgage crisis since the agency backstops banks if borrowers stop paying. But housing experts are growing increasingly concerned about the agency's ability to handle rising numbers of defaults. (Cash cushion shrivels for FHA.)

In November, the agency reported that its reserve fund has dropped to .53% of its insurance guarantees, well below the 2% ratio mandated by Congress and the 3% ratio it had last fall. The fund covers losses on the mortgages the agency insures.

Federal housing officials, who took several steps to shore up the agency's finances last year, promised to do more. The new announcement is the latest set of changes to FHA policies.

What the new rules mean
The agency will increase its up-front mortgage insurance premium to 2.25%, from 1.75%. It will also ask Congress for the right to hike its ongoing premium, currently between .5% and .55% monthly.

The FHA will also require borrowers to have at least a credit score of 580 to qualify for the agency's 3.5% downpayment program. Those with lower scores will have to pay at least 10%. However, this rule may have little practical effect since Stevens recently said the average borrower score is 693.

The new policy also will reduce the amount of money sellers can provide to homebuyers at closing to 3%, down from 6%, of the home's price. That change will bring the agency in line with industry standards and remove the incentive to inflate appraisals.

Finally, officials plan to clamp down on lenders offering FHA mortgages. It will more closely monitor their performance and compliance with agency rules, as well as seek legislative authority to require mortgage firms to assume liability for all loans they originate and underwrite.

One thing the agency did not do is to broadly increase the downpayment requirement. Many industry observers said such a step is necessary to reduce the risk the FHA faces.

Agency plays crucial role
As banks have clamped down on mortgage lending, the FHA program has emerged as one of the few ways people can buy a home.

Banks are more willing to make FHA loans because they come with a federal guarantee to cover losses if the borrower defaults. And borrowers can more easily qualify for FHA loans because they only need 3.5% down and can have lower credit scores.

As a result, demand for FHA loans has exploded. The agency guaranteed more than $360 billion in single-family mortgages in fiscal 2009, which ended Sept. 30, more than four times the volume in 2007.

The agency insured about 30% of home purchases and 20% of refinanced mortgages in 2009. Nearly 50% of first-time homebuyers go through the agency.

The agency, however, has also seen a spike in delinquencies amid the mortgage meltdown. Some 14.36% of FHA loans were past due in the third quarter, according to the Mortgage Bankers Association. This compares to 9.64% of all loans.

Jobless claims fall

2009-12-31T12:39:00.000-05:00

By Hibah Yousuf, staff reporter
December 31, 2009: 9:28 AM ET

NEW YORK (CNNMoney.com) -- The number
of Americans filing first-time claims for
unemployment insurance fell sharply last
week to the lowest level in 17 months, the
government said Thursday. Analysts had
expected an increase.
There were 432,000 initial jobless claims
filed in the week ended Dec. 26, down 22,000
from the previous week's revised 454,000,
the Labor Department said. The figure is the
lowest since July 19, 2008, when there were
413,000 claims filed.
A consensus estimate of economists
surveyed by Briefing.com expected claims to
jump to 460,000.
The 4-week moving average of initial claims
totaled 460,250, down 5,500 from the
previous week's revised average of 465,750.
"It's encouraging to see that we're
continuing to move in the right direction
toward 400,000 claims," said Tim Quinlan,
economic analyst at Wells Fargo. "We're
certainly off the highs we saw earlier this
year.
Jobless claims have been trending downward
since the end of March, when they peaked at
674,000, the highest figure since 1982.

Latest Case-Shiller Housing Report and Its Ramifications: Seeds of a 2010 Crisis?

2009-12-30T12:20:00.000-05:00

On a seemingly quiet news and market day just before the New Year’s Holiday, the key news item of December 29th, the Case-Shiller Home Prices index, drew little attention. However, commentary suggests that the data (for October) implies that demand, though only in line with expectations, was pushed forward by government tax credits and is likely to fade when these expire in mid 2010, unless of course it is extended yet again. The options are not tempting:
If the credit expires, housing demand is likely to drop off, especially because much of the prior purchases were simply pushed forward to exploit the temporary tax credit, robbing the market of future demand. Ramifications for jobs, spending would be negative.
However, if the credit is extended, that would be a form of stimulus spending which would pound the already weak USD, which in turn could start a nasty downward spiral and double-dip/ ‘W” shaped “recovery” as it means:
1. Rising Long Term Treasury Yields: A weakening dollar hurts US Treasury bond demand and thus forces rising long term rates needed to peddle the stuff. We’re already seeing this happen.

2. Rising Mortgage Rates: That, in turn, would drive up new mortgage rates. Worse, it would mean that the waves of Adjustable Rate Mortgages due to reset would only go higher in 2010-2011.

3. Rising Default Rates and Declining Real Estate Prices: Mortgage reset rates, already set to rise, would become that much higher, bringing that many more defaults and troubles for the critical banking and housing, sectors. Note that current studies suggest the vast majority of mortgage holders, particularly those with mortgages under 15 years old, have zero or negative equity in their homes due to declining house prices. Add to this witches brew of continued job losses or even just wage stagnation combined with rising mortgage costs, and we get higher default rates, both residential and commercial, as both forced and “strategic” defaults grow (see Jingle Mail: Strategic Mortgage Defaults Could Increase Dramatically in 2010 for more on this).

4. Renewed Housing and Banking Sector Crisis: Rising default rates, already rising, further weaken the already troubled banking and housing sector with asset write downs and further declines in property values as more inventory hits an oversaturated market. Remember, the housing and banking sectors lead us into the crisis, into the current rally, and are essential for any sustained recovery.

5. The Feared “Double Dip Recession”: Further downturns in these sectors would thus likely send stock and other risk asset markets tumbling. Unless there are more bailouts, which in turn hits the USD again…? (Go to item 1 above and repeat).

The other key upshot was the observation in Parsing the Latest Data from S&P/Case-Shiller that the prior housing decline in the 90s lasted about 8 years, and that was against a better economic background filled with the rise of growth fueling technologies like cell phones and the internet. The current housing mess is only a bit over 2 years old, and is against the backdrop of a weaker, more debt laden government and economy. This suggests the housing market--and thus the banks, and thus the economy--is likely to be struggling for years to come.

Hope I’m wrong on this, and the above is far from certain. If nothing else, deeper troubles in the EU and elsewhere could keep up demand for the USD and thus US debt as the USD wins this contest of the least ugly. In forex, all is relative, and the least ugly currency wins just as well as the prettiest one.

Author's Disclosure: No Positions

Statewide, November sales increased 36.5%

2009-12-23T14:41:00.000-05:00

Press Release

(INDIANAPOLIS, IN) – The Indiana Association of REALTORS (IAR) today released its “Indiana Real Estate Markets Report” for the month of November as a continuation of its “Indiana is Home” project.

The Report, found online at www.IndianaIsHome.com, is the first-ever county-by-county comparison of existing single-family home sales in Indiana. IAR obtains the data directly from the state’s 23 largest Multiple Listing Services (MLSs) and the Broker Listing Cooperative (BLC) in central Indiana. To date, the Report represents 98% of the housing market statewide.

Statewide, November sales increased 36.5% from the same month last year; median prices saw an increase of 10.5%. This is the second consecutive month that there has been an increase in sales over the previous year.

“The numbers that we have seen from November, as well as October, are welcomed news as we approach the end of the year,” said Karl Berron, Chief Executive Officer. “It remains the fact that homes continue to be affordable to Hoosier families. And while the recent jump in numbers can be linked to the impact of the $8,000 first-time homebuyer tax credit, it’s important to recognize that Indiana’s housing markets are continuing to make a turnaround after a very tough year.

“The increase in sales combined with other housing statistics, including increases in new construction, are important steps forward for our state’s and country’s economic recovery,” Berron added.

More about “Indiana Is Home”

It is a multi-media project hosted by media professional Pat Carlini and aimed at keeping Hoosier homeowners, would-be homeowners, policymakers and the media well-informed on the ever-changing local real estate markets.

This month, Carlini narrates a video explaining the extension and expansion of the $8,000 first-time homebuyer tax credit.

Indianapolis-based Boost Media and Entertainment shot and produced all videos found at www.IndianaIsHome.com.

IAR represents more than 16,000 REALTORS® who are involved in virtually all aspects related to the sale, purchase, exchange or lease of real property in Indiana. The term REALTOR® is a registered mark that identifies a real estate professional who is a member of the world’s largest trade association, the National Association of REALTORS®, and subscribes to its strict Code of Ethics.

Source: Indiana Association of Realtors

Mortgage Rates Rise for First Time in Five Weeks

2009-12-15T12:39:00.000-05:00

DECEMBER 11, 2009 After five weeks of declines

By AMY HOAK
After five weeks of declines, rates on most mortgages moved higher this week, following long-term bond yields that rose after an upbeat employment report, Freddie Mac's chief economist said Thursday.

The 30-year fixed-rate mortgage averaged 4.81% for the week ended Dec. 10, up from last week's 4.71% average, according to Freddie Mac's weekly survey of conforming mortgage rates. The mortgage averaged 5.47% a year ago.

Fifteen-year fixed-rate mortgages averaged 4.32%, up from 4.27% last week. They averaged 5.20% a year ago. And 5-year Treasury-indexed hybrid adjustable-rate mortgages averaged 4.26%, up from their 4.19% average last week. The ARM averaged 5.82% a year ago. But average rates on 1-year Treasury-indexed ARMs dropped slightly this week. The ARM averaged 4.24%, down from 4.25% last week and 5.09% a year ago.

"Following an upbeat employment report, long-term bond yields rose slightly and fixed mortgage rates followed," said Frank Nothaft, Freddie Mac chief economist. "The economy shed only 11,000 jobs in November, far fewer than the market consensus forecast, and the unemployment rate unexpectedly fell to 10%. In addition, revisions added 159,000 jobs to September and October."

Still, mortgage rates remain low compared with the same time a year ago, he said. "Notwithstanding, rates on 30-year fixed mortgages are almost 0.7 percentage points below those at the same time last year. This translates into an $81 lower monthly payment on a $200,000 conventional mortgage," he said.

Mortgage application volume was up a seasonally adjusted 8.5% for the week ending Dec. 4, compared with the previous week, the Mortgage Bankers Association reported on Wednesday. The weekly MBA survey also reported that rates on fixed-rate mortgages were on the rise.

Obama Signs Home Buyer Tax Credit Extension

2009-11-06T16:49:00.001-05:00

Will It Be Effective?
by Jann Swanson

It is finally official. The homebuyers' tax credit has been extended to April 30, 2010.

President Barack Obama approved the extension as part of a $24 billion economic stimulus bill signed Friday. The bill also includes an extension of unemployment benefits to the longtime jobless and tax credits for some businesses.

The housing tax credit portion of the bill extends the $8,000 tax credit for home buyers who are purchasing their first home from the current November 30 deadline and expands the program to offer a credit of $6,500 to other homeowners who have lived in their current home for at least five years and are seeking to relocate.

Another modification to the original legislation raises the income limits for program participation from $75,000 for a single purchaser to $125,000 and from $125,000 to $225,000 for a couple. There are also credits available on a diminishing basis above those income limits.

The bill was passed by the Senate on Wednesday evening and by the House on Thursday. Both bodies acted in a bipartisan manner which has seldom been seen this year. The Senate passage was unanimous; the House voted 403 to 12 for the bill.

Housing interests as well as the Obama Administration had lobbied heavily for the extension. In a statement released after the House passage of the legislation, Mortgage Bankers Association Chairman Robert E. Story, Jr., said, "At a time when we are finally starting to see some signs of life in the housing and mortgage markets, extending and expanding the homebuyer tax credit is a critical step to keeping the momentum. This has been one of MBA's top single family legislative priorities, and we are very glad to see that policymakers on both sides of the aisle see the importance of this measure.

"The existing credit for first-time homebuyers has helped move a segment of potential homebuyers off the sidelines and into their first homes. By expanding it to qualified existing homeowners, we can help stimulate even more home purchases for qualified buyers. I also want to applaud measures in the bill that will help eliminate fraudulent use of the tax credit."

The Associated Press quoted Rep. Shelley Berkley that the bill "will allow more people to purchase a home in my district and help stop the continued downward spiral in housing prices caused by the foreclosure crisis." Shelly represents Nevada, a state that has been particularly hard-hit by the housing collapse.

Critics of the bill have said that it is merely accelerating purchases that would have occurred anyway and creating yet another artificial housing bubble.

Mortgage News Daily Managing Editor Adam Quinones said, "It is likely that the prior tax credit's Nov.30 expiration has already stolen a portion of housing demand from 2010. On a broader scale, the extent to which the tax credit extension adds new demand is a function of buyer's perception of home prices, liquidity in the secondary mortgage market, and the health of the labor market. Overall, while the home buyer tax credit extension is a net positive for the industry, there are still several structural ineffficiences that must be addressed before housing can gain recovery momentum".

In signing the bill President Obama stressed that the measure is revenue neutral and will not increase the deficit.

The NAR has published an informative page on the home buyer tax credit extension.
http://www.realtor.org/home_buyers_and_sellers/2009_first_time_home_buyer_tax_credit

First time home buyer tax credit gets unanimous Senate approval

2009-11-05T10:03:00.000-05:00

A measure to extend and expand the first-time home buyer tax credit won unanimous Senate approval Wednesday on a 98-0 vote, and House passage would send it to President Barack Obama for his signature into law.

House Majority Leader Steny Hoyer, a Maryland Democrat, said the chamber may act on it Thursday.

If passed into law, the new tax credit would extend the existing credit for first-time homebuyers, worth up to $8,000, and offer a new credit of up to $6,500 for some existing homeowners.

The reduced credit would be available to all homebuyers who have been in their current residence for a consecutive five-year period in the past eight years.

The new rule also raises the qualifying income limits to $125,000 for single taxpayers and $250,000 for joint taxpayers, from the current $75,000 and $150,000.

The maximum allowed home purchase price would be $800,000.

A home buyer must have a sale agreement in hand by April 30 and close escrow by June 30, 2010.

Military personnel, deployed overseas for a minimum of 90 days in 2008 or 2009, would have until April 30, 2011 to claim the tax credit.

That's all good news for the housing market.

The National Association of Realtors says as many as 400,000 resale transactions (1.2 million for both new and resale homes) were completed specifically because of the first-time home buyer tax credit, since it began, and that put a dent in the housing inventory.

Home sales also add property and sales tax revenues to the coffers of local governments as reduced inventory helps boost prices and home values.

Fortunately, the first-time home buyer tax credit's availability has coincided with mortgage rates often hanging below 5 percent, according to Jeff Howard, CEO of Erate.com.

As the Nov. 30 tax credit deadline neared, reports from the Commerce Department, revealed new home sales slipped 3.6 percent in September and were down 7.8 percent from September 2008.

Tax credit history

As part of the Housing and Economic Recovery Act of 2008, Congress first created a $7,500 first-time home buyer tax credit for those who purchased a home between April 8, 2008, and July 1, 2009.

Later, under the American Recovery and Reinvestment Act of 2009, Congress extended the credit and raised it to an$8,000 tax credit for those who purchased homes by the current Nov. 30, 2009 expiration date.

By October 9, 2009, more than 1.2 million tax returns had claimed about $8.5 billion in the refundable tax credit, for both new and resale homes - according to the Treasury Inspector General for Tax Administration (TIGTA).

A TIGTA audit also revealed last month that nearly 90,000 taxpayers -- including nearly 600 children -- may have fraudulently enjoyed the credit, hoodwinking the government out of more than $600 million.

The new legislation includes provisions to stifle fraud after the Internal Revenue Service identified 167 suspected criminal schemes and opened nearly 107,000 examinations of potential civil violations of the first-time homebuyer tax credit.

Cheating the IRS is a federal felony that comes with a fine of up to $250,000 and three years in a federal pen, or both.

To combat fraud, a HUD-1 Settlement Statement will have to be attached to the tax return to secure the credit.

For more info:
Broderick Perkins, operates the Silicon Valley-based DeadlineNews Group digital news service. Get the feed from the Deadline Newsroom

Perkins is the National
• Consumer News Examiner
• Offbeat News Examiner
• Real Estate News Examiner

2009-10-23T14:47:00.002-04:00

Homes: About to get much cheaper

National home prices are forecast to shrink another 11%. Miami, Las Vegas and Phoenix will record steep declines, but a few cities will actually post gains.

By Les Christie, CNNMoney.com staff writer
Last Updated: October 20, 2009: 11:07 AM ET

NEW YORK (CNNMoney.com) -- If you thought home prices were bottoming out, you may be wrong. They're expected to head a lot lower. Home values are predicted to drop in 342 out of 381 markets during the next year, according to a new forecast of real estate prices. Overall, the national median home price is predicted to drop 11.3% by June 30, 2010, according to Fiserv, a financial information and analysis firm. For the following year, the firm anticipates some stabilization with prices rising 3.6%.
In the past, Fiserv anticipated the rapid decline in home-sale prices over the past few years -- though it underestimated the scope.

Mark Zandi, chief economist with Moody's Economy.com, agreed with Fiserv's current assessments. "I think more price declines are coming because the foreclosure crisis is not over," he said. In fact, those areas with high concentrations of foreclosure sales will experience the steepest drops, according to Fiserv. Miami, for example, is expected to be the biggest loser. Prices are forecast to plunge 29.9% by next June -- after having already fallen a whopping 48% during the past three years.
If Fiserv's forecast holds, Miami real median home price will tumble to $142,000 by June 2011.

In Orlando, Fla., the second-worst performing market, Fiserv anticipates a 27% price collapse by June 2010, followed by a less severe drop the following year. In Hanford, Calif., prices are estimated to drop 26.9% and continue falling 9.5% in 2011; in Naples, Fla., they're expected to fall 26.8% and then flatten out.
Other notable losers include Las Vegas, where prices have already fallen 54.6% and are expected to lose another Homes: About to get much cheaper 23.9% by June 2010. In Phoenix values have already collapsed by 54% and could fall another 23.4%. In both
cities, Fiserv anticipates the losses to continue into 2011, but they will be less than 5%. Prices had stabilized. The latest forecast is at odds with the past few months of the S&P/Case-Shiller Home Price index. That report has given hope that most housing markets may have already stabilized because the composite index of 20 cities rose in May, June and July.

Nationally, it found that home prices have gained 3.6%. Brad Hunter, chief economist for Metrostudy, which provides housing market information to the industry, however, expects a change in fortunes, however. "I'm afraid Case-Shiller may be just a temporary reprieve," he said. He pointed out that the tax credit for first-time home buyers helped support prices during the three months of Case-Shiller gains. By the end of November, the credit will have been used by 1.8 million homebuyers, at least
355,000 of whom would not have bought a house without the tax break, according to estimates by the National Association of Realtors. But the market assistance ends when the credit expires on Dec. 1. Hunter also sees a new wave of foreclosure problems coming from higher priced loans and prime mortgages. He expects a high failure rate for option ARM loans that were issued to prime customers so they could buy homes in bubble markets, such as California and Florida. In those areas, prices for even modest homes had skyrocketed.

WinnersA handful of metro areas will buck the trend, according to Fiserv. Six markets will remain flat, and 33 will actually post gains. The biggest winner will be the Kennewick, Wash., metro area, where home prices have ramped up
8.9% over the past three years and are expected to increase another 3.4% by June 2010.
Fairbanks, Alaska, prices are anticipated to rise 2.5%, while Anchorage will climb 2.1%. Elmira, N.Y., prices may
inch up 1.8%. The nation's biggest metro area, New York City, will underperform the nation as a whole over the next two years, according to Fiserv. Prices, which have already fallen 21.7% to a median of $375,000, are expected to fall 17.4% by June 2011. Home values in the nation's second largest city, Los Angeles, have fallen 43.3% since June 2006 to a median of $313,000. They are expected to dive another 20.2% over by June 2010, and then start to climb in 2011. Chicago prices, which have fallen 25.2% to $227,000, will drop only 4.1% over the next 12 months and then starting to climb.

The Detroit metro area now has the dubious distinction of having the lowest home prices in the country. Prices have dropped 51.7% to a median of $50,000. They're expected to fall another 9.1% and then stabilize.

First Published: Find mortgage raOtecstoibneyro2u0r,a2r0e0a9: 3:45 AM ET
Find this article at: http://money.cnn.com/2009/10/20/real_estate/home_price_forecast/index.htm

Will the $8,000 Tax Credit Be Extended

2009-10-19T19:03:00.000-04:00

Groups urge U.S. to extend home purchase tax credit

Mon Oct 19, 2009 1:18pm EDT

NEW YORK (Reuters) - Real estate and banking industry trade groups urged the Obama administration on Monday to press to extend and expand a tax credit for first-time home buyers that they said is instrumental to stabilizing the fragile housing market.

A government program that offers an $8,000 tax credit to first-time home buyers, which is due to expire on November 30, should be extended for another year and expanded to include all buyers of homes that would be primary residences, the trade groups said in a letter.

The letter from the Mortgage Bankers Association, National Association of Home Builders, and the National Association of Realtors was addressed to Treasury Secretary Timothy Geithner, Department of Housing and Urban Development Secretary Shaun Donovan, and Lawrence Summers, chair of the National Economic Council.

"Achieving equilibrium between supply and demand for housing is critical to stabilizing housing prices, and therefore household wealth," said the group.

Extending the tax credit would help boost demand enough to absorb housing inventory, the groups said in the letter.

The National Association of Realtors estimated the tax credit is responsible for generating about 335,000 in additional home sales.

Pressure from the groups comes as the housing market is showing nascent signs of stability, including price increases for the first time in three years. But expectations banks will have to dump a glut of foreclosed homes on the market despite mortgage modifications have led many analysts to predict a retrenchment, especially as the typically soft winter selling season sets in.

The November 30 deadline for the tax credit will likely mark a "false peak" in the house price rebound, unless the program is extended, according to John Burns Real Estate Consulting.

Lawmakers have said they are considering extending or expanding the tax credit.

Senate Majority Leader Harry Reid backs a bipartisan bill to extend the credit for six months. A Senate Republican plan would expand it to $15,000.

"Our fragile economy is just beginning to show signs of recovery," the housing groups said. "We should not jeopardize that recovery by letting this tax credit expire."

(Reporting by Al Yoon; Editing by Leslie Adler)

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Act fast! Homebuyer tax credit ends soon

2009-08-27T20:54:00.000-04:00

There's barely three months left before the $8,000 tax credit for first-time buyers ends -- and it can take that long to close on your new home.

By Les Christie, CNNMoney.com staff writer

Last Updated: August 27, 2009: 3:38 PM ET

NEW YORK (CNNMoney.com) -- Use any metaphor you want: the ticking clock, sands running through the hourglass or pages falling away from the calendar. The fact is, time is running out to claim the $8,000 first-time homebuyers tax credit.

Passed earlier this year as part of the economic stimulus package, the credit is good for up to $8,000, or 10% of the purchase price, and applies to people who have not owned a home in the previous three years. (There are some income restrictions.) The best part: Unlike a similar program from 2008, the credit does not have to be repaid.

The bad part: It ends on Dec. 1.

Because it usually takes around 90 days to close on a house after a contract is signed, buyers have very little time left to act. As of Thurs., Aug. 27, there were only 96 days left before the credit ends.

"Buyers have to get a home under contract very, very soon," said Tom Kunz, CEO of Century 21. "They probably should get out looking."

Sense of urgency

What they will find may surprise them: Many of the prime properties have already been snapped up. Home sales have been on the upswing, and inventories are so depleted in hot markets that first-time buyers are struggling to find homes in their price range. (Check prices in your city.)

In Whittier, Calif., for example, there are few repossessed homes for sale. Those are easy to buy because there isn't a lot of red tape and the bank wants to get rid of them as quickly as possible. Instead, most of the properties are short sales, where the sellers have to convince their lender to let them sell the house for less than they owe.

"That's why there's such a sense of urgency now," said Irma Tapper, a Century 21 real estate agent in Whittier. "The banks have to approve short sales, and they're taking three to six months to do that."

That means a first timer putting a bid on a short-sale might not get an answer form the bank until well after the Dec. 1 deadline for the tax credit. So when an actual repossession listing hits the markets, it creates a feeding frenzy.

Chuck Whitehead, who runs the Coldwell Banker agency in Temecula, Calif., said one recent listing hit the market on a Friday and by Monday there were 57 bids.

The National Association of Realtors attributes much of this activity to the first-time buyer tax credit. It estimates that 1.8 million buyers will file for the credit, and 350,000 of them wouldn't have been able to buy without it.

"It makes a big difference because most of these clients are in a lower price range," said Michelle Edmunds, an agent with Coldwell Banker in Temecula, Calf., who has closed sales for six first-time buyers. "The houses they buy need work and normally they wouldn't want to move in because of the [less than perfect] conditions the homes are in."

That is true for Wesley Forsythe. This June, the 30-year-old computer consultant and his girlfriend bought a row house in the Fishtown section of Philadelphia. Since he paid just $80,000 for the three-bedroom, two-bath place, the credit acted like a 10% discount.

"It allowed us to expand our price range and plan additional renovations," he said. "My mortgage is several hundred dollars less than what my new rent would have been."

Forsythe applied for the credit immediately after closing, filing an amended 2008 tax return. The IRS cut him a check in less than seven weeks. He's spending it now on new hardwood floors, repainting most of the interior and renovating a bathroom. He's stretching the cash by doing much of the work himself.

Cash for Clunkers effect

Of course, analysts worry that this frenzy will dry up once the tax credit expires. They argue that without the incentive, much of the pressure on homebuyers to act quickly will vanish, and the nascent housing recovery could slump.

In many ways the tax credit is similar to the Cash for Clunkers program that ended this week. Already, auto dealers are anticipating that car sales will evaporate after accelerating during the program.

"It's just like Cash for Clunkers," said Robert Dye, a senior economist for PNC Financial Services Group. "It runs the risk of a let-down as the program runs its course."

Johnny Isakson, R-Ga., who is a former real estate broker, is pushing legislation to extend the tax credit through next year, increase it to $15,000, include non-first-time homebuyers, and remove income restrictions.

The effort has drawn strong industry support.

"We need to stimulate the move-up buyer," said Century 21's Kunz, "so it works its way up the pricing food chain. That's what we need to get inventory moving again."

New home sales blast past expectations

2009-08-26T14:41:00.002-04:00

More people are buying: Sales of new homes hit their highest level since last September.

By Les Christie, CNNMoney.com staff writer

Last Updated: August 26, 2009: 1:49 PM ET

NEW YORK (CNNMoney.com) -- Sales of newly constructed homes leaped unexpectedly in July to hit their highest level since last September.

New homes sold at an annualized rate of 433,000 during the month, according to a joint report issued by the Census Bureau and Department of Housing and Urban Development.

That far exceeded analysts' forecasts and was up 9.6% from the revised 395,000 rate recorded in June. A consensus of industry experts surveyed by Briefing.com had predicted July sales of 390,000.

The news followed other positive housing market reports earlier this month, including a spike in existing home sales, home prices and affordability.

"There are many economic conditions that led to the surge," said Bob Walters, chief economist for Quicken Loans. "But certainly low mortgage rates, huge price reductions on the high inventory of new builds, and the first-time homebuyer tax credit have been instrumental in getting consumers to take the plunge into the real estate pool of opportunity."

Plus, the psychology of the market is changing, according to Peter Morici, an economics professor at the University of Maryland. "The notion that prices will drift down forever is gone," he said. "Now people are thinking the window of opportunity will not be open forever."

"Home shoppers visiting builders' model homes are more likely to purchase than earlier in the year," added Brad Hunter, chief economist for Metrostudy, a real estate research and consulting firm.

They are also canceling fewer contracts. Of the 10 markets where Hunter examines cancellation rates, most are running at substantially lower levels. In Phoenix, for example, the cancellation rate lately has been about 4% compared with 7% late last year.

It certainly is an attractive market. The median price of a new home declined again last month to $210,100, down only slightly from June but off more than 11% from July 2008.

The Housing Market Index, a measure of builder confidence calculated by the National Association of Homebuilders and Wells Fargo, inched up again this month to 18, its highest level in more than a year.

That's still low by normal standards: Anything below 50 indicates that more builders think business conditions are poor. And new sales, though rising, are still well below what they were last August, when they sold at a 520,000 annualized rate.

But the sales spike did help reduce the inventory: Available new homes dropped to 271,000 -- the lowest total in 16 years -- from 281,000 a month earlier. That's down to a healthier 7.5 month supply at the current rate of sales from 8.8 months in June.

Still, when factoring in existing homes for sale, inventory levels remain high, according to Mike Larson, real estate analyst for Weiss Research.He also pointed out that the continued influx of foreclosed properties over the next year or so will replenish supplies.

However, supply could creep back up at the end of the year. On Nov. 30, the $8,000 tax credit for first-time homebuyers is also set to expire. And experts worry that the brisk pace of sales will fall off if homebuyers are sidelined once the incentive disappears.

But for now, they are optimistimic."This [report] is clear evidence the dramatic cut back in housing starts, plus increasing consumer confidence and the targeted tax cut for first-time buyers, is restoring stability to the new home market," said Larson.

Midwest Home Sales Post 8.5 Percent Gain in July

2009-08-22T10:34:00.001-04:00

August 21, 2009

Midwest Home Sales Post 8.5 Percent Gain in July

By THE ASSOCIATED PRESS

Filed at 3:52 p.m. ET

KANSAS CITY, Mo. (AP) -- Home sales in the Midwest surged 8.5 percent in July, the second straight annual increase, as new home buyers snapped up properties to take advantage of a temporary federal tax credit, the National Association of Realtors reported Friday.

The median sales price in the 12-state region declined about 6 percent from year-ago levels to $157,200 -- the smallest decline among the four national regions, the association said.

Nationally, home resales rose 5.6 percent in July, the first annual increase since November 2005. Affordability is driving sales -- the median sale price fell 15 percent to $178,400.

Compared with last year, home sales rose in all but three of the 12 Midwestern cities tracked in The Associated Press-Re/Max Monthly Housing Report, also released Friday. The report analyzed all home sales, regardless of company affiliation, in the metropolitan statistical areas.

While sales were up, median sale prices continued to fall in a majority of the markets, a combination of sellers being more realistic about the economic environment and consumers whittling away at a large inventory of foreclosed homes.

Real estate agents in several markets said they continued to see a boost in sales because of the first-time home buyer credit, which provides consumers with up to $8,000. The credit expires at the end of November, though the real estate industry is pushing Congress to extend it and sustain the housing rally.

Bryan Bechler, an agent with Reece & Nichols in Kansas City, Mo., said first-time buyers make up 20 percent of his sales. The local market appears to be at a turning point with July sales and prices flat.

The biggest sales gain came in Fargo, N.D., which saw sales rise 24 percent in July, according to the AP-Re/Max report. Median sale prices were also on the move, rising almost 8 percent to $143,000.

''I believe that at least in the last few months we've turned the corner,'' said Mark Mason, an agent with Prudential Premiere, who said business in Fargo has boomed in the past three months as consumers bounced back from a bad winter and springtime flooding.

He said that sales have been up in most price ranges, although the very high-end homes above $800,000 are still difficult to move. He also said new regulations forced on appraisers in the wake of the housing bubble has increased the time for deals to get done from a couple weeks to a couple months or longer.

''We're having little glitches like that that are driving us crazy,'' Mason said.

Detroit continued to see higher sales in July, rising 15 percent. But those sales are mostly of foreclosed homes or properties selling for a fraction of their original worth as investors pick at the bones of a city wracked with losses to its automotive and other manufacturing industries. The median sale price plummeted almost 34 percent from year-ago levels to $65,000.

Mario Hall, an agent with Thompson Real Estate, said he's routinely selling homes for less than $10,000 within Detroit proper and recently sold a duplex for $2,000. He said the majority of his buyers are investors and often pay cash.

He added that while he gets calls about the first-time home buyer tax credit, few buyers can get financing for a house worth enough to receive the full $8,000.

Hall said he believes the surge of sales that Detroit has seen could end in the next year or so as the true deals are snapped up. Home prices, however, won't come back until the homes in the worst shape -- typically foreclosed homes that have been gutted or vandalized -- are taken off the market.

''Some you really can't give away,'' he said.

The largest Midwestern sales drops came in the cities of Wichita, Kan.; Indianapolis and Cleveland, which have experienced continued pressure to their local economies and saw sales declines of about 9 percent or more in July.

Wichita has dealt with a number of layoffs within its key aviation industry as the recession dried up the market for private and corporate jets.

Sales in the market fell almost 16 percent in July while the median sale price declined 7 percent to $124,900.

Marilyn Brown, an agent with Prudential Dinning-Beard, said the Wichita market typically lags the rest of the country and it is just now seeing the increase in foreclosures that has hurt other parts of the country.

''If we could get finished with all the layoffs, people can feel confident about keeping a job and buying a home,'' Brown said.

Initial claims drop in latest week

2009-08-06T12:52:00.000-04:00

Government report shows 550,000 first time claims for jobless benefits were filed last week, fewer than forecast.

By Ben Rooney, CNNMoney.com staff writer

Last Updated: August 6, 2009: 11:25 AM ET

NEW YORK (CNNMoney.com) -- The number of Americans filing first time claims for unemployment benefits fell last week, while the number of people requesting ongoing benefits rose, the government said Thursday.

There were 550,000 initial jobless claims filed in the week ended Aug. 1, down 38,000 from an upwardly-revised 588,000 the previous week, according to the Labor Department's weekly report.

The total was smaller than the 580,000 new claims economists surveyed by Briefing.com had forecast.

The number of initial jobless claims filed in recent weeks had been distorted by seasonal adjustments related to plant closures in the auto industry, which occurred earlier this year. But a Labor Department official said this seasonal volatility had "run its course."

The report suggests that the pace of the decline in the labor market is slowing. But many economists warn that it's too soon to say the nation's job woes are over.

"The numbers are volatile even when the trend is clear," said Ian Shepherdson, chief U.S. economist at High Frequency Economics, in a research report. "We need to see several more weeks at this level to confirm a real shift."

Still, last week's tally "certainly looks good" compared to previous weeks, Shepherdson said.

The four-week moving average of initial claims, which smoothes out volatility in the measure, was 555,250. That's a decrease of 4,750 from the previous week's revised average of 560,000. The average has declined for six weeks in a row.

The government also said 6,310,000 people filed continuing claims in the week ended July 25, the most recent data available. That's up 69,000 from the preceding week'srevised 6,241,000 claims.

The four-week moving average of continuing claims fell 148,500 to 6,278,750.

Thursday's report came a day before the government's closely watched monthly jobs report.

The Labor Department report is expected to show that the economy shed 328,000 jobs in July, less than the 467,000 reported for June. The unemployment rate is predicted to rise to 9.6% from 9.5%.

First Published: August 6, 2009: 8:48 AM ET

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New Home Sales: "Really Good News"

2009-07-27T12:03:00.000-04:00

Sales of newly constructed single family homes rose 11% over May, but median price fell 3%.

By Les Christie, CNNMoney.com staff writer

Last Updated: July 27, 2009: 11:50 AM ET

NEW YORK (CNNMoney.com) -- Sales of newly constructed single-family homes spiked 11% in June to an annualized rate of 384,000 homes, according to a report released Monday.

The gain over May was much greater than expected. A consensus of housing industry analysts had forecast seasonally adjusted sales of 352,000, according to Breifing.com.

However, sales are still 21% below the levels of a year ago, when new homes sold in June at an annualized rate of 488,000, according to the report released by the U.S. Department of Housing and Urban Development. Four years ago, during the height of the housing boom, the sales rate for June was 1,374,000, nearly three-and-a-half times higher than last month.

Still, the report was very positive, according to Peter Morici, an economics professor at the University of Maryland who had forecast June sales to be at the 350,000 level. "That is really good news. Considering what's going on in existing home sales, with all the foreclosure activity sending down home prices, for new homes to jump like that is a good indicator that the economy is bottoming out."

Builders have been more optimistic about market conditions and this report should further buoy their spirits. An index of builder confidence from the National Association of Home Builders (NAHB) rose to 17 this month after languishing in single-digit territory.

In June, they began building single-family housing units at an annualized rate of 470,000, a 14.4% jump over May.

Pat Newport, a housing industry analyst for IHS Global Insight, also deemed the report very good news -- but is uncertain how Obama's $8,000 tax credit for first-time homebuyers will affect the longer view.

"I only wonder how much of the increase is coming from rising demand from new homebuyers," he said. "The tax credit is boosting demand, but what will happen when it goes away in December?"

Prices and inventory

The median price paid for a house sold in June 2009 was down about 3% to $206,200; the mean price was $276,900.

By the end of the month, the inventory of new homes had dropped to 281,000, an 8.8 month supply at current rates of sale. Last month, there were enough homes on the market to last 10.2 months at that rate.

"They have to clean out that stock to get building again," said Morici.

"Normal" new home inventory is about 300,000, according to Newport, which we're already below. But ,he added, that the median time to sell a home is at an all-time high of 11.8 months.

"That tells you it's still very hard to sell a new home," he said.

Much of that struggle is because the housing stock is concentrated in exurbs -- otherwise known as McMansions far away from work. "Inventories are misaligned," said Morici, who likened the situation to the auto industry being overstocked with large trucks and SUVs instead of fuel efficient cars.

"There'll be a shift from far-out to closer-in and from bigger to smaller," he said. But builders will have a hard time selling those "white elephants" and they'll languish on the market, he predicted.

The excess inventory also tend to be concentrated in just a few markets, such as California, southern Florida, Las Vegas and Arizona, according to Bernard Markstein, a senior vice president and economist with the National Association of Home Builders.

"[In most other parts of the country] inventory has been worked down to the point where if you want to buy a new home, it will probably have to be built," he said.

Perhaps the best news is that home construction may be ready to once again boost the economy again. "The construction-put-in-place numbers that come out next month will show that housing is starting to add to the GDP," said Newport. "It's been nothing but a drag on growth lately."

With new home inventory more in balance, consumers may no longer be able to wring extras, such as high-end appliances and even swimming pools, out of builders. "People are going to find builders are not going to be quick to make concessions," Markstein said. "The time for getting deals is going away."

First Published: July 27, 2009: 10:17 AM ET

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Housing Starts Rose in June

2009-07-17T15:48:00.000-04:00

Treasurys ease on housing data

Government bond prices fall after a report showed that housing starts rose in June, a positive sign for the staggering housing market.

July 17, 2009: 1:05 PM ET

NEW YORK (Reuters) -- U.S. Treasury prices fell Friday after the government said U.S. housing starts rose in June, bolstering prospects for economic recovery and damping demand for safe-haven U.S. government debt.

Talk of a buyer for struggling CIT Group Inc (CIT, Fortune 500), a U.S. lender to hundreds of thousands of small- and medium-sized businesses, added to pressure on Treasurys, traders said.

"Housing starts, without a doubt, are why the market is down," said William Sullivan, chief economist at JVB Group in Boca Raton, Florida. "We were trading up overseas until 8:30 a.m. (EDT) when we got news of this surprising rebound in housing starts and building permits. That's viewed as a healing process in the economy which in turn reduces the demand for liquidity assets such as Treasury securities."

New U.S. housing starts rose a bigger-than-expected 3.6%, propelled by a 14.4% rise in single-family home starts, the Commerce Department said, the latter the biggest rise since December 2004.

Benchmark 10-year Treasury notes fell 18/32 in price in mid-morning trade, their yields rising to 3.65% from 3.56% late Thursday.

"This is another piece of data for those who see the recession ending soon," said William O'Donnell, head treasury strategist at RBS Securities in Greenwich, Connecticut.

An end to the recession would tend to favor riskier investments like stocks and corporate bonds, rather than safe-haven Treasurys.

Economists generally view the manufacturing sector as slowly stabilizing so the possibility of an end to the recession in the housing sector would neutralize what has been a big contributor to the steepest downturn in the economy since the Great Depression.

"The housing starts rise is very convincing evidence of the potential for the general housing market to improve," Decision Economics senior economist Pierre Ellis in New York.

Traders and analysts said speculation about a possible buyer for CIT Group Inc. also weighed.

"If there's some deal worked out on CIT that's a mild negative for Treasurys because it reduces that flight to safety and quality," Sullivan said.

CIT declined to comment on a report that JPMorgan Chase & Co (JPM, Fortune 500) was a suitor for its factoring unit.

John Spinello, senior vice president and chief fixed-income technical strategist at Jefferies & Co. in New York, said the market could be overreacting a bit to the housing data.

"(Housing starts) were good. No question. It was the first time we saw multiple months of increase since 2007, but they're still at very low levels," he said.

But thin summer, pre-weekend trading could be exaggerating the market's move, Spinello said.

"The market is a little bit thin. We expect the 3.63% (level of the 10-year yield) to hold and draw some buyers," Spinello said. "Right now with no supply in the marketplace, we could probably range-trade into supply."

The Treasury's next auction of anything other than short-term debt is July 27 when the government sells 20-year TIPS. It will sell two-year notes on July 28.

Two-year Treasury notes were down 1/32 in price Friday, their yields rising to 1.01% from 0.98% Thursday.

Five-year Treasury notes fell 9/32 in price, their yields rising to 2.51% from 2.44% late Thursday.

Thirty-year Treasury bonds fell 28/32, their yields rising to 4.50% from 4.44% Thursday.

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Fewer than expected file for unemployment

2009-07-09T15:16:00.001-04:00

Labor Department says first time jobless claims fell by 52,000 last week to 565,000. But continuing claims rose to another record high.

By Ben Rooney, CNNMoney.com staff writer

Last Updated: July 9, 2009: 1:57 PM ET

NEW YORK (CNNMoney.com) -- The number of Americans filing initial unemployment claims fell sharply last week, while those filing ongoing claims rose to another all-time high, according to government data released Thursday.

There were 565,000 initial jobless claims filed in the week ended July 4, down 52,000 from a revised 617,000 the previous week, the Labor Department said.

It was the lowest number since January and was below the consensus estimate of 603,000 from economists surveyed by Briefing.com.

Analysts said last week's drop was distorted by a change in the pattern of seasonal layoffs in the automotive industry.

Initial claims typically spike in July as automakers idle certain manufacturing plants, and the Labor Department adjusts its data for such seasonal factors.

However, many plant closures occurred early this year, said Mark Vitner, an economist at Wacovia Economics Group.

On a non-seasonally adjusted basis, initial claims were 577,506.

"The improvement in first week of July was exaggerated by the timing of plant closures," Vitner said. "This is something we're going to be dealing with throughout the month."

Meanwhile, the number of people requesting continued jobless benefits rose to a record high, indicating that the labor market remains weak.

The government said continuing claims rose to 6,883,000 in the week ended June 27, the most recent data available.

That's an increase of 159,000 from the previous week's revised total of 6,724,000 and was the highest reading since the Labor Department began keeping records in 1967.

The 4-week moving average of continuing claims rose 12,000 to 6,769,000.

The ongoing rise in continuing claims suggests that more workers are struggling to re-enter the work force.

"While layoffs have topped out, hiring has not picked up," Vitner said. "The increase in unemployment rate going forward will be more a result of lack of hiring rather than layoffs," he said.

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First Published: July 9, 2009: 8:42 AM ET

Mortgage rates slide

2009-07-03T14:42:00.000-04:00

The 30-year and 15-year fixed tick down on signs of continued economic weakness.

By Julianne Pepitone, CNNMoney.com contributing writer

Last Updated: July 2, 2009: 11:08 AM ET

NEW YORK (CNNMoney.com) -- Home mortgage rates retreated last week, with the 30-year fixed slipping to 5.7% from 5.8% the week prior, according to a report from a financial data aggregator released Thursday.

The average 15-year mortgage rate also fell, dipping to 5.07% from 5.16%, according to the weekly national survey from Bankrate.com.

Mortgage rates fell to month-ago levels "as evidence mounts of continued economic weakness," the report said, citing troubling recent data on unemployment, GDP and consumer spending.

"Rates are likely to bob up and down as concerns alternate between economic weakness and future inflation," the report said. "Spurts of volatility should be expected, especially given the uncertain economic and financial climate."

A related report this week said home prices fell 18.1% from a year earlier, but the change from March narrowed sharply in a possible sign that housing markets may be starting to turn.

Current rates remain much lower than last year's levels, when the average 30-year fixed mortgage rate was 6.53%, according to Bankrate.com.

At the current rate of 5.7%, the monthly payment on a $200,000 mortgage would be $1,160.80, or about $107 less than the monthly payment at last year's rate of 6.53%.

Other rates: The average jumbo 30-year fixed rate ticked up to 6.67% from 6.96%. Loans are considered "jumbo" when they are too large to be purchased or guaranteed by Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500).

Adjustable-rate mortgages were mixed, the report said, with the average 1-year ARM ticking up to 5.17% and the 5-year ARM falling to 5.17% from 5.26%.

First Published: July 2, 2009: 10:55 AM ET

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Lenders to Return $68 Billion

2009-06-09T12:10:00.001-04:00

Ten banks allowed to pay back TARP

Leading lenders expected to return a total of $68 billion in bailout funds to taxpayers. JPMorgan Chase and U.S. Bancorp confirm they have been approved.

By David Ellis, CNNMoney.com staff writer

Last Updated: June 9, 2009: 12:08 PM ET

NEW YORK (CNNMoney.com) -- Ten leading banks won approval to repay money from the government's controversial TARP program, regulators said Tuesday, which could represent approximately $68 billion in bailout funds returned to taxpayers.

The Treasury Department, which has overseen the $700 billion Troubled Asset Relief Program, did not indicate which banks were included in that group, although most lenders confirmed the news separately.

Eight of the nine banks that were found to not need new capital following the government's bank stress tests last month made the list. JPMorgan Chase (JPM, Fortune 500), Goldman Sachs (GS, Fortune 500), American Express (AXP, Fortune 500), Bank of New York Mellon (BK, Fortune 500), State Street (STT, Fortune 500) as well as regional banking giants Capital One (COF, Fortune 500), BB&T (BBT, Fortune 500) and U.S. Bancorp (USB, Fortune 500) all said they will pay back TARP funds. (Insurer MetLife also was not required to raise capital but it did not receive any TARP money.)

Investment bank Morgan Stanley (MS, Fortune 500), which was the only financial firm that regulators did ask to raise money after the stress tests, confirmed it also won approval from the Treasury Department to pay back $10 billion.

Chicago-based Northern Trust (NTRS, Fortune 500), which took in $1.576 billion under the program but was not part of the bank stress tests, also announced Tuesday it is paying back TARP funds.

So far, the Treasury Department has allowed nearly two dozen small, mostly community-based lenders to redeem the government's preferred shares, representing nearly $1.9 billion in taxpayer money.

Should the latest banks agree to redeem the company's preferred-shares the government acquired last fall, that would represent approximately another $68 billion in TARP repayments.

"These repayments are an encouraging sign of financial repair, but we still have work to do," Treasury Secretary Tim Geithner said in a statement.

Proceeds received from those 10 banks will be applied to the Treasury Department's general account, the agency said Tuesday, some of which be will used to promote financial stability should the economy take a turn for the worse. A portion of those funds will also be used to reduce Treasury's borrowing and the nation's rapidly rising level of debt.

The banks that buy back the government's stake will also be able to repurchase the warrants, or rights to purchase shares at a future date, the government acquired when it injected capital into many of these banks late last year.

Treasury said those obligations could be purchased at a "fair market value", but that banks wishing to repurchase warrants would have to hire an independent advisor to come up with that number. Those estimates, however, would have to match those of the Treasury Department before banks get the go ahead to repurchase the warrants.

Leading up to Tuesday's announcement, there had been talk that the government may auction those warrants on the open market in order to quell criticism about their pricing. Some have charged that allowing banks to redeem warrants at too cheap of a price would be to the disadvantage of U.S. taxpayers who stand to make significant gains should bank stocks continue to move higher in the months and years ahead.

Large lenders have been working particularly hard to break free from the TARP program for several months. Many have raised billions of dollars in fresh capital in recent weeks and issued debt without government backing.

Casting off the 'scarlet letter'

Banks have grown increasingly frustrated with the program amid increasing government restrictions, including limitations on the hiring of foreign workers. Wall Street firms have also complained intensely about the compensation restrictions associated with the program, noting that many top performers have already lured away by foreign banks or the hedge fund industry.

Bank executives, including JPMorgan Chase chief Jamie Dimon, have complained publicly in recent months about such restrictions. Dimon, who famously called the program a "scarlet letter" for banks, said he was encouraged by Tuesday's announcement, adding that the funds from the program were best used elsewhere.

"Paying back TARP at this time is the right thing for JPMorgan Chase, and it's the right thing for our country," Dimon said in a statement.

Tuesday's announcement, however, represents a major compromise from government officials. Regulators have been fearful about the nation's largest banks' ability to weather the current economic climate as the unemployment rate marches higher and signs of trouble crop up in new areas like commercial real estate.

Last month, the government found that the nation's 19 largest financial institutions that participated in the stress tests could suffer as much as $599 billion in losses over the next two years.

Regulators have also been fearful that major financial institutions, which are responsible for issuing a substantial amount of credit to the U.S. financial system, may scale back on lending even further as a result of paying back TARP funds and could thus jeopardize what may be a nascent economic recovery.

Several bank chiefs downplayed these concerns in statements issued Tuesday, arguing instead that they will be there for consumers and businesses seeking loans.

"We fully expect to continue to vigorously offer lending opportunities to our credit-worthy consumer, small business, corporate and institutional customers, invest for future growth and support the U.S. government's overall efforts to stimulate the economy," Richard K. Davis, chairman and CEO of U.S. Bancorp, said in a statement.

One key question, however, is what will happen to the troubled major financial institutions that remain under the government's thumb, such as Citigroup (C, Fortune 500) and Bank of America (BAC, Fortune 500).

Industry experts have suggested that such banks could remain at a severe competitive disadvantage, burdened by the hefty dividend on the government's preferred shares, as well as the possibility of losing business or employees to non-TARP rivals.

First Published: June 9, 2009: 10:21 AM ET

Job losses slow dramatically

2009-06-05T15:24:00.001-04:00

Employers cut 345,000 jobs in May, the smallest loss since September. But the unemployment rate hit a 26-year high and experts say the market is still weak.

By Chris Isidore, CNNMoney.com senior writer

Last Updated: June 5, 2009: 10:44 AM ET

NEW YORK (CNNMoney.com) -- Job losses slowed dramatically in May, according to the latest government reading on the battered labor market, even as the unemployment rate rose to a 26-year high. But some experts cautioned that the job market remains weak.

Employers cut 345,000 jobs from their payrolls in the month, down from the revised decline of 504,000 jobs in April.

This was the fewest jobs lost in a month since last September, when the bankruptcy of Lehman Brothers caused a crisis in U.S. financial markets and choked off credit for many businesses. Economists surveyed by Briefing.com had forecast a loss of 520,000 jobs in May.

There were still widespread job losses, as most sectors of the economy, including manufacturing, construction, retail, and business and professional services posted declines in jobs.

But there were also some signs of growth, notably in education and health services, as well as the leisure and hospitality sector. Nearly one third of industries added jobs during the month, the highest level of gains since last October.

Still, the unemployment rate rose to 9.4% from 8.9% in April. Economists expected unemployment would increase to 9.2%.

Strangely enough, economists said the rise in unemployment is partly a sign of an improved jobs outlook. That's because people who had stopped looking for work started looking once again, and thus were classified as unemployed rather than "not in the labor force" - which is how the Labor Department counts most discouraged workers.

"As conditions improve more people flock to the labor market," said Robert Brusca of FAO Economics. He believes the economy is poised to start adding jobs before the end of this year.

"Jobs are doing what they do at the end of recessions and in early recoveries," he said. "No one can be optimistic enough to catch the turn when it comes."

But other economists cautioned that even though it was a better-than-expected jobs report, there are still signs of weakness.

Kurt Karl, chief economist at Swiss Re, said he doesn't expect a monthly gain in jobs until at least the middle of 2010. With employers still cutting jobs and hours, he said consumers won't have enough money to spur an economic recovery in the near term.

"I think things are turning for the better. But it's a disappointingly slow turn," he said. "Consumers can't consume more with this kind of picture."

Karl pointed out that the loss of 345,000 jobs in a month was worse than any one-month drop in the previous three recessions. There have now been 6 million jobs lost since the start of 2008, with nearly half of them occurring in the first five months of this year.

"That 345,000, while an improvement, is still a lot of jobs," he said. "We're not out of the woods yet."

The unemployment rate was the highest since August of 1983. And the official unemployment rate only captures part of the pain being felt by job seekers.

More than a quarter of unemployed people have been out of work for six months or more, and the number of long-term unemployed reached nearly 4 million, the highest reading on records that go back to 1980.

There were also 9.1 million people who were working part-time jobs because they could not find full-time work or they had their hours cut back. This was also a record high.

When counting people who wanted full-time work who are working part-time, as well as some of the people who are not counted as unemployed because they had stopped looking for work, the so-called underemployment reading rose to a record level of 16.4%.

What's more, the average work week slipped again to a record low 33.1 hours. That pushed average weekly wages down as well during the month.

Tig Gilliam, chief executive of Adecco Group North America, a unit of the world's largest employment staffing firm, said the average hours worked will have to increase before the economy will be ready to start adding jobs again, as employers will be cautious about restarting their hiring.

Gilliam is also concerned that the number of temporary employees fell for the 17th straight month, another sign of employer wariness.

"That's doesn't suggest a dramatic improvement in hiring soon," he said. "We're still in a difficult labor market and it's going to take us time the rest of this year to work through to where companies are adding back jobs."

First Published: June 5, 2009: 8:41 AM ET

Economists: Recession to end in 2009

2009-05-27T11:20:00.001-04:00

A recovery in the second half of this year will be 'moderate,' according to a report from the National Association for Business Economics.

By Julianne Pepitone, CNNMoney.com contributing writer

May 27, 2009: 3:31 AM ET

NEW YORK (CNNMoney.com) -- The end of the recession is in sight, according to a new survey of leading economists.

While the economy is showing signs of stabilizing, the recovery will be more moderate than is typical following a severe downturn, said the National Association for Business Economics Outlook in a report released Wednesday.

The panel of 45 economists said it expects economic growth will rebound in the second half of 2009. However, the group still expects to see a decline in second-quarter economic activity.

"The good news is that the NABE panel expects economic growth to turn positive in the second half of this year, with the pace of job losses narrowing sharply over the remainder of this year and employment turning up in early 2010," said NABE president Chris Varvares in a written statement.

Almost three out of four survey respondents expect the recession will end by the third quarter of 2009, the report said.

But 19% predicted that a turnaround won't come until the fourth quarter, and 7% said it may not come until early 2010. None of the panelists expected the recession to continue past the first quarter of next year.

GDP: The report predicted a 1.8% decline in real GDP in the second quarter of 2009, bringing the total year-to-date decrease to 3.7%. That's the biggest drop since 1957-1958, the report said.

Still, "a modest second-half rebound in real GDP is expected," the report said, with economic growth turning positive in the third quarter. Real GDP growth over the second half of 2009 is expected to average 1.2%, which is well below average, the report said.

"Growth in 2010 is slated for a return to near its historical trend," the report said, predicting a 2.7% year-over-year increase. The NABE's February outlook had predicted a 3.1% uptick.

Jobs: The panel forecast a total of 4.5 million jobs lost in 2009, pushing the unemployment rate to 9.8%. Modest gains in 2010 will reduce the rate to 9.3% by year's end, the report predicted.

Separate reports this month showed the unemployment rate is currently down in 21 states and stands at 8.9% nationally.

Deficit: Government spending "will provide vital support to the economy," and will be the only expenditure sector to grow in 2009, the report said.

But that spending will help push the federal deficit to a record-high $1.7 trillion in the 2009 fiscal year, before falling slightly to $1.4 trillion in fiscal 2010.

Housing: New and existing home sales are close to their lows, with 72% of NABE panelists expecting sales to hit bottom by the middle of 2009.More than 60% of those surveyed said housing starts would also bottom out at the same time.

The panelists were split on the issue of when home prices will hit their lows: 30% said it would happen by the third quarter of 2009; 30% said the fourth quarter; and 40% said declines will continue into 2010 or later. The median prediction is that home prices will rise 1% in 2010, the report said.

Spending: Widespread job losses and weak income growth have reduced consumer spending and boosted the personal savings rate, the report said. The savings rate has seen two consecutive quarters of sharp increases, holding above 4% through March. More than 70% of the panelists expect "more thrifty behavior is here to stay, at least for the next five years," the report said.

Credit: Obtaining long-term and short-term financing is still difficult, which poses a risk to the economy,but 90% of respondents said actions from the Federal Reserve have helped to ease the credit crunch.

Five-year outlook: More than half of the NABE economists said they expected potential growth of the U.S. economy over the next five years to be between 2% and 2.5%; 37% of respondents forecast growth between 2.5% and 3%, while 7% of the panelists said growth will be higher than 3%.

$8,000 toward down payment

2009-05-16T10:51:00.001-04:00

FHA credit will give first-time home buyers $8,000 toward down payment

Posted by Cami Reister | The Grand Rapids Press May 16, 2009 05:00AM

Matt and Liz Hedges want to be first-time home buyers, and they know the market is ripe.

The couple live on Matt's income while Liz stays home to care for their 9-month-old son. They still are building an emergency fund, so they were looking at a zero-down loan program.

But their plan changed with news this week the Federal Housing Authority soon will allow the $8,000 first-time buyer tax credit to be used as a down payment.

"This really broadens our options and areas where we can look," said Liz, 24. "If we had to wait, we'll wait. But we really want to take advantage of all the incentives right now."

They are among many potential first-time buyers interested in the announcement this week by Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development , that the FHA soon will allow the tax credit to be used as a down payment via a bridge loan from a lender.

Donovan delivered the news Tuesday in a speech at the National Association of Realtors Real Estate Summit in Washington, D.C.

"FHA will permit trusted FHA-approved lenders and HUD-approved nonprofits, as well as state and local governmental entities to 'monetize' the tax credit through short-term bridge loans," Donovan said in prepared remarks.

Details have yet to be released, but some real estate agents hope it will be the tipping point to reverse a long-suffering market.

Rick Seese, associate broker and manager of Greenridge Realty's Lowell office, said it will make a huge difference.

"America is probably more cash strapped than they have been at any time in the last 10 to 20 years," Seese said. "This will allow a buyer to put $8,000 down. If they qualify for the whole $8,000, that can represent a 5 percent down payment."

Even buyers who have a down payment saved up are interested in it, said Five Star Real Estate agent Mary Kent.

"Maybe it's going to open up some doors that might not have been opened prior," Kent said.

Cathy Hoppough said the down payment option is good, but even more needs to be done. The broker of Coldwell Banker Hoppough & Associates in Ionia lists foreclosed properties for HUD and several lenders.

"We need about a $15,000 credit for every buyer out there, not just first-time buyers, to stimulate the housing market," Hoppough said.

"There are a lot of other people out there who would be stimulated to buy something if it applied to them."

Waiting for details

Lenders are waiting for the FHA to release details of the down payment plan.

Based on the limited information so far, Rusty Darter of Byron Bank said it has the potential to help several buyers, but it is not for everyone.

"It concerns me a little bit when someone borrows money to be able to come up with a down payment to be able to borrow more money to buy a house," he said.

"What if there are things in that person's life that offset that tax credit and ... their refund becomes less than the down payment?"

Until the details are released, it's hard to know, he said.

"On the face, it does look like a good opportunity."

E-mail Cami Reister: creister@grpress.com

FHA Plans to Offer $8,000 Upfront to First-Time Buyers

2009-05-13T14:35:00.001-04:00

CAUTION: “Although it remains to be seen how the program is actually implemented, the plan resembles former seller-funded down payment assistance programs,” writes housing analyst Ivy Zelman in a research note Wednesday.

One of the problems during the housing boom was that many people were able to buy a home with little or no money down, giving them little financial incentive to work hard to hold on when times got rough.

Now U.S. housing officials are working on a plan that would essentially allow some first-time buyers to purchase homes by paying little money upfront. Rather, they would be able to put an $8,000 income tax credit for first-time buyers towards their down payment on loans backed by the Federal Housing Administration. The idea is to allow home buyers to “monetize” the tax credit. Right now, home buyers must wait until they file their taxes to receive the credit.

The FHA is finalizing a program that would allow approved lenders, non-profits, and state and local governments to fund short-term loans that could be used as down payments to be repaid once the borrower received the tax credit. Once they received their tax credit, they would pay off the short-term loan and put equity into their home.

The FHA requires a minimum 3.5% down payment on loans backed by the agency, which means that buyers could put little or nothing down on homes up to $230,000. “It is close to having nothing down,” says Thomas Lawler, an independent housing economist.

The proposal, hailed by home builders and Realtors, is drawing some comparisons to the no money down programs that the FHA has worked to shut down. Congress ended a program last year that allowed home sellers to fund down payments to home buyers through nonprofit groups, and the FHA has blamed that program for an outsized share of loan defaults. Under that program, nonprofit groups would “gift” the 3% minimum down payment to a home buyer, often funded by the seller of the home. Buyers would move into the home without paying any of their own money for the down payment.

“Although it remains to be seen how the program is actually implemented, the plan resembles former seller-funded down payment assistance programs,” writes housing analyst Ivy Zelman in a research note Wednesday. “We remain concerned that the lenient underwriting standards, low down-payment requirements and now the ability of FHA borrowers to purchase a home without putting any of their own equity into the purchase is creating a tremendous risk for the program and taxpayers in the future.”

Several states, including Pennsylvania and New Mexico, had already instituted similar programs. Housing Secretary Shaun Donovan outlined the plan Tuesday during a speech to the National Association of Realtors. “We think the policy is a real win for everyone,” he said.

Congress approved the tax credit in February’s stimulus bill, which provides up to $8,000 for first-time home buyers on a new or existing home. The tax credit expires Dec. 1.

Readers, would you be more likely to buy a new home if you could spend this tax credit before you file your tax returns?

This copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our Subscriber Agreement and by copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit

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Dow in triple-digit rally on jobs, banks

2009-05-08T15:56:00.000-04:00

Wall Street advances after payroll losses in April are not as bad as expected and stress test results are finally released.

By Alexandra Twin, CNNMoney.com senior writer

Last Updated: May 8, 2009: 3:47 PM ET

NEW YORK (CNNMoney.com) -- Stocks rallied Friday, extending the two-month rally, after a government report showed employers cut fewer jobs than expected last month. The release of the long-awaited bank stress test results also gave the market a boost.

The Dow Jones industrial average (INDU) gained 130 points, or 1.6%, with 20 minutes left in the session. The S&P 500 (SPX) index rose 18 points, or 2%. The Nasdaq composite (COMP) added 19 points, or 1.1%.

The major gauges are on track to end higher for the week. For the Dow and S&P 500, it would mark the eighth up week in the last nine. For the Nasdaq, it would mark the 9th up week in a row.

Stocks have been rallying since early March, as investors have bet that the worst for the economy and financial sector has already happened. The S&P has jumped 36% since hitting a more than 12-year low on March 9th.

Although the jobs report was not positive, it could have been worse, said Jim Dunigan, chief investment officer at PNC Wealth Management. That appeared to be sufficient reason to get investors back into the market.

"We seem to be turning a corner here with the pace of the contraction in both employment and the overall economy," he said.

Employment report: Employers cut 539,000 jobs from their payrolls in April, the Labor Department reported Friday morning, surprising economists who were looking for job cuts of around 600,000. Employers cut a revised 699,000 jobs from their payrolls in March.

It was the smallest number of job cuts since last October, when the economy lost 380,000 jobs. However, it brings the total numbers of jobs lost to 5.7 million since January 2008. The recession is considered to have started the month before that, in December 2007.

The unemployment rate, generated by a separate survey, rose to 8.9%, as expected, from 8.5% in March, the worst reading since September 1983.

"In absolute terms it was a pretty poor report," said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc.

He said it wasn't as bad as the ones that preceded it, but that it was helped partly by short-term factors such as a big increase in government jobs added to conduct the 2010 census.

"The overall employment picture is still bad, but I think people are looking at leading indicators such as weekly jobless claims, which have been declining," he said. "That could mean a better payrolls report in May."

In other economic news, wholesale inventories shrank for the seventh consecutive month in March, falling to $411.7 billion, the lowest level in 16 months.

Financials: The government released the results of the stress tests late Thursday, saying that 10 of the 19 banks tested will need to raise almost $75 billion in anticipation of a deeper recession.

Leading the list was Dow component Bank of America (BAC, Fortune 500), which needs to raise nearly $34 billion. Wells Fargo (WFC, Fortune 500) needs $13.7 billion and Citigroup (C, Fortune 500) needs $5 billion.

JPMorgan Chase (JPM, Fortune 500), American Express (AXP, Fortune 500) and Goldman Sachs (GS, Fortune 500) were among the banks that won't need to raise any additional money.

All the stocks rose at least modestly as investors breathed a sign of relief that the results weren't worse.

The KBW Bank (BKX) sector index added 10.8%.

"The dollar amounts are in ranges that had either been leaked or suspected and there seems to be a pretty orderly resolution to the outcome," Dunigan said. "The other part is that investors are just happy to have it behind them."

Company news: Fannie Mae (FNM, Fortune 500) reported a loss of $23.2 billion in the first quarter, or $4.09 per share, worse than a year ago. The mortgage finance company also said it needs an additional $19 billion from the government.

After the close Thursday, AIG (AIG, Fortune 500) reported a quarterly loss of 97 cents per share versus a loss of $1.41 a year ago. Analysts thought AIG would report a loss of 6 cents per share. The stock inched higher Friday.

Bonds: Treasury prices rose, lowering the yield on the benchmark 10-year note to 3.28% from 3.32% Thursday. Treasury prices and yields move in opposite directions.

Other markets: In global trading, Asian markets ended higher. European markets ended higher.

In currency trading, the dollar fell versus the euro and the yen.

U.S. light crude oil for June delivery rose $1.92 to settle at $58.63 a barrel on the New York Mercantile Exchange.

COMEX gold for June delivery fell 60 cents to settle at $914.90 an ounce.

First Published: May 8, 2009: 9:46 AM ET

Pending home sales jump 3.2%

2009-05-04T13:52:00.001-04:00

Buyers defy expectations with an increase in sales contracts signed during March.

By Les Christie, CNNMoney.com staff writer

Last Updated: May 4, 2009: 11:25 AM ET

NEW YORK (CNNMoney.com) -- Is the housing meltdown ending?

Pending home sales rose in March for the second consecutive month and are up year over year. The Pending Home Sales Index from the National Association of Realtors showed a 3.2% gain to 84.6 from February, when it was 82. The index stands 1.6% higher than a year ago.

The consensus forecast of industry experts polled by Briefing.com had predicted no increase in the index.

It may still take a while before the market gains enough momentum to firmly state that the downturn has been reversed, according to Lawrence Yun, NAR's chief economist. And, the upturn may have been boosted by the first-time homebuyers tax credit, a temporary measure that will lapse in December.

"We need several months of sustained growth to demonstrate a recovery in housing, which is necessary for the overall economy to turn around," said Yun. "This increase could be the leading edge of first-time buyers responding to very favorable affordability conditions and an $8,000 tax credit, which increases buying power even more in areas where special programs allow buyers to use it as a down payment."

The index is understood to be a forward indicator of home sales trends since it measures contracts signed, not completed sales. The up-tick may indicate that home prices have fallen low enough for buyers to get off the fence.

Feeling for the bottom

Yun is not calling a bottom yet, however, because the index is still at a relatively low level. Instead, he's looking toward the summer selling season to determine what direction the market will take. Plus, he would like the number of homes on the market to drop to a more normal level of six to seven months of supply.

"If inventory goes down - it's at just under 10 months now - to below eight months, that would mean we're on the way to a sustainable recovery," Yun said.

Anecdotal evidence indicates that trend may be happening. Realtors and other industry insiders are seeing rising open house attendance and multiple bids on some particularly desirable properties. Plus, pricing has become sharper, according to Sherry Chris, the CEO of Better Homes and Gardens Real Estate.

"Overpricing seems to be ending," she said. "Properties are coming onto the market and selling quickly."

And buyers are feeling a little more urgency, she added. In many markets, buyers have not felt any pressure to make an offer. "They said to themselves, 'I don't have to act immediately. It will still be on the market two weeks from now,'" she said.

Today, buyers are more likely to bid because they perceive the market as at or near its bottom. An April Gallup Poll reported that 71% of Americans thought it was a good time to buy a house.

They don't, however, believe there will be price increases soon; three of four buyers think prices will stabilize or even decline in their areas over the next 12 months, according to Gallup.

Pat Newport, a real estate analyst for IHS Global Insight, is putting less emphasis on pending home sales than he once did for his housing market analyses. There has been a disconnect lately, he said, between the number of properties going into contract (pending home sales) and the number that actually close (existing home sales).

He speculates that this is because buyers are making offers and signing contracts but, because of financing problems, many deals are falling through.

Regional differences

The South saw the largest gain of any region, with pending home sales jumping 8.5%. Pending sales are 7.7% higher there compared with a year ago.

The Midwest gained 3.9% from February and 1.7% year-over-year. Northeast sales fell 5.7% and are off 24.1% compared with March 2008. The West dropped 1% for the month but are up 8.2% year-over-year.

Low home prices continued to help to drive sales, although NAR's affordability index actually fell 2.3% from February, when it hit a historic high. This index is based on family income, home prices and mortgage rates.

"Compared to a year ago, the typical family can pay much less in mortgage costs for the same home, or buy a better home without necessarily increasing their monthly payment," said NAR President Charles McMillan, in a prepared statement. "For buyers who've been on the sidelines and have good jobs, the market has never looked more favorable.

First Published: May 4, 2009: 10:00 AM ET

New home sales data show encouraging signs

2009-04-24T14:05:00.001-04:00

New home sales data show encouraging signs

The Associated Press

updated 12:00 p.m. ET, Fri., April 24, 2009

WASHINGTON - New home sales and demand for big-ticket manufactured goods both were better than expected in March, raising some hopes that the long slides in housing and manufacturing are slowly coming to an end.

New home sales fell 0.6 percent last month to a seasonally adjusted annual rate of 356,000 from an upwardly revised February rate of 358,000, the department said. Economists surveyed by Thomson Reuters expected a sales pace of 340,000 units.

February’s results were 6 percent higher than originally reported, but home sales last month were down nearly 31 percent from March 2008.

The housing results fanned optimism that developers have slashed prices and construction enough that sales have finally hit bottom. Prices, however, are likely to remain weak for months as builders continue to clear out their stock of unsold homes.

The Commerce Department said Friday that orders for durable goods dropped 0.8 percent last month, about half the 1.5 percent decline that economists expected. A rise in orders for commercial and military aircraft helped cushion weakness elsewhere.

The small drop followed a 2.1 percent increase in orders in February. That was the first gain after six straight monthly declines.

While February’s durable goods results were revised down from an earlier estimate of a 3.5 percent gain, that rise in orders followed by only a small drop in March show some faint signs of life in manufacturing.

Still, economists cautioned the best that can be expected is for industrial production to stabilize. They do not expect a rebound from the current low levels anytime soon given all the problems facing the economy.

“The bottom line here is that it is still impossible to tell whether the sharp slowing in the rate of decline of core orders in February-March is simply a correction after the horrors of the previous few, post-Lehman months, or the start of a genuine stabilization,” Ian Shepherdson, chief U.S. economist at High Frequency Economics, wrote in a note to clients.

U.S. manufacturers have been hurt by a steep drop in demand at home and from major overseas markets, which face their own recessions.

Diversified manufacturers 3M Co. and Honeywell International Inc. on Friday reported large drops in their quarterly profits and lowered their earnings outlooks for the year. 3M said weak demand from U.S. customers hurt sales of LCD screen coatings, office supplies, steel coatings and other products, while Honeywell said the broader downturn in commercial aviation and autos weighed heavily on its sales.

But on Wall Street, stocks rose after Ford Motor Co.’s better-than-expected quarterly results.

Still, demand for transportation products fell 1.4 percent in March, reflecting a continued slide in orders for motor vehicles, which fell 1.7 percent, according to the government data.

That weakness was offset somewhat by increases of 4.4 percent in demand for commercial aircraft and 4.7 percent in orders for military aircraft. Even with the increase in orders for commercial aircraft, they remain sharply lower than a year ago as the global recession has depressed demand worldwide.

Excluding transportation, orders fell 0.6 percent last month, just half of the 1.2 percent decline that had been expected. Demand also dropped for primary metals such as steel, and for orders of machinery and computers.

While non-defense capital goods excluding aircraft — viewed as a good proxy for business investment plans — rose 1.5 percent, they also were significantly lower than a year ago as businesses have slashed efforts to expand and modernize.

The overall economy, as measured by the gross domestic product, fell at an annual rate of 6.3 percent in the fourth quarter, the biggest decline since 1982. Economists believe the GDP fell almost as sharply in the January-March quarter. They expect a smaller fall in the current quarter as the recession becomes the longest in the post-World War II period.

Paul Ashworth, senior U.S. economist at Capital Economics, said the durable goods data “fits within the broader pattern that we are seeing: the severity of the recession is easing gradually, but any actual recovery is still some way off.”

The lengthy downturn already has resulted in more than 5 million jobs lost in the U.S. since December 2007, and companies still are announcing mass layoffs and extended plant shutdowns.

General Motors Corp. on Thursday said it will temporarily close 13 assembly plants in the U.S. and Mexico, laying off more than 26,000 workers. The closures, which will start in May, will be as short as three weeks to as long as 11.

URL: http://www.msnbc.msn.com/id/30386322/

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2009-04-22T22:27:00.004-04:00

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Obama launches mortgage rescue plan

2009-04-16T13:50:00.001-04:00

First participants in the Treasury Department's program to help homeowners avoid foreclosure include some of the nation's largest banks.

By Tami Luhby, CNNMoney.com senior writer

Last Updated: April 16, 2009: 10:15 AM ET

NEW YORK (CNNMoney.com) -- The Obama administration's loan modification program is finally underway.

The Treasury Department announced Wednesday the first six participants to sign up for President Obama's plan. They include three of the nation's largest banks: JPMorgan Chase (JPM, Fortune 500), which will get up to $3.6 billion in subsidy and incentive payments; Wells Fargo (WFC, Fortune 500), $2.9 billion; and Citigroup (C, Fortune 500), $2 billion. The others are GMAC Mortgage, $633 million; Saxon Mortgage Services, $407 million; and Select Portfolio Servicing, $376 million.

Additional loan servicers will be added to the list over time, a Treasury spokesman said.

Several major servicers, including JPMorgan Chase and Wells Fargo, said they began modifying loans under the government initiative earlier this month. CitiMortgage signed up for the program on Monday and will start processing applications soon.

"We view this modification program as yet another incremental opportunity for thousands of homeowners to preserve and maintain the dream of homeownership," Wells Fargo said in a statement.

Distressed homeowners and housing counselors have been eagerly awaiting the program's launch since Obama first announced it on Feb. 18. However, it took weeks for the government to clarify the terms and for the financial institutions to update their systems and start accepting applications, frustrating many of those in trouble.

Billed as helping up to 9 million borrowers stay in their homes, the two-part plan calls for servicers to reduce monthly payments to no more than 31% of eligible borrowers' pre-tax income or to refinance eligible mortgages even if the homeowner has little or no equity. The government is allocating $75 billion to subsidize part of payment reduction, as well as provide thousands of dollars in incentives for servicers and borrowers to participate.

The Treasury Department said Wednesday it is capping the payments to servicers to allow more companies to participate. It is allocating $50 billion to the program, with Fannie Mae (FNM, Fortune 500), Freddie Mac (FRE, Fortune 500) and the Department of Housing and Urban Development providing the rest.

The modification plan calls for the servicer to reduce interest rates so that the monthly obligation is no more than 38% of a borrower's pre-tax income, and then the government would kick in money to bring payments down to 31% of income. Servicers can also reduce the loan balance to achieve these affordability levels. The government will share in the cost, up to the amount the servicer would have received if it had reduced the interest rates.

Only loans where the cost of the foreclosure would be higher than the cost of modification would qualify. Also, Treasury will not provide subsidies to reduce rates to levels below 2%.

It was not immediately clear whether the servicers must pay the incentives to homeowners and investors out of their funding share.

In addition to subsidizing the interest rates, servicers will use the Treasury funding to pay for incentives for themselves, homeowners and investors. The program gives servicers $1,000 for each modification and another $1,000 a year for three years if the borrower stays current. It will also give $500 to servicers and $1,500 to mortgage holders if they modify at-risk loans before the borrower falls behind.

Homeowners, meanwhile, will get up to $1,000 a year for five years if they keep up with payments. The funds will be used to reduce their loan principals.

The Treasury Department set the caps based on public data about the mortgages the servicers handle. Though the program mandates that servicers modify all loans that meet the requirements, the department feels the servicers will have sufficient funds to cover all troubled borrowers' applications.

"We're confident we'll have enough money," said Treasury spokesman Andrew Williams.

Separately, major servicers also recently started accepting applications under the refinance portion of the program.

Obama urges millions to refinance mortgages

2009-04-10T10:22:00.003-04:00

Contact Frank or Duane Toll Free 888-898-3326 to discuss your refinancing options

‘People can really take advantage of this,’ president says of low rates

The Associated Press

updated 3:21 p.m. ET, Thurs., April 9, 2009

WASHINGTON - Declaring “good news” in the midst of an economic meltdown, President Barack Obama on Thursday urged families to take advantage of near-record low mortgage rates by refinancing their home loans.

“We are at a time where people can really take advantage of this,” Obama said, seated with a handful of homeowners who have already lowered their bills.

But he also warned people to watch out for scam artists, cautioning, “If somebody is asking you for money up front before they help you with your refinancing, it’s probably a scam.”

Rates on 30-year mortgages inched upward this week but remain near the lowest level in decades, allowing borrowers with strong credit and stable jobs to save money if they refinance.

Low rates have sparked a surge in refinancing activity, with nearly 80 percent of new home loan applications coming from borrowers seeking to refinance. Freddie Mac’s sibling company, Fannie Mae, refinanced $77 billion in loans last month, nearly double February’s volume.

“The main message we want to send today is there are 7 to 9 million people across the country who right now could be taking advantage of lower mortgage rates,” Obama said in a photo opportunity in the Roosevelt Room. “That is money in their pocket.”

Foreclosures and defaults continue to break records. A record 5.4 million American homeowners with a mortgage, or nearly 12 percent, were at least one month late or in foreclosure at the end of last year. And nearly half of homeowners with a risky subprime adjustable-rate mortgage were in trouble.

Last month, the Obama administration launched a new plan to provide $75 billion in incentives for the mortgage industry to modify loans to help borrowers avoid foreclosure. On Thursday, the president encouraged people to take advantage of a government Web site — www.makinghomeaffordable.gov — to see how they can get help.

In recent weeks nearly 200,000 homeowners have contacted Bank of America to find out if they are eligible to refinance under the Obama administration’s new guidelines, said Vijay Lala, the bank’s product management executive. “We’ve seen a tremendous amount of interest.”

URL: http://www.msnbc.msn.com/id/30135793/

MSN Privacy . Legal

Signs of Life in Real Estate Market

2009-04-04T11:26:00.000-04:00

There's is a lot of activity out on the coast that may indicate a reawakening of the housing market there - and across the country.

By Les Christie, CNNMoney.com staff writer
April 3, 2009: 11:51 AM ET
NEW YORK (CNNMoney.com) -- No state has been harder hit by the housing bust than California.

It has piled up more foreclosures and has endured among the worst home-price declines. The median price of a single-family home sold in February was $247,590, down 41% from 12 months earlier, according to the California Association of Realtors (CAR).

And home construction in the Golden State has nearly vanished: December housing permits shrank to about a quarter of what they were during the boom years, according to the National Association of Homebuilders.

But there are signs that California's housing market may be coming out of this tailspin: Sales volume is increasing, investors are returning and inventory is shrinking.

Bringing back buyers
Low prices have brought out droves of buyers. In February, they purchased more than 600,000 homes, some 80% more than they bought in February 2007, according to CAR. And most of this activity is where prices are off 40% to 60% from their peaks.

In the Sun City area of Riverside County, for example, prices have fallen more than 35% over the past 12 months. Two-thirds of February's sales in the area were of foreclosed properties owned by banks, according to Chuck Whitehead, broker with Coldwell Banker Associated Brokers.

"The sales rebound is largely centered around areas that have experienced the biggest impact from the subprime crisis," said CAR chief economist Leslie Appleton-Young.

In more stable communities, where fewer homes were saddled with toxic mortgages, prices have not crashed as badly and sales are rebounding more slowly. But foreclosures still account for a significant portion of sales, according to Phil Jones, a broker with Coldwell Banker Coastal Alliance in Long Beach.

Most analysts foresee continued price declines in California, according to Nicholas Retsinas, director of Harvard's Joint Center for Housing Studies. "But [there'll be] a slowing of that decline, which portends the end of price drops."

That may already be happening in Long Beach, according to Jones. The measure he uses to judge market trends there, price per square foot, turned up in February, growing 5% to $360.

"Every one of my agents is very busy," Jones said.

Investing 2.0
Another positive sign that markets don't have much further to fall is that investors are returning to some markets.

"I spoke with one investor who is putting together a group of buyers and they're ready to get back into the market," said Jones. "They're planning to buy single-family homes in bulk."

John Dugan is one such investor. The San Francisco-based medical supplies salesman is using a portion of his Entrust Group-managed IRA to buy townhouses in the Sacramento area.

So far he's purchased three 840-square-foot, two-bedroom, one-bath duplexes. He paid just $35,000 to $80,000 a piece - down from their $180,000 to $200,000 selling prices a few years ago.

He paid cash for the first property and rents it out for $750 a month, a profit of $550 after dues and common charges. That's a 19% return on investment, without figuring on appreciation.

"This kind of pricing is something you only think of as Midwestern, not Californian," he said.

Supply dropping
The booming sales have whittled away existing home inventory to just six and a half months - down from 15 months a year ago.

"Typically, I would describe a normal market as having a six to seven month supply of homes," said Appleton-Young. "We have that now."

California's inventory now compares favorably with the rest of the nation, where there's a 9.7 month supply of homes on the market, according to the National Association of Realtors.

One wildcard, however, is that banks have kept many repossessed homes off the market. "Banks are spoon feeding them out very slowly so they don't overload the market," said Whitehead. But, he added, if they release a lot of properties during the heavy spring buying season, they "will be eaten right up by buyers."

Could the end be near?
All of those factors add up to a more optimistic forecast for California, which is seen as a harbinger of things to come for the rest of the country.

Appleton-Young said that while home prices should continue to decline for the rest of 2009, she predicts that the pace of decline will slow. In total, she's predicting a total loss of 19% for the year. But, "I think we could see home price stabilization by early next year," she said.

If that happens in California, it could spread to the rest of the hard-hit Sun Belt markets - and beyond.

"California was the pace setter for lots of the mortgage products that went toxic," said Retsinas. "The sense is if the problems can be addressed there, the rest of the country will follow."

U.S. home sales climb

2009-03-25T13:35:00.001-04:00

U.S. home sales climb at fastest pace in 10 monthsBy Lucia Mutikani

WASHINGTON (Reuters) - New orders for long-lasting U.S. made goods rose in February for the first time in seven months and new home sales rebounded, government reports showed on Wednesday, suggesting the economic downturn might be easing a bit.

The Commerce Department said durable goods orders rose 3.4 percent to $165.6 billion in February, the biggest gain since December 2007, after a 7.3 percent plunge the prior month.

In another report, the department said sales of newly built U.S. single-family homes rose at their fastest pace in 10 months in February.

The data are the latest in a series of recent economic reports indicating the downturn in the economy, after a brutal fourth quarter, may be moderating.

"This is consistent with the data that we've seen for January and February, reflecting the fact that the pace of the decline in the U.S. economy has stabilized somewhat from the significant decline seen in November and December," said Michael Woolfolk, senior currency strategist at the Bank of New York Mellon, in New York.

U.S. equity indexes extended gains after the new home sales data, while U.S. Treasury debt prices fell and the U.S. dollar was lower against the euro.

SLOW DOWN IN PACE OF DETERIORATION

Recent data, including retail sales and housing, have pointed to some signs of a slowdown in the pace of the economy's downturn. The U.S. economy slipped into recession in December 2007.

New durable goods orders excluding transportation rose 3.9 percent in February, the largest gain since August 2005, the Commerce Department said. Orders for machinery soared 13.5 percent in February, the biggest increase since March 2004.

(Additional reporting by Julie Haviv in New York; Editing by Neil Stempleman)

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Government Help For Current Homeowners

2009-03-21T08:58:00.008-04:00

Source: HUD "Making Home Affordable"

What is “Making Home Affordable" all about?

Making Home Affordable is part of President Obama's comprehensive strategy to get the housing market back on track. Through the Making Home Affordable Program, up to 9 million American families may be eligible to refinance or modify their loans to a payment that is affordable now and into the future.

Homeowners Who Pay Their Mortgage on Time

Eligible borrowers who are current on their mortgages but have been unable to take advantage of today's lower interest rates because their homes have decreased in value, may now have the opportunity to refinance. Through the Home Affordable Refinance Program, Fannie Mae and Freddie Mac will allow the refinancing of mortgage loans that they own or that they placed in mortgage backed securities.

Beginning April 4, 2009, borrowers whose loans are owned or securitized by Fannie Mae may also apply through any Fannie Mae approved lender. That's me!

Are You Eligible?

Use the following link to determine eligibility.

http://makinghomeaffordable.gov/refinance_eligibility.html

Frequent Questions

http://www.financialstability.gov/docs/borrower_qa.pdf

Rates Below 5%

2009-03-18T19:24:00.002-04:00

Bonds skyrocket on Fed's $300B pledge

Bond prices spike after Federal Open Market Committee says it will purchase long-term Treasurys over the next six months.

By David Goldman and Catherine Clifford, CNNMoney.com staff writers

Last Updated: March 18, 2009: 5:19 PM ET

NEW YORK (CNNMoney.com) -- Treasury prices surged Wednesday, after the Federal Reserve said it would buy up to $300 billion in long-term Treasurys - a move the central bank has hinted at for months.

By 4:46 p.m. ET, the yield on the benchmark 10-year note had plummeted more than 0.5 percentage points to 2.499% from 3.01% late Tuesday, the largest single-day drop since Oct. 20, 1987.

The 30-year long bond skyrocketed 5 points immediately following the announcement, while the yield, which moves opposite to price, tumbled. At one point, the price surged more than 7 points before easing.

Many interest rates on various forms of debt are tied to long-term Treasury yields, including 10-year mortgage rates. The Fed has been exploring all of its options in an effort to lower interest rates after it lowered its rate to a range of 0.25% to 0%.

First Published: March 18, 2009: 7:55 AM ET

Housing starts unexpectedly surge

2009-03-17T15:43:00.000-04:00

Government report shows construction of new homes jumped 22% in February.

By Ben Rooney, CNNMoney.com staff writer

Last Updated: March 17, 2009: 9:32 AM ET

NEW YORK (CNNMoney.com) -- Initial construction of U.S. homes unexpectedly surged in February, after falling for eight months, according to a government report released Tuesday.

Housing starts rose to a seasonally adjusted annual rate of 583,000 last month, up 22% from a revised 477,000 in January, according to the Commerce Department. It was the first time housing starts increased since June, when they rose 11%.

Economists were expecting housing starts to decline to 450,000, according to consensus estimates compiled by Briefing.com. Still, starts are down more than 47% from February 2008, when over 1.1 million new homes broke ground.

New construction of single-family homes, considered the core of the housing market, increased 1.1% to an annual rate of 357,000 versus 353,000 in January.

February's increase was driven by a nearly 80% increase in construction of multi-family homes. New construction of buildings with 5 or more units increased surged 80% to 212,000 from 118,000 in January.

Applications for building permits, considered a reliable sign of future construction activity, rose 3% to a seasonally adjusted annual rate of 547,000 last month. Economists were expecting permits to fall to 500,000.

While the surge in new construction was a welcome sign for the nation's battered housing market, analysts warned that the increase could be short lived.

"With new home sales still falling and the months' supply at a record, there is no reason for homebuilding to rise," wrote Ian Sheperdson, chief U.S. economist at High Frequency Economics in a research note. "This is a temporary rebound, not a recovery."

New home construction surged in the Northeast, jumping nearly 89% last month. Starts also increased in the Midwest and the South.

In the West, where the housing market was overbuilt in the boom years and where there is a glut of foreclosed homes, starts declined nearly 25% versus the previous month.

Fast, Secure Online Prequals

2009-03-08T15:37:00.010-04:00

We were asked to create a fast, secure online loan prequal tool.

Here It Is

www.SecurePrequal.com

Simply direct your clients to SecurePrequal.com. We'll get your answers within 24 hours or less.

Frank

Cell: 317-501-3467

$8,000 First Time Home Buyer Tax Credit for 2009

2009-03-07T14:12:00.009-05:00

The tax credit at a glance:

The tax credit is for first-time home buyers only. A 1st time home buyer is defined as an individual who has not owned a home for the previous (3) years.

The tax credit does not have to be repaid. It is a credit, not a deduction against taxable income.

The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.

The credit is available for homes purchased on or after January 1, 2009 and before December 1, 2009.

Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.

The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit.

For example, if a qualified home buyer expected, notwithstanding the tax credit, federal income tax liability of $5,000 and had tax withholding of $4,000 for the year, then without the tax credit the taxpayer would owe the IRS $1,000 on April 15th. Suppose now that the taxpayer qualified for the $8,000 home buyer tax credit. As a result, the taxpayer would receive a check for $7,000 ($8,000 minus the $1,000 owed).

Click HERE for more details

Consumer credit: Surprise $1.8 billion jump

2009-03-06T21:43:00.001-05:00

Consumer borrowing showed a surprise rise in January, snapping a three-month decline and signaling that households may have started to loosen their purse strings.

Total consumer borrowing rose by $1.8 billion to $2.564 trillion in January, according to the Fed. That's an increase from a revised $2.563 trillion in December.

Economists were expecting consumer credit to fall by $5 billion in January, according to a consensus of economists polled by Briefing.com.

Unexpected Fall in Jobless Claims

2009-03-05T12:40:00.005-05:00

According to the Associated press, See Article Here, jobless claims experienced an unexpected fall this past week. The Labor Department expected 650,000 new claims. Actual claims came in at 639,000.

Obstacles are Always Opportunities in Disguise!

2009-03-01T10:47:00.009-05:00

March madness begins. Welcome to the Spring Season! How can you create a strong pipeline and get closings this season? You can be successful. It does not matter if you are a listing agent, a buyer's agent, a loan officer or a combination of all of them!

Today I'm going to review a basic idea, "Marketing 101".

Determine Your Client's Need and Give Them a Way to Satisfy the Need

First things first. Who is your client? Is your client the home buyer, the home owner, a company that refers clients to you or a person who refers clients? It may be all of them. Here's where Marketing 101 comes into play.

#1 What is the need, or the problem, your client has?

#2 What can you do to help solve the problem?

Obstacles are Always Opportunities in Disguise!

Example

Here's a fresh approach that was introduced to me several years ago. I am a mortgage banker and I want to do loans. I want real estate agents to refer borrowers to me. Therefore, the real estate agent is my client. I believe that most agents wish to increase their sales. Think about how you can adapt the idea for your referral partners.

"I am a different type of mortgage banker. I believe that if you are going to help build my business by referring your clients to me, that I am obligated to help YOU build your business. That is what I do. I help you build your business. I have an ongoing supply of individuals who wish to purchase homes. I need to match those individuals with trusted referral partners."

Who are your potential or existing referral partners. How can you help build their business? Concentrate on solutions and not the problem.

I want a 4.875% rate!

2009-02-26T14:46:00.000-05:00

Question: I'm shopping for the best terms I can get for a new mortgage. How do I get a rate below 5%?

Answer: The internet is loaded with mortgage offers. Make sure to review disclaimers and get key terms in writing prior to making any type of commitment. I always provide a Good Faith Estimate in writing prior to a client applying for a mortgage. In addition, we can provide a loan comparison of competing offers to compare the true benefits of loan options. Watch out for disclaimers like this. Most people do NOT qualify for the low teaser rate.

"Disclosures: Fees & charges apply and may vary by product and State. Subject to underwriting approval. Application required; not all applicants will be approved. Minimum credit score of 731 required to be eligible for advertised rate. Full documentation & property insurance required. Loan secured by a lien against your property. Consolidating or refinancing debts may increase the time and/or the total amount needed to repay your debt. Taxes & insurance extra. Terms, conditions & restrictions apply. For example, as of 02/26/09, a $250,001 loan amount financed at 4.750% (5.000% APR) with a 2.250 point discount and a 20% downpayment, would result in 360 monthly principal and interest payments of $1,304.12. Lock in fee required to secure rate. Recent rate but subject to change without notice. Rate available on loan amounts from $250,001 to (A) $417,000 (contiguous US) and (B) $625,500 (AK and HI) on owner-occupied single-family residential properties. Rates, loan products, & fees subject to change without notice. Your rate and term may vary. "

Question: Is the government going to lower rates?

Answer: The government has been making attempts to lower interest rates. One tool has been to purchase billions of dollars of mortgage back bonds. Unfortunately, rates have not responded as planned. See Blog Archive for 4% mortgage interest rate.

$8,000 Home Buyer: Key Points

2009-02-17T21:13:00.000-05:00

1. New buyers: The tax credit included in the economic stimulus legislation is much narrower than the $15,000 proposal. This credit is equivalent to 10 percent of the purchase price of the home--although it's capped at $8,000--and applies only to first-time home buyers and principal residences. But unlike an earlier $7,500 home buyer tax credit, this one does not have to be repaid.

2. First time buyers defined: For the purpose of this legislation, a "first-time home buyer" is someone who hasn't owned a principal residence for three years before buying a house. (The date of purchase is considered the day that the title is transferred.) That means if you've owned a vacation home--but not a principal residence--within the past three years, you would still qualify for the credit.

3. 2009 buyers only: Only those who purchase a home on or after January 1 and before December 1, 2009 are eligible for the credit. Anyone who bought a home last year won't be able to take advantage of it.

4. Income limits: The tax credit is subject to income limitations. Single buyers need a modified adjusted gross income of $75,000 or less to qualify for the full credit, that's $150,000 for married couples. Those earning more than these thresholds may be eligible for reduced credits.

5. Refundable: Because the tax credit is "refundable," qualified buyers can take advantage of it even if they don't have much tax liability.

6. Recapture: Buyers have to own the home for at least three years in order to capitalize on the credit. If they sell the home before then, they will have to return the credit to the government. (Exceptions will be made in certain cases, such as death or divorce.)

4.625% Mortgages - Bait and Switch -

2009-02-16T17:21:00.000-05:00

I did a survey at four of the "leading" online mortgage sites. The 4.625% rate seems to be popular! I decided to read the fine print they put at the bottom of the page and discovered there is more to the story. In my opinion, 99% of potential clients would not fit the criteria. I will post an actual disclaimer at the end of this post.

Not only does this smell of bait and switch, but the APR (annual percentage rate) is calculated differently at each site. People have been taught that the APR is a simple way to compare competing offers. Unfortunately, calculating an APR is more an art than a science. I have been originating mortgages for eight years and I recently completed the Indiana mandatory 24 hour educational requirements for loan originators. In addition, I passed the Secretary of State's Indiana Primary Manager test. I have not found any source that states which fees lenders must include in the APR. The requirements are general and a matter of interpretation. So how do people make an informed decision?

The first thing an individual can do is work with a company they have worked with in the past. They can also seek referrals from people they trust. In addition, always get key terms in writing. I make it a practice to give clients a written Good Faith Estimate as well as a written loan comparison. Work with companies and people you trust and always get it in writing.

(Here's the disclaimer. It's similar to all the others. Notice they charge 2.64% loan points/lender fees)

* Refinance at 4.625% Fixed. Example assumes a $200,000 loan amount with a fixed interest rate of 4.625% and Annual Percentage Rate (APR) of 4.856%. Terms of the payment are based on a 30 year term fixed rate loan with principal and interest payments of $1,028.28 per month with a 2.64% loan points/lender fees due at closing. The example assumes a credit score of 780 or greater with a loan to value (LTV) of 80% or less on a primary residence. Rate and terms offered may vary depending on your credit history and other qualifications, amount of equity in the property, location, type of property, and other factors. This program is available as of February 11, 2009 from a participating Service Provider.

$15,000 Home Buying Tax Credit Is OUT of the Stimulus Package

2009-02-11T23:00:00.000-05:00

I was disappointed to hear that the Senate proposed $15,000 home buyer tax credit has been removed from the Stimulus Package that President Obama will likely sign in a few days.

I worked for Marathon Oil Company for (6) years as a territory manager. My customers regularly asked me if the DTW (dealer tank wagon) which is the price that gas stations paid for gasoline was going up or going down. Even with an insider perspective, I quickly discovered that my recommendations were not much better than the Weather Men's Predictions. I have enjoyed a (10) year career in the mortgage and real estate industry. My clients regularly want to know the direction of mortgage interest rates. I have found the same principle of accuracy as the Weather Men's Prediction with mortgage rate trends as I did with gasoline prices.

I believe the Weather Men's Prediction Principle applies to many things in life including politics. The $15,000 home buyer credit was almost guaranteed to be included as part o the stimulus package as of a couple days ago. It appears President Obama will sign a package that does not include it.

According to The Associated Press Senate Majority leader Harry Reed claims that 95% of American workers will get a tax cut. Senator Joe Lieberman says the bill will be the beginning of the turn around of the American economy. President Obama states "it will save or create more than 3.5 million jobs. I hope these claims do NOT follow the Weather Men's Prediction Principle!

Other provisions include:

Expanded unemployment benefits, food stamps and heath care coverage.
A $250 one-time payment to millions o social security beneficiaries.
$46 billion in transportation related projects.

Housing Stimulus Update

2009-02-07T21:18:00.001-05:00

Congress is actively considering an expanded home buyer tax credit, and the Senate has approved the following improvements:

The tax credit amount increases to $15,000.
The tax credit is extended to anyone buying a principal residence.
The tax credit will apply to all purchases occurring within a year after the bill is signed into law.
It is a true tax credit; it does not have to be repaid.

Please call your Senators and urge support for the expanded home buyer tax credit. To reach your Senators, call 1-866-924-NAHB (6242).

4% Home Mortgage Interest Rate

2009-02-07T11:19:00.001-05:00

Question: Are Home Mortgage Rates Going Down to 4%.

Answer: The government has been making attempts to lower interest rates. One tool has been to purchase billions of dollars of mortgage back bonds. Unfortunately, rates have not responded as planned.

From the Los Angeles Times

Mortgage rates rise despite the Fed's efforts to push them down

Even as the Fed has continued to buy billions of dollars' worth of mortgage-backed bonds each week, home loan rates are at their highest level since mid-December.

By Tom Petruno
February 6, 2009
The Federal Reserve is trying to push mortgage rates down. But the marketplace has other ideas. Home loan rates rose this week to the highest level since mid-December, according to mortgage giant Freddie Mac's latest national lender survey. The average rate on 30-year loans was 5.25%, up from 5.10% last week and the highest since 5.47% the week of Dec. 7. "I don't think this is going as planned," said Tom Atteberry, a money manager at First Pacific Advisors in Los Angeles.
The Fed in early January launched an unprecedented program to buy mortgage-backed bonds for the central bank's own portfolio. The idea: By boosting demand for mortgage securities, the Fed hoped to pull down interest rates on the bonds, which in turn was supposed to lower rates on new home loans used to back such securities.
The plan worked -- for a few weeks. Annualized yields on mortgage bonds issued by Freddie and Fannie Mae slid to well under 4% by mid-January. And the average 30-year home loan rate fell to 4.96% the week of Jan. 11, the lowest since at least 1971. That triggered another rush of loan applications from homeowners seeking to refinance, and in general stoked hopes for the still-struggling housing market. But even as the Fed has continued to buy billions of dollars' worth of mortgage-backed bonds each week, market yields on the securities have rebounded sharply, which has helped to push up home loan rates.
One factor driving mortgage bond yields higher has been a jump in yields on long-term Treasury bonds. Some investors have balked at buying Treasuries because they know Uncle Sam will borrow record sums this year, and figure yields are sure to rise further. Another issue putting upward pressure on mortgage rates: Some lenders have been so swamped with refi applications that they've raised rates to avoid facing a bigger backlog, said Keith Gumbinger, vice president at mortgage research firm HSH Associates in Pompton Plains, N.J. "They're trying to get business to ease off," he said.
But some analysts say the biggest problem the Fed faces in trying to manipulate home loan rates is that private investors want a higher return on mortgage securities than the Fed is willing to accept.
"They're trying to artificially move the rates away from where the market thinks they should be," Atteberry said. A 5% annualized yield on mortgage bonds is about the minimum many investors will accept, he said. The rebound in mortgage rates "is the market starting to exert its discipline," Atteberry said.
It's a reminder to the Fed that although it directly controls short-term interest rates, its power over long-term rates has always been limited, and still is, analysts say.

Sources

LA Times

Reuters

Bloomberg

$7,500 1st Time Home Buyer Credit

2009-02-06T20:39:00.000-05:00

Highlight:

Technically, the stimulus bill is actually changing the terms of the $7,500 tax credit that was issued as a part of the Housing Recovery Act, which Congress passed last summer. That legislation required that the tax credit be repaid over 15 years, making it more of a no-interest loan. Not surprisingly, the measure had little impact on the market. The stimulus bill now under consideration would make that tax credit a true credit that doesn't need to be repaid.

Homebuyers get a bonus in the stimulus bill

First time buyers could receive a $7,500 tax credit if they purchase soon.

By Les Christie, CNNMoney.com staff writer

Last Updated: January 29, 2009: 5:18 PM ET

NEW YORK (CNNMoney.com) -- If you're thinking of buying a home, there could be a big bonus for you in the economic stimulus bill that's now before Congress.

Among its many provisions is a $7,500 tax credit for first time home buyers. The House passed the $819 billion stimulus plan, including this tax credit, in a vote late Wednesday. The Senate may vote on its version of the bill some time next week.

Many in the housing industry believe this credit could do a lot to jump start the moribund housing market.

"Our economists have studied the effect [of the credit] and they say there could be a 10% increase in home sales if it's implemented," said Mary Trupo, a spokeswoman for the National Association of Realtors. "It gives people who are sitting on the fence or who have inadequate funds for closing costs an incentive to act now."

A 10% increase would yield an extra half million sales this year.

Who qualifies

To be eligible, buyers cannot have owned a home for the past three years, and the new home has to be used as a primary residence. The credit phases out as income rises above $75,000 for singles and $150,000 for couples, and disappears entirely at $95,000 and $170,000, respectively.

Applying for it is easy, or at least as easy as doing your income taxes. Just claim it on your return. That's it. No other forms or papers have to be filed.

Both the Senate and the House versions of the new act remove the requirement that buyers repay the credit. The Senate bill applies retroactively to any purchase completed between January 1, 2009 and the end of August. The House version is also retroactive to the start of the year, and expires at the end of June. As long as buyers don't sell for at least 36 months, they keep the money.

And the credit is refundable, meaning that it can be claimed even if the amount of the credit earned exceeds the buyer's tax liability.So even if your total tax bill comes to just $5,000, you can still qualify for a full $7,500 refund.

The housing industry has been pushing this idea for many months, arguing that first-time homebuyers are the key to boosting home sales. First time buyers who purchase from existing homeowners free those sellers to trade up to bigger, better houses.

Buyers beware

But the credit has its drawbacks, according to Bob Williams, a spokesman for the Tax Policy Center, which gave it a mediocre C+ grade in its Tax Stimulus Report Card.

Williams argues that the credit is poorly targeted because it goes to every first-time buyer, not just the ones who wouldn't buy without it. So, it merely provides a windfall for many people who would have purchased anyway. (See correction, below).

And in the end, a $7,500 tax credit, regardless of the details, does nothing to address the issue that's holding most buyers back - the suspicion that prices are going to keep falling.

"As long as people are uncertain about what markets are going to do, this won't help much," said Williams. "It's not enough to change that."

The industry would like to make the tax credit stronger by making it available to all homebuyers, not just first-timers. And it's pushing to have the credit last through the end of the year, at least.

"By the time it's implemented," said Trupo, "there could be very few months left to act."

An earlier version of this story incorrectly stated that the tax credit for a home purchased in 2009 could only be taken off of 2009 taxes. However, homebuyers can choose to take the credit for 2008, according to the IRS. Even if they buy a home after they've filed their 2008 taxes, they can file an amended return.

ZERO Move-In Financing

2009-02-05T20:59:00.000-05:00

USDA Rural Development Guaranteed Housing loan program.

Property Eligibility

Income Eligibility

KEY PROGRAM FEATURES of USDA Rural Development Guaranteed Housing Loan Program:

• No Down Payment Required.

• No Minimum Cash Contribution Required from Borrower.

• No Monthly Mortgage Insurance…just 2% Guarantee Fee for Purchase

• No Cash Reserve Requirement.

• No Stated Maximum Loan Amount; maximum loan based on repayment ability.

• Qualifying ratios of 29%/41%. Ratios may be exceeded to accommodate qualifying borrowers if compensating factors exist.

• Ratios can be exceeded up to 2% on energy efficient NEW and EXISTING homes meeting requirements of the 2000 International Energy Conservation Code.

• 2/1 Temporary Interest Rate Buydowns Allowed

• Loan up to 102%* of appraised value allowed…not the lesser of Sale Price or Appraisal. Difference of contract and appraised value can be used to finance closing costs, prepaids and required repairs. In addition, the guarantee fee paid by borrower can be added above the appraised value.

• Eligible Repairs/Rehabilitation can added to loan amount and completed after closing with the set-up of a repair escrow account.

• No First Time Homebuyer Requirement.

• New and Existing Singe Family One Unit Homes OK.

• Liberal Acreage Allowance.

• Fully Amortized 30-year Fixed Rate Loan.

• No Prepayment Penalty.

• No Seller Contribution Limit.**

• No Limitation on Source of Funds for Closing Costs. No seasoning requirement.

• 100% Gifted Closing Cost or Down Payment/Closing Cost Assistance is permitted.

• No limit on CLTV when soft second financing such as SHIPP or HOME is used for closing costs and prepaids.

• Non-traditional credit may substitute for lack of traditional credit history.

• Streamline documentation available for applicants with a 620 credit score or higher. Borrowers with a 620 mid-score or higher get an automatic "Credit Waiver" from RD and borrower does not need to explain derogatory credit and no rental verification is required. ***

• No minimum credit score required however extraordinary compensating factors must be present to warrant loan approval for applicants with FICO scores of 580 and below.

*Appraisal may be exceeded by amount of Guarantee Fee paid by the borrower.

**Some lenders have a 6% seller contribution as an internal policy. RD requires fees charged to borrower to be reasonable and customary. In addition, all fees and charges are and subject to State, Federal and lender requirements.

*** Exception: Any applicant with delinquent Federal debts, regardless of credit risk score and any applicant with an unsatisfactory payment history on a previous Rural Development loan, regardless of credit risk score. Subject also to lender approval.

For general information purposes only. Loan approval subject to Lender underwriting guidelines and RD regulations 1980-D and applicable ANs.