Real Estate Market Watch June 2011
I have some news and observations this month that I think you will find interesting. On the national front, housing affordability has reached an all-time high. This calculation, released by Wells Fargo and The National Association of Home Builders, says that 74.6% of all homes sold in the first quarter of 2011 were affordable for families earning the national median income of $64,400. This is the highest level in the 20 years this data has been tracked. The two driving factors in this calculation are the price of homes and interest rates–both of which are at historically low levels. In fact, according to Corelogic, national home prices have declined 33.8% from their peak. Keep in mind, that is a nationwide statistic.
Locally, home values never declined that much. From our peak average annual sale price of $129,421 in 2006, prices have only declined 5% based on the January-May 2011 time period. Average sale price for the first 5 months of this year is $122,939 and has increased from 2009 to 2010 and again so far this year. Prices in our area have stabilized and are on the rise.
Homes may never be more affordable. Contrary to popular opinion, there are not too many homes currently on the market in our area. Based on May sales, we only have 8.04 month’s supply of homes currently listed. That is lower than the average annual month’s supply for every year from 2007-2010. There are almost 1000 fewer homes currently listed than there were at our peak in September of 2007. In fact, I’ve heard several buyers mention that there aren’t enough potential homes to see.
Evansville Home Show–Save the Date
Looking for good ways to make your boring house into your dream home? Thinking about sprucing up the yard or preparing for summer with a hot tub? Desperate for do-it-yourself tips and tricks? The 64th Annual Heritage Federal Credit Union Home Show has all this and more at Roberts Stadium on April 1st through the 3rd.
Features include:
Don’t miss this!
Sunday at 1:00 PM – Staging Your Home to Sell! presented by Terry Haas, Real Estate Expert, Home Staging Consultant and featured agent of HGTV’s Designed to Sell sponsored by F.C. Tucker Emge Realtors
– 200+ Indoor & Outdoor Displays
– 15,000+ Attendees
– Two Stages
– Live Demonstrations and Presentations from Local and National Experts
– Thousands of Dollars in Home Show Sweepstakes Giveaways
– Information and Specials from Exhibitors
– The Children’s Pavilion
– And more!
Here is the schedule of events.
Taking Steps toward Refinancing a Rental Property
By Ilyce R. Glink and Samuel J. Tamkin
Saturday, July 31, 2010
I have a rental property that I bought five years ago for $170,000 but now is valued at $120,000. I have a mortgage at 6.75 percent with about $45,000 in equity on the property. I am not in financial difficulty, but I would like to take advantage of low interest rates. Is it possible to refinance my rental home? If so, any tips would be appreciated.
You should be able to refinance a single-family rental property as long as you have at least 25 percent equity in the house and have a credit score of at least 700.
Fannie Mae and Freddie Mac are both refinancing rental properties, and although Fannie Mae will allow you to own as many as 10 properties, most lenders will let you own only four, including the one you live in.
But don’t expect to get an interest rate in the 4 percent range. You might get something at 5 to 5.5 percent range — which is still a lot less than what you’re paying. And although Fannie and Freddie are buying residential rental property mortgages, not every lender is doing them. So you’ll have to start shopping around to find a lender who can help you.
I’m not particularly knowledgeable about many financial ventures, but I want to understand whether I can help a friend who has a house and owes more than the property is worth. He took out a second mortgage, ran up his credit cards and has several liens against the property.
His ex-wife was in bankruptcy before they got together. Now his home of 34 years might be pulled away from him. He has severe credit problems and is not old enough for a reverse mortgage. Are there any programs that might help him save his home? What would happen if I paid him for half of his house?
It’s clear that you are a thoughtful and generous person, and your friend is lucky to have you in his life. However, what you’re proposing could easily destroy your financial stability, so you’ll want to take every precaution to protect yourself.
Start by speaking with a knowledgeable real estate attorney who can help you look much further into your friend’s investments, debts, homeownership problems and so forth. It’s great that you want to help, but you don’t know what kind of financial quicksand you might be stepping into, and you need to make sure you help in a way that doesn’t wind up hurting you. I can’t recommend that you extend any help until you have a very clear picture of what your friend is facing financially.
Before putting one dime toward this problem, invite your friend to review the situation with you and your attorney. Try to figure out why he is in so much debt, how far underwater the house is and what options and opportunities exist to help him out.
See if he has any other assets, and discuss when and how he might pay back a loan from you. Focus on what kind of deal you can make for your dollars — one that ensures you will get back every cent you invest if you decide to do that. Whether you choose to give your friend a gift to help him out of his problems is your choice. But if you expect repayment, you need to know more, and you need to have a discussion about your expectations for repayment in the future.
If your friend can’t — or won’t — share every detail about his finances, including who owns what and who charged up the liabilities he and his ex-wife now owe, then you should offer moral support, point him in the direction of the nearest HUD housing counselor (888-995-HOPE) and keep your dollars in your pocket.
There are programs out there to assist homeowners struggling to make their mortgage payments. The federal Home Affordable Modification Plan (HAMP) is an effort to assist homeowners, but it has fallen short of expectations, and few homeowners are actually benefiting long-term. Some mortgage lenders have their own plans to help borrowers, and your friend should call his lender first. In addition, if your friend has the stomach for it, he can call his credit card lenders and work out a payment plan with them, but he’d have to stop charging more items on his credit cards.
Your friend might want to talk to a counselor at Credability.com (formerly Consumer Credit Counseling Center of Greater Atlanta) or another reputable credit counseling center officer to work through the various options that might be available to him.
I have a 30-year fixed-rate mortgage that I took out in 2003. Until recently, I was paying a few hundred dollars extra each month toward the principal balance. I think I have about 16.5 years left on it, and my balance now is about $106,000.
I’d love to take advantage of historically low rates, but I think I waited too long to make a move. If I refinanced to a 15-year loan now, I guess I’d only cut off a year or so, and I think my payment would be about the same. Any thoughts?
If you cut a year or two from your mortgage, you’ll still save thousands in interest. You might also give yourself more of a tax deduction in the next few years. I think it might be worth doing, but you have to do the numbers.
You should be able to refinance a 15-year loan at about 4 percent (as of late July). That is probably quite a bit lower than what you’re paying now.
In 2003, your interest rate was probably in the high 5 percent range. If the payments are the same, you’re still saving 18 months’ worth of payments, so the trick will be to keep your closing costs as low as possible. If the payments are less than what you’re paying now, you can add them in and shave even more time from the loan term.
But you’re right: If you save, it might not be by all that much. But you won’t know for sure until you run the numbers. Note also that if you refinance, you’ll have the pressure to make at least the same payment, so if times get a bit tougher for you, that could be a problem as well. Pull out the pad and paper or go to the computer and work out the numbers.
You might also want to sit down with a good mortgage lender or mortgage broker and see what your savings might be and what it would cost you to refinance.
Disney Unveils Unique Residential Resort Community at Walt Disney World
RISMEDIA, June 24, 2010–Disney unveiled Golden Oak, a one-of-a-kind luxury residential resort community offering the unprecedented opportunity to purchase a home at Walt Disney World Resort in Florida. Especially designed for resort living, Golden Oak will provide an entirely new way for families to connect with the world’s best known family destination and entertainment brand.
"We have a range of options for Guests at all price points to enjoy the Walt Disney World Resort. But Golden Oak is something totally new: a residential resort community, right in the heart of the magic," said Matt Kelly, vice president, Disney Resort Real Estate Development. "Golden Oak will be a place where families can come together and make memories for generations to come–with Disney World right at their doorstep."
Golden Oak will offer a limited collection of single family custom homes priced between $1.5 and $8 million, with fewer than 30 home sites available for sale this year. Designed by Disney’s famed Imagineers, the gated community will feature intimate neighborhoods and amenities created with everyone in the family in mind. Disney’s well-known attention to detail is visible in every park, pathway and the custom-design of the proposed private clubhouse. Expansive conservation areas comprise almost half of the entire 980 acre footprint.
The proposed private clubhouse, concierge services and collection of Walt Disney World Resort benefits will bring Disney’s guest service culture directly to Golden Oak residents. As previously announced, Golden Oak is planned to include Four Seasons Resort Orlando at Walt Disney World Resort, combining Disney’s renowned service and hospitality with Four Seasons’ defining standard of excellence. Golden Oak plans to offer residents access to select Four Seasons’ future amenities including the full service spa, restaurants, golf course and event space.
Initially, Golden Oak will consist of three types of single family homes. Village Homes will capture the romantic look of a Mediterranean village on home sites up to one-quarter acre. Estate Homes, on approximately one-half acre home sites, will offer a variety of architectural styles including Tuscan, Spanish Revival, Venetian, Italianate, Dutch Colonial and Island Colonial. At up to three-quarters acre in size, Grand Estate Homes will include architectural styles consistent with Estate Homes and will accommodate the needs of large families. Homeowners will use one of Golden Oak’s select custom homebuilders to build the home of their dreams.
Tap free money to pay for energy upgrades
By Amy Hoak, MarketWatch
Homeowners have until the end of the year to make improvements that qualify for a federal energy-efficiency tax credit, including insulation upgrades and heating and air-conditioning equipment.
That isn’t to say incentives for home energy efficiency will go away for good. There are efforts under way in Washington to extend the credit, and a separate bill slowly working through Congress would provide similar and possibly bigger breaks.
Plus, there are the numerous local incentives for which homeowners might be eligible, sometimes through utility companies, and the state-run programs for Energy Star appliance rebates, funded by federal dollars but administered locally.
Here’s what homeowners need to know about finding some financial help for home energy-efficiency upgrades:
Federal tax credits
Eligible upgrades for a federal tax credit include insulation, windows and doors, roofs, heating, ventilating and air conditioning systems, water heaters and biomass stoves. The credit is worth 30% of the costs, up to a maximum $1,500 total for all improvements. Installation costs for windows and doors, roofs and insulation aren’t eligible, however.
To qualify, materials have to meet certain energy-efficiency standards. Also, the improvements must be made to an existing home and it must be the homeowner’s principal residence. Rental homes don’t qualify.
Separately, a tax credit is also available for more advanced energy improvements, including solar panels and wind turbines. This credit is worth 30% of your costs, with no cap, and doesn’t expire until the end of 2016.
These federal tax credits are nonrefundable. That means they reduce your tax bill dollar-for-dollar, but you won’t receive any money back if you don’t owe any federal income tax. For some of the more advanced energy improvements, the credit can be carried forward to future years. For more information, go to EnergyStar.gov and search for "tax credits." Read more at Energy Star’s website.
It’s important to do improvements in the proper order to get the most for your money, said Ronnie Kweller, spokeswoman for the Alliance to Save Energy, an advocate for energy-efficiency policies.
"The first thing we recommend: Seal up and properly insulate the house. No matter how efficient your equipment is, if you’re sending warmed or cooled air out the window, or cracks around the window, you’re not going to be ahead," Kweller said.
Addressing insulation problems first might save you money on your next project, said Matt Golden, president and founder of Recurve, a San Francisco-based home-performance company. For example, sometimes a smaller furnace is all you need once the building’s envelope is sealed properly.
Look locally
Despite the emphasis on federal tax credits, many incentives are available at the local level, said Gary Nieman, vice president of government policy initiatives for Owens Corning, a producer of building materials. Utility companies will sometimes offer financial assistance for home-energy audits, for example, and many state and local communities offer help on energy-efficiency upgrades.
To get a handle on what help is available near you, Golden recommends visiting the Database of State Incentives for Renewables and Efficiency at DSIREusa.org. Visit the database.
For instance, in Illinois, if Nicor Gas is your provider, energy-efficient heating products purchased and installed before May 31, 2011 are eligible for rebates. In South Carolina, Duke Energy Carolinas electric residential retail customers can qualify for rebates on certain heat pumps and air conditioners.
States also are handling disbursement of the $300 million stimulus funds for energy-efficient appliances. The program has been popular — in some areas funding has already run out. Visit EnergySavers.gov for a list of state programs.
More to come
Energy-efficiency advocates are lobbying for an extension of the current federal tax credit set to expire at the end of the year. But pending legislation on the proposed "Home Star" program would provide even more help for homeowners and create jobs.
Two types of rebates would be available under that program. Silver Star rebates would offer 50% off on specific improvements including insulation, duct sealing, windows and doors, and water heaters, of up to a combined $3,000 per home. Gold Star rebates are for more comprehensive work, rewarding homeowners who do an energy audit and implement a full set of measures to reduce energy; those homeowners could receive up to $8,000 by achieving a certain level of home efficiency, if the Home Star program is approved.
"Home Star is designed first and foremost as a jobs bill," focused on putting Americans to work by retrofitting existing homes, Recurve’s Golden said. But Home Star also encourages consumers to think about their home’s total performance as opposed to a patchwork of purchases to improve efficiency, he said.
For the foreseeable future, chances are good that something will be offered by government or utilities to help consumers shoulder the cost of energy-efficiency home improvements, Nieman said. After all, he said, these subsidies are in municipalities’ and utilities’ best interest: If homeowners conserve, it reduces the need to build more power plants to keep up with demand.
Senate Approves Extension for Homebuyer Tax Credit
The Senate approved a plan to give those already in a contract to purchase a home an extra three months to take advantage of the Federal Home Buyers tax credits.
The extension gives the current buyers in contract until September 30 2010 to complete their purchases and qualify for tax credits up to $8000. The current terms stated that buyers had until April 30 to get a signed sales contract and until June 30 to complete the closing process.
The proposal was approved by a 60-37 vote but only applies to consumers who already have signed contract to finish at a later date. Approximately about 180,000 future buyers who already had signed the purchase agreements would have missed out on the tax credit because of not closing on the original deadline.
Hurry up and close to get home-buyer tax credit
By Amy Hoak, MarketWatch
CHICAGO (MarketWatch) — The next few weeks are crucial for home buyers, who need to close a purchase by the end of June to claim the federal home-buyer tax credit. A hiccup during the next month could cost a buyer thousands of dollars.
“If for some unforeseen reason you end up closing on July 1, you lose out on the tax credit,” said John T. Walsh, president of Total Mortgage Services in Milford, Conn.
“Any number of delays could push it past June 30. It’s not uncommon for purchases to take 75 to 90 days to settle,” said Timothy M. Dwyer, president of Entitle Direct, a title insurance company.
Delays often happen due to issues with buyers’ mortgage approvals, but problems on a seller’s side may also create a hold-up. To minimize the impact of any surprises, buyers should schedule a closing at least a week before the deadline, experts say, and keep the lines of communication open with all professionals working to get the sale finalized. Make sure everyone involved knows there’s a tax credit at stake, so all parties understand that time is of the essence.
Also, keep in mind that in recent weeks low mortgage rates created somewhat of a “mini refinance boom,” Walsh said.
Loans for borrowers who qualify for the tax credit are generally taking priority over other mortgage applications, he said. But with a large volume of loans moving through the pipeline, it’s likely that any mortgage will take longer to process — and potentially delay a closing.
But don’t panic. Below are tips to make sure you get to the closing table on time.
Be proactive
Being preapproved for a mortgage doesn’t mean you’re guaranteed to get the loan, Dwyer said. It’s only an indication that the bank — based on your basic financial information, the value of the home and the size of the loan — would likely fund a loan of that type, he said. There are a lot of steps before you get the green light, and often there is extra documentation required from the borrower at crunch time.
“Get all the information to the lender as quickly as possible,” Dwyer said.
Joseph W. Rand, managing partner with Better Homes and Gardens Rand Realty in New City, N.Y., suggested taking the initiative: Ask the lender or broker what they anticipate needing, based on their experience with past loans. That way, you’re prepared to turn in whatever is needed as soon as you’re asked for it.
Some requests might not be obvious, including copies of pay stubs from a former employer if you recently switched jobs or a letter from a creditor to ensure you paid a debt in question, he said.
“The general idea is to sit down with the lender or give a call and say: ‘What conceivably might you need from me in the next month to get this thing cleared to close?’ ” Rand said.
Make sure to follow up with the lender periodically as you head toward the closing date, Dwyer said.
And don’t forget about the other supporting characters in the closing process: Depending on local custom, that could be a real-estate attorney, escrow agent or settlement agent. Be in contact with them, or make sure your real-estate agent is, to ensure everything is running smoothly.
Keep the seller on track, too
Sellers also have tasks to complete prior to closing, but they don’t have the financial incentives buyers do to get the deal closed before the tax-credit deadline. So make sure they understand the urgency in getting necessary tasks completed.
Typical delay-causing events on the seller’s side could include title problems or certificate-of-occupancy issues, Rand said. Buyers who are having an attorney review the title report should ask their lawyer to look at it as soon as possible after receiving it.
“They need to make sure there’s nothing that might delay the closing,” he said.
Some of the biggest issues will be property violations, he said, examples of which could include noncompliance with zoning codes or building permits that were never closed when work was done on the house.
Remember, too, that if the seller can’t move before June 30, that doesn’t necessarily prevent the closing from happening before that date. After the sale is finalized, the buyer can lease back the home to the seller for a short amount of time, Dwyer said.
“Close the transaction in June and allow the seller to live in the house for a couple of weeks. Everyone wins,” he said.
Just don’t forget to put that temporary rental agreement in writing.
Create a time buffer
Above all, schedule the closing far enough before the deadline so that, if there are delays, you can deal with them and still close on time.
“For God’s sake, don’t schedule it for June 29,” Dwyer said. He suggested scheduling a closing for June 21 at the latest.
Walsh agreed, suggesting even a two-week time buffer if possible, just in case.
“It’s going to be crunch time at the end of June. I would suspect that there will be people who aren’t going to close on June 30 who have every intention of closing on June 30,” he said. “Prepare in advance, just in case there is a hiccup.”
Fannie Mae wants $8.4 billion more in federal aid
By Mark Trumbull, Staff writer / May 10, 2010
One of America’s mortgage-market linchpins, Fannie Mae, announced a deep quarterly loss Monday and sought additional support from the federal government.
The loss of $11.5 billion for the first quarter of 2010 is a sign that troubles in the US housing markets continue – and a reminder that Congress still needs to sort out the future of the troubled "government sponsored enterprises" like Fannie Mae.
Fannie and its sibling organization, Freddie Mac, own or guarantee a large share of US mortgage loans. The question for the future is whether – or how – they can do that without putting US taxpayers at risk during market downturns.
Treasury Secretary Tim Geithner recently acknowledged the dilemma – and that the Obama administration has not yet proposed a solution.
"The housing finance system clearly cannot continue to operate as it has in the past," he told the House Financial Services Committee in March. But "designing and implementing practical solutions … will not be simple."
Many housing-policy experts say it’s useful to have some system that ensures the flow of financing in mortgage markets, to a reduce the risk of downward spirals in a market that’s central to the net worth of American families. Fannie and Freddie currently serve that function, but in doing so they take big risks that came home to roost in 2008.
Both corporations essentially failed and were taken into a government conservatorship. Taxpayers are paying a price, as the Treasury pumps in money to make sure that losses don’t push Fannie and Freddie into a position of negative net worth.
Along with announcing its quarterly loss, Fannie Mae said Monday that it was calling for $8.4 billion in support from the Treasury, because of its first-quarter performance resulted in a net-worth deficit. The news organization ProPublica, in its running tally of federal bailouts, currently puts total government aid for Fannie and Freddie at $144.9 billion since the conservatorship.
Fannie’s first-quarter loss this year was smaller than in the same period of 2009, when the firm lost $15.2 billion. And Monday’s report comes amid some positive signs for the housing market. The credit agency Transunion reported a small decline in mortgage delinquencies during the first quarter.
The stronger the economy gets, with an improving job market, the fewer people are likely to default on their mortgages. Still, many hard-hit metro areas still have a large number of current or expected foreclosures.
What can be done to improve the health of the housing markets – and of the finance system that now relies so heavily on Fannie and Freddie?
Three leading options are:
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Reconstitute the firms. Make them essentially as they were before 2008 (a hybrid of shareholder ownership with a congressionally mandated mission to support the home-loan market), but with tighter oversight and perhaps backstopping from private mortgage firms that benefit from the services provided by Fannie and Freddie. The problem: We’ve just seen that a hybrid public-private identity can work badly.
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Nationalize them. Turn them into government-owned corporations, with tighter oversight of their risks and capital cushions. The problem: This would mean putting trillions of dollars in debt they carry officially on the federal balance sheet. If problems keep cropping up, taxpayers are on the hook.
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Shrink or eliminate them. This option, favored by many conservatives, would seek to create a housing market much less reliant on loans that are bought or backed by Fannie or Freddie. One idea is to break them into smaller pieces, and have them gradually withdraw to a smaller role. The problem: In times of financial crisis, mortgage lending can dry up without government financing or guarantees (as occurred in 2008).
"There is significant reason to question the capacity of private banks to support mortgage markets in times of financial distress without government support," Congress’s government accountability office said in a 2009 report.
But adding loads of new debt onto the federal balance sheet could take America a step closer to a possible Greece-style debt crisis.
"The federal debt stands at $8 trillion. But the Fannie Mae, Freddie Mac, and Federal Home Loan Bank debt stands at $8 trillion as well," Anthony Sanders, a real estate expert from George Mason University, told the recent House hearing. Together, those debts are greater than a year’s gross domestic product, which he called a “Grecian Formula” of debt issuance to fund housing goals.
A solution to the thorny problem of housing-market finance is notably absent from the financial reform bill now working its way through Congress.
Tree Houses–Not Just for Kids!
CNET
Tree houses aren’t just for kids anymore. They are used increasingly as primary residences, vacation getaways, and meditation retreats.
Homes perched high in a forest canopy or woven from the very branches of trees take ecofriendly building to the extreme. Future-forward designers are concocting tree houses that live and “breathe,” such as the Fab Tree Hab. It uses high-tech computer modeling and ancient techniques such as pleaching, which weaves together living branches and trunks to create walls and ceilings.
“Most folks that contact us are not looking for a product that is ‘environmentally friendly,'” explained Mitchell Joachim, an architect at the Smart Cities group of the MIT Media Lab. “Instead they want a product that is the environment. “
How to Avoid a Real Estate Investing Overdose
BOSTON (AP) — Are you overexposed to real estate?
It’s a question worth asking if you’re among the legions of homebuyers contributing to a turnaround in home sales.
That’s not to say that real estate prices are overvalued. There’s still a long road to recovery.
A government index of home prices, released Thursday, declined 0.2 percent in February, the third straight monthly drop. Nationally, the median sales price in March of $170,700, was nearly unchanged from a year earlier, according to the National Association of Realtors.
Real estate can play an important role in your overall investment strategy whether you’re a homeowner or a renter. That’s because real estate investments tend to move up and down at different speeds, and at different times. Such diversification helps to limit the overall volatility of your portfolio.
HOW TO INVEST: There are three major ways investors can own a stake in real estate: direct ownership, real estate mutual funds, and real estate investment trusts. (more…)
Existing-Home Sales Rise on Home Buyer Tax Credit and Favorable Market Conditions
RISMEDIA, April 23, 2010—Buyers responding to the home buyer tax credit and favorable affordability conditions boosted existing-home sales in March 2010, marking the beginning of an expected spring surge, according to the National Association of Realtors.
Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, rose 6.8% to a seasonally adjusted annual rate of 5.35 million units in March from 5.01 million in February, and are 16.1% above the 4.61 million-unit level in March 2009.
Lawrence Yun, NAR chief economist, said it is encouraging to see a broad home sales recovery in nearly every part of the country, with two important underlying trends. “Sales have been above year-ago levels for nine straight months, and inventory has trended down from year-ago levels for 20 months running,” he said. “The home buyer tax credit has been a resounding success as these underlying trends point to a broad stabilization in home prices. This is preserving perhaps $1 trillion in largely middle class housing wealth that may have been wiped out without the housing stimulus measure.” (more…)
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