One of the biggest challenges to a housing recovery is the current rate of unemployment. It is obvious that a person without a job can’t get a mortgage. An additional impact is that many people who are currently employed are afraid to commit to buying a home because of the uncertainty of the job they do have.
It is easy to understand their concern when you read the Bureau of Labor Statistics news release on 2009 unemployment which was released March 3. In the report, it was stated:
All 50 states and the District of Columbia posted statistically significant unemployment rate increases in 2009.
If we look at the unemployment rate by county over the last four years, we see a very unsettling story. Below is a visual depiction of the increase. The darker the area the higher the unemployment rate.
[Read full article...]
Whenever you are selling anything, it helps to have an idea what your customer is thinking. I had the opportunity to attend a session at the Luxury Portfolio Summit in Las Vegas which covered the findings of the Survey of Affluence and Wealth in America 2010 produced by American Express Publishing and the Harrison Group. Below are the highlights of the report which we received in the program for the event.
If you are selling a home in the upper price ranges in your region, you should find the following statistics rather interesting.
How do the wealthy feel?
- 70% still say their economic security has been affected and one-quarter are worried about losing their job or company.
- Confidence in political and business leaders remains very low.
- The savings bubble persists.
- Desire for “value” and budgeting are mantras, but NOT at the expense of quality.
[Read full article...]
There has been an improvement in the interest rates available for Jumbo Mortgages, and that is encouraging news. In addition, some lenders are even lowering the amount of down payment required in the Jumbo loan programs- which is even more good news.
Let’s begin with some basics.
Jumbo mortgages are those mortgages which exceed the Fannie Mae/Freddie Mac acceptable loan amounts (referred to as conforming loan amounts). Those thresholds are determined annually on a county-by-county basis based on average sales prices of homes and the number of units in the home. Where I come from (Long Island, NY) is considered a “high-cost area”, which allows us to close Conforming Loans on a one-family home up to $729,750. Any mortgage, above that $729,750 limit, is classified as Jumbo.
Now let’s talk a little history.
There was a time in the Mortgage World that we refer to as “B.S.” (Before Subprime). In that world, there was a .25% to .375% higher interest rate on Jumbo Mortgages. That additional rate was the result of two factors- risk and supply.
[Read full article...]
We all know that if you want to keep current on what’s going on in anything, you need to stay on top of what is being published by the people in that field. That is why every weekend we bring together all the articles (from a myriad of sources) together in order to keep people current on the real estate market. We’ve also broken down our articles into categories so that you can more easily find specific topics you are looking for!
Below are 27 real estate articles (not including our own) from the past week to help you navigate this complex market. So grab a seat, scroll down a little bit, and start reading some of the articles that are most appealing to you! (We’ve even provided you with a reading buddy to keep you company.) Enjoy!
[Read full article...]
Here is Part 2 of Skip Schenker’s two part series on understanding the FHA 203(k) and its real value. In case you missed yesterday’s, here is a link to Part 1.
How Is the Appraisal Completed?
The appraiser is given a detailed report from either a licensed contractor [for the “Streamline” 203(k)]; or from an FHA 203(k) Consultant [For the “Standard” 203(k)]. This Bid/Report details the scope of work that will be financed into the loan. The appraiser visits the home and uses the scope of work report as his “rose colored glasses” and appraises the home under a “hypothetical assumption that the work has been completed”. Thus the home is appraised “As-Repaired” even though the work has not been completed nor is it required to be completed until after the transaction closes and will be completed by the buyer thru his contractor.
Financing at 110% of the “Repaired Value”
Yes, it’s true. Let’s use yesterday’s example; if the home is sold for $200,000 and the buyer’s acquisition cost is $258,000 including the renovation account. If the home is appraised “As Repaired” at $235,000, this transaction will close because 110% of $235,000 is $258,500 and the acquisition cost is $258,000 which is less than 110%. FHA will insure this loan and the transaction will close (some lenders have underwriting overlays and will only fund loans at 100% of the “repaired value”). The FHA 203(k) can keep transactions together and eliminate the seller from having to make price reductions at the eleventh hour to keep the buyer from walking because the value did not come in.
[Read full article...]
Many readers have requested a post on the FHA 203k program. I was lucky to meet Skip Schenker, a national expert and instructor on the subject, while we were both speaking at a conference in Dallas last month. I asked him to share some of his thoughts. Here is his contribution. - Steve Harney
The FHA 203(k) Renovation loan may be the most important, least known, and underutilized government loan that could save the Real Estate market in 2010 and Beyond…
The Perfect Storm
Over 2 million homes were foreclosed in 2009 and more are expected this year. Property values have declined significantly, and many economists expect property values to continue to decline into 2011. Many of these homes have not been maintained nor updated and have old or antiquated electrical, plumbing systems, heating, roof, insulation, windows, doors, appliances, etc.
Cash-strapped homeowners losing their homes convert their updated air conditioners, heaters, cabinets, countertops, doors and appliances into much needed cash by selling them on eBay, Craigslist or at garage sales; Vacant homes get vandalized for any remaining valuable items like copper wiring, plumbing, light fixtures, and switches.
[Read full article...]
Banks Trying to Put the Pieces Together
Often I get asked why banks are not foreclosing on borrowers even after they do not make mortgage payments for many months. Actually, the answer is quite logical. To fully appreciate the banks position we must understand that the current housing market is like a Rubik’s cube. Every action the bank takes creates a challenge on the other side of this real estate puzzle.
The banks have no thirst for vacant properties for two reasons:
1.) Once they take ownership of the house through foreclosure they become liable for the property.
In many cases it is easier to hold off the foreclosure process and let the borrower continue maintaining and ‘house-sitting’ the property.
2.) The banks realize that an empty house impacts the value of other homes in the area.
Banks have mortgages on many of these surrounding properties. If value is affected, there is a greater chance that those borrowers will stop making mortgage payments.
[Read full article...]
Yesterday I posted on the latest Negative Equity Report from First American Core Logic. In that post, I quoted the report as saying that one of the ramifications of negative equity is that it is:
a major factor in changing homeowners’ default behavior.
That change in behavior could take on many different forms. One of the most alarming is the concept of ‘walking away’. By that I mean the borrower just decides to no longer make mortgage payments whether they have the financial where-with-all to pay or not. We have posted on this before.
In those posts, we followed the evolution of the concept from its beginnings in the blog-o-sphere, to the creation of a web site (www.YouWalkAway.com), to the main street media covering the issue. We then reported on how a law professor at the University of Arizona wrote a paper supporting the idea.
[Read full article...]
Can you throw one to my house?
First American Core Logic just released their Fourth Quarter 2009 Negative Equity Data Report last week. Negative equity, often referred to as “underwater” or “upside down,” means that borrowers owe more on their mortgage than their homes are worth. The reason this report is so important is that studies have shown that there is a direct correlation between a home losing equity and its chances of winding up a distressed property (foreclosure or short sale).The report itself states:
Negative equity is a significant drag on both the housing market and on economic growth. It is driving foreclosures and decreasing mobility for millions of homeowners.
Why does negative equity lead to foreclosures?
Simply explained, once borrowers see their house fall into the situation where the mortgage is higher than the value of the home, they think differently about paying said mortgage. From the report:
The rise in negative equity is closely tied to increases in pre‐foreclosure activity and is a major factor in changing homeowners’ default behavior.
Below is a graph showing that as the home continues to lose equity the percentage of pre-foreclosure activity raises dramatically.
[Read full article...]
Hey there KCM Community!
Here are the 41 articles we posted (or should have posted) from the past week. Let us know if we left any good ones out! Just post them in the comments section below. Enjoy the rest of your weekend, and remember– keep sharing good information!
Here for you,
The KCM Crew
[Read full article...]
