Tuesday, May 30, 2006


Assistance organizations stripped of tax-exempt status

A new ruling denying home seller-funded down-payment-assistance organizations tax-exempt status is a good idea or a threat to home buyers, depending on whom you talk to.

The Internal Revenue Service ruled May 4 that such organizations do not qualify as tax-exempt charities. The programs, such as those at Nehemiah Corp. and AmeriDream, provide cash assistance to home buyers who can't afford down payments and closing costs.

Typically, the gifts range from 2 percent to 5 percent of the purchase price, and home buyers aren't required to repay the money.

These programs have been credited with helping to boost home-ownership rates, but have come under fire after government-issued reports found that such programs have led to underwriting problems and have increased the cost of home ownership.

Such programs can qualify as tax-exempt charitable and educational organizations under Internal Revenue Code section 501(c)(3) when properly structured and operated. In its May 4 ruling, the IRS makes it clear that seller-funded programs are not charities because they do not meet the code requirements.

"We helped about 18,000 individuals and families become homeowners in 2005. We have helped 175,000 homeowners since AmeriDream was founded in 1999," said Ann Ashburn, president and CEO of Gaithersburg, Md.-based AmeriDream. "It (the ruling) could make it impossible for us to continue to make those gifts."

Or, AmeriDream's president said, the ruling might require the organization to request funding.

"Last year we put out $75 million. So the question is, is the government willing to continue home ownership and fund it at a cost of $75 million a year for AmeriDream? If you take the entire industry, it's over $500 million dollars annually, half a billion dollars annually that nonprofits put into the economy to continue home ownership," Ashburn said.

Nehemiah Corp. of America, a down-payment-assistance organization launched in 2000, said in May that it was studying and evaluating the new IRS ruling. "We are disappointed that a program that has been granted tax-exempt status for more than nine years and has served hundreds of thousands of Americans would have this tax exemption arbitrarily threatened in this fashion. We intend to contest the IRS opinion," the company said in a statement.

The Nehemiah program has provided more than $825 million in gift funds to more than 212,000 families in 8,500 cities nationwide, the organization said. Also, the Nehemiah Community Reinvestment Fund has generated more than $57 million in investment and lending capital, and funded projects have a total development cost of more than $550 million.

"It is important to note that Nehemiah has not been sanctioned in any way by any regulatory agency and that Nehemiah continues to serve home buyers by delivering world-class down-payment assistance through the reputable Nehemiah Program," the organization said.

Addressing the background behind the IRS ruling, "There has been a tremendous effort to introduce a whole new segment of American society to home ownership," Mark Dotzour, chief economist at Texas A&M University's Real Estate Center, said. Dotzour said there used to be three barriers of entry for home ownership: lack of income, lack of down payment, and lack of quality credit rating.

"To attack the issue of home ownership and increase home ownership among minorities, creative loan programs have been offered in the last few years to allow people to buy homes," Dotzour said. "These down-payment-assistance programs were one way to address the barrier of not having a down payment."

If a down-payment-assistance organization is legitimate, more power to them, the economist said. But if a program isn't legitimate, the IRS is doing the right thing by helping to ensure it won't take advantage of consumers, in Dotzour's opinion.

"I would welcome this move by the IRS as an opportunity to continue to scrutinize the industry to protect both consumers and lending institutions," Dotzour said.

The Department of Housing and Urban Development refused to comment directly on the IRS ruling. However, a spokesman supplied a statement from the government agency on the topic of seller-funded down-payment-assistance programs.

The agency said, "HUD recognizes that loans with down-payment assistance from seller-funded nonprofit gift providers do not perform as well as loans to borrowers with no such assistance," in a statement.

Instead, HUD suggested that borrowers might benefit from financing through its Federal Housing Administration.

"The types of home buyers who rely on down-payment assistance could be well served by financing through the Federal Housing Administration (FHA). HUD recently proposed legislation that would make FHA financing more available to borrowers who have riskier financial profiles or have little cash for a down payment," the agency said.

"The legislation, introduced in the House of Representatives April 6, would provide safer, more affordable financing options for this type of borrower, as opposed to mortgage products that are risky and more costly," HUD said.

By Janis Mara
Inman News

Friday, May 26, 2006


Sales of existing homes fell 2% in April to a seasonally adjusted annual rate of 6.76 million, the National Association of Realtors said Thursday.

The decline was close to the 6.74 million expected by economists surveyed by MarketWatch.

Inventories rose by 5.8% to 3.38 million homes for sale, a 6-month supply at the April sales pace. It's the largest supply relative to sales since January 1998.

The median sales price rose 4.2% in the past year to $223,000, the lowest price gain since September 2001. Read the full release from NAR.

The housing market peaked in August, said David Lereah, chief economist for the real estate group. "This may be the bottom. It appears May is a little better."

Sales of existing homes are down 5.7% year-over-year.

On Wednesday, the Commerce Department said sales of new homes rose unexpectedly to 1.20 million in April.

"We are now experiencing normal market conditions across most of the country," said Thomas Stevens, a builder from Vienna, Va., who is president of the real estate group.

Half of the country is cooling and half is heating up, Lereah said. Florida, California and Arizona are cooling, with inventories building up and prices beginning to fall. On the other hand, markets in Texas, the Carolinas, Ohio, Utah and New Mexico are gaining momentum.

Lereah continued to predict a soft landing for housing, but cautioned that the market is at a "delicate juncture." His group is closely watching inventories in the rapidly cooling markets.
Condo sales fell 2.7% in April to a seasonally adjusted annual rate of 839,000. Sales of single-family homes dropped 2% to 5.92 million annualized.

The Federal Reserve is watching data such as the housing figures for signs that its 16 consecutive interest rate hikes are cooling the economy enough to whip inflation. The Fed is considering at least a pause in rate hikes at the June meeting. Markets and economists are giving odds of about 50-50 that the Fed will pause.

Housing is slowing because of rising mortgage rates and falling affordability. Mortgage rates averaged 6.51% in April, up from 6.32% in March and 6.25% in February.

Housing has been a major contributor to the U.S. economic expansion of the past four years. Ultra low interest rates fueled a housing boom that boosted construction and employment in real estate and mortgage banking. Consumers were able to tap hundreds of billions of dollars of home equity, allowing them to keep spending despite stagnant incomes.

By Rex Nutting From Marketwatch

Sunday, May 21, 2006


As expected, the Federal Reserve raised the federal funds rate -- the interest rate on overnight loans between banks -- by another quarter point to 5%, marking the 16th consecutive increase dating back to June 2004. The Fed indicated May 10th that further credit-tightening "will depend importantly on the evolution of the economic outlook."

Retail sales rose by 0.5% in April after a 0.6% advance in March, the Commerce Department reported May 11. The April increase was weaker than the 0.8% that Wall Street had been expecting. Excluding gasoline sales, retail sales rose 0.1% in April, an indication that the big price jump at the pump since early March was depressing demand for other consumer products.
The U.S trade deficit improved for the second straight month, something that hasn't happened in two years. The Commerce Department reported May 12 that the gap between what the country sells abroad and what it imports narrowed to $62 billion in March, a 5.5% improvement over February's $65.6 billion deficit.

For the week ending May 5, the Mortgage Bankers Association's index of applications to buy a home or refinance an existing loan declined 5.8% from 596.8 to 562.1, its lowest level since February. Rates on 30-year and 15-year fixed-rate mortgages, however, were slightly down for the week ending May 11, according to Freddie Mac.
(Courtesy of Louise Rose, ELB Mortgage Brokers)

Tuesday, May 16, 2006


A slower U.S. housing market means sellers can no longer bank on having their pick of offers for properties showing their age and the wear and tear of everyday living. Dressing up, or staging, a home with a thorough cleaning and decorator touches may be vital to luring increasingly fussy buyers.

Sellers work within a range of budgets as they prepare a property for sale, often from a few hundred to a few thousand dollars. Yet many critical fixes don't cost a dime.

"Walk through the house and remove all the clutter," says Rhonda Duffy, an agent for Rainmaker Realty in Atlanta. She reports four houses on the market for every one buyer in her area, plus slower activity in her firm's northern California, Washington D.C., and Florida offices.
"A living room should have a couch and chairs, a table, some plants and maybe a TV, not a 30-year life history," she says. "Clean out the closets and don't forget the garage."

Since similar houses that had routinely sold in weeks over the past few years may now be sitting on the market for several months, sellers are challenged over a longer time to keep their home free of the remnants of hectic family life.

At the least, agents recommend, stage the house for a series of high-quality photos to run on an Internet listing sight -- first impressions take on even greater importance these days. Then, keep copies of the photos accessible to would-be buyers as they walk through the house, says Duffy. Toys, piled-up mail and crowded countertops are likely to be forgiven if a buyer can see the home's full potential. Staging for photos can include moving a sofa away from a feature window and editing items on a fireplace mantel.

Personal items that will soon have to make the move to a new place anyway should be boxed up and stored ahead of opening the house to potential buyers. Sellers must try to distance themselves emotionally from the house as soon as the decision is made to list, says Fran Bailey, an agent with Baird & Warner in suburban Chicago. "Yes, the purpose of a home is to support a lifestyle. Now, it has another purpose and that is to sell itself," Bailey says.

Don't rid the home of its lamps, however. Plenty of light, including a small lamp on a kitchen counter, can go a long way to warm the place up. Made beds and emptied garbage cans should become second nature since sellers never know when they may have to show the place on little notice.

The few hundred dollars budgeted for the house sale might be best spent on storage rental or professional clutter removal -- out-of-commission appliances for instance -- in order to optimize square footage. For smaller homes, space is often a trick of the eye, says Lindsay Peroff, with 1800gotjunk.com, a junk-removal service operating in larger cities.

When to call the pros

Once personal items and extra furniture are out of the way, sellers may want to spend enough to hire professional cleaners, including someone to wash windows inside and out and to shampoo carpets. Pets shouldn't be around for showings and neither should their smell.

"This may seem simple, but you'd be surprised how many people don't do it," says David Henry, an agent with Coldwell Banker in Aptos, Calif., in Santa Cruz County. "Air the place out several hours a day, for several days."

Have pest, septic and mold inspections prior to investing in any upgrade projects, he says. Then, sellers can better prioritize upgrade ideas and budget accordingly.

Sellers hoping to keep their staging expenses lean and their family routine intact might focus on the exterior. Web-based listings may be key to generating early interest, but curb appeal is what's likely to get buyers to the front door.

Get rid of clutter and dead vegetation and add color with some new plantings. When possible, try to pick flowers that will bloom in time for showings, says Duffy. Remove broken and dated lawn features and fences -- and, says Duffy, tear out chain-link fences in any condition.

Inside, modest budgets stretch the most if spent on fresh paint, particularly for the entry and main rooms of the house. Cracked windowpanes, leaky faucets and other modest repairs deserve attention.

Agents and decorating professionals said budgets of several thousand dollars might be best used toward exterior panting, new landscaping and kitchen face-lifts.

Value rooms

It's no surprise that kitchens and bathrooms sell a home, so spiffing up these spaces, even for a few dollars, can go a long way toward boosting the asking price and generating interest.
Many people underestimate the low cost and high impact of swapping out cabinet hardware and faucets for updated styles, says Daryl Coley, who co-owns the Tulsa, Okla.-based franchise of national remodeling chain Kitchen Solvers.

He suggests that larger budgets go to countertop upgrades; solid surface materials such as granite, quartz and marble give a high-end feel. Even less-expensive choices, such as a laminate with a beveled front that runs $1,000 to $2,000 depending on footage, can give the overall room a fresher look. Floors should be considered next, he says. Those watching the bottom line might consider long-wearing laminate flooring as an alternative to hardwood or tile.

Gut kitchen renovations or even a few choice updates -- refaced cabinets, new floors and countertops -- can typically add $5,000 to $10,000 to the asking price depending on size and quality, says Coley. But sellers must keep in mind that new owners may have different taste; a few staging updates might prove more enticing to buyers than being stuck with an expensive renovation they don't like.

Dressing up

It's likely that a designer free of emotional investment in the property can better dress a home for the widest range of potential buyers. If the budget allows, a professional stager -- a growing field of certified and noncertified participants -- might ease seller anxiety; many agents, but not all, also consider staging a specialty.

Think twice before assuming you can stage on your own. Chicago designer Philip Popwici was called in to help sell a midrise Chicago apartment, on the market for nearly three months with little interest, that along with several similar two-bedroom, two-bath units in building, was about to have its Lake Michigan views compromised by new construction. Staging introduced to potential buyers the appeal of the apartment exclusive of its view. It sold long before any of the comparable properties, some of which had to be pulled off the market.

Popwici, owner of Rooms Redux, a staging company catering to a clientele of condo and town home owners, helped carve out a dining space in an open floor plan with furniture positioning, essentially adding a room within existing square footage. He recommends hanging a mirror to mimic a window in rooms lacking natural light. He says bathrooms and master bedrooms are a good place to use limited resources. A few touches, like rich window treatments and candles, can make these rooms feel like a retreat for potential buyers.

He too emphasizes a good edit of life's possessions.

Yet, while decluttered homes stand a better chance of selling, that doesn't mean homes should be shown completely empty, the experts say.

Those working under a larger budget might consider trendy and appropriately proportioned rental furniture to fill the main rooms, says Baird & Warner's Bailey.

At the least, says Rainmaker's Duffy, stage small vignettes of tables, lamps and artificial plants to soften corners and add interest. Make sure to provide a chair or two, even inexpensive covered folding chairs and a simple covered table, for any buyer who might need to sit down and weigh her options -- like making an offer.

By Rachel Koning Beals From Marketwatch

Tuesday, May 09, 2006

Economic Review
as published by Hanley Wood

Executive Summary
Can we expect the Fed to keep the rate hikes coming? Most of the recent data points to the economy remaining robust and despite fifteen consecutive quarter point hikes and another on the way, the Fed may still need to do more to control inflation. The yield on the 10 year treasury has continued to climb and put pressure on mortgage rates, as it closed above the 5% mark for the first time in over 3 years on April 13. The 10 year treasury is currently yielding 5.132% as of Monday’s close. Crude oil remains trading above the $70/barrel mark. Higher energy prices remain worrisome, as it will start to hurt the average consumers’ spending habits and also its eventual effect in passing price pressure onto consumer goods. But so far, it has not dampened consumer sentiment since consumer confidence showed an unexpected rise for the second straight month. Stronger than expected GDP, new homes, and personal income data contributed t! o the rise in rates towards the end of April and strengthened the case that further rate hikes are to come.

The Economy
The advance estimates for first quarter GDP increased at an annual rate of 4.8%, up from the final fourth quarter real GDP gain of 1.7%. The advance figure represents the fastest growth since the third quarter of 2003. The advance number for the GDP Price Inflator came in at 3.3%, which was lower than the 3.5% final number reported for 4Q05. The personal consumption expenditure index showed a 2% increase, which lies near the high end of the Fed’s comfort zone. Both the GDP Price Inflator and PCE index are important, because they are gauges used to determine inflationary price pressure.

Consumer confidence also rose unexpectedly to 109.6, which is its highest rating since May 2002. The present situation index, which came in at 136.2, was at its highest levels since August 2001, which shows unusual optimism from consumers about our current economy in the face of rising energy prices and interest rates. Personal incomes increased 0.8% in March, which is its largest increase since September 2005. This marks the seventh straight month that personal incomes grew and the gain was larger than most economists had expected.

Housing Market
New home sales surged in March, increasing a stronger than expected 13.8% from its February number to 1,213,000 units. Although the month over month number showed sharp increase in sales, new home sales are still down 7.2% from the same period a year ago and have been trending down since they peaked in October 2005 until this rebound. Prices for new homes declined for the second straight month, decreasing 2.7% to $224,200 from $230,400 in February and at even at the current sales rate, there remains 5.5 months of supply in the market. In March 2006, annualized sales of existing single-family homes increased slightly to a seasonally adjusted 6.92 million units from a revised 6.90 million units in February. March’s sales pace is down slightly from the same period in the previous year, as year-over-year sales are down 0.7% from March 2005. The median sales price of existing single-family homes in the U.S. was $218,000, a one-year increase of ! 7.39% and the same as February’s revised number. Even with a healthy year-over-year increase, existing median home prices remain well off their 12 month highs for all U.S. regions. National mortgage rates increased for the sixth straight week as Freddie Mac’s weekly Primary Mortgage Market Survey showed that current 30 year fixed mortgage rates average 6.59%, with an average 0.5 points. Average rates continued to rise as average points paid in this period decreased slightly. In the week ending April 21st, the MBA’s seasonally-adjusted Purchase Index hit its lowest level in more than two years at 389.4. The index has since rebounded in May, likely due to seasonality in home buying, but is still 10% off the levels of the same period last year. The overall trend of decline is another indicator that the home loan industry will start to feel a major squeeze as rates rise.
For market-level data and analysis please visit our website at http://www.hanleywood.com/hwmi/.
(Courtesty of Louise RoseELB Mortgage Brokers, Inc.)

Lenders now have a second formula for judging your past, backed by the three giant credit bureaus. Your VantageScore could look very different from your FICO score.
The three credit bureaus are touting their new credit-scoring system as a boon for borrowers, easier to understand and more "consistent" than other scoring methods.

Maybe. But VantageScore, which uses the same underlying data about your debts as the FICO score you already know, also poses some serious risks. And let's be clear: This isn't about making credit easier for the little guy.

This is business. Big business. Equifax, Experian and TransUnion are private companies that each track your accounts, balances and payment habits. A credit "score" simply assigns a weight to those factors to produce an indicator of how much risk you pose as a borrower. Fair Isaac's formula for scoring is the one lenders like best.

Every time an appliance store or car dealership asks one of the credit bureaus for your credit score, the data the bureau has collected about you is sent through the proprietary FICO model.

The lender pays the credit bureau for the score, and the bureau pays FICO for using its formula.This is quite a lucrative business for Fair Isaac. Credit scoring accounts for 20% of the company's revenues, according to Merrill Lynch analyst Edward Maguire, but 65% of its operating profits.

The bureaus, naturally, want to cut out the middleman.

Read more about the new credit score by following this link: MSN Money

Article written by :Liz Pulliam Weston

Friday, May 05, 2006


A forecasting tool used by the housing industry to predict demand pointed down in March, suggesting sales of previously owned homes would fall.

The National Association of Realtors on Tuesday said its index for pending sales of existing homes declined at a seasonally adjusted annual rate of 1.2% to 116.2 from February's 117.6. The index was 6.0% below the level of 123.6 in March 2005.

Rising mortgage rates are affecting the market, according to NAR's chief economist David Lereah.

"Home sales rebounded from the slide that started last fall, but the pending sales data is showing a dampening effect from rising mortgage interest rates that have been trending up since January," Lereah said. "This means a modest slowing can be expected in the sales pace in the months ahead, although the market will hold at historically strong levels."

By region, the index showed a 5.2% climb in the Northeast in March from February - but a 1.1% drop since March 2005.

In the West, the index increased 0.7% in March but was 13.3% below a year prior. The South eased 1.2% in March and was 1.6% below March 2005. The Midwest fell 7.4% in March and was 9.3% below a year earlier.

The NAR's pending home sales index was designed to try measuring the direction of the housing market in the future. It is based on pending sales of existing homes, including single-family homes and condominiums. A home sale is pending when the contract has been signed but the transaction has not closed. Pending sales typically close within one or two months of signing.
Last week, the NAR reported sales of existing homes in the U.S. rose to a 6.92 million annual rate during March, a 0.3% advance from February's 6.90 million even though mortgage rates stepped up. Year-over-year, sales were down 0.7%. The average 30-year rate was 6.32% in March, compared with 6.25% in February and 5.93% in March 2005. The inventory of homes on the market increased to 5.5 months in March from 5.2 months in February. The median home price held steady at $218,000.

(Courtesy of Jeff Bater - Wall Street Journal)

Monday, May 01, 2006


New-home sales in March soared 13.8%, the largest percentage increase in 13 years, the Commerce Department said April 26. The median price of new homes sold, however, fell to $224,000, down 2.2% from what homes were selling for in March 2005.

Existing-home sales rose by 0.3%, marking the second consecutive monthly increase after five months of declines. The number of homes for sale increased 7.0%, representing a five-and-a-half-month supply at the March sales pace, the largest supply since 1998. Median prices of existing homes are up 7.4% in the past 12 months to $218,000, the smallest price gain since January 2004.

Meanwhile, the U.S. economy bounded ahead at a 4.8% pace for the opening quarter of the year, the strongest growth spurt in two-and-a-half years, the Commerce Department reported April 28. The increase marked a vast improvement from the feeble 1.7% annual rate registeredin the final quarter of 2005.

Consumer confidence in April, according to the Conference Board's Index of Leading Economic Indicators, rose to 109.6, up from a revised 107.5 in March. April's reading, important because it helps predict future economic activity, reached its highest level in four years.

On April 27 at the Joint Economic Committee of the Senate and House, Federal Reserve Chairman Ben Bernanke lent cheer to U.S. financial markets by saying that a pause in the Fed's tightening program is possible. The Federal Open Market Committee, which makes monetary policy for the Fed, meets May 10.
(Courtesty of Louise Rose, ELB Mortgage Brokers)