LENDERS' WORKOUT PROGRAMS OFFER HELP FOR BORROWERS IN TROUBLE

Whether it's from a job loss, medical emergency, mortgage-payment hike or simply personal-finance mismanagement, a small but growing number of homeowners is falling into foreclosure every year.

For most people who fall behind on their mortgage, their first instinct is to avoid all contact with the lender. But that's a mistake, consumer counselors and others say, because it's likely those financial problems will only get worse, making it harder to work out the best repayment terms.

Many borrowers don't realize that lenders are as eager as homeowners to avoid foreclosures, which cost lenders $40,000 to $60,000 per house, according to industry estimates. Most lenders offer "workout" programs where they work with the borrower on repayment plans that meet the borrower's financial circumstances.

"Going to the lender is ideal. The sooner, the better," said Erica Sandberg, a spokeswoman with the Consumer Credit Counseling Service of San Francisco, certified by the U.S. Housing and Urban Development Department to provide housing counseling.

Lenders agree. "It's never too early and never too late to call your lender," said Loretta Abrams, vice president of consumer affairs for HSBC North America.

And, "any of our borrowers can approach our workout staff," said Tim McGarry, spokesman at Washington Mutual. "It's always our goal to keep people in homes. Foreclosure is a bad outcome for us as a lender."

Justifiably nervous

But plenty of borrowers -- about half, according to some focus-group research -- are afraid that divulging their money woes to their lender will prompt the lender to accelerate the foreclosure process.

That fear is not surprising: Often, when borrowers fall into financial difficulty, their first contact with the lender may encourage them to run in the other direction the next time the phone rings. That's because many lenders, if a borrower is 30 to 60 days' late, initially have the collections department call.

"A collection agent's job is really to get you to pay. They want to know when you're going to pay, how much you're going to pay, how you're going to pay," said J. Michael Collins, a principal at PolicyLab Consulting Group, LLC, a market-research firm focusing on consumers' financial decisions, in Ithaca, N.Y. "It's a very ... aggressive approach."

It's not until the borrower is close to defaulting on the loan that lenders move the account to the "loss mitigation" department, staffed not by collection agents but by people trained to work with the borrower to prevent foreclosure, Collins said.

Some lenders already understand this issue. "Lenders who are working with borrowers who have a history of credit problems, they understand that the first time you make contact with that borrower when they're in trouble, you've got to facilitate a cooperative relationship," Collins said. "But what a lot of lenders are used to is more of a market where people have more income. There's no real good reason for somebody not to pay" is the standard thinking.

Still, Collins says he sees a shift happening, with more prime-market lenders realizing the importance of making that initial contact with the borrower a cooperative one.

Maybe that's because some see delinquency and foreclosure rates getting worse before they get better, thanks to more people holding loans with adjustable rates set to move higher. In some cases those adjustments will push up monthly mortgage bill 30% or more.

More foreclosures coming?

Adjustable-rate mortgages are a growing portion of the mortgage-loan market, accounting for about one-fourth of all home loans nationwide, and three-fourths of subprime home loans in 2005, according to a recent report by ACORN, an advocate for low- and moderate-income families.

"While foreclosure activity continues to remain slightly below historical averages, the number of properties in some stage of foreclosure from January to July has increased by 39% compared to the same period of 2005," said James Saccacio, chief executive officer of RealtyTrac, a foreclosure-tracking company, in a recent press release.

First-quarter data from the Mortgage Bankers Association shows delinquency and foreclosure rates essentially flat, and still a small portion of the overall loan market. But there's been an up-tick in late payments among borrowers with subprime credit.

About 4.41% of all loans were late 30 days or more in the first quarter compared with 4.31% for the first quarter in 2005, according to MBA. That delinquency rate includes homes in the foreclosure process.

For loans held by borrowers with subprime credit, 12.02% of adjustable-rate loans were delinquent, up from 10.25% a year earlier, according to the MBA, which says its survey covers about 80% of residential mortgage loans in the U.S.

"When these people get faced with their first increased payment and their payment goes from $600 to $1,200, that's very difficult for folks to deal with," Collins said. Some borrowers "had no idea their payment was going to go up this much," he said, citing his research with focus groups of borrowers in default on their adjustable-rate mortgages.

And it's not only working-class people who are surprised, said Douglas Robinson, a spokesman for NeighborWorks America, a nonprofit company that works on housing and community-development issues.

"We're seeing more and more middle-income homeowners who are in trouble, particularly on the coasts -- the Boston, New York, California markets where home buyers may have stretched just a little bit to get into that house in those high-priced markets ... and for whatever reason they miscalculated the increase that would occur," Robinson said.

Consumer counseling agencies also say they've seen a rise in the number of people coming to them with mortgage-related problems.

"We're seeing a surge in the people who are calling because they have [adjustable-rate mortgages] and they can no longer afford the monthly payment," said Sandberg, of CCCS in San Francisco. "They end up behind on their credit-card payments. Then they can't refinance the mortgage because their credit is damaged. Then they're stuck with these high mortgage payments and damaged credit."

Meanwhile, the number of homeowners seeking help from her agency in preventing a foreclosure jumped 125% in the past two years, said Betty Parker, housing coordinator for the Consumer Credit Counseling Service of North Central Texas. "We see well over a hundred foreclosure preventions a month," she said.

What to expect

The good news is lenders do want to work with borrowers. If your lender's collection department is still calling you, consider working with a third-party housing counselor.

You can reach housing counselors by calling 888-995-HOPE, a number recommended by NeighborWorks America. Or you can call 866-845-2227 to reach one of 1,000 housing counselors certified by the National Foundation for Credit Counseling.

Be sure to confirm the U.S. Department of Housing and Urban Development has certified those counselors.

"It's better if they're working through an agency. I think the lender will be more responsive," said Ron Chicaferro, executive vice president of Thornburgh Mortgage, in Santa Fe, N.M.

When you start negotiating, your lender will likely offer you one of its "loan workout" options, which tend to be about the same across lenders, though some lenders are more willing to work with borrowers than others. "Some of them are great and some of them are ... a little more challenging," Parker said.

One option is a repayment plan, where any late payments are spread out and added to your regular mortgage bill. Another common option: Forbearance, where mortgage payments are reduced or suspended for a set period of time.

Some borrowers are eligible for mortgage modification, essentially a rewriting of the loan to extend its term or to reduce the interest rate.

Then, there's the short sale: In a situation where the borrower is simply unable to maintain the mortgage payment, the lender will sometimes allow the borrower to sell the house for less than the outstanding balance on the loan.

The borrower has to arrange the sale, but gets to walk away without a foreclosure on record (though the seller may owe taxes on the portion of the loan that the lender has forgiven). The lender doesn't have to deal with foreclosure proceedings or with selling the house.

Plenty of Web sites offer valuable information:

Tips on avoiding foreclosure, from CCCS of San Francisco

The Hope for Homeowners site also has tips

The NeighborWorks America site also has useful information

Also, check your state and city Web sites for "consumer affairs" or "consumer services" - they often list homeowner assistance programs, said Abrams, of HSBC.

-- August 22, 2006

By Andrea Coombes

From MarketWatch

WHAT DO AGENTS REALLY BRING TO THE TABLE?

I hate going to the dentist. I've always had good teeth, only one cavity in my head, so why spend all that money (not to mention the dental insurance) on a service I've never really needed. As long as I brush and floss, why do I need someone with a doctor's degree to look over my teeth, clean them, whiten them, etc.?

Besides, I've pulled teeth myself -- when I was just a grade school kid, in fact. So if I can pull teeth at that age, with just a string and a doorknob, why on earth do I have to pay a professionally trained tooth puller now? As I reminisce on those days of my early tooth-pulling, I even recall getting paid for pulling my own teeth! That's right. Every morning after pulling my teeth, I had money under my pillow.

Obviously, anyone who has received quality dental care in the past sees right through the absurdity of this argument. However, when it comes to real estate agents, everyone wants them to provide their services for discounted prices – even free.

Licensed real estate professionals bring state-mandated training and knowledge to the table for buyers and sellers. In fact, agents have to get as much, or more, training than what it would take for some college degrees before being given permission by the state to represent buyers and sellers in the transaction.

By the time a transaction is over, it is chock full of legally-binding documents controlling the transaction, pulling two parties together to exchange hundreds of thousands of dollars to complete a transaction that they may be involved in only a couple of times in their life.

Both the buyer and seller must perform to the contract, and most times, they don't even know how or what they're supposed to do to perform the paragraphs they just agreed to perform.

Nearly half of the buyers are purchasing for the first time, according to the National Association of Realtors. They only think agents are there to usher them into houses and that's it. And that's because hundreds of thousands of agents make that tooth extraction look so easy.

Why should you have a real estate agent on your investing/buying/selling team when it comes to building wealth?

There's talk on Capitol Hill of how the real estate industry has a "strangle hold" on the business. It makes me want to, not so much defend, as much as bring to the forefront what licensed professionals actually bring to the table for consumers.

You've heard the term, "You get what you pay for," and that doesn't go wasted on agents as well. Many sellers would love to get through the transaction themselves, without any help from a "middle man," to save the commission dollars. It sounds like it makes sense, "Hey, why pay thousands of dollars of your money to sell a house when you can do it yourself?"

But every agent has a real estate license regulated by the state. This means they are knowledgeable about various aspects of real estate law, rules and regulations, such as:

1. What rights exist for land and how they can be traded


2. How title can be held and how to ensure clear title to the land


3. Financing: traditional, non-traditional, owner-held, etc.


4. Fair housing laws: federal, state and local


5. Local limits on the sale and trade of real estate


6. State disclosure laws and regulations on the trade of real estate


7. Contracts and forms

Most sellers and buyers I've talked with, while having access to plenty of "information" on the internet about the sales transaction, do not have a handle on the nuances, pitfalls, and inherent dangers of legal problems they can face in the midst of this huge investment.

Published: August 25, 2006

By M. Anthony Carr

Realty Times

LONG TERM RATES DIP FOR FIFTH STRAIGHT WEEK;

SHORT-TERM RATES ALSO FALL

McLEAN, VA -- Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market SurveySM (PMMSSM) in which the 30-year fixed-rate mortgage (FRM) averaged 6.48 percent with an average 0.4 point for the week ending August 24, 2006, down from last week's average of 6.52 percent. Last year at this time, the 30-year FRM averaged 5.77 percent. This is the lowest the 30-year FRM has been since the week ending April 6, 2006, when it averaged 6.43 percent.

The average for the 15-year FRM this week is 6.18 percent, with an average 0.4 point, unchanged from last week when it averaged 6.20. A year ago, the 15-year FRM averaged 5.35 percent. This is the lowest the 15-year FRM has been since the week ending April 20, when it was 6.17 percent.

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) fell to 6.14 percent this week, with an average 0.5 point, from last week's rate of 6.18 percent. A year ago, the five-year ARM averaged 5.30 percent.

One-year Treasury-indexed ARMs averaged 5.60 percent this week, with an average 0.7 point, was down from last week when it averaged 5.65 percent. At this time last year, the one-year ARM averaged 4.56 percent.

"The Fed has acknowledged that it is closely monitoring the housing market as it slows down from last year's record pace," said Frank Nothaft, Freddie Mac vice president and chief economist. "Although this fuels arguments about whether we will experience a soft landing or a bursting housing bubble, market watchers also perceive that it possible that the Fed may stop raising short-term interest rates over the near term. This perception takes upward pressure off mortgage rates."

"Meanwhile, although both existing and new home sales for July fell below market expectations -- confirming the slowdown in the housing market -- we still expect 2006 to be the third highest year on record for total sales."

Published: August 25, 2006

Article offered by Realty Times

WATCH OUT FOR UTILITY TREE EASEMENTS

No matter where you live, whether it's in an urban area, a residential area or an agricultural area, you can appreciate the value of a tree. Trees do so much for us.

Obviously, they provide us with often much needed shade. But in addition to shade, they also help reduce soil erosion and prevent flooding. A mature tree can consume a substantial amount of water every day, thereby reducing flooding.

Sometimes, property owners must take legal action in order to protect their trees. This kind of legal action is more common than you might think.

A common problem that I wish to focus on in this column concerns utility easements on property. The easement may be for a common electric line, a telephone company line, or even a natural gas line. Many homeowners have property subject to these easements.

The easement allows the utility to run its line or pipe on, under or over a piece of property. In turn, the property owner, or its predecessor, is usually paid a small amount of money. In the case of a subdivision, often the developer receives the payment. The subsequent purchasers often receive no money, but must be forever burdened by the easement.

Utilities could never exist without these easements because their network of pipes and wires needs to reach out into the community and this can only be done through easements.

What I am referring to in this article is a common easement condition requiring that the ground in the areas of the pipes and wires be maintained so as to allow for repairs and inspections. Some utility companies are claiming they have a right to cut down trees, often mature trees, pursuant to this easement requirement.

The question is: Do you have to allow the company to enter your property and destroy your trees? The answer is maybe yes, and maybe no.

What follows are some factors that may resolve this question.

The first question concerns the utility easement language. How specific was the easement? Was it clear that trees can't be planted over the easement area? Or did it only require that if any vegetation exists, it be maintained in good order so that visual inspections can occur and physical access can take place?

Does the easement specifically provide for the right to remove trees? Or is this right being presumed by the utility company?

How long has it been since the last time that the utility sought to enforce its rights under the easement. If it has been decades, did the utility effectively forfeit its rights under the easement?

What is the purpose of the easement? Are less invasive means of satisfying its goals available other than tree removal?

Was the property use restriction properly recorded so that the property owner had a way of knowing about the restriction before the purchase was made. If not, it is possible that the restriction may not have legal force.

Sometimes these matters can be resolved through compromise. Perhaps a better maintenance campaign can resolve any concerns that the utility might have.

However, if the utility is dead set on removing mature trees from your property, you need to decide whether the value of those trees is worth seeking legal assistance. The utility will have an experienced lawyer. If you want to fight for your rights in court, you too will likely need one.

If your lawyer determines that you have a legal right to stop any tree destruction, there is a good chance that your lawyer will go into court and ask for an injunction. An injunction is a court order that stops the utility company from taking down any trees until the court has an opportunity to engage in further evaluation of the merits.

Injunctions are not easy to obtain. Your ability to obtain one will be largely dependent on an ability to demonstrate irreparable harm if an injunction is not granted as well as an ability to demonstrate that the legal issues are on your side.

The legal issues can be complicated and very fact specific. The key, however, is that simply because a utility claims a right to destroy your trees does not mean that it really has that right. I am a tree person who feels badly when mature trees are unfairly destroyed. I wish any one whose trees are at risk the best of luck.

Published: August 17, 2006

By Stuart Lieberman

Realty Times

SINGLE GIRL POWER GROWING INFLUENCE IN REAL ESTATE

Ladies, take note, you've begun taking a larger role in the area of homeownership over the last few years, according to a new study from the Joint Center for Housing Studies at Harvard University.

"Not only are unmarried women a large segment of the home buying population," says Rachel Bogardus Drew, the author of the report, "but they are fast-growing, too, increasing their share of home buyers by 50 percent in eight years. The value of their home purchases over a 3-plus year period totaled more than $550 billion ... ."

The study is as much a report on the sociological changes in our country as on the buying practices of women. The continued breakdown of the family has pushed women to start fending for themselves, financially, instead of waiting for the combination of salaries with a mate to purchase a home.

"Two out of three female buyers were previously married, though that share drops significantly for younger buyers," Ms. Drew points out. "They also have lower incomes than unmarried men and married home buyers, but are less apt to finance their home purchase."

Still, the overwhelming buying segment is made up of married couples at 63 percent, but now unmarried women are the second highest buying group (at least when looking at marital status) at 20 percent in the last three years. Unmarried men make up 17 percent of the buying pool.

The demographics paint an admirable picture of the group, being older than their unmarried male counterparts, and facing many obstacles, demonstrating their determination to get in the real estate ownership circle. They also have lower incomes and many of them are buying with children in tow (30 percent).

Financially, they've demonstrated that even with lower incomes, homeownership is available. At $37,000, their median income is 11 percent less than single men, but account for why they are less likely than married couples to live in single family homes -- however, the majority of them were move up buyers in the last three years. They are plodding along with wealth growth, taking a patient path to building their net worth by buying low, selling when the market grows and moving into a larger, more expensive dwelling.

The growth of this demographic has not gone unnoticed, as both for-profit and not-for-profit entities have begun initiatives to help women in their quest for homeownership. One of the groups was the Women's Mortgage Industry Network (WMIN), which was launched four years ago and is sponsored by Freddie Mac. The group's goals include engaging "the mortgage industry and non-financial service providers in a targeted education and counseling campaign that it believes will help close the gap in homeownership rates," according to information from FreddieMac.com.

One of the most interesting points of this report was one of the buying options Ms. Drew uncovered in her report of single women, purchasing in a co-housing community.

"Co-housing communities, though relatively small in number -- about 50 in the U.S. -- are an attractive choice for women who want the privacy of their own home with the benefit of a supportive, surrounding community. These communities typically consist of 12 to 42 self-sufficient private dwelling units, but also include a common kitchen/dining space where meals are shared as well as communal outdoor space. Other arrangements help to pair single mothers looking for a shared living situation," she writes.

"By pooling incomes single mothers can often afford to buy a more desirable home, and by living together they can share household tasks and childcare, which can free up valuable time. Living with someone can also provide critical emotional support and help make single parenting less exhausting and lonely."

Obviously, this is a growing segment of the real estate industry and will continue it's upward trend with the aging of the baby boom generation and the natural selection of women living an average seven years longer than men.

Published: August 18, 2006

By M. Anthony Carr

Realty Times

SWIMMING POOLS: DO THEY INCREASE OR DECREASE A HOME'S VALUE?

Maybe the sweltering days of summer have you wishing for a pool as a backyard oasis.

Like Clark Griswold in "National Lampoon's Christmas Vacation," who fantasizes about buying an in-ground pool with his holiday bonus, you can see it already: The crystal clear water, the poolside deck, the floating raft just waiting for you to climb on and sunbathe.

You're not alone.

Some real estate professionals caution that a swimming pool can be a deterrent to some buyers when the home goes back on the market; having an in-ground pool in the backyard has the potential to dissuade an interested buyer with no desire for the feature or the maintenance it demands.

Still, Americans apparently can't stay away from buying personal water wonderlands, according to statistics compiled by the Association of Pool & Spa Professionals. It isn't just the pool itself, either; many times the backyard investment continues poolside with the installation of homey decks and outdoor kitchens.

In 2005, 176,500 in-ground pools were sold and installed, bringing the total number of those pools in the country up to 4.7 million, according to the association's statistics. About 4.3 million pools were sparkling throughout the country in 2002.

Also in 2005, 219,000 above-ground pools were sold, bringing the total number of them in the country to 3.6 million, the association found. About 3.4 million above ground pools were scattered throughout the country in 2002.

And in some areas of the country, a house's pool is more of a necessity than a flaw.

Smart swimming

In places where pools are common, "a house without a pool would be harder to sell," said Brian Van Bower, president of Aquatic Consultants Inc., a pool-design firm based in Florida.

Seven in 10 Arizona homes have pools, said Roger Soares II, president of Hydroscapes LLC, a pool-design and construction company based in Arizona. "In a lot of areas it's not a need, but here it's a necessity because it's so hot."

Often times, homeowners would rather buy a home with a pool than have to install it themselves, Soares said. If you do buy a home that already has a pool, make sure to get it looked at by a qualified pool inspector, said Suzanne Barrows, spokeswoman for the Association of Pool & Spa Professionals.

"We recommend that you have the pool inspected by a pool person, but in some cases home inspectors have taken education courses so they know what to do," Barrows said. "If the home inspector is a reputable inspector and he or she doesn't know how to inspect a pool, they'll say so, and the good ones will have names of people in the area who could do it."

But if you're already settled and are contemplating buying a pool for your home, it's best to think before you dive.

Above-ground pools traditionally don't add any value to a home come resale time, according to research from the National Association of Realtors. They also aren't much of a deterrent to buyers because they can be easily removed, said Wallace Perry, Coldwell Banker United, Realtors' president and chief operating officer for the Carolinas region.

"It's not enough of an economic factor to influence it (the sale) either way," he said. A seller might even take the pool down and bring it to their new home.

In-ground pools have a different story.

They do tend to add value to a home -- about 7.7%, according to National Association of Realtors statistics. Regionally, in-ground pools will add about 5% to the value of a home in the Northeast part of the country, about 6% in the Midwest and 7.5% in the Southeast and West. In the Southwest, a swimming pool will add nearly 11% to the home's value.

But because they're permanent, buyers who aren't interested in the upkeep or the energy costs of in-ground pools may turn away from a home with one, Perry said. Heated pools especially can run up a power bill, he said.

The feature seems to interfere more often in the sale of lower-priced homes -- homes with selling prices of less than $200,000, Perry said. On the higher end of the market, a pool doesn't seem to be a factor and will probably even enhance a home's appeal, he said.

In general, in-ground pools will usually return 50% of their original cost when the home is sold, Perry said. Depending on location, the age of the pool and maintenance given throughout its lifetime, the return could be even less, said Carolyn Helmlinger, president of Coldwell Banker Mid-America Group, Realtors in Des Moines.

Your own enjoyment, therefore, should be the primary reason for installing a pool.

"If you're going to put in a pool, you need to be comfortable that you're going to be there more than five years," Perry said.

Deep pockets

Another reason to tread carefully before buying a swimming pool: It's a big investment of money and time.

Again, above-ground pools aren't as permanent or as pricey, with many of them available for a couple thousand dollars or less.

Although there are still companies advertising in-ground pools around $16,000, the average price is more like $30,000 to $35,000, which would get its owner a water feature and possibly a spa, Soares said. Landscaping around the pool could cost anywhere from $3,000 to more than $100,000.

Then there's the maintenance once it's installed.

Running the filter -- assuming you have an efficient pump -- will cost an average of $20 a month if it's run all day, every day, Soares said. Chemicals could cost between $5 and $20 a month in the winter and anywhere from $20 to $100 a month during the summer. Pay someone to take care of the pool instead and the going rate is around $65 a month, he said.

Easier chemical distribution through automated dispensing has helped save time and eliminate some of the hassles of pool care, said Ed Kahn, editor of pool magazines including "Pool & Spa Living." Also popular: salt chlorination systems, which covert regular salt to chlorine and prevent pool owners from ever having to buy a chemical.

Emerging pool styles are tailoring to customers' needs as well. New, smaller pools, for example, are configured in a way to provide some of the benefits of hot tubs, Kahn said.

"It looks like a small pool, it has the propulsion system that creates a current in the water so you can literally swim in place as if you're swimming in a large pool," he said. On resting days, owners can use the pool for hydrotherapy.

Aquatic fitness centers produced by Vista, Calif.-based Dimension One Spas allow for vertical and horizontal exercises with less impact, said Bob Hallam, the company's president. They also take up less space.

The pools are so popular, the company is doubling production this year to meet demand, he said. Models run from $25,000 to $35,000, he said.

Why the surge of popularity for the product? "We're all aging, and a lot of people my age -- which is a baby boomer -- still want to keep in good shape," Hallam said. The warm water lessens impact on the joints.

Pool envy?

If the memory of a fun Fourth of July pool party at the neighbor's house still has you desiring your own aqua retreat, Barrows offers these questions to consider before heading to the show room or calling a builder:

• What do you want to use the pool for? Is it for exercise or to splash around in? Look around online for styles and prices. The Association of Pool & Spa Professionals' consumer site, www.poolpeopleusa.com, is a place to start.
• Who is going to use the pool? Adults? Children? The association also maintains a site for kids, www.splashzoneusa.com, that emphasizes pool safety.
• Do you want the design of the pool to mesh with the rest of the yard? Landscaping can be as simple as a small deck and as elaborate as an outdoor kitchen with fire pits and pizza ovens.
• What kind of pool do you want? In-ground? Above-ground? A swim spa? Consider what kinds of pools are in your neighborhood or talk with a local real estate professional if you have any concerns about what installing a pool will do to your resale value.

Above all, talk to pool owners before jumping into a purchase, Soares said. Ask them how they liked their builder. Do additional homework by checking a builder's references and finding out how long they've been in business.

"It's amazing how many people will not do that," he said.


-- August 09, 2006

By Amy Hoak
From Marketwatch

HOME SALES TO HOLD FAIRLY STEADY FOR BALANCE OF YEAR

WASHINGTON (August 8, 2006) – The housing market is in a process of stabilizing with little change in overall sales volume expected over the balance of the year, according to the National Association of Realtors®.

David Lereah, NAR’s chief economist, said the indicators already are leveling-off. “We’ve seen a minor easing in closed transactions of existing-home sales, and a slight increase in the leading indicator of pending sales based on contracts,” he said. “New-home sales and housing starts have been fluctuating, so the overall market is stabilizing.”

“On one hand is the rise in mortgage interest rates that has slowed sales in many higher-cost markets, and on the other is 3.8 million new jobs over the last two years,” Lereah said. “This means many potential home buyers could enter the market in the foreseeable future, especially in moderately priced areas where affordability conditions remain favorable. In fact, this is already occurring.”

Although sales will be fairly steady over the balance of the year, declines since last fall mean annual totals will be lower. Existing-home sales are forecast to fall 6.5 percent to 6.61 million this year, the third highest on record after 2005 and 2004. New-home sales are projected to drop 12.8 percent in 2006 to 1.12 million, also the third best on record. Housing starts should be down 9.1 percent to 1.88 million this year.

The 30-year fixed-rate mortgage is running nearly a percentage point higher than a year ago but is likely to rise very slowly in the months ahead, reaching 6.9 percent in the fourth quarter.

NAR President Thomas M. Stevens from Vienna, Va., said current market conditions are favorable for buyers. “The rise in housing supply is the biggest change in the market over the last year,” said Stevens, senior vice president of NRT Inc. “Clearly, this has taken pressure off of home prices and has significantly widened choices for buyers. At the same time, sellers are getting excellent returns – but in this competitive environment they need real estate professionals more than any time since the 1990s to market their homes and maximize value.”

The national median existing-home price for all housing types is forecast to grow 4.3 percent this year to $229,000, while the median new-home price is expected to rise only 0.5 percent to $242,100 as builders offer incentives to clear unsold inventory.

The unemployment rate should average 4.7 percent for the balance of the year. Inflation, as measured by the Consumer Price Index, is likely to be 3.5 percent for 2006, while growth in the U.S. gross domestic product is projected at 3.5 percent. Inflation-adjusted disposable personal income is expected to grow 3.0 percent this year.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries.

# # #

Article offered by NAR

NAR PRESIDENT SAYS FED DECISION IS GOOD FOR HOUSING

WASHINGTON (August 9, 2006) – The decision yesterday by the Federal Reserve’s Federal Open Market Committee not to raise the federal funds rate for the 18th straight time indicated that the Federal Reserve recognizes the value of the housing economy to the national economy as a whole, the president of the National Association of Realtors® said today.

“This move sends a very positive signal to the housing sector, which has been so robust over the past five years that it has sustained the economy while other sectors have lagged. Largely as a direct result of more than two years of interest rate hikes, the housing market today is fragile in some parts of the country. The Fed’s decision indicates that it realizes the vital role housing plays in the economy,” said NAR President Thomas M. Stevens, senior vice president of NRT Inc.

The decision by the FOMC leaves the banks’ prime lending rate, the benchmark for various consumer and business loans, at 8.25 percent. Before the Fed started raising rates in June 2004, the prime had been at 4 percent.

Stevens said the Fed’s decision indicates it realizes the economy has slowed, especially the housing economy. “We can’t continue to raise rates without expecting the housing economy to suffer. That translates into higher costs for home buyers, slower sales and a lower level of economic activity in housing, which accounts for one-fourth to one-fifth of the gross domestic product,” he said.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries.

Article offered by NAR

HOUSE PASSES BILL TO BOOST HOME OWNERSHIP UNDER FHA

Program changes affect down payment, loan limits

The U.S. House of Representatives on Tuesday passed legislation that aims to increase home-ownership opportunities for low- and moderate-income Americans through restructuring of Federal Housing Administration policies.

The bill, H.R. 5121, dubbed "The Expanding American Homeownership Act," was created in response to rising home prices and outdated loan limits that eliminated FHA financing for buyers in many U.S. housing markets.

The bill specifically will:

• Eliminate the current statutory 3 percent minimum down payment, reducing a significant barrier to home ownership. FHA's existing down-payment requirement does not meet the demands of today's marketplace, where most first-time home buyers put down 2 percent or less. The "new" FHA would offer a variety of down-payment options.

• Create a new, risk-based insurance premium structure for FHA that would match the premium amount with the credit profile of the borrower. It would replace the current structure, in which there is standard premium amount for all borrowers, while still protecting the soundness of its Insurance Fund. FHA would have the flexibility to charge a lower premium for low-risk borrowers, and to charge higher-risk borrowers a slightly higher premium.
  
  
• Increase and simplify FHA's loan limits. FHA's loan limit in high-cost areas would rise from 87 percent to 100 percent of the GSE conforming loan limit and in lower-cost areas from 48 percent to 65 percent of the conforming loan limit. In many areas of the country, the existing FHA limits are lower than the cost of new construction, eliminating FHA financing as an option for buyers of new homes in those markets. FHA has simply been priced out of the market in other areas, such as California, where FHA insured only about 5,000 home mortgages in all of 2005, down 95 percent from 109,000 in 2000.

"When FHA was formed in 1934, it was an historic event that made home ownership possible for people who had nowhere else to turn," said Assistant Secretary for Housing-Federal Housing Commissioner Brian D. Montgomery. "We are now closer to another landmark -- a modernized, flexible FHA that can respond to the needs of today's low and moderate-income home buyers who need a helping hand."

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Wednesday, July 26, 2006

Inman News