Article Source: Robert Freedman, REALTOR® Magazine Online

Copyright National Association of REALTORS®, Reprinted from REALTOR.org with permission.

        

     —- From our May Newsletter

At the beginning of March, President Obama and his team unveiled the details of his $75 billion Homeowner Affordability and Stability Plan, designed to help roughly 9 million struggling homeowners hold on to their houses. The plan will utilize two basic strategies to accomplish its goal: first, help mortgage borrowers refinance their risky, expensive loans into more affordable one, and second to encourage lenders with monetary incentives to perform more mortgage modifications.

Apparently, there have been plenty of takers on the homeowner side of things, but not as many lenders willing to participate, the Obama Administration recently announced fresh incentives to get more lenders motivated to participate in the program.

Any mortgage servicers that decide to sign on will now receive $500 up front for modifying second mortgages and $250 per year for the next three years if the refinance was successful. Second mortgages, like home equity loans, have been targeted specifically because roughly 50 percent of mortgages on the brink of failure have these second liens. According to the Administration, funding for this new incentive program will come from the available $50 billion Troubled Asset Relief Program (TARP) reserves set aside for mortgage recovery efforts.

While major lenders like Bank of American, Wells Fargo, and JPMorgan Chase have already thrown their support behind the Obama plan, many others have been skeptical in the past as their investors balked at former provisions of the program. They were against the modifications of only first mortgages, leaving many homeowners with risky and expensive second mortgages that might continue to jeopardize the success of the first loan modification. Investors also worried that major banks holding those second liens would not be motivated to refinance them because borrowers would be more likely to keep up with their seconds after the first loans become more affordable.

The new incentives address this issue and require all who sign one to modify all second mortgages after the first has been modified. This means stretching out the second home loan term and decreasing the interest rate to the level of the first mortgage. The government will then help subsidize the lenders' costs for bring the interest rate down to 1 percent on most fixed and adjustable rate mortgages, and 2 percent for interest-only loans.

Help for the previous administration's Hope for Homeowners plan is also included in the new incentives. Participation to this point has been minimal, but the government hopes that more will join up with program now that it will be embraced under the Obama team's blanket of affordability measures.

Hope for Homeowners scared many lenders away because it required strict borrower qualification standards and did not allow for second lien issues. Now the program will provide lenders with a $2,500 up-front payment for helping borrowers refinance. And lenders originating the new loans will be encouraged with $1,000 a year for three years, as long as the borrower remains on top of the payments.

Will these incentives be enough to coerce more major lenders into the mortgage modification playing field. That remains to be seen, but obviously the government believes it has provided the proper enticements to get them involved in serious foreclosure prevention efforts.

        

It happened again the other day...  Last week I was looking up clients that I've had for a year and still have not purchased a house. When I mentioned the $8000 tax credit they were surprised. Other Realtors that I have spoken to since have noted similar responses from the people that they deal with.
This substantiates for me at least, the idea that bad or sensational news travels farther and faster than good or beneficial news!

So, for anyone out there that does not know already, first time home buyers are being awarded $8000 for buying a house before December of 2009.

        

Feb. 20, 2009 - Doug Rebert, Prudential Homesale Services Group interviewed on Fox 43 news. Home sales are up in the South Central Pennsylvania real estate market. New first-time home buyer tax credit gives even better than the previous tax credit. Up to $8,000 with no repayment, but must take advantage of it before December 2009. For non-homebuyers, there is a tax credit for making energy-efficient improvements to your home. Interest rates are historically low. Today the interest rates are 5%, which allows someone to buy more land and more home, for the same monthly payment.

        

    from our February Newsletter

U.S. mortgage interest rates continued to make history in the latest month as the average rate dipped below 5 percent shortly for the first time on record before inching back up.

January 8

During the first week of the month, interest rates on 30-year fixed rate mortgages (FRM), as reported by Freddie Mac, fell to 5.01 percent, excluding points, from 5.14 percent the previous week. The average rate on a 15-year FRM dropped to 4.62 percent from 4.91 percent, while the one-year adjustable rate mortgage (ARM) held steady at an average of 4.95 percent.

According to Frank Nothaft, Freddie Mac vice president and chief economist, interest rates on long-term loans fell for the tenth week "in part to the Federal Reserve's recent purchases of mortgage-backed securities issued by Freddie Mac, Fannie Mae and Ginnie Mae," said.

January 15

As the Fed continued to pump money in to the nation's banks, 30-year FRM loans fell to 4.96 percent in the second week, the lowest rate on record since the 1971 beginning of the Freddie Mac survey. The decrease was attributed to news of rising unemployment as well as generally poor economic indicators.

January 22

The long-term mortgage interest rate jumped up in the third week to 5.12 percent, with Freddie Mac noting that even with the increase, rates had averaged 0.25 percentage points lower during January then they did during the previous month. This allowed many homeowners to refinance out of risky adjustable rate mortgages.

January 29

The month ended with interest rate barely changing during the last week. The average rate on a 30-year FRM loan slipped down to 5.10 percent, while the 15-year FRM remained unchanged at 4.80 percent from the previous week and the one-year ARM dropped to 4.90 percent from 4.92 percent.

What's Next for Interest Rates?

The future of interest rates for February looks volatile but general predictions have rates moving slightly upward. The driving factors may be a mix of reports of high unemployment and the continued debating of the next stimulus package in the House and Senate.

        

When deciding which remodeling projects will get you the most return on your investment and attract potential homebuyers, choose the outside of your house!  According to the 2008 Remodeling Cost vs. Value Report, exterior remodeling projects return the most money as a percentage of cost.

On a national level, wood deck additions and all types of siding replacements returned more than 80 percent of costs upon resale.  Window replacements also return a high percentage of remodeling costs.

Here is a breakdown of the percentage of project costs returned for major remodeling efforts:

1. Wood Decks - 81.8%
2. Siding Replacement - more than 80%
3. Window Replacements - more than 76%
4. Kitchens - 76%
5. Bathrooms - 74.4%
6. Attic-to-Bedroom Conversion - 73.6%
7. Basement Remodel - 72.7%
8. Back-Up Power Generators - 57.1%
9. Sunroom Additions - 56.6%
10. Home Office Remodels - 54.4%

        

    —- From Our January Newsletter —-

Home Sales Pace

Sales of existing U.S. homes fell in November, according to the National Association of Realtors, by 8.6 percent to a seasonally adjusted rate of 4.49 million units, a decrease from 4.91 million the previous month. Sales were also off by 10.6 percent from October 2007 figures.

The national median home price also dropped in November, falling to $181,300 from $186,500 in October. The median price one year earlier was $208,700.

The NAR defines existing homes as all previously owned single-family homes, townhouses, condominiums, and co-ops. The group "seasonally adjusts" the sales numbers to factor in things like inclement weather, school sessions, winter holidays, etc to smooth out the trends. The NAR also describes its sales data based on an annual pace. The monthly figure represents the total number of housing units sold in one year if the current rate were to continue unchanged.

Sales Pace by Region

Existing home sales dropped across the board in November, with the Northeast posting the largest month-to-month declines. Sales there sank by 12 percent to 730,000 units, compared with October's 830,000 units. In a year-over-year comparison, sales were down by 18 percent.

The South saw a 10.9 percent decline in sales to 1.64 million homes, with sales falling 17.6 percent since November 2007.

The sales pace in the Midwest fell by 7.4 percent in November from the previous month to 1 million units, and is down 16 percent from last year during the same time.

The West experienced a 4.3 percent monthly drop in sales, but the number of units sold was still up a solid 17.9 percent over last year's figures.

Home Prices

The median home price, the point at which half of all homes are sold for more and half are sold for less, decreased in November for the sixth consecutive month, led by another significant price slide in the West.

The median price for homes in the Western United States fell to $242,500, down from $258,900 in October. The current price represents a 25.5 percent decrease from November 2007.

The Midwest median sales price dropped by another $3,000 and is down by 11.2 percent on a year-over-year basis.

The median price in the South fell to $154,500 from $160,800 in October. Compared with one year earlier, the price was down 10.6 percent.

In the Northeast, median home prices fell to $257,700 in November from $241,800 the previous month. Prices were down.01 percent versus last year when median prices were at $257,900.

Inventory

The number of existing homes for sale in the U.S. increased in November to 11.2 million units, up from October's 10.3 million units.

        

    —- from our December Newsletter —-

After facing months of criticism for sitting on the sidelines as the U.S. mortgage market fell to pieces, the Federal Reserve board was very busy in November, taking drastic measures in an attempt to shore up the faltering lending industry.

On Sunday, November 21, Fed Chairman Ben Bernanke, current Treasury Secretary Henry Paulson, and next-in-line Treasury Secretary Timothy Geithner announced a new bailout package for the troubled Citigroup. The decision to invest an additional $20 billion dollars in the company's preferred stock comes hard on the heels of last month's move to inject $25 billion to help the company work off its bad debt and restore consumer confidence in the Citigroup's fiscal future.

The government has also promised to back $306 billion of the company's failing mortgages and other problem assets.

"With these transactions, the U.S. government is taking the actions necessary to strengthen the financial system and protect U.S. taxpayers," the agencies said.

Although the banking giant had the largest market share in 2006, Citigroup has fallen to fifth place among U.S. banks as the many subprime and other exotic loans on its books have soured.

Moreover, while the bold move by the Fed apparently had the desired effect (Citigroup's stock skyrocketed almost 60 percent the day after the announcement), many wonder if the taxpayers will be the hardest hit by this deal in the end. The government is committed to buying 254 million Citigroup shares at almost twice the current market cost.

This is certainly not the first of such actions by the federal government. Trying to stave of widespread financial panic, the Fed gave fiscal aid to JPMorgan Chase in March to buyout Bear Stearns.

The next big move was placing mortgage companies Fannie Mae and Freddie Mac in government conservatorship. "Fannie Mae and Freddie Mac are so large and so interwoven in our financial system," Secretary Paulson said on September 7, "that a failure of either of them would cause great turmoil in our financial markets here at home and around the globe."

A bailout of insurance corporation American International Group (AIG) took place at the same time.

Then, just two days after the second Citigroup rescue plan was announced, the Fed made the much talked-about but highly controversial decision to start buying up mortgage-backed securities (MBS) and direct obligations from Freddie and Fannie. The plan calls for $100 billion for purchasing the mortgage-related debt obligations and $500 billion for MBS transactions.

"This action is being taken to reduce the cost and increase the availability of credit for the purchase of houses, which in turn should support housing markets and foster improved conditions in financial markets more generally,'' the central bank said in a statement.

The Fed also issued a statement the same day pledging $200 billion to guarantee consumer loans like credit card debt, and car and student loans.

While the effect of all these Fed programs on the U.S. mortgage markets is still unclear, most analysts feel it is unlikely that we have seen the last of government intervention in the free market, at least not until the economy stabilizes at non-recession levels again.

        

   —- from our October Newsletter —-

Home Sales Pace

Sales of existing U.S. homes rose in September, according to the National Association of Realtors, by 5.5 percent to a seasonally adjusted rate of 5.18 million units, up from 4.91 million units in August. That sales pace was also up 1.4 percent from September 2007 figures. Median home prices, however, fell by 9.0 percent to $191,600 during the same period, from $210,500 last year.

The NAR defines existing homes as all previously-owned single-family homes, townhouses, condominiums, and co-ops. The group "seasonally adjusts" the sales numbers to factor in things like inclement weather, school sessions, winter holidays, etc to smooth out the trends. The NAR also describes its sales data based on an annual pace. The monthly figure represents the total number of housing units that would be sold in one year if the current rate were to continue unchanged.

Sales Pace by Region

September's sales jump was led by an enormous increase in the Western sales pace. The West experienced a 16.8 percent rise to an annual rate of 1.25 million units compared with 1.07 million in August. That also puts sales up 34.4 percent on an annual basis.

The Midwest and South saw only minor growth in comparison with the West, while the Northeast saw a decrease in sales in September.

Sales in the Midwest rose to 1.19 million units, 4.4 percent higher than the 1.14 million housing transactions in August.

The South had 1.9 million sales in September, an increase of 2.2 percent from 1.86 million the previous month.

Finally, in the Northeast, sales of existing homes dropped 1.2 percent to 840,000 units, from 850,000 units in August.

Home Prices

The median home price, the point at which half of all homes are sold for more and half are sold for less, decreased in September, as a rise in home values in the West that was more than compensated for by price declines in the other three regions.

The median price in the Northeast dropped to $246,800 from $271,000 in August. The price has declined 5.4 percent in the last year.

The median price in the Midwest fell to $152,500 from $168,000 the month before and decreased by 7.9 percent since September 2007.

In the South, the median home price was down to $167,200 from $176,500 the previous month and 4.1 percent from one year earlier.

The median price in the West rose to $253,600 in September, up from $253,600, but the current price is still 18.5 percent below the going rate at the same time last year.

Inventory

The number of existing homes for sale in the U.S. continued to shrink in September, contracting to 4.27 million units, a decrease of 1.6 percent from August. The supply of homes available at the end of September represents a 9.9 month stock at the current sales pace; the August pace reflected a 10.6 month supply.

Next Report

Data for October existing home sales, prices, and inventory will be available at the end of November.

        

   —- from our October Newsletter —-

September was a month full of chaos in the mortgage and housing markets. Looming failure of Wall Street titans like Lehman Brothers and AIG, buyouts of troubled banks like Washington Mutual and Wachovia, and talks of federal government intervention made interest rates unpredictable for potential homebuyers. With ARM loan interest rates continuing to adjust upward, and energy and food costs remaining high, borrowers by the hundreds of thousands forced to enter foreclosure. In fact, according to the Mortgage Bankers Association, 40 percent of all subprime ARM loans in the U.S. were in some stage of foreclosure or default in September, with 12 percent of all prime ARM loans falling into the same category.

Widespread foreclosures create numerous problems for both individual neighborhoods and for the country as a whole. Obviously, on a national level, soured loans have cost companies millions of dollars and in some cases, their very existence. On a local scale, abandoned foreclosed properties that fall into disrepair are magnets for vagrants and criminal activity. Nearby homes also fall in value as foreclosed homes make the neighborhood less desirable to live in.

Millions more of American homeowners are expected to fall into foreclosure during the next few years. In some cases, there may be no way to save their home. Yet in many other cases, homeowners can avoid foreclosure by talking with their lenders and possibly taking advantage of new federal programs.

Talk to Your Lender

The first step to avoiding default and foreclosure is to approach your lender and tell him of your situation. If your ability to keep up with your payments is lagging, talk to your mortgage lender before you actually have to make a late payment.

Foreclosure means a huge loss of money for lenders, plus a lot of hassle to resell the property. Many would rather renegotiate the terms with you and possibly even write-down your mortgage balance a bit, instead of losing out completely on their investment when you default.

HOPE for Homeowners

In addition to early programs for struggling homeowners, the federal government started a new initiative in early on October 1, called HOPE for Homeowners, which could save as many as 400,000 American mortgage borrowers.

The program authorizes the Federal Housing Authority to back more adjustable rate mortgage (ARM) loans in danger of failure. It works like this: a worried homeowner contacts a HOPE representative. The representative works with the lender and voluntarily gets them to agree to write down the loan balance to 90 percent of the current value of the home. Then, they refinance the original mortgage into an FHA-guaranteed 30-year fixed rate mortgage with predictable monthly payments. As the value of the home appreciates in the future, the homeowner agrees to share some of that equity with the government.

In order to qualify for this program, borrowers must be able to fully document their income, occupy the property involved (no investment properties will qualify) and their housing costs after the refinance must total no more than 31 percent of their income (38 percent if they participate and in a 3-month trial period with timely payments.)

Borrowers interested in participating in the FHA program can contact their lenders, speak with a HUD counselor, or call 1-888-995-HOPE.