House Hunter Realty

I heard from a young woman this week, the sister of a friend, who had some
questions regarding a real estate purchase. She didn™t have a real estate agent,
and she was negotiating a œfor sale by owner purchase. Being a first-time
homebuyer, she felt a little in over her head.

I answered the questions as best I could, and at the end of our conversation, she
made a comment that struck me. œI didn™t realize, she said, œhow difficult it would
be to buy a house.

My reply to her was that it shouldn™t be. And her experience gave me some real in-
the-trenches insight into the housing market issues. It provides an inside glimpse
into overall issues in the market.

Simply put, the seller has a house she wants to sell. The buyer loves the house and
wants to buy it. They have agreed on a price. My friend™s sister has pre-approval
from a lender for more than the sale price. Sounds like everything should be in
order, right?

Well, the financing has gotten tricky, and the seller is not as flexible as she would
like to be because she owes right around what the house is worth. There are a
few repairs to be made before the house can transfer, and the seller agreed to
some concessions for that, as well as paying some of the buyer™s closing costs, in
exchange for a higher sale price.

The problem is, the house didn™t appraise for that higher sales price. The seller
claims she doesn™t have enough money to bring to the table to close the deal, which
would include paying off the existing mortgage, and still make the concessions on
the repairs and buyer™s closing costs. The buyer™s lender is saying she doesn™t have
enough cash reserves to get financing if she has to pay all the closing costs and
make the repairs.

She tried to switch loan products with the lender, attempting to get more flexible
terms both with conventional and FHA loans. She even went to another lender and
explained the situation, but got roughly the same answer.

On top of that all, the seller, after the appraisal, said œThe house is worth more than
that.

So what this buyer and seller have is a stalemate. For me, it was another up-close
look at what, big-picture, is happening in real estate markets all over

Sellers owe more than their homes are worth, and, worse, hang onto this notion
that what THEY paid for the home somehow determines its worth. Buyers,
meanwhile, have to have 20 percent or more down, plus reserves, or else they™re
subjected to financing difficulties. These are all facts of life now, and nothing we all

haven™t experienced or at least heard about lately. But as someone who believes
in homeownership and the value of real estate, it™s still hard to hear someone say œI
didn™t realize buying a house would be this difficult. It also shows that working with
a qualified real estate agent can be a big help!

With the homeownership rate in the U.S. lower now than it™s been for a long time,
and with the media questioning the wisdom of purchasing real estate, the very
notion of homeownership has perhaps never been under such attack. So many
people are nervous about buying a home. Then comes along someone who really
WANTS to be a homeowner, knows she is ready for it and has found her perfect
first home. And instead of it being an exciting, enjoyable experience, it has become
an ordeal.

Of course, she is not alone. Unfortunately, the trenches are full of such stories.

With the holiday season upon us, we will all likely spend time and money doing
holiday shopping. It might be fun for some, but it™s the time of year you can go
overboard if you™re not careful. I found an interesting article that outlines a few of
the ways stores get consumers to spend more on their holiday shopping. Check out
the link below for the article:

http://money.cnn.com/2010/11/22/pf/saving/holiday_savings/index.htm

The number of homes waiting to hit the market “ called œshadow inventory by
many “ grew by nearly 10 percent in the last year, according to a market research
firm.

CoreLogic released data that shows that shadow inventory of residential property
as of August reached 2.1 million units, or eight months worth of supply, up from
1.9 million, or a five-months supply, from one year earlier. With an actual inventory
unsold homes on the market of about 4.2 million, the change in shadow inventory
increased the total supply of unsold inventory by 3 percent, CoreLogic reports.

According to CoreLogic, the total actual and shadow inventory was 6.3 million units
in August, up from 6.1 million a year ago. The total months™ supply of unsold homes
was 23 months in August, up from 17 months a year ago. Although it can vary and
it depends on the market and real estate cycle, typically a reading of six to seven
months is considered normal, which means the current total months™ supply is
roughly three times the normal rate.

The extra inventory could put downward pressure on prices, as demand from
buyers is already relatively low and adding supply to the market won™t help. Many
experts believe the shadow inventory has grown as banks, already bogged down
with repossessions, have been slow to push further foreclosure actions through the
pipeline.

The foreclosure moratorium imposed by some lenders after the œrobo-signing
controversy has likely added to the shadow inventory as well.

The increased inventory, both in terms of keeping prices flat and providing a large
selection of homes, makes the current buyer™s market even more so.

I came across this article on The Wall Street Journal™s website, and I wanted to pass it along. The article details five ways financial institutions are spying on you, and it shows that your credit report alone is NOT the only reason you might be denied financing. It™s an eye-opening and potentially controversial read. Check it out here:

 http://online.wsj.com/article/SB10001424052748704865104575588803958385376.html

There™s probably little argument against the notion that the United States is in a housing slump. There does, however, seem to be some different views on what it will take to œfix it.

In talking to other real estate professionals, investors and clients, it seems the different ideas are wide-ranging. Some seem to think lending has to become more available. Some believe that home prices still have room to drop, and that™s causing buyers to be nervous. Others have conflicting views on what must be done “ or not done, in fact “ about the massive amounts of foreclosed homes.

So what™s it going to take for the U.S. to reach the point of a real, sustainable and widespread housing recovery? More and more, it looks as though it™s going to take some compromise.

The argument that financing for housing is too tight is a pretty solid one. Just looking at the requirements to get a home loan now compared to a few years ago, it™s impossible to say that standards haven™t gotten stricter. The reasons for this are many, and maybe not as simple as some seem to think, and the financing problem is a good example of why compromise is needed.

There seems to be standoff of sorts among those involved in the mortgage industry. In fact, it™s what they call in the movies a œMexican standoff, with multiple parties all pointing guns at each other and waiting for someone else to make a move.

The players in the mortgage standoff right now are financial institutions, policy-makers and mortgage-market investors. Wall Street has its guns pointed at Washington, and vice versa, and both parties have their guns also trained on mortgage borrowers and the secondary mortgage market.

The government wants to keep people in their homes, while at the same time recognizing that the foreclosure mess has to play all the way out before there is a return to œnormal. The financial institutions say they are willing to lend money, but they are also concerned about writing down loan losses on outstanding loans they already have. Investors want to know who™s going to compensate them for the bad mortgages they are holding.

So everyone™s pointing their guns and standing kind of motionless. Who makes the next move?

Depending how you feel about the role of government in the housing market, you may or may not be buoyed by the language that came out of Washington last week. Phyllis Caldwell of the Treasury Department’s Homeownership Preservation Office said to a congressional panel that œan important part of ensuring longer-term stability in the market is to enable properties to be resold to families who can afford to purchase them.

That sounds like a vote for letting the foreclosure process play out, which is a complete about-face from the rhetoric that has come out of the capital for the past two years, when the emphasis seemed to be stopping foreclosures and keeping people in their homes, all else be damned.

The fact is, though, that President Obama™s plans for loan modifications that were originally targeted to help over 4 million homeowners have largely failed, with only about 10 percent of that figure receiving permanent modifications. Maybe all the modifications have done is stall the process that needs to work itself out before there is a recovery.

The change in tune might be a sign that the government is willing to cooperate, maybe let the housing market deal with foreclosures in its own way.

That might be good news, but banks and investors will have to cooperate, too. Banks are probably going to have to acknowledge that they™re going to take more losses on bad loans “ sort of a step back before going forward. Investors are going to have to be willing to share the loss, too. If bad loans are going to cost the banks, spread the cost to the buyers in the secondary market, too.

Simply put, it seems as though before progress is made with foreclosures, there are more lumps to be taken. If the banks, the mortgage securities market and the government “ which DOES NOT want another bailout “ share that loss, maybe it™s more palatable.

That, of course, will take compromise and cooperation. In case you haven™t noticed, those have been in short supply of late.

As anticipated, the foreclosure moratorium put forth by some of the nation™s largest lenders had a stalling effect on home sales.

The National Association of Realtors last week reported that September pending home sales slipped 1.9 percent “ the first decline after three months of increases “ and attributed some of the decline to the halt in foreclosures.

œExisting-home sales have shown some improvement but the foreclosure moratorium is likely to cause some disruption and contribute to an uneven sales performance in the months ahead, said NAR chief economist Lawrence Yun in a news release. œNonetheless, there appears to be a pent-up demand that eventually will be unleashed as banks resolve their issues with foreclosures and the labor market improves. However, tight credit and appraisals coming in below a negotiated price continue to constrain the market.

Economists had expected about a 3-percent increase in pending September sales, according to The Wall Street Journal.

Yun™s forecast for existing-home sales in 2011 predicts a rise to about 5.1 million from about 4.8 million in 2010. He expects housing starts to rise to 716,000 in 2011 from 598,000 this year.  

œWe™ve added 30 million people to the U.S. population over the past 10 years, but sales are where they were in 2000, so there appears to be a sizable pent-up demand that could come to the market once the economy gathers momentum, Yun said.

Home prices continue to remain affordable and interest rates are low but are expected to rise in 2011, Yun said.

The most recession-proof cities didn™t see home prices surge in the first place, says the MetroMonitor, a quarterly report released by Brookings Institute’s Metropolitan Policy Program.

MetroMonitor identified 21 large metro areas that have enjoyed robust economies and stable labor and housing markets in the last few years.

“Most of these cities have some general characteristics in common,” says Howard Weil, author of the report and a fellow at the Metropolitan Policy Program. “They didn’t experience huge housing bubbles followed by a crash, and their economies weren’t rooted in the auto industry.”

The top 10 stable cities identified by MetroMonitor are:

1. Albany, N.Y.
2. Augusta, Ga.
3. Austin, Texas
4. Baton Rouge, La.
5. Buffalo, N.Y.
6. Columbia, S.C.
7. Dallas
8. Des Moines, Iowa
9. El Paso, Texas
10. Honolulu

Source: CNNMoney.com, Hibah Yousuf (06/24/2010)

 With spring just around the corner, it will soon be time to get outside and give the outside of our homes some TLC. One of the best investments you can make in your home “ especially if you™re planning to sell “ is in its curb appeal. To make your home beautiful from the street, check out Better Homes and Gardens 20 hints for building curb appeal.

One of the problems during the real estate boom in the U.S. was the ubiquitous œteaser-rate adjustable mortgage. Various ARMs have been blamed for luring unsuspecting borrowers into homes they really could not afford. In fact, many borrowers didn™t fully comprehend how much their payments could rise. If you want to look at the impact an adjustable rate could have on your house payment, you can visit BankRate.com™s Adjustable Rate Mortgage Calculator

With all the talk lately over low mortgage rates, rising mortgage rates and adjustable rate mortgages, there might be some questions about what kind of home loan is the best.

The answer depends largely on the borrower.

There are basically two families of home loans: adjustable-rate mortgages (ARM) and fixed-rate mortgages (FRM). Each offers advantages and disadvantages.

ARMs are attractive because of their low initial payments. Depending on the particular product, you can typically get a rate that doesn™t adjust until at least three years. With a lower starting rate, that means a lower payment than a FRM ¦ until the rate adjusts.

After the initial period, however, the rate could adjust sharply. In fact, part of what occurred to fuel the credit crisis was rates that adjusted so high that home owners could no longer afford the payments and faced delinquency and foreclosure.

So for whom are ARMs a good fit?

Someone who is quite certain they will not stay in the house for long might be better off with an ARM. For example, if your rate doesn™t re-set for five years, but you plan on moving after three years, you can probably pay a rate of about 1 percent less than you would on a FRM over the same three years.

ARMs are also popular because with their lower initial rate, it is easier to qualify for the monthly payment. If you are in a situation in which you can confidently predict your income to rise before the rate does, you could qualify for more house now and handle the larger payment down the road.

On the other hand, fixed-rate mortgages offer more stability and less risk. While rates are higher than ARMs, you are assured that your rate will not go up in the future. If you are unsure about your income rising enough to meet a rising house payment, or you are unsure about how long you plan to stay in the house, this may be the safe route for you to take.

If you are looking at a purchase soon, also consider the fact that a rate rise is being predicted. Fixed-rate mortgages now might be as much as 1 percent lower than they will be in about a year, some experts project.

Either way, the rates make the present an attractive time to borrow for a home. Of course, this is a simple overview and should not be considered as hard-and-fast loan advice. For that, you should consult a qualified mortgage professional who can explain your options and make the best recommendation based on your individual situation.