SAN DIEGO REAL ESTATE AGENT BLOG » First Time Homebuyer

Key Features of the New Housing Rescue Plan

Michael Carter - San Diego Real Estate Agent — Mon, 29 Mar 2010 18:06:10 +0000

The government’s newest housing rescue effort, which was announced Friday, includes these key tenets:

· As much as $14 billion of the Troubled Asset Relief Program (TARP) will be made available to pay for writing down second liens for loans whose borrowers refinance through the Federal Housing Administration.

· Lenders that facilitate refinances through the FHA will be required to write down the principal of the first mortgage by at least 10 percent so the home owner has a loan-to-value ratio no higher than 97.75 percent.

· Lenders of second liens will be offered incentives of 10 cents to 21 cents per dollar of principal they write down in connection with an FHA refinance.

· Borrowers who lose their jobs can apply to have their mortgage payments reduced for three to six months while they search for a new job.

· Borrowers with a payment still greater than 31 percent of income after they find a job will be considered for a permanent loan modification.

· To encourage more short sales and “deed in lieu” of foreclosure transactions in which the lender settles the loan for less than is owed, the government will double assistance to borrowers to $3,000 and increase incentives to subordinate lien holders and investors to $6,000.

Source: Reuters News (03/26/2010)

Michael Carter
San Diego Real Estate Agent
MTC Future Realty
(619) 488-5774

San Diego County housing prices rebound in February

Michael Carter - San Diego Real Estate Agent — Tue, 16 Mar 2010 00:08:28 +0000

San Diego County housing prices bounced back in February to reach a median $322,000 that was in the range of prices for much of last year, MDA DataQuick reported Monday.

The median, the midpoint of all prices, was up 5.6 percent from January’s $305,000 and up 13 percent from February 2009. The January median price had fallen 7.5 percent from December’s $330,000, reflecting an active market in low-cost homes and little activity in moveup properties.

February’s numbers represented the highest year-over-year increase since March 2005, a few months before the median peaked at $517,500 and then fell to a low of $280,000 in January 2009.

But housing experts caution that January and February do not usually set the pace for sales and price trends for the year because of their traditionally low volume of activity.

Single-family resale homes had a median price of $358,500, up 3.9 percent from January’s $345,000 and just about the same as the December median; the figure was 12 percent ahead of year-ago levels. Condo resales stood at $219,500, up 8.9 percent from January’s $201,500 and nearly equal to the median price in December; it was 12.6 percent ahead of February 2009’s $195,000. The new-home median, including condo conversions, was $460,000, up 13.3 percent from January’s $406,000 and the highest since last May; it was 1.8 percent higher than in February 2009.

Sales in February stood at 2,465, up 6.2 percent from January but 8 sales lower than in February 2009. Single-family resales were below year-ago levels, down 4.2 percent, a reflection of the low inventory of homes for sale, especially low-cost distressed properties, as lenders try to modify loans rather than initiate foreclosure proceedings. Many analysts expect foreclosures to increase this year and thus lead to more sales but perhaps lower prices overall.

By Roger Showley

Michael Carter
San Diego Real Estate Agent
MTC Future Realty
(619) 488-5774

Program Will Pay Homeowners to Sell at a Loss

Michael Carter - San Diego Real Estate Agent — Tue, 09 Mar 2010 15:56:09 +0000

In an effort to end the foreclosure crisis, the Obama administration has been trying to keep defaulting owners in their homes. Now it will take a new approach: paying some of them to leave.

This latest program, which will allow owners to sell for less than they owe and will give them a little cash to speed them on their way, is one of the administration’s most aggressive attempts to grapple with a problem that has defied solutions.

More than five million households are behind on their mortgages and risk foreclosure. The government’s $75 billion mortgage modification plan has helped only a small slice of them. Consumer advocates, economists and even some banking industry representatives say much more needs to be done.

For the administration, there is also the concern that millions of foreclosures could delay or even reverse the economy’s tentative recovery — the last thing it wants in an election year.

Taking effect on April 5, the program could encourage hundreds of thousands of delinquent borrowers who have not been rescued by the loan modification program to shed their houses through a process known as a short sale, in which property is sold for less than the balance of the mortgage. Lenders will be compelled to accept that arrangement, forgiving the difference between the market price of the property and what they are owed.

“We want to streamline and standardize the short sale process to make it much easier on the borrower and much easier on the lender,” said Seth Wheeler, a Treasury senior adviser.

The problem is highlighted by a routine case in Phoenix. Chris Paul, a real estate agent, has a house he is trying to sell on behalf of its owner, who owes $150,000. Mr. Paul has an offer for $48,000, but the bank holding the mortgage says it wants at least $90,000. The frustrated owner is now contemplating foreclosure.

To bring the various parties to the table — the homeowner, the lender that services the loan, the investor that owns the loan, the bank that owns the second mortgage on the property — the government intends to spread its cash around.

Under the new program, the servicing bank, as with all modifications, will get $1,000. Another $1,000 can go toward a second loan, if there is one. And for the first time the government would give money to the distressed homeowners themselves. They will get $1,500 in “relocation assistance.”

Should the incentives prove successful, the short sales program could have multiple benefits. For the investment pools that own many home loans, there is the prospect of getting more money with a sale than with a foreclosure.

For the borrowers, there is the likelihood of suffering less damage to credit ratings. And as part of the transaction, they will get the lender’s assurance that they will not later be sued for an unpaid mortgage balance.

For communities, the plan will mean fewer empty foreclosed houses waiting to be sold by banks. By some estimates, as many as half of all foreclosed properties are ransacked by either the former owners or vandals, which depresses the value of the property further and pulls down the value of neighboring homes.

If short sales are about to have their moment, it has been a long time coming. At the beginning of the foreclosure crisis, lenders shunned short sales. They were not equipped to deal with the labor-intensive process and were suspicious of it.

The lenders’ thinking, said the economist Thomas Lawler, went like this: “I lend someone $200,000 to buy a house. Then he says, ‘Look, I have someone willing to pay $150,000 for it; otherwise I think I’m going to default.’ Do I really believe the borrower can’t pay it back? And is $150,000 a reasonable offer for the property?”

Short sales are “tailor-made for fraud,” said Mr. Lawler, a former executive at the mortgage finance company Fannie Mae.

Last year, short sales started to increase, although they remain relatively uncommon. Fannie Mae said preforeclosure deals on loans in its portfolio more than tripled in 2009, to 36,968. But real estate agents say many lenders still seem to disapprove of short sales.

Under the new federal program, a lender will use real estate agents to determine the value of a home and thus the minimum to accept. This figure will not be shared with the owner, but if an offer comes in that is equal to or higher than this amount, the lender must take it.

Mr. Paul, the Phoenix agent, was skeptical. “In a perfect world, this would work,” he said. “But because estimates of value are inherently subjective, it won’t. The banks don’t want to sell at a discount.”

There are myriad other potential conflicts over short sales that may not be solved by the program, which was announced on Nov. 30 but whose details are still being fine-tuned. Many would-be short sellers have second and even third mortgages on their houses. Banks that own these loans are in a position to block any sale unless they get a piece of the deal.

“You have one loan, it’s no sweat to get a short sale,” said Howard Chase, a Miami Beach agent who says he does around 20 short sales a month. “But the second mortgage often is the obstacle.”

Major lenders seem to be taking a cautious approach to the new initiative. In many cases, big banks do not actually own the mortgages; they simply administer them and collect payments. J. K. Huey, a Wells Fargo vice president, said a short sale, like a loan modification, would have to meet the requirements of the investor who owns the loan.

“This is not an opportunity for the customer to just walk away,” Ms. Huey said. “If someone doesn’t come to us saying, ‘I’ve done everything I can, I used all my savings, I borrowed money and, by the way, I’m losing my job and moving to another city, and have all the documentation,’ we’re not going to do a short sale.”

But even if lenders want to treat short sales as a last resort for desperate borrowers, in reality the standards seem to be looser.

Sree Reddy, a lawyer and commercial real estate investor who lives in Miami Beach, bought a one-bedroom condominium in 2005, spent about $30,000 on improvements and ended up owing $540,000. Three years later, the value had fallen by 40 percent.

Mr. Reddy wanted to get out from under his crushing monthly payments. He lost a lot of money in the crash but was not in default. Nevertheless, his bank let him sell the place for $360,000 last summer.

“A short sale provides peace of mind,” said Mr. Reddy, 32. “If you’re in foreclosure, you don’t know when they’re ultimately going to take the place away from you.”

Mr. Reddy still lives in the apartment complex where he bought that condo, but is now a renter paying about half of his old mortgage payment. Another benefit, he said: “The place I’m in now is nicer and a little bigger.”

Michael Carter
San Diego Real Estate Agent
MTC Future Realty
(619) 488-5774

Could the Tax Credit Be Extended Again?

Michael Carter - San Diego Real Estate Agent — Mon, 22 Feb 2010 21:52:06 +0000

The pressure is increasing on Congress to renew the homebuyer tax credits for a third time.

The first $7,500 tax credit was passed in 2008 and required first-time buyers to repay the credit over 15 years. A few months later in 2009, Congress expanded the credit to a maximum of $8,000 that didn’t have to be paid back.

At the end of last year, Congress extended the benefit again until April 30 with an extra two months on top of that to close. A new credit of $6,500 was added for move-up buyers, too.

Now representatives of the housing industry are lobbying for another extension. Some experts, including Mark Zandi, chief economist at Moody’s Economy.com, who supported the earlier credits, think the time has come to let it go.

“It’s worn out its benefit,” he says. “If you extend it again, it isn’t going to do much, and what you’re doing is providing a tax break to folks who bought anyway.”

Source: The Wall Street Journal, Nick Timiraos (02/22/2010)

Michael Carter
San Diego Real Estate Agent
MTC Future Realty
(619) 488-5774

Property Values Fall Again

Michael Carter - San Diego Real Estate Agent — Thu, 11 Feb 2010 02:35:27 +0000

U.S. home values declined another 5 percent in the fourth quarter, compared to the previous year. This was the 12th straight quarter of year-over-year declines, reported Zillow.com.

More than 29 percent of homes sold in 2009 in the U.S. went for less than sellers originally paid for them, Zillow said, estimating that more than 20 percent of U.S. home owners owe more on their mortgages than their properties are worth.

“While the next few months are likely to bring further home value declines in most markets, we do expect to see a national bottom in home prices by the middle of this year,” Zillow Chief Economist Stan Humphries said in a statement. “Thereafter, home values are likely to bounce along the bottom with real appreciation remaining negligible for some time.”

Source: Bloomberg, Daniel Taub (02/10/2010)

Michael Carter
San Diego Real Estate Agent
MTC Future Realty
(619) 488-5774

Will Rewarding Borrowers Prevent Defaults?

Michael Carter - San Diego Real Estate Agent — Wed, 10 Feb 2010 15:41:06 +0000

Will paying underwater borrowers to keep meeting their mortgage obligations prevent them from walking away?

Loan Value Group LLC says it is working with a major mortgage lender to test this theory.

Here’s the plan. The mortgage investor offers a cash reward to borrowers to keep paying. The amount varies by borrower based on income, negative equity, geography, and other risk factors. The more likely a borrower will default, the bigger the carrot.

The borrower can’t collect the payment until the mortgage is paid, although the rewards can be used to help pay off the mortgage if the property is sold.

The plan keeps lenders from having to mark properties to market and take big losses. Frank Pallotta, a founder of Loan Value Group and former executive at Morgan Stanley and Credit Suisse, says the program will pay for itself if only a few borrowers stay put and keep paying.

Source: The Wall Street Journal, Nick Timiaros (02/08/2010)

Michael Carter
San Diego Real Estate Agent
MTC Future Realty
(619) 488-5774

Pending Home Sales Stabilize

Michael Carter - San Diego Real Estate Agent — Tue, 02 Feb 2010 21:40:26 +0000

Pending home sales have leveled from a market swing driven by response to the home buyer tax credit, according to the NATIONAL ASSOCIATION OF REALTORS®.

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in December, increased 1 percent to 96.6 from 95.6 in November, and remains 10.9 percent above December 2008 when it was 87.1.

In November, the monthly index had fallen by 16.4 percent from surging activity in preceding months.

Lawrence Yun, NAR chief economist, says it’s important to recognize how the tax credit is skewing market data.

“There are easily understood swings in contract activity as buyers respond to a tax credit that was expiring and was then extended and expanded,” he says. “These swings are masking the underlying trend, which is a broad improvement over year-ago levels.”

December activity was the fifth highest monthly tally in two years.

The Tax Credit Impact

Buyers who have a contract in place to purchase a primary residence by April 30, 2010, have until June 30, 2010, to finalize the transaction to qualify for a tax credit of up to $8,000 for first-time buyers and $6,500 for repeat buyers.

Yun projects the extended and expanded tax credit will encourage 2.4 million households to take the credit in 2010.

“While new-home sales will remain low due to a lack of construction, existing-home sales are projected to rise to around 5.6 million in 2010,” Yun says. Last year there were 5.16 million existing-home sales.

He added that one of the greatest benefits of rising sales will be firming home prices.

“For several months now we’ve been seeing stabilization in all of the home price measures as inventory is pulled down,” Yun says. “As a result, the housing wealth for many middle class families has begun to stabilize.”

Regional Data

Here’s a breakdown by region for the PHSI:

Northeast: rose 2.3 percent to 76.1 in December and is 14.9 percent higher than December 2008.
Midwest: increased 5.2 percent to 86.9 and is 8.7 percent above a year ago.
South: rose 2.2 percent to an index of 98.4, and are 5.5 percent higher than December 2008.
West: fell 3.8 percent to 119.9 but is 18.6 percent above a year ago.

NAR

Michael Carter
San Diego Real Estate Agent
MTC Future Realty
(619) 488-5774

10 Home Features Buyers Want

Michael Carter - San Diego Real Estate Agent — Mon, 01 Feb 2010 19:36:05 +0000

Home designers and builders speaking at the recent International Builders Show in Las Vegas say that buyers are seeking cost-effective features and rejecting things that don’t have lasting value.

“It’s all about family togetherness – casual living, entertaining and flexible spaces,” says Carol Lavender, president of the Lavender Design Group in San Antonio.

Paul Cardis, CEO of Avid Ratings, which conducts an annual survey of buyer preferences, identified these must-haves in new homes:

Large kitchens with islands
Energy efficiency, including energy-efficient appliances, super insulation, and high-efficiency windows.
Home offices
Main-floor master suite
Outdoor living space
Ceiling fans
Soaking tub in the master suite and/or an oversize shower with a seating area
Stone and brick exteriors rather than stucco or vinyl
Community walking paths and playgrounds
Two-car garages, but three-car garages are even more desirable

Source: MarketWatch, Steve Kerch (01/30/2010)

Michael Carter
San Diego Real Estate Agent
MTC Future Realty
(619) 488-5774

Ten Inexpensive Ways to Wow Buyers

Michael Carter - San Diego Real Estate Agent — Tue, 26 Jan 2010 21:29:03 +0000

Here are 10 cheap ways to make a property more attractive to shoppers.

Improve first impressions. Touch up the paint on the front door and other areas that buyers see first.
Clean up the landscaping. Trim the hedges and trees and plant some annuals in the flowerbeds.
Paint the interior. A coat of light yellow or cream with contrasting white woodwork looks fresh and clean.
Refurbish the floors. Buff the hardwoods. Install new carpets – or at least get them professionally cleaned.
Take care of the big problems. If the house needs a roof or the front stoop is crumbling, get them fixed.
Buy warranties. Putting appliances under warranty gives homebuyers a secure feeling.
Improve energy efficiency. New windows or improved insulation tell a potential buyer the seller is on top of things plus they come with tax benefits.
Replace light fixtures. Updated fixtures, especially at the entrance way and in the foyer, create a good first impression.
Buy a stove. Home owners whose kitchen isn’t top of the line can jazz it up for a few hundred dollars by buying a new stove, which gives the room a fresh feel.
Tidy up the bathrooms. Get rid of mildew, replace caulking and replace stained sinks.

Source: U.S. News & World Report, Luke Mullins (01/21/2010)

Michael Carter
San Diego Real Estate Agent
MTC Future Realty
(619) 488-5774

Government Announces Short Sales Guidelines

Michael Carter - San Diego Real Estate Agent — Thu, 03 Dec 2009 02:47:23 +0000

The U.S. Treasury Department announced new guidelines this week designed to make short sales go more smoothly.

To qualify under these new guidelines:

The property must be the home owner’s principal residence.
The home owner must be delinquent on the mortgage or close to defaulting.
The loan must have been made before Jan. 1, 2009, and be for less than $729,750.
The borrowers’ total monthly mortgage payment must exceed 31 percent of their before-tax income.

Under the plan, borrowers will receive $1,500 from the government for selling homes for less than the amount of their mortgages. Mortgage-servicing companies will get $1,000 for each completed short sale. Second-mortgage holders can receive up to $3,000 of the sales proceeds in exchange for releasing their liens. Investors who hold the first mortgage can collect up to $1,000 from the government for allowing the payments.

Borrowers who complete a short sale under the program must be “fully released” from future liability for the debt, according to the guidelines.

Source: Associated Press, J.W. Elphinstone (11/01/2009) and The Wall Street Journal, Ruth Simon (11/01/2009)

Michael Carter
San Diego Real Estate Agent
MTC Future Realty
(619) 488-5774