Wa State Home Sales begin to Stabalize

Western Washington home sales during December nearly equals year-ago levelsKIRKLAND, Wash. (Jan. 5, 2011) – December‟s volume of pending sales around Western Washington nearly matched the total for the same month a year ago, which was the best December since 2006.

Sellers accepted offers from 4,359 buyers last month, only 40 fewer than a year ago when members of Northwest Multiple Listing Service reported 4,399 pending sales of single family homes and condominiums. In 2008, members notched 3,255 pending sales, down from 2007‟s total of 3,950 pendings and the 2006 figure of 5,744 mutually accepted offers.

Eight counties had year-over-year increases in pending sales for December, with two others equaling the year-ago totals.

“If you were in any mall in Washington state in December, you got the feeling that the economy is headed in the right direction,” said OB Jacobi, president of Windermere Real Estate Company and a member of the board of directors of Northwest Multiple Listing Service. “That increase in consumer confidence is the boost the real estate market needs,” he suggested.

Closed sales, another barometer of activity, improved on November‟s volume, but dipped about 6 percent when compared to figures from twelve months ago. MLS members reported 4,430 closings across its 21-county service area during December. A year ago, brokers logged 4,711 completed transactions.

For 2010, Northwest MLS members tallied 52,408 closed sales of single family homes and condos (combined), up slightly from the previous year when there were 52,105 completed transactions.

“Despite the expiration of the tax credit, King County saw about 3 percent more home sales in 2010 than in 2009,” Jacobi noted.

The area-wide median price for last month‟s closed sales of homes and condos was $255,000, up slightly from November‟s figure of $250,000, but down about 3.8 percent from a year ago when the median selling price was $265,000. In King County, where 40 percent of last month‟s closings occurred, the median sales price was $342,400, about 2.2 percent lower than a year ago when it was $350,000.

Listing activity tapered off last month compared to 12 months ago. Northwest MLS members added 5,460 new listings of single family homes and condominiums during December. That‟s down 7 percent from a year ago when 5,873 sellers listed their homes with a member-broker.

Last month‟s additions boosted system-wide inventory to 32,171 at month end. That number nearly equals the selection of a year ago when the NWMLS database encompassed 32,152 active listings, although thirteen counties have fewer properties for sale than at this time a year ago.

Measured by months supply (the time, in months, that it would take to sell existing inventory at the current rate of sales), there is a supply of less than 7.4 months across the NWMLS market area. (A market with a supply of approximately six months is considered balanced, favoring neither buyers nor sellers.)

Nationwide, the National Association of REALTORS® reported a 9.5-month supply. Both King and Snohomish counties have less than a 6-month supply.

“Buyers are taking their time and looking for the „perfect‟ house,” Jacobi observed. “One of our agents worked with a couple for over a year before a higher-end home they'd been eying for months had a price drop and they jumped on it,” he noted, adding, “Whether it's a starter home or a luxury property, to sell in today's market a great home also needs to have a great price.”

Lawrence Yun, NAR chief economist, described continuing gains in home sales as encouraging and believes all the indicator trends are pointing to a gradual housing recovery. “In addition to exceptional affordability conditions, steady improvements in the economy are helping bring buyers into the market,” he commented. However, he cautioned, further gains are needed to reach normal levels of sales activity, and home price prospects will vary depending largely upon local job market conditions.

NAR president Ron Phipps, broker-president of Phipps Realty in Warwick, R.I., expects good buying opportunities to continue. The third generation real estate professional noted serious buyers have a lot of opportunities during the winter months since “traditionally there are far fewer buyers competing for properties at this time of year.” He believes buyers will enjoy favorable affordability conditions into the new year, even though he expects mortgage rates will gradually rise as 2011 progresses.

Northwest Multiple Listing Service, owned by its member brokers, is the largest full-service MLS in the Northwest. Its membership includes more than 24,000 brokers and agents. The organization, based in Kirkland, currently serves 21 counties in Western and Central Washington.

Snoqualmie Ridge 2010 Real Estate Review

*Prices drop a modest 3% Year over Year
*Sales Volume increases by 3%
*Average Day on Market come down by 21 Days.

In comparing 2010 Residential Sales at Snoqualmie Ridge to 2009 overall prices were fairly flat with volume and average days on market showing slight signs of improvement.

In 2009 Snoqualmie Ridge saw 179 Single Family Home Sales. In 2010 that number increased to 185. The Average Single Family Home at Snoqualmie Ridge sold for $493,569 in 2010. That is down for an average of $509,794 in 2009. (A drop of $16,370 for the average home or just over 3%)

In 2009 the average home was: 2,823 sq ft, took 142 Days on Market to sell, had an average starting list price of $559,424 and a final SALES price of $509,795

In 2010 the average home was: 2,876 sq ft, took 121 Day on Market to sell, had an average starting list price of $529,449 and a final SALES price of $493,569

All of these are very good trends after back to back years of double digit price drops in 2008 and 2009. We’re still a long way from moving 300+ homes in a year and seeing price improvement, but actual market stabilization may be seen by midyear and with rates remaining low and prices down to near 2003 levels it is very conceivable that we see well over 200 Single Family Homes move at Snoqualmie Ridge in 2011.

New Location for The Cascade Team RE Main Office

We are happy to announce a new location for the Main office of The Cascade Team Real Estate. We have secured the western side office in St George Square in Gillman Village in Issaquah.

We will be opening our doors in the new location on January 1st, 2011.

The address is: 355 NW Gilman Blvd., Suite 101, Issaquah, WA 98027

In celebration of the new location we are hosting a public Open House on Friday January the 7th from 4:00 until 7:00. Please feel free to stop in and say “Hello”. We will have appetizers, champagne on hand and also gifts for the public and for agents who stop in.

5 Predictions for 2011

Freddie Mac analysts point to five features that they believe will likely characterize the 2011 housing and mortgage markets:

1. Low mortgage rates. With Fed observers expecting the central bank to keep the federal funds rate at its current target range of 0 percent to 0.25 percent for most (or all) of 2011, relatively low mortgage rates will be a feature of the 2011 mortgage market. Thirty-year fixed-rate loans are likely to remain below 5 percent throughout the year, and initial rates of 5/1 hybrid adjustable-rate mortgages will likely remain below 4 percent in 2011.

2. Prices have hit bottom. House prices are likely to begin a gradual, but sustained recovery in the second half of 2011.

3. Housing will remain affordable. With affordability high, many first-time buyers will be attracted to the housing market in the New Year, likely translating into more home sales in 2011 than in 2010.

4. Refinances will dwindle. Many eligible borrowers have already refinanced and the federal Making Home Affordable refinance program is expiring on June 30. While fixed-rate loans are likely to remain low, they will move up gradually, making it even less likely that refinances will be attractive to most home owners.

5. Delinquency rates will decline. Based on the last several business cycles, the share of loans that are 90 or more days delinquent or in foreclosure proceedings — known as the "seriously delinquent rate" — generally crests within a year of the start of the recovery in payroll employment, and this economic recovery appears to fit within that pattern. Payrolls began to rise last January, and by the spring the seriously delinquent rate had begun to fall.

Source: Freddie Mac (12/09/2010)

Mortgage rates hit 4.61 pct

The time to buy is now! Home prices have dropped by nearly 30% to at or near 2003 levels and rates are still historically low..... BUT CLIMBING!

By JANNA HERRON, AP Real Estate Writer Janna Herron, Ap Real Estate Writer –

NEW YORK – Rates on fixed mortgages rose for the fourth straight week this week. The surge could slow refinancings and further hamper the housing market.

Freddie Mac said Thursday that the average rates on 15- and 30-year fixed loans increased sharply from last week. Mortgage rates tend to track the yields on 10-year Treasury bonds. Those yields have been rising as investors anticipate Congress will extend the Bush-era tax cuts for two years and long-term unemployment benefits for 13 months.

The 30-year rate rose to 4.61 percent from 4.46 percent last week. That is well above the 4.17 percent rate hit a month ago — the lowest level on records dating back to 1971.

The average rate on a 15-year fixed loan, a popular refinance option, rose to 3.96 percent. Rates hit 3.57 percent last month — the lowest level since 1991.

Rates are rising after plummeting for seven months. Investors are selling Treasury bonds in anticipation of the tax deal President Barack Obama and Republicans forged that could boost the economy next year if passed. A stronger economy would make the stock market a more attractive place to invest money. That's a big reason why many investors are selling their safer Treasurys bonds.

The sell-off is adding more Treasury bonds to market, which depresses prices and raises yields. Prices and yields move in opposite directions.

Rising mortgage rates are chilling the market for refinancing, especially among those who were seeing rates fall a few weeks ago and thought they might get a better deal. Refinance activity fell for the fourth straight week last week, according to the Mortgage Bankers Association.

"Our business has been cut by 30 percent in four weeks," said Michael Moskowitz, president of Equity Now, a direct mortgage lender in New York.

Low mortgage rates did little to boost the struggling housing market. However, the increase in rates may have convinced some homebuyers who were waffling to go ahead and make a move. Applications for home purchases rose for the third consecutive week and are at their highest point since the beginning of May. Mortgage brokers and real estate agents agree that a sustained rise in mortgage rates eventually will sideline potential buyers who started to think of historically low rates as a given.

"It's all about negative psychology," said Julie Longtin, a real estate agent with RE/MAX Cityside in Providence, R.I. "Already my buyers are thinking about withdrawing until rates dip again."

That would weigh on home prices, which have started to fall again. The ranks of homeowners who owe more than their homes are worth would grow and more won't be able to refinance to shore up their finances. Americans, feeling less wealthy, could hunker down again and curb their spending. That would slow economic growth.

"If rates stay south of 5 percent, I don't think we go back into a tailspin," said Mark Zandi, chief economist at Moody's Analytics. "Above 5 percent, it gets dicey for housing and the economy."

To calculate average mortgage rates, Freddie Mac collects rates from lenders across the country on Monday through Wednesday of each week. Rates often fluctuate significantly, even within a single day.

Rates on five-year adjustable-rate mortgages averaged 3.60 percent, up from 3.49 percent. The five-year hit 3.25 percent last month, the lowest rate on records dating back to January 2005.

Rates on one-year adjustable-rate home loans slipped to 3.27 percent from 3.25 percent.

The rates do not include add-on fees, known as points. One point is equal to 1 percent of the total loan amount.

The average fee for 30-year and 15-year mortgages in Freddie Mac's survey was 0.7 point. It was 0.6 point for five-year and one-year mortgages.

A Positive Surprise for Wa Home Sales!

KIRKLAND, Wash. (Dec. 6, 2010) – Northwest Multiple Listing Service members recorded a few pleasant surprises last month. Pending sales during November outgained the same month a year ago, marking the first year-over-year increase since April, when the tax credits expired.

Also noted as encouraging were an upswing in relocation sales, shrinkage in the number of new listings added to inventory, and a year-to-date volume of closed sales that is outpacing 2009.

Northwest MLS director OB Jacobi described last month’s gain in the number of transactions written as “surprising.” “That’s surprising, since November is typically one of the slowest sales months of the year, and this year we essentially lost a week to poor weather conditions.” Jacobi, the general manager at Windermere Real Estate Company, also reported increased activity at open houses last month.
Jacobi suggested the increase in sales was due in part to an uptick in interest rates that motivated some buyers to move forward, combined with a desire for people to be in their new homes before the holidays.

Members of NWMLS, which covers 21 counties in Washington, reported 4,987 pending sales of single family homes and condominiums during November. That volume of mutually accepted offers was up about 2 percent from twelve months ago, when brokers logged 4,888 pending sales.

In the four-county Puget Sound region, pending sales rose more than 2.8 percent, from 3,829 a year ago to last month’s total of 3,938. That’s the highest November volume since 2006.

“We're seeing an upswing in relocation sales after a long lull, which indicates a positive sign in terms of local hiring,” Jacobi remarked, adding, “Employers traditionally want new hires in place by the first of the year, so sales are happening now.”

House-hunters have ample choices in most price ranges, with inventory currently priced from $15,000 for a manufactured home in Shelton (Mason County) to a $28.8 million home on Mercer Island.

Inventory is up slightly (1.6 percent) from twelve months ago, but fewer new listings were added during November compared to a year ago. At month end, NWMLS tallied 36,835 active listings of single family homes and condominiums in its database, which compares to the year-ago total of 36,266 listings.

Members reported 6,340 new listings during November, about 6.8 percent fewer than a year ago when they added 6,801 residential properties. Last month’s additions included 5,401 single family homes and 939 condominiums.

The shrinkage in new listings coming onto the market is lowering the month’s supply of inventory in those areas, noted J. Lennox Scott, chairman and CEO of John L. Scott Real Estate. Area-wide, there is about a 7.3 month supply at the current sales pace. King County has about a 5.7 month supply. The National Association of Realtors (NAR) reported a 10.5 month supply at the end of October. (A market with a supply of approximately six months is considered balanced, favoring neither buyers nor sellers.)

With inventory plentiful, brokers say buyers are taking their time before making any decisions.

“Move-up buyers are moving into the market,” Jacobi said, but noted, “They know value and have the luxury of time. Buyers are willing to wait for the right home at the right price, and then they jump on it. A few years ago, the hares were driving the market. Now it's the tortoises. Today's buyer's motto seems to be: Slow and steady wins the race.”

Commenting on move-up buyers, Lennox Scott noted an increase in home sales last month in the mid-price ranges in both Seattle and the Eastside.

Prices on sales that closed last month dipped below year-ago totals. The median price area-wide for November’s closed sales of single family homes and condominiums was $250,000, down about 5.7 percent from the year-ago figure of $265,000.

In King County, prices edged up slightly, from $337,000 to $340,000. Clallam, Grant, Jefferson, Okanogan, San Juan, Skagit and Whatcom counties also reported year-over-year price gains.

Condominium prices continue to slump. The median price for last month’s closed sales was $204,500, down more than 11 percent from twelve months ago when the median price was $229,950.

Through eleven months, the volume of closed sales for 2010 is slightly ahead of 2009 (up 1.2 percent).

Tight credit continues to worry brokers, despite favorable affordability conditions.
“Everyone is wondering how long interest rates are going to remain low, but that's impossible to predict with certainty,” observed Lennox Scott. “At the moment at least, they're at near-historic lows, but every one percent increase in interest rates reduces buying power by 10 percent. And this can have a significant impact on a person's ability to buy a home,” he stated.

NAR’s chief economist, Lawrence Yun, expects the recent sales pattern to continue. In remarks accompanying NAR’s latest report on the housing market, he described it as experiencing an uneven recovery. The temporary foreclosure stoppage in some states is likely to have held back a number of completed sales, he noted. “Still,” he said, “Sales activity is clearly off the bottom and is attempting to settle into normal sustainable levels.”

Northwest Multiple Listing Service, owned by its member brokers, is the largest full-service MLS in the Northwest. Its membership includes more than 24,000 brokers and agents. The organization, based in Kirkland, currently serves 21 counties in Western and Central Washington.

A Tale of Two Houses

House #1
A 20 room mansion (not including 8 bathrooms) heated by natural gas. Add on a pool (and a pool house) and a separate guest house, all heated by gas. In one month this residence consumes more energy than the average American household does in a year. The average bill for electricity and natural gas runs over $2400 per month. In natural gas alone, this property consumes more than 20 times the national average for an American home. This house is not situated in a Northern or Midwestern 'snow belt' area. It's in the South.

House #2
Designed by an architecture professor at a leading national university. This house incorporates every 'green' feature current home construction can provide. The house is 4,000 square feet (4 bedrooms) and is nestled on a high prairie in the American southwest. A central closet in the house holds geothermal heat-pumps drawing ground water through pipes sunk 300 feet into the ground.

The water (usually 67 degrees F) heats the house in the winter and cools it in the summer. The system uses no fossil fuels such as oil or natural gas and it consumes one-quarter electricity required for a conventional heating/cooling system. Rainwater from the roof is collected and funneled into a 25,000 gallon underground cistern. Wastewater from showers, sinks and toilets goes into underground purifying tanks and then into the cistern. The collected water then irrigates the land surrounding the house. Surrounding flowers and shrubs native to the area enable the property to blend into the surrounding rural landscape.

HOUSE #1 is outside of Nashville , Tennessee ; it is the home of the 'Environmentalist' Al Gore.

HOUSE #2 is on a ranch near Crawford , Texas ; it is the residence of the ex-President of the United States , George W. Bush.

Now THAT is the definition of an "inconvenient truth"!!


Verify at: http://www.snopes.com/politics/bush/house.asp

Fed Releases Updated Appraisal Guidelines

The Federal Reserve, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corp., the Office of Thrift Supervision and the National Credit Union Administration jointly on Thursday released the latest and what is expected to be final version of property appraisal guidelines.

The new guidelines set a standard for appraisal independence. Lenders can exchange information with appraisers, but they cannot "directly or indirectly coerce, influence, or otherwise encourage an appraiser or a person who performs an evaluation to misstate or misrepresent the value of the property."

Among other rules:

· Banks cannot tell the appraiser of any expected or qualifying estimate of value.
· Banks cannot specify a minimum value requirement for the property that is needed to approve the loan or as a condition of ordering the valuation.
· Banks cannot tie an appraiser's compensation to loan approval.
· Banks can’t blacklist an appraiser if his valuations fail to meet expected thresholds.

The agencies also clarified that broker price opinions (BPOs) don’t comply with the minimum appraisal standards.

Source: Housing Wire, Jon Prior (12/02/2010)

Protect Home Ownership. Defend MID

The Mortgage Interest Deduction (MID) is vital to both home ownership and our economy.

I'm disappointed that anyone in Congress — or on a Presidential Commission — would even suggest limits to the Mortgage Interest Deduction. Mortgage interest has been deductible for nearly 100 years, and the proposed changes will affect all 75 million home owners in the United States. We must act now to make sure the MID is not changed.

Ever since the Deficit Commission announced its conclusions, the news media have been buzzing about the report. And what do they emphasize? Proposals to limit or even eliminate the Mortgage Interest Deduction. I'm concerned because all this does is scare the public — and potential buyers — away from the housing market. The last thing the housing industry needs right now (and for the foreseeable future) is another bucket of ice water to be thrown on the market. People who hear these news reports don't differentiate between a proposal and a done deal. They just know that a tax provision they actually understand and rely on is under siege.

This is just unacceptable.

A "Tiny" House Boom!

See The Video HERE:


By TERENCE CHEA, Associated Press Terence Chea, Associated Press – Mon Nov 29, GRATON, Calif. –

As Americans downsize in the aftermath of a colossal real estate bust, at least one tiny corner of the housing market appears to be thriving.

To save money or simplify their lives, a small but growing number of Americans are buying or building homes that could fit inside many people's living rooms, according to entrepreneurs in the small house industry.

Some put these wheeled homes in their backyards to use as offices, studios or extra bedrooms. Others use them as mobile vacation homes they can park in the woods. But the most intrepid of the tiny house owners live in them full-time, paring down their possessions and often living off the grid.

"It's very un-American in the sense that living small means consuming less," said Jay Shafer, 46, co-founder of the Small House Society, sitting on the porch of his wooden cabin in California wine country. "Living in a small house like this really entails knowing what you need to be happy and getting rid of everything else."

Shafer, author of "The Small House Book," built the 89-square-foot house himself a decade ago and lived in it full-time until his son was born last year. Inside a space the size of an ice cream truck, he has a kitchen with gas stove and sink, bathroom with shower, two-seater porch, bedroom loft and a "great room" where he can work and entertain — as long as he doesn't invite more than a couple guests.

He and his family now live in relatively sprawling 500-square foot home next to the tiny one.

Shafer, co-owner of the Tumbleweed Tiny House Company, designs and builds miniature homes with a minimalist style that prizes quality over quantity and makes sure no cubic inch goes to waste. Most can be hooked up to public utilities. The houses, which pack a range of amenities in spaces smaller than some people's closets, are sold for $40,000 to $50,000 ready-made, but cost half as much if you build it yourself.

Tumbleweed's business has grown significantly since the housing crisis began, Shafer said. He now sells about 50 blueprints, which cost $400 to $1,000 each, a year, up from 10 five years ago. The eight workshops he teaches around the country each year attract 40 participants on average, he said.

"People's reasons for living small vary a lot, but there seems to be a common thread of sustainability," Shafer said. "A lot people don't want to use many more resources or put out more emissions than they have to."

Compared to trailers, these little houses are built with higher-quality materials, better insulation and eye-catching design. But they still have wheels that make them portable — and allow owners to get around housing regulations for stationary homes.

Since the housing crisis and recession began, interest in tiny homes has grown dramatically among young people and retiring Baby Boomers, said Kent Griswold, who runs the Tiny House Blog, which attracts 5,000 to 7,000 visitors a day.

"In the last couple years, the idea's really taken off," Griswold said. "There's been a huge interest in people downsizing and there are a lot of young people who don't want to be tied down with a huge mortgage and want to build their own space."

Gregory Johnson, who co-founded the Small House Society with Schafer, said the online community now has about 1,800 subscribers, up from about 300 five years ago. Most of them live in their small houses full-time and swap tips on living simple and small.

Johnson, 46, who works as a computer consultant at the University of Iowa, said dozens of companies specializing small houses have popped up around the country over the past few years.

Before he got married, Johnson lived for six years in a small cabin he built himself and he wrote a book called "Put Your Life on a Diet: Lessons Learned from Living in 140 Square Feet."

"You start to peel away the things that are unnecessary," said Johnson, who now lives in a studio apartment with his wife. "It helps you define your priorities with regard to your material things."

Northern California's Sonoma County has become a mini-mecca for the tiny house industry, with an assortment of new businesses launching over the last few years.

Stephen Marshall, 63, worked as a building contractor for three decades before the real estate market tanked three years ago. That's when he jumped into the tiny house business, starting Petaluma-based Little House On The Trailer.

His company builds and sells small houses that can serve as stand-alone homes equipped with bathrooms and kitchens, and others he calls "A Room of One's Own" that can be used as a home office or extra bedroom. Many of his customers are looking for extra space to accommodate an aging parent or adult children who are returning home, he said.

He said his small houses, which sell for $20,000 to $50,000, are much cheaper than building a home addition and can be resold when the extra space is no longer needed. His company has sold 16 houses this year and aims to sell 20 next year.

"The business is growing as the public becomes aware of this possibility," Marshall said. "A lot of families are moving in with one another. A lot of young people can't afford to move out. There's just a lot of economic pressure to find an alternative way to provide for people's housing needs."

New Lending Guidelines From Fannie Mae

By LYNNLEY BROWNING
NEW lending guidelines being rolled out by Fannie Mae will make securing a mortgage a lot easier for some borrowers but harder for others.
The rules, effective on Dec. 13, will allow buyers to use gifts and grants from nonprofit groups for their minimum 5 percent down payment, which is the threshold set by Fannie Mae, the government-owned company that sets lending standards and buys mortgages from lenders. (Freddie Mac is considering similar new guidelines, said Brad German, a spokesman.)

Previously, borrowers had to contribute a minimum 5 percent down payment from their own funds, but additional down payment money could be from a gift (though never from a home seller). The exception was for borrowers who put 20 percent down: all that money could come as a gift.

Because many lenders now require a down payment of 10 percent or more, the new rules mean that borrowers will still have to come up with extra funds — either their own or gifts.
Still, “this is definitely going to help upgrade buyers and young couples who for whatever reason don’t have enough money and are getting some from their families,” said Edward Ades, the owner of Universal Mortgage, a broker in Brooklyn.

The gift rules apply only to single-family principal residences, including town houses, co-ops and condominiums, and covers mortgage amounts in excess of 80 percent of the property’s value. Also, there is a limit on the loan balance — $729,000 in high-cost areas like New York City, and $417,000 in other areas.

Now, the not-so-good news.

Fannie Mae is getting tougher on debt-to-income ratios, or the amount of a borrower’s gross monthly income that goes toward paying off all debts. The maximum ratio for those seeking a conventional mortgage will drop to 45 percent from 55 percent under the new guidelines.

The agency is also taking a harder look at payment histories on revolving debt. In the past, if a borrower missed a monthly payment, Fannie Mae ignored it, or required that lenders add a few percentage points to the total balance when calculating the debt-to-income ratio. Now, buyers who have missed a payment will have 5 percent of the total balance added to their ratios.
Mr. Ades said that new hurdle could sink many potential borrowers with student-loan debt that has been deferred.

Susan A. Kreyer, the president of the New York Association of Mortgage Brokers, added that buyers who had bought big-ticket items through financing with delayed payments would also be affected.

In addition, Fannie Mae is scrutinizing people who are at the end of their mortgages, with 10 or fewer payments left. It will now count those remaining balances in the debt-to-income ratios — another departure. Mortgage experts say that older buyers near the end of their loans may now have a tougher time securing a loan for a second home.

But perhaps the toughest news from Fannie Mae concerns borrowers who have gone through foreclosure. They will be excluded from obtaining a Fannie-backed loan for seven years, up from four. “That’s a long time in this economy,” Ms. Kreyer said. That change was announced separately from the gift and debt rules, but will also take effect in Fannie Mae’s automated underwriting systems next month.

Fannie Mae buys or guarantees around $3.2 trillion in residential loans, about 28 percent of the entire residential mortgage market in the United States. Lenders typically issue loans based on the agency’s guidelines.

Buyers who do not meet the new Fannie Mae requirements may have to consider a nonconforming loan from the Federal Housing Administration. These loans, which do not follow Fannie Mae underwriting guidelines, require mortgage insurance premiums and, for those with low credit scores, higher interest rates and steeper down-payment requirements.

A version of this article appeared in print on November 21, 2010, on page RE6 of the New York edition

Should credit-score firm revise policy?

By KENNETH R. HARNEY
WASHINGTON POST WRITERS GROUP

WASHINGTON — Here’s a home­owner credit torture scenario that has a major real estate lobby on Capitol Hill demanding immediate reforms.

Say a homeowner has a solid payment record on just about all his accounts. The last time he checked, his credit scores were comfortably in the 750s.

Suddenly he receives a notice from the bank that because of “market conditions,” the equity line limit has been cut to $35,000 — slightly above the $30,000 balance outstanding — from $60,000. Then one of his credit-card issuers delivers more bad news: The $20,000 limit has been reduced to $10,000. The balance on the card is about $9,000.

The cuts could send the home­owner’s credit scores plunging into the upper 600s. This in turn could put him out of reach for a refinancing at a favorable interest rate or hamper his ability to buy a house and sell his current one.

The reason for the score plunge: With the reductions in credit limits, the homeowner is is using a higher percentage of credit — $30,000 of the $35,000 revised limit (86 percent) on his home equity line, and $9,000 of the $10,000 limit (90 percent) on the card. Scoring models typically penalize high use rates because they correlate with delinquency problems.

The largest lobby group on Capitol Hill, the 1.1 million-member National Association of Realtors, is demanding that the creator of the FICO score that dominates the mortgage market — Fair Isaac Corp. — act immediately to lessen the negative impacts when banks abruptly cancel or slash nondelinquent customers’ credit lines.

The group wants FICO either to ignore the use rate for consumers with solid histories of on-time payments or to compute the score as if the credit maximum had not been reduced.

Asked for a response, Joanne Gaskin, Fair Isaac’s director of mortgage scoring solutions, said research conducted by the company last year found that consumers who use 70 percent of their available credit “have a future bad rate 20 to 50 times greater than consumers with lower utilizations.” Ignoring this key indicator, the study said, would “decrease [the score’s] predictive power.”

The National Association of Realtors has also asked Fair Isaac to help out with the nationwide foreclosure crisis by revising its model to recognize lender codings on credit file accounts indicating that homeowners had received loan modifications approved under federally backed programs.

Rather than treating borrowers’ reduced post-modification payments as ongoing evidence that the mortgage was “not paid as originally agreed” — which depresses scores sharply — the association said FICO scores should reflect that the lender agreed to lower payments and borrowers are making payments “as agreed.”

Mortgage Rates Back on the Rise

Rates for 30-year fixed mortgages rose to 4.39 percent this week from 4.17 percent a week ago, and average interest on 15-year loans moved to 3.76 percent from 3.57 percent, said Freddie Mac.

Interest for five-year adjustable-rate mortgages jumped to 3.4 percent from 3.25 percent, meanwhile, and one-year ARMs held at 3.26 percent. Rates have climbed along with long-term Treasury yields as traders unloaded Treasurys purchased before the Federal Reserve announced a $600 billion bond purchase program.

Source: Chicago Sun-Times (11/19/10)

Credit Score Requirements Stifling Borrowers

Despite record-low interest rates, an increasing number of Americans can’t afford to buy a house.

The nation’s two largest mortgage lenders, Wells Fargo & Co. and Bank of America Corp., have raised the minimum required credit score on FHA-insured loans to 640 from 620.

Requiring a 640 credit score excludes about 15 percent of FHA borrowers, FHA commissioner David Stevens said.

Such a high limit will further delay a recovery in the real estate market, says Ron Phipps, president of the National Association of REALTORS®.

Source: Bloomberg, Jody Shenn and John Gittelsohn (11/17/2010)

Lenders face lawmaker wrath over foreclosures

WASHINGTON/CHARLOTTE, North Carolina (Reuters) – Banks under fire over their foreclosure practices face twin hearings in Congress this week, at which they will come under renewed pressure to find ways to keep borrowers in their homes.

The hearings on Tuesday and Thursday will include the first appearances by executives from major lenders like Bank of America and JPMorgan Chase since the furor over sloppy foreclosure paperwork erupted in September.

Banks are accused of having used "robo-signers" to sign hundreds of foreclosure documents a day, a fiasco that has reignited public anger with banks that received billions of dollars in taxpayer aid during the financial crisis.

Lenders will be pressed on whether the paperwork problems are further evidence that modifying loans is a better alternative to eviction.

"Foreclosure should be the last option and we need to examine barriers to mortgage modifications," Democratic Senator Tim Johnson, expected to lead the Banking Committee next year, said in an emailed response to Reuters.

Other witnesses at Tuesday's Senate Banking Committee hearing include Iowa Attorney General Tom Miller, who is leading a 50-state probe of foreclosure practices.

Miller's testimony will be closely watched. A settlement with lenders could include fines or commitments to loan modifications.

Bank of America and JPMorgan were among banks that temporarily suspended foreclosures pending internal reviews of their practices, but have since begun to resume sales of foreclosed properties.

Some lawmakers and consumer activists called in October for all lenders to institute a national moratorium on foreclosures, but they failed to gain traction due to fears it would further depress home sales and crimp economic growth.

Real estate data company RealtyTrac said the temporary suspensions by banks led to a 9 percent drop in U.S. foreclosures in October from the month prior.

Republican Representative Spencer Bachus, the front-runner to be chairman of the House Financial Services Committee next year, said the paperwork problems are "disturbing," but singled out federal regulators for criticism.

"It is disappointing that the regulators didn't catch this before the media since most of the problems in the contested foreclosure proceedings occurred at the nation's largest banks," Bachus told Reuters in an email.

The House panel's foreclosure hearing is set for Thursday.

COST TO BANKS

The mortgage paperwork mess threatens to eat into bank profits by delaying sales of bank-owned properties, drawing fines from regulators, and spawning lawsuits from both homeowners and investors in mortgage-backed securities.

Some industry analysts have said a bigger cost for banks stems from investor demands that they buy back billions of dollars of mortgage bonds because they misrepresented the quality of the underlying loans.

Georgetown University law professor Adam Levitin, a witness on Tuesday, sees a fundamental danger highlighted by the sloppy paperwork. He believes the mortgage industry has failed to properly track the ownership of loans, undermining the legal standing of mortgage-backed securities.

The U.S. government's Home Affordable Modification Program has had limited success and banks have been reluctant to reduce the principal owed, a step that can require approval by multiple investors, and causes banks and investors to take losses.

Nevertheless, some economists and housing experts believe the time has come for lenders and mortgage investors to accept reductions in the amounts they are owed.

"It just cannot be the case that foreclosure is preferable to modification -- including reductions of principal -- for a significant proportion of mortgages where the dead-weight costs of foreclosure, including a distressed sale discount, are so high," Federal Reserve Governor Daniel Tarullo said in a speech at George Washington University law school on Friday.

The Fed and other federal banking regulators are reviewing the processes large banks have in place for foreclosures.

Congress is currently led by the Democrats, but big losses at the November 2 elections mean Republicans will control the House next year while Democrats retain the Senate with a reduced majority.

That split in control could ensure legislative gridlock and minimize lawmakers' influence on the foreclosure issue.

"I have no hopes for this Congress whatsoever," said John Taylor, president of the National Community Reinvestment Coalition. Taylor said he is placing his hopes for a mortgage modification push in the state attorneys general.

(Reporting by Dave Clarke and Joe Rauch; Additional reporting by Kevin Gray in Miami and Dan Levine in San Francisco; Editing by Tim Dobbyn)

Mortgage rates fall to fresh lows this week

By JANNA HERRON, AP Real Estate Writer Janna Herron, Ap Real Estate Writer – Thu Nov 11, 3:28 pm ET
NEW YORK – The mortgage rate bar is even lower, but few homebuyers are making the jump.

Rates on fixed mortgages again fell to their lowest levels in decades this week, Freddie Mac said Thursday, after the Federal Reserve unveiled a massive bond-buying program to help spur economic growth.

That marked more than a half-year of record lows. But housing activity has still faltered.

"I have zero purchase deals," said Wisconsin mortgage broker John Stearns. "That's how it's been for months."

Stiff headwinds — unemployment, foreclosures and tight credit — are undermining attractive rates and forcing buyers to the sidelines.

Home sales logged their worst summer in decades, with third-quarter sales falling by 21 percent from a year ago, the National Association of Realtors said Thursday. Median home prices fell in half of U.S. cities in the July-to-September period, up from a third in the previous quarter.

And banks are on pace to take back more than 1 million homes this year, foreclosure listing firm RealtyTrac Inc. said Thursday. Recent investigations into faulty paperwork have postponed some foreclosure sales, resulting in a 9-percent drop in home repossessions in October from the previous month.

Major lenders temporarily halted some foreclosures while they reviewed their practices and attorney generals in all 50 states launched a joint investigation into the issue. But many have resumed or plan to resume foreclosures soon.

"While that put a pause in the foreclosure process, that doesn't do anything to help delinquencies," said LendingTree chief economist Cameron Findlay.

Economic woes, such as unemployment or reduced income, continue to be the main catalysts for foreclosures. Borrowers who owe more than their homes are worth are also at high risk and their numbers are rising.

Zillow Inc. said Wednesday that the number of mortgage holders who are "upside down" on their home loans rose in the third quarter to 23 percent. Homeowners with negative equity have a harder time refinancing even though rates are enticingly low.

The average rate on 15-year fixed loans, a popular choice for refinancing, fell to 3.57 percent from 3.63 percent, Freddie Mac said. That's the lowest since the survey began in 1991. The average rate for 30-year fixed loans fell to 4.17 percent from 4.24 percent last week. That's the lowest on records dating back to 1971.

The Federal Reserve detailed plans last week to buy $600 billion in Treasury bonds. The central bank gave more details on Wednesday, saying it plans to purchase $105 billion in Treasurys over the next month. The extra demand means Treasurys will produce lower yields for investors. Mortgage rates tend to track those yields.

To calculate average mortgage rates, Freddie Mac collects rates from lenders across the country on Monday through Wednesday of each week. Rates often fluctuate significantly, even within a single day.

Rates on five-year adjustable-rate mortgages fell to their lowest level in at least five years. They averaged 3.25 percent, down from 3.39 percent a week earlier. It is the lowest rate on records dating back to January 2005.

Rates on one-year adjustable-rate home loans were unchanged at 3.26.

The rates do not include add-on fees, known as points. One point is equal to 1 percent of the total loan amount.

The average fee for 30-year and 15-year fixed loans in Freddie Mac's survey was 0.8 point. It was 0.7 point for 1-year and five-year mortgages.

Home Sales Could Enter 'Virtuous Cycle'

Consumer confidence and business spending are key to whether the U.S. housing market will move into a virtuous or a vicious cycle in 2011, NAR Chief Economist Lawrence Yun told a packed audience at the Residential Economic Outlook Forum Friday in New Orleans.

After the downturn, the housing market has clawed its way back to a point of near stability, Yun said, with the pace of new foreclosures easing, sales moving toward historically normal levels and prices on a national basis gaining modestly.

At the same time, affordability remains strong. He said all of the price excesses from the housing bubble have been squeezed out. In San Diego, for example, buyers today would pay $1,564 a month in mortgage payments for a house that at the height of the boom would have cost them $2,833 a month.

The broader economy is also showing positive signs, with businesses enjoying strong profits, sitting on huge cash reserves, and even adding jobs. Yun predicts this positive trend to continue into 2011, with existing home sales reaching 5.5 million units, prices rising a modest 1 percent, and the U.S. gross domestic product increasing to about 2.5 percent.

“We are entering a virtuous cycle,” he said. But for the positive trend to continue, he added, businesses will have to start spending some of their cash to fuel job growth at a far greater pace than they’re doing now. Currently, businesses are adding jobs at a pace of about 100,000 a month. That needs to grow to about 400,000 a month for unemployment
to start shrinking.

The scenario will be far more negative if businesses continue to sit on their cash. In that case, sales will fall, inventories will rise, the high rate of foreclosures will resume, and the cost to the federal government of bailing out Fannie Mae and Freddie Mac will surge.

Federal Reserve Governor Thomas Koenig, who shared the data with Yun, said the Fed’s continued effort to spur the economy, most recently through a $600 billion bond buying program, is understandable given concerns over the slow pace of growth. But the continued subsidization of the market could unleash inflationary forces.

Yun said he sees possible evidence of inflation building, but it’s not visible now because the housing-cost portion of inflation measurements is holding down prices.

—Rob Freedman, REALTOR® Magazine

30-Year Mortgage Rates Inch Up 3rd Straight Week

Freddie Mac confirms that average interest for 30-year fixed mortgages rose for the third consecutive week, bumping up to 4.24 percent from 4.23 percent a week ago.

The average 15-year rate for the week ended Nov. 4 was 3.63 percent, a drop from 3.66 percent.

Source: St. Louis Post-Dispatch (11/05/10)

With rates still near record lows, and homes prices near 10 year lows, now is the time to buy. Rates basically have nowhere to go but up from here, and new government regulations taking affect in the spring of 2011 will further add to fees required to purchase.

Homeownership at lowest in a decade

By The Associated Press The Associated Press –

HOMEOWNERSHIP LOW: The percentage of homes owned by their occupants remained at 66.9 percent this fall, the lowest level in more than a decade. A rise in foreclosures and weak demand for housing have kept the rate low.

LOWEST SINCE 1990s: The last time the rate was lower was in 1999, when it was 66.7 percent.

REVERSING TREND: For decades, the rate was about 64 percent. It began climbing in 1995. Presidents Bill Clinton and George W. Bush encouraged home buying and the rate hit a peak of more than 69 percent in 2004. The housing market went bust two years later.

Realtors Support FHFA Proposal to End Private Transfer Fees

by Amber Pineda on October 26, 2010

RISMEDIA, October 19, 2010 (RISMedia.com) The National Association of Realtors (NAR) strongly supports the proposed guidance from the Federal Housing Finance Agency to prevent government-sponsored enterprises Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks from investing in mortgages encumbered by private transfer fee covenants.

In a letter sent to FHFA, NAR reiterated its opposition to these covenants, which developers often attach to a property to require payment of fees back to that developer each time the property is resold. These covenanted mandates are often extremely difficult to reverse once in place, and in many cases are attached to a deed for up to 99 years.

“As the leading advocate for homeownership and private property rights, we oppose private transfer fees, which decrease affordability, serve no public purpose, and provide no benefit to purchasers or the community where the home is located,” said NAR President Vicki Cox Golder, owner of a real estate company in Tucson, Ariz. “These fees increase the cost of homeownership and place an inappropriate drag on the transfer of property—they do little more than generate revenue for private developers or investors.”

NAR also made recommendations to FHFA if the agency decides to provide an exception for organizations such as homeowners associations, where there may be a direct benefit to the homeowner.

“If FHFA believes that some private transfer fees have a legitimate place in real estate markets, then we recommend they adopt strategies to minimize any unintended consequences. If an exception is made for certain organizations, such as homeowners associations, then FHFA should ensure that the fees paid are reasonable and fully disclosed—otherwise these properties could be at a disadvantage in the marketplace. FHFA should also consider an exception for existing properties with private transfer fees because the lack of an exception would curb the ability of homeowners to sell their homes,” said Golder.

There is virtually no oversight on where or how private transfer fee proceeds can be spent, on how long a private transfer fee may be imposed, or on how the fees should be disclosed to home buyers. For these reasons, 12 states have banned or restricted private transfer fees, including Arizona, Delaware, Hawaii, Illinois, Iowa, Maryland, Louisiana, Ohio, Mississippi, Minnesota, North Carolina and Utah.