Article of the Day

Freddie Mac Expects Low Mortgage Rates Through Mid-2012

12/23/2011 By: Carrie Bay 

 

Mortgage rates will likely remain very low, at least through mid-2012, according to Freddie Mac.

Rates on 30-year conforming mortgages have hovered around 4.0 percent or lower for the past quarter. The GSE says that in large part due to the Federal Reserve’s program for extending the maturity date for mortgage securities it holds. This program is expected to continue through the middle of next year.
This should keep fixed-rates for 15- through 30-year mortgages relatively low during the first half of the year, with rates edging up during the second half, Freddie Mac said in its latest market outlook.
In addition, the GSE says the Fed’s guidance that it will likely keep the target range for its benchmark federal funds rate near zero though mid-2013 ensures that initial

interest rates for adjustable-rate mortgages (ARMs) will also remain extremely low throughout 2012.
Freddie Mac also said in its outlook forecast that housing activity will be better in 2012, but not robust. The GSE says to expect fewer single-family originations but more multifamily lending next year.
Looking at the macroeconomic picture, Freddie expects stronger growth, in the range of 2.5 percent in 2012. While the national unemployment will decline going forward, the GSE expects it to remain above 8 percent through next year.
“While the headwinds remain strong going into 2012, there are indications the economy and the housing market are gaining ground, albeit slowly,” commented Frank Nothaft, Freddie Mac’s chief economist.
Nothaft says sustained and increased job growth are essential to move the recovery forward – and by that he means monthly payroll gains well above the 130,000 average seen in 2011.
In housing, Nothaft says to look for the rental market to lead the way and for some improvement in the single-family space to pop up in parts of the country.
While green shoots of recovery appear to be beginning to take hold, the industry shouldn’t set expectations too high.
“All told, next year will be another bumpy ride,” according to Nothaft.

Article of the Day

Study Finds 38% of Homes Purchased in 2011 Bought with Cash

12/23/2011 By: Carrie Bay 

Despite record low mortgage rates, 2011 has seen a surprisingly high level of cash home purchases, according to the real estate research firm Hanley Wood Market Intelligence.

Jonathan Dienhart and Ken Lee, two analysts with the company, say between tight lending standards and a desperate search for yield by investors, cash purchases of homes – particularly for distressed properties – became even more common in 2011 than last year.

The two discovered that 38 percent of homes purchased in 2011 were bought with all cash. That’s up from 34 percent in 2010, and double the 19 percent rate in 2006.
According to Dienhart and Lee, this trend is likely to continue in the near term. They note that cash-paying investors are responsible for an increasing share of home purchases nowadays as prior homeowners abandon the ownership market and head back to rentals.

Article of the Day

Housing Market Strengthening But Long Road to Recovery Lies Ahead

12/23/2011 By: Krista Franks 

The year 2011 is ending on a high note as economists anticipate some signs of recovery ahead. Prices appear to be reaching their trough, visible supply is on the decline, and banks are beginning – just slightly – to loosen lending standards, according to a fourth-quarter report from Capital Economics.

However, Capital Economics warns these positive signs do not point to an immediate recovery.
Taking into account the historic ratio between disposable income and housing prices, homes were undervalued by 23 percent in the third quarter. Homes have not been this undervalued since at least 1975.
Since 2006, prices have declined 33 percent, countering the sharp increases of the boom years. Therefore, “[it is clear that prices don’t need to fall further,” Capital Economics says.

Nondistressed home prices in particular seem to have bottomed out. While home prices declined 4 percent this year, prices of nondistressed homes fell only 0.5 percent.
Having reached the bottom, however, prices will not jump far in the new year. Capital Economics predicts national home prices will remain unchanged over the next two years before seeing positive movement – a 2.5 percent increase – in 2014.

This past year has seen some positive movement in housing inventory with a 20 percent decrease in the number of homes listed for sale over the year. However, supply will remain an obstacle moving forward as the current shadow inventory is estimated at 4 million.

Demand will also continue to be an issue. However, the report notes the market has seen a slight increase in home sales, which it attributes to first-time buyers.

Banks are contributing to rising demand and supply absorption by allowing loans with loan to value ratios of 80 percent or even slightly higher, something that has not occurred since mid-2008, according to Capital Economics.
The overall economy will not help boost the housing market in the coming year as the U.S. will continue to be affected by the euro-zone crisis.

The rental market will continue to be the best-performing segment of the market.

Article of the Day

Study: Twin Cities rank among best regions for business

Minneapolis / St. Paul Business Journal by Ed Stych, Web Producer

Date: Wednesday, December 14, 2011, 9:59am CST

 

A new study says the Twin Cities is the fourth-best region for business.

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The Twin Cities area is the fourth-best community for business in the nation, according to a new study that measures the regions with the highest concentration of business and the strength of their economic output.
Washington, D.C.; Boston; and Des Moines, Iowa, ranked ahead of the Twin Cities in the list compiled by MarketWatch, a division of The Wall Street Journal.
In the bottom 10 of the 102 largest communities in the country were five California cities, three Florida cities and two Ohio cities. Stockton, Calif., finished last.

The 8 Healthiest Housing Markets

Daily Real Estate News

Many of the housing markets projected to have the biggest gains into 2012 tend to be the home to major universities, strong private sector employment, or have nearby military bases, according to a list of the healthiest housing markets by Builder Magazine. Builder teamed with Hanley Wood Market Intelligence to compile its annual list of the healthiest housing markets in the country, factoring in housing projections from Moody’s Economy.com. The list was based on projected price appreciation, population growth, income growth, and improving employment picture. 

The following are the eight cities that topped Builder’s list, including projected housing permits in 2011 and 2012. 

1. Minneapolis-St. Paul-Bloomington Minn.-Wis.

2011 Building Permit Forecast: 4,511

2012 Building Permit Forecast: 10,118

Home prices here are expected to rise 8 percent next year, the highest growth projected in the 100 cities analyzed. As a hub for medical technology and headquarters for several large companies, employment is expected to grow 2.5 percent in 2012. 

2. Fort Collins-Loveland, Colo.

2011 Building Permit Forecast: 1,004

2012 Building Permit Forecast: 1,650

With Colorado State University the major employer here and often ranked as one of the best cities to live in the country, households are expected to grow by 2.7 percent in 2012 and employment is expected to grow 2.6 percent. Housing permits are expected to rise 50 percent as well, according to Moody projections. 

3. Salt Lake City, Utah

2011 Building Permit Forecast: 1,294

2012 Building Permit Forecast: 1,181

With lots of high-tech businesses, Salt Lake City is poised to have some grains in employment and income in the coming year. After a drop in home prices, prices are expected to rebound and increase 4.7 percent next year. 

4. Jacksonville, Fla. 

2011 Building Permit Forecast: 2,284

2012 Building Permit Forecast: 4,363

Jacksonville has a strengthening employment picture, with a military presence and a growing financial services sector. Employment is expected to increase 3.2 percent in 2012. With stabilizing home prices already, prices are expected to rise 5 percent next year and housing permits are expected to double. 

5. Miami-Fort Lauderdale-Pompano Beach, Fla. 

2011 Building Permit Forecast: 2,708

2012 Building Permit Forecast: 7,522

This metro area is expected to reverse course with jobs forecasted to grow by 2.7 percent, home prices stabilizing, and housing permits expected to double. The rebound is expected to be mostly driven by two major projects, the CitiCentre and Resorts World Miami, are expected to add tens of thousands of jobs in coming years.

6. Charlottesville, Va. 

2011 Building Permit Forecast: 634

2012 Building Permit Forecast: 798

The city is home to the University of Virginia and also continues to attract a surge in second-home buyers from the Washington, D.C., area. Home prices are expected to rise 1 percent in 2012 and median income is forecasted to grow by 3.7 percent.

7. Colorado Springs, Colo. 

2011 Building Permit Forecast: 2,099

2012 Building Permit Forecast: 3,639

The biggest employers in Colorado Springs are military bases and the Air Force Academy, which are expected to see big growth when the troops from Afghanistan return. Home prices are expected to rise 2.6 percent, employment to grow by 1.4 percent, and households to increase by 1.8 percent in 2012. 

8. Oklahoma City, Okla. 

2011 Building Permit Forecast: 3,417

2012 Building Permit Forecast: 5,284

At 6.1 percent, Oklahoma City has one of the lowest unemployment rates in the country. Furthermore, the job market is expected to continue to rise there, and incomes are projected to increase 3 percent next year. While the area has a seen a drop in home prices recently, housing prices are projected to rebound and increase 2.6 percent as Oklahoma City’s low cost of living continues to attract businesses and new households. 

Recent Changes to Fannie and Freddie

Compliments of Chris Safe @ Bell Mortgage

 
Changes in the mortgage industry happen at a rapid clip – often on a daily basis. Here are some of the most recent changes regarding Fannie Mae and Freddie Mac, the government sponsored enterprises (GSEs) that currently own about 50 percent of all U.S. mortgages.

Fannie Mae owns a division known as HomePath. HomePath works to get buyers into foreclosed properties by offering special incentives such as 3.5 percent closing costs. As of October 31, 2011, this incentive will expire. That doesn’t mean that they’re no longer willing to pay any closing costs; it just means that your Realtor will need to negotiate some form of closing cost assistance as part of the deal.

As of this writing, Fannie Mae still has a FirstLook program. The program gives home buyers, who plan to occupy the property as their own, first chance at making an offer. Investors must wait 15 days before making a bid.

The American Recovery and Reinvestment Act of 2009 allowed Fannie Mae to purchase loans of up to $729,750 (for single-family homes) in designated high-cost areas. Congress continued to extend that limit until October 1 of this year. That loan limit is now reduced to $625,500. This means that a loan of up to $625,500 (in designated high-cost areas) is still considered “conforming” and borrowers won’t be charged “extra” as they will for a jumbo mortgage that kicks in above that limit. For non-designated high-cost areas, the limit is still $417,000. You can access a list of those high-cost areas in this pdf file: http://www.fhfa.gov/webfiles/19489/HighCost_PL111-242.pdf.

Freddie Mac has a division similar to Fannie Mae’s but it is known as HomeSteps. HomeSteps is currently offering the same FirstLook initiative that allows homebuyers the first chance to make an offer on home for 15 days after the initial listing. They are also offering a 2-year home warranty and up to 30 percent savings on new appliances on any newly purchased foreclosures that they currently own.

They are also offering a new opportunity for condo buyers who make an offer by November 15 and close by December 30, 2011 to pay up to $1500 to cover HOA (Home Owner Association) dues. If you have any questions about any of the buyer bonuses that Freddie Mac or Fannie Mae are offering, discuss these details with your real estate and mortgage professionals.

Why should you use a Realtor when buying a home?

Many people don't really understand how using a Realtor to buy a home works.  There is a lot of confusion and misinformation about how a Buyers Realtor gets paid.  This post explains exactly how it works and why you really should use a Realtor when buying a home.

First of all, the seller is the one who pays the Buyers Agents commission.  Here's how it works.  The listing agent will negotiate with the Sellers and agree on a percentage of the homes sale price as compensation.  For illustration purposes, let's use 6%.  So the listing agent has an agreement with the Sellers for them to pay 6% in commission when the house sells. This is not all for the listing agent, however - this 6% pays both the listing agent and the buyers agents commission. Now when the listing agent lists the property, they state how much compensation the Buyers Agent receives in the listing.  The norm in this market for a traditional sale is 2.7%.  Banks usually pay 3% to the Buyers Agent. With short sales and some traditional sales, the payout will only be 2.5%.  So the Seller is the one paying the Buyers Agents commission - the Buyer is not paying any commission in the greater majority of these transactions.  There is one major exception.

The exception is when Buyers and their Agents agree, in their written Contract to Represent, that the Buyer will pay the agents commission or the difference between what the Seller pays and a specific number.  Why would a Buyer agree to this when Sellers pay the commission? Consider this scenario:  A Realtor is helping a Buyer buy an investment property in Minneapolis for $20,000-$40,000. Make no mistake, there are many homes in Minneapolis and St. Paul in this price range or even lower. By the way, if this sounds appealing to you, there are also other factors to consider - City required repairs can cost as much or more than you paid for the house - and they are very stringent and many times require you to use a licensed contractor.

The Realtor has taken the buyer through 10 to 20 homes in Minneapolis before they found the right one. They have spent, say 40 hours with the client, driving them around, using up gas and their time.  The Realtor also provides their expertise in dealing with the city of Minneapolis, the required repairs for the house, etc.  If the purchase price is $20,000 and the Buyers agent Payout is 3%, then the Realtors commission would be $600.  But wait - Realtors also have to pay a portion to their brokerage - usually anywhere from 10%-50%.  So that $600 is now $300-$550 depending on the brokerage split.  Then the Realtor has to pay taxes on top of that.  It doesn't sound like it would be worth it to anyone to do this, now does it?  Especially since the investor will probably cash flow the home from month 1. 

So in a scenario like this, the Realtor will establish a base commission and the investor/buyer will have to agree to it in a written contract before they write up an offer on any homes.  Again, this is usually used only when the buyer is buying a home under $100,000 and not all agents use it.

So what does it cost a Buyer to use a Realtor to buy a home?  There is one fee from the Realtor's brokerage.  It's called a Broker Commission, Broker Admin Fee, Broker Fee or a few other names.  It covers the brokers investment in the transaction, which is basically the payroll for the administrative staff that go through and process the completed purchase agreements, etc.  The fee is usually between $350-$425 and is paid at closing, either on the settlement statement or separately to the agent. 

That is all a Buyer is going to pay for using a Buyers Agent.  If you chose not to use a Buyers Agent and had a lawyer draw up your contract, you would most likely pay more than that $350-$425 you would pay to your agent's brokerage.

Other benefits?  Your Realtor will have access to more information than you will. A big portion of the listings and information on the internet are outdated, sold, expired, canceled or just wrong.  You could spend hours looking at homes, find a few that you love and then find out they sold months ago.  Your Realtor has access to the most up to date information, as well as other information that doesn't show up in the public view of listings. To start the search, your Realtor can get your criteria from you, that is your minimum amount of bedrooms, baths, garage stalls, sq footage, yard space, cities, price range, whether or not you are looking for a foreclosure or traditional sale, etc and set you up on an auto search that will search for homes matching your criteria and email you new listings as they come on.

Another benefit - Your Realtor will know the market.  Besides personal experience, they have tools to look up comparable active properties, pending sale properties, and recently sold properties. They can then create a CMA, or Comparative Market Analysis, which will give you a good idea of what to offer on the property.  They also have experience dealing with Banks, Lenders and other agents.  They know the process and are an advocate for you when dealing with Sellers and their agents. They write up the offer with you, present it and negotiate until you come to an agreement. If there is an issue after the acceptance of the purchase agreement, such as something that you found in the inspection and want repaired before closing, they negotiate that with the Sellers Agent and make sure it is taken care of. They can guide you through the process, recommend lenders, inspectors, title companies, handymen to do work after the sale, etc and make sure you are comfortable with every step.  They provide their expertise and explain the different aspects of the purchase agreement, such as the different contingencies like the Inspection Contingency or the 10 day Right of Rescission after receipt of condominium documents, etc. 

Remember, this is their full time job ( in most cases).  They provide valuable expertise, advice, contacts and negotiation skills in a major transaction for you.  Having an agent gives you an edge and you are handicapping yourself if you choose to go without one.