Last Weeks Stats

LISTINGS Residential (Single Family & Condo)
May 17 – 23, 2010 584
Last Year 594
May 9 -15, 2010 294
Last Year  200

Perspectives From Washington DC

The following bullet points are notes that I took at the National Association of Realtors (NAR) Mid-Year Meetings in Washington, D.C. last week.  Following that are some articles covering the same published by the NAR.  Our delegation personally heard from Senators McConnell and Bunning, and Representatives Yarmouth, Whitfield, Rogers, Guthrie, Chandler, and Davis. 

Speaker:  David Stevens, HUD Assistant Secretary and FHA Commissioner.

  • Two biggest problems for recovery are unemployment and negative equity.
  • HAMP Program (Home Affordability Modification Program has helped some (10-20%) but has been problematic.
  • Going forward we need to get back to the “New Normal” which will be sustainable (a word you hear a lot in Washington regarding the recovery)
  • FHA did 1.9 million loans last year (30% of the market)
  • Passage of House Bill HR 5072 is critical if FHA is to continue.
  • We were on the brink of a worldwide depression.
  • FED bought mortgage backed securities and that is why rates are at 5%.  If not they would be in the 7-7.5% range.
  • FHA is too big and is not sustainable….. nor should it be. It is a temporary fix, without it there would be few options.  The banks must start lending for the recovery to continue.
  • FICO scores will rise to 580, if less, a 10% down payment will be required.
  • 8,000 community banks are working and lending.
  • 9.9% unemployment currently.  Tax increases will come next year which will not help employment numbers.
  • Good news….85% of loans are solvent.
  • 90% of all loans are backed by the government…..not healthy or sustainable.
  • Bank of America has 1.4 million loans 60+ past due.

Speaker:  Lawrence Yun, NAR Chief Economist

  • Distressed sales represent 30-40% of the market (5% historically)
  • 4 million people took advantage of tax credits equally $12.6 billion.  Of those, 3 million probably would have purchased anyway, however, the net of 1 million new buyers was critical to stabilizing housing values. 
  • Without credit values would have decreased an additional 5-8%.
  • 8 million jobs have been lost.  500,000 have been created this year.
  • Household Formation is critical to stabilization.  We need fewer kids living at home with mom & dad.
  • Jumbo and second home loans must open up.  They are not government backed so they are not being made.
  • Rates will rise over the next year or two as the unemployment rate lowers.  There will be a direct correlation.
  • FHA flip rules need to be relaxed.

Speaker:  Mark Zandi, Chief Economist & Co-founder of Moody’s

  • The Gross Domestic Product (GDP) fell 2.5% over the last year, the worst since 1937.  It averages a 2.5-3% increase annually.
  • GDP should grow by 3% this year.
  • We should add 125,000 jobs per month this year, which is a break even point, and 250,000 per month next year which should give us traction.
  • Housing sales in 2012 should equal 2002-2003 levels which is healthy.
  • All sectors of business should increase within 12 months except state and local governments which have lost 20-25,000 jobs per month in 2010.
  • There are 10 million vacant homes, 8 million is a good target.
  • We are in the fourth wave of foreclosure which is “Strategic Default”: Homeowners can make the payment, however, it does not make financial sense to do so.
  • U.S. has a $1.4 trillion deficit.  At the current rate, a “Greece” scenario is conceivable within 10 years or less.
  • The United States overall public debt is closer to $14 Trillion.

NAR Articles:

Big Push on Capitol Hill for Real Estate Reforms

REALTORS® are asking Congress to strengthen the Federal Housing Administration, extend the FHA’s high-cost loan limits, and get flood and disaster insurance reforms passed as part of their push on Capitol Hill this week during the NATIONAL ASSOCIATION OF REALTORS®’ 2010 Midyear Legislative Meetings & Trade Expo.

Several thousand REALTORS® are in town and will be meeting with members of Congress over two days this week. Here’s a look at some of REALTORS®’ top legislative priorities:

Support for small business. REALTORS® would like the government to help small businesses get much-needed financing by allowing federal credit unions to loan a higher percentage of their assets than they can now. The increase is needed to help offset the difficulty small businesses are facing in getting loans from banks.

Stronger commercial market. Extending the Term Asset-Backed Securities Loan Facility (TALF) will help improve commercial mortgage market liquidity and push Congress to act quickly on reauthorizing funds for the popular Rural Housing Service Sec. 502 loan guarantee program, which is on the verge of running out of money.

Various FHA reforms. Legislation to strengthen the FHA would allow the agency to increase its annual mortgage insurance premium, which borrowers can fold into the loan amount. FHA Commissioner David Stevens has said that once the agency has that authority, it’ll be able to reduce its upfront mortgage insurance premium, which it raised several months ago to meet congressionally mandated reserve requirements. The upfront premium hurts borrowers more because it has to be paid in full at closing.

The FHA legislation would also give the agency more tools for enforcing rules against bad lenders. The legislation has passed the House Financial Services Committee. NAR’s goal is to put the bill on fast-track passage in the House, then get it introduced and passed in the Senate as soon as possible.

NAR is also seeking to make the FHA’s high-cost loan limits permanent. The limits, now at $729,750, expire in the fall. If the limits aren’t extended, they would drop to about $417,000, too low to make the FHA a viable financing option in many larger metropolitan areas like Boston, San Francisco, Washington, and New York.

Flood and disaster insurance. The reforms NAR is seeking of the national flood insurance and disaster insurance programs aim to strengthen private insurers’ role in handling most disasters, reserving federal involvement as a backstop. REALTORS® will be asking their members of Congress to pass the legislation in the House before Memorial Day. Then attention would turn to the Senate.

Helping the commercial securities market recover. The commercial mortgage-backed securities market, which for years has been the principal means for getting financing into commercial markets, is starting to come back. Yet new CMBS issues remain only a fraction of the volume that’s needed to meet demand. NAR is calling on the government to extend its TALF program to the end of the year so investors will have low-cost loans available to them to invest in commercial securities at a time when a lot of uncertainty remains about the strength of the market.

Preventing bad amendments. The big focus of Congress now is financial services reform. The bill is huge in scope, but only a part of it directly concerns real estate. REALTORS® have been successful in defeating draconian amendments, including one that would have required all borrowers to put down a minimum 5 percent. Supporters of that amendment and other tough measures that could hurt housing, including a defeated amendment that would have ended federal control of secondary mortgage market companies Fannie Mae and Freddie Mac in the near future, are expected to be introduced again at different junctures of the legislative process, so REALTORS® will be sharing with their members of Congress the danger the requirements would pose to the market now.

Careful treatment of Fannie and Freddie. NAR’s position on Fannie Mae and Freddie Mac reform is that it must be taken up separately, next year, and must be undertaken carefully. REALTORS® oppose ending federal control before a structure is in place to ensure the availability of mortgage financing in the market, in good times and bad, which is the role the two companies are playing today.

— Robert Freedman, REALTOR® Magazine

When Will the Housing Market Rebound?

All the signs are there for continued improvement in the economy as well as housing markets, but it will be several years before real estate practitioners can expect to see markets returning to equilibrium, two of the country’s top economists told REALTORS® this week.

By the end of this year, practitioners should see 5.4 million existing-home sales and home price growth of up to 3 percent, said NAR Chief Economist Lawrence Yun.

Already many markets are seeing home price increases, including San Diego, where prices are up some 16 percent. Orange County, Calif., and Boston are two other strong areas, with price increases of 10 percent to 12 percent, Yun said.

Did the Tax Credit Make a Difference?

The federal home buyer tax credit has been essential for getting buyers back into the market, stabilizing inventories, and shoring up prices, Yun said. He estimated that the credit — which is available to buyers who had properties under contract by April 30 and who close on their sale by June 30 — brought more than 4 million households into the market since it was enacted about two years ago. That includes about 1 million who otherwise wouldn’t have bought.

More fundamental to the improving housing picture is the increasing strength of the economy, which is on track to expand by 3.1 percent this year after shrinking 2.5 percent last year, Yun said.

With inflation tame and interest rates low, businesses are enjoying robust profitability and their balance sheets are in the best position they’ve been in for years, said Mike Zandi, chief economist for Moody’s That’s helping with employment, which about two months ago turned positive for the first time since the economic crisis began and is now seeing about 125,000 net jobs added a month, he said.

Working Through the Inventory

Even with those good signs, practitioners are unlikely to see home prices reach a level that balances with the country’s growing population for several more years, maybe not until 2014, Zandi said. It’ll take that long to work through the country’s large overhang of inventory from high foreclosures.

There are almost 4.5 million distressed residences in the United States today, meaning the homes are in foreclosure or the owners are several months behind on their payments, Zandi said. The housing market can’t return to equilibrium — which Zandi defined as something over 7 million sales a year to meet population demand — until that overhang is addressed.

In the meantime, those distressed homes are keeping downward pressure on prices. He doesn’t think values will start to show any signs of improvement across the board until next year.

What Could Jeopardize Recovery

Both Yun and Zandi cited the federal government’s budget deficit as a risk that could derail the economy if a credible plan for addressing it isn’t put forward. Zandi said the government’s emergency intervention to stem the mortgage crisis was necessary — despite sending the deficit higher — because without it the economy would still be in a crisis and interest rates would be much higher, making recovery that much more difficult.

Now, he said, the government must make it a priority to rein in the deficit.

Yun said what’s happening in Europe, as Greece wrestles with its credit crisis, also poses risk to the United States. If Greece defaults and other countries run into trouble, the global market for U.S. mortgage-backed securities could be hurt badly, forcing up interest rates and driving down home sales.

The crisis in Greece could also be a preview of what the United States will face if it doesn’t turn its attention to deficit reduction.

– By Robert Freedman, REALTOR® Magazine

With the housing recovery still fragile, it’s hard to look ahead with anything but caution. However, the long-term prospects for the market are “incredible,” FHA Commissioner David Stevens told REALTORS® yesterday in the opening forum of the 2010 NAR Midyear Legislative Meetings & Trade Expo.

Young households today represent a demographic block larger than even the baby boomers, and their entry into the housing market promises to help build “an incredible real estate market in the future,” said Stevens. But first the housing market must move from recovery to stability and then to long-term growth, and that will only happen if investors regain confidence in the mortgage market. And for that to happen, the mortgage market must be reformed to reward transparent financing structures.

Stevens credited NAR’s role in helping Congress and the administration stabilize the market through its support of a “mosaic” of pragmatic policies, such as:

• The Federal Reserve’s $1.25 trillion dollar investment in Fannie Mae and Freddie Mac mortgage backed securities, which helped keep interest rates historically low.
• The home buyer tax credit, which has so far been taken by 2.2 million households for $16 billion in total returns
• The federal government’s foreclosure prevention efforts, which have helped 1.1 million households.

That mix of programs has led to today’s housing recovery but the job won’t be finished, he says, until the federal government steps out of the picture and the market stands on its own. “We constantly talk about exit strategy,” Stevens said, referring to the administration’s goal of unwinding its mortgage-market interventions.

To help protect the recovery, Stevens urged REALTORS® while they’re in Washington this week to convince lawmakers to pass FHA reform legislation under consideration in the House as soon as possible. That legislation, H.R. 5072, would enable FHA to lower the upfront mortgage insurance premium and instead fold a higher annual premium into the loan, a change that would align FHA with the approach used in the private sector. The legislation would also give FHA more tools for clamping down on bad lenders.

The changes in the mortgage insurance premium are needed to help FHA improve its financial picture and restore its reserves to its congressionally mandated level. Not having the authority it needs to change its premium structure “is costing FHA $300 million a month in money it’s not getting,” he said.

“You are the recovery,” he told the packed room of REALTORS®. “Now we’ve got to finish the job.”


LISTINGS Residential (Single Family & Condo)
May 3 -9, 2010 584
Last Year 644
April 25 – May 1, 2010 328
Last Year  231
LISTINGS Residential (Single Family & Condo)
May 10 – 16, 2010 566
Last Year 593
May 2 – 8, 2010 325
Last Year  223

4 Fundamentals of Selling a Home Today

Here are four things sellers should understand about today’s market to make their homes as saleable as possible:

1. Real estate pricing is very local: “When you’re looking at comparables, you have to see what’s sold in the past three months. Look at your competition and what’s under agreement,” advises Colette Casey-Brenner, sales manager at Coldwell Banker Arlington, Mass.

2. Get property pics online: Stage the property, then take pictures and video. Better yet, hire a professional photographer to do the job.

3. Disclosure is key: Tell potential buyers what’s wrong before they figure it out. That eliminates last-minute re-negotiations and cold feet.

4. Clean, clean, super-clean: A clean and clutter-free property makes potential buyers likely to pay more, says David Kelman, an associate with RE/MAX Landmark in Milton, Mass.

Source: Boston Globe (04/29/2010)


LISTINGS Residential (Single Family & Condo)
April 26 – May 2, 2010 605
Last Year 491
April 18 – 24, 2010 257
Last Year  171