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What Will Home Prices Do In 2014 - 2015

Posted by James Trammell on May 19, 2014 at 1:10 AM Comments comments (1)

Can Home Prices Continue to Rise in 2014?

 December 16, 2013 by Mark Ferguson 

 home prices continue to riseThe real estate market has been appreciating in most areas of the country over the last two years. Some people are concerned rents and home prices are reaching unattainable levels similar to the situation before the recent housing crisis. The big question is whether price increases can be sustained or if we are in for dropping prices and more distressed sales. Here is a great read on the cities in the US with the 12 biggest increases in prices.

 

To add to the concern with increasing house prices, many people are saying there is still shadow inventory coming on the market from banks. The theories state the banks have held on to foreclosures and or not foreclosed on delinquent borrowers due to government regulations and other factors. However, I am a REO listing broker, who has heard about shadow inventory for three years and it has yet to materialize. We have seen big increases in prices in my area (Colorado) and many other areas across the United States; can home prices continue to rise in 2014?

 

Prices have risen in Colorado

 I am by no means an expert on the United States housing market, but I am an expert in my area. I have been a licensed Real Estate agent since 2001, I sell well over 100 homes a year, I buy fix and flips and long-term rental properties. Knowing values and my market is extremely important to my business and success. The median price my town and surrounding area is about $175,000 and the median price in the US is about $177,500. I think those prices are similar enough for my theories to hold weight in most of the country. There are going to be places where prices are much higher or lower where some of my ideas might not work, but I can’t research every market in the country.

 

The housing crisis helped to bring on this price increase

 There are multiple reasons I believe the housing crisis helped cause the sharp rise in housing prices. The most obvious reason is that house prices decreased across the country for years. Over the history of the United States housing prices have always increased due to inflation, building costs and other factors. When housing prices stayed stable for 7 years it makes sense they are do for an increase. When housing prices drop for seven years, the prices are really due for an increase. Of course many areas had a sharp increase in values before the housing market crash, but many areas had modest increases like my area in Colorado.

 

The second reason the housing crisis has caused home prices to increase; building almost stopped in the United States for 7 years. There were so many foreclosures during the housing crisis and the market had an ample supply of inventory for all price ranges. There was no way for builders to compete with low-priced distressed inventory so they stopped building. The US population continues to rise and housing must be built to keep up with that demand. Since there was no building for years, we are left with a housing shortage, especially in the lower price ranges.

 

Cost to build new homes is affecting house prices

 In my area we are seeing a huge increase in new home builds. We saw almost no building for years, but with the market stabilization and now an inventory shortage the builders have come back. I checked my MLS system a few months ago to see just how many builders were in the area. I counted 52 builders in our county alone with active listings in the MLS system! A few years ago there was one, maybe two builders who had homes listed in the MLS.

 

The new construction is definitely bringing in more inventory to the housing market, but what kind of inventory is it? I mentioned that our average price is $175,000, but the builders can barely build homes below $200,000 in our area. Most of the new construction is well above $200,000 and that is not going to cure the inventory shortage in the lower end of the market. If our median price is $175,000 then that means over half of the market is not being affected by the new construction. The lower end of the market must rely on resale’s to supply their housing market. With REO inventory continuing to decrease there is no place for the market to go, but up. Core Logic shows Reo inventory is down 33 percent from a year ago.

 

What changes could cause a decrease in housing prices?

 First off my analysis does not apply to all markets. I know many areas of the country have housing prices 5 times higher than our prices and they have unique markets. I have no idea what those prices will do, but historically it seems those market go up and down with huge variances. However, I do think there are some factors that could influence most markets across the country and cause a price decrease.

 

Housing prices are tied into the US economy. If people have jobs and are making money they can afford to buy homes. If we were to see another recession or the unemployment rate to increase significantly, then I could see our housing market decline again. I don’t think we will see the drop in housing prices that we previously saw, because investors are chomping at the bit to get good deals right now. I don’t think the investors will let prices decline very far, because they could rent those homes and still make money. I am an investor myself and not too worried about a price decrease or rent decrease, because I make sure I have plenty of room in my investments for market corrections.

 

If there really is a large shadow inventory of distressed properties looming in the background. I believe there would have to be a couple of scenarios for that shadow inventory to significantly affect housing prices.

1.The shadow inventory would have to be huge; millions and millions of foreclosures. Right now there is so much demand for distressed properties that I believe a large amount of distressed inventory could be absorbed easily in most markets.

2.The shadow inventory would have to be released in a very short amount of time. Over the last three years we have seen foreclosures released very slowly by banks. They are not dumping inventory all at once and that has helped to revive the housing market. If a large amount of inventory was released in a few months it could affect housing prices, but I don’t think that will happen based on past bank actions.

 

What about the hedge funds and their buying spree?

 Many people are concerned about the hedge funds and their rental property strategy. I wrote an article on it a few months ago on why I don’t think their actions will affect most of the housing market. I think the hedge funds have driven up prices in local markets, but overall they have purchased a tiny fraction of the US housing market. If they all decided to sell their inventory at once, they could bring down prices in a few US markets. I do not think they are all going to sell their homes at once, because it would not benefit them to destroy housing markets where they hold significant inventory.

 

Conclusion

 I think prices will continue to rise in most areas of the country, at least in the lower end of the market. There is no way for builders to build cheap enough to meet low-end demand and there is simply not enough inventory for that market segment without price increases. I think we could see another housing crash, but it would take major economic changes in the US economy or banks completely changing strategies on how they dispose of REO inventory that they may or may not have.

 

Shadow Inventory 2014

Posted by James Trammell on May 19, 2014 at 1:05 AM Comments comments (0)

Shadow Inventories Are Quickly Vanishing, Report Says

 

 

Daily Real Estate News | Friday, April 04, 2014

 

For the past three years, the shadow inventory has declined year-over-year and posted double-digit declines for the past 16 consecutive months as the housing market continues to heal, Anand Nallathambi, president and CEO of CoreLogic, says in the company’s February 2014 National Foreclosure Report.

 

The national residential shadow inventory was 1.7 million homes in January – a 23 percent year-over-year drop from 2.2 million in January 2013. Foreclosures also continued to fall last month, dropping to 43,000 in February, 15 percent lower than year ago levels.

 

“Although there is good news that completed foreclosures are trending lower, the bigger news is the impressive decline in the foreclosure and shadow inventories,” said Mark Fleming, chief economist for CoreLogic. “Every state has had double-digit, year-over-year declines in foreclosure inventory, which is reflected in the $70 billion decline in the shadow inventory.”

 

Over the past year, shadow inventory has been falling at an average monthly rate of 41,000 units, CoreLogic reports. The states that hold 42 percent of all distressed properties in the nation are: Florida, California, New York, New Jersey, and Illinois.

 

Other highlights from the report:

• About 752,000 homes were in some stage of foreclosure or known as “foreclosure inventory” as of February 2014 – a 35 percent drop over year ago levels.

• 1.9 million mortgages – or 4.9 percent – were in serious delinquency by the end of February. Serious delinquency is defined as loans that are 90 days or more past days and includes loans in foreclosure or REO.

• The five states with the highest foreclosure inventory in February (as percentage of all homes with a mortgage) were: New Jersey (6.2%); Florida (6%); New York (4.7%); Maine (3.4%); and Connecticut (3.2%).

• The five states with the lowest foreclosure inventory in February were: Wyoming (0.3%); Alaska (0.4%); North Dakota (0.5%); Nebraska (0.5%); and Colorado (0.6%).

 

Source: CoreLogic

 

Refinance ? Keep in mind the essential dos and don?ts

Posted by Catherine on December 24, 2012 at 3:05 AM Comments comments (0)

It’s evident that the lowest mortgage rates that you’re experiencing now, has actually triggered off an avalanche of new mortgages. In fact, the Mortgage Banker’s Association is expecting to see about 3 trillion dollars in business this year. However, it’s literally the new buyers who seem to be interested in applying for the home loans. Statistics show that 80 percent of the recent home loans actually went to the current homeowners going in for refinance. The Association is of the opinion that the average buyer of a 30 years fixed mortgage who makes a 20 percent down payment actually pays 4.63 percent now. However, it has been seen observed most aren’t qualifying for these great rates.

The dos and don’ts of refinancing

If you’re looking forward to refinancing your mortgage, then here are some dos and don’ts that you should keep in mind so that you qualify for these great rates.

1. Do enhance your credit

The very first thing that you should do is enhance your credit score so that you can take the benefit of the great rates. This might actually prove hard if you’re planning a refinance because you’ve got a tight budget. Begin by getting hold of a copy of your credit score. Now, if your credit score isn’t too high, then you should consider working on it for a few months by paying off your debt and removing errors. You should then consider applying for refinance. Of all the factors that a bank generally considers when applying for a loan, this one happens to be the one that you can easily get rid of.

2. Don’t make the mistake of overextending

It’s important that you don’t make the mistake of overextending yourself. Remember, lenders these days are coming back to the traditional way of thinking about the debt to income ratios. Hence, it’s important that you think the same too. A few decades ago the front end debt to income ratio was 25 percent. Now, banks are likely to consider your back end debt to income ratio as well. This includes all your monthly loan payments, say for instance your credit card or student loan payments and likewise. Basically the problem begins when the lenders start allowing the debt to income ratio to climb up to 30 percent and higher.

3. Do pay your points

It’s always advisable that you pay your points or closing costs on time, and especially if you have plans of staying on the loan for a long period of time. When you had got your mortgage, you probably chose not to pay your points, however you should pay them if you’re looking forward to getting the best rates. Don’t be misled by seeing the statistics of a loan without any points. Remember, paying the higher costs up front can actually reduce your monthly payments to a great extent.

4. Don’t consider same payment over a longer mortgage

Never make the mistake of considering the same payment for a longer mortgage period. Rather it’s always advisable that you try and swing your current payment, in lieu of simply going in for a refinance to decrease your monthly bills. You could change over to a 15 years mortgage. As for the fact if you sell your house in between, you’ll have built up on your equity to a great extent by then.

You should keep in mind the 4 dos and don’ts in mind whenever you go in for refinance. For otherwise, there are chances that you just might not qualify for the great rates available.

 

Obama extends help to struggling homeowners ? Loan modification benefits

Posted by martinez on April 27, 2012 at 6:05 AM Comments comments (0)

With the rise in the number of monthly debt obligations and the bruised job market in the US, most of the homeowners are struggling with their monthly mortgage payments. The Obama administration is extending its home mortgage assistance program in order to extend help to all those struggling homeowners who don’t qualify for home mortgage modification. As the nation’s housing market is tumbling, you need to take immediate steps to get on the right track so that you don’t end up losing your home to a forced foreclosure. The Obama Administration is not only giving the struggling homeowners an option to breathe a sigh of relief, but it is also helping the nation’s real estate market to boost itself. If you’re not aware of the home mortgage modification benefits, read on.

 

You can forestall a foreclosure: The biggest benefit of modifying your home loan is that you can avoid a foreclosure. Since the home loan is a secured loan that pledges your home as collateral, the moment you start defaulting on the loan amount, you’ll lose your home to a foreclosure. No bank or financial institution enjoys foreclosing a house as they lose a large amount while carrying out the entire process. Therefore, you should get help from the process mortgage modification if you want to forestall a foreclosure.

 

You can change the interest rates: The interest rate that you pay on the mortgage loan is usually the most probable reason for mortgage defaults. If you’ve fallen back on your monthly mortgage payments due to sky-high rates that your mortgage lender is charging you, you may get your loan modified and the interest rate lowered. With lower interest rates, you can even revise the monthly payments and thereby save a considerable amount of money in a month.

 

You can change the term of the loan: You may have taken out a 15 year term mortgage loan as you thought that you can make the payments on time. If you are presently going through a credit crunch and you feel that you can’t make the payments on time, you should speak with your mortgage lender and make sure that you extend the term to a 30 year loan so that you can lower the monthly payments and thereby repay without falling back on all the other monthly debt obligations.

 

When you feel that you can’t make the monthly installments on your home loan, negotiate with your mortgage lender. Draft a mortgage modification hardship letter stating the reason for not being able to make the payments on time and close the deal. Just ensure that you make the payments on time after your loan is modified so that you don’t hurt your credit score.

Home buyer tips

Posted by James Trammell on January 27, 2011 at 10:13 PM Comments comments (0)

7 Steps to Take Before You Buy a Home

By: G. M. Filisko

 

By doing your homework before you buy, you’ll feel more content about your new home.

 

1. Decide how much home you can afford

Generally, you can afford a home priced 2 to 3 times your gross income. Remember to consider costs every homeowner must cover: property taxes, insurance, maintenance, utilities, and community association fees, if applicable, as well as costs specific to your family, such as day care if you plan to have children.

 

2. Develop your home wish list

Be honest about which features you must have and which you’d like to have. Handicap accessibility for an aging parent or special needs child is a must. Granite countertops and stainless steel appliances are in the bonus category. Come up with your top-five must-haves and top-five wants to help you focus your search and make a logical, rather than emotional, choice when home shopping.

 

3. Select where you want to live

Make a list of your top-five community priorities, such as commute time, schools, and recreational facilities. Ask your REALTOR® to help you identify three to four target neighborhoods based on your priorities.

 

4. Start saving

Have you saved enough money to qualify for a mortgage and cover your downpayment? Ideally, you should have 20% of the purchase price set aside for a downpayment, but some lenders allow as little as 5% down. A small downpayment preserves your savings for emergencies.

However, the lower your downpayment, the higher the loan amount you’ll need to qualify for, and if you still qualify, the higher your monthly payment. Your downpayment size can also influence your interest rate and the type of loan you can get.

Finally, if your downpayment is less than 20%, you’ll be required to purchase private mortgage insurance. Depending on the size of your loan, PMI can add hundreds to your monthly payment. Check with your state and local government for mortgage and downpayment assistance programs for first-time buyers.

 

5. Ask about all the costs before you sign

A downpayment is just one homebuying cost. Your REALTOR® can tell you what other costs buyers commonly pay in your area—including home inspections, attorneys’ fees, and transfer fees of 2% to 7% of the home price. Tally up the extras you’ll also want to buy after you move-in, such as window coverings and patio furniture for your new yard.

 

6. Get your credit in order

A credit report details your borrowing history, including any late payments and bad debts, and typically includes a credit score. Lenders lean heavily on your credit report and credit score in determining whether, how much, and at what interest rate to lend for a home. Most require a minimum credit score of 620 for a home mortgage.

You’re entitled to free copies of your credit reports annually from the major credit bureaus: Equifax, Experian, and TransUnion. Order and then pore over them to ensure the information is accurate, and try to correct any errors before you buy. If your credit score isn’t up to snuff, the easiest ways to improve it are to pay every bill on time and pay down high credit card debt.

 

7. Get prequalified

Meet with a lender to get a prequalification letter that says how much house you’re qualified to buy. Start gathering the paperwork your lender says it needs. Most want to see W-2 forms verifying your employment and income, copies of pay stubs, and two to four months of banking statements.

If you’re self-employed, you’ll need your current profit and loss statement, a current balance sheet, and personal and business income tax returns for the previous two years.

Consider your financing options. The longer the loan, the smaller your monthly payment. Fixed-rate mortgages offer payment certainty; an adjustable-rate mortgage offers a lower monthly payment. However, an adjustable-rate mortgage may adjust dramatically. Be sure to calculate your affordability at both the lowest and highest possible ARM rate.

 

Lead based paint new EPA regulations

Posted by James Trammell on June 25, 2010 at 12:46 AM Comments comments (0)

EPA Requirements

 

Common renovation activities like sanding, cutting, and demolition can create hazardous lead dust and chips by disturbing lead-based paint, which can be harmful to adults and children.

To protect against this risk, on April 22, 2008, EPA issued a rule requiring the use of lead-safe practices and other actions aimed at preventing lead poisoning. Under the rule, beginning April 22, 2010, contractors performing renovation, repair and painting projects that disturb lead-based paint in homes, child care facilities, and schools built before 1978 must be certified and must follow specific work practices to prevent lead contamination.

 

EPA requires that firms performing renovation, repair, and painting projects that disturb lead-based paint in pre-1978 homes, child care facilities and schools be certified by EPA and that they use certified renovators who are trained by EPA-approved training providers to follow lead-safe work practices. Individuals can become certified renovators by taking an eight-hour training course from an EPA-approved training provider. Learn how to become an EPA certified firm and where to take a training course near you.

 

Contractors must use lead-safe work practices and follow these three simple procedures:

Contain the work area.

Minimize dust.

Clean up thoroughly.

Short Sale No More State Tax On Forgiven Debit

Posted by James Trammell on April 28, 2010 at 12:36 AM Comments comments (0)

 

 Real Estate News | Permalink 

Published: Friday, April 23, 2010

 

Concerned homeownersno longer have to disburse California state income tax on debt forgiven in a short sale, forclosure, or loan modification. On the 12th of April, the Senate Bill 401 by and large supports California's tax management of mortgage debt relief income with federal law. For debt forgiven on a loan protected by a "qualified principal residence," borrowers will nowadays be excused from both federal and state income tax consequences. The existing federal exemption is for debtedness up until $2 million, while the most recent California exemption is for indebtedness up to $800,000 and forgiven debt up to $500,000.

 

"Qualified principle residence" indebtedness is classified as debt gained in attaining, constructing, or significantly enhancing a principal residence. It incorporates both first and second trust deeds. As well as refinance loan to the extent the finances were expended to pay off a prior that would have qualified.

 

The tax breaks relate to debts released from 2009 all the way through 2010. Californians who have already filed their 2009 tax returns can obtain the exemption by filing a form 540X amendment.

For those who are not eligible for the above discharge (e.g., second home or rental property) may possibly be exempt under other stipulation. Taxpayers who are bankrupt are exempt from debt relief income tax. Additionally, taxpayers that are insolvent are exempt from debt relief income tax to the degree their present legal responsibility surpasses current assets.

 

Where?s Housing Headed? Follow Rents

Posted by James Trammell on February 17, 2010 at 7:34 PM Comments comments (0)
It may not be the most widespread measure of housing prices, but if you want to follow a powerful driver, look at rents. Specifically, it?s the rents Americans pay on condos, apartments or houses that are about the same size, and share the same neighborhood as your ranch or colonial, that in the end determine what your house is worth. "If you look at the trend in rents to see where housing prices are headed, you?re looking at the right measure," says Yale economist Robert Shiller. In recent reports, Deutsche Bank demonstrates how steady or even falling rents have pulled down housing prices, to the point where in many markets it costs about the same amount to own as to lease. That?s a golden mean that America hasn?t seen in almost a decade. The DB research also offers convincing evidence that the wrenching adjustment in housing prices is finished for much of the nation, with a bit more pain to come in selected areas. Before we get to the numbers, let?s examine why rents exercise a kind of gravitational pull over home prices. In normal times, people won?t pay too much more to own a house than to lease it. After all, if you?re paying rent instead of a mortgage and taxes, you still get to enjoy the same rec room, chef?s kitchen, and casita for visiting grandparents. So the surest sign of a frenzy appears when owning becomes far more expensive than renting. That?s precisely what happened during the last bubble. And the surest sign that prices have fully adjusted arrives when the ratio of what people pay in rent versus what owners spend on the same property returns to its historic average. That brings us to the Deutsche Bank studies. Its REIT research team first established a benchmark for a "normal" ratio of rents to ownership costs ? what it calls ATMP, or after-tax mortgage payment ? for 53 U.S. cities. On average, DB found that families across America were spending about 87% as much to rent as to own in 1999. Hence, they were traditionally willing to pay a premium as homeowners, though not a big one. But by mid-2006, with the craze in full swing, the figure fell below 60%. At that point, Americans were spending an incredible 66% more to own than to rent. It was far worse in the bubble markets: In Las Vegas, Phoenix and Miami, homeowners were paying twice as much as renters, and in San Francisco and Orange Country, owners? monthly payments were triple those of their neighbors with leases instead of mortgages. So how did that happen? During the bubble, rents ? the real engine that drives values ? were inching along at more or less their usual pace. From 1999 to 2007, apartment rents increased only 32%. But home prices jumped more than three times as fast, around 105%. DB reckoned that housing prices are more or less reasonable when the ratio returns to its 1999 level. Why 1999? Because the ratio was relatively stable throughout the 1990s, and it was the year the steep rise in prices began in earnest.. At the end of the third quarter of 2009, the overall number stood at 83%, meaning renting was just a tad more attractive than owning. But the picture varies widely from city to city. In 15 of those 53 metro areas, including St Louis, Indianapolis, and remarkably, Phoenix and San Diego, it?s now higher than in 1999, meaning that homeowners? costs actually dropped versus what renters pay, courtesy of the steep decline in prices. In California?s San Bernardino and Riverside Counties, it now costs 10% less to own than to rent; in 2006, owners paid more than twice as much as renters. In another 14 cities, a list encompassing Boston, San Jose, and Chicago, the cost of owning exceeds that of renting by 6% or less. In the remaining 24 markets, housing is still moderately to extremely overpriced. The biggest problem areas are Baltimore, Long Island, and Seattle, where the ratio is still between 24% and 32% above the 1999 benchmark. What does that mean for future prices? Given that analysis, it?s likely that prices will fall another 5% or so nationwide. The drop could even be slightly greater. One reason: Rents, the force that govern housing prices, are still falling. In 2009, apartment rents dropped 2.3%, and the fall continues. And enormous adjustments are needed in still-exorbitant markets such as New York and Baltimore. Thankfully, the improving economy and decline in the rate of job losses means that rents should soon stabilize and could even start increasing by the end of 2010. But fortunately, for most of the U.S., the sudden, terrifying fall in prices worked its own black magic. The numbers are back in alignment, or close to it. It had to happen. That?s what rents, housing?s great master, were telling us all along.

Investors are happy with new FHA flip rules

Posted by James Trammell on January 25, 2010 at 11:20 PM Comments comments (0)

HUD No. 10-011

Lemar Wooley

(202) 708-0685 FOR RELEASE

Friday

January 15, 2010

 

HUD TAKES ACTION TO SPEED RESALE OF FORECLOSED PROPERTIES TO NEW OWNERS

Measure to help bring stability to home values and accelerate sale of vacant properties

WASHINGTON - In an effort to stabilize home values and improve conditions in communities where foreclosure activity is high, HUD Secretary Shaun Donovan today announced a temporary policy that will expand access to FHA mortgage insurance and allow for the quick resale of foreclosed properties. The announcement is part of the Obama administration commitment to addressing foreclosure. Just yesterday, Secretary Donovan announced $2 billion in Neighborhood Stabilization Program grants to local communities and nonprofit housing developers to combat the effects of vacant and abandoned homes.

"As a result of the tightened credit market, FHA-insured mortgage financing is often the only means of financing available to potential homebuyers," said Donovan. "FHA has an unprecedented opportunity to fulfill its mission by helping many homebuyers find affordable housing while contributing to neighborhood stabilization."

With certain exceptions, FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days. This temporary waiver will give FHA borrowers access to a broader array of recently foreclosed properties.

"This change in policy is temporary and will have very strict conditions and guidelines to assure that predatory practices are not allowed," Donovan said.

In today's market, FHA research finds that acquiring, rehabilitating and the reselling these properties to prospective homeowners often takes less than 90 days. Prohibiting the use of FHA mortgage insurance for a subsequent resale within 90 days of acquisition adversely impacts the willingness of sellers to allow contracts from potential FHA buyers because they must consider holding costs and the risk of vandalism associated with allowing a property to sit vacant over a 90-day period of time.

The policy change will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. This will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.

"FHA borrowers, because of the restrictions we are now lifting, have often been shut out from buying affordable properties," said FHA Commissioner David H. Stevens. "This action will enable our borrowers, especially first-time buyers, to take advantage of this opportunity."

The waiver will take effect on February 1, 2010 and is effective for one year, unless otherwise extended or withdrawn by the FHA Commissioner. To protect FHA borrowers against predatory practices of "flipping" where properties are quickly resold at inflated prices to unsuspecting borrowers, this waiver is limited to those sales meeting the following general conditions:

All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.

In cases in which the sales price of the property is 20 percent or more above the seller's acquisition cost, the waiver will only apply if the lender meets specific conditions.

The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.

Specific conditions and other details of this new temporary policy are in the text of the waiver, available on HUD's website.


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