Real Estate News

Fannie Mae is trying to lure more buyers to its foreclosure properties by offering to cover 3.5 percent in closing costs for home owners who close by June 30 on its HomePath properties. Fannie’s HomePath program provides low down payment financing on REO property sales and has no requirements for insurance or appraisals. During the fourth quarter of last year, Fannie offered closing cost assistance and was able to recoup 55 percent of unpaid principal balance on defaulted home loans through the sales. Source: Source Media Note: If you are interested in bidding on a Fannie Mae or other REO property, a pre-approval is the first step. Just give me a call and I can help you get started and guide you throughout the process.




Apartment bargains once dominated the housing market, but those bargains have slowly faded away. As vacancies decrease and rents rise, renters are finding fewer deals. Analysts expect vacancies to decrease even more and rents to continue to rise through 2013, as the economy continues to improve. Rental activity recorded its best start for the year since 1999, according to Reis Inc. Vacancy rates have fallen to mid-2008 levels and rents have increased for the past five quarters, now averaging $991 per month nationwide. Renters are finding the fewest deals along the coasts, such as New York, Washington, D.C., Boston, Los Angeles, San Francisco, Seattle, and San Jose, Calif. These cities are experiencing low vacancy rates. Also, a boost in these cities’ economies is sending rents higher. New York City alone has seen double rent increases compared to the national average and has the lowest vacancy rate in the nation. Source: MSNBC



The housing market is poised for an uptick in home sales during the traditional spring buying season, as employment improves and rates remain low, Freddie Mac said in its April 2011 economic outlook. Overall, Freddie Mac said home sales will increase 5% in 2011 compared to 2010 — a projected 4.9 million home sales. The agency estimates that number will rise 12.2% to 5.5 million homes sales in 2012. The Federal Reserve’s current monetary policy and Treasury note purchase program are keeping rates low, according to Frank Nothaft, chief economist at the agency. On a monthly comparative basis, homes sales are expected to be lower this month than April 2010, as sales last year were inflated by the first-time homebuyer tax credit, Nothaft said. Short-term rates are especially supportive of household borrowing, Nothaft said, adding that he expects adjustable-rate loans to account for 7% of all 2011 sales. This is up from 5% in 2010. Source: HousingWire



With affordability at an all-time high, the number of investors and international buyers taking advantage of bargains has reached a record number in all-cash purchases — and some experts predict that number will only grow higher. A record 33 percent of existing-home sales were made to cash buyers in February, the National Association of REALTORS® recently reported. The proportion of cash deals could hit 40 percent by the end of this year, predicts Thomas Popik, research director for Campbell Communications in Washington, which conducts monthly surveys of 3,000 real estate brokers. But it’s not just investors moving in: Many of these cash deals are also coming from a growing number of international buyers. About 55 percent of international buyers paid cash for their U.S. homes, according to an April 2010 report by NAR. Short sales and foreclosures accounted for 59 percent of last year’s cash sales, according to a report by Morgan Stanley. "You buy the house at a discount with cash. Then you flip it almost immediately to the first-time home buyer who’s using a loan, simply because they were not able to buy at the foreclosure sale," Chang says. Source: Detroit Free Press





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Source: NewsLetterProOnline.com

Real Estate News

More investors are taking on the risk of flipping homes, despite sluggish real estate markets across the country. Investors say there are still profits to be made in the house flipping business. Nearly 1 million homes were bought as investment properties in 2010, according to the National Association of REALTORS®, and a record number of buyers purchasing properties with cash currently are flooding the market. In Washington, D.C., Justin Konz of RestorationCapital says his clients are going through four of five properties a month and are making gross profit margins of 35 percent or higher. Flippers mostly are finding their homes through foreclosures auctions, REOs, and short sales. They seek homes at rock-bottom prices that will have low fix-up costs, no more than about 5 percent or 10 percent of the purchase price. In Florida, where investors are finding it more difficult to flip homes because of the drastic drop in prices and high inventories, flippers are targeting inner-city properties that are being sold at steep discounts. For example, some of houses are selling for $30,000 when they once sold for $200,000. Perry Henderson, a real estate agent and investor in Austin, Texas, says the biggest opportunities in flipping are the “ugly” houses that have lingered on the market or "old houses that somebody’s grandma lived in for 40 years and didn’t do anything to. Now, she’s passed away and her family wants to sell quickly." Real estate investor Brian Fuller, who with partners buys and sells more than 200 properties a year in the San Diego area, says he’s drawn to the “biggest eyesore on the block.” He says they then “turn it into the best looking house there. We’re helping pull up values in the neighborhood." Source: CNN/Money.com

A new report from Deutsche Bank notes that housing affordability is presently at an all-time high. (DB’s proclamation is based on figures compiled by the National Association of Realtors.) Bank analysts note that the acceleration in affordability is "unprecedented" and it should help stabilize both housing starts and residential construction. DB believes the chief reason why housing activity has stalled is lending standards. "This is the one area where senior loan officers are still tightening, unlike what they have done for consumer and commercial/industrial loans," the bank said. Its analysts believe when banks and lenders "become willing to make home loans, surging affordability should lift construction—perhaps by a significant amount." Rates are off their historic lows of the fall and early winter, but some lenders report that potential home buyers are becoming more active, believing that rates will continue to rise and want to lock-in now. Source: Source Media



Living downtown is becoming increasingly appealing to college-educated 20- and 30-somethings. In two-thirds of the country’s 51 largest cities, the college-educated population in the past decade has grown twice as fast within 3 miles of urban centers when compared to the rest of the metro area, the USA Today reports. That is a jump of 26 percent, on average, compared with 13 percent in other parts. Young adults with higher education, in particular, seem to be showing a preference for urban living. Young adults with a four-year degree are about 94 percent more likely to live near urban neighborhoods than less-educated young professionals. (In 2000, that number was about 61 percent.) Even floundering downtowns are attracting more young people. For example, Detroit, which has faced a 25 percent drop in its population since 2000, has added 59 percent (or 2,000) young and educated residents during that time, according to Impresa Inc., an economic consulting firm. Looking to keep the young vibe going strong, Detroit even has recently launched a campaign — ”15 by 15” — to bring 15,000 young, educated professionals to live in the downtown by 2015. To do that, they are offering cash incentives: A $25,000 forgivable loan to buy a home in downtown and stay there for at least five years or $3,500 on a two-year lease. Source: USA Today



In an encouraging sign for the housing market, new home construction increased in March, according to a government report. Housing starts, the number of new homes being built, rose 7.2% in March to an annual rate of 549,000 units, up from a revised 512,000 in February, the Commerce Department said. Economists had expected an annual rate 520,000 units, according to consensus estimates from Breifing.com. The report also said there were 594,000 building permits issued in March. That’s up 11% from 534,000 permits in February, and was also better than expected. Building permits were forecast to have increased to an annual rate of 540,000 units. In addition, new construction of multifamily homes continues to outpace construction of single-family units, which are considered the core of the residential housing market. Single-family housing starts increased 7.7% in March, while construction of buildings with five units or more was up 14.7% versus February. Source: CNN/Money

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This newsletter was posted on Sunday, April 24th, 2011 at 8:14 am.

Annual Fund Raising Dinner - Saturday April 30th at 7 PM

FHA Offers Alternatives For Average Americans

We have undergone a credit crisis in America. This is a crisis that has taken away many home financing alternatives. However, Americans are not without home financing alternatives. It is time to take a good look at an old standard—FHA financing.

For years, FHA was the standard for first time buyers, immigrants and those with credit issues. During the real estate and subprime boom, FHA financing shrunk from over 25% of the loans in America to well under 5% of the market. But now the government has moved to make FHA more attractive. Congress passed a bill to raise the FHA loan limits in many parts of the country.

Even without these modifications, here are some of the advantages of FHA…

A Low Downpayment. Generally the downpayment on an FHA mortgage is very affordable as compared to conventional financing. The downpayment required is less than 5.0%. A total of 3.5% cash is required from the borrower’s owner funds to be invested in the total transaction, inclusive of closing costs.

A Liberal Gift Policy. FHA borrowers virtually do not have to come to the transaction with any liquid assets in savings. All money may be provided by gift from a relative. Relatively all conventional lending requires that a certain amount of the borrower’s funds belong to the borrower through savings amassed some time before the transaction takes place. FHA also requires no cash reserves left in the bank after settlement. Keep in mind that prudent underwriting standards mayvery well require savings and cash reserves after closing.

More Lenient Qualification Standards. FHA requires less income to qualify for a mortgage. The standards allow a housing payment which is 31% of a borrower's gross monthly income and total debt service which is 43% of a borrower's gross monthly income. By contrast, most conventional programs have ratios of 28% and 36%. FHA also allows a prospective borrower who does not qualify to add a related co-borrower to the application--and this co-borrower does not have to live in the home.

FHA also does not require a minimum credit score to qualify for a mortgage, though there is a very liberal standard for those who are making a minimum down payment. It should also be noted that many lenders that purchase or make FHA loans do have minimum credit score standards.

FHA ARM Program. The FHA one-year and 3/1 adjustable mortgage programs are very popular because annual adjustments are limited to one percent each year, as compared to most conventional adjustables which have caps of two percent each year. For example, this means that the 3/1 adjustable can only increase one percent at the start of the 4th year. Also, the lifetime cap on these FHA adjustables is five percent, while most conventional alternatives have a six percent limit.

FHA Loans Are Assumable. FHA remains as one of the few programs to allow assumption of adjustable and fixed rate mortgages at the same rate and term as the original loan. This is a major advantage when you are trying to sell your home in a high-rate environment. Note that the assumption must be accomplished by an owner-occupant that is credit-qualified.

FHA Has No Maximum Income Limits.Though FHA loans are limited as to a maximum loan amount, there is no maximum income limitation. Many conventional first time buyer programs that allow a minimum downpayment, also limit the maximum income level of the borrower.

FHA also has programs to help homeowners improve their properties (rehabilitation), refinance their present mortgage and even reverse mortgages for seniors. Put it all together and you have a program that packs a lot of punch with first-time homebuyers or other low-tomoderate income Americans. If you are in the market to purchase a home or refinance your present home, you should look seriously at an FHA mortgage as an alternative. Contact us if you would like more information on whether FHA might be the right option for you..

FHA Advantages

¨ Low Down Payment

¨ No Cash Reserves

¨ Co-Borrowers Don’t Have

To Occupy The Property

¨ Fixed Rate With Assumable

Terms

¨ Adjustables With Low Caps

¨ Gifts Allowed

¨ Rehab program

¨ Reverse Mortgage Program

Source: The Hershman Group, www.originationpro.com

Direct Financing Now Available in All Provinces!

Real Estate Trends

World Crisis And Employment

We had such profound news in the past several weeks that many economic reports took a back seat.In a recovery, we typically analyze each piece of economic data with a microscope. Not this past month. This lack of focus is explained by the severity of the world-wide events that have occurred. First, we have had an entire region of the world which has seemed to rise up at once and challenge their leaders. The government of two countries have fallen and another is in the midst of a civil war. To make matters even more complex, the region is a significant supplier of oil. Then the world was shocked by the tragic earthquake and tsunami in Japan, the world's third largest economy. If the devastation, which left thousands dead and hundreds of thousands homeless was not enough for Japan to endure, the longterm risks of a nuclear power crisis hovered over the region in the weeks after the tragedy.

These events serve as a reminder as to why predictions are rarely ever reliable. They are also a reminder that we can't just focus upon what is happening within our own economy in order to monitor the recovery. We truly participate in a worldwide economy. This does not mean that our economic reports can take a backseat forever. Right now we are seeing much evidence that the recovery is continuing, though the real estate sector is still a drag upon growth. At the risk of sounding like a broken record, there is only one factor which will help us out of the real estate slump more quickly -- stronger employment growth. As we go to press, we have the release of a very important employment report. Last month we had a positive report. One positive report does not presage a stronger recovery, but two strong reports can start a trend. Stronger job growth will translate into a quicker recovery for real estate. It will also put our economy in a better position to withstand some of these world-wide shocks...

Tax Time Here For Homeowners
M any of the nation’s 75 million home owners may be appreciating the value of home ownership just a bit more as the tax deadline approaches. “Owning a home offers myriad benefits throughout the year, but some of the financial advantages of home ownership are most apparent at tax time,” said National Association of Realtors® President Ron Phipps.
A number of tax deductions and credits are still available for home owners; these include deductions with specific limits for home loan interest and capital gains on home sales, and credits for certain energy-efficient improvements. Even with these benefits, home owners pay 80-90% of all U.S. federal income taxes. “It’s been suggested that many of today’s tax incentives for home ownership primarily benefit wealthy individuals, but that’s simply not true,” said Phipps. “As today’s public debate continues about what home ownership means for families, communities, and the nation’s economy, there’s no question that for many, owning a home is still the best way to begin building wealth.” Over 90% of home owners who claim the interest deduction earn less than $200,000 a year, and the ability to deduct the interest paid on a home loancan mean significant savings at tax time.
Source: NAR.org

Selected Interest Rates

March 24, 2011

30 Year Mortgages——–4.81%

2010 High (April 8)——–5.21%

2010 Low (Nov 11)——–4.17%

15 Year Mortgages——–4.04%

5/1 Hybrid ARMs———–3.62%

1 Year Adjustables——3.21%

10 Year Treasuries——3.39%

Sources—Fed Reserve, Freddie Mac

Note: Average rates do not include fees

and points. Information is provided for

indicating trends only and should not be

used for comparison purposes.

Beware: Rents Are Headed Higher

A lready, rental vacancy rates have dipped below the 10% mark, where they had been lodged for most of the past three years. "The demand for rental housing has already started to increase," said Peggy Alford, president of Rent.com. "Young people are starting to get rid of their roommates and move out of their parent's basements." By 2012, she predicts the vacancy rate will hover at a mere 5%. And with fewer units on the market, prices will explode. Rent hikes have averaged less than 1% a year over the past decade, according to Commerce Department statistics, adjusted for inflation. Now, Alford expects rents to spike 7% or so in each of the next two years -- to a national average that will top $800 per month. In the hottest rental markets, the increases will likely top the 10% mark annually for the next couple of years. This is a sharp change from the recession, when many Americans couldn't afford to live on their own. More than 1.2 million young adults moved back in with their parents from 2005 to 2010, said Lesley Deutch of John Burns Real Estate Consulting. Many others doubled up together. As a result, landlords had to reduce prices and offer big incentives to snag renters. Now that the recession is easing, many of these young people are ready to find new digs, mostly as renters, not owners. Plus, millions losing their homes to foreclosure are looking for new places to live. Apartment developers may not be able to keep up with this heightened demand, which will force prices upwards, according to Chris Macke, a real estate analyst with CoStar, which tracks multi-family housing trends...

Source: CNN/Money.com
 
Did you know… Nearly 70% of buyers and sellers say they believe the housing market and property values will recover in the next year or two, according to a new survey by Prudential Real Estate. Those surveyed said they also are ready to buy: Six in 10 respondents say they aremore interested in buying real estate...


Source: RISMedia.com

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The Biggest Mistakes Homebuyers Make

Buying a home is the biggest purchase most people will ever make, yet many go into it blind. Here are the most common, and costly, mistakes homebuyers make

Not knowing your credit score.
If you're even toying with the idea of buying a home, you must find out exactly what your FICO score is. If you find it is less than ideal, wage a systematic campaign to raise it. Too many borrowers ignore this step and get surprised when they get interest ratequotes. Once you've pored over yourcredit history and corrected any errors, your next step is to pay down revolving debt balances to no more than 30%usage. That will help raise your score significantly.The lower your score, the higher yourcosts of borrowing. Fannie Mae andFreddie Mac, for example, chargehigher up-front fees to borrowers withcredit scores below 740. For a buyer with a credit score between 680 and700, the fee comes to 1.5% of the mortgage principal. On a $200,000 mortgage, that adds up to $3,000. Someone with a 740 score pays
nothing. Lower-score borrowers also get saddled with higher interest rates,about a 0.4 percentage point more forthe below 700 borrower. That costs anextra $62 a month -- $744 a year -- on a$200,000, 30-year, fixed rate loan.

Buying a car before a house.
Anytime consumers open new credit accounts --credit card, auto loan, etc. -- their FICO score could drop, according to Craig Watts, a spokesman for Fair Isaac, thecreator of FICO scores. "Hence the admonition to not open other newaccounts while your mortgageapplication is in process," he said. A big purchase would use up a considerable proportion of a borrower's total credit limit, which results in a drop in the score. Lenders often continue to check credit scores in the weeks before closing. "The lender will likely slam on the brakes if the applicant's credit scores have suddenly dropped below the minimum required for the requested loan rate," Watts said.

Skimping on the home inspection.
Buying a pig in a poke can cost buyers big bucks, just when they can leastafford it. So It's vital to find all the costly flaws before you buy. Many homes on the market today are distressed properties -- foreclosures and short sales-- and that only increases the importance of good inspections, according to David Tamny, president of the American Society of Home Inspectors. "The owners usually didn't have the money to keep up these homes," he said. "There's a lot of deferred maintenance." A home inspection can find problems with the foundation, electrical, plumbing,roof, attic insulation, and heating and air conditioning. In some states, separate licensed inspectors offer mold or termiteinspections. Often homebuyers, who may be strapped for cash, stint on inspections and look for the cheapestway to go. That can lead to disaster. The cost of repairs far exceeds the cost of inspection," said Tamny.

No contingencies.
When signing a sales contract, buyers usually have to put up 1% to 3% in "earnest money,"which they don't get back if they pull out of the deal except under certain conditions spelled out in the contract. Sellers try to limit the grounds for canceling, and inexperienced buyers may sign contracts that don't include common exceptions, such as uncovering major problems during the home inspection, failing to obtain financing and failure of the house to appraise. Failure to obtain financing is common these daysbecause lenders have become very picky; underwriting is very strict. Even if your mortgage company is still willing to finance your
purchase, the house itself may be worth less than you've contracted to pay for it,and the lender will pull its approval. With residential real estate markets still slow, sellers usually accept contingency clauses, but if they resist, it may be better to rethink the deal. Losing a deposit of$2,000 to $6,000 on a $200,000 home hurts.

Not budgeting for insurance.
Don't underestimate insurance costs and fail to budget for them. Many homebuyers don't understand just what is -- and what is not-- covered. Standard policies pay for theft and wind, fire, lightning, hail and
explosion damage. Not covered is flooding, earthquake damage or problemscaused by neglect of routine
maintenance, according to Jeanne Salvatore, spokes woman for the Insurance Information Institute, an industry-sponsored educational group. "The most important thing before youbuy a home is to find out what it will cost to insure it," she said. "Insurance needs to be calculated into the cost of owning ahome. Unlike a mortgage you can pay off, you'll be responsible for insurance costsforever."For flood insurance, most buyers use the National Flood Insurance Program. Earthquake coverage may be available through a state authority or some privatecompanies. Depending on location, flood insurance can run into a lot of money.The cost of $250,000 worth of government flood coverage on thebuilding and $100,000 of its contents cango as high as $5,714 in high-risk, coastal areas.
Source: CNN/Money.com
The Hershman Group, http://www.originationpro.com/