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What's in Store for Housing in 2012?

The worst for the housing market may finally be over, according to housing experts in a recent article in Kiplinger. After median home price have dropped nearly 40 percent nationwide, a rebound is taking shape -- although, housing experts say, the market may stay flat for awhile before gradually ticking up. 

According to housing experts in a recent Kiplinger article, here are some predictions for the real estate market in the coming year:

Home prices stabilize: Mark Zandi, chief economist at Moody's Analytics, predicts that home prices nationwide may still drop another 3 to 5 percent in 2012, but the new year will most likely finally bring a leveling off of home prices before gains start to take shape in 2013. When markets do begin to stabilize in the new year, “price appreciation tends to spread unevenly, creating a lot of confusion about where the recovery is occurring and when,” David Stiff, chief economist at Fiserv Case-Shiller, told Kiplinger. “Even within a single city, more desirable neighborhoods will stabilize first, while prices in other neighborhoods may fall at a rapid pace.”

Housing affordability high: Housing affordability -- the ratio of median home prices to median family income -- will likely remain at record levels in 2012. Homes in many cities are “substantially undervalued,” the Kiplinger article notes. That may even lead to a mini bubble with double-digit spikes in prices, such as an increase of 10 to 15 percent in a given year in some markets, housing experts say.  

Low mortgage rates: Helping to keep affordability high, low mortgage rates are expected to continue on in 2012 -- at least the first part of the year, economists predict. The 30-year fixed-rate mortgage, the most popular among home buyers, has been hovering under a 4-percent average the past few weeks, staying in record low territory. Rates are expected to stay between 4 to 5 percent in 2012, predicts Guy Cecala, publisher of Inside Mortgage Finance, an industry publication. 

Sales increases: The National Association of REALTORS^® has already been showing a tick up in sales taking shape with increases in existing-home sales during the summer and early fall of 2011. High inventories of homes continue to flood the market but a drastic slowdown in new-home building the past three years is “gradually easing the surplus,” the Kiplinger article notes. 

Foreclosures: Foreclosures remain the problem and still plague many markets. After a slowdown with lenders processing the paperwork, foreclosures have began to pick up once again. About 1.84 million home loans are 90 days or more delinquent and 2.17 million have finished the foreclosure process but aren’t up for sale yet, according to RealtyTrac data. Alex Villacorta, director of research and analytics at Clear Capital, told Kiplinger that he predicts regardless of the downward price pressure caused from foreclosures, overall home prices won’t fall as long as lenders bring additional foreclosures to the housing market at a steady pace. 

Source: “What’s Ahead for Home Prices in 2012,” Kiplinger (January 2012)

 

Darren Orshoff or Gold Shield Realty Group says that while the market itself is getting better...the last paragraph of this article is the real indicator!  Over 2 million homes already foreclosed but not on the market yet?  Almost 2 million more with no real chance of getting back on track because they are upside down for years to come?  This housing industry crisis is far from over.  The solution?  I like what Bruce Norris has to say...Make all FHA and other Government loans fully assumable as long as they make the loan current.  There will never again be another defaulted on loan moving forward.  Add to that a release in investor restrictions on buying homes, as well as a mandatory Short Sale based on current market values in 90 days policy and this crisis is over in 24 months and well on its way to recovery.

Calif. AG Wants Answers, Sues Fannie, Freddie

California Attorney General Kamala Harris filed a lawsuit against mortgage giants Fannie Mae and Freddie Mac this week, pressuring the government-sponsored enterprises to respond to some 51 questions regarding foreclosures and other actions taken by Fannie and Freddie in the state.

Fannie and Freddie own about 60 percent of California mortgages. Harris is investigating the GSE’s involvement in 12,000 foreclosed properties in the state where they served as landlords, as well as the GSEs' role in selling or marketing mortgage-backed securities, HousingWire reports. 

The state is seeking a variety of information from Fannie and Freddie, including a list of which homes in the state that they foreclosed on, whether they have complied with civil rights laws protecting minorities and military members against unlawful convictions and foreclosures, and whether they complied with California's securities and tax laws.

Fannie Mae and Freddie Mac have not commented on the lawsuit. An attorney representing the Federal Housing Finance Agency, however, said the lawsuits’ 51 subpoenas were "frequently vague and ambiguous," HousingWire reports. Also, the FHFA attorney said Harris does not have the authority to issue subpoenas against the GSEs since they’re under federal control.

Source: “State AG Sues Fannie and Freddie for Answers,” Associated Press (Dec. 21, 2011)

Mortgage Rates Reach New Record Lows

Just in time for the holidays: Mortgage rates reached new all-time lows this week, pushing home buyer affordability even higher, Freddie Mac reports in its weekly mortgage market survey. 

"Rates on 30-year fixed mortgages have been at or below 4 percent for the last eight weeks and now are almost 0.9 percentage points below where they were at the beginning of the year, which means that today's home buyers are paying over $1,200 less per year on a $200,000 loan,” Frank Nothaft, chief economist at Freddie Mac, said in a statement. “This greater affordability helped push existing home sales higher for the second consecutive month in November to an annualized pace of 4.42 million, the most since January.” 

Here’s a closer look at mortgage rates for the week ending Dec. 22:

• 30-year fixed-rate mortgages: averaged 3.91 percent this week, with an average 0.7 point, beating last week’s 3.94 percent record. A year ago at this time, 30-year rates averaged 4.81 percent. 
• 15-year fixed-rate mortgages: averaged 3.21 percent, with an average 0.8 point, matching last week’s all-time low. Last year at this time, the 15-year mortgage averaged 4.15 percent.
• 5-year adjustable-rate mortgages: averaged 2.85 percent this week, with an average 0.6 point, a new record after dropping from last week’s 2.86 percent average. Last year at this time, 5-year ARMs averaged 3.75 percent. 
• 1-year ARMs: averaged 2.77 percent this week, with an average 0.6 point, also a new record after falling from last week’s 2.81 percent average. A year ago at this time, the 1-year ARMs averaged 3.40 percent. 

 Source: Freddie Mac

 

9 Reasons to Buy Investment Property Now

J. Paul Getty famously said, “Buy when everyone else is selling and hold when everyone else is buying.” Many commercial brokers believe that present market conditions provide an unprecedented buying opportunity to lock in significant real estate investment returns. Despite the opinion of some real estate professionals, however, many investors remain on the fence. While each investor must carefully consider their own financial objectives and risk tolerance before jumping back into the market, we’ve listed a few reasons investors should consider in assessing today’s real estate purchase opportunities: 1031 Exchange Opportunity - Investors with low basis properties may utilize Internal Revenue Code § 1031 to defer tax on the sale of one underperforming asset to acquire one or more discounted replacement properties that may enhance cash flow and provide higher long term investment returns. Attractive Purchase Prices – Many distressed sellers (and some banks) are selling investment properties at deep discounts and accepting offers that are below current replacement costs. Recent reports indicate that lenders are selling foreclosed properties (often referred to as ‘real estate owned’ or “REO” property) at an average discount of 28% below prices being paid for comparable non-distressed properties in the same market. Historically Low Financing Costs - The Fed’s stimulus efforts, such as QE2 (“Quantitative Easing 2”), have resulted in historically low interest rates, making the cost of debt service exceptionally attractive. Qualified real estate investors can take advantage of today’s low interest rates to bolster cash flow and lock in better long-term investment returns. Inflation Hedge – With many economists predicting that inflation will increase at some point in the future, hard assets, like investment real estate, can provide a hedge against the declining value of money in an inflationary environment. Additionally, ownership of leased real estate can provide an investor with increased income as rent rates also tend to rise in inflationary periods. Yield - Financial institutions are paying very low yields on money market accounts and other conservative investments. In contrast, many investment properties are generating returns in the 7-9% range, providing considerably better yields than many other competing investments. Less Competition – Foreign ownership of U.S. investment real estate is increasing. Foreign investors see U.S. real estate as a solid investment in a stable economy, and the lower value of the dollar has made U.S. real estate an even more attractive bargain. These two trends will increase demand, which will drive up prices on certain types of investment property. By buying now, investors can stay ahead of the competition. Desirable Product Classes – Some classes of investment property are experiencing considerably more demand than supply. For example, in the multi-family segment, demand for rentals has increased as foreclosures have mounted and there is little new multi-family construction in the pipeline to meet such increased demand. As a result, multi-family rents are increasing and many experts project this trend to accelerate. Worst Price Declines are Over – Property values nationally have declined by 30% or more since the market peak in 2006,. Many economists believe we are at an important pivot point where prices will stabilize and begin to increase (albeit at lower appreciation rates than in the past). If investors wait too long, they may find they are facing competing bids and higher prices to close. Buying before demand picks up in the nearly inevitable recovery locks in today’s bargain prices. Real Estate is Local – Despite national statistics about real estate prices, most investors are aware that real estate is local and supply/demand and investment returns are determined by local market conditions. Many investors are using 1031 exchanges to exchange out of areas that are not projected to perform well and into areas where the local economy is more robust and investment returns are more favorable. Financial professionals tell their customers it is almost impossible to ‘time the market’ and purchase investments at the very lowest point and later sell these same assets at near market peaks. The concept is fraught with many problems and, as a result, most financial advisors caution customers to not pursue this approach. Despite this advice, investors often wait until it’s too late to purchase and miss opportunities. Don’t be left out.

Low Mortgage Rates Keep Housing Affordability High

Mortgage rates continued to be near record lows this week, keeping housing at affordable levels for most households. 

"Thirty-year fixed-rate loans have declined 0.62 percentage points from a year ago, and median sales prices on existing homes are off 4.7 percent in the year ending with October,” Frank Nothaft, Freddie Mac’s chief economist, said in a statement. “These low rates and home prices have pushed housing affordability to record highs this year.”

Monthly principal and mortgage interest payments accounted for 12.6 percent of a median family incomes in October, Nothaft notes. For the sixth time this year, the National Housing Affordability Index reached another all-time record high, according to the National Association of REALTORS®. 

Here’s a closer look at mortgage rates for the week ending Dec. 8.

• 30-year fixed-rate mortgages: averaged 3.99 percent, with an average 0.7 point, down from last week’s 4 percent average. A year ago, 30-year rates averaged 4.61 percent. 
• 15-year fixed-rate mortgages: averaged 3.27 percent, with an average 0.8 point, just slightly above the all-time low of 3.26 percent it reached on Oct. 6. Last year at this time, 15-year rates averaged 3.96 percent. 
• 5-year adjustable-rate mortgages: averaged 2.93 percent this week, with an average 0.5 point, ticking up slightly from last week’s 2.90 percent average. Last year at this time, the 5-year ARM averaged 3.60 percent.
• 1-year ARMs: averaged 2.80 percent this week, with an average 0.6 point, edging up slightly from 2.78 percent last week. A year ago, 1-year ARMs averaged 3.27 percent.  

Source: Freddie Mac

 

Federal Agency Urges Ban on Cell Phones While Driving

DAILY REAL ESTATE NEWS | WEDNESDAY, DECEMBER 14, 2011

The National Transportation Safety Board has called for a ban on all cell phone use while driving, even using hands-free devices like wireless headsets. The agency is urging states to adopt such a ban after recent investigations into distraction-related accidents have showed cell phones were a major contributor.

While some states ban handheld cell phones while driving, no state currently has any laws against using hands-free devices, and Bluetooth devices now even come installed in cars. The agency said even hands-free devices pose a risk, and the agency also said it’s alarmed by the number of drivers who are increasingly texting, e-mailing, and surfing the Internet while driving too. 

“People are tempted to update their Facebook page, they are tempted to tweet, as if sitting at a desk. But they are driving a car,” NTSB Chairwoman Deborah Hersman told The New York Times. Hersman compared distracted driving to drunken driving. 

States are not required to adopt NTSB’s recommendation, but it is viewed as a major move since it’s the first call by a federal agency urging such a sweeping ban of cell phone use while driving. 

Currently, nine states ban the use of handheld phones, and 35 states ban texting by drivers, according to the Governors Highways Safety Association. 

“It’s about cognitive distraction. It’s about not being engaged at the task at hand,” Hersman told The New York Times. “Lives are being lost in the blink of an eye. You can’t take it back, you can’t have a do-over, and you can’t rewind.”

Source: “U.S. Safety Board Urges Cellphone Ban for Drivers,” The New York Times (Dec. 14, 20

THIS SHOULD NEVER PASS!!!

 

Sellers Overvalue Their Home’s Worth, Study Finds

About 76 percent of home owners believe their home is worth more than their agent’s recommended listing price -- that’s up from 73 percent last year, according to a new survey conducted by HomeGain of real estate professionals and home owners. 

On the other hand, 68 percent of home buyers say homes are overpriced, with 32 percent saying homes are overpriced by more than 10 percent. 

“Home buyers and sellers continue to remain apart as to home valuations with the vast majority of home owners thinking their homes are worth more than their agents and the market are telling them,” Louis Cammarosano, general manager of HomeGain said in a statement.

Source: “Three Quarters of Owners Continue to Overvalue,” RISMedia (Dec. 6, 2011)