When Will Home Prices Stop Falling? | 2011-2012 Real Estate Predictions

Rick Sharga, senior vice president at RealtyTrac Inc., discusses the outlook for the U.S. housing market and home foreclosure filings.

The number of U.S. homes receiving a foreclosure filing will climb about 20 percent in 2011, reaching a peak for the housing crisis, as unemployment remains high and banks resume seizures after a slowdown, according to RealtyTrac. Sharga speaks with Mark Crumpton on Bloomberg Television’s “Bottom Line.” (Source: Bloomberg)








February 2010 News

Affordability

Affordability remains at record levels, supported by the lowest mortgage rates in decades, low home prices, as well as the first-time buyer tax credit. So far this year, the home price-to-income ratio has fallen well below the historical average of 25 percent. The ratio now stands at 15 percent.

 
November News
 

 


Inventory

The supply of homes continued to shrink, falling 6.6 percent to 3.29 million, representing a 7.2-month supply at the current sales pace. Compared to a year ago, there are now 11 percent fewer homes on the market. This is the lowest level of competing homes on the market since March 2006.


First-Time Homebuyer Credit Extended to April 30, 2010; Some Current Homeowners Now Also Qualify
 
IR-2009-108, Nov. 24, 2009

WASHINGTON — A new law that went into effect Nov. 6 extends the first-time homebuyer credit five months and expands the eligibility requirements for purchasers.

The Worker, Homeownership, and Business Assistance Act of 2009 extends the deadline for qualifying home purchases from Nov. 30, 2009, to April 30, 2010. Additionally, if a buyer enters into a binding contract by April 30, 2010, the buyer has until June 30, 2010, to settle on the purchase.

The maximum credit amount remains at $8,000 for a first-time homebuyer –– that is, a buyer who has not owned a primary residence during the three years up to the date of purchase.

But the new law also provides a “long-time resident” credit of up to $6,500 to others who do not qualify as “first-time homebuyers.” To qualify this way, a buyer must have owned and used the same home as a principal or primary residence for at least five consecutive years of the eight-year period ending on the date of purchase of a new home as a primary residence.

For all qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 tax returns.

A new version of Form 5405, First-Time Homebuyer Credit, will be available in the next few weeks. A taxpayer who purchases a home after Nov. 6 must use this new version of the form to claim the credit. Likewise, taxpayers claiming the credit on their 2009 returns, no matter when the house was purchased, must also use the new version of Form 5405. Taxpayers who claim the credit on their 2009 tax return will not be able to file electronically but instead will need to file a paper return.

A taxpayer who purchased a home on or before Nov. 6 and chooses to claim the credit on an original or amended 2008 return may continue to use the current version of Form 5405.

Income Limits Rise

The new law raises the income limits for people who purchase homes after Nov. 6. The full credit will be available to taxpayers with modified adjusted gross incomes (MAGI) up to $125,000, or $225,000 for joint filers. Those with MAGI between $125,000 and $145,000, or $225,000 and $245,000 for joint filers, are eligible for a reduced credit. Those with higher incomes do not qualify.

For homes purchased prior to Nov. 7, 2009, existing MAGI limits remain in place. The full credit is available to taxpayers with MAGI up to $75,000, or $150,000 for joint filers. Those with MAGI between $75,000 and $95,000, or $150,000 and $170,000 for joint filers, are eligible for a reduced credit. Those with higher incomes do not qualify.

New Requirements

Several new restrictions on purchases that occur after Nov. 6 go into effect with the new law:

Dependents are not eligible to claim the credit.
No credit is available if the purchase price of a home is more than $800,000.
A purchaser must be at least 18 years of age on the date of purchase.
For Members of the Military

Members of the Armed Forces and certain federal employees serving outside the U.S. have an extra year to buy a principal residence in the U.S. and still qualify for the credit. An eligible taxpayer must buy or enter into a binding contract to buy a home by April 30, 2011, and settle on the purchase by June 30, 2011.

For Questions and Answers Page, visitHomebuyer Tax Credit
For more details on the credit, visit the First-Time Homebuyer Credit page on IRS.gov.



October News


Pending Home Sales Continute Record Streak; Up for Seventh Straight Month -

NAR’s Pending Home Sales Index rose to 103.8 in August, a 6.4 percent increase over the index reading of 97.6 in July and a 12.4 percent increase over August 2008.

Read more ...

 

 

 



 



 Mortgage Rates Dip Below 5 Percent -

Mortgage rates are near an all-time low with 30-year, fixed-rate mortgages averaging 4.94 percent nationally and 4.96 percent in the North Central region including Illinois. according toFreddie Mac Primary Mortgage Market Survey® (PMMS®),

Read more...

First Time Homebuyer Tax Credit
Senator Richard Durbin, Illinois State Senator Just sent this in an email as a response to a letter from myself and many others, asking for an extension for first-time homebuyer tax credit.

“Two bills have been introduced that extend or expand the homebuyer's tax credit. S. 1678 would extend the first-time homebuyer's tax credit through May 31, 2010, at the current rate of $8,000.S. 1230, the Home Buyer Tax Credit Act of 2009, would replace the current tax credit for first-time homebuyers with a one-time credit for all homebuyers equal to 10% of the purchase price of a principal residence, up to $15,000. This tax credit would be in effect for one year after the enactment of the bill.

These bills have been referred to the Senate Finance Committee.  While I am not a member of this committee, I will keep your thoughts in mind as Congress considers legislation to encourage home purchases.”

Let’s hope the later one passes committee and is allowed to be voted on. This would be a positive step towards putting the housing industry back on track. Stay tuned…

###

 


- Will There Be an Extension?

Record Streak Continues for Pending Home SalesThe Latest News

Washington, October 01, 2009
Pending home sales have increased for seven straight months, the longest in the series of the index which began in 2001, according to the National Association of Realtors®.
The Pending Home Sales Index,* a forward-looking indicator based on contracts signed in August, rose 6.4 percent to 103.8 from a reading of 97.6 in July, and is 12.4 percent above August 2008 when it was 92.4. The index is at the highest level since March 2007 when it was 104.5.
Lawrence Yun, NAR chief economist, said not all contracts are turning into closed sales within an expected timeframe. “The rise in pending home sales shows buyers are returning to the market and signing contracts, but deals are not necessarily closing because of long delays related to short sales, and issues regarding complex new appraisal rules,” he said. “No doubt many first-time buyers are rushing to beat the deadline for the $8,000 tax credit, which expires at the end of next month.”
The Pending Home Sales Index in the Northeast jumped 8.2 percent to 85.3 in August and is 12.0 percent higher than August 2008. In the Midwest the index rose 3.1 percent to 90.8 in August and is 7.6 percent above a year ago. In the South, pending home sales increased 0.8 percent to an index of 104.6 and is 8.2 percent above August 2008. In the West the index surged 16.0 percent to 130.5 and is 22.3 percent above a year ago.
“There is likely to be some double counting over a span of several months because some buyers whose contracts were cancelled have found another home and signed a new contract to buy,” Yun explained. “Perhaps the real question is how many transactions are being delayed in the pipeline, and how many are being cancelled? Without historic precedents, it’s challenging to assess.”
Yun also noted that the data sample coverage for pending sales is smaller than the measurement for closed existing-home sales, so the two series will never match one for one.
NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said first-time buyers need to act now. “Potential first-time buyers must make a contract offer very soon to have a reasonable chance of qualifying for the tax credit,” he said. “Congress needs to extend and expand this program because it’s stimulating the economy and reducing inventory close to price stabilization points.”
McMillan said a sizable number of homebuyers already in the pipeline could be let down because of the tight deadline. “We know there is a pent-up demand because sales are below normal levels for the size of our population. The faster we absorb excess inventory, the sooner we’ll turn the corner on home prices, prevent additional families from becoming upside-down in their mortgages, and give Wall Street the confidence to extend credit to other sectors,” he said. “Each home sale pumps an additional $63,000 into the economy through related goods and services, so the benefits of extending and expanding the tax credit far outweigh the costs.”
Yun said the forecast for home sales and prices depends very much on whether a tax credit is extended. “All we can say for certain is sales will decline when the tax credit expires because we are not yet on a self-sustaining recovery path. It also raises a risk of a double-dip recession,” he said. “Extending and expanding the tax credit is the best tool in our arsenal to encourage financially qualified buyers to stimulate the economy and help reduce the budget deficit.”
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.2 million members involved in all aspects of the residential and commercial real estate industries.
# # #

Long-Term Mortgage Rates Ease Further This Week -

Short Term Rates Mixed
McLean, VA – Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey® (PMMS®) in which the 30-year fixed-rate mortgage (FRM) averaged 4.87 percent with an average 0.7 point for the week ending October 8, 2009, down from last week when it averaged 4.94 percent. Last year at this time, the 30-year FRM averaged 5.94 percent. The last time the 30-year FRM was lower was the week ending May 21, 2009, when it averaged 4.82 percent.
The 15-year FRM this week averaged 4.33 percent with an average 0.7 point, down from last week when it averaged 4.36 percent. A year ago at this time, the 15-year FRM averaged 5.63 percent. This is the lowest the 15-year FRM has been since Freddie Mac started tracking it in 1991.
The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.35 percent this week, with an average 0.5 point, down from last week when it averaged 4.42 percent. A year ago, the 5-year ARM averaged 5.90 percent. The 5-year ARM has not been lower since Freddie Mac started tracking it in 2005.
The one-year Treasury-indexed ARM averaged 4.53 percent this week with an average 0.5 point, up from last week when it averaged 4.49 percent. At this time last year, the 1-year ARM averaged 5.15 percent.
(Average commitment rates should be reported along with average fees and points to reflect the total cost of obtaining the mortgage.)
"Long-term mortgage rates eased further this week," said Frank Nothaft, Freddie Mac vice president and chief economist. "Interest rates for 30-year fixed-rate loans were the lowest since mid-May; 15-year FRMs were at a record low since data were first collected in 1991 and 5-year ARMs also hit an all-time record starting in 2005. Compared to a year ago, consumers could shave almost $134 off their monthly mortgage payments on a 30-year fixed-rate loan for $200,000 by refinancing.
"Such low rates are spurring mortgage demand. Mortgage applications surged to a 19-week high over the week ending on October 2nd, according to the Mortgage Bankers Association. Moreover, applications for home purchases were at the strongest pace since the beginning of this year."
Freddie Mac was established by Congress in 1970 to provide liquidity, stability and affordability to the nation's residential mortgage markets. Freddie Mac supports communities across the nation by providing mortgage capital to lenders. Over the years, Freddie Mac has made home possible for one in six homebuyers and more than five million renters. 
  

Summary of Survey Results
Fixed-Rate Mortgages
 
Average Conventional 30-Year Commitment Rate
Fees & Points
Average Conventional 15-Year Commitment Rate
Fees & Points
US
 4.87
 0.7
 4.33
 0.7
Northeast
 4.86
 0.8
 4.33
 0.9
Southeast
 4.92
 0.6
 4.35
 0.6
N. Central
 4.90
 0.6
 4.34
 0.5
Southwest
 4.83
 0.6
 4.36
 0.5
West
 4.83
 0.8
 4.29
 0.7
 
Five/One-Year Adjustable-Rate Mortgages
 
First Commitment Rate
Fees & Points
Margin
 
US
 4.35
 0.5
 2.75
 
Northeast
 4.39
 0.4
 2.74
 
Southeast
 4.13
 0.6
 2.75
 
N. Central
 4.69
 0.6
 2.74
 
Southwest
 4.42
 0.5
 2.78
 
West
 4.25
 0.6
 2.73
 
 
One-Year Adjustable-Rate Mortgages
 
First Commitment Rate
Fees & Points
Margin
 
US
 4.53
 0.5
 2.77
 
Northeast
 4.05
 0.4
 2.77
 
Southeast
 4.75
 0.3
 2.75
 
N. Central
 5.21
 0.7
 2.75
 
Southwest
 4.65
 0.4
 2.85
 
West
 4.39
 0.7
 2.75
 

 

Freddie Mac's Primary Mortgage Market Survey (PMMS) is for informational purposes only and Freddie Mac is not responsible for business decisions made based on the reported results of the PMMS. Freddie Mac may change the methodology used to conduct the PMMS survey at any time and without notice.
DEFINITIONS
Commitment Rate is the interest rate a lender would charge to lend mortgage money to a qualified borrower exclusive of the fees and points required by the lender. This commitment rate applies only to conventional financing on conforming mortgages with loan-to-value rates of 80 percent or less.
ARM Index - is the One-year Treasury
Loan to Value Ratio (LTV) is the ratio of the loan amount of a mortgage loan to the lower of the appraisal value or purchase price of the property securing the loan.
Origination Fees and Discount Points are the total charged by the lender at settlement. One point equals one percent of the loan amount.
Margin is a fixed amount added to the underlying index to establish the fully indexed rate for an ARM.
Weighted Averages for the Primary Mortgage Market Survey have been adjusted as of October 16, 2008. The new weights use the dollar volume of conventional mortgage originations within the 1-unit Freddie Mac loan limit as reported under Home Mortgage Disclosure Act (HMDA) for 2007. The weights are listed in the table below.

Freddie Mac Region
PMMS Weights
Northeast
24.2
Southeast
19.8
North Central
15.1
Southwest
12.7
West
28.2
 
Primary Mortgage Market Survey Results
October 8, 2009
30-Year Fixed Rate Mortgages
 
US
NE
SE
NC
SW
W
Average
 4.87
 4.86
 4.92
 4.90
 4.83
 4.83
Fees & Points
 0.7
 0.8
 0.6
 0.6
 0.6
 0.8
 
15-Year Fixed Rate Mortgages
 
US
NE
SE
NC
SW
W
Average
 4.33
 4.33
 4.35
 4.34
 4.36
 4.29
Fees & Points
 0.7
 0.9
 0.6
 0.5
 0.5
 0.7
 
5/1-Year Adjustable Rate Mortgages
 
US
NE
SE
NC
SW
W
Average
 4.35
 4.39
 4.13
 4.69
 4.42
 4.25
Fees & Points
 0.5
 0.4
 0.6
 0.6
 0.5
 0.6
Margin
 2.75
 2.74
 2.75
 2.74
 2.78
 2.73
 
1-Year Adjustable Rate Mortgages
 
US
NE
SE
NC
SW
W
Average
 4.53
 4.05
 4.75
 5.21
 4.65
 4.39
Fees & Points
 0.5
 0.4
 0.3
 0.7
 0.4
 0.7
Margin
 2.77
 2.77
 2.75
 2.75
 2.85
 2.75



 
The National Mortgage Rate Snapshot
 
One Year Ago
One Week Ago
 
30-YR
15-YR
5/1-YR
1-YR ARM
30-YR
15-YR
5/1-YR
1-YR ARM
Average
 5.94
 5.63
 5.90
 5.15
 4.94
 4.36
 4.42
 4.49
Fees & Points
 0.6
 0.6
 0.6
 0.6
 0.7
 0.6
 0.6
 0.5
Margin
N/A
N/A
 2.74
 2.76
N/A
N/A
 2.74
 2.75

 

September News

 

About Making Home Affordable

 

The Obama Administration has introduced a comprehensive Financial Stability Plan to address the key problems at the heart of the current crisis and get our economy back on track. A critical piece of that effort is Making Home Affordable, a plan to stabilize our housing market and help up to 7 to 9 million Americans reduce their monthly mortgage payments to more affordable levels.


The Home Affordable Refinance Program gives up to 4 to 5 million homeowners with loans owned or guaranteed by Fannie Mae or Freddie Mac an opportunity to refinance into more affordable monthly payments. The Home Affordable Modification Program commits $75 billion to keep up to 3 to 4 million Americans in their homes by preventing avoidable foreclosures.

Our consumer website, www.MakingHomeAffordable.gov, provides homeowners with detailed information about these programs along with self-assessment tools and calculators to empower borrowers with the resources they need to determine whether they might be eligible for a modification or a refinance under the Administration's program. Through this website, borrowers can also connect with free counseling resources to help with outstanding questions; locate homeowner events in their communities; find a handy checklist of key documents and materials to have ready when making that important call to their servicer as well as FAQs from borrowers in similar circumstances; and much more.

 Helpful Links

ELIGIBILITY                                  LOAN LOOK UP                                 RESOURCES                           FAQ

Making Home Affordable Program: Guidelines

On March 4, 2009, the Obama Administration announced new U.S. Department of the Treasury guidelines to enable servicers to begin modifications of eligible mortgages under the Administration's Making Home Affordable Program (MHA) – announced by President Barack Obama on February 28, 2009.
NAR's Detailed Summary of the Obama Housing Plan> (PDF: 112K)
Key Components of the Plan>
View the Treasury Department Guidelines>
 



Federal Housing Rescue Plan Launches 

 

The Obama Administration’s program to rescue distressed home owners got off the ground this week. The program was announced on Feb. 18, but it took several weeks to put the bureaucracy in place. Six of the nation’s largest banks signed up to participate, the Treasury Department announced Wednesday. They are JPMorgan Chase, Wells Fargo, Citigroup, GMAC Mortgage, Saxon Mortgage Services, and Select Portfolio Servicing. Treasury says it is allocating $50 billion to the program. The Department of Housing and Urban Development will provide the rest. The plan calls for loan servicers to reduce interest rates so a family’s monthly mortgage obligation is no more than 38 percent of its pre-tax income. Loan servicers also can reduce loan balances. After the loans are modified, the government then provides enough money to reduce payments to 31 percent of income. Participating servicers get $1,000 a year for each modification and another $1,000 a year for three years if the borrower remains current. Servicers get an extra $500 if they do the modifications before the borrower falls behind in his payments—and the borrower gets $1,500. Also, homeowners get $1,000 a year for five years if they remain current on their payments. The money must be used to reduce their principal balances. Source: CNN, Tami Luhby (04/16/2009)



 


J.D. Power and Associates Reports ...continued



Keller Williams ranks highest among real estate companies in satisfying home buyers, while Prudential ranks highest in satisfying home sellers, according to the J.D. Power and Associates 2008 Home Buyer/Seller StudySM released today.

The inaugural study measures customer satisfaction of home buyers and sellers with the largest national real estate firms. Overall satisfaction is determined by examining three factors for the home-buying experience: agent (65%); office (21%); and services (13%).  Four factors are examined for the home-selling experience: agent (43%); marketing (38%); office (12%); and services (7%).



In the home-buyer segment, Keller Williams achieves a score of 831 on a 1,000-point scale, and receives highest ratings from customers in all three factors. Following in the rankings are Prudential (820) and Coldwell Banker (816). Prudential performs well in the agent and office factors, while

--- 23 July 2008