Nearly 528,000 homes were taken over by lenders in the first six months of the year, a rate that is on track to eclipse the more than 900,000 homes repossessed in 2009, according to data released Thursday by RealtyTrac Inc., a foreclosure listing service.

“That would be unprecedented,” said Rick Sharga, a senior vice president at RealtyTrac.

By comparison, lenders have historically taken over about 100,000 homes a year, Sharga said.

The surge in home repossessions reflects the dynamic of a foreclosure crisis that has shown signs of leveling off in recent months, but remains a crippling drag on the housing market.

The pace at which new homes falling behind in payments and entering the foreclosure process has slowed as banks continue to let delinquent borrowers stay longer in their homes rather than adding to the glut of foreclosed properties on the market. At the same time, lenders have stepped up repossessions in an effort to clear out the backlog of distressed inventory on their books.

The number of households facing foreclosure in the first half of the year climbed 8 percent versus the same period last year, but dropped 5 percent from the last six months of 2009, according to RealtyTrac, which tracks notices for defaults, scheduled home auctions and home repossessions.

In all, about 1.7 million homeowners received a foreclosure-related warning between January and June. That translates to one in 78 U.S. homes.

Foreclosure notices posted monthly declines in April, May and June, but Sharga said one shouldn’t read too much into that.

“The banks are really sort of controlling or managing the dial on how fast these things get processed so they can ultimately manage the inventory of distressed assets on the market,” he said.

On average, it takes about 15 months for a home loan to go from being 30 days late to the property being foreclosed and sold, according to Lender Processing Services Inc., which tracks mortgages.

Assuming the U.S. economy doesn’t worsen, aggravating the foreclosure crisis, Sharga projects it will take lenders through 2013 to resolve the backlog of distressed properties that have on their books right now.

And a new wave of foreclosures could be coming in the second half of the year, especially if the unemployment rate remains high, mortgage-assistance programs fail, and the economy doesn’t improve fast enough to lift home sales.

The prospect of lenders taking over more than a million homes this year is likely to push housing values down, experts say.

Foreclosed homes are typically sold at steep discounts, lowering the value of surrounding properties.

“The downward pressure from foreclosures will persist and prices will be very weak well into 2012,” said Celia Chen, senior director of Moody’s Economy.com.

She projects home prices will fall as much as 6 percent over the next 12 months from where they were in the first-quarter.

Economic woes, such as unemployment or reduced income, continue to be the main catalysts for foreclosures this year. Initially, lax lending standards were the culprit. Now, homeowners with good credit who took out conventional, fixed-rate loans are the fastest growing group of foreclosures.

There are more than 7.3 million home loans in some stage of delinquency, according to Lender Processing Services.

Lenders are offering to help some homeowners modify their loans. But many borrowers can’t qualify or they are falling back into default. The Obama administration’s $75 billion foreclosure prevention effort has made only a small dent in the problem.

More than a third of the 1.2 million borrowers who have enrolled in the mortgage modification program have dropped out. That compares with about 27 percent who have received permanent loan modifications and are making payments on time.

Among states, Nevada posted the highest foreclosure rate in the first half of the year. One in every 17 households there received a foreclosure notice. However, foreclosures there are down 6 percent from a year earlier.

Arizona, Florida, California and Utah were next among states with the highest foreclosure rates. Rounding out the top 10 were Georgia, Michigan, Idaho, Illinois and Colorado.

AP Real Estate Writer Alan Zibel in Washington contributed to this report.

“While all real estate in the U.S. is local, the same is not true for property owners,” said NAR President Vicki Cox Golder, owner of Vicki L. Cox Real Estate in Tucson, Ariz. “The U.S. continues to be a top destination for international buyers from all over the world. Foreign buyers understand the value of owning a home in this country and can rely on REALTORS® to help guide them through the complex process of buying property in the U.S. With expertise, knowledge and experience, REALTORS® have a global perspective.”

The survey, released today, covers the period between April 1, 2009, and March 31, 2010. During that time foreign buyers, including those with residency outside the U.S. as well as recent immigrants and temporary visa holders, are estimated to have purchased $66 billion of U.S. residential property, or 7 percent of the residential market.

Slightly more than a quarter of REALTORS®, 28 percent, reported working with at least one international client in the past year. This is a significant increase from the 2009 report, when 23 percent of REALTORS® worked with foreign clients. Eighteen percent of all REALTORS® were estimated to have completed at least one sale, compared to 12 percent last year.

“Several factors have contributed to an increase in international buyer interest in the U.S.,” said Golder. “A large majority of REALTORS® report the changes in value to the U.S. dollar have had a strong impact on the international real estate business. In addition, perceptions abroad about trends in the U.S. real estate market have led many international clients to believe purchasing a home in the U.S. is more affordable than in their country and holds more value.”

International buyers came from 53 different countries around the world. The top four countries were Canada, Mexico, the U.K. and China/Hong Kong. With 23 percent of international buyers coming from Canada, the country has remained the largest buying group in the past three years. Foreign buyers from Mexico have been steadily increasing. In 2010 Mexico replaced the U.K. as the second largest buying group with 10 percent of buyers. Buyers from the U.K. buyers decreased from 10.5 percent in 2009 to nine percent in 2010. Eight percent of recent buyers came from China/Hong Kong.

Two factors important to international clients when purchasing property in the U.S. are proximity to their home country and the convenience of air transportation. Florida typically attracts European, Canadian and South American buyers while the East Coast draws Europeans. The West Coast brings Asian buyers and the Southwest attracts Mexicans.

International buyers were reported in 39 states in 2010, but a slight majority of the total buyers are concentrated in Florida, California, Arizona and Texas. These four states account for 53 percent of purchases and have remained the top destinations for the past three years, with Florida and California remaining the top two destinations.

The median price paid by international buyers for a home in the U.S. was $219,400, a decrease from 2009’s median price of $247,100. However, the median price paid by foreign buyers was significantly higher than the overall median market price, which was $172,500 in 2009. On average, foreign buyers tend to purchase closer to the upper end of the market; 16 percent of the total international purchases were for homes priced at more than $500,000. According to REALTORS®, this was because international buyers are typically looking for a second home.

A majority of international buyers, 66 percent, purchased single-family detached homes. However, more international buyers purchased a condo than did their U.S. counterparts, at 23 percent and 7 percent, respectively. Only 44 percent of international buyers used a mortgage to pay for their home, compared to 92 percent of domestic buyers. Fifty-five percent of foreign buyers paid all cash. REALTORS® reported that a majority of international buyers use all cash because of the difficulty in establishing international credit in the U.S. Over one-third, 34 percent, of potential foreign buyers was unable to complete transactions because of financing problems in the U.S.

Source: NAR

This relatively small actual number is nevertheless causing the credit industry to look at new ways to evaluate walk-away risk even among the very creditworthy.

Credit bureau Experian reports that borrowers in California, Florida, and other hard-hit states are more likely to walk away than people living in states with more stable markets. Also, residents of states where lenders have no recourse are more likely to toss in the towel.

People with small amounts of negative equity also are more likely to stay and pay.

Source: Washington Post (07/03/2010)

NEW YORK (Reuters) – Nearly one out of every three U.S. home sales in the first quarter was a foreclosure property as steep price discounts boosted demand for distressed real estate, RealtyTrac said in a new report on Wednesday.

Foreclosure homes accounted for 31 percent of all residential sales in the first quarter of 2010, with the average sales price of properties that sold while in some stage of foreclosure nearly 27 percent below homes that were not in the process, Irvine, California-based RealtyTrac said.

“In a normal market, only 1 to 2 percent of home sales are foreclosures, so this is certainly a significant level,” Rick Sharga, senior vice president at RealtyTrac, said in an interview.

Total U.S. foreclosure sales in 2009 were up more than 1,100 percent from 2006 and more than 2,500 percent from 2005. Foreclosure sales accounted for 29 percent of all sales in 2009, up from 23 percent in 2008 and a mere 6 percent in 2007, the real estate data company said.

Foreclosure activity in the first quarter, however, ebbed from the previous quarter as well as year-over-year.

A total of 232,959 U.S. properties in some stage of foreclosure — including mortgage default notices, scheduled for auction or bank-owned (REO) — were sold to third parties in the first quarter, a decrease of 14 percent from the previous quarter and down 33 percent from the peak during the first quarter of 2009, when sales of foreclosure homes accounted for 37 percent of all residential sales.

“The drop from the previous quarter can probably be attribute to seasonality, and while the year-over-year drop is significant, it should be noted that it was down from the peak,” Sharga said.

“A combination of an enormous inventory of distressed properties and an unprecedented interest by homebuyers to buy these properties boosted sales,” he said.

The average sales prices on properties in some stage of foreclosure decreased 23 percent from 2006-09, while the average discounts on foreclosure purchases increased from 21 percent in 2006 to 27 percent in the first quarter of 2010.

The discounts on REOs are larger than those on pre-foreclosures, although discounts on pre-foreclosures appear to be trending higher as short sales become more common, the company said.

“First time homebuyers and investors continue to buy foreclosure properties in large numbers, and at substantial discounts,” James Saccacio, Chief Executive Officer of RealtyTrac, said in a statement.

“As lenders have begun repossessing homes at record levels over the first half of 2010, it will be interesting to watch how they will manage the inventory levels of distressed properties on the market in order to prevent more dramatic price deterioration,” he said.

Meanwhile, the Sun Belt continued to lead foreclosures nationally, with Nevada, California and Arizona posting the highest percentage of foreclosure sales in the first quarter.

Foreclosure sales accounted for 64 percent of all sales in Nevada in the first quarter — the highest percentage of any state. The state’s percentage was down from 65 percent of all sales in the previous quarter and 75 percent of overall sales in the first quarter of 2009.

California posted the second highest percentage for U.S. states, with foreclosure sales accounting for 51 percent of all sales there in the first quarter — up from 50 percent in the previous quarter, but down from 70 percent of all sales in the first quarter of 2009.

Other states where foreclosure sales accounted for at least one-third of total sales were Massachusetts, Rhode Island, Florida, Michigan, Georgia, Illinois, Idaho and Oregon.

Foreclosures are by far one of the biggest threats to the U.S. housing market. Improvement in the housing market bodes well for the national economy, as it points to better demand in the sector where the first signs of the latest recession took root.

The Standard & Poor’s/Case-Shiller 20-city home price index released Tuesday posted an 0.8 percent gain. It had fallen in each of the past six months.

Eighteen of 20 cities showed price increases in April from March. Washington, San Francisco and Dallas each posted gains of 2 percent or more. Eleven cities reversed their declines from the month before.

Only Miami and New York recorded price declines. New York hit a low since the index first recorded prices there in 1987.

Nationally, prices have risen 3.8 percent from their April 2009 bottom. But they remain 30 percent below their July 2006 peak.

The overall price gains highlight the impact of the federal tax credits for homebuyers at the start of the traditionally strong spring selling season. Buyers rushed to purchase before the tax credits expired at the end of April. The numbers are likely to drop in the next report.

“Demand for homes has softened since then, and that is likely to weigh on prices, particularly in May and June,” wrote TD Bank Financial Group economist Martin Schwerdtfeger Tuesday. “Weaker sales and still-high foreclosures will likely drive month’s supply higher in the near term, and this will put lid on home prices.”

David M. Blitzer, the S&P’s index chairman, said the recovery is not getting a consistent and sustained boost from the housing market. He doesn’t expect that to happen until next year.

“Other housing data confirm the large impact, and likely near-future pullback, of the federal program,” Blitzer said.

Last week, the government reported that new home sales fell in May to their lowest level on record, plunging 33 percent from the month before. That was the slowest sales pace on records dating back to 1963. Sales of previously occupied homes edged down 2.2 percent.

Also, homebuilders KB Home and Lennar Corp. both reported sharp declines in new home orders in the three months ended in May.

Patrick Newport, an economist at IHS Global Insight, expects prices to resume falling through next year and lose another 6 percent to 8 percent. The declines will be widespread, he predicts.

“In two to three months, the indexes for almost all the cities will begin falling again,” Newport said. source:yahoo

“The home buyer tax credit did its job in stoking spring sales and we expected a temporary pull back in the builders’ outlook after the credit expired at the end of April,” said NAHB Chairman Bob Jones, a home builder from Bloomfield Hills, Mich. “However, the reduction in consumer activity may have been more dramatic than some builders had anticipated, which resulted in their lower confidence levels.”

“We expected some softening in the market following the expiration of the home buyer tax credit and this report seems to verify this assumption,” said NAHB Chief Economist David Crowe. “In the coming months, an improving economy, rising employment, low mortgage rates and stabilizing home values should help the housing market move forward. But as today’s HMI data shows, builders still remain very cautious and are aware that several factors could impede the nascent housing recovery, including serious problems in obtaining financing for the production of housing, faulty appraisal practices and competition from short sales and foreclosed properties.”

Derived from a monthly survey that NAHB has been conducting for more than 20 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

Each of the HMI’s component indexes recorded declines in June. The component gauging current sales conditions fell five points to 17, while the component gauging sales expectations for the next six months declined four points to 23 (from a one-point downward revised index level of 27 in May) and the component gauging traffic of prospective buyers fell two points to 14.

The HMI also posted losses in every region in June. The Northeast, which has the smallest survey sample and is therefore subject to greater month-to-month volatility, fell 17 points to 18 following a 14-point jump in May. The Midwest posted a three-point loss to 14, while the South also registered a three-point decline to 19 and the West fell four points to 15 from a revised May level of 19.

Editor’s Note: The NAHB/Wells Fargo Housing Market Index is strictly the product of NAHB Economics, and is not seen or influenced by any outside party prior to being released to the public. HMI tables can be accessed online at: www.nahb.org/hmi. More information on housing statistics is also available at: www.housingeconomics.com.

Between 65% and 75% of loans that are modified through the Home Affordable Modification Program but not backed by the federal government are likely to go bad, according to the report released by Fitch Ratings, a N.Y.-based credit-rating agency.

The main reason these borrowers continue to struggle is that HAMP does nothing to solve the rest of their debt problems, the report added.

“Many of these borrowers still have very heavy levels of other debt,” said Diane Pendley, a Fitch managing director, “auto loans, credit cards and other expenses. The HAMP modifications reduce housing expenses down to 31% of income but do not touch these other obligations.”

On average, HAMP-modified borrowers, according to Pendley, have 64% of their monthly pretax income spent before they even buy a quart of milk. If even a small emergency arises — an unexpected car repair, a medical bill or a loss of overtime income — they’re in trouble.

“We’re talking borrowers who don’t have cash reserves,” said Pendley. “If they did, they wouldn’t be in this position in the first place. It doesn’t take much for them to get in the same situation again”

Jay Brinkmann, the chief economist for the Mortgage Bankers Association, finds nothing at all surprising about the Fitch finding. “Over the course of studying this over several years,” he said, “we find re-default rates from 40% to 60% on modified mortgages. You have borrower behavior that keeps coming back.”

When that happens, lenders are much more likely now to recommend that borrowers opt for foreclosure alternatives instead of modifying loans a second time.

Currently, according to the Fitch report, about half of prime borrowers who lose their homes now do so through foreclosure.

The other 50% go through short sales, in which they sell their homes for less than what they owe the bank, or deed-in-lieu, a transaction where the bank takes back the property directly and forgives the outstanding balance.

Don’t foreclose! Do a short sale
The servicers have been encouraged to rev up their short sale engines by the Treasury Department, which runs HAMP and its sister program, Home Affordable Foreclosure Alternatives (HAFA), which provides cash incentives to the parties who agree to short sales..

Now, when borrowers re-default on HAMP mods or other bank workouts, banks are much more likely to offer help to execute a short sale or deed-in-lieu.

“HAFA gave the servicers an indication that this is where they should take these [re-defaulting loans],” said Pendley. “The banks are now assisting borrowers; they’re being much more proactive, like helping them find real estate brokers for short sales.”

The benefit of these transactions for borrowers is that it lets them move on more quickly with their lives. They can get out from under the unaffordable mortgage payments, find a cheaper rental, start to, perhaps, save a little cash and start to rebuild their credit scores. source: money.com

RISMEDIA, June 17, 2010–As the temperatures continue to rise this summer, so does the cost of keeping your home cool. While homeowners across the country come to depend on air conditioners to keep the temperature down during the warm summer months, there are other options that will keep you cool while keeping your energy bill low.

Fans and ceiling fans-If you’re looking for ways to beat the heat, a ceiling fan can be a great investment for your home. This one appliance can make a room feel 6 or 7 degrees cooler, and even the most power-hungry fan costs less than $10 a month to use if you keep it on for 12 hours a day. Good fans make it possible for you to raise your thermostat setting and save on air-conditioning costs. Fans don’t use much energy, but when air is circulating, it feels much cooler. Ceiling fans are best, but a good portable fan can be very effective as well.

-You should remember that even mild air movement of 1 mph can make you feel three or four degrees cooler. Also, make sure your ceiling fan is turned for summer – you should feel the air blown downward.

Shades, drapes or blinds-Install white window shades, drapes or blinds to reflect heat away from the house. Close blinds, shades and draperies facing the sun (east-facing windows in the morning and west-facing windows in the afternoon) to keep the sun’s heat out and help fans or air conditioners cool more efficiently. Always remember that the best way to keep your home cool is to keep the heat out.

Internal Heat-The most common sources of internal heat gain are; appliances, electronic devices and lighting. Be aware of devices in your home that are generating heat and if you have air conditioning, use it wisely.

Don’t put lamps, televisions or other heat-generating appliances next to your air-conditioning thermostat, because the heat from these appliances will cause the air conditioner to run longer. The heat they produce will make the thermostat think your house is warmer than it really is, and your system will run harder than it needs to.

-Unless you absolutely need them, turn off incandescent lights and heat-generating appliances. Replace incandescent bulbs with compact fluorescents; they produce the same light but use a fifth the energy and heat.

-You should also try to avoid heat-generating activities such as cooking on hot days or during the hottest part of the day. If you are cooking, use your range fan to vent the hot air out of your house. By reducing the amount of heat in your home, you will use less energy to cool it.

Plants-Plant trees or shrubs to shade air conditioning units, but not block the airflow. A unit operating in the shade uses less electricity. Deciduous trees planted on the south and west sides will keep your house cool in the summer and allow the sunlight to warm the house during the winter.

Roof and Walls-Paint your roof white – If you’ve got a flat roof, paint it with a specially formulated reflective paint or just paint it white. The reflective effect will help to keep the rooms under the flat roof much cooler.

Other things to remember
-Humidity makes room air feel warmer, so reduce indoor humidity. Minimize mid-day washing and drying clothes, showering and cooking. When you must do these things, turn on ventilating fans to help extract warm, moist air.

-Avoid landscaping with lots of unshaded rock, cement, or asphalt on the south or west sides of your home because it increases the temperature around the house and radiates heat to the house after the sun has set.

-If the attic isn’t already insulated or is under-insulated, insulate it now. Upgrading from 3 inches to 12 inches can cut cooling costs by 10%.

Exacting buyers are upending the battered real estate market, agents and other experts say, leading to last-minute demands for multiple concessions, bruised feelings on all sides and many more collapsed deals than usual.

It is a reversal of roles from the boom, when competing buyers were sometimes reduced to writing heartfelt letters saying how much they loved the house and how they promised to eternally worship the memory of the previous owners. These days, it is the buyers who are coldly seeking the absolute best deal while the sellers are left in emotional turmoil.

“We see buyers who must have learned their moves from the World Wrestling Federation,” said Glenn Kelman, chief executive of the online broker Redfin. “They think the final smack-down occurs at the inspection, where the seller will be reluctant to refuse any demand because the alternative is putting the house back on the market as damaged goods.”

Everyone expected the housing market to suffer at least a temporary hangover after the government’s $8,000 tax credit expired, but not necessarily this much. Preliminary data from around the country indicates that the housing market began swooning last month immediately after the credit was no longer available. In some places, sales dropped more than 20 percent from May 2009, when the worst of the financial crisis had subsided.

Builders have been affected too. Construction of new homes in May dropped 17.2 percent from April, the Commerce Department said Wednesday, significantly lower than forecast. Permits for future construction dropped 10 percent, suggesting a cruel summer.

Even the lowest home mortgage rates in decades are not doing much to invite deals. The Mortgage Bankers Association said Wednesday that applications for loans to buy houses were down by a third compared with last year. Applications are back to the level of the mid-1990s, when the country’s housing market was smaller.

Against such a backdrop of misery, buyers are empowered — and are taking full advantage.

John Porter Simons, a Seattle software engineer, thought he had a couple willing to pay $340,000 for his house. But they asked for $24,000 worth of work, most of which involved waterproofing the basement. “It was totally irrational,” said Mr. Simons. “My basement has never flooded. I live on a hill.”

He made a counteroffer to their offer, and the buyers walked. The house is now under contract to a new set of buyers, who got a cut in price and $2,500 in electrical work thrown in.

Buyers, of course, say they are merely being smart.

Chris Dunn, an economic consultant in Chicago, saw a house he liked last month for $539,000. He offered $500,000, but then his inspector told him that he would eventually have to replace the windows. The sellers were persuaded to kick in $10,000 more to pay for the work.

“We didn’t feel we were being that aggressive,” said Mr. Dunn. “We had the position, ‘If the seller is willing to come down enough, we will buy this home.’ If they weren’t willing, we would have just moved on. In this market, you have a lot of options.”

In some cases, agents say, sellers literally cannot afford to make concessions. Another $10,000 will push them underwater, which means they will have to arrange the sale through the bank.

“People cashed in on their houses to get money to go on vacation, for a new roof, to send the kids to college,” said Roberta Baldwin, an agent in Montclair, N.J. “They thought it was always going to be worth more.”

Even when a sale can be worked out, it is not uncommon for everyone to walk away feeling more aggrieved than celebratory.

“Buyers feel they’re not appreciated for simply making an offer,” Ms. Baldwin said. “And sellers feel humiliated and even angry. They expected to do better.”

Information about scuttled deals tends to be anecdotal, but Mike Lyon of Lyon Real Estate in Sacramento estimates that 15 to 17 percent of sales in his area are falling apart at the last minute as sellers prove unable or unwilling to give buyers what they want. In a normal market, he said, the figure is about 5 percent.

“This is the fallout from all the foreclosures: Buyers think that anyone who is selling must be desperate,” said Mr. Lyon, who employs about a thousand agents. “They walk in with the bravado of, ‘The world’s coming to an end, and I want a perfect place.’ ”

The tax credit, for all its flaws, may have helped avert financial Armageddon, but the final effect is still being tallied. In Indianapolis, the number of contracts signed in May was down 32 percent compared with May 2009. They dropped nearly 25 percent in Minneapolis/St. Paul, 20 percent in Seattle, 10 percent in Sacramento and 42 percent in Hartford. (A few areas, including Miami, showed improvements instead of declines.)

Pending contracts, if they are not canceled at the last minute, become official in six to eight weeks. Many deals done in April, when the credit was in effect, are still being completed and will be counted in May or June sales reports. So the severity and extent of the current slump will not become clear until fall.

The optimists, and real estate remains full of them, say the trough is temporary. The stimulus might have stolen sales from May but by July, they argue, people will need to buy again.

Indeed, the Mortgage Bankers Association’s purchase application index ticked up slightly this week after five weeks of decline, although the association declined to say the index had bottomed out.

John P. Johnson of Des Moines will continue to hope, as he has for more than two years now, for a market that is healthy enough to supply him with a buyer. His house, built in 1981, is too recent to be charming and too old to be new.

“When we upgraded the kitchen, we put in Corian countertops, which were fashionable at the time, but now they all want granite,” he said.

He had one offer in the fall, which fell apart when the buyer made too many demands (a shaved sales price plus paying the closing costs and all their other fees). Despite another price cut to $204,000, only one couple showed up at the last open house. His agent tells him the market is dead. The number of contracts signed in Des Moines in May was down 47 percent from last year.

“Keeping this house ready to sell is a full-time job,” said Mr. Johnson. “I never thought I’d be spending my retirement doing this.”

This story originally appeared in the The New York Times
URL: http://www.cnbc.com//id/37746209/

“Home-value declines and continued low mortgage rates have kept home-buyer affordability relatively high. Mortgage rates on 30-year fixed-rate loans averaged 5.0 percent in Freddie Mac’s Primary Mortgage Market Survey® over the first quarter,” said Frank Nothaft, Freddie Mac vice president and chief economist.

“House price measures tend to show a lot of seasonality, with values lower during the slow home-selling months of autumn and winter and higher during the greater-activity months of spring and summer. Examining year-over-year home-value changes largely controls for seasonality. Compared with the first quarter of 2009, the national index dipped slightly – down 1.1 percent – with three-of-nine regions posting price gains. Houses in the Pacific region were up 4.5 percent over the past year, and in the Middle Atlantic and West South Central states prices were up about one percentage point, on average. While values were up the most in the Pacific region over the past year, this gain occurred after values had fallen more than 30 percent over the two prior years, from the beginning of 2007 to the beginning of 2009.”

The CMHPI Purchase-Only Series includes only property values based on home purchases with a conventional mortgage in its calculation. Freddie Mac also produces a CMHPI Classic Series that includes data from both home purchase transactions and mortgage refinancings, with the latter values based on appraisals. Generally, because appraisals are backwards looking through the use of recent comparable property transactions, the Classic Series will typically lag changes in the Purchase-Only series. The CMHPI Classic Series indicated that average U.S. home values fell 1.5 percent (-6.0 percent annualized) during the first quarter. Comparing the first quarter of 2010 with the first quarter of 2009, the Classic Series shows 6.7 percent depreciation.

The CMHPI Purchase-Only Series had the following regional house-price changes:

Middle Atlantic Division (NJ, NY, PA): decreased 0.4 percent (-1.7 percent, annualized) in the first quarter of 2010. Over the last 12 months, home values increased 1.0 percent, and during the last five years, home values increased 10.1 percent.
West South Central Division (AR, LA, OK, TX): fell 0.9 percent (-3.5 percent, annualized) in the first quarter of 2010. Over the last 12 months, home values were increased 0.7 percent, and during the last five years, home values increased 16.6 percent.
New England Division (CT, MA, ME, NH, RI, VT): declined 1.1 percent (-4.5 percent, annualized) in the first quarter of 2010. Over the last 12 months, home values decreased 1.7 percent, and during the last five years, home values declined 6.5 percent.
Pacific Division (AK, CA, HI, OR, WA): decreased 2.0 percent (-7.8 percent, annualized) in the first quarter of 2010. Over the last 12 months, home values increased 4.5 percent, and during the last five years, home values have decreased 13.2 percent.
South Atlantic Division (DC, DE, FL, GA, MD, NC, SC, VA, WV): fell 2.3 percent (-8.8 percent, annualized) in the first quarter of 2010. Over the last 12 months, home values decreased 4.0 percent, and during the last five years, home values fell 5.2 percent.
Mountain Division (AZ, CO, ID, MT, NM, NV, UT, WY): decreased 2.8 percent (-10.8 percent, annualized) in the first quarter of 2010. In the last 12 months, home values decreased 6.1 percent; during the last five years, home values declined 4.4 percent.
East North Central Division (IL, IN, MI, OH, WI): decreased 2.9 percent (-11.2 percent, annualized) in the first quarter of 2010. Over the last 12 months, home values decreased 3.4 percent, and during the last five years, home values decreased 8.9 percent.
East South Central Division (AL, KY, MS, TN): decreased 3.1 percent (-11.9 percent, annualized) in the first quarter of 2010. Over the last 12 months, home values decreased 1.8 percent, and during the last five years, home values increased 8.7 percent.
West North Central Division (IA, KS, MN, MO, ND, NE, SD): decreased 3.2 percent (-12.1, annualized) in the first quarter of 2010. Over the last 12 months, home values fell 1.3 percent; over the last five years, home values decreased 0.2 percent.

Unlike other home price indexes based on mean or median values of homes sold during a given period, the CMHPI is constructed using regression techniques from observations of actual sales prices or appraised values of the same homes over time. The street addresses of properties that serve as collateral for mortgages are processed using software certified by the United States Postal Service to create a uniform address format and are then matched to identify consecutive transactions on the same property. There are currently 42 million records in the repeat-transactions database used to construct the classic Conventional Mortgage Home Price Index – this database includes transactions on one-family detached and townhome properties serving as collateral on loans originated through the first quarter of 2010 and purchased by Freddie Mac or Fannie Mae by April 30, 2010.

Freddie Mac publishes the CMHPI each quarter. Index values and growth rates for the classic series are available for the nation as a whole as well as for the nine Census divisions, the 50 states and the District of Columbia, and 392 metropolitan statistical areas (MSAs) and metropolitan divisions; index values and growth rates for the purchase-only series are available for the nation and nine Census divisions. All of the CMHPI series can be found on Freddie Mac’s web site, www.freddiemac.com/finance/cmhpi/.

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.

The total number of foreclosure filings — notices of default, auction notices and bank repossessions — fell by 9% from March to April, and 2% compared with April 2009, according to data released Thursday by RealtyTrac, the online marketer of foreclosed properties.

This is the first time that has happened in the history of the report, which goes back to January 2006.

But the number of homes repossessed during April is at an all-time high of 92,432. That is a 45% increase over April 2009. If repossessions continue at this pace, more than 1.1 million homes will be lost in 2010.

“There were two important milestones in the April numbers that show foreclosure activity has begun to plateau, but at a very high level that will not drop off in the near future,” said RealtyTrac CEO James Saccacio.

Saccacio said he expects the pattern to become the norm for many months, with the overall numbers of filings staying high, but not increasing, and repossessions remaining at record levels.

The reason that repossessions can rise while filings hold steady is that lenders are working through a backlog of delinquent properties, taking more of them through the entire process to repossession, rather than letting them linger in limbo.

Walkaways
The numbers of repossessed properties, also called real-estate owned or REOs, have been boosted by a spike in the number of homeowners voluntarily giving up their homes because their the value has dropped so precipitously.

These “strategic defaults” now account for nearly one in three foreclosures, according to a recent report from the University of Chicago Booth School of Business and Northwestern’s Kellogg School of Management. That’s up from 22% 12 months earlier.

Some homeowners walk away when they are “underwater,” owing far more than the value of their home, because they realize that they will never recoup the losses. The further homeowners fall underwater, the more likely they are to leave.

About one in four U.S. homeowners is underwater, according to CoreLogic, a financial data provider. Nearly 5 million of those borrowers owe mortgage debt that exceeds their property values by 25% or more. The total of negative equity in these deeply underwater borrowers is a whopping $655 billion.

Foreclosure epicenters
Nevada continues to rank as the worst-hit foreclosure state, with one of every 69 households receiving some kind of filing. That’s nearly six times the national rate which is one household for every 387 receiving a filing.

Foreclosures: How bad is your state?
Arizona had the second highest rate; Florida the third; and California the fourth. California, the largest state in the union, had nearly 70,000 filings, more than any other state. Michigan, where the vast number of foreclosures can be traced to job losses and economic turmoil, recorded more than 19,000.

The metro area market that recorded the highest rate of foreclosure filings in April was Las Vegas, where one of every 60 homes was delinquent, Second was Modesto, Calif., with one in 101, and neighboring Merced, where one in 104 homeowners was in some stage of default.
source: cnn.com

While the rate of new foreclosure actions has eased, a stockpile of loans that are seriously delinquent or in foreclosure means a long path to recovery for the U.S. housing market.

“It’s like shutting off the oil leak but you still have a lot of oil in the Gulf to deal with,” Jay Brinkmann, the MBA’s chief economist, said in an interview.

Loans that are 90 days or more past due or in foreclosure represent a historically high 68 percent of all problem mortgages.

The combination of loans in foreclosure and those that are at least one payment past due declined to 14.01 percent on a non-seasonally adjusted basis from a record 15.02 percent in the fourth quarter, according to the MBA’s National Delinquency Survey.

New claims for unemployment insurance in the first quarter were higher than expected, the MBA said, which stemmed improvement in the 30-day delinquency rate. The rate has stabilized, Brinkmann said, though “a bad situation that is not getting worse is still bad.”

The delinquency rate for one-to-four-unit residential loans in the first quarter rose to a seasonally adjusted rate of 10.06 percent of loans outstanding from 9.47 percent the prior quarter and from 9.12 percent a year earlier.
The MBA said it views the adjusted data with caution because of difficulty gauging what represents a fundamental improvement rather than seasonal adjustments. Delinquency rates typically peak in the fourth quarter and fall in the first quarter.

Unadjusted, the delinquency rate fell to 9.38 percent in the first quarter from 10.44 percent the prior quarter.

“Overall, we see a continuation of the pattern of declines in short-term delinquency rates, at least on a non-seasonally adjusted basis, the continued historically high share of delinquencies that are 90 days or more past due, and a leveling off in the pace of foreclosures,” Brinkmann said in a statement.
The share of loans starting the foreclosure process rose to 1.23 percent in the first quarter from 1.20 percent the prior quarter, but edged down from 1.37 percent a year earlier.

The percentage of U.S. home loans in foreclosure climbed to a record 4.63 percent from 4.58 percent in the fourth quarter and from 3.85 percent a year ago.

Despite government efforts to modify loan terms, foreclosures have mounted as seriously delinquent mortgages work through the process of bank repossession.

Unemployment, which hovers near double digits, is forcing more homeowners to default in states other than those most hurt in the initial foreclosure tidal wave spawned by high-risk loans.

Washington, Maryland, Oregon and Georgia had the largest overall increases in foreclosure starts in the first three months of the year compared with the last three months of 2009, the MBA said. source: cnbc.com

The homebuyer tax credit signed into law in March by Gov. Arnold Schwarzenegger is available effective today.

Assembly Bill 183 established a tax credit of $10,000 or 5 percent of the purchase price of a newly built home and a $10,000 tax credit for first-time purchasers of existing homes.

The credit is good through Dec. 31, or until funding is exhausted, whichever comes first.

The $200 million allocated for the program is split evenly, with $100 million going to purchasers of new homes and $100 million to first-time buyers of existing homes.

AB 183 was co-authored by Assemblywoman Anna Caballero, D-Salinas, and state Sen. Roy Ashburn, R-Bakersfield.

More information on the state tax credits can be viewed at www.ftb.ca.gov/individuals/new_home_credit.shtml.

The state program is kicking in just as federal homebuyer tax credits end.

Congress included the temporary tax credits in the economic stimulus package signed into law shortly after President Barack Obama took office last year. Lawmakers, after intense lobbying from the real estate industry last fall, extended it until Friday.

Homebuyers who had signed contracts in hand by Friday’s deadline have until June 30 to complete their deals, and according to state officials, can also take advantage of both tax credit programs up to that time – a potential tax credit boost of up to $18,000.

The federal government offered buyers who haven’t owned a home for three years a tax credit of 10 percent of the purchase price, up to $8,000. Single buyers with incomes above $145,000 and couples making more than $245,000 were not eligible.

The federal program also offered a credit of 10 percent, up to a maximum of $6,500, for buyers who already owned a home for at least five years, with the same income limits applying.

Nearly 1.8 million households had used the federal tax credits as of mid-February at a cost of $12.6 billion, according to the most recent records released by the Internal Revenue Service.

Some analysts said the first-time buyers credit helped new-home sales surge 27 percent last month compared with a record low in February. That was the biggest monthly increase in 47 years.

source: sacbee.com By Mark Glover
mglover@sacbee.com
Published: Saturday, May. 1, 2010 – 12:00 am | Page 6B

New-home sales rose 26.9% to a seasonally adjusted annual rate of 411,000 last month, compared to an upwardly revised annual rate of 324,000 in February, the Census Bureau said. The gain snapped a four-month streak of declines.
A consensus of economists surveyed by Briefing.com expected March sales to rise to an annual rate of 330,000.

The March sales were the strongest since last July, and the percentage gain was the biggest on a month-over-month basis since a 31% gain in March 1963.

New-home sales spiked in every region of the United States. The South saw the biggest jump in new home sales, up 43.5%, while the Northeast region saw sales climb 35.7%. The West and Midwest regions both saw single-digit percentage growth, with the West up 6% and the Midwest up 4%.

The Census Bureau data followed a report from the National Association of Realtors on Thursday that showed existing home sales soared nearly 7% in March, as new homebuyers raced to buy up properties before a tax credit expires on April 30.

“It’s obvious that homebuyers are rushing in to take advantage of the tax credit that’s set to expire,” said Robert Dye, senior economist for PNC Financial Services.

In November, the government extended and expanded an $8,000 tax credit, which also allows some repeat buyers to qualify for a $6,500 credit. Buyers have until April 30 to qualify.

Fewer homes to buy
Dye expects to see continued strength in April’s data before “tailing off” through the summer as the group of buyers who rushed in are “all spent out.”

The Census Bureau estimated that 228,000 new homes hit the market in March. At the current sales rate, it would take 6.7 months to sell through that inventory, down sharply from an estimated 9.2 months of inventory in February.
Although new-home sales in March exceeded analyst expectations, sales are still trending near record lows, and prices are still under pressure due to oversupply.

“It’s a very good sign to see [the March inventory] number down,” said Dye. “But this needs to tighten up more to see upward pressure on prices.”

The average price of a new home was $258,600, according to the Census Bureau. That was virtually flat compared to a year earlier, and 12% below average prices in 2008.

A precarious jobs market continues to threaten the housing market. Dye expects the April unemployment rate to dip to a still-high 9.6% from March’s 9.7% when data are announced May 7.

“Firming house prices and an improving jobs market will make recovery felt on Main Street as well as Wall Street,” said Dye. “We’re headed in the right direction.”

Californians have a brief window of opportunity to receive up to $18,000 in combined federal and state homebuyer tax credits. To take advantage of both tax credits, a first-time homebuyer must enter into a purchase contract for a principal residence before May 1, 2010, and close escrow between May 1, 2010 and June 30, 2010, inclusive. Buyers who are not first-time homebuyers may use the same timeframes to receive up to $16,500 in combined tax credits if they are long-time residents of their existing homes as permitted under federal law, and they purchase properties that have never been previously occupied as provided under California law.

Under the federal law slated to soon expire, a first-time homebuyer may receive up to $8,000 in tax credits, and a long-time resident may receive up to $6,500, for certain purchase contracts entered into by April 30, 2010 that close escrow by June 30, 2010. Additionally, under a newly enacted California law, a homebuyer may receive up to $10,000 in tax credits as a first-time homebuyer or buyer of a property that has never been occupied. The new California law applies to certain purchases that close escrow on or after May 1, 2010 (see Cal. Rev. & Tax Code section 17059.1(a)(4)). California law generally allows buyers of never-occupied properties to reserve their credits before closing escrow, but buyers seeking to combine the federal and state tax credits will not be able to satisfy the timing requirements for such reservations (see Cal. Rev. & Tax Code section 17059.1(c)(1)(A)). Other terms and restrictions apply to both tax credits.

For more information, C.A.R. offers a Homebuyer Tax Credit Chart with a side-by-side summary of the federal and California laws. C.A.R. also offers a legal article entitled Homebuyer Tax Credit Update.

C.A.R. provides REALTORS® with many other legal articles covering a wide range of topics of interest. Some of the new or newly revised legal articles available at http://qa.car.org are as follows:

Federal Lead-Based Paint Renovation Rule: Provides new certification requirements and lead-safe work practices effective April 22, 2010 for contractors and property owners performing renovations that disturb lead-based paint in target housing.

Modifications are “clearly not working well and it’s not a surprise,” said Sam Khater, a senior economist at research firm First American CoreLogic. “It’s pointless to rewrite these loans because they’re underwater.”

Nearly 4.5 million foreclosure filings are expected in 2010, according to RealtyTrac, a seller of default data.

Source: Bloomberg, John Gittelsohn (03/25/2010)

More than 4.7 percent of all mortgages were more than 90 days past due in the fourth quarter, a 21.1 percent increase from the same quarter in 2008. The number of troubled borrowers with prime mortgages increased 16.5 percent year over year.

Foreclosure sales, short sales, and deed-in-lieu-of-foreclosure actions rose by 8.6 percent from the third quarter to 163,224 and were up 44.5 percent from fourth quarter 2008.

The report, which reflects 34 million loans with nearly $6 trillion in principal balances, said: “Loan servicers reported that they expect new foreclosure actions to increase in the upcoming quarters as many of the mortgages that are seriously delinquent may eventually result in foreclosure as alternatives that prevent foreclosure are exhausted.”

Source: Reuters News (03/25/2010)

The bulk of the responsibility for carrying out the new program will be assigned to the Federal Housing Administration, which will insure lenders against part of the losses.

The plan asks banks to write down loan balances to less than the value of the home. If there is both a first and second mortgage, the combined total would have to be no more than 115 percent of the home’s value.

The Treasury would pay part of unemployed homeowners’ loans for three months while they job hunt.

Source: The Wall Street Journal, Nick Timiraos and James R. Hagerty (03/25/2010)

March 25, 2010

Dear C.A.R. Member:

I’m gratified to report that late this afternoon, Gov. Schwarzenegger signed Assembly Bill 183, the Homebuyer Tax Credit legislation, into law. His actions today are the result of our efforts in Sacramento over the last several weeks as members and our team in the capital worked for the bill’s passage before it landed on the governor’s desk.

AB 183 will provide $200 million for home buyer tax credits, allocating $100 million for qualified first-time home buyers of existing homes and $100 million for purchasers of new, or previously unoccupied, homes. The eligible taxpayer who purchases a qualified personal residence on and after May 1, 2010, and on or before Dec. 31, 2010, or who purchases a qualified principal residence on and after Dec. 31, 2010, and before Aug. 1, 2011, pursuant to an enforceable contract executed on or before Dec. 31, 2010, will be able to take the allowed tax credit. The credit is equal to the lesser of 5 percent of the purchase price or $10,000, in equal installments over three consecutive years. Under AB 183, purchasers will be required to live in the home for at least two years or forfeit the credit (i.e., repay it to the state).

The positive impact of the federal home buyer tax credit is clear. Nearly 40 percent of first-time home buyers said they would not have purchased a home if the federal tax credit for first-time home buyers was not offered, according to C.A.R. research conducted last year.

The state’s previous home buyer tax credit program was so successful that it ran out of tax credits by the end of June 2009, eight months before it was set to expire and just as housing markets appeared to be turning a corner. Unlike last year’s legislation, AB 183 adds a tax credit for the purchase of an existing home by a first-time home buyer.

AB 183 will significantly contribute to the effort to stimulate jobs-creation within California’s housing market by helping to incentivize first-time home buyers to purchase homes that have been abandoned, foreclosed upon and returned to the lender, or have been sitting on the market for extended periods of time. It is these homes that will require substantial rehabilitation by the new owners, which will in turn generate a tremendous increase in jobs and accessory purchases connected to home improvement activities.

Your Association’s efforts at the state and federal level to help protect private property rights and your right to conduct business are ongoing. This promises to be another busy year in the state legislature and in Washington , D.C.

If you’re not already involved in the political process, I encourage you to do so. You can go to http://www.car.org/governmentaffairs/getinvolved/ for a quick guide to involvement opportunities at the local, state, and national levels.

Sincerely,

Steve Goddard
2010 President
CALIFORNIA ASSOCIATION OF REALTORS®

Analysts at Barclays Capital estimated that banks and mortgage investors held about 645,800 foreclosed homes in January, up 4.6 percent from December. That is down significantly from the peak of 845,000 in November 2008.

States with the largest number of foreclosures are Florida, Arizona, Nevada, California, and Michigan.

Source: The Wall Street Journal, James R. Hagerty (03/19/2010)

Increases in jobs, credit, and affordable homes will overcome impediments such as rising interest rates, and the expiration of the Federal stimulus program to push the housing market toward recovery, says Dean Maki, chief U.S. economist for Barclays Capital.

“I would bet even odds that we’re at a bottom and that we’re going to see improvement in the coming months,” says Karl Case, co-creator of the S&P/Case-Shiller Home Price Index and a professor of economics at Wellesley College.

“The underlying trend is turning positive,” says Bruce Kasman, chief economist at JPMorgan Chase & Co.

Source: Bloomberg, Kathleen M. Howley and Rich Miller (03/15/2010)

“Unusually poor weather conditions certainly had a negative effect on builders’ business in February,” said NAHB Chairman Bob Jones, a home builder from Bloomfield Hills, Mich. “At the same time, the continual flow of distressed properties priced below the cost of production is having an adverse effect on new-home appraisals and also making it tough for builders’ customers to sell their existing homes.”

“The lack of available credit for new projects, the large number of distressed properties for sale and the continuing hesitancy of potential buyers due to the weak job market are definitely weighing on builder confidence at this time,” said NAHB Chief Economist David Crowe. “That said, the inventory of new homes on the market is at an extremely low level, and we do expect a 25 percent improvement in new-home construction in 2010 over 2009 to rebuild inventory and meet expected pent-up demand.”

Derived from a monthly survey that NAHB has been conducting for more than 20 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

In declining two points to 15 this March, the HMI returned to where it was in January 2010, losing the ground it had gained in the intervening month. Each of the HMI’s component indexes fell in March; the component gauging current sales conditions declined two points to 15, while the component gauging sales expectations in the next six months declined three points to 24 and the component gauging traffic of prospective buyers declined two points to 10.

Regionally, the HMI results were mixed in March. While the Northeast posted a five-point gain to 23 and the West posted a one-point gain to 15, the Midwest HMI slid three points to 10 and the South HMI edged down one point to 18.

Editor’s Note: The NAHB/Wells Fargo Housing Market Index is strictly the product of NAHB Economics, and is not seen or influenced by any outside party prior to being released to the public. HMI tables can be accessed online at: www.nahb.org/hmi. More information on housing statistics is also available at: www.housingeconomics.com.

California, the country’s most populous state with roughly 38 million people, also faces a double-digit unemployment rate persisting until 2011, the report said.

“California is in for a continued rough ride for the balance of 2009 and is not going to see economic growth return until the end of the year, shortly after the U.S. economy begins to grow,” the report said.

A $24.3 billion budget gap faced by the state is sure to force deep spending cuts, which will limit the contribution of public spending to the state’s economic recovery, the report said.

“California’s state government, saddled with anachronistic revenue and spending processes, has no choice but to contract at the worst time,” the report said.

California’s current recession may be its worst since World War Two, and headwinds impeding a recovery include weak international trading partners.

The home of Silicon Valley and Hollywood, and often seen as a cultural trendsetter, California will be a follower not a leader in recovery from the country’s current downturn, the report said.

HOUSING WOES NEAR END

Some relief in housing, however, is taking shape. “If there is any good news in the picture, it is that the correction in the housing market is complete and the overshooting which normally occurs after a correction has appeared,” the report said.

“Our employment forecast suggests that it will be late in 2009 before prices are tempting enough and supply is low enough for the market to stabilize. When it does, the contraction in residential construction will, finally, after more than three years, cease to be a drag on the California economy,” the report added.

But then the drag from state worker layoffs will emerge, and it will be “decidedly negative and will retard economic growth in 2010.”

California’s unemployment rate now stands at a near-record 11 percent, largely from slashed payrolls in home building and finance amid the mortgage crisis and foreclosure surge.

California’s economy will begin to grow at more normal levels by the beginning of 2011, but not enough jobs will be created to push the unemployment rate below double digits until the end of 2011, the report predicted.

Potential risks to recovery include renewed turmoil in financial markets and a “longer term collapse in consumption,” the report added.

It also listed political risks from state officials failing to craft a state budget in a timely manner and protectionism in international trade.

“While we don’t anticipate any of these to occur, there is enough momentum in this recession and discussion in the policy sphere to make them possible,” the report said.

(Editing by Leslie Adler)

Lawrence Yun, NAR chief economist, said commercial real estate almost always lags the economy. “Because of the lingering impact from the deep recession over the past two years, vacancy rates will trend higher and many commercial property owners will need to make rent concessions,” he said.

“With the job market expected to turn for the better later this year, we’ll see rising demand for office and warehouse space, but that isn’t likely before 2011,” Yun said. “At the same time, improved consumer confidence would help sustain the retail sector and encourage more people to enter the rental market.”

Yun notes that commercial vacancy rates remain high in most market areas and are depressing rents.

The Society of Industrial and Office Realtors, in its SIOR Commercial Real Estate Index, an attitudinal survey of more than 700 local market experts, suggests a flattening level of business activity in upcoming quarters with 55 percent of members expecting the market to improve in the second quarter.

The SIOR index rose 0.2 percentage point to 35.5 in the fourth quarter, compared with a level of 100 that represents a balanced marketplace. This is the first gain following 11 consecutive quarterly declines. Although some indicators show that a decline in commercial property values is beginning to flatten, 86 percent of respondents report prices are below replacement costs.

Nearly nine in 10 survey participants said new commercial development is virtually nonexistent in their market areas, and rent concessions are reported almost everywhere.

A Long Way To Go
An independent survey earlier this month showed a couple dozen banks are willing to expand commercial credit this year, which is critical. The lending expansion is aided by the Federal Reserve’s Term Asset-Backed Loan Facility (TALF), which is encouraging issuance of commercial mortgage-backed bonds. In addition, regulators are prodding lenders to extend terms for many existing commercial loans.

“We have a long way to go for satisfactory levels of commercial credit, but these are important first steps,” Yun said. “Given that about $1.4 trillion in commercial debt will come due over the next three years, more extensive action is needed and the Fed needs to more actively help resuscitate commercial mortgage-backed securities. The credit improvement will mean more commercial property sales in 2010, even some at deeply discounted prices.”

Looking at the overall market, commercial vacancy rates generally will stay at elevated levels, according to NAR’s latest COMMERCIAL REAL ESTATE OUTLOOK. The NAR forecast for four major commercial sectors analyzes quarterly data in the office, industrial, retail and multifamily markets. Historic data were provided by CBRE Econometric Advisors.

Office Market
With a lot of sublease space currently on the market, vacancy rates in the office sector are forecast to rise from 16.3 percent in the fourth quarter of 2009 to 17.6 percent in the fourth quarter of this year; the longer term outlook is for vacancies to average 17.4 percent in 2011.

Annual office rent is projected to decline 7.2 percent in 2010, following a drop of 12.7 percent last year. In 57 markets tracked, net absorption of office space, which includes the leasing of new space coming on the market as well as space in existing properties, should be a negative 27.3 million square feet in 2010.

Industrial Market
There is proportionately less industrial sublease space on the market than in the office sector, but obsolescence remains a factor. Industrial vacancy rates will probably rise from 13.9 percent in the fourth quarter of last year to 14.9 percent in the closing quarter of 2010; they could average 14.5 percent next year.

Annual industrial rent is likely to fall 9.6 percent this year, after declining 10.9 percent in 2009. Net absorption of industrial space in 58 markets tracked is seen at a negative 93.5 million square feet in 2010.

Retail Market
Retail vacancy rates are expected to edge up from 12.4 percent in the fourth quarter of 2009 to 12.7 percent in the same period of this year, and may hold at that level in 2011.

Average retail rent is forecast to decline 2.4 percent in 2010, following a drop of 4.0 percent in 2009. Net absorption of retail space in 53 tracked markets should be a negative 3.4 million square feet this year.

Multifamily Market
The apartment rental market – multifamily housing – is poised to gain from a rise in household formation. Multifamily vacancy rates are likely to decline from 7.4 percent in the fourth quarter of last year to 6.6 percent in the fourth quarter of 2010, and possibly edge down to 6.1 percent next year.

Average rent is projected to decline 3.4 percent this year, following a decline 3.6 percent in 2009. Multifamily net absorption is expected to be 115,000 units in 59 tracked metro areas this year.

Investors see these low rates as a boon to a recovery of employment and business.

Bernanke’s announcement also took the edge off the news Wednesday that housing sales hit a new low in January.

“Even though nothing he said was particularly new, it was just enough to calm the ruffled feathers that were out there,” said Jim McDonald, chief investment strategist at Northern Trust in Chicago.

Source: Associated Press, Tim Paradis (02/24/2010

The Commerce Department reported Wednesday that new home sales dropped 11.2 percent last month to a seasonally adjusted annual sales pace of 309,000 units, the lowest level on records going back nearly a half century. The big drop was a surprise to economists who were expecting a 5 percent increase over December’s pace.

While winter storms were partly to blame, home sales have fallen for three straight months despite sweeping government support. Economists were already worried that an improvement in sales in the second half of last year could falter as various government support programs are withdrawn.

“There is no doubt that January and February are going to be messy months for housing, given the severe weather conditions, but that doesn’t take away from the fact that the housing sector has taken another big step back, even with the government aid,” Jennifer Lee, a senior economist at BMO Capital Markets, said in a research note.

A rebound in housing in the second half of last year helped to boost overall economic growth back into positive territory. Each new home built, for example, creates about three jobs for a year and generates about $90,000 in taxes paid to local and federal authorities, according to the National Association of Home Builders.

However, economists are worried that if housing falters in coming months, that will be one more headwind the recovery will have to overcome. The decline to an annual purchase rate of 309,000 in January was 6 percent below the previous record low set in January last year.

“I don’t think we are going to have a double-dip recession in housing, but it is going to take us longer to recover from a very deep hole,” said Patrick Newport, an economist at IHS Global Insight.

January’s weakness was evident in all regions except the Midwest, where sales posted a 2.1 percent increase. Sales were down 35 percent in the Northeast, 12 percent in the West and almost 10 percent in the South.

The drop in sales pushed the median sales price down to $203,500. That was down 5.6 percent from December’s median sales price of $215,600, and off 2.4 percent from year-ago prices.

New home sales for all of 2009 had fallen by almost 23 percent to 374,000, the worst year on record. The National Association of Home Builders is forecasting that sales will rise to more than 500,000 sales this year, an improvement from 2009 but still far below the boom years of 2003 through 2006 when builders clocked more than 1 million new home sales per year.

January’s data increased concerns that the housing rebound could falter in coming months as the government withdraws the support it has used to try to bolster the housing market. The real estate crisis was the epicenter of the country’s overall recession, the worst downturn since the 1930s.

The Federal Reserve has been holding down mortgage rates by buying $1.25 trillion in mortgage-backed securities, but that program is set to end March 31. And temporary tax credits to bolster home buying are scheduled to expire at the end of April.

Federal Reserve Chairman Ben Bernanke told Congress Wednesday that by holding the securities on its books the central bank would continue to help keep mortgage rates low. Economists believe that as long as the Fed owns the securities it will reduce the overall supply and thus help support the price.

Bernanke, delivering the Fed’s twice-a-year economic report to Congress, said that the Fed’s record low interest rates were still needed to attack high unemployment levels and help the overall economy recover.
By MARTIN CRUTSINGER, AP Economics Writer Martin Crutsinger, Ap Economics Writer

It is important, however, not to generalize foreclosure trends across all states. In fact, four states – Nevada, Arizona, Florida, and California – account for 45 percent of the foreclosure inventory (according to the Mortgage Bankers Association’s Mortgage Delinquency Survey) and 50 percent of all delinquency filings (based on data from RealtyTrac). Nevada tops the list with more than 10 percent of its housing units receiving at least one delinquency notice. In general, throughout 2009 these four states topped the list with the highest rates of filings and the number of foreclosures.*

In contrast, Vermont boasted the lowest foreclosure rate – 0.05 percent of its housing units – as well as the lowest absolute number of foreclosures – 143. Similarly, North Dakota had only 0.13 percent of its housing units receiving a delinquency notice. West Virginia was third at 0.17 percent and South Dakota ranked fourth at 0.21 percent. For comparison, the average national delinquency rate in the same quarter was at 8.85 percent.

Current Situation
At the beginning of the foreclosure crisis, mortgage defaults were primarily among non-prime borrowers. But things changed. In 2009, the wave of foreclosures were largely among prime loans. This suggests that while the initial crisis stemmed from bad underwriting practices, the extension of the crisis was due to the national economic recession and borrowers losing their jobs. Actually, the number of seriously delinquent prime loans grew at a much faster rate in 2009 – 66 percent – than did the number of seriously delinquent subprime loans, which increased by about 20 percent. As a result, prime loan defaults accounted for about 60 percent of the increase in all delinquent loans over the past year.

Similarly, the number of prime loans in foreclosure has doubled in each of the past two years, 99 percent between 2007 and 2008, and 95 percent in 2009. In comparison, the number of subprime loans in the process of foreclosure increased only 5 percent in the past year and 12 percent the year before. There has been, however, a much lower share of subprime loans originated in the last year, falling by 14 percent from the year prior. In the 3rd quarter of 2009, prime mortgage foreclosures accounted for 54 percent of all foreclosures, while subprime loans accounted for 36 percent.

In the last couple of months, it has become evident that the foreclosure crisis has moved “up market.” Among recent prime loan defaults, those loans with balances of between $417,000 and $600,000 have performed the worst. In fact, the monthly Mortgage Monitor by Lender Processing Services (LPS) suggests that non-agency jumbo prime loans have had the worst deterioration rates year-over-year for both delinquencies and foreclosures, with delinquencies increasing some 85 percent and foreclosures increasing some 190 percent, both significantly higher than other product types. In 2006, homes in the bottom one-third of home values accounted for almost 55 percent of all foreclosures. In 2009, the bottom one-third made up 35 percent of foreclosures, compared to 35 percent and 30 percent for the middle and top one-thirds, respectively. That means 30 percent of foreclosures are homes in the top tier of local home values, almost twice the proportion of foreclosures than three years ago. Data by Amherst Securities suggest that the increasing rate of negative equity among top home price tiers might be kindling this trend.

Underwater
Nearly 10.7 million, or 23 percent, of all residential properties with mortgages were in negative equity as of the second quarter of 2009. An additional 2.3 million mortgages were possibly approaching negative equity – or having less than five percent in equity. That adds up to nearly 28 percent of all residential properties with a mortgage nationwide.

The share of homeowners “under water” is still largely concentrated in five states – in fact, those states with the highest foreclosure rates, namely Nevada, Arizona, Florida, Michigan, and California. Among the top five states, the average negative equity share was 46 percent, compared to 13 percent for the remaining states.

In terms of larger metropolitan areas (with population greater than 50,000 people), the highest levels of negative equity are in those metros located in the top five “negative equity” states. Within smaller metropolitan areas largest losses are seen in Merced, CA and El Centro, CA (both 85 percent underwater), Modesto, CA and Stockton, CA (both 84 percent), Bakersfield, CA (79 percent), and Port St. Lucie, FL (79 percent).

“Strategic Defaults”
With estimates from LPS of some 25 percent of borrowers currently having negative equity nationwide, the question increasingly being asked is what the likelihood may be of homeowners underwater who are likely to “leave the pool”, or “strategically default”. According to a study by Experian and Oliver Wyman, more than a quarter of all existing defaults were found to be strategic and they more than doubled from 2007 to 2008 to 588,000. The study also found that borrowers with higher credit scores were 50 percent more likely to strategically default than those with lower credit scores.

In another survey study by Guiso, Sapienza, and Zingales**, the authors found that 26 percent of existing defaults were strategic. They also found that no household would default if the equity shortfall is less than 10 percent of the value of the home. Yet, 17 percent of households would default, even if they could afford to pay the mortgage, when the equity shortfall reaches 50 percent of the value

of their house.

Besides relocation costs, the most important variables in predicting strategic default are moral and social considerations. All things being equal, people who consider it immoral to default are 77 percent less likely to declare their intention to do so, while people who know someone who defaulted are 82 percent more likely to declare their intention to do so. That said, there is some research that suggests that while borrowers with negative equity should be walking away in droves, most homeowners choose not to strategically default due to the desire to avoid the shame and guilt of foreclosure and exaggerated anxiety over the perceived consequences from foreclosure.

What May Lie Ahead
What many analysts are finding alarming is the decreasing rate of delinquencies that are ending up in foreclosures. Loss mitigation efforts such as the Making Home Affordable Program (HAMP), as well as backlogs caused by the elevated delinquent loan volumes, are extending the number of days in delinquency. The data by LPS suggest that average number of delinquent days for loans in foreclosure has risen from 249 to 406 from January 2008 to December 2009 – an increase of 63 percent. The fear is that the increasing pool of troubled loans, also referred to as the “shadow inventory,” is only going to lead to more inventory and home price problems in the future. (We’ll discuss shadow inventory in a follow-up article in next month’s Real Estate Insights.)

The impact of HAMP is still difficult to evaluate. December’s numbers suggest 1,164,507 cumulative trial-period plan offers extended to borrowers, and 902,620 trial modifications started. The goal is 3-4 million homeowners with lower mortgage payments through a modification through 2012. Available data indicate around 112,000 modifications have turned permanent. The latest assessment of the program’s progress by the State Foreclosure Prevention Working Group*** also suggests that while the HAMP has helped to slow down the foreclosure crisis, current efforts have been insufficient as the total number of struggling homeowners not on track for any foreclosure prevention assistance continues to grow. Indeed, the Working Group found that only four out of ten seriously delinquent borrowers were involved in loss mitigation efforts.

As the increase in the rates of prime loan defaults suggests, so does the predominant hardship reason for permanent modifications under the Making Home Affordable program: curtailment of income is currently the primary reason for mortgage defaulting. With the unemployment rate at or near 10 percent nationally, and millions of more Americans having either exited the workforce or remaining underemployed, it is very difficult to say definitively how the economy will play out in the next couple of years and what the effects will be on the future foreclosure rates.

More in-depth analysis of this issue by NAR Research is available at www.realtor.org/research.

Illinois posted the nation’s fourth highest total in January, with 18,120 properties receiving a foreclosure filing during the month — a nearly 2 percent increase from the previous month and a 25 percent increase from January 2009.

Michigan posted the nation’s fifth highest total, with 17,574 properties receiving a foreclosure filing, and Texas posted the sixth highest total, with 12,225 properties receiving a foreclosure filing.

Other states with totals among the 10 highest in the country were Nevada (11,854), Georgia (11,274), Ohio (11,105) and New Jersey (6,146).
realtytrac.com

IRVINE, Calif. – Feb. 11, 2010 – RealtyTrac® (www.realtytrac.com), the leading online marketplace for foreclosure properties, today released its January 2010 U.S. Foreclosure Market Report™, which shows foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 315,716 U.S. properties during the month, a decrease of nearly 10 percent from the previous month but still 15 percent above the level reported in January 2009. The report also shows one in every 409 U.S. housing units received a foreclosure filing in January.

REO activity nationwide was down 5 percent from the previous month but still up 31 percent from January 2009; default notices were down 12 percent from the previous month but still up 4 percent from January 2009; and scheduled foreclosure auctions were down 11 percent from the previous month but still up 15 percent from January 2009.

“January foreclosure numbers are exhibiting a pattern very similar to a year ago: a double-digit percentage jump in December foreclosure activity followed by a 10 percent drop in January,” said James J. Saccacio, chief executive officer of RealtyTrac “If history repeats itself we will see a surge in the numbers over the next few months as lenders foreclose on delinquent loans where neither the existing loan modification programs or the new short sale and deed-in-lieu of foreclosure alternatives works.”

It’s anticipated that these rules will go into effect in the spring or early summer of 2010.

Higher insurance requirements – this change requires that an upfront mortgage insurance
premium required of a borrower would be raised from 1.75% to 2.25%.

Larger down payment – only those borrowers with FICO scores about 580 would qualify
for the low 3.5% down payment. Those borrowers with a score lower than 580 would need
a down payment of at least 10%.

Lower seller concessions – this is the money returned to a borrower in exchange for
agreeing to a higher home sales price. This seller concession would drop from 6% to 3%.

Higher minimum FICO score requirements – in addition to needing a minimum FICO score
to qualify for the lower down payment option, it may be difficult for a borrower to even
begin the process with FICO scores below 600. This higher FICO score requirement is not
limited to FHA loans, but is being adopted throughout the mortgage industry; what was
once a fair FICO score may now only be considered a poor score. source: www.myfico.com

Significant changes to the terms of your credit card must be given 45 days prior to the
change taking affect. Under current rules, credit card companies only needed to give 15
days notice prior to making certain term changes.
Over-limit fees will be prohibited unless you consent to pay for the privilege.
Your credit card bill will now be due on the same calendar day every month. This means
you can schedule payments each month knowing exactly when your bill needs to be paid.
When you open a new account, your interest rate must stay at the opening rate for at
least 12 months. Even if a consumer’s rates are raised after 12 months, the increased rate
only applies to new purchases – not the balance accrued in the first 12 months. There are a
few exceptions that allow a rate increase such as a 60-day delinquency on the account, a
variable rate, the completion of a workout plan or temporary hardship arrangement, or an
expiration of a specified period of time.
Statements must be mailed at least 21 days ahead of when they are due. This provides
you with more time between when you receive your statement and when your bill is due.
If you’re under 21, it will be difficult to open a new credit card account. You’ll need a
co-signer or show proof of income.
You can “opt-out” if you don’t like the terms your credit card companies send you. Your
card may be closed, but you will have multiple options for paying off your balance,
including having up to 5 years to pay the card off – under the terms you had before opting
out.
Other accounts can’t be used as the basis for raising your interest rate. This practice
known as “universal default”, allowed late payment or defaults on other bills (such as utility
bills) to be cause for raising your credit card interest rate even though those other accounts
are not related to your credit card account.

Restoring good payment history will lower a raised APR. If you are reported as delinquent
on your credit card payments for 60 days your APR can be increased, but it must return to
the old rate if you make 6 consecutive payments thereafter.
Payments go towards higher interest rate balances first. For example, if you have a cash
advance balance in addition to a regular purchase balance, it’s very likely the cash advance
has a higher interest rate associated with it. When you pay more than your minimum, the
excess amount goes toward paying off that higher interest rate balance before the rest of
your balance.
It may be harder for those with bad credit to get credit. The Federal Reserve openly
recognized that these new rules may make it difficult for those with bad credit or limited
credit histories to qualify for a new credit card.
Increased protection for gift card holders. Gift cards now cannot expire for at least 5
years and no inactivity fees can be assessed unless the gift card goes unused for at least
12 months.
source: www.myfico.com

Members can download the latest issue of Trends by clicking here.

Success in today’s Real Estate Market depends on people, technology, and a competitive edge! TRENDS Newsletter provides you the competitive edge with the latest information on the California housing market.

TRENDS Newsletter is a monthly publication developed by the Economics Department of THE CALIFORNIA ASSOCIATION OF REALTORS®. Each issue contains a variety of statistical data covering:

As a subscriber to TRENDS, you’ll have the latest numbers and analysis on the housing market in California and its regions each month.

· Housing market indicators for California and its regions

· California monthly sales, median home price, and sales
by price range

· Unsold inventory index for California and its regions

· California housing supply

· Median home sales price and resale activity for both
detached homes and condominiums

· C.A.R.’s Housing Affordability Index

· Median Home Prices by City, based on data
obtained from DataQuick Information Systems,
table format showing current median price and the
year-ago price for over 400 cities in California.

· Timely articles written by our experienced economists
and research staff.

The TRENDS newsletter is FREE for members. If you are not a member of C.A.R. and would like to order the newsletter magazine click here. If you are already a subscriber and would like to renew your subscription click here. To receive one free issue, please send an e-mail request to Alma Menchaca at almam@car.org. or call directly at (213) 739-

Freddie required lenders to buy back $2.7 billion of loans in the first nine months of 2009. Fannie Mae won’t disclose its figures, but the mortgage trade publication Inside Mortgage Finance said Fannie made $4.3 billion in loan-repurchase requests in the first nine months of 2009.

One result is that banks are underwriting mortgage loans even more carefully than they were last year, which can further slow the lending process.

“If you’re being hit with a lot of repurchases very suddenly, the easiest thing to do is to tighten your standards rapidly,” said Glenn Boyd, a Barclays analyst.

Source: The Wall Street Journal, Nick Timiraos (01/30/2010)

The agency is changing what is known as the “anti-flipping rule” to speed up sales of renovated homes in communities with too many bank-owned and foreclosed homes, says FHA Commissioner David H. Stevens.

Waiving the 90-day rule will encourage private investors to buy vacant properties, fix them up, and quickly sell them to buyers who will be eligible to buy them using FHA financing.

FHA’s change “is going to be absolutely terrific” for first-time home buyers hoping to take advantage of the tax credit, says Bobby Taylor, an associate with Coldwell Banker Mountain West Real Estate in Salem, Ore.
source: realtor.org

She predicts:
Real estate will be an attractive investment strategy in 2010 with wealthy investors devoting an increasing segment of their portfolios to it.
Loan modifications will result in more people who should probably be facing foreclosure slipping deeper into debt.
Cities like Omaha, Neb., and Buffalo, N.Y., which avoided the housing bubble and most of the bust, will be models for cities trying to avoid another bubble.
Financial troubles in Dubai will ripple through the U.S. luxury market, creating energy in a market that has been stagnant.

Source: Forbes, Francesca Levy (12/28/2009)

WASHINGTON – Federal Housing Administration (FHA) Commissioner David Stevens today announced a set of policy changes to strengthen the FHA’s capital reserves, while enabling the agency to continue to fulfill its mission to provide access to homeownership for underserved communities. The changes announced today are the latest in a series of changes Stevens has enacted in order to better position the FHA to manage its risk while continuing to support the nation’s housing market recovery.
The FHA will propose to take the following steps: increase the mortgage insurance premium (MIP); update the combination of FICO scores and down payments for new borrowers; reduce seller concessions to three percent, from six percent; and implement a series of significant measures aimed at increasing lender enforcement. U.S. Housing and Urban Development Secretary Shaun Donovan previewed the changes in December of last year, noting that the FHA would announce additional details before the end of January.
“Striking the right balance between managing the FHA’s risk, continuing to provide access to underserved communities, and supporting the nation’s economic recovery is critically important,” said Commissioner Stevens. “When combined with the risk management measures announced in September of last year, these changes are among the most significant steps to address risk in the agency’s history. Additionally, by continuing to provide affordable, responsible mortgage products, FHA will support the housing market’s recovery. Importantly, FHA will remain the largest source of home purchase financing for underserved communities.”
Announced FHA Policy Changes:
1.Mortgage insurance premium (MIP) will be increased to build up capital reserves and bring back private lending
◦The first step will be to raise the up-front MIP by 50 bps to 2.25% and request legislative authority to increase the maximum annual MIP that the FHA can charge.
◦If this authority is granted, then the second step will be to shift some of the premium increase from the up-front MIP to the annual MIP.
◦This shift will allow for the capital reserves to increase with less impact to the consumer, because the annual MIP is paid over the life of the loan instead of at the time of closing
◦The initial up-front increase is included in a Mortgagee Letter to be released tomorrow, January 21st, and will go into effect in the spring.

2.Update the combination of FICO scores and down payments for new borrowers.
◦New borrowers will now be required to have a minimum FICO score of 580 to qualify for FHA’s 3.5% down payment program. New borrowers with less than a 580 FICO score will be required to put down at least 10%.
◦This allows the FHA to better balance its risk and continue to provide access for those borrowers who have historically performed well.
◦This change will be posted in the Federal Register in February and, after a notice and comment period, would go into effect in the early summer.

3.Reduce allowable seller concessions from 6% to 3%
◦The current level exposes the FHA to excess risk by creating incentives to inflate appraised value. This change will bring FHA into conformity with industry standards on seller concessions.
◦This change will be posted in the Federal Register in February, and after a notice and comment period, would go into effect in the early summer.

4.Increase enforcement on FHA lenders
◦Publicly report lender performance rankings to complement currently available Neighborhood Watch data – Will be available on the HUD website on February 1.
■This is an operational change to make information more user-friendly and hold lenders more accountable; it does not require new regulatory action as Neighborhood Watch data is currently publicly available.
◦Enhance monitoring of lender performance and compliance with FHA guidelines and standards.
■Implement Credit Watch termination through lender underwriting ID in addition to originating ID.
■This change is included in a Mortgagee Letter to be released tomorrow, January 21st, and is effective immediately.
◦Implement statutory authority through regulation of section 256 of the National Housing Act to enforce indemnification provisions for lenders using delegated insuring process
■Specifications of this change will be posted in March, and after a notice and comment period, would go into effect in early summer.
◦HUD is pursuing legislative authority to increase enforcement on FHA lenders. Specific authority includes:
■Amendment of section 256 of the National Housing Act to apply indemnification provisions to all Direct Endorsement lenders. This would require all approved mortgagees to assume liability for all of the loans that they originate and underwrite
■Legislative authority permitting HUD maximum flexibility to establish separate “areas” for purposes of review and termination under the Credit Watch initiative. This would provide authority to withdraw originating and underwriting approval for a lender nationwide on the basis of the performance of its regional branches
In addition to the changes proposed today, the FHA is continuing to review its overall response to housing market conditions, and continuing to evaluate its mortgage insurance underwriting standards and its measures to help distressed and underwater borrowers through FHA/HAMP and other FHA initiatives going forward. source: hud.gov

California energy regulators on Thursday approved a $350 million rebate program for homeowners and businesses that install solar thermal water heaters, which use the sun’s warmth to heat water for the bathroom, kitchen and laundry room.

Such systems have been around for decades, but they’ve received little of the attention paid to photovoltaic solar panels. And yet, using sunlight to heat water cuts the amount of natural gas or electricity a building needs. Most California homes run their boilers on natural gas, while a few use electricity.

California’s popular rebate program for photovoltaic solar has helped spur the growth of the state’s solar power industry, from companies that make solar panels to those that install them. The California Public Utilities Commission, which unanimously approved the new rebates on Thursday, now wants to see the same results with solar thermal companies.

“The time is right to establish a program that promotes the growth of the solar thermal market, creates green jobs and furthers our goals of greenhouse gas reductions,” said Commissioner Timothy Simon.

There are several variations on solar thermal technology, but most involve a rooftop “collector” that absorbs the sun’s heat and transfers it to water. In colder climes, the collector transfers heat to an antifreeze solution, which then transfers the heat to water.

A typical home solar water system costs from $5,000 to $7,000. Using one can cut a home’s natural gas bill in half, said Bernadette Del Chiaro, clean energy advocate for Environment California, an environmental group.

“This is another giant step forward for California making solar a mainstream technology,” she said.

The new solar thermal rebates will work much like the old photovoltaic rebates, decreasing in size over time. The average residential rebate will start around $1,500 but eventually will fall to $550. The program will run for eight years or until the funding is used up, whichever comes first.

Funding will come from utility customers, through a surcharge on natural gas bills. The surcharge is estimated to be 13 cents per month.

E-mail David R. Baker at dbaker@sfchronicle.com.

The tax credit could be combined with the recently extended and expanded federal tax credit for home buyers.
source: car.org

The legislation, which is part of a larger bill that also extends unemployment benefits, was signed into law by President Obama today.

More people are now eligible to take advantage of the law, which includes a $6,500 tax credit for buyers who are current home owners and have lived in their home for five of the past eight years.

Income limits for eligible home buyers were also expanded to $125,000 for single buyers and $225,000 for couples, up from $75,000 for individuals and $150,000 for couples. Qualifying home prices are capped at $800,000.

NAR’s Government Affairs Division has compiled facts on the changes made to the current tax credit. NAR members sent more than 500,000 letters to leaders in Congress and made nearly 13,000 telephone calls to Senate offices last weekend to encourage support. So far this year, REALTORS® have spent nearly $14 million lobbying Congress, according to federal campaign finance records compiled by the Center for Responsive Politics.

Sen. Johnny Isakson, a Georgia Republican and a former member of NAR, was key in extending the credit, as well as pushing it through initially. Other prominent boosters include the National Association of Homebuilders and the Mortgage Bankers Association.

Listen to NAR President Charles McMillan’s podcast announcement.

NAR economists estimate that approximately 2 million people will take advantage of the tax credit this year.

Sources: NAR and The Associated Press, Julie Hirschfeld Davis (11/06/2009)

The conclusion of the first half of the 2009-10 legislative session has brought many new laws that may affect California REALTORS® and their clients. Not surprisingly in the subprime aftermath, prominently featured among the new laws is stricter regulation of the mortgage lending industry. To view the full text and legislative summary of any of the following new bills, go to www.leginfo.ca.gov.

•REO Buyer Can Select Escrow and Title: Effective October 11, 2009, the Buyer’s Choice Act prohibits an REO lender selling residential property up to four units from directly or indirectly requiring the buyer to purchase escrow services or title insurance from any particular company. A buyer, however, who has received written notice of the right to make an independent selection, may agree to the REO lender’s escrow or title recommendations. An REO lender that violates this law can be held liable for three times the charges the buyer incurred, whereas a violation by the seller’s agent may be subject to license disciplinary action. This law expires on January 1, 2015. Assembly Bill 957.
•No Advance Fee Loan Modifications: Starting October 11, 2009, a new law prohibits anyone from claiming any compensation for negotiating or arranging a loan modification until after that person fully performs each and every service as promised. Aimed at combating loan modification scams, this ban applies to upfront fees collected by real estate agents and attorneys. The ban expires on January 1, 2013. Also effective immediately, anyone who negotiates or arranges a loan modification must give the borrower a specified notice that paying a third-party for loan modification services is unnecessary. These new requirements apply to mortgage loans secured by residential property up to four units, with certain exceptions for lenders and loan servicers acting on their own behalf. Violations can be penalized by, among other things, a $10,000 fine plus one-year imprisonment for individuals, or a $50,000 fine for businesses. Real estate brokers with existing Advance Fee Loan Modification Agreements reviewed by the Department of Real Estate (DRE) can no longer, as of October 11, 2009, enter into these agreements or collect advance fees. Agreements entered into and advance fees collected before October 11, 2009 are not affected. For the DRE announcement, go to http://www.dre.ca.gov/pdf_docs/SB94WebAnnouncement(brokers).pdf. Senate Bill 94.
•Advance Fee Redefined: Aside from loan modifications discussed above, Senate Bill 94 also broadens the definition of an advance fee which must be specially handled by real estate agents, such as by submitting an advance fee agreement for DRE review and placing funds received into a broker’s trust account. Under the new definition that took effect on October 11, 2009, agents cannot separate advance fees or services into components to avoid the advance fee requirements. More specifically, an advance fee is now defined as “a fee, regardless of the form, claimed, demanded, charged, received, or collected by a licensee from a principal before fully completing each and every service the licensee contracted to perform, or represented would be performed.” Exceptions include advertisements in newspapers of general circulation, tenant prescreening fees, and tenant security deposits. Senate Bill 94.
•Mortgage Loan Originators Regulated: Beginning in December 2010, a real estate licensee acting as mortgage loan originator must obtain a license endorsement, which entails education, written testing, and reporting requirements. A mortgage loan originator is anyone who, for compensation or gain, takes a mortgage loan application or offers or negotiates terms of a mortgage loan for residential property containing one-to-four units. Exemptions include real estate agents who only engage in selling, buying, or leasing activities, unless compensated by a lender or mortgage loan originator. This license endorsement requirement comports with the creation of a Nationwide Mortgage Licensing System and Registry under recent federal law. Finance lenders and residential mortgage lenders under the Department of Corporation must also register in the nationwide system. Additionally, if a real estate broker or the broker’s salesperson makes, arranges, or services loans secured by residential property containing one-to-four units, the broker must notify the DRE by January 31, 2010 or within 30 days of commencing such loan activity, whichever is later. Senate Bill 36.
•Mortgage Broker Activities Restricted: Commencing January 1, 2010, a mortgage broker will be deemed a fiduciary with a duty to place the borrower’s economic interest above his or her own. This fiduciary duty pertains to a mortgage broker who makes loans secured by residential property of one-to-four units. Also starting January 1, 2010, the law will strictly regulate higher-priced mortgage loans as defined, including requiring upfront disclosure if a mortgage broker only arranges higher-priced mortgage loans, restricting prepayment penalties and yield spread premiums, prohibiting negative amortization, and prohibiting mortgage brokers from steering borrowers to higher-cost loans. Assembly Bill 260.
•Appraisal Industry Oversight: The Office of Real Estate Appraisers (OREA) will have regulatory oversight of appraisal management companies, which gained prominence after Fannie Mae and Freddie Mac adopted the Home Valuation Code of Conduct (HVCC). Starting January 1, 2010, the OREA must implement a registration system for appraisal management companies, including fingerprinting and background checks for persons with operational authority as defined. On a separate note, this law clarifies what conduct constitutes improperly influencing the appraisal process by anyone with an interest in a real estate transaction. Such prohibited conduct includes withholding or threatening to withhold an appraisal fee, withholding or threatening to withhold future appraisal business, and promising future business, promotions, or compensation. Senate Bill 237.
•Mortgage Fraud Becomes a State Crime: As of January 1, 2010, anyone who deliberately makes any misrepresentation or omission during the mortgage lending process with the intent of influencing that process will be guilty of mortgage fraud under California law. A violation of this law is a crime punishable by one-year imprisonment. Under existing federal law, loan fraud against a federally-insured lender is a crime punishable by a $1 million fine, plus one-year imprisonment (18 U.S.C. section 1014). Senate Bill 239.
•Increase in Homestead Exemptions: Coming into effect on January 1, 2010, the homestead exemption protecting a homeowner’s equity from judgment creditors has been increased by $25,000 across the board to $75,000 for individuals, $100,000 for married couples or family units as specified, and $175,000 for persons over 65 years, disabled, or over 55 years with limited income as specified. Assembly Bill 1046.
•60-Day Notice to Terminate Tenants Extended: Existing law generally requiring a 60-day notice to terminate a month-to-month residential tenant, which was originally slated to sunset on January 1, 2010, has been extended indefinitely. A 30-day notice to terminate is sufficient if the tenant has lived in the property for less than one year, or if the landlord has sold the property and certain requirements are met as specified in our standard-form Notice of Termination of Tenancy (C.A.R. Form NTT). The 60-day notice requirement does not apply to fixed-term leases, such as a one-year lease. Other laws address tenants in properties foreclosed upon. Senate Bill 290.
Other Significant Laws: Other new laws that may interest REALTORS® include, without limitation, the following:

•Landlord Utilities: Requires certain utility companies to notify residential tenants of landlord’s past due accounts and upcoming shutoffs, and allows tenants to begin service in their own names and deduct payment from rent (Senate Bill 120).
•Mobilehome Parks: Prohibits management from requiring a homeowner to use a specific broker or dealer when replacing a mobilehome or manufactured home on a space in a mobilehome park (Senate Bill 804).
•Swimming Pools: Requires anti-entrapment devices for owners of apartment buildings, condominium complexes, and others, including the filing of compliance statements (Assembly Bill 1020).
•Mechanic’s Liens: Provides new procedures, including service of a Notice of Mechanic’s Lien to the owner and mandatory recording of a lis pendens when enforcing a mechanic’s lien (Assembly Bill 457).
•Low Water-Using Plants: Renders unenforceable any HOA provision prohibiting landscaping with water-efficient plants in common interest developments (Assembly Bill 1061).
•Reverse Mortgages: Provides new disclosure and other requirements under the Reverse Mortgage Elder Protection Act (Assembly Bill 329).
•Disposal of Records: Shields from liability businesses that dispose of abandoned records containing personal information by shredding or erasing, and gives a legal presumption that a tenant owns records remaining on the premises after tenancy termination (Assembly Bill 1094).
•Plumbing Fixtures: Provides new disclosure and other requirements for water-conserving plumbing fixtures effective on or after January 1, 2014 (Senate Bill 407).

“ California ’s housing market continued its strong sales rebound this year, resulting from the continued pace of distressed properties coming to market,” said C.A.R. President James Liptak . “This follows two years of double-digit sales declines in 2006 and 2007. Looking ahead, we expect sales to moderate to a more sustainable pace.”

“After experiencing its sharpest decline in history, we expect the median price to rise modestly next year,” Liptak added. “2010 will mark the beginning of the ‘new normal’ for California ’s housing market. This ‘new normal’ likely will feature a steady stream of sales driven by distressed properties in the low end of the market, coupled with moderate home-price appreciation.”

“With distressed properties accounting for nearly one-third of the sales in 2010, inventory will be relatively lean, under six months during the off-season months, and a roughly four-month supply during the peak season,” said C.A.R. and Vice President Leslie Appleton-Young. “We expect the median price to decrease slightly through the remainder of 2009 and into next year, then rise before leveling off next summer. For the year as a whole, home prices are forecast to reach $280,000. The wild cards for 2010 include foreclosures, loan resets, the labor market, and the California budget crisis, as well as the actions of the federal government.”

Since its inception earlier this year, the $8,000 first-time homebuyer tax credit has brought 1.2 million new buyers into the market—350,000 of whom would not have purchased a home without the credit, according to NAR. The credit is due to expire November 30.

“Now is the time for Congress to keep this recovery going by extending the tax credit through 2010 and making it available to more homebuyers. We have all seen how the credit has been a spur to bring homebuyers into the market, and have seen the beginnings of a real recovery in the housing market. Housing has always led this nation out of economic downturns, and can do so again,” said NAR President Charles McMillan.

Write Congress Now

REALTORS®, the leading advocates for homeownership and housing issues, will be writing to their Senators and Representatives to tell them of the successes with the tax credit thus far, and press them to extend and expand it now.

McMillan added that the market has improved, but it has not yet fully corrected itself. “The credit needs to be available for an additional period of time in order to sustain the progress that’s been made so we can continue to see our markets fully recover. Uncertainty about the future of the credit will dampen consumer demand. The only way we can assure that the progress we’ve made can continue is to extend the credit and to do that now,” he said.

As the current deadline for the credit looms, potential homebuyers need to complete a contract, satisfy any contingencies, secure financing, and go to closing by November 30. In today’s market, NAR estimates that it generally is taking between 45 and 60 days from contract to closing.

“That means potential homebuyers who qualify must act now, and so must Congress,” McMillan said.

Source: NAR

In the following markets, home values are expected to remain level this year but increase in value next year:

Baton Rouge, La.
Buffalo-Niagara Falls, N.Y.
Dallas-Plano-Irving, Texas
Fort Worth-Arlington, Texas
Houston-Sugar Land-Baytown, Texas
Little Rock-North Little Rock-Conway, Ark.
Omaha-Council Bluffs, Neb.-Iowa
Pittsburgh, Pa.
San Antonio, Texas
Syracuse, N.Y.

source: realtor.org

“The giddiness we see out there [about a recovery] is without merit,” says Richard A. Smith, CEO of Realogy, which is the parent company of Century 21, ERA, Coldwell Banker, and Sotheby’s International Realty.

Not everybody sees things Smith’s way. Michelle Meyer, an economist with Barclays Capital in New York, says that while the tax credit did contribute to an increase in sales, some of the improvement reflects an improving economy.

“Even if you say some of the gain is artificial, it’s still true that we’re seeing an increase in housing demand, and that shows fundamental strength,” she says.

Mark M. Zandi, chief economist at Moody’s Economy.com, ignores this chicken-or-egg argument and points to an analysis he did that suggests increasing the tax credit to $15,000 for all home owners through the end of next year would result in 675,000 additional home sales.

Source: BusinessWeek, Prashant Gopal (09/11/2009)

By E. Scott Reckard And Ronald D. White  August 21, 2009

Widespread joblessness is causing more Americans to fall behind on their house payments, triggering a new round of foreclosures that some analysts fear could delay the nation’s economic recovery.

A mortgage trade group reported Thursday that more than 13% of the nation’s homeowners were delinquent on their mortgages or in the process of having their homes repossessed during the second quarter of this year. That’s the highest figure since tracking began in 1972. California’s rate, 15.2%, was among the highest of all states.

The numbers underscores a worrisome trend. A spate of foreclosures — which began with speculators who walked away from their souring investments, then spread to high-risk borrowers who couldn’t make their payments when their low-interest mortgages reset — is now hitting unemployed homeowners with good credit scores, clean financial histories and conventional home loans.

The U.S. has shed 6.7 million jobs since the recession began, employment losses that have left even high-quality borrowers struggling. One in three new foreclosures from April to June was from a prime, fixed-rate loan, up from one in five a year earlier.

The rising tide of foreclosures could swamp positive economic trends such as improving home sales and a surprise increase in U.S. regional manufacturing, also reported Thursday.

“The broadening of the foreclosure crisis to include prime loans due to high and rising unemployment will delay a bottom in the housing market and threatens the economic recovery,” said Mark Zandi, co-founder and chief economist of Moody’s Economy.com.

It’s also a huge challenge to the Obama administration, which is pressuring banks to restructure troubled mortgages to keep borrowers in their homes. Such modifications are difficult to achieve when a family’s income is slashed. The Washington-based Mortgage Bankers Assn. predicts that U.S. job losses will continue at least until the middle of 2010, meaning that mortgage delinquencies and repossessed homes will almost certainly continue rising.

“We would expect delinquencies and foreclosures to peak sometime after that, probably at the end of next year,” said Jay Brinkmann, the trade group’s chief economist.

The U.S. jobless rate in July was 9.4%, down slightly from 9.5% in June, a 26-year high. California’s June unemployment rate was 11.6%. July figures will be released today.

The employment troubles are compounding a messy situation for banks. Faced with a burgeoning backlog of problem loans, loan-servicing giants such as Bank of America Corp. and Wells Fargo & Co. have gotten off to a slow start on the Obama administration’s Home Affordable Modification program, recently released government statistics show.

Anxious borrowers who have contacted The Times complain that lenders lose their documents, pass them from employee to employee and make them endure unexplained delays.

They include Janet and Stan Hurwitz, who said they enjoyed pristine credit and good salaries before this recession turned their financial world upside down. Both now unemployed, they’re worried about exhausting their savings and losing their spacious Porter Ranch home.

Stan, 58, lost his job as an apparel sales representative in May and has pursued dozens of leads without success. Janet, a 53-year-old commercial pilot, has been unable to find work in the battered airline industry since returning from disability last summer.

The couple have pared expenses drastically and are trying to refinance their 6.25% mortgage to reduce their $2,789-a-month payment. But the Hurwitzes say that the mounds of paperwork they have sent out — to Bank of America, two government-sponsored home retention plans, credit and debt consolidation agencies and several elected officials — seem to have disappeared into a black hole.

“No matter what you send in, or where, it just disappears,” Stan Hurwitz said.

After The Times contacted Bank of America on Thursday about the case, the bank issued a statement saying it “has reached out to the Hurwitzes to apologize for their experience and to ensure they have a single point of contact to help them through these challenging times.”

“Despite our best efforts, there are limits to how far modification programs can go,” the Bank of America statement said. With unemployment rates so high, “even the most ambitious modification plan will not help when the homeowner has no income or prospects.”

The bank said unemployment benefits count as income under the Obama plan as long as they continue for nine months, adding that it is working with the government “to find solutions for at-risk homeowners who fall outside the eligibility requirements of the current program as well as the growing number of customers now unemployed.”

The mortgage bankers group said efforts to aid distressed borrowers, such as the Obama administration’s housing affordability program, are providing some relief but are not addressing all the problems.

“While the various loan modification programs continue to have an impact on holding foreclosure rates below where they otherwise would be, the issue is that many of the foreclosures involve homes that are vacant, borrowers who no longer have jobs, or loans where there was fraud involved,” Brinkmann said.

Another problem plaguing California and other hard-hit areas is the unprecedented decline in home prices. Falling values have left homeowners who purchased at the peak of the housing boom “underwater,” owing far more than their homes are worth. Even drastically reducing interest rates and paying borrowers bonuses to stay in their homes can have little lasting effect if it will be years before homeowner equity is restored, Economy.com’s Zandi noted.

“The idea [of the Obama plan] is to give homeowners a break so they can get through the recession and the falling housing market and, hopefully somewhere down the road, make full payments again,” Zandi said. “That’s going to be helpful, but as long as foreclosures keep rising and home prices keep falling, a lot of houses will be so far underwater that it makes no sense to bother modifying them — from the lender’s perspective and from the borrower’s.”

He said the Obama administration might reach its goal of having lenders offer 3.5 million to 4 million loan modifications — restructurings that lower rates, extend the time for borrowers to repay what they owe and, in some cases, suspend interest payments on part of the loan balance. But Economy .com is projecting that only half of those offers will result in actual modifications, “and they’ll be lucky if they get 1 million successful modifications out of that,” Zandi said.

If the problem worsens, the government and lenders may have to revisit some ideas that so far have proved untenable, such as finding a way to reduce the principal owed on large numbers of loans, he added.

The problems are especially thorny in California, Zandi noted, because unemployment is higher and home prices have fallen more than in most other states.

Still, he said, the Golden State should recover sooner than other hard-hit states including Nevada, Florida and Michigan because its economy is more diversified. Already, he noted, there are signs of stabilizing prices in areas such as San Francisco and Orange County, as buyers step in on the belief that California’s notoriously up-and-down housing market will eventually stage one of its famous recoveries.

scott.reckard@latimes.com

ron.white@latimes.com

Times staff writer Martin Zimmerman contributed to this story.

Sales in new-home communities of 10 units or more declined 26 percent in June 2009 compared with a year ago, the same percentage decline as in the prior month, according to the monthly CBIA/Hanley Wood Market Intelligence (HWMI) New Home Sales and Pricing Report.   Sales of single-family homes declined 38 percent, while sales of townhomes and “plexes”–duplexes, triplexes, etc.–decreased 16 percent, while sales of condominiums increased by 9 percent.

Compared with the same period last year, the median base price of homes sold declined 5 percent.

“This is still the third highest monthly sales total for the year, with all of the highest monthly totals coming in after the tax credit was enacted,” said Robert Rivinius, CBIA’s President and CEO.  “We need to keep this positive momentum going if our state hopes to start climbing out of this recession by year’s end, and we hope lawmakers take note of the success of the new home buyer tax credit and grant an extension when they return to wrap up this year’s legislative session. The tax credit has proven to generate new-home sales, and in turn job generating new-home construction, and getting an extension would go a long way towards putting more people back to work and reinvigorating the overall economy.”

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