30-Year Mortgages Fall to Lowest Rate in 3 Months
Borrowing costs on home loans dipped to a three-month low this week, providing much-needed relief to home buyers who are facing a tight lending climate.
Freddie Mac reported a drop in the 30-year fixed rate to 6.45 percent from 6.52 percent a week earlier, while interest on 15-year fixed loans slipped to 6.12 percent from 6.18 percent. Adjustable-rate mortgages, however, moved in the opposite direction.
The five-year ARM settled at 6.35 percent for the week, up a notch from 6.34 percent a week ago; and interest on one-year ARMs averaged 5.84 percent compared to 5.6 percent.
Source: Baltimore Sun (08/31/07)
FHA Policy Changes Would Ease Mortgage Crisis
The NATIONAL ASSOCIATION OF REALTORS® on Friday voiced support for an array of Federal Housing Administration policy changes that President George W. Bush has proposed to address problems in the mortgage industry.
The changes would help troubled borrowers refinance with FHA insurance, providing relief to home owners who have fallen behind in their mortgage payments because of so-called “exploding ARMs.”
The proposal also would allow more high-risk buyers to take advantage of better terms.
In addition, Bush plans to temporarily suspend the tax on mortgage debt forgiven by a lender, which would help borrowers work out lower loan balances and payments to avoid foreclosure.
“NAR has been advocating for many of these FHA changes since early 2007,” NAR President Pat V. Combs said in a statement. “We have encouraged both Congress and the U.S. Department of Housing and Urban Development to make meaningful changes to the FHA that would stem rising foreclosures.”
Many borrowers who’ve been making their mortgage payments at the starter rate but were unable to keep them up after the loan reset have been unable to refinance through the FHA, Combs said. “But with this increased flexibility, FHA can now help many more families in jeopardy of losing their home.”
Combs said NAR will continue to urge Congress to act quickly to enact other FHA program changes that will help ease the current crisis and protect consumers.
FHA modernization should include increasing loan limits, eliminating or reducing the amount of cash down payments required for FHA loans, establishing risk-based pricing, revising prepayment penalty regulations, and increasing loss mitigation efforts.
NAR also supports separate legislation to abolish the mortgage cancellation tax that consumers are forced to pay when their mortgage is forgiven by their lender.
“NAR believes in a comprehensive effort to ensure this crisis will not repeat itself and alleviate the burden for many families who are currently facing the nightmare of losing their home,” Combs said.
— REALTOR® Magazine Online
10 Most Expensive Blocks in the U.S.
Forbes.com has generated a list of the most expensive blocks in 10 affluent cities across the country. They are:
1. Boston, Louisburg Square: A private square in the middle of Beacon Hill, Boston’s most exclusive neighborhood. The block has long been home to the most expensive homes in the city.
2. Chicago, between Willow, Howe, Burling, and Orchard: A once middle-class area that, due to zoning changes, has seen the rise of mega-mansions.
3. New York City, between Madison Avenue, Fifth Avenue, 70th St., and 69th Street: This Upper East Side zip code is the most expensive in Manhattan, so it makes sense it should contain the city’s most expensive block.
4. Dallas, Turtle Creek Boulevard, south of Lover’s Lane: Most would pick Highland Park as the most expensive, but the winner is north of that, in University Park, where values are higher than Beverly Drive due to large lots.
5. Houston, Willowick Road and Knollwood Street, south of the River Oaks Country Club: Local real estate professionals disagreed with this assessment and say Lazy Lane was the priciest.
6. Los Angeles, where Carolwood Drive meets Hanover Dr., west of Angeles Drive: This hot neighborhood is just above Sunset Boulevard and nestled between the Bel Air Country Club and the Los Angeles Country Club.
7. San Francisco, Broadway between Vallejo, Lyon, and Broderick: With the elevation to see the Bay and downtown, these homes are massive in a city where space is at a premium. To give you an idea of the cost: 2845 Broadway is listed for $65 million and 2901 Broadway is going for $55 million.
8. Seattle, Lake Washington Boulevard between East Denny Laine Place and Howell Place: Situated on the city’s Lake Washington beachfront, homes on this stretch of Lake Washington Boulevard have views across the lake as well as panoramas of Mount Rainier.
9. Miami, Leucadendra Drive, north of Arvida Parkway: A small island loop and home to the pricey Gable Estates, this address is the priciest in Miami, but Miami is overshadowed by Miami Beach, where beachfront condos command awe-inspiring prices.
10. Washington, D.C., Woodland Drive, N.W., between McGill Terrace and Rock Creek Park: The massive homes in the backyard of the Naval Observatory near Rock Creek Park out-price the Colonial townhomes in Georgetown.
The magazine worked with California-based data provider Reply! to map the 100 most expensive properties in each city and then measured home values and the concentration of high-priced home values in each particular cluster. The rankings were based on property records, tax records, and an algorithm that calculates a market value for a home based on neighborhood trends, to effectively measure homes that haven’t been appraised or sold recently.
Forbes then confirmed the data findings with real estate professionals in each city to see if the data findings reflected their experience in the upper echelon of the real estate market.
Source: Forbes.com, Matt Woolsey (08/31/07)
Mortgage Interest Tax Deduction Falls Under Fire
Rep. John Dingell (D-Mich.) recently confirmed his plans to roll out legislation in September to wipe out an existing tax break for owners of large houses.
Under the measure, owners of residences measuring 3,000 square feet or bigger — as many as 8.6 million residential properties nationwide, according to 2003 federal government data — no longer would be able to claim a tax deduction on mortgage interest. Dingell’s aim is to discourage wasteful energy use and help curtail pollution tied to climate change.
But housing industry officials warn that the current slump in the sector makes now a particularly challenging time to tinker with the deduction.
Doing so “would have repercussions for the housing market as a whole,” according to Mary Trupo, NATIONAL ASSOCIATION OF REALTORS® spokeswoman.
Source: Deseret Morning News (Utah) (08/27/07)
NAR: Existing-Home Sales Stabilize in July
Existing-home sales were essentially unchanged in July, with increases in the West and Northeast offset by a decline in the Midwest, according to the NATIONAL ASSOCIATION OF REALTORS®.
Total existing-home sales — including single-family, townhomes, condominiums, and co-ops — slipped 0.2 percent to a seasonally adjusted annual rate of 5.75 million units in July from an upwardly revised pace of 5.76 million in June. They are 9 percent below the 6.32 million-unit level in July 2006.
Lawrence Yun, NAR senior economist, says the market is holding on despite temporary mortgage disruptions. “Home sales probably would be rising in the absence of the mortgage liquidity issues of the past two months,” he says. “Some buyers with contracts have been scrambling when loan commitments did not materialize at the last moment, while other potential buyers are simply waiting for the mortgage market to stabilize.”
However, the rise in sales and prices in the Northeast region on a fairly consistent basis in recent months is a promising sign, especially since this was the first region that underwent sales and price weakness after the boom, Yun says. “Now, it appears that it will be the first region to climb back, indicating that other regions could follow a similar path,” he notes.
Regional Sales
Here’s how existing-home sales fared across the country:
West: rose 1.8 percent in July to an annual pace of 1.12 million, but are 15.2 percent below a year ago. Median price: $349,400, up 0.9 percent from July 2006.
Northeast: increased 1 percent to a level of 1.02 million in July, but are 2.9 percent lower than July 2006. Median price: $290,900, up 5.9 percent from a year ago.
South: unchanged at an annual rate of 2.26 million in July, but are 10.7 percent below a year ago. Median price: $186,300, down 3.2 percent from July 2006.
Midwest: fell 2.2 percent in July to a level of 1.35 million, and are 5.6 percent below July 2006. Median price: $173,800, which is 1.8 percent below a year ago.
Single-Family Home Sales Slip, Condos Rise
Overall, single-family home sales dipped 0.4 percent to a seasonally adjusted annual rate of 5 million in July from an upwardly revised level of 5.02 million in June. Those numbers are 9.3 percent below the year-ago pace of 5.51 million units. The median existing single-family home price was $228,600 in July, down 1 percent from July 2006.
On the other hand, existing condominium and co-op sales rose 1.4 percent to a seasonally adjusted annual rate of 750,000 units in July from 740,000 in June. But condo an co-op sales are 7.5 percent below the 811,000-unit level in July 2006. The median existing condo price was $230,600 in July, up 2.4 percent from a year ago.
NAR President: A Good Time to Buy
NAR’s latest research on July housing figures also revealed:
The national median existing-home price for all housing types was $228,900 in July, down 0.6 percent from July 2006 when the median was $230,200 — the highest monthly price on record. The median is a typical market price where half of the homes sold for more and half sold for less.
Total housing inventory rose 5.1 percent at the end of June to 4.59 million existing homes available for sale, which represents a 9.6-month supply at the current sales pace. That number is up from an upwardly revised 9.1-month supply in June.
The national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 6.7 percent in July, up from 6.66 percent in June, according to Freddie Mac. The rate was 6.76 percent in July 2006. Last week, Freddie Mac reported the 30-year fixed rate dropped to 6.52 percent.
“For buyers able to qualify for conventional financing, there are ample opportunities in the current market,” says NAR President Pat V. Combs. “Availability and pricing of conventional loans are reasonable, and FHA-insured mortgage applications have been rising as low- and moderate-income buyers seek alternatives to subprime loans. If buyers are in it for the long haul, now can be a good time to get into your home.”
But Combs says it’s important to boost FHA’s viability. “NAR is advocating for a stronger FHA to help creditworthy borrowers who may be trapped in subprime loans with unfavorable terms,” she says. “We’d also like to see the elimination of prepayment penalties, which can trap borrowers in mortgages they can no longer afford.”
— REALTOR® Magazine Online
For more economic news and research reports, visit NAR’s Research division at REALTOR.org.
Mortgage Ads Send Mixed Messages
Dozens of mortgage lenders have shut down their subprime operations, but you wouldn’t know it from Internet and television advertising where lenders are declaring, “Bad Credit? Call Today!”
“It’s been a common feature of advertising,” says Allen Fishbein, director of housing and credit policy at the Consumer Federation of America. “They offer their products not around interest rates but among monthly payments, ease of access, among ‘you’re more likely to get a yes with us than with others.’ I don’t think that has changed in this environment.”
Lenders are defending themselves. “It’s important to point out that there are loan options available for borrowers with lower credit scores in today’s market,” Darren Beck, senior vice president of marketing for LendingTree.com, told the Boston Globe.
While there’s nothing wrong with lending money to people with bad credit, government officials are concerned about independent mortgage brokers who try to trick people into purchasing properties they can’t really afford, says David Nahmias, U.S. attorney for the Northern District of Georgia, who has worked on mortgage fraud cases.
The Federal Trade Commission continues to investigate any cases of lending institutions misleading people with their mortgage-related advertising, says Peggy Twohig, associate director for the division of financial practices at the agency.
“It depends on exactly what they say, how they say it, how big and bold things are titled, and what is said in the small print,” she notes.
Source: Boston Globe, Nancy Trejos (08/25/07)
Mortgage Rates Drop to Three-Month Lows
Freddie Mac reported that 30-year fixed home loans moved down this week to 6.52 percent, from 6.62 percent a week ago. That’s the lowest level in three months. Meanwhile, interest rates on 15-year fixed mortgages dropped to 6.18 percent from last week’s average of 6.3 percent.
Source: San Diego Union-Tribune (08/24/07)
Mortgage Crisis: What Went Wrong?
Daily Real Estate News | August 22, 2007
Mortgage Crisis: What Went Wrong?
Nearly 2 million mortgages are scheduled for rate increases this fall, which is expected to send foreclosures soaring.
President Bush has blamed the failure of borrowers to read the fine print. But many experts say the problem runs much deeper. The mortgage business has long been a tug of war between a social commitment to broad homeownership and the efforts of private financial operators to earn money.
Robert Kuttner, co-editor of The American Prospect and a senior fellow at Demos, a New York-based think tank, says the government should resume directly subsidizing starter mortgages and construction of homes for moderate-income buyers. He says these programs need to combine careful credit assessment with counseling, rather than relying totally on the private mortgage industry. He says he also would prevent irresponsible, speculative lenders from selling mortgages in the secondary market.
“We’ve now had an experiment in the claims made for mortgage deregulation, extending over three decades, and deregulation flunked,” Kuttner says. “America needs to restore a system in which government supports homeownership — and makes sure that mortgage lenders serve as responsible creditors, not predators.”
Source: The Associated Press, Nathan K. Martin (08/19/07)
NAR: Commercial Real Estate Index Hits Record High
A forward-looking index for the commercial real estate market recorded its ninth consecutive improvement in the second quarter, according to the NATIONAL ASSOCIATION OF REALTORS®.
The Commercial Leading Indicator for Brokerage Activity rose 0.5 percent to an index of 120.7 in the second quarter, the highest on record, from a downwardly revised reading of 120.1 in the first quarter. It is 1.1 percent higher than the second quarter of 2006 when it stood at 119.7. NAR’s track of the index dates back to 1990.
Lawrence Yun, NAR senior economist, says the commercial sectors are benefiting most from rises in industrial production, shipments of durable goods, and wholesale trade.
“Despite some signs of slower overall economic expansion, the rise in the index means net absorption of space in the industrial and office sectors is likely to expand over the next six to nine months,” he says. “In addition, an improvement in returns on investment implies healthy rent increases for commercial property owners.”
Positive movements in the index components more than offset a fall in the National Association of Real Estate Investment Trusts price index. The net gain in NAR’s index also indicates modestly higher completions of overall office, warehouse, retail, and lodging structures.
What You Can Expect
“In short, the latest data suggests improved business opportunities for commercial real estate practitioners in the months ahead,” Yun says.
Net absorption in the office and industrial sectors in the fourth quarter of 2007 is expected to be 30 million to 40 million square feet, with about $365 billion to $375 billion in new completed commercial construction activity. That is compared to $343 billion of new construction reported in the second quarter of this year.
The rise in the commercial leading indicator also implies that commercial real estate practitioners could expect leasing and sales activity in the fourth quarter of this year to be about 1.1 percent higher than the fourth quarter of 2006.
More than 120,000 NAR members offer commercial services, and 68,000 of those are currently members of the REALTORS® Commercial Alliance, NAR’s commercial division.
The commercial leading index is a tool to assess market behavior in the major commercial real estate sectors. The index incorporates 13 variables that reflect future commercial real estate activity.
— REALTOR® Magazine Online
Fed Cuts Discount Rate, Promises More
In an effort to stabilize financial markets, the Federal Reserve last Friday cut the discount rate that it charges to make direct loans to banks from 6.25 percent to 5.75 percent.
The Fed did not change its target for the more important federal funds rate, which has remained at 5.25 percent for more than a year, but it sent a strong signal in its public statement that it was prepared to cut that rate as well.
In making the reduction the Fed stated, “the downside risks to growth have increased appreciably.” The Fed did not refer to inflation, which was the concern that previously kept it from cutting the federal funds rate.
“They provided a much needed response to the growing market turmoil today, but they will have to do more,” says Mark Zandi, chief economist at Moody’s Economy.com.
The move to cut the discount rate will not have a major impact on consumer interest rates in the way that cutting the federal funds rate triggers an immediate drop in banks’ prime lending rate, the benchmark for millions of consumer and business loans.
However, Friday’s move was expected to help with a severe cash crunch facing many businesses, including mortgage companies, which are having trouble getting loans for short-term financing needs.
Source: The Associated Press, Martin Crutsinger (08/17/07)
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