Sullivan Team Real Estate News Blog
Closing For Home Buyer Tax Credit Extended To Sep 30, 2010 & Flood Insurance Extended
http://www.inman.com/news/2010/07/2/obama-signs-tax-credit-flood-insurance-extensions-law
extensions into law
Closing deadline for homebuyer tax credits pushed to Sept. 30
BY INMAN NEWS, FRIDAY, JULY 2, 2010.
Inman News
President Obama today signed into law bills extending the closing deadline for claiming the federal homebuyer tax credit and temporarily reinstating the National Flood Insurance Program.
HR 5623, the Homebuyer Assistance and Improvement Act of 2010, gives homebuyers who were under contract by April 30 until Sept. 30 to close their home purchase and claim the federal homebuyer tax credit, if they meet other eligibility requirements.
Real estate and lending industry groups said thousands of homebuyers would have missed the original closing deadline of June 30 because they were waiting for bank approval of short sales, or coping with other delays caused by third parties handling their closings (see story).
HR 5569, the National Flood Insurance Program Extension Act of 2010, retroactively reinstates the National Flood Insurance program, which expired May 31, until Sept. 30.
The Senate passed both bills by unanimous voice vote Wednesday, after plans to use a bill extending unemployment insurance to extend both deadlines were complicated by disagreements over deficit spending.
The bill to extend unemployment benefits, HR 4213, fell two votes short in the Senate Wednesday of the 60 votes needed to end debate, and no further action on the bill is expected until lawmakers return from the the July 4 recess.
Changing US Demographics
U.S. Nears Racial Milestone
http://online.wsj.com/article/SB10001424052748704312104575298512006681060.html?KEYWORDS=nears+racial+milestone
By CONOR DOUGHERTY
Whites are on the verge of becoming a minority among newborn children in the U.S., marking a demographic shift that is already reshaping the nation's politics and economy.
Jeremy Igo for The Wall Street Journal
Korean immigrant publisher Ki-Hyun Chun, center, works Thursday on the Asian Herald in Charlotte, N.C., where the nonwhite population has risen.
The Census reported Thursday that nonwhite minorities accounted for 48.6% of the children born in the U.S. between July 2008 and July 2009, gaining ground from 46.8% two years earlier. The trajectory suggests that minority births will soon eclipse births of whites of European ancestry.
"The question is just when," said Kenneth Johnson, senior demographer at the Carsey Institute at the University of New Hampshire. He guesses the demographic milestone will be crossed in the next few years, and could happen as early as 2011.
America's changing face has transformed race relations from the traditional divide of black and white to a more complex mix of race, language and religion. There are new strains on schools and social services, while immigration has emerged as one of the nation's most contentious issues—as evidenced by Arizona's recent law that makes illegal immigration a state crime.
A number of forces are pushing the U.S. toward a "majority minority" future. The median age of the white population is older than that of nonwhites, and thus a larger share of minority women are in prime child-bearing years. In addition, white women are having fewer children than nonwhites, while the growth in mixed marriages has led to more multiracial births.
The recession has slowed the transformation by reducing immigration. It also has made people of all races less willing to start families. But births among nonwhites slowed less than those among whites between July 2008 and July 2009. Among the Hispanic population, there were roughly nine births for every one death, compared with a roughly one-to-one ratio for whites.
Minorities made up 35% of the U.S. population between July 2008 and July 2009, up from 31% in 2000, the Census said. While immigration is a touchy political issue, it is not the driving factor behind the nation's growing diversity. Hispanics, for instance, accounted for 54.7% of the total population increase between July 2008 and July 2009, but about two-thirds of that gain came from births.
Charlotte, N.C., and surrounding Mecklenburg County offer a microcosm of the diversifying nation. A statue of Mahatma Gandhi stands in front of the historic county courthouse, a gift from the Charlotte Asian Heritage Association. Food Lion, a supermarket chain in the Southeast, spent the past year adding thousands of Hispanic food items to 19 Charlotte area stores. In 1990, 70.3% of the county was white. Today, it is 54.6%, and Mecklenburg County's youngest whites are a minority among their peers.
Ki-Hyun Chun, a Korean immigrant, started a small immigrant-focused accounting firm in the 1970s. Today, in addition to his firm, he runs an Asian library with 130,000 books and a three-language Asian newspaper out of his building on the edge of downtown Charlotte.
The shifting mix has "changed our definition of diversity," said Ann Clark, chief academic officer of the Charlotte-Mecklenburg school district. The district, for example, used to put its teachers through training to overcome racial biases that usually cut along black-and-white lines. Now, the district focuses more on reaching kids who live in poverty or don't speak English at home. It has hired four full-time translators and started a program to educate teachers about poverty.
Esselito Solano, a 31-year-old who owns a company that makes stone kitchen counters, said he felt like an outsider when he emigrated to the U.S. from the Philippines in the mid-1980s. He remembers being perplexed when an elementary-school teacher made him throw away the remainders of his cafeteria lunch instead of bringing it home, a wasteful move in his native country.
Today, his young daughters are growing up as part of a nonwhite majority. In 2006, the most recent data available, 43% of the babies born in Mecklenburg County were non-Hispanic whites, according to health statistics. "They're not going to have a hard time blending in," said Mr. Solano.
Charlotte's business and social institutions also reflect the change. The Charlotte Chamber of Commerce has expanded minority membership via a program that gives discounts to several racial and ethnic chambers. In 2007, the NAACP of North Carolina formed a coalition called Historic Thousands on Jones Street People's Assembly, which is made up of 93 North Carolina advocacy groups that represent various races and ethnicities. "With this changing demographic, we had to operate in coalition," said Rev. William Barber, president of the NAACP of North Carolina.
America has long been on a path toward becoming a more diverse nation, and several states, including California and Texas, are already "majority minority." But in the past decade or so, the dual forces of assimilation and the housing boom have pushed diversity beyond gateway cities into the suburbs and across states that hadn't traditionally attracted immigrants.
Philip Maung started off in a gateway city, immigrating to Los Angeles from Burma (now Myanmar) in 1989. He moved to Charlotte in 1997 to start Hissho Sushi, now a 400-store company that sells sushi out of kiosks in airports and grocery stores. The company's 50,000-square-foot headquarters has offices, warehousing and a chilled room where a dozen employees begin rolling sushi at 3:30 a.m. "In a bigger city like New York or L.A., I wouldn't have had a shot," said Mr. Maung.
Although he has achieved the American dream, Mr. Maung said he wanted his two boys, both born in Charlotte, to understand where he came from. Two years ago, he sent the kids back to Asia to spend time learning Chinese and living in the developing world. "They'll come back with their eyes open," he said.
Write to Conor Dougherty at conor.dougherty@wsj.com
Economists See Economic Growth of 3% Thru 2011
Economists Expect Slow U.S. Growth
http://online.wsj.com/article/SB10001424052748703890904575296403144025366.html?KEYWORDS=economists+expect+slow
By PHIL IZZO
Economists surveyed by The Wall Street Journal are sticking with their forecasts for slow but steady growth in the U.S. economy through the middle of 2011 despite recent turmoil in European debt markets.
But their outlook is clouded by growing worries about Europe and the vitality of the U.S. job market.
On average, the 53 respondents to the Journal's monthly survey still expect the U.S. economy to grow about 3% in the second half of the year and to continue at that pace into 2011. That means adding jobs so gradually that unemployment, now at 9.7%, will be at a still-elevated 8.6% by the end of December 2011.
"Jobs are key for demand growth," said Michael Carey of Crédit Agricole CIB. "The European sovereign-debt crisis could negatively impact growth through financial conditions."
The risk of contagion from Europe and other uncertainties led the forecasters to push back until February 2011 the moment at which they expect the Federal Reserve to raise interest rates.
A month earlier, they anticipated a Fed move before the end of this year.
Twenty-four of the economists, a plurality, said the biggest downside risk to their forecast for the U.S. economy for the second half was ripple effects from the European government-debt crisis, which has spread beyond Greece and raised doubts about everything from the viability of the euro to the strength of the European banks.
An additional 11 said the biggest downside risk was disappointing job growth in the U.S.
In the U.S., the pace of job growth is key to the speed of the recovery.
Twenty-two economists, a plurality of respondents, said the one development that could lead growth to exceed their forecasts in the second half is a pickup in hiring.
3:24
A WSJ economic survey shows economists forecasting slow but steady growth in the U.S. through the mid-2011 despite recent turmoil in European debt markets. But their outlook is clouded by growing worries about Europe and the vitality of the U.S. job market. WSJ's David Wessel joins the News Hub to discuss.
About the Survey
The Wall Street Journal surveys a group of 57 economists throughout the year. Broad surveys on more than 10 major economic indicators are conducted every month. Once a year, economists are ranked on how well their forecasts have fared. For prior installments of the surveys, see: WSJ.com/Economist.
Twelve others cited accelerated consumer spending, which is tied to the job market.
On average, they expect the U.S. to add about 2.2 million jobs over the next 12 months, substantially less than a third of the jobs lost since the onset of the recession in December 2007.
Federal Reserve Chairman Ben Bernanke offered guarded reassurances about the economy in testimony to the House Budget Committee Wednesday, saying a new recession is unlikely and that the Fed still expects the U.S. economy to grow at a 3.5% annual rate in the months ahead. Still, his tone was notably cautious, given the headwinds facing Europe and recent turmoil in financial markets.
"Forecasting is very difficult and I make no promises in any particular direction," he said, "but it appears to us that the recovery has made an important transition from being supported primarily by inventory dynamics and by fiscal policy toward a recovery being led more by private final demand." Still, he added, a double-dip recession couldn't be "entirely ruled out." The economists in the survey put the odds of a double-dip recession at just 19%.
The economists—most of whom are American—see a 75% chance, on average, that Greece will be unable to pay its debts as promised and will either default or restructure them, despite the rescue package offered by other European countries and the International Monetary Fund.
And the forecasters put 1-in-3 odds on the euro zone eventually splintering, undoing an experiment in which 16 sovereign nations share a common currency.
The forecasters give the Fed much higher grades, an average of 80 out of 100, than they do the European Central Bank, which has lost some of its credibility in recent weeks over its response to turmoil in European debt markets.
The economists give it a grade of 68. The Bank of England and Bank of Japan came in at 70 and 63, respectively.
Meanwhile, the Fed's roundup of regional economic conditions in May, prepared for the central bank's June 22-23 policy meeting and released Wednesday, found that the economy continued to improve across the country, but many of the Fed's 12 regional banks described the pace of growth as modest. Based on conversations with local businesses, the Fed banks said consumer spending is strengthening, though consumers tend to be buying necessities rather than big-ticket discretionary items. Tourism activity improved across the country, except for cancellations in areas affected by the Gulf oil spill. "The potential exists for a much greater impact, although contacts are quite uncertain as to the ultimate effects," the Fed said.
District-by-District Summaries
The Fed found that the job market is improving, particularly in manufacturing. The Boston and Dallas Fed banks noted a pickup in temporary hiring. Overall, manufacturing, services outside of finance and transportation "continued to gradually improve," the Fed said. But commercial real-estate activity was weak, despite a modest increase in lending in some parts of the country. "Commercial and industrial lending by banks remained weak in most Districts, although Philadelphia, Chicago, Dallas, and San Francisco noted business-loan demand was firming, the Fed noted.
The economists' prescriptions for policy makers depend heavily on their diagnosis of the current risks.
By a nearly 2-1 count, the larger number of economists, many of whom cited concerns about issues facing the euro zone, said developed nations need to pay more attention to deficits. "Fiscal issues are the No. 1 risk to the recovery/expansion," said Paul Ballew of Nationwide.
The smaller group of economists, who said the labor market is the biggest challenge, said governments in developed countries are worrying too much about deficits and not enough about supporting growth with fiscal policy.
"Fiscal tightening would snatch defeat from the jaws of victory," said David Resler of Nomura Securities International Inc.
Spending more or cutting taxes to promote job growth expands the deficit, but reducing government support before a recovery has become self-sustaining could hold back the labor market.
—Jon Hilsenrath contributed to this article.
Write to Phil Izzo at philip.izzo@wsj.com
New home sales soar 15% in April 2010
http://money.cnn.com/2010/05/26/news/economy/new_home_sales/
New home sales soar 15% in April
By Hibah Yousuf, staff reporterMay 26, 2010: 11:05 AM ET
NEW YORK (CNNMoney.com) -- New home sales soared in April as homebuyers rushed to claim the tax credit that expired at the end of the month.
New home sales climbed 14.8% to a seasonally adjusted rate of 504,000 last month, up from an upwardly revised 439,000 in March, the Census Bureau reported on Wednesday. Sales year-over-year were up 47.8%.
A consensus of economists surveyed by Briefing.com had expected April sales to rise to an annual rate of 425,000.
April was the second straight month of increases. In March new home sales snapped a four-month losing streak and surged at the fastest single-month rate in 47 years as homebuyers snatched up properties ahead of the looming deadline for the tax credit.
The homebuyer tax credit, which expired April 30, boosted sales since buyers had to sign contracts by the end of last month. First-time homebuyers qualified for a tax credit up to $8,000, while repeat buyers could get as much as a $6,500 break.
The credit also pushed existing home sales higher during the month, according to a real estate industry report released earlier this week.
"We got two solid increases in March and April," said Mark Vitner, senior economist at Wells Fargo. "We may see sales fall to a record low in the aftermath of the tax credit program, but any fallback should be short-lived."
That's because even with the jump, the current annual rate of new home sales is still historically low. Vitner said about 700,000 homes are sold annually in a stable economy.
"A true recovery in the housing market won't get underway until we see solid gains in employment and income," Vitner said.
Although last month employers added the most jobs since March 2006, Vitner said the labor market has a long way to go as it recovers the 8.4 million jobs that were lost in 2008 and 2009 and long-term unemployment sits at severe highs.
"The job market is getting a little bit better, but it's still abysmal, he said.
Price and inventory: The government report showed that the median price of new homes sold in April was $198,400, down almost 10% from March from April 2009.
Vitner said the drop in price is because first-time home buyers, who typically spend less than repeat buyers, represented a larger portion of overall buyers last month.
An estimated 211,000 new homes were for sale at the end of April. At the current sales pace, the government expects it will take five months to sell through that inventory. That's down from March, when there were 6.7 months of inventory on the market.
Sales by region: Sales rose the most in in the Midwest, where they spiked by more than 30%; the West welcomed a 21.7% climb. Sales in the South rose more than 10%, and they were flat in the Northeast.
Bay State Construction Permits Surge In April 2010
http://www.bankerandtradesman.com/news138517.html
Bay State Construction Permits Surge In April 5/26/2010
New home construction permits in Massachusetts spiked in April from the same month a year earlier, according to numbers from the U.S. Census Bureau.
Cities and towns in the Bay State issued 714 permits in April, up from 399 in April 2009. That's also up from March, when 532 permits were issued.
There were 479 permits issued for single-family homes in April, compared to 319 in April 2009.
Nationwide, there were 56,330 permits in April, a sharp increase from the 46,536 permits a year earlier.
Banker and Tradesmen: April MA Sales Surge From Year Prior: Homes Up 46%, Condos Up 56%
Bay State Home, Condo Sales Surge By Double-Digit Percentages In April
Median Home Prices Climb For Fifth Straight Month
http://www.bankerandtradesman.com/news138481.html
The Warren Group May 25, 2010
Tune In
To listen to The Warren Group CEO Timothy Warren Jr. discuss the increase in sales activity in the Bay State, clickhere.
Single-family home sales in Massachusetts spiked 45.8 percent in April compared to the same month a year ago, while condominiums sales soared 55.7 percent, according to The Warren Group, publisher of Banker & Tradesman.
Prices for both single-family homes and condos also climbed in April.
"The surge in sales activity continued in April. Single-family home sales have increased year-over-year for 10 straight months and median home prices have been on the rise for five months," said Timothy M. Warren Jr., CEO of The Warren Group. "There is more confidence about a turnaround in the housing market, but concerns remain about foreclosure activity and unemployment, which are still high."
Single-family home sales shot up 46 percent to 3,980 from 2,730 in April 2009. It was the most sales for the month of April in five years. Year-to-date sales are up 26.1 percent to 11,286 from 8,953.
The median price for single-family homes sold in April rose 7.1 percent to $285,000 from $266,125 a year ago. The median selling price for the first four months of the year was $280,000, 8.1 percent higher than the $259,000 median price recorded during the same period in 2009.
Statewide condominium sales jumped 56 percent to 1,831 from 1,176 in April 2009. A total of 5,278 condo sale transactions were recorded in the first four months of the year, a 32.6 percent increase from 3,981 the prior year.
The median condo price climbed 5.5 percent to $253,000 in April from $239,900 during the same month in 2009. The year-to-date median condo price rose 8.7 percent to $246,250 from $226,500.
Economy To Grow in 2010 and 2011
WALL STREET JOURNAL, MAY 23, 2010
Economists See Solid U.S. Growth
By LUCA DI LEO
WALL STREET JOURNAL, MAY 23, 2010
http://online.wsj.com/article/SB10001424052748704167704575258620270541194.html?mod=WSJ_economy_LeftTopHighlights
The U.S. economy should expand at a solid pace this year and next as consumers increase spending, confident the recession is behind them, a panel of economists said in a survey released Monday.
The 46 economists surveyed in the National Association for Business Economics report between April 27 and May 7 predicted U.S. gross domestic product would expand by 3.2% in 2010 and 2011.
That is a touch higher than the 3.1% growth predicted for both years in the last survey, released Feb. 10.
"Although risks involving Europe have recently escalated, the outlook in this country has improved in most respects," said NABE President Lynn Reaser, chief economist at Point Loma Nazarene University.
"Growth prospects are stronger, unemployment and inflation are lower, and worries relating to consumer retrenchment and domestic financial headwinds have diminished," she said.
Stung by the worst recession since the 1930s, Americans were thriftier in 2009. But consumer spending, which accounts for more than two-thirds of U.S. GDP, drove the economy's growth in the first quarter of 2010. That should help compensate for fading support from the government later this year.
The U.S. savings rate should average 3.4% this year, the economists predicted, down from a 4.6% forecast three months ago.
Spending will be helped by a gradually improving labor market. Employment gains are expected to remain robust through 2011, except for a slowdown in job creation in the July-September period, when those working on the 2010 decennial Census count will lose their temporary jobs.
The economists surveyed expect the unemployment rate to fall from 9.9% in April to 9.4% at the end of this year and to 8.5% by the end of 2011.
The economy in April added jobs at the fastest pace in four years, with strong employment gains in the private sector.
Personal spending and income data for April, due for release on Friday, are expected to show that the turnaround in employment is starting to support incomes, according to analysts surveyed by Dow Jones Newswires.
Business investment also will drive the economy's expansion, according to the NABE survey, with spending on equipment and software buoyed by higher profits. Small companies, which are still finding it hard to get loans following the financial crisis, are expected to benefit from some easing of credit conditions.
The panelists expect inflation to remain low for longer than in the previous survey. As a result, they see the Federal Reserve's benchmark lending rate rising to just 0.5% at the end of 2010, compared with a February prediction that it would increase to 0.75% in the final quarter of this year. The Fed funds rate at which banks lend to each other overnight currently stands between zero and 0.25%.
The NABE forecasts are slightly less optimistic than predictions made by Federal Reserve officials at their last meeting. Fed officials said after the April 27-28 meeting that the economy should grow by about 3.5% this year and 4% in 2011, with the jobless rate falling to 8.3% at the end of next year.
On a more negative note, the strength of the housing rebound was downgraded in the latest NABE survey. Economists no longer expect the sector to outpace the overall economy.
U.S. home construction posted a bigger-than-expected gain in April thanks to the extension of a tax credit, but the plunge in permits suggested the housing sector would remain a weak spot in the economy.
Almost half of those surveyed believed Greece would default on its debt over the next year. (The survey ended a few days before European governments announced a $1 trillion debt-stabilization fund to prevent the Greek crisis from spreading.)
But the impact on the U.S. economy was still seen as limited by NABE panelists.
Not everyone agrees with this conclusion. Fed governor Daniel Tarullo warned last week that Europe's debt crisis posed serious risks to the U.S. economy because it could hurt U.S. exports and bank lending, as well as revive stress in global financial markets.
Write to Luca Di Leo at luca.dileo@dowjones.com
Interest Rates At Near 50 Year Low: 4.86%
Wall STREE JOURNAL, MAY 24, 2010
Mortgage Rates Decline
Home Buyers Get Surprise Boost From Europe Crisis as Loans Drop to Below 5%
By NICK TIMIRAOS
http://online.wsj.com/article/SB10001424052748704904604575262713807080890.html?mod=WSJ_Real+Estate_LeftTopNews
The financial turmoil in Europe is providing an unexpected windfall for American home buyers, as international money seeking a safe haven is flowing into the U.S., pushing domestic mortgage rates to the lowest levels of the year and back near 50-year lows.
The housing industry had been bracing for months for a period of rising mortgage rates, triggered by the end of the Federal Reserve's $1.25 trillion mortgage-securities purchase program. Conventional wisdom held that mortgage rates would rise as the Fed pulled back from propping up the market.
Instead, many in the industry now say rates could drift as low as 4.5% this summer from 4.86% now, instead of rising to 6% as some economists projected, making for significantly lower payments for Americans buying homes or refinancing their mortgages.
Refinance business "exploded" last week, says Jeff Lazerson, chief executive of Mortgage Grader, a brokerage in Laguna Niguel, Calif. "It's schizophrenic. We all had this expectation of higher interest rates and no more refinances." He says he helped a borrower lock in a 30-year loan with a 4.25% fixed rate last week, the lowest in his 24 years in the business.
Rates on 30-year mortgages averaged 4.84% last week, according to a survey by mortgage-insurance titan Freddie Mac. Rates were quoted late Friday at 4.86%, the lowest since December 2009, according to a survey by financial publisher HSH Associates, and down from a high of 5.27% for the week ended April 9. Rates on 15-year mortgages averaged 4.24% last week—the lowest since Freddie began its survey in 1991.
Economists largely attribute the decline in mortgage rates to the European debt crisis and new concerns about the global economy, which unleashed a massive wave of cash into U.S. bonds from investors around the world.
This buying pushed down yields on Treasury bonds. Because mortgage rates are closely pegged to yields on 10-year Treasury notes, which fell to 3.2% Friday, the decline in Treasurys pulled down mortgage yields. Typically, mortgage yields remain around 1.5 percentage points above yields on 10-year Treasury notes.
Falling mortgage rates can give a powerful lift to the housing market. A general rule of thumb holds that every one percentage point decline in mortgage rates is the equivalent of roughly a 10% reduction in the home price for the buyer.So, if the current rates hold, say economists, that could help stabilize prices and allow current homeowners to sell existing homes without substantial price cuts.
It isn't clear how much home-buying the lower rates will spur. Demand had fallen in recent weeks after buyers raced to close sales ahead of last month's expiration of an $8,000 federal tax credit for home purchases. Applications for new-purchase loans hit a 13-year low in the week ending May 14, according to the Mortgage Bankers Association.
Borrowers do face roadblocks. Underwriting standards are their strictest in a decade, and record numbers of borrowers are "underwater," owing more to the bank than their homes are worth. That has excluded large swaths of borrowers from getting loans at the new lower rates.
Still, lower rates could widen the pool of people who qualify for a mortgage, while others may find they qualify for a slightly larger loan. "They can buy the place with the extra bedroom or the swimming pool," says Jay Brinkmann, chief economist at the Mortgage Bankers Association.
Falling rates have encouraged some Americans to consider refinancing their existing mortgages to save money. A one-percentage-point decline in mortgage rates can cut $250 off the monthly payment on a $400,000 30-year fixed-rate mortgage, giving consumers cash they can use to spend.
Richard Hunsinger plans to refinance two loans on his Potomac, Md., home into a new 15-year mortgage this week with a 4.37% rate. The 55-year-old dentist is worried that interest rates will eventually rise sharply, boosting the payment on his home-equity line of credit. His first mortgage, also a 15-year loan, currently has a fixed rate of 5.25%. And while the rate on his $240,000 home-equity loan is just 3.25%, it has risen as high as 8% in the past.
Rates "can't stay low forever," says Dr. Hunsinger. If they go up over the next year, "this will look like a really bright decision."
By historical standards, rates are incredibly low. Until 2003, rates on 30-year fixed-rate loans hadn't dipped below 5% since the 1960s. Rates fell to similar points throughout much of the past year as the government was helping to hold down costs for borrowers.
Nearly half of all borrowers with 30-year conforming fixed-rate mortgages have mortgage rates of 5.75% or higher and could reduce their rates by a full percentage point if they refinanced at current rates, according to investment bank Credit Suisse.
Many of those borrowers may have tried to refinance last year, only to find that they couldn't qualify. When rates fell to similar lows in 2003, refinance activity hit a record $2.9 trillion, compared to $1.2 trillion last year, according to Inside Mortgage Finance, a trade publication.
Now, more private investors are coming into the market for loans, offering better prices for securities containing mortgages with low rates than they were one year ago. That could lead banks and brokers to cut upfront origination fees, and borrowers who are able to refinance could find it cheaper to do so than last year.
"I'm calling people back and saying, 'Now it's worth it,'" says Michael Menatian, a mortgage banker in West Hartford, Conn.
—Prabha Natarajan contributed to this article
Write to Nick Timiraos at nick.timiraos@wsj.com
FHA Suspends Anti Flipper Rules For 1 Year - Some Limitations
Investors find flaws in FHA anti-flipping rules
Restrictions on resale price, same-day closings irk some
BY STEVE BERGSMAN, FRIDAY, MAY 14, 2010. Inman News
http://www.inman.com/buyers-sellers/columnists/stevebergsman/investors-find-flaws-in-fha-anti-flipping-rules
In February, the Federal Housing Administration suspended for one year a regulation designed to hold back "flippers," or investors who acquire single-family homes and then put them back into the market very quickly, often within 90 days.
One would think this would be party time for flippers -- and it is! -- but there are some caveats within the rule suspension that still limit completely unabashed flipping.
At least the handcuffs are off and that's welcome news.
As Paul Barrow, the fellow behind thePrivateMarket.com, extolled, "This will be music to investor's ears everywhere! We no longer have to wait and plan to hold for 91 days to contract and sell, fix and flip projects to first-time homebuyers."
A little history first.
Back in 2003, the FHA decided to no longer approve loans on properties that were resold within 90 days of original purchase. In those halcyon days, the FHA feared flipping homes was causing prices in individual neighborhoods to unnaturally boom. Of course, back then everything was booming, and flippers -- they prefer to call themselves investors -- wondered why they were being singled out.
Flippers have historically been mischaracterized and demonized, says JP Moses, founder of REI tips, or www.reitips.com. He is also a self-proclaimed flipper and his website was created as a nexus for those in the business.
There are a small number of bad apples in this industry as there are in any industry, but they shouldn't soil what is essentially a good, efficient and legal business. Unfortunately, they do.
"I feel strongly that the real estate investor has become kind of a scapegoat," he says. "Realtors have lobbyists working on their behalf and multimillion-dollar budgets dedicated to enhancing their image. Investors don't have anything like that."
So how did Moses feel about the FHA reversing course?
"It's hilarious to me," he exclaims. "The FHA is admitting the 90-day seasoning has hindered neighborhood redevelopment. Thank you, and in today's economy that is a positive step, but why not listen to what you are saying and just eliminate the rule altogether? It's not doing anyone any good."
In Moses' view, flippers are among the few groups of active investors at the forefront of redeveloping communities hard hit by waves of foreclosures and abandonment. That's because they buy the REOs, rehab the properties and then put the homes back on the market as quickly as possible.
"Who else is going to buy the flood of REOs, especially the ones in bad shape?" asks Moses.
The rationale behind the FHA's change of heart -- albeit temporary -- was that the agency concluded that acquiring, rehabilitating and reselling of REO properties often takes less than 90 days and prohibiting the use of FHA mortgage insurance for a subsequent resale within 90 days of acquisition adversely impacts the willingness of sellers to allow contracts from potential FHA buyers.
That's because buyers must consider holding costs and risk of vandalism associated with allowing a property to sit vacant over a 90-day period of time.
"This will translate to lower holding costs, more projects and higher-quality inventory for buyers because if we are able to sell a property then we can buy another property faster," says Barrow. "It will turn ugly houses into residences first-time homebuyers want to purchase."
Barrow is an investor, and his company, Private Market Real Estate in Denver, offers opportunities for others to invest in flip or rental opportunities.
"Even if we finished a remodel in four or five weeks," says Barrow, "we had to let the property sit. That slows down the sale and the next acquisition. It also clogs up the market at a time when there is so much demand."
So while this is all well and good for investors, it's not without some minor limitations.
The 20 percent rule. If your resale is higher than 20 percent of your acquisition price, you'll have to pony up some extra proof that the price was justified. "Most of the time investors are able to add more than 20 percent value to the property from the time they buy it," says Barrow, "so there are some extra hoops you have to jump through." In other words, if you buy a house for $100,000 and try to sell it for $125,000, the house is subject to additional underwriting guidelines, which is like a double appraisal.
Title hold. Since a seller must hold property, that still means no simultaneous closings. "You can theoretically close on your purchase Monday, go into contract with your FHA buyer on Tuesday, and hopefully close with them in 30 days," says Moses, "but you still can't do back-to-back, same-day closes to an FHA end-buyer.
Short-term funding. Investors still need to come up with short-term funding of the 30- to 60-day variety if they want to buy, fund and then sell to an FHA end-buyer.
Previous flips. Basically, the subject property should not display a pattern of prior flipping activity, says Moses. If a property has been, for example, wholesaled in the last 12 months, the FHA may flag the deal and disapprove.
Moses calls himself a wholesale flipper, as differentiated from a retail flipper. The uniqueness being that the retail flipper buys a house, fixes it up, and eventually sells to the end user.
A wholesale flipper is the person who sniffs a deal out and quickly resells to a rehabber or landlord without doing any work on the property. Wholesale flippers get a much smaller commission.
The FHA changes don't matter much to the wholesale flipper, because he or she can't flip a house to an FHA buyer, says Moses. "So, the rule doesn't affect my business too much, but it will definitely be a boon to retail flippers."
Steve Bergsman is a freelance writer in Arizona and author of several books, including "After the Fall: Opportunities and Strategies for Real Estate Investing in the Coming Decade."
Millions Of Lost Jobs Likely Won't Return
Millions of jobs that were cut won't likely return
http://www.usatoday.com/money/economy/2010-05-13-jobs-gone_N.htm
By Christopher S. Rugaber, AP Economics Writer
WASHINGTON — Fewer construction workers will be needed. Don't expect as many interior designers or advertising copywriters, either. Retailers will get by with leaner staffs.
The economy is strengthening. But millions of jobs lost in the recession could be gone for good.
And unlike in past recessions, jobs in the beleaguered manufacturing sector aren't the only ones likely lost forever. What sets the Great Recession apart is the variety of jobs that may not return.
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That helps explain why economists think it will take at least five years for the economy to regain the 8.2 million jobs wiped out by the recession, longer than in any other recovery since World War II.
It means that even as the economy strengthens, more Americans could face years out of work. Already, the percentage of the labor force unemployed for six months or longer is 4.3%. That's the highest rate on records dating to 1948.
Behind the trend are the cutbacks businesses made in the recession to make up for a loss of customers. To sustain earnings, they became more productive: They found ways to produce the same level of goods or services with fewer workers. Automation, global competition and technological efficiencies helped solidify the trend.
Diminished home equity and investment accounts have made shoppers more cautious, too. And their frugality could endure well into the recovery. That's why fewer retail workers, among others, will likely be needed.
Among those whose former jobs may be gone for good are:
• Julie Weber of Milwaukee, who designed office cubicles for nearly seven years. She lost her job about a year ago. Since then, she's been able to find only part-time work outside her field. Interior design was hammered by the real estate downturn. "My hope for getting back into the industry is not very high," says Weber, 29.
• Erik Proulx, 38, a former advertising copywriter in Boston, who finds more companies are turning to social media and viral marketing and are less drawn to agencies that focus on traditional TV and print ad campaigns. Proulx was laid off in October 2008 the third time an employer had cut his position or had closed. He no longer wants to rejoin the industry. Proulx has started a blog to help other unemployed ad professionals network.
Louis DiFilippo, 30, who decided to study information technology after losing his job managing a gourmet food store in Washington, D.C. After six months of unemployment, he embraced a career with more stability. He now works on computer network security for the Navy. "I'm much happier now," he said.
More than one-third of chief financial officers at 620 big companies surveyed in March by Duke University and CFO magazine said they didn't expect to restore their payrolls to pre-recession levels for at least three years. Nearly all cited higher productivity and tepid consumer spending.
"Companies have just figured out, 'We didn't want to fire people ... but now that they're gone, we've realized that we can get by without them,'" said John Graham, a Duke finance professor who directed the survey.
Productivity grew at an annual rate of 6.3% in the year ending in March, the Labor Department said this month. It was the largest increase in 48 years, though most economists think that pace isn't sustainable.
In the long run, more productive workers raise standards of living: Companies can pay more without inflating prices. But in the short run, high productivity delays hiring.
U.S. employers did add 290,000 jobs in April. The unemployment rate rose to 9.9%, though, because 805,000 people without jobs poured into the labor force to seek work.
Three industries, in particular, where many jobs may not be coming back are retailing, manufacturing and advertising.
Retailers have lost 1.2 million jobs, or 7.5% of retail jobs that existed before the recession, according to Labor Department data. Circuit City and Linens & Things have collapsed. Starbucks closed nearly 800 U.S. stores. Robert Yerex, an economist at Kronos, a work force management company, estimates 20% of those jobs are never coming back.
Manufacturing has shed 2.1 million jobs, or 16% of its total, since the recession began. Goodyear Tire & Rubber and Boeing laid off a combined 15,700 people during the recession. General Motors eliminated 65,000 through buyouts and layoffs. And as Americans buy fewer cars and homes, more than 1 million jobs in the auto, steel, furniture and other manufacturing industries won't return, according to estimates by Moody's Analytics.
Advertising and PR agencies have lost 65,000 jobs, or about 14% of the pre-recession total. Moody's Analytics estimates those industries will lose even more within five years.
In addition, a consolidated airline industry has shed layers of jobs that won't likely return. Delta Air Lines earlier this year spread out departure times for flights from its Cincinnati hub, rather than bunching them at peak travel times. That way, it could operate from one concourse rather than two, said Kent Landers, a spokesman. The change allowed Delta to cut more than 700 baggage handling and other ground services jobs.
More than half the 15.3 million people out of work in April said they regard their layoff as permanent, the Labor Department said. That's the highest proportion on records dating to 1967. In previous recessions, workers often endured only temporary layoffs: Their employers would recall them once business picked up.
Caterpillar has resumed hiring after laying off 19,000 full-time workers during the recession, thanks to rising demand for its construction and mining equipment. But most of the new jobs will be overseas. Of the 9,000 hires CEO Jim Owens said Caterpillar plans to make this year, only 3,000 will be in the U.S.
Many economists say eventually, companies won't be able to squeeze any more work out of their employees. That would force employers to step up hiring.
But Janet Yellen, president of the Federal Reserve Bank of San Francisco, cautions that this won't happen anytime soon. She believes corporate America remains in the early stages of a drive for greater efficiencies.
"We may be in store for ... high productivity growth for some time," she said in a speech this year. "If so, the rate of job creation will be frustratingly slow."
Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Areas With Highest and Lowest Underwater Homes
Top 10 areas with lowest, highest rate of underwater homes
CoreLogic: National negative equity levels flat at 24% year-over-year
BY INMAN NEWS, TUESDAY, MAY 11, 2010.
http://www.inman.com/news/2010/05/11/top-10-areas-with-lowest-highest-rate-underwater-homes
The number of homes where borrowers owe more on the mortgage than the house is worth has dropped to about 11.2 million in the first quarter, according to a report by business information company CoreLogic.
That's down from 11.3 million at the same time last year, though homes with negative equity (aka "underwater" or "upside down" homes) made up 24 percent of all residences with mortgages both quarters. That share goes up to 28 percent when those with less than 5 percent equity (2.3 million borrowers) are added.
"The two most important triggers of default, negative equity and unemployment, have stabilized over the last six months," said Mark Fleming, CoreLogic's chief economist, in a statement. "As house prices grow again and borrowers pay down their mortgage debt, negative equity levels will begin to diminish. The typical underwater borrower is likely to regain their lost equity over the next five to seven years."
The report was based on data from 47 million mortgaged properties, accounting for more than 85 percent of all mortgages in the country, the company said. A property's estimated current value (per First American CoreLogic's Automated Valuation Models) was subtracted from outstanding mortgage debt (from public records) to obtain a property's equity level.
Not enough data was available to include equity levels in Louisiana, Maine, Mississippi, South Dakota, Vermont, West Virginia and Wyoming, the company reported.
The U.S. negative equity rate: 23.7 percent (11.3 million out of 47.7 million mortgages)
Top 10 states with the highest negative equity rates:
1. Nevada: 69.9 percent (418,543 out of 599,128)
2. Arizona: 51.2 percent (690,578 out of 1.3 million)
3. Florida: 47. 7 percent (2.2 million out of 4.5 million)
4. Michigan: 38.6 percent (533,249 out of 1.4 million)
5. California: 34.1 percent (2.3 million out of 6.9 million)
6. Georgia 28.7 percent (457,652 out of 1.6 million)
7. Idaho: 23.7 percent (57,093 out of 240,613)
8. Virginia: 23.6 percent (293,825 out of 1.2 million)
9. Maryland: 22.8 percent (309,568 out of 1.4 million)
10. Utah: 21.1 percent (99,030 out of 470,205)
Note: California also has the highest negative equity rate by volume of all the states covered.
Top 10 states with lowest negative equity rates:
1. Oklahoma: 5.9 percent (23,724 out of 402,187)
2. New York: 7 percent (127,765 out of 1.8 million)
3. Montana 7.3 percent (8,048 out of 109,940)
4. Pennsylvania: 7.4 percent (132,307 out of 1.8 million)
5. North Dakota: 8 percent (3,603 out of 45,310)
6. Kentucky: 8.8 percent (23,800 out of 270,671)
7. Alabama: 9.1 percent (30,384 out of 334,535)
8. Iowa: 9.1 percent (28,618 out of 314,963)
9. Nebraska 9.4 percent (20,650 out of 219,821)
10. Hawaii: 9.8 percent (22,594 out of 230,246)
Note: North Dakota also has the lowest negative equity rate by volume of all the states covered.
Top 10 metro areas with the highest negative equity rates:
1. Las Vegas-Paradise, Nev.: 74.7 percent
2. Phoenix-Mesa-Glendale, Ariz.: 57.5 percent
3. Orlando-Kissimmee-Sanford, Fla.: 55.1 percent
4. Riverside-San Bernardino-Ontario, Calif.: 53.5 percent
5. Fort Lauderdale-Pompano Beach-Deerfield Beach, Fla.: 53.1 percent
6. Miami-Miami Beach-Kendall, Fla.: 50.4 percent
7. Tampa-St. Petersburg-Clearwater, Fla.: 48.1 percent
8. Detroit-Livonia-Dearborn, Mich.: 46.8 percent
9. West Palm Beach-Boca Raton-Boynton Beach, Fla.: 45.3 percent
10. Sacramento-Arden-Arcade-Roseville, Calif.: 44.8 percent
Note: The Phoenix metro area also has the highest negative equity rate by volume of all the metro areas covered.
Top 10 metro areas with the lowest negative equity rates:
1. Nassau-Suffolk, N.Y.: 5.4 percent
2. Pittsburgh, Pa.: 5.9 percent
3. Philadelphia, Pa.: 7.5 percent
4. Hartford-West Hartford-East Hartford, Conn.: 9.9 percent
5. Austin-Round Rock-San Marcos, Texas: 9.9 percent
6. San Francisco-San Mateo-Redwood City, Calif.: 9.9 percent
7. San Antonio-New Braunfels, Texas: 10.4 percent
8. New York-White Plains-Wayne, N.Y.-N.J.: 11 percent
9. Cambridge-Newton-Framingham, Mass.: 11.5 percent
10. Nashville-Davidson-Murfreesboro-Franklin, Tenn.: 11.5 percent
Note: Pittsburgh also has the lowest negative equity rate by volume of all the metro areas covered.
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NAR Mid Year Convention Real Estate Forecasts May 14, 2010
Economist: Expect home-price weakness to persist
Home sales expected to bounce back to normal by 2012
BY MATT CARTER, FRIDAY, MAY 14, 2010.
Inman News
http://www.inman.com/news/2010/05/14/economist-expect-home-price-weakness-persist
WASHINGTON -- With the economy on the mend, home sales could bounce back to their historical levels by 2012, although the bulging foreclosure pipeline is likely to keep prices in check, economist Mark Zandi of Moody's Analytics told Realtors holding their annual midyear meeting in the nation's capital.
Zandi said he expects sales of new and existing homes to grow from between 5.5 million and 6 million this year to between 6 million and 6.5 million next year, and hit about 7 million in 2012.
That would put home sales back on their historic trend line. But Zandi said that when it comes to home prices, "the coast is not quite clear."
With the foreclosure pipeline full -- Moody's estimates that 4.3 million out of approximately 50 milllion first mortgages are in foreclosure or overdue by 90 days or more -- Zandi expects further price weakness for the next six to 12 months and no real price growth through 2012.
Although loan modifications could help about half of homeowners facing foreclosure avoid losing their homes, another 9 million homeowners are underwater by more than 20 percent, he said, making them more likely to consider a "strategic default."
Strategic defaults, or defaults by homeowners who are able to make their mortgage payments but choose not, will constitute a fourth wave of foreclosures, Zandi said.
The first wave of foreclosures, in 2006, often involved house flippers who got into trouble when prices stopped rising. Subprime borrowers facing interest-rate resets dominated the second wave in 2007, which was followed in 2008 by foreclosures among the unemployed and borrowers with negative equity.
There are already about 9.5 million vacant homes -- about 1.5 million more than would be expected by historical trends -- and it could take two years to work off that inventory, Zandi estimated.
That assumes that builders keep putting up homes at a slower-than-usual pace of 600,000 homes a year, while new household formation produces demand for 1.35 million homes a year, a difference of 750,000.
While builders could very well pick up the pace of construction, Zandi expects demand will rise even faster -- a view echoed by National Association of Realtors Chief Economist Lawrence Yun.
Yun said that with housing starts so far below historical norms, there's a chance that there will be housing shortages. Home prices could rise 2 to 3 percent this year and even more steeply after that because of the constraints on supply, he said.
While that might seem like a nice problem to have, Yun said abrupt price appreciation would not be good for businesses because some buyers will be priced out of the market.
Sales of distressed homes are expected to account for between 30 and 40 percent of transactions for the rest of the year, Yun said. But the European debt crisis could lead to additional stress tests for U.S. banks, which would hurt jumbo and second-home lending, he said.
Zandi said the structured finance market, which channeled money into home lending before the financial crisis, remains "completely dormant." Fannie Mae, Freddie Mac and the Federal Housing Administration are standing behind 95 percent of loans, he noted.
"It's not healthy for our economy to be reliant on the government for mortgage credit," Zandi said. Nor is the rising ratio of federal debt to gross domestic product, which could eventually drive up interest rates and derail his optimistic economic projections, he said.
Zandi expects GDP, which fell 2.5 percent last year -- the worst showing since 1933 -- should grow by 3 percent this year, 4 percent in 2011, and 5 percent in 2012.
But it may be 2014 before enough jobs are created to make up for the 9 million lost during the financial crisis, he said.
Businesses must create 125,000 a month just to keep up with the growing size of the nation's work force, he said -- a "break-even" pace he expects can be sustained this year. Next year, Zandi expects about 250,000 jobs will be created each month, a figure he said should grow to 300,000 in 2012.
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