Monthly Archives: September 2009

Housing Prices Stabilizing?

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NEW YORK – Sept. 30, 2009 – Home prices rose for the third-consecutive month in July, bolstering the view that the long free fall in the housing market may be history. But consumer confidence fell unexpectedly, modestly pushing down stocks.

Housing prices ticked up 1.6 percent from June, according to the Standard & Poor’s/Case-Shiller home price index, which tracks 20 large cities. Low mortgage rates and bargains on foreclosed homes are attracting buyers.

Home prices rose for the first time in three years in May. And after falling 12 percent from October through April, prices climbed 3.6 percent from May to June.

“I think we’ve made the turn,” says Joel Naroff of Naroff Economic Advisors.

Values rose in 18 of the 20 cities, with only Las Vegas and Seattle posting monthly declines, of 1.1 percent and 0.1 percent, respectively. Thirteen cities have had at least three consecutive monthly gains.

The residential real estate market is still weak. Home values in the 20 cities are off 13.3 percent from July 2008 and 33.5 percent from their 2006 peak. Prices are now about where they were in fall 2003. But the year-over-year declines have been steadily shrinking in each of the past six months.

In some cities, the housing market is almost stable year-over-year, with prices in Cleveland, Dallas and Denver dipping 1.3 percent, 1.6 percent and 2.9 percent, respectively.

Yet some economists say the recent run-up is a brief reprieve, and home prices have yet to hit bottom. Patrick Newport of IHS Global Insight says the market will swoon again after housing inventories are fattened by a new wave of foreclosures and an $8,000 tax credit for first-time home buyers expires Nov. 30. Newport says prices will likely fall 6 percent before mounting a more sustainable rebound in mid-2010.

David Blitzer, chairman of Standard & Poor’s index committee, says, “The numbers are very encouraging, but it will probably take some time before we have convincing data that we’re past the bottom.”

Meanwhile, a closely watched consumer confidence index dipped to 53.1 in September from 54.5 in August, the Conference Board said. Analysts expected it to rise to 57.

Ian Shepherdson of High Frequency Economics noted most of the drop stemmed from consumer attitudes about current conditions, which reflects high unemployment. The more critical “expectations index” was stable, sliding to 73.3 from 73.8. The overall index is up from a record low of about 25 in February.

Still, “With the holiday season quickly approaching, this is not very encouraging news,” says Lynn Franco, head of the board’s consumer research center. The Dow Jones industrial average closed down 47 points at 9742.

Will the Cap and Trade Bill Have an Impact on Housing Sales?

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In the interest of creating a better environment, new legislation that is along the lines of the Waxman-Markey Cap and Trade Bill is scheduled to be unveiled by the end of the month.  The bill will include language for a new National Building Code calling for homes to be more energy efficient.

With regard to new construction, there have been some notable innovations in green building designs and the use of these should be encouraged in new homes.

However, according to a recent article, the proposed code has a provision which would mandate that all housing transactions be required to undergo and pass an environmental inspection.  In older home sales this could be significant.  Windows that are not airtight and appliances that are not Energy Star certified would have to be replaced before the sale could happen.

The fear is that this bill could possibly affect the sales of “fixer-upper” homes; however, I cannot honestly see the government moving in with these types of restrictions at this point which would severely impact the sale of the huge inventory of foreclosure properties now sitting on the block with millions more expected.

Currently, sellers in Massachusetts and many other states are mandated to have smoke and carbon monoxide detectors as a requirement before any property can be transferred.  Also, owners with private septic systems must have a Title V inspection and it fails, they are required to remedy the problem by installing a new septic system.

Most people are onboard with these items since they have a huge impact on safety and protecting the environment.  However, if home sellers have to repair every problem prior to a sale, it could significantly drive up the cost of selling a home.

At a time when the country is spending countless sums of money to shore up the housing market with a first-time tax credit and the possibility of extending and expanding this program, it seems contradictory to come up with legislation that could sabotage these efforts.

I will be on the lookout for more clarification of this bill in the coming weeks and hope that the stir about it is more smoke than fire.

With the housing market still in a depressed state, it is hard to imagine that the government would choose this time to make housing sales more difficult.

Mortgage Modification Plan Update

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WASHINGTON – Sept. 10, 2009 – The Obama administration’s $50 billion mortgage relief program is finally picking up speed after a sluggish and disappointing start: Nearly one in five eligible homeowners have been offered help so far.

The “Making Home Affordable” plan was launched with great fanfare in March. As of last month, lenders had sent out more than 571,000 offers to reduce borrowers’ monthly payments, the Treasury Department said Wednesday.

That’s 19 percent of the nearly 3 million U.S. homeowners eligible for a loan modification under the plan, up from 15 percent at the end of July.

“There are signs the plan is working,” said Michael Barr, assistant Treasury Secretary for financial institutions. “But we can do better.”

Of the modifications offered, about 360,000 borrowers, or 12 percent, have signed up for three-month trial modifications, which are supposed to be extended for five years if the homeowners make their payments on time.

To increase pressure on the industry, Waters and other lawmakers threatened to revive a failed proposal, opposed by banking lobbyists, to let bankruptcy judges rewrite the terms of a mortgage.

That change is necessary, consumer groups say, because getting a lender to do so voluntarily is still a time-consuming, bureaucratic nightmare. Many lenders are still scheduling foreclosure sales, and charging borrowers fees for participating in the Obama plan.

“The administration has got to put some teeth in this and really get some consequences for the lenders and servicers who are not cooperating,” said Bonnie Mathias, a board member of the Association of Community Organizations for Reform Now, or ACORN.

But mortgage executives say they are racing to implement the program, hiring thousands of workers to handle an unprecedented flood of calls.

“We fully understand the urgency,” Jack Shackett, Bank of America’s head of credit loss prevention, told lawmakers. “We understand that we have a long way to go under very challenging circumstances.”

Bank of America has doubled its number of trial modifications in two months to nearly 60,000. But it still lags its competitors, having enrolled about 7 percent of its 836,000 eligible loans, compared with 25 percent for JPMorgan Chase & Co.

The Treasury Department’s decision to publish those numbers has clearly provided a powerful inventive for many in the industry.

Lenders are “concerned about the report card showing them in a worse light than their peers,” said David Stevens, an assistant secretary at the Department of Housing and Urban Development. “Nobody wants to be a low performer on that score card.”

Industry executives also say they are planning to work with Obama administration officials on a possible extension of the program to unemployed homeowners. Also under consideration is finding a way to help borrowers with “pick-a-payment” or option ARM loans, which gave borrowers the ability to defer some of their interest payments and add them to the principal.

Treasury says 48 mortgage companies are now involved in the program, up from 38 in July. The companies have requested financial information from almost two-thirds of eligible borrowers and say they are on track to have 500,000 loan modifications in place by Nov. 1.

The program is voluntary, relying on subsidies to encourage mortgage companies to participate. Lenders must agree to reduce the loan payments to 38 percent of a borrower’s monthly pretax income. After that, the government and lender split the cost of bringing the payment down to 31 percent.

Borrowers can receive rates as low as 2 percent for five years.WASHINGTON – Sept. 10, 2009 – The Obama administration’s $50 billion mortgage relief program is finally picking up speed after a sluggish and disappointing start: Nearly early one in five eligible homeowners have been offered help so far. The “Making Home Affordable” plan was launched with great fanfare in March. As of last month, lenders had sent out more than 571,000 offers to reduce borrowers’ monthly payments, the Treasury Department said Wednesday. That’s 19 percent of the nearly 3 million U.S. homeowners eligible for a loan modification under the plan, up from 15 percent at the end of July. “There are signs the plan is working,” said Michael Barr, assistant Treasury Secretary for financial institutions. “But we can do better.” Of the modifications offered, about 360,000 borrowers, or 12 percent, have signed up for three-month trial modifications, which are supposed to be extended for five years if the homeowners make their payments on time. To increase pressure on the industry, Waters and other lawmakers threatened to revive a failed proposal, opposed by banking lobbyists, to let bankruptcy judges rewrite the terms of a mortgage. That change is necessary, consumer groups say, because getting a lender to do so voluntarily is still a time-consuming, bureaucratic nightmare. Many lenders are still scheduling foreclosure sales, and charging borrowers fees for participating in the Obama plan. “The administration has got to put some teeth in this and really get some consequences for the lenders and servicers who are not cooperating,” said Bonnie Mathias, a board member of the Association of Community Organizations for Reform Now, or ACORN. But mortgage executives say they are racing to implement the program, hiring thousands of workers to handle an unprecedented flood of calls. “We fully understand the urgency,” Jack Shackett, Bank of America’s head of credit loss prevention, told lawmakers. “We understand that we have a long way to go under very challenging circumstances.” Bank of America has doubled its number of trial modifications in two months to nearly 60,000. But it still lags its competitors, having enrolled about 7 percent of its 836,000 eligible loans, compared with 25 percent for JPMorgan Chase & Co. The Treasury Department’s decision to publish those numbers has clearly provided a powerful inventive for many in the industry. Lenders are “concerned about the report card showing them in a worse light than their peers,” said David Stevens, an assistant secretary at the Department of Housing and Urban Development. “Nobody wants to be a low performer on that score card.” Industry executives also say they are planning to work with Obama administration officials on a possible extension of the program to unemployed homeowners. Also under consideration is finding a way to help borrowers with “pick-a-payment” or option ARM loans, which gave borrowers the ability to defer some of their interest payments and add them to the principal. Treasury says 48 mortgage companies are now involved in the program, up from 38 in July. The companies have requested financial information from almost two-thirds of eligible borrowers and say they are on track to have 500,000 loan modifications in place by Nov. 1. The program is voluntary, relying on subsidies to encourage mortgage companies to participate. Lenders must agree to reduce the loan payments to 38 percent of a borrower’s monthly pretax income. After that, the government and lender split the cost of bringing the payment down to 31 percent. Borrowers can receive rates as low as 2 percent for five years.