Precursor to Existing-Home Sales Heads Higher

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 By Carrie Bay via DSNews.com

Pending sales of existing homes rose again in March, according to data released Thursday by the National Association of Realtors (NAR).

The trade group’s monthly reading of contract signings – which is a forward-looking indicator of where sales of previously owned homes will likely be within one to two months – rose 5.1 percent in March.

With distressed properties now accounting for nearly half of the market’s sales activity, the pending sales reading points to an increase in REO and short sales in the coming months.

NAR described its latest assessment as another sign that the market’s recovery is proving to be “uneven, but a notable improvement.”

The trade group’s measurement of contract activity has risen in six of the past nine months. Reports of actual sales of previously owned homes have exhibited the same ups and downs.

“Since reaching a cyclical bottom last June, pending home sales have posted an overall gain of 24 percent and demonstrate the market is recovering on its own,” said Lawrence Yun, NAR’s chief economist.

“The index means modest near-term gains in existing-home sales are likely, which would be even stronger if tight mortgage lending criteria returned to normal, safe standards,” Yun added.

Contracts signings rose last month in every region of the country except the Northeast, where the pending sales index dropped 3.2 percent from the previous month, NAR said.

In the Midwest the index rose 3.0 percent in March. In the West pending home sales increased 3.1 percent, and in the South they jumped 10.3 percent.

“Based on the current uptrend with very favorable affordability conditions, rising apartment rents, and ongoing job creation, existing-home sales should rise around 5 to 10 percent this year with sales growth of lower priced homes likely to outperform high-end homes,” Yun said.

He explained that with more homes sold in the lower price range, it will ultimately translate to further declines in price trends.

“The good news,” Yun added, “is that recent homebuyers are staying well within budget, leading to exceptionally low loan default rates among homebuyers over the past two years.”

Distressed Properties Claim 40% of Existing-Home Sales

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Via: DSNews.com

Distressed homes – typically REOs and short sales – accounted for 40 percent of the existing homes sold in March, the National Association of Realtors (NAR) reported Wednesday.

The trade group notes that these properties generally sell at discounts in the vicinity of 20 percent. Their large market share served to dampen the median existing-home price. For all housing types, it came in at $159,600 last month, down 5.9 percent from March 2010.

Overall, sales of previously owned homes rose 3.7 percent last month as the spring buying season began to take hold. NAR described March’s reading as “continuing an uneven recovery,” following the 9.6 drop recorded in February.

Lawrence Yun, NAR’s chief economist, expects the improving sales pattern to continue.

“Existing-home sales have risen in six of the past eight months, so we’re clearly on a recovery path,” he said. “With rising jobs and excellent affordability conditions, we project moderate improvements into 2012, but not every month will show a gain – primarily because some buyers are finding it too difficult to obtain a mortgage.”

“For those fortunate enough to qualify for financing, monthly mortgage payments as a percent of income have been at record lows,” Yun added.

The March numbers put the annual sales rate at 5.10 million in March, up from a revised 4.92 million in February, but below the 5.44 million pace in March 2010.

NAR notes that sales were at elevated levels from March through June of 2010 in response to the federal homebuyer tax credit. Immediately following its expiration, existing-home sales bottomed last July, and been on a slow but fairly steady path ever since.

“Although home sales are coming back without a federal stimulus, sales would be notably stronger if mortgage lending would return to the normal, safe standards that were in place a decade ago – before the loose lending practices that created the unprecedented boom and bust cycle,” Yun said.

He says given that the Federal Housing Administration (FHA) and Veterans Affairs (VA) government-backed loan programs turned a modest profit over to Treasury last year, and have never required a taxpayer bailout, low down payment loans should continue to be made available for consumers who have demonstrated financial responsibility.

A parallel NAR practitioner survey shows first-time buyers purchased 33 percent of homes in March, compared with 34 percent in February. They were 44 percent in March 2010.

All-cash sales were at a record market share of 35 percent last month, up from 33 percent in February and 27 percent in March 2010.

Investors accounted for 22 percent of sales activity in March, up from 19 percent both the month before and a year earlier.

Today's Real Estate Market a 'Once-in-a-Generation Opportunity'

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Via DSNews.com

Greg Rand, a 20-year real estate veteran and CEO of OwnAmerica, says now is the time to invest in real estate.

Rand compares the current market to the years following the Great Depression when market conditions sparked a boom that sustained 65 years of appreciation in real estate.

“This economic crisis, while similar to the Great Depression, is also unique in the way that the housing market played a central role,” Rand said. “It is true that this is a once-in-a-generation crisis. It is also true that this is a once-in-a-generation opportunity. It’s time to focus on the other side of the coin.”

According to Rand, a little optimism can go a long way toward spurring real estate back to life.

“There is a very real economic force called irrational pessimism that is the cause of much economic hardship, not the effect,” he said.

“More people are unemployed because successful businesses are afraid to expand. More people are losing homes they can afford because they are underwater and believe their home will never appreciate again. People with job security are convinced they don’t have it and live in fear,” Rand explained.

He insists, “Irrational pessimism is one reason why today’s situation runs so parallel to the Great Depression.”

Rand contends there is no housing meltdown. Rather, there was a media and Wall Street meltdown centered on a predictable housing correction.

The real estate market changes hourly, he says, and investing in real estate is a matter of watching the trends.

“It comes down to the idea that no matter how the markets change, no matter which way the winds shift, people will always need a place to live,” Rand said. “That’s been true of America since the first log cabin.

“If you plug into that concept and leave fear in a box on the shelf, you can be ahead of the curve and ride the wave of the trends that matter,” according to Rand.

OwnAmerica is a Web-based resource for real estate investors and investment advisors headquartered in New York.

Rand is also on WABC Radio, a regular commentator on the Fox Business network, a columnist for Real Estate magazine, and author of the book “Crash-Boom” from Career Press.

Freddie Mac Market Outlook Predicts an Increase in Home Sales

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via DSNews

Freddie Mac forecasts a 5 percent increase in 2011 home sales over 2010, according to its U.S. Economic and Housing Market Outlook for April.

The report also contends that refinancing will likely account for a smaller share of loan applications later this year as wealthy borrowers decrease and mortgage rates increase.

“Expect to see a bit of spring in homes sales activity during the second quarter,” said Frank Nothaft, VP and chief economist at McLean, Virginia-based Freddie Mac.

Nothaft continued, “Sales contract signings for existing homes were up in February, positioning the market for a bounce up going into the traditional home-buying season.”

The expected pick-up in home sales is due to recent positive employment reports, the Market Outlook reveals. Unemployment declined for the fourth straight month to 8.8 percent, and net employment increased by 216,000 jobs. Real estate employment was up by 10,000 jobs since last November.

The report also calculates that the share of adjustable-rate mortgage loans will be 7 percent in 2011 compared to the 5 percent 2010 average.

Freddie Mac compiles data on major economic and housing and mortgage market indicators and offers forecasts based on those indicators.

Are The “Good Deals” In Foreclosures A Thing Of The Past?

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Foreclosure activity is slowing, it seems. If you're shopping for bank-owned homes, therefore, supplies may be limited.

Less REO Means Fewer Foreclosure "Deals"

According to foreclosure-tracking firm RealtyTrac, the number of national foreclosure filings plunged 35 percent in March 2011 as compared to March 2010. A "Foreclosure filing" is a catch-all term comprising default notices, scheduled auctions, and bank repossessions.

Foreclosures filings were down in all but 8 states last month. The rapid improvement is a reflection on both the housing market and the economy -- each is outperforming expectations.

Activity remains concentrated, too. More than half of all bank repossessions can be tied to just a handful of states.

Like Real Estate, Bank Repossessions Are Local

In March, just 6 states accounted for 51% of the country's bank repossessions. If you're an investor buying foreclosures, or a first-time buyer looking for a deal, you'll find more raw foreclosures in these 6 states:

1. California : 15% of all repossessions
2. Florida : 9% of all repossessions
3. Arizona : 7% of all repossessions
4. Michigan : 7% of all repossessions
5. Texas : 6% of all repossessions
6. Nevada : 5% of all repossessions

And then, at the other end of the spectrum is Vermont. With just 5 repossessions for all of March, Vermont accounted for 0.008% of repossessions nationwide -- the lowest rate in the country.

Use A Free Foreclosure Search Engine

Foreclosures and short sales are in high demand with today's home buyers, accounting for almost 40% of all home resales.

It's no wonder. Distressed homes typically sell for 15% off as compared to non-distressed homes. Buying foreclosures can be a great "deal". The hard part can be finding them.

One trick to finding foreclosures is to search the databases that other buyers aren't. There's plenty of free ones available, including RealtyTrac's free foreclosure database and the one from HUDForeclosed.com. Both sites give 7-day, all-access membership for free.

After 7 days, you can cancel your membership, or stay on as a paid member.

Then, after you've narrowed down your search, call your real estate agent to see the home, and start with negotiations. Buying foreclosures is different from buying "traditional" homes. You'll want somebody experienced to help you.

Otherwise, the banks may work you over a bit.

 

Via Dan Green The Mortgage Report

What's Cheaper? FHA Mortgage Rates or Conforming Mortgage Rates

 

 

With the FHA insuring a greater percentage of mortgages than ever before, the stigma of “going FHA” is fading. And for good reason, too. The FHA offers a terrific mortgage product as compared to the conforming market.

With an FHA-backed loan, downpayment requirements are smaller, closing costs can be less, and 60% of the time, mortgage rates are lower than on a comparable conforming loan.

FHA And Conforming Mortgages : Key Differences

People tend to assume that a 30-year fixed is a 30-year fixed is a 30-year fixed.  The market doesn’t work that way.  It’s like saying a car is a car is a car. There are traits that make each product unique.

Yes, both the FHA and Fannie/Freddie back a product called the “30-year fixed rate mortgage“, but beyond their identical, 30-year amortization schedules, the products are hardly similar.

As examples:

• FHA mandates mortgage insurance on all loans. Fannie and Freddie do not.
• FHA mortgage insurance lasts 60 months. Conforming mortgage insurance lasts until there’s 20% equity in the home.
• FHA mortgages can be assumed by a subsequent, qualified buyer. Conforming mortgages cannot.
• FHA-backed homes must be free of defects and “issues”. Fannie/Freddie homes may have small defects.
• Fannie/Freddie require loan-level pricing adjustments. The FHA does not.

And, lastly, the FHA requires a minimum downpayment of 3.5% on a purchase. Fannie and Freddie want to see 5 percent, at least; oftentimes, 10 percent.

Mortgage Rates For FHA Mortgages And Conforming Mortgages

Another big difference between FHA and conforming mortgages is how they’re priced.

Because FHA and conforming mortgages go to Wall Street through two different channels, it follows that their mortgage rates will always be slightly different. Some days, FHA rates and conforming rates move in the same direction.

Most days, they don’t. Look at the chart at top.

Going  back 6 years, the average bank-reported interest rate for the FHA 30-year fixed rate mortgage has followed a very different path than the comparable conforming 30-year fixed.

The mortgage rate differential has been stark at times:

• May 2006 : FHA 30-year fixed beat Conforming 30-year fixed by roughly 1 percent
• January 2009 : Conforming 30-year fixed beat FHA 30-year fixed by roughly 1 percent

The data shows us that neither product is better than the other, per se. The right product foryour home will depend on the market pricing of any given day. Even since last November, this is apparent.

In November 2010, 30-year fixed rate mortgage pricing in the conforming market was 1/2 percent better than the FHA market. Today, that’s completely reversed. FHA mortgages are looking cheap right now.

Which Is Better : FHA Or Conforming 30-Year Fixed?

So which is better?  FHA or Conforming? It’s a common question and the answer is “it depends”. You have to look at every loan individually, and separately.

For example, not even the venerable FHA Streamline Refinance program is such a no-brainer.

Because of the FHA’s new funding fees and accompanying mortgage insurance payments, there’s several scenarios in which it makes more sense to eschew the FHA Streamline and opt for a standard, conforming rate-and-term refinance instead. You wouldn’t think that to be true, but the math doesn’t lie. You have to consider all of your options.

On purchases, the choice is a little bit simpler. As a basic rule of thumb:

• Downpayment of 4.99% or less : Apply for an FHA mortgage
• Downpayment of 5.00-19.99% : Ask your loan officer for a recommendation
• Downpayment of 20% or more :Apply for a conforming mortgage

The rules aren’t universal, of course. Credit scores and property type figure into the math, too, but it’s a good start.

Via Dan Green of Waterstone Mortgage