California house sales up, prices down

California home sales posted an increase both on a monthly and annual basis in November, marking the fifth consecutive month of year-to-year sales increases, according to figures released today from the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.). Meanwhile, the statewide median price of an existing, single-family detached home sold in California rose 1 percent compared with October, but declined 5.2 percent compared with a year earlier.

Making sense of the story

• Closed escrow sales of existing, single-family detached homes in California rose to a seasonally adjusted 503,570 units in November, up 2.1 percent from a revised 493,140 in October, according to information collected by C.A.R. from more than 90 local REALTOR® associations and MLSs statewide.
  
  
• November home sales also were up 2.3 percent from the revised 492,040 units sold during the like period a year ago. The statewide sales figure represents what would be the total number of homes sold during 2011 if sales maintained the November pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales.
  
• The November statewide median price of an existing, single-family detached home sold in California was $280,960, up 1 percent from $278,060 in October but down 5.2 percent from the $296,480 median price recorded for November 2010.
  
• The Unsold Inventory Index for existing, single-family detached homes was 5 months in November, down from 5.3 months in October and down from a 6.2-month supply in November 2010. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.

Builder confidence rises for the third consecutive month

Builder confidence in the market for newly built, single-family homes edged up two points to 21 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for December. This marks a third consecutive month in which builder confidence has improved, and brings the index to its highest point since May 2010.
“This is the first time that builder confidence has improved for three consecutive months since mid-2009, which signifies a legitimate though slowly emerging upward trend,” said NAHB Chief Economist David Crowe. “While large inventories of foreclosed properties continue to plague the most distressed markets and consumer worries about job security and the challenges of selling an existing home remain significant factors, builders are reporting more inquiries and more interest among potential buyers than they have seen in previous months.”

Each of the HMI’s three component indexes registered a third consecutive month of improvement in December. The component gauging current sales conditions rose two points to 22, while the component gauging sales expectations in the next six months edged up one point to 26. The component gauging traffic of prospective buyers gained three points to 18, which is its highest level since May 2008.

New Home Sales Continue To Rise:

Investors cheered yet another U.S. report showing signs of improvement in the housing market.

The Commerce Department report showed US new home sales rose for the third straight month in row, increased by 1.6% to a seasonally adjusted annual rate of 315,000 from October.

Even as the pace of gain was smaller than 2.6% forecast by economists, investors took comfort in that housing data released in recent days have started to show stabilization, and given that the housing market is one of a major contributors to the economy, it could provide some support for the economic growth next year. New homes account for just a fraction of the housing market, but they have a big impact on the economy. Each new home built creates roughly three jobs for a year and generates about $90,000 in taxes, according to the National Association of Home Builders.

Home bargains abound, but willing lenders are rare breed

Faced with finicky lenders, would-be home buyers are increasingly turning to family members, friends, and even strangers they meet online. While this is understandable, given the abundant bargains on the market, they also present significant risks.
Making sense of the story

• So-called peer-to-peer lending sites, such as Prosper and Lending Club, say demand for home-related financing is on the rise. In September, Weemba, a social-networking site, launched a platform to connect lenders directly with prospective home buyers and other borrowers.
  
  
• Despite historically low mortgage rates, traditional lenders remain reluctant to provide mortgages to anyone with less than stellar credit. And, in certain markets, lenders are requiring down payments of more than 20 percent of the home’s purchase price.
  
  
• Borrowers taking loans from family members – so-called intrafamily loans – save on interest since family members are likely to charge less than the banks. Additionally, parent lenders can earn a higher return from their child’s interest payments than they would on a certificate of deposit or money-market fund. Under federal law, on a loan of more than nine years, parents must charge at least roughly 2.8 percent, in most cases.
  
  
• Consumers who prefer to look for loans beyond the family can apply at peer-to-peer lending sites. If approved for a loan after a screening by the companies, applicants may then receive money from investors.
  
  
• However, these alternative routes to financing can be expensive for borrowers. Rates at Lending Club run from around 7 percent to 28 percent. At Prosper, rates run roughly 7 percent to 35 percent. The companies say these rates, which are fixed, are higher than traditional mortgage rates in part because their loans are unsecured.

Job Claims, Factory Data Suggest Recovery Picking Up Steam:

Government reports on weekly jobless claims, manufacturing activity and inflation offered fresh evidence the U.S. economic recovery is picking up steam. 
New U.S. claims for unemployment benefits dropped to a 3 1/2 year low last week, a government report showed on Thursday, suggesting the labor market recovery was gaining speed. Initial claims for state unemployment benefits dropped 19,000 to a seasonally adjusted 366,000, the Labor Department said. That was the lowest level since May 2008.

A gauge of manufacturing in New York State showed growth accelerated in December to its highest level since May as new orders improved, the New York Federal Reserve said in a report on Thursday. The survey of manufacturing plants in the state is one of the earliest monthly guideposts to U.S. factory conditions. The gain in December added on to improvement last month that pulled the index out of a five-month contraction.

Wholesale prices rose a modest 0.3 percent last month, as companies paid more for such items as food and pharmaceuticals. But energy prices barely rose, keeping inflation in check.

Most economists say they think inflation has peaked and will slowly decline next year. That's because prices for oil and many agricultural commodities have fallen from their highs this spring. Slower growth in China and a possible recession in Europe have reduced global demand for energy and other goods.

Lower price growth means consumers will have more buying power, potentially boosting consumer spending. The jump in gas and food prices earlier this year limited the ability of consumers to buy other goods, thereby slowing the economy.

Consumer spending rebounded in the July-September quarter as prices eased. The stronger spending helped increase growth to an annual rate of 2 percent from a slight 0.9 percent in the first half of the year. Economists expect consumer spending to rise again in the last three months of this year and think growth could top 3 percent. Federal Reserve policymakers, like many private economists, predict inflation will fall next year. That would give the central bank more latitude to hold down interest rates and potentially take other steps to stimulate the economy.

Tame inflation, improved manufacturing, increased consumer demand and super-low mortgage rates all add up to big positives for the housing market.

Consumer concerns stabilize in November

Home price expectations moved from negative to positive territory in November for the first time in six months, according to Fannie Mae’s November National Housing Survey. Respondents to the survey said they expect home prices to increase by 0.2 percent over next year. “Though their home price expectations have become slightly positive, consumers remain concerned about the direction of the economy and continue to view their household finances as being relatively flat,” said Doug Duncan, vice president and chief economist of Fannie Mae. “Most Americans expect no improvement in their personal financial situation in the next 12 months and will likely remain wary about undertaking the significant financial obligation associated with homeownership until their view of their income, expenses, and job security heads in a more positive direction.”

Highlights from the survey include:

• Nearly a quarter (22 percent) of respondents expect home prices to increase over the next year (up 3 percentage points since last month), while 22 percent say they expect home prices to decline, down 1 percentage point since last month. Fifty-three percent say prices will stay the same, a 2 percentage point drop from October.
• Approximately one-third of Americans say that mortgage rates will go up over the next 12 months, down 3 percentage points from October and a return to the level seen in September.
• Sixty-eight percent of respondents say it is a good time to buy a home (down by 1 percentage point since last month), and just 10 percent say it is a good time to sell, unchanged from the previous two months.

Fannie, Freddie Mac complete nearly 2 million foreclosure-prevention actions

Foreclosure-prevention actions by Fannie Mae and Freddie Mac increased in the third quarter of 2011, according to a report by the Federal Housing Finance Agency. Since entering conservatorship in 2008, the GSEs have taken nearly 2 million foreclosure-prevention actions and completed 1 million loan modifications.
According to the FHFA report, the increase in completed foreclosure prevention activity in the third quarter was driven primarily by loan modifications and repayment plans. Two-thirds of all borrowers who received loan modifications in the third quarter had their monthly payments reduced by more than 20 percent. Additionally, the GSEs' cumulative refinancings through the Home Affordable Refinance Program (HARP) increased 11 percent during the third quarter to nearly 928,600 loans.

Housing Industry Rebound:

After half a decade of withering sales and slumping prices, there are strong and diverse signs that the single-family housing market is poised for a rebound. In some metropolitan areas, the market has bottomed, with both sales and prices on the rise and foreclosures on the decline.

This contrarian — and largely overlooked — thesis flies in the face of the persistent gloom that has nagged the industry since 2007, when the subprime crisis flared. Industry analysts and players cite a number of reasons — some traditional (employment), others unique to the post-credit bubble era (foreclosures)  — for the long-awaited sea change. An analysis of industry and government data also support the forecast. “It has become increasingly apparent to us that the pieces for a housing rebound next year are beginning to fall into place,” declared Barclays Capital analyst Stephen Kim in a recent note to investors.

Proponents admit that the nascent rebound could easily be derailed, but stress that after years of government efforts to support sales and prices as well as the volatile impact of foreclosures, the market has regained a measure of normalcy.

“With the exception of really hard-hit markets, the vast majority is ready to turn around,” adds Jerry Howard, president and CEO of the National Association of Home Builders, NAHB. "The Washington, D.C., area is not only ripe for recovery, they need to start building units.”
There’s been little conventional, however, about this housing slump, which is one reason it's had so many false bottoms. Among its many firsts — housing starts fell through 1 million annual units, foreclosures topped 2 million in three consecutive years, and home prices declined on a national basis.

The catalysts to recovery are mostly the same: for potential buyers, residential rents have now risen enough to consider buying; existing-home inventory is the lowest in five years, while that of new homes is at a 40-year low; affordability is at a record high; delinquencies have peaked; consumer confidence is on the rise ; and job growth is accelerating.mFor investors, with a continuation of the gold rally in question, real estate is beginning to look like a viable inflation hedge alternative, while rising rents mean greater profits. Finally, there’s the intangible fatigue with bad news, and a desire to end the negative feedback loop.

“We believe there is sizable housing demand that could be released into the market," says Lawrence Yun, chief economist of the National Association of Realtors, NAR. The NAR is forecasting existing home sales will rise 5 percent in both 2012 and 2013; prices will edge up 2 percent in each of those two years, then 4 percent in 2014. The NAHB is forecasting a 5.1-percent increase in new home sales and a 10-percent increase for new home starts in 2012.
Jobs, Jobs, Jobs

A turnaround in the housing market will require continued improvement in the job market.
The economy has created jobs 13 months in a row for a total of almost 1.9 million. Weekly jobless claims have been routinely below the key level of 400,000, and the national jobless rate is down to 8.6 percent.

There are already signs in some markets that an improving employment picture is boosting housing demand and sale prices. In cities such as Tampa, Fla., South Bend, Ind., Grand Rapids, Mich., Raleigh, N.C., Wichita, Kan., and Green Bay, Wis.., the median sales price of an existing single family home increased 1-2 percent in the third quarter, during which time the jobless rate and/or payrolls growth improved dramatically.

Even in the Cape Coral-Fort Myers, Fla. metropolitan area — considered the epicenter of the foreclosure crisis a few years ago — prices were just 1.4 percent lower in the third quarter than the previous year. A new index by the NAHB and First American, the Improving Markets Index, IMI, launched in September, tracks housing markets throughout the country that are showing signs of improving economic health. Thirty cities – including San Jose, Pittsburgh, New Orleans and Winston-Salem, N.C. – are showing growth in permits, sales and employment.

In San Diego — where in the last year the jobless rate has fallen from 10.4 percent to 9.7 percent and 24,000 jobs have been added — home inventory is down to two months; in some areas of San Francisco (9.4 vs. 10.3 percent), it is one month. More broadly, 40 percent of all states showed existing home sale increases on both a quarterly and annual basis in the third quarter, according to National Association of Realtors data. That includes high foreclosure-rate states, such as California, Georgia, Michigan and Utah. All but six states showed double-digit gains year over year.

Help with a down payment

With most lenders requiring borrowers to put down at least 20 percent as a down payment – unless using an FHA or VA loan, or purchasing mortgage insurance – the best holiday gift some people might receive would be help with a down payment on a house.
Making sense of the story

• According to a survey by Trulia, the biggest barrier to buying a home these days is saving for the down payment. The survey, conducted over the summer, found that 51 percent of renters said coming up with money for the down payment was preventing them from buying, while 35 percent identified qualifying for a mortgage as the stumbling block.
  
  
• Under federal tax law, each individual is permitted to give money or valuables worth up to $13,000 to a single recipient in a calendar year. A married couple could jointly bestow up to $26,000 a year per recipient.
  
  
• According to one financial planner, there also is the option of lending a relative or close friend the money for the down payment, or the closing costs, then forgiving the loan in a future year. The recipient would have to pay interest on the loan until it was forgiven, at which point it would become a gift.
  
  
• Another way to help with the down payment is to pay other expenses, such as tuition, thereby freeing up money to make a home purchase. Gifts for educational or medical expenses are not subject to taxes, as long as they are paid directly to the educational or medical institution.
  
  
• However, prior to giving the money, gift-givers should consider their own financial picture, and they should make sure the recipient is responsible and not behind on other payments that could be subject to debt collection.

Stronger lure for prospective home buyers

With the monthly cost of owning a home more affordable now than at any point in the past 15 years, homeownership is becoming less expensive than renting in a growing number of cities.

Making sense of the story

• The Wall Street Journal’s third-quarter survey of housing-market conditions in 28 of the nation’s largest metropolitan areas found that home values declined in all but five markets compared with the second quarter, according to data from Zillow Inc.
  
  
• Meanwhile, rent levels have risen briskly across the country and mortgage rates, hovering around 4 percent, are the lowest in six decades.
  
  
• As a result, monthly mortgage payments on the median priced home – including taxes and insurance – are lower than the average rent levels in 12 metro areas, according to data compiled by Marcus & Millichap.
  
  
• Homeownership also is looking more affordable because after several years of declines, apartment rents will rise approximately 4 percent this year, and rents are poised to pick up even more momentum across the country next year, according to Marcus & Millichap.
  
  
• Affordability could continue to improve as prices slide even lower in coming months. Price declines are likely because the share of “distressed” sales, including bank-owned foreclosures, tend to rise in the winter, when traditional sales activity cools.

Pending Home Sales Pop:

Potential home buyers came out of the woodwork in October, signing contracts to buy existing homes at a higher-than expected pace.

Pending home sales jumped 10.4 percent compared to September, according to the National Association of Realtors, with the biggest gains in the Midwest, up 24 percent. The Northeast also saw sizeable gains, as did the South. Only out West did buyers stay on the sidelines, with pending home sales there basically flat month to month.

“Home sales have been plodding along at a sub-par level while interest rates are hovering at record lows, and there is a pent-up demand from buyers who normally would have entered the market in recent years," said Realtor chief economist Lawrence Yun. "We hope this is indicates more buyers are taking advantage of the excellent affordability conditions.”

This data continues the string of positive housing data with New Home Sales up 1.3% on a monthly basis and Existing Home Sales up 13.5% on a yearly basis

California housing affordability rises in Q3

Housing affordability increased in 22 of the state’s 28 metropolitan areas in the third quarter, according to the California Building Industry Association’s Housing Opportunity Index (HOI)
On a statewide basis, the HOI found that a family earning the median income could have afforded 63.5 percent of the new and existing homes that were sold during the third quarter, up from 61.3 percent in the second quarter.

The San Francisco, San Mateo and Marin County metro area was once again California’s least-affordable metro area for the twelfth consecutive quarter, and second in the nation, with just 32.9 percent of the homes sold being affordable to a family earning the median income, up from 27.5 percent in the second quarter. Orange County was California’s second least-affordable market and fifth in the nation (43 percent), followed by Los Angeles County (45.1 percent) and Santa Cruz County (47 percent).

Congress reinstates FHA loan limit

Last week, the U.S. Congress passed a “minibus” appropriations measure that will continue to fund the government and includes a provision to reinstate the FHA loan limit in high-cost areas for two years. President Obama signed the measure into law Friday.
The higher Fannie Mae, Freddie Mac, and FHA conforming loan limits of $729,750 expired Oct. 1, when it was reduced to $625,500. The passage of H.R. 2112 provides for an extension of FHA-insured mortgages at the higher level through December 2013. It also provides for a short-term extension of the National Flood Insurance Program (NFIP) through Dec. 16, 2011. C.A.R. and NAR strongly urge Congress to work on a five-year NFIP reauthorization bill to provide certainty and avoid further disruption to real estate markets.

“C.A.R. is pleased the Senate and House were able to come to a reasonable compromise on extending the FHA loan limit to ensure affordable home financing for middle-class buyers,” said 2012 C.A.R. President LeFrancis Arnold. “However, we are disappointed that the Senate and House could not agree on increasing the loan limits for Fannie Mae and Freddie Mac, especially since the Senate bill included a premium on high-cost loans that protected U.S. taxpayers from footing the costs.”

C.A.R. and the NAR have long advocated making permanent higher loan limits.

HARP 2 refinance plan a boost to borrowers, banks

The Obama administration announced broad outlines of the revised Home Affordable Refinance Program on Oct. 24. Fannie Mae and Freddie Mac issued guidance last week that filled in most of the details.

Making sense of the story

• HARP 2 greatly reduces or eliminates the risk-based fees Fannie and Freddie charge on many loans and virtually eliminates the chance that lenders will have to pay for losses on loans that go into default if they made underwriting mistakes. It also vastly streamlines the underwriting process.
  
  
• Although lenders can begin taking applications Dec. 1, it could take several months before the new loans are made. Fannie Mae said it won't begin buying certain types of refinanced loans until March.
  
  
• To qualify, the existing loan must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009. The loan balance must be more than 80 percent of the home's market value. The loan must be current for the past six months, with no more than one late payment in the past 12 months. Those who previously refinanced through HARP are ineligible.
  
  
• The new program improves on the existing HARP refi program by letting borrowers refinance into a new fixed-rate loan regardless of how much is owed. The existing program caps the new loan at 125 percent of the home's market value.
  
  
  
• Homeowners also can refinance into a new adjustable rate loan that has a fixed rate for at least the first five years, but in this case the new first mortgage cannot exceed 105 percent of the home's value.
  
  
• In most cases, borrowers won't have to pay for a new appraisal (Fannie or Freddie will use their automated in-house appraisals) or have any particular debt-to-income ratio or credit score.
  
  
• Borrowers who refinance through their existing loan servicer generally won't have to document their income or assets or have a particular credit score or debt-to-income ratio. The lender will only have to verify that one borrower on the loan has a job or other source of income, but not the amount of income.
  
  
• Homeowners who refinance through a new lender will have to meet additional underwriting requirements, but not as many as people who are refinancing through traditional routes.
  
  
• Borrowers can have a second loan on the house of any amount and still qualify, as long as the holder of the second mortgage resubordinates it to the new loan. Most of the big lenders have agreed to do so, but there is no guarantee they or others will.
  
  
• If borrowers have mortgage insurance on the existing loan, they must maintain it, but they should be able to transfer that insurance to the new loan at the old premium rate, according to Freddie Mac. The big mortgage insurers have agreed to allow this, but again there is no guarantee all will.
  
  
• There are still many questions about the program, such as what interest rates banks will charge, whether they will impose additional fees or underwriting requirements beyond what Fannie and Freddie require, and whether investors will be willing to buy securities backed by these new HARP 2 loans.

Existing Home Sales Beat Expectations:

Americans bought previously owned homes at a much higher level than economists had forecasted.

Economists had forecasted that October Existing Home Sales would decline -2.20%. But they actually improved by +1.3%. The National Association of Realtors reported that the annualized rate of sales is 4.97 million units which was also better than the forecasted 4.8 million units. The September reading was revised upward as well. Sales were up 13.5% from the same month a year earlier. Even though we have a soft economy, high unemployment, tight lending standards, and an uncertainty about the direction of prices.

The report showed the median sales price in October was $162,500, down 4.7% from $170,600 a year earlier.

The inventory of previously owned homes remained high but did slide down to 3.33 million units or a 8 month supply. Sales rose 4.4% in the West, 2.1% in the South, and 2.8% in the Midwest but fell 5.1% in the Northeast.

So, to recap - Existing Home Sales gained 13.5% from this month last year and had a month-over-month gain of 1.3%. Also, inventories shrank. This certainly shows that there is positive momentum in the housing sector.

Home Price Index shows decline in August

The average home price nationwide has declined 28.3 percent since the market peaked in June 2006, according to the most-recent Home Price Index by Lender Processing Services. The LPS HPI summarizes national home prices by tracking monthly prices in more than 13,500 ZIP codes. Within each ZIP code, it tracks five price levels from low to high. The total value of U.S. housing inventory covered by the LPS HPI stood at $10.6 trillion at the peak. As of the end of August 2011, it was $7.65 trillion. During the period of most rapid price changes, from July 31, 2007, through December 2009, prices declined $56,000. The average annual decline during that time was 13.8 percent.

Since December 2009, prices have fallen more slowly, interrupted by brief seasonal intervals of rising prices. Since then, the LPS HPI national average home price has fallen $20,000. This corresponds to an average annual decline of 3.6 percent. Price changes were largely consistent across the country during August. Prices increased in only five percent of ZIP codes in the LPS HPI. Higher-priced homes had smaller declines: -0.72 percent for the top 20 percent of homes (prices above $321,000) compared with -1 percent for the bottom 20 percent (below $103,000).

California housing affordability improves in Q3

The percentage of home buyers who could afford to purchase a median-priced, existing single-family home in California rose to 52 percent in the third quarter of 2011, up from 51 percent in second-quarter 2011 and was up from 46 percent in the third quarter of 2010, according to C.A.R.’s Traditional Housing Affordability Index (HAI). Home buyers needed to earn a minimum annual income of $61,530 to qualify for the purchase of a $292,120 statewide median-priced, existing single-family home in the third quarter of 2011. The monthly payment, including taxes and insurance, would be $1,540, assuming a 20 percent down payment and an effective composite interest rate of 4.63 percent. The effective composite interest rate in second-quarter 2011 was 4.85 percent and 4.78 percent in the third quarter of 2010.

Regionally, housing affordability rose in most counties in the San Francisco Bay Area but was down in Los Angeles County and Fresno County. At 77 percent, San Bernardino County was the most affordable, while San Mateo County was the least affordable, with only 25 percent of households able to purchase the county’s median-priced home.

Consumer Sentiment Increases Again:

Confidence among U.S. consumers rose more than projected in November, offering additional support to the biggest part of the economy. It was the third straight month of increases in consumer sentiment.

The Thomson Reuters/University of Michigan preliminary index of consumer sentiment climbed to 64.2 this month, the highest since June, from 60.9 in October. The median estimate of economists surveyed by Bloomberg News called for a reading of 61.5.

U.S. consumers are entering the holiday shopping season with a more optimistic outlook than they had a month ago, largely because of a recent decline in gas prices, according to the widely watched index.

Consumer Sentiment is very key to the housing industry. As consumers feel more confident in their expectations about the economy, they are more likely to finally make the move to purchase their next home

Mortgage aid open to more Calif. borrowers

The state-run program, “Keep Your Home California,” which helps homeowners struggling to pay their mortgages now has broader eligibility guidelines. Borrowers who did “cash-out” refinances and own multiple properties now are eligible for the program, according to California Housnig Finance Agency officials.
Making sense of the story

• To date, Keep Your Home California has helped approximately 8,000 low- and moderate-income households that are behind on loan payments or close to default.
  
  
• There are four parts to the program: Mortgage help for the unemployed, mortgage aid for homeowners with documented financial hardship, relocation help for those in the midst of a short sale or deed-in-lieu of foreclosure, and reduction of principal.
  
  
• Homeowners who completed “cash-out” mortgage refinancing now are allowed to take part in the four programs outlined above, and borrowers who own more than one property also can apply for the program. Previously, these two groups of borrowers were excluded from participation.
  
  
• Mortgage aid to unemployed borrowers also has been extended to nine months, instead of six. Such homeowners can receive up to $3,000 a month. To qualify, borrowers must be receiving unemployment benefits.
  
  
• Additionally, the program has reinstated up to $20,000 in past-due mortgage payments instead of the previous $15,000 cap.

Homeowner vacancy rate remains steady in Q2

The national vacancy rate for homeowner housing was at 2.5 percent in the second quarter, according to the Dept. of Commerce’s Census Bureau. The rate was approximately the same as that of second quarter 2010 and 0.1 percentage points lower than the rate in the first quarter.
The homeownership rate of 65.9 percent was 1 percentage point lower than the second quarter 2010 rate (66.9 percent) and 0.5 percentage points lower than the rate in the previous quarter (66.4 percent).

Approximately 85.7 percent of the housing units nationwide were occupied and 14.3 percent were vacant in the second quarter 2011. Owner-occupied housing units made up 56.5 percent of total housing units, while renter-occupied units made up 29.2 percent of the inventory in the second quarter of 2011. Vacant year-round units comprised 10.8 percent of total housing units, while 3.5 percent were for seasonal use.

Private Sector Sees Job Growth:

We received a couple of reports on employment levels last week. The ADP Private Payroll report continued to show gains in hiring in the private sector. Their monthly gauge came in at 110K which was much better than market expectations of 101K.

In a separate report, the national Unemployment Rate fell from 9.1% to 9.0%. The total non-farm payroll gains were 80K which was below market expectations. However, the prior period was revised upward significantly.

Bright spots: Professional and business services up 562K in 2011. Hotel and restaurants up 344K this year. Health Care up 313K for the year. Retail Trade up 156K this year. And mining jobs are up 152K during the year.

What's not doing well? Construction, government, financial services, insurance and real estate.
ales of new homes rose in September after four straight monthly declines.

Obviously, housing demand is very closely tied to employment levels. While employment levels still have a long way to go, there is some improvement which is a positive for housing.

Handling high closing costs

Closing costs can increase the price of a home by as much as $10,000, sometimes more. Borrowers who are “cash-poor” can ask for assistance, or talk to their lender about a lender credit toward closing costs.

Making sense of the story

• Some lenders advertise that if borrowers agree to accept a mortgage interest rate from a quarter to a full percentage point higher than they would ordinarily qualify for, they can receive credit toward their closing costs.
  
  
• These mortgages are sometimes called no-closing-cost loans, though the term is misleading. The credit usually covers only fees charged by the mortgage broker or bank, like the loan origination fee, the underwriting expense, and the appraisal. That generally leaves title insurance, mortgage-recording taxes, insurance, and escrowed taxes to cover.The amount of credit depends on total closing costs and other loan details. Generally, for every one-eighth of a point increase in interest rate, borrowers receive a credit worth half a percentage point of the principal amount.
  
  
• While these mortgages can be helpful to some, borrowers should carefully review all the details. There are pluses and minuses to these loan types. A downside is the higher rate and monthly payment remain in place through the life of the loan.
  
  
• Doing a side-by-side comparison of loans with and without the credit can be helpful.

Home buyers unrealistic about home value appreciation

A recent survey by Zillow found that 42 percent of prospective home buyers believe home values typically appreciate by 7 percent a year. Historically, home values in a normal market tend to appreciate by 2-5 percent annually. In the survey, Zillow surveyed prospective home buyers and asked basic questions about the home-buying process. Despite the unrealistic expectations about home value appreciation, respondents seem fairly knowledgeable about the home-buying process, answering 65 percent of questions correctly.

However, several important parts of the process confused them. Two in five (41 percent) buyers think they are required to buy private mortgage insurance (PMI) regardless of the amount of their down payment. Additionally, more than half of prospective home buyers who were polled confuse appraisals and inspections. Fifty-six percent said the purpose of an appraisal was to determine if the home is in good condition, when in fact, that is the purpose of an inspection.

Additional Survey Findings:

• More than one-third (37 percent) of prospective home buyer respondents believe buying homeowner's insurance is optional.
• Nearly half of polled prospective home buyers in the study do not understand when they will actually own the home they intend to buy. Forty-seven percent said a prospective buyer owns a home after the purchase contract is signed.
• The majority (87 percent) of polled prospective home buyers know that closing costs are negotiable and can vary by bank and lender.

FHFA revises HARP to help more borrowers

The Federal Housing Finance Agency, along with Fannie Mae and Freddie Mac, on Monday announced changes to the Home Affordable Refinance Program (HARP) to help more borrowers.

The program will continue to be available to borrowers with loans sold to Fannie Mae and Freddie Mac on or before May 31, 2009, with current loan-to-value (LTV) ratios above 80 percent.

The new program enhancements address several other key aspects of HARP including:

• Eliminating certain risk-based fees for borrowers who refinance into shorter-term mortgages and lowering fees for other borrowers;
• Removing the current 125 percent LTV ceiling for fixed-rate mortgages backed by Fannie Mae and Freddie Mac;
• Waiving certain representations and warranties that lenders commit to in making loans owned or guaranteed by Fannie Mae and Freddie Mac;
• Eliminating the need for a new property appraisal where there is a reliable AVM (automated valuation model) estimate provided by the Enterprises; and
• Extending the end date for HARP until Dec. 31, 2013, for loans originally sold to the Enterprises on or before May 31, 2009.

Fannie and Freddie plan to issue guidance with operational details about the HARP changes to mortgage lenders and servicers by Nov. 15. Since industry participation in HARP is not mandatory, implementation schedules will vary as individual lenders, mortgage insurers and other market participants modify their processes.

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After a rejection

Some borrowers think that because their mortgage application is turned down the first time, they won’t ever be approved. In reality, some borrowers succeed on the second or third attempt, usually with a different mortgage professional, and often several months later, after they have saved more money for a larger down payment or improved their credit score.

Making sense of the story

• Before reapplying for a mortgage, borrowers are advised to look at the reasons they were initially rejected.
  
• The Equal Credit Opportunities Act requires lenders to give loan applicants specific reasons in writing within 30 days of their decision. If it’s based on a problem in the borrower’s credit report, the lender must tell the borrower the name and address of the credit agency that provided the information.
  
• Talking to the loan officer who denied the application to see how close the borrower was to being approved also can be helpful. Sometimes the gap is small and could be bridged with a larger down payment or another home appraisal, for example.
  
• It also may be worthwhile to shop around for other lenders. Borrowers can work with a mortgage broker or an online network like LendingTree or Zillow’s Mortgage Marketplace.
  
• A credit union also might be a better bet for some applicants. Credit union loan committees may permit better deals for longtime members; they might also modify loan terms for borrowers they already know.
  
• However, first-time buyers may need to scale back their aspirations. One reason people get turned down for a mortgage is because they try to buy more property than they can afford based on current incomes.
  
• Applicants also should look at ways to strengthen their financial picture. If a borrower’s credit is poor, paying down credit-card balances can help to increase a FICO score.

Existing Home Sales Climb, Inventories Fall:

Sales of previously occupied homes (the largest segment of all home sales) increased by 11.3% on a year-over-year basis according to the National Association of Realtors. Sales did decrease 3% from the previous month which was close to market expectations.

Inventories declined 2% to 3.48 million units, representing 8.5 months of supply at current sales rates.

"It’s in a holding pattern. When it does break out, it will break out upward, but it hasn‘t broken out yet,“ said Lawrence Yun, chief economist of the NAR. A separate report from the Labor Department showed that rent of primary residences is up 2.1% on a year-on-year basis. In time, rising rents should help boost sales of homes, Yun said.

Distressed home sales fell from 31% to 30%. All Cash Sales held steady at 30% suggesting continued interest by investors, and first-time home buyers accounted for 32% of the sales.

This report certainly didn't show the housing market taking off, but it did have some bright spots which is welcome news as we continue our slow climb out of the bottom.

Economic growth expected to be no greater than 2 percent through 2012

Economic growth is expected to be no greater than 2 percent through the end of 2012 – a growth rate that makes the economy very vulnerable to any external shock that could trigger a downturn, according to Fannie Mae’s Economics & Mortgage Market Analysis Group. External factors, coupled with uncertainty surrounding the degree of domestic fiscal austerity, including the scheduled expiration of various tax cuts and unemployment benefits, and the impact of forthcoming regulations, will determine how fast the economy will grow.

“There’s been a little seasonal cyclical pickup in housing activity recently, as spring and summer sales are generally stronger than fall and winter, but leading indicators point to housing sales bouncing near the bottom at least through the end of 2012,” said Fannie Mae Chief Economist Doug Duncan.

“Home prices are a key factor for any positive movement in the housing market, and the large inventory of distressed homes working their way through the market is putting downward pressure on prices. Now that we are entering a traditionally weak seasonal sales period, we expect home prices to show renewed declines after firming for several months,” Duncan stated.

Foreclosure starts decline in September

Following a steep spike in August, foreclosure starts returned to levels more in line with prior months in September, and were below the numbers reached at the peak. California has seen a drop in activity of 56 percent since its peak, from 58,623 Notice of Default filings in March of 2009 to 25,778 today.
Foreclosure sales were mixed in September, with declines in Arizona, California and Nevada, while Oregon and Washington both showed increases. Despite the declines, the percentage purchased by third parties, typically investors, was at or near peak levels. In California, third parties made up a record 27.4 percent of all sales last month.

California statistics:
• Foreclosure starts declined 20.9 percent
• Foreclosure sales declined 23.3 percent
• Foreclosure timeframes declined 3.9 percent

Retail Sales Strongest Rate Since February:

Headline Retail Sales for September increased at a rate of 1.1% which more than doubled market forecasts of 0.5%. The Core Retail Sales (this excludes autos) also increased more than expected. It came in at 0.6% which was three times better than the market forecasts of 0.2%.

This is very important for the housing market because housing demand is very closely tied to consumer confidence. This brings up a very interesting point. Various consumer sentiment and consumer confidence reports have shown a recent dip in their readings. So, consumers are telling the survey takers that they feel less positive about the economy and that they are less willing to spend money. But those reports are based upon surveys.

Retail Sales are based upon real and actual sales. And clearly, consumers are spending more which means their economic outlook is positive and that is always a positive for the housing market.

Triggers for rejection

Last year, more than two million people were turned down for homes, according to federal data, often because the applicants didn’t meet certain lender requirements or because their applications were incomplete or otherwise problematic. With lenders’ underwriting criteria becoming more rigorous in recent years, it’s important buyers know the most common triggers for mortgage-loan rejection.

Making sense of the story

• Insufficient income: Lenders want to be sure borrowers can afford to make the mortgage payments. Lenders typically look for at least a two-year track record of income, which could hurt those who have changed jobs recently.
  
• Cloudy financial picture: Generally, total debt payments, including the mortgage, cannot exceed 45 to 50 percent of a borrower’s adjusted gross monthly income. Overtime and bonuses are included only if the borrower has worked for the same employer at least two years, and has a history of receiving them.
  
• Poor credit: Lenders typically reject applicants with FICO scores below 620.
  
• Low appraisal: One of the predominant reasons buyers are turned down for home loans is because the appraisal on the property is too low. A buyer may think he or she is purchasing a house worth $800,000, but if the appraisal comes in less than that, the lender will not loan the borrower the money.
  
• Property problems: Sometimes issues turn up within a house, like a major repair or safety issue that needs to be addressed, before an application can be approved.
  
• Information mix-ups: Approximately 12 percent of new mortgage applications were denied because of unverifiable information or incomplete credit applications, according to the Federal Financial Institutions Examination Council.

Americans pessimistic about economy, home prices, household finances

Fannie Mae’s September National Housing Survey found that Americans are still very pessimistic about the economy, home prices, and household finances.  Findings also demonstrate that consumers are paying close attention to economic news and what policymakers are saying, and continue to link their personal financial situations with the current macro-economic environment.

“The lack of a sense of urgency to buy homes, given expectations for further declines in home prices and continued low mortgage rates, coupled with general pessimism regarding their own personal finances and the economy, bodes poorly for the recovery of the housing market,” said Doug Duncan, vice president and chief economist of Fannie Mae.

Highlights of survey include:

Americans noted a very large decline in their expectation for mortgage rates in September, with only 33 percent saying that mortgage rates will go up in the next 12 months (down 12 percentage points since August – the lowest number on record).
For the fourth consecutive month, Americans expect home prices to decline over the next year. On average, Americans expect home prices to go down by 1.1 percent, the highest expected decline to date. 
Only 18 percent of respondents expect home prices to increase over the next 12 months (the lowest reported number to date in the National Housing Survey), while 25 percent say they expect home prices to decline (down by 2 percentage points since August).
While 68 percent of Americans say it is a good time to buy a home (down 1 percentage point since last month), only 10 percent of those polled say it is a good time to sell one’s home (up by 1 percentage point since August).
Despite continued consumer caution about taking on a large financial obligation to buy a home, 63 percent say they would buy their next home if they were going to move (up by 1 percentage point since August), while 32 percent of Americans say they would rent their next home (down 2 percentage points since last month).
The number of Americans who expect their personal financial situation to worsen over the next year has decreased for the first time in four months (down from 22 percent in August to 19 percent in September).

Employment Picture Brightens:

While unemployment levels will continue to be a major concern and a drag on our economy, several reports showed some improvement last week.  This is the single biggest factor in housing.  Regardless of interest rates - people simply don't purchase homes when they are unemployed or are concerned about their employment picture.  This is why the following data is welcome news for the housing industry.

The headline unemployment rate remained unchanged at 9.1%, however economists are focusing on the improvement in the non-farm payroll data.

Non-farm Payrolls jumped up to 103K in September, from the revised previous month's result of 57K, the U.S. Department of Labor reported. The results considerably exceeded forecasts of 73K growth. The change in total non-farm Payroll employment for July was also revised upward from 85K to 127K.

Average Hourly Earnings increased to 0.2% in September, following a 0.2% drop in August. On an annual basis Average Hourly Earnings remained flat at 1.9% for the second consecutive month in September.

Average Weekly Hours increased to 34.3 in September from 34.2 in August, despite forecasts of remaining at the same level.

In a separate report, the ADP Private Payroll data which measures U.S. non-farm private business sector hirings increased by 91K in September, after rising 89K in August. This was higher than market forecasts of only a 75K increase.

Construction spending rises in August

Construction spending rose 1.4 percent in August to a seasonally adjusted annual rate of $799.1 billion compared with July’s estimate of $788.3 billion, according to the U.S. Census Bureau of the Dept. of Commerce. The August figure also is 0.9 percent above the August 2010 estimate of $791.7 billion.

Residential construction was at a seasonally adjusted annual rate of $237.8 billion in August, 0.7 percent above the revised July estimate of $236.2 billion.

Pending home sales decline nationwide in August

NAR’s Pending Home Sales Index (PHSI) declined 1.2 percent to 88.6 in August from 89.7 in July, but is 7.7 percent above August 2010. The Index is a forward-looking indicator based on contract signings. The data reflects contracts, but not closings.

The PHSI in the Northeast fell 5.8 percent to 63.6 in August, but is 1.3 percent higher than August 2010. In the Midwest, the index declined 3.7 percent to 76.2 in August, but is 8.2 percent above a year ago. Pending home sales in the South rose 2.6 percent to an index of 96.9 and are 7.6 percent higher than August 2010. In the West, which includes California, the index declined 2.4 percent to 108.1 in August but is 10.5 percent above a year ago.

“We continue to experience a pattern in which financially qualified home buyers, willing to stay well within their means, are being denied credit – a factor in elevated levels of contract failures,” said Lawrence Yun, chief economist for NAR. “Based on the improving fundamentals of population growth, some job additions, rent increases and higher stock market wealth, we should be seeing existing-home sales closer to 5.5 million, but are expecting just over 4.9 million this year. The unnecessarily restrictive mortgage underwriting standards are attenuating the housing recovery and are a risk factor for the overall economy.”

U.S. to lower the size of mortgage it will guarantee

The current conforming loan limit, which determines the maximum size of a mortgage that the Federal Housing Administration (FHA), Fannie Mae, and Freddie Mac can buy or guarantee – is set to expire Friday, Sept. 30.

Making sense of the story

• Beginning Oct. 1, the conforming loan limit will decline to $625,500, from the current $729,750 limit, though the majority of counties will fall far below the $625,500 maximum.
  
• Non-conforming or jumbo loans typically carry a higher mortgage interest rate than a conforming loan and require a higher down payment, increasing the monthly payment and negatively impacting housing affordability for California home buyers.
  
• Under the new GSE loan limits, Monterey County would see the greatest drop in the loan limit at $246,750, followed by San Diego ($151,250), Sonoma ($141,550), Solano ($140,500), and Napa ($137,500) counties.
  
  
• Under the new FHA loan limits, Monterey County would see the greatest drop in the loan limit at $246,750, followed by Merced ($201,450), Riverside ($164,650), San Bernardino ($164,650), Solano ($157,300), and San Diego ($151,250) counties.
  
• The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) estimates that more than 30,000 California home buyers statewide will be impacted by the change to the conforming loan limits.
  
• In anticipation of the conforming loan limit decline, some banks already have stopped accepting conventional and government applications for loan amounts that exceed the new permanent loan amounts.

California pending home sales increase in August

California pending home sales climbed in August from both the previous month and year, the C.A.R. reported this week. The year-to-year increase was the highest level since July 2009.
Pending home sales in California rose 7 percent from July, according to C.A.R.’s Pending Home Sales Index (PHSI). The index was 125.3 in August, up from July’s index of 117.1, based on contracts signed in August. The index was up 12.6 percent from August 2010. Pending home sales are forward-looking indicators of future home sales activity, providing information on the future direction of the market.

The report also includes information on distressed properties. In August, the total share of all distressed property types sold statewide inched up to 43.7 percent from July’s 42.9 percent. The share of distressed sales was lower from a year prior, when distressed sales totaled 44.5 percent of all home sales. Of the distressed properties sold statewide, 18.9 percent were short sales compared with July’s 17.5 percent share and last August’s share of 19.3 percent.

The share of REO sales was down from both July and a year ago. REOs made up 24.4 percent of sales in August, down from 25.2 percent in July and 24.7 percent in August 2010. Non-distressed sales made up the remaining share of home sales in August at 56.3 percent, down from 57.1 percent in July and 55.5 percent in August 2010.

REALTORS® expect 1 percent rise in Calif. home sales

The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) released its 2012 Housing Market Forecast this week during CALIFORNIA REALTOR® EXPO 2011 in San Jose. The forecast calls for California home sales and median price to improve only slightly in 2012, as the continuation of the tepid economic recovery, uncertainty about the future, and funding challenges for residential mortgages are expected to keep the market moving sideways, with little foreseeable momentum in either direction.

Making sense of the story

• The forecast for California home sales next year is for a slight 1 percent increase to 496,200 units, following essentially flat sales of 491,100 homes this year compared to the 491,500 homes sold in 2010.
  
  
• “Discretionary sellers will play a larger role in next year’s housing market,” said C.A.R. President Beth L. Peerce. “Those who held off selling in 2011 may list their homes in 2012, thereby improving the mix of homes for sale compared with the last few years. Additionally, distressed sales will remain an important segment of the overall market as lenders continue to work through the foreclosure process.”
  
  
• The California median home price is expected to increase 1.7 percent in 2012 to $296,000 in 2012, according to the forecast. Following a double-digit increase in the median price in 2010, the median home price will decrease a projected 4 percent in 2011 to $291,000.
  
  
• View a video of C.A.R. Vice President and Chief Economist Leslie Appleton-Young discussing the 2012 Housing Market Forecast.
  
  
• “2012 will be another transition year for the California housing market, as the continued uncertainty about the U.S. financial system, job growth, and the stability of the overall economy remain in the forefront for all market participants,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. “An improvement in job growth, consumer spending, and corresponding gains in housing are essential to a broader recovery in the economy, but would-be buyers will remain cautious as they weigh these myriad uncertainties against the clear opportunities presented by today’s very affordable housing market

C.A.R. releases its 2012 Housing Market Forecast

California home sales and median price are predicted to improve only slightly in 2012, as the continuation of the tepid economic recovery, uncertainty about the future, and funding challenges for residential mortgages are expected to keep the market moving sideways, with little foreseeable momentum in either direction, according to C.A.R.’s “2012 California Housing Market Forecast” released Tuesday.

The forecast, which was presented today by C.A.R. Chief Economist Leslie Appleton-Young during her luncheon at CALIFORNIA REALTOR® EXPO 2011, says that California home sales next year is for a slight 1 percent increase to 496,200 units, following essentially flat sales of 491,100 homes this year compared to the 491,500 homes sold in 2010.

The California median home price will increase 1.7 percent in 2012 to $296,000 in 2012, according to the forecast. Following a double-digit increase in the median price in 2010, the median home price will decrease a projected 4 percent in 2011 to $291,000.

“2012 will be another transition year for the California housing market, as the continued uncertainty about the U.S. financial system, job growth, and the stability of the overall economy remain in the forefront for all market participants,” said Appleton-Young. “An improvement in job growth, consumer spending, and corresponding gains in housing are essential to a broader recovery in the economy, but would-be buyers will remain cautious as they weigh these myriad uncertainties against the clear opportunities presented by today’s very affordable housing market.”

When will home prices spring back?

(MONEY Magazine) -- It was with some trepidation that Stephanie Kim and her husband, Brendan, 40 and 42, put their Chicago townhouse on the market in June. While the place was in great shape, prices in their city were off 8% from 2010 -- and of the 30 similar homes in the area listed the previous year, only nine had sold.
And yet there was an offer on the house almost immediately; the sale closed two months later at just $15,000 under the $650,000 asking price. "We thought it would take a lot longer to sell," says Stephanie.

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Nationwide, the U.S. housing market remains deep in the doldrums and economists expect prices to fall another 5% to 10% in many places. And yet some sellers, like the Kims, are seeing signs of a turnaround.

Send The Help Desk your questions about home prices.

In a few of the hardest-hit areas, such as Detroit, homes have become so cheap that it no longer makes sense to rent.

In other places, like Los Angeles, price drops haven't stopped, but they've slowed, and homes are selling faster. Plus, even if your area is still hurting, your neighborhood might be on its way back.

When the rebound arrives, desirable zip codes will see price jumps first, says David Stiff, chief economist for housing research firm Fiserv Case-Shiller. "Real estate is always local, but these days it's hyperlocal," says Chicago broker Scott Berg.
To estimate where your own house lies on the recovery spectrum, answer the following questions.

HOW FAST ARE NEARBY HOMES SELLING?

While it's a good sign when price drops slow down, inventory levels are actually a better gauge of where your market is headed, says David Crowe, chief economist for the National Association of Home Builders.
That's because monthly home-value numbers are skewed by seasonal fluctuations, and prices are usually the last thing to budge when a market turns the corner.

What to do: Ask a realtor to tell you the number of listings now on the market in your area and the number of homes sold over the past year.
Let's say there are 100 listings and there were 240 sales last year, or an average of 20 per month. That equals a five-month supply, which is considered stable. More than six months and it's a buyer's market, says Crowe; less than three and sellers probably have the upper hand.

IS BUYING CHEAPER THAN RENTING?

People are more likely to buy homes when the payment on a loan is below what they'd pay to rent a similar home.
The number to calculate is the price-to-rent ratio, or the price of a home divided by one year's rent on a comparable one. In general, it's cheaper to buy when the price-to-rent ratio is below 15, although some places, such as San Francisco, have higher ratios even in soft markets.

What to do: Compare your neighborhood's price-to-rent ratio with what it was before the housing boom. You can find historical sale price info on Trulia.com; your realtor should be able to give you information on rental rates from a few years ago.

WHAT'S THE FORECLOSURE FACTOR?
Not surprisingly, a decrease in foreclosure filings is often an encouraging sign. But the official data aren't entirely reliable. "In some markets the year-over-year change is artificially low because of processing delays," says Rick Sharga, senior vice president with RealtyTrac.

What to do: RealtyTrac.com can tell you if the official level of distressed sales is rising or falling (just plug in your zip code).
To suss out the hidden foreclosure factor, take a close look at the homes in your neighborhood. Distressed owners tend to fall behind on lawn cutting and house painting long before a foreclosure, says Crowe. If you see several places in disrepair, don't expect your home value to rise soon.

IS YOUR AREA PRIMO?
As buyers return, they'll naturally grab places with shorter commutes and better schools and amenities.
The Kims' townhouse, for example, was located in Chicago's South Loop area, near Lake Michigan and museums. "Buyers are cherry-picking," says Sharga. You won't buck the larger market trend entirely, but once things are cranking in your favor, your home will pop first.

Existing Home Sales Up Strongly:

Existing-home sales increased in August, even with ongoing tight credit and appraisal problems, along with regional disruptions created by Hurricane Irene, according to the National Association of Realtors®. Monthly gains were seen in all regions.

Total Existing Home Sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, rose 7.7 percent to a seasonally adjusted annual rate of 5.03 million in August from an upwardly revised 4.67 million in July, and are 18.6 percent higher than the 4.24 million unit level in August 2010.

Investors accounted for 22 percent of purchase activity in August, up from 18 percent in July and 21 percent in August 2010. First-time buyers purchased 32 percent of homes in August, unchanged from July; they were 31 percent in August 2010.

All-cash sales accounted for 29 percent of transactions in August, unchanged from July; they were 28 percent in August 2010; investors account for the bulk of cash purchases.

Total housing inventory at the end of August fell 3.0 percent to 3.58 million existing homes available for sale, which represents an 8.5-month supply at the current sales pace, down from a 9.5-month supply in July.

Mistakes housing investors make

With traditional investments delivering low returns, some are considering buying rental housing. However, potential investors should do their homework and avoid the following common mistakes.
Making sense of the story

• Investing in real estate right now can be profitable, if everything goes as planned. Rents are increasing in many areas, and more properties may be coming on the market.
  
  
• Last month, the Obama administration asked for proposals on how to convert at least some of Fannie Mae’s and Freddie Mac’s inventories of foreclosed homes into affordable rentals.
  
  
• Traditionally, investors rented out properties for 1 percent of the purchase price per month. However, according to one property management firm, today, some investors are receiving as much as 2 percent of the purchase price.
  
  
• While it may be true that in some areas home prices are relatively low, that doesn’t mean the property can be rented out. Homes in deserted subdivisions aren’t any more appealing to renters than they are to buyers. The same is true for less-attractive properties or those in less-desirable school districts.
  
  
• Prior to purchasing a property, investors should also factor in closing costs of 3 percent to 6 percent, the costs to fix up the place and maintain it, and the holding costs.
  
  
• Investors become landlords, and as such, need to keep in mind that, just like homeowners, tenants may not always be able to pay rent. Evicting tenants can take several weeks.
  
  
• It’s also important to remember that owning a rental is not the same as owning a home. An owner may put up with flaws in a home that a renter wouldn’t tolerate. Additionally, many states and communities have strict laws for landlords, even for those who own only one property.

Fannie Mae releases August consumer indicators

Nearly 80 percent of Americans (78 percent) say the economy is on the wrong track and 27 percent believe home prices will go down over the next year, according to findings from Fannie Mae’s August National Housing Survey. Additionally, 22 percent of Americans polled expect their financial situation to worsen over the next year – the highest levels of pessimism for both indicators since August 2010. For the third consecutive month, Americans reported they expect home prices to decline over the next year. On average, Americans expect home prices to decline by 0.5 percent, compared with an expected decline of 0.3 percent in July.

While 69 percent of respondents say it is a good time to buy a home, only 9 percent of those polled say it is a good time to sell one's home.

The number of Americans who expect their personal financial situation to worsen over the next year increased for the fourth month in a row, rising to 22 percent in August compared with 20 percent in July.

Foreclosure starts driven higher by Bank of America

Foreclosure filings and foreclosure sales increased in August throughout the majority of areas covered by ForeclosureRadar. Foreclosure starts – the first notice filed, either a Notice of Default or Notice of Trustee Sale depending on the state – rose in every state, and appears to have been primarily driven by Bank of America and related entities, where foreclosure starts rose 116 percent from July to August, according to the report. Wells Fargo and US Bank also saw increases in foreclosure start filings, while filings by JP Morgan Chase and Citibank were essentially flat.

Notice of Default filings increased 69.5 percent in California, to the highest level in a year. Notice of Trustee Sale filings were up more moderately, rising 6 percent month-over-month, but down 23.6 percent year-over-year. Cancellations were nearly flat, up just 1.9 percent from July.

Activity on the courthouse steps increased in August, with Properties Sold Back to Bank (REO) increasing 12.3 percent from the prior month. Properties Sold to Third Parties rose 9.9 percent month-over-month and 10.8 percent year-over-year. Time to Foreclose increased to 333 days in August, 49 days longer than a year ago

Refinancing 'Stimulus' Is No Slam Dunk:

The U.S. is caught up in "refi" madness.

Among the measures President Obama may unveil in his major policy speech this week is a plan to make mortgage refinancing easier, so more households can benefit from ultralow rates. Various proposals for this have been circulating for some time; last June, Morgan Stanley dubbed its version a "Slam-Dunk Stimulus."

But there is a catch. Many mortgage holders aren't able to refinance because they can't afford the fees, no longer qualify for a loan or their mortgage is more than the home is worth. As a result, refi activity has been fairly weak despite the 4.3% average rate for a 30-year, fixed-mortgage.

On Wednesday, the Mortgage Bankers Association will release its weekly mortgage application data; as of last week, its refi index was down 33% from the same period a year ago and even further below peak refi activity in 2003.

This despite the fact that more than three-quarters of borrowers with a mortgage backed by Fannie Mae or Freddie Mac had a rate of 5% or more as of June, according to one recent policy proposal.

Hence the desire for government intervention. The hope is it could benefit as many as 30 million households and free up $20 billion to $70 billion a year by reducing interest payments, according to various proposals.

But that money isn't likely to provide much of a stimulus. For one, there is no guarantee it will be spent; balance-sheet impaired households may pay down debts or boost savings. And, even if people did spend every penny, even $70 billion would still amount to less than 0.5% of the nation's $15 trillion gross domestic product.

Bloomberg  News

Many mortgage holders aren't able to refinance because they can't afford the fees, no longer qualify for a loan or their mortgage is more than the home is worth. Above a foreclosure sign in Phoenix, Ariz.

True, shoring up household finances has benefits.

"What we're doing is restructuring household balance sheets," says Columbia Business School Professor Chris Mayer, co-author of one policy proposal.

The quicker debt burdens can be lowered, the better for the economy's long-term health.

Such a program isn't without cost, though. Banks and other investors currently holding mortgage bonds would suffer. The taxpayer, through Fannie and Freddie, would also take an up-front hit. And, should any program also include debt forgiveness, there would be significant moral hazard.

While a mass refi program may offer some economic relief, it is certainly no cure-all.

Write to Kelly Evans at kelly.evans@wsj.com

Home prices seen picking up in 2012:

Home prices are seen ticking up modestly in 2012, according to a Reuters poll released on Friday.

Existing home sales are expected to improve modestly. The forecasts from the poll are consistent with expectations the housing sector will continue to limp along in a weakened state for years to come.

A recovery in the housing market is dependent on improvement in the labor market and broader economy, analysts said.

"One of the big concerns is you've got a lot of homes where the mortgage holder is still underwater and most of those homeowners will continue to make payments," said Brown.

"It gets to be a problem, however, if somebody loses their job, somebody gets sick, there's a divorce or something where the home has to be sold."

U.S. home prices -- as measured by Standard & Poor's/Case-Shiller 20-City Composite Home Price Index -- will fall 3.8 percent for the year, before stabilizing and gaining 0.8 percent in 2012, according to the median forecast of 22 economists in the Reuters poll taken over the past week.

The expectations were improved from the previous Reuters housing poll in June, which forecast prices would fall 5.0 percent this year and rise just 0.5 percent next year.

The forecasts for the changes in the home price index for this year had a wide range, from a decline of 14.0 percent to a gain of 0.1 percent. The forecasts for 2012 had a smaller gap, from a decline of 6.0 percent to a gain of 4.0 percent.

Of 28 economists polled, 14 said that prices had either already hit bottom this year or would by the fourth quarter. Twelve respondents said prices won't reach a trough until 2012, while one forecast 2013 and one expected it would take until 2014.

In the third quarter, the pace of existing home sales is expected to come in at a 4.78 million annualized rate and will edge up to 4.95 million in the fourth quarter. Sales of previously owned homes were at an annual rate of 4.67 million units in July, according to data from the National Association of Realtors.

Economists saw the rate of home sales coming in at 5.1 million for both the first and second quarter of next year.

"New foreclosures peaked in 2009, but the inventory of foreclosed homes will decline only slowly," said David Berson, chief economist at mortgage insurer PMI Group.

Spring buying pushed home prices up for a third straight month in most major U.S. cities in June.

The Standard & Poor's/Case-Shiller home-price index showed Tuesday that prices increased in June from May in 19 of the 20 cities tracked. Prices rose 3.6 percent in the April-June quarter from the previous quarter. Neither of those numbers is adjusted for seasonal factors.

Getting a fair appraisal in a tough market:

Since the real estate market took a downturn, some people have complained they couldn’t buy, sell, or refinance a home because an appraiser used bank-owned (REO) or short-sold homes as comparables in the valuation process, which dragged down the value of their home. While using REO and short-sold properties can lower the value of a home, some homeowners are upset that their county assessor will not use these properties as comps for their property taxes.
Making sense of the story

• In California, some assessors will consider distressed sales when looking at comps, but it varies widely by county, neighborhood, and house. In general, assessors will always look at non-distressed sales first and if there are enough, disregard REO and short sales. However, if there are not enough standard sales, or the home is in an area dominated by distressed sales, the assessor likely will take these properties into account.
  
  
• Under Proposition 13, property is assessed upon a change in ownership at its fair market value. That is usually the same as the sale price. However, with distressed property, the sale price may not equal fair market value.
• Between changes of ownership, assessors can raise values only by an inflation rate, not to exceed 2 percent per year, plus the value of major improvements or additions.
  
  
• Under Prop. 8, owners who think the market value of their property has fallen below its assessed value can ask for a temporary reduction to the fair market value.
  
  
• Homeowners who think their homes are worth less than the assessed value can usually ask their assessor for an informal review. If they are still not satisfied, they can file a formal appeal with their county’s assessment appeals board by Sept. 15 or Nov. 30, depending on the county.

Obama administration releases August Housing Scorecard

HUD and the U.S. Dept. of the Treasury released its August Housing Scorecard last week.
Included in the report are detailed assessments for the 10 largest mortgage servicers participating in the Making Home Affordable Program with results from the second quarter of 2011. In addition to providing greater transparency about servicer performance in the program, the servicer assessments are intended to set a new industry benchmark for disclosure around servicer efforts to assist struggling homeowners, while prompting them to correct identified deficiencies.

More than 5 million mortgage aid arrangements were started between April 2009 and the end of July 2011. In July, more than 28,000 additional homeowners received a permanent modification through the Administration's Home Affordable Modification Program (HAMP); more than 790,000 homeowners across the country have now received a HAMP permanent modification with a median payment reduction of 37 percent. To date, homeowners in permanent modifications have realized aggregate savings in monthly mortgage payments of nearly $7.8 billion.
The Servicer Assessments summarize performance for the 10 largest Making Home Affordable participating servicers from reviews largely conducted throughout the second quarter of 2011 on three categories of program implementation: identifying and contacting homeowners; homeowner evaluation and assistance; and program reporting, management and governance. Although some improvements have been made, based on the reviews for this quarter, Bank of America, NA and J.P. Morgan Chase Bank, NA remain in need of substantial improvement. Both servicers were subject to withholding of financial incentives under the program based on results from the first quarter and will continue to have their incentives withheld until their performance improves.

While Ocwen Loan Servicing, LLC and Wells Fargo Bank, NA were both found to be in need of substantial improvement in the first quarter of 2011, compliance activities conducted to follow up on their progress and assess other areas of program implementation found that both mortgage servicers have corrected identified deficiencies from the first quarter. Both servicers were found to be in need of moderate improvement in the second quarter.

When income is freelance

After the financial market downturn in 2008, getting approved for a mortgage loan became even more difficult. Combine that with the fledgling economy, which left many people turning to freelance work, and the challenges involved in qualifying for a home mortgage increase exponentially. However, with a little extra work, home buyers using freelance work as proof of income still can qualify for a new loan.
Making sense of the story

• Borrowers who earn most of their income on 1099s should be prepared for extra preparation, paperwork, and discussion of their financial standing when applying for a mortgage.
  
  
• It’s important that independent contractors show that their income is stable and increasing. For some, that may mean declaring all their income on their tax returns, and not, say, carrying anything over to the next year, even if it means paying more taxes.
  
  
• Consistency in income is key, so those applying for a mortgage this fall or winter should be prepared to provide proof for year-to-date income.
  
  
• To increase the chances of getting a mortgage approval, borrowers should pay off other debts, including balances on credit cards.
  
  
• Pinpointing the source of the down payment also is helpful. If the down payment will be a gift from a relative, borrowers are advised to submit an account statement showing the funds are available and awaiting the home purchase. Same goes for borrowing from a 401(k).
  
  
• Freelancers also should be prepared for a more in-depth analysis of their ability to repay the debt. Submitting tax returns from the last three years and explaining any significant differences in income is advised

California housing production declines from year earlier:

California housing production declined 45 percent in July compared with a year earlier, and posted the lowest monthly permit total since January of 2009, according to the California Building Industry Association. Statistics compiled by the Construction Industry Research Board (CIRB) show that permits were pulled for 2,248 total housing units in July, down 45 percent from the same month a year ago and down 53 percent from June, representing the lowest monthly permit total since January of 2009 when 2,104 permits had been issued. Permits for single-family homes totaled 1,436, down 30 percent from June 2010 and down 39 percent from the previous month, while multifamily permits totaled 812, down 61 percent from a year ago and down 67 percent from June.

Mike Winn, CBIA’s president and CEO, noted that in addition to dismal economic conditions, CIRB attributed some of the decline to secondary effects of the costly green building code changes and fire sprinkler mandates that went into effect on Jan. 1.

“Permits that had been applied for back in December to avoid the costly new regulations had not actually been issued yet and needed to be issued by July 1,” said Winn. “This caused more permits to be issued through the end of June which could account for some of the decline in July, according to CIRB’s analysis.”

The New Homebuyer Tax Credit Won't Die --Should It?

The government has given buyers using the credit another three months to close sales, and the initiative is being imitated on a smaller scale by states and private companies. But some think the market would be better off if we laid it to rest for good.

Karen and Greg Osmon had outgrown the three-bedroom Winston-Salem, N.C., home they lived in with their two children, so they put it up for sale. Unfortunately, they did so in December of 2008, at the height of the financial crisis. With the economy in a downward spiral, they couldn't find a buyer, and when the property didn't move for over a year, they were forced to pull it off the market.
The Osmons decided to try selling again in early May of this year, but they'd missed a chance to capitalize on an incentive that had boosted home sales in the months prior: the first-time homebuyer tax credit, an $8,000 federal rebate whose April 30 deadline boosted sales of new homes in that month by 48% over the previous year, according to the Census Bureau.

For full story:
http://www.forbes.com/2010/07/01/home-buyer-tax-credit-lifestyle-real-estate-housing.html

National Home Price Index Rises:

The Federal Housing Finance Agency (FHFA) House Price Index (HPI) covers single-family housing, using data provided by Fannie Mae and Freddie Mac. The House Price Index is derived from transactions involving conforming conventional mortgages purchased or securitized by Fannie Mae or Freddie Mac.

According to FHFA, their national Housing Price Index for purchases rose 0.9% and is the third consecutive month of home price increases and shows that the housing market does have some real fundamental "bright spots".