Here in Tucson, over 68,000 homes are “underwater”. No, the desert has not flooded. Unless you’re in New Orleans, being “underwater” means that you owe more on your mortgage than the current value of the property. Last week we learned that 25% of homeowners in the country owe more than their homes are worth and in Tucson, over a third are underwater. Arizona is the second worst rate in the country behind Nevada at 48% largely because the number is 54% in Phoenix!! Now you know why banks do not consider offering home equity loans in our state and why Fannie Mae and Freddie Mac consider Arizona as a “severely declining market”.
In Ken Harney’s weekly real estate column, he writes about Brent T. White, a University of Arizona law professor who suggests that homeowners that are “under water” on their home loans, walk away!
Josh Brodesky’s column in The Arizona Daily Star discusses White’s academic paper and the possible repercussions from walking away from mortgage. The article also gauges reactions from professionals and homeowners.
As a mortgage originator, I cannot imagine advising a borrower to default on their mortgage. However, millions of Americans have few alternatives. It will take years for Arizona to recover from the foreclose crisis. On the other hand, this is a very desirable place to live and the housing affordability index in Arizona is at its best level in forty years thanks to low housing values and record low interest rates. If you want to get in on the market, call me! I’m David Wolsky with PHH Home Loans and can be reached at 520-275-2536! Ask me about the tax credit available for buying an owner-occupied home by June 30th, 2010.
I can tell you first hand, working inside of a real estate office, the tax credit is a definite stimulus to the housing industry. Every seven seconds, another house goes into foreclosures. The inventory must be moved! There are millions of qualified buyers out there, but there is still a lot of fear, especially with those potential buyers that are afraid of losing their jobs. The tax credit is a great lure for those qualified buyers. I personally think they should extend the credit for all home buyers. There is a pent up desire for home buying, but move up buyers and investors are mostly on the sidelines. I met with an investment advisor today and he was quick to remind me that it is a great time to buy stocks when the market is low and that strategy certainly applies to the housing market. The affordability index is at its best levels in decades. With the low prices, the tax credit and record low interest rates, it is the right time to buy (and hold). Here’s more insight on the tax credit…
From Inman News:
White House spokesman Robert Gibbs today confirmed that President Obama supports an extension of the first-time homebuyer tax credit, along with prolonging jobless benefits and health care subsidies for unemployed workers.
Briefing reporters, Gibbs said the measures don’t amount to a second stimulus plan.
Evidence of bipartisan support in the Senate for extending the first-time homebuyer tax credit was also on display Sunday on ABC’s “This Week,” with guests Sen. Charles Schumer, D-N.Y., and Sen. John Cornyn, R-Texas, finding common ground on the issue.
From the Kiplinger’s Tax Letter:
Start with the first time home buyer credit, the $8,000 break that is set to expire on Nov. 30. The credit will be extended for a few months, and lawmakers will clarify that first time purchasers don’t have to complete the sale by the expiration date to get the tax credit. They need only sign a contract. The odds are low that Congress will expand the credit to folks who aren’t first time home buyers, or increase the credit limit to $15,000.
Special thanks to Inman News and Matt Carter for the following information:
Beginning in January, The Federal Housing Administration will tighten the credit guidelines and make rule changes the appraisal process to minimize defaults.. FHA’s insurance fund is sufficient to cover future losses, Federal Housing Commissioner David H. Stevens said, but the tighter policies will ensure that the loan guarantees remain self-sustaining and continue to be funded by premiums paid by borrowers, not taxpayers. The rule changes for appraisals will be similar to the changes implemented by Fannie Mae and Freddie Mac this past May, known as the Home Valuation Code of Conduct (HVCC). There has been some push back to HVCC by industry groups, but I suspect that it is here to stay.
Other FHA changes include new requirements for streamlined refinancing such as income verification and demonstrating a tangible benefitto the borrowers.
There will bill tighter restrictions for FHA approved lenders that will require us to submit audited annual financial statements. Another rule change transfers the risk of loans originated by mortgage brokers to lenders who fund the loans. This practice is already in place for Fannie and Freddie. Brokers won’t have to be individually approved to originate FHA loans which will potentially increase the number of lenders eligible to provide FHA loans resulting in more effective oversight per The U.S. Department of Housing and Urban Development (HUD).
HUD also proposes to increase the net-worth requirement for approved mortgagees from $250,000 to $1 million — a move that could exclude many smaller companies from FHA lending. The requirement has not been increased since 1993 and is currently below industry standards, HUD said. The Mortgage Bankers Association (MBA) issued a statement saying it has long advocated a higher net-worth requirement for FHA lenders, but noted that it “is just as important that any new requirements be reasonable and not unduly hamper competition.” MBA has proposed a $500,000 net-worth requirements.
I have 15 years of FHA lending experience. My company, PHH Mortgage is the fourth largest lender in the country and we specialize in government loans. Call David Wolsky at 520-275-2536. We are licensed in all 50 states. Email me at david@davidwolsky.com for all your mortgage needs.
Existing Home Sales for March fell by 3.05% to 4.57 million, somewhat larger drop than expected. However, inventory of homes available for sale slipped by 1.6% to 3.737k, that is 9.3% below its year ago level. This is a 9.8 months supply compared to last November’s 11.0 months supply. The rate of decline is slowing and inventory is shrinking.
It is estimated that about half of these sales are distressed and continue to place downward pressure on both prices and new construction. The other half of these sales were to first-time buyers.
New Home Sales fell by 0.6% in March to 356k. This is a bit higher than estimates and February’s numbers were revised up from 337K to 358K. Inventory of new homes available for sale dropped by 5.2% to 311k. This is 33.7% below its year ago level and 45.6% below its July 2006 peak level. The supply has been steadily declining over the past months, from a January record of 12.5 months to February’s 11.2 and now March’s 10.7. While this is 2.5 times the 4.0 average for the 5 years ending in 2005 it is an encouraging trend.
The MBA Mortgage Applications Index is another bright note. It rose by 5.3% during the week ending April 17. Applications are now 83.8% above their year ago level.
While the Purchase Index fell, affordability is rising and pent up demand appears to be emerging, reflected in the number of first-time homebuyers in the condo market.
Year/Year home sales are improving in highly impacted markets including Las Vegas, Phoenix, Minneapolis and most areas of North Virginia, California and Florida.
The Refinance Index rose by 7.7% and is now 186.1% above its year ago levels. Refinance accounts for about 80% of all new mortgage activity, a real benefit of continued low mortgage rates.
A remaining rub for housing continues to be declining prices from both inventory overhang and mounting foreclosures.
Collectively, the housing indicators suggest a bottom may be at hand.
WEEK OF APRIL 27th
Consumer confidence for April comes out Tuesday and it should increase for the second straight month. Analysts believe it will hit 28.8 — up from 26 in March and February’s all-time low of 25.
One of the most important reports — advance 1stquarter GDP — will be released Wednesday, and it’s expected to drop 4.9%. However, two revisions follow and further declines are expected. Final 4thquarter GDP fell -6.3%.
Thursday is the busiest day for reports, beginning with first-time jobless claims for the week ended April 25. They’ve been up and they’ve been down but remain too volatile to establish a trend. Most economists, however, see job losses rising into next year.
We also get personal income and personal spending for March, which should be little changed from February. Income is expected to fall 0.2%, matching the previous data. Personal spending, however, could show slight improvement. It is predicted to decline 0.1% — a tad better than the previous 0.2% dip.
The 1stquarter employment cost index (ECI) should make no waves. This index monitors the cost of wages, salaries and benefits paid by employers. It is expected to rise 0.5%, just as it did in the 4thquarter.
Thursday’s final report, the Chicago PMI manufacturing index for April, is expected to rise to 34 from 31.4. This would be the first increase in several months. The national counterpart of that index, the ISM report on manufacturing nationwide, follows on Friday and it, too, is predicted to rise to 38.0 from 36.3. If these reports come in on target they would provide a small ray of hope for the hard-hit manufacturing sector.
Unfortunately, factory orders, which rose 1.8% in February, are expected to turn negative in March, falling 0.7%. Friday’s last report, the University of Michigan/Reuters’ final consumer sentiment survey for April, should not change much. Analysts believe it will come in at 61.5, which is a tad below the 61.9 of two weeks ago.
This last week of the month features a number of key reports and a statement by the Fed after its Wednesday meeting. Although no rate change is expected, the markets want to hear the Fed’s assessment of economic conditions, its outlook and its plans to buy more Treasuries in order to hold lending rates down.
