Archive for September, 2012

CNN doesn’t seem to understand the concept of "bubble"

Home prices may not return to peak until 2023,” is the CNN Money headline. The story is that housing prices may take that long to hit their 2007 levels — that is, the levels they were at the peak of the housing bubble.

This is news? During the bubble, property values prices rose way above rational levels, and thus way above where they should have been. (“Should have,” being defined as where they would go if they stuck to normal levels of inflation.)

It’s as if CNN was expecting prices to look like this:

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When in reality they’re going to look like this:

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You can’t expect prices to hit 2007 levels any time soon. Home prices have, on average, tracked inflation. After the bubble burst, prices dropped below where they should have been (think of it as the pendulum swinging far in the other direction), and are making their way back to their “natural” state. At which point they’ll proceed to track inflation, barring another bubble or bust.

So if, like CNN, you were expecting the market to quickly make its way back to 2007 levels, think again. And give it time.

Stink bugs invade Virginia

Meet your enemy Meet the brown marmorated stink bug: A creepy little bugger that can release an odor when attacked (it smells like cilantro — go figure). It  was “imported” from Asia about 15 years ago, and has made its home across the mid-Atlantic.

Come autumn, the cold drives them indoors, where you’ll likely find them anywhere and everywhere. (Legend has it that killing one will attract more.) When winter ends, they emerge to lay their eggs — 280 per female.

This year has been a good year for them, which agricultural experts say mean next year is going to be just great.

Just great.

See, stinkbugs aren’t just annoying, they damage crops. Not to the extent that, say, the boll weevil might, but they attack apple orchards and vineyards, both of which Virginia has. Peaches, apricots, and other fruit, too. It feeds by sticking its nose (sorry, proboscis) into fruits, leaving a dead spot that spreads.

Luckily, scientists are hard at work to try to halt the invasion. One potential solution: Introduce the marmorated stinkbug’s enemy, a tiny wasp that destroys its eggs. Because introducing one non-native creature to control another is almost always a good idea.

What could possibly go wrong with introducing millions of tiny killer wasps?

Victims of illegal foreclosure will soon get payment

About 46,000 Virginians will soon be able to get their due from the national mortgage foreclosure settlement — they’ll be receiving the paperwork in the mail.

That settlement was reached with the nation’s five biggest lenders, which had been caught creating fake documents, forging signatures, and otherwise breaking the law so they could foreclose more quickly. And now at least some of their victims are getting a chance to recoup their losses.

Borrowers who were foreclosed on between January 1, 2008 and Dec. 31, 2011 — and who had their loan serviced by Ally/GMAC, Bank of America, Citi, JPMorgan Chase, or Wells Fargo — are eligible for part of the $1.5 billion set aside for borrower restitution.

Good numbers from existing-home-sales report

Two things of note from NAR’s August existing home sales report: First-time buyers make up about 31% of the market, and distressed sales (foreclosures and short sales) only make up about 22%.

(Note: Just in case it’s not clear, those numbers are mutually exclusive. They overlap, but there’s no way to know by how much.)

Why is this interesting?

First, the first-time-buyers number is about what it was a year ago — it’s down one percent, but that’s pretty much statistical noise. And the number of investors buying is down from 22% in August 2011 to only 18% this year.

Which means that the recovery isn’t just being fueled by investors — regular folks are still the majority of the market, and in fact are becoming more the majority. That’s good for long-term economic health.

Further, keep in mind that “first-time buyers” include people who haven’t owned in the past three years. Keep an eye on that number in the months ahead. Families who lost their homes to foreclosure are going to start buying again, and they’ll be classified as first-time buyers. So if my prediction of “shadow consumers” emerging is accurate, you’ll see that first-time-buyer number increase over the next year or two.

As for distressed sales, NAR says they’re at the lowest level since NAR began tracking it a few years ago. (Sorry, I don’t know the exact date.) More good news.

It’s a slow recovery, but it’s showing up in more and more numbers.

Maybe there’s no recovery? Beg to differ with ya

Interesting post over at the Progressive Policy Institute entitled “Rising Home Prices May Not Spell Recovery.” Interesting, but — to be overly blunt — wrong.

The argument by author Jason Gold is that, although it seems home prices have hit bottom, we may not be in a true recovery for several reasons, which he then explains.

And which I’m going to debunk. :)

1. Rising prices will drive investors out, and they’re a huge part of the market. Fueled by a lot of former owners who are now renting, Gold argues, investors have entered the market in a big way, and are today a major driving force. “As of May 2012, investor purchases made up 25.3% of all real estate transactions,” he writes. “That’s simply unsustainable,” he says, because rising prices will drive investors away from the market.

This may well be true, but Gold’s error (IMO) is not considering what other effects rising prices will have. And one of them, I would bet, is that it will bring more sellers off the sidelines — those people who have wanted to move (or move up) but have held back because of their homes have depreciated too much.

As rising prices push them into the market, low interest rates will still appeal to buyers — and as those homes are sold, the sellers will become buyers. In other words, as low prices brought investors in, higher prices will bring more sellers.

2. More mortgage applications doesn’t mean a better housing market. Refinancing constitutes 80% of total applications, Gold points out, and “the percentage of first-time homebuyers … is still far below the 40% of a normal housing market.”

So?

Heck, that could more easily be construed as good news for the market. If we’re seeing sales and prices improve while four of five loans are re-fis, imagine what will happen as that gets back to a normal balance.

Further, re-fis mean more money in consumers’ pockets, which bodes well for the long term health of the economy.

3. Lots of wannabe homeowners can’t qualify for a loan because they’ve been “scarred by foreclosures and ‘short sales’.”

Put another way, Gold is saying that the market can’t recover if so many people no longer qualify for mortgages, even as lenders are loosening their purse strings.

This is something we’ve covered before. Yes, people who want to own are finding that a foreclosure or short sale has hurt their credit to the point of not qualifying. But those only stay on a credit report for three or seven years. And the housing crash is more than five years old. Ergo, there are these “shadow consumers” waiting for their credit to clear in the next year or two. (Click here for the more detailed post on that, “‘Shadow consumers’: Why the housing market is going to bounce back faster than people expect.”

4. Political confusion is keeping the market down. An uncertain regulatory environment means lenders don’t know what to expect not only in terms of loans, but in terms of the secondary market.

As with #2, so? If the market is doing this well with all the uncertainty, think of what it will do once Congress stops doing its impression of a whiny five year old. Sure, Congressional stonewalling is keeping the market from doing as well as it could, but it’s certainly not enough to stall the recovery.

 

All this isn’t to say that Gold doesn’t have some excellent points — the housing market an overall economy is recovering, not recovered. It could end up stalling or retreating; there are no guarantees. But there are certainly probabilities, and those still favor a recovery that continues.

SWAR raises RPAC cash with Realtor Town Hall

Our friends at the Southwest Virginia Association raised a bunch of money for RPAC last night with a town hall meeting in Abingdon. Local legislators spoke, raffles were held (with one bear bringing in more than $700), concerns were heard, and perhaps most importantly, money was raised to help RPAC help Virginia Realtors.

Nice going there, SWAR!

Virginia Home Sales Up 7% in August 2012

The August 2012 Virginia Home Sales Report has been released and yet again, most state-wide indicators show an improved housing market in the Commonwealth.

As shown above, the pace of home sales in August 2012 (8,679) marked a 7% improvement over the same month one year earlier (8,125).  Furthermore….

  • Virginia’s median sales price increased 3% in August 2012.
  • Virginia’s total sales volume increased 10% in August 2012.
  • Virginia’s average days on market decreased 12% in August 2012.

Read more inside the complete August 2012 Virginia Home Sales Report.

 

30-second agency quiz question

The last agency quiz question was a quickie, but this one is a, er, longie? Well, it’s not a gimme, that’s for sure.

You are holding an open house for one of your listings (obviously). A customer walks in who is very interested in the property. Knowing the law, you quickly disclose that you work for the seller (using VAR form 100: Disclosure of Brokerage Relationship for Unrepresented Party(ies).

So far so good.

But then this customer says, “Can you show me two other homes in the area — listed with other firms — just so I can compare them to this one? But this is the house I want.”

The question: What forms, if any, do you need to have this person sign before you show them those other homes?

A: None. He’s only a customer, not a client.

B: A buyer-broker agreement (either exclusive or non-exclusive). You are showing him property, and it’s clear he is interested in purchasing a home. If later he wants to negotiate for your listing, then other forms will come into play.

C: A Disclosure of Dual Agency or Dual Representation. The person is clearly interested in your listing, and you can’t represent clients on both sides of the transaction without this.

D: Both B and C.

Trulia: Buying 45% (!) cheaper than renting

Every season, Trulia looks at the cost to rent vs. the cost to buy in 100 metro areas across the country. Usually there are some areas where renting wins and some where buying wins.

But this time — for the summer of 2012 — buying is less expensive than renting in every metro area. In some places the difference is huge, in others it’s small, but for once it’s better to buy than rent everywhere.

First off, asking home prices have started to rebound and have risen by 2.3% year over year in August (3.8% excluding foreclosures); however, rents have risen more (4.7%). This means that prices are lower relative to rents than they were a year ago.

But more importantly, mortgage rates have fallen: the best rates this summer have been around 3.5%, while last summer rates were closer to 4.5%.

 

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Click here to read all the details.

FHA eases condo restrictions (this is a big deal)

FHA has changed its requirements for condos to be certified, making it easier for sellers to sell and buyers to get financing.

This has been a big and ongoing issue, and today’s news is a major and positive change — and something condo owners (and the people who represent them) will appreciate.

Here’s the background: If someone wants FHA financing for a condo, not only do they have to be approved, but the condo itself has to have been “certified”. And back in 2011, FHA de-certified all of them — it required every one to reapply.

Two problems there. First, not every condo board went through the trouble, either because of laziness, confusion, or fear of lawsuits/fines if they made a mistake on the paperwork, because the law said that if there are inaccuracies, the condo board members could face up to 30 years in prison.

Second, the condo requirements were high enough that a lot of condos didn’t make the cut. (FHA was tired of having so many delinquent and foreclosed condos on its books.) Ergo, no FHA loans for potential buyers — something sellers may not have found out about if the condo board neglected to mention it.

For example, at least half the units had to be owner-occupied, no more than 15 percent of owners could be delinquent on their condo fees — defined as 30 or more days behind. Finally, three-quarters of the space had to be residential.

Needless to say, there was some consternation; NAR urged the FHA to loosen those rules so qualified buyers could buy and sellers could sell.

Today, FHA has done just that — at least in part.

The new rules for certification allow investors to own up to half of the units (not just 10 percent), and half the space can be commercial (instead of 25 percent). And it raised the bar on delinquency to 60 or more days behind on condo fees instead of 30 or more.

Some significant hurdles to certification remain. Half a project’s units must still be owner-occupied, for example, although the rule is waived for REOs; NAR wants the requirement eliminated. Only half a condos units can be financed through FHA. And the condos’ boards are still liable for incorrect information, although less so if they’re following attorneys’ advice.

It’s a good first step, and should make things easier for at least some condo owners to sell, and for some potential buyers to get financing. But it’s still just a first step.

Read more about this on NAR’s Speaking of Real Estate blog.

Or click here to read the HUD document directly.