Top Mortgage Story:




Four months of increasing home sales

By Jim Woodard




The volume of home sales increased nationally by 7.2 percent in July over the previous month. That includes single-family homes, condos and townhomes, according to a report from the National Association of Realtors. July's positive report is the fourth month in a row when home sales increased. It's the first time in the past five years that sales rose continuously for four months.


Read Full Article




Other Mortgage Stories:



New home sales up 9.6 percent

Mortgage rates drop again

Most homeowners opt for fixed-rate refinance mortgages

Proposed extension of the home buyer tax credit

Home affordability rising

Owners are more realistic about their home's value

Home auctioning on rise

Men-Women differ in home-buying approach

Possible revival of shared appreciation mortgages

New trend in reasons for moving

More urban farms surfacing

Tenants resist high rents













Four months of increasing home sales

The volume of home sales increased nationally by 7.2 percent in July over the previous month. That includes single-family homes, condos and townhomes, according to a report from the National Association of Realtors. July's positive report is the fourth month in a row when home sales increased. It's the first time in the past five years that sales rose continuously for four months.



"The housing market has decisively turned for the better," said Lawrence Yun, NAR's chief economist. "A combination of first-time buyers taking advantage of the housing stimulus tax credit and greatly improved affordability conditions are contributing to higher sales. Because price-to-income ratios have fallen below historical trends, there are more all-cash offers. In some recovering markets like San Diego, Las Vegas, Phoenix and Orlando, the demand for foreclosed and lower priced homes has spiked, and a lack of inventory is becoming a common complaint," Yun said.



An NAR survey showed first-time buyers purchased about 30 percent of homes in July, and distressed homes accounted for 31 percent of transactions. Total housing inventory at the end of July rose 7.3 percent to 4.09 million existing homes available for sale. Inventory totals are 10.6 percent lower than a year ago when the number of unsold homes was at a record high, NAR noted.

Sales of newly constructed homes have been increasing dramatically. In July they jumped upward by 9.6 percent over the previous month. This followed a 9.1 percent rise in June. The annualized pace of new home sales is now at the highest level since September, 2008. New home median prices are down by about 11.5 percent compared with last year at this time. We're seeing strong indicators of a stabilizing housing market.



Top

National mortgage rates dropped again during most of August, dipping down to an average of 5.12 percent for a 30-year fixed-rate loan, but rising a bit during the last week of August to 5.14 percent. The 15-year fixed, particularly popular with homeowners seeking a finance loan, moved up slightly to 4.58 percent as we move into September, according to Freddie Mac, a major buyer of existing home mortgages. Rates are now near the lowest level since the end of May. Also, the number of applications for purchase mortgages increased each week in August.

Homeowners seeking a refinance mortgage are choosing a fixed-rate loan, as opposed to an adjustable-rate mortgage, in almost every case. About 99 percent of owners who originally had a conforming adjustable-rate mortgage (ARM) are now applying for a fixed-rate refinance loan, according to a report from Freddie Mac, a major buyer of existing home mortgages.



While 30-year fixed-rate mortgages continue to be preferred by home buyers, the shorter 15-year loan is preferred by most owners applying for a refinance loan. "When interest rates hit very low levels for fixed-rate mortgages, borrowers often take this opportunity to lower their interest rate and shorten their loan term," said Frank Nothaft, Freddie Mac's chief economist.



"Both refinancing borrowers and families buying homes are shying away from ARMs in the current environment. The small benefit from the lower rate of an ARM loan is not enticing enough to cover the risk that rates will rise in the future from today's historic lows," Nothaft said.

Real estate organization leaders are putting more intensive pressure on legislators to extend and expand the $8,000 first-time home buyer tax credit, now due to expire on December 1. Most industry leaders are calling on Congress to extend the tax credit program to at least November 30, 2010 and make it available to all buyers of homes to be used as their principal residence.



"If Congress acts to extend the tax credit program, it would spur 383,000 additional home sales, including 80,000 housing construction starts. That would creat nearly 350,000 jobs over the coming year," said Joe Robson, chairman of the National Association of Home Builders. "That's good for the economy and good for America."



Although there have been signs of economic stabilization in recent weeks, the unemployment rate is approaching double-digits. Without a concerted focus on the housing sector, that comprises more than 15 percent of the GDP, any hope for a recovery could fade, a NAHB report noted. "At best, it looks like a jobless recovery once it gets underway. This is why Congress needs to take bold, meaningful action now," Robson said. Other major real estate organizations are making similar recommendations.

Affordability is rising substantially in most regions nationwide, mostly due to significant home price declines and low mortgage interest rates. These factors produced strong sales of existing homes during the second quarter of this year, according to a report from the National Association of Realtors. Total sales, including single-family homes and condos, rose 3.8 percent nationally to a seasonally adjusted annual rate of 4.76 million units during the second quarter. That reflects a sizable increase over the 4.58 million units in the first quarter.



Thirty-nine states experienced sales increases from the first quarter, and nine states were higher than a year ago. The District of Columbia showed both quarterly and annual rises. Home sales are not only increasing but appear to be sustainable, it was noted by Lawrence Yun, NAR's chief economist. "With low interest rates, lower home prices and a first-time buyer tax credit, we've been seeing healthy increases in home sales," Yun said. "That's a hopeful sign for the economy."



Recently, there have been double-digit home sale gains in Idaho, Utah, New Mexico, Washington, Hawaii, New York, New Jersey, Maine, Vermont, Wisconsin, Indiana, South Dakota and Montana, he noted. The third quarter is off to a good start for the housing industry. The number of home construction starts and permits were up in July.

Homeowners are now much more realistic about the current value of their home than they were a few months ago. At the same time, they are more optimistic about the future of home values and the housing market generally.



This new trend was revealed in a recent survey. About 60 percent of homeowners now believe their home lost value during the past year. Actually, 83 percent of homes lost value during the past 12 months, the report noted. However, 81 percent of homeowners believe their home's value will not decrease over the next six months. The survey responses reflected a strong increase in consumer confidence in the housing market.



The survey also showed that many homeowners are still waiting on the sidelines to sell or buy a home. When asked about future plans to sell, 29 percent of homeowners said they would be "somewhat likely" to put their homes on the market within the next 12 months, particularly if they saw definitive signs of a real estate market turnaround.

The auctioning of homes is becoming an increasingly popular marketing technique - particularly for foreclosed properties and unique upper-tier "one of a kind" type homes that are difficult to appraise. Last year alone, about $58.6 billion in real properties were sold at the clap of an auctioneer's gavel, according to the National Auctioneers Association. Due to this increasing activity the NAA has launched a website listing real estate auctions in a "multiple listing service" style format.



Rather than fighting the trend, many Realtors are embracing home auctioning as a viable marketing method. In some cases, they contribute listed homes to group auctions. They can also register prospective bidders at an auction and receive a commission on a property they might buy. The National Association of Realtors now has educational programs for its members on auctioning and its benefits.



The auctioning of foreclosed properties is a particularly hot marketing niche. An increasing number of firms have recently entered this field, offering to auction groups of foreclosed homes owned by lenders who are very anxious to reduce their inventory.



Another type of residential property where auctioning is very effective is luxury or "trophy" homes, often selling for multi-million dollar prices. These properties are often difficult to accurately appraise, due to lack of comparable property sales. Also, the carrying cost of owning such luxury properties is very high, thus raising the "urgency level" of finding a buyer and consummating a sale. An auction can often solve that problem.

When it comes to making home-buying decisions, there are significant differences between men and women, it was revealed in a recent survey taken by Coldwell Banker Real Estate.



As an example of the findings, women are inclined to make up their mind more quickly than men, the survey responses revealed. When asked how long it took before they knew their home was "right" for them, nearly 70 percent of women had made up their mind the day they walked into the house, as apposed to 62 percent of men. About 55 percent of women would rather live closer to their extended family than to their point of employment. That choice was expressed by only 37 percent of men.



Despite some significant differences, most couples said no one really "wears the pants in their relationship" when it comes to decisions about their home. About 70 percent of respondents said their decision-making is basically mutual. When couples were asked how they would use an extra 12 x 12 foot room if it could be anything they wanted, 25 percent said bedroom; 15 percent office or study; 11 percent family room or den; 8 percent an entertainment center.



Interestingly, four times as many men as women said they would use the extra room for recreation or entertainment. The Coldwell Banker survey included direct input from 1,000 participating individuals.

Sometimes old becomes new in the home mortgage field. That could be the case with the shared appreciation mortgage (SAM) - an old concept that is showing signs of renewed interest. This is a mortgage where the lender agrees to an interest rate lower than the prevailing market rate in exchange for a share of the appreciated value of the home.



The share of the appreciation in value is known as the "contingent interest." It's determined and due at a sale closing or at the termination of the mortgage. In the past, these mortgages were particularly popular when prevailing rates were very high. Now, of course, mortgage rates are at historic lows.



The primary appeal of SAMs today is from homebuyers who are just marginally meet qualification requirements to finance the purchase of a home. This is most common with young first-time home buyers. The lower interest rate and mortgage payments of a SAM help buyers afford and qualify for financing. In a typical case, the lender might reduce the mortgage interest rate by a full percentage point when claiming 20 percent of the appreciated value of the property. A SAM should not be confused with an equity-sharing agreement. With a SAM, the borrower continues to owe the entire current balance of the loan even if the property's appraised value should decrease.







Top

The improving economy is changing the mindset of home buyers. Instead of moving from one community to another because of recession-related factors, today's families are more likely to be motivated by the desire to live in a bigger and better home with more amenities. The shifting trend was revealed in a recent survey conducted by Relocation.com. A similar survey last March indicated that the recession was driving the move of most families who relocate from one community to another.


"The change between the March and recent surveys indicate that consumer attitudes are shifting," the survey report noted. "With more people taking advantage of favorable real estate deals and falling rents, even as the recession continues to pinch most Americans, they suggest a boost in consumer confidence. While finances still factor into the moving decisions, the survey indicates that fewer people were feeling the need to move due to job losses, foreclosures or downsizing to cut costs. The people who looked to improve their living situation were a mix of those buying a home or renting who were seeking to take advantage of lower rents and home prices to move smart."


The key reason to move, as indicated by survey respondents, was the desire to live in a bigger and better home (26 percent). Next in line was to find a better neighborhood or community, followed by the desire to live closer to family and friends, and the need to find a home in an area with a lower cost of living.


Other reasons for moving were a change in marital status, the need for better or special schools, job loss or retirement. While finances are still important factors, fewer people are feeling the need to move because of job losses, foreclosures, or downsizing to cut cost, according to the survey report.

Urban farming, or community gardens, are becoming increasingly popular and beneficial to communities. More local governments are actively supporting this use of selected land parcels within their jurisdictions.



Urban farming is generally practiced for much needed income-earning or food-production activities. It also provides a viable source of recreation and relaxation for participating citizens who want to exercise their "green thumb" capabilities. The practice dates back to ancient Persia. During the past century it brings back memories of the Victory Gardens during the two world wars. These gardens were developed and maintained by citizens who wanted to produce foods, thus relieving supply pressures due to the war effort.



Today, about half of the world's population lives in urban areas. More people than ever before (about 800 million) are involved in urban agriculture. The Food and Agriculture Organization (FAO) describes urban gardens as "an industry that produces, processes and markets food, largely in response to the daily demands of consumers within a town or city. Participants apply intensive production methods, using and reusing natural resources and urban wastes to yield a diversity of crops."



An example of communities that now actively support urban gardens is Bloomington, Indiana. Their City Council passed an urban agriculture ordinance. With a unanimous vote, they ruled that urban gardens are permitted activities in all residential zones within the city.

Renters of apartments and other homes are showing increasing resistance to the high rents that have escalated over the past couple of years. However, those rents have been in decline recently in nearly every major market nationwide, according to a survey conducted by Real Facts, a rental research firm.



On average, asking rents are down nationwide. The overall average rent during the second quarter of this year was $968 per month - down from $978 per month during the first quarter. The markets where recent rents declined most dramatically are high-end markets, such as those in coastal California. The San Jose, California market posted the greatest decline in rents during the second quarter -- down by 3.8 percent from the previous quarter. This is followed by San Francisco with a 2.7 percent drop; Austin, Texas down by 2.4 percent; and Oxnard-Thousand Oaks, California with a 1.8 percent drop.



The one factor these markets have in common is that they are all located in exceptionally high-priced areas where average rental rates have been well over $1,000 per month.