Tuesday, December 27, 2011
Thursday, December 22, 2011
Wishing you and your loved ones Happy Holidays!
From Coldwell Banker Action Realty to you: Happy Holidays!
Mortgage Rates Keep Hitting Record Lows
December 22, 2011, 12:32 PM ET
By Mia Lamar and Nathalie Tadena
Mortgage rates in the U.S. again touched record lows over the past week,
according to Freddie Mac’s weekly survey of mortgage rates.
“Rates on 30-year fixed mortgages have been at or below 4% for the last eight weeks and now are almost 0.9 percentage point below where they were at the beginning of the year, which means that today’s home buyers are paying over $1,200 less per year on a $200,000 loan,” Freddie Mac Chief Economist Frank Nothaft said.
The 30-year fixed-rate mortgage averaged a new record low at 3.91% for the week ended Thursday, down from 3.94% the previous week and 4.81% a year ago. Rates on 15-year fixed-rate mortgages matched the prior week’s record low at 3.21%. A year ago, the 15-year fixed-rate mortgage rate averaged 4.15%.
Five-year Treasury-indexed hybrid adjustable-rate mortgages, or ARM, averaged 2.85%, down from 2.86% last week and 3.75% a year ago. One-year Treasury-indexed ARM rates averaged 2.77%, down from 2.81% in the prior week and 3.4% last year.
To obtain the rates, 30-year and 15-year fixed-rate mortgages required an 0.7-point and 0.8-point payment, respectively. Five-year and one-year adjustable rate mortgages required an average 0.6-point payment. A point is 1% of the mortgage amount, charged as prepaid interest.
The low rates could be helping to boost sales of existing homes, although falling prices are also pulling in buyers. Home sales in November hit the second-highest level of the year, rising 4% from October.
Original Post: http://blogs.wsj.com/developments/2011/12/22/mortgage-rates-keep-hitting-record-lows/
By Mia Lamar and Nathalie Tadena
Bloomberg News
Freddie Mac says the 30-year
fixed-rate mortgage was at a new record low.
“Rates on 30-year fixed mortgages have been at or below 4% for the last eight weeks and now are almost 0.9 percentage point below where they were at the beginning of the year, which means that today’s home buyers are paying over $1,200 less per year on a $200,000 loan,” Freddie Mac Chief Economist Frank Nothaft said.
The 30-year fixed-rate mortgage averaged a new record low at 3.91% for the week ended Thursday, down from 3.94% the previous week and 4.81% a year ago. Rates on 15-year fixed-rate mortgages matched the prior week’s record low at 3.21%. A year ago, the 15-year fixed-rate mortgage rate averaged 4.15%.
Five-year Treasury-indexed hybrid adjustable-rate mortgages, or ARM, averaged 2.85%, down from 2.86% last week and 3.75% a year ago. One-year Treasury-indexed ARM rates averaged 2.77%, down from 2.81% in the prior week and 3.4% last year.
To obtain the rates, 30-year and 15-year fixed-rate mortgages required an 0.7-point and 0.8-point payment, respectively. Five-year and one-year adjustable rate mortgages required an average 0.6-point payment. A point is 1% of the mortgage amount, charged as prepaid interest.
The low rates could be helping to boost sales of existing homes, although falling prices are also pulling in buyers. Home sales in November hit the second-highest level of the year, rising 4% from October.
Original Post: http://blogs.wsj.com/developments/2011/12/22/mortgage-rates-keep-hitting-record-lows/
Wednesday, December 7, 2011
Why Home Prices Are (and Aren’t) Stabilizing
By Nick Timiraos
December 6, 2011, 1:19 PM ET
Home prices are falling again, but some analysts see a silver lining because the prices of homes that aren’t selling out of foreclosure have been holding steady.
CoreLogic reported that home prices in October declined by 1.3% from September and by 3.9% from one year ago. A separate index released Monday by LPS Applied Analytics showed that home prices in September had dropped by 1.2% from August.
“Many housing statistics are basically moving sideways,” said Mark Fleming, chief economist at CoreLogic.
Still, the CoreLogic index shows an important emerging trend where home prices are stabilizing after excluding distressed sales.
What’s the difference between distressed sales and non-distressed sales?
Unlike traditional owners, banks are often faster to cut prices in order to unload properties quickly—or what are called “distressed” sales. The upshot is that, the more homes being sold by lenders in any given month the faster prices tend to fall.
This was clear throughout the initial years of the housing bust. Prices declined most sharply in 2008 as banks dumped foreclosed properties at fire-sale prices. Owner-occupants are less likely to list their homes for sale in the winter months, too, which means that each winter there are also drops in prices because distressed sales account for a growing share of sales.
Are prices of distressed homes falling at the same rate as non-distressed homes?
That’s been the case up until recently. While total home prices were down by 3.9% from one year ago, prices were down by just 0.5% from one year ago when excluding distressed sales. In September, total prices were down by 3.8% from one year ago, but non-distressed prices were down by 2.1%.
This shows that while price declines are resuming, they are not yet falling from one-year ago for non-distressed homes. In fact, during the first nine months of 2011, prices of non-distressed homes remained relatively stable, with year-over-year declines between 2% and 3%.
Analysts at Barclays Capital called this “the most important trend in the housing industry right now,” in a report published on Monday.
Why would any stabilization of non-distressed prices matter?
If it’s true that prices of non-distressed homes are stabilizing, even as distressed homes continue to fall in price, it would mean that a distressed home is “increasingly being seen as a poor substitute for a non-distressed home,” writes Stephen Kim, the Barclays housing analyst. He says it’s possible that the “bifurcation between distressed and non-distressed homes will only widen with the passage of time.”
Won’t the overhang of foreclosures put pressure on non-distressed prices anyway?
That’s all too possible. There are more than two million loans in some stage of foreclosure, and it may be too early to argue that those won’t in some way impact the sales prices of non-distressed homes. For one, homes that sell out of foreclosure at significantly lower prices could be used by appraisers as “comparable” sales that may make banks less willing to lend at an agreed sales price for a non-distressed home.
In certain markets where many homes are selling out of foreclosure, it’s hard to simply set aside distressed homes. “You can’t deny the fact that if half of homes that sold in San Diego in a given year were distressed, that is the trend,” said Kyle Lundstedt, managing director at LPS.
What could happen if this trend holds up, with distressed prices falling and non-distressed prices staying flat?
It could stabilize something else: home-buyer confidence. “There is nothing that strikes fear in a homeowner’s heart than to hear that his home value has declined,” writes Mr. Kim of Barclays. “But if it was home price trends that got us into this funk, it stands to reason that a recovery in sentiment will be similarly ushered in once price declines have abated—which is precisely what the CoreLogic price data shows us.”
Original Post: http://blogs.wsj.com/developments/2011/12/06/why-home-prices-are-and-arent-stabilizing/
- Getty Images
Home prices are falling again, but some analysts see a silver lining because the prices of homes that aren’t selling out of foreclosure have been holding steady.
CoreLogic reported that home prices in October declined by 1.3% from September and by 3.9% from one year ago. A separate index released Monday by LPS Applied Analytics showed that home prices in September had dropped by 1.2% from August.
“Many housing statistics are basically moving sideways,” said Mark Fleming, chief economist at CoreLogic.
Still, the CoreLogic index shows an important emerging trend where home prices are stabilizing after excluding distressed sales.
What’s the difference between distressed sales and non-distressed sales?
Unlike traditional owners, banks are often faster to cut prices in order to unload properties quickly—or what are called “distressed” sales. The upshot is that, the more homes being sold by lenders in any given month the faster prices tend to fall.
This was clear throughout the initial years of the housing bust. Prices declined most sharply in 2008 as banks dumped foreclosed properties at fire-sale prices. Owner-occupants are less likely to list their homes for sale in the winter months, too, which means that each winter there are also drops in prices because distressed sales account for a growing share of sales.
Are prices of distressed homes falling at the same rate as non-distressed homes?
That’s been the case up until recently. While total home prices were down by 3.9% from one year ago, prices were down by just 0.5% from one year ago when excluding distressed sales. In September, total prices were down by 3.8% from one year ago, but non-distressed prices were down by 2.1%.
This shows that while price declines are resuming, they are not yet falling from one-year ago for non-distressed homes. In fact, during the first nine months of 2011, prices of non-distressed homes remained relatively stable, with year-over-year declines between 2% and 3%.
Analysts at Barclays Capital called this “the most important trend in the housing industry right now,” in a report published on Monday.
Why would any stabilization of non-distressed prices matter?
If it’s true that prices of non-distressed homes are stabilizing, even as distressed homes continue to fall in price, it would mean that a distressed home is “increasingly being seen as a poor substitute for a non-distressed home,” writes Stephen Kim, the Barclays housing analyst. He says it’s possible that the “bifurcation between distressed and non-distressed homes will only widen with the passage of time.”
Won’t the overhang of foreclosures put pressure on non-distressed prices anyway?
That’s all too possible. There are more than two million loans in some stage of foreclosure, and it may be too early to argue that those won’t in some way impact the sales prices of non-distressed homes. For one, homes that sell out of foreclosure at significantly lower prices could be used by appraisers as “comparable” sales that may make banks less willing to lend at an agreed sales price for a non-distressed home.
In certain markets where many homes are selling out of foreclosure, it’s hard to simply set aside distressed homes. “You can’t deny the fact that if half of homes that sold in San Diego in a given year were distressed, that is the trend,” said Kyle Lundstedt, managing director at LPS.
What could happen if this trend holds up, with distressed prices falling and non-distressed prices staying flat?
It could stabilize something else: home-buyer confidence. “There is nothing that strikes fear in a homeowner’s heart than to hear that his home value has declined,” writes Mr. Kim of Barclays. “But if it was home price trends that got us into this funk, it stands to reason that a recovery in sentiment will be similarly ushered in once price declines have abated—which is precisely what the CoreLogic price data shows us.”
Original Post: http://blogs.wsj.com/developments/2011/12/06/why-home-prices-are-and-arent-stabilizing/
Wednesday, November 30, 2011
Q&A: Step-by-step guide to foreclosure
Q&A: Step-by-step guide to foreclosure
Tony
Answer: Each state has different versions of the foreclosure process. In Florida and some other states, a lender must get permission from a judge before it can repossess your home.
When you are served with a foreclosure lawsuit, your lender files a “complaint” against you, laying out the facts as it sees it. It’s basically telling a story as to why it thinks that it should get your house as payment toward the debt that you owe.
Along with the complaint, it serves several other documents, such as the “summons,” which gives the court power over you, and the “lis pendens,” which is a document filed in the public records to let everyone know that the property is the subject of a lawsuit.
When you are served with a lawsuit, you typically have 20 days to respond or you will be in “default,” which means that you have waived all of your defenses to the lawsuit, allowing the bank to proceed with the foreclosure. This is not a good idea. At this point, your attorney will respond to the suit with a “motion to dismiss” or an “answer.” If your attorney feels that the bank has no chance to win based on everything that it alleged in the complaint, he or she will file a motion to dismiss the suit.
If, however, the suit is not defective as filed, your attorney will file an answer, in which he or she admits or denies each of the bank’s statements from the complaint. The answer also will also set forth your “affirmative defenses.”
An affirmative defense explains why the bank should not get your home even though you may not be making your mortgage payments.
At this point in the lawsuit, several months or more will have gone by and the attorneys will begin “discovery.” That’s the process of getting to the truth by asking each other questions and getting documents from the other side for review.
During the discovery phase, you and your lender will probably go to a “mediation.” In a mediation, both you and your lender will lay out your side of the story before an unbiased third party, the mediator, who will encourage you both to voluntarily settle the case. At a mediation, no one is forced to settle the case. Both sides need to agree.
The discovery process can take six months or more. Once it is complete, you or your lender may make a “motion for summary judgment,” which is basically saying to the court that your side of the case is so strong that there is no possible way for you to lose. Most foreclosure cases end at the summary judgment hearing because the judge rules for the lender. But if the judge thinks there are still some questions to be answered, there will be a trial. At trial, the judge (or jury) will determine the truth and decide who wins the case.
If you win, the lender has failed and you keep your house. If the lender wins, which is much more likely, the judge will set a date for your home to be sold, with the proceeds from the sale going toward paying your lender back for the money that you borrowed.
If the fair market value of your home is not enough to pay your loan back in full, your lender may ask for a “deficiency judgment.” That gives the lender the right to come after you for the difference between the market value of your home and the amount that you owe your lender.
If the sale brings more money than you owe your bank, you get back what’s left over. (Check with an attorney about the process for receiving any refund.)
If you hire an attorney, the entire process typically will take about two years, during which time you can be working with your lender toward a loan modification, short sale or deed in lieu of foreclosure. Of course, if all else fails, there is always bankruptcy, but that’s a different topic for another column.
About the writer: Gary M. Singer is a Florida attorney and board-certified as an expert in real estate law by the Florida Bar. He is the chairperson of the Real Estate Section of the Broward County Bar Association and is an adjunct professor for the Nova Southeastern University Paralegal Studies program. Send him questions online at http://sunsent.nl/mR20t7 or follow him on Twitter @GarySingerLaw.
The information and materials in this column are provided for general informational purposes only and are not intended to be legal advice. No attorney-client relationship is formed. Nothing in this column is intended to substitute for the advice of an attorney, especially an attorney licensed in your jurisdiction.
© 2011 the Sun Sentinel (Fort Lauderdale, Fla.), Gary M. Singer. Distributed by McClatchy-Tribune News Service.
Original Post: http://www.floridarealtors.org/NewsAndEvents/article.cfm?id=267984
Monday, November 14, 2011
How to Figure the Fuzzy Math of Internet Home Values
Original Post: http://online.wsj.com/article/SB10001424052970204554204577026131448329006.html?mod=WSJ_RealEstate_RIGHTTopCarousel
By ALYSSA ABKOWITZ
Jason Gonsalves worked hard to turn his 6,500-square-foot stucco-and-stone home in the suburbs of Sacramento into the ultimate grown-up party pad, complete with game room, custom wine cellar and an infinity-edge pool overlooking Folsom Lake. When interest rates fell recently, Mr. Gonsalves, who runs a lobbying firm, looked into refinancing his $750,000 mortgage. That's when he got startling news—the home had dropped more than $200,000 in value while he was renovating.
Scott Pollack
Or at least, that's what one real-estate website told him. Another valued the house at only $640,500. And these online estimates left him all the more confused when a real-life appraiser, assessing the house for the refinancing loan, pinned its value at $1.5 million. "I have no idea how those numbers could be so different," Mr. Gonsalves says.
Right or wrong, they're the numbers millions of consumers are clamoring for. After years of real-estate pros holding all the informational cards in the home-sale game, Web-driven companies like Zillow, Homes.com and Realtor.com are reshuffling the deck, giving home shoppers and owners estimates of what almost any home is worth. People have flocked to the data in startling numbers: Together, four of the biggest sites that offer home-value estimates get 100 million visits a month, with web surfers using them to determine what to ask or bid for a home, or whether to refinance.
But for figures that can carry such weight, critics say, the estimates can be far rougher than most people realize. Valuations that are 20% or even 50% higher or lower than a property's eventual sale price are not uncommon, as the sites themselves acknowledge. The estimates frequently change, too—sometimes by hundreds of thousands of dollars—as sites plug new data into their algorithms.
All of the competitors make it clear their numbers are guesstimates, not gospel. "A Trulia estimate is just that—an estimate," says a disclaimer on that site's new home-value tool. Zillow goes a step further, publishing precise numbers about how imprecise its estimates can be. And every major site urges home-price hunters to consult appraisers or real-estate agents to refine their results.
But despite the disclaimers, homeowners and real-estate agents say, many Web surfers put enough faith in the estimates to sway the way they shop and sell.
After Frank and Sue Parks put their manor-style house in Louisville, Ky., on the market, they watched as Zillow put a $331,000 value on the dwelling in May; by July it had climbed to $1.5 million. (Zillow says the lower estimate reflected errors in its statistical model.) The couple got potential buyer referrals from the site, but they fended off a stream of lowball offers before they sold this fall. Mrs. Parks says the estimate roller coaster "really affected our ability to move the place."
Determining a home's value has traditionally been the job of an appraiser, who gathers data on recently sold homes and compares them with the "subject property" to arrive at an estimate.
In the late 1980s, economists started developing automated valuation models, or AVMs, computer models that could analyze data about comparable sales, square footage, number of bedrooms and the like, in a matter of seconds. For years, these tools were mostly reserved for in-house analysts at lending banks.
It wasn't until 2006 that Zillow took them to the masses, with its Zestimates, which now offer values for more than 100 million homes based on the company's own algorithms. "Humans don't make these decisions," says Stan Humphries, chief economist at Zillow.
Numbers like these have become weapons in the arsenal of consumers like Simms Jenkins, an Atlanta marketing executive, who has recently relied on online estimates to help him both buy and sell homes. "I can't imagine 25 years ago, when people would just go out and spend their entire Saturday looking at homes," he says. "You don't have to do that now."
But appraisers and real-estate consultants say the online models can veer off target with alarming frequency. Most data for the models come from two sources: records from tax assessors and listing data for recent sales. Collection is a challenge, however, because not every county tracks properties the same way—some calculate home size by number of bedrooms, others by overall square footage. And automated models aren't designed to account for the unique construction details that often make or break a deal, or for intangible factors like a neighborhood's gentrification. "You cannot use a computer model in certain areas and expect the value to come out right," says John May, the former assessor of Jefferson County, Ky., which includes the state's largest city, Louisville.
For all these reasons, models that banks use often add a "confidence score" to their estimates. Consumer-oriented sites, meanwhile, rely on disclaimers, some of which are eye-opening. Zillow surfers who read the "About Zestimates" page find out that the site's overall error rate—the amount its estimates vary from a homes' actual value—is 8.5%, and that about one-fourth of the estimates are at least 20% off the eventual sale price. In some places, the numbers are far more dramatic: In Hamilton County, Ohio, which includes Cincinnati, it's 82%.
The sites argue that, over time, edits and corrections will help them perfect their numbers—with many fixes coming from their customers.
On Homes.com, anyone who knows a homeowner's surname and the year the home was last purchased, can edit the details of a property listing in ways that can eventually change the estimated value.
Zillow has accepted revisions on 25 million homes—perhaps the strongest testament to how seriously consumers take its estimates. Today, the site says its figures are accurate enough to give consumers a good sense of any home's value. In the meantime, says Mr. Humphries, its economist, "We're always tweaking the algorithm or building a new one."
—Email: editors@smartmoney.com
By ALYSSA ABKOWITZ
Jason Gonsalves worked hard to turn his 6,500-square-foot stucco-and-stone home in the suburbs of Sacramento into the ultimate grown-up party pad, complete with game room, custom wine cellar and an infinity-edge pool overlooking Folsom Lake. When interest rates fell recently, Mr. Gonsalves, who runs a lobbying firm, looked into refinancing his $750,000 mortgage. That's when he got startling news—the home had dropped more than $200,000 in value while he was renovating.
Scott Pollack
Or at least, that's what one real-estate website told him. Another valued the house at only $640,500. And these online estimates left him all the more confused when a real-life appraiser, assessing the house for the refinancing loan, pinned its value at $1.5 million. "I have no idea how those numbers could be so different," Mr. Gonsalves says.
Right or wrong, they're the numbers millions of consumers are clamoring for. After years of real-estate pros holding all the informational cards in the home-sale game, Web-driven companies like Zillow, Homes.com and Realtor.com are reshuffling the deck, giving home shoppers and owners estimates of what almost any home is worth. People have flocked to the data in startling numbers: Together, four of the biggest sites that offer home-value estimates get 100 million visits a month, with web surfers using them to determine what to ask or bid for a home, or whether to refinance.
But for figures that can carry such weight, critics say, the estimates can be far rougher than most people realize. Valuations that are 20% or even 50% higher or lower than a property's eventual sale price are not uncommon, as the sites themselves acknowledge. The estimates frequently change, too—sometimes by hundreds of thousands of dollars—as sites plug new data into their algorithms.
All of the competitors make it clear their numbers are guesstimates, not gospel. "A Trulia estimate is just that—an estimate," says a disclaimer on that site's new home-value tool. Zillow goes a step further, publishing precise numbers about how imprecise its estimates can be. And every major site urges home-price hunters to consult appraisers or real-estate agents to refine their results.
But despite the disclaimers, homeowners and real-estate agents say, many Web surfers put enough faith in the estimates to sway the way they shop and sell.
After Frank and Sue Parks put their manor-style house in Louisville, Ky., on the market, they watched as Zillow put a $331,000 value on the dwelling in May; by July it had climbed to $1.5 million. (Zillow says the lower estimate reflected errors in its statistical model.) The couple got potential buyer referrals from the site, but they fended off a stream of lowball offers before they sold this fall. Mrs. Parks says the estimate roller coaster "really affected our ability to move the place."
Determining a home's value has traditionally been the job of an appraiser, who gathers data on recently sold homes and compares them with the "subject property" to arrive at an estimate.
In the late 1980s, economists started developing automated valuation models, or AVMs, computer models that could analyze data about comparable sales, square footage, number of bedrooms and the like, in a matter of seconds. For years, these tools were mostly reserved for in-house analysts at lending banks.
It wasn't until 2006 that Zillow took them to the masses, with its Zestimates, which now offer values for more than 100 million homes based on the company's own algorithms. "Humans don't make these decisions," says Stan Humphries, chief economist at Zillow.
Numbers like these have become weapons in the arsenal of consumers like Simms Jenkins, an Atlanta marketing executive, who has recently relied on online estimates to help him both buy and sell homes. "I can't imagine 25 years ago, when people would just go out and spend their entire Saturday looking at homes," he says. "You don't have to do that now."
But appraisers and real-estate consultants say the online models can veer off target with alarming frequency. Most data for the models come from two sources: records from tax assessors and listing data for recent sales. Collection is a challenge, however, because not every county tracks properties the same way—some calculate home size by number of bedrooms, others by overall square footage. And automated models aren't designed to account for the unique construction details that often make or break a deal, or for intangible factors like a neighborhood's gentrification. "You cannot use a computer model in certain areas and expect the value to come out right," says John May, the former assessor of Jefferson County, Ky., which includes the state's largest city, Louisville.
For all these reasons, models that banks use often add a "confidence score" to their estimates. Consumer-oriented sites, meanwhile, rely on disclaimers, some of which are eye-opening. Zillow surfers who read the "About Zestimates" page find out that the site's overall error rate—the amount its estimates vary from a homes' actual value—is 8.5%, and that about one-fourth of the estimates are at least 20% off the eventual sale price. In some places, the numbers are far more dramatic: In Hamilton County, Ohio, which includes Cincinnati, it's 82%.
The sites argue that, over time, edits and corrections will help them perfect their numbers—with many fixes coming from their customers.
On Homes.com, anyone who knows a homeowner's surname and the year the home was last purchased, can edit the details of a property listing in ways that can eventually change the estimated value.
Zillow has accepted revisions on 25 million homes—perhaps the strongest testament to how seriously consumers take its estimates. Today, the site says its figures are accurate enough to give consumers a good sense of any home's value. In the meantime, says Mr. Humphries, its economist, "We're always tweaking the algorithm or building a new one."
—Email: editors@smartmoney.com
Thursday, November 10, 2011
Windows Over Broadway
Homeowners Richard and Harriet Fields have learned to live their lives on
display. The floor-to-ceiling windows in their loft in Manhattan offer great
views and a lack of privacy.
Monday, October 31, 2011
Beverly Hills Selling Spree
Jennifer Aniston nabs $36 million; high-end homes are moving in the wealthy
enclave
By JULIET CHUNG OCTOBER 28, 2011 for WSJ.com
In August, fashion designer Vera Wang bought a midcentury modern-style home in Beverly Hills for $9 million from real-estate investor and designer Steven Hermann. He'd bought it for $5 million in 2008, then spent more than $3 million on a gut renovation.
In nearby Holmby Hills, Lions Gate Entertainment Chief Executive Jon Feltheimer and his wife, Laurie, recently sold a five-bedroom home that they had bought in 2009 for $9.8 million. A family spokesman said the Feltheimers intended to build a new home but sold after deciding the process would be too time-consuming. They got $14.4 million, from Russian soccer player Gurgen Khachatryan.
At a time when luxury homes are making up an increasingly large share of foreclosures, an unexpected number of high-end owners in and near Beverly Hills are demanding—and in some cases getting—millions more for properties they've recently bought.
Brokers say the appetite has remained remarkably healthy for prime property in this area, particularly for renovated homes. For the year to date ended Thursday, 25 homes in the greater Beverly Hills, Bel Air and Holmby Hills area had sold for $10 million or more, according to Jeff Hyland of Hilton & Hyland, a Christie's International Real Estate affiliate. That's more than the 16 and 21 sold over the same period in the hot years of 2006 and 2007.
Last summer, Jennifer Aniston sold her nearly 10,000-square-foot Beverly Hills home, which she bought in 2006 for $13.5 million, for $36 million. The actress set a local price-per-square-foot record—$3,600—with the sale. Designed by late architect Harold W. Levitt, the home recalled Bali and featured five bedrooms, extensive stonework and a bridge over a koi pond. A spokesman for Ms. Aniston didn't respond to requests for comment.
Not far from Ms. Aniston's former home is another house designed by Mr. Levitt that's been heavily renovated to include Asian influences. The house went on the market in June asking $14.9 million; it's now asking $10.9 million. Owner Tim Mulcahy says he bought the house speculatively, paying $4.6 million for it last year and spending a further $3.5 million on the renovation. Mr. Mulcahy says he's aware there's a housing downturn but calls Beverly Hills a unique market. "I don't feel I've lost money; I feel that I will have some gain," he adds.
In Beverly Hills' gated enclave of Beverly Park, a European businessman bought a 20,000-square-foot contemporary, sight unseen, for $16.5 million last fall. Now, he is asking $25 million for the house—without having done any work on it.
"We thought, 'Let's throw it up on the market and see what happens,' " says the broker, Josh Altman of Hilton & Hyland, of the home, which sits on nearly seven acres and has a dining room with a grotto and waterfall. The attempted sale makes sense, Mr. Altman says, because he was able to get his client a good price on the home and because similar super-size homes in the area are scarce.
Also testing the waters: Paramount Chairman Brad Grey, who, after buying a home in Holmby Hills in the winter for $18.5 million, put it back on the market in September for $23.5 million. Mr. Grey never intended to sell the property, says his broker, Stephen Shapiro of the Westside Estate Agency. He adds that Mr. Grey decided to sell after renovating another property he owns nearby.
Write to Juliet Chung at juliet.chung@wsj.com
By JULIET CHUNG OCTOBER 28, 2011 for WSJ.com
In August, fashion designer Vera Wang bought a midcentury modern-style home in Beverly Hills for $9 million from real-estate investor and designer Steven Hermann. He'd bought it for $5 million in 2008, then spent more than $3 million on a gut renovation.
In nearby Holmby Hills, Lions Gate Entertainment Chief Executive Jon Feltheimer and his wife, Laurie, recently sold a five-bedroom home that they had bought in 2009 for $9.8 million. A family spokesman said the Feltheimers intended to build a new home but sold after deciding the process would be too time-consuming. They got $14.4 million, from Russian soccer player Gurgen Khachatryan.
At a time when luxury homes are making up an increasingly large share of foreclosures, an unexpected number of high-end owners in and near Beverly Hills are demanding—and in some cases getting—millions more for properties they've recently bought.
Brokers say the appetite has remained remarkably healthy for prime property in this area, particularly for renovated homes. For the year to date ended Thursday, 25 homes in the greater Beverly Hills, Bel Air and Holmby Hills area had sold for $10 million or more, according to Jeff Hyland of Hilton & Hyland, a Christie's International Real Estate affiliate. That's more than the 16 and 21 sold over the same period in the hot years of 2006 and 2007.
Last summer, Jennifer Aniston sold her nearly 10,000-square-foot Beverly Hills home, which she bought in 2006 for $13.5 million, for $36 million. The actress set a local price-per-square-foot record—$3,600—with the sale. Designed by late architect Harold W. Levitt, the home recalled Bali and featured five bedrooms, extensive stonework and a bridge over a koi pond. A spokesman for Ms. Aniston didn't respond to requests for comment.
Not far from Ms. Aniston's former home is another house designed by Mr. Levitt that's been heavily renovated to include Asian influences. The house went on the market in June asking $14.9 million; it's now asking $10.9 million. Owner Tim Mulcahy says he bought the house speculatively, paying $4.6 million for it last year and spending a further $3.5 million on the renovation. Mr. Mulcahy says he's aware there's a housing downturn but calls Beverly Hills a unique market. "I don't feel I've lost money; I feel that I will have some gain," he adds.
In Beverly Hills' gated enclave of Beverly Park, a European businessman bought a 20,000-square-foot contemporary, sight unseen, for $16.5 million last fall. Now, he is asking $25 million for the house—without having done any work on it.
"We thought, 'Let's throw it up on the market and see what happens,' " says the broker, Josh Altman of Hilton & Hyland, of the home, which sits on nearly seven acres and has a dining room with a grotto and waterfall. The attempted sale makes sense, Mr. Altman says, because he was able to get his client a good price on the home and because similar super-size homes in the area are scarce.
Also testing the waters: Paramount Chairman Brad Grey, who, after buying a home in Holmby Hills in the winter for $18.5 million, put it back on the market in September for $23.5 million. Mr. Grey never intended to sell the property, says his broker, Stephen Shapiro of the Westside Estate Agency. He adds that Mr. Grey decided to sell after renovating another property he owns nearby.
Write to Juliet Chung at juliet.chung@wsj.com
Monday, October 17, 2011
It's Time to Buy That House
By JACK HOUGH
U.S. house prices have plunged by nearly a third since 2006, and homeownership rates are falling at the fastest pace since the Great Depression.
The good news? Two key measures now suggest it's an excellent time to buy a house, either to live in for the long term or for investment income (but not for a quick flip). First, the nation's ratio of house prices to yearly rents is nearly restored to its prebubble average. Second, when mortgage rates are taken into consideration, houses are the most affordable they have been in decades.
Two of the silliest mantras during the real-estate bubble were that a house is the best investment you will ever make and that a renter "throws money down the drain." Whether buying is a better deal than renting isn't a stagnant fact but a changing condition that depends on the relationship between prices and rents, the cost of financing and other factors.
![[UPSIDE]](http://si.wsj.net/public/resources/images/BF-AB641_UPSIDE_NS_20111014202407.jpg)
But the math is turning in buyers' favor. Stock-oriented folks can think of a house's price/rent ratio as akin to a stock's price/earnings ratio, in that it compares the cost of an asset with the money the asset is capable of generating. For investors, a lower ratio suggests more income for the price. For prospective homeowners, a lower ratio makes owning more attractive than renting, all else equal.
Nationwide, the ratio of home prices to yearly rents is 11.3, down from 18.5 at the peak of the bubble, according to Moody's Analytics. The average from 1989 to 2003 was about 10, so valuations aren't quite back to normal.
But for most home buyers, mortgage rates are a key determinant of their total costs. Rates are so low now that houses in many markets look like bargains, even if price/rent ratios aren't hitting new lows. The 30-year mortgage rate rose to 4.12% this week from a record low of 3.94% last week, Freddie Mac said Thursday. (The rates assume 0.8% in prepaid interest, or "points.") The latest rate is still less than half the average since 1971.
As a result, house payments are more affordable than they have been in decades. The National Association of Realtors Housing Affordability Index hit 183.7 in August, near its record high in data going back to 1970. The index's historic average is roughly 120. A reading of 100 would mean that a median-income family with a 20% down payment can afford a mortgage on a median-price home. So today's buyers can afford handsome houses—but prudent ones might opt for moderate houses with skimpy payments.
For example, the median home in the greater Phoenix market, including houses, condos and co-ops, costs $121,700, according to Zillow.com. With a 20% down payment and a 4.12% mortgage rate, a buyer's monthly payment would be about $470. Rent for a comparable house would be more than $1,100 a month, according to data provided by Zillow.com.
Of course, all of this assumes mortgages are available—no given now that lending standards have tightened. But long-term data on down payments and credit scores suggest conditions are more normal than many buyers think, according to Stan Humphries, chief economist at Zillow. "If you have good credit, a job and a down payment, you can get a mortgage," Mr. Humphries says. "There's more paperwork and scrutiny than five years ago, but things are pretty much like they were in the '80s and '90s."
Not all housing markets are bargains. Mr. Humphries says Zillow has developed a new price/rent ratio that uses estimates for each individual property rather than city medians, to better reflect the choices facing typical buyers. A fresh look at the numbers suggests Detroit and Miami are plenty cheap for buyers, with price/rent ratios of 5.6 and 7.7, respectively. New York and San Francisco are more expensive, with ratios of 17.6 and 17.2, respectively. The median ratio for 169 markets is 10.7.
For investors seeking income, one back-of-the-envelope way of seeing how these numbers stack up against yields for other assets is to divide 1 by the price/rent ratio, resulting in a rent "yield." The median market's rent yield is 9.3% and Detroit's is 17.9%.
Investors would then subtract for taxes, insurance, upkeep and other expenses—costs that vary widely. But suppose total costs were 4% of the purchase price. That would still leave a 5.3% rent yield in the typical market. With the 10-year Treasury yield at 2.2% and the Standard & Poor's 500-stock index carrying a dividend yield of 2.1%, rents for residential housing in many markets look attractive.
A few caveats are in order. First, not all transactions are average ones. Even in low-priced markets, buyers should shop carefully. Second, prices could fall further. Celia Chen, a senior director at Moody's Analytics, expects prices to drop 3% before bottoming early next year and rising slowly thereafter. "If the economy slips back into recession, however, we could easily see a 10% drop," Ms. Chen says.
And property "flipping" can be dangerous even when prices are rising. That is because, absent a real-estate boom, house price gains simply aren't that exciting. Research by Yale economist Robert Shiller suggests houses more or less track the rate of inflation over long time periods.
Houses aren't the magic wealth creators they were made out to be during the bubble. But when prices are low, loans are cheap and plump investment yields are scarce, buyers should jump.
—Jack Hough is a columnist at SmartMoney.com. Email: jack.hough@dowjones.com
U.S. house prices have plunged by nearly a third since 2006, and homeownership rates are falling at the fastest pace since the Great Depression.
The good news? Two key measures now suggest it's an excellent time to buy a house, either to live in for the long term or for investment income (but not for a quick flip). First, the nation's ratio of house prices to yearly rents is nearly restored to its prebubble average. Second, when mortgage rates are taken into consideration, houses are the most affordable they have been in decades.
Two of the silliest mantras during the real-estate bubble were that a house is the best investment you will ever make and that a renter "throws money down the drain." Whether buying is a better deal than renting isn't a stagnant fact but a changing condition that depends on the relationship between prices and rents, the cost of financing and other factors.
But the math is turning in buyers' favor. Stock-oriented folks can think of a house's price/rent ratio as akin to a stock's price/earnings ratio, in that it compares the cost of an asset with the money the asset is capable of generating. For investors, a lower ratio suggests more income for the price. For prospective homeowners, a lower ratio makes owning more attractive than renting, all else equal.
Nationwide, the ratio of home prices to yearly rents is 11.3, down from 18.5 at the peak of the bubble, according to Moody's Analytics. The average from 1989 to 2003 was about 10, so valuations aren't quite back to normal.
But for most home buyers, mortgage rates are a key determinant of their total costs. Rates are so low now that houses in many markets look like bargains, even if price/rent ratios aren't hitting new lows. The 30-year mortgage rate rose to 4.12% this week from a record low of 3.94% last week, Freddie Mac said Thursday. (The rates assume 0.8% in prepaid interest, or "points.") The latest rate is still less than half the average since 1971.
As a result, house payments are more affordable than they have been in decades. The National Association of Realtors Housing Affordability Index hit 183.7 in August, near its record high in data going back to 1970. The index's historic average is roughly 120. A reading of 100 would mean that a median-income family with a 20% down payment can afford a mortgage on a median-price home. So today's buyers can afford handsome houses—but prudent ones might opt for moderate houses with skimpy payments.
For example, the median home in the greater Phoenix market, including houses, condos and co-ops, costs $121,700, according to Zillow.com. With a 20% down payment and a 4.12% mortgage rate, a buyer's monthly payment would be about $470. Rent for a comparable house would be more than $1,100 a month, according to data provided by Zillow.com.
Of course, all of this assumes mortgages are available—no given now that lending standards have tightened. But long-term data on down payments and credit scores suggest conditions are more normal than many buyers think, according to Stan Humphries, chief economist at Zillow. "If you have good credit, a job and a down payment, you can get a mortgage," Mr. Humphries says. "There's more paperwork and scrutiny than five years ago, but things are pretty much like they were in the '80s and '90s."
Not all housing markets are bargains. Mr. Humphries says Zillow has developed a new price/rent ratio that uses estimates for each individual property rather than city medians, to better reflect the choices facing typical buyers. A fresh look at the numbers suggests Detroit and Miami are plenty cheap for buyers, with price/rent ratios of 5.6 and 7.7, respectively. New York and San Francisco are more expensive, with ratios of 17.6 and 17.2, respectively. The median ratio for 169 markets is 10.7.
For investors seeking income, one back-of-the-envelope way of seeing how these numbers stack up against yields for other assets is to divide 1 by the price/rent ratio, resulting in a rent "yield." The median market's rent yield is 9.3% and Detroit's is 17.9%.
Investors would then subtract for taxes, insurance, upkeep and other expenses—costs that vary widely. But suppose total costs were 4% of the purchase price. That would still leave a 5.3% rent yield in the typical market. With the 10-year Treasury yield at 2.2% and the Standard & Poor's 500-stock index carrying a dividend yield of 2.1%, rents for residential housing in many markets look attractive.
A few caveats are in order. First, not all transactions are average ones. Even in low-priced markets, buyers should shop carefully. Second, prices could fall further. Celia Chen, a senior director at Moody's Analytics, expects prices to drop 3% before bottoming early next year and rising slowly thereafter. "If the economy slips back into recession, however, we could easily see a 10% drop," Ms. Chen says.
And property "flipping" can be dangerous even when prices are rising. That is because, absent a real-estate boom, house price gains simply aren't that exciting. Research by Yale economist Robert Shiller suggests houses more or less track the rate of inflation over long time periods.
Houses aren't the magic wealth creators they were made out to be during the bubble. But when prices are low, loans are cheap and plump investment yields are scarce, buyers should jump.
—Jack Hough is a columnist at SmartMoney.com. Email: jack.hough@dowjones.com
Wednesday, October 12, 2011
Coldwell Banker: Inside Malibu's Famous $75 Million Mansion
Coldwell Banker's Chris Cortazzo presents a tour of the home where 'True Blood' and 'Funny People' were filmed.
Tuesday, October 4, 2011
Report: Fannie Mae, Regulator Missed Foreclosure Abuses
Original Post: http://blogs.wsj.com/developments/2011/10/03/report-fannie-mae-regulator-missed-foreclosure-abuses/
By Alan Zibel and Nick Timiraos
Mortgage titan Fannie Mae and its federal regulator failed to pay enough attention to mounting evidence of abuses at foreclosure-processing law firms until the issue gained broad public attention last year, a federal watchdog says.
The inspector general of the Federal Housing Finance Agency, in a report being released Tuesday, questioned Fannie Mae’s oversight of law firms that conduct foreclosures on its behalf.
Fannie uses a network of law firms to handle foreclosures for the banks and other mortgage servicing companies that collect payments on loans backed by Fannie. The network arrangement allows Fannie to negotiate discounted rates with approved firms, which in turn can lock in business from the nation’s largest mortgage investor.
The inspector general’s report indicated that the FHFA had a growing awareness of potential foreclosure-processing problems in June 2010, when it conducted a two-day field visit to Florida. The FHFA, according to the inspector general, found that “documentation problems were evident and law firms…were not devoting the time necessary to their cases due to Fannie Mae’s flat fee structure and volume-based processing model.”
After that Florida trip, FHFA staff told Fannie officials that its attorneys were “increasingly unprepared when they enter the courtroom,” leading to a larger backlog of foreclosures.
But the warnings weren’t enough to head off widespread document problems that surfaced months later. In September 2010, banks suspended foreclosures after it emerged that they were using so-called robo-signers to process hundreds of documents without verifying their contents. Fannie and its smaller sibling, Freddie Mac, terminated one of their main Florida law firms last November after uncovering widespread abuses.
In a review completed by the FHFA this past January, the regulator concluded that Fannie Mae could have reacted to foreclosure deficiencies sooner. It also found that Fannie had “inadequate” controls and monitoring of its legal network.
Homeowners “shouldn’t have to worry whether they will be victims of foreclosure abuse,” said Steve Linick, the inspector general. The failures by FHFA and Fannie to provide proper oversight of foreclosure attorneys represent a “breach of the public trust and an assault on the integrity of our justice system,” said Rep. Elijah Cummings (D., Md.), who made the initial request for the inspector general to conduct the report.
An FHFA spokeswoman said that the FHFA is “concluding our supervisory work in this area and we will direct the enterprises to take whatever action is warranted once we are done.” Fannie Mae declined to comment on the report.
Fannie last year hired an outside law firm to do compliance for its legal network and to conduct a review of its largest Florida law firms. But the inspector general faulted those reviews for being too narrow in scope and said they “missed the opportunity to confirm and provide a better understanding of the allegations of foreclosure abuses.”
The report also said that the FHFA should have a formal process to share information about “problem law firms.” For example, the report said Freddie Mac last year terminated a law firm that processed over 43% of Fannie Mae’s foreclosures in Florida and voluntarily told Fannie it had terminated the firm, in part due to foreclosure processing abuses. Fannie decided to retain the firm, the report said, in part because it concluded that the cost of transferring its files to a new firm “would be substantial.”
The report also noted that Fannie had been aware of potential problems with legal filings in foreclosures since late 2003, when a Fannie Mae shareholder notified the company of potential abuses. An outside law firm, Baker & Hostetler LLP, conducted an independent review for Fannie in 2006 in response to the shareholder’s allegations. The report’s findings were first reported by The Wall Street Journal in March.
The 2006 review found no evidence that homeowners had been improperly placed in foreclosure, but it said that foreclosure attorneys working on Fannie’s behalf in Florida had “routinely made” false statements in court in an effort to more quickly process foreclosures, among other warnings.
Fannie officials also told investigators in 2006 that the company had opted against performing regular reviews of its foreclosure attorneys because the company’s lawyers felt the firm would be better insulated from responsibility for misconduct. The report said the approach was under review at the time, and Fannie in 2008 revamped its attorney network.
A Fannie spokeswoman said the company took a series of steps to address specific issues identified by the 2006 report.
By Alan Zibel and Nick Timiraos
Mortgage titan Fannie Mae and its federal regulator failed to pay enough attention to mounting evidence of abuses at foreclosure-processing law firms until the issue gained broad public attention last year, a federal watchdog says.
The inspector general of the Federal Housing Finance Agency, in a report being released Tuesday, questioned Fannie Mae’s oversight of law firms that conduct foreclosures on its behalf.
Fannie uses a network of law firms to handle foreclosures for the banks and other mortgage servicing companies that collect payments on loans backed by Fannie. The network arrangement allows Fannie to negotiate discounted rates with approved firms, which in turn can lock in business from the nation’s largest mortgage investor.
The inspector general’s report indicated that the FHFA had a growing awareness of potential foreclosure-processing problems in June 2010, when it conducted a two-day field visit to Florida. The FHFA, according to the inspector general, found that “documentation problems were evident and law firms…were not devoting the time necessary to their cases due to Fannie Mae’s flat fee structure and volume-based processing model.”
After that Florida trip, FHFA staff told Fannie officials that its attorneys were “increasingly unprepared when they enter the courtroom,” leading to a larger backlog of foreclosures.
But the warnings weren’t enough to head off widespread document problems that surfaced months later. In September 2010, banks suspended foreclosures after it emerged that they were using so-called robo-signers to process hundreds of documents without verifying their contents. Fannie and its smaller sibling, Freddie Mac, terminated one of their main Florida law firms last November after uncovering widespread abuses.
In a review completed by the FHFA this past January, the regulator concluded that Fannie Mae could have reacted to foreclosure deficiencies sooner. It also found that Fannie had “inadequate” controls and monitoring of its legal network.
Homeowners “shouldn’t have to worry whether they will be victims of foreclosure abuse,” said Steve Linick, the inspector general. The failures by FHFA and Fannie to provide proper oversight of foreclosure attorneys represent a “breach of the public trust and an assault on the integrity of our justice system,” said Rep. Elijah Cummings (D., Md.), who made the initial request for the inspector general to conduct the report.
An FHFA spokeswoman said that the FHFA is “concluding our supervisory work in this area and we will direct the enterprises to take whatever action is warranted once we are done.” Fannie Mae declined to comment on the report.
Fannie last year hired an outside law firm to do compliance for its legal network and to conduct a review of its largest Florida law firms. But the inspector general faulted those reviews for being too narrow in scope and said they “missed the opportunity to confirm and provide a better understanding of the allegations of foreclosure abuses.”
The report also said that the FHFA should have a formal process to share information about “problem law firms.” For example, the report said Freddie Mac last year terminated a law firm that processed over 43% of Fannie Mae’s foreclosures in Florida and voluntarily told Fannie it had terminated the firm, in part due to foreclosure processing abuses. Fannie decided to retain the firm, the report said, in part because it concluded that the cost of transferring its files to a new firm “would be substantial.”
The report also noted that Fannie had been aware of potential problems with legal filings in foreclosures since late 2003, when a Fannie Mae shareholder notified the company of potential abuses. An outside law firm, Baker & Hostetler LLP, conducted an independent review for Fannie in 2006 in response to the shareholder’s allegations. The report’s findings were first reported by The Wall Street Journal in March.
The 2006 review found no evidence that homeowners had been improperly placed in foreclosure, but it said that foreclosure attorneys working on Fannie’s behalf in Florida had “routinely made” false statements in court in an effort to more quickly process foreclosures, among other warnings.
Fannie officials also told investigators in 2006 that the company had opted against performing regular reviews of its foreclosure attorneys because the company’s lawyers felt the firm would be better insulated from responsibility for misconduct. The report said the approach was under review at the time, and Fannie in 2008 revamped its attorney network.
A Fannie spokeswoman said the company took a series of steps to address specific issues identified by the 2006 report.
Tuesday, September 27, 2011
Why You Should Consider Buying a New Home
Monday, September 26, 2011
Rate Drop Spurs Home Refinancing
By NICK TIMIRAOS SEPTEMBER 24, 2011 for WSJ.com
The 30-year fixed-rate mortgage dipped below 4%, possibly triggering a refinancing boom for many of the same borrowers who already have taken advantage of rock-bottom interest rates.
According to a survey by Credit Suisse on Thursday, lenders were offering an average rate of 3.91% on 30-year fixed-rate mortgages to borrowers who paid "points," or fees, worth 1% of the loan balance.
Wells Fargo & Co. advertised on its website Friday afternoon a 3.875% rate on a 30-year fixed-rate mortgage, with fees of 1% on the loan.
Lou Barnes, a mortgage banker in Boulder, Colo., refinanced four
borrowers on Thursday into 30-year fixed-rate mortgages at 3.875%. "At this
point, the only people being helped are those who need it the least," he
said.
For the home-sales market, low rates will help make homes more affordable,
but may not boost home buying if consumers are worried about the economy.
"Today, the buyers' concern is the falling value of homes," said Mr. Barnes.
"I've had potential buyers say: 'I don't care if rates are zero if prices are
going to fall again.' "
Mortgages rates fell this past week after the Federal Reserve announced
Wednesday that it would begin plowing payments from its portfolio of $885
billion in government-backed mortgage bonds back into mortgages. That caused a
rally in the mortgage market because the Fed's move eliminates the risk that the
central bank would be forced to sell its mortgage holdings as refinancing
increases.
Mortgages rarely have been this cheap. A 1961 study by the National Bureau of
Economic Research shows that loans made to World War II veterans in the late
1940s were available with 4% rates.
More than 60% of borrowers with a 30-year fixed-rate mortgage could reduce
their mortgage rate by one percentage point, up from 42% at the beginning of
August, according to Credit Suisse.
But some borrowers haven't been able to refinance rates because they can't
qualify under loan standards that are much tighter than at the time of their
first loan. Other borrowers don't have enough equity in their home to
refinance.
Before the housing crisis, refinancing tended to jump when borrowers were
able to lower their rate by 0.5 percentage point. Since 2009, mortgage
applications have taken longer to process, while riskier borrowers have faced
higher refinancing costs. As a result, borrowers typically now refinance when
rates are 1.5 percentage points below their current rate, according to Bank of
America mortgage analysts.
Donald Fraser, a 56-year old pathology assistant who
shaved a full percentage point off the 4.875% mortgage he got last year, said he
plans to stash most of the $2,700 a year in savings into retirement. "I don't
think we'll ever see these rates in my lifetime or yours," he said.
It isn't clear how much these lower rates will help the economy, in part
because a weakening economy is fueling the decline.
"We felt lucky. At the same time, we're lucky at the expense of a suffering
market," said Richard Klompus, who refinanced his Glastonbury, Conn., home with
a 4%, 30-year fixed-rate mortgage.
Mr. Klompus, 49, had a hybrid adjustable-rate mortgage that carries a 4.5%
rate for the first five years before moving to a variable rate. He paid tens of
thousands of dollars to pay down his loan balance to $417,000, the maximum size
for loans eligible for purchase by mortgage companies Fannie Mae and Freddie
Mac.
To encourage refinancing, Obama administration officials and U.S. regulators
are in talks with lenders about ways to revamp an existing White House
refinancing initiative designed to help borrowers with little or no equity. The
program is open to borrowers whose loans are backed by Fannie and Freddie, which
guarantee about half of all outstanding home loans.
The Federal Housing Finance Agency, which oversees Fannie and Freddie, is
weighing a series of changes to the program, which has been snarled by a series
of technical hurdles. Just 838,000 borrowers have refinanced, short of the
hoped-for four million to five million. Just 63,000 of those borrowers have
loans worth more than 105% of their home value.
"It hasn't worked, to be honest," said James Parrott, a top White House
housing adviser, in a speech to industry executives this week. He said the
housing market is at a "critical juncture" and policy decisions over the next
six months could determine whether the economic headwinds are "going to be a
blip or a broader struggle."
A separate question is whether banks will be able to handle the volume of
mortgage applications.
Banks recently have laid off mortgage employees in anticipation of lower loan
volumes, while shifting others to the backlog of delinquent loans. The reduced
ability to handle loan volumes means that banks have charged higher rates
relative to their borrowing costs, muting the decline in rates.
Write to Nick Timiraos at nick.timiraos@wsj.com
The 30-year fixed-rate mortgage dipped below 4%, possibly triggering a refinancing boom for many of the same borrowers who already have taken advantage of rock-bottom interest rates.
According to a survey by Credit Suisse on Thursday, lenders were offering an average rate of 3.91% on 30-year fixed-rate mortgages to borrowers who paid "points," or fees, worth 1% of the loan balance.
Wells Fargo & Co. advertised on its website Friday afternoon a 3.875% rate on a 30-year fixed-rate mortgage, with fees of 1% on the loan.
Tuesday, September 13, 2011
Can Record Low Mortgage Rates Help You?
Thursday, September 8, 2011
Six Steps That Could Boost Refinancing
By Nick Timiraos
Associated
Press
Mortgage rates have dropped—again—to their lowest levels in the last 50 years. A Freddie Mac survey showed that 30-year fixed-rate mortgages averaged 4.12% this week, down from 4.22% last week.
But demand for new loans or refinancing remains muted, underscoring reasons why policy makers at the White House and Federal Reserve are thinking about new ways to help more homeowners refinance.
In Tuesday’s Outlook column, we looked at one of the great puzzles of the government’s initial response to the housing crisis: why few underwater borrowers have refinanced their loans through a White House program that was launched more than two years ago.
The Home Affordable Refinance Program allows underwater borrowers whose loans are backed by Fannie and Freddie to refinance. Under HARP, borrowers with loans worth 80% to 125% of the value of their house can refinance without putting down more cash or taking out mortgage insurance—those steps are often so costly that it no longer makes sense to refinance.
While 838,000 loans had refinanced under the program through June, fewer than 63,000 mortgages with loan-to-value ratios between 105% and 125% had refinanced. Fannie and Freddie guarantee millions of loans that are underwater.
The White House could take a number of steps to revamp the program, though many of these steps would require the blessing of Fannie and Freddie’s regulator, the Federal Housing Finance Agency. Here are six that policy makers would be likely to consider:
- Remove the eligibility date. Currently, loans that were originated after June 2009 aren’t eligible for HARP, and loans that have already refinanced once through HARP can’t be refinanced again.
- Eliminate the 125% loan-to-value cap. Nearly one in 13 loans backed by Fannie Mae can’t participate in the HARP program because they’re too far underwater. These loans weren’t eligible initially for HARP because they can’t be sold into standard pools of mortgage-backed securities issued by Fannie and Freddie. Some analysts have suggested that the Federal Reserve could buy these loans as one way to facilitate the program.
- Waive risk-based fees that Fannie and Freddie charge. The firms charge lenders extra fees for riskier borrowers, which effectively raises the rate and reduces the incentive for underwater borrowers to refinance. “It wouldn’t be just a refinance boom for the pristine credits. It would open it up for middle America as well,” says Bob Walters, chief economist at Quicken Loans.
- Streamline the application process to tamp down closing costs. Eliminating appraisals, waiving title insurance requirements, and simplifying the refinance process could reduce fees that may have discouraged underwater borrowers from refinancing. (There’s much more on this in a paper by mortgage-market consultant Alan Boyce and Columbia Business School economists Glenn Hubbard and Christopher Mayer.)
- Address second mortgages and mortgage insurance. Using the HARP program for borrowers who are underwater has proven “extraordinarily difficult,” says Mr. Walters, because many borrowers have second mortgages or mortgage insurance from companies that must sign off on the new loan. Coming up with a way to gain automatic pre-approval from participating second-lien holders and mortgage insurers could accelerate underwater refinancing.
- Indemnify lenders against the potential for “put-backs.” This is a big one. Many banks have been reluctant to refinance borrowers under HARP, or are charging hefty fees, because of the concern that they’ll have to buy back the loan from Fannie and Freddie if it defaults.
Of course, any uptick in refinancing would come at the expense of bondholders, muting some of the economic boost. A working paper from the Congressional Budget Office provided some estimates around the benefits and costs of refinancing more borrowers.
Fixing one or two of these steps would help at the margins. Dealing with all of them would provide a bigger boost to refinancing. And all of them stop short of the “blanket refinance” that some analysts have proposed, where Fannie and Freddie would automatically refinance borrowers with an above-market rate, whether they ask for it or not.
“Mass refinance” programs aren’t as likely to happen because they threaten to create significant uncertainty for mortgage-bond investors. Officials may be reluctant to take steps that reward yesterday’s borrowers at the expense of tomorrow’s.
Follow Nick on Twitter: @NickTimiraos
Original Post: http://blogs.wsj.com/developments/2011/09/08/six-steps-that-could-boost-refinancing/
Wednesday, September 7, 2011
What Did Fannie, Freddie Know?
By RUTH SIMON And NICK TIMIRAOS
The 17 lawsuits filed Friday by federal
regulators against some of the world's biggest financial institutions hinge on a
simple premise: The mortgage loans that banks packaged into securities often
didn't meet the underwriting guidelines the banks outlined in their securities
filings.
The lawsuits, filed by the Federal Housing Finance Agency, allege that the banks made untrue statements and omitted key facts when they sold mortgage investments to loan giants Fannie Mae and Freddie Mac.
The suits involve $196 billion in mortgage bonds packaged by some of the world's biggest banks. In addition to the banks, the suits name more than 100 executives who signed offering statements for the securities. Several of the named banks denied the allegations, didn't respond to requests for comment or declined to comment.
The FHFA didn't specify how much it is seeking in damages.
Fannie and Freddie don't make loans directly, but they support housing markets by buying mortgages from banks and then selling them to investors as securities, providing guarantees to investors.
During the housing boom, the two companies augmented their role in the housing market by purchasing privately issued mortgage securities as investments.
It is those investments at issue in the suits. Analysts said the cases could ultimately turn on whether the FHFA can show that Fannie and Freddie, given all their expertise in evaluating mortgage risks, were misled about the quality of the loans backing those investments.
Citing detailed loan information, the FHFA lawsuits allege that the banks repeatedly misrepresented or made untrue statements about basic characteristics of loans in the securities, such as the portion of borrowers who lived in their homes and the percentage of the property's value being financed.
Banks "routinely" packaged loans into securities even though they had been flagged by third-party due diligence firms as not meeting underwriting guidelines, according to the lawsuits.
"It's a great myth that you can't defraud sophisticated financial parties," said William K. Black, a former bank regulator involved with hundreds of successful savings-and-loan-era prosecutions. "Models cannot protect you against fraudulent loans" or inadequate disclosures.
The FHFA's review of a sample of loans in one Goldman Sachs Group Inc. bond deal cited in a lawsuit found that the portion of properties that appeared not to be owner-occupied was nearly double the amount stated in the prospectus supplement.
Goldman Sachs declined to comment.
The banks are likely to argue that Fannie and Freddie knew that the loans were risky and that losses were due to underlying economic conditions, not faulty underwriting. "It will become clear that the plaintiffs knew as much as the defendants about the quality of these loan portfolios," says Andrew Sandler, co-chairman of BuckleySandler LLP, a law firm representing banks in litigation and regulatory enforcement actions.
Roughly a dozen investors and government agencies, including at least five federal home loan banks, American International Group Inc. and the National Credit Union Administration, have filed similar lawsuits.
Both the FHFA and NCUA have an edge over some other plaintiffs because they have subpoena power that has provided them with access to loan files.
Given that evidence from the loan files, "it would be amazing if these complaints do not survive motions to dismiss," said David Grais, an attorney in New York who represents several Federal Home Loan Banks in similar legal actions. Many of the other lawsuits are still in their early stages; most have survived motions to dismiss.
Write to Ruth Simon at ruth.simon@wsj.com and Nick Timiraos at nick.timiraos@wsj.com
The lawsuits, filed by the Federal Housing Finance Agency, allege that the banks made untrue statements and omitted key facts when they sold mortgage investments to loan giants Fannie Mae and Freddie Mac.
The suits involve $196 billion in mortgage bonds packaged by some of the world's biggest banks. In addition to the banks, the suits name more than 100 executives who signed offering statements for the securities. Several of the named banks denied the allegations, didn't respond to requests for comment or declined to comment.
The FHFA didn't specify how much it is seeking in damages.
Fannie and Freddie don't make loans directly, but they support housing markets by buying mortgages from banks and then selling them to investors as securities, providing guarantees to investors.
During the housing boom, the two companies augmented their role in the housing market by purchasing privately issued mortgage securities as investments.
It is those investments at issue in the suits. Analysts said the cases could ultimately turn on whether the FHFA can show that Fannie and Freddie, given all their expertise in evaluating mortgage risks, were misled about the quality of the loans backing those investments.
Citing detailed loan information, the FHFA lawsuits allege that the banks repeatedly misrepresented or made untrue statements about basic characteristics of loans in the securities, such as the portion of borrowers who lived in their homes and the percentage of the property's value being financed.
Banks "routinely" packaged loans into securities even though they had been flagged by third-party due diligence firms as not meeting underwriting guidelines, according to the lawsuits.
"It's a great myth that you can't defraud sophisticated financial parties," said William K. Black, a former bank regulator involved with hundreds of successful savings-and-loan-era prosecutions. "Models cannot protect you against fraudulent loans" or inadequate disclosures.
The FHFA's review of a sample of loans in one Goldman Sachs Group Inc. bond deal cited in a lawsuit found that the portion of properties that appeared not to be owner-occupied was nearly double the amount stated in the prospectus supplement.
Goldman Sachs declined to comment.
The banks are likely to argue that Fannie and Freddie knew that the loans were risky and that losses were due to underlying economic conditions, not faulty underwriting. "It will become clear that the plaintiffs knew as much as the defendants about the quality of these loan portfolios," says Andrew Sandler, co-chairman of BuckleySandler LLP, a law firm representing banks in litigation and regulatory enforcement actions.
Roughly a dozen investors and government agencies, including at least five federal home loan banks, American International Group Inc. and the National Credit Union Administration, have filed similar lawsuits.
Both the FHFA and NCUA have an edge over some other plaintiffs because they have subpoena power that has provided them with access to loan files.
Given that evidence from the loan files, "it would be amazing if these complaints do not survive motions to dismiss," said David Grais, an attorney in New York who represents several Federal Home Loan Banks in similar legal actions. Many of the other lawsuits are still in their early stages; most have survived motions to dismiss.
Write to Ruth Simon at ruth.simon@wsj.com and Nick Timiraos at nick.timiraos@wsj.com
Wednesday, August 31, 2011
Monday, August 29, 2011
Carole King's Ranch at a 37% Discount
Carole King's ranch has gotten a major price cut to $11.9 million, from $19 million in 2006, a 37% discount. Candace Jackson has details on The News Hub.
Tuesday, August 16, 2011
Survey Finds Some Homes Underpriced
By NICK TIMIRAOS
Home prices in some of the nation's hardest-hit metro areas have fallen far below pre-bubble levels, stirring concerns that properties in those markets are undervalued.
In a recent analysis, real-estate firm Zillow Inc. studied the correlation between home prices and annual incomes over the 15-year period that ended in 2000, before home prices began to surge.
For decades, price-to-income levels have moved in tandem, with a specific housing market's prices rising or falling in line with local residents' incomes. Many economists say that makes the price-to-income ratio a good gauge for determining whether housing is undervalued or overvalued for a given market.
Zillow found property prices in one-third of nearly 130 housing markets across the nation were undervalued, when compared with residents' current income and the pre-bubble trend.
"At a broad level, it is helpful to understand that if people in certain markets paid three times their average income in housing before the bubble, those markets are probably going to get back to that level," said Stan Humphries, chief economist at Zillow.
The analysis underscores a broader point: While the nation's housing markets largely fell and rose together during the housing boom and bust, they aren't likely to hit bottom and begin recovery at the same time or pace. The Zillow analysis shows that many markets still appear to be overvalued.
For the U.S. as a whole, home prices were around 2.9 times incomes from 1985 to 2000. But during the housing boom, values increased at a much faster rate than incomes. The price-to-income ratio peaked at around 5.1 in 2005. Home prices have since fallen so that on average, nationally, prices are around 3.3 times incomes, or about 14% above the historical trend.
Of course, prices have fallen much faster in certain markets. In Las Vegas, home prices are now 25% below their historic price-to-income trend of 2.7. During the housing bubble, that ratio more than doubled to 5.6. Home prices have been falling for the past five years, and by March, prices were just 2.1 times household incomes.
Home prices are undervalued by 35% in Detroit; by 18% in Modesto, Calif.; and 13% in Fort Myers, Fla.
"Values dropped so far that there are just great bargains," said Dan Elsea, president of brokerage services for Real Estate One in the Detroit area. For years, layoffs in the automobile sector contributed to a "total freeze on activity," he said. But over the past six months, as the industry has recovered, "you have this dam burst of people saying, 'We're ready to buy.'"
Elsewhere, prices are so low that more investors are scooping up foreclosed properties and renting them out. Since March, Ron Leis, a real-estate agent in Sacramento, Calif., has spent about $500,000 to buy four foreclosed properties that have been converted to rentals. Investors can cover their monthly costs and make an 8% to 12% profit "pretty easily," he said. "We haven't seen that in 20 years."
Prices have fallen in some markets that didn't see a big runup in home prices, such as Rochester, N.Y., and Dallas, leaving them slightly below their historic price-to-income levels.
Housing also has grown more affordable thanks to mortgage rates,falling to near their lowest levels since the 1950s. Last week, the 30-year fixed-rate mortgage averaged 4.32%, according to a survey by Freddie Mac.
Aaron Holley hadn't even thought about buying a home until he looked into consolidating his student-loan debts and saw how interest rates and home prices had fallen. "I never actually thought there was going to be the possibility of me owning a home in the state of California," said Mr. Holley, 29, who last month bought a three-bedroom home in Santa Rosa, Calif., for $260,000. He locked in a 4.38% fixed rate on a 30-year mortgage.
Zillow's report shows that home prices in Santa Rosa are around 4.9 times area incomes, down from a peak of 9.4 in 2005 and back to levels not seen since 1999. Prices are still higher than the 1985-2000 average of 4.1 times incomes. The prospect that home prices will decline further "bothers me a little bit," says Mr. Holley, who works as a concept artist for a videogame company. "But at the same time, I feel like I got a good deal."
Some of the most overvalued housing markets, according to the Zillow analysis, include Virginia Beach, Va.; Honolulu; and Charleston, S.C. In Virginia Beach, Va., for example, prices would have to fall by 50% to hit their traditional relationship to incomes.
Other areas where price-to-income levels show that housing is still overvalued, such as Washington, D.C., may not see prices fall further due to structural changes in the economy. Second-home markets that have more out-of-market homebuyers also tend to have more volatile price-to-income levels.
Write to Nick Timiraos at nick.timiraos@wsj.com
Home prices in some of the nation's hardest-hit metro areas have fallen far below pre-bubble levels, stirring concerns that properties in those markets are undervalued.
In a recent analysis, real-estate firm Zillow Inc. studied the correlation between home prices and annual incomes over the 15-year period that ended in 2000, before home prices began to surge.
For decades, price-to-income levels have moved in tandem, with a specific housing market's prices rising or falling in line with local residents' incomes. Many economists say that makes the price-to-income ratio a good gauge for determining whether housing is undervalued or overvalued for a given market.
Zillow found property prices in one-third of nearly 130 housing markets across the nation were undervalued, when compared with residents' current income and the pre-bubble trend.
The analysis underscores a broader point: While the nation's housing markets largely fell and rose together during the housing boom and bust, they aren't likely to hit bottom and begin recovery at the same time or pace. The Zillow analysis shows that many markets still appear to be overvalued.
For the U.S. as a whole, home prices were around 2.9 times incomes from 1985 to 2000. But during the housing boom, values increased at a much faster rate than incomes. The price-to-income ratio peaked at around 5.1 in 2005. Home prices have since fallen so that on average, nationally, prices are around 3.3 times incomes, or about 14% above the historical trend.
Of course, prices have fallen much faster in certain markets. In Las Vegas, home prices are now 25% below their historic price-to-income trend of 2.7. During the housing bubble, that ratio more than doubled to 5.6. Home prices have been falling for the past five years, and by March, prices were just 2.1 times household incomes.
Home prices are undervalued by 35% in Detroit; by 18% in Modesto, Calif.; and 13% in Fort Myers, Fla.
"Values dropped so far that there are just great bargains," said Dan Elsea, president of brokerage services for Real Estate One in the Detroit area. For years, layoffs in the automobile sector contributed to a "total freeze on activity," he said. But over the past six months, as the industry has recovered, "you have this dam burst of people saying, 'We're ready to buy.'"
Elsewhere, prices are so low that more investors are scooping up foreclosed properties and renting them out. Since March, Ron Leis, a real-estate agent in Sacramento, Calif., has spent about $500,000 to buy four foreclosed properties that have been converted to rentals. Investors can cover their monthly costs and make an 8% to 12% profit "pretty easily," he said. "We haven't seen that in 20 years."
Prices have fallen in some markets that didn't see a big runup in home prices, such as Rochester, N.Y., and Dallas, leaving them slightly below their historic price-to-income levels.
Housing also has grown more affordable thanks to mortgage rates,falling to near their lowest levels since the 1950s. Last week, the 30-year fixed-rate mortgage averaged 4.32%, according to a survey by Freddie Mac.
Aaron Holley hadn't even thought about buying a home until he looked into consolidating his student-loan debts and saw how interest rates and home prices had fallen. "I never actually thought there was going to be the possibility of me owning a home in the state of California," said Mr. Holley, 29, who last month bought a three-bedroom home in Santa Rosa, Calif., for $260,000. He locked in a 4.38% fixed rate on a 30-year mortgage.
Zillow's report shows that home prices in Santa Rosa are around 4.9 times area incomes, down from a peak of 9.4 in 2005 and back to levels not seen since 1999. Prices are still higher than the 1985-2000 average of 4.1 times incomes. The prospect that home prices will decline further "bothers me a little bit," says Mr. Holley, who works as a concept artist for a videogame company. "But at the same time, I feel like I got a good deal."
Some of the most overvalued housing markets, according to the Zillow analysis, include Virginia Beach, Va.; Honolulu; and Charleston, S.C. In Virginia Beach, Va., for example, prices would have to fall by 50% to hit their traditional relationship to incomes.
Other areas where price-to-income levels show that housing is still overvalued, such as Washington, D.C., may not see prices fall further due to structural changes in the economy. Second-home markets that have more out-of-market homebuyers also tend to have more volatile price-to-income levels.
Write to Nick Timiraos at nick.timiraos@wsj.com
Wednesday, August 3, 2011
Top 10 Best Places to Live
The strength of the local job market is a key factor in a study that details the Top 10 best places to live, says MarketWatch's Amy Hoak. She tells Stacey Delo that more people are moving for work. Plus: Mortgage rates are staying low, for now.
Tuesday, July 26, 2011
Vacation Homes: Why It May Be Time to Buy
By JESSICA SILVER-GREENBERG for WSJ.com WEEKEND INVESTOR July 23, 2011
The clouds hanging over upscale vacation-home markets are starting to lift. While prices are still falling in most regions, the luxury segment is picking up, and brokers are reporting more inquiries than they have had in years.
The upshot: If you have the money and plan on staying put for the long term, now may be a good time to buy.
Five years after housing's peak, markets that once were out of sight even for well-heeled buyers are now in range. On Hilton Head Island, S.C., a three-bedroom home nestled between the Atlantic Ocean and Calibogue Sound changed hands in April for $750,000, after having sold for $1.2 million in June 2006. In Vail, Colo., a three-bedroom home that fetched $3.3 million in 2008 sold in February for $2.5 million.
Overall, the median second-home price was $150,000 in 2010, down 11% from 2009 and roughly 25% from 2006, according to the National Association of Realtors. That isn't pretty, but it is only slightly worse than the 22% drop for the overall housing market. The higher end of the market—homes in the $5 million-plus range—has held up better, says Douglas Duncan, chief economist at Fannie Mae. "At the top of the market, particularly luxury homes, prices have proven very elastic, and have sprung upward quickly," he says.
Buyers are taking heed. On Palm Beach Island, Fla., sales were up 50% in the year ending June 30. Transactions in the Hamptons, on New York's Long Island, jumped 59% in the second quarter from a year earlier. In Aspen, Colo., sales for the year ending May 31 were up 10%.
The number of people looking at properties is up as well: In Vail, Hilton Head and Palm Beach, foot traffic has jumped by at least 30% this year, according to local real-estate agents. "People have frugality fatigue," says John Burns, president of John Burns Real Estate Consulting Inc. in Irvine, Calif.
This isn't to suggest the boom is back. In general, properties situated in prime locations—on the water or near a ski slope—are selling well, but homes in less desirable spots are languishing on the market. Banks are increasingly wary of making second-home mortgages, particularly "jumbo" loans above federally guaranteed limits; 10% of banks raised their standards on such loans last year, according to the Federal Reserve. And the tax deduction for mortgage interest on second homes is at risk of being cut back.
Geography is the best guide to today's vacation markets: In some places prices are holding up, while in others they are still tanking.
The blue-chip market consists of a handful of spots where prices have stabilized and could soon rebound as sales pick up. Some, such as Hilton Head, have benefitted from tough restrictions on building, which kept inventories manageable during the bust. Prices there have risen by 4% during the past year.
The other market is still very much in crash mode. In places like Miami, Fla. and even Martha's Vineyard, Mass., prices have continued to drop as foreclosed properties flood the market. But bargains abound as sellers cut their asking prices or accept less to unload properties. In March, for example, a three-bedroom home on Palm Beach Island, Fla., listed for $4.6 million sold for just $2.5 million.
With the broader housing market still so sick, it might seem the height of folly to jump into such unpredictable investments now. Even in blue-chip markets there isn't a guarantee of price appreciation anytime soon. Indeed, over time vacation-home markets don't do noticeably better than primary-home markets. Homes on Martha's Vineyard appreciated by 40.9% over the past 10 years, edging out Boston's 40.5%. But Hilton Head's 15% gain was trounced by nearby Charleston, S.C.'s 25.4% rise.
Then again, most vacation-home buyers aren't looking to make big investment profits. More than 80% of second-home buyers surveyed by the National Association of Realtors in May reported that they bought for consumption reasons—to live in the house and enjoy it.
And many second-home buyers are wealthy enough to pay in cash, sidestepping the restrictive and time-consuming mortgage process. Last year, 36% of vacation-home transactions were all-cash deals, up from 29% in 2009, according to the National Association of Realtors. "If you have cash right now, you are in unique position," says Paul Dales, senior U.S economist with research firm Capital Economics.
If you are thinking of taking the plunge, here is a look at some prominent markets across the country.
These markets are stabilizing and, in some, prices already have started to rise.
Median home price: $695,000
Median home price five years ago: $1,000,000
Market Snapshot: Situated roughly halfway between San Francisco and Los Angeles, Santa Barbara is starting to reel in wealthier buyers again, says Ken Switzer, a real-estate agent with Prudential California Realty. While prices have plunged since the peak, they have steadied out over the past two years, and sales are starting to jump, according to Paul Suding, president of Santa Barbara's Association of Realtors. Strict zoning and scarce available land helped protect Santa Barbara from the overbuilding that swept much of California, he says.
Who's Buying: With interest rates near record lows, restaurant owners Dave and Leah Larson decided it was time to buy. In June, they picked up a four-bedroom ranch-style home for $1.39 million. The couple says the property seems like a great investment because it is on a street where homes recently sold for about $2 million. "We're very happy and we get the tax savings on the second home," says Mr. Larson, 39 years old.
Median home price: $781,000
Median home price five years ago: $802,000
Market Snapshot: Housing economists look to Aspen as a luxury-market bellwether. Dotted with upscale boutiques and four-star restaurants, the ski town is welcoming buyers with ample cash on hand, says Steven Shane of SDS Real Estate, a local real-estate broker. Sales of $1 million-and-above are on the rise—especially on the higher end. So far this year, 18 properties priced at $5 million or above have sold, up from 14 in the same period last year.
Who's Buying: Laura Stovitz, a Los Angeles lawyer, already had a second home in Aspen but couldn't resist the opportunity to trade up. In April, she sold her town house for $3 million and purchased a $6.5 million home with three bedrooms, an office, gym and adjacent guest house. She says she isn't worried about falling prices because the posh ski town seems so "European in its appeal and will likely be insulated from the domestic market's doldrums."
Median home price: $680,000
Median home price five years ago: $1,100,000
Market Snapshot: Prices have fallen 42% since their peak, but sales are picking up, say real-estate agents. That's thanks, in part, to the return of Wall Street bonuses, says David Adamo, chief executive of Luxury Mortgage Corp. in Stamford, Conn. Despite booming sales, prices have fallen in the past year, creating opportunities for buyers, according to Clear Capital, a Truckee, Calif.-based research firm. The best deals, of course, can be found away from the water, where inventories are high and properties are sitting for longer.
Who's Buying: Jeffrey Ponzo, a retail executive, is still marveling at the deal he got on his ranch-style home with a pool and tennis court in East Quogue, N.Y. The 45-year old New Yorker closed this month on the $950,000 home; a year earlier, it was listed for $1.1 million, he says. "The return on a quality-of-life aspect far exceeds any money I might have saved if I waited for prices to fall further," he says.
Median home price: $307,000
Median home price five years ago: $574,000
Market Snapshot: Sales are up 17% for the year ending June 30, according to Jim Keilor, a real-estate agent with Hilton Head-based Alliance Group, while prices are ticking up. The vacation spot, famous for its golfing and lush beaches, didn't see the overbuilding found in places like Phoenix and Las Vegas. "We were insulated from much of the pain elsewhere because we are an island," Mr. Keilor says. Interest from buyers is back to 2006 levels, says Randy Smith, a real-estate agent on the island.
Who's Buying: Steve Race, 52, purchased a two-bedroom oceanfront home in April. The former Lockheed Martin executive, who took a buyout in February, wanted a sunny spot at a good price, but didn't want to brave the "softness" of the foreclosure-scarred Florida markets. He watched prices fall for more than two years, he says, before deciding that even if they fell further he was scoring a good deal on the two-bedroom house he bought for $500,000. Given the uncertainty of the stock market right now, he says, he would rather have his "money invested in a home with real value."
These areas are still suffering—but bargains abound.
Median home price: $403,000
Median home price five years ago: $638,000
Market Snapshot: Even though this exclusive northeastern island sidestepped overbuilding during the boom, buyers still seem reluctant, says Sean Federowicz of Coldwell Banker Landmarks, a broker on the island. The problem: Martha's Vineyard is made up of six different communities, some of which have had waves of foreclosures, says Carol Shore, a real-estate agent on the island. "Even though the $22 million waterfront properties are selling, the lower-end properties are dragging down much of the rest of the market," she says.
Who's Buying: In February, Brian Roach and his wife snapped up a three-bedroom house in Oak Bluffs for $740,000, roughly 35% below the asking price. The 53-year-old financial-services executive is comforted by the island's cachet, which he believes will help prices appreciate down the road. "At some point, you see such low interest rates and good prices and you don't want to wait anymore," he says.
Median home price: $385,000
Median home price five years ago: $562,000
Market Snapshot: Unlike its nearby resort cousin, Aspen, Vail experienced a wave of development just as the market crashed, says Josh Lautenberg, owner of Sonnenalp Real Estate in Vail. Since the peak, available inventory has shot up by 40%, he says. Although sales started picking up in 2010, there has been another dip in activity while people "wait to see if the other shoe is going to drop."
Who's Buying: Falling prices didn't discourage Peter Tempkins, a 56-year-old insurance executive, from buying a $370,000 three-bedroom home in May. "My gut feeling is that we didn't buy at the bottom, we bought one step from the bottom, and for us it was just a great time to buy a place we love," he says.
Median home price: $130,000
Median home price five years ago: $302,000
Market Snapshot: Miami was among the biggest casualties of the housing crash, in part because a wave of speculative building swept through the market. Prices have fallen 57% percent since 2006, reports Clear Capital, and 10% from last year. But bargains are beginning to attract more foreigners—particularly wealthy Venezuelans looking for a safe haven from President Hugo Chavez, says Michael Internosia, vice president of sales for Pordis Residential, a Miami based real-estate firm, who notes that such buyers made up 35% of his sales so far this year.
Who's Buying: Sam Mandel considers himself something of a second-home veteran. Last year, the 78-year-old retired physician bought a Hamptons home in Shinnecock Bay, N.Y. In February, he purchased a home in Miami Beach's Canyon Ranch development for $985,000. The two-bedroom condominium with beach views caught his eye because it was "distinctive and will be easy to resell if need be," he says.
Median home price: $254,000
Median home price five years ago: $758,000
Market Snapshot: A condo binge during the boom has led to a glut—and shoppers are swarming on low-priced units, says Alex Villacorta, director of research and analytics for Clear Capital. That is presenting bargains at the higher end, says David Fite, owner of real-estate agency Fite Shavell & Associates. Sales are on the rise: there were 29 transactions in the first quarter, typically the busiest selling season, up from 6 in 2009 and 26 last year, says Christine Franks, president of real-estate broker Wilshire International Realty.
Who's Buying: John Reid, a 57-year-old retired financial-services executive, and his sister are taking advantage of plunging prices. The siblings earlier this month purchased a $4.75 million four-bedroom home near the ocean, in an all-cash deal. "I got the sense that prices were nearing the bottom," Mr. Reid says. "If we wanted a good deal on a fabulous home, we had to act quickly."
Write to Jessica Silver-Greenberg at jessica.silver-greenberg@wsj.com
Corrections & Amplifications
Santa Barbara, Calif., is an example of a "blue chip" residential real-estate market where prices have stabilized. An earlier version of this article incorrectly labeled the section on Santa Barbara as Santa Monica, Calif.
The clouds hanging over upscale vacation-home markets are starting to lift. While prices are still falling in most regions, the luxury segment is picking up, and brokers are reporting more inquiries than they have had in years.
The upshot: If you have the money and plan on staying put for the long term, now may be a good time to buy.
Five years after housing's peak, markets that once were out of sight even for well-heeled buyers are now in range. On Hilton Head Island, S.C., a three-bedroom home nestled between the Atlantic Ocean and Calibogue Sound changed hands in April for $750,000, after having sold for $1.2 million in June 2006. In Vail, Colo., a three-bedroom home that fetched $3.3 million in 2008 sold in February for $2.5 million.
This isn't to suggest the boom is back. In general, properties situated in prime locations—on the water or near a ski slope—are selling well, but homes in less desirable spots are languishing on the market. Banks are increasingly wary of making second-home mortgages, particularly "jumbo" loans above federally guaranteed limits; 10% of banks raised their standards on such loans last year, according to the Federal Reserve. And the tax deduction for mortgage interest on second homes is at risk of being cut back.
Geography is the best guide to today's vacation markets: In some places prices are holding up, while in others they are still tanking.
The blue-chip market consists of a handful of spots where prices have stabilized and could soon rebound as sales pick up. Some, such as Hilton Head, have benefitted from tough restrictions on building, which kept inventories manageable during the bust. Prices there have risen by 4% during the past year.
The other market is still very much in crash mode. In places like Miami, Fla. and even Martha's Vineyard, Mass., prices have continued to drop as foreclosed properties flood the market. But bargains abound as sellers cut their asking prices or accept less to unload properties. In March, for example, a three-bedroom home on Palm Beach Island, Fla., listed for $4.6 million sold for just $2.5 million.
With the broader housing market still so sick, it might seem the height of folly to jump into such unpredictable investments now. Even in blue-chip markets there isn't a guarantee of price appreciation anytime soon. Indeed, over time vacation-home markets don't do noticeably better than primary-home markets. Homes on Martha's Vineyard appreciated by 40.9% over the past 10 years, edging out Boston's 40.5%. But Hilton Head's 15% gain was trounced by nearby Charleston, S.C.'s 25.4% rise.
Then again, most vacation-home buyers aren't looking to make big investment profits. More than 80% of second-home buyers surveyed by the National Association of Realtors in May reported that they bought for consumption reasons—to live in the house and enjoy it.
And many second-home buyers are wealthy enough to pay in cash, sidestepping the restrictive and time-consuming mortgage process. Last year, 36% of vacation-home transactions were all-cash deals, up from 29% in 2009, according to the National Association of Realtors. "If you have cash right now, you are in unique position," says Paul Dales, senior U.S economist with research firm Capital Economics.
If you are thinking of taking the plunge, here is a look at some prominent markets across the country.
Blue Chips
These markets are stabilizing and, in some, prices already have started to rise.
Santa Barbara, Calif.
Median home price: $695,000
Median home price five years ago: $1,000,000
Market Snapshot: Situated roughly halfway between San Francisco and Los Angeles, Santa Barbara is starting to reel in wealthier buyers again, says Ken Switzer, a real-estate agent with Prudential California Realty. While prices have plunged since the peak, they have steadied out over the past two years, and sales are starting to jump, according to Paul Suding, president of Santa Barbara's Association of Realtors. Strict zoning and scarce available land helped protect Santa Barbara from the overbuilding that swept much of California, he says.
Who's Buying: With interest rates near record lows, restaurant owners Dave and Leah Larson decided it was time to buy. In June, they picked up a four-bedroom ranch-style home for $1.39 million. The couple says the property seems like a great investment because it is on a street where homes recently sold for about $2 million. "We're very happy and we get the tax savings on the second home," says Mr. Larson, 39 years old.
Aspen, Colo.
Median home price: $781,000
Median home price five years ago: $802,000
Market Snapshot: Housing economists look to Aspen as a luxury-market bellwether. Dotted with upscale boutiques and four-star restaurants, the ski town is welcoming buyers with ample cash on hand, says Steven Shane of SDS Real Estate, a local real-estate broker. Sales of $1 million-and-above are on the rise—especially on the higher end. So far this year, 18 properties priced at $5 million or above have sold, up from 14 in the same period last year.
Who's Buying: Laura Stovitz, a Los Angeles lawyer, already had a second home in Aspen but couldn't resist the opportunity to trade up. In April, she sold her town house for $3 million and purchased a $6.5 million home with three bedrooms, an office, gym and adjacent guest house. She says she isn't worried about falling prices because the posh ski town seems so "European in its appeal and will likely be insulated from the domestic market's doldrums."
The Hamptons, N.Y.
Median home price: $680,000
Median home price five years ago: $1,100,000
Market Snapshot: Prices have fallen 42% since their peak, but sales are picking up, say real-estate agents. That's thanks, in part, to the return of Wall Street bonuses, says David Adamo, chief executive of Luxury Mortgage Corp. in Stamford, Conn. Despite booming sales, prices have fallen in the past year, creating opportunities for buyers, according to Clear Capital, a Truckee, Calif.-based research firm. The best deals, of course, can be found away from the water, where inventories are high and properties are sitting for longer.
Who's Buying: Jeffrey Ponzo, a retail executive, is still marveling at the deal he got on his ranch-style home with a pool and tennis court in East Quogue, N.Y. The 45-year old New Yorker closed this month on the $950,000 home; a year earlier, it was listed for $1.1 million, he says. "The return on a quality-of-life aspect far exceeds any money I might have saved if I waited for prices to fall further," he says.
Hilton Head, S.C.
Median home price: $307,000
Median home price five years ago: $574,000
Market Snapshot: Sales are up 17% for the year ending June 30, according to Jim Keilor, a real-estate agent with Hilton Head-based Alliance Group, while prices are ticking up. The vacation spot, famous for its golfing and lush beaches, didn't see the overbuilding found in places like Phoenix and Las Vegas. "We were insulated from much of the pain elsewhere because we are an island," Mr. Keilor says. Interest from buyers is back to 2006 levels, says Randy Smith, a real-estate agent on the island.
Who's Buying: Steve Race, 52, purchased a two-bedroom oceanfront home in April. The former Lockheed Martin executive, who took a buyout in February, wanted a sunny spot at a good price, but didn't want to brave the "softness" of the foreclosure-scarred Florida markets. He watched prices fall for more than two years, he says, before deciding that even if they fell further he was scoring a good deal on the two-bedroom house he bought for $500,000. Given the uncertainty of the stock market right now, he says, he would rather have his "money invested in a home with real value."
Depressed Markets
These areas are still suffering—but bargains abound.
Martha's Vineyard, Mass.
Median home price: $403,000
Median home price five years ago: $638,000
Market Snapshot: Even though this exclusive northeastern island sidestepped overbuilding during the boom, buyers still seem reluctant, says Sean Federowicz of Coldwell Banker Landmarks, a broker on the island. The problem: Martha's Vineyard is made up of six different communities, some of which have had waves of foreclosures, says Carol Shore, a real-estate agent on the island. "Even though the $22 million waterfront properties are selling, the lower-end properties are dragging down much of the rest of the market," she says.
Who's Buying: In February, Brian Roach and his wife snapped up a three-bedroom house in Oak Bluffs for $740,000, roughly 35% below the asking price. The 53-year-old financial-services executive is comforted by the island's cachet, which he believes will help prices appreciate down the road. "At some point, you see such low interest rates and good prices and you don't want to wait anymore," he says.
Vail, Colo.
Median home price: $385,000
Median home price five years ago: $562,000
Market Snapshot: Unlike its nearby resort cousin, Aspen, Vail experienced a wave of development just as the market crashed, says Josh Lautenberg, owner of Sonnenalp Real Estate in Vail. Since the peak, available inventory has shot up by 40%, he says. Although sales started picking up in 2010, there has been another dip in activity while people "wait to see if the other shoe is going to drop."
Who's Buying: Falling prices didn't discourage Peter Tempkins, a 56-year-old insurance executive, from buying a $370,000 three-bedroom home in May. "My gut feeling is that we didn't buy at the bottom, we bought one step from the bottom, and for us it was just a great time to buy a place we love," he says.
Miami, Fla.
Median home price: $130,000
Median home price five years ago: $302,000
Market Snapshot: Miami was among the biggest casualties of the housing crash, in part because a wave of speculative building swept through the market. Prices have fallen 57% percent since 2006, reports Clear Capital, and 10% from last year. But bargains are beginning to attract more foreigners—particularly wealthy Venezuelans looking for a safe haven from President Hugo Chavez, says Michael Internosia, vice president of sales for Pordis Residential, a Miami based real-estate firm, who notes that such buyers made up 35% of his sales so far this year.
Who's Buying: Sam Mandel considers himself something of a second-home veteran. Last year, the 78-year-old retired physician bought a Hamptons home in Shinnecock Bay, N.Y. In February, he purchased a home in Miami Beach's Canyon Ranch development for $985,000. The two-bedroom condominium with beach views caught his eye because it was "distinctive and will be easy to resell if need be," he says.
Palm Beach, Fla.
Median home price: $254,000
Median home price five years ago: $758,000
Market Snapshot: A condo binge during the boom has led to a glut—and shoppers are swarming on low-priced units, says Alex Villacorta, director of research and analytics for Clear Capital. That is presenting bargains at the higher end, says David Fite, owner of real-estate agency Fite Shavell & Associates. Sales are on the rise: there were 29 transactions in the first quarter, typically the busiest selling season, up from 6 in 2009 and 26 last year, says Christine Franks, president of real-estate broker Wilshire International Realty.
Who's Buying: John Reid, a 57-year-old retired financial-services executive, and his sister are taking advantage of plunging prices. The siblings earlier this month purchased a $4.75 million four-bedroom home near the ocean, in an all-cash deal. "I got the sense that prices were nearing the bottom," Mr. Reid says. "If we wanted a good deal on a fabulous home, we had to act quickly."
Write to Jessica Silver-Greenberg at jessica.silver-greenberg@wsj.com
Corrections & Amplifications
Santa Barbara, Calif., is an example of a "blue chip" residential real-estate market where prices have stabilized. An earlier version of this article incorrectly labeled the section on Santa Barbara as Santa Monica, Calif.
Thursday, July 21, 2011
Time to Buy: Housing Recovery Is Under Way
Housing affordability is at its best level in 30 years, according to Ken Rosen of U.C. Berkeley's Fisher Center for Real Estate, who says now is the time to buy and that mortgage rates will be much higher in five years. Stacey Delo reports. Image courtesy of Getty Images.
Wednesday, July 20, 2011
Georgia Estate With Private Golf Course
The current owner is asking $20 million for this Georgia estate, which features an 18-hole golf course, six guest houses and was designed by country music legend Kenny Rogers.
Tuesday, July 12, 2011
Even In a Struggling Market, You Can Still Sell Your House
Published: Tuesday, 12 Jul 2011 | 3:43 PM ET By: Mark Koba
Source: Openhouseok.com
Kerry Tramel's home in Moore, Oklahoma was on the market for two years before it sold.
It took two years, but Kerry Tramel and his wife Vy finally sold their four bedroom home in Moore, Oklahoma last December.
In the process, Tramel learned a lot about how to sell—and buy—a house in a devastated real estate market.
"We paid $350,000 for it and that's what we sold if for," says Tramel, who heads a local mattress manufacturer. "I was going to do everything I could not to lose on it."
The two-story house with 3,300 square feet was originally offered at $379,000. Tramel admits he could have sold the home right away if he was willing to take less money.
"I passed up an offer of $350,000 one month after it was listed by the agent," says Tramel, who has two young children. "I thought we might be able to get more, but we didn't."
As the housing market struggles to punch its way out of an economic collapse, selling a home these days might seem like an impossible task. But some houses, like Tramel's, can be sold. It just takes patience, a little luck, and a willingness to lower your price.
Even then, it's not always under your control. A key factor still appears to be that time-worn principle—location.
"It's really based on where foreclosures and falling prices haven't hit too hard," says Mary Cassidy, a real estate agent with Bronxville/Ley Real Estate in Westchester County, New York. "Housing's hurting, but there is activity."
Areas that saw the biggest gains from the housing boom are still the slowest to recover.
"For places like Las Vegas, and Phoenix where foreclosures are still happening, home sales are going to take a long time to recover," says Bob Walters, chief economist at QuickenLoans.com. "Other areas of the U.S. have OK sales, like the middle of the country or the East Coast."
While waiting for a buyer for their house, Tramel says he and Vy became "professional house shoppers" and learned how to be a buyer as well. They saw more than 90 properties.
"We were doing both at the same time, buying and selling," Tramel says.
In the process, Tramel picked up a lot about the local real estate market.
"I noticed we didn't have the runup in homes prices that other areas of the country did and we didn't have a lot of foreclosures," Tramel adds. "Home prices haven't had that far to fall, at least from what I can see."
Eventually, Tramel found a buyer. They were renting out their current home and looking for another place to live.
"They had been looking for a long time and knew it was a buyer's market," Tramel says. "But once they knew my price was at the lowest it was going to be, we negotiated on other items such as what may stay in the house. That's how we worked things out."
That allowed Tramel and his family to find for a new home themselves.
"We found a house just a few miles away in Norman that I really loved and we put in a low bid. We put in another offer but nothing happened."
Tramel used Halloween to break the impasse.
"I purposely took my two boys to the neighborhood for trick-or-treating and I saw the owner on the porch of the house we wanted," Tramel says. "I said, 'I'm trying to buy your house' and he said 'We'd love to sell it to you. Why don't you call and we'll work it out.' So that's what we did. The real estate agents still got their commissions and we got what we wanted."
What Tramel got was a 3,900 square foot house for $475,000 that included a home entertainment theatre. It had been on the market for just two months. Tramel says the owner took a loss but was willing to do that in order to move. After both parties came to an agreement, it was just a matter of closing the deal.
"I put 20 percent down and had to go through requirements for the loan with a local mortgage banker, but it was not really that bad a process," Tramel says. "The people that bought my house got a VA loan without any down payment. Not sure how that will work out, but I intend to stay in my house for a long time. I hate moving."
While Tramel was able to move up in price and space, other sellers are looking for a way to downsize.
Cape Cod Second Home
For Judy and Vinny Capraro, selling their vacation home in Cape Cod, Massachusetts this past May was a way to cut out a long drive from their house in New Jersey—and save money.
Photo: trulia.com
The Capraro home on Cape Cod was sold after being listed for just two weeks.
"We had a mortgage and we didn't see any equity building in the home," says 69 year old Judy Capraro, a retired public school teacher who lives in Middletown, New Jersey.
"Even though it's a very nice neighborhood, we were 'underwater ' and owed more on the home than it was worth. Home prices have fallen somewhat," Capraro goes on to say. "It was enough at least for us to sell."
The Capraro's bought the three bedroom, two bath house in West Hyannis 14 years ago for $142,000.
Renovations and rebuilding kept costs rising, Capraro says. Even with a fixed mortgage, the monthly payment of about $2,600 didn't seem worth it to Capraro and 72 year old Vinny, who retired five years ago as superintendent of schools in Edison, New Jersey.
"It's a lot different for people in their 30s and 40s and waiting out the next twenty years for the values to go up," says Judy Capraro, who gives music lessons to supplement the couple's income. "We just didn't see that happening."
The home sold for $375,000 after being on the market for just two weeks. The original asking price was $399,000. Like Tramel, the Capraro's didn't want to lose money, but the couple got an eye opening moment they didn't expect.
"The new owner, a woman in her 40s, came in with cash for the whole deal and that made up somewhat for the difference in price," Judy explains. "We wanted to get more money and we didn't really make that much, but in a way we were lucky to sell it."
With three grown children, Capraro says she and her husband are now content with just owning their senior residence condominium.
"We have a mortgage on this place and we'll be staying here for some time," Capraro adds. "They'll have to carry me out of here."
As for Cape Cod, selling their second home doesn't rule out a return.
"We can certainly go back there and rent another house during summer months," Capraro goes on to say. "We used to rent our own house sometimes. But now we don't have to worry about cleaning up, fixing things that are broken, and worrying about the place."
For both Tramel and Capraro, selling a home in today's market came with surprises and lessons learned.
"Everybody has to give a little to sell a house," Tramel goes on to say. "You also have to be patient, if you can. Also, know what you can live with in terms of price.
"I really thought it would take a while to sell," Capraro adds. "We're glad it didn't. My advice? I'd say get a good agent who knows the area. Our agent was right down the street and had customers waiting. It's a buyer's market for sure. Just be prepared to negotiate. Being flexible helps in the end."
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