Maryland Short Sale Expert

 

 

 

Don't Walk Away......Do A Short Sale!

 

 

 

 

1.Home Sales

2. Home Prices

3. Inventory

4. Mortgage Rates

5. Affordability

6. Jobs, Jobs, Jobs

(Watch This Video-starts in 25 seconds)

(Click Below For The Interactive Map)

http://online.wsj.com/public/resources/documents/JOBSMAP09.html

 

 

States with the largest increase in sales (Q4 2008/Q4 2007 increase)

• Nevada: 134%

 

• California: 85%

 

• Arizona: 43%

 

• Florida: 13%

 

• Minnesota: 7%

 

• Virginia: 3%

 

Median Home Price

• The median home price declined by 12.4% in 2009.

 

• 2009: $173,500 – 17% ($29,605) below the 4% trend

 

• 2008: $198,100

 

• The reason for big drop = 1^st time buyers + no jumbos

 

• Distressed homes accounted for 36% of total sales in 2009. Distressed properties typically sell for 15 to 20 percent less than traditional homes.

 

• The lack of financing available for upper-priced homes also puts downward pressures on national average price.

 

• Originations of jumbo mortgages have fallen by more than 70%, according to various industry sources.

 

• The market share of jumbo loan originations has fallen to 6% from the typical 15% (Inside Mortgage Finance).

 

• High-end home sales, which priced above $750,000 and typically requiring a jumbo loan, have fallen from 4.4% of sales in 2007 to only 2.3% in 2009.

 

• In 2009, the months supply of high-priced homes stood at 41 months compared to 18 months 2007, in sharp contrast with the months supply of all homes which has risen only modestly from 9 months to 10 months over the comparable period.

 

• The luxury home market remained stagnant with homes priced over $1 million spent an average of 167 days on the market in 2009 as opposed to 148 days in 2008, according to a ZipRealty survey.

 

 

Home Price Appreciation

• From 1989 to 2000, home prices grew by 3.9% on average.

 

• From 2000 to 2005, home price appreciation ranged from 7 to 13%.

 

• If home prices actually grew by 4% every year from 1989, the median home price would be $203,105 which is approximately 17% above where we are today. In other words, at $173,500 in 2009, homes are undervalued by 17%.

 

• That’s the repercussions of 5 years of inflated prices (2001-2005).

 

Inventory – Months Supply

Definition: Number of months it would take to sell all the homes on the market at the current rate of sales.

 

• Stronger sales activity in the second half of the year driven by first-time buyers rushing to beat the November deadline for the tax credit helped draw down inventory of existing homes 16% to 8.8 months in 2009.

 

• 2009: 8.8 months

 

• 2008: 10.5 months

 

• Also noteworthy is the number of investors jumping back into the market.

 

• Both foreign and domestic real estate investors took advantage of slashed prices to scoop up properties across the country.

 

• According to MDA Dataquick’s October home sales report, absentee buyers bought 41% of all Las Vegas-area homes sold in October – the highest figure for any month this decade. In phoenix, absentee buyers purchased 38% of all homes sold – a relatively high percentage in the West.

 

• Absentee buyers are often investors, but can include second-home buyers and others who, for various reasons, indicate at the time of sale that the property tax bill will go to a different address.

 

• The housing supply is now at the lowest level in more than two and a half years. As of December 2009, there were 3.29 million existing homes available for sale, down 11.1% from a year ago and 28.2% below the record of 4.58 million in July 2008.

 

• Dec 2009: 3,289,000

 

• Dec 2008: 3700,000

 

• July 2008: 4,575,000

 

• Raw unsold homes on the market has been trending down and “… a shrinking supply of unsold inventory suggests we are getting closer to price stabilization in many areas, but we need a steady stream of financially qualified buyers to further reduce inventory and get us to a self-sustaining market,” according to Lawrence Yun, NAR chief economist. “Foreclosures will continue to come on the market, but rising sales from the expanded tax credit should stabilize home prices by next spring and help to stem future foreclosures.”

 

• While we’ll likely have another surge in the spring as home buyers take advantage of the extended and expanded tax credit, many economists and industry experts caution against the next wave of foreclosures.

 

• Resets and recasts of Opt ARM and Alt-A loans, a large percentage of which are already delinquent.

 

• Shadow inventory of foreclosed homes controlled by lending institutions that could flood the market once the moratorium. One estimate puts it at seven million (WSJ, Nov 23, “Low Housing Inventory Count Likely to Be Fleeting”).

 

• Federal deficit will cause investors to require more returns on government’s debts, which in turn will push the cost of borrowing up.

 

• At the current pace of sales, assuming that the estimate 7 million of shadow inventories would become mainstream, the months supply would surge a whopping 213% to 23.5 months from the 8.8 months recorded at the end of 2009.

 

• Demand doesn’t go away, it just goes to the sidelines.

 

• For much of 2009, many areas remained segmented, with at least two different markets coexisting within each market.

 

Definitions:

• Buyers market: more than 6 months of inventory

 

• Balanced market: 6 months of inventory

 

• Sellers market: less than 6 months of inventory

 

• Lower home prices coupled with reduced inventory of moderately priced homes created multiple bids for homes in some entry level markets.

 

• In some fast recovering markets like Las Vegas, Southern California, and south Florida, there is an inventory shortage of lower-priced homes (National Association of Realtors).

 

At the high-end, sales of homes above the “conforming loan limits” have ground to a halt due to tight lending conditions.

 

Aaron Rice

 

Mortgage Rates

Mortgage rates averaged 5.04% in 2009, an all-time low since Freddie Mac started its mortgage survey in 1971.

 

• Mortgage rates ranged from 4.81% to 5.59% in 2009. At the end of December, rates stood at 4.93%.

 

• In the week ending February 4^th, rates edged up to 5.01%.

 

• However, economists expect interest rates to climb back up as soon as the 2^nd quarter this year as:

• Market conditions improve

• Inflation pressure emerges

 

• The Federal Reserve’s reeling in its $1.25 trillion mortgage-backed-securities (MBS) program by March 2010

 

Let's Put This All in Prospective

Gasoline	40 cents a gallon
Stamp	8 cents
Turkey	43 cents a pound
Datsun Sports Coupe	$1,866
Monthly Rent	$150
Average New Home Price	$25,250
Dow Jones Average	890

 

Affordability - % of Income

Definition: The percentage of a median family’s income required to make mortgage payments (principal and interest) on a median priced home.

 

• Unprecedented interest rates, low mortgage rates as well as the first-time buyer tax credit continue to contribute to improving affordability conditions.

 

• The median mortgage payment (principal and interest) in 2009 consumed about 15% of family income in comparison to the historical standard of 25%.

 

• 2009: 15%

 

• 2008: 18.5%

 

• 2006: 23.2%

 

• 15% in 2009 is the lowest on record (since 1970). In 2003, it was at 19.1% due to significantly lower mortgage rates that year.

 

• The highest price-to-income ratio ever recorded was in 1981 when it hit 36.3%. Interest rates during this year averaged 15.12%, the second highest on record after 1982’s 15.38%.

 

10-Year Average:

• 2000-2009: 20%

• 1990-1999: 20.3%

• 1980-1989: 28%

• 1970-1979: 19.5%

• 20-Year Average: 20.1%

• 40-Year Average: 21.9%

 

Gross Domestic Product

Strong growth reported in the last two quarters of the year suggest that the U.S. economy is out of the recession but not necessarily in the clear.

 

• The economy grew by 5.7% in the fourth quarter of 2009, the quickest pace since the third quarter of 2003.

 

• Driver: Stronger than expected replenishment of inventory.

 

• GDP is the market value of goods and services produced by labor and property in the United States.

 

• GDP components – Historical Average (1929-2009):

 

• Consumer Spending: 66% (2009: 71% - highest since 1940)

 

• Government Spending: 20% (2009: 21% - close to long-term average)

 

• Business Investment (the buying of capital equipment and inventory): 14% (2009: 11% - lowest since 1946)

 

• Net Exports of Goods & Services (Exports minus Imports): -1% (2009-3%)

 

- Exports: 7% (2009: 11%)

- Imports: 8% (2009: 14%)

 

Gross Domestic Product

Even though the overall economy contracted by 2.4% in 2009, the worst performance by the U.S. economy since 1946, the hit really came in the 1^st quarter of 2009. During the last two quarters, the economy experienced stronger-than-expected growth.

 

• Q1: -6.4%

• Q2: -0.7%

• Q3: 2.2%

 

• Q4: 5.7% (Quickest pace since third quarter of 2003)

 

Recession:

Is commonly defined as two consecutive quarters of decline in real GDP. The National Bureau of Economic Research, a private organization, effectively decides when recessions occur, however, and the actual dating process is determined by judgment rather than a formal rule.

 

• The NBER does not define a recession in terms of two consecutive quarters of decline in real GDP. Rather, a recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.

 

Depression:

• A severe (GDP down by 10% or more) or prolonged (three or four years) recession is referred to as an economic depression.

 

Inflation

• Inflation dipped into negative territory, averaging around -0.4% in 2009.

 

• Core inflation which excludes food and energy stood at 1.7%, down from 2.3% in 2008.

 

• Long-term inflation target of 1.7% to 2% is set by Fed

 

• Inflation (as measured by the Consumer Price Index (CPI)) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.

 

• The CPI represents all goods and services purchased for consumption by the reference population BLS has classified all expenditure items into more than 200 categories, arranged into eight major groups. Major groups and examples of categories in each are as follows: 

 

 FOOD AND BEVERAGES (breakfast cereal, milk, coffee, chicken, wine, full service meals, snacks)

 

HOUSING (rent of primary residence, owners' equivalent rent, fuel oil, bedroom furniture)

 

APPAREL (men's shirts and sweaters, women's dresses, jewelry)

 

TRANSPORTATION (new vehicles, airline fares, gasoline, motor vehicle insurance)

 

MEDICAL CARE (prescription drugs and medical supplies, physicians' services, eyeglasses and eye care, hospital services)

 

RECREATION (televisions, toys, pets and pet products, sports equipment, admissions);

 

EDUCATION AND COMMUNICATION (college tuition, postage, telephone services, computer software and accessories);

 

OTHER GOODS AND SERVICES (tobacco and smoking products, haircuts and other personal services, funeral expenses).

 

• Also included within these major groups are various government-charged user fees, such as water and sewerage charges, auto registration fees, and vehicle tolls. In addition, the CPI includes taxes (such as sales and excise taxes) that are directly associated with the prices of specific goods and services. However, the CPI excludes taxes (such as income and Social Security taxes) not directly associated with the purchase of consumer goods and services.

 

• The CPI does NOT include investment items, such as stocks, bonds, real estate, and life insurance. (These items relate to savings and not to day-to-day consumption expenses.)

 

Unemployment

• Unemployment increased to an average of 9.3%, a 26-year high, in 2009 from 5.8% in 2008.

 

• Unemployment rose to 10% in the final month of the year and hiring is still sluggish.

 

• In January 2010, unemployment rate edged down to 9.7%, the first drop in seven months. While the job market is lurching toward improvement, it still has a long way to go.

 

• The government now estimates that 8.7 million jobs had vanished in the Great Recession. They also warn that it will take until the middle of the decade for the job market to return to normal. Normal is around 5.5 to 6%.

 

• The economy is slowly growing, and normally job creation would be strengthening. But the job market is weighed down by employers who remain slow to hire because consumers are not spending enough. Companies worry about their prospects once government stimulus aid fades. Contributing to the worry is also the possibly higher costs related to taxes and/or healthcare measures from federal and state governments.

 

• The industries creating jobs will probably include those involving health care, legal services, data processing, transportation, software and computer design, high-tech manufacturing and electrical power generation. More jobs involved in making buildings more energy-efficient are also likely, analysts said.

 

 

The Events That Drive The Numbers

Note: Foreclosures/short sales represented approximately 36% of all sales transactions in 2009.

 

• In 2008, average distressed sales as a percentage of total sales were computed based on the monthly distressed sales percentage for the last 3 months of the year, starting with October, which is when NAR started tracking the ratio.

 

• 1 in 45 (2.21%) housing units received at least one foreclosure filing in 2009. This is up from 1.84% in 2008, 1.03% in 2007 and 0.58% in 2006.

 

• Total number of filings: 4 million

 

• So far, foreclosure prevention programs have had limited impact on slowing foreclosure rates.

• January 2010: Foreclosure filings were reported on 315,716 properties, a decrease of 10% from the previous month but still 15% above the level reported in January 2009.

 

• One in every 409 U.S. housing units received a foreclosure filing.

 

• REO activity nationwide was down 5 percent from the previous month but still up 31 percent from January 2009.

 

• “January foreclosure numbers are exhibiting a pattern very similar to a year ago: a double-digit percentage jump in December foreclosure activity followed by a 10 percent drop in January,” said James J. Saccacio, chief executive officer of RealtyTrac “If history repeats itself we will see a surge in the numbers over the next few months as lenders foreclose on delinquent loans where neither the existing loan modification programs or the new short sale and deed-in-lieu of foreclosure alternatives works” (RealtyTrac).

 

• “As bad as the 2009 numbers are, they probably would have been worse if not for legislative and industry-related delays in processing delinquent loans,” said James J. Saccacio, chief executive officer of RealtyTrac. “After peaking in July with over 361,000 homes receiving a foreclosure notice, we saw four straight monthly decreases driven primarily by short-term factors: trial loan modifications, state legislation extending the foreclosure process and an overwhelming volume of inventory clogging the foreclosure pipeline.

 

• “Despite all the delays, foreclosure activity still hit a record high for our report in 2009, capped off by a substantial increase in December,” said Saccacio. “In the long term a massive supply of delinquent loans continues to loom over the housing market, and many of those delinquencies will end up in the foreclosure process in 2010 and beyond as lenders gradually work their way through the backlog.” The big jump in December foreclosure activity was somewhat surprising given the moratoria enacted by both Freddie Mac and Fannie Mae, along with programs from some of the major lenders and loan servicers aimed at delaying foreclosure actions against distressed homeowners.

 

• Fannie Mae and Freddie Mac, as well as a few major banks, have announced a temporary halt in foreclosures at least through the holiday season. This extra breathing room should be used by homeowners to talk to their lender and apply for a more permanent loan modification plan offered from the Treasury.

 

• However, current economic and market conditions still point towards continuing high foreclosures in 2010.

 

• Unemployment rate remained at historically high level of 10% and is likely to stay elevated for most of 2010.

 

• There’s a sizable number of homeowners who are underwater.

 

• A large number of Alt-A and Opt ARM mortgages, many of which are already delinquent, are scheduled to reset and recast in the near term.

• Shadow inventories are estimated to be in the millions.

 

• From the market perspective, these inventories are drawing great interest from first-time buyers and investors as these properties are typically sold at steep discount (15%-40%).

 

• In some fast recovering markets like Las Vegas, Southern California, and south Florida, there is in fact an inventory shortage of lower-priced homes. Bidding wars are common in these markets.

 

• The case of short-sales vs. foreclosures: According to Clayton Holdings, a loan analytics provider, lenders typically lose about 19% of a mortgage's value in a short sale while they lose an average of 40% on loans that go into foreclosure.

 

• There are people who are significantly underwater on their mortgages, particularly in the hardest hit regions. Often it is financially in their best interest to not own their home anymore, however these homeowners have more options than a “strategic default”. Often distressed home owners FEEL it is financially in their best interest. It’s an emotional time. They are feeling overwhelmed. They may not have examined the facts and done the projections on personal financial impact, including credit. The walk away decision is possibly also impacted by the degree of market decline in an area. Where it is severe, the math gets worse and worse.

 

• Short Sales are another option that can help troubled homeowners arrive at the same result with a less damaging impact on the homeowner financially, on the community, and on the lenders.

 

• On the Lender’s Side: short sales cost less. Lenders don’t need to pay the legal fees associated with foreclosure and they don’t have the liability of having the home. In some states, lenders must wait up to a year or more after foreclosing before they can sell the home. According to the report by the Joint Economic Committee of Congress on April 11, 2007, “Sheltering Neighborhoods from the Subprime Foreclosure Storm,” each foreclosure costs lenders approximately $50,000. That figure is now approaching $60,000 by some estimates. Additionally, vacant properties are not good for neighborhoods or communities.

 

• On the Home Owners Side: many of these homeowners discussed in the article are in a tricky position. They don’t want to continue to pay these outrageous payments when renting costs are a fraction of their mortgage but many of them still have a desire to do the right thing – even if they don’t know what it is. Short sales release consumers from homeownership debt. Their home is sold and the lender forgives most, if not all, of their debt.

 

 

Top Foreclosure States:

• Nevada: 7% (1 in 14 houses)

• Florida: 4.5% (1 in 22 houses)

• Arizona: 4.5% (1 in 22 houses)

• California: 4.0% (1 in 25 houses)

• Colorado: 2.4% (1 in 41 houses)

• Michigan: 2.4% (1 in 43 houses)

• Ohio: 2.3% (1 in 44 houses) (2009: 2.01% or 1 in 50 houses)

• Georgia: 2.2% (1 in 45 houses)

• Illinois: 1.9% (1 in 52 houses)

• New Jersey: 1.8% (1 in 56 houses) (2009: 1.81% or 1 in 55 houses)

 

Note: Nontraditional category of residential mortgages includes, but is not limited to, adjustable-rate mortgages with multiple payment options, interest-only mortgages, and “Alt-A” products such as mortgages with limited income verification and mortgages secured by non-owner-occupied properties. It excludes standard adjustable-rate mortgages and common hybrid adjustable-rate mortgages.

 

• With the onset of a global financial crisis, lenders got back to conservative practices. Higher down payments and credit scores were required.

 

• Fannie Mae raised its minimum credit score from a 580 to a 620.

 

• With the tightening of standards, a substantially larger proportion of borrowers have looked to FHA for financing because it requires a smaller down payment and typically has lower credit score requirements than conventional financing.

 

• In 2009, FHA accounted for 24% of all loans made (as of June), up from 2% three years ago.

 

• With this massive expansion, there has been concern that the agency could be growing faster than it can keep up with which may lead to problems down the line.

 

• FHA’s cash reserves fell below the 2% limit to a little over .5%.

 

• There has also been a comparison between FHA and subprime loans since both attracted low down payment and/or more risky borrowers with lower credit scores.

 

• The agency has defended this, stating that the loans with the highest delinquency rates are from seller funded down payment loans that are no longer allowed. Without the losses from these loans it believes it would be above the 2% reserve requirement. (Washington Post)

 

• FHA has stated that it will be increasing its risk management measures, indicating it will likely raise the minimum down payment, credit score requirements, and possibly FHA insurance premiums.

 

• Because banks don’t want to keep the loans they’re making on their books, they have tended to primarily make loans that fit into Fannie Mae, Freddie Mac, and Ginnie Mae (FHA, VA) requirements so it can then hand the loan over to them.

 

• The stimulus bill included the following provisions about the loan limits that they (Fannie, Freddie, FHA) require:  Reinstates the conforming loan limit that expired at the end of 2008 to either 125% of local median home price or $271,050 for FHA loans or $417,000 for loans guaranteed by Fannie Mae or Freddie Mac with an overall cap of $729,750.

 

• In October, this was extended through 2010.

 

• Loans that are above the conforming limit are called jumbo loans.

 

• This means that jumbo loans are much harder and more expensive (in terms of points and rates) for consumers to obtain.

 

• Originations of jumbo mortgages have fallen by more than 70 percent according to various industry sources.

 

• The market share of jumbo loan originations has fallen to 6 percent from the typical 15 percent (according to Inside Mortgage Finance). High-end home sales, those homes priced above$750,000 and typically requiring a jumbo loan, have fallen from 4.4 percent of sales in 2007 to only 2.3 percent in 2009.

 

• The months’ supply of high-priced homes for sale generally is higher than lower priced homes. However, the inventory situation has dramatically worsened in the high-end market with months’ supply in 2009 at 41 months compared to 18 months in 2007. By comparison, the months’ supply of all homes has risen only modestly from 9 months to 10 months over the comparable period.
(Months’ supply: the number of months it would take to sell all of the current inventory at the current pace of sales)

 

• “Lenders are keeping credit standards overly stringent for borrowers at the higher end of the market, and are increasingly reluctant to make jumbo loans,” said NAR Chief Economist Lawrence Yun. “The interest rate spread between 10-year treasuries and jumbo loans has also substantially increased, making jumbo loans much more costly than has previously been the case. Many people believe that the jumbo market is for the very rich, but in many areas of the country, middle-class families need these loans to buy a median-priced home.”

 

 

Stimulus aid continued to gain traction

Case in point: First-time home buyer tax credit:

1.2009 can be characterized as the year of first-time buyers.

From mid 2008 to 2009, the number of first-time home buyers increased to 47% of home purchasers from 41% (NARs 2009 Profile of Home Buyers and Sellers). 2001-2009 average is 41%.

2009: 47%

2008: 41%

2007: 39%

2006: 36%

2005: 40%

2004: 40%

2003: 40%

2001: 42%

 

2.Favorable affordability condition due to historically low interest rates and unprecedented home prices as well as the tax credit are attracting more and more first-time buyers into the market, especially in the low-priced home markets.

 

Lower home prices coupled with reduced inventory of moderately priced homes are creating multiple-offer situations in some entry level markets.

3.According to NAR chief economist Lawrence Yun, 4.4 million Americans are expected to take advantage of the home buyer tax credit before it expires by the middle of 2010.

 

From the enactment in February of this year through October, NAR estimates 1.8 million households would have qualified to claim the first-time home buyer tax credit.

 

NAR estimated that approximately 350,000 additional sales would not have taken place without the tax credit.

 

Notes: 2002: Survey not available

 

 

What The U.S. Goverment Is Doing

1. Extended First-Time Home Buyer Tax Credit
2. Extended Higher Loan Limits
3. Continued Federal Reserve MBS Purchaes
4. Implemented Foreclosure Prevention Program
5. Tightended Requirements for FHA
6. Lifted FHA 90-Day Seasoning Requirement Lifted
7. Addressed Home Valuation Code of Conduct (HVCC)

Extended First-Time Home Buyer Tax Credit

Who: First time buyers and Existing Homeowners who have been in their home 5 consecutive of the past 8 years.

 

•When: Extended and expanded November 6, extended for contracts signed by April 30, 2010 and closed by June 30, 2010.

 

•Why: To continue to stimulate demand for housing. The stimulus from only first time buyers was concentrated in the lower price points. The government intends to stimulate the mid-to-upper price points (under $800k) by including existing homeowners in the credit.

 

•Implications: Propping up demand during the traditionally slow part of the year may help to bridge the gap between seasons, keeping prices stable or increasing. By the time the credit expires, the seasonality of the market will have swung into late spring/early summer, the traditionally busy season. There could be another rush to meet the deadline in April-June when homebuyers push up their timeline to meet the credit. Experts believe that the extension will help give the market time to grow deeper roots toward recovery and that the market will be more stable by the time the credit expires.

 

Extended Higher Loan Limits

•Who: Fannie Mae, Freddie Mac, FHA will continue to accept loans to the higher loan limits.

 

•When: Extended again in October through the end of 2010.

 

•Why: To increase the credit available in the higher priced markets. Without this measure, even standard homes would fall into the “jumbo loan” category. Typically homes that fall into the jumbo loans are reserved for high end homes. In the expensive markets, these are not high end homes. This measure is to help homes in those markets continue to sell by having financing readily available to buyers interested in that price range.

 

•Implications: Financing will be available to those buyers, resulting in home sales continuing for those markets and price points, helping to move inventory and stabilize home prices.

 

Continued Federal Reserve MBS Purchase

•Who: Federal Reserve

 

•What: Unconventional means of stimulating the housing market by purchasing Mortgage Backed Securities (MBS).

 

•Why: Free up credit and keep mortgage rates low.

 

•The Results: When the Fed first announced it would purchase $500 billion in MBS in the late fall of 2008, interest rates fell by 1%. When they announced they would purchase an additional $750 billion MBS last spring, mortgage rates fell again by approximately a quarter of a percent. Mortgage rates have stayed at this low level through the year as a result of the Fed’s actions.

 

 Expiration Date: March 2010

 

•Implications: Many experts believe that interest rates will rise when the purchases are complete. NAR’s chief economist believes they will rise to the mid 5% range.

 

Implemented Foreclosure Prevention Program

•What: On February 18, 2009 President Obama unveiled his $75 billion Homeowner Affordability and Stability Plan designed to help approximately 7 to 9 million families avoid foreclosure by refinancing or restructuring their mortgages.

 

•Key Provisions: (original, from last year)

 

Reduction of monthly payments

•After the bank has agreed to lower monthly payments to 38% of income, the Treasury will match additional reductions as low as 31% of income.

 

•In other words, the Treasury will cover half of the costs of lowering monthly payments between 38% and 31% of income.

 

Incentives for lenders

•For each modification lenders will receive $1,000 upfront.

 

•For each month that the borrowers stay current on modified mortgages, lenders will receive additional payments up to $1,000 per year for three years if the monthly payments are reduced by at least 6%.

 

•For each loan modification that occurs before a payment is missed, lenders will receive $1,500 and servicers $500.

 

Incentives for homeowners

•Reductions of principal balance on mortgages for those who stay current on their loans - up to $1,000 a year for up to five years.

 

Eligibility requirements

•The mortgage must be originated before Jan 1, 2009.

 

•The program will accept new borrowers until Dec 31, 2012.

 

•The home must be owner-occupied and a primary residence.

 

•Income will be documented and verified.

Refinancing options

 

•The restriction on refinancing loans owned or guaranteed by Fannie Mae or Freddie Mac requiring at least 20% equity in the home will be removed.

 

•The loans must be current and the loan value cannot exceed 105% of current property value.

 

•Loans may be refinanced to as low as 2% and may be extended to 40-year terms.

 

•This program will go into effect March 4.

 

•Key Changes:

•The program took much longer to gain momentum than expected.

 Before modifying any loans, the banks had to enable their systems modify the loans.

 

•Second mortgages were added to the provisions for modifications. (April)

 

•Homeowners up to 125% underwater can refinance, up from 105%. (July)

 

•The program was extended from only Fannie Mae and Freddie Mac to include FHA. (July)

 

•Short Sale provisions were added. (December)

 

•Streamlined paperwork requirements added. (January)

 

•The Outcome: Far less homeowners than planned have been helped by this bill. Less than 67,000 borrowers went from the trial phase. The new streamlined paperwork process mandates that paperwork is obtained before the trial phase begins.

 

Tightended Requirements for FHA

•What: FHA has recently announced it will tighten its lending standards. It will do the following: 1) Increase upfront insurance premiums by 0.5% 2) Cap Seller Contributions to Buyer’s closing costs at 3% 3) Require higher down payments for those with poor credit.

 

•Why: FHA has grown from 2% of all loans in 2006 to 30% of all new loans and 20% of refinances in 2009. Their capital reserve ratio, the funds it uses when borrowers default, have fallen below the requirement of 2% to a little over 0.5%.

 

•Implications: These measures are aimed at building the reserves up and protecting the vitality of FHA and keep it lending in the future without tax-payer funds. Although buyers will need to bring additional money to the table at closing and they cannot expect to get all of their closing costs from the seller, these are not dramatic changes. Many first-time buyers and those will less-than-perfect-credit still see FHA as a good option.

 

•FHA’s market share for home purchase in terms of lending activity dollar volume has skyrocketed:

2001: 6.8%

2002: 4.9%

2003: 4.0%

2004: 3.0%

2005: 1.9%

2006: 2.0%

2007: 3.4%

2008: 16.1%

2009 Q1: 19.0%

2009 Q2: 15.9%

2009 Q3: 17.1%

 

Lifted FHA 90-Day Seasoning Requirement

With certain exceptions, FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days.

 

•In an effort to stabilize home values and improve conditions in communities where foreclosure activity is high, HUD announced a temporary policy that will expand access to FHA mortgage insurance and allow for the quick resale of foreclosed properties.

 

•This temporary waiver will give FHA borrowers access to a broader array of recently foreclosed properties.

 

•This change in policy is temporary and come with very strict conditions and guidelines to assure that predatory practices of "flipping" where properties are quickly resold at inflated prices to unsuspecting borrowers are not allowed.

 

•This waiver is limited to those sales meeting the following general conditions:

1. All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.
2. In cases in which the sales price of the property is 20 percent or more above the seller's acquisition cost, the waiver will only apply if the lender meets specific conditions
3. The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program

•In today's market, FHA research finds that acquiring, rehabilitating and the reselling these properties to prospective homeowners often takes less than 90 days. Prohibiting the use of FHA mortgage insurance for a subsequent resale within 90 days of acquisition adversely impacts the willingness of sellers to allow contracts from potential FHA buyers because they must consider holding costs and the risk of vandalism associated with allowing a property to sit vacant over a 90-day period of time.

 

•The policy change will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. This will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.

 

•This will benefit first-time buyers who often have been shut out from buying affordable homes.

 

•The waiver will take effect on February 1, 2010 and is effective for one year, unless otherwise extended or withdrawn by the FHA Commissioner.

 

•This is great news not only for homebuyers but investors too. What investors need to know is it only applies to properties acquired through foreclosures.

 

•In 2009, investors accounted for 15% of total home sales.

 

•% of buyers who were investors:

• Oct 2008: 14%

• Nov 2008: 20%

• Dec 2008: 14%

• Jan 2009: 14%

• Feb 2009: 25%

• Mar 2009: 24%

• Apr 2009: 18%

• May 2009: 14%

• Jun 2009: 14%

• Jul 2009: 9%

• Aug 2009: 12%

• Sep 2009: 13%

• Oct 2009: 14%

• Nov 2009: 12%

• Dec 2009: 15%

• Jan 2010: 17%

 

Addressed Home Valuation Code of Conduct (HVCC)

•What: Regulations regarding the communication process between lenders and appraisers. It states that for a loan to be purchased by Fannie Mae or Freddie Mac, the lender cannot communicate directly with the appraiser in order to create a layer of separation and promote fair and accurate appraisals.

 

•Why: Overly inflated home prices that boomed during the bubble may have been due in part to appraisal practices.

 

•What Happened: The regulation almost “slipped” into effect without time for review by industry experts. This created much confusion in the market. In fear of not complying with the regulation, banks became very cautious and ordered appraisals through appraisal management companies. Because these companies cut into the appraiser’s compensation, less experienced appraisers tended to work with them. As a result, many times the company assigned appraisers who were not familiar or inexperienced with an area the job. This caused many appraisals to come in too low to make the contract work. The bank would not loan for more than the appraisal said the house was worth, leaving the buyer and seller to come up with the difference. If they could not, the deal fell through

 

•The result: In July, Fannie Mae, Freddie Mac, and FHA released additional provisions released clarifying specific: the appraiser must have knowledge of the area, how distressed property sales should impact the valuation, and that real estate agents are permitted to directly speak with the appraiser.

 

What Can The National Association of REALTORS® Tell Us About 2009

 

Primary Reason For Purchasing a Home

Desire to own a home	35%	62%	11%
Job-related relocation or move	9	2	16
Desire for larger home	9	2	16
Change in family situation	9	8	10
Affordability of homes	8	10	6
Desire for a home in a better area	4	1	7
Desire to be closer to family/friends/relatives	4	1	7
Desire to be closer to job/school/transit	3	1	5
First-time home buyer tax credit	3	6	1
Desire for smaller home	3	*	5
Retirement	3	1	4
Establish household	2	2	1

 

 Tenure In Previous Home

1 year or less	4%
2 to 3 years	18
4 to 5 years	21
6 to 7 years	12
8 to 10 years	15
11 to 15 years	12
16 to 20 years	8
21 years or more	11
Median	7

 

Buyer's Expected Length of Tenure

1 year or less	1%
2 to 3 years	3
4 to 5 years	12
6 to 7 years	3
8 to 10 years	14
11 to 15 years	5
16 to 20 years	22
Don’t Know	39
Median	10

 

First Step in Home Buying Process

	All Buyers	First-time Buyers	Repeat Buyers
Looked online for properties for sale	36%	31%	40%
Contacted a real estate agent	18	14	21
Looked online for information about the home buying process	11	16	7
Contacted a bank or mortgage lender	8	11	6
Drove-by homes/neighborhoods	8	6	10
Talked with a friend or relative about home buying process	7	11	3
Visited open houses	4	2	5
Looked in newspapers, magazines, or home buying guides	3	2	3
Contacted builder/visited builder models	2	1	2
Attended a home buying seminar	1	3	*

 

Number of Weeks in Home Search

Median length of search in weeks

On average, buyers viewed 12 homes in their search

2001	7
2003	8
2004	8
2005	8
2006	8
2007	8
2008	10
2009	12

 

Info Sources Used in Home Search

60% of New Home Buyers got information from home builders

Internet	90%
Real estate agent	87
Yard sign	59
Open house	46
Print newspaper advertisement	40
Home book or magazine	26
Home builder	18
Relocation company	4
Television	8
Billboard	6

 

Existing Home Listing Statistics for Baltimore, Maryland

The data below provides a snapshot of residential real estate listing statistics for Baltimore, Maryland as of 2010-02-15. Asking price and inventory statistics are shown for combined single family home and condo listings. You might also be interested in the unemployment rate history for Baltimore, Maryland.

 

Baltimore 25th Percentile, Median and 75th Percentile Home Price  Source HousingTraker.net

 

Baltimore-Towson, Maryland Unemployment Rate

 

The unemployment rate for the Baltimore-Towson, Maryland metropolitan area was 7.6% in December 2009. The Maryland state unemployment rate was 7.5% and the national unemployment rate was 10.0% for the same month. Note: All comparisons are made with December data as January metro level unemployment data has not yet been released.

Unemployment Rate	December 2009	Month/Month (Points)	Year/Year (Points)
National	10.0%	0.0	+2.6
Maryland	7.5%	+0.2	+2.1
Baltimore-Towson	7.6%	0.0	+1.8

Unemployment Rate: Baltimore-Towson, Maryland, National

 

 

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