HOUSING HOPE IN ABQ

Check out this recent article in Forbes:

Forbes.com: Where Home Prices Are Likely to Rise
Real EstateWhere Home Prices Are Likely To RiseMatt Woolsey, 08.25.08, 8:00 PM ET
Believe it or not, in the future people will be buying and selling homes. Some of them will even make a profit.
It's not so crazy an idea. Consider Albuquerque, N.M. The mid-sized Southwestern city has experienced housing price declines since a peak in the third quarter of 2007, job growth has been flat, and housing starts are expected to fade by 45% through the end of 2008. Nevertheless, it's a city that home builders and economists are bullish about for 2010 and beyond.
In Depth: Where Home Prices Are Likely To Rise
Video: Where Home Prices May Get A Boost
According to analysts at Moody's Economy.com, Albuquerque's job growth through 2012 is projected at an average annual rate of 1.6%, fueled in large part by its low costs and local business expansion. Housing starts in the city are expected to reverse course in 2009, growing by 26.6%, according to the National Association of Home Builders (NAHB). This means builders have high hopes for 2010 and 2011, when those homes will be completed and on the market.
It's the same story in several other cities: more tough times to come in the short term, but potential for a recovery and a rise in prices in the long term.
Behind The Numbers To determine where house prices are expected to rise next, Forbes.com looked at projections for housing starts from the NAHB and job-growth figures from Moody's Economy.com, for the 100 largest metro areas in the U.S. The estimates are based on the cost structures of business in the respective cities and the composition of the local economies.
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Housing start projections from the NAHB may seem like wishful thinking. Trade-association economists often view their own industry through rose-colored lenses. The National Association of Realtors (NAR), for example, has developed a reputation for its positive outlooks despite negative numbers.
But the NAHB data are filled with laggards, signifying some realistic thinking. Housing starts in Las Vegas are expected to drop by 32% in 2008 and actually get worse in 2009, falling by a further 43%. In overbuilt, highly leveraged Phoenix, starts are predicted to fall 50% this year and descend another 11% more in 2009.
Because houses take six months to two years to build, that means home builders aren't expecting profits in the Vegas or Phoenix market until past 2011.
"These are some of the most overbuilt markets," says Robert Denk, an economist at the NAHB. "There are some markets that got really out of hand and they're going to be in trouble for a couple years still." He cites Cape Coral, Fla., as the poster child of overbuilding exuberance. "They built 10 years of housing in two years."
The prognosis isn't as bad elsewhere.
Texas On The Rise? Centex, one of Texas' largest homebuilders, has been stung by overextension into Michigan and Colorado, as well as big bets on the vacation-home market in Texas. In July, the builder reported losses of $150 million. There's a bright spot, however.
San Antonio and Austin, Texas, have largely avoided the real estate crash, with price increases of 2.5% and 4.1% in year-over-year terms, respectively, according to the NAR. This is driven in part by the fact that the two markets are expecting building slowdowns of 24.7% and 28.2%, respectively, through the end of the year, as home builders are bearish about the remainder of 2008 and 2009 in the sales market or cannot find financing. Builders as a whole are taping their wounds and cutting back production, adopting a wait-and-see approach to home prices in the coming year.
But for the start of 2010 and into 2011, builders expect a more vibrant market for sellers. For homes built in 2009, which would come off the conveyor belt in 2010 and 2011, the NAHB forecasts a 9.6% increase in Austin and a 20.9% increase in San Antonio above 2008 levels. Much of that has to do with expected job growth in all non-farm sectors.
Recovery In Obvious Places At this point, it's clear the subprime contagion won't be contained in the next year, based on the acceleration of home price drops and foreclosures nationwide. But when the bad vintages of loans finally come off the books, the cities where prices are expected to rebound are largely those with vibrant economies.
"The logic is pretty straightforward," says Mark Zandi, chief economist at Moody's Economy.com. "People will spend as much on housing as their income will allow them. House prices are very closely tied to household income over the long run when you look at business cycles."
Do you think recovery is in the cards after 2010? Or more of the same? Add your thoughts in the Reader Comments section below.
This means that recovery is likely in the cards for even the hardest-hit spots. Cities like Atlanta and Colorado Springs, Colo., may be reeling from high defaults and foreclosures, but from 2007 through 2012, their economies are expected to experience 2% and 1.6% average annual job growth. That means more in-migration and more money in the economy, factors that help businesses grow and profit--and put more money in residents' pockets.
As local economies grow bigger and more dynamic, land values increase because the value of what can be produced on that land increases. When land prices go up, home values go up.
Home prices moving up; it sort of makes one nostalgic.

NEW FHA REQUIREMENTS

FHA Raises Its Premiums to Insure Repayment of Mortgages Wall Street Journal (08/27/08) P. A11; Hagerty, James R. Effective Oct. 1, upfront charges imposed on most FHA borrowers will climb to 1.75 percent of the mortgage amount from 1.5 percent prior to implementation of the agency's new risk-based pricing system that bases fees on credit scores, down-payment amounts and equity levels. The FHA is holding annual premiums steady, however, at 0.50 percent to 0.55 percent. With investors increasingly avoiding mortgages not backed by the FHA, Fannie Mae or Freddie Mac and the government-sponsored enterprises becoming more selective about which loans to buy or guarantee, Inside Mortgage Finance reports a jump in FHA-insured mortgages to 23 percent of all home loans last month from 1.8 percent two years ago; the publication predicts that the figure could hit 30 percent by the end of 2008. While the FHA reports $19 billion in reserves, rising defaults have generated concerns that the agency might need money from the government to cover losses.

PMI and Down Payments Required

Allow your borrowers to save money by paying a higher interest rate !!! TAMI Tax Advantage Mortgage Insurance known as TAMI will SAVE your borrowers money. In lieu of paying a monthly payment for PMI, the borrower pays a slightly higher interest rate which of course is tax deductible. The increase in higher interest rate is LESS than the PMI payment. The ADD ON for TAMI is credit score sensitive and based on LTV !!! The chart is extensive, so the following is based on credit scores ABOVE 700. Loan-To-Value ADD ON TO INTEREST RATE 90.01 - 95.00 0.375% 85.01 - 90.00 0.250% 80.01 - 85.00 0.125% The borrower may pay points to buy the rate down. Rule of thumb: ONE point equals 1/4% in interest rate. Assume a sales price of $300,000 with 5% down payment. The loan would be $285,000. Assume 30 year fixed at 6.500%: $ 1,801.39 (P & I @ 6.500%) $ 1,872.25 (P & I @ 6.875% which includes TAMI Add on) 223.25 (Monthly PMI) 0.00 (PMI) 250.00 (Estimated Taxes) 250.00 (Estimated Taxes) 75.00 (Estimated Insurance) 75.00 (Estimated Insurance) $ 2,349.64 (Total Payment) $ 2,197.26 (Total Payment) $152.39 per month SAVINGS WITH A TAMI COMBINATION!!! SOFT MARKET 95% loans on NON-JUMBO are still available. The borrower MUST have credit scores ABOVE 680 and two months reserves. If not, we will require an additional 5% down payment. Non-Owner Occupied requires a MINIMUM of 15% down payment with 720 credit scores and above. 25% down payment required if credit scores are below 720 !!! JUMBO loans require a MINIMUM of 15% down payment.

PSYCHOLOGY OF BUYING A HOME

Conducted by International Communications Research (ICR), a leading third-party research company, the findings from the Coldwell Banker Survey include the following highlights:
Quality, “Feel”and First Impression of Home Matter
More than three out of every four respondents (78 percent) felt that the quality of a home is more important than square footage.
The majority of respondents (60 percent) also said that the “feel” of a home is as important as its price.
12 percent of respondents knew their house was “the one” even before stepping inside. After visiting just once, that figure rose to 51 percent.

“While some buyers begin the process with a list of “must-haves,” this data demonstrates how intangible impressions like “quality” and “feel” factor heavily into the home decision-making process,” said Dr. Peters. “In fact, some people even experience ’love at first sight’ when it comes to their homes, which means one cannot overstate the importance of a strong first impression. And price isn’t all that matters – as opposed to investing and then hoping for an overnight return, consumers recognize that a home must have the right ‘feel’ for their everyday lifestyles.”

Buyers Prefer Security, Nurturing and Cozy Spaces Over More Abstract Ideals
51 percent of respondents said that, “A home should be a space that feels safe and secure,” while an additional 16 percent felt it should be “full of warm, cozy spaces where I can curl up.” Taken together, these responses heavily outweighed those who felt a home should be a “refuge to get away from it all” (13 percent), “open to nature with great views (12 percent),” or “a space that feels airy and light (6 percent).”
58 percent of respondents agreed with the statement, “My home is a place to shelter and nurture my family.” The next most popular response was, “My home is a place to escape from the pressures of daily life,” which 19 percent of respondents agreed with.

“Lovely views and lots of light are nice to have,” said Dr. Peters, “but these results underscore that first and foremost, a house becomes a home when it feels comfortable and safe for the family that resides there. Now more than ever, consumers are probably more inclined to choose security over special add-ons like lofty views or an airy atmosphere.”

National Home Sales up 5.3% in June

NEW YORK (CNNMoney.com) -- The number of pending homes for sale rose in June, a rebound from the previous month, according to a report released Thursday.
The National Association of Realtors' Pending Home Sales Index rose 5.3% in June to 89 from a downwardly revised reading of 84.5 in May.
The index remains 12.3% below its level in June 2007, when it stood at 101.4, but it's at its highest point since October 2007, when it was at 89.9.
The number of homes under contract for sale fell more than expected in May, after a surprising spike in April.
However, this month's report isn't necessarily good news for the average home seller. That's because many of the pending home sales are for foreclosed properties being sold at a steep discount by lenders, according to Mike Larson, a real estate analyst at Weiss Research.
"It's bad news if you're a regular home seller because you're competing against institutions that are willing to undercut you - in some cases, by a large margin," Larson said in a statement.
The report shows that housing markets picked up in every U.S. region.
The pending home sales index for the West coast climbed 4.6% in June. "You're seeing some sort of rebound in California. Not only are sales picking up, but permit numbers are leveling off, meaning we may see a bottom for housing starts in the west," said Patrick Newport, an economist at Global Insight.
In the South, the index jumped 9.3%, while it increased by 3.4% in the Northeast, and by 1.3% in the Midwest.
Home sales may get a boost in 2009 thanks to the government's housing stimulus bill.
"With a tax credit now available to first-time home buyers, increases in home sales could be sustained with the momentum carrying into 2009," said Lawrence Yun, NAR chief economist.
Indeed, NAR raised its existing-home sales outlook for 2009 by 7%, saying it now expects sales of 5.51 million next year, up from an expected total of 5.15 million this year.
Additionally, NAR projected that existing home prices will rise by 4.4% in 2009 to $215,800, according to a spokesman.
However, new-home sales in 2009 are forecast to drop 8.8% to $464,000, down from $509,000 this year.
The trade group launched the Pending Home Sales index in 2001, and a reading of 100 is equal to results that first year.
The index is considered a more forward-looking indicator of home sales than the NAR's closely watched existing home sales report. Unlike existing home sales estimates, pending home sales are usually counted a month or two before a closing contract is signed.
First Published: August 7, 2008: 10:02 AM EDT

NEW FORECLOSURE SCAMS

Of course, out of tragedy come the scam artists. USA Today has an article today about a "fraud virus" hitting distressed homeowners. The FTC is quickly putting laws in place to stop these crooks. What happens is that scammers promise to save the owners home by promising to negotiate with the lender. The homeowner can live in the house paying rent but signs the title over to a rescue company that is supposed to pay the mortgage. Instead of doing so, the crooks take the up-front cash the seller pays them for this service and sells the house. Or they just disappear with the cash. The scammers hide a deed-transfer clause in the refinancing documents. Some states have forbidden foreclosure companies from charging up-front fees. Others require a separate distinct written agreement regarding the title transfer. Washington requires that if the house is sold that 82% of the proceeds goes to the original owner. We all are aware of the scum-seekers that are out there now and I, for one, am very cautious about keeping deals on the up and up. It's no time for games.