The Outlook for the U.S. Housing Market.
http://thedianerehmshow.org/shows/2010-07-26/outlook-us-housing-market
Home inventories continue to rise despite record low interest rates. The administration is turning its attention to the struggling housing market. What it could mean for buyers, renters and the economy as a whole.
Guests
Guy Cecala
Publisher of Inside Mortgage Finance Publications
Dina ElBoghdady
covers the real estate market for the Washington Post.
Thomas Lawler
founder of Lawler Economic & Housing Consulting, LLC, former senior vice president of Fannie Mae.
Comments
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We recently had our mortgage modified thru the FDIC. It was a lot of work, but worth the effort-originally, we had put down a deposit, never had a 2nd mortgage & thru the whole process continued to pay the mortgage, even though at 1 point we were both on unemployment. Many of the wealthy in SW Florida are just giving keys back to the bank as they can't sell their investment property and walking away & it's appaling. $3 - $4 million dollar houses are selling for $2 million in once very expensive developments. It shouldn't be so easy to walk away from a house. I can remember when foreclosure and bankruptcy were once embarassing & shameful. What happened to responsiblity?
Me and my husband have been looking for a house for over a year (FHA LOAN), we have a credit on the 700's but every time we put on an offer on a house we are competing with investors. There's no way we can compete with investors given that they pay CASH.
My husband and I are young, self-employed professionals living in the Raleigh-Durham area, which still has a relatively "hot" real estate market. We had absolutely no problem getting a a good old fashioned 30-year fixed mortgage loan with a 20% downpayment. We went under contract on two separate homes in the past 3 months and both purchases fell through due to the seller's stubbornness—they just couldn't understand that they had to take a loss on their home that they bought 3+ years ago. So in our case, it was the seller who caused our home-purchase to fall through, not the banks, government or other entity. We have now been jaded by the home buying process and will probably continue to rent for as long as possible. We wanted to be proud homeowner's... but we just couldn't make it happen.
I am a mortgage lender of 13 years now. What I hear these guests saying is that things are tougher and it scares many from applying. So let's get specific: self employed borrowers are the hardest hit if you want to pick a market segment because now there are no "stated income loans" where you don't have to prove income through traditional means. The 2 top reasons people are not buying today are the same top 2 reasons they went into default just a few years ago. The #1 cause for default is job loss, and #2 is divorce. There is no loan program that will offset this risk.
As far as increased down payments, FHA still requires only 3.5% down payment, FNMA has made it tougher for a 5% down loan, so the private, local banks are filling the void and doing the 2nd mortgage so that customers can still buy houses with 5% or 10% down if they wish so they don't have to liquidate assets. In my opinion, the credit or qualifying IS NOT that different than before and FHA still allows "dirtier credit" than the "sub-prime" lenders ever would.
Last of all, I would suggest that it would be nice to hear the sound advice that real estate is local, because while new construction is down 35% in May 2010, in my county, in TX, our new construction increased 30%. People who take advantage of the 30-40% discount on houses (lower rates, home prices combined), will be those who will be ahead of the rest of the recovery and reap the benefits.
Thank you
Sean
I believe that many lenders did not make loans that were more than "risky" becaue they thought the values in the housing market would keep going up; they made the loans because they could sell them off as securities or to Fannie Mae.
One of your guest's hit our situation right on the head:
Both my husband and I have great credit.
We both have secure jobs although our incomes have been reduced by 38%.
Home is reduced in value by 41%.
Can not refinance.
Can not sell.
I have been researching every program out there (federal and private) but there seems to be nothing for those of us that are just plugging along and are not behind in payments. What do we do?
I am not a realtor, but you need to find a realtor that works specifically with forclosures. I saw many customers give up on the process because the "steals" get stolen quickly and sometimes there is quite a buddy system at work. Good luck. Are you already prequalified? The cash offers will always be taken more seriously but if you have a lender that is quick and can close in a short time, sometimes that helps. The bigger banks are slow and the "asset manager" who reviews the offers knows that.
Loan modification should be available. Bank of America, for example, has 2 loan modification departments. One is for those who are delinquent, the other for those who have stayed current on their mortgage like you. They DESPERATELY need to keep paying customers in an "on time " status. The modification can be made 1 of 2 ways: they can reduce the principle, or reduce the rate. The loss is written off by the bank. The process is slow and frustrating, but be sure you call for the loan modification. Once recovery starts, it will disappear.
PLEASE stop being part of the problem and help with the solution!
Fannie and Freddie DO NOT demand a 760+ credit score and 25-30% down payment. Of course that helps but it doesn't stop one from obtaining a mortgage.
Your guest is reinforcing the public opinion that home -ownership is a bad thing...it's NOT!
All that is needed is individual fiscal responsibility. ... don't borrow money you haven't the ability to repay.
Lenders offered ridiculous programs that were sure to fail. Now brokers are being held to the fire because of it. WE could only sell the products that were offered.
I would not have dreamed of offering a mortgage client a No income No Asset type of loan....how stupid can one be?
Stay within your means...
I was in my local branch of BOA 2 weeks ago for another reason, they hold most of our accounts as well as our mortgage.
The branch manager asked me about re-financing, when I mentioned how much we were under, (about 41%) she just said, "oh, maybe some other time."
I purchased a short sale. It took FOREVER. Over 9 months. The banks really do not want short sales to happen
the bankers are disconnected from the mortgage process in most cases. You should call customer service (endure the pain) and tell them you need the "eminent forclosure dept" for someone who is "current" on their mortgage for the time being. Keep repeating that to the rep's you talk to until you reach that specific dept. My neighbor just got modified to a 2% range. It was a hassle but she did it all by phone and mail.
I lost my job in March. My serverance ran out in June. I have applied for unemployment. My husband will lose his job at the end of this week and will be applying for unemployment. At the end of June when my severance ended, I called my mortgage holder, BANK OF AMERICA, and they told me they would send us modification paperwork in 3-7 days. I didn't get it and called back a week later then then said, No no 10-14 days. (Note they told me not to use the government website paperwork ... because they needed to process their OWN forms through the bank).
It has been 30 days and I have not received my paperwork. My sister has a different lender and they have filled out the paperwork and it has been over 60 days and two mortgage payments and it has still not been processed.
Maybe it is not that people aren't filling out the paperwork but that these lenders are dragging their feet on the processing until it gets to a point that it is moot and foreclosure happens rather than loan modification.
I wonder if anyone else has experienced this and if anyone is looking into this issue?
Is anyone going to address the vandalism and break-ins regarding the houses that sit because they are vacant? They then become so damaged due to the police and government organizations don't know who actually owns the home for action to be done. Furthermore, the banks STILL think they are worth "X" amount of dollars; when they clearly are not! For example, we have a house that is now surrounded with homes that look as if it is a devastated neighborhood from Katrina and we live in INdianapolis, IN. From Rich Anderson, Indianapolis, IN
Thanks for your input...I'm starting today!
Don't more of you need to talk about the fundamental generation of VALUE by our economy? Some jobs directly generate value in America--growing brussels sprouts, building hi-tech batteries, etc. These produce things of value from raw materials and work: everybody needs them. A restaurant, real estate or casino job does not generate any fundamental value, since the people who have the money to spend are those who ARE generating value. The real estate and other markets will take care of themselves when more people are producing things of fundamental, not derivative, value.
Being a present day disabled combat veteran this has me worried. Less then a year into bankruptcy due to medical bills, recently married, wife being the now career professional, with plans for the future of course, how might today's housing market affect the VA home loans decisions if applicable?
From my experience submitting closed loan packages to lenders from a real estate attorney, plus extensive research into the housing collapse, some facts that call into question the "conventional wisdom" being re-re-re-repeated on this show:
In Sept 2008 there was $20 trillion worth of real estate in the US, and $10T in total mortgages. Of that $10T, $1.5T conformed to Fannie/Freddie underwriting standards, and $8.5 was non-conforming, privately-underwritten debt. The gov't programs promoting home ownership produced conforming loans. No way did 15% of home loans bring down the whole pyramid - the 85% of crooked loans did.
How do I know they were crooked? By the terms I saw processing the sub-prime, nonconforming loan closing packages, such as:
-Fees ranging from 5 to 10% of the loan amount
-Interest rate increases of 4 to 6 percentage points after the borrowers belongings were on the moving van
-Terms in the loan documents that were unlawful in the state. When the lawyer refused to include them, lawsuits and disbarment were threatened by big-name lenders.
Spare us the blaming of home buyers for the crash. They'd be paying these loans if lenders hadn't continually exploited deregulation to scrape off potential equity into their own pockets.
I am a Real Estate agent. I showed a property this weekend that is owned by a seller who lives out of the country. The home is over priced by about $80k. Foreclosure was filed in January 2010. The Seller has no intention to short sell the property and probably doesn't care if it gets foreclosed on. My buyers would like the opportunity to buy the property today at fair market value but does not have the ability to go directly to the bank until the foreclosure procedures go through the cycle which can take another year, which brings the values down that much more. It seems like a lose lose reality.
as a fellow vet and mortgage guy, and someone who works VA loans I'll tell you. You will have to wait until 3 yrs after the BK discharge debt to get a loan. It is critical that you maintain good credit on remaining or new accounts after the BK so VA will see this as an isolated incidence. The problem you may have is that lenders are "adding to the rules" VA already has in place to "play is safe" and this is a shame, a farce to satisfy shareholders possibly, and is only going to end with lenders shooting themselves in the foot, but once recovery is solid I believe the silliness will unwind.
In response to the Diane Reams show regarding mortgages and FHA loans in particular... The recent example regarding the woman who sold her Virginia home to lawyer, I would guess her buyers have a mortgage higher than the VA loan limit of $729,750 is because that is the base loan limit. An FHA loan does NOT allow buyer’s to roll in closing costs as your guest stated. However, the FHA funding fee of up to 2.25% can be added to the base loan, which is this example would be $16,419.37, which would make their total loan amount $746,160 which would explain why their loan amount exceeded the caller’s expectations.
Elysia Stobbe
Branch Manager
VanDyk Mortgage
estobbe@vandykmortgage.com
Thank you kindly.
It's a more comprehensive problem: only homeowners can get the loans or the rewards for putting up solar panels or solar water heaters or windmills or air conditioners. The Baby Boomers (and the Silent Generation?) are trapped in their homes and jobs by the fallen values of their real estate and 401(k) portfolios, locking out Generations X and Y from non-entry-level jobs. The hiring freezes and layoffs of teachers (300,000 threatened nationwide) don't help. George W. Bush offered to help with homeownership, but it turned into a hunt for N.I.N.J.A.'s (No Income, No Jobs or Assets) to create mortgage-backed securities that took down Ireland and Iceland and more. W.'s claim that a mother with three jobs was uniquely American conflicted with a 3/17/2005 NPR story about white-collar Argentinians with three jobs, creating a death spiral of stagnant wages. No reliable wages = no homeownership.
See www.bls.gov/news.release/empsit.t15.htm for the official jobless numbers (unemployed U-3 vs. underemployed U-6), www.shadowstats.com for the proof that it's even higher (but down 0.1%) at 21.6% not 16.5% or 9.5%, then www.usdebtclock.org to track debts state/national/international.
My comment is about responsibility. Where is the morals of the lenders. Our taxes went up on our house when the prices skyrocketed, so the bank decided they should get $1000.00 more dollars per month added to our escrow/payment, which we in no way could pay. They only needed $2,000.00 in the escrow for the taxes but felt they should have a cusion of $12,000.00, which put us into defaulting. In trying to fix their greed, we tried everything and have not been able to do anything with this loan, the loan has been sold 4 times, the goverment program only lowered the payment $200.00, which did not help us at all. Our house is worth 1/4 of what it was worth 2 years ago. The lenders don't have to help us because the loan is insured so they will get their money. So now we would be better to walk away, we will win in the end because credit is what got us here, we obviously don't need it. If the lendors are going to be corrupt, then and now, we really have to concider renting. They morally could have fixed things for us, but obviously don't have to. So in the end these lenders are going to just end up losing somewhere along the line and that is the thing that scares me, because that is what will really crash our economy. So there are many situations why people have to just give up. There are so many who have no idea how really hard homeowners have tried to make it happen and couldn't.
We were one of the lucky ones. We sold our house last Summer and we actually made a profit on it. We had been in that house for almost 10 years and done some minor upgrades to it. We were able to get into a brand new home and put %15 down on our new mortgage as well. I like to think we were fortunate, but really, I think it is because we were careful. When we bought our first home in 2000, we made sure we could afford the payment and also, knew that a 30 yr fixed mortgage was the only way to be sure the payment would not go up. The ARM mortgages were attractive but risky. Also, we were careful to buy a home that we knew we could afford if one of us lost our job. We did not buy over our means. I think a lot of people go overboard too easily because when something is rolled into a mortgage payment it might not seem so bad at the time....then the rates adjust.
Steve Roberts mentioned that loose mortgage requirements led to the collapse of Fannie and Freddie without properly attributing senators Obama, Dodd and Frank - the authors of those loose requirements who also recieved the highest campaign contributions from Fannie and Freddie. He later blamed the Bush administration for encouraging home ownership when it was Bush and other republicans who blew the whistle on Fannie and Freddie and proposed reform legislation blocked by Obama and the Democrats. Your host is either ignorant of the facts or trying to do a liberal re-write of history.