Sat Feb 21, 2009 News Snippets

The White House has established a Web site, Recovery.gov, designed to help Americans track projects funded by the stimulus bill.
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Lenders and mortgage investors would have to agree on a lower interest rate that would be designed to reduce the borrower's mortgage payments to 38 percent of their pretax income. The government would then provide financing to bring that ratio down to 31 percent.

Households who owe more on their mortgages than their homes are worth to refinance. There are nearly 14 million households in that situation, according to Moody's Economy.com.
===========================================================National Association of Home Builders/Wells Fargo Housing Opportunity Index

Now it's the most affordable housing market in at least five years

More than 60% of all U.S. homes sold during the last three months of 2008 were affordable - meaning that a family making the national median of $61,500 a year would pay 28% or less of their total income toward housing expenses.

At 62.4% affordable, the figure is up considerably from 56.1% in the previous quarter and 46.6% at the end of 2007

In the fourth quarter, the national median home price fell to $190,000 from $205,700 in the previous-year period

Existing homes sold at an annualized rate of 4.74 million in December, down from more than 7 million during the boom.

New home sales crashed to an annualized rate of 331,000 in December, the lowest since record keeping began in 1963.

Affordability, which was a major factor in homebuying during the boom, no longer matters very much. In most parts of the United States, affordability has returned to where it was in 2002 or 2003. The new barrier is willingness to buy. Harvard University Joint Center for Housing Studies
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"Even the experts don't quite know what's going on." Paul Volcker, a top economic adviser
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March Will Be The Tipping Point Of The Recession

The Federal Reserve has said that it now expects unemployment to hit almost 9% by the end of the year.
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What borrowers need to know

*FOR BORROWERS CURRENT ON THEIR MORTGAGE

-What help is available for borrowers who stay current on their mortgage payments but have seen their homes decrease in value?
Such eligible borrowers may now be able to refinance into a 30- or 15-year, fixed-rate loan. Through the program, Fannie Mae and Freddie Mac will allow the refinancing of mortgages they hold.

-I owe more than my property is worth, do I still qualify to refinance under the plan?
Eligible loans will now include those where the new first mortgage will not exceed 105 percent of the current market value of the property.

-How do I know if I am eligible?
Complete eligibility details will be announced on March 4 when the program starts. The program is limited to loans held or securitized by Fannie Mae or Freddie Mac.

-When can I apply?
Mortgage lenders will begin accepting applications after the details of the program are announced on March 4.

-What should I do now?
Gather the information that you will need to give your lender after March 4, including information about the monthly income; your most recent income tax return; information about any second mortgage on the house; and payments on each of your credit cards or other loans.

*FOR BORROWERS AT RISK OF FORECLOSURE

-What help is available for borrowers who are at risk of foreclosure?
By providing lenders with financial incentives to modify existing first mortgages, the Treasury Department hopes to help as many as 3 million to 4 million homeowners avoid foreclosure regardless of who owns or services the mortgage.

-Do I need to be behind on my mortgage payments to be eligible for a modification?
No. Borrowers who are struggling to stay current on their mortgage payments may be eligible if their income is not sufficient to continue to make their mortgage payments and they are at risk of imminent default.

-How do I know if I qualify for a payment reduction under the plan?
You may qualify for a mortgage modification if (a) the house is your primary residence; (b) your monthly mortgage payment is greater than 31 percent of your monthly gross income; and (c) your loan is not large enough to exceed current Fannie Mae and Freddie Mac loan limits.

-I have a mortgage on a duplex. I live in one unit and rent the other. Will I still be eligible?
Yes. Mortgages on 2-, 3- and 4-unit properties are eligible as long as you live in one unit as your primary residence.

-How much will a modification cost?
There is no cost to borrowers for a modification under the plan.

-Is my lender required to modify my loan?
No. Lenders participate in the program on a voluntary basis and loans are evaluated for modification on a case-by-case basis. But the government is offering incentives and it is expected that most major lenders will participate.

-My loan is scheduled for foreclosure soon. What should I do?
Contact your mortgage servicer or credit counselor. Many lenders have said they intend to postpone foreclosures on mortgages that may qualify for the modification.

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Re: The possibility of Bankruptcy Law change to allow Judges to write down mortgages.

Banks want to minimize "cramdowns" and waves of modifications.
(Why you might ask Martha?) Because in part due to the tricky "accounting nuances." If a bank "lowered the balance of a certain mortgage, there would be a strong argument that it would have to reduce the value on its balance sheet of all similar mortgages in the same geographic area to reflect the danger that the region had hit an economic slump. Under this stringent approach, financial industry mortgage-related losses could far surpass even the grim $1.1 trillion estimated by Goldman Sachs."

But they are really swimming against the tide of public opinion. We'll soon know if the banks would have been much better off generating their own modification plan.

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Fannie Mae allows investors to mortgage more properties (The change is effective March 1)
Fannie Mae modified a policy that allowed real estate investors to have only four financed properties. The number can now be five to 10.

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Interest Rates

Rates on 30-year-fixed mortgages fell this week, declining along with bonds yields amid easing concerns over inflation due to the still-slowing economy.

The average rate on a 30-year fixed mortgage dropped to 5.04 percent this week from 5.16 percent last week. A year ago, the 30-year, fixed-rate mortgage averaged 6.04 percent.

The average rate this week on a 15-year fixed-rate mortgage was 4.68 percent, down from 4.81 percent last week, Freddie Mac said. The rate stood at 5.64 percent a year ago.

Average rates on five-year, adjustable-rate mortgages declined to 5.04 percent from 5.23 percent. Rates on one-year, adjustable-rate mortgages fell to 4.80 percent from 4.94 percent last week.

The rates do not include add-on fees known as points. The nationwide fee for 30-year mortgages averaged 0.7 point for this week. The fee for 15-year mortgages averaged 0.6 point.

Fees for five-year adjustable rate mortgages averaged sixth-tenths of a point, and 0.5 point for one-year adjustable rate mortgages.

Mortgage finance companies Fannie Mae and Freddie Mac, which were seized by the federal government in September 2008, own or guarantee almost 31 million home loans worth about $5.5 trillion. That’s more than half of all U.S home mortgages.
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The Society of Industrial and Office Realtors®, in its SIOR Commercial Real Estate Index, has declined for eight consecutive quarters and is 58.5 percentage points below the 100-point criteria that represents a balanced marketplace.

Commercial real estate activity continuing to decline, as measured by net absorption and the completion of new commercial buildings, is likely to weaken further over the next six to nine months.

Office MarketLosses in the job market continue to reduce demand for office space. Vacancy rates are projected to increase to 16.7 percent in the third quarter of 2009 from 13.4 percent in the third quarter of 2008.

Industrial MarketThe industrial sector is now beginning to feel the impact of the global economic slowdown, which is reducing the demand for exports. Vacancy rates in the industrial sector are forecast to rise to 12.2 percent in the third quarter of 2009 from 10.7 percent in the third quarter of last year.

Retail MarketThe slowdown in consumer spending has hit retailers hard. The retail vacancy rate will probably rise to 13.4 percent in the third quarter of this year from 9.8 percent in the third quarter of 2008. Average retail rent is expected to fall 9.0 percent this year; it declined 2.0 percent in 2008.

Multifamily MarketThe apartment rental market – multifamily housing – has held its own as a result of depressed home sales as potential buyers seek rental housing. Multifamily vacancy rates are forecast to edge up to 6.0 percent in third quarter of this year from 5.8 percent in the third quarter of 2008. Average rent is projected to grow 1.7 percent this year, following a 2.9 percent gain in 2008.

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Key West Real Estate Stats

The Number of Sales for 2008 was 1,166, an ‐11% decline relative to 2007. Sales had fallen during the 1st quarter by ‐21%, ‐19% by mid‐year, and ‐15% as of the 3rd quarter compared to the same period in 2007.

A positive sales trend occurred during the period August through December 2008 when the number of sales of all property types increased by +5% over that sameperiod in 2007.

The Dollar Value of Sales decreased by ‐29% to $679MM for 2008. In 2007, it was $964MM.

Year to date, the Dollar Value has been ‐30% to ‐32% each quarter versus 2007.
The Average Sale Price for 2008 was $588K, ‐21% less than the $740K for 2007.
The average Sale Price for the 1st quarter of 2008 was $635K, $626K by mid‐year, and $604K as of September 30, 2008.

Original List Price to Sale Price for 2008 was 78.6% compared to 81.3% at the end of 2007, a ‐3% drop.

The Average List Price declined by ‐8% to $899K as it continues to track downward from $931K on June 30 and $990K at the end of 2007.

The peak price of $1,065K occurred at the end of 2005.

The 4,573 New Properties Listed during 2008 was ‐9% less than the 5,055 of 2007, and ‐24% from the highest amount of 6,008 registered in the Winter of 2006.

The Months of Inventory, which is the months required to sell the existing inventory on December 31, 2008 if no other properties were listed for sale, increased by +15% to 46 months (3 yrs 10 mos.). It was 40 months at the end of 2007, 37 to finish 2006, and 15 at the end of 2005.

The Number of EOY 2008 Properties For Sale, 4,424, was up +2% over the 4,337 at the end of 2007. For 2006, the end of year number was 4,628, and for 2005, 3,469.

The continuing high inventory of properties provides Buyers numerous purchasing opportunities in all price ranges!

The properties that are priced to the current market are the ones that are sold, and the market has steadily declined since 2005 and will remain flat or continue the decline in 2009 until the inventory is depleted to an overall level of less than 3,000 properties for sale.

232 was the average number of days of market time needed to sell a property, an increase of +2% over the 227 of 2007, +22% from 190 in 2006, and +45% versus the 2005 days to sell figure of 160.
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Now roughly 10 million underwater homeowners
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Title: voluntary foreclosures or Temptation to Walk Away

$75 billion homeowner-rescue plan offers a lot of help to people in imminent danger of losing their homes. It does far less for those who are deep underwater on their mortgages but have the wherewithal to keep making their monthly payments.

The most effective way to keep underwater homeowners from walking away en masse would be a big writedown of the principal they owe. That would give them positive equity in their homes -- or at least the hope for it once prices begin creeping upward again -- and with it, a reason to stay put. But, principal writedowns -- pay offs up to $5,000 of principal for homeowners who remain current on their payments -- aren't required, or even central to the proposal.

Writing down mortgage debt on houses that are underwater could total $1 trillion or more.

"If your house is worth much less than the loan, you're pretty sure you'll never really own it." says Yale University economist John Geanakoplos
Lowering the amount that people owe on their homes would obviously help the homeowners.

What's surprising is that it might even benefit the people who bought their loans, bundled into mortgage-backed securities. How could that be? Because the values of those securities have already plunged -- in some cases to as little as 25% per dollar of face value -- in the expectation of massive foreclosures. If big writedowns managed to keep more people in their homes, it could actually enhance the value of those mortgage-backed securities.ForeclosureRadar.com, tracks California foreclosures: By lowering payments and not principal balance, you're guaranteeing the extension of this crisis for years to come. Even for those who want to keep their homes at the moment, reducing monthly payments without addressing negative equity may just postpone the inevitable.