The Gate Arty Blog - January 2010 Archive

90 Day FHA Rule is Waived

Wednesday, January 20, 2010 - By Gate Arty

HUD has taken a major step to stabilize the real estate market by waiving the “90 day flip rule” effective February 1st, 2010. Currently, FHA prohibits insuring a mortgage on a home owned by the seller for less than 90 days. Originally the 90 day rule was put in place to protect FHA borrowers against predatory practices of "flipping" where properties are quickly resold at INFLATED prices to unsuspecting borrowers. This act will give FHA borrowers access to a broader array of recently foreclosed properties. 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. To qualify these conditions must be met:

• All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.

• 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.

• The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.

This waiver will be a major coup for real estate investors because the pool of available buyers is substantially increased. Before, investors had to wait 90 days before listing a property in MLS or hold a property for 90 days before selling to a FHA buyer – something most are unwilling to do because of holding costs & risks associated with delayed closings. This should be a major shot in the arm & should drastically reduce the “days on market” for home inventory.

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Home Price Reductions

Wednesday, January 13, 2010 - By Gate Arty

Trulia.com has reported that 21% of the existing housing inventory has had a least one price reduction during its time on the market. The good news is that figure has decreased 2 straight months now. The South leads the nation with 20% of homes seeing price reductions. The luxury home market has been affected the most. Luxury homes are defined as homes listed over $2 million (by Trulia). The average price cut on these homes is 15%. In comparison, homes under $2 million, have been reduced an average of 10%.  While luxury homes make up just 2% of the total listings currently, they make up 24% of the total dollar value of price reductions.

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Growing Number of Foreclosures

Tuesday, January 12, 2010 - By Gate Arty

Statistics from Lender Processing Services indicate that as of November 30th 2009, one in every 7.5 homeowners either fell into delinquency or foreclosure. The total number of delinquencies reached a record high of 9.97%, a 5.46% increase from the previous month and a 21.29% increase from November 2008. Loans falling into more severe delinquent categories reached 5.01% through November, compared to 1.52% of loans improved toward a current status.  That's compared to November’s mortgage monitor report, when 4.02% of current mortgages through December 2008 fell into delinquency by October 2009.  The states with the most non-current loans were Florida, Nevada and Mississippi. Those with the fewest were North Dakota, South Dakota and Alaska.

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Vacancies Increase in 2009

Friday, January 08, 2010 - By Gate Arty

The apartment vacancy rate ended the year at 8%, the highest level since 1980. This according to Reis Inc., a New York research firm that tracks vacancies and rents in the top 79 U.S. markets. Rents fell 3% last year, according to Reis. Led by major metropolitan cities that experienced brisk growth until the recession.  Effective rents -- which include concessions such as one month of free rent -- fell 5.6% in New York last year, the worst since Reis began tracking the data in 1990.  Very few markets have been spared. During the fourth quarter, vacancies increased in 52 markets, while they improved in 17 and stayed flat in 10.

Apartments have been squeezed because younger workers, who are more likely to rent, have experienced the brunt of job losses during the downturn.  Such oversupplied markets as Florida, Phoenix and Las Vegas are hurting, even though housing sales have picked up. Marcus & Millichap is to release a separate report on Friday that forecasts a further 2% to 3% drop in apartment rents over the next year, most of which will be concentrated over the next six months. One potential silver lining for apartment owners is the fact that many of those developments had secured financing before credit markets seized up, and since the credit crunch has frozen most new development, new apartment completions should fall by half in 2011.  However, government efforts to prop up the housing market also threaten the apartment sector by making it easier for some renters to buy homes. Some landlords have reported a slight uptick in renters moving out to buy homes. Thanks to falling home prices and record low mortgage rates, it now costs less to own than it has in the past decade on a mortgage-payment-to-rent basis. But falling rents are expected to offset some of the recent improvement in affordability, making renting more attractive than owning in some markets

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Improving Energy Efficiency

Thursday, January 07, 2010 - By Gate Arty

The government is expected to unveil a new program in the next couple of months that if approved may reimburse homeowners for up to half the cost of making their homes more efficient.  Homeowners will get the most return for the money in simple upgrades like caulking the windows, putting insulation in the attic, and changing the light bulbs - not new windows, refrigerators or dishwashers. A complete energy retrofit - which could include caulking and insulation as well as new windows, appliances and boiler, could slice a home's energy consumption in half, according to Lane Burt, manager of building energy policy at Natural Resources Defense Council.  But getting all that work done might run into the tens of thousands of dollars. And any new federal program - which is still being drafted and is not guaranteed to become law - would cap the government reimbursements at $12,000, said Burt.  The original proposal, which called for $23 billion to be spent on energy retrofits, was estimated to create over half a million jobs, according to CleanEdison, an association of green building professionals.  Those familiar with the proposal say the final bill may set aside $10 billion for energy retrofits. Still, it's a lot more than is currently being done - while some states have reimbursement programs, there is no federal plan. The original stimulus bill contained $5 billion for low income homeowners and money to retrofit federal buildings, but nothing for middle income Americans. The new proposal has no income restriction.  But in addition to creating jobs and saving consumers money, it also lays the framework for an energy efficient economy and achieving the 80% reduction in greenhouse gases most scientists say is necessary to avoid the worst impacts of global warming.

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