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Conditions prime for home buying in 2012

Source: Courant HomeFinder Digest

With the housing market and mortgage industry gearing up for their peak season in home buying activity, a number of indications from both sectors could mean the most successful season in years.

Mortgage application activity on the rise

According to a recent report from the Mortgage Bankers Association, home loan activity rose 1.4 percent during the week ending May 4.  This overall increase was spurred by an upswing of purchase requests, as the refinancing share of the index declined.

Refinancing requests fell marginally to 72.1 percent from 72.6 percent a week earlier, the report found.  In addition, government initiatives such as the Home Affordable Refinance Program and Home Affordable requests from distressed borrowers as the Government Refinance Index fell 2.3 percent from the previous week.

These trends of rising purchase applications and decreasing refinance activity could be an indicator that the housing market is growing stronger.  The fact that the refinance share of mortgage application activity has trended lower during recent weeks could be a result of more current homeowners choosing to keep their home loans under the same structure as they gear up to sell their properties.

Home loan delinquencies declining

The mortgage delinquency rate of borrowers who were more than 60 days late on their home loan payments was down during the first quarter this year to a rate of just 5.78 percent.  This marks both an  annual and month-over-month decline, according to a report from TransUnion.  This is the lowest the rate has been since the beginning of 2009.  As a potential result, this could give lenders the confidence they need to extend more lines of credit to prospective borrowers in the coming months.

“To see that quarter-over-quarter, and year-over-year, more homeowners were able to make their mortgage payments is certainly welcome news, “said TransUnion U.S. housing financial services business unit Vice President Tim Martin.  “Before this, we saw two quarters of delinquency increases and while we are still about three times above the pre-recession norm, this should mark the start of consistent improvement each quarter.”

Prior to this decline, the delinquency rate had fallen for six straight quarters until climbing during the final six months of 2011.

Housing affordability reaches 40-year high

Due to recent changes in mortgage rates, median housing incomes and property values, a report from Fisery and Care-Shiller found that housing affordability is currently at the highest level seen in nearly four decades.  Home prices have fallen by as much as 35 percent since the housing market’s peak, according to the report.  Property values are now at the same level they were in 1998.

“The precipitous drop in home prices was an immediate cause of the last recession and the financial crises.  Falling home equity has cut into household consumption and has further constrained the economic recovery,” said Fisery Chief Economist David Stiff.

Nowadays, at the current median household income, the average American family that purchases a home will only need to allocate 12 percent of their annual income to the investment.  Typically, experts advise not pulling more than 30 percent of annual income toward housing, which makes 12 percent a real bargain.

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New Federal Timelines May Speed Short Sales

 By:  Kenneth Harney; kenharney@earthlink.net

If you’re one of the estimated 11 million homeowners burdened with an underwater mortgage, a new federal policy could be good news starting in June when you want to do a short sale to shed your mortgage debt load and avoid foreclosure, you may not have to wait for months to hear back from your bank when you submit an offer from a potential purchaser.  Instead, if your loan is owned or securitized by either of the dominant conventional mortgage market players – Fannie Mae or Freddie Mac – you can expect a response within 30 business days, with a final decision no later than 60 days.  If you don’t hear back during the first 30 days, the bank will be required to send you weekly update telling you precisely where the holdups are and when they are likely to be resolved.  None of this is typical of short-sale procedures today.  Banks and servicers who don’t comply will face monetary and other penalties.

The mandatory timelines, which real estate and mortgage industry experts say should help speed up what traditionally has been a glacial process, are being imposed by the Federal Housing Finance Agency, the regulatory overseer of Fannie and Freddie in conservatorship.  Short sales represent and important alternative to foreclosure, and involve the lender or loan servicer agreeing to accept less than the full amount owed by the borrower.

Though they can be complex and messy, and can take anywhere from several months to more than a year to complete, short sales are turning into a mainstay of the real estate market.  According to a report from the foreclosure data firm RealtyTrac, short sales jumped by 33 percent in January compared with the same month the year before.  In 12 states – including California, Arizona, Colorado, Florida, New York and New Jersey – there were more shorts sales recorded during January than sales of foreclosed properties.

This trend is welcome, say regulators, but the total time required to complete short sales is still far too long,.  The 30-day and 60-day mandates address just one of the key points of delay in the process, but regulators promise a series of additional steps during the coming months designed to speed transactions.  They include clearer guidelines on borrower eligibility, property valuations, compensation for lenders holding second liens, and mortgage insurance issues.  All of these are points of friction that can delay short0sales agreement for weeks or months.

Realty agents who specialize in short sales say setting mandatory timelines is a step in the right direction, but won’t solve all the problems.  The new rules and promises of more “are great if they really happen,” said broker Erik Berry of Erik Berry and Associates in Sacramento, Calif.  Short sales that his firm handles take an average of “about six months” from start to finish on Fannie-Freddie loans.  But FHA transactions – which will not be affected by the new regulations – average much longer, and sometimes drag on for a year.

Berry also is skeptical that banks and servicers will be able to reform their staffing practices quickly enough to meet the compressed timelines – even if penalties are imposed, In some cases, he said in an interview, banks switch personnel and negotiators five or six times over the course of a short sale. “You’re dealing with one person one day and they say, don’t worry, everything’s fine, then suddenly they’re gone and you never hear from them again,” leaving the deal stalled for weeks.

Matt Battiata, whose Battiata Real Estate Group in Del Mar, Calif., handles hundreds of short sales a year, said a reliable, 60-day decision deadline for responses to offers will be helpful – 30 days better than the 90-day average he now sees from banks – but the whole process will still take longer than traditional sales.  For clients seeking to do short sales today, Battiata estimates five to six months from offer to closing.  After June, assuming the new federal rules and penalties work, the estimate might only be cut by a month.

On top of this, some of the complications inherent in short sales are beyond the control of regulators or banks, he pointed out.  For instance, buyers put in offers to purchase but then change their minds, forcing the sellers and brokers to come up with replacement offers, and the bank to reset the clock to analyze the new package.

The takeway for potential short sales:  Be aware of the new moves afoot to streamline the process but don’t expect miracles

For questions and answers on Connecticut Real Estate, Homes for sale, Leases and Condo Property Management, feel free to visit us on the web at www.BarberinoRealEstate.com or call Alan Barberino at 203-265-7534

Pending Home Sale On The Rise!

Source:  Carol Riordan www.HartfordCourant.com – HomeLife

 

Pending home sale for February were up significantly versus a year ago according to a study just released by the national Association of Realtors (NAR).

Their Pending Home Sales Index (PHSI)* showed an overall increase across the United States to an index of 96.5, a rise of 9.2 percent compared to February of 2011.  In the Northeast, the index rose 18.4 percent to 77.7.  The Midwest also posted large gains with a 19.0 percent increase to an index of 93.8.  There was an increase of 7.8 percent in the South to an index of 105.8 and a decrease in the West of 1.8 percent to an index of 99.3.

NAR Chief Economist Lawrence Yun predicted a strong buying season based on recent monthly PHSI increases.  He said, “We had a very good January, now we have a nine-percent increase in February figures.  These are implying that this buying season will be a quite decent year.”

The unseasonably warm weather has encouraged people to go out and look for properties.  Potential buyers are not just browsing, however, but shopping seriously for homes as indicated by a rise in realtor confidence.  “Realtors are looking at some of the qualitative factors,” said Yun.  “Whether or not people are returning on their open house visits; whether people are examining homes very carefully or just kicking the tires.”

Another indication of the real estate market’s recovery is declining shadow inventory which is measured by seriously delinquent mortgages and homes in foreclosure.  Shadow inventory reached a high in the last quarter of 2009, but has been steadily declining since then.  There has also been a decline in bank-owned properties and properties owned by the government through Fannie Mae, Freddie Mac and the Federal Housing Administration.  In addition, visible inventory has reached its lowest level in the five years.  “So all three buckets of potential inventory…are declining and therefore, because it’s declining consistently, it’s implying that the market is able to absorb this inventory and it’s all moving in the right direction, “said Yun.

He noted that home sales have been essentially stable since 2009 and that the recent uptick in the PHSI is noteworthy.  “If activity is sustained near present levels, existing-home sales will see their best performance in five years,” Yun said.  “Based on all of the factors in the current market, that’s what we’re expecting with sales rising seven to 10 percent in 2012.”

*The PHSI is a forward-looking indicator based on contract signings.  The data reflects contracts, but not closings.  The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales.  Information about NAR is available at www.realtor.org.

Visit www.BarberinoRealEstate.com for all your Connecticut Real Estate Home Selling and Buying needs.  Specializing in Condominium Property Management in CT, Leases and Sales. Go with the pro! Alan Barberino.

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