Last Week's Show

Countrywide
And in our Top News, a search for alleged victims of mortgage discrimination.
It comes on the heels of a landmark 335 million dollar fair-lending settlement with Countywide Financial. The record-breaking settlement stemmed from charges that Countrywide, now owned by Bank of America, discriminated against Hispanic- and African-American borrowers from 2004 to 2008. And now, the Justice Department is trying to find the alleged victims so they can be fairly compensated.
We’re talking about more than TWO-HUNDRED-THOUSAND people affected, and Janis Bowdler, a policy director at National Council of La Raza, a Latino civil-rights group, told The Wall Street Journal last week: “It’s going to be really difficult to find those families.”
U. S. Attorney General Eric Holder regarding the settlement:

“Such conduct undercuts…will not be tolerated”

Countrywide has denied the Justice Department’s allegations of any wrongdoing.

Lenders – Short Sales
Lenders are increasingly accepting more short sales to help struggling home owners avoid foreclosure, according to a recent MSNBC.com article.

“Foreclosure sales are pretty devastating,” said Faith Schwartz, executive director of Hope Now, a resource for cash-strapped homeowners.

Both short sales and foreclosures increased in 2010, but in 2011, short sales continued to climb even more while foreclosures dropped.

Banks are realizing that a short sale is far more preferable than a foreclosure in most cases. Neighborhoods also tend to benefit more because short sales tend to sell for less of a discount and, unlike a foreclosure, don’t often sit vacant.

Parents and Kids
A big trend that’s getting bigger: more and more parents are helping their children purchase their first home. What’s most surprising is that a high percentage of these buyers are still baby boomers themselves, according to a national survey recently commissioned by Better Homes and Gardens Real Estate.

According to the survey, ONE in FIVE baby boomers has already gifted, loaned or co-signed a loan to support their children or grandchildren in purchasing a home, and more than TWO-THIRDS of baby boomers want to provide this type of support in the future.

Shorter Foreclosures
The average time it takes for banks to process a foreclosure — from missed mortgage payment to the final part of the process — has increased to 674 days, more than double the time frame foreclosures took just four years ago, according to LPS Applied Analytics. Four years ago, the average time nationally was 253 days.

Delinquent home owners are learning how to stay longer in their homes with some home owners taking advantage of delay tactics, according to a recent article at CNN Money.

Housing experts say the delays are continuing to throw a thorn in the real estate market’s recovery. Areas with the longest delays in foreclosures include Washington, D.C and Florida, with averages of over ONE-THOUSAND DAYS and New York State with an average of just over 900 days.

Home Prices Stabilize
Analysts have been taking a hard look at the state of the home real estate market, with one general conclusion being reached in a story last week in the Daily Real Estate News: Home prices are expected to stabilize in 2012, but buyers and sellers will continue to be at odds over home prices.

According to a report from the Mortgage Bankers Association, buyers believe now is a great time to buy, but sellers are unhappy – and will continue to be so until 2013 at the earliest. Even so, nearly 80 percent of American households say now is a good time to buy a home.

Robo-signing
Taking one last look back at 2011, Time Magazine recently noted three issues that had the greatest impact on real estate during the year.

Number ONE was the so-called “robo-signing” scandal, where banks were found to have approved numerous foreclosures without proper reviews. Here was Housing and Urban Development Secretary Shaun Donovan speaking about that issue.

“We do have concerns…to help keep people in their homes.”

Other situations that hit real estate hard? An abnormally high number of natural disasters, including tornadoes and floods.
One effect of these weather problems was to create a focus on the National Flood Insurance Program, a program which has still not fully recovered from Hurricane Katrina. The Program received an extension until May but its future remains uncertain.

EPA – Idaho
The Washington Post reports that one couple’s four-year struggle to build their home on a one-half acre plot of land will now be adjudicated by the Supreme Court of the United States. At issue in the case is the right of Chantell and Mike Sackett to appear before a judge and contest the Environmental Protection Agency’s claim that their property is considered wetlands and therefore subject to the Clean Water Act. After obtaining local building permits, the Sacketts were served with a compliance order from the EPA that could fine them over thirty five thousand dollars per day, almost double what they paid for the lot. The EPA contends that obtaining an exception to build would have been cheaper than the legal bills the Sacketts incurred. The Sacketts counter that they believe no exception would have been forthcoming from the government agency.

The NATIONAL ASSOCIATION OF REALTORS® has filed a brief as a friend of the court stating, among other things, that not allowing citizens of the United States to file for judicial review of government agencies’ actions creates an insurmountable obstacle of time and money to protecting their property from permits and regulations that may not apply to the property owners.

Gen Y
Almost 6 million members of Generation Y now live with their parents, an increase of over 1.2 million since 2007 according to Rick Palacios, Senior Research Analyst with John Burns Real Estate Consulting. At almost THIRTY-SEVEN percent, home ownership among 25 to 29 is at its lowest level since 1999.

Mr. Palacios cites the eight hundred sixty five billion dollars in student loan debts as one of the contributing factors in depressing home ownership in this key demographic of young adults

Foreign Owners
A new report from the NATIONAL ASSOCIATION OF REALTORS® says that foreign ownership in American real estate sits at about 8 percent, but that percentage is worth eighty two billion dollars.

With many homes here worth what they were nearly 10 years ago, the decline is attracting many foreigners, mainly Canadians looking to buy at bargain prices, followed by Asians and Europeans.

Foreigners are choosing warmer climates in places such as Phoenix, Palm Springs, and Las Vegas, with Florida, Texas and California among the next most-popular choices.

Distressed Properties
A new report by Real Capital Analytics shows the number of distressed commercial properties is plateauing and expected to continue to do so in the new year. Distressed properties — which include commercial properties that are in default, foreclosure, or repossessed by lenders — had dropped twenty billion dollars in October from March 2010.

The office sector continues to have the largest number of distressed commercial properties. But that number has been steadily declining from its peak in October 2010. The apartment sector has the second-highest level of distressed commercial properties.

The metro areas with the largest number of commercial properties in distress are Manhattan, followed by L.A.-Orange County. Meanwhile, Houston has the lowest.

Just how good are these numbers, and how much should it affect your decision as to whether or not to dip your toes back into the real estate waters? Other than a statistically aberrant month in mid 2010, November’s seasonally-adjusted annual figures were the best we’ve had in several years. But before we get giddy and jump to conclusions that aren’t yet fully justified by final numbers over the next few months, let’s throw in this slight caveat that gets a little technical but really matters:

For a good part of 2011, we had to be careful about pending figures that were not reflected by the number of completed transactions. The reasons generally accepted as the causes for this were that home appraisals were coming in at a price lower than that agreed to by the buyer and seller, or banks and other lenders were using extremely high credit standards as their measure for approving a loan. These kinks resulted in either the pending contracts being delayed, or in some cases cancelled altogether.

So it’s important to note that Lawrence Yun, Chief Economist for the NATIONAL ASSOCIATION OF REALTORS®, was cautious in characterizing November’s Pending figures. He said the gains may result partially from delayed transactions from prior months.

Noting that housing affordability conditions are at a record high and that there is a pent-up demand from buyers who’ve been waiting on the sidelines for a sign to proceed, Yun said that some of the increase in this latest report appears to be from buyers recommitting to making their purchase after their initial contract ran into problems.

But Yun still observed that November did reasonably well in comparison with the past year, and that the sustained rise in contract activity suggests that closed existing home sales, which are the important final economic impact figures, should continue to improve in the months ahead.

So, to summarize, it’s pretty safe to say that we ended the year nicely, and that all indications at the moment are that things will continue to improve in the months to come.

That stands for principal, interest, taxes and insurance. They’re the core of your monthly housing budget.

The P and the I, principal and interest, are all about your mortgage. Your monthly mortgage payment is made up of the principal–the money you’re borrowing–as well as interest – the cost the lender charges you in borrowing that money. A lender can help you figure out your monthly mortgage payment, or you’ll find numerous mortgage calculators online, such as at Realtor.com.

OK, so that’s the P and the I…next is the T and the other I…Taxes and Insurance.

Property taxes are going to be one of your larger expenses as a homeowner. The exact cost will vary, depending on your property’s assessed value, and the tax rate where you live.

As far as insurance goes, that will vary too…but the national average, at least as of 2010, for the annual cost of homeowners insurance is $807.

In most places taxes and insurance are paid either once, or twice a year. And if you write the checks, you’ll have to budget for those costs, and make sure you have sufficient reserves saved up, so you’re not late for either one.

But you probably know there’s another way to pay them, which is why the term ‘PITI’ includes taxes and insurance. And that’s called escrow.

If you use escrow, a lender maintains accounts for you to pay your property taxes and homeowners’ insurance. The lender will figure out the amount needed to pay these expenses and add it to your monthly mortgage payment. When the bills come due, they’ll already have enough money set aside in the account to pay for it.

That’s convenient for you, because you don’t have to make one payment for your mortgage, another for taxes and yet another for insurance. Instead, all those ‘PITI’ expenses are covered with one monthly payment.

It’s also good for the lender, because they’re certain their investment is staying current on taxes, and staying protected with homeowners insurance. In fact, some lenders offer a discount to your mortgage rate if you escrow, possibly 0.25 percent lower…a slight savings over the life of your loan which may well be worth it.

You might want to talk it over with your Realtor and your lender to see if making the tax and insurance payments in escrow is right for you.

OK, now let’s talk about other possible expenses.

Does your new home have a home owner’s association, or a condo association? Condo fees are usually paid monthly, while HOA fees are generally paid every quarter. If you already have a contract on a place, you’ll already know about this, since condo and HOA fees are disclosed right up front. But make sure you figure them into your monthly budget.

Up next? Utilities. Depending where you live, you might have to pay separate bills for water, sewer, electricity, gas and maybe even trash – although sometimes that’s covered in property taxes.

And one good way to figure out ahead of time what your utility bills will be, is to ask the current home owners to provide you with actual bills, or at least estimates in their monthly utility costs. And don’t forget internet, TV and a phone line – if you plan on getting any of that in your new place.

With home ownership, you don’t want to forget maintenance costs. Projects can creep up–a furnace blow out, a plumbing problem, or a roof leak. Some housing experts recommend having at least 1 percent of the purchase price of your home in savings for home improvements. On a $250,000 home, that would mean saving about $2,500. Some housing experts would say saving even 2 to 3 percent. To put yourself in even better shape, keep saving that amount each year or at least some amount, so you’ll have the money available for possible big-ticket repairs.

And finally – don’t forget about – you. That’s right, your budget needs to take care of you, and your family, in addition to the house. Make sure there’s plenty left over for gas and groceries, a savings account, a nice vacation, and even for a fun night out every now and then.

So, as we wrap up our discussion about crunching the numbers, let’s put it all in perspective. Having a solid, dependable household budget is actually, nothing new.

More than 150 years ago, the great American author Ralph Waldo Emerson wrote: “No man acquires property without acquiring with it – a little arithmetic also.”

We’ve been talking about mortgage rates a lot lately on Real Estate Today, and there are plenty of reasons why. It has such a BIG impact to a home buyer’s purchasing power. The lower the rate, the less you pay over the long run of your loan. Who wants to pay thousands of dollars extra in interest?

We’re a nation who loves sales and bargains–well, folks, mortgage rates right now are at HUGE bargains, in fact, record-breaking bargains. Thirty-year fixed-rate mortgages–the most popular choice among home buyers–have been at or under 4 percent for more than two months. A rate that low was unheard of until recently.

Mortgage rates have been shattering records in recent weeks, continuing to reach new average lows. The records have been set ever since the Fed made a very rare step this summer, vowing to keep key rates low until 2014.

What’s this mean? Well for a home buyer, it means you just won the lottery: Snagging a 30-year fixed-rate mortgage at below 4 percent can greatly increase your purchasing power.

A few years ago, you’d find rates in the 6 percent range. In the 1980s, you may have locked in rates at 18 percent. …. 18 percent–could you imagine?

Every slightest percent drop in a mortgage rate means your money stretches further. Low mortgage rates are part of the reason of what’s pushing housing affordability for the average family at record highs.

Today’s home buyers are paying over $1,200 less per year on a $200,000 loan because of the drop in mortgage rates. That can really add up–$1,200 less on your mortgage per year. That’s not chump change, that’s significant…particularly over a life of a loan. And remember–that’s just the average, the savings can be far greater for some.

As many home buyers are now discovering, low mortgage rates means they can afford much more house nowadays than they could just a few years ago when rates were in the 6 percent range–about 2 percent or more higher than today.

As one mortgage expert recently told The Wall Street Journal–a home buyer’s purchasing power is actually 77 percent higher now due to the lower rates than it was 20 years ago. Listen to this: In 1991, the amount of money you would pay each month for your mortgage for a $200,000 home will now buy you a $350,000 home. That is an incredible increase in your buying power.

There’s another big thing to keep in mind with these low mortgage rates. You get to lock these in, maybe for 30 years or 15 years for the life of your loan. Can you imagine a fixed-rate loan that you might never need to refinance?

Now don’t make the mistake of thinking these rates will hang around forever…don’t we wish. Sure, we have some assurance from the Fed that we’ll see low rates will hang around for some time but some economists are predicting they won’t stay this low for much longer and 30-year rates even may start ticking up the middle part of this year to 4.5 percent, maybe a little higher even. Hey, big sales don’t last forever.

Now when talking about mortgage rates, we need to be fair here too. We realize that these low rates are like dangling a carrot in front of a rabbit to some home buyers out there. Not everyone is finding they can take advantage of these low rates, whether it be for home purchases or home refinances. Lenders have gotten a little stricter in recent years with their underwriting standards, and you need to have a good credit score and prove you’re a good credit risk to snag these low, low rates.

But for those who can qualify, big savings are there. Talk with a lender and see what rate you can qualify for and you may be amazed at how much your purchasing power has increased by a low rate alone. It’s truly one of those secret perks you may discover when financing your home purchase today.