Home Prices Could Jump 9.7% in 2013

By Al Yoon

Home-price forecasts for 2013 are on the rise.

J.P. Morgan Chase & Co. expects U.S. home prices to rise 3.4% in its base-case estimate and up to 9.7% in its most bullish scenario of economic growth. Standard & Poor’s, which rates private-issue mortgage bonds, on Friday said it expects a 5% rise in 2013.

AFP/Getty Images

The J.P. Morgan analysts boosted their base-case estimate from 1.5% after a convincing rise in the “net demand” for housing this year has surpassed 2 million homes for the first time since 2006, said John Sim, a strategist at the investment bank. Net demand is the pace of existing home sales minus the inventory of homes available for sale.

“Net demand has picked up a lot in 2012,” said Mr. Sim. “Once you get north of the 2 million territory, you are in the positive growth area unless you get a lot of distressed inventory, which this year hit a low point” since at least 2008, he added. J.P. Morgan predicts that net demand to rise from 2.7 million next year from 2.3 million this year.

An expected increase in home prices in 2012 triggered a run into some of the riskiest real estate assets, such as subprime mortgage-backed securities from the real estate boom, and analysts including Mr. Sim expect that trend to continue. Rising home prices and the quest for yield has also given a tailwind to new mortgage bond issuance that has been mired in the fallout of the housing crisis and regulatory uncertainty for the past four years.

U.S. home prices nationwide increased on a year-over-year basis by 6.3% in October, the biggest increase since June 2006, according to CoreLogic. Investors zoning in on the increases bought subprime mortgage bonds, which have posted returns of more than 40% since December.

Home price increases could exceed J.P. Morgan’s base forecast if investors seeking yield push deeper into real estate, according to Mr. Sim’s home price report.

That may already be happening, considering recent comments by Luke Scolastico, a vice president at Credit Suisse, one of two issuers of mortgage bonds without government backing since the financial crisis. Credit Suisse is increasing its purchases of jumbo loans to meet demand for securities it sees from investors, he said on an American Securitization Forum panel this week.

“We’re buying loans, every day…and (on the month,) more than the month before,” Mr. Scolastico said. Part of the reason is because of home price appreciation, but also because of the “technical demand” for relatively higher yielding assets as Federal Reserve policies depress interest rates, he said.

New mortgage bond sales from other issuers, including investment banks, could boost issuance of private label bonds this year as high as $30 billion, Mr. Sim said. That’s up from almost $5 billion this year but paltry compared with annual volume above $1 trillion generated as the housing bubble neared its breaking point in 2006.

Mortgage bonds issued by Fannie Mae, Freddie Mac and Ginnie Mae still fund more than 90% of new home loans. Bank portfolios and other private lending make up the rest.

Considering risks, J.P. Morgan analysts conceded that the economy is “gloomy” and tight lending standards can stop a bullish homebuyer from proceeding with a purchase. On the supply side, the “shadow inventory” of more than four million homes near or stuck in foreclosure still looms, though that is dropping, the analysts said.

What’s more, just the uncertainty over whether politicians will be able to steer clear of the “fiscal cliff,” the scheduled tax increases and spending cuts next month, may hurt investor confidence, the J.P. Morgan analysts said.

If taxes rise, reduced income for the potential homebuyers will damp housing demand, they added.

But the expectations for higher home prices are still widespread. Nearly three-quarters of investors polled by J.P. Morgan expect home prices to rise 5% in 2013.

Number of real estate contracts signed up 14.5 percent over the year

by Tara Steele in Economy, News – October 25, 2012  

Forecasting increases home prices and completed transactions for the year, the National Association of Realtors is starting to report slow, but positive improvement for housing.

A forward-looking economic indicator

According to newly released data from the National Association of Realtors (NAR), the Pending Home Sales Index (PHSI), a measure of contract signings, rose 0.3 percent in September from August, barely cause for any noise, however, looking at the PHSI data over the year, it is evident that contracts are up 14.5 percent compared to September 2011. The PHSI is considered a forward-looking economic indicator, used to gauge what the volume of closed transactions will be in coming months.

NAR’s Chief Economist, Dr. Lawrence Yun said, “Home contract activity remains at an elevated level in contrast with recent years, but currently appears to be bouncing around in a narrow range. This means only minor movement is likely in near-term existing-home sales, but with positive underlying market fundamentals they should continue on an uptrend in 2013.”

While housing has a long road ahead before anyone can call it a full recovery, small, yet positive economic indicators in housing are slowly emerging, with the PHSI being one of them, given that it has risen for 17 consecutive months on a year-over-year basis.

Regional performances varied

Compared to September 2011, all regions experienced double-digit increases in contract activity, but most barely changed for the month. The exception is the West region, whose PHSI index rose 4.3 percent for the month, but is only up 0.8 percent for the year, which NAR says is due to limited inventory levels there.

The PHSI in the Northeast rose 1.4 percent to 79.3 in September and is 26.1 percent higher than a year ago. In the Midwest the index fell 5.8 percent to 89.5 in September but is 19.3 percent above September 2011. Pending home sales in the South increased 1.0 percent to an index of 111.5 in September and are 17.6 percent higher than a year ago.

Looking forward

NAR reports that “Housing affordability conditions are forecast to remain favorable through next year, with the 30-year fixed-rate mortgage staying near record lows for the balance of this year but gradually rising to 4 percent in the second half of 2013.”

Additionally, the trade group says that completed existing-home sales in 2012 will total close to 4.6 million (an increase of 9.0 percent), and are projected to rise about 9.0 percent next year to nearly 5.1 million. With notably lower housing inventory, the national median existing-home price is expected to increase 6.0 percent this year and 5.0 percent in 2013.

Top home improvement projects for the fall

Have you had a home improvement project in mind for a while? Fall might be your last good shot at completing it before the winter sets in.

Photo: Thinkstock

 

If you see winter as a time for staying indoors and celebrating the holidays, then the fall season is a perfect time to get started on the home improvement projects that will help you enjoy your winter festivities.

In fact, if you wait until winter to start your renovation project, you may run into some serious roadblocks, says George “Geep” Moore, a contractor and chairman of the National Association of Home Builders (NAHB) Remodelers.

“Particularly in areas with ice and snow, you want to get your [renovation] materials delivered and stored early in the season, because once the weather turns bad, it could make it tough or impossible to get them,” he says.

So before Old Man Winter comes to your town, you might want to consider the following home improvement projects.

Fall Project #1 – Roof Repair or Replacement

Let’s face it, there’s nothing that kills the holiday spirit quicker than the drip, drip, drip of a leaky roof. And the last thing you want is Santa and his reindeer (or a snow pack) falling through the roof. So, before the heavy winter weather comes pouring down, you might want to think about a fall roof job.

Moore says the fall timing couldn’t be better. “For one thing, the heat of summer is gone and it’s a whole lot easier on the guys doing the work. Roofs can get incredibly hot in summer,” he says. Moore adds that extreme heat could also increase the time frame of the project, as workers’ pace may be affected by the heat.

As for a winter roof project, it’s doable – but potentially difficult. More says that roofs can be repaired or replaced in winter, but in most parts of the country, the weather is simply not conducive to it. And if your roof is leaking or not up to holding the weight of snow, roof replacement or repair could be dangerous, he says.

“For those reasons, fall is a good time to do roofing projects,” he says.

[Want to install a new roof? Click to find the right contractor now.]

Fall Project #2 – Flooring

There’s nothing like new flooring to bring a room or home to life. Whether it’s new wood, carpet, or even tile, your winters will likely seem a bit cozier with a fresh floor. And fall might be the perfect time to install it.

Here’s why: “Some types of flooring adhesives need the temperature of the house to be between 75 and 80 degrees. It’s for that glue to adhere properly,” says Moore. “Cold air can be a little more damp and can stop the glue from drying properly, so you could have a bonding problem.”

This means that the cold winter months might not be the best time to install flooring, depending on where you live.

[Want to install new floors this fall? Click to find the right contractor now.]

And even if you have central heating, the risk of any cold air coming into your home is still something to consider.

“You wouldn’t want to be opening and closing your door in winter if you live in a very cold climate. That could let in a lot of cold air,” says Moore.

So, unless you want the sound of loose tiles or other type of flooring to accompany your holiday tunes, you might want to give a contractor a call and get started on this project during the fall.

Fall Project #3 – Window Replacement

Can you imagine having rain, snow, or hail pouring into your home through a series of large holes in your walls? Probably not. So, if you want new windows for your holiday season, now – while the weather is mild – might be the time to get on it.

In fact, according to Moore, fall is a lot easier than winter to do window installation.

“You can replace windows in winter, but you may have to control the elements,” he says. “By that I mean building a temporary wall, so to speak, with poles and polyethylene to keep the walls and interior protected.”

And that’s not all. “Then you might have to build a small frame on the outside as a shield from the elements to be able to work,” adds Moore. “As you get further and further north, where it gets colder, it’s going to be tougher.”

If you want to avoid this trouble, calling a contractor and planning your window replacement(s) during the fall might be smarter. It can also protect you from potential damage to your home’s interior in the event that rain or snow gets blasted inside, says Moore.

[Need help installing new windows? Click to find the right contractor now.]

And we don’t know about you, but being showered with rain or snow, while inside your home, doesn’t exactly sound like holiday fun. Well, maybe a little.

Fall Project #4 – Heating Systems Check

If there’s one thing you want your home to be in winter, it’s warm and cozy. And a key ingredient to being warm and cozy is heat – as in hot water and warm air. So before the chilly weather comes wandering in, it’s important to make sure these things are in good working order, says Moore.

Let’s start with the water heater. “You want your water heater completely protected from the elements. They can be put in the attic, or further north, in the basement. You also want the water pipes completely protected and insulated from the cold,” says Moore.

Next thing to take care of? Your heating unit. “Every fall you should fire up your heater to make sure it’s in working order,” says Moore. “Check the filters, the gas flow, and the flame. Make sure you have a proper flame, with the right amount of gas and oxygen.”

If you aren’t sure how to do this, call a pro. Often, you can get a yearly contract for this service, Moore says. “With a service contract, if they do have to replace or repair any parts, you usually get a break on the rate. And it doesn’t cost near as much to make a repair during a service call as it does if it breaks down in winter,” he says.

And really, isn’t the holiday season filled with enough extra costs?

[Need to fix your heating system? Click to find the right home contractor now.]

Fall Project #5 – Concrete and Mortar

Have you been meaning to pour a new concrete patio or driveway or build a new fireplace, but haven’t quite gotten around to it? Well, you might want to take advantage of the fall weather, otherwise the cold dampness of winter may make these projects more difficult, says Moore.

“We use the rule of thumb that we want [the weather] to be 40 degrees and rising. If it’s not 40 degrees, including at night, we don’t pour concrete,” says Moore. “It’s due to the fact that there’s moisture in the concrete and it can freeze.” And if it freezes, it won’t set properly.

The cold air also doesn’t play nice with brick work that uses mortar.

In fact, when it comes to anything that uses a water solution with mortar, the colder it is, the slower it’s going to set up, explains Moore. He adds that “the damp cold air won’t hold much more moisture, so the moisture just won’t leave the concrete to let it set up.”

Fall Project #6 – Painting

There’s nothing like a fresh coat of paint to bring a fresh new feeling to your home. Whether it’s inside or out, new paint can really make for a warm and fuzzy holiday season.

But what doesn’t go down well with the holiday meal is a side of paint fumes or dripping walls. And those are just two reasons you may want to get on this project in the fall – especially if you live in a part of the country where the temperature drops dramatically, day or night, says Moore.

“Most paint products will want the temperature to be between 70 and 90 degrees to dry properly,” says Moore. And while you can control the inside temperature, Moore warns that if a lot of cold air comes in through the doorways or windows, it could adversely affect the paint job.

The real concern, of course, is exterior paint. “You probably want above 40 degrees, not dropping below 40 at night. There are some paints that are made for that, but most of the paints we use today are latex or acrylic and are temperature sensitive,” says Moore. The problem arises, he adds, when the paint freezes, and as a result does not dry properly.

 

Sellers’ Remorse Hinders Housing Market

It is a great time to buy a home. Selling a home? That is a different matter.

The combination of the sharp decline in home prices since the housing bust and record-low mortgage rates have brought housing-affordability indexes to record highs. And with rents rising, home price/rent ratios—the housing equivalent of a price/earnings ratio for stocks—are at their lowest levels in more than a decade.

Small wonder, then, that when households polled for the Thomson Reuters/University of Michigan’s survey of consumers in August were asked whether it was a good time to buy a home, most said yes. That left an index based on their responses near its highest levels since 2004.

Households also were asked whether they thought it was a good time to sell a home, and there the response was very different, with most people saying no. While the Michigan index of home-selling conditions has made a little progress, it remains severely depressed.

Indeed, sellers’ lack of enthusiasm is a big part of why real-estate agents have been complaining about a lack of inventory lately. The obvious outcome is higher prices. And that looks likely in those areas where buyers are starting to line up but sellers remain on the sidelines.

Against that backdrop, it is hard to see why the Federal Reserve needs another round of quantitative easing to try to push mortgage rates even lower. Not least because having people lock into such low rates could cause problems if rates ever normalize down the line and people don’t want to give up their super-cheap, fixed-rate mortgages.

But the Fed is likely to see that as a problem for another day.

—Justin Lahart

A version of this article appeared September 12, 2012, on page C14 in the U.S. edition of The Wall Street Journal, with the headline: Sellers’ Remorse Hinders Housing Market.

September 2012 interest rates!!

Buying A Home Is 45% Cheaper than Renting

The most important housing decision that most consumers face is whether to rent or to buy. So to help them with this decision, we took a look at the key market factors affecting the cost of homeownership.  First off, asking home prices have started to rebound and have risen by 2.3% year over year in August (3.8% excluding foreclosures); however, rents have risen more (4.7%). This means that prices are lower relative to rents than they were a year ago. But more importantly, mortgage rates have fallen: the best rates this summer have been around 3.5%, while last summer rates were closer to 4.5%. Based on asking prices and rents during the summer of 2012, buying is now 45% cheaper than renting in the 100 largest U.S. metros, on average ??? that???s a savings of $771 a month. If you plan to stay in a home for 7 years, which is the average time that Americans traditionally live in a home before moving again, it is more affordable to buy than to rent in ALL of the 100 largest metros in the U.S.

Costs aside, the decision to rent or buy a home is very personal. There???s a strong emotional component: some people want the security of homeownership and others want the footloose freedom of renting. But the financial factors are also very personal because the decision to rent or buy depends on:

1. Can you qualify for a mortgage at the best rate available?
2. Which tax bracket are you in, and do you itemize your deductions?
3. How long will you stay in your home?

To calculate whether renting or buying costs less, we assume people can get a low mortgage rate of 3.5%, itemize their federal tax deductions and are in the 25% tax bracket, and will stay in their home for seven years. (Below, we???ll show how changing these assumptions can affect the rent-versus-buy math.) We do the following calculations:

• First, we looked at all the homes for sale and rentals listed on Trulia in June, July and August 2012. On for-sale homes, we took the asking price and estimated what it would rent for; for rentals, we took the asking rent and estimated what it would sell for. That way, we can calculate the average rent and asking price for an identical set of properties in a metro area, for a direct apples-to-apples comparison. By looking at homes currently for sale or rent, we???re able to illustrate the actual housing options that consumers face right now.

• Second, we estimated the total costs of renting and buying for the typical property in a metro over a seven-year period. We factored in all the costs of homeownership (e.g., closing costs, maintenance, insurance, taxes, etc.), along with the tax benefit of deducting mortgage interest and property taxes, as well as the proceeds from selling the home after seven years with modest home price appreciation. On the rental side, we factored in renters??? insurance and the security deposit. Finally, we calculate the net-present-value of all those costs to capture the opportunity cost of tying your money up in a down payment. This gives us the total cost of buying versus renting. We then calculated the dollar difference and percentage difference between renting and buying.

• Finally, we looked at alternative scenarios of the costs of renting versus buying, by changing the mortgage rate, the income tax bracket for tax deductions, and the time horizon.

Where Buying is a Slam Dunk
With a 20% down payment, a 30-year fixed mortgage rate at 3.5% and at the 25% federal tax bracket, homeownership is cheaper than renting in all of the 100 largest metros by a wide margin. There is no market where the financial decision is even close, so long as you plan to stay in the home for at least seven years, get 3.5% mortgage, and itemize your tax deductions. However, how much cheaper it is to buy a home than to rent really depends a LOT on where you live.

Buying is 24% cheaper than renting in Honolulu, 28% cheaper in San Francisco, and 31% cheaper in New York. On the other end of the spectrum, homeownership is extremely affordable in Detroit, where buying a home is 70% cheaper to buy than to rent, and 63% cheaper in both Oklahoma City and Gary IN. Check out the top 10 lists below to see where the cost differences between buying and renting are smallest and largest.

Where the Financial Advantage of Buying Over Renting is Smallest
U.S. Metro	Monthly cost of home ownership ($)	Monthly cost of renting ($)	Difference ($)	Difference (%)
Honolulu, HI	$1,519	$2,007	-$488	-24%
San Francisco, CA	$2,327	$3,226	-$899	-28%
New York, NY-NJ	$1,857	$2,687	-$831	-31%
San Jose, CA	$1,819	$2,646	-$827	-31%
Los Angeles, CA	$1,379	$2,020	-$641	-32%
Ventura County, CA	$1,516	$2,274	-$759	-33%
Orange County, CA	$1,610	$2,423	-$813	-34%
San Diego, CA	$1,314	$1,981	-$667	-34%
Albany, NY	$999	$1,535	-$536	-35%
Long Island, NY	$1,603	$2,513	-$910	-36%

Note: Cost of homeownership assumes that the home is sold after 7 years and includes closing costs, maintenance, insurance, property taxes and other costs. Cost of renting includes security deposit and renters insurance. Monthly cost is based on net present value of costs over 7 years. Monthly costs are based on the average across all properties listed in the metro area, including those for sale and those for rent, in summer 2012.

Where the Financial Advantage of Buying Over Renting is Huge
U.S. Metro	Monthly cost of home ownership ($)	Monthly cost of renting ($ )	Difference ($)	Difference (%)
Detroit, MI	$349	$1,149	-$800	-70%
Gary, IN	$616	$1,649	-$1,033	-63%
Oklahoma City, OK	$590	$1,576	-$987	-63%
Lakeland–Winter Haven, FL	$495	$1,276	-$781	-61%
Toledo, OH	$476	$1,222	-$746	-61%
Dayton, OH	$524	$1,332	-$808	-61%
Warren–Troy– Farmington Hills, MI	$588	$1,494	-$907	-61%
Memphis, TN-MS-AR	$548	$1,389	-$841	-61%
Cleveland, OH	$585	$1,464	-$879	-60%
West Palm Beach, FL	$723	$1,764	-$1,041	-59%

Note: Cost of homeownership assumes that the home is sold after 7 years and includes closing costs, maintenance, insurance, property taxes and other costs. Cost of renting includes security deposit and renters insurance. Monthly cost is based on net present value of costs over 7 years. Monthly costs are based on the average across all properties listed in the metro area, including those for sale and those for rent, in summer 2012.

What does this mean in dollars? Buying is cheaper than renting by several hundred dollars a month in every large metro. The charts above show how the percent difference in buying versus renting may be smaller in San Francisco (-28%) than in almost all other metros, but the annual dollar savings is big ($899) because the rents and home prices there are so high ??? so even a smaller percentage difference means a big dollar difference. (Remember that we???re looking at the annual cost of buying or renting the typical listed home. Most homes listed are for-sale, and for-sale homes tend to be much larger than rentals, on average. That???s why the monthly cost of renting the typical home is higher than the actual amount most renters pay.)

Scroll through the table below to see the cost of buying versus renting in major metros across the country below or check out the full interactive infographic.

Powered by Tableau

Why Mortgage Rates, Tax Brackets and Timing Matters in the Rent vs. Buy Debate
But what if you can???t get the best mortgage rate, don???t itemize your tax deductions or stay in your home for less than seven years? Each of those raises the cost of homeownership, so buying wouldn???t be quite as good of a deal relative to renting. Here???s why each matters:

• The best mortgage rates are available for people with the best credit scores ??? and a not-so-hot credit score could make your mortgage a full percentage point higher, which translates to at least a 10% difference in your monthly mortgage payment.
• Itemizing your tax deductions lets you subtract your mortgage interest and property tax payments from your pre-tax income, which lowers your tax burden especially if you???re in a higher tax bracket. How much does not itemizing raise the cost of homeownership? It depends on your tax bracket and the amount of mortgage interest and property taxes you would deduct.
• Selling a home in less than seven years after buying it means that you???re spreading your buying and selling closing costs overfewer years ??? making the average monthly cost of homeownership higher.

To see how your mortgage rate, tax bracket and time horizon affect the cost of renting versus buying, let???s look at several scenarios for a few large metros:

SCENARIO	New York	LA	Boston	Atlanta
3.5% mortgage, 25% tax bracket, stay 7 years (baseline)	-31%	-32%	-41%	-57%
4.5% mortgage *	-23%	-24%	-34%	-53%
Not itemizing tax deductions *	-18%	-21%	-30%	-50%
Stay 5 years *	-21%	-22%	-32%	-52%
4.5% mortgage, not itemizing, AND 5 years	3%	-1%	-12%	-40%

* For these scenarios, the factors not mentioned are the same as the baseline.

 

Take Los Angeles, for instance. The top row shows that if you can (1) get a 3.5% mortgage, (2) are in the 25% tax bracket and itemize your deductions, and (3) stay 7 years, it???s 32% cheaper to buy than to rent.

Change any one of those scenarios, and buying is still cheaper than renting but less so:

•  With a 4.5% mortgage instead of a 3.5% mortgage, buying drops from 32% cheaper than renting to 24% cheaper.

• Failing to itemize tax deductions drops buying from being 32% cheaper to 21% cheaper.

• Staying 5 years instead of 7 makes buying 22% cheaper.

• But all three ??? the 4.5% mortgage, not itemizing, and staying only 5 years ??? makes buying just 1% cheaper than renting ??? as the bottom row shows.

In New York, these same differences make buying 3% MORE expensive than renting instead of 31% cheaper. In fact, with a 4.5% mortgage, not itemizing and staying only 5 years, buying is more expensive than renting in Honolulu (by 13%), San Francisco (by 10%), and San Jose (by 4%), too.

In the other 96 of the 100 largest metros, though, buying is still cheaper than renting. In Atlanta, for instance, where buying is 57% cheaper than renting in the best of circumstances (3.5% mortgage, itemizing, and staying 7 years), buying remains 40% cheaper even with a 4.5% mortgage, not itemizing, and staying only 5 years. In fact, today???s low mortgage rates make it financially better to buy even if you only stay put for 3 years in many metros. But buying a home also involves a lot of time, emotional energy and financial risk, so we can???t really recommend buying a home that you plan to live in for just 3 years even if the financial calculation is in favor of buying. Money isn???t everything.

If Buying is So Cheap ???
??? why isn???t everyone doing it? Home sales are still less than halfway back to normal, and the homeownership rate continues to fall. The big obstacle holding back renters who want to buy is the down payment ??? even more than getting a mortgage. And keep in mind, in the metros where the cost of buying is less than half of what it would cost to rent over the long term, it still takes years to save enough for a down payment. It may be 56% cheaper to buy than to rent in Denver, for instance, but it takes more than 8 years to save enough for a down payment there. And high unemployment during the recession made it even harder than usual for people to save for a down payment. On top of that, people who lost their homes or took on lots of debt might not qualify for a mortgage. Bottom Line: Buying may beat renting in every major metro by a wide margin, saving consumers thousands of dollars a year, but buying still remains out of reach for many would-be homeowners.

via pro.truliablog.com

Real estate industry welcomes changes to FHA condo rules

The Federal Housing Administration has finally done what it promised back in May: published revised rules that could convince condo associations across the country to get certified or re-certified for financing, thereby opening individual unit owners and sellers to low down payment, FHA-insured mortgages once again.

For condo boards, real estate agents and property managers, the long-awaited rule changes announced yesterday should prove to be “excellent news,” that will “help spark home sales and help tens of thousands of condominium associations recover from the housing slump,” according to the Community Associations Institute, the largest U.S. trade group in the field.

Among other changes, the rules eliminate some of the legal liability headaches that caused many condo boards to balk at FHA certifications; raise the permissible investor-ownership limit; and increase the percentage of non-residential, commercial use allowed in an FHA-certified project.

To Christopher Gardner, managing member of FHAProsLLC, a Los Angeles-based firm that assists condo boards with their applications for FHA certifications, the changes “aren’t a home run but maybe a double,” but should still significantly reduce the impediments associations encountered in seeking FHA approvals.

Under federal rules, individual units in condo projects are not eligible for financing unless the entire project has passed FHA’s certification process, which looks at project budgets, reserves, forthcoming capital improvement needs, insurance policies, delinquent payments of association dues, composition of renters versus owner-occupants, and various other factors.

Industry experts welcomed the revisions to the certification form itself, which previously intimidated condo association officers because it appeared to ask them to accept broad legal liability on matters they couldn’t totally be certain about, such as disputes among tenants in the building, litigation filed with courts involving the condo project or board, compliance with local and state regulations and the like.

Though FHA attempted to reassure them that it would be rare that the government would seek the maximum penalties in cases of misinformation in applications for certification, those penalties nonetheless were daunting: up to $1 million in fines and 30 years in prison.

Now the certification form asks a single signer representing the association to attest that, to the signer’s knowledge and belief, the information in the application is accurate, has been reviewed by an attorney, and that the project complies with local and state regulations.

The signer also must warrant that he or she has no knowledge of circumstances that might have an adverse impact on the project, including construction defects, “operational issues,” or legal problems. The federal penalties remain, but consultants such as Gardner say the revisions should alleviate “a lot of the fears” boards had with the previous language.

The rule changes published Thursday are “temporary” until FHA replaces them with formal, final regulations that would be preceded by proposed rules giving the industry additional opportunity to seek improvements. The new policies also represent the culmination of lengthy negotiations between FHA and industry groups, including NAR, CAI and consulting and management firms that started last spring.

At a conference held by the Northern Virginia Association of Realtors Thursday, acting FHA commissioner Carol J. Galante said the revisions show “that we listened” to the critiques from the industry, while still protecting the government’s insurance funds.

Under the previous rules, condo associations abandoned FHA in droves, even at significant costs to their own unit owners who suddenly had difficulty selling because FHA financing was no longer available to purchasers.

Only one out of 10 condo associations that would normally qualify for FHA financing currently is certified, according to Gardner, whose firm maintains a massive database of information on condos. HUD confirms that just 2,100 out of a possible 25,000 projects had obtained certifications or recertifications as of late last year.

The human costs of the previous rules were sometime extreme, Gardner says. In one case, an elderly woman who owned a unit in a non-certified community sought to obtain an FHA reverse mortgage in order to
help pay the costs of her cancer treatments. The condo board said no — it didn’t want to run the certification gauntlet or take on the legal liabilities.

Among the key changes now in effect:

• The investor ownership limit in existing projects has been raised to 50 percent. Previously there was a 10 percent cap on the number of units owned by any single investment entity. Now the rule states that “any investor/entity (single or multiple owner entities) may own up to 50 percent of the total units…if at least 50 percent of the total units in the project” are owned or under contract for purchase by owner-occupants.
• The percentage of space used for commercial/non-residential purposes in a project is limited to 25 percent, but applicants can request exceptions up to 35 percent and even above in certain mixed-use developments that are still “primarily residential” in character and where the project is “free of adverse conditions to the occupants of the individual condominium units.”
• Condo associations in which as many as 15 percent of unit owners are 60 days delinquent on their condo fees will now be eligible for certification. Under the previous rules, no more than 15 percent could be 30 days late. This was a major issue for many associations since they didn’t track 30-day delinquencies. Industry groups had sought a 90 day delinquency standard.
• Previous confusion over FHA requirements on fidelity bonds for management companies — with coverage that sometimes duplicated what was already maintained by the condo association itself — appears to be resolved. If the association’s fidelity bond policy names the management company as an insured or agent, it should pass muster.

Ken Harney writes an award-winning, nationally syndicated column, “The Nation’s Housing,” and is the author of two books on real estate and mortgage finance.

ForSalebyOwner.com founder gives up on own listing, hires real estate broker

Former FSBO CEO sells home the traditional way Founder and former CEO of ForSalebyOwner.com, Colby Sambrotto listed his 2,000 square foot New York condominium on …

Former FSBO CEO sells home the traditional way

Founder and former CEO of ForSalebyOwner.com, Colby Sambrotto listed his 2,000 square foot New York condominium on his own through online classified ads and FSBO sites, but after six months, he opted to hire New York broker Jesse Buckler who immediately advised a price change as the listing was not attracting the right buyer

After giving up on the DIY route, Sambrotto’s decision to hire a broker led to attracting multiple offers, closing for $150,000 over the original asking price. The Wall Street Journal reports the listing sold for $2.15 million including a 6% commission.

Many FSBOs turn to Realtors

The news stands as an enormous validation of the real estate profession and while some may tease, it is no laughing matter and the former FSBO CEO made a good financial decision.

AGBeat columnist Herman Chan said, “If people want to take a stab at For Sale By Owner (ie FSBO), go for it. But well over 80% of FSBO’s eventually have to list with an real estate agent to get their house sold. It’s harder than it looks!”

Not a new dilemma

Marlow Harris, Seattle Residential and Investment Consultant at Coldwell Banker Bain Associates told AGBeat, “The ForSaleByOwner.com founder’s dilemma is one we see quite often and is not unusual. Trying to sell your own property yourself or using a discount brokerage, is not the solution for everyone. Unusual properties, properties in the higher price range, these are more difficult to sell and often require specialization.”

Harris continues, “We see these choices across the board, from single family homes to huge housing developments. For instance, Vulcan, one of Paul Allen’s companies which has invested heavily in Redfin, does not use Redfin to market their many condominium projects. They use traditional real estate firms such as John L. Scott, Williams Marketing and Matrix Real Estate, finding that the do-it-yourself approach to real estate just doesn’t work for these types of sales.”

Decline in real estate pricing slows in Summit

BRECKENRIDGE— Real estate sales data compiled by the county assessor’s office shows a stabilization in local property values, Summit County Assessor Beverly Breakstone said.

Valuations for the 24-month period ending June 30 show a 5-percent decline in all real estate sectors. Residential sales prices also declined by 5 percent during the period. Figures are based on actual sales.

Valuations declined 16 percent during the two-year period ending in June 2011, and 26 percent during the period ending in 2009.

“Overall, you can see that things have recovered since 2009, the height of the recession when property values were really starting to take the hit,” Breakstone said.

Property valuations help set tax rates for property owners and impact the county’s budget. Commissioner Thomas Davidson said last month the board expects to make additional budget cuts into 2014 to address declining revenues that result from lower taxes.

During the recent data period, residential valuations dropped about 5 percent countywide but some areas fared better than others. Frisco’s sales prices held steady while Dillon properties declined by about 6 percent. That might be due to the number of lower-priced condos in Dillon, Breakstone said, a segment of the market that typically sees price pressure.

Condo sales prices dropped by about 7 percent across the county, while single family homes dropped 3 percent.

Vacant land sales saw price recoveries during the last four to five months of the period, helping valuations to settle out for the period at about even.

Kim Marquis- The Summit Business Journal  Aug. 2 2012

How to sell a house

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