A Big Boost for Buyers Seeking Jumbo Loans

Major banks are now heading into the jumbo mortgage market, originating big loans at affordable rates for their own investment portfolios. Bank of America, the country’s largest mortgage lender, is rolling out a large program to finance jumbo loans between roughly $730,000 and $1.5 million, with fixed 30-year rates starting in the upper 5% range. The loans will be available through the bank’s retail network and also through its Countrywide Home Loans subsidiary. With little fanfare, other financial institutions have become more active in this segment of the mortgage market. For example, ING Group, an Amsterdam-based banking and insurance conglomerate, offers jumbos as large as $2 million through its online ING Direct unit. The minimum downpayment for an ING Direct jumbo is 25%; Bank of America quotes a minimum 20%. ING’s jumbos typically are “5/1” and “7/1” hybrids with a fixed interest rate for the first five or seven years, followed by an adjustable rate tied to the Libor index for the balance of the 30-year term. Current rates start around 5%. Bank of America’s new program requires hefty liquid resources — six months of principal, interest, property tax and insurance payments in reserve — plus fully documented income, solid credit scores and a full appraisal. (www.washingtonpost.com)
Washington Post (3/21/09); Kenneth R. Harney

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Downpayment Insurance Could Stabilize Home Prices

One solution to stabilizing housing prices by reducing the risk of buying a home with little or no cost to the taxpayer is a government-sponsored insurance program for new home buyers. This could bring responsible home buyers back into the market and create a floor for home prices, according to Peter Niculescu, the former head of capital markets at Fannie Mae, and Beth Wilkinson, Fannie Mae’s former general counsel. Home buyers could purchase insurance for their downpayments. To qualify, they would have to keep the home for at least five years. The insurance policy would be written on an assessment of average home values in the neighborhood. If a home owner can maintain or improve the home and sell it for more than his neighbor’s, he gets any profit above the original purchase price. If prices are lower when he sells, the home owner gets to keep the downpayment. To mitigate the risk to the taxpayer, the policy should be capped at 25% of the home value. Larger downpayments would not be fully insured, nor would larger declines in home prices. The program is meant to temporarily stabilize home prices, and it would have a relatively short life, perhaps two years. (www.wsj.com)
Wall Street Journal (3/21/09); Peter Niculescu and Beth A. Wilkinson

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First-Time Home Buyers Could Get Tax Break

The Florida House is moving forward with an aggressive tax break for first-time home buyers that would offer thousands of dollars in upfront savings to lure reluctant buyers into the state’s ailing real estate market. The break would give buyers who have never claimed a Florida homestead a 50% property-value exemption, which would result in about $2,000 in savings on a $200,000 home. The exemption would phase out over five years. Supporters are promoting the proposed 2010 ballot measure as an economic stimulus plan aimed at whittling down the 300,000-plus unsold homes languishing on the market. The 20-month backlog is eroding home values and feeding the foreclosure crisis, because people can’t sell their homes, they said. If the legislature passes the tax break this spring, the measure would go before voters as a constitutional amendment in November 2010 and require 60% approval to become law. “This is the answer to what you can do this session to help stimulate the market,” said David Hart, vice president of the Florida Home Builders Association. (www.miamiherald.com)
Miami Herald (3/12/09); Josh Hafenbrack

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Real Estate — What Recovers First?

In the commercial real estate market, multifamily apartment and rental buildings will be rebounding the fastest, according to Victor Calanog, director of research at New York property research firm Reis. “When firms begin hiring again, these sectors will benefit the quickest,” he said. “The sector that won’t recover until 2011 to 2012 will be retail properties.” Howard Davidowitz, chairman of New York-based retail consulting firm Davidowitz & Associates, projects that more than 200,000 stores will close this year. “I have never seen anything like this,” he said. “We are in the worst real estate crisis since the Great Depression. The worst is yet to come.” The metropolitan areas most likely to suffer are those that experienced rent declines and massive job losses recently, according to Reis. New York is one example of a metropolitan area with properties at risk due to the decline of Wall Street. Bernard Markstein, senior economist and director of forecasting for NAHB, is optimistic the housing market will reach a bottom in the next few months. He quoted improvement in home prices in parts of the country that didn’t overbuild. For example, housing prices rose in Wilmington, Ind., by 1.2% year-over-year in the last quarter of 2008. Meanwhile, Buffalo, N.Y., a city that’s been depressed for decades, eked out a gain of 1.7% during the same period. “Next year will see slow but steady improvement, as home builders are controlling their inventory,” he said. (www.forbes.com)
Forbes (3/18/09); Madalina Iacob

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Everybody Into the Rental Pool

Although there are few statistics on the national vacation-home rental market, property managers and online listings companies say that more second-home owners are trying to rent out their properties at least part-time, a trend propelled by the Internet as well as a gloomy economy. At the same time, prospective renters, feeling the financial pinch themselves, are more likely to haggle over prices, book shorter stays (often at the last minute) and opt for destinations within driving distance. And with more properties to choose from, they can afford to be picky about amenities and discounts. That is translating into more pressure on home owners to spruce up and market their properties. “If I want to be fully booked, I have to offer more features that renters can’t find elsewhere,” said Victor Nawrocki, who owns a home near Orlando that he furnished with Tempur-Pedic mattresses and Disney décor — including a “101 Dalmatians”-themed room decked out with black-and-white spotted wallpaper and bedding and two enormous plush dogs lounging on the twin beds. Other draws include a heated pool and hot tub (protected by an alarm if a wandering child opens the gate) and a game room with a pool table, football and air hockey. “I’ve been really proactive and it’s paid off,” he said, pointing out that the four-bedroom house has been booked 85% of the time since he started renting it last July. (www.nytimes.com)
New York Times (3/20/09); Susan Stellin

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Case Study: Marketing Green Condos to an Eco-Conscious Consumer

As the green movement continues to expand and evolve, more and more people are beginning to understand the value of living in a green apartment home. While there may have been some initial hesitation over paying a premium for such a residence, people are now weighing the costs against the benefits — and they are finding that the advantages are greatly outweighing the drawbacks. The 35-story, 251-unit Visionaire condominium building in lower Manhattan is currently 52% sold, with continued interest in the project in spite of the dismal state of the economy. Jackie Urgo, president of The Marketing Directors, the sales and marketing agent of the green residential project, reports that approximately 30 to 40 prospects continue to visit the site each week. The Visionaire offers studios, one-, two- and three-bedroom homes. Residences range in size from 605 to 1,884 square feet, with prices ranging from $680,000 to $2.6 million. Urgo notes that residents are willing to pay 10% to 15% more to live in a green building than a non-green building. Urgo asserts that the condo is appealing largely to families, specifically to mothers with young children, who are concerned about their indoor air quality in a city known for congestion. Within the building, a high-efficiency air infiltration system cleanses the air in all residences, and a 24-hour indoor air quality monitoring system is designed to ensure optimal air filtration. In addition, low-VOC paints, adhesives and sealants were used throughout the building construction and design.  (www.multihousingnews.com)
Multi-Housing News (3/4/09); Erika Schnitzer

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