Jumbo Loans Are Reborn, But Terms Are Stiffer
Home buyers should not expect the eligibility standards for the new super-size loans available through the end of this year under the economic stimulus plan to be as generous as in the under-$417,000 segment of the market. For example, in the guidelines for what Fannie Mae calls its new “jumbo conforming” program, the company will buy fixed-rate mortgages up to $729,750, but only if there is a 10% minimum downpayment; there is a minimum FICO score of 700 for any loans with less than a 20% downpayment; there is minimum 40% downpayment and 660 FICO for second homes and investor properties; there are no balloon or negative-amortization terms; and household debt-to-income ratios do not exceed 45%. Also, the interest rates on the new super-size conforming loans are not expected to be anywhere near competitive with smaller mortgages. Besides higher base rates, there are add-on charges in “declining” markets that can push final note rates beyond 7.5%. Many areas tagged as declining are in former housing-boom markets in California and the Eastern Seaboard, where jumbo mortgages are most common and most needed. On jumbo FHA mortgages only a 3% downpayment is required. (www.washingtonpost.com)
Washington Post (3/29/08); Kenneth R. Harney
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Detroit’s Housing Slump Is Attractive to Investors
Investors from as far away as Hong Kong and Hawaii are coming to Detroit to make their fortune buying foreclosed homes in bulk, as many as 100 at a time in some instances. Sales were up dramatically in Detroit in February, rising 49% from a year before, and realty watchers say foreclosure properties played a key role in the increase. Smith Kitporka, 28, an investor in San Jose, Calif., said he has been buying Detroit foreclosures for two years, often paying as little as $10,000. “No war-zone houses or anything like that,” he said. “Just good houses in good neighborhoods.” Jeremy Burgess, a 28-year-old investor from Washington state who has been living in the area for the past year, said that he can pick up an $85,000 house in Detroit for $20,000 to $30,000 these days. Listings on Fannie Mae’s Web site show many Detroit foreclosures for less than $25,000. Last year, Detroit led the nation in foreclosures. Of the 10,342 homes on the market in Detroit recently, 3,355 were bank-owned foreclosures (REOs), according to Realcomp Inc. And in the tri-county area, 7,104 bank-owned foreclosures were listed out of more than 47,095 homes on the market. In many cases, there’s still a disparity between what banks want to get for foreclosed properties and what investors are willing to pay, according to Mark Nagy, a broker and consultant for RE investment Inc. in Southfield, Mich. In many cases, a bank today wants 55 to 65 cents on the dollar for a suburban property, yet investors want to pay 40 to 50 cents. In Detroit, the bank may want 30 to 35 cents, and investors want it at 20 to 25 cents. “Those two points have not met in the middle yet,” he said. “It’s an evolution process. It’s going to evolve that bulk sales will increase.” (www.freep.com)
Detroit Free Press (3/31/08); Greta Guest
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As Owners Default, Lenders Move In
Across the country, federally chartered banks held more than $12 billion worth of foreclosed properties at the end of 2007, about 100% more than a year earlier. Of those, $6.6 billion are residential properties of one to four units, said Keith Leggett, senior economist at the American Bankers Association. The increase carries profound implications for the real estate economy because decisions by individual banks on whether to wait out the slump or dump properties on a deadened market almost certainly would affect property values. Chicago-based Harris Bank’s REOs grew to $11.5 million at the end of 2007, up from $4.9 million at the end of 2006, according to documents filed with the Federal Deposit Insurance Corp. That includes commercial and residential properties. The $41 billion asset institution said it’s working with real estate agents to sell the foreclosed residential properties, but because of market conditions, “we are seeing assets stay on the books longer,” Harris spokeswoman Amy Yuhn said. “Our philosophy is that these properties are in the communities we lend in, so we’re not just going to dump them on the market,” she said, noting that such a practice could have an impact on local neighborhoods. “So we do hold onto them on the balance sheet longer because we do go through a longer selling process, just as if it were anyone selling a house.” (www.chicagotribune.com)
Chicago Tribune (3/31/08); Mary Umberger, Becky Yerak and Tara Malone
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Dense Housing Can Win Support
When a team of Stanford University researchers polled a random sampling of 238 San Mateo County residents about the local housing crisis, just 38% said that they believed there was a need for more housing in the area. But the research team, commissioned by a nonprofit called Threshold 2008 and led by Stanford professor Jim Fishkin, wasn’t finished with its respondents. After polling them, the participants were each paid $200 to attend an intensive two-day seminar on housing issues at a nearby college and then surveyed again. This time, 68% said they’d support building more housing in the county. The majority said the new homes should be densely concentrated in already developed areas, even if it means taller buildings in their neighborhoods. “What it shows is that if you give people a chance to think about the issue and get informed, they come to the conclusion it’s something we really need to address,” said Threshold 2008 director Greg Greenway, a former businessman and housing advocate. (www.insidebayarea.com)
Inside Bay Area (3/30/08); Will Oremus
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Report: Housing Slump Hitting Second Homes
The housing recession is putting a dent in second home sales, with vacation home sales dropping more than 30% last year from 2006, according to the National Association of Realtors®. And sales of homes to investors fell by more than 18% from year earlier totals, compared to a 10% drop last year in sales of properties intended as primary residences. “Certainly, second homes are discretionary purchases, and there is a natural tendency to pull back from big-ticket items in periods of uncertainty,” Realtors’ economist Lawrence Yun said in the report. “The other factor is the disruption in the mortgage market, with a significant tightening of credit during the second half of 2007." Even with the slowdown, a significant number of residential properties purchased in 2007 — almost one third of total sales — were acquired as second homes. In 2007, 12% of houses sold across the U.S., or about 740,000 homes, were for vacation use. And 21%, or 1.35 million units, were purchased as investments. (www.dallasnews.com)
Dallas Morning News (3/28/08); Steve Brown
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Local Housing Market Shows Signs of Spring Thaw
Area home sales in Charleston, S.C. plummeted 28.5% during the first two months of this year compared to the same period of 2007; the average property that changed hands in that time languished on the market for more than four months; and the number of properties for sale has stretched to a whopping 10,850 listings. But there are signs that buyers are budding. Real estate agents from all over the Lowcountry said open houses are full and they are busier with showings than they have been in months. The Charleston Metro Area Chamber of Commerce expects almost 13,000 homes to change hands this year, a 6% increase from 2007. The chamber said activity is poised to pick up thanks to attractive mortgage rates, a relatively healthy local economy and demand from out-of-town buyers. Also, it’s spring — the peak season for home buying. Charleston is doing great compared to a lot of communities around the nation, according to Matt Sloan, president of Daniel Island Co. Some segments of the market have held up relatively well, particularly high-end homes and empty lots. Almost 60 properties on Kiawah Island sold for more than $2.5 million last year, according to Chris Drury, president of Kiawah Island Real Estates. (www.charleston.net)
Charleston Post and Courier (3/30/08); Kyle Stock and Warren Wise
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