‘Declining Markets’ and Self-Fulfilling Prophecies
Growing ranks of critics say that designations of Zip codes, metropolitan areas and entire states as “declining markets” could hinder a real estate recovery and hurt minority groups and moderate-income buyers disproportionately. Since late 2007, most lenders, insurers and mortgage investment firms have compiled lists of markets that they regard as higher risks because housing values are dropping. In those areas, borrowers are charged higher rates and loan fees and are required to make bigger downpayments. These costs can rise significantly when applicants have credit scores below designated minimum levels. In some cases, the extra fees can add more than two percentage points to the interest rate and require much more cash up front. At their extreme, declining-market designations remove entire categories of real estate from financing eligibility. Some private mortgage insurers won’t touch second homes or rental-home investments in large parts of Florida and California. The National Association of Hispanic Real Estate Professionals said that the current policies have the effect of cutting out or penalizing huge geographic areas that contain many smaller sub-markets where values are relatively stable or do not pose exceptional risks. The National Association of Realtors® recently sent letters to the executives of Fannie Mae and Freddie Mac asking them to “discontinue the policy of stigmatizing entire Zip codes” and metro areas as declining markets because they “typically include widely differing” neighborhood conditions. (www.washingtonpost.com)
Washington Post (4/26/08); Kenneth R. Harney
[Return to top]
They’re Just Walking Away From Homes
As home values fall and credit woes rise, more Central Florida consumers are walking away from homes — a process that lenders, credit counselors and foreclosure experts advise against. You Walk Away, a San Diego firm, helps people who don’t have much equity in their homes figure out how to leave their mortgages without doing too much damage to their credit ratings. Walking away is most attractive to people who live in places where housing prices rose most, such as California, Nevada and Florida. Business is booming and the company hopes to grow from 16 to 48 employees in the next three months. There can, however, be repercussions to letting a house go. Penalties can be frightening. Mortgage lenders Freddie Mac and Fannie Mae have said that home owners who walk away from their mortgages will have to wait several years before they can qualify again. And their credit ratings will be slashed. Robin Stout Migala, consumer-outreach manager at Freddie Mac, says she worries that troubled home owners can sometimes fall prey to scam artists and end up signing over their homes without receiving any help in return. (www.orlandosentinel.com)
Orlando Sentinel (4/28/08); Anika Myers Palm
[Return to top]
Home Prices Aren’t Tanking Everywhere
While housing sales have fallen somewhat, Randy Jeffers, chairman of the Texas Association of Realtors®, still regards his market of Amarillo as a seller’s market right now, with the median price of an existing single-family home up at an annual rate of 11% in the fourth quarter. He often finds that would-be buyers and sellers are surprised about what is going on locally. As the country’s collective housing ills land bold headlines, locals incorrectly extrapolate the information to their own markets, he said. The housing problems largely aren’t national but regional in nature, said Susan Wachter, a real estate professor at the University of Pennsylvania’s Wharton School. “The interesting thing is that there are parts of the country where housing prices are doing fine, thank you,” she said. In fact, only five states are in what she would consider a housing recession: California, Arizona, Nevada, Florida and Michigan. Areas in upstate New York, some Rocky Mountain states and the Carolinas are faring better than the rest of the country in terms of price appreciation these days, said Lawrence Yun, chief economist for the National Association of Realtors®. In metro areas — including San Francisco, Washington and New York — homes are typically retaining more of their value the closer they are to the city’s core, Wachter said. In fact, declining home values in an area’s suburbs are tending to drag down the average for the rest of the metropolitan area, she said. (www.marketwatch.com)
MarketWatch (4/21/08); Amy Hoak
[Return to top]
Housing Market Looking Up in Collierville
Realtor® John Green is among those in his industry in Collierville, Tenn. who say the Memphis area housing market in general hasn’t suffered as much as some other parts of the country, and may rebound soon. The latest figures for March show the number of homes sold in Collierville down nearly 27% and in Germantown down 38% from the same month in 2007. However, the average sales prices for March climbed 7%, to $342,000, in Collierville and 5%, to $351,000, in Germantown. Gloomier figures for March were more common in some other Memphis areas. In South Memphis, for example, the average home sales price dropped by 51%. Still, positive developments in seven of the 17 markets making up the Memphis area, along with broader trends, point to good things to come for a market not prone to dramatic swings, says Tommie Criswell-Jones, broker manager for the Crye-Leike Realtors® office in Collierville. She said that low interest rates, government efforts to stimulate the economy and a return to a more normal housing market after two to three years of frenzy are additional reasons for optimism. (www.commercialappeal.com)
Memphis Commercial Appeal (4/27/08); Kevin McKenzie
[Return to top]
Federal Legislation Needed to Reduce Copper Theft Problem, Sheriffs Say
Despite laws passed by the state legislature last year to help reduce the number of copper thefts in Arkansas, and new legislation recently enacted in Tennessee, some East Arkansas officials think that federal legislation may be the solution to the problem plaguing farmers, utility companies, contractors and business owners. Scrap metal dealers said that copper was being purchased for $3 to $3.50 a pound, depending on the quality. In December, thieves broke into an Entergy Arkansas substation in western Pulaski County, and ripped out and stole a large amount of copper ground wire, causing thousands of dollars in damage and leaving more than 2,000 of the utility’s customers without power for three hours. Local sheriffs said that copper thefts are out of control in eastern Arkansas because thieves find it easier to go into Tennessee and sell the copper. They said they hope Tennessee’s new law will make it harder for Arkansans to sell the copper in that state. Tennessee now requires scrap metal dealers to be registered and also requires people selling the copper and other metal to present identification and thumb print when selling. (www.stephensmedia.com)
Stephens Media Group (4/20/08); Rob Moritz
[Return to top]
Lenders Swamped by Delinquent Mortgages
Seven out of 10 troubled mortgage borrowers remain without a plan to work out their loans despite increased industry efforts to help them, according to a new report from a coalition of state attorneys general and banking regulators. The findings were not all grim. The coalition reported that the number of late borrowers working with their lenders to prevent foreclosure has increased and that the measures taken by lenders to help them have become more aggressive. Instead of rescheduling missed payments, more lenders reduced the overall burden by modifying loan terms. They lowered interest rates or extended the term of the loan to cut payments. Less often, they forgave part of the principal. But the lenders are failing to make headway because they can’t keep up with the number of delinquent loans. About 50,000 more loans were modified in January than in October, said Mark E. Pearce, North Carolina’s deputy commissioner of banks. But 90,000 additional loans became delinquent during that time. The coalition, which represents 11 attorney generals, two state banking departments and the Conference of State Bank Supervisors, said the lending industry will not make a dent in the foreclosure crisis if it continues to address the problems on a case-by-case basis. Instead, it needs to change the system so that borrowers with similar problems are automatically handled the same way, the coalition said. (www.washingtonpost.com)
Washington Post (4/23/08); Dina ElBoghdady
[Return to top]
|
