New Real Estate Appraisal Rules Rankle Some Home Owners, Agents
Jim Couture sold his three-bedroom colonial in Methuen, Mass., last spring in 10 days, for a sum within 1% of his asking price. Still, Couture is mad about new appraisal rules that are supposed to protect consumers. Couture’s sale required two $400 appraisals, the first of which took weeks to schedule and relied on suspect comparable sales, he says, to arrive at a value roughly $30,000 less than his selling price. The second came closer to the mark, but only after blown deadlines nearly derailed the contract. “I can’t relay how stressful the whole ordeal was,” he said. Although the new Home Valuation Code of Conduct rules were designed by regulators to protect appraisers from undue pressure from interested parties, complaints abound about higher costs, lower quality and long wait times. (www.chicagotribune.com)
Chicago Tribune (9/13/09); Anne Kates Smith
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Recession May Forge a Housing Shift in California
During the housing boom, home owners in the Los Angeles area had no qualms about spending money to commute to distant suburbs carved out of the hinterlands, according to economist Edward Leamer, director of the UCLA Anderson Forecast. But frugal home buyers, he said, will be more inclined to look first at homes that are closer to their jobs. “We’re going to see more multifamily-dwelling units,” Leamer said. “We’ll probably be seeing a trend toward smaller, greener, less-costly-to-maintain houses,” said Walter Maloney, a spokesman for the National Association of Realtors®. It’s “a return to basics.” But not everyone is buying it. Eventually, when the economy regains steam and housing prices rebound, Southern Californians will again stretch to buy a house they cannot really afford, some believe. “People have short memories and just look a couple years ahead,” said San Fernando Valley real estate agent Gary Rapoport, who represents clients generally looking for properties in the $400,000 range. “They just want to buy whether they qualify or not.” Matt Rodriguez, a 30-year-old parade float builder, may exemplify the new, cautious Californian. Although he and his wife, a community college teacher, together earn more than $100,000 annually, the tanking real estate market persuaded them to put an indefinite hold on buying a starter home in the San Gabriel Valley. Friends’ horror stories — in this instance, the tale of a contractor buddy whose fixer-upper is now $250,000 underwater — further darkened Rodriguez’s long-term perspective. “We’ve scrambled. We’ve refigured,” Rodriguez said, “It makes no sense to own now. We’re moving on,” by which he means that they’re staying put in their $1,150-a-month un-air-conditioned Pasadena rental, saving money by growing their own vegetables and shopping for bargains wherever they can. (www.latimes.com)
Los Angeles Times (9/13/09); Chip Jacobs
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Seven New Rules for the First-Time Home Buyer
As the one-year anniversary of the nation’s near financial collapse arrives, first-time home buyers are reexamining the long-standing real estate maxim that you should always stretch financially when buying your first home. Economists and financial planners who recently spoke with a New York Times writer were almost unanimous in their rejection of it. Put 20% down so you have less of a chance of owing more than your home is worth if prices fall again, they advise. Get a fixed-rate mortgage, so the biggest part of your monthly housing bill remains stable. If you’re determined to be truly conservative, don’t spend more than about 35% of your pretax income on mortgage, property tax and home insurance payments. Bank of America, which adheres to the guidelines that Fannie Mae and Freddie Mac set, will let your total debt (including student and other loans) hit 45% of your pretax income, but no more. The best case for stretching for a first house is that first-time home buyers in their 20s and 30s will probably see their incomes grow more quickly than older people buying their second or third home. Harvey S. Rosen, a Princeton economist, finds in a forthcoming Journal of Finance article that he co-wrote with two Federal Reserve Bank economists, Kristopher Gerardi and Paul S. Willen, that the size of a house that someone buys tends to be a good indicator of what their income will be later. “People can, on average, make reasonably good predictions of their future incomes and act on them in sensible ways by buying bigger houses,” Rosen said. Indeed, much of the mess in the mortgage market has been because of people borrowing money with loans that they didn’t understand — or betting that housing prices would continue to rise enough that they would be able to refinance their loans before the payments rose. Income overconfidence may have had something to do with it (and high unemployment worsened the problems), but it’s probably not the primary cause. (www.nytimes.com)
New York Times (9/12/09); Ron Lieber
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Builders Keep Homes Under $200,000
For Ron Terry Construction Inc., which for 15 years has been building affordable homes priced at less than $200,000 in Flathead Valley, Mont., building homes is constantly a learning process. The company upgraded to more advanced framing techniques, is refining its floor plans and is looking for affordable ways to build green. “We make sure we can include green features in our homes but still keep them affordable,” said Merna Terry, who recently was certified as a green professional by NAHB. “We’ve moved our heating in our homes to all-electric. We use windows with low-e coating. The windows are more energy-efficient.” Low-emissivity coating works like an invisible mirror to reflect light back out from the house, keeping it cooler. The Terrys also use energy heel trusses, which allow for more insulation between wood studs. “We’re always looking at what’s helpful to a home owner’s energy consumption.” Recently, the company was offering credits toward its homes to get the market moving. When the bottom of the housing industry fell out, the Terrys, like many others, felt the shift. “We went five months this winter without a sale, and we were used to 40 to 50 sales a year,” Merna said. “That was really scary. But it feels like the bottom’s been hit and we’re starting to pick up. Things have really turned around for us this summer. We sold seven homes in June, one of our best months ever. I sold two homes [Tuesday].” In April, the Terrys offered an $8,000 credit toward a new home. Each month, the company offers a different special. In August, it had a completed townhouse for sale and was offering a $2,000 allowance for extra appliances, window blinds, sod for the yard and a Culligan water softener system free for a year. “Our profit margin is the same percentage as bigger homes, but they cost less money, so [the profit] is less,” Merna said. “It’s the small things that make a difference in whether we have a good profit with a home.” By having their own employees rather than subcontractors do most of the work on their houses, and having home sites ideally suited to the homes and set options, the Terrys keep costs from going up. But the recession has made it difficult in 2009. (www.dailyinterlake.com)
Daily Inter-Lake (8/9/09); K.J. Hascall
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Birmingham-Area Home Builders Hope for Uptick
In metro Birmingham, Ala., there are pockets of renewed activity, as builders benefit from the interest sparked by a new $8,000 tax credit for first-time home buyers, said Bart Fletcher, executive vice president of the Greater Birmingham Association of Home Builders. “There’s a little bit of excitement and enthusiasm in the industry that we haven’t seen in several months,” he said. “Summer always brings an increase in activity, but it’s been positive compared to what we’ve seen recently.” Fletcher said he expects the activity to continue through the end of November, when the tax credit expires. And if Congress decides to reauthorize the program, there’s a good change the momentum will continue, he said. The coming months will be the true test of a potential recovery for the home building industry, said Darin White, associate professor of marketing at Samford University’s Brock School of Business. The first-time home buyer tax credit, which some economists say is driving as much as 50% of current home sales, is set to expire Nov. 30, White said. Then the industry will be left without an artificial stimulant. “That will be really interesting to see if these green shoots will go ahead and bloom on out or if they will wither,” he said. (www.bhamnews.com)
Birmingham News (9/6/09); Dawn Kent
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Condos Forced Into Creative Action Amid Foreclosure Crisis
Condo associations, developers and lenders across the nation are trying innovative tactics to save themselves from financial disaster amid the foreclosure crisis. The association at Shoreline Towers, a 378-unit Chicago condominium, plans to use reserve funds to buy foreclosed units, rent them, then resell them when the market improves. The move prevents foreclosed units from being sold far below market value and allows the association to recoup some unpaid assessments. Last month, a judge in Seminole County, Fla., appointed a receiver to collect rents at the request of a condo association at a condo where more than half the owners were delinquent and unpaid fees topped $700,000. The rental income will be used to pay the overdue assessments of condo owners who rented their units, then stopped paying. (www.usatoday.com)
USA Today (9/13/09); Judy Keen
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