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Archives for July 2013

Case Shiller Indices Near 5 Year High

Home prices rose to their highest levels in almost five years in May, increasing 2.5 percent, according to the Case Shiller Home Price Indexes released Tuesday. The 20-city index was up 12.2 percent from a year earlier and the companion 10-city index was up 11.8 percent.

Economists had expected the 20-city index to increase 2.0 percent from April, a 12.3 percent annual improvement.

For the month, the 10-city index rose 2.5 percent and the 20-city index was up 2.4 percent.

All 20 cities included in the survey improved both month to month and year to year.

The two surveys have improved month-month and year-on-year for 12 consecutive months.

The 10-city index rose to its highest level since September 2008 and the 20-city index to its highest level since October 2008.

The home values found by Case Shiller continued to shrug off discounts in the sales of distressed properties. According to the National Association of Realtors distressed properties – foreclosures and short sales – accounted for 18 percent of home sales transactions in May – 11 percent foreclosures and seven percent short sales. Foreclosures, the NAR said, sold for an average discount of 15 percent below market value, while short sales were discounted 12 percent.

The home values improved too despite higher mortgage rates which could have both a positive and negative impact: rising rates themselves might bring prices down as buyers look for affordable monthly payments, but also increase demand as buyers try to lock in rates before further increases. The increased demand against weak inventories would send prices up.

The NAR reported the median price of an existing single family home rose 5.9 percent in May, an annual gain of 12.6 percent. The monthly Case-Shiller Home Price Indices use the “repeat sales method” of index calculation which includes data on properties that have sold at least twice, in order to capture the appreciated value of each specific sales unit, according to the description of the index on the S&P website.

While good news for home sellers, the continued sharp increases – the indices have shown double-digit year-year increases for three months in a row — are likely to revive concerns of a growing housing bubble.

The Case Shiller indices have gone up for six straight months and 12 times in the last 14; each index dipped last October and November.

Overall, the 10-city index rose to 169.69, its highest level since September 2008 when it was 173.35 while the 20-city index improved to 156.14, the highest level since October 2008 when it was 158.09. The index values in fall 2008 though were continuing to decline while the indices reported Tuesday reflect a market on the rise.

The month-month increases were led by San Francisco where prices rose 4.3 percent, the 15th straight month of price increases in that city. Prices rose more than three percent in May in four other cities: Chicago, up 3.7 percent, Atlanta up 3.4 percent and San Diego and Seattle where prices rose 3.1 percent.

Prices have improved for 20 straight months in Phoenix, 15 straight months in Los Angeles and 14 straight months in Las Vegas.

Year-year the price gains were led by San Francisco where prices rose 24.5 percent since May 2012, followed by Las Vegas, up 23.2 percent, Phoenix, up 20.6 percent and Atlanta, up 20.1 percent. Eight other cities – Detroit, Los Angeles, Miami, Minneapolis, Portland, San Diego, Seattle and Tampa – recorded double-digit year-year price gains.

Despite the May improvement, the 10-city index is down 25.0 percent from its June 2006 high of 226.29 and the 20-city index is off 24.4 percent from its July 2006 peak of 206.52.

VIDEO: Housing prices could rise 10 percent by year-end

Although the housing recovery is just getting started, investors and homeowners alike can expect to see prices jump in the coming months, Richard Smith, the president and CEO of Realogy Holdings, told CNBC.

“We are in the early stages,” Smith said on “Squawk on the Street” on Wednesday. “This is a three-, four-, maybe even five-year correction process. … We’ll talk about stability when we get to that time frame.”

“Prices are continuing to go up,” he said. “Demand is outstripping supply, so pricing is reacting. You can listen to [the National Association of Realtors] that there’s another 9 to 10 percent price increase between now and the end of the year.”

Inventory is “selling as quickly as we can get it,” Smith said, estimating that turnover is 5.2 months nationally and may extend to six months by next year.
Early indications are that higher interest rates are having little impact on home sales, he said.

“We’re a firm believer that affordability is the issue,” he said, citing data from the National Association of Realtors that suggest buying a home is still affordable. If mortgage rates rise to the level of 6 percent or 7 percent, affordability could suffer, he added, “but we have a long ways to go.”

But the market is difficult for first-time homebuyers, who are subject to mortgage underwriting restrictions, Smith said. He is hopeful that the final Dodd-Frank rules will include a less cumbersome definition of a qualified residential mortgage (QRM).

“Right now, lenders are lending at the highest possible standard, because they don’t know the rules,” he said, adding that rules on lending will be “more practical” when QRM is defined

Other potential regulatory changes are removal of the 20 percent down payment requirement and relaxation of the obligation for lenders to hold a percentage of a given loan on their balance sheet, Smith said.

“All that now is in play,” he said.

SOURCE: CNBC

Short Sale Stigma Surfacing?

In markets with high foreclosure rates, a short sale stigma may exist, and short sales may not be as sought among home buyers. Brokers may be at an advantage if they state in the listing that the nondistressed home they’re selling is “not a short sale,” suggests a new study, which evaluated 5,000 home sales in Boca Raton, Fla.

Homes listed as “not short sales” sold for 2 to 5 percent more than nondistressed homes that did not state that. Homes listed as “not a short sale” also sold faster, selling about 10 to 15 percent faster than other similar properties, according to the study’s author Ken H. Johnson, an associate professor at the Tibor and Sheila Hollo School of Real Estate at Florida International University in Miami.

“In some areas, buyers are probably starting to believe that short sales mean a big hassle because they’ve heard horror stories about waiting months for one or more banks to sign off on the deal,” Johnson says.

Johnson notes that the study’s findings speak to that particular local market in Boca Raton, “but I think you can extrapolate to other areas where we’ve seen a lot of distressed properties and foreclosures in the last few years,” says Johnson. “What we found is that, in those affected areas, there is a short sale stigma.”

SOURCE: Realtor Magazine

Bank of America Sells Idaho Bank Branches

Bank of America Sells Idaho Bank BranchesSeattle-based Washington Federal is acquiring 51 Bank of America branches in eastern Washington, Oregon, Idaho and New Mexico.

The company announced the move Friday with its earnings report and also said it has completed its conversion to a national bank charter.

The acquisitions will give Washington Federal a total of 236 branches. The additions:

Washington: Clarkston, Cle Elum, Chelan, Chewelah, Colfax, Colville, Dayton, Deer Park, Leavenworth, Moses Lake, Newport, Odessa, Omak, Pullman, Quincy, Republic, Walla Walla and two in Wenatchee.

Idaho: Four in Boise, Gooding, Hailey, Idaho Falls, Ketchum, Nampa, Osburn, Payette, Pocatello, Salmon, Sandpoint and Twin Falls.

Oregon: Hermiston, Hood River, La Grande, Milton-Freewater, Ontario and The Dalles.

New Mexico: Angel Fire, Chama, two in Clovis, Espanola, Hobbs, Raton, Roswell, two in Silver City, and Socorro.

Bank of America put the branches up for sale earlier this year as part of its sweeping restructuring. Washington Federal has been looking for opportunities to grow through acquisitions in states where it already has branches, including Oregon, Idaho and New Mexico.

KTVB talked to the Chief Executive Officer of Washington Federal, Roy Whitehead about what this means for Bank of America customers in the Treasure Valley.

Whitehead said that there will be a period of a few months, when it’s businesses as usual while the two banks gets ready for the conversion. Then in late 2013, new debit cards and checks will be sent to existing customers. Online banking accounts will also move over to Washington Federal’s online banking system.

Customers will be getting information in the mail about the merger, which Whiteheads urges customers to read the information very carefully so there is no confusion about the acquisition.

Whitehead also goes onto say that credit cards issued by Bank of America will not be affected by the acquisition.

SOURCE: KTVB and Seattle Times

A reverse-mortgage nightmare

An elderly N.Y. woman received $273,000 from a reverse mortgage that may have cost her as much as $1.5 million, her daughter says.

Call it the estate-devouring, nightmare home loan you hope to never encounter: A reverse mortgage with a base interest rate of 9.95 percent, plus a 50 percent share for the lender of increases in value of the house after closing, plus an additional 2 percent “maturity fee” to sweeten the payout even more.

On top of that, there’s a $33,000 mandatory purchase of an annuity by the homeowner that is added to the principal balance and incurs compounding interest while lessening the lender’s future payments to the homeowner.

Is this for real? Do mortgages with terms like this actually exist in this country today? They do. Talk to Sarah Havemeyer, of Southampton, N.Y., who’s been fighting a California bank in court for two years over her late mother’s reverse mortgage that dates back to 1997.

Although the bank, OneWest, has not yet provided a total of what it believes is owed on the reverse mortgage, according to Havemeyer, she estimates it could be in the neighborhood of $1.5 million to $1.6 million. By comparison, the amount Havemeyer’s mother actually received from the reverse mortgage between 1997 and her death in 2010 was just $272,911.51.

A reverse mortgage places a lien against a senior’s home in exchange for periodic or lump-sum payments. The full amount borrowed does not come due until the borrower dies, moves or sells the home.

Nearly one in 10 federally backed reverse mortgages is in default, risking foreclosure for owners. Family members need to be involved from Day One. And stay involved.

OneWest, for its part, isn’t talking. The bank declined to discuss either Havemeyer’s litigation or any details of the reverse-mortgage terms. The law firm representing OneWest’s subsidiary that claims ownership of the reverse-mortgage note — Financial Freedom Acquisition — did not respond to a request for comment.

Financial Freedom has filed for foreclosure, seeking payment of the $272,911.51, plus “interest at the rate stated” in the mortgage along with legal and other fees. The filing did not indicate that a huge chunk of the “interest” due flows from its 50-50 share in the appreciation of the house from $556,000 in 1997 to its approximate current value around $1.8 million.

Havemeyer, who is executor of her mother’s estate, is challenging the foreclosure, claiming Financial Freedom has not been able to present documentation that it actually owns the mortgage, and the terms of the loan are “unconscionable and usurious” and violate state law.

Were it not for the unusual terms of the mortgage, Havemeyer’s dispute with the bank and its subsidiary might be seen as just another real-estate squabble in the high-gloss Hamptons on New York’s Long Island. But the terms make this case jump out as special.

Start with the triple whammy of 50-50 appreciation sharing, plus the mandatory annuity added to the loan balance, plus the 2 percent extra fee tacked on at the end. Although the vast majority of reverse mortgages have never employed such payment terms, thousands that were marketed in the 1990s did.

In the late 1990s, a series of California lawsuits claimed that terms such as these amounted to “financial abuse of the elderly” and allowed lenders to “[reap] unfair profits at the expense of the elderly,” many of whom ended up owing far more than they borrowed.

A consolidated class-action suit was later settled by the defendants — Transamerica, Transamerica HomeFirst, Metropolitan Life Insurance and Financial Freedom Senior Funding — for $8 million. None of the companies admitted wrongdoing.

Through a long chain of events spanning the mortgage crash, OneWest Bank acquired reverse-mortgage assets that dated back to Transamerica and Financial Freedom Senior Funding, including the loan now in dispute.

A widow and 78 when she obtained her loan from Transamerica Home First, Sarah C. Hoge, Havemeyer’s mother, did not seek guidance from family members. Havemeyer’s lawyer in the foreclosure case, Michael Walsh, says, “I can’t imagine that Mrs. Hoge really did understand what she was getting into.” But she signed up, and ultimately did not opt out of the class-action settlement in California, which provided her a payment of $8,480.

How Havemeyer’s case ultimately turns out is anybody’s guess. But the bottom line is this: Reverse mortgages, even today’s friendlier versions that offer upfront counseling, can be hazardous to elderly borrowers’ financial health and potentially costly for their heirs.

Nearly one in 10 federally backed reverse mortgages is in default, risking foreclosure for owners. Family members need to be involved from Day One. And stay involved.

SOURCE: Seattle Times

Mortgage rates dip as taper fears subside

An ebb in concern over the Fed relaxing its bond-buying program has led to a drop in mortgage rates.

Mortgage buyer Freddie Mac reports the average on a 30-year mortgage has fallen from its two-year high of 4.51% to 4.37% this week. The average on the 15-year mortgage fell to 3.41% from 3.53%.

Rates have spiked in the last two months in response to the Fed announcing it will eventually begin “tapering” its aggressive bond purchases. At the start of May, rates on the 30-year mortgage sat at 3.35%, just above the record low of 3.31%.

The jump in rates has put a drag on the housing recovery. On Wednesday, the Commerce Department reported a 9.9% decrease in housing starts for the month of June, their lowest level in 10 months. The Mortgage Bankers Associated also announced Wednesday that weekly applications for mortgages fell 2.6%, continuing their slide of the past few weeks.

While the data shows the housing recovery has lost some steam, the big picture still looks promising. Starts are still up 10.4% from a year ago and applications for permits to build single-family houses rose to the highest level in five years. The National Association of Home Builders/Wells Fargo builder sentiment index released Tuesday jumped to 57 this month, putting homebuilder confidence at a 7-year high.

In a testimony to congress on Wednesday, Bernanke assured officials that the Fed would delay tapering if the rise in rates puts a greater strain on the housing recovery.

“We will be waiting to see if the movement in mortgage rates has any material effect on housing,” Bernanke said. “If we think the mortgage rate increases are thwarting the progress, we will have to take additional action.”

Following the Chairman’s comments, the yield on the 10-year treasury note fell to 2.49% from 2.53% on Wednesday as investors began buying up U.S. bonds. Mortgage rates typically track the yield on the 10-year note, which rose to 2.52% on Thursday.

SOURCE: USA Today

IRS TIPS: Renting Your Vacation Home

A vacation home can be a house, apartment, condominium, mobile home or boat. If you own a vacation home that you rent to others, you generally must report the rental income on your federal income tax return. But you may not have to report that income if the rental period is short.In most cases, you can deduct expenses of renting your property. Your deduction may be limited if you also use the home as a residence.

Here are some tips from the IRS about this type of rental property.

• You usually report rental income and deductible rental expenses on Schedule E, Supplemental Income and Loss.

You may also be subject to paying Net Investment Income Tax on your rental income.

• If you personally use your property and sometimes rent it to others, special rules apply. You must divide your expenses between the rental use and the personal use. The number of days used for each purpose determines how to divide your costs.

Report deductible expenses for personal use on Schedule A, Itemized Deductions. These may include costs such as mortgage interest, property taxes and casualty losses.

• If the property is “used as a home,” your rental expense deduction is limited. This means your deduction for rental expenses can’t be more than the rent you received. For more about this rule, see Publication 527, Residential Rental Property (Including Rental of Vacation Homes).

• If the property is “used as a home” and you rent it out fewer than 15 days per year, you do not have to report the rental income.

Get Publication 527 for more details on this topic. It is available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
Additional IRS Resources:

  • Publication 527, Residential Rental Property (Including Rental of Vacation Homes)
  • Tax Topic 415 – Renting Residential and Vacation Property

IRS YouTube Videos:

IRS Podcasts:

VIDEO: Home builder confidence soars despite rising rates

Confidence among the nation’s home builders in July jumped to the highest level since January of 2006, according to a monthly index from the National Association of Home Builders. This is the third consecutive monthly gain. The index stands at 57. Fifty is the line between positive and negative sentiment.

Builder Confidence in Hailey Idaho“Today’s report is particularly encouraging in that it shows improvement in builder confidence across every region as well as solid gains in current sales conditions, traffic of prospective buyers and sales expectations for the next six months,” noted NAHB Chairman Rick Judson, a home builder from Charlotte, N.C. “This positive momentum could be disrupted by threats on the policy side, particularly with regard to the mortgage interest deduction and federal support for the housing finance system.”

All three components of the index rose in July. Current sales conditions rose five points to 60—the highest level since early 2006. The component gauging sales expectations in the next six months gained seven points to 67, and the component gauging traffic of prospective buyers rose five points to 45—marking the strongest readings for each since late 2005.

“Builders are seeing more motivated buyers coming through their doors as the inventory of existing homes for sale continues to tighten,” noted NAHB Chief Economist David Crowe. “Meanwhile, as the infrastructure that supplies home building returns, some previously skyrocketing building material costs have begun to soften.”Sales of newly built homes rose just over 2 percent from May to June. Single family housing starts were flat. But permits, considered a more reliable indicator, gained 1.3 percent month-to-month.

Home builders have been hampered by a lack of finished lots on which to build, as well as by shortages in skilled labor and building materials. Builders have been raising prices in order to make up for higher costs, and record low interest rates have helped them to be able to do that.

“Builders may be somewhat insulated from rising rates due to price points. New homes typically aren’t “entry level” and buyers that qualify can generally weather a .375 percent to .75 percent change in rates without getting declined due to debt-to-income,” said Matthew Graham of Mortgage New Daily. “I think the confluence of rising prices and falling rates in the 3.25 percent range is what fueled the frenzy. Now we just have the rising prices part, so all things being equal, it should be cooling down.”

SOURCE: CNBC

There’s No Reason to Panic About Rising Mortgage Rates

Over the past few weeks, mortgage rates have spiked, sending potential homeowners shrieking through the streets in uncontrollable panic.

Okay, that last part might be a bit of an exaggeration, but you’d never know it by reading the mainstream media. Don’t believe me? Google the term “mortgage rates spike” and you’ll have more than enough material to last you through the summer.

Mortgage rates are still ridiculously cheap

The reality is that yes, mortgage rates have gone up. And yes, they’ve gone up a lot from where they were two months ago. But should you, as either a potential home buyer or home seller, be concerned? In a word: no.

All Good Things Must Come to an End

What’s lost in the discussion about the recent rise in mortgage rates is what it says about the broader economy.

Two months ago, the interest rate on a 30-year fixed-rate mortgage was 3.35 percent. Not only was that cheap, it was historically cheap, like, once-in-a-lifetime cheap. Never before, and perhaps never again, will we see rates sink to such a ridiculously low level.

Why were they so low? Because the Federal Reserve, which has been putting downward pressure on mortgage rates since last September, had no confidence in the economy.

If anything, then, the fact that they are rising — at the behest of the central bank, I might add — can only mean one thing: The economy is getting better.

The Housing Recovery Won’t Be Thwarted

The biggest concern is that rising rates will put a damper on the housing recovery and therefore be bad for people who are trying to sell their homes. The fact that this is transpiring during the prime selling season only adds to this fear.

But here’s the thing: The impact on the housing market will likely be much less than one might think.

The vast majority of mortgages that have been underwritten over the past few years have been to people who are refinancing existing homes, not to people looking to buy new ones. As a result, when mortgage rates rose, the former dropped off considerably more than the latter.

According to the Mortgage Bankers Association, the volume of applications to refinance mortgages has dropped by 53 percent since the beginning of May. Meanwhile, the volume of applications for purchase-money mortgages has declined by only 8 percent.

In other words, the impact on the demand for new and existing homes has, at least thus far, been comparatively muted.

To be fair, the same cannot necessarily be said for prospective homebuyers. If you fall into this category, it can’t be denied that you missed an opportunity to get a mortgage at an interest rate that we may never see again.

At the same time, mortgage rates are still ridiculously cheap. The most recent national average puts the rate for a 30-year fixed-rate mortgage at 4.51 percent. As the Wall Street Journal noted, even at a 5 percent interest rate, housing is still affordable by historical standards.

Ask anyone who bought a house before 2010 what they think of that rate. “Jump all over it,” they’ll say. Prior to last year, that would have been the lowest rate in recorded history. And chances are, the same will be true going forward.

Yes, mortgage rates have spiked. But let’s keep those increases in perspective.

SOURCE: Daily Finance

33 Day Market Time All Hallmark Listings Sold

Hallmark Idaho Properties in alliance with Cablela’s Trophy Properties is proud to announce that YTD for 2013, all company listings sold and closed had a market time of just 33 days from date of listing to contract sale date.

Utilizing a series of marketing strategies and systems, plus working hard at working with servicing other real estate agents within the local community has been essential in achieving such positive sales results.

While complying in the information is was also noted the many of the listed properties had multiple offers for sellers to choose from with many sales prices above the asking price.

If your considering selling and want results, give Hallmark a call!

208-928-SOLD