Raleigh Real Estate Blog

Federal Tax Incentive Gets Market Moving

2009-07-07T07:17:00.000-07:00

Story from Newburyport News

There is a tax credit to stimulate the real estate market, and it's working. In February, a federal tax credit for first-time home buyers of $8,000 was passed into law, and the effect has been noticeable.

Basically, if you haven't owned a home for the last three years and your income is within the prescribed limits, if you buy a home before Dec. 1, you can claim an $8,000 credit against your 2009 income tax return. That's a chunk of cash in your pocket to buy a home. And because the FHA is giving mortgages with as little as 3.5 percent down to people with reasonable credit, the barriers to buying a home are low.

So things have been happening. The demand for lower-priced properties — less than $300,000 — has increased substantially. Condos are selling. Renters who never before thought they could buy their own home are finding out that now they can! And while buyers can't borrow the down payment, it CAN be a gift from a relative.

Some homeowners are realizing that now is a great time to sell because of this new demand. They have been catching on that now is a good time to put their starter home on the market and move on — it's a great time to move up because the homes in the $300K to $600K range are well priced and the interest rates are low.

Buyer and seller services have never been better — the best Realtors have hung in there through the slump and are busy with the growing momentum.

This government stimulus is well thought out and having a beneficial and stabilizing effect on the real estate market. While no one expects prices to go back to the levels of a few years ago any time in the foreseeable future, prices are now at the 2001-2002 levels, which makes a lot more sense. Unless you bought your home or refinanced it to the max at the peak of a giddy market, when many people — including the lending industry — unfortunately chose to ignore the old adage "it's too good to be true," you are probably in good shape to thoughtfully plan your home ownership future. Once again, we do have something to look forward to!

Current Market Trends

2009-07-03T09:55:00.000-07:00

Story from the Press Democrat

The real estate industry is full of clichés and metaphors, for example: “location, location, location,” “a wave of foreclosures is about to hit the market,” “are we at the bottom of the market?” and “interest rates are the lowest they’ve been since the Macedonian Period!”

These clichés and metaphors are spewed out more frequently than the phrase “bailout” flashes across the ticker on Fox News, MSNBC and other media conglomerates who attempt to shape our economic thought process and buying habits. The million-dollar question: “Is this the right time to buy real estate?”

Although we can’t look into the future and give an accurate answer to that question, we can look at history and trends.

According to Kiplinger’s Personal Finance, “It’s a good time to snag a bargain if you’re confident in your job prospects and you don’t plan to sell for at least five years.” Over the past decade, real estate lost its way. Real estate was typically purchased to have a place to call “home” and raise a family or create lifelong memories. However, when real estate rose faster than a kindergartner’s hand when asked by their teacher “who wants a cookie?” real estate became a commodity and the American dream of owning a home changed overnight to an appreciation feeding frenzy.

Consumers thought it was their right to gain 20 percent appreciation year after year until they were ready to sell and retire from the proceeds or refinance with a less risky loan and take cash out for exotic vacations, vehicle and boat purchases or trips to the local home improvement store where homes were transformed from an outdated and sometimes unlivable dwelling to the neighborhood Taj Mahal.

With all of that aside, it does seem like now is a good time to buy real estate. In fact, according to Forbes.com, the number one item on their list of things to buy before the economy improves is housing. “This may be the best time in a generation to buy a home.”

The Pew research center reported that 75 percent of Americans said it was a “good” or “very good” time to buy (people-press.org). The Wall Street Journal reported that median home prices in the San Francisco Bay Area are up 9.2 percent year-to-date and MSN Money.com/Case Shiller posted the following statistics regarding return on investment from Jan. 1, 2001 through Dec. 31, 2008: The Dow Jones down 19.8 percent, the S&P down 35.2 percent, the Nasdaq down 59.9 percent and real estate up 69.8 percent.

I am often told by consumers that they’re waiting for the market to go down even more before they decide to buy. However, keep in mind that if homes decrease another 10 percent, you’ll save $50,000 on a $500,000 purchase, but if interest rates increase by more than 1 percent it will offset the $50,000 you saved on your purchase price and your monthly cost will increase.

USA Today is currently estimating that California’s excess supply of homes will be substantially depleted and new construction will be needed to meet demand, thus leading to a housing recovery. Over the past six years, 30-year mortgage interest rates have hit historical lows on five different occasions, followed by quick and dramatic increase in rates as reported by the Federal Reserve.

Again, one cannot predict the future, but with data and statistics one can be informed and make an educated decision. Our market place (especially homes priced under $400,000) is very competitive. Buyers in this price range are often bidding against multiple offers, homes are selling for above asking price and inventory is very low — all creating a demand for a supply that has decreased dramatically. It is a good time to buy, so contact a real estate professional, get pre-qualified with a loan officer and let the shopping begin!

Triangle Home Sales Dip, But Positives Emerge

2009-05-16T03:23:00.000-07:00

Story from Triangle Business Journal

The number of Triangle homes sold in April was down year over year, but new data from the Triangle Multiple Listing Service show a couple of welcome trends.

First, while the 1,623 homes sold last month represented a 30 percent drop from the 2,324 sold in April 2008, it is the highest monthly total posted in six months. The triangle remains strong for those seeking Chapel Hill, Durham, or Raleigh relocation services.

Even better, the number of houses on the market represented a 7.5 month supply, down almost half from a high of 14.9 months in November. April 2008 featured a 6.9 month supply.

The median price for houses sold in April dipped 4 percent, to $177,600, from $184,922 in the same month last year. While a negative number, it’s still much better than the double-digit declines seen across much of the U.S.

The MLS figures, which are supplied by Stacey Anfindsen of research company Metrostudy, cover the Raleigh-Cary and Durham metropolitan areas. The numbers also are broken down by county.

• In Wake County, the number of homes sold dropped 35 percent, to 862. The inventory for sale represented a 7.3-month supply, up from 6.3 a year ago. The median price fell 2.5 percent, to $195,000.

• In Durham County, the number of homes sold slipped 20 percent, to 245. The inventory for sale for each Durham real estate agency represented a 4.9-month supply, down from 5.2 a year ago. The median price rose 3 percent to $170,000.

• In Orange County, the number of homes sold plunged 48 percent, to 57. The inventory for sale represented a 6.5-month supply, up from 5.9 a year ago. The median price fell 11 percent to $258,000.

• In Johnston County, the number of homes sold dips 22 percent, to 173. The inventory for sale represented a 8.9-month supply, up from 8.1 a year ago. The median price fell 5.6 percent, to $150,100.

Durham-Chapel Hill Surges Past Raleigh-Cary For Job Growth Potential

2009-04-15T18:45:00.000-07:00

Story from Triangle Business News

The Durham-Chapel Hill metropolitan area has surged past Raleigh-Cary in NewGeography.com’s annual study ranking job-growth potential.

Durham-Chapel Hill soared 24 spots, to No. 19, in the rankings of all U.S. metropolitan areas with at least 30,000 jobs. Raleigh-Cary tumbled 30 spots, to No. 38.

The rankings are based largely on federal job growth numbers for 336 metropolitan areas. Researchers assess the numbers for the current year, the previous year and the previous five years and also compare five-year growth rates over the past decade to come up with a score for each area.

In addition to the overall rankings, the metros are grouped by market size. Durham-Chapel Hill rose seven spots, to No. 4, in the midsize group, while Raleigh-Cary dropped seven spots in the large group, to No. 8, from No. 1 last year.

Joel Kotkin, one of the researchers who put together the rankings, said on his blog that Durham-Chapel Hill offers tax and housing-cost bargains compared to major markets such as San Jose, Calif., and Boston.

Asked why Raleigh-Cary fell, Kotkin said in an e-mail that “It is a drop of jobs that was a bit more than other high-flyers.”

But, Kotkin said, Raleigh-Cary’s job numbers were still relatively solid, especially considering how poor the U.S. economy has performed over the past 15 months. Both areas are still among the most popular in the nation for relocating, and Raleigh real estate continues to sell along with Durham and Chapel Hill real estate.

“In 2008, 2 percent growth made a city a veritable boom town,” Kotkin said on his blog.

“In past iterations, we saw many fast-growing economies – some adding jobs at annual rates of 3 percent to 5 percent,” said Kotkin.

The top city overall was Odessa, Texas. For the complete rankings, go to this page on NewGeography.com.

The Return Of Jumbo Mortgages

2009-04-05T20:55:00.000-07:00

As Originally Posted to the Wall Street Journal

Jumbo mortgages became more expensive and harder to come by as the nation's credit crisis deepened. That might be starting to change.

"Jumbo" refers to mortgages that are too large to be bought by Freddie Mac or Fannie Mae. The "conforming loan limit" for those government-backed entities is $417,000 in many parts of the country, but goes up to $729,750 in high-cost areas of the continental United States.

Bank of America recently began trumpeting its jumbo program, offering 30-year fixed-rate jumbo mortgages with rates in the high-5% range. "We decided it was time to really go after that market," says Vijay Lala, a product management executive for the bank.

More lenders may soon join in, says Guy Cecala, publisher of Inside Mortgage Finance.

He says Bank of America appears to have lower jumbo rates than its giant banking competitors Wells Fargo, J.P. Morgan Chase and Citibank. "I suspect the others will slowly follow suit," Mr. Cecala says.

Big Drop in Rates

The rates on 30-year fixed-rate jumbo mortgages averaged 6.5% for the week ended March 27 -- the lowest since May 2007, according to HSH Associates, a publisher of consumer loan information. On Oct. 31, a recent high point, the average rate on a 30-year fixed-rate jumbo mortgage was 7.9%, according to HSH data.

GMAC also has been pricing its jumbos aggressively, says Paola A. Kielblock, national product specialist for Fairway Independent Mortgage, a mortgage broker and banker based in Madison, Wis.

She recently has seen rates in the high-5% to the low-6% range for 30-year fixed-rate jumbo mortgages, and the low-5% range for five-year adjustable-rate jumbos.

Bill Higgins, chief lending officer for ING Direct, says his firm has been offering jumbos in the 5% range for several months -- even back when average rates were higher.

Lenders' interest in making more jumbo loans isn't surprising, says Keith Gumbinger, vice president for HSH.

Lenders no longer have many institutional buyers for their jumbo loans, forcing them to keep the loans they write on their books. Banks held back when cash was tight. But banks have more money to lend these days, as consumers have taken money out of the stock market and put it into safer investments.

"More cash comes in the door," Mr. Gumbinger says, and so "the loans go out the other side."

Plus, banks have gotten assistance from the federal government, and record-low conforming mortgage rates have inspired more people to refinance loans -- giving banks some more liquidity, he says.

For financial institutions, the return on a jumbo mortgage is also starting to look appealing. Banks are "taking a look at what investment alternatives there are," says Mr. Higgins of ING Direct, and they "are saying 'we wouldn't mind a 6% to 7% asset on the books.' "

Cheaper But Not Easy

Borrowers in the market for this kind of loan, however, shouldn't expect a simple process. Mortgage shoppers will find differences in price and availability from lender to lender, Mr. Gumbinger says. Jumbo programs vary greatly from one side of town to the other, he adds, and lenders will sometimes originate a higher volume of loans for a while, then slow down.

"To be honest, I'm not certain if [the low rates] will be around for a while," Ms. Kielblock says.

What You Need to Know

If you think you're in the market for a jumbo mortgage, consider the following:

Do you really need a jumbo? Don't automatically assume that your mortgage will exceed the conforming loan limits, says Cameron Findlay, chief economist of LendingTree. As home prices have fallen and the U.S. has raised loan limits in some areas, more home buyers probably need conforming mortgages.

Some people who are looking to refinance and who originally needed jumbo loans may also fall within increased loan limits.

With a conforming mortgage, you will likely get a better rate.

Availability may be increasing, but requirements are still stiff. Bank of America jumbo loans, for example, require at least a 720 credit score and a 20% down payment (or 20% home equity on a refinancing). And borrowers need to have at least six months worth of reserves in the bank. ING Direct requires 25% down.

Search widely for good deals. "Borrowers need to shop around for any mortgage, but particularly for jumbos," Mr. Cecala says. "A small local lender or credit union may have a good deal, but you won't know unless you do your homework. Ask real-estate agents, your friends, or anyone who might have a lead on a good jumbo lender."

Compare apples to apples. Lenders often talk about their products in terms that don't allow you to easily compare with other lenders, Mr. Higgins of ING says. Make sure to draw fair comparisons that consider mortgage fees and costs.

Raleigh Real Estate Market Summary

2009-03-31T18:22:00.000-07:00

Raleigh (, rälē or rah-lee) is the capital of the state of North Carolina and the county seat of Wake County.

Raleigh is known as the "City of Oaks" for its many oak trees. As of the 2000 census, it had a population of 276,093, making it the second most populous city in North Carolina, after Charlotte.

Raleigh, Durham and Chapel Hill make up the three cities of The Triangle, so named in 1959 with the creation of the Research Triangle Park, a research park between Durham and Raleigh (mostly located within Durham County).

The Triangle is a regional population, equivalent to the U.S. Census Bureau's Combined Statistical Area of Raleigh-Durham-Cary. Its estimated total population as of 2005 was 1,509,560. The estimated Raleigh-Cary metropolitan statistical area population, as of 2004, is 914,680.

While almost all of the city limits is located in Wake County, a few small portions of Raleigh are actually in Durham County as a result of annexation Raleigh Durham Annexation Agreement Lines.

The City of Raleigh estimates its population to be 353,604 as of July 1, 2006, making it one of the fastest growing cities in the nation.

Raleigh placed fourth on MONEY Magazine's 2006 list of Best Big Cities.

Raleigh Real Estate Market Stats:

Population: 412,559
Average Home Price: $250,000
Average Rental Price: $1,250
Average Cost of Living: +14%
Male/Female: 50%50%
Married/Single: 31%69%

Raleigh Real Estate Market Demographics:
Adults 20-24: 10%
Adults 25-34: 23%
Adults 35-49: 34%
Adults 50-64: 23%
Adults 65+: 10%

Leading Raleigh Real Estate Company: FOR Home BUYERS 800-333-2893
Email: staff@forhomebuyers.com or Visit: www.forhomebuyers.com

January House Prices Worse Than Expected

2009-03-31T18:16:00.000-07:00

As Posted to CNBC.com

Prices of U.S. single-family homes in January plunged a record 19.0 percent from a year earlier, showing a U.S. housing market that is still in the throes of a deep recession, according to a Standard & Poor's/Case-Shiller report on Tuesday.

The composite index of 20 metropolitan areas fell 2.8 percent in January from December, S&P said of the index that dates back to 2000.

The U.S. housing market is in the worst downturn since the Great Depression as a huge supply of unsold homes, tighter lending standards and record foreclosures push down home prices.

The drops on a month-over-month as well as year-over-year basis were bigger than expectations based on a Reuters survey of economists.

Michelle Meyer, an economist at Barclays Capital in New York, said the large number of foreclosures were behind the steep home price drops in certain areas.

"Home prices fell on a year-over-year basis in all 20 metro areas surveyed, driven by steep drops in boom-to-bust markets such as Las Vegas, Phoenix and San Francisco," she said.

"Home prices are falling sharply in these markets due to deeply-discounted foreclosed homes, which make up more than half of existing home sales," she said.

S&P said its composite index of 10 metropolitan areas declined 2.5 percent in January from December for a 19.4 percent year-over-year drop, also a record. The 10-city index dates back to 1988.

As of January, average home prices across the United States are at similar levels to late 2003. From the peak in the second quarter of 2006, the 10-City Composite is down 30.2 percent and the 20-City Composite is down 29.1 percent.

Most parts of the country appear to remain on a downward path, with all 20 metro areas reporting annual declines, and nine of them falling more than 20 percent in the last year, David M. Blitzer, Chairman of the Index Committee at Standard & Poor's, said in a statement.

"There are very few bright spots that one can see in the data," he said.

The composite indexes have been reporting consecutive annual record declines since October 2007, while on a month-to-month basis they have shown 30 consecutive months of falls, he said.

The U.S. housing market is critical to the economy, with a wide-ranging impact from the construction industry to the sale of appliances and furniture. After hurting growth for multiple quarters, a continued deterioration could prolong a turnaround for the world's largest economy, which has been in a recession since late 2007.

Economists believe the housing market will not begin to recover until home prices fall far enough to stimulate demand, which has emerged in some states, such as California.

Many potential buyers, however, are opting to stay sidelined, waiting for home prices to stabilize from their downward spiral.

The three worst performing cities, in terms of annual declines, continued to be from the Sun Belt. Phoenix was down 35.0 percent, Las Vegas declined 32.5 percent and San Francisco fell 32.4 percent.

Dallas, Denver and Cleveland fared the best though they too suffered drops, with prices falling 4.9 percent, 5.1 percent and 5.2 percent, respectively.

New York, buoyed by plentiful jobs and big bonuses in the financial sector in recent years, showed a more modest annual decline of 9.6 percent. Home prices in New York, however, are vulnerable, with rampant financial sector layoffs expected to take a toll on real estate.

Raleigh-Cary Tops Nation In Growth

2009-03-27T08:40:00.000-07:00

Originally Posted to The News & Observer

The metropolitan area is home to more than 1 million people after growing by more than 4 percent from 2007 to 2008. But that is slower than in previous years.

As the national economy lost steam last year, the Raleigh area continued to attract residents, becoming the fastest-growing metropolitan area in the country.

According to census numbers released today, the Raleigh-Cary metropolitan area, which includes Wake, Johnston and Franklin counties, grew by 4.3 percent from July 2007 to July 2008, and is now home to close to 1.1 million people. It well outpaced its closest rival, the Austin, Texas, area, which grew by 3.8 percent.

The national average was just under 1 percent.

The Triangle has been near the top of the nation's growth chart for more than a decade, as newcomers poured into the area to take jobs in technology, tourism and academia. The resulting building boom, and the jobs that came with it, drew hundreds of thousands of new residents.

Much changed in recent months as the economy fell into a deep recession. While the downturn took longer to arrive in North Carolina, the state's unemployment rate of 9.7 percent is now well above the national average of 8.1 percent.

Next year's figures may show a darker picture for the Triangle.

Even this year marks a slowdown for the area, despite its place at the top of the list. The growth rate was nearly half a point lower than the two previous years, when it was 4.7 percent.

The Durham-Chapel Hill metropolitan area, which includes Durham, Orange, Chatham and Person counties, didn't make the Top 10, but its population continued to swell at a steady 2.5 percent, up slightly from the year before. Just fewer than 490,000 people live in that area.

Raleigh Home Prices Off 2.5% For 4th Quarter

2009-03-24T18:25:00.000-07:00

Originally Posted to Triangle Business Journal

Home prices in the Raleigh area dipped by 2.5 percent in the fourth quarter, according to new data from real estate company Zillow.

The median value of a home in the region was $199,365.

At the local market’s peak in the first quarter of 2008, the median price of a home in Raleigh was $209,204. The market has dropped by about 5 percent since then.

Some 61.6 percent of Raleigh-area homes have lost value in the last 12 months, Zillow says. The company estimates that of all home sales, 15 percent involved homes that were sold at a loss.

Foreclosed homes represented 10 percent of all transactions in the Raleigh area, compared to about 20 percent across the country.

Across the U.S., Zillow says, the price of a home dipped by 11.6 percent during 2008. This marks the eighth consecutive quarter of year-over-year depreciation.

The number of U.S. homeowners with negative equity, or those who owed more on their homes than the property was worth, rose to 17.6 percent from 14.3 percent in the third quarter.

American homeowners saw $3.3 trillion erased from the value of their real estate in 2008, Zillow says. In the fourth quarter, homeowners lost $1.4 trillion, or 42 percent of the annual total.

Raleigh-Durham Home Prices Swim Against Current In 2008

2009-03-24T18:19:00.000-07:00

Originally Posted at Triangle Business Journal

The Triangle's housing market continues to be among the best in the country in terms of prices, according to a new batch of federal data.

The Federal Housing Finance Agency says home prices in the Raleigh-Cary area increased by 2.96 percent in 2008. That ranks the Raleigh metropolitan area 18th best in the country. The Durham-Chapel Hill area also fared well, placing 28th with home-price growth of 2.15 percent for the 12 months ending Dec. 31.

Nationally, FHFA says, home prices fell by 4.5 percent in 2008.

FHFA is the regulator of mortgage lenders Fannie Mae and Freddie Mac. The agency’s data exclude home loans that cannot be bought or securitized by Fannie and Freddie; that leaves out both homes with large “jumbo” mortgages and most homes with subprime loans. Thus, the data tend to overstate overall housing prices in an area.

But the agency’s data do make for useful comparisons among metropolitan markets, and they underscore a key fact about the Triangle's housing market: Even as transactions have dropped, prices have remained much stronger than in most areas of the country.

“Price declines continued in the fourth quarter although not as rapidly as some had expected,” FHFA Director James B. Lockhart said in a written statement. “We are hopeful the housing initiatives announced last week by President Obama will begin to provide much-needed stability to the housing markets.”

Obama’s $75 billion housing plan is meant to help homeowners avoid foreclosure.

Former KB Home CEO Karatz Indicted

2009-03-24T18:15:00.000-07:00

Originally Posted at Triangle Business Journal

Bruce Karatz, former CEO of KB Home, has been indicted by a federal grand jury in a stock options scheme.

Los Angeles-based KB Home sold homes for a combined total of $263 million in 2007, the last year for which figures are available, according to Triangle Business Journal research. That made the firm the area’s No. 1 residential builder, though it is among a number of builders that have experienced local leadership and structural changes in recent months as the housing market has tanked.

Karatz, 63, is alleged to have backdated stock options over seven years, awarding himself and others millions in stock-based compensation. Karatz resigned from KB Home (NYSE: KBH) in November 2006 under pressure in the wake of an options inquiry. Other top KB executives forced out were Richard B. Hirst, executive vice president and chief legal officer, and Gary A. Ray, the head of human resources.

The SEC began its formal probe in January 2007.

According to the reports, Karatz’s 20-count indictment included seven counts of mail fraud, five counts of wire fraud, three counts of securities fraud, four counts of lying in statements to the U.S. Securities and Exchange Commission and one count of lying to KB Home’s accountants.

If convicted, Karatz, could face a prison sentence of up to 415 years.

Unexpected Rebound In New Home Construction For February

2009-03-24T18:11:00.000-07:00

Originally Posted at Triangle Business Journal

New home building unexpectedly rebounded across the country last month as builders increased their housing starts to a 583,000 annual pace from a record low of 477,000 set in January.

The Commerce Department reported Tuesday that new home construction rose 22 percent from January to February but remained 48.5 percent below year-ago levels. The surge was led by an 83 percent jump in multi-family construction. Single-family homebuilding rose by a modest 1.1 percent.

In the South, which includes the Carolinas, new construction jumped 30 percent last month compared to the month before but was still 44 percent below the levels of last year.

Only one region reported a drop in housing starts: the West, where starts declined by 24.6 percent. The largest increase was in the Northeast, where starts increased 88 percent.

Permits for future new home construction in the South rose by 5.9 percent from January to February but were still 46 percent lower than the year before.

Nationwide, permits rose 3 percent from January to February but remained 48.8 percent lower than a year ago.

The South region includes Virginia, Maryland, D.C., Alabama, Arkansas, Delaware, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, and West Virginia.

N.C. Corporate Tax Revenue Down 37%

2009-03-24T18:06:00.000-07:00

Originally Posted at Triangle Business Journal

Collections from the state’s tax on corporate profits were down 37 percent for the first eight months of fiscal 2009, July through February, as North Carolina companies battled the recession.

The number is seen as a barometer of business conditions.

Collections during the eight-month period were $275.8 million, down from the $441.5 million recorded during the same period in fiscal 2008, according to the North Carolina controller’s office.

The state taxes corporate profits at a rate of 6.9 percent.

In a new report on the state’s fiscal outlook, North Carolina General Assembly researchers pegged recessionary job losses in the state at 197,000 through February and commented that “recessionary conditions will persist for much, if not all, of 2009.”

Mortgage Rates Hit 1971 Levels

2009-03-23T13:46:00.000-07:00

As Originally Posted to Seeking Alpha

The gap between the 10-year Treasury note and the 15-year / 30-year fixed-rate mortgages has narrowed, not surprisingly, since the Federal Reserve began actively buying mortgage securities in January (see Bloomberg article).

The average rate on a 30-year fixed mortgage fell to 4.96 percent in January, the lowest it has been when considering data that goes back to 1971. Rates were recently at 4.98 percent. With a promise to increase mortgage-backed security purchases by an additional $750 billion, along with as much as $300 billion in Treasury purchases over the next 6 months, rates obtained with the help of a Raleigh real estate agency should continue to be under pressure in the near term.

As the Fed continues to support low rates in hopes that consumers will either refinance or make a new home purchase, others are also encouraging consumers to purchase now, but for different reasons. Given the flood of money entering the market, consumers will eventually begin seeing inflationary pressures. Now may be the time to act while both rates and prices are low.

Housing Experts Say Buyers Have Several Options

2009-03-17T08:43:00.000-07:00

From News 14 Carolina

CHAPEL HILL, N.C. – Real estate experts say the federal government is providing several opportunities to help certain parts of the housing market.

For qualified buyers, there are a number of government programs to help finance their purchases.

Whitney Long, a loan originator with Carolina Home Mortgage in Chapel Hill, N.C., says although private bank loans have been harder to secure, loans from the Federal Housing Administration or through the VA or USDA can provide help for those looking to finance most or all of their costs. She said that especially applies to those who use the first-time homebuyer's credit.

"We're starting to see a lot more people get pre-qualified, think about buying now that the credit has come out with the $8,000 for new home buyers," Longs said. "So, it's certainly a big incentive for people to think about it."

She said she's doing about 50 percent more government loans than before.

Even though experts are not sure when the slump will end, they know the numbers will eventually start heading the other way.

"If you look at all the things that have historically gone well for our market, in terms of the universities, the demographics, the educational level, the income and earning level of the people that live here, those are the types of markets that come out of recessions quicker," Stacey Anfindsen, a real estate market analyst, said.

The housing market in the region is doing better than the rest of the nation and although they're slower than before, statistics show there is activity in the real estate market.

But Nick Tennyson, executive director of the Durham, Orange and Chatham Home Builder's Association, knows people are being cautious.

"I don't think any of us should kid ourselves about the fact that there are people who have lost their jobs in our market and people who are afraid about that," Tennyson said. "I think that's really just stopped a lot of people from considering any sort of purchase."

Commercial Real Estate Properties Going Green in Raleigh

2009-03-06T09:09:00.000-08:00

Increasingly, there is more demand for environmentally-friendly working and living spaces in the U.S.. Fittingly, the cutting-edge technology firms of the Research Triangle Park area of North Carolina are leading the way through innovative design and eco-engineering. The following article, taken from the Triangle Business Journal, highlights the efforts of America's largest center for technology development.

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As the epicenter of innovation and cutting-edge technologies, Research Triangle Park is pushing for a more “green” environment, both inside its buildings and across its 7,000-acre expanse.

Liz Rooks, executive vice president of the Research Triangle Foundation, which oversees the park, says zoning and environmental best practices have changed dramatically in the last 50 years.

With the opening of the Wake County portion of the park, the RTF worked with North Carolina State University to design a master plan with a heavy emphasis on protecting the ecology, she says.

Environmentally sensitive land was identified and declared off-limits for development. Steep slopes were clearly marked out, and existing vegetation was retained to prevent erosion.

Despite the nation's housing slump, Raleigh real estate remains in steady demand due to the unique combination of high-tech businesses, world-class colleges and universities, and advanced medical facilities. Efforts on behalf of the Park to "go green" only add to the appeal.

Read Entire Article from the Raleigh Business Journal

For Home Buyers Update

2008-12-09T07:37:00.000-08:00

919.878.1110 office
800.333.2893 toll free
919.454.3564 direct
Stephanie@ForHomeBuyers.com www.ForHomeBuyers.com

NC Triangle Real Estate Update December 2008

Happy Holidays! In this holiday season FOR HomeBUYERS, Inc. would like to wish you much joy and happiness as you spend this time with family and friends. And let us continue to be thankful for what we have and for blessings to come.

Triangle Market Conditions: Who would have expected all the turn of events since our last email in September. The economic instability is now beginning to have a greater impact on the housing market in the Triangle as buyers seem to be taking a wait and see attitude. Also, the winter season is always somewhat slower so the market is softening more than usual. All that being said, the interest rates are dropping and we may see record lows very soon. This could be a great time to buy a home in the Triangle. The major banks are loaning money for homes. You will need to have a good credit score of about 680 and the minimal amount for a down payment of 3% with FHA until January 1 and then it goes to 3.5%. If you are eligible for a VA loan you can still get 100% financing. You can negotiate Closing Costs to be paid by the seller. If you are renting, now is a great time to buy a home. Sellers are very negotiable on their prices. In fact, there may not be any better time to buy than the next 3 or 4 months. When summer arrives people will begin moving again and prices will either stay more firm or even go up. The diversity of the job market in the Triangle keeps the housing market on a firmer foundation than most areas.

Don’t forget about the tax credit: In addition to the lower interest rates, you can take advantage of the $7500 tax credit through June 30, 2009. We provided detailed information in our September newsletter on the tax credit. If you would like more information please call us at 800-333-2893.

Visit www.ForHomeBuyers.cmo or call 919-878-1110 or 800-333-2893 to schedule a no obligation Consultation at your convenience to learn how Exclusive Buyer Representation can help you Avoid Costly Home Buying Mistakes. If you are not in the area, we can provide the Consultation by phone. We work evenings and weekends by appointment. This initial Consultation does not obligate you to us in any way. You may also REPLY to this email for an appointment to speak with one of our Exclusive Buyer’s Agent Realtors.

U.S. Steps Up Help For Homeowners

2008-12-01T06:27:00.000-08:00

WASHINGTON -- The chief executives of Detroit's Big Three auto makers appealed in dire language for U.S. taxpayers to help their industry, but couldn't dispel doubts in Congress that have clouded prospects for a government-led rescue.

In appearances Tuesday before the Senate Banking Committee, the leaders of General Motors Corp., Ford Motor Co. and Chrysler LLC, together with the head of the United Auto Workers union, argued the shaky U.S. economy couldn't withstand a collapse of any of the companies.

The chief executives of GM and Chrysler said they could run out of funds without the government's support. GM CEO Rick Wagoner said the package is needed to "save the U.S. economy from a catastrophic collapse." Many markets however are doing well, these markets include; Raleigh Real Estate, Durham Homes, High Point Homes, Greensboro Homes, Home Inspection, Wilson Homes, Wilson NC Real Estate, Home Warranty, Raleigh Estate Homes, Triangle Homes, Chapel Hill Farms and Farms Chapel Hill.

That the companies were convening -- "hat in hand," as Sen. Christopher Dodd (D., Conn.) said -- before a congressional panel reinforced the depth of their difficulties and the possible diminishment of their political clout. Extending a helping hand to Detroit auto makers, long a central part of the nation's manufacturing base, doesn't appear to be a given.

One question is whether the auto makers can muddle through to January when a new Congress convenes with strengthened Democratic majorities and a Democrat in the White House. The complexity of a possible intervention -- and the political divisiveness it has wrought -- could be too great to overcome this week.

On Monday, Senate Democrats introduced legislation that would set aside $25 billion to help the industry, drawing from the $700 billion fund created to stabilize financial markets. The legislation would allow the auto companies and parts suppliers to receive "bridge home loans" of at least ten years with favorable interest rates. But there is resistance among many senior Republicans and the White House. If no decision is made this week, the issue will be kicked over to the new 111th Congress.

In the late afternoon session, Republicans largely condemned the industry's request. Even some Democrats committed to helping the auto makers showed little enthusiasm for the task at hand.

While noting he backs aid, Senate Banking Chairman Mr. Dodd denounced the companies for failing to move more aggressively to reverse their sharp declines in market share. "They're seeking treatment for wounds that, I believe, are largely self-inflicted," Mr. Dodd said, adding the industry has failed to adapt and "we're all paying the price for it."

As the hearing stretched past its third hour, the top executives disclosed how much they might each apply for if Congress approved the $25 billion loan package: $10 billion to $12 billion for GM; $7 billion to $8 billion for Ford; and $7 billion for Chrysler.

The companies said they would use the money to pay employees, cover current operating costs and develop new products.

Both GM and Ford are on a pace to use up $2 billion each a month, based on their third-quarter earnings. Not getting funding immediately threatens GM most directly because the firm is operating close to its minimal funding requirements. The supply chain is shared among the Big Three, so a bankruptcy filing of one could spell problems for the other two.

Some analysts suggest GM, Ford and Chrysler can cut costs enough to survive until January. But if the U.S. auto market continues to sink, the companies' cash drain could outpace their ability to cut costs.

GM has said that without government aid, the company would run out of operating funds as early as early 2009.

Chrysler joined GM for the first time in linking its survival to a federal bailout. "Without immediate bridge financing support, Chrysler's liquidity could fall below the level necessary to sustain operations in the ordinary course," Robert Nardelli, the company's chairman and CEO, said. He added that the company was currently spending about a $1 billion a month more than they were taking in, leaving the auto maker with slightly more than $6 billion cash on hand.

Only Ford says that while the loan package is necessary for the betterment of the U.S.-based auto companies, it could withstand the downturn without government assistance.

The auto makers and the union sketched their companies' far-reaching impact. They also argued that Chrysler, Ford and GM are on the right track to compete with foreign-based auto makers, but that turmoil in the broader economy foiled their good planning. The companies together employ 239,000 people in the U.S.

Under pressure from senators over the issue of executive compensation, Chrysler's Mr. Nardelli said he would be willing to accept a salary of $1 a year as part of a federal bailout. Lee Iacocca made the same commitment when he ran Chrysler and secured federal loan guarantees in 1979. The chief executives of GM and Ford declined to make the same commitment.

The Banking Committee testimony is part of a broader lobbying campaign that includes parts suppliers and dealers. The executives will appear before the House Financial Services Committee Wednesday. All told, the companies are seeking $25 billion to weather the weakening economy, which has dampened demand for autos and restricted consumer access to home loans.

In another indication of the industry's problems, the world's three dominant credit insurers now consider the U.S. auto industry among the riskiest sectors for default.

Few lawmakers in either party doubt the economic challenges facing the Big Three. At issue is how -- and whether -- Congress should get involved.

Sen. Jim Bunning (R., Ky.) said a rescue proposal by Senate Democrats would give the industry "virtually a blank check," and doesn't require the companies to improve productivity and lower labor costs. "Major changes are needed, if federal dollars are to be made available," he said.

Sen. Richard Shelby (R., Ala.) said he has doubts about whether the money will be enough to meet the industry's needs: "Is this the end, or just the beginning?"

Industry supporters, such as Sen. Carl Levin (D., Mich.) want action this week. "The stakes are great and time is short," said Sen. Levin, who is scrambling to find the 60 votes needed to overcome objections in the Senate. Sen. Levin drafted the legislation that would set aside $25 billion to help the industry using bridge home loans.

To qualify, companies would have to accept limits on executive compensation, allow the government to take stock in the firms, and submit a detailed plan showing how they intend to return to sound financial footing and improve their capacity to produce fuel-efficient vehicles.

It wasn't clear whether Congress would demand management changes as a condition to any bailout, although the topic was on the minds of some lawmakers. Sen. Bob Bennett (R., Utah) predicted the jobs of hourly workers and executives are on the line as the industry restructures itself. "Everybody's going to get hurt in the process," he said, adding that the idea "that we in the Congress can prevent that from happening is wishful thinking."

The proposed assistance would be on top of $25 billion in already-approved home loans intended to help the industry retool to meet higher fuel-efficiency standards. The White House is pushing a rival plan to speed release of the previously approved home loans, by removing certain restrictions.

In testimony before the House Financial Services Committee, Treasury Secretary Henry Paulson said Tuesday the collapse of one of the auto companies "would be something to be avoided." But he said giving the industry access to the $700 billion fund isn't the answer. "I don't see this as the purpose" of the bailout program, he said.

Some Democrats aren't showing enthusiasm. Sen. Dianne Feinstein (D., Calif.) said she has problems with helping the industry without first receiving "a new business plan" that shows how the companies will return to competitiveness.

Sen. Jon Tester (D., Mont.) said the idea of additional government intervention isn't popular with voters: "People in Montana are experiencing bailout fatigue."

Homeowners Wait as Relief Plan Drags

2008-11-11T06:44:00.000-08:00

Washington Disagreements over how to structure a federal foreclosure-prevention program are complicating and potentially delaying what is likely to be the Bush administration's last attempt to forestall sliding home prices.

The White House and the Federal Deposit Insurance Corp. are at odds over basic questions about the effort's size and breadth, several government officials said. The expectation that a new president could immediately redraw the design and scope of any plan has further delayed matters.

The FDIC has been developing a proposal, which some estimate could help between two and three million homeowners, designed to encourage banks to rework troubled loans by providing a partial federal guarantee for losses on modified mortgages that meet specific criteria, people briefed on the proposal said. Under the plan, the government would cover roughly half the loss on reworked loans that went into foreclosure A market that has seamed to escape the real estate slump is the Raleigh Real Estate Market.

The plan would use between $40 billion and $50 billion from the government's $700 billion financial-market rescue fund to create these loss-sharing agreements between banks and the government.

The White House is reviewing several ideas, including a new one that would further expand the role of the U.S. Department of Housing and Urban Development. Details of that proposal couldn't be learned, but it is expected to be different from that crafted by the FDIC.

The FDIC's plan was believed to be in advanced stages and some government officials felt it could have been unveiled last week. Several officials said the plan is strongly opposed by the White House, though officials there deny killing the idea.

"Anyone telling you that they know the White House position on any of the various foreclosure mitigation plans -- plural -- that we are reviewing is a liar," White House spokesman Tony Fratto said.

Treasury Secretary Henry Paulson agrees with FDIC Chairman Sheila Bair that the administration needs to take additional steps to help homeowners, but has concerns with some aspects of Ms. Bair's proposal, according to people familiar with the matter. Among his concerns is that sharing eventual losses with the government could give lenders an incentive to push homeowners into foreclosure.

Others are also worried about the unintended consequences of helping struggling homeowners. "The more you do this, you give people an incentive to default," said Alex Pollock, a resident fellow at the American Enterprise Institute. "They think, 'What am I, the sucker? Why am I paying, when if I just default, I get a better deal?'"

The FDIC's proposal has garnered support from multiple camps, as it is seen as the most aggressive in its effort to broadly modify loan terms. Still, because full details of the proposal haven't been released, it is unclear how it would prevent lenders from trying to take advantage of the new government guarantee.

"On the whole, the FDIC has consistently enjoyed a productive and collaborative working relationship with the Treasury and the Administration," FDIC spokesman Andrew Gray said.

Senate Democrats have called for the White House to support the FDIC's efforts in this area. Ms. Bair, a White House nominee who has sometimes been at odds with the administration over its response to the housing crisis, told a Senate panel two weeks ago that talks were continuing, but provided few details. Ms. Bair's term as FDIC chief extends until 2011.

Foreclosures tend to worsen the spiral of falling house prices because they depress the values of neighboring properties. They are also a central source of the problems undermining the financial system and the broader economy.

"Even an ambitious program of mortgage modifications will not prevent a further decline in house prices," said Douglas Elmendorf, a senior fellow at the Brookings Institution and a former Clinton economic adviser. "It might prevent an overshooting of house prices on the downside. But houses still look overvalued relative to people's rents or incomes, and it's going to be very difficult to sustain house prices at their current level."

White House officials are consulting with multiple industry and government groups, including Fannie Mae, Freddie Mac and HUD, people familiar with the matter said.

White House spokeswoman Dana Perino said the Bush administration would accept input from the winner of Tuesday's election and intends to move ahead quickly. "For us to wait three months, I don't think that anybody would support that."

Make your home look 10 years younger

2008-10-13T09:17:00.000-07:00

These tips brought to you by ForHomeBuyers. ForHomeBuyers is a leading raleigh real estate dealing in the raleigh real estate industry.

Paint a room: Do any of your rooms look drab and worn, with walls and woodwork full of scuffed or fading paint? Or perhaps your wall color is dated and could benefit from a hip new palette. Maybe you have antiquated and stained wallpaper that needs to come down. Take a critical look at the color and condition of your walls, then consider jazzing them up a bit with new paint or wallpaper.

Replace pillows: Are the accent pillows on your sofas or beds starting to look a bit tattered? Are they out of style, reminiscent of a look long gone? If so, it's time to get new ones. Check out your favorite home-interior stores to see what's new.

Freshen wood furnishings: In the hustle and bustle of daily life, wood furnishings get dented and dinged. Now is the time to get a stain stick and touch up all your wood pieces, covering up those boo-boos that make them look older than their years.

Do some deep cleaning: There's nothing like a thorough deep cleaning to make your home look newer. Put on your grubby clothes, turn on some great tunes and get to work. Scrub your walls and woodwork, polish your silver, scour the grout in your kitchen and bathroom, and wash windows.

Weed out artificial plants: While I love faux greens, they are dust magnets. After a few years, they get filthy and faded. So do some interior weeding, tossing the fakes you've had on display for years. When you replace them, you're going to be so blown away by how much better today's faux greens are that you'll wish you'd rooted out the old plants earlier.

Edit accessories: Today's trend in interior design is for a lighter and leaner use of accents, using fewer pieces to make a bold statement. As you evaluate your displays, remove pieces you aren't crazy about and find new ways to showcase the select items you are crazy about.

Replace fixtures. Take a long, hard look at your light fixtures, faucets and the hardware on your cabinets. Do you still love them as much as you did when you moved in? If not, it's time to replace them with today's new styles

Open yourself to new window treatments: Window coverings take a beating from sun and dust. And when they get dated, they age the look of your entire home. Sometimes simply hanging new curtains will dramatically update the look of a room. I'm in the process of doing just that in my kitchen. The window valance above my sink has gone limp, so this fall I'm going to replace it. I'm having as much fun thinking through my window-treatment options as I will looking at my new coverings once they are up.

Other things to consider:

- Do you have a home warranty?

- Is the house on a septic system?

- Does the home feature a custom bathroom design?

- Does the master bathroom feature a custom shower enclosure?

- Are you working with a home buyers agent?

Nervous about buying a house?

2008-10-13T07:15:00.000-07:00

Home Buying Tips and Help for Home Buyers

The single most important step that any Raleigh home buyer can take is to contact Ann Davis of FOR Home BUYERs. Ann Davis is the leading Buyers Agent in RTP and one of the top Raleigh real estate agents.

Ann Davis works exclusively for home buyers and helps new buyers work through the complex RTP real estate market. Contact Ann Davis and let her represent you throughout the entire home buying process.

They're a couple in their early 30s -- a computer technician married to a bank teller. They have stable jobs, a down payment in the bank and an intense desire to escape their Charlotte condo for a luxury home in Raleigh North Carolina.

In fact, the couple has picked out their ideal property -- a sprawling ranch-style house on a full acre. Plus they're convinced this is an opportune time to buy.

Still, the couple is racked with doubts and have yet to make a serious bid on the property. Are they crazy to consider buying in so tumultuous a real estate market? Their parents think so and call them often to urge that they hold off.

This couple's situation illustrates the pervasive confusion affecting prospective homebuyers at a time of economic uncertainty, says a real estate broker, who is also the author of "A Survival Guide to Buying a Home."

One manifestation of buyer ambivalence is a common phenomenon: the withdrawn bid.

"People search around and around for the perfect house at a bargain price. When they find it, they're super excited and run to their agent's office to write an offer. But an hour later they tell the agent to tear up their bid," the broker says.

Of course, buyer ambivalence is understandable -- given the economic situation in the country. Turbulence on Wall Street, along with high gas and food prices and job jitters are combining to cause insomnia for many once-confident members of the middle class.

"It's difficult to get a handle on home values now -- or to accurately project what real estate will be worth in the future," the real estate broker says. Even so, he insists that those who get a rock-bottom price on a home in a desirable community will one day be glad they acted now rather than waiting.

Here are pointers for those now contemplating a home purchase:

• Clarify your reasons for making a purchase.

Fear is a powerful force that can restrain people from going forward -- even when they believe it's in their interest to do so. But those convinced that now is a good time to realize a long-held housing dream shouldn't let ungrounded fears inhibit them, says another real estate broker and former president of the National Association of Exclusive Buyer Agents.

"The main thing is to go into a purchase with your eyes wide open, plus every piece of solid information you can obtain," the other broker says.

Keep in mind, though, that there could be reasons why it might be imprudent for you to buy now, including near-term employment prospects or perceived job security.

• Get a strong mortgage lender and RTP home buyers agent on your team to build confidenc e.

It's no secret that home lenders now want to be doubly sure any home loan they originate will be solid. This means you'll need to be unusually well-prepared to answer the lender's request for documents, the other broker says.

"All your paperwork must be in order. I recommend that even before you go look at homes, you sit down with a Ann Davis and get all of your paperwork in order."

Also, more lenders are now demanding proof that the funds you've amassed for your down payment have been in your savings or checking account for some time. That means you'll need to produce account statements showing the money is truly your own, which gives you a stronger stake in the home or real estate property you buy.

If you're self-employed, you can now expect your lender to do a rigorous review of documents related to your business.

But the time you spend documenting your eligibility for the home loan will be worth it if your lender gives you a "pre-approval" letter. This you can use as a bargaining chip when negotiating for the home or real estate property of your choice.

• Take your time choosing a home -- within reason.

Many neighborhoods now have an unusually large number of for sale signs. This huge array of choices gives homebuyers yet another reason to delay commitment to any one property.

"If this is the right time for your family to buy a house, don't let the negative atmosphere around real estate discourage you. Use the abundance of choices to help you get precisely what you want," the other broker says.

Here are some other things to consider when buying a home:

- Do you have a home warranty?

- Is the house on a septic system?

- Does the home feature a custom bathroom design?

- Does the master bathroom feature a custom shower enclosure?

Most Reverse Mortgages Dodge Credit-Crisis Woes

2008-09-29T07:20:00.000-07:00

I am considering taking out a reverse mortgage in the near future. Is there any connection with the mortgage problems that have been in the news? Could those problems affect my reverse mortgage in any way? I could use a reverse mortgage to pay off my mortgage balance. I have been to several sessions on reverse mortgages and understand the program. I just want to make sure that all these problems that have been arising in the banking industry will not affect me.
—Marie Bell, San Diego

If you stick with a government-backed reverse mortgage, your payments are guaranteed. And if you take your reverse mortgage as a lump-sum payment, there is no uncertainty. So-called proprietary loans typically offer more flexible terms and aren't backed by the government. But so far payments have continued during the capital crunch.

Reverse mortgages can help older homeowners with mortgage payments, home maintenance or property taxes, among other expenses. Instead of the borrower making payments to the lender, as with a regular mortgage, the lender makes a payment, or payments, to the borrower. The borrower keeps control of the house and doesn't have to pay back the loan as long as he or she lives there. When the homeowner dies or moves out, the loan is typically paid off by selling the house, and any money left over goes to the homeowner or the homeowner's estate.

Fees are typically steep -- up to 7% of the home's value. The loans are generally limited to people who are age 62 or older, and borrowing limits are capped based on where the homeowner lives. There's a good primer at reversemortgage.org.

The most common type of reverse mortgage is a Home-Equity Conversion Mortgage, or HECM, in which the Federal Housing Administration insures lenders' and borrowers' risk. Those loans, backed by federal-government insurance, are secure. But if you're considering taking out such a loan, try to wait a few weeks: A housing law enacted earlier this year raised the lending limits for the HECM product. On or about Oct. 1, the Department of Housing and Urban Development is expected to announce those limits and start using them, says Peter Bell, president of the National Reverse Mortgage Lenders Association, a trade group in Washington, D.C.

There are also proprietary reverse mortgages -- often with higher lending limits (and, at times, a minimum-age requirement of 60) -- that aren't government-backed but which get bundled and sold to investors. Much of the securitization business had been handled to date by a unit of Lehman Brothers Holdings Inc. Although Lehman's holding company filed for bankruptcy-court protection Monday, the unit that securitized reverse mortgages "isn't part of the bankruptcy filing," Mr. Bell says. "So for the moment, there's no issue."

Still, it is getting tougher to find proprietary reverse-mortgage products. A year ago, there were 15 such products. "As of last week we were down to one or two," Mr. Bell says.

By: Kelly Greene
Wall Street Journal; September 20, 2008

Fixed-Rate 30-Year Mortgages Fall Below 6% on Bailout News

2008-09-18T10:29:00.001-07:00

Rates on 30-year fixed-rate home mortgages dropped substantially this week, falling under 6% for the first time since May in the wake of the government takeover of Fannie Mae and Freddie Mac, according to Freddie Mac's weekly rate survey.

The national average for the 30-year fixed-rate mortgage was 5.93%, down from 6.35% and 6.31% a year ago, according to Freddie Mac's weekly survey. The rate is down nearly 0.6 percentage point over the past months.

"This means that the monthly principal and interest payment on a new $200,000 loan is over $76 lower than a month ago," said Frank Nothaft, Freddie Mac chief economist, in a news release. He expects the movement to help spur home purchases and loan refinancing in coming weeks.

Fifteen-year fixed-rate mortgages averaged 5.54%, down from 5.90% and 5.97% a year ago.

Rates fell substantially earlier this week, after news of the government's bailout of Fannie Mae and Freddie Mac.

"Lower rates have occurred at an opportune time, as the July pending sales data from the National Association of Realtors were off 3.2% from June," Mr. Nothaft said. "Refinance applications are up 18% over the past three weeks through September 5th, indicating that refinance activity has already begun to pick up."

The MBA reported that mortgage applications filed are going up.

Wall Street Journal; September 12, 2008

FBI Probes Unusual Incentives for Home Buyers

2008-08-20T10:25:00.000-07:00

Investigators Ask Whether Payments Misled Lenders

When home sales began to slow at the start of the downturn, home builders offered buyers incentives -- instead of reducing prices -- to stimulate demand. The incentives included cars, tuition and credit-card payments, and even cash.

Now, federal investigators are questioning whether some of those incentives misled lenders and caused them to write mortgages that were artificially inflated, contributing to today's home-price crash.

Using incentives to sell homes has long been a marketing tool for builders. When properly disclosed and structured, the practice is legal. But the Federal Bureau of Investigation is looking into allegations that home builders, brokers and appraisers defrauded lenders by not disclosing unusually large incentives to buyers, which could have added as much as $100,000 to the price of a home.

Housing analysts say incentive schemes prolonged the housing boom in hot markets like Las Vegas and, consequently, have made the downturn all the more severe.

The FBI wouldn't name individuals or companies under scrutiny, but confirmed that it is looking at cases where the disclosures of incentives "haven't made it all the way to the ultimate lender," says William Stern, financial crimes supervisor for the FBI in Palm Beach County, Fla., and the bureau's former national mortgage-fraud coordinator.

Interviews with real-estate agents, home buyers and former employees at home builders describe an industry where competitive pressures fueled unusually creative giveaways in a last-ditch attempt to prevent price cuts. Home builders hate to cut prices, not only because it reduces profit, but also because their customers who paid full price complain.

In the Las Vegas division of Dallas-based Centex Corp., the home builder paid off car loans, credit-card bills and mortgage payments on existing homes to entice new buyers on homes priced between $350,000 and $550,000. Those payments weren't always disclosed to lenders.

"You weren't buying a house. You were buying a package," says Dana Ellis, who worked as an escrow manager for Centex from 2004 to 2006. To qualify, Centex required the buyer to use the company's in-house mortgage unit to originate the loan, and the loan application included an incentive "addendum" that listed the incentives but wasn't always sent to the lender. "They weren't disclosing any of this. That was on separate paper that was pulled," she says.

In some states these incentives are not available. The state regulators are much more active and enforce laws that prevent home builders from offering buyers incentives that lead to mortgage and financial problems.

In reviewing the hot real estate markets nationwide, one state, North Carolina, is home to four of the top ten hottest real estate markets in the country.

North Carolina, unlike California and Las Vegas, Nevada, does not have "flipper" markets. Also North Carolina has a diverse employment base and many jobs are available is a wide range of industries.

The employment opportunities are vast in North Carolina and are fueling demand for homes and real estate throughout the entire state of North Carolina.

The relocation market in North Carolina, especially Raleigh Relocation opportunities increases demand and results in more consistent pricing levels.

North Carolina has a very strong network of real estate professionals that help homebuyers avoid costly mistakes that can lead to foreclosures and financial difficulties.

Let's examine some of North Carolina's hottest real estate and the proven professionals that help buyers and sellers make good decisions:

Raleigh Real Estate Agency: An exclusive buyers real estate agency that is based in Raleigh, North Carolina and dedicates themselves to representing you through the entire buying process.

Winston Salem Real Estate Agency: Another established real estate agency in the area. The Winston Salem Real Estate Agency provides custom profiles of homes for sale in Winston Salem, Greensboro, Kernersville, and the neighboring Piedmont Triad area of North Carolina.

Greenville Real Estate Agency: Part of Our Town Properties, the Greenville Real Estate Agency is will to help its clients by providing them with tips about buying local real estate, Greenville relocation, and how to handle Greenville real estate mortgages.

In many cases, an exclusive buyers agent could have helped homeowners in Nevada, California, Michigan, and Ohio avoid the many traps that national home builders such as: Centex and Beazer Homes often make available through deceptive marketing incentives.

Centex says that the program was confined to about 50 sales and was shut down in June 2006, about six months after it began. Centex averaged 63 home sales a month for the year beginning April 2006. "These incentives did not reflect standard corporate practice and, once discovered, the practice was immediately halted," Centex spokesman David Webster says. Centex says only one of the loans was government-backed, through the Veterans Administration home-loan program, and the builder has promised to stand behind all of those loans.

Elsewhere, developers offered "sweat equity," or payments for buyers to receive home improvements such as landscaping. "You're basically getting banks to give you a cash advance," says Chip Hickman, the general manager of Easy Street Realty in Las Vegas. He said such programs weren't heavily advertised and were offered by many area builders, although he declined to name them. "It was more sales agents in the model home saying, 'Look, tell me what you need and I got a lot of money to play with.' "

There aren't any strict limits on incentives, but they could run afoul of federal regulations if they cause the mortgage to increase by more than the cost of the incentive. "It's a phantom incentive to mask it in an excessive loan," says Brian Sullivan, a Department of Housing and Urban Development spokesman.

Stronger due diligence by banks might have caught some of these problems. Banks, however, say they relied on professional appraisal companies to insure property pricing. Mortgage-fraud experts say appraisers sometimes cooperated with builders because it was the only way to get business. Appraisers say that determining the value of new homes is more difficult because comparable sales figures are provided by builders.

In some cases, developers gave outsized commissions to real-estate agents who then gave that money back to the buyer. The average commission on a home sale nationally was 5.2% last year, up from 5% in 2005, according to a survey by Real Trends, an industry newsletter.

At the height of the real-estate boom, commissions in Las Vegas regularly reached double digits, real-estate agents say. Kurt DeWinter, a Henderson, Nev., agent, received a $70,000 commission on a $550,000 home from Beazer Homes USA Inc. two years ago. He says he gave half of that to the buyer.

"They didn't care what you did with the money as long as the buyer paid the price they wanted for the house," says Mr. DeWinter, who personally went into foreclosure in that same neighborhood on a $500,000 Beazer home. He says he received a $50,000 incentive from the builder, which he used for his down payment. Beazer didn't return calls seeking comment.

Some builders continue to make generous offers. Wagner Homes Inc., a local home builder, advertises in big capital letters at the top of a flyer "$130,000 commission any way you like it!" for homes in developments like "Dawn Day Fusion," a northwest Las Vegas subdivision that offers homes with Asian-inspired architectural flourishes. New homes listed there in mid-July for $530,000 even though similar model homes in that development sold for $400,000 two years ago.

"A fee that high has got to raise a bunch of flags," says Kenneth LoBene, HUD's Las Vegas field director, because builders typically reduce the price of the home rather than offer such large incentives and because homes in that subdivision have sold for as little as $240,000 in foreclosure auctions. Representatives of Wagner Homes didn't return calls seeking comment. Steve Hawks, a Las Vegas real-estate agent, points to offers like this as one that a commercial lender wouldn't back if properly disclosed. "You find me an institutional investor that's going to buy this loan," he says.

Builders Feel Pinch of Key Omission From the Housing Bill

2008-08-18T07:46:00.000-07:00

FHA's Elimination Of Down-Payment Gifts Could Dent Demand

Although a bill aimed at reviving home sales and curtailing foreclosures is about to become law, some of its provisions are proving a drag for the nation's large home builders.

Despite a rally Tuesday, the Dow Jones Wilshire U.S. Home Construction Index, which tracks the stocks of major builders, has fallen about 8.5% since President George W. Bush indicated last week that he wouldn't veto the bill that has been approved by Congress.

There have been months of intense lobbying by the building industry, but analysts say the legislation is a mixed bag for the new-home market. On the bright side, the bill shores up mortgage giants Fannie Mae and Freddie Mac, which should help restore some confidence in the mortgage market. It also provides a $7,500 tax credit to stimulate demand among first-time home buyers.

But for the builders, the bill's elimination of seller-funded down-payment assistance on mortgages backed by the Federal Housing Administration is a big loss -- one that could eliminate as many as one in 10 home buyers from the market, according to an analyst.

Starting in October, buyers using FHA loans can no longer accept down-payment "gifts" that are ultimately funded by the home seller, often a builder. Currently, the FHA allows a nonprofit group to gift the down-payment to the buyer. The nonprofit group is then reimbursed by the builder -- a practice the housing bill would stop.

Seller-funded down-payment assistance, which essentially allows buyers to purchase homes with little or no money down, has been filling the void left when the subprime-mortgage market all but vanished in 2007.

FHA officials have said loans that include the down-payment gifts are incurring higher default rates than FHA loans without the gifts. Builders say the gifts make homeownership possible for low-income buyers who have been unable to save money for a down payment.

Miami-based Lennar Corp. used down-payment assistance on 33% of the mortgages it originated in the second quarter, while Ryland Group Inc. said 18% to 20% of its buyers used down-payment assistance during the first half of the year.

"We believe a material portion of these people won't be able to find alternative mortgage-financing options," says Michael Rehaut, a housing analyst at J.P. Morgan. "This likely will result in an additional segment of demand leaving the market."

The elimination of down-payment gifts could bar as much as 10% of the nation's home-buyer pool and as many as 25% of buyers in lower-priced markets, such as Texas, where the gifts are more prevalent, according to housing researcher Zelman & Associates.

Complicating matters further for the builders, the housing bill would increase the down-payment requirement on FHA loans to 3.5% from 3%. Previous versions of the measure had lowered the down payment to 1.5%.

"There will undoubtedly be some impact, but we believe the buyers will adjust and the market will adjust," says Tim Eller, the chief executive of Centex Corp, which said that 25% of its sales in its fiscal year ended March 31 involved down-payment assistance.

In the absence of down-payment gifts, Mr. Eller says, his company can put buyers on a savings plan. In addition, he says that not everyone who uses down-payment assistance is necessarily unable to come up with a down payment.

Mr. Eller also is hopeful that a tax-credit provision in the legislation will help stimulate demand. "We know that this is no silver bullet, but it will have some stimulative impact," he say.

The tax credit mirrors a similar program in the 1970s that Mr. Eller says allowed him to buy his first home, a condominium outside Chicago. But unlike the credit Mr. Eller used in 1974, the credit proposed in the current housing bill has to be paid back over 15 years, making it more like an interest-free loan.

And a home buyer would typically collect a credit after they file their taxes. That may not help buyers who need a cash infusion -- like a down-payment gift -- at the time of the sale.

It is possible that builders could use their mortgage businesses to lend the tax credit to buyers at the house closing, and then be reimbursed after the buyer files their taxes. But that puts the builder at risk if the buyers default on these loans -- a risk the builder's mortgage units aren't necessarily designed to deal with.

"The primary purpose of the builders' mortgage subsidiaries is to get mortgage origination fees," J.P. Morgan's Mr. Rehaut says. "They don't want to take on default risks."

On a brighter note, builders say the housing bill could boost higher-end sales by raising the conforming-loan limits on Fannie- and Freddie-guaranteed loans and FHA loans to a maximum of $625,000 in some high-priced areas.

But many of those higher-end sales will depend on whether buyers can sell their current homes, often to first-time home buyers, which is why builders say the tax credit will help the overall market.

"First time home buyers can help bring back stabilization" in the market, Centex's Mr. Eller says. "It's a very large cohort, and they can have a big impact."

By: Michael Corkery
July 30, 2008