Coldwell Banker partners with Videolicious

January 16, 2013 By Leave a Comment

1,000 agents will get access to automated video creation platform

BY INMAN NEWS, WEDNESDAY, JANUARY 16, 2013.

Inman News®

In a new relationship that it says could grow, franchising giant Coldwell Banker Real Estate LLC has announced it will provide a customized version of the Videolicious automated video creation platform to 1,000 agents who have demonstrated a desire to grow their business through video.

Videolicious will allow Coldwell Banker agents to create videos without complex software, the company said, using their iPad or iPhone and integrating existing stills and video to create shorts in minutes.

“We believe that video content needs to go beyond slide shows, and our system has adapted to video as a critical component in showcasing their personality and industry knowledge,” said Michael Fischer, chief marketing officer at Coldwell Banker Real Estate, in a statement.

Fischer said Coldwell Banker On Location, the brand’s YouTube channel, has more than 50,000 videos and saw a 121 percent increase in views last year.

Videolicious was one of a number of new companies demonstrating new services at last summer’s Real Estate Connect conference in San Francisco, and is one of 25 exhibitors in “Start-Up Alley” this week at Real Estate Connect New York City.

Videolicious CEO Matt Singer will team up at the conference Thursday with HDhat CEO Mark Passerby and Andreas Klavehn of Carl Zeiss AG, to present alive demo at 10:05 a.m. EST on using smartphones to produce high-quality video.

Courtesy of your Arcadia Real Estate Agent

Filed Under: Bussiness, Technology Tagged With: , , , ,

First impressions are made at the front door

January 14, 2013 By Leave a Comment

Home’s entrance is seldom high on remodeling priorities

BY ARROL GELLNER, FRIDAY, JANUARY 11, 2013.

Inman News®

Front door of a <a href="http://www.shutterstock.com/pic.mhtml?id=75275389" target="_blank">Georgian era townhouse</a> in Salisbury, England image via Shutterstock.Front door of a Georgian era townhouse in Salisbury, England image via Shutterstock.

Have you ever been to a house where you had to skirt the gas meter or sidle around garbage cans to get to the front door? Or one where there was such a bewildering array of doors, you weren’t sure which one to knock at?

The front entrance is seldom high on people’s remodeling priorities. Yet, just like that old saw about first impressions, it’s your home’s entrance that people notice first. It’s practically impossible to rectify a bad impression made at the front door.

Tract-home builders have known this for years; even in the cheapest house, they’ll never cut corners on the front door. They know that a strong impression of quality here subtly colors a visitor’s perception of the whole house.

For much of architectural history, front entrances have been a focal point of a home’s design. In colonial New England, for example, the front door was often flanked by sidelights and topped by a pediment, setting it apart from an otherwise austere facade.

The entrance should also be clearly apparent from the street. That doesn’t mean it has to be glaringly exposed to view — just that its location should be easily deduced by an unfamiliar passerby. Architects call this principle “demarcation.”

There are lots of subtle ways to demarcate a front entrance. The most common is to surround the door with an architectural form such as a pediment or other type of trim. Another traditional strategy places the door in a recess, on a projection, or under a roofed porch. You can find a well-known example of the latter on the back of a $20 bill.

Here are some thoughts for planning your own grand entrance:

  • Don’t place an unsheltered entrance door flush with the front wall of the house; it’ll create an unwelcoming “side door” or trailer-door effect.
  • Don’t bring the path to the front door past utilities such as gas or electric meters, or past unsightly storage areas for trash or the like. Keep these kinds of features out of the visitor’s line of sight.
  • Don’t force visitors to walk on a driveway to get to your front door. Provide a separate walking path, or at least set aside a portion of the driveway paving using a different color or texture so it’s clearly meant just for those on foot.
  • If you plan to provide a covered entrance porch, make it at least 6 feet wide — enough for a person to stretch out both arms without touching either wall. Anything less will feel cramped and uncomfortable. Also, make the porch at least 4 feet deep (6 feet is better), or it’ll feel cramped when more than one person is waiting outside the front door. A cheaper alternative to building a projecting porch is simply to recess the front door. Again, make the recess at least 6 feet wide, and not less than 2 feet deep.
  • Lastly, if your house has several doors facing the street, make sure your front approach aims your visitors toward the main entrance. Your front door may seem obvious to you, but, hey, you live there.

Courtesy of your Arcadia Real Estate Agent

Filed Under: Brian Peralez, Bussiness, Design, For Sale, Make Over Tagged With: , , , ,

Consumer watchdog tightens mortgage lending rules on banks

January 10, 2013 By Leave a Comment

In

Elise Amendola / AP

In this Thursday, Dec. 20, 2012, photo, a sign hangs in North Andover, Mass. The Consumer Financial Protection Bureau will force banks to verify a borrower’s ability to repay loans to ward off the kind of loose lending that helped push the U.S. economy into recession.

More than five years after the housing market collapsed, the U.S. government’s newly created consumer watchdog said Thursday it will force banks to verify a borrower’s ability to repay loans to ward off the kind of loose lending that helped push the U.S. economy into recession.

The Consumer Financial Protection Bureau said its new guidelines would also protect borrowers from irresponsible mortgage lending by providing some legal shields for lenders who issue safer, lower-priced loan products.

Lenders and consumer groups have anxiously awaited the new rules, which are among the most controversial the government watchdog is required to issue by the 2010 Dodd-Frank financial reform law.

“When consumers sit down at the closing table, they shouldn’t be set up to fail with mortgages they can’t afford,” Richard Cordray, the bureau’s director, said in a statement.

The new rules are intended to combat lending abuses that contributed to the U.S. housing bubble, when shoddy mortgage standards led American households to take on billions of dollars in debt they could not afford.

The U.S. economy is still feeling the after-effects of the bubble, which sparked a global credit crisis after it burst in 2006. As the housing market imploded, banks sharply tightened the screws on lending.

Regulators said the new rules would head off future crises by preventing irresponsible lending, without forcing banks to restrict credit further. Lenders will have to verify a potential borrower’s income, the amount of debt they have and their job status before issuing a mortgage.

And because lenders are likely to want the heightened legal protection that comes with offering certain “plain vanilla” loans, the rules could go a long way in determining who gets a loan and who can access low-cost borrowing rates.

Safe harbor for lenders
Dodd-Frank directed regulators to designate a category of “qualified mortgages” that would automatically be considered compliant with the ability-to-repay requirement. The rule was first set in motion by the Federal Reserve and then handed off to the consumer bureau in July 2011.

The consumer protection bureau said on Thursday that it would define “qualified mortgages” as those that have no risky loan features – such as interest-only payments or balloon payments – and with fees that add up to no more than 3 percent of the loan amount.

In addition, these loans must go to borrowers whose debt does not exceed 43 percent of their income.

These loans would carry extra legal protection for lenders under a two-tiered system that appears to create a compromise between the housing industry and consumer advocates.

Bank groups had lobbied the bureau to extend a full “safe harbor” to all qualified loans, preventing consumers from claiming in lawsuits that they did not have the ability to repay them. But consumer advocates wanted a lower form of protection that would allow borrowers greater latitude to sue.

Under the rules announced on Thursday, the highest level of protection would go to lower-priced qualified mortgages. Such prime loans generally will go to less-risky consumers with sound credit histories, the bureau said.

Higher priced loans would receive less protection. Lenders would be presumed to have verified the ability to repay the loan, but borrowers could sue if they could show that they did not have sufficient income to pay the mortgage and cover other living expenses.

Credit availability
Some lawmakers and mortgage lenders had warned against a draconian rule that could exacerbate the current credit crunch and set back a housing market that has become a bright spot in an otherwise tepid economic recovery.

Consumer bureau officials said they were sensitive to concerns about credit tightening, and they baked into the rules several provisions meant to keep credit flowing and to smooth the transition to the new regime.

The new rules establish an additional category of loans that would be temporarily treated as qualified. These mortgages could exceed the 43 percent debt-to-income ratio as long as they met the underwriting standards required by Fannie Mae, Freddie Mac or other U.S. government housing agencies.

The provision would phase out in seven years, or sooner if housing agencies issue their own qualified mortgage rules or if the government ends its support of Fannie Mae and Freddie Mac, the two housing finance giants it rescued in 2008.

Regulators also proposed creating a qualified mortgage category that would apply to community banks and credit unions.

Banks will have until January 2014 to comply with the new rules, the consumer bureau said.

 

Visit NBCNews.com for breaking news, world news, and news about the economy

Courtesy of your Arcadia Real Estate Agent

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Fannie, Freddie short sales hit record high

January 8, 2013 By Leave a Comment

REO inventories down 36 percent from 2010 peak

BY INMAN NEWS, MONDAY, JANUARY 7, 2013.

Inman News®

<a href="http://www.shutterstock.com/pic.mhtml?id=50051371" target="_blank">Short sale sign</a> image via Shutterstock.
Short sale sign image via Shutterstock.

Loan servicers working on behalf of Fannie Mae and Freddie Mac signed off on a record number of short sales in the third quarter of 2012, according to a report from the mortgage giants’ regulator, the Federal Housing Finance Agency (FHFA).

Short sales and deeds-in-lieu of foreclosure totaled 37,966 for the three months ending Sept. 30, 2012, up 4 percent from the previous quarter and 23 percent from a year ago. Fannie and Freddie implemented accelerated timelines in June 2012 for reviewing and approving short-sale transactions.

Fannie and Freddie short sales and deeds-in-lieu


Right-click graph to enlarge. Source: Federal Housing Finance Agency.

The mortgage giants’ inventories of “real estate owned” (REO) homes also continued to decline, as Fannie and Freddie got rid of homes faster than they acquired them through foreclosures.

During the first nine months of the year, Fannie and Freddie acquired 197,507 homes through foreclosure, and sold 218,321 REOs and foreclosed homes.

Fannie and Freddie REO inventories (thousands of homes)


Right-click graph to enlarge. Source: Federal Housing Finance Agency.

All told, Fannie and Freddie had 158,138 homes in their REO inventories as of Sept. 30, 2012, down 13 percent from a year ago and a drop of nearly 36 percent from a Sept. 30, 2010, peak of 241,684.

Fannie and Freddie were placed under government control, or conservatorship, in September 2008. Since then, loan servicers working on their behalf have approved 2.1 million home retention actions, including 1.26 million permanent loan modifications.

During the same period, Fannie and Freddie acquired more than 1.1 million homes through foreclosure, and signed off on 413,436 short sales and deeds-in-lieu of foreclosure.

There have been about 4 million completed foreclosures nationwide since September 2008, according to data aggregator CoreLogic.

Of the 62,561 loan modifications completed in the third quarter, about 45 percent of borrowers saw their monthly payments decrease by more than 30 percent. More than a third of loan mods included principal forbearance. Less than 15 percent of loans modified in fourth-quarter 2011 had missed two or more payments as of Sept. 30, 2012, nine months after modification, the report said.

Since the beginning of the Obama administration’s Home Affordable Modification Program (HAMP) in April 2009, just over 1 million borrowers have been offered a trial loan modification, and more than half had been granted a permanent modification. Of those, 21.2 percent had defaulted as of the third quarter. The vast majority of the remainder, 428,946 borrowers, were in active permanent modifications as of the third quarter.

Since October 2009, Fannie and Freddie have offered 564,822 non-HAMP permanent loan modifications. Non-HAMP modifications made up two-thirds of all permanent loan mods in the third quarter, the report said.

The share of mortgage loans 30-59 days delinquent rose slightly to 2.08 percent of all loans serviced in the third quarter, but the share of seriously delinquent loans fell slightly to 3.39 percent. Seriously delinquent loans are those that are 90 days or more delinquent or in the process of foreclosure. More than half of seriously delinquent borrowers had missed more than a year of mortgage payments as of the end of the third quarter, the report said.

Nearly 3 in 10 of these deeply delinquent borrowers are located in Florida.

 

Courtesy of your Arcadia Real Estate Agent

Filed Under: Market, Mortgage Tagged With: , , , , , ,

10 Banks Agree to Pay $8.5B for Foreclosure Abuse

January 7, 2013 By Leave a Comment

By Associated PressJan. 07, 2013
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(WASHINGTON) — Ten major banks and mortgage companies agreed Monday to pay $8.5 billion to settle federal complaints that they wrongfully foreclosed on homeowners who should have been allowed to stay in their homes.

The banks, which include JPMorgan Chase, Bank of America and Wells Fargo, will pay billions to homeowners to end a review process of foreclosure files that was required under a 2011 enforcement action. The review was ordered because banks mishandled people’s paperwork and skipped required steps in the foreclosure process.

Under the new settlement, people who were wrongfully foreclosed on could receive from $1,000 up to $125,000. Failing to offer someone a loan modification would be considered a lighter offense; unfairly seizing and selling a person’s home would entitle that person to the biggest payment, according to guidelines released last summer by the Office of the Comptroller of the Currency. Monday’s settlement was announced jointly by the OCC and the Federal reserve.

The agreement covers up to 3.8 million people who were in foreclosure in 2009 and 2010. Of those, about 400,000 may be entitled to payments, advocates estimate.

About $3.3 billion would be direct payments to borrowers, regulators said. Another $5.2 billion would pay for other assistance including loan modifications.

The companies involved in the settlement also include: Citigroup, MetLife Bank, PNC Financial Services, Sovereign, SunTrust, U.S. Bank and Aurora. The 2011 action also included GMAC Mortgage, HSBC Finance Corp. and EMC Mortgage Corp.

The deal “represents a significant change in direction” from the original, 2011 agreements, Comptroller of the Currency Thomas Curry said in a statement.

Banks and consumer advocates had complained that the loan-by-loan reviews required under the 2011 order were time consuming and costly without reaching many homeowners. Banks were paying large sums to consultants who were reviewing the files. Some questioned the independence of those consultants, who often ruled against homeowners.

Curry said the new deal meets the original objectives “by ensuring that consumers are the ones who will benefit, and that they will benefit more quickly and in a more direct manner.”

“It has become clear that carrying the process through to its conclusion would divert money away from the impacted homeowners and also needlessly delay the dispensation of compensation to affected borrowers,” Curry said.

Some consumer advocates said that the agreement lets banks off the hook for payments that could have ended up being much higher.

“It’s another get out of jail free card for the banks,” said Diane Thompson, a lawyer with the National Consumer Law Center. “It caps their liability at a total number that’s less than they thought they were going to pay going in.”

Leaders of a House oversight panel asked regulators for a briefing on the proposed settlement on Friday. Regulators agreed to brief committee staff after the settlement was announced on Monday.

– By DANIEL WAGNER

 

Courtesy of your Arcadia Real Estate Agent

Filed Under: Uncategorized Tagged With: , , , , ,

Can a Landlord Force Tenants to Have Renter’s Insurance?

December 19, 2012 By Leave a Comment

DATE:DECEMBER 18, 2012 | CATEGORY:TIPS & ADVICE |AUTHOR:PROFESSORBARON.COM

More and more landlords these days are requiring renters to have a renter’s insurance policy in place during their tenancy. There are a lot of benefits to both the landlord and the renter as a result of the tenant having a policy. And renter’s policies are inexpensive — about $125-$175 per year — and give a renter decent coverage for the cost. Let’s first talk about why you should have the insurance in place, then answer the question of whether a landlord can require a tenant have renter’s insurance.

Why have a renter’s policy?

Unfortunately, things happen. Houses get robbed, units flood and suffer property damage, fires destroy belongings. The reason you have insurance is so that when these things happen, you don’t have to shoulder the entire cost on your own. The insurance company steps in and helps out, so the problem isn’t as disruptive to your life and livelihood as it would have been if you had not had that policy coverage in place.

And a renter’s policy protects not just your personal property — like TVs, clothing, couches, computers — in case of a loss, but it also provides some liability protection in case the dog bites someone, you cause a flood to other units or a guest at the property gets hurt.

Lastly, many policies will provide cash to cover temporary living costs and rent on another unit in case you cannot live in the apartment due to damages. Talk to your insurance agent regarding this and all the coverage components.

Can insurance be mandatory?

Insurance is a contractual issue between you and the owner of the property. If you have an existing lease that doesn’t require it, then you don’t have to carry it.

But when your lease is up for renewal, the owner can require it as a term of your new lease or any lease extension.

Overall though, it’s a small price to pay for some fair coverage. Before you fight having it, call your insurance agent and get a quote for basic coverage, like $25,000 in personal property coverage. You’ll probably get a lot more information from your agent, and hopefully decide that getting the coverage is really a good idea to give you some added insurance protection in life.

Courtesy of your Arcadia Real Estate Agent

 

Filed Under: Bussiness Tagged With: , , , , ,

Housing Issues to Watch in 2013

December 17, 2012 By Leave a Comment

By Nick Timiraos

Home prices finally hit a bottom in 2012, well ahead of many predictions that called for continued price drops this year.

Prices were up 6% from one year ago in October, according to CoreLogic CLGX -0.26%, putting them on track for their best year since 2005. Housing starts, which hit a bottom three years ago, ramped up to their highest level in four years. Sales of new homes are running around 20% of last year’s levels, while existing home sales are up around 10%. Continued declines in homes listed for sale—particularly foreclosures—explain much of the improving price picture.

So will 2013 be the year of recovery or relapse? Evidence points more strongly to a continued rebound, albeit one that still has considerable headwinds and that varies from one market to another. This week, we’ll offer five areas of focus for 2013.

1. Don’t fear the shadow. For years, housing analysts have warned that a glut of delinquent mortgages—a so-called “shadow” inventory of eventual foreclosures—would overwhelm housing markets. That hasn’t happened.

On a national basis, the shadow inventory is still there, but it is slowly getting smaller. The number of homes that were 90 days or more past due or in foreclosure fell to around 3 million in October, down by more than 430,000 this year and nearly 1.3 million from the peak in 2010, according to Barclays Capital. Normally, there’s a “shadow” of around 800,000, which means the excess shadow supply stands at around 2.2 million.

Banks have slowed down their foreclosure processes and while those could ramp up in 2013, they’re unlikely to lead to a deluge of supply. Also, big declines in new construction over the past few years have pushed the current housing demand, however muted, towards absorbing the excess supply of foreclosed homes.

The shadow inventory is often discussed as a national phenomenon, but it isn’t really national anymore. States where banks have struggled to meet court-administered foreclosure processes have a significantly higher share of unresolved bad debt: around 5.9% of mortgages are in foreclosure in those judicial states, compared with fewer than 2% in nonjudicial states, according to Lender Processing Services.

Many housing markets “will swallow what foreclosures come to the market whole because we’re seeing inventory shortages develop, acutely,” says Jeffrey Otteau, president of appraisal firm Otteau Valuation Group in East Brunswick, N.J.

 

In New Jersey, which has the second highest foreclosure rate in the country, the bigger problem is that many foreclosures are concentrated in certain communities, particularly inner-city and rural areas. “Those markets are going to take it on the chin,” he says.

 

 

 

 

Courtesy of your Arcadia Real Estate Agent

Filed Under: Brettany Harrison, Brian Peralez, Market Tagged With: , , , , , ,

4 Reasons to List or Buy a Home in December

December 14, 2012 By Leave a Comment

 / By Zillow.com / Comments
Home For Sale Real Estate Sign in Front of Beautiful New House.

Tis the season to sell and buy! Here are the top four reasons sellers should list and buyers should purchase prior to ringing in the New Year.

The commitment factor

Buyers searching for homes over the holidays are serious, committed and ready to go, often motivated by a deadline-oriented relocation brought on by a career switch or an unexpected change in housing situation.

Furthermore, with vacation time during the season, local buyers generally have more time during the weekdays to look.

Emotional buying

The holiday season also brings out emotions and feelings of nostalgia in buyers, which may help push their decision making to quickly move forward with the purchase.

When staging homes, sellers and agents should try to make the house feel as holiday-homey as possible. Let the buyers picture themselves there.

How about some tasteful greenery, the gentle glow of twinkly lights, a little golden holiday bling and the scent of baking cookies wafting through your open house?

The low inventory advantage

Inventory of homes for sale is excruciatingly low. Buyers have fewer choices, which means sellers’ homes will be in demand — and greater demand equals more money.

Low inventory isn’t necessarily a bad thing for buyers, especially for those who must make a decision quickly.

However, both buyers and sellers must be realistic about desired purchase and sale pricing.

Tax advantages

Purchasing prior to the end of the year can be advantageous and motivating to buyers for tax reasons.

Closing on a home before the end of the year allows you to deduct property taxes, mortgage interest, and loan points on this year’s tax return.

If you can buy your dream home AND save money, why wouldn’t you?

“4 Reasons to List or Buy a Home in December” was provided by Zillow.com. 

Courtesy of your Arcadia Real Estate Agent

Filed Under: Arcadia News, Brian Peralez, For Sale, Pasadena News Tagged With: , , , , , , ,

Housing recovery hinges on mortgage supply

December 11, 2012 By Leave a Comment

Commentary: Outstanding mortgages now below $10 trillion for first time since 2005

BY LOU BARNES, FRIDAY, DECEMBER 7, 2012.

Inman News®

<a href="http://www.shutterstock.com/pic.mhtml?id=97779053" target="_blank">Mortgaged home</a> image via Shutterstock.
Mortgaged home image via Shutterstock.

Markets are very quiet despite the usual first-week-of-month flood of new data. In the last week the 10-year T-note has not traded above 1.63 percent nor below 1.58 percent, and mortgages are holding just below 3.5 percent depending on borrower and property.

The November payroll survey estimate arrived with a 146,000-job gain. That’s better than forecast but garbled by Sandy, and we cannot know whether up or down. The unemployment rate fell to 7.7 percent, but may have been more distorted by Sandy than payrolls: The percent of unemployed fell because the surveyed workforce shrank.

“I’m calling from the Bureau of Labor Statistics. If you are not at work, do you still have a job but just can’t get to it? Have you quit looking for work because you’re demoralized, or because a tree fell on your car? Hello? Hello? You’re too cold to talk? You don’t seem to understand how important this call is to the nation. Hello? Is your phone out? Yes, I know that if it were we wouldn’t be talking. No need to be insulting.”

The Institute for Supply Management (“Purchasing Managers” in old days) takes two surveys at the end of each month. The manufacturing survey for November dumped two points from October to 49.5, the worst since 2009. The second one, for the service sector, rose to 54.7 from 52.3 in October. Tend to trust the manufacturing number: It has longer history, four decades versus one.

This morning the University of Michigan released its consumer confidence survey for December. It had been on a rising trend since late summer, up to 82.7 last month and was expected to stay there or higher, and instead tanked to 74.5. Economy rolling over? Republicans who just discovered who won in November? Nobody knows.


Without added mortgage supply, a genuine housing recovery lives only in the minds of the pollyannas.

Intermission for Fiscal Cliff. The election has brought order to Republicans, most of whom understand they could have had a better deal in 2011. House Speaker John Boehner fired two unruly Tea Pots from their committee posts, and South Carolina Republican Sen. Jim DeMint resigned altogether, headed for the Heritage Foundation, where he can screech in its phone booth undisturbed.

President Obama has less feel for his tax base and the economy than Mitt Romney for the people, but this time might not overreach his way out of a deal in plain sight. I think chances have reversed two bad weeks and improved now.

Back to reality. Each quarter the Fed releases Z-1, describing the movement and landing place of every buck in the financial system. Some new numbers are striking.

The net worth of U.S. households in the last 90 days rose by $1.7 trillion. Feel that?

Didn’t think so. A mere wobble in a base of $64 trillion. Which by the way is not a shabby net worth. Over the last year the wobbles have combined for genuine progress, a gain of $4.5 trillion.

The Fed estimates recovery of $1 trillion of the $7 trillion in home equity lost since 2006, a long way to go but moving. The other $3.5 trillion gained is in financial assets, most buried out of sight in pension funds, insurance company reserves, and retirement accounts, slow and quiet, but real.

Included in Z-1 are mortgage accounts. Yesterday’s release shows a pickup in post-Bubble plodding in some places, but a total stall in another. The overall figure contains both the good and the troublesome news: Aggregate U.S. residential mortgages have fallen by $88 billion in 90 days, $289 billion in the last year, and are now below $10 trillion for the first time since 2005 (from the $11.2 trillion peak in 2007).

Some of the overall decline is from overdue write-offs. Loans also disappear via sales and refis, but there is little of that in the worst stuff. The trash in private-label MBS is down to $936 billion from $2.2 trillion in 2007. Home equity loans (including seconds) from a same-year peak at $1.13 trillion have fallen to $790 billion.

The bad news: Without added mortgage supply, a genuine housing recovery lives only in the minds of the Pollyannas. The nation’s sole supply of new mortgages, Fannie-Freddie-FHA-VA, has been the same since 2009, about $5.8 trillion. All other sources, the “private” dreamland of government-haters, are just as inert as they have been since 2007.

When these mortgage aggregates begin to rise, then we’ll know that housing really is healing, and the economy with it.

Thanks to Bill McBride at www.calculatedriskblog.com, and his best-in-biz charts. He is more optimistic about today’s employment numbers, but I can’t see any of the “sustainable” progress here that the Fed is looking for, and expect them at their meeting next week to continue and even amplify QE3.


Graph via Calculated Risk Blog.

Lou Barnes is a mortgage broker and nationally syndicated columnist based in Boulder, Colo. He can be reached at lbarnes@pmglending.com.

 

Courtesy of your Arcadia Real Estate Agent

Filed Under: Market Tagged With: , , , , ,

Housing gains boost Fed’s money easing as rally spurs growth

December 6, 2012 By Leave a Comment
In this Feb. 8 photo, two workers carry a window for a home under construction in a new subdivision by Toll Brothers in Yardley, Pa. A revival in the U.S. housing market is amplifying the impact of the Federal Reserve's efforts to spur the world's largest economy.

In this Feb. 8 photo, two workers carry a window for a home under construction in a new subdivision by Toll Brothers in Yardley, Pa. A revival in the U.S. housing market is amplifying the impact of the Federal Reserve’s efforts to spur the world’s largest economy. / ALEX BRANDON/AP
Written by
Jeff Kearns and Shobhana Chandra
Bloomberg News

A revival in the U.S. housing market is amplifying the impact of the Federal Reserve’s efforts to spur the world’s largest economy.

Home values boosted by record-low mortgage rates are helping improve the finances of both households and banks. That’s easing the flow of credit, providing a further boost to the housing market and the economy, say economists at Bank of America Corp. and Deutsche Bank AG.

“We’re in the very early stages of a reinforcing cycle,” said Michelle Meyer, a New York-based senior economist at Bank of America, the second-biggest U.S. lender by assets. “The Fed has been quite impactful.”

Meyer predicts monthly housing starts could exceed 1 million at an annual rate by the end of 2013, compared with 894,000 in October.Residential construction may add to economic growth this year for the first time since 2005, boosting gross domestic product by 0.3 percentage point, said Deutsche Bank’s Joseph LaVorgna. That contribution may double next year and reach 1 percentage point when related industries such as furnishings and remodeling are added, he said.

“The one thing missing from this economic recovery was a healthy contribution from housing, and we might finally be on the cusp of that,” said LaVorgna, chief U.S. economist for Deutsche Bank in New York, who predicts GDP may grow about 2.5 percent in 2013. “Housing is going to be integral to the economy. We’re assuming it continues to do some of the heavy lifting.”

The Fed in September announced it would buy $40 billion a month in mortgage-backed securities in its third round of so- called quantitative easing.

The central bank’s purchases of housing debt have helped drive borrowing costs to all-time lows. The average fixed rate on a 30-year mortgage was 3.32 percent last week, close to the prior’s week’s 3.31 percent that was the lowest on record, according to Freddie Mac.

U.S. home prices jumped 6.3 percent in October from a year earlier, the biggest increase since June 2006, data provider CoreLogic Inc. said today.

Combined sales of new and existing dwellings climbed to a 5.16 million annual pace in October, up 40 percent from July 2010, which was the lowest since comparable data began in 1999. The S&P/Case-Shiller index of home prices in 20 cities climbed 3 percent in September from a year earlier, the biggest gain since July 2010.

‘An Accelerator’

“Monetary policy is working,” said Yelena Shulyatyeva, a U.S. economist at BNP Paribas SA in New York. “What we’ve seen is a very robust housing recovery this year, particularly in prices. It’s kind of an accelerator for other sectors of the economy, consumption in particular.”

Stronger demand is boosting sales at builders such as Toll Brothers Inc., the largest U.S. luxury-home builder, which today said revenue jumped 48 percent to $632.8 million in the three months ended Oct. 31, while net contracts signed surged 75 percent.

The Standard & Poor’s Supercomposite Homebuilding Index, which includes Toll Brothers and PulteGroup Inc. among its 11 members, has climbed 77 percent this year, compared with a 12 percent increase for the broader S&P 500 Index. PulteGroup, up 171 percent this year, is the biggest gainer in the S&P 500.

The benchmark gauge of U.S. equities slumped 0.1 percent to 1,407.84 as of 3 p.m. in New York. The yield on the 10-year Treasury note retreated 0.01 percentage point to 1.61 percent

“If we can get ourselves into a positive, virtuous circle here with rising house prices, rising construction, improving employment, I think that part of that process will be easing of mortgage-lending conditions,” Fed Chairman Ben S. Bernanke said Nov. 20 in response to audience questions after a speech in New York.

The central bank’s efforts “are having the desired effects” by reducing mortgage rates, San Francisco Fed President John Williams said in a Nov. 14 speech, and the housing rebound “should be a key driver of economic growth.”

To be sure, housing is “far from being out of the woods,” in Bernanke’s words. Sales and prices are below pre-crisis levels, and about 20 percent of borrowers owe more than their homes are worth, Bernanke said in Nov. 15 speech in Atlanta. Residential investment now accounts for 2.5 percent of nominal GDP, down from a peak of 6.3 percent in 2005.

Hurdles Remain

Builders sold fewer new homes than forecast in October and purchases were revised down for the prior month, showing the industry still faces hurdles such as an unemployment rate that’s stuck around 8 percent three years into the economic recovery.

Williams last month said the central bank will probably start buying $45 billion a month of Treasuries next year in addition to the current $40 billion of debt purchases. The policy-setting Federal Open Market Committee meets Dec. 11-12.

“The unemployment rate remains unacceptably high,” New York Fed President William C. Dudley said in a speech yesterday.

Still, for those with jobs, low interest rates are a boon. Among them are Danny and Pat Yorkovich, who decided to buy a bigger house after 18 years in their current residence. They signed a contract on a new, three-bedroom ranch-style home in Charlotte, North Carolina, in November.

“The interest rates were good,” said Danny Yorkovich, 44, who works as an office manager. “We didn’t owe anything on the home we had, and had been saving up and waiting for the right time to purchase.”

New-home sales ripple through the economy as buyers spend an average of $8,000 on household items, including furniture, appliances and landscaping, according to David Crowe, chief economist for the Washington-based National Association of Home Builders.

That’s benefiting companies like Atlanta-based Home Depot Inc., the largest U.S. home-improvement retailer, and Lowe’s Cos., the second-biggest, which both reported higher third- quarter profit as sales rose. Shares of Home Depot have climbed 53 percent this year, while Mooresville, North Carolina-based Lowe’s is up 40 percent.

Even those who aren’t moving are spending more on furnishing and remodeling, according to Robert Niblock, chief executive officer of Lowe’s.

“The bottoming of home values gives that homeowner psychological permission to spend on their homes again,” Niblock said in a Nov. 19 telephone interview.

Cutting Debt

Household finances are improving, putting consumer demand on a stronger footing. Americans have cut debt by $1.37 trillion from the peak in 2008, according to Federal Reserve Bank of New York data. Household indebtedness shrank by $74 billion to $11.31 trillion during the third quarter.

Lending tied to real estate is reviving. After six years of declines, home equity lines of credit will rise 30 percent to $79.6 billion in 2012, the highest level since the start of the financial crisis in 2008, according to Moody’s Corp.

The Fed’s record easing policy is “a very big part” of why banks are becoming more inclined to make home loans, Bernanke said Nov. 20.

The benefits of lower borrowing costs and the housing industry’s improvement are starting to accrue for both the broader economy and the Fed’s monetary policy, according to Guy Berger, a Stamford, Connecticut-based U.S. economist at RBS Securities Inc., one of the 21 primary dealers authorized to trade directly with the Fed.

“Housing is gumming up the economy and financial markets less than it was,” Berger said. “The housing market’s improvement does give a little bit more bang to the buck.”

 

Courtesy of you Pasadena Real Estate Agent

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