Monthly Archives: September 2013

What a Government Shutdown Means for FHA Lending

As of early afternoon on Sept. 30, lawmakers were discussing short-term budget legislation, called a continuing resolution, to pay for federal government operations after midnight tonight. U.S. Department of Housing and Urban Development officials have updated the National Association of REALTORS® on what to expect concerning the status of Federal Housing Administration loans with a federal government shutdown looming at midnight eastern time.

  • The Office of Single Family Housing will endorse new loans under current multi-year appropriation authority in order to support the health and stability of the U.S. mortgage market. (FHA endorsements currently represent 15% of the market.) Approximately 80% of FHA loans are endorsed by lenders with delegated authority. The remaining 20% are endorsed through the FHA Homeownership Centers, leveraging FHA staff with a contractor that works on-site.
  • The Office of Single Family Housing will maintain the minimum operations necessary to support FHA’s existing portfolio.
  • The FHA Call Center and the National Servicing Center’s Call Center will remain open.
  • Any function of FHA that is funded through a multi-year appropriation or where the failure to perform those functions would result in an imminent threat to the safety of human life or the protection of property will continue. FHA's portfolio of insured mortgages – multifamily, healthcare, and single family, as well as commitments entered into for project-based rental assistance are within those functions.
  • The Office of Housing will continue to work on planned sales of defaulted notes, as required for the orderly termination of HUD’s fiduciary insurance and servicing obligations.

In anticipation of a possible shutdown, NAR is consulting with officials from the U.S. Department of Housing and Urban Development, Fannie Mae, Freddie Mac, Ginnie Mae, FHA, VA, and the Rural Housing Service, among other agencies, and will post information on how a shutdown is expected to affect these agencies’ operations. 

Source: Government Shutdown Update, The National Association of REALTORS® (Sept. 30, 2013)


Recovery in New-Home Market Accelerates

The recovery of the new-home market picked up speed in August, with builders beginning construction on more single-family homes and building permits soaring to a five-year high, the Commerce Department reported Wednesday. 

Construction starts on single-family homes rose 7 percent in August, reaching its highest point in six months, according to the Commerce Department. 

“Home building seems to be holding up decently in the higher mortgage rate environment, probably due to the support of strong underlying fundamentals: thin inventories and steady household formation,” says economist Guy Berger.

Single-family housing starts rose across the country, with the West seeing the biggest gain: 17.5 percent. They increased by 9.6 percent in the Northeast, 7.1 percent in the Midwest, and 2.3 percent in the South. 

"This is the kind of signal we've been looking for, with single-family starts and permits up or holding steady across every region in the nation," says David Crowe, chief economist for the National Association of Home Builders. "Today's report is reflective of gradual improvement in buyer confidence in the overall market and our recent surveys that indicate a solid outlook for single-family production. On the multifamily side, we are catching up with underlying rental demand. We expect to see additional multifamily starts in the future, but not as rapid a pace of growth as we've seen in the past."

In August, starts within the multi-family market — which includes the volatile apartment and condo sector — dropped 11.1 percent. Higher mortgage rates could be making developers in the multifamily sector more cautious about starting new projects, Reuters reports. 

Meanwhile, the gains are expected to continue for the single-family housing market. Building permits for single-family homes, a gauge for future construction, rose 3 percent in August to its highest level since May 2008. Building permits for multifamily homes plummeted 15.7 percent in August. 

Source:  National Association of Home Builders and “Home Construction Rises, as Do Building Permits,” Reuters (Sept. 18, 2013)

Are Rising Home Prices Prompting More Divorces? What?!?!

As home prices rise, some unhappy couples are seeing it as an opportunity to part ways without losing a ton of money from their real estate assets, according to an article at RISMedia. Divorce attorneys and real estate professionals are reporting an upswing in divorcing clients. 

“So many couples have been living together and biding their time,” says Leigh Sigman, an Orlando lawyer. “I know many people who have coasted for years and touched base with me periodically — until they got equity in their homes.”

During the housing market crash, home prices fell dramatically in some areas, causing the home in a marriage to become one asset that no one wanted in a divorce because of the large amount of mortgage debt it carried, says Sigman. 

But some metros are seeing that as home values rise, divorce rates are too. 

“I have seen many of the deals we’re doing have involved a divorce — selling a house because of it or buying because of it,” says Robert Tenaglia, a real estate professional in Orlando. “When people don’t have equity and don’t have money, it dissuades them from going through the final step.” 

Many couples may need the equity from the house sale to cover the costs of starting a new life and for a down payment on a new home or an apartment deposit, Tenaglia says. 

Source: “Divorce and Home Values: Till Equity Do Us Part,” RISMedia (Sept. 6, 2013)

Ready for a Sell-Off? Equity-Backed Home Owners Resurface

In the next 15 months, 8.3 million home owners — about 18 percent of home owners who have a mortgage — are expected to gain enough equity to be in a better position to sell their homes, according to RealtyTrac’s September report on home equity. 

“Steadily rising home prices are lifting all boats in this housing market and should spill over into more inventory of homes for sale in the coming months,” says Daren Blomquist, vice president at RealtyTrac. “Home owners who already have ample equity are quickly building on that equity, while the 8.3 million homeowners on the fence with little or no equity are on track to regain enough equity to sell before 2015 if home prices continue to increase at the rate of 1.33 percent per month that they have since bottoming out in March 2012.

The 8.3 million of home owners have a range of 10 percent negative equity to 10 percent positive equity, according to RealtyTrac. Home owners with low equity may face challenges in selling a home due to the cost of the sale and having a down payment on a new home. As equity rises, more home owners are in the position to sell their home without having to resort such actions as a short sale. 

The report also notes that one in four home owners in foreclosure also were found to have positive equity. Home owners with equity may have a better chance at selling their homes before letting the foreclosure process run its course, Blomquist says. 

But that’s “assuming they realize they have equity and don’t miss the opportunity to leverage that equity,” Blomquist says. “Even home owners deeply underwater have reason for hope, with about 150,000 each month rising past the 25 percent negative equity milestone — although it will certainly take years rather than months before most of those homeowners have enough equity to sell other than via short sale."

Source: RealtyTrac and “More Than 8 Million Home Owners Are ‘Resurfacing,’” Inman News (Sept. 5, 2013)

New Homes Likely to Get Pricier as Land Costs Rise

Builders are facing rising lot prices due to a shortage in suitable lots, and the rising costs will likely get passed on to buyers of new homes. 

The average price of a finished lot suitable for building was up 40 percent in the second quarter compared to a year ago, according to John Burns Real Estate Consulting’s analysis of 27 leading markets. In some places, the increase has been even more. For example, in San Francisco and Oakland, finished lots were up 87 percent; up 75 percent in Atlanta; and up 70 percent in Las Vegas. 

The big jumps are "making up for lost ground" during the housing downturn when lot prices dropped, says David Crowe, chief economist for the National Association of Home Builders.

Finished lot prices represent nearly 22 percent of a new home’s price, Crowe says. 

Source: “Higher lot prices may boost new home prices,” USA Today (Sept. 3, 2013)