Friday, July 28, 2006

CREDIT SCORES ARE EVER-CHANGING

What do you do if your credit score is high enough to obtain the rate and product you are seeking, but is not as high as you think it should be?

"Leave it alone," says Southwest Florida mortgage broker Frank Cicione.

"This is not an ego trip," Cicione advised his colleagues who were taking a four-unit continuing education course in understanding credit scoring at the Florida Association of Mortgage Brokers annual convention last week in Tampa.

"If it ain't broker, don't fix it," he told the class.

Not messing with a good thing is sound advice for consumers. Why? Because trying to improve your score could actually result in a lower score, not a higher one. Some steps to a higher number are counterintuitive, such as opening a new account and closing out an old one, a step that you could really mess up your score.

Another common mistake borrowers make is showing up at a broker's office with a credit score that has been purchased over the Internet. More likely than not, Cicione told the class, the score you have in your hands is going to be 50-60 points lower than the classic FICO score the mortgage business goes by.

"It's going to be lower than our industry-specific score almost every time," the 36-year mortgage industry veteran said of generalized scores designed for sale to consumers, but not businesses.

A savvy broker trained in the nuances of credit scoring will advise borrowers right away that the score they purchased off the Internet is not the same as the one used by lenders so that there will be no surprises.

But if your broker didn't mention that and the score he receives is much lower than the one you pulled, don't be alarmed. He's not trying to rip you off by forcing you into a higher-rate loan.

Cicione, a broker in the Ft. Myers area who was president of his state trade association in 1999, also pointed out to the class that mortgage scores are nothing more than a "snapshot" of the consumer's credit profile at a particular point in time. "Thirty-days later," he said, the score "could be very different, even if they don't do anything rash," like buying furniture or a new car on time.

Credit scores "are active things," he said. "They're vibrant, and a new score is generated every single time" an inquiry is made.

To understand why you didn't score better than you expected, Cicione told the class to ignore late payments and look instead to the four reason codes or key factors given with each score.

"These codes are your roadmap," he said. "They are listed in the order of importance or weight causing a negative impact when calculating the score. And they should be relayed back to the consumer to explain how they can change their credit profile and increase their score over time."

Although other things often contribute to a lower score, he added, the reason codes list the more important problems that lead to lower scores. And here's another tip: While four factors will be listed, the first two "are the ones you really want to pay attention to," according to the long-time broker. "The lower ones are probably not worth worrying about."

Published: July 26, 2006

by Lew Sichelman
Realty Times

Wednesday, July 26, 2006

HOUSE PASSES BILL TO BOOST HOME OWNERSHIP UNDER FHA

Program changes affect down payment, loan limits

The U.S. House of Representatives on Tuesday passed legislation that aims to increase home-ownership opportunities for low- and moderate-income Americans through restructuring of Federal Housing Administration policies.

The bill, H.R. 5121, dubbed "The Expanding American Homeownership Act," was created in response to rising home prices and outdated loan limits that eliminated FHA financing for buyers in many U.S. housing markets.

The bill specifically will:

  • Eliminate the current statutory 3 percent minimum down payment, reducing a significant barrier to home ownership. FHA's existing down-payment requirement does not meet the demands of today's marketplace, where most first-time home buyers put down 2 percent or less. The "new" FHA would offer a variety of down-payment options.

  • Create a new, risk-based insurance premium structure for FHA that would match the premium amount with the credit profile of the borrower. It would replace the current structure, in which there is standard premium amount for all borrowers, while still protecting the soundness of its Insurance Fund. FHA would have the flexibility to charge a lower premium for low-risk borrowers, and to charge higher-risk borrowers a slightly higher premium.

  • Increase and simplify FHA's loan limits. FHA's loan limit in high-cost areas would rise from 87 percent to 100 percent of the GSE conforming loan limit and in lower-cost areas from 48 percent to 65 percent of the conforming loan limit. In many areas of the country, the existing FHA limits are lower than the cost of new construction, eliminating FHA financing as an option for buyers of new homes in those markets. FHA has simply been priced out of the market in other areas, such as California, where FHA insured only about 5,000 home mortgages in all of 2005, down 95 percent from 109,000 in 2000.

"When FHA was formed in 1934, it was an historic event that made home ownership possible for people who had nowhere else to turn," said Assistant Secretary for Housing-Federal Housing Commissioner Brian D. Montgomery. "We are now closer to another landmark -- a modernized, flexible FHA that can respond to the needs of today's low and moderate-income home buyers who need a helping hand."

***
Wednesday, July 26, 2006
Inman News

Monday, July 24, 2006

DO-IT-YOURSELF OPTIONS FOR SAVING MONEY ON YOUR NEXT MOVE

Moving your home, especially long distance, can cost you a mint if you want full-service packing and shipping. That might be your only option if you have one of the larger McMansions or your apartment is full of antique furnishings that need to be protected. For those who can rough it a little, there are more and more do-it-yourself options out there.

Rental trucks allow you to do it all yourself -- pack, drive and unpack.

Say you're moving from New York City to Danbury, Conn., deep in the suburbs 68 miles away. A 24-foot truck -- enough to pack up a three-bedroom apartment -- from U-Haul will cost you $271 for two days with 109 miles thrown in.

The same move from New York to Pasadena, Calif., would be $2,746 for 10 days with 3,400 miles included. With Penske, such a cross-country trip in a 26-foot truck costs $2,501 with 10 days and unlimited miles.

If you're up for packing but not driving, a few services will drop off containers at your home for you to load at your leisure. Then they will drive or ship your furniture to your new home. It costs more than renting but you pay nothing for gas and travel expenses and you get plenty of time to load and unload. The downside: these services aren't available everywhere and you'll have to arrange street parking yourself.

Door-To-Door (doortodoor.com) will drop off large crates made of plywood and covered with a weatherproof tarp to your home. They are big enough to hold king-size mattresses and each fits around one bedroom's worth of furniture. You have five days to load and unload on either end.

Location may be a problem. Door-To-Door serves most, but not all, metro areas. In some places, such as New York City, the company won't leave the crates on the street overnight. You'll have to pay for their moving company to load your crates for you.

That will cost you $5,400 for four containers from New York to Los Angeles, for example, or $3,000 from New York to Boston. Prices include insurance up to $1,200 per container.

If you've always wanted your own semi, ABF U-Pack Moving will deliver a 28-foot trailer to your street or driveway. You pay by the foot and you can use as much or as little of the trailer as you want. The company packs the rest with commercial freight.

Nineteen feet of trailer space, enough for a three-bedroom home, would cost $3,000 from Chicago to Los Angeles, but you may have to pack it in one day depending on parking regulations. Insurance is not included.

Compare those rates with Allied Van Lines, a full-service international mover. For the same three-bedroom, you'll pay around $7,000 for a cross-country move or $3,000 for New York to Danbury just for the transport, plus another $2,000 for full-service packing.


-- July 17, 2006

By Marshall Loeb
From Marketwatch

Friday, July 21, 2006

FANNIE MAE FORECASTS 10% DROP IN 2006 HOME SALES

Report predicts mortgage originations could fall 18%

The number of homes changing hands in 2006 could decline by up to 10 percent next year, and mortgage originations could fall by 18 percent to $2.41 trillion in 2006, the top economists at Fannie Mae project.

In a report issued Wednesday, Fannie Mae economists David Berson and Molly Boesel said a weakening investor demand and a lack of affordability could bring sales volume down 8 percent to 10 percent next year, to 7.61 million units. That would still be the third-best year ever for home sales, the report notes.

"The surge in the number of immigrants over the past 25 years, the age-structure of the population, and continued job and income growth as the overall economy grows around trend rates should partially offset the drop in sales related to affordability and investors," the report said.

The falloff in sales will be most pronounced in areas with weak economies and where the falloff in investor demand creates a large increase in the supply of homes for sale. Home prices could fall in those areas, slowing overall home-price gains to 3 percent in 2006, ending two years of double-digit growth.

A recent surge in new-home sales -- new-home sales jumped by 4.6 percent in May, to the highest level since December -- appears to be an anomaly, Berson and Boesel said, possibly caused by double counting sales as cancellations have risen. For the first five months of 2006, actual sales were down 10.8 percent from a year ago, and the Mortgage Bankers Association purchase applications index in June was at its lowest level since October 2003.

"Even though new sales have increased, the level of unsold inventories has continued to climb to record highs -- clearly a warning sign for home prices should sales slip in coming months," the Fannie Mae report said. "We think that sales will decline over the rest of the year, as leading indicators of sales continue to weaken."

The expected drop in home sales will also have an impact on mortgage originations, which Fannie Mae predicts will fall 18 percent to $2.41 trillion. While mortgages associated with home purchases are only expected to decline by 2 percent, to $1.48 trillion, higher interest rates are expected to continue to squeeze the refinance market, which Berson and Boesel predict will slide by 36 percent to $931 billion.

That's even after taking into account an expected pickup in refinancing of adjustable-rate mortgages as consumers try to avoid higher monthly payments by moving to fixed-rate or lower-rate ARMs. ARMs are still expected to account for a 25 percent share of home loans two years from now (compared to 29 percent today), because it will take several years of slower home-price gains before some home buyers can take advantage of fixed-rate mortgages.

Citing Commerce Department figures, Fannie Mae's economists think real gross domestic product (GDP) growth slowed to 2.5 percent to 3 percent in the second quarter, down from 5.6 percent in the first quarter. High energy prices, the lagged effects of tighter monetary policy and a drop in the housing market should keep inflation in check, they say, which could allow the Federal Reserve to hike the federal funds rate one more time this year, holding at 5.5 percent or perhaps even rolling rates back.

"We expect the Fed to tighten one more time before the end of the summer, bringing the federal funds rate up to 5.5 percent, before it pauses for a while to observe the impact of … tightening on inflation and economic activity," they said. "If, as we project, core inflation falls back a bit as the economy slows, then the Fed could remain on the sidelines for a while -- and possibly even ease slightly in 2007 if economic growth remains at a below-trend pace. But if core inflation rises further or economic growth remains above-trend, then additional tightening probably would occur."



***

Inman News

Wednesday, July 19, 2006

HOME APPRAISALS: MAKE SURE YOU READ THEM

Every lender requires one, but sometimes sellers and buyers don't always look them over carefully. And in some cases, buyers and sellers don't see their appraisals at all because they are asking the wrong person for the report.

Gerald A. McKinzie, owner of McKinzie Metro Appraisal, says that the only person an appraiser can give the appraisal to is the actual client. So if the appraisal is ordered by the lender then the mortgage company or bank will get the appraisal. "We can't give the appraisal to [the homeowner] because of appraiser ethics and I think this is pretty true nationwide. [Appraisers] cannot give the report or the conclusion of the report or their findings to anyone but their client," says McKinzie.

However, McKinzie says, your mortgage company, bank, or lending institution that ordered the appraisal can provide you with a copy.

The American Society of Appraisers says that an appraisal is important, now more than ever. With a fluctuating market, increased inventory, and housing prices dropping in many areas, the association says, having an appraisal is critical and valuable information. If you didn't receive an appraisal when you purchased your home, the association says that under federal law it is your right to receive one. The association highly recommends that you request a copy of it.

"Homeowners should point out anything they can to the appraiser who comes to do the inspection," says McKinzie. He says even things that might not be top of mind or easy to spot such as a new furnace should be mentioned. Also, remodeling, upgrades, new roofs, new flooring, and landscaping are important to mention to the appraiser.

"We have instances a lot of times where we find we're appraising a house in 2006 and the same house sold in 2003. Well the tendency for some appraisers would be to say, well it sold for $300,000 in 2003 and if I add so many percent per year this is what I get in 2006," says McKinzie. But he adds that what the appraiser might be overlooking "is that the person who bought [the house] in 2003 may have finished off the entire basement or they may have added a deck."

Appraisals are opinions of value that can affect the ability to borrow to purchase a home. Residential real estate appraisals are determined by using a Comparison Method. The appraiser compares your home to similar homes in the same neighborhood that have already sold in order to determine the value of your house.

Age, general size, construction quality, number of bedrooms and baths, lot size, garages, and pools are all comparison categories for the appraiser. The association says that reviewing your appraisal can give you hints about which areas are worth investing more money in when it comes to remodeling. For instance, if you have a home that has fewer bathrooms than the average home in your area, you might consider adding a bathroom. If you have an outdated kitchen this can cause your appraisal to come in at a lower value than a nearby, similar home that is up-to-date.

McKinzie says when you're ready to sell your home, "If the appraisal was done in the last five years you might get some idea where the appraiser says something negative about it such as house will not market as well because it has shag carpeting in the bedrooms on the second floor. If you see that in the appraisal and [the carpet] is still there then it might be time to correct that issue."

Reading your home appraisal will offer information and insight on how your home fits into the marketplace.

Published: July 17, 2006
by Phoebe Chongchua
Realty Times

Monday, July 17, 2006

HOME SALES EXPECTED TO STABILIZE IN THE MONTHS AHEAD

WASHINGTON (July 11, 2006) – Home sales are projected to ease modestly but should stay within a relatively narrow range over the balance of the year, according to the National Association of Realtors.

David Lereah, NAR’s chief economist, said the market is showing signs of stabilizing. “The major housing indicators have been moving up and down within a reasonable range, which means the market should even-out just below present levels,” he said. “At the same time, housing inventory levels are balanced in much of the country, so overall price appreciation will be at a normal rate. We should see home sales rise and fall month to month, but don’t look for any big shifts one way or the other.”

Existing-home sales are expected to decline 6.7 percent to 6.60 million in 2006 from 7.08 million last year. That would still be the third highest level on record. New-home sales should fall 12.8 percent this year to 1.12 million from 1.28 million in 2005. Housing starts are forecast to decline 6.8 percent to 1.93 million this year from 2.07 million in 2005.
The 30-year fixed-rate mortgage is likely to reach 7.0 percent by the end of the year.

“The uptick in interest rates has been slowing home sales,” Lereah said. “We remain concerned about the potential impact of higher interest rates in some of the more expensive areas of the country.”

NAR President Thomas M. Stevens from Vienna, Va., said consumers who have been on the sidelines should feel more confident about the market normalization. “When it comes to big ticket purchases, buyers are more comfortable in a stabilizing environment,” said Stevens, senior vice president of NRT Inc. “At the same time, home sellers in most areas understand that the period of abnormal price growth is over, and they have become more realistic about the current market. This is helping to ease the pressure on home prices in some areas.”

The national median existing-home price for all housing types is expected to rise 5.3 percent to $231,300 in 2006. With more construction in lower cost regions as well as price incentives that are helping to clear unsold inventory, the median new-home price should increase 1.0 percent this year to $243,300.

The unemployment rate is projected to average 4.7 percent in 2006, while inflation, as measured by the Consumer Price Index, is forecast at 3.4 percent. Growth in the U.S. gross domestic product is expected to be 3.4 percent this year, and inflation-adjusted disposable personal income is likely to grow 3.1 percent.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries.

# # #
Existing-home sales for June will be released July 25; the Pending Home Sales Index is scheduled for August 1 and the next forecast will be August 8.

Article offered by the NAR

Friday, July 14, 2006

SELLERS FACE CONTINGENT DILEMMA

Contingencies in contracts will always exist. It is a rare thing to find a written contract which satisfies both parties right up front without a contingency.

In a sellers market, even if the buyer writes it with no contingencies, the seller will tack on a few of his own -- must find home of choice, comes to mind. Even so, when sellers add contingencies, it's usually only a couple that are easily remedied and which don't cost the buyer much money. When buyers add contingencies, on the other hand, it means the seller may face delayed expenses (such has home inspection defects) or have the chance that the house may not sell at all. Here's what I mean.

A Washington, D.C. area seller writes that he has "drastically lowered" his price, has a great agent and is "very realistic about the market," but that he's turned down two contingent contracts with unrealistic buyers. Having lowered the price to 30 percent below appraised value, the two contracts have both been contingent on the buyer selling his or her home first before completing the sale.

In further discussion, both buyers, according to this seller, are very unrealistic about the value of their own homes, and want to put them on the market way overpriced.

"They think my house is a great deal because I have lowered my price," Tired Seller writes. "Then they write a contract based on the equity they 'assume' they have in their home. They want to list it way overpriced ... . My plan is to just keep lowering the price until it sells. Any advice?"

First of all, if you've already drawn two contracts, then you may have hit the low-enough point. Now, work on the marketing and seller subsidies up front. In addition, before rejecting an offer outright, I would write a counter that the buyer can only list the property for a certain amount. Don't say, "market value price," go ahead and have your agent draw up a comparative market analysis on the buyer's house and base the price on that CMA.

In addition, ask the buyer to follow the same modus operandi you have -- be willing to drop the price every other week until it draws a contract. Write all this verbiage in the "Other Terms" section of the contract. Remember, in real estate everything is negotiable.

When a contract comes through, in a buyers market a seller needs to remember to keep his or her cool. You don't need to roll over a play dead, accepting any terms the buyer offers. Remember, you have a contract in your hand. While the buyers may have dozens of other homes to choose from, they have chosen yours because it obviously fits their housing needs. They also obviously like your price, so now concentrate on the terms. In today's market, if your house is priced right, then you only have to focus on terms to get a winning contract on the board.

The challenge of accepting a contingent contract in many MLS's around the country, is that the status changes from Active to Under Contract/Contingencies. The problem with that is with so many homes on the market, 99 percent of buyer agents search only Active listings for their buyers -- they rarely seek out UC/Contingencies status. Why bother? They are obviously in negotiation with a buyer already.

So switching the status may mean your home lingers toward closing while waiting for the buyers' home to sell. On the other hand, the buyer becomes much more motivated to sell and may be willing to drop the price right away to elicit a quick sale.

The No. 1 contingency in contracts today is the home inspection. Instead of fearing this contingency, the astute seller will conduct his or her own home inspection and fix the problems before the buyer finds something later. Be tough on your own house. If it has an old air conditioner -- have it worked on and serviced. Make sure all the plugs work properly.

If you are a do-it-yourselfer, make sure you have the permits or at least professional inspections necessary to show you did the work right. I've seen sellers redo the plumbing and/or electrical work of the previous owner who was a DIY because they just didn't know it was done wrong.

In other words, the seller who anticipates the challenges from a buyer will be ahead of the game. Don't wait till you "find out" that you have termites -- look it up and uncover the defect before it's a surprise. Be willing to accept contingencies, but also be willing to negotiate to make it work for you as well.

Published: June 30, 2006

By M. Anthony Carr
Realty Times

Wednesday, July 12, 2006

WALL STREET RATING AGENCY REINS IN "PIGGYBACK" MORTGAGE COMBOS

"Piggyback" mortgage programs -- one of the most popular ways to afford a home purchase in many high-cost markets -- are getting tough new scrutiny from Wall Street.

In fact, bond market restrictions that took effect July 1 could raise interest rates and fees for some home buyers who expect to take out a piggyback this summer.

The name piggyback refers to the combination of a standard, conventional 30-year mortgage with a junior lien or second mortgage. The two loans are closed simultaneously and allow home purchasers to put little or nothing down while avoiding payment of private mortgage insurance (PMI) premiums.

PMI is required by most lenders whenever a borrower puts less than 20 percent down. In a piggyback plan, by contrast, a purchaser might combine a conventional first mortgage equal to 80 percent of the home value and a floating-rate home equity credit line equal to 15 percent of the property value. The purchaser would make a 5 percent downpayment to complete the deal -- a so-called 80-15-5 transaction. Other possibilities include an 80-20 piggyback -- no downpayment required -- or an 80-10-10, with a 10 percent downpayment.

Piggyback lenders frequently sell the first loan into the secondary market (to Fannie Mae, Freddie Mac, or private bond issuers), and retain the home equity credit line or second mortgage in their own portfolios. Loans that are sold into the secondary market usually end up in giant pools of mortgages that are converted into bonds for institutional investors.

Wall Street ratings agencies tell investors how risky the underlying mortgages in a pool are -- i.e., how likely they are to default and cut off the investor's income stream. The most influential of the ratings agencies in the mortgage arena is Standard & Poor's. Though consumers may be unaware, S&P's ratings and criteria often affect what rates and fees are charged to borrowers at the time of origination.

Recently S&P conducted an extensive analysis of nearly 640,000 piggyback first-lien mortgages contained in bond pools. Many of the mortgages helped fund home purchases in California, Washington DC, New York and other high-cost areas between 2002-2004. S&P's findings amounted to a big dose of bad news for fans of piggybacks: First-lien mortgages connected with piggybacks are far more likely to go into default than stand-alone first mortgages of comparable size.

According to S&P credit analyst Kyle Beauchamp, first mortgages that were originated as piggybacks are 43 percent more likely to go into default than standard first mortgages. Piggybacks made to borrowers with FICO credit scores below 660 are 50 percent more likely to go into default than stand-alone first mortgages made to borrowers with identical credit scores.

To counter the higher risk of nonpayment, S&P has begun imposing higher credit enhancements or pool insurance requirements on piggyback mortgages. That added cost to lenders selling loans to Wall Street, in turn, will be passed along to individual borrowers in the form of higher rates or fees.

Why the higher propensity to default? Mortgage industry analysts say the piggyback deals are essentially low or no downpayment programs without the benefit of private mortgage insurance. The inherent risk is the same as any "high LTV" (low downpayment) mortgage, but there is no built-in mechanism to cover that risk for the investor.

A second key factor, according to a research paper by Dr. Charles Calhoun, former deputy chief economist of the Office of Federal Housing Enterprise Oversight (OFHEO), is piggyback borrowers' exposure to rising interest costs on their floating-rate home equity credit lines.

With the Federal Reserve moving short-term rates up steadily from 2005 through last month, many piggyback borrowers have found themselves financially squeezed with no easy refinancing options.

Published: July 10, 2006
By Kenneth R. Harney
Realty Times

Monday, July 10, 2006

NEW STUDY PINPOINTS TOP PLACES WHERE REAL-ESTATE PRICES MAY FALL

Some of the nation's hottest housing markets are cooling, but the strength of the economy is balancing the risk of home-price declines, according to PMI Mortgage Insurance Co., which released its U.S. Market Risk Index on Tuesday.

The average risk score for the country's largest metropolitan statistical areas was 288 in the first quarter, one point up from the last quarter and 70 points up from a year ago. During the quarter, 25 metropolitan areas saw increases in risk, while 20 saw decreases.

The index uses data from the Office of Federal Housing Enterprise Oversight, the Bureau of Labor Statistics and the PMI affordability index to assign 50 of the country's largest metropolitan areas a score from one to 1,000.

A score of 100 means the area has a 10% chance its home prices will decline over the next two years. Higher scores mean a greater risk of home-price declines in the future. The New Orleans area was left out of the quarter's results due to the impact of Hurricane Katrina.

"This quarter's data signals that in many areas the expansion of the housing balloon has slowed substantially," said Mark Milner, chief risk officer of PMI Mortgage Insurance Co., in a statement. The company is a subsidiary of the PMI Group Inc.

"The Risk Index also shows that slowing price appreciation is balanced by underlying economic strength. In the absence of an unexpected economic shock, this makes a gradual cooling of the market the most likely outcome," Milner added.

Thirteen metropolitan areas had risk scores higher than 500 -- indicating a 50% or greater risk of home-price declines in the next two years. The San Diego-Carlsbad-San Marcos, Calif., area had the highest risk, with a rating of 599. Newark, N.J., and Miami both had 32-point increases in risk over the quarter, landing at 459 and 359, respectively.

Thirty-four markets experienced decelerating home prices over the year, with Las Vegas leading the group. Appreciation slowed to 14.5% in Las Vegas, down from 30.1% a year ago.

"We'd reached a point where prices had gotten too far away from economic fundamentals," according to Milner. "A return to a more normalized appreciation climate is a natural outcome."

Appreciation may be slowing in a number of markets, but it is still positive in the country's largest metropolitan areas -- with half of them maintaining appreciation rates in the double digits.

Other findings from the report include the following:

  • Risk is concentrated along the coasts: Eight of the 13 highest risk areas are located in California and five are in the Northeast.


  • Six markets saw appreciation of more than 20% over the year. Phoenix saw appreciation of 31.1%; Orlando, Fla., saw appreciation of 27.7%; Fort Lauderdale, Fla., saw appreciation of 25.7% and Miami saw appreciation of 24.7%.


  • Four higher-risk markets saw appreciation drop into the single digits over the year. San Diego experienced 7.7% appreciation; Boston experienced 5.7% appreciation; Providence, R.I., experienced 9.5% appreciation, and Cambridge, Mass., experienced 5.2% appreciation.


  • Affordability decreased in more than half of the largest metropolitan areas during the first quarter of 2006. Affordability increased slightly in 19 markets due to slower price growth; five of the markets were in Texas and six were in the Midwest.


  • All but four of the largest metropolitan areas -- Detroit, Milwaukee, Cleveland and Warren, Mich. -- have seen recent employment growth. Las Vegas led the country in employment growth at 6.23% over the year, followed by Phoenix with 6.02%.

Below are the risk scores for the top 50 metropolitan areas, minus New Orleans:

  • San Diego-Carlsbad-San Marcos, Calif., 599
  • Nassau-Suffolk, N.Y., 589
  • Boston-Quincy, Mass., 588
  • Santa Ana-Anaheim-Irvine, Calif., 588
  • Sacramento-Arden-Arcade-Roseville, Calif., 585
  • Riverside-San Bernardino-Ontario, Calif., 583
  • Oakland-Fremont-Hayward, Calif., 582
  • Los Angeles-Long Beach-Glendale, Calif., 575
  • Providence-New Bedford-Fall River, RI-Mass., 568
  • San Francisco-San Mateo-Redwood City, Calif., 560
  • San Jose-Sunnyvale-Santa Clara, Calif., 559
  • Cambridge-Newton-Framingham, Mass., 537
  • Edison, N.J., 536
  • New York-White Plains-Wayne, N.Y.-N.J., 498
  • Las Vegas-Paradise, Nev., 481
  • Newark-Union, N.J.-Penn., 459
  • Fort Lauderdale-Pompano Beach-Deerfield Beach, Fla., 441
  • Washington-Arlington-Alexandria, D.C.-Va.-Md.-W.Va., 431
  • Miami-Miami Beach-Kendall, Fla., 359
  • Minneapolis-St. Paul-Bloomington, Minn.-Wis., 355
  • Detroit-Livonia-Dearborn, Mich., 337
  • Baltimore-Towson, Md., 307
  • Tampa-St. Petersburg-Clearwater, Fla., 294
  • Virginia Beach-Norfolk-Newport News, Va.-N.C., 278
  • Warren-Troy-Farmington Hills, Mich., 184
  • Orlando-Kissimmee, Fla., 179
  • Phoenix-Mesa-Scottsdale, Ariz., 175
  • Atlanta-Sandy Springs-Marietta, Ga., 165
  • Denver-Aurora, Colo., 149
  • Philadelphia, 130
  • Chicago-Naperville-Joliet, Ill., 127
  • St. Louis, Mo.-Ill., 112
  • Seattle-Bellevue-Everett, Wash., 109
  • Portland-Vancouver-Beaverton, Ore.-Wash., 108
  • Milwaukee-Waukesha-West Allis, Wis., 108
  • Kansas City, Mo.-Kan., 101
  • Austin-Round Rock, Texas, 93
  • Charlotte-Gastonia-Concord, N.C.-S.C., 87
  • Houston-Sugar Land-Baytown, Texas, 83
  • Dallas-Plano-Irving, Texas, 80
  • Nashville-Davidson-Murfreesboro, Tenn., 71
  • Fort Worth-Arlington, Texas, 69
  • Cleveland-Elyria-Mentor, Ohio, 68
  • Columbus, Ohio, 65
  • San Antonio, 65
  • Cincinnati-Middletown, Ohio-Ky.-Ind., 64
  • Memphis, Tenn.-Miss.-Ark., 61
  • Indianapolis-Carmel, Ind., 58
  • Pittsburgh, 57


-- June 30, 2006

      By Amy Hoak
      From Marketwatch

        Friday, July 07, 2006

        SELLERS FIND IT DIFFICULT TO SET A PRICE IN A VOLATILE MARKET

        A year or two ago, pricing a house was simple. Sellers only had to look at what their neighbors were charging, add 10% and wait for the bidding wars to begin.

        Now that the market has grown uncertain, homeowners are at more of a loss when deciding what price tag to put on their property. So in an attempt to attract buyers, some sellers are experimenting with non-traditional strategies for setting prices. Approaches include starting high and cutting the figure every few weeks, dropping the price to a different bracket to attract new shoppers or giving a range of numbers rather than one set figure.

        Golledge House, Bradbury, Calif.: Advertised a range between $1.198 million and $1.298 million, to reach more buyers

        Home-sellers are trying these strategies as real-estate markets across the country continue to send mixed signals. Listings are on the rise -- they are triple last year's levels in parts of Southeastern Florida and five times higher in Phoenix. In Washington, D.C., home builders are dumping inventory and undercutting existing home prices by offering rebates on closing costs or outright discounts. Overall, home prices are growing at the slowest pace in two years, though they were still up 12.5% in the first quarter from a year earlier, as measured by the Office of Federal Housing Enterprise Oversight. In some affluent places, like Palm Springs, Calif., and Palm Beach County, Fla., single-family home prices have flattened or declined.

        A changing market can especially highlight the flaws of traditional pricing sources, including Web sites that list comparable home sales and estimates from real-estate agents. Agents may quote too-high prices to get listings, for one, and some Web sites have too few recent listings (within the last six months) to be useful. And while banks can access automated appraisal tools to determine prices, mostly used in calculating a home-equity line of credit or loan, consumers generally can't get those numbers.

        When times are slow, most agents recommend setting a price that's just at or 5% below the market. Yet not everyone takes that advice. Below, a sampling of four unusual pricing strategies.

        A Range on the Home

        When Eleanor and Simon Golledge put their Bradbury, Calif., home on the market in April, there were hardly any local listings for comparison. Their rural town has fewer than 1,000 residents, and many of the homes, including theirs, were custom built. So instead of naming a price, the Golledges (who are selling the home without an agent) settled on an asking range. On a for-sale-by-owner Web site, they say they will "entertain offers" from $1.198 million to $1.298 million.

        Ms. Golledge, an accountant, says she got the idea from local brokers, who often use price ranges. It almost worked. The couple, who paid $770,000 for the house two years ago, has received three offers near or below the low end of the range. They accepted the highest, for $1.2 million, but it fell through on a seller's contingency. (The Golledges had a clause in the contract that they needed to find a home they wanted to buy within a certain time period. They didn't.) They're hoping for another offer that's closer to their high number.

        The practice, sometimes known as "value range pricing," first came into use in Australia in the early 1990s and was adopted by some California brokers soon afterward. There are scattered adherents throughout the country, but it's not widely practiced.

        Broker Carlton Lund in Carlsbad, Calif., has used the approach for a decade, and almost all of his listings now come with a range. "It's all about widening the pool of buyers and getting them to the table," says Mr. Lund, who suggests a spread of between 10% and 12%. He says that about three-quarters of the homes he works with typically sell at the upper end of the range -- though that has dropped to half in a slower market recently.

        Marcus Allen, a professor at Florida Atlantic University and co-author of a related study published last August in the Journal of Real Estate Finance and Economics, hasn't seen a clear benefit. After researching the sale of 6,000 homes in Texas, he found that using a range increased the amount of time it takes to sell a home by 5%, and didn't have an impact on final prices. He calls it "a novelty pricing strategy."

        Slashing Early

        Two weeks ago, Rita and Daniel Davis put their three-bedroom Craftsman bungalow in Minneapolis on the market for $284,900.

        A week later, the price tag was $279,900.

        Cutting the price is common practice -- just not so quickly. In Minneapolis, sellers generally wait 30 to 45 days before making a reduction, says Mary Leizinger, a real-estate agent who is working with the couple. The fast drop wasn't due to unfamiliarity with the market. Before they listed their house, the couple had visited seven others for sale nearby. They discovered that many were similar to theirs, and worse, there was something for sale on every block. By cutting their price within days, the couple hopes to send a message that they're flexible. "We're between a rock and a hard place," says Ms. Davis, a businesswoman.

        Rob Cohen, a real-estate broker in Boston, thinks the strategy could work, especially given that the market price is often a moving target when sales are slow. He also understands that sellers might want to test the waters with a slightly optimistic number, to get the best possible deal. However, he always prefers to set a home's price at or below market and hold for a while. "This isn't a business of hopes and dreams," he says.

        Ms. Davis isn't sure if it will pay off either, but the couple still has room to negotiate. They bought their place 35 years ago for $17,900.

        Slashing Often

        In February, Jonathan Hinkle, a telecommunications account manager, put his five-bedroom home in Lansdowne, Va., on the market for $1.35 million. He purposely set it high and cut the number by $50,000 a few weeks later -- and continued dropping it by $50,000 every few weeks until it reached $1.05 million. Mr. Hinkle, who bought the house two years ago, says that's close to the lowest price at which he can afford to sell.

        Hinkle House, Lansdowne, Va.: Dropped from $1.35 million to $1.05 million in $50,000 increments

        He heard about the idea from a real-estate agent who had used the tactic before. "The market is so volatile, this seemed a good strategy," he says. It required some patience; he says he didn't get any serious shoppers until the price fell to $1.1 million. However, all were lured away by nearby builders, who recently began underwriting closing costs, buying down mortgage rates and giving away such things as $500 gasoline cards and three years' worth of paid electric bills. (The practice is growing more common. A study by the National Association of Home Builders shows that more than half of all builders are throwing in incentives to sell homes, up from a third a year ago.) Mr. Hinkle, who wants to buy a newly built home nearby, has used that to his advantage: He asked the builder to discount the new home so he could take less on the old home. The builder agreed.

        Playing With Blocks

        Buyers tend to think in price blocks -- a habit that may be reinforced by the Internet. According to a study conducted by the National Association of Realtors last year, eight out of 10 buyers begin their home search online, meaning that they see homes only in the price parameters they enter into search engines.

        Houston real-estate broker Melinda Noel says the span often depends on the price. Buyers tend to look in $20,000 to $25,000 increments for homes under $500,000, in $50,000 increments for homes between $500,000 and $1 million, and in $250,000 increments over $1 million. She has counseled sellers to set a price at the top of a break point, and then jump down a whole notch if the market doesn't respond -- say, from $749,000 to $699,000. "The goal is to hit the top of the market, without going over the edge," she says.

        Cincinnati professor John Bryan tried to price his home carefully. He surfed through local listings online and then waited until May, when real-estate sales are traditionally strongest, to put it on the market. (He bought a new five-bedroom home in January, a slow month for sales.) He finally set the price at $324,000.

        He received one contract, for $307,000, but that fell through. He has just lowered the price to $299,900, even though he may lose money on the deal after closing costs and commissions. (He bought at $250,000 in 1998 and added $56,000 in renovations, including a new kitchen, air-conditioning system and landscaping.) He hopes the new price will bring his listing to the attention of a new group of Internet shoppers. Mr. Bryan says he is disappointed that he had to drop the price so low, but he thought it was the best solution. "I'm trying to break a psychological barrier," he says.


        -- July 03, 2006
        By June Fletcher
        From The Wall Street Journal Online

        Wednesday, July 05, 2006

        AFFORDABLE DISASTER INSURANCE ESSENTIAL TO PROTECT AMERICAN DREAM OF HOMEOWNERSHIP

        WASHINGTON (June 28, 2006 )– Recent natural disasters have raised concerns that the cost of homeownership can easily spiral out of reach for the average consumer during times of catastrophe if homeowner insurance isn’t made affordable, the National Association of Realtors® said today in written testimony to the House Subcommittee on Housing and Community Opportunity.

        “Options for obtaining and maintaining coverage for natural disasters are dwindling,” said Thomas M. Stevens of Vienna, Va., president of NAR. “America’s hard-working families deserve a comprehensive federal natural disaster policy that makes natural disaster insurance available and affordable and reduces the circumstances under which insurance companies cancel these insurance policies.”

        Recent research conducted by NAR in the state of Florida concluded that the lack of affordable or available homeowners’ insurance contributed to a slowdown in Florida real estate markets, which can contribute to a slowdown in overall economic activity in the region.

        “When buyers and sellers in high-risk states cannot obtain or retain homeowners insurance, which is necessary for a mortgage, it can slow home sales in those areas,” said Stevens. “A strong housing market is the foundation of a healthy economy, and as a nation, we must safeguard the vitality of the residential and commercial real estate markets.”

        As Congress addresses the need for a comprehensive natural disaster insurance policy, NAR stands ready to assist in formulating solutions to this problem. “If the ‘big one’ hits, and people are not insured, then the American taxpayer will pay the price,” said Stevens.

        The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries.
        ###

        Article offered by The NAR

        Monday, July 03, 2006

        REAL ESTATE TAXES, ENERGY COSTS WORRY POTENTIAL HOMEOWNERS

        Survey shows housing affordability, healthcare costs are also top issues

        Rising property taxes and energy costs are among the leading worries associated with home ownership, according to an annual survey conducted by the National Association of Realtors trade group's Housing Opportunity Program.

        About 34 percent of respondents stated that property taxes are a top worry, while 28 percent said they were most troubled by energy costs and 14 percent cited rising mortgage interest rates as a leading concern.

        The Housing Opportunity Program, created in 2002, has a mission to promote rental and home-ownership opportunities for consumers.

        By a 2-to-1 margin, respondents said they believe that high monthly payments, rather than high down payments, are "the greatest obstacle to buying a home," according to an association announcement about the survey.

        About 82 percent of respondents said high energy costs are one of their top three concerns, 53 percent cited lack of affordable healthcare and 42 percent cited lack of affordable housing in their community. About one-third said they worry that the cost of housing is so unaffordable that they will never be able to buy a home and more than 58 percent are concerned that the cost of a home is becoming so unaffordable that it is hurting their local economy, the Realtor group reported.

        Between one-fifth and one-third of respondents said they are not seeing enough of their friends and family and they are not as involved in their neighborhood as they would like, according to the survey results. They also report missing out on promotions, having less productivity and cutting back on vacations because they have to work too much to pay for their home or they don't have the money because of high home costs.

        About 68 percent of survey participants said they believe having enough money to pay rent every month is difficult for families in their community -- up 7 percent from last year.

        Eight in 10 said they would be willing to support more affordable housing for people in their community and a record 68 percent said they would be more likely to vote for a candidate who worked to make housing more affordable in their area, up 6 percent in two years, the Realtor group reported.

        "Many families are struggling to meet the high cost of home ownership, and increasingly those costs are property taxes and energy utilities," stated Thomas M. Stevens, NAR president and senior vice president of NRT Inc.

        In 2003, the average monthly mortgage principal and interest payment was $840. In 2005, families were paying 23.8 percent more, or $1,040 monthly. In the past year alone, the average monthly mortgage principal and interest payment has gone up 11.5 percent -- from $1,015 in April 2005 to $1,132 in April 2006, the Realtor group reported.

        The Energy Information Administration estimates that in February 2006 the price of electricity was 12 percent higher than February 2005; natural gas was up 28 percent; and home heating oil was up 25 percent. State and local property taxes for the 2004 fiscal year averaged $1,121 per person, up 13.8 percent from fiscal year 2003 when the average was $985, and 15.7 percent higher than the $969 average for the 2002 fiscal year, according to Census Bureau statistics.

        "Americans are increasingly looking to their community leaders to seek ways to take a more active role in addressing affordability issues in their communities," Stevens stated.

        About 57 percent of respondents said they are increasingly concerned that their children or other family members will not be able to afford housing in their communities, and 46 percent said they worry that they and family members will be forced to live in less desirable areas because homes in more desirable areas are not affordable.
        ***
        June 28, 2006
        Article offered by Inman News