The 30-year fixed-rate mortgage rose to 6.12 from 6.10 percent last week.
The group's seasonally adjusted refinance index fell 18.5 percent to 1604.6 from 1968.8 the previous week, and the purchase index decreased 10.6 percent to 390.2 from 436.5 one week earlier.
Mortgage applications topple as rates climb
Activity drops more than 14 percent as 30-year fixed-rate mortgage climbs to 6.12 percent, industry trade group's weekly index says.
December 27 2006: 9:49 AM EST
NEW YORK (CNNMoney.com) -- Mortgage applications fell as interest rates rose across the board, an industry trade group reported Wednesday.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity for the week ended Dec. 22 fell 14.2 percent to 555.8, from 647.6 a week earlier.
The refinance share of mortgage activity decreased to 48.8 percent of total applications from 50.8 percent the previous week.
Fixed 15-year mortgage rates increased to 5.84 from 5.82 percent. Rates on one-year adjustable-rate mortgages (ARMs) increased to 5.87 from 5.82 percent.
The ARM share of activity declined to 23.1 from 23.6 percent of total applications from the previous week.
The MBA's survey covers about 50 percent of all U.S. retail residential mortgage loans. Respondents include mortgage bankers, commercial banks and thrifts.
Freddie Mac (Charts) and Fannie Mae (Charts) are among the nation's largest mortgage lenders.
Tuesday, January 23, 2007
Wednesday, January 17, 2007
Some Think the Housing Market Is Still Sliding
Daily Real Estate News | January 17, 2007
Some Think the Housing Market Is Still Sliding
Home builders continue to announce inventory write-downs, fueling concern that the U.S. housing market hasn't reversed its decline.
Last year home builder stocks lost 25 percent of their value, according to Morningstar’s industry index. In October and November, home sales improved slightly and many took that as a sign that things were improving.
But those small increases don’t erase the fact that there are a historically high number of homes on the market. The percentage of vacant houses for sale compared to total housing units was over 1.5 percent in the third quarter, higher than at any time since 1965, according to Census Bureau data.
"The building industry built far in excess of demand in the past two years," says Eric Landry, an equity analyst with Morningstar. "What it's gonna take is sopping up this excess demand."
Home builders haven’t reduced prices enough to move the inventory, says Wachovia Capital Markets analyst Carl Reichardt.
Landry is also skeptical that a recovery is in sight. “The amount of non-performing land on these companies' balance sheets is still very high. It just doesn't appear to us that it's bottomed."
Source: Associated Press, Jeremy Herron (01/16/07)
Some Think the Housing Market Is Still Sliding
Home builders continue to announce inventory write-downs, fueling concern that the U.S. housing market hasn't reversed its decline.
Last year home builder stocks lost 25 percent of their value, according to Morningstar’s industry index. In October and November, home sales improved slightly and many took that as a sign that things were improving.
But those small increases don’t erase the fact that there are a historically high number of homes on the market. The percentage of vacant houses for sale compared to total housing units was over 1.5 percent in the third quarter, higher than at any time since 1965, according to Census Bureau data.
"The building industry built far in excess of demand in the past two years," says Eric Landry, an equity analyst with Morningstar. "What it's gonna take is sopping up this excess demand."
Home builders haven’t reduced prices enough to move the inventory, says Wachovia Capital Markets analyst Carl Reichardt.
Landry is also skeptical that a recovery is in sight. “The amount of non-performing land on these companies' balance sheets is still very high. It just doesn't appear to us that it's bottomed."
Source: Associated Press, Jeremy Herron (01/16/07)
Tuesday, January 16, 2007
The Cost of Killing the Real Estate Deal
When the house deal falls through
The price of bowing out of a home purchase can be high.
By Les Christie, CNNMoney.com staff writer
NEW YORK (CNNMoney.com) - Everyone knows buying a home is expensive these days. But not buying a house can run into a few bucks as well.
A lot of niggling little expenses and fees that home buyers encounter on the path to closing still must be paid even if the deal falls through. And those expenses can add up to shockingly high amounts.
"How high depends on where the buyers and sellers are in the negotiating process," says Bob Moulton, a mortgage broker with Americana Mortgage Group on Long Island. "Many of the expenses can't be transferred to another purchase."
When buyers bid on homes, the offers they make come with the understanding that contingencies written into the contracts will be satisfied. A house must pass an inspection, for example, or a buyer's financing package must come through. If those don't happen, the deal dies.
Between the time the offer is accepted, however, and the point when the deal falls apart, many actions may have taken place and they have to be paid for.
Fees you don't get back
Inspection fees: One of the prime reasons home sales break down is that inspections turn up unforeseen problems. The foundation might be badly cracked or the roof needs replacement. Usually, a seller will try to accommodate a buyer in order to get the house sold, but sometimes the problems can't be negotiated away.
The inspector's fee, though, which can run anywhere from about $250 for a small job to $1,000 or more for a big one, doesn't go away either and it's strictly the responsibility of the buyer.
Title search: All lenders require that a property's ownership is not in dispute and that it be free and clear of encumbrances. That means someone has to examine legal documents and records to make sure no one else can claim to own it and that there are no mortgage or mechanic's liens on it.
Generally speaking, title searches are undertaken by title insurers and they often absorb the search cost if a home purchase is canceled, according to Jim Maher, executive vice president of the American Land Title Association. There can, however, be cancellation fees that the buyer has to pay. Whether these fees apply and how high they can run varies from state to state.
Survey: In some cases buyers, or their lenders, may want the land surveyed before closing, according to Curt Sumner, executive director of the American Congress on Surveying and Mapping, the industry's trade association. Surveys can find encroachments on the property or other problems that buyers may want to know about before they take possession.
"The property survey is often ordered by somebody else in the chain, the buyer's attorney, the lender, but it's the buyer who gets the bill," says Sumner.
If any discrepancies that arise cannot be corrected or the deal falls apart for other reasons, the surveyor must still be paid. That can amount to somewhere in the neighborhood of $500 to $1,500, or more for really big jobs.
Attorney fees: Many real estate attorneys work on a flat rate and sometimes those fees can be applied to another home purchase, provided it is made within a designated time period, say a year. Other attorneys charge an hourly rate, which means any labor spent on a deal that fails still has to be paid for by the buyer. That can easily run into the hundreds of dollars and if there is any hassle about terminating the contract, the fees can quickly hit four-figure territory.
Appraisal fee: Many lenders insist an independent property appraisal be done before they approve the final loan, according to Moulton. It may be to protect the lender but it's the buyer who pays for it, perhaps $300 or so.
Financing costs: Application fees can usually be applied to another purchase but the delay can, in the current rising rate environment, cost buyers dearly, in added interest on their mortgages.
Moulton says, "Buyers locked into a low rate can buy an extension. It costs about a half percent of the amount of the loan for an extra 30 days."
That translates into $1,000 for a $200,000 mortgage, an expensive solution. And, that means the buyer has to find another property quickly, before the extension runs out or get stuck with a more expensive loan. Since the first week of January, 2006, the average interest on a 30-year, fixed-rate mortgage has risen from 6.21 to 6.60 percent, according to Freddie Mac. That difference would add about $51 a month to a mortgage payment, a total of more than $18,000 over the loan's lifetime.
Document preparation fees: Mortgage lenders and title companies charge these to put together all the papers they need to go forward with the loan. They may not add up to too much but, on top of all the other expenses, well, who needs it?
Bottom line
Add it all up and the expense of canceling a home purchase can easily add up to several thousand dollars - and it's not even tax-deductible.
There's no real solution to the costs associated with backing out of a deal. Making an offer on a home sends a big piece of machinery into motion and puts many different people to work. They have to be paid.
But buyers should calculate whether the costs of fixing whatever is wrong with the property (if it is fixable) adds up to a lot more money than it costs to back out of the deal - before they make the decision to walk away.
The price of bowing out of a home purchase can be high.
By Les Christie, CNNMoney.com staff writer
NEW YORK (CNNMoney.com) - Everyone knows buying a home is expensive these days. But not buying a house can run into a few bucks as well.
A lot of niggling little expenses and fees that home buyers encounter on the path to closing still must be paid even if the deal falls through. And those expenses can add up to shockingly high amounts.
"How high depends on where the buyers and sellers are in the negotiating process," says Bob Moulton, a mortgage broker with Americana Mortgage Group on Long Island. "Many of the expenses can't be transferred to another purchase."
When buyers bid on homes, the offers they make come with the understanding that contingencies written into the contracts will be satisfied. A house must pass an inspection, for example, or a buyer's financing package must come through. If those don't happen, the deal dies.
Between the time the offer is accepted, however, and the point when the deal falls apart, many actions may have taken place and they have to be paid for.
Fees you don't get back
Inspection fees: One of the prime reasons home sales break down is that inspections turn up unforeseen problems. The foundation might be badly cracked or the roof needs replacement. Usually, a seller will try to accommodate a buyer in order to get the house sold, but sometimes the problems can't be negotiated away.
The inspector's fee, though, which can run anywhere from about $250 for a small job to $1,000 or more for a big one, doesn't go away either and it's strictly the responsibility of the buyer.
Title search: All lenders require that a property's ownership is not in dispute and that it be free and clear of encumbrances. That means someone has to examine legal documents and records to make sure no one else can claim to own it and that there are no mortgage or mechanic's liens on it.
Generally speaking, title searches are undertaken by title insurers and they often absorb the search cost if a home purchase is canceled, according to Jim Maher, executive vice president of the American Land Title Association. There can, however, be cancellation fees that the buyer has to pay. Whether these fees apply and how high they can run varies from state to state.
Survey: In some cases buyers, or their lenders, may want the land surveyed before closing, according to Curt Sumner, executive director of the American Congress on Surveying and Mapping, the industry's trade association. Surveys can find encroachments on the property or other problems that buyers may want to know about before they take possession.
"The property survey is often ordered by somebody else in the chain, the buyer's attorney, the lender, but it's the buyer who gets the bill," says Sumner.
If any discrepancies that arise cannot be corrected or the deal falls apart for other reasons, the surveyor must still be paid. That can amount to somewhere in the neighborhood of $500 to $1,500, or more for really big jobs.
Attorney fees: Many real estate attorneys work on a flat rate and sometimes those fees can be applied to another home purchase, provided it is made within a designated time period, say a year. Other attorneys charge an hourly rate, which means any labor spent on a deal that fails still has to be paid for by the buyer. That can easily run into the hundreds of dollars and if there is any hassle about terminating the contract, the fees can quickly hit four-figure territory.
Appraisal fee: Many lenders insist an independent property appraisal be done before they approve the final loan, according to Moulton. It may be to protect the lender but it's the buyer who pays for it, perhaps $300 or so.
Financing costs: Application fees can usually be applied to another purchase but the delay can, in the current rising rate environment, cost buyers dearly, in added interest on their mortgages.
Moulton says, "Buyers locked into a low rate can buy an extension. It costs about a half percent of the amount of the loan for an extra 30 days."
That translates into $1,000 for a $200,000 mortgage, an expensive solution. And, that means the buyer has to find another property quickly, before the extension runs out or get stuck with a more expensive loan. Since the first week of January, 2006, the average interest on a 30-year, fixed-rate mortgage has risen from 6.21 to 6.60 percent, according to Freddie Mac. That difference would add about $51 a month to a mortgage payment, a total of more than $18,000 over the loan's lifetime.
Document preparation fees: Mortgage lenders and title companies charge these to put together all the papers they need to go forward with the loan. They may not add up to too much but, on top of all the other expenses, well, who needs it?
Bottom line
Add it all up and the expense of canceling a home purchase can easily add up to several thousand dollars - and it's not even tax-deductible.
There's no real solution to the costs associated with backing out of a deal. Making an offer on a home sends a big piece of machinery into motion and puts many different people to work. They have to be paid.
But buyers should calculate whether the costs of fixing whatever is wrong with the property (if it is fixable) adds up to a lot more money than it costs to back out of the deal - before they make the decision to walk away.
Monday, January 15, 2007
Denver Real Estate Borrowers: 7 predatory practices that should be illegal
Home-loan servicing gone awry - 7 predatory practices that should be illegal
Monday, January 15, 2007
Recent years have seen a flurry of proposals and legislation directed toward predatory mortgage lending. The focus, however, has been almost entirely on loan originations. Aside from a few well-publicized lawsuits, predatory servicing has attracted little attention, yet in many respects it is more vicious, and the adverse consequences are more far-ranging.
The loan origination market is a minefield for borrowers, to be sure, but they do have choices. Exercising intelligence and care, and with a little homework, they can find a loan provider who will treat them fairly. When the loan is closed and shifted to a servicing agent, however, the borrower's choices disappear.
Borrowers have no say whatever in choosing the firm that will be servicing their loan. They cannot fire that firm for cause, no matter how wretched the firm's service. The only way they can extricate themselves from a predatory servicer is to refinance, which is costly, with no assurance that the next servicer will be any better.
The financial incentives to provide good service to customers, which work in other sectors of our economy, work only selectively with loan servicing. Servicers who originate loans have an incentive to provide good service to those borrowers they view as potential clients for new loans or other services. The incentive disappears, however, for borrowers with spotty payment records, who are not viewed as potential customers for other services.
An incentive to provide good service doesn't exist at all for specialized servicing firms who have nothing to sell. Such firms will not get more customers by improving service quality -- only higher costs -- nor will they lose customers if they provide poor service. Their incentive is to generate as much revenue as possible from borrowers. It is hardly surprising that such firms figure so prominently in discussions of predatory servicing.
Predatory servicing could be reduced or eliminated by legislation that restricted the sale of servicing contracts, or gave borrowers the right to change servicers. However, these would be drastic changes that would be very difficult to enact. The alternative is to identify predatory practices and make them illegal. Here is a partial list:
Mandatory Provision of Complete and Comprehensible Monthly Statement. The law should require servicers to provide easy-to-understand monthly statements showing everything that transpired during the month that affected the borrower's account. This should include balance changes and their sources, payments, disbursements, rate adjustments, and fees.
Rationale: In the absence of comprehensible monthly statements, predatory practices can go unnoticed by the borrower indefinitely.
No Suspension of Payments Because of an Escrow Shortage. Servicers should be prohibited from placing scheduled payments of principal and interest in suspense accounts when only the escrow payment is short.
Rationale: This pernicious practice results in unnecessary delinquencies and late payments, and can lead down a slippery slope to collections and ultimate foreclosure.
No Profits From Loans in Collection. On services purchased from third parties in connection with a loan in collections, such as legal fees and property inspections, servicers should be barred from marking up third-party fees, receiving payments for referral of business, or purchasing the services from affiliated entities.
Rationale: Profiting from loans in collections provides an incentive to move borrowers to that status unnecessarily. It also increases the cost to borrowers struggling to return to good standing by paying back arrears.
Mandatory Reporting to Credit Bureaus. Servicers would be required to report payment history on all their accounts.
Rationale: Servicers should not be able to cripple the ability of borrowers to refinance profitably by not reporting good payment records to the credit bureaus.
No Conversions to Simple Interest. On purchased servicing contracts, the purchasing servicer should not be permitted to convert a mortgage to simple interest merely because the note does not explicitly prevent it.
Rationale: Simple-interest mortgages, which accrue interest daily, are more problematic for borrowers than standard monthly accrual mortgages. If a borrower did not negotiate a simple-interest mortgage at origination, a later conversion to simple interest following the transfer of servicing is unconscionable.
Mandatory Disclosure of Policy Toward Crediting Extra Payments. Servicers should disclose exactly what their procedures are for crediting extra payments to the loan balance.
Rationale: Borrowers making extra payments of principal have the right to this information so that they can plan their schedule of extra payments in the most advantageous way.
Mandatory Retention of Complete Servicing Files. Servicers should be required to retain the complete file on every account until it is paid off. When servicing is transferred to a new servicer, the purchasing firm should be required to obtain the complete file.
Rationale: Servicers should be prevented from covering up abusive practices by selling the servicing to another firm while leaving evidence of the abuses behind.
The writer is professor of finance emeritus at the Wharton School of the University of Pennsylvania.
Monday, January 15, 2007
Recent years have seen a flurry of proposals and legislation directed toward predatory mortgage lending. The focus, however, has been almost entirely on loan originations. Aside from a few well-publicized lawsuits, predatory servicing has attracted little attention, yet in many respects it is more vicious, and the adverse consequences are more far-ranging.
The loan origination market is a minefield for borrowers, to be sure, but they do have choices. Exercising intelligence and care, and with a little homework, they can find a loan provider who will treat them fairly. When the loan is closed and shifted to a servicing agent, however, the borrower's choices disappear.
Borrowers have no say whatever in choosing the firm that will be servicing their loan. They cannot fire that firm for cause, no matter how wretched the firm's service. The only way they can extricate themselves from a predatory servicer is to refinance, which is costly, with no assurance that the next servicer will be any better.
The financial incentives to provide good service to customers, which work in other sectors of our economy, work only selectively with loan servicing. Servicers who originate loans have an incentive to provide good service to those borrowers they view as potential clients for new loans or other services. The incentive disappears, however, for borrowers with spotty payment records, who are not viewed as potential customers for other services.
An incentive to provide good service doesn't exist at all for specialized servicing firms who have nothing to sell. Such firms will not get more customers by improving service quality -- only higher costs -- nor will they lose customers if they provide poor service. Their incentive is to generate as much revenue as possible from borrowers. It is hardly surprising that such firms figure so prominently in discussions of predatory servicing.
Predatory servicing could be reduced or eliminated by legislation that restricted the sale of servicing contracts, or gave borrowers the right to change servicers. However, these would be drastic changes that would be very difficult to enact. The alternative is to identify predatory practices and make them illegal. Here is a partial list:
Mandatory Provision of Complete and Comprehensible Monthly Statement. The law should require servicers to provide easy-to-understand monthly statements showing everything that transpired during the month that affected the borrower's account. This should include balance changes and their sources, payments, disbursements, rate adjustments, and fees.
Rationale: In the absence of comprehensible monthly statements, predatory practices can go unnoticed by the borrower indefinitely.
No Suspension of Payments Because of an Escrow Shortage. Servicers should be prohibited from placing scheduled payments of principal and interest in suspense accounts when only the escrow payment is short.
Rationale: This pernicious practice results in unnecessary delinquencies and late payments, and can lead down a slippery slope to collections and ultimate foreclosure.
No Profits From Loans in Collection. On services purchased from third parties in connection with a loan in collections, such as legal fees and property inspections, servicers should be barred from marking up third-party fees, receiving payments for referral of business, or purchasing the services from affiliated entities.
Rationale: Profiting from loans in collections provides an incentive to move borrowers to that status unnecessarily. It also increases the cost to borrowers struggling to return to good standing by paying back arrears.
Mandatory Reporting to Credit Bureaus. Servicers would be required to report payment history on all their accounts.
Rationale: Servicers should not be able to cripple the ability of borrowers to refinance profitably by not reporting good payment records to the credit bureaus.
No Conversions to Simple Interest. On purchased servicing contracts, the purchasing servicer should not be permitted to convert a mortgage to simple interest merely because the note does not explicitly prevent it.
Rationale: Simple-interest mortgages, which accrue interest daily, are more problematic for borrowers than standard monthly accrual mortgages. If a borrower did not negotiate a simple-interest mortgage at origination, a later conversion to simple interest following the transfer of servicing is unconscionable.
Mandatory Disclosure of Policy Toward Crediting Extra Payments. Servicers should disclose exactly what their procedures are for crediting extra payments to the loan balance.
Rationale: Borrowers making extra payments of principal have the right to this information so that they can plan their schedule of extra payments in the most advantageous way.
Mandatory Retention of Complete Servicing Files. Servicers should be required to retain the complete file on every account until it is paid off. When servicing is transferred to a new servicer, the purchasing firm should be required to obtain the complete file.
Rationale: Servicers should be prevented from covering up abusive practices by selling the servicing to another firm while leaving evidence of the abuses behind.
The writer is professor of finance emeritus at the Wharton School of the University of Pennsylvania.
Sunday, January 14, 2007
Oil, retail sales add grease to housing
By Lou Barnes
Friday, January 12, 2007
After a one-week pause, the rise in long-term rates that began over the holidays has resumed and is likely to continue. Mortgages are departing 6.125 percent for 6.25 percent, taken by the 10-year T-note's easy cruise through support levels to 4.77 percent.
The cause: nothing fancy, nothing to do with Iraq, just good economic news and a little grease from $51/barrel oil.
In this morning's news, December retail sales were far better than the weak hopes in the bond market: up .9 percent, strong in all sectors except warm-weather-suppressed clothing sales, and that performance followed a strong November. GDP forecasters are scrambling for revisions: the 4th quarter will come in above 3 percent instead of the 2 percent or less that had been so widely assumed.
Other reports were minor affairs, but all point to a better economy. Mortgage purchase applications have done well since October -- maybe a warm-weather boost, maybe they'll be squelched by rising mortgage rates, but late fall was a happy change from the previous yearlong, straight-line decline. Claims for unemployment insurance are falling, near-term and extended; the minor slowdown in the economy last fall did nothing to loosen a tight labor market.
On that point ... since Federal Reserve Chairman Ben Bernanke has abandoned his career as a public speaker, the guy to listen to instead is Vice-Chair Donald Kohn. This week he gave a nod to the potential for housing to resume its slide, but his key phrases provide a clear forecast: " ... A sustained pace of expansion that, necessarily, is less rapid than that from mid-2003 to mid-2006. ... Problematic would be a pickup in the growth of nominal hourly labor compensation that was passed through to prices."
"Necessarily" less rapid means that if the economy fails to obey the growth-capacity speed limit near 3 percent, the Fed will shoot out its tires. Rising wages are OK so long as they chew into corporate profits (heaven knows there is room), but a labor market this tight is a hazard, constrained only by global wage competition.
Expectations for near-recession and Fed ease have been badly misplaced. Growth is splendid worldwide, falling energy prices acting as a tax cut in the developed world, and central banks everywhere are leaning into it. The inverted yield curve, usually a reliable indicator of slowdown, this time appears to be an artifact of health.
This week's Iraq developments had no effect on the financial markets. Concern would show up in oil and gold, at least, but did not.
I hope that this preoccupation persists. Certainly, when on a moneymaking binge the markets are capable of ignoring anything. The breathalyzer: when premiums for risk disappear, the party is really rolling, just as now.
However, Iraq risk is rising. President Bush's speech this week was odd in several respects, these applying to markets: not a syllable on how to pay for the venture, this year's appropriation to be $150 billion, taking total cost to about a half-trillion, plus another $100 billion to restore equipment and deferrals. No mention that the five brigades quickly headed to Iraq leave us with no strategic reserve. The rest of our forces are either in Afghanistan or in rehab, and the National Guard is useful only for support.
He did mention: potential, nonspecific retaliation against Iran and Syria (that following appointment of an air-assault-specialist admiral to lead Central Command in its two existing ground wars). The Wall Street Journal today editorialized, "We wouldn't rule out incursions into either country."
Markets have obviously adjusted to the long, slow grinder. I don't know at what point a wider war, or a longer one, or a withdrawal and attendant instability, or a constitutional crisis will get the unpleasant attention of the markets, but I cannot imagine that one of these developments will fail to do so.
Friday, January 12, 2007
After a one-week pause, the rise in long-term rates that began over the holidays has resumed and is likely to continue. Mortgages are departing 6.125 percent for 6.25 percent, taken by the 10-year T-note's easy cruise through support levels to 4.77 percent.
The cause: nothing fancy, nothing to do with Iraq, just good economic news and a little grease from $51/barrel oil.
In this morning's news, December retail sales were far better than the weak hopes in the bond market: up .9 percent, strong in all sectors except warm-weather-suppressed clothing sales, and that performance followed a strong November. GDP forecasters are scrambling for revisions: the 4th quarter will come in above 3 percent instead of the 2 percent or less that had been so widely assumed.
Other reports were minor affairs, but all point to a better economy. Mortgage purchase applications have done well since October -- maybe a warm-weather boost, maybe they'll be squelched by rising mortgage rates, but late fall was a happy change from the previous yearlong, straight-line decline. Claims for unemployment insurance are falling, near-term and extended; the minor slowdown in the economy last fall did nothing to loosen a tight labor market.
On that point ... since Federal Reserve Chairman Ben Bernanke has abandoned his career as a public speaker, the guy to listen to instead is Vice-Chair Donald Kohn. This week he gave a nod to the potential for housing to resume its slide, but his key phrases provide a clear forecast: " ... A sustained pace of expansion that, necessarily, is less rapid than that from mid-2003 to mid-2006. ... Problematic would be a pickup in the growth of nominal hourly labor compensation that was passed through to prices."
"Necessarily" less rapid means that if the economy fails to obey the growth-capacity speed limit near 3 percent, the Fed will shoot out its tires. Rising wages are OK so long as they chew into corporate profits (heaven knows there is room), but a labor market this tight is a hazard, constrained only by global wage competition.
Expectations for near-recession and Fed ease have been badly misplaced. Growth is splendid worldwide, falling energy prices acting as a tax cut in the developed world, and central banks everywhere are leaning into it. The inverted yield curve, usually a reliable indicator of slowdown, this time appears to be an artifact of health.
This week's Iraq developments had no effect on the financial markets. Concern would show up in oil and gold, at least, but did not.
I hope that this preoccupation persists. Certainly, when on a moneymaking binge the markets are capable of ignoring anything. The breathalyzer: when premiums for risk disappear, the party is really rolling, just as now.
However, Iraq risk is rising. President Bush's speech this week was odd in several respects, these applying to markets: not a syllable on how to pay for the venture, this year's appropriation to be $150 billion, taking total cost to about a half-trillion, plus another $100 billion to restore equipment and deferrals. No mention that the five brigades quickly headed to Iraq leave us with no strategic reserve. The rest of our forces are either in Afghanistan or in rehab, and the National Guard is useful only for support.
He did mention: potential, nonspecific retaliation against Iran and Syria (that following appointment of an air-assault-specialist admiral to lead Central Command in its two existing ground wars). The Wall Street Journal today editorialized, "We wouldn't rule out incursions into either country."
Markets have obviously adjusted to the long, slow grinder. I don't know at what point a wider war, or a longer one, or a withdrawal and attendant instability, or a constitutional crisis will get the unpleasant attention of the markets, but I cannot imagine that one of these developments will fail to do so.
Thursday, January 11, 2007
Denver Metro Real Estate Report: Southglenn Neighborhood
Market Data Report
Overall:
I cannot say enough good things about the Southglenn Neighborhood! Let me try: this price range remains the fastest-moving in the Denver Metro area what's more, buyers and homeowners here enjoy larger homes and lot sizes for the price than in much of the Denver Metro area. Add in expected appreciation due to the Streets at Southglenn development, incredible parks and recreation amenities and the close commute to anywhere in the Metro area and you have the fantastic mix that makes up Southglenn today.
Sales have remained steady compared with 2005 numbers, still selling with far less than average days on market; expect these numbers to strengthen in 2007.
The Denver Metro real estate foreclosure problem, rooted in risky loans and lending to risky borrowers, is also present in this neighborhood. Foreclosures affect sale and appraisal prices and there is a drag effect on values in Southglenn. However, it is not at all the problem that it is in other Denver Metro neighborhoods. Stay tuned and expect the foreclosure problem to worsen as Adjustable Rate Mortgages continue to mature, increasing interest rates and raising mortgage costs beyond affordable levels to homeowners.
Last, an increase in interest rates is expected this year which may depress housing prices. This would be offset in a big way by the redevelopment of this area, promoting home values throughout 2007 and 2008. So interest rate increases could slow the rate of appreciation in this neighborhood, but buyers and sellers here will not see the "dips" found in other Denver Metro neighborhoods. Southglenn neighborhood will remain an outstanding investment.
Find below a complete look at the latest data, which tells you how the market is looking at your neighborhood, not your home.
The Data
Home Sale Price Range: $183,000?370,000
Average Home Sale Price: $267,271
Days on Market Range: 3 ? 232 days
Average Days on Market: 69 Days
Average Price per Square Foot: $158.21
Average Square Footage: 1879 square feet
Square Foot Range: 1144 ? 2830
Interpretation and Advice
We see that your neighborhood is appreciating at a level that is unusual in the Denver real estate market today. This means opportunities for investors and renters and for first-time homebuyers to either refinance in order to eliminate mortgage insurance or to capture their gain and put it down on a larger or an investment property. Do this before interest rates rise and create a downward effect on housing prices in your neighborhood.
I can also tell you that this is the fastest-moving price point in the Denver Metro area today and that if you are considering buying or selling in this neighborhood, this is your time. I can find the best value for your purchase in this neighborhood or I can let you know how to prepare your home for market so it sells quickly for top dollar. Some things to remember if you are considering selling and purchasing a home in the coming year is to:
1. Make no major purchases. No trips to the furniture store, no new cars, etc. Check with a loan person NOW about your credit record and ask about what you can do now to pump up your score. You want to get the best rate possible when you buy your new home.
I prefer working with a knowledgeable, trustworthy lender with years in the business like Ron Brown at Nationwide Lending Group. Call him at (303) 989-8500.
2. If your home has a lot of fancy wallpaper, colorful paint and "decorator" touches, start working on making your home more neutral, one room at a time, so it does not become a big job when you put the house on the market. Creamy neutral tones sell homes.
3. Do bigger projects like sanding and painting the exterior, refinishing the deck, making maintenance-oriented repairs so this does not become a big job when you are ready to put the house on the market.
4. Pay attention to your yard. Get rid of weeds and overgrown bushes, bald patches in the lawn, plant nice flowers.
5. Get in the habit of getting rid of clutter. Get rid of things that just take up space (making your home look smaller), un-stuff overstuffed closets, get rid of storage, find a place for everything you use and get rid of the items you do not use. Visit model homes if you are not sure of what will look like clutter to a potential buyer when s/he visits your home. (TAKE your BROKER with you to the model home!!)
6. BE CAREFUL about "fixing" up in any significant ways before talking with a professional about whether or not it will add value to your home. Doing the things set forth above are the most important steps to take and will help you greatly when it comes to sale price.
Call me at (720) 275-3926 if you want a professional inspection and market analysis of your home, at no cost to you. I am keeping a close eye on homes in your neighborhood and it would be my pleasure to make your sale a complete success.
Your Personal Real Estate Information Source,
Marie de Espinosa
Integrity, Insight, Results!
Overall:
I cannot say enough good things about the Southglenn Neighborhood! Let me try: this price range remains the fastest-moving in the Denver Metro area what's more, buyers and homeowners here enjoy larger homes and lot sizes for the price than in much of the Denver Metro area. Add in expected appreciation due to the Streets at Southglenn development, incredible parks and recreation amenities and the close commute to anywhere in the Metro area and you have the fantastic mix that makes up Southglenn today.
Sales have remained steady compared with 2005 numbers, still selling with far less than average days on market; expect these numbers to strengthen in 2007.
The Denver Metro real estate foreclosure problem, rooted in risky loans and lending to risky borrowers, is also present in this neighborhood. Foreclosures affect sale and appraisal prices and there is a drag effect on values in Southglenn. However, it is not at all the problem that it is in other Denver Metro neighborhoods. Stay tuned and expect the foreclosure problem to worsen as Adjustable Rate Mortgages continue to mature, increasing interest rates and raising mortgage costs beyond affordable levels to homeowners.
Last, an increase in interest rates is expected this year which may depress housing prices. This would be offset in a big way by the redevelopment of this area, promoting home values throughout 2007 and 2008. So interest rate increases could slow the rate of appreciation in this neighborhood, but buyers and sellers here will not see the "dips" found in other Denver Metro neighborhoods. Southglenn neighborhood will remain an outstanding investment.
Find below a complete look at the latest data, which tells you how the market is looking at your neighborhood, not your home.
The Data
Home Sale Price Range: $183,000?370,000
Average Home Sale Price: $267,271
Days on Market Range: 3 ? 232 days
Average Days on Market: 69 Days
Average Price per Square Foot: $158.21
Average Square Footage: 1879 square feet
Square Foot Range: 1144 ? 2830
Interpretation and Advice
We see that your neighborhood is appreciating at a level that is unusual in the Denver real estate market today. This means opportunities for investors and renters and for first-time homebuyers to either refinance in order to eliminate mortgage insurance or to capture their gain and put it down on a larger or an investment property. Do this before interest rates rise and create a downward effect on housing prices in your neighborhood.
I can also tell you that this is the fastest-moving price point in the Denver Metro area today and that if you are considering buying or selling in this neighborhood, this is your time. I can find the best value for your purchase in this neighborhood or I can let you know how to prepare your home for market so it sells quickly for top dollar. Some things to remember if you are considering selling and purchasing a home in the coming year is to:
1. Make no major purchases. No trips to the furniture store, no new cars, etc. Check with a loan person NOW about your credit record and ask about what you can do now to pump up your score. You want to get the best rate possible when you buy your new home.
I prefer working with a knowledgeable, trustworthy lender with years in the business like Ron Brown at Nationwide Lending Group. Call him at (303) 989-8500.
2. If your home has a lot of fancy wallpaper, colorful paint and "decorator" touches, start working on making your home more neutral, one room at a time, so it does not become a big job when you put the house on the market. Creamy neutral tones sell homes.
3. Do bigger projects like sanding and painting the exterior, refinishing the deck, making maintenance-oriented repairs so this does not become a big job when you are ready to put the house on the market.
4. Pay attention to your yard. Get rid of weeds and overgrown bushes, bald patches in the lawn, plant nice flowers.
5. Get in the habit of getting rid of clutter. Get rid of things that just take up space (making your home look smaller), un-stuff overstuffed closets, get rid of storage, find a place for everything you use and get rid of the items you do not use. Visit model homes if you are not sure of what will look like clutter to a potential buyer when s/he visits your home. (TAKE your BROKER with you to the model home!!)
6. BE CAREFUL about "fixing" up in any significant ways before talking with a professional about whether or not it will add value to your home. Doing the things set forth above are the most important steps to take and will help you greatly when it comes to sale price.
Call me at (720) 275-3926 if you want a professional inspection and market analysis of your home, at no cost to you. I am keeping a close eye on homes in your neighborhood and it would be my pleasure to make your sale a complete success.
Your Personal Real Estate Information Source,
Marie de Espinosa
Integrity, Insight, Results!
Tuesday, January 09, 2007
Denver Real Estate Market Report - Highlands Ranch Eastridge 2006
Market Data Report
Overall:
Market data in this report pertains to Highlands Ranch filing 120 - a map of this area appears here and on the mail card you received.
This neighborhood ramped up sales in the latter half of this year, owing to it's affordability (couples earning average Denver Metro wages can afford a home here) and it's great location. Your neighborhood is avoiding the foreclosure activity that puts a drag on home prices that we see in neighborhoods of similar affordability in Denver and Aurora.
Having said that, you are not free of this problem and the lowest sale prices in your neighborhood are foreclosures. This is going to affect your sale and appraisal prices. Expect to see more foreclosures here in the coming year as more Adjustable Rate Mortgages hit the three year mark and interest rates shoot mortgages up beyond family capacity to pay.
Expect this to continue to be a popular neighborhood in which to move. Those planning to move should think of doing so soon, before more foreclosures here drag prices down and mortgage interest rates make their predicted increases, which will also push housing prices down. Below is a look at the latest data, which tells you how the market is looking at your neighborhood, not your home.
The Data
Number of Homes Sold in 2006: 70
Average Days on Market 2006: 65
Days on Market range 2006 solds: 2 days - 246 days
Average Sale Price 2006: $266,362
Sale Price range 2006: $203,906 ? 393,000
Price per Square Foot 2006: $145.24
Average Square Footage: 1834
Interpretation and Advice
We see that your neighborhood is holding it's own right now. I can tell you that this is the fastest-moving price point in the Denver Metro area today and that if you are considering buying or selling in this neighborhood, this is a great time to do so. I can find the best value for your purchase in this neighborhood or I can let you know how to prepare your home for market so it sells quickly for top dollar. Some things to remember if you are considering selling and purchasing a home in the coming year is to:
1. Make no major purchases. No trips to the furniture store, no new cars, etc. Check with a loan person NOW about your credit record and ask about what you can do now to pump up your score. You want to get the best rate possible when you buy your new home.
I prefer working with a knowledgeable, trustworthy lender with years in the business like Ron Brown at Nationwide Lending Group. Call him at (303) 989-8500.
2. If your home has a lot of fancy wallpaper, colorful paint and "decorator" touches, start working on making your home more neutral, one room at a time, so it does not become a big job when you put the house on the market. Creamy neutral tones sell homes.
3. Do bigger projects like sanding and painting the exterior, refinishing the deck, making maintenance-oriented repairs so this does not become a big job when you are ready to put the house on the market.
4. Pay attention to your yard. Get rid of weeds and overgrown bushes, bald patches in the lawn, plant nice flowers.
5. Get in the habit of getting rid of clutter. Get rid of things that just take up space (making your home look smaller), un-stuff overstuffed closets, get rid of storage, find a place for everything you use and get rid of the items you do not use. Visit model homes if you are not sure of what will look like clutter to a potential buyer when s/he visits your home. (TAKE your BROKER with you to the model home!!)
Call me at (720) 275-3926 if you want a professional Inspection and Market Analysis of your home, at no cost to you. I am keeping a close eye on homes in your neighborhood and it would be my pleasure to make your sale a complete success.
Your Personal Real Estate Information Source,
Marie de Espinosa
Integrity, Insight, Results!
Overall:
Market data in this report pertains to Highlands Ranch filing 120 - a map of this area appears here and on the mail card you received.
This neighborhood ramped up sales in the latter half of this year, owing to it's affordability (couples earning average Denver Metro wages can afford a home here) and it's great location. Your neighborhood is avoiding the foreclosure activity that puts a drag on home prices that we see in neighborhoods of similar affordability in Denver and Aurora.
Having said that, you are not free of this problem and the lowest sale prices in your neighborhood are foreclosures. This is going to affect your sale and appraisal prices. Expect to see more foreclosures here in the coming year as more Adjustable Rate Mortgages hit the three year mark and interest rates shoot mortgages up beyond family capacity to pay.
Expect this to continue to be a popular neighborhood in which to move. Those planning to move should think of doing so soon, before more foreclosures here drag prices down and mortgage interest rates make their predicted increases, which will also push housing prices down. Below is a look at the latest data, which tells you how the market is looking at your neighborhood, not your home.
The Data
Number of Homes Sold in 2006: 70
Average Days on Market 2006: 65
Days on Market range 2006 solds: 2 days - 246 days
Average Sale Price 2006: $266,362
Sale Price range 2006: $203,906 ? 393,000
Price per Square Foot 2006: $145.24
Average Square Footage: 1834
Interpretation and Advice
We see that your neighborhood is holding it's own right now. I can tell you that this is the fastest-moving price point in the Denver Metro area today and that if you are considering buying or selling in this neighborhood, this is a great time to do so. I can find the best value for your purchase in this neighborhood or I can let you know how to prepare your home for market so it sells quickly for top dollar. Some things to remember if you are considering selling and purchasing a home in the coming year is to:
1. Make no major purchases. No trips to the furniture store, no new cars, etc. Check with a loan person NOW about your credit record and ask about what you can do now to pump up your score. You want to get the best rate possible when you buy your new home.
I prefer working with a knowledgeable, trustworthy lender with years in the business like Ron Brown at Nationwide Lending Group. Call him at (303) 989-8500.
2. If your home has a lot of fancy wallpaper, colorful paint and "decorator" touches, start working on making your home more neutral, one room at a time, so it does not become a big job when you put the house on the market. Creamy neutral tones sell homes.
3. Do bigger projects like sanding and painting the exterior, refinishing the deck, making maintenance-oriented repairs so this does not become a big job when you are ready to put the house on the market.
4. Pay attention to your yard. Get rid of weeds and overgrown bushes, bald patches in the lawn, plant nice flowers.
5. Get in the habit of getting rid of clutter. Get rid of things that just take up space (making your home look smaller), un-stuff overstuffed closets, get rid of storage, find a place for everything you use and get rid of the items you do not use. Visit model homes if you are not sure of what will look like clutter to a potential buyer when s/he visits your home. (TAKE your BROKER with you to the model home!!)
Call me at (720) 275-3926 if you want a professional Inspection and Market Analysis of your home, at no cost to you. I am keeping a close eye on homes in your neighborhood and it would be my pleasure to make your sale a complete success.
Your Personal Real Estate Information Source,
Marie de Espinosa
Integrity, Insight, Results!
Saturday, January 06, 2007
Denver Metro Area Real Estate: Berkeley Market Report
Market Data Report
Overall:
What a great year for the Berkeley Neighborhood! This price range remains the fastest-moving in the Denver Metro area and this neighborhood has unparalleled appreciation at 5.3%. Furthermore, sales have remained steady compared with 2005 numbers, still selling with less than average days on market.
The Denver Metro real estate foreclosure problem, rooted in risky loans and lending to risky borrowers, has created a problem in this neighborhood. A large number of foreclosures has been a drag on values in Berkeley, especially in the last half of the year. However, it is not nearly the problem that it is in other Denver neighborhoods.
Because values are so strong in Berkeley, foreclosures are lowering the level of appreciation rather than causing a huge dip in prices. Stay tuned and expect the foreclosure problem to worsen as Adjustable Rate Mortgages continue to mature, increasing interest rates and raising mortgage costs beyond affordable levels to homeowners.
Last, an increase in interest rates is expected this year which may depress housing prices. I expect this could slow the rate of appreciation in this neighborhood, but buyers and sellers here will not see the "dips" found in other Denver neighborhoods. Berkeley neighborhood will remain an outstanding investment.
Find below a complete look at the latest data, which tells you how the market is looking at your neighborhood, not your home.
The Data
Number of Homes Sold in 2006: 171
Year-to-Date 2006 Appreciation Rate: 5.3%
Days on Market 2006: 71
Days on Market range 2006 solds: 0 days - 556 days
Average Sale Price 2006: $237,127
Sale Price range 2006: $82,000 - 520,000
Price per Square Foot 2006: $145.24
Interpretation and Advice
We see that your neighborhood is appreciating at a level that is unusual in the Denver real estate market today. This means opportunities for investors and renters and for first-time homebuyers to either refinance in order to eliminate mortgage insurance or to capture their gain and put it down on a larger or an investment property. Do this before interest rates rise and create a downward effect on housing prices in your neighborhood.
I can also tell you that this is the fastest-moving price point in the Denver Metro area today and that if you are considering buying or selling in this neighborhood, this is your time. I can find the best value for your purchase in this neighborhood or I can let you know how to prepare your home for market so it sells quickly for top dollar. Some things to remember if you are considering selling and purchasing a home in the coming year is to:
1. Make no major purchases. No trips to the furniture store, no new cars, etc. Check with a loan person NOW about your credit record and ask about what you can do now to pump up your score. You want to get the best rate possible when you buy your new home.
I prefer working with a knowledgeable, trustworthy lender with years in the business like Ron Brown at Nationwide Lending Group. Call him at (303) 989-8500.
2. If your home has a lot of fancy wallpaper, colorful paint and "decorator" touches, start working on making your home more neutral, one room at a time, so it does not become a big job when you put the house on the market. Creamy neutral tones sell homes.
3. Do bigger projects like sanding and painting the exterior, refinishing the deck, making maintenance-oriented repairs so this does not become a big job when you are ready to put the house on the market.
4. Pay attention to your yard. Get rid of weeds and overgrown bushes, bald patches in the lawn, plant nice flowers.
5. Get in the habit of getting rid of clutter. Get rid of things that just take up space (making your home look smaller), un-stuff overstuffed closets, get rid of storage, find a place for everything you use and get rid of the items you do not use. Visit model homes if you are not sure of what will look like clutter to a potential buyer when s/he visits your home. (TAKE your BROKER with you to the model home!!)
6. BE CAREFUL about "fixing" up in any significant ways before talking with a professional about whether or not it will add value to your home. Doing the things set forth above are the most important steps to take and will help you greatly when it comes to sale price.
Call me at (720) 275-3926 if you want a professional inspection and market analysis of your home, at no cost to you. I am keeping a close eye on homes in your neighborhood and it would be my pleasure to make your sale a complete success.
Your Personal Real Estate Information Source,
Marie de Espinosa
Integrity, Insight, Results!
Overall:
What a great year for the Berkeley Neighborhood! This price range remains the fastest-moving in the Denver Metro area and this neighborhood has unparalleled appreciation at 5.3%. Furthermore, sales have remained steady compared with 2005 numbers, still selling with less than average days on market.
The Denver Metro real estate foreclosure problem, rooted in risky loans and lending to risky borrowers, has created a problem in this neighborhood. A large number of foreclosures has been a drag on values in Berkeley, especially in the last half of the year. However, it is not nearly the problem that it is in other Denver neighborhoods.
Because values are so strong in Berkeley, foreclosures are lowering the level of appreciation rather than causing a huge dip in prices. Stay tuned and expect the foreclosure problem to worsen as Adjustable Rate Mortgages continue to mature, increasing interest rates and raising mortgage costs beyond affordable levels to homeowners.
Last, an increase in interest rates is expected this year which may depress housing prices. I expect this could slow the rate of appreciation in this neighborhood, but buyers and sellers here will not see the "dips" found in other Denver neighborhoods. Berkeley neighborhood will remain an outstanding investment.
Find below a complete look at the latest data, which tells you how the market is looking at your neighborhood, not your home.
The Data
Number of Homes Sold in 2006: 171
Year-to-Date 2006 Appreciation Rate: 5.3%
Days on Market 2006: 71
Days on Market range 2006 solds: 0 days - 556 days
Average Sale Price 2006: $237,127
Sale Price range 2006: $82,000 - 520,000
Price per Square Foot 2006: $145.24
Interpretation and Advice
We see that your neighborhood is appreciating at a level that is unusual in the Denver real estate market today. This means opportunities for investors and renters and for first-time homebuyers to either refinance in order to eliminate mortgage insurance or to capture their gain and put it down on a larger or an investment property. Do this before interest rates rise and create a downward effect on housing prices in your neighborhood.
I can also tell you that this is the fastest-moving price point in the Denver Metro area today and that if you are considering buying or selling in this neighborhood, this is your time. I can find the best value for your purchase in this neighborhood or I can let you know how to prepare your home for market so it sells quickly for top dollar. Some things to remember if you are considering selling and purchasing a home in the coming year is to:
1. Make no major purchases. No trips to the furniture store, no new cars, etc. Check with a loan person NOW about your credit record and ask about what you can do now to pump up your score. You want to get the best rate possible when you buy your new home.
I prefer working with a knowledgeable, trustworthy lender with years in the business like Ron Brown at Nationwide Lending Group. Call him at (303) 989-8500.
2. If your home has a lot of fancy wallpaper, colorful paint and "decorator" touches, start working on making your home more neutral, one room at a time, so it does not become a big job when you put the house on the market. Creamy neutral tones sell homes.
3. Do bigger projects like sanding and painting the exterior, refinishing the deck, making maintenance-oriented repairs so this does not become a big job when you are ready to put the house on the market.
4. Pay attention to your yard. Get rid of weeds and overgrown bushes, bald patches in the lawn, plant nice flowers.
5. Get in the habit of getting rid of clutter. Get rid of things that just take up space (making your home look smaller), un-stuff overstuffed closets, get rid of storage, find a place for everything you use and get rid of the items you do not use. Visit model homes if you are not sure of what will look like clutter to a potential buyer when s/he visits your home. (TAKE your BROKER with you to the model home!!)
6. BE CAREFUL about "fixing" up in any significant ways before talking with a professional about whether or not it will add value to your home. Doing the things set forth above are the most important steps to take and will help you greatly when it comes to sale price.
Call me at (720) 275-3926 if you want a professional inspection and market analysis of your home, at no cost to you. I am keeping a close eye on homes in your neighborhood and it would be my pleasure to make your sale a complete success.
Your Personal Real Estate Information Source,
Marie de Espinosa
Integrity, Insight, Results!
Friday, January 05, 2007
Owning Rental Real Estate in Denver
It pays to own rental real estate
--------------------------------------------------------------------------------
Many enjoy great tax benefits, market-value appreciation
Bob Bruss
Friday, January 05, 2007
On a recent flight from San Francisco to Chicago, I sat next to a talkative businesswoman. After we exchanged pleasantries and she learned I invest in and write about real estate, she asked, "What type of real estate should my husband and I invest in?"
Rather than give a direct answer, I replied, "Well, do you have any realty investments now?" Just our townhouse, she replied. "Has that been a good investment?" I asked.
She said they bought it about four years ago and since then it has more than doubled in market value. I responded that was extraordinary, but it can happen for well-located homes.
Then I asked her, "How much of a cash down payment did you make?" She replied, "Ten percent down. We got one of those PMI (private mortgage insurance) mortgages for 90 percent financing." Next, she launched into a rant about what a ripoff her $124 per month PMI premium is.
After I politely explained how she could cancel the PMI with an on-time payment record for at least 24 months by asking the lender to cancel the PMI based on a new appraisal, she was very grateful. "Why didn't the lender tell me?" she asked.
Then I tactfully redirected the conversation to make two points: (1) She and her husband wisely bought for 10 percent down, and (2) They are profiting from the benefits of leverage by controlling the entire property-value increase with just a small cash investment.
IF ONE HOME IS GOOD, WOULDN'T TWO BE BETTER? During the conversation, my seatmate said she and her husband want to buy a larger house. I congratulated her on that wise decision, especially in the current "buyer's market" in most cities.
Then she asked if they should keep or sell the townhouse when they buy a larger home. Since she mentioned the townhouse is located in a good neighborhood and there seems to be strong rental demand, I suggested keeping the townhouse as a rental.
When my new friend asked about losing the $500,000 principal-residence home-sale tax exemption for a married couple filing jointly (up to $250,000 for a single homeowner), I explained the townhouse can be rented as long as 36 months before losing this benefit of Internal Revenue Code 121.
"That's presuming you and your husband owned and occupied it at least 24 of the last 60 months before the home sale," I reminded my seatmate. If the townhouse continues to go up in value over the 36 months after you move out, I continued, then you get to enjoy even more tax-free market-value appreciation up to $500,000.
Then I asked, "If one home is good, wouldn't two be better?" She got the point real fast. Next, I briefly explained the tax advantages of keeping the townhouse as a rental property for a few years before deciding to keep or sell it.
I explained the benefits of the noncash depreciation tax deduction for rental property, but I don't think I did a very good job. Saving tax dollars didn't seem to interest her.
PROS AND CONS OF OWNING RENTAL HOUSES. Although there are many tax advantages of owning rental houses, especially tax-free income deductions up to $25,000 if you earn less than $100,000 annual adjusted gross income, there are a few possible disadvantages.
The primary negative to owning rental houses is called "tenants and toilets." By carefully selecting quality tenants who are likely to pay the rent on time (based on their credit report and FICO score), the management problem can be minimized. Good-quality house renters often stay many years.
Another possible negative is maintenance. Periodically, house components need repair or replacement. Rental-house owners should have access to quick cash for an emergency, such as a roof replacement. A home equity credit line is the best source because it costs nothing (except a $50 annual fee) until it is used by writing a check.
PROFESSIONAL PROPERTY MANAGEMENT ISN'T CHEAP. Although owner management of rental houses is recommended to save costs if the property is located within an hour's drive, sometimes landlords either don't want to or are unable to manage their rental houses.
When that happens, there are professional property management firms available. Before hiring such a firm, investors should obtain client references and check out the firm extremely carefully.
Most professional property management firms charge fees of 10 percent to 15 percent of the gross rental income for houses. They often charge additional fees for supervising repairs and for renting vacancies. The best firms provide monthly computer printouts to owners showing rent collections and expense payments, along with a monthly check to the owner.
ARE APARTMENTS GOOD INVESTMENTS? My airline seatmate had one more important question: "Wouldn't apartments be a better investment since my husband and I travel a lot?"
Then I explained large apartment buildings can be good investments because the landlord can usually hire an on-site resident manager to collect the rents and manage the property. But I quickly added, "Then your job is to manage the manager."
My personal experience has been apartment buildings ... (1) usually don't appreciate in market value as fast as single-family houses and (2) problems with apartment buildings are usually big problems, such as malfunction of a key component or the need for an expensive repair, such as a new roof.
Also, if the local apartment rental market is soft, with too many vacancies, that severely hurts the rental cash flow.
Apartment buildings and commercial properties are valued depending on their capitalization or "cap rate," which depends on the net operating income. However, single-family rental-house market values depend on recent sales prices of comparable nearby houses rather than rental income and expenses.
BONUS ADVANTAGE OF RENTAL HOUSES. An extra advantage of investing in rental houses or any other type of real estate investment or business property (but not your personal residence) is it can be exchanged -- tax-deferred -- for other investment or business real estate of equal or greater cost and equity.
Internal Revenue Code 1031 makes it possible to pyramid realty investments from a small rental property into investment property worth far more, without the erosion of capital gains tax. Full details on this and other tax benefits are available from your tax adviser.
--------------------------------------------------------------------------------
Many enjoy great tax benefits, market-value appreciation
Bob Bruss
Friday, January 05, 2007
On a recent flight from San Francisco to Chicago, I sat next to a talkative businesswoman. After we exchanged pleasantries and she learned I invest in and write about real estate, she asked, "What type of real estate should my husband and I invest in?"
Rather than give a direct answer, I replied, "Well, do you have any realty investments now?" Just our townhouse, she replied. "Has that been a good investment?" I asked.
She said they bought it about four years ago and since then it has more than doubled in market value. I responded that was extraordinary, but it can happen for well-located homes.
Then I asked her, "How much of a cash down payment did you make?" She replied, "Ten percent down. We got one of those PMI (private mortgage insurance) mortgages for 90 percent financing." Next, she launched into a rant about what a ripoff her $124 per month PMI premium is.
After I politely explained how she could cancel the PMI with an on-time payment record for at least 24 months by asking the lender to cancel the PMI based on a new appraisal, she was very grateful. "Why didn't the lender tell me?" she asked.
Then I tactfully redirected the conversation to make two points: (1) She and her husband wisely bought for 10 percent down, and (2) They are profiting from the benefits of leverage by controlling the entire property-value increase with just a small cash investment.
IF ONE HOME IS GOOD, WOULDN'T TWO BE BETTER? During the conversation, my seatmate said she and her husband want to buy a larger house. I congratulated her on that wise decision, especially in the current "buyer's market" in most cities.
Then she asked if they should keep or sell the townhouse when they buy a larger home. Since she mentioned the townhouse is located in a good neighborhood and there seems to be strong rental demand, I suggested keeping the townhouse as a rental.
When my new friend asked about losing the $500,000 principal-residence home-sale tax exemption for a married couple filing jointly (up to $250,000 for a single homeowner), I explained the townhouse can be rented as long as 36 months before losing this benefit of Internal Revenue Code 121.
"That's presuming you and your husband owned and occupied it at least 24 of the last 60 months before the home sale," I reminded my seatmate. If the townhouse continues to go up in value over the 36 months after you move out, I continued, then you get to enjoy even more tax-free market-value appreciation up to $500,000.
Then I asked, "If one home is good, wouldn't two be better?" She got the point real fast. Next, I briefly explained the tax advantages of keeping the townhouse as a rental property for a few years before deciding to keep or sell it.
I explained the benefits of the noncash depreciation tax deduction for rental property, but I don't think I did a very good job. Saving tax dollars didn't seem to interest her.
PROS AND CONS OF OWNING RENTAL HOUSES. Although there are many tax advantages of owning rental houses, especially tax-free income deductions up to $25,000 if you earn less than $100,000 annual adjusted gross income, there are a few possible disadvantages.
The primary negative to owning rental houses is called "tenants and toilets." By carefully selecting quality tenants who are likely to pay the rent on time (based on their credit report and FICO score), the management problem can be minimized. Good-quality house renters often stay many years.
Another possible negative is maintenance. Periodically, house components need repair or replacement. Rental-house owners should have access to quick cash for an emergency, such as a roof replacement. A home equity credit line is the best source because it costs nothing (except a $50 annual fee) until it is used by writing a check.
PROFESSIONAL PROPERTY MANAGEMENT ISN'T CHEAP. Although owner management of rental houses is recommended to save costs if the property is located within an hour's drive, sometimes landlords either don't want to or are unable to manage their rental houses.
When that happens, there are professional property management firms available. Before hiring such a firm, investors should obtain client references and check out the firm extremely carefully.
Most professional property management firms charge fees of 10 percent to 15 percent of the gross rental income for houses. They often charge additional fees for supervising repairs and for renting vacancies. The best firms provide monthly computer printouts to owners showing rent collections and expense payments, along with a monthly check to the owner.
ARE APARTMENTS GOOD INVESTMENTS? My airline seatmate had one more important question: "Wouldn't apartments be a better investment since my husband and I travel a lot?"
Then I explained large apartment buildings can be good investments because the landlord can usually hire an on-site resident manager to collect the rents and manage the property. But I quickly added, "Then your job is to manage the manager."
My personal experience has been apartment buildings ... (1) usually don't appreciate in market value as fast as single-family houses and (2) problems with apartment buildings are usually big problems, such as malfunction of a key component or the need for an expensive repair, such as a new roof.
Also, if the local apartment rental market is soft, with too many vacancies, that severely hurts the rental cash flow.
Apartment buildings and commercial properties are valued depending on their capitalization or "cap rate," which depends on the net operating income. However, single-family rental-house market values depend on recent sales prices of comparable nearby houses rather than rental income and expenses.
BONUS ADVANTAGE OF RENTAL HOUSES. An extra advantage of investing in rental houses or any other type of real estate investment or business property (but not your personal residence) is it can be exchanged -- tax-deferred -- for other investment or business real estate of equal or greater cost and equity.
Internal Revenue Code 1031 makes it possible to pyramid realty investments from a small rental property into investment property worth far more, without the erosion of capital gains tax. Full details on this and other tax benefits are available from your tax adviser.
Thursday, January 04, 2007
Denver Home Loan Borrowers: Lenders Pull Back From Troubled Subprime Market
Lenders Pull Back From Troubled Subprime Market
Mortgage Lenders Network USA, a large lender of subprime mortgages, says it has stopped accepting applications for new loans and is "currently exploring strategic alternatives" for its wholesale business lines, according to telephone recordings on at least two of its four wholesale lending offices.
MLN, based in Middletown, Conn., which last year is reported to have lent more than $12 billion, is the fourth lender to withdraw from the subprime market in the last two weeks. Ownit Mortgage Solutions has declared bankruptcy and shut down, citing "the current unfavorable conditions of the mortgage industry." Option One Mortgage, a unit of H&R Block Inc., and ACC Capital Corp., the private holding company for Ameriquest Mortgage Co. and affiliates, are both for sale.
All of these companies rely on investment banks to provide the capital for their loans. Merrill Lynch & Co., JPMorgan Chase & Co., Credit Suisse First Boston, among others, invest the cash through a line of credit, then turn the loans into bonds for sale to investors. As the subprime market has gone south, the bonds’ attractiveness has declined and potential buyers have run in the other direction. The bankers have demanded repayment, leaving the lenders out of money and facing bankruptcy.
Source: Associated Press, David Enrich (01/02/07)
Mortgage Lenders Network USA, a large lender of subprime mortgages, says it has stopped accepting applications for new loans and is "currently exploring strategic alternatives" for its wholesale business lines, according to telephone recordings on at least two of its four wholesale lending offices.
MLN, based in Middletown, Conn., which last year is reported to have lent more than $12 billion, is the fourth lender to withdraw from the subprime market in the last two weeks. Ownit Mortgage Solutions has declared bankruptcy and shut down, citing "the current unfavorable conditions of the mortgage industry." Option One Mortgage, a unit of H&R Block Inc., and ACC Capital Corp., the private holding company for Ameriquest Mortgage Co. and affiliates, are both for sale.
All of these companies rely on investment banks to provide the capital for their loans. Merrill Lynch & Co., JPMorgan Chase & Co., Credit Suisse First Boston, among others, invest the cash through a line of credit, then turn the loans into bonds for sale to investors. As the subprime market has gone south, the bonds’ attractiveness has declined and potential buyers have run in the other direction. The bankers have demanded repayment, leaving the lenders out of money and facing bankruptcy.
Source: Associated Press, David Enrich (01/02/07)
Wednesday, January 03, 2007
Sample Market Alert
Daily Commentary
By Larry Baer, Market Alert
SHORT-TERM TREND (20 days or less) The trend trajectory of the mortgage market continues to lean almost imperceptibly in favor of steady to fractionally higher rates and slightly lower prices.
SUGGESTED PIPELINE STRATEGY: Until/unless the price of the Fannie Mae 6.0% mortgage-backed security can muster the necessary momentum to climb above 100.875 on a closing basis -- I recommend that you avoid interest rate risk for loans in this category.
From a timing perspective it is worth noting that a number of short-term trading cycles will be merging between Thursday, January 4th and Monday, January 8th. During this period of time look for increased volatility in the mortgage market.
LONG-TERM TREND (21 days or more) Favors lower rates and higher prices.
SUGGESTED PIPELINE STRATEGY: I recommend that you maintain a “lock ‘em if you’ve got ‘em” pipeline risk management strategy for loans in this category until/unless the price of the Fannie Mae 6.0% mortgage-backed security can muster the momentum to close above a price of 100.875.
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Commentary: The Institute of Supply Management’s manufacturing index for December rose to a reading of 51.4% from November’s 49.5% level. Growth in exports and resilient consumer demand helped work down an inventory glut in many industries, stabilizing factory demand. Today’s report implies that businesses have a much smaller inventory bloat than many analysts had anticipated – which in-turn strongly suggests the manufacturing sector will not be a significant drag on economic growth in the first quarter of 2007.
The “so what?” factor from a mortgage interest rate perspective revolves around the idea that stronger than expected economic growth increases the demand of capital which by extension ultimately pushes mortgage interest rates higher.
The chance of any help from the Fed in the form of a short-term rate cut in the first quarter of 2007 now pivots almost exclusively on substantial weakness in the labor sector.
There will likely be some breath-holding among mortgage investors as Friday’s December nonfarm payroll numbers approach.
In my view it will take a headline nonfarm payroll number less than 100,000, a jobless rate of 4.6% or higher and/or a drop in average hourly earnings of at least 0.2% to spawn much of a rally in the mortgage market. Since we’re wishing and hoping here … it would be especially nice if Friday’s report shows big downward revisions for November and October payroll figures as well.
I’m not going to suggest such an outcome is not possible … I’m just going to say that in my opinion to bet on these mortgage market friendly numbers to appear on Friday morning would be closely equivalent to betting a month’s salary that you can draw one card and fill an inside straight flush. Definitely possible … just not likely.
Be patient … be disciplined … and play it by the numbers.
By Larry Baer, Market Alert
SHORT-TERM TREND (20 days or less) The trend trajectory of the mortgage market continues to lean almost imperceptibly in favor of steady to fractionally higher rates and slightly lower prices.
SUGGESTED PIPELINE STRATEGY: Until/unless the price of the Fannie Mae 6.0% mortgage-backed security can muster the necessary momentum to climb above 100.875 on a closing basis -- I recommend that you avoid interest rate risk for loans in this category.
From a timing perspective it is worth noting that a number of short-term trading cycles will be merging between Thursday, January 4th and Monday, January 8th. During this period of time look for increased volatility in the mortgage market.
LONG-TERM TREND (21 days or more) Favors lower rates and higher prices.
SUGGESTED PIPELINE STRATEGY: I recommend that you maintain a “lock ‘em if you’ve got ‘em” pipeline risk management strategy for loans in this category until/unless the price of the Fannie Mae 6.0% mortgage-backed security can muster the momentum to close above a price of 100.875.
--------------------------------------------------------------------------------
Commentary: The Institute of Supply Management’s manufacturing index for December rose to a reading of 51.4% from November’s 49.5% level. Growth in exports and resilient consumer demand helped work down an inventory glut in many industries, stabilizing factory demand. Today’s report implies that businesses have a much smaller inventory bloat than many analysts had anticipated – which in-turn strongly suggests the manufacturing sector will not be a significant drag on economic growth in the first quarter of 2007.
The “so what?” factor from a mortgage interest rate perspective revolves around the idea that stronger than expected economic growth increases the demand of capital which by extension ultimately pushes mortgage interest rates higher.
The chance of any help from the Fed in the form of a short-term rate cut in the first quarter of 2007 now pivots almost exclusively on substantial weakness in the labor sector.
There will likely be some breath-holding among mortgage investors as Friday’s December nonfarm payroll numbers approach.
In my view it will take a headline nonfarm payroll number less than 100,000, a jobless rate of 4.6% or higher and/or a drop in average hourly earnings of at least 0.2% to spawn much of a rally in the mortgage market. Since we’re wishing and hoping here … it would be especially nice if Friday’s report shows big downward revisions for November and October payroll figures as well.
I’m not going to suggest such an outcome is not possible … I’m just going to say that in my opinion to bet on these mortgage market friendly numbers to appear on Friday morning would be closely equivalent to betting a month’s salary that you can draw one card and fill an inside straight flush. Definitely possible … just not likely.
Be patient … be disciplined … and play it by the numbers.
Monday, January 01, 2007
Foreclosure Update: Longmont
County reports most foreclosures in nearly 20 years
The Associated Press
BOULDER — Nearly 800 Boulder County residents defaulted on their mortgages in 2006, making for the highest number of foreclosures in the county in nearly 20 years.
The county’s 790 foreclosures for 2006 was 27 percent higher than the 619 reported in 2005. The record was set in 1988, when 1,080 foreclosures were reported as the state’s oil and real estate economies collapsed and people left the state looking for work.
Other parts of Colorado also saw high foreclosure numbers this year. Broomfield reported 195 for 2006, a 57 percent increase over the 124 reported last year and a record for the county’s five years of existence.
Public trustee’s offices in the seven-county metropolitan area reported 17,782 foreclosures as of the end of November, 3.8 percent higher than the 1988 record of 17,122.
Mortgage fraud schemes and an increasing number of low- or no-down-payment and other higher-risk mortgage products have contributed to the high numbers of foreclosures, experts said.
Lou Barnes, a mortgage lender with Boulder West Financial Services, said most of the foreclosure activity stemmed from loans that required little or no down payment or was in areas with soft housing markets.
He said soft markets in Larimer, Weld and Adams counties and in eastern Longmont have come to be known as the “foreclosure belt,” where a glut of new housing has depressed prices of existing homes.
“That means the buyer from three years ago who’s in trouble now can’t get out of their house,” he said. “If you’ve got less than 5 percent equity in your house and prices aren’t appreciating, you can’t afford to sell your house.”
Some housing experts have predicted foreclosures could rise even further next year.
The Associated Press
BOULDER — Nearly 800 Boulder County residents defaulted on their mortgages in 2006, making for the highest number of foreclosures in the county in nearly 20 years.
The county’s 790 foreclosures for 2006 was 27 percent higher than the 619 reported in 2005. The record was set in 1988, when 1,080 foreclosures were reported as the state’s oil and real estate economies collapsed and people left the state looking for work.
Other parts of Colorado also saw high foreclosure numbers this year. Broomfield reported 195 for 2006, a 57 percent increase over the 124 reported last year and a record for the county’s five years of existence.
Public trustee’s offices in the seven-county metropolitan area reported 17,782 foreclosures as of the end of November, 3.8 percent higher than the 1988 record of 17,122.
Mortgage fraud schemes and an increasing number of low- or no-down-payment and other higher-risk mortgage products have contributed to the high numbers of foreclosures, experts said.
Lou Barnes, a mortgage lender with Boulder West Financial Services, said most of the foreclosure activity stemmed from loans that required little or no down payment or was in areas with soft housing markets.
He said soft markets in Larimer, Weld and Adams counties and in eastern Longmont have come to be known as the “foreclosure belt,” where a glut of new housing has depressed prices of existing homes.
“That means the buyer from three years ago who’s in trouble now can’t get out of their house,” he said. “If you’ve got less than 5 percent equity in your house and prices aren’t appreciating, you can’t afford to sell your house.”
Some housing experts have predicted foreclosures could rise even further next year.
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