By Matt Phillips, Damian Paletta, and Henry J. Pulizzi from the Wall Street Journal Online
President Bush and Treasury Secretary Henry Paulson began a full-court press to make the administration's case that it has the housing and credit situations well in hand.
Speaking to a Rotary Club meeting in Fredericksburg, Va., Mr. Bush reinforced his opposition to a federal bailout of lenders and real-estate speculators, but said administration initiatives will help still-creditworthy homeowners renegotiate their mortgages and remain in their homes.
"It's going to take a while to work through the housing bubble, but we can mitigate some of the issues," Mr. Bush said. "We've got a strategy."
Mr. Paulson told a town hall meeting on the outskirts of Orlando, Fla., that there was no "silver bullet" to solve the credit-market problems, though he expressed optimism about several programs designed to limit mortgage foreclosures and restore market stability. The meeting was the first of several in towns across the country this week to discuss White House efforts to minimize foreclosures.
"The magic here is investors and servicers coming together to deal with an unprecedented situation so we don't have perverse outcomes and so that we don't have a market failure," Mr. Paulson said. Mr. Paulson used the term "market failure" at least six times and "unprecedented" at least twice in less than two hours.
Mr. Paulson helped broker industry discussions that led to a new format announced two weeks ago to make it easier for many homeowners with subprime adjustable-rate mortgages to move toward more affordable refinanced loans. Many other borrowers could qualify to have their interest rates frozen for up to five years.
With record numbers of subprime adjustable-rate mortgages resetting into more expensive monthly requirements and housing prices falling in many parts of the country, foreclosure rates have risen sharply, putting pressure on the economy.
Mr. Paulson said he supported Citigroup Inc.'s decision last week to move its assets from its structured investment vehicles, or SIVs, onto its balance sheet. SIVs, which issue short-term debt to buy other, higher-yielding assets, have been struggling because of exposure to risky subprime-mortgage debt.
He spoke enthusiastically about supporting a legislative proposal to allow government-sponsored enterprises Fannie Mae and Freddie Mac to securitize more expensive mortgages to spread their liquidity function into a different part of the market, but signaled that the administration would condition its support on broader regulatory reform of the companies.
In Virginia, the president warned lawmakers not to raise taxes while the U.S. economy faces credit-market-related challenges, saying his administration has a good plan to deal with the turmoil in the housing market.
He touted the Federal Housing Administration's mortgage-renegotiation program, known as FHASecure, and the Treasury Department-led private-sector initiative for homeowners about to be stung by resetting mortgage rates.
"I am concerned, I know you're concerned, about the housing industry. We all should be," Mr. Bush said.
Democrats were quick to criticize Mr. Bush's remarks as overly optimistic on the economy and unrealistic on the effectiveness of the White House's housing policies.
"The Bush administration continues to see the economy through rose-colored glasses, whether it be the subprime crisis, the credit crisis, the energy crisis or the declining dollar, it blithely marches along without making any serious effort to solve these economic problems," said Sen. Charles Schumer (D., N.Y.)
Saturday, December 29, 2007
Thursday, December 27, 2007
Rental Corner: When to Repair Your Tenant's Property
Getting Your Fix: Renters' Rights to Minor Repairs
How to get landlords to keep their end of the maintenance bargain.
Renters often feel stuck with less-than-ideal living conditions. Maybe the drip, drip, drip of your leaking bathroom faucet is driving you insane. There's an unsightly stain in your living room carpet. Or the paint in your kitchen has gone from crisp white to the dingy yellow of spoiled milk. These aren't huge problems and don't justify a move. But you don't just have to live with them, right?
Landlords Must Fix Major Problems
Your landlord is responsible for keeping your unit in a habitable, or livable, condition. The landlord must keep the structure of the building sound, including stairways, floors, and roofs; keep electrical, heating, and plumbing systems operating safely; supply hot and cold water in reasonable amounts; and exterminate infestations of pests such as cockroaches.
Keep in mind, however, that if a problem is the result of your own carelessness -- such as a vermin infestation caused by your poor housekeeping -- the repair bill will properly be forwarded to you. If you don't pay it, the amount may be taken out of your security deposit.
Landlords May Have to Make Minor Repairs
What about the annoying problems most tenants face, like leaky faucets, old paint, torn screens, or worn flooring? While these types of problems can be unpleasant or inconvenient, they don't make the unit uninhabitable. Does the landlord have to repair them?
Whether your landlord must take care of a minor repair depends upon a number of factors, beginning with the nature of the problem. Purely cosmetic repairs are not legally required. Mildewed grout or worn carpet, for example, are less likely to require a landlord's attention than are loose tiles that make the shower unusable or holes in carpeting that could trip someone.
If you're not sure whether your landlord is legally required to make a repair, check to see if your specific complaint is addressed by:
the terms of your lease
any oral or written promises your landlord has made
state and local building codes, or
state landlord-tenant laws.
How to Get Your Landlord to Make Minor Repairs
It's often harder to enforce your rights to minor repairs than major ones. Tenants in an uninhabitable dwelling are often allowed by law to withhold rent or use "repair and deduct" procedures, but taking those actions for merely minor problems could get you evicted. There are, however, a number of proven strategies for getting landlords to take care of minor problems.
1. Write a repair request. Even if you've already asked your landlord to take care of a problem, a written request is almost always helpful. It gives you a chance to articulate the problem clearly and point out why it's in the landlord's best interest to have it fixed. A letter also allows a reluctant landlord to think it over without having to give you an immediate answer (which often results in a knee-jerk "no").
Try to develop a number of themes in your letter. One effective tactic is to explain that the problem might become worse -- and more costly to the landlord -- if it's not taken care of right away. A landlord might find it easy to ignore your drippy faucet until you point out the possibility of an overflowing sink and water damage to the floors.
Another theme that will grab your landlord's attention is the potential for injury. A hole in the stairway carpeting could cause someone to trip and fall, making the landlord liable for the injury. Landlords are also sensitive to security issues, so be sure to point out any security risks created by your problem, such as a broken lock or faulty hallway light. Finally, if the problem affects other tenants, be sure to emphasize that.
2. Propose mediation. If your oral and written requests are ignored, contact a mediation service, which will invite the landlord to meet with you and a trained mediator. The mediator will help the two of you reach a mutually-acceptable solution, but will not (unlike a judge) impose a solution. Many communities offer free or low-cost mediation services as an alternative to going to court.
3. Report your landlord to your local building or housing agency. Some minor problems may violate local building or housing codes. Call the agency that enforces these codes in your area to find out. (Look under the city or county government listings of your phone book.) Officials at the agency should be able to explain whether your problem violates local or state codes, and may be able to take action against your landlord.
Keep in mind that reporting your landlord won't likely improve your relationship, which may be important to you if you want to stay in your unit for some time. Even state "antiretaliation" laws, which prohibit rent hikes, terminations, or other adverse actions following a tenant's complaint to a government agency or exercise of a legal right, cannot forestall a sour relationship.
4. Sue your landlord in small claims court. If you can prove in court that the unaddressed problems decrease the value of your unit, a judge can award you the difference between what you've been paying in rent and the amount the unit is actually worth. Obviously, suing your landlord is not your best option if you want to salvage your landlord-tenant relationship. But if you've tried everything else and moving elsewhere is not feasible, taking your landlord to court might be the right remedy.
How to get landlords to keep their end of the maintenance bargain.
Renters often feel stuck with less-than-ideal living conditions. Maybe the drip, drip, drip of your leaking bathroom faucet is driving you insane. There's an unsightly stain in your living room carpet. Or the paint in your kitchen has gone from crisp white to the dingy yellow of spoiled milk. These aren't huge problems and don't justify a move. But you don't just have to live with them, right?
Landlords Must Fix Major Problems
Your landlord is responsible for keeping your unit in a habitable, or livable, condition. The landlord must keep the structure of the building sound, including stairways, floors, and roofs; keep electrical, heating, and plumbing systems operating safely; supply hot and cold water in reasonable amounts; and exterminate infestations of pests such as cockroaches.
Keep in mind, however, that if a problem is the result of your own carelessness -- such as a vermin infestation caused by your poor housekeeping -- the repair bill will properly be forwarded to you. If you don't pay it, the amount may be taken out of your security deposit.
Landlords May Have to Make Minor Repairs
What about the annoying problems most tenants face, like leaky faucets, old paint, torn screens, or worn flooring? While these types of problems can be unpleasant or inconvenient, they don't make the unit uninhabitable. Does the landlord have to repair them?
Whether your landlord must take care of a minor repair depends upon a number of factors, beginning with the nature of the problem. Purely cosmetic repairs are not legally required. Mildewed grout or worn carpet, for example, are less likely to require a landlord's attention than are loose tiles that make the shower unusable or holes in carpeting that could trip someone.
If you're not sure whether your landlord is legally required to make a repair, check to see if your specific complaint is addressed by:
the terms of your lease
any oral or written promises your landlord has made
state and local building codes, or
state landlord-tenant laws.
How to Get Your Landlord to Make Minor Repairs
It's often harder to enforce your rights to minor repairs than major ones. Tenants in an uninhabitable dwelling are often allowed by law to withhold rent or use "repair and deduct" procedures, but taking those actions for merely minor problems could get you evicted. There are, however, a number of proven strategies for getting landlords to take care of minor problems.
1. Write a repair request. Even if you've already asked your landlord to take care of a problem, a written request is almost always helpful. It gives you a chance to articulate the problem clearly and point out why it's in the landlord's best interest to have it fixed. A letter also allows a reluctant landlord to think it over without having to give you an immediate answer (which often results in a knee-jerk "no").
Try to develop a number of themes in your letter. One effective tactic is to explain that the problem might become worse -- and more costly to the landlord -- if it's not taken care of right away. A landlord might find it easy to ignore your drippy faucet until you point out the possibility of an overflowing sink and water damage to the floors.
Another theme that will grab your landlord's attention is the potential for injury. A hole in the stairway carpeting could cause someone to trip and fall, making the landlord liable for the injury. Landlords are also sensitive to security issues, so be sure to point out any security risks created by your problem, such as a broken lock or faulty hallway light. Finally, if the problem affects other tenants, be sure to emphasize that.
2. Propose mediation. If your oral and written requests are ignored, contact a mediation service, which will invite the landlord to meet with you and a trained mediator. The mediator will help the two of you reach a mutually-acceptable solution, but will not (unlike a judge) impose a solution. Many communities offer free or low-cost mediation services as an alternative to going to court.
3. Report your landlord to your local building or housing agency. Some minor problems may violate local building or housing codes. Call the agency that enforces these codes in your area to find out. (Look under the city or county government listings of your phone book.) Officials at the agency should be able to explain whether your problem violates local or state codes, and may be able to take action against your landlord.
Keep in mind that reporting your landlord won't likely improve your relationship, which may be important to you if you want to stay in your unit for some time. Even state "antiretaliation" laws, which prohibit rent hikes, terminations, or other adverse actions following a tenant's complaint to a government agency or exercise of a legal right, cannot forestall a sour relationship.
4. Sue your landlord in small claims court. If you can prove in court that the unaddressed problems decrease the value of your unit, a judge can award you the difference between what you've been paying in rent and the amount the unit is actually worth. Obviously, suing your landlord is not your best option if you want to salvage your landlord-tenant relationship. But if you've tried everything else and moving elsewhere is not feasible, taking your landlord to court might be the right remedy.
Wednesday, December 26, 2007
Looking for an End to the Housing Slump
By Amy Hoak From MarketWatch
CHICAGO -- After a year of falling house prices in numerous parts of the country and a meltdown in the mortgage market that affected borrowers regardless of their ZIP code, many hope that housing markets will finally start to get better next year.
But if there's any improvement in 2008, it may be relatively modest.
It's difficult to get a consensus on exactly when housing will turn the corner. Local markets will certainly vary, but at the least it's likely that some of the same problems that plagued 2007 will carry over into next year.
At best, market conditions could start to stabilize, with home sales regaining strength. If more buyers get back into the market, some of the huge inventories of new and existing homes for sale can begin to be worked off.
"The only reason why demand is finding a bottom is because sellers are cutting their prices," said Mark Zandi, chief economist of Moody's Economy.com. "There was a sense that the market would cool -- I don't think there was a sense it would crash. And it crashed."
The National Association of Realtors predicts a slight increase in existing-home sales next year but a decline in new-home sales. Others aren't as optimistic, including the Mortgage Bankers Association, which is predicting that sales won't pick up until 2009.
After the median price for existing homes dropped 1.9% in 2007 to a projected $217,600, NAR forecasts that the median price will rise 0.3% to $218,300 in 2008.
But the MBA is expecting prices of existing homes to decrease 2.93% in 2007 and 2.04% in 2008; new-home prices should decrease 2.72% in 2007 and 1.96% in 2008.
A recent Economy.com report, "Aftershock: Housing in the Wake of the Mortgage Meltdown," predicts home sales will hit bottom in early 2008, with housing starts hitting bottom mid-2008.
But prices will continue to drop, and by early 2009 home prices will have fallen about 13% nationally from their peaks, according to the report. Prices will have fallen more than 15% if nonprice discounts to buyers are taken into account.
Housing's ills
Housing's most fundamental problem, according to the Economy.com report, is the excess of unsold inventory lingering in many of the country's local markets. The supply of homes for sale hit its highest level in 22 years in October, according to NAR.
Overbuilding is a culprit in many markets, and investors who are unloading units bought during the boom are adding to the massive supply, the National Association of Home Builders pointed out in a recent forecast. In December, the group reported that single-family housing starts were down by about 50% from a record high at the beginning of 2006.
"Once we hit bottom ... we're going to stay there for awhile," at least in terms of new construction, predicted Richard F. Moody, chief economist of Mission Residential.
Adding to the already elevated inventories are foreclosures hitting the market. According to the MBA, 1.69% of first-lien mortgages were in the foreclosure process in the third quarter. The percentage was the highest in the survey's history, and the group expects high numbers of foreclosures to continue into next year.
Areas where overall economic conditions were weak, including Michigan and Ohio, drove up the national foreclosure numbers, as did areas where there was much investor speculation, including California, Nevada and Florida. Defaults on adjustable-rate loans -- especially subprime loans made to borrowers with weaker credit histories -- caused a lot of the strain; when the mortgage's teaser period was up, homeowners couldn't keep up with payments.
The mortgage meltdown this summer made it tougher for some borrowers to get a loan, another stumbling block in this housing market. In particular, nonconforming loans, which can't be bought by government-sponsored mortgage agencies Freddie Mac or Fannie Mae, were harder or more expensive to come by.
Many borrowers with good credit and a decent down payment were fine, but subprime loans, intended for borrowers with poor credit histories, became a thing of the past. Alt-A loans, which required little or no documentation, became a rarity. And rates on jumbo loans went through the roof, making it tougher for home buyers in expensive markets.
Some borrowers who could qualify for a Federal Housing Administration insured loan turned to those, and proposed FHA modernization may help some borrowers even more. But in the second half of the year, the credit disruptions slowed down an already sluggish market.
Waiting for the rebound
Rick Loughlin thought the Boston market appeared to be "really coming alive" this summer.
"Then we had the mortgage crisis," said Loughlin, chairman of the Greater Boston Real Estate Board and president of Coldwell Banker Residential Brokerage New England. The borrowing ability of many individuals took a hit, reducing the number of buyers able to enter the market and stranding homeowners looking to trade up.
The lending landscape isn't likely to change much in the near term, with no-documentation and low-down payment loans remaining harder to come by, Moody said.
Perhaps the only bright spot in the mortgage arena this year was low interest rates on conforming loans. The average rate on the 30-year fixed-rate mortgage fell below 6% at one point in December; NAR expects the 30-year to rise to about 6.4% by the end of 2008.
The low rates "should have provided a lift to home sales, but it has not," said Lawrence Yun, NAR's chief economist. That indicates to him that the elevated cost of jumbo loans is still taking a toll. If conforming loan limits were raised to accommodate expensive markets, it could have a greater impact on housing than the current low conforming rates have, he said.
Sitting on the sidelines
The home price drops encouraged a number of people to put home buying decisions on hold. In some of the most sluggish markets, sellers who don't absolutely need to sell aren't attempting to do so; those who do are offering price cuts and concessions to make the deal.
"A lot of buyers and investors are sitting on the sidelines. They feel unsure what is happening in the marketplace," said Devin Reiss, president of the Greater Las Vegas Association of Realtors. Some mistakenly think that it's impossible for anyone to get a mortgage nowadays, even with good credit, he said. Often, however, fears revolve around the undesirable scenario of buying a home only to watch it decrease in value a short time later.
His advice for bargain hunters: Don't wait too long.
"If we start to see demand go up and supply go down, prices will go (up) with it," he said.
But probably the best advice is to know your market before making any kind of move.
"A hallmark of the downturn is how broad it is across the country," said Economy.com's Zandi. But even in poor-performing markets there could be good neighborhoods, he said, adding that housing conditions vary "block to block."
NAR reported that 93 out of 150 metropolitan areas showed increases in median existing single-family home prices during the third quarter of 2007, compared with 2006, even though price drops in other areas brought down the national median price.
Still, Bob McNamera, a real-estate agent with Pasquesi Realty in Chicago, said that some people are staying out of the market based on what they hear about general trends.
"They hear it's a bad market, and don't do any more homework," he said. First-time buyers, however, with a down payment and decent credit, could find bargains, he added.
Even in Stockton, Calif., an area hard-hit by foreclosures, Renee Becker, a Realtor and vice president of Beck Realtors, has hope for next year. The deals in the foreclosure inventory might bring back more investors and help fuel a slow and gradual recovery, she said.
CHICAGO -- After a year of falling house prices in numerous parts of the country and a meltdown in the mortgage market that affected borrowers regardless of their ZIP code, many hope that housing markets will finally start to get better next year.
But if there's any improvement in 2008, it may be relatively modest.
It's difficult to get a consensus on exactly when housing will turn the corner. Local markets will certainly vary, but at the least it's likely that some of the same problems that plagued 2007 will carry over into next year.
At best, market conditions could start to stabilize, with home sales regaining strength. If more buyers get back into the market, some of the huge inventories of new and existing homes for sale can begin to be worked off.
"The only reason why demand is finding a bottom is because sellers are cutting their prices," said Mark Zandi, chief economist of Moody's Economy.com. "There was a sense that the market would cool -- I don't think there was a sense it would crash. And it crashed."
The National Association of Realtors predicts a slight increase in existing-home sales next year but a decline in new-home sales. Others aren't as optimistic, including the Mortgage Bankers Association, which is predicting that sales won't pick up until 2009.
After the median price for existing homes dropped 1.9% in 2007 to a projected $217,600, NAR forecasts that the median price will rise 0.3% to $218,300 in 2008.
But the MBA is expecting prices of existing homes to decrease 2.93% in 2007 and 2.04% in 2008; new-home prices should decrease 2.72% in 2007 and 1.96% in 2008.
A recent Economy.com report, "Aftershock: Housing in the Wake of the Mortgage Meltdown," predicts home sales will hit bottom in early 2008, with housing starts hitting bottom mid-2008.
But prices will continue to drop, and by early 2009 home prices will have fallen about 13% nationally from their peaks, according to the report. Prices will have fallen more than 15% if nonprice discounts to buyers are taken into account.
Housing's ills
Housing's most fundamental problem, according to the Economy.com report, is the excess of unsold inventory lingering in many of the country's local markets. The supply of homes for sale hit its highest level in 22 years in October, according to NAR.
Overbuilding is a culprit in many markets, and investors who are unloading units bought during the boom are adding to the massive supply, the National Association of Home Builders pointed out in a recent forecast. In December, the group reported that single-family housing starts were down by about 50% from a record high at the beginning of 2006.
"Once we hit bottom ... we're going to stay there for awhile," at least in terms of new construction, predicted Richard F. Moody, chief economist of Mission Residential.
Adding to the already elevated inventories are foreclosures hitting the market. According to the MBA, 1.69% of first-lien mortgages were in the foreclosure process in the third quarter. The percentage was the highest in the survey's history, and the group expects high numbers of foreclosures to continue into next year.
Areas where overall economic conditions were weak, including Michigan and Ohio, drove up the national foreclosure numbers, as did areas where there was much investor speculation, including California, Nevada and Florida. Defaults on adjustable-rate loans -- especially subprime loans made to borrowers with weaker credit histories -- caused a lot of the strain; when the mortgage's teaser period was up, homeowners couldn't keep up with payments.
The mortgage meltdown this summer made it tougher for some borrowers to get a loan, another stumbling block in this housing market. In particular, nonconforming loans, which can't be bought by government-sponsored mortgage agencies Freddie Mac or Fannie Mae, were harder or more expensive to come by.
Many borrowers with good credit and a decent down payment were fine, but subprime loans, intended for borrowers with poor credit histories, became a thing of the past. Alt-A loans, which required little or no documentation, became a rarity. And rates on jumbo loans went through the roof, making it tougher for home buyers in expensive markets.
Some borrowers who could qualify for a Federal Housing Administration insured loan turned to those, and proposed FHA modernization may help some borrowers even more. But in the second half of the year, the credit disruptions slowed down an already sluggish market.
Waiting for the rebound
Rick Loughlin thought the Boston market appeared to be "really coming alive" this summer.
"Then we had the mortgage crisis," said Loughlin, chairman of the Greater Boston Real Estate Board and president of Coldwell Banker Residential Brokerage New England. The borrowing ability of many individuals took a hit, reducing the number of buyers able to enter the market and stranding homeowners looking to trade up.
The lending landscape isn't likely to change much in the near term, with no-documentation and low-down payment loans remaining harder to come by, Moody said.
Perhaps the only bright spot in the mortgage arena this year was low interest rates on conforming loans. The average rate on the 30-year fixed-rate mortgage fell below 6% at one point in December; NAR expects the 30-year to rise to about 6.4% by the end of 2008.
The low rates "should have provided a lift to home sales, but it has not," said Lawrence Yun, NAR's chief economist. That indicates to him that the elevated cost of jumbo loans is still taking a toll. If conforming loan limits were raised to accommodate expensive markets, it could have a greater impact on housing than the current low conforming rates have, he said.
Sitting on the sidelines
The home price drops encouraged a number of people to put home buying decisions on hold. In some of the most sluggish markets, sellers who don't absolutely need to sell aren't attempting to do so; those who do are offering price cuts and concessions to make the deal.
"A lot of buyers and investors are sitting on the sidelines. They feel unsure what is happening in the marketplace," said Devin Reiss, president of the Greater Las Vegas Association of Realtors. Some mistakenly think that it's impossible for anyone to get a mortgage nowadays, even with good credit, he said. Often, however, fears revolve around the undesirable scenario of buying a home only to watch it decrease in value a short time later.
His advice for bargain hunters: Don't wait too long.
"If we start to see demand go up and supply go down, prices will go (up) with it," he said.
But probably the best advice is to know your market before making any kind of move.
"A hallmark of the downturn is how broad it is across the country," said Economy.com's Zandi. But even in poor-performing markets there could be good neighborhoods, he said, adding that housing conditions vary "block to block."
NAR reported that 93 out of 150 metropolitan areas showed increases in median existing single-family home prices during the third quarter of 2007, compared with 2006, even though price drops in other areas brought down the national median price.
Still, Bob McNamera, a real-estate agent with Pasquesi Realty in Chicago, said that some people are staying out of the market based on what they hear about general trends.
"They hear it's a bad market, and don't do any more homework," he said. First-time buyers, however, with a down payment and decent credit, could find bargains, he added.
Even in Stockton, Calif., an area hard-hit by foreclosures, Renee Becker, a Realtor and vice president of Beck Realtors, has hope for next year. The deals in the foreclosure inventory might bring back more investors and help fuel a slow and gradual recovery, she said.
Looking for an End to the Housing Slump
By Amy Hoak From MarketWatch
CHICAGO -- After a year of falling house prices in numerous parts of the country and a meltdown in the mortgage market that affected borrowers regardless of their ZIP code, many hope that housing markets will finally start to get better next year.
But if there's any improvement in 2008, it may be relatively modest.
It's difficult to get a consensus on exactly when housing will turn the corner. Local markets will certainly vary, but at the least it's likely that some of the same problems that plagued 2007 will carry over into next year.
At best, market conditions could start to stabilize, with home sales regaining strength. If more buyers get back into the market, some of the huge inventories of new and existing homes for sale can begin to be worked off.
"The only reason why demand is finding a bottom is because sellers are cutting their prices," said Mark Zandi, chief economist of Moody's Economy.com. "There was a sense that the market would cool -- I don't think there was a sense it would crash. And it crashed."
The National Association of Realtors predicts a slight increase in existing-home sales next year but a decline in new-home sales. Others aren't as optimistic, including the Mortgage Bankers Association, which is predicting that sales won't pick up until 2009.
After the median price for existing homes dropped 1.9% in 2007 to a projected $217,600, NAR forecasts that the median price will rise 0.3% to $218,300 in 2008.
But the MBA is expecting prices of existing homes to decrease 2.93% in 2007 and 2.04% in 2008; new-home prices should decrease 2.72% in 2007 and 1.96% in 2008.
A recent Economy.com report, "Aftershock: Housing in the Wake of the Mortgage Meltdown," predicts home sales will hit bottom in early 2008, with housing starts hitting bottom mid-2008.
But prices will continue to drop, and by early 2009 home prices will have fallen about 13% nationally from their peaks, according to the report. Prices will have fallen more than 15% if nonprice discounts to buyers are taken into account.
Housing's ills
Housing's most fundamental problem, according to the Economy.com report, is the excess of unsold inventory lingering in many of the country's local markets. The supply of homes for sale hit its highest level in 22 years in October, according to NAR.
Overbuilding is a culprit in many markets, and investors who are unloading units bought during the boom are adding to the massive supply, the National Association of Home Builders pointed out in a recent forecast. In December, the group reported that single-family housing starts were down by about 50% from a record high at the beginning of 2006.
"Once we hit bottom ... we're going to stay there for awhile," at least in terms of new construction, predicted Richard F. Moody, chief economist of Mission Residential.
Adding to the already elevated inventories are foreclosures hitting the market. According to the MBA, 1.69% of first-lien mortgages were in the foreclosure process in the third quarter. The percentage was the highest in the survey's history, and the group expects high numbers of foreclosures to continue into next year.
Areas where overall economic conditions were weak, including Michigan and Ohio, drove up the national foreclosure numbers, as did areas where there was much investor speculation, including California, Nevada and Florida. Defaults on adjustable-rate loans -- especially subprime loans made to borrowers with weaker credit histories -- caused a lot of the strain; when the mortgage's teaser period was up, homeowners couldn't keep up with payments.
The mortgage meltdown this summer made it tougher for some borrowers to get a loan, another stumbling block in this housing market. In particular, nonconforming loans, which can't be bought by government-sponsored mortgage agencies Freddie Mac or Fannie Mae, were harder or more expensive to come by.
Many borrowers with good credit and a decent down payment were fine, but subprime loans, intended for borrowers with poor credit histories, became a thing of the past. Alt-A loans, which required little or no documentation, became a rarity. And rates on jumbo loans went through the roof, making it tougher for home buyers in expensive markets.
Some borrowers who could qualify for a Federal Housing Administration insured loan turned to those, and proposed FHA modernization may help some borrowers even more. But in the second half of the year, the credit disruptions slowed down an already sluggish market.
Waiting for the rebound
Rick Loughlin thought the Boston market appeared to be "really coming alive" this summer.
"Then we had the mortgage crisis," said Loughlin, chairman of the Greater Boston Real Estate Board and president of Coldwell Banker Residential Brokerage New England. The borrowing ability of many individuals took a hit, reducing the number of buyers able to enter the market and stranding homeowners looking to trade up.
The lending landscape isn't likely to change much in the near term, with no-documentation and low-down payment loans remaining harder to come by, Moody said.
Perhaps the only bright spot in the mortgage arena this year was low interest rates on conforming loans. The average rate on the 30-year fixed-rate mortgage fell below 6% at one point in December; NAR expects the 30-year to rise to about 6.4% by the end of 2008.
The low rates "should have provided a lift to home sales, but it has not," said Lawrence Yun, NAR's chief economist. That indicates to him that the elevated cost of jumbo loans is still taking a toll. If conforming loan limits were raised to accommodate expensive markets, it could have a greater impact on housing than the current low conforming rates have, he said.
Sitting on the sidelines
The home price drops encouraged a number of people to put home buying decisions on hold. In some of the most sluggish markets, sellers who don't absolutely need to sell aren't attempting to do so; those who do are offering price cuts and concessions to make the deal.
"A lot of buyers and investors are sitting on the sidelines. They feel unsure what is happening in the marketplace," said Devin Reiss, president of the Greater Las Vegas Association of Realtors. Some mistakenly think that it's impossible for anyone to get a mortgage nowadays, even with good credit, he said. Often, however, fears revolve around the undesirable scenario of buying a home only to watch it decrease in value a short time later.
His advice for bargain hunters: Don't wait too long.
"If we start to see demand go up and supply go down, prices will go (up) with it," he said.
But probably the best advice is to know your market before making any kind of move.
"A hallmark of the downturn is how broad it is across the country," said Economy.com's Zandi. But even in poor-performing markets there could be good neighborhoods, he said, adding that housing conditions vary "block to block."
NAR reported that 93 out of 150 metropolitan areas showed increases in median existing single-family home prices during the third quarter of 2007, compared with 2006, even though price drops in other areas brought down the national median price.
Still, Bob McNamera, a real-estate agent with Pasquesi Realty in Chicago, said that some people are staying out of the market based on what they hear about general trends.
"They hear it's a bad market, and don't do any more homework," he said. First-time buyers, however, with a down payment and decent credit, could find bargains, he added.
Even in Stockton, Calif., an area hard-hit by foreclosures, Renee Becker, a Realtor and vice president of Beck Realtors, has hope for next year. The deals in the foreclosure inventory might bring back more investors and help fuel a slow and gradual recovery, she said.
CHICAGO -- After a year of falling house prices in numerous parts of the country and a meltdown in the mortgage market that affected borrowers regardless of their ZIP code, many hope that housing markets will finally start to get better next year.
But if there's any improvement in 2008, it may be relatively modest.
It's difficult to get a consensus on exactly when housing will turn the corner. Local markets will certainly vary, but at the least it's likely that some of the same problems that plagued 2007 will carry over into next year.
At best, market conditions could start to stabilize, with home sales regaining strength. If more buyers get back into the market, some of the huge inventories of new and existing homes for sale can begin to be worked off.
"The only reason why demand is finding a bottom is because sellers are cutting their prices," said Mark Zandi, chief economist of Moody's Economy.com. "There was a sense that the market would cool -- I don't think there was a sense it would crash. And it crashed."
The National Association of Realtors predicts a slight increase in existing-home sales next year but a decline in new-home sales. Others aren't as optimistic, including the Mortgage Bankers Association, which is predicting that sales won't pick up until 2009.
After the median price for existing homes dropped 1.9% in 2007 to a projected $217,600, NAR forecasts that the median price will rise 0.3% to $218,300 in 2008.
But the MBA is expecting prices of existing homes to decrease 2.93% in 2007 and 2.04% in 2008; new-home prices should decrease 2.72% in 2007 and 1.96% in 2008.
A recent Economy.com report, "Aftershock: Housing in the Wake of the Mortgage Meltdown," predicts home sales will hit bottom in early 2008, with housing starts hitting bottom mid-2008.
But prices will continue to drop, and by early 2009 home prices will have fallen about 13% nationally from their peaks, according to the report. Prices will have fallen more than 15% if nonprice discounts to buyers are taken into account.
Housing's ills
Housing's most fundamental problem, according to the Economy.com report, is the excess of unsold inventory lingering in many of the country's local markets. The supply of homes for sale hit its highest level in 22 years in October, according to NAR.
Overbuilding is a culprit in many markets, and investors who are unloading units bought during the boom are adding to the massive supply, the National Association of Home Builders pointed out in a recent forecast. In December, the group reported that single-family housing starts were down by about 50% from a record high at the beginning of 2006.
"Once we hit bottom ... we're going to stay there for awhile," at least in terms of new construction, predicted Richard F. Moody, chief economist of Mission Residential.
Adding to the already elevated inventories are foreclosures hitting the market. According to the MBA, 1.69% of first-lien mortgages were in the foreclosure process in the third quarter. The percentage was the highest in the survey's history, and the group expects high numbers of foreclosures to continue into next year.
Areas where overall economic conditions were weak, including Michigan and Ohio, drove up the national foreclosure numbers, as did areas where there was much investor speculation, including California, Nevada and Florida. Defaults on adjustable-rate loans -- especially subprime loans made to borrowers with weaker credit histories -- caused a lot of the strain; when the mortgage's teaser period was up, homeowners couldn't keep up with payments.
The mortgage meltdown this summer made it tougher for some borrowers to get a loan, another stumbling block in this housing market. In particular, nonconforming loans, which can't be bought by government-sponsored mortgage agencies Freddie Mac or Fannie Mae, were harder or more expensive to come by.
Many borrowers with good credit and a decent down payment were fine, but subprime loans, intended for borrowers with poor credit histories, became a thing of the past. Alt-A loans, which required little or no documentation, became a rarity. And rates on jumbo loans went through the roof, making it tougher for home buyers in expensive markets.
Some borrowers who could qualify for a Federal Housing Administration insured loan turned to those, and proposed FHA modernization may help some borrowers even more. But in the second half of the year, the credit disruptions slowed down an already sluggish market.
Waiting for the rebound
Rick Loughlin thought the Boston market appeared to be "really coming alive" this summer.
"Then we had the mortgage crisis," said Loughlin, chairman of the Greater Boston Real Estate Board and president of Coldwell Banker Residential Brokerage New England. The borrowing ability of many individuals took a hit, reducing the number of buyers able to enter the market and stranding homeowners looking to trade up.
The lending landscape isn't likely to change much in the near term, with no-documentation and low-down payment loans remaining harder to come by, Moody said.
Perhaps the only bright spot in the mortgage arena this year was low interest rates on conforming loans. The average rate on the 30-year fixed-rate mortgage fell below 6% at one point in December; NAR expects the 30-year to rise to about 6.4% by the end of 2008.
The low rates "should have provided a lift to home sales, but it has not," said Lawrence Yun, NAR's chief economist. That indicates to him that the elevated cost of jumbo loans is still taking a toll. If conforming loan limits were raised to accommodate expensive markets, it could have a greater impact on housing than the current low conforming rates have, he said.
Sitting on the sidelines
The home price drops encouraged a number of people to put home buying decisions on hold. In some of the most sluggish markets, sellers who don't absolutely need to sell aren't attempting to do so; those who do are offering price cuts and concessions to make the deal.
"A lot of buyers and investors are sitting on the sidelines. They feel unsure what is happening in the marketplace," said Devin Reiss, president of the Greater Las Vegas Association of Realtors. Some mistakenly think that it's impossible for anyone to get a mortgage nowadays, even with good credit, he said. Often, however, fears revolve around the undesirable scenario of buying a home only to watch it decrease in value a short time later.
His advice for bargain hunters: Don't wait too long.
"If we start to see demand go up and supply go down, prices will go (up) with it," he said.
But probably the best advice is to know your market before making any kind of move.
"A hallmark of the downturn is how broad it is across the country," said Economy.com's Zandi. But even in poor-performing markets there could be good neighborhoods, he said, adding that housing conditions vary "block to block."
NAR reported that 93 out of 150 metropolitan areas showed increases in median existing single-family home prices during the third quarter of 2007, compared with 2006, even though price drops in other areas brought down the national median price.
Still, Bob McNamera, a real-estate agent with Pasquesi Realty in Chicago, said that some people are staying out of the market based on what they hear about general trends.
"They hear it's a bad market, and don't do any more homework," he said. First-time buyers, however, with a down payment and decent credit, could find bargains, he added.
Even in Stockton, Calif., an area hard-hit by foreclosures, Renee Becker, a Realtor and vice president of Beck Realtors, has hope for next year. The deals in the foreclosure inventory might bring back more investors and help fuel a slow and gradual recovery, she said.
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