1. Foreclosures entering the market as a result of the National Mortgage Settlement
2. Pent up supply of homeowners who have been unable to sell their homes over the last several years

There have been several recent headlines making strong statements about home values in the country. We must be sure to read the ENTIRE report – not just the headlines. Here are four headlines and the portion of the report that reflects the caution in their ‘cautious optimism’.

HEADLINE:

LPS Home Price Index Shows U.S. Home Price Increase of 0.2 Percent in February; Early Data Suggests Further Increase of 0.3 Percent is Likely During March

CAUTION:

“Reasons for caution are clear, as we’ve been here before. Non-seasonally adjusted prices increased for a few months in early 2009, 2010 and 2011 – trends that all ended by summer, after which all the gains – and then some – were lost. As is true this month, those temporary increases were on low sales volumes – about 30 percent lower than at any point since 1998. Furthermore, the inventory of distressed homes remains high, which will continue to put a drag on prices.”

HEADLINE:

Foreclosure hotspots show signs of housing turnaround

CAUTION:

“However, much will depend on the continued health of our economy, specifically job rates, and how lenders will release their foreclosure inventories now that the 49 state AG Agreement has been signed.”

HEADLINE:

Fiserv Expects Home Prices to Stabilize

CAUTION:

“On the other hand, nearly one-half of the metro areas, or 191, saw prices decrease by more than 2 percent, including double-digit losses in Atlanta (-12.8 percent), Reno, Nevada (-10.8 percent), and Tucson, Arizona (-10 percent).

In the fourth quarter of 2011, the average price of a U.S. single-family home fell four percent from the year-ago period, and Fiserv Case-Shiller projects a further decline of 0.8 percent by the end of 2012.”

HEADLINE:  

Home Prices in March Show Monthly Gain: CoreLogic

CAUTION:

“Even with price gains above 5 percent for leading states and CBSAs, Capital Economics said in response to the CoreLogic report that over the year, prices are more likely to stabilize rather than make a dramatic climb.

“There are fears in some quarters, triggered by recent disappointing GDP and payrolls data, of a sharp slowdown in economic growth which could derail the fledgling improvement in the housing market,” said Paul Diggle, property economist for Capital Economics.”

Courtesy of the KCM Blog

NAR’s composite quarterly Housing Affordability Index* rose to a record high of 205.9 in first quarter, based on the relationship between median home price, median family income and average mortgage interest rate. The higher the index, the greater the household purchasing power. This is the first time the quarterly index broke the 200 mark; recordkeeping began in 1970.

NAR President Moe Veissi, broker-owner of Veissi & Associates Inc., in Miami, said market conditions are optimal for home buyers. “For those with good credit, we’ve never seen better housing affordability conditions or market opportunities than we see at present,” he said. “Although home prices are stabilizing and sales are rising, some buyers still have to jump through a lot of hoops to convince a lender that they are creditworthy, even for a mortgage that would be well within their means. This is especially true for self-employed buyers.”

Veissi noted home sales would be much higher if lending standards would return to normal.

The index shows the median income family, earning just under $61,000, could afford a home costing $325,500 in the first quarter, which is more than double the national median existing single-family home price of $158,100. The median monthly mortgage principal and interest payment for a median-priced home would take only 13.5 percent of gross income.

A companion index measuring the ability of first-time buyers to purchase a home also set a record, with the first-time buyer index reaching 135.8 in the first quarter.

Assumptions for the first-time buyer index include a lower income, at 65 percent of median family income, a starter home costing 85 percent of the median price, and a downpayment of 10 percent. This index means the typical entry-level buyer could afford a home costing $182,500, which is well above the overall median price.

“It’s never been easy to buy a first home because of the cash required for downpayment and closing costs, but conditions for first-time buyers who are able to get a mortgage have never been better,” Veissi explained.

Most first-time buyers choose a loan with a lower downpayment, often an FHA-insured loan with 3.5 percent down, and some use the VA program with no downpayment.

Both home prices and mortgage interest rates are expected to edge up modestly as the year progresses, but housing affordability will remain very favorable with the median-income household well positioned to afford a median-priced home. For all of 2012 the index is projected to set an annual record, averaging 191 for the year.

1. The actual data that indicates where the housing market is headed
2. Quotes from analysts who have scrutinized this data

Today, we want to give you a quote by Ivy Zelman which appeared last week in a Wall Street Journal article Stunned Home Buyers Find the Bidding Wars Are Back.

“We very much believe we’ve hit bottom.”

Why is the quote from Zelman important? She is an industry expert consistently recognized by Institutional Investor, Greenwich Associates, StarMine and The Wall Street Journal as an industry-leading analyst. She has been nicknamed ‘Poison Ivy’ for her harsh positions on housing over the last several years. Now, Zelman is calling a bottom and projecting prices to moderately increase in the next twelve months.

Again, another expert on housing is calling a bottom; another bear turns bull.

Courtesy of KCM Blog

The Pending Home Sales Index,* a forward-looking indicator based on contract signings, rose 4.1 percent to 101.4 in March from an upwardly revised 97.4 in February and is 12.8 percent above March 2011 when it was 89.9.  The data reflects contracts but not closings.

The index is now at the highest level since April 2010 when it reached 111.3.

Lawrence Yun, NAR chief economist, said 2012 is expected to be a year of recovery for housing.  “First quarter sales closings were the highest first quarter sales in five years.  The latest contract signing activity suggests the second quarter will be equally good,” he said.

“The housing market has clearly turned the corner.  Rising sales are bringing down inventory and creating much more balanced conditions around the county, which means home prices will be rising in more areas as the year progresses,” Yun said.

The PHSI in the Northeast slipped 0.8 percent to 78.2 in March but is 21.1 percent above March 2011.  In the Midwest the index declined 0.9 percent to 93.3 but is 16.9 percent higher than a year ago.  Pending home sales in the South rose 5.9 percent to an index of 114.1 in March and are 10.6 percent above March 2011.  In the West the index increased 8.7 percent in March to 108.0 and is 9.0 percent above a year ago.

1. On average, to get a short sale approval, it can take 60-90 days.

There could be mortgage insurance and an end investor on the loan as well as the servicer, which means it has to go through three different processes. Bank of America could be the servicer on the loan but they do not actually own the loan, so, the short sale has to pass their guidelines, then go to the mortgage insurer if there is one, then to the end investor like Fannie Mae and Freddie Mac. If you are a buyer and can’t wait at least 60-90 days for an approval and then another 30 days to go to closing, then you need to look at other houses. The worst thing you can do is tie up a house that is in a short sale with no intention of being patient while waiting for a short sale approval. Approvals can come sooner than 60 days, but industry standard is at least 60 days to get an approval or denial.

2. There is a general assumption that you can purchase a short sale for 40-50% under its listed price.  In a short sale the bank comes out and does a valuation of the property and will expect a slight discount, but will not accept a huge amount under the market value.

Hopefully, if the agent who is handling the sale is experienced, they will have already gotten an approved list price from the bank by the time you are interested in making an offer. The bank will usually be willing to negotiate on that price, but will not, in almost every case, take 40-50% off of that price. To that point, you may be able to get a reasonable deal on a short sale, though it will not be, in most cases, as much of a deal as you may be able to get on an REO (foreclosed property). Also to that point, most short sales will be in better condition than an REO. When you look at the potential repairs a comparable REO needs and the time and expense it can take to do those improvements vs. a short sale being sold at a slight market discount with improvements already made, the investment could even out. There are REO properties that can be picked up for a huge discount, but require massive repairs that a comparable short sale may not require.

3. Short sales are a very difficult process and it takes a qualified person to handle this type of transaction.

With this type of transaction it takes a very experienced agent on the listing side as well as the buying side. Make sure before you move forward on the transaction that the listing agent has ample experience dealing with these types of transactions, or you could be tied up in a contract for months that never goes to settlement. There are several different types of short sale processes and each bank’s process is somewhat different; it takes a professional who has had experience with all of these different types of short sales to help facilitate a successful transaction.

4. In most short sale transactions the properties are sold “as-is” and no repairs will be made.

Although there are some exceptions to this rule, speaking in general, short sales are sold “as-is” and no repairs will be made even if they are found during a home inspection. In most short sale transactions the bank will require both the buyer and the seller to sign an addendum that states the property is being sold “As-is” and no repairs will be made.

These are just a few short pointers for buyers who are looking to purchase a short sale as they are a reality in every market, and if you have the patience you may be able to get the home you are looking for at a discount!

Courtesy of the KCM Blog

Total existing-home sales¹, which are completed transactions that include single-family homes, town homes, condominiums and co-ops, declined 2.6 percent to a seasonally adjusted annual rate of 4.48 million in March from an upwardly revised 4.60 million in February, but are 5.2 percent above the 4.26 million-unit pace in March 2011.

Lawrence Yun, NAR chief economist, said the recovery is in the process of settling into a higher level of home sales.  “The recovery is happening though not at a breakout pace, but we have seen nine consecutive months of year-over-year sales increases,” he said.  “Existing-home sales are moving up and down in a fairly narrow range that is well above the level of activity during the first half of last year.  With job growth, low interest rates, bargain home prices and an improving economy, the pent-up demand is coming to market and we expect housing to be notably better this year.”

“We were expecting a seasonal increase in home listings, but a lack of inventory has suddenly become an issue in several markets with not enough homes for sale in relation to buyer interest,” Yun said.  “Home sales could be held back because of supply factors and not by demand – we’re already seeing this in the Western states and in South Florida.”

The national median existing-home price³ for all housing types was $163,800 in March, up 2.5 percent from March 2011.

NAR President Moe Veissi, broker-owner of Veissi & Associates Inc., in Miami, said buyer traffic is up.  “Our members are reporting an increase in foot traffic from a year ago, but more importantly, home shoppers this year are much more serious about finding the right home and making an offer,” he said.  “Stabilizing home prices and historically favorable affordability conditions are giving buyers more confidence, and Realtors® have become more optimistic since the beginning of the year from the positive shift in buyer patterns.”

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries.

http://www.phfa.org/forms/newsletter/phfa_developments/current/UTTM_HOPNewMortProduct_FINAL_April2012.pdf

Income Items:

1.  Gather your documents. Today, many people will have to produce 2 years’ complete tax returns, including W2?s, 1099?s, K1?s, and all the schedules, as well as a month’s worth of pay stubs.
2. Be prepared to explain them. Deductions in your returns and your pay stubs may impact the income your lender will use to qualify you which, in turn, has a big impact on the loan you will get.
3. Have a breakdown of base pay versus overtime for both your pay stubs and 2 years’ W2?s. Lenders treat overtime (and bonus income) differently than your base pay. Be prepared to explain any changes over the last few years because your loan officer will ask you about it.

Asset Items:

1. Start accumulating your bank statements. Lenders look back 3 months from when you sign your contract of sale.
2. You will have to explain any and all large deposits (which are defined as deposits greater than your regular pay check) because lenders want to make sure you haven’t taken out any new loans that aren’t on your credit report.
3. Avoid any significant cash deposits. However, if you did have a cash deposit, understand that the lender will have you source it (a bill of sale and DMV receipt for that motorcycle, for example).
4. If you will be receiving a gift, consult your loan officer on how to document it (from the donor’s ability to how you deposit it).

Credit Items:

1.  Ask your loan officer to run your credit and go over it with them. Believe it or not, most credit reports contain errors. Best to identify them and get working on correcting them as early as possible.
2. Do what you can to pay down your balances to under 30% of available credit to help you get the best score possible.
3. Do NOT close accounts or pay off collection accounts without discussing it with your loan officer. Either one of these logical moves can actually have a negative impact on your score.

When buying a home, remember the Boy Scout motto, “Be prepared”. Following these suggestions will make your loan approval easier and less stressful.

Courtesy of KCM Blog

“Realtor® Nationwide Open House is a fantastic opportunity for those interested in homeownership to connect with a Realtor® who can offer expert guidance and advice on the home buying process,” said National Association of Realtors® President Moe Veissi, broker-owner of Veissi & Associates Inc., in Miami. “During the weekend Realtors® will be on hand to answer questions about the local housing market and provide insights into the social and financial benefits of homeownership. Open houses are also a great way for potential buyers to get a feel for what is available in their local market.”

According to NAR’s 2011 Profile of Home Buyers and Sellers 45 percent of all buyers used open houses as a source in their home search process. This figure suggests the value of open houses even in the Internet era. In addition, buyers in the Northeast region are significantly more likely to use open houses, followed by those in the Midwest region. Women are more likely to use open houses than men, as are buyers who were not born in the U.S. or whose primary language is not English. Older buyers rely more on open houses than younger buyers, and buyers with higher incomes are also more likely to visit open houses.

NAR’s most recent housing affordability index indicates that homeownership is even more attractive now, with affordability conditions reaching their highest level since recordkeeping began in 1970. The index, which is based on the relationship between the median home price, median family income and the average mortgage interest rate, reached 206.1 in January, the first time the index broke the two hundred mark. The higher the index, the greater the household purchasing power. The current index indicates that the typical family has roughly double the income needed to purchase a median-priced home.

“For buyers who can qualify for a mortgage and are willing and able to take on the responsibilities of homeownership, now is a very good time to become a homeowner,” said Veissi. “And for those consumers, Realtor® Nationwide Open House is a great way to kick off the home buying season and learn more about housing issues and the local real estate market.”

To find open houses in your area, visit www.Realtor.com and search for open houses in the Realtor® Nationwide Open House Weekend box on the home page. The special search function will be available beginning April 26.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries.