June 16, 2017

What Was Happening Before The Recession

It’s Friday desk clearing time for this blogger. “A new report from RealtyAustin shows for the first time ever, the average price for single family homes in the Austin area is nearly $400,000, up 9.6 percent from May 2016. After a long search first time home buyer Caitlin Intrator remains optimistic. ‘I do think the growth will continue, so when I hear that number I think, Yes! Can I just get in today? So tomorrow I can start reaping the benefits.’”

“David Arbit, director of research and economics for the Minneapolis Association of Realtors, said we’re not in a housing bubble. ‘Typically in bubbles, you have easy money, where if basically if you fog a mirror, you can get a mortgage,’ Arbit said. ‘And we don’t really have that anymore.’”

“They were all the rage — then the scourge — of the housing boom and bust. Now they’re back, big time: home mortgages that require tiny or zero down payments from buyers. Several major lenders are offering loans with 1 percent down, and now a large national mortgage company has gone all the way, requiring absolutely nothing down.”

“Movement Mortgage, a top-10 retail home lender, has just introduced a financing option that provides eligible first-time buyers with a nonrepayable grant of up to 3 percent. This allows applicants to qualify for a 97 percent loan-to-value-ratio conventional mortgage — essentially zero from the buyers, 3 percent from Movement. Duke Walker, branch manager for Movement for the Washington area, told me that although the program is brand-new, it’s already ‘going great guns.’ Movement is hardly the only player in this arena.”

“Many San Diegans would like to own a home in the region they work in, but they often struggle with the large down payment. Gearing up for a new generation of buyers, San Diego-based Guild Mortgage has launched a 1 percent down payment mortgage that has some of the easiest debt requirements on the market. Other lenders — Quicken Loans, Guaranteed Rate, United Wholesale Mortgage — have 1 percent down programs, but Guild Mortgage allows the borrower to have the most debt and allows for more sources of income, said an analysis by HousingWire.”

“Norm Miller, real estate finance lecturer at the University of San Diego, said 1 percent down payment programs ignore a lesson from the housing crash: Not having a high amount of equity in a home can be asking for trouble. He said a buyer who overpays for a property by 5 percent, but only pays 1 percent down, could quickly find themselves with negative equity. ‘That’s not an unrealistic scenario,’ he said, noting data from 2005 to 2008 that showed it happening frequently. ‘It’s déjà vu all over again.’”

“Miller said that adjustable rate mortgages weren’t the only factor in the crash, but also dropping home values. Defaults don’t typically happen if a borrower’s home has positive equity, he said. When the value of a home drops, that’s a big factor in defaulting — no matter what type of loan. ‘The system is not set up to stop people from overpaying,’ Miller said.”

“San Francisco, which had the greatest uptick in home values in recent years, now has the weakest market out of the nation’s top 100 metropolitan areas, with annual prices falling for the first time since 2011. ‘We are seeing an increasing number of engineers who don’t want to live in this state of uncertainty. They are opting to go back home to India or China, or they are looking to work in Canada,’ said Mike Grandinetti, chief marketing and corporate strategy officer at Reduxio, an IT firm based in Silicon Valley.”

“For more than 20 years, Mark Eilers, managing director of land services for Colliers International in Tampa, has been helping clients buy and sell land. Q: With prices for residential real estate rising so much, there’s concern that we might be headed for another housing bust. Do you see signs that commercial real estate in general is slowing down or even facing a bust like that in 2007-08? A: (Lenders) are much more methodical in underwriting than they were back then, and they are underwriting more intelligently. Now things have slowed done and people on all sides are being more careful, the lenders, the developers, everybody.”

“Q: Are any types of development cooling? A: Multi- family (apartments). The lending market is tightening up so it’s putting pressure on getting deals done even if they find land. Right now lenders are a bit wary. Are we going to be oversaturated in West Shore, for example, with all the top-dollar rents? How deep is the renting pool? Downtown Tampa is the same way. It’s all predicated on the fact that because land is so expensive, rents have to be really high and (lenders) are concerned, do we have enough business to rent at $2 a square foot? Historically in Tampa, an apartment complex built in 1985 in Carrollwood is getting $1, maybe $1.30.”

“CoreLogic’s latest report places Connecticut’s negative equity share, or percentage of mortgaged homes in which the loan amount is higher than what the home is currently worth, at 9.9 percent — the fifth-highest total nationally. Nevada has the highest negative equity share, at 12.4 percent. Florida, Illinois and New Jersey rounded out the top five. ‘I’m not surprised if that were the case,’ said Michael Barbaro, president of the Connecticut Association of Realtors. ‘I can tell you that what I’ve witnessed is a lot of sellers or would-be sellers that just don’t have the equity to sell.’”

“Barbaro said the fact that millions of people are still underwater shouldn’t be surprising considering what was happening in the lending world before the recession. ‘Prior to the crash, there was a prevalence of high-ratio loans, such as 100 percent financing,’ he said. ‘In addition to the fact that they purchased at the height of the market, (homeowners) didn’t have a lot of equity to begin with.’”

“Searches for ‘overgrown,’ ‘debris’ and ‘dilapidated’ in the Public Eye email inbox yield countless reports of rundown homes in South Jersey. Despite a four-year turnaround in the housing market and an optimistic outlook from officials, Atlantic County still has one of the nation’s highest foreclosure rates. Homes remain vacant years after the recession. While auctions and investors have helped remedy the problem in many towns, residents still notice homes falling into disrepair, with no one seeming to handle the problem.”

“One Egg Harbor Township resident who contacted Public Eye said he’s taken the first step in getting a neglected foreclosed home addressed. The concerned resident said the committee helped him get as far as identifying who currently owns the property, Ditech Home Loans, to which notice has been given. But there has been no response from the Florida-based company.”

“A last-ditch effort may be to look into home and garden show casting calls. A quick scan of the TV seems to suggest the newest reality-show trend is home renovations, and Atlantic County could provide a handful of house-flipper series a season’s-worth of shows.”