KCM Blog: There is no shortage of opinions as to where home prices are headed in 2012. From Clear Capital’s expectation that prices will show a ‘slight uptick’ this year to Fitch’s projection that prices ‘will fall another 13 percent’, there seems to be no consensus as to where real estate values are headed. How can there be such a disparity of opinion among industry experts? Prices are determined by the relationship between supply and demand and there are many unanswered questions regarding both of these components.

Questions about Demand

• Will this be the year that the 5.9 million adults between the ages of 25 and 34 that are still living with their parents decide to purchase a home of their own?
• With mortgage payments lower than rent payments in the majority of the country, will first time buyers finally decide it makes more financial sense to buy rather than rent?
• Will the baby boomers take advantage of the great deals available and start purchasing vacation and retirement homes?
• Will investors continue to purchase large quantities of distressed properties?
• Will hedge funds negotiate a deal with the banks for bulk purchases of foreclosures?

Questions about Supply . . .

Read the rest of Where Are House Prices Headed in 2012?

KCM Blog: Several real estate economists have shown that the average homeowner accumulates more overall wealth than the average renter.[i] However, it is not clear how this is done. Is it that owned property usually appreciates at such a rate that, after considering leverage, returns to ownership are extraordinarily high? Said another way, might homeowners accumulate more overall wealth because ownership is a great levered equity creator through property appreciation? Or, is it that owners acquire greater wealth, on average, because they are systematically paying down a mortgage thereby creating equity thanks to loan amortization? In other words, paying off property creates wealth.

In ongoing research being conducted by Beracha and Johnson,[ii] these and other questions concerning homeownership and the accumulation of wealth are being investigated. In earlier research, Beracha and Johnson show that renting is the superior investment strategy; however, in this earlier strict horserace between buying and renting, a very bold assumption is made. Specifically, it is assumed that any rent savings (from lower rent versus mortgage payments) are reinvested without fail. Thereby, after balancing all of the costs and benefits from ownership and comparing them to renters’ portfolios from reinvesting rent savings, renting wins.

Read the rest of Creating Wealth Through Homeownership – The Proof

KCM Blog: One of the rarely touted advantages of people taking FHA mortgages today is the fact that they are assumable. What that means is, when the FHA homebuyer of today is looking to sell his home, a qualified purchaser can “take over” their loan.

Most people believe that interest rates will return to a “normal” range (between 6.5% and 7%) in a couple of years. When you assume a mortgage, the terms remain the same. This means that a buyer five years from now can enjoy a 4 – 4.5% mortgage by assumption rather than the 6.5% – 7% mortgage they would get without it. Since most people buy homes based on how the monthly payment fits into their personal monthly budget, this is extremely impactful.

As an example, a $300,000 loan at 4% today carries with it a $1,432.25 principal and interest payment on a 30 year fixed mortgage. If offered for sale in five years, the purchaser could assume the $271,858.56 balance with the same $1,432.25 payment and remaining term of 25 years. The total payments over the 25 years would be $429,675.

Read the rest of The Power of Assumability

Palm Beach Post: NORTH LAUDERDALE — Homeowners who protested rocketing insurance bills based on claims of rising rebuilding costs have sparked a big change at the state’s largest insurer.

Citizens, Florida’s insurer of last resort with 1.5 million policyholders, announced Friday it will allow qualified appraisals among other options to set premiums — no longer insisting customers have little choice but to accept results from software known as 360Value.

“We believe that providing these options gives our policyholders and agents more confidence in the valuation process while providing policyholders with adequate protection for their homes,” said Citizens President Scott Wallace.

Advocates for homeowners welcomed the news.

full story here

Palm Beach Post: WEST PALM BEACH — Palm Beach County property owners have until March 1 to apply for a 2011 homestead exemption.

You must be a permanent resident of Florida who has owned and lived in your home before Jan. 1 to receive the standard $25,000 exemption. Homeowners may also be eligible for an additional $25,000 exemption depending on their property’s assessed value.

Property owners who already have exemptions and did not move in 2011 do not need to file. Applications can be filed online at www.pbcgov.com/papa.

Applications also can be filed at service centers in West Palm Beach, Palm Beach Gardens, Delray Beach, Royal Palm Beach and Belle Glade.

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Palm Beach Post: A third year of surging home sales in Palm Beach County has buoyed hopes of a market turnaround as 2011 ended with a 24 percent hike in purchases.

And while year-end median prices for existing single-family homes slipped 15 percent to $193,700, Realtors said Friday that low inventory has kicked up bidding wars that may boost prices.

“It’s been a long down cycle, but it can’t last forever,” said Bill Richardson, president of the Realtors Association of the Palm Beaches. “I really do believe we are in a recovery. It won’t be meteoric, but there will be a steady climb.”

According to the Florida Realtors, which on Friday released total sales numbers for last year and December, 185,921 homes were purchased statewide in 2011, a 9 percent increase from the previous year.

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Palm Beach Post: WEST PALM BEACH — Palm Beach County property owners have until March 1 to apply for a 2011 homestead exemption.

You must be a permanent resident of Florida who has owned and lived in your home before Jan. 1 to receive the standard $25,000 exemption. Homeowners may also be eligible for an additional $25,000 exemption depending on their property’s assessed value.

Property owners who already have exemptions and did not move in 2011 do not need to file. Applications can be filed online at www.pbcgov.com/papa.

Full story here

(Reuters) – About one million American homeowners would get writedowns in the size of their mortgages under a proposed deal with banks over shady foreclosure practices, Housing and Urban Development Secretary Shaun Donovan said on Wednesday.

The deal, which could be struck within weeks, would mark the largest cut in the mortgage load since the start of the credit crisis in 2007 and could pressure the government-sponsored mortgage agencies to also reduce principal on underwater home loans.

“We’re very close to a settlement that would both fix the servicing problems, but also help over a million families around the country stay in their homes and get help,” Donovan said at a U.S. Conference of Mayors meeting in Washington.

Full story here

2012 shows signs of an improving housing market as the U.S. economy continues its forward-moving yet slow road to recovery. Although there are economists projecting housing prices will decline further, aided by distressed property sales that sell at a greater discount, these prices are expected to rebound considerably later in the year and continue into 2013.

Factors that continue to impede a speedier recovery in the housing are consumer confidence, job-growth uncertainty, and tough lending standards that keep many otherwise qualified buyers from financing a home purchase. However, consumer confidence may be showing signs of improvement according to a report released by Fannie Mae on December 7, which revealed that consumer sentiment toward home prices is stabilizing and that, for the first time in six months, more people believe that prices will soon begin to rise. This is an encouraging development, as much of our economic vitality depends upon the overall confidence of the consumer, and could trigger even stronger home sales as more people feel confident that prices will go up.

As the new year begins, many consumers appear to be in a holding pattern, waiting to see how the economy reacts to the different demands both here and abroad. Yet with steadily increasing sales and record-breaking affordability, now is the time to take advantage of these opportunities to buy or sell a home.

Sources: Fiserv, Fannie Mae

Palm Beach Post: Linda Sapp’s reaction to her insurance bill was sticker shock: The annual premium doubled to $4,800, adding hundreds to her monthly mortgage payment.

Her first thought: “There’s no way I can afford my house.”

Her son needs daily help with a medical condition that causes severe swelling in his legs. The Acreage resident works 20 hours a week at Subway to supplement her husband’s income as service manager for a fire-sprinkler company. Her State Farm bill sent her scrambling to find another insurer.

In Boynton Beach, retiree Thomas Spatafora is on a fixed income and said he has never filed a property claim. But annual premium increases just keep on coming from the state’s insurer of last resort, Citizens.

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Palm Beach Post: Florida’s energy future is expected to be controversial once again this year as the legislature begins its session Tuesday.

Some bills propose allowing property owners who produce electricity from renewable sources to sell it directly to tenants, bypassing the utility company.

Other bills would reverse a law that allows utilities to charge customers for nuclear plant planning and related costs before the plant is built.

Florida Agriculture Commissioner Adam Putnam, who oversees the state’s Energy Office, is concentrating on crafting an energy bill that helps clear the way for more renewable energy such as solar and biomass.

“I want an energy bill that can pass. I learned a long time ago in this business you can make a statement or you can make a law,” Putnam said. “It’s our objective to begin to lay the ground rules through this bill for an energy policy for the state that will pass, that will go the distance.”

Full story here

Area Foreclosures
http://www.mlsfinder.com/fl_rmls/markloewenberg/index.cfm?primarySearchType=foreclosure&searchType=city

CHICAGO (MarketWatch) — It’s tougher for just about all mortgage borrowers to get a loan for a home purchase or refinance these days, but many self-employed business owners are really feeling the pinch.

Take Brett Yarmie, who tried getting a mortgage from about four lenders before finding one that would lend him money to buy a home in the Los Angeles area. That’s despite the fact that Yarmie has owned an automotive body shop for 30 years, and this is the third house he has bought.

“This [mortgage] was definitely the most challenging,” he said.

Banks are requiring more financial documentation from all buyers, but because of the variability in their income streams, the finances of self-employed borrowers tend to get a more thorough look. Personal tax returns, business tax returns and financial statements are considered in establishing the overall viability of a borrower, said Franco Terango, senior vice president and divisional executive at Bank of America Home Loans.

full story here

Area Foreclosures
http://www.mlsfinder.com/fl_rmls/markloewenberg/index.cfm?primarySearchType=foreclosure&searchType=city

Palm Beach Post: When Danny Rivera decided he wanted to move to Florida nearly two years ago, the state’s housing market was in full collapse.

Rivera, 50, who works in information technology for Bank of America, thought briefly about buying a new house, but then decided to search northern Palm Beach County for re-sales.

“What I found was that with a lot of those houses, the prices seemed competitive, but then when you figured in the amount I would have to spend on upgrading everything to get what I wanted, I would have had to spend a lot more,” he said.

full story here

Area Foreclosures
http://www.mlsfinder.com/fl_rmls/markloewenberg/index.cfm?primarySearchType=foreclosure&searchType=city

Palm Beach Post: Florida homebuyers will be able to purchase flipped properties with FHA loans through next year as federal officials try to speed the resale of foreclosed and abandoned homes.

The U.S. Department of Housing and Urban Development announced today that it was extending a 2010 waiver of its anti-flipping regulation, which was scheduled to end Saturday.

The rule forbids Federal Housing Administration-backed loans from being used to buy homes that have been owned by the seller for less than 90 days. It was put in place to thwart the kind of unscrupulous home flipping that drove up real estate prices during the boom and which is partly blamed for the market crash.

Full story here

Palm Beach Post: Losses to South Florida home values are estimated to be $6.5 billion this year, an amount that, while daunting, is a considerable improvement from 2010.

Last year, Palm Beach, Broward and Miami-Dade counties lost a combined $28.6 billion in housing values, according to a recent report from real estate analysts at Zillow.

Nationwide, home values in 2011 dropped by $681 billion, down from the previous year’s staggering loss of $1.1 trillion.

But while the thrashing to home worth has lessened, it’s not about to turn around completely, warned Stan Humphries, chief economist for Seattle-based Zillow.

full story here

BankRate.com: To buy or sell in 2012, what with Armageddon coming and all? Absent any ancient Mayan wisdom on real estate strategies, let’s just hope the real cataclysmic event in the real estate market already has passed, even if the rubble from the bubble remains.

A stubborn overstock of households with loans higher than their value will continue to restrain prices and create some major obstacles for sellers in 2012, a year that’s shaping up to be another homebuyer’s market. In fact, recent studies indicate that more than 20 percent of all residential properties with a mortgage are still underwater, hinting that many foreclosures and workouts are still to come.

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Marketwatch: In a year when the average rate on a 30-year fixed mortgage fell to new record lows — it’s been under 4% for more than two months straight now — home prices also dropped, about 3% to 4% over the past 12 months, depending on the index.

It’s not supposed to be that way. You’d think lower rates would help jump-start purchases and that demand, in turn, should push prices higher.

But there’s the rash of foreclosures pushing home values down. And then there’s the problem, these days, of getting financing — lenders’ underwriting standards are much stricter.

And then there’s buyer confidence: If your job’s on shaky ground, why would you want to shell out big bucks to buy a house? While the jobless rate has dropped — it was at 8.6% in November, down from 9.8% in Nov. 2010 and about 10% the year before that — and enough new jobs are being created now to absorb the natural increase in the labor pool, there aren’t enough new jobs yet to absorb the large numbers of long-term unemployed people.

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(Reuters) – Data on sales of previously owned homes from 2007 through October this year will be revised down next week because of double counting, indicating a much weaker housing market than previously thought.

The National Association of Realtors said a benchmarking exercise had revealed that some properties were listed more than once and in some instances new home sales were also captured.

“All the sales and inventory data that has been reported since January 2007 is being downwardly revised. Sales were weaker than people thought,” NAR spokesman Walter Malony told Reuters.

Full story here

Palm Beach Post:

More than 30 percent of Florida homebuyers during the boom year of 2007 had two or more mortgages, evidence of rampant investment that is partly blamed for real estate’s ruination, a recent federal report says.

A Federal Reserve Bank of New York study released this fall uses previously undisclosed credit and loan information to show that home flippers played a bigger role than previously thought in bringing down the market.

In 1999, just 16 percent of Florida homebuyers had two or more loans.

Chronicled on the Fed’s blog this month, the report singles out the hard-hit states of Florida, California, Arizona and Nevada to compare real estate purchases between 2000 and 2010 with the rest of the nation.

full story here

(Reuters) – Brian Keith is busier than ever as the architecture firm he works for rushes to wrap up work on a 300-unit apartment complex in Dallas.

The project is one of dozens the firm, JHP Architecture, has on its hands — a surge of business driven by a rise in demand in the United States for rental properties.

The increased demand has forced JHP to expand, and it expects to keep hiring at least through the first quarter.

“We’re seeing overall work come back and there’s a backlog of contracts to go through,” said Keith, director of urban design and planning at JHP. “There’s strong interest in multi-family units and plenty of pent-up demand.”

With U.S. unemployment at a lofty 8.6 percent, home foreclosures rising and property prices under pressure, more and more Americans have given up the dream of owning, opting instead to rent, a shift that is remaking the face of the U.S. housing industry.

Full story here