RISMEDIA, June 28, 2010—(MCT)—Mortgage rates have tumbled to record lows, but high unemployment and job jitters by still-working Americans mean the milestone is unlikely to attract enough borrowers to boost the unsteady housing market, economic and real estate professionals say.

Mortgage buyer Freddie Mac reported recently that the average interest rate on a 30-year fixed-rate mortgage in the U.S. slipped to 4.69%, down from 4.75% last week. A year ago the rate was 5.42%.

The 4.69% rate is an all-time low for Freddie Mac since it began tracking 30-year mortgages in 1971. Freddie Mac’s rate assumes an average point of 0.7, which would translate to a fee of about $1,400 on a $200,000 mortgage.

However, many consumers are taking a pass on the opportunity to purchase homes, which also have come down in cost during the real estate slump, regardless of low interest rates.

“We can talk about the lowest rates ever, but if there’s no one looking to buy a house, then it’s not of any great use,” said University of Wisconsin-Whitewater economics professor Russell Kashian. “Generally in the economy, this isn’t going to have a huge impact.”

Bank Mutual chief executive Michael T. Crowley Jr. put it this way: “If somebody had a good job and felt they were going to be spared anything bad happening to their work environment, it’s a great time to buy and lock in that price and interest rate as well. The trouble is, like everything else in life, when you can least afford it is when some of these opportunities present themselves.”

Interest rates have been trending down over the past couple of months as investors concerned about world affairs and the economy have sought the safety of Treasury bonds. That has pushed down yields on the bonds and mortgage rates tend to track with Treasury yields.

After getting a boost late last year and this spring from special economic stimulus tax credits, the housing market has begun to slow down, Freddie Mac and local real estate pros said. To be eligible for a tax credit of up to $8,000 for first-time buyers and $6,500 for move-up buyers, consumers had to have a signed contract to purchase a home by April 30 and then close before July 1.

“We’re kind of in a lull period that everyone knew was going to come after the tax credits ended, and now it’s just waiting until the market kicks back in and supply and demand are more in balance,” said Mike Ruzicka, president of the Greater Milwaukee Association of Realtors.

There could be more mortgage refinancing than home-buying prompted by the lower rates, but that appears to vary from lender to lender.

After sporadic surges in refinancing in 2005, 2006, 2007 and part of 2008, many people have already obtained mortgage rates lower than 5%, Crowley said. It might not be worth it to many people to pay closing and transaction costs to shave some dollars off the monthly payment, he said.

“And some of them have met hard times, and maybe their credit report doesn’t look as good as two or three years ago, or maybe they lost their job or there’s some other stress going on,” Crowley said. “So some of them are reluctant to expose themselves to another underwriting process.”

But Brian Wickert, president of Accunet Mortgage in Butler, said refinancing activity has been brisk as rates have ratcheted downward. Wickert said, however, that anyone thinking of refinancing needs to consider how closing costs, which normally are about $1,300 in Wisconsin, and paying points would change the ultimate expense. Some mortgage lenders hype the low rates in advertising but fail to mention their transaction costs, he said.

“When it comes to mortgages, the rate is the bait and the closing costs are the hook. A borrower really has to pay attention to both when judging whether it’s worthwhile to refinance,” Wickert said.

David Clark, a Marquette University economics professor who monitors home sales in Wisconsin, said he didn’t think the record low rates would trigger “a large movement into refinancing” because many people already had done so at rates that weren’t a lot higher. Improving the housing market will take more than low rates, he said.

“It really comes down to a confluence of factors that includes jobs, which ultimately affects consumer confidence in terms of their willingness to make big purchases,” Clark said.

Copyright (c) 2010, Milwaukee Journal Sentinel

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RISMEDIA, June 26, 2010—(MCT)—When the going gets tough, the houses get smaller. Or at least that’s what data from the U.S. Census Bureau are suggesting.

The average size of a new single-family house shrank significantly from 2008 to 2009, the census figures show.

According to the data, the national average decrease was 51 square feet, to 2,422 square feet. In the Northeastern United States, the change was more dramatic: House size diminished by more than 200 square feet, to 2,529 square feet.

Is this a victory for the anti-McMansion forces that have spent much of the last decade railing against the waste, overconsumption and isolation that very big houses can promote? Not so much.

“We also saw a decline in the size of new homes when the economy lapsed into recession in the early 1980s,” said David Crowe, chief economist of the National Association of Home Builders.

Philadelphia economist Kevin Gillen, vice president of Econsult Corp., said that buyers are having fewer children, so they need less space. They’re also looking for more centrally located and eco-conscious properties.

“So the data do not indicate that buyers are looking for smaller homes because they think small is beautiful,” Gillen said. “Rather, they want homes that are more energy-efficient, with a more urban location and with fewer bedrooms—that all naturally translates into a smaller home.”

With some small year-to-year variations, houses have grown almost unceasingly since 1978, census data show. In the early 1980s, the decline in new-home size was temporary—30 years ago, the average size was 1,700 square feet. This time, the shrinking new house appears to be related to several, perhaps longer-term causes—conditions that Crowe said are likely to be around for awhile:

-A greater percentage of all homes are being purchased by first-time buyers, who don’t have to worry about selling old homes in a tough market. Nor do they tend to have a lot of money to buy houses.
-Consumers have a growing desire to cut energy costs.
-Buyers have smaller amounts of equity in their current homes to roll into their new ones.
-Credit standards are tighter, and there is less focus on home buying as an investment.

The largest share of buyers taking advantage of the recently expired tax credits were first-timers, figures from the National Association of Realtors show. In April 2010 alone, 49% of those buying previously owned homes were first-timers, up from 44% in March, the numbers show. Qualified first-time buyers were eligible for up to an $8,000 tax credit.

Moreover, since 2006, when the nationwide real estate boom peaked, sales have been shifting toward lower-price segments of the market—less than $350,000.

Because of that, “new construction, at least the relatively small amount that there is, has started to reflect smaller footprints,” said Michael Feder, president and CEO of Radar Logic of New York, which tracks real estate values. “This is probably a result of targeting a sale price and backing into what can be built,” Feder said—meaning that if you know what price range will sell, you build a house to fit it.

The shift back toward sales of homes costing less than $350,000 “reflects a decline in home prices in all price segments,” he said, “as well as a decline in demand for expensive homes due to the economic downturn and the paucity of housing credit, particularly jumbo loans” (loans over $417,000 in the Philadelphia area).

On average, home sales for less than $350,000 have increased 12% year-over-year during the months since January 2009, while sales of houses priced from $350,000 to $900,000 have decreased 8%, Feder said.

Although energy efficiency—a component of “green” building—has been increasing in importance among new-home buyers, it isn’t yet a critical part of the decision-making process—especially with credit tighter and price a major concern, market research indicates.

In a members survey conducted last summer by the National Association of Home Builders, respondents said that “among buyers who are willing to pay more for green features, more than half—57%—are unlikely to pay more than an additional 2%” for them, said Joe Robson, the group’s former chair.

As record numbers of foreclosures mount across the country and the brakes are only now being put to four years of home-price declines, fewer Americans are buying houses as surefire investments.

A Fannie Mae survey in April of 3,400 Americans 18 and older showed reasons such as safety and quality of schools as the driving factors in owning a home.

“Consumers are still committed to owning a home, but are showing increased cautiousness,” said Doug Duncan, Fannie Mae’s chief economist. “They are rebalancing their attitudes toward housing and home ownership by adopting a more realistic, long-term approach and are less willing to take risks.”

(c) 2010, The Philadelphia Inquirer.

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San Francisco real estate mogul Walter Shorenstein died Thursday afternoon. The 95-year-old was one of the nation’s most successful businessmen, and one of its 400 richest men. View full post on

RISMEDIA, June 25, 2010—(MCT)—Sales of newly built U.S. homes collapsed in May 2010, the government said recently, falling to a record low and stirring concerns among some economists that the housing market would stumble again now that a popular federal tax credit for buyers has expired.

The Commerce Department said new homes sold at a seasonally adjusted annual rate of 300,000 units in May, a 32.7% drop from the revised April estimate and 18.3% below the May 2009 figure. It was the lowest sales pace and the biggest decline since the government began tracking figures in 1963. Sales fell across all regions.

While many economists are expecting sales of both new and resale homes to falter in coming months as the effects of the federal tax credit begin to wane, the May drop was significantly larger than most had anticipated.

“No two ways about it, these figures were just awful, when you look at the magnitude of the decline,” said Michael D. Larson, a housing and interest rate analyst for Weiss Research. “Obviously we were all expecting some kind of hangover impact, but this is like what you would have on New Year’s Day.”

The pessimistic read on new-home sales came as a survey released by the Mortgage Bankers Association said applications for home purchases and refinancings fell again last week, marking the sixth decline in the last seven weeks. Taken together, the reports indicate the housing market is weakening despite the availability of the lowest fixed mortgage rates in more than a year.

“The big thing is this is happening while mortgage rates have fallen to historical lows,” Irvine, Calif., economist John Burns said. “If there was ever a time to buy a home, you know now is the time.”

While new home sales make up a much smaller share of the housing market than do sales of previously owned properties, analysts watch them closely to get a read on consumer sentiment and job creation, particularly in the construction industry.

The new-home sales figures also give an indication as to where the broader market might be headed in coming months as new-home sales are recorded when a buyer signs a purchase contract—as opposed to sales of previously owned homes, which are measured when deals close.

The federal tax credit required buyers to enter into a home purchase contract by April 30 and close their deals by June 30. The credit offered as much as $8,000 to first-time buyers and $6,500 for current homeowners.

“Today’s numbers certainly reinforce the idea that housing is weak outside of government support,” said Dan Greenhaus, chief economic strategist for Miller Tabak & Co. in New York. “The question always has been and remains: How quickly will we appreciate; how quickly are sales going to grow without government support? And the answer is: They are likely to be somewhat muted.”

Sales of previously owned homes fell 2.2% in May when compared with April, a separate group reported.

The median sales price of new houses sold last month was $200,900, a 1% increase from the previous month but a nearly 10% decline from the year-earlier median. The Commerce Department estimated that 213,000 new houses were for sale at the end of May, representing a supply of 8 1/2 months at the current pace.

Not all the news was bad. For the first time in two years, fewer homeowners are missing mortgage payments, Treasury Department regulators reported.

Three years have passed since the mortgage debacle made most subprime and nontraditional loans unavailable, and most loans since have been “plain vanilla” fixed-rate mortgages to prime-credit borrowers. The better-performing newer loans stand in contrast to the dicey old ones that finally are being flushed away for good.

The regulators’ first-quarter report on mortgages serviced by large national banks and thrifts said delinquency rates dropped in all categories, including the most default-prone subprime and alt-A loans. (Alt-A borrowers had decent credit scores but added risk factors; an alt-A borrower might have paid interest only at a fixed rate for the first five years with limited documentation of income and assets).

According to the Comptroller of the Currency and the Office of Thrift Supervision, the percentage of mortgages that were current and performing increased for the first time since the agencies began publishing the report in June 2008. Delinquencies fell in all categories, from a single missed payment to 90 or more days of delinquency.

The numbers increased, however, in all foreclosure categories. Compared with the previous quarter, newly initiated foreclosures increased 19% to 370,536; foreclosures in process increased 9% to 1,170,874; and completed foreclosures increased 19% to 153,654.

The regulators attributed the increase to servicers having exhausted efforts to assist holders of troubled loans. Under the government and private loan-modification plans, lenders proceed with seizing and selling homes if foreclosure is the least costly option for banks or loan investors after all modification options are applied.

The developments come as mortgage rates for highly qualified borrowers have dropped to the lowest level since 1950 and 1951. Borrowers with solid credit, 20% down payments and the provable ability to repay were able to find loans at interest rates of 4.25% for a 30-year fixed mortgage and 3.75% for 15-year loans, said John K. Holmgren, a spokesman for the California Association of Mortgage Professionals. To obtain those rates, borrowers would be required to pay 1% of the loan balance in upfront fees to lenders, Holmgren said.

The rates are available for loans of up to $417,000, the standard limit for mortgages that Fannie Mae and Freddie Mac will buy or guarantee. In higher-cost housing markets, where Fannie and Freddie buy larger loans, borrowers would pay a quarter of a point more in interest to obtain mortgages for up to $729,750, Holmgren said.

The U.S. Treasury gave final approval to a previously announced plan to provide $1.5 billion in federal funds to support anti-foreclosure programs in the five states hit hardest by the housing collapse, including $700 million in California to assist moderate-income families and military personnel.

Steven Spears, executive director of the California Housing Finance Agency, said plummeting housing prices and high unemployment “have created a homeownership crisis” in the state.

The state plan includes three mortgage assistance programs and help in finding rental housing for borrowers who cannot afford to stay in their homes after exhausting all other options.

(c) 2010, Los Angeles Times.

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