Ron Estell blogs about the highs and lows of the January market, and shares his forecast for the rest of the year.

“This year’s challenge will be interest rates. The federal government bought mortgage backed securities in order to keep interest rates low. The announcement has been made that the purchase of mortgage backed securities will continue until June of this year.

After that point, we expect that market rates will increase. Bank-owned and short-sale investment opportunities will also be plentiful, but with foreclosure rates declining there may not be the continued downward pressure on prices later in the year.”

It may be premature to predict the real estate market developments,  but it is always interesting to watch the trends to see how they affect you and, hopefully, they will help you prepare for the rest of the year to come.

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Improvements in the economy have been small but varied. Most sectors had seen growth over the past few months except unemployment. However, the unemployment numbers for the month of November were just released, and although the improvements are incremental, they are certainly a step in the right direction.

David Welch blogs about how job growth will affect the housing market:

“The employment report came out and the expectation was that 130,000 jobs would be reported lost in November, but the actual number was only 11,000. The better news was that the unemployment rate actually went down a couple of ticks to 10%. It may not be time to start celebrating, but it is close.

As the employment situation improves, people will begin to purchase homes at a more brisk pace, absorbing the current inventory. As the inventory begins to go down, prices will begin to rise. At some point, new home builders will begin to see increased sales. They will need to step up production leading to improvements in construction employment. I think we will be seeing some real improvements by the end of the first quarter of 2010.”

Unemployment has fallen just in time for the holidays. A major factor affecting consumer confidence, the jobless rate has kept many from spending or turning to credit this holiday season. As Welch speculates, larger steps towards economic improvement could be the result if unemployment numbers continue to fall.

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Mortgage interest rates are setting records again, as they fell to 4.78 percent, matching the previous low from a year ago.  The falling rates come as a surprise to those who expected economic pressure to  drive rates higher as the year ended. But, even as the economy shows signs of improvement, inflation has stayed low.

Ki Gray blogs about the historically low mortgage rates:

“Mortgage rates fell this week with 3 of the 4 major mortgage products hitting all time lows. The most important of the four mortgage products -the 30 year rate- fell to 4.78 from 4.83, which was equivalent to the previous low. The 15 year mortgage product hit 4.29, beating the previous low of 4.32 reached last week. The 5 year ARM came in at 4.18, breaking the previous low.

What’s interesting is that we keep waiting for mortgage rates to increase. Some have speculated that rates could move into the double digits in the next two years. But while this discussion has been occurring, mortgage rates have continued to drop and reach historical lows.”

Gray, along with many analysts, speculate that these low rates are the calm before the inflation storm. Predictions of rates moving into the double digits have been circulating since last year, but as of yet, none have come to fruition. It may simply be just a matter of time, however. As Gray points out, from here, there is only one way  interest rates will likely go, and that’s up.

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Complaints about the slow and inefficient foreclosure  process continue as homeowners struggle to find ways to keep their homes. Banks have yet to rectify many of the wrongs committed by predatory lending practices even as  the line for refinancing gets longer. Furthermore, small businesses are closing due to tight credit and poor bank management. The overall effect is a burden on the economy as a whole, creating the need for government intervention.

Ki Gray blogs about mortgage lenders receiving government scrutiny:

“Wells Fargo, the receiver of $25 billion in bank bailout money, was the primary lender on two recently shuttered businesses in Alabama. Wadley company Plantation Patterns and Anniston corporation Anniston Sportswear both filed for bankruptcy, and Wells Fargo was the primary lender for both companies. According to federal statistics and a local mayor’s report, a total of more than 660 jobs were lost in both closings.

Not unfamiliar to federal scrutiny, Countrywide came under the federal microscope again last year, this time by a federal bankruptcy court official. Accused of destroying, losing or misplacing $515,000 in checks issued by homeowners, the home lender was further accused of adding inappropriate charges to the bankruptcy debt of homeowners.”

The list of mortgage lenders under scrutiny includes most of the major players in the federal bailout, adding insult to injury. Not only are they under fire for their sub-prime mortgage practices, but the banks are also being watched closely for predatory practices for reverse mortgages that prey on the elderly.

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Among the numerous government-sponsored enterprises (GSE), there are a few that center around housing. Fannie Mae and Freddie Mac are two of the GSEs that were established to improve the efficiency of capital markets. To do this, they act as intermediaries to assist lenders and borrowers. Part of this assistance is done by setting guidelines for mortgages, called conforming loans.

Bob Phillips blogs about 2010 conforming loan limits:

“A conforming mortgage is one that, quite literally, conforms to the mortgage guidelines set forth by Fannie Mae or Freddie Mac. Each year, the government sets the maximum allowable loan size for a conforming mortgage, based on ‘typical’ housing costs nationwide. Loans in excess of this amount are typically called ‘jumbo’.

As home prices increased from 1980 to 2006, so did conforming loan limits. Since then, however, as home prices have dipped, the conforming loan limit has held. Now, in 2010, for the fifth consecutive year, the government set $417,000 as the nation’s conforming mortgage loan limit.”

Phillips continues his post by explaining that there are several instances when the conforming loan limits do not apply. These areas are considered “high-cost” areas and are given a range of up to $729,750. 

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New laws and regulations aim to reduce the chances of another housing collapse created by deregulation. As these new laws come into effect, it’s a REALTOR®’s responsibility to not only know them but to know how the new laws will change the buying and selling process.  Although these changes may seem like a burden as they add days to an already lengthy process, they also enhance a Realtor’s ability to gather information.

Christopher Gilliam blogs about how new government regulations can impact a closing:

“Recently there have been a number of significant changes to federal laws, regulations and statutes as well as new legislation regarding the lending and real estate industries and real estate transactions. Each change affects homebuyers and sellers, but they all aim to standardize or further regulate the real estate and lending industries in order to further increase transparency and improve the real estate transaction experience for consumers.

Two pieces of legislation enacted by the federal government are the Home Ownership and Equity Protection Act (HOEPA) and the Housing and Economic Recovery Act (HERA). The Federal Reserve Board published the regulations for complying with HOEPA and HERA in the Truth in Lending Act.  Both HOEPA and HERA will affect the timing of real estate transactions.”

Gilliam goes on to explain how the Secure and Fair Enforcement (SAFE) act for mortgage licensing is part of a movement to provide consumers with information to find safer and better deals on their mortgage. While many of the new regulations can add days to a closing, creating a better home buying experience overall is worth the delay.

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The $8,000 tax credit for first-time buyers served as the catalyst, when mixed with low prices and record low interest rates, ignited home sales across the country. Other than the “Cash for Clunkers” program, the tax credit was the most successful use of recovery dollars, with more than a million Americans applying for it. The National Association of REALTORS®  has gotten behind the movement to extend the credit for another year, but Capitol Hill has yet to sign off on an extension.

Anthony Licciardello blogs about extending the first time buyers tax credit:

“When you close the book on this year, it will be remembered for many things: banking bailouts and government takeovers over several major financial, auto, insurance businesses. You have to say, the tax credit given to first-time homebuyers, has been profoundly positive, and probably one of the best investments the government has made to date in this crisis.

Since this newest first-time home buyer tax credit was instituted, Staten Island home sales have risen steadily from the third quarter on, a statistic that was appearing nationwide. In both 2008 and 2009, IRS data has shown 1.4 million first-time homebuyers across the country have filed applications for the tax credit. How many of these folks would have bought a home otherwise, well, that is not clear.”

Opponents of the credit believe the program is doing little to motivate buyers or that tax credits add to the deficit. Realtors point out that when a home is sold to a first-time buyer, it usually means that the seller is moving up to another home as well. The result is a ripple of economic growth, spurred by incentives like the tax credit.

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California remains among the top four states with the highest foreclosure rates, joined by Florida, Nevada, and Arizona. In an effort to curb any future problems with predatory lending and sub-prime loan fraud, Governor Arnold Schwarzenegger has approved seven new laws. These laws directly affect the mortgage industry and provide more consumer protections to homeowners and borrowers.

Erin Attardi blogs about the new California laws:

“Governor Schwarzenegger signed several pieces of legislation into law that will affect real estate transactions in the state of California – all for the better! SB 36, by Senator Ron Calderon (D-Montebello), creates licensing requirements for all residential loan originators.

SB 237, by Senator Ron Calderon (D-Montebello), creates a registration program for appraisal management firms. SB 239, by Sen. Fran Pavley (D-Agoura Hills), makes it a felony to commit fraud on a mortgage loan application.”

These new laws, writen by Assemblyman Ted Lieu (D-Torrance), are aimed at keeping current homeowners out of foreclosure and preventing future homeowners from experiencing this same type of crisis.

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Banks accused of predatory lending are now the center of lawsuits filed by individuals who have lost their homes. Many of these homeowners were middle class families who were foreclosed upon after their interest rates adjusted and they could no longer afford their homes. Many argue that the same banks that are now taking their homes should have known the loans were questionable to begin with.

Yanni Raz blogs about lenders being sued:

“Wells Fargo, Countrywide Financial and Citigroup are just a few among the rest of the defendants. Borrowers who are suffering with such issues are turning to the legal system to save their homes. Many professionals say they have not seen so many cases in over 23 years.

Some homeowners are seeking the courts’ help individually, while others are serving as part of class action lawsuits. With foreclosures continuing to rise, borrowers are looking to force banks to modify unaffordable loans or to stop them from foreclosing on homes. Often, they also seek money for loss and damages.

Banks have faced lending lawsuits and have paid millions of dollars in settlements. But the recent housing boom was fueled by questionable loans that many borrowers had no hope of repaying, because realistically they would not be able to afford it in the long run.”

Raz continues by explaining that state attorneys general has gotten involved in several cases as well, urging lenders to modify loans and help troubled homeowners. Unfortunately, with so many people affected by the sub-prime mortgage crisis, resolution for these homeowners may take years.

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Florida’s foreclosure market has been the center of attention as the hard-hit state shows signs of recovery. As recently as August of this year, Florida had amassed a backlog of foreclosures that accounted for 15 percent of the nation’s total foreclosure listings. Now, as the state begins to turn a corner, Florida’s foreclosure filings fall as the number of foreclosures nationwide still rise.

David Welch blogs about foreclosure rate drops in Florida:

“There are a number of possible causes for the slow down. Of course, if you read my last quote, I am holding out hope that we are really turning the corner on this trend. The three hardest hit states were also areas where the most speculative buying was taking place.

The foreclosures I was seeing a year or two ago were frequently new or nearly new homes in fantastic condition. Investors were the first to just walk away from these properties, because they had little invested in them.”

A six percent fall in foreclosure inventory is certainly a step in the right direction. Even though Florida remains the state with the fourth highest inventory of foreclosures, Welch hopes that the fall in inventory is the beginning of a new trend.

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