Faced with finicky lenders, would-be home buyers are increasingly turning to family members, friends, and even strangers they meet online. While this is understandable, given the abundant bargains on the market, they also present significant risks.
Making sense of the story
- So-called peer-to-peer lending sites, such as Prosper and Lending Club, say demand for home-related financing is on the rise. In September, Weemba, a social-networking site, launched a platform to connect lenders directly with prospective home buyers and other borrowers.
- Despite historically low mortgage rates, traditional lenders remain reluctant to provide mortgages to anyone with less than stellar credit. And, in certain markets, lenders are requiring down payments of more than 20 percent of the home’s purchase price.
- Borrowers taking loans from family members – so-called intrafamily loans – save on interest since family members are likely to charge less than the banks. Additionally, parent lenders can earn a higher return from their child’s interest payments than they would on a certificate of deposit or money-market fund. Under federal law, on a loan of more than nine years, parents must charge at least roughly 2.8 percent, in most cases.
- Consumers who prefer to look for loans beyond the family can apply at peer-to-peer lending sites. If approved for a loan after a screening by the companies, applicants may then receive money from investors.
- However, these alternative routes to financing can be expensive for borrowers. Rates at Lending Club run from around 7 percent to 28 percent. At Prosper, rates run roughly 7 percent to 35 percent. The companies say these rates, which are fixed, are higher than traditional mortgage rates in part because their loans are unsecured.
Read the full story
http://online.wsj.com/article/SB10001424052970203518404577094371355763672.html?mod=WSJ_RealEstate_LeftTopNews
The Wall Street Journal
With the monthly cost of owning a home more affordable now than at any point in the past 15 years, homeownership is becoming less expensive than renting in a growing number of cities.
Making sense of the story
- The Wall Street Journal’s third-quarter survey of housing-market conditions in 28 of the nation’s largest metropolitan areas found that home values declined in all but five markets compared with the second quarter, according to data from Zillow Inc.
- Meanwhile, rent levels have risen briskly across the country and mortgage rates, hovering around 4 percent, are the lowest in six decades.
- As a result, monthly mortgage payments on the median priced home – including taxes and insurance – are lower than the average rent levels in 12 metro areas, according to data compiled by Marcus & Millichap.
- Homeownership also is looking more affordable because after several years of declines, apartment rents will rise approximately 4 percent this year, and rents are poised to pick up even more momentum across the country next year, according to Marcus & Millichap.
- Affordability could continue to improve as prices slide even lower in coming months. Price declines are likely because the share of “distressed” sales, including bank-owned foreclosures, tend to rise in the winter, when traditional sales activity cools.
Read the full story
http://online.wsj.com/article/SB10001424052970203764804577060502694077494.html?mod=WSJ_RealEstate_LeftTopNews
Applications for home purchase loans dropped by 20 percent in October from September, even though mortgage rates in October held close to their lowest levels of the year. Compared with one year ago, applications for home purchases were unchanged.
Read the full story
http://blogs.wsj.com/developments/2011/11/11/applications-for-purchase-mortgages-declined-in-october/?mod=WSJBlog&mod=WSJ_Real Estate_BLOGSDEVELOPMENTSFEED
The government is changing its Home Affordable Refinance Program (HARP), making it easier for homeowners to refinance their underwater, high-interest mortgages.
Making sense of the story
- Although HARP has helped more than 890,000 homeowners nationwide by reducing their monthly mortgage payments, there are still millions of homeowners who are too far underwater to participate.
- Under the new rules, homeowners who owe more than 125 percent of the market value of their homes will be allowed to refinance into new loans.
- The program also streamlines the refinancing process for homeowners who are current on their mortgage payments and reduces or removes fees that previously hindered them from refinancing.
- Fannie Mae and Freddie Mac also will reduce the fees they charged in the past to enable borrowers to better afford the new loans. Among the fees that will be reduced or eliminated are those for appraisals, title insurance, and closing costs.
- Fees also will be waived for some underwater borrowers who are refinancing into 20-year or shorter-term loans.
- HARP is only open to borrowers who are current on their payments for the past six months with no more than one missed payment in the past 12 months. The loans must have been originally issued before May 31, 2009, and purchased by Fannie Mae or Freddie Mac.
Read the full story
http://money.cnn.com/2011/10/24/real_estate/housing_refinance/index.htm?hpt=hp_t2
A new paper by Federal Reserve Bank of Boston economists used consumer sentiment data to try to find out how the housing market’s state of affairs was affecting the willingness to buy a home. Age mattered, which suggests a new generation may be coming along that will cast a wary eye at homeownership for a long time to come.
Read the full story
http://blogs.wsj.com/economics/2011/10/18/next-generation-of-homeowners-are-freaked-out/
The Appraisal Institute has released a form intended to help real estate appraisers analyze values of energy-efficient home features.
The Appraisal Institute issued the form as an optional addendum to Fannie Mae Form 1004, the appraisal industry’s most widely used form for mortgage lending purposes. Used by Fannie Mae, Freddie Mac, and the Federal Housing Administration, Form 1004 is completed by appraisers to uphold safe and sound lending. Currently, the contributory value of a home’s green features is rarely part of the equation.
The Appraisal Institute’s addendum allows appraisers to identify and describe a home’s green features, from solar panels to energy-saving appliances. Form 1004 devotes limited attention to energy efficient features, so green data usually doesn’t appear in the appraisal report, or it is included in a lengthy narrative that often is ignored.
More info
California home sales and median price are predicted to improve only slightly in 2012, as the continuation of the tepid economic recovery, uncertainty about the future, and funding challenges for residential mortgages are expected to keep the market moving sideways, with little foreseeable momentum in either direction, according to C.A.R.’s “2012 California Housing Market Forecast” released Tuesday.
The forecast, which was presented today by C.A.R. Chief Economist Leslie Appleton-Young during her luncheon at CALIFORNIA REALTOR® EXPO 2011, says that California home sales next year is for a slight 1 percent increase to 496,200 units, following essentially flat sales of 491,100 homes this year compared to the 491,500 homes sold in 2010.
The California median home price will increase 1.7 percent in 2012 to $296,000 in 2012, according to the forecast. Following a double-digit increase in the median price in 2010, the median home price will decrease a projected 4 percent in 2011 to $291,000.
“2012 will be another transition year for the California housing market, as the continued uncertainty about the U.S. financial system, job growth, and the stability of the overall economy remain in the forefront for all market participants,” said Appleton-Young. “An improvement in job growth, consumer spending, and corresponding gains in housing are essential to a broader recovery in the economy, but would-be buyers will remain cautious as they weigh these myriad uncertainties against the clear opportunities presented by today’s very affordable housing market.”
More info
Counties across the U.S. are discovering that illegal or questionable mortgage paperwork is far more widespread than first thought, tainting the deeds of tens of thousands of homes dating to the late 1990s.
Read the full story
http://www.mercurynews.com/real-estate/ci_18806467
C.A.R.’s Research and Economics recently issued its latest “Real Estate 411” article, which discusses the impact of the U.S.’s credit downgrade and its impact on mortgage rates.
According to the article, the problems with U.S. Treasuries, and the debt crisis here and abroad are adding another layer of uncertainty to an already uncertain marketplace right now. The main question for housing in particular is where mortgage rates are headed.
Standard & Poor’s downgraded the U.S. Treasury and Fannie and Freddie (GSEs) which caused financial market gyrations across the board. However, the other two rating agencies, Moody’s and Fitch, have not made any changes to their credit rating of the U.S. Treasury or the GSEs.
While some have reported the downgrade is likely to lead to a bump in interest rates, in actuality, the yield on the 10-year Treasury, to which most mortgage rates are tied, has hit recent lows because of what is taking place in the global financial marketplace.
More info
HomeSteps, the real estate sales unit of Freddie Mac, is offering “Condo Cash,” a special limited time offer that will provide eligible condominium buyers with up to $1,500 for standard condominium association dues.
HomeSteps’ Condo Cash is limited to buyers who submit offers between Aug. 15 and Nov.15, 2011, and close escrow on or before Dec. 30, 2011. HomeSteps’ Condo Cash offer is valid only on HomeSteps homes that have been on the market for at least 120 days and are sold to owner-occupant buyers.
HomeSteps Condo Cash is not available on HomeSteps condominiums purchased through auctions, sealed bids, bulk sales, or in areas where such offers are prohibited by law.
More info
