Patrick Canavan - Orange County Real Estate Voice

The Wall Street Journal
Mistakes housing investors make
With traditional investments delivering low returns, some are considering buying rental housing. However, potential investors should do their homework and avoid the following common
mistakes.
Making sense of the story

Investing in real estate right now can be profitable, if everything goes as planned. Rents are increasing in many areas, and more properties may be coming on the market.

Last month, the Obama administration asked for proposals on how to convert at least some of Fannie Mae’s and Freddie Mac’s inventories of foreclosed homes into affordable rentals.

Traditionally, investors rented out properties for 1 percent of the purchase price per month. However, according to one property management firm, today, some investors are receiving as much as 2 percent of the purchase price.

While it may be true that in some areas home prices are relatively low, that doesn’t mean the property can be rented out. Homes in deserted subdivisions aren’t any more appealing to renters than they are to buyers. The same is true for less-attractive properties or those in less-desirable school districts.

Prior to purchasing a property, investors should also factor in closing costs of 3 percent to 6 percent, the costs to fix up the place and maintain it, and the holding costs.

Investors become landlords, and as such, need to keep in mind that, just like homeowners, tenants may not always be able to pay rent. Evicting tenants can take several weeks.

It’s also important to remember that owning a rental is not the same as owning a home. An owner may put up with flaws in a home that a renter wouldn’t tolerate. Additionally, many states and communities have strict laws for landlords, even for those who own
only one property.

Read the full story
http://online.wsj.com/article/SB10001424053111904103404576558484074477822.html?mod=WSJ_RealEstate_LeftTopNews

The New York Times
When real estate agents make referrals Home buyers have a right to be informed of any business relationship between the real estate agent and the mortgage broker.

Read the full story
http://nyti.ms/piue8q

The Wall Street Journal
New ways to use less energy at home The share of homes being built in the U.S. with environmentally friendly features jumped to 16 percent of single-family starts last year from 2 percent in 2006, says McGraw-Hill Construction.

Read the full story
http://online.wsj.com/article/SB10001424053111903461304576524391474712716.html?mod=WSJ_RealEstate_LeftTopNews

The Los Angeles Times
Many underwater homeowners hampered by high interest rates A total of 10.9 million homes with a mortgage were in a negative equity position at the end of the second quarter, constituting 22.5 percent of all residential properties with a mortgage, according to CoreLogic.

Read the full story
http://lat.ms/mQ02zI

CNN Money
When will home prices spring back? Nationwide, the U.S. housing market remains deep in the doldrums and economists expect prices to fall another 5 percent to 10 percent in many places. Yet, some sellers are seeing signs of a turnaround.

Read the full story
http://money.cnn.com/2011/09/15/real_estate/home_prices.moneymag/index.htm?iid=HP_River

Forbes
U.S. consumers have miserable outlook on housing and growth, with good reason Fannie Mae’s August survey on the housing market found that more than three quarters of Americans (78 percent) say the economy is on the wrong track, and 22 percent expect their own financial footing to worsen over the next year.

Read the full story
http://onforb.es/mTCTNf

The Mercury News
Home buyers find themselves aced out by investors In the Bay Area, about one-fifth of all homes sold in July were purchased by absentee buyers, mostly investors looking for rentals of properties to fix up and then sell, according to DataQuick.

Read the full story
http://www.mercurynews.com/business/ci_18853804

USA Today
Tight standards make mortgages tough to get Following the greatest housing decline since the Great Depression, home lending standards have tightened to their strictest levels in decades, economists say.

Read the full story
http://www.usatoday.com/money/economy/housing/story/2011-09-15/mortgages-tough-toget/50405698/1

KEEP THIS IN MIND
Closed escrow sales of existing, single-family detached homes in California rose to a seasonally adjusted 497,390 units in August, up 8.6 percent from a revised 457,930 in July, according to information collected by the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.). August home sales were up 10.2 percent from the revised 451,520 units sold during the like period a year ago.

The August statewide median price of an existing, single-family detached home sold in California was $297,060, up 1 percent from a revised $294,050 in July, but down 7.4 percent from the $320,860 median price recorded for August 2010.

The Unsold Inventory Index for existing, single-family detached homes was 5 months in August, down from 5.5 months in July and down from a revised 5.8 months in August 2010. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.

The Los Angeles Times
Many homeowners refinancing mortgages to shorter terms borrowers who can afford higher mortgage payments, and who meet lenders’ stricter loan guidelines, often opt to replace their 30-year mortgages with shorter term loans at near-record low rates.

Making sense of the story
The latest Freddie Mac quarterly survey of homeowners who refinanced found that more than one in three borrowers who refinanced from a 30-year fixed-rate loan opted to replace it with 15-year or 20-year mortgages at near-record low rates.

Homeowners considering refinancing into a shorter-term mortgage must have the income or financial reserves sufficient to pay the extra money each month.

Borrowers not only need to have the income or financial reserves, they also have to qualify for a refinance, have the credit score needed, and the home appraisal to support it.

For some low-cost refi programs, lenders want to see at least 25 percent equity in the house. Higher FICO credit score requirements by Fannie Mae and Freddie Mac are another impediment, as both companies reserve their best rates for borrows with FICO scores of 740 or higher.

Read the full story
http://lat.ms/kmv9mS

The Wall Street Journal
While home prices may be falling, insurance premiums are on the rise after five years of relatively stable premiums, some of the country’s biggest insurers have raised rates – or say they plan to.

Read the full story
http://online.wsj.com/article/SB10001424052748704281504576327391187988696.html?mod=WSJ_RealEstate_LeftTopNews

Sacramento Bee
Housing crash means bargains for some buyers distressed properties – short sales and foreclosures – continue to dominate the market, driving down prices for everyone. That’s bad news if you own a home and are watching it slowly slip under water. But for investors, first-time buyers, and those with the ability to move up, the market couldn’t be better.

Read the full story
http://www.sacbee.com/2011/05/22/3644881/housing-crash-means-bargains-for.html

Los Angeles Times
California creating mortgage fraud task force California Attorney General Kamala Harris is creating a 25-person task force to target mortgage fraud of any size – from small operations that preyed on troubled borrowers to corporations that sold risky loans as safe investments.

Read the full story
http://lat.ms/jWf9DP

Los Angeles Times
Foreclosure rate slows as repossession timeline lengthens increased scrutiny of how lenders foreclose on Americans has dragged the repossession process out to unprecedented lengths, driving down the pace at which banks are taking back homes.

Read the full story
http://lat.ms/iu1Ynf

CNN Money
Remodeling your home? Watch out for scams for many homeowners, the warmer months is the prime time to remodel a kitchen or bathroom. But beware – there are some contractors who may offer a deal that’s simply too good to be true.

Read the full story
http://money.cnn.com/2011/05/23/pf/saving/home_remodeling_tips/index.htm

Los Angeles Times
Mortgage delinquencies level off the percentage of homeowners who are behind on their mortgage payments inched higher in the first quarter while the number of new foreclosures declined, a lobbying group for the homelending industry says.

Read the full story
http://latimesblogs.latimes.com/money_co/2011/05/new-mortgage-delinquencies-slow.html

CNN Money
Foreclosures for sale: Big supply, low prices foreclosures accounted for 45 percent of sales in California and Arizona, and 28 percent of all existing home sales during the first three months of 2011, according to RealtyTrac.

Read the full story
http://money.cnn.com/2011/05/26/real_estate/foreclosure_sales_report/index.htm?iid=HP_River

Orange County Register
Calif. pending home sales fell in April the CALIFORNIA ASSOCIATION OF REALTORS®’ pending home sales index shows that the number of new deals going into escrow decreased 11% from March and was down 19.2% from April of last year.

Read the full story
http://lansner.ocregister.com/2011/05/20/calif-pending-home-sales-fell-in-april/110511/

What you should know about the market
Mortgage rates are still relatively low, and with an abundant supply of inventory, house hunters have plenty of opportunity. Nevertheless, the changed housing market has brought new aspects to consider when looking to purchase a home.

During the peak of the current housing cycle, developers began breaking ground on “up and coming” neighborhoods, to meet demand. Unfortunately, that demand stalled in many areas, leaving home buyers to question whether location is still considered favorable. Before housing hunting, buyers should research the county auditor’s website, consult with their REALTOR® on the amount of time homes in the neighborhood take to sell, and inquire about foreclosure rates.

The days of buying a home with no money down are virtually over, with the exception of some very specific VA and USDA loans, which are reserved for certain kinds of borrowers. Additionally, most conventional mortgage mortgages now require at least a 5 percent down payment, and FHA loans generally required approximately 4 percent down.

The housing market will recover, but many analysts disagree on when. Homeowners may have no choice but to stay in their newly purchased home for many years, so buyers should think long term about the size of the home, location, and how it fits into their lifestyle.

The Mercury News
Bankrupt homeowners shed second mortgages Some struggling homeowners are using a little known, but increasingly popular, provision of the bankruptcy code to eliminate second mortgages and avoid foreclosure.

MAKING SENSE OF THE STORY

Bankruptcy laws prevent homeowners from eliminating the debt of a first mortgage if they plan to stay in their home. But second mortgages are treated differently. Second mortgages can be
declared unsecured debt when there is no equity to cover them.

When that happens in a personal bankruptcy proceeding, the second mortgage is put on hold and no payments are required while the homeowner completes a repayment plan for other debts,
which typically takes three to five years. At that point, the second mortgage is eliminated.

While this strategy has gained in popularity among homeowners, mortgage bankers are not in favor of the practice, and have called it "a troubling phenomenon." However, there is little the
mortgage industry can do, aside from seeking to change the law, which could be difficult given the current partisan lineup in Washington.

Read the full story
http://www.mercurynews.com/real-estate/ci_18011666

In Other News...
CNNMoney
Obama: Homeowners need more help President Obama said that struggling homeowners need even more help from the banks, in a CBS town hall that aired Thursday.

Read the full story
http://money.cnn.com/2011/05/12/news/economy/obama_housing/index.htm?iid=HP_LN

Los Angeles Times
Good-faith estimate disclosures ineffective in helping consumers shop for mortgages A survey finds that most home buyers and refinancers ignore the federally mandated disclosures, which
enable them to compare rates and terms for home loans.

Read the full story
http://lat.ms/l6g8be

Sacramento Bee
Home prices continue to slide in March both nationwide and across the region, according to figures by CoreLogic.

Read the full story
http://www.sacbee.com/2011/05/10/3616338/sacramento-area-home-prices-continue.html

San Francisco Chronicle
Homeowners who battled banks share success stories of homeowners who feel mistreated by their banks are commonplace these days. Some homeowners actually do get workable solutions, most commonly loan modifications to reduce their payments.

Read the full story
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2011/05/08/BUU31JAUHB.DTL

Sacramento Bee
California once again ranks as one of worst states for mortgage fraud for the fifth year in a row, California ranks as one of the worst states for mortgage fraud - coming in at number three on the list of the worst states for 2010 behind New York and Florida, according to a report the LexisNexis Mortgage Asset Research Institute released this week.

Read the full story
http://www.sacbee.com/2011/05/09/3613296/california-once-again-ranks-as.html

SmartMoney
For second home purchases, cash is now king though investment properties have struggled in the down economy, real estate agents in destinations like Palm Springs and Palm Beach are starting to see bursts of activity again, with a common thread in many second-home markets: Cash is king.

Read the full story
http://www.smartmoney.com/personal-finance/real-estate/for-2nd-home-purchases-cash-is-now-king-1304539128506/

Los Angeles Times
BofA to open more outreach centers for delinquent homeowners Bank of America plans to triple the number of its assistance offices for homeowners in trouble on their mortgages, including adding seven of the new outreach centers in California.

Read the full story
http://latimesblogs.latimes.com/money_co/2011/05/bofa-to-open-more-outreach-centers-for-delinquenthomeowners.html

The New York Times
Dealing with higher costs of FHA loans the increased cost of FHA mortgages has shifted the math a bit for would-be borrowers. A home buyer with a down payment of less than 20 percent generally has to pay up in some other way to ensure that lenders are protected against default.

Read the full story
http://www.nytimes.com/2011/05/08/realestate/08mort.html?_r=1&ref=realestate

The New York Times
Financing foreclosed homes foreclosure properties, especially those with the water and power turned off, may not qualify for standard financing, but would-be owner-occupants may qualify for a federally insured 203(k) loan.

Making sense of the story

• Would-be owner-occupants who do not have enough money to purchase a foreclosure home using cash, may qualify for the federally insured 203(k) loan, which allows borrowers to roll projected rehab costs into the loan.

• According to one real estate expert, most foreclosure properties are sold as is, and, oftentimes, heat, plumbing, and electric are turned off, making it unlikely a lender will lend money on the home.

• To qualify for a 203(k) loan, buyers generally hire an independent consultant hired by the Federal Housing Administration to review contractor cost estimates and architectural plans for things like whether the work will bring the property up to minimum standards, while not going overboard on improvements.

• Buyers should be aware that not all foreclosure properties are eligible. For instance, a partially built house that has never had a certificate of occupancy requires a construction loan of the kind that a commercial developer would use.

• The interest rate on a 203(k) loan is approximately a quarter of a percentage point higher than on a standard FHA-insured loan, and a buyer also can expect to pay 1 or 2 points.

• Also, as with other FHA-backed loans, down payments may be as low as 3.5 percent, and loan limits apply. Currently, most FHA loans are capped at $729,750.

Read the full story
http://www.nytimes.com/2011/05/15/realestate/financing-foreclosed-homesmortgages.html?_r=1&ref=realestate

Los Angeles Times
Are we facing the end of the 30-year fixed-rate mortgage? Many housing proponents say the government’s move to dismantle Fannie Mae and Freddie Mac means the most popular home loan will be more expensive. But how much more is a matter of debate.

Read the full story
http://lat.ms/igUMTC

Orange County Register
No housing recovery until 2014? More than half of Americans don’t think there will be a housing recovery until 2014 or later, a new survey shows. That’s up from 34 percent who responded that way in November 2010.

Read the full story
http://lansner.ocregister.com/2011/05/19/no-housing-recovery-until-2014/110399/

San Francisco Chronicle
Home sellers are financing buyers with poor credit Financing provided by home sellers, popular in the 1980s when mortgage rates reached 18 percent, is making a comeback in markets that have been hit hard by foreclosures and where tightening lending standards and years of economic distress have drained the pool of creditworthy buyers.

Read the full story
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2011/05/12/BUD41JEM63.DTL

Mercury News
Fixed mortgage rates touch new lows for 2011 Fixed mortgage rates fell this week to the lowest point of the year, offering incentives for homeowners to save money by refinancing their loans.

Read the full story
http://www.mercurynews.com/business/ci_18095581

Los Angeles Times
Foreclosure rate slows as repossession timeline lengthens Increased scrutiny of how lenders foreclose on Americans has dragged the repossession process out to unprecedented lengths, driving down the pace at which banks are taking back homes.

Read the full story
http://lat.ms/iu1Ynf

San Francisco Chronicle
Mortgage disclosures getting another revamp A consumer watchdog agency unveiled two versions of a sample disclosure form Wednesday as part of its efforts to simplify the paperwork borrowers are currently handed when applying for a mortgage.

Read the full story
http://www.sfgate.com/cgibin/article.cgi?f=/n/a/2011/05/18/financial/f090501D83.DTL&type=business

Los Angeles Times
Why are short sales so long and drawn out? It’s understandable that lenders would want to get as much money as possible from a deal in which a home is being sold for less than what is owed on it, but turning short sales into an ordeal is discouraging potential buyers.

Read the full story
http://lat.ms/ku63xM

Press Enterprise
Freddie Mac launches promotion to sell its foreclosed homes This week, Freddie Mac launched its HomeSteps Summer Sales Promotion, which offers to cover up to 3.5 percent of a buyer's closing costs.

Read the full story
http://blogs.pe.com/business/2011/05/in-an-effort-to-reduce.html

What you should know about the market

• Occasionally, homeowners hoping to close a deal agree to purchase home warranties to give the home buyer peace of mind. However, prospective homeowners should do their homework to make sure the policies will actually help.

• Typical home warranties cover the major mechanicals and appliances in a home for one year after the sale. Warranties range in price from $350 to $800. If purchased from reputable companies, home warranties can help homeowners deal with broken appliances, malfunctioning air conditioning, and other problems.

• The policies usually require homeowners to contact the service company when something breaks. The company then sends out a repair person who provides an evaluation for a set fee, usually about $65. Once a professional has determined what the problem is, the warranty company pays for the broken items to be repaired or replaced.

Los Angeles Times
Don’t become a crime victim when you show your home to potential buyers safety should always be a top concern for both real estate agents and home sellers. While holding an open house and allowing potential home buyers to tour the property is an effective means of selling a home, home sellers should be aware of the risks.

MAKING SENSE OF THE STORY

• While most criminals will seek small items and anything they can fit into their pockets, sometimes these “buyers” are actually scoping the home for a future burglary. According to a safety expert who has worked with the NATIONAL ASSOCIATION OF REALTORS® and other groups, first and foremost, people should trust their instincts, so if someone or something is making one uncomfortable, be extra alert and extremely careful.

• If a potential buyer or unknown agent arrives at the house unexpectedly, the homeowner should tell him to call their agent to schedule an appointment.

• Before allowing anyone to enter the house, all lights should be turned on and all blinds, shades, and curtains opened. Homes are safer for showing when someone outside can see inside.

• In advance of an open house, homeowners should remove all valuables, including jewelry, artwork, and electronic equipment.

• Additionally, money, mail, bank statements, credit cards and keys should never be kept lying around, or even in a drawer with easy access.

• Prescription drugs should be kept in locked cabinets, to prevent anyone from stealing them or using the information on the label.

• Professional burglars often linger in rooms, looking for items they can dispose of quickly. They also search for ways to get in and out, scouting possible escape routes and checking for security devices. Couples up to no good often split up so one can check out the house and its belongings, while the other keeps the agent and/or seller occupied.

Read the full story
http://lat.ms/hoOwlg

In Other News…
Reuters Home buyers try to beat “jumbo” loan squeeze Beginning Oct. 1, the government will dial back on the size of mortgages it guarantees in highcost areas like San Francisco New York, and Washington.

Read the full story
http://reut.rs/gqjB4i

Bloomberg
Home vacancies fall in first quarter as foreclosures stall The U.S. home-vacancy rate, a measure of the share of properties empty and for sale, fell to 2.6 percent in the first quarter as foreclosures slowed amid a lender backlog in processing paperwork.

Read the full story
http://bloom.bg/eQGTyF

MarketWatch
Mortgage payoff is a different investment In a world in which debt is a four-letter word, paying off the home mortgage could be a wise move for many people, providing they take the time to do the math or find a financial adviser who can help.

Read the full story
http://bit.ly/fEgUCN

Los Angeles Times
FHA mortgages may still beat loans available from private-sector rivals Although it has raised fees, the FHA continues to offer much higher and more flexible maximum debt-to-income ratios, far more generous underwriting, and lower down payments than conventional lenders.

Read the full story
http://lat.ms/eJXpF

The New York Times
Fallout from a poor credit score If you want to see how quickly you can ruin a great credit score, just skip a mortgage payment.

Read the full story
http://nyti.ms/jBLGsX

The Wall Street Journal
Buyers’ market? Stressed sellers say not so fast Falling home prices should give aspiring homeowners the upper hand this spring, but in a growing number of locations, it doesn’t feel like a buyer’s market.

Read the full story
http://on.wsj.com/erBR6a

The New York Times
Real estate remains in distress as U.S. home prices fall again Housing prices slid back in February to their lowest level of the downturn, fresh proof — as if any were needed — that real estate remains one of the most troubled sectors of the economy.

Read the full story
http://nyti.ms/m7zWYq

Washington Post
Pending sales of existing homes in U.S. rose 5.1 percent in March The number of Americans signing contracts to buy previously owned homes rose more than forecast in March, a sign the industry that triggered the recession may begin to stabilize.

Read the full story
http://bit.ly/l7vlHy

What you should know about the market

• Some home buyers may opt for a condo over a single-family home for a number of reasons. A condominium can provide a less-expensive entry into the housing market, and is a low-maintenance downsizing option for seniors. However, misconceptions about condominium ownership abound, which can often keep potential buyers from considering them as an option.

• Many home buyers view condo fees as an additional expense, compared with owning a single-family residence. However, it’s important to look at what’s included in that figure. Typical condo fees generally include a contribution toward the building’s upkeep and maintenance, but also may include heating costs, water, sewer, garbage-collection fees, and even electricity and cable TV, in some cases.

• Even well-managed condo associations may have what is called a “special assessment,” which is an additional fee that condo owners must pay when the regular condominium fees are insufficient to pay for a major repair. Not unlike living in a single-family home, even homeowners who routinely save money for repairs may encounter major unforeseen expenses, such as foundation or roof repair.