Americans still confident in home values: survey

Thu Jun 21, 2007 5:43PM EDT
By Mary Childs

WASHINGTON (Reuters) - Although existing homes are selling at their slowest pace in four years, most Americans are confident their homes are worth more now than they were a year ago, according to a survey released on Thursday.

A poll conducted by the Boston Consulting Group found that 55 percent of Americans believe their house would sell for more money now than last year, compared with 59 percent who felt the same way last summer. Eighty-five percent expect their home to be worth even more in five years than it is now.

"It's a reasonable expectation. Markets neither boom nor bust forever," said David Berson, the chief economist with mortgage finance company Fannie Mae. "We're in a down period now, and I don't think it's going to end any time soon, but it will end long before five years is up."

Homeowners remain optimistic even though existing home sales last month hit their lowest rate since June 2003.

National surveys of home prices seem to bear out at least a degree of optimism, showing prices still rising, if only slowly.

According to the Office of Federal Housing Enterprise Oversight, the average U.S. home price rose 4.3 percent over the year ended in the first quarter, the smallest gain in nearly a decade.

While record rates of homes entering foreclosures and weak sales figures have troubled analysts, 63 percent of the 1,007 homeowners surveyed still see real estate as a solid investment.

The softening housing market also appears to have had little impact on spending behavior. Seventy-six percent of participants in the nationwide telephone survey say it hasn't affected their spending at all.

"Talk of declining average values of homes is not forcing a cutback in spending," Michael Silverstein, senior partner at Boston Consulting, said in a statement. "It's just not translated into the American psyche."

Still, the survey, which was conducted between May 31 and June 3, showed concern among nearly half the participants that declining housing prices are hurting the national economy.

Most predict the slump will last two years. Even so, 69 percent of homeowners interviewed anticipate renovating their nest-egg in the next year.

We should prepare now for dangerous global cooling

Let's interject a little rational thought into the climate change discussion:

"Read the sunspots

The mud at the bottom of B.C. fjords reveals that solar output drives climate change - and that we should prepare now for dangerous global cooling

R. TIMOTHY PATTERSON, Financial Post
Published: Wednesday, June 20, 2007

Politicians and environmentalists these days convey the impression that climate-change research is an exceptionally dull field with little left to discover. We are assured by everyone from David Suzuki to Al Gore to Prime Minister Stephen Harper that "the science is settled." At the recent G8 summit, German Chancellor Angela Merkel even attempted to convince world leaders to play God by restricting carbon-dioxide emissions to a level that would magically limit the rise in world temperatures to 2C.

Forget warming, beware the new ice age

The fact that science is many years away from properly understanding global climate doesn't seem to bother our leaders at all. Inviting testimony only from those who don't question political orthodoxy on the issue, parliamentarians are charging ahead with the impossible and expensive goal of "stopping global climate change." Liberal MP Ralph Goodale's June 11 House of Commons assertion that Parliament should have "a real good discussion about the potential for carbon capture and sequestration in dealing with carbon dioxide, which has tremendous potential for improving the climate, not only here in Canada but around the world," would be humorous were he, and even the current government, not deadly serious about devoting vast resources to this hopeless crusade.

Climate stability has never been a feature of planet Earth. The only constant about climate is change; it changes continually and, at times, quite rapidly. Many times in the past, temperatures were far higher than today, and occasionally, temperatures were colder. As recently as 6,000 years ago, it was about 3C warmer than now. Ten thousand years ago, while the world was coming out of the thou-sand-year-long "Younger Dryas" cold episode, temperatures rose as much as 6C in a decade -- 100 times faster than the past century's 0.6C warming that has so upset environmentalists.

Climate-change research is now literally exploding with new findings. Since the 1997 Kyoto Protocol, the field has had more research than in all previous years combined and the discoveries are completely shattering the myths. For example, I and the first-class scientists I work with are consistently finding excellent correlations between the regular fluctuations in the brightness of the sun and earthly climate. This is not surprising. The sun and the stars are the ultimate source of all energy on the planet.

My interest in the current climate-change debate was triggered in 1998, when I was funded by a Natural Sciences and Engineering Research Council strategic project grant to determine if there were regular cycles in West Coast fish productivity. As a result of wide swings in the populations of anchovies, herring and other commercially important West Coast fish stock, fisheries managers were having a very difficult time establishing appropriate fishing quotas. One season there would be abundant stock and broad harvesting would be acceptable; the very next year the fisheries would collapse. No one really knew why or how to predict the future health of this crucially important resource.

Although climate was suspected to play a significant role in marine productivity, only since the beginning of the 20th century have accurate fishing and temperature records been kept in this region of the northeast Pacific. We needed indicators of fish productivity over thousands of years to see whether there were recurring cycles in populations and what phenomena may be driving the changes.

My research team began to collect and analyze core samples from the bottom of deep Western Canadian fjords. The regions in which we chose to conduct our research, Effingham Inlet on the West Coast of Vancouver Island, and in 2001, sounds in the Belize-Seymour Inlet complex on the mainland coast of British Columbia, were perfect for this sort of work. The topography of these fjords is such that they contain deep basins that are subject to little water transfer from the open ocean and so water near the bottom is relatively stagnant and very low in oxygen content. As a consequence, the floors of these basins are mostly lifeless and sediment layers build up year after year, undisturbed over millennia.

Using various coring technologies, we have been able to collect more than 5,000 years' worth of mud in these basins, with the oldest layers coming from a depth of about 11 metres below the fjord floor. Clearly visible in our mud cores are annual changes that record the different seasons: corresponding to the cool, rainy winter seasons, we see dark layers composed mostly of dirt washed into the fjord from the land; in the warm summer months we see abundant fossilized fish scales and diatoms (the most common form of phytoplankton, or single-celled ocean plants) that have fallen to the fjord floor from nutrient-rich surface waters. In years when warm summers dominated climate in the region, we clearly see far thicker layers of diatoms and fish scales than we do in cooler years. Ours is one of the highest-quality climate records available anywhere today and in it we see obvious confirmation that natural climate change can be dramatic. For example, in the middle of a 62-year slice of the record at about 4,400 years ago, there was a shift in climate in only a couple of seasons from warm, dry and sunny conditions to one that was mostly cold and rainy for several decades.

Using computers to conduct what is referred to as a "time series analysis" on the colouration and thickness of the annual layers, we have discovered repeated cycles in marine productivity in this, a region larger than Europe. Specifically, we find a very strong and consistent 11-year cycle throughout the whole record in the sediments and diatom remains. This correlates closely to the well-known 11-year "Schwabe" sunspot cycle, during which the output of the sun varies by about 0.1%. Sunspots, violent storms on the surface of the sun, have the effect of increasing solar output, so, by counting the spots visible on the surface of our star, we have an indirect measure of its varying brightness. Such records have been kept for many centuries and match very well with the changes in marine productivity we are observing.

In the sediment, diatom and fish-scale records, we also see longer period cycles, all correlating closely with other well-known regular solar variations. In particular, we see marine productivity cycles that match well with the sun's 75-90-year "Gleissberg Cycle," the 200-500-year "Suess Cycle" and the 1,100-1,500-year "Bond Cycle." The strength of these cycles is seen to vary over time, fading in and out over the millennia. The variation in the sun's brightness over these longer cycles may be many times greater in magnitude than that measured over the short Schwabe cycle and so are seen to impact marine productivity even more significantly.

Our finding of a direct correlation between variations in the brightness of the sun and earthly climate indicators (called "proxies") is not unique. Hundreds of other studies, using proxies from tree rings in Russia's Kola Peninsula to water levels of the Nile, show exactly the same thing: The sun appears to drive climate change.

However, there was a problem. Despite this clear and repeated correlation, the measured variations in incoming solar energy were, on their own, not sufficient to cause the climate changes we have observed in our proxies. In addition, even though the sun is brighter now than at any time in the past 8,000 years, the increase in direct solar input is not calculated to be sufficient to cause the past century's modest warming on its own. There had to be an amplifier of some sort for the sun to be a primary driver of climate change.

Indeed, that is precisely what has been discovered. In a series of groundbreaking scientific papers starting in 2002, Veizer, Shaviv, Carslaw, and most recently Svensmark et al., have collectively demonstrated that as the output of the sun varies, and with it, our star's protective solar wind, varying amounts of galactic cosmic rays from deep space are able to enter our solar system and penetrate the Earth's atmosphere. These cosmic rays enhance cloud formation which, overall, has a cooling effect on the planet. When the sun's energy output is greater, not only does the Earth warm slightly due to direct solar heating, but the stronger solar wind generated during these "high sun" periods blocks many of the cosmic rays from entering our atmosphere. Cloud cover decreases and the Earth warms still more.

The opposite occurs when the sun is less bright. More cosmic rays are able to get through to Earth's atmosphere, more clouds form, and the planet cools more than would otherwise be the case due to direct solar effects alone. This is precisely what happened from the middle of the 17th century into the early 18th century, when the solar energy input to our atmosphere, as indicated by the number of sunspots, was at a minimum and the planet was stuck in the Little Ice Age. These new findings suggest that changes in the output of the sun caused the most recent climate change. By comparison, CO2 variations show little correlation with our planet's climate on long, medium and even short time scales.

In some fields the science is indeed "settled." For example, plate tectonics, once highly controversial, is now so well-established that we rarely see papers on the subject at all. But the science of global climate change is still in its infancy, with many thousands of papers published every year. In a 2003 poll conducted by German environmental researchers Dennis Bray and Hans von Storch, two-thirds of more than 530 climate scientists from 27 countries surveyed did not believe that "the current state of scientific knowledge is developed well enough to allow for a reasonable assessment of the effects of greenhouse gases." About half of those polled stated that the science of climate change was not sufficiently settled to pass the issue over to policymakers at all.

Solar scientists predict that, by 2020, the sun will be starting into its weakest Schwabe solar cycle of the past two centuries, likely leading to unusually cool conditions on Earth. Beginning to plan for adaptation to such a cool period, one which may continue well beyond one 11-year cycle, as did the Little Ice Age, should be a priority for governments. It is global cooling, not warming, that is the major climate threat to the world, especially Canada. As a country at the northern limit to agriculture in the world, it would take very little cooling to destroy much of our food crops, while a warming would only require that we adopt farming techniques practiced to the south of us.

Meantime, we need to continue research into this, the most complex field of science ever tackled, and immediately halt wasted expenditures on the King Canute-like task of "stopping climate change."

R. Timothy Patterson is professor and director of the Ottawa-Carleton Geoscience Centre, Department of Earth Sciences, Carleton University."

Home loan apps decline

Wednesday, June 20, 2007

Inman News

Fewer borrowers chose to take out loans for home purchases and refinancings last week even as long-term mortgage rates ended a monthlong climb, the Mortgage Bankers Association reported today.

The drop-off in activity pushed the market composite index -- a measure of mortgage application volume -- down 3.4 percent on a seasonally adjusted basis from the week before.

Applications for refinancings declined 4.2 percent from the first week of June, and the index that tracks home purchases was down 3 percent.

Borrowing costs on long-term loans were fairly calm in the latest survey, with the average contract interest rate for 30-year fixed-rate mortgages dipping to 6.6 percent from 6.61 percent a week earlier and the average rate on the 15-year fixed holding at 6.28 percent.

Costs on the one-year ARM, however, jumped from 5.48 percent to 5.7 percent during the period, boosting the ARM share of total applications to 20.3 percent from 18.7 percent a week earlier. The refi share of activity held at 38 percent, MBA reported.

Points, or loan-processing fees expressed as a percent of the total loan amount, averaged 1.58 on the 30-year loans, 1.42 on the 15-year, and 1.16 on one-year ARMs. Statistics, which include the origination fee, are based on loan-to-value ratios of 80 percent.

The Mortgage Bankers Association survey covers approximately 50 percent of all U.S. retail residential mortgage originations, and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts.

***

Expand Your Living Space ... Outdoors

(Courtesy of AOL)

Jun 15th 2007 12:34PM

Everyone seems to be into home makeovers. How could you not after watching an episode of the tear-jerking 'Extreme Makeover: Home Edition'? And do you remember 'Trading Spaces'? Is that show still on?

It seems like now the trend is all about outdoor living. One of the latest home catalogs that I received features an outdoor kitchen, complete with stainless steel grill and other cooking appliances. Of course, there's an outdoor wet bar and a beautiful dining set overlooking the lush garden and fountain. Maybe that's great if you live in California. But the East Coast humidity may just kill the fun of cooking and dining outside.

Regardless of how I feel, I can't deny that expanding living space outdoors is hot right now. Just look at the list of top searched outdoor living, the term "outdoor kitchens" is tops on our list. This definitely piques my curiosity and maybe I'll stop throwing away that outdoor living catalog!

So what have you done to expand your living space outdoors? Any tips and pointers?

This month's top searched outdoor living terms on AOL Search:
1) Patio furniture
2) Hot tubs
3) Patio umbrellas
4) Outdoor kitchens
5) Outdoor lighting
6) Swimming pool
7) Outdoor rugs
8) Patio cushions
9) Patio doors
10) Grill

To check out more outdoor living ideas, go to AOL Shopping and for more tips and ideas, search for outdoor living spaces on AOL Search.
Posted by Mia

Economist expects U.S. home prices to fall 10%

Forecast says no recession, but 'certainly close'
Tuesday, June 19, 2007

By Glenn Roberts Jr.
Inman News

Turbulence.

That is the one-word title for the latest U.S. economic forecast by David Shulman of the Anderson Forecast at the University of California, Los Angeles.

"This is not a recession, but it is certainly close," Shulman writes in the forecast, released today. "If our forecast is close to the mark, the period from the second quarter of 2006 to the first quarter of 2008 will mark a historically anomalous long period of below-trend growth."

Shulman's previous quarterly forecast report, released in April, was titled, "A Long Runway for the Soft Landing."

His latest forecast anticipates a 10 percent peak-to-trough price decline in U.S. housing prices "that will likely extend into 2009."

In an interview this week with Inman News, Shulman said the current real estate downturn is "completely different from anything we've previously experienced," adding that the only comparable period may be the Great Depression.

"We've never had the run-up in house prices we saw between 2000 and 2005," and the housing-market slump is likely to be similarly unprecedented, he said.

A rise in foreclosures and the withering of the subprime lending market are still "in the early innings," he said, and foreclosure outlook is expected to get worse "well into 2008."

There may be statistical errors with U.S. gross domestic product numbers, the report notes, and recent real GDP growth may have been understated.

While some economists expected the Federal Reserve to cut the federal funds rate to prop up the ailing housing market, worries about inflation risks have perhaps taken precedent, Shulman noted in his report.

"We do not expect much help from monetary policy until the fourth quarter," Shulman stated in his report, and this "delay will push back the housing recovery until well until 2008."

His forecast calls for the Federal Reserve to cut the federal funds rate from a current level of 5.25 percent to 4.5 percent, with the reductions beginning in fourth-quarter 2007.

The rate of housing starts is expected to average 1.35 million units in 2007 and 1.43 million in 2008, according to the report.

Weakness in the housing market "is finally spilling over into consumption spending," the report states, and the U.S. economy has transitioned from "locomotive" to "caboose" among global economies.

"Today, Europe and Japan are strong and the U.S. is lagging. With the Euro-area expected to grow at 2.6 percent, the United Kingdom at 2.7 percent and Japan at 2.4 percent, our estimate of 1.8 percent (for the United States) is the laggard.

"Furthermore, China continues to grow at a blistering double-digit pace and India is not too far behind," the report states, and the global economy "is powering the stock market to new highs."

U.S. export growth, growth in business investment and especially commercial structures, and continued spending by wealthy consumers "will keep the U.S. out of recession in 2007," Shulman expects. The housing decline should be behind us by mid-2008, he states.

In a separate report focused on California, economist Ryan Ratcliff stated, "So far, 2007 has been a bit of a puzzle in the California economy. Falling sales, weak prices and rising foreclosures have continued to rule the local housing markets, and both national and state measures of construction activity suggest that real estate has been a drag on economic growth for close to a year now.

"But in spite of all this bad news from real estate, the wider California economy is mostly unfazed: job growth has slowed only slightly and we've seen only a minor uptick in unemployment."

About 27 percent of all job creation in the state from 2003-05 was from the construction sector, compared with about 11 percent from 1990-2005, the report states.

While previous forecasts anticipated "significant job loss" for the construction sector, Ratcliff notes in his report that construction has remained flat since early 2006, while the real estate finance sector "has lost enough jobs in 2006 to bring growth in financial activities to a halt."

Mortgage-related industries have seen significant job losses in the past 12 months, the report states.

Strength of the commercial building industry may have served to buoy construction employment during this residential decline, the report suggests.

Shulman also said that there may be an issue with immigrant workers in the construction industry "getting paid off the books."

Ratcliff's report expects a combination of job losses in construction and real estate finance to hit home during the rest of this year and in early 2008, pulling down overall payroll job growth in the state to less than 1 percent for the next five quarters. The report also expects a rise in unemployment to 5.5 percent.

Ratcliff states that there are some mixed signals for real estate in California, such as a decline in median sales price of about 10 percent in some counties over the past year, "but some counties have actually seen appreciation accelerate in the last six months, and median sales prices for larger geographies are universally higher."

The median sales price in the state hit an all-time high of $484,000 in April, he noted, while a home-price gauge by a government agency fell for two consecutive quarters.

Homes that have moved all the way through a foreclosure process "are rapidly approaching highs not seen since the 1990s, and several counties have surpassed their previous highs." But despite surging foreclosure sales, "resale prices have been largely unfazed," the report states.

Ratcliff expects that, based on the lengthy pipeline of mortgage resets, the state's housing market may not return to normal until mid-2009. And that return to normalcy could come as soon as mid-2008, based on historical building-cycle data, he states.

"Unfortunately, both of these perspectives argue that things in the housing market will get worse before they get better. While we don't see any calamitous implosion of home prices in the near future, this patter of flat to slight falling prices and weak sales volumes will be the norm for some time to come."

***

Send tips or a Letter to the Editor to glenn@inman.com, or call (510) 658-9252, ext. 137.

Copyright 2007 Inman News

U.S. Economy: Housing Starts Drop; Slump May Persist (Update5)

By Bob Willis

June 19 (Bloomberg) -- Home starts in the U.S. fell for the first time in four months in May as interest rates rose, suggesting the worst housing recession in 16 years will persist.

Builders broke ground on new houses at an annual rate of 1.474 million, down 2.1 percent from the prior month, the Commerce Department said today in Washington. Building permits increased 3 percent to 1.501 million.

The slump, which has lasted almost two years, is restraining economic growth even as inflation is too high for the comfort of Federal Reserve officials. Meanwhile, the average rate on a 30-year fixed mortgage has jumped to the highest in more than a year, putting pressure on first-time buyers and raising the prospect of additional defaults.

``There is still some more downside to the housing market,'' said Nariman Behravesh, chief economist at Global Insight Inc. in New York. ``Mortgage rates started up again and there is still a shakeout going on in subprime.''

Behravesh came closest to predicting the drop in starts among 68 economists surveyed by Bloomberg News. The median forecast was for a decline to a 1.472 million pace.

The housing industry is also wrestling with soaring foreclosures among subprime borrowers -- those with poor or incomplete credit histories. Lower prices and more incentives have failed to spur interest as buyers wait for bigger bargains.

Yields on Treasury notes fell and stocks were little changed. The yield on the benchmark 10-year note was 5.08 percent at 2 p.m. in New York. A six-week rout pushed the yield to a five-year high of 5.32 percent on June 13.

Weakness in West

The drop in starts was led by a 20 percent slump in the West. Construction also fell 1.6 percent in the South. Starts rose 16 percent in both the Northeast and Midwest.

Housing's recession cut 0.9 percentage point from growth in the first quarter after detracting 1.2 percentage points in the second half of 2006.

The drop in homebuilding slowed economic growth to a 0.6 percent annual rate in the first quarter, the weakest in four years. Economists surveyed by Bloomberg forecast the economy will grow 2.1 percent this year, compared with an average of 3.1 percent over the last three decades.

Borrowing Costs

The average rate on a 30-year fixed rate mortgage rose to 6.74 percent last week, according to figures from Freddie Mac, the No.2 buyer of U.S. mortgages. The increase reflected expectations of faster global growth and fears inflation would accelerate. The rate averaged 6.22 percent last month and 6.18 percent in April.

Starts were down 24 percent in the 12 months ended in May.

``The trend down is still intact,'' said Kevin Logan, senior market economist at Dresdner Kleinwort in New York, who forecast a fall to 1.47 million units. ``The housing contraction is going to be a drag for the rest of the year.''

Construction of single-family homes fell 3.4 percent last month to a 1.17 million rate. Work on multifamily homes, such as townhouses and apartment buildings, increased 3.1 percent to an annual rate of 304,000, the most this year.

The increase in permits was led by a jump in multifamily authorizations. Permits for single-family homes dropped 1.8 percent to a 1.05 million annual pace, the lowest since July 1997.

``We continue to see a deterioration in demand for single- family homes, and so it looks like there's more downside to go for the housing market,'' said Tim McGee, chief economist at U.S. Trust Corp. in New York.

Unsold Homes

Record levels of unsold homes suggest the slump is far from over. Fed policy makers now acknowledge the housing recession may linger longer than previously forecast.

``The adjustment in the housing sector is still ongoing, and the slowdown in residential construction now appears likely to remain a drag on economic growth for somewhat longer than previously expected,'' Chairman Ben S. Bernanke said June 5.

A record number of Americans were at risk of losing their homes last quarter because they couldn't make payments as interest rates rose and growth slowed, according to a report last week from the Mortgage Bankers Association. The share of all mortgages entering foreclosure rose to 0.58 percent from 0.54 percent in the fourth quarter.

The failure of at least 50 subprime lenders, who make loans to consumers with poor or limited credit history, combined with the increase in foreclosures has raised concern more homes will be thrown back on the market.

Subprime

Some banks have made it more difficult for borrowers to qualify for a mortgage in the wake of the subprime debacle. Add the jump in rates, and affordability has taken a hit.

Declines in sales, construction and prices this year are going to be steeper than previously thought, the National Association of Realtors said June 6, in its fourth forecast revision this year. Housing starts are likely to fall 21 percent to 1.43 million from 1.8 million last year, the group said.

Sales of previously owned homes probably will tumble 4.6 percent to 6.18 million and the median price likely will fall 1.3 percent to $219,100, the Chicago-based trade group said. A month earlier, the association projected 2007 home sales to decline 2.9 percent. Sales of new homes will fall to 860,000 from 1.05 million last year, the group said.

A report yesterday showed builders turned more pessimistic this month. The National Association of Home Builders/Wells Fargo sentiment index dropped to 28, a 16-year low, from 30 in May. Readings below 50 mean most respondents view conditions as poor.

`Really Worried'

``Builders are really worried now, not only by the credit tightening in the mortgage market, but now all of a sudden by an increase in the fundamental mortgages as well,'' David Seiders, chief economist at the National Association of Homebuilders, said in an interview yesterday.

Hovnanian Enterprises Inc., New Jersey's largest homebuilder, last month reported its third consecutive quarterly loss as it cut prices and wrote off land options while sales continued to plummet.

``Without a doubt, things have slowed since about March,'' said Ara Hovnanian, the builder's chief executive officer in an interview yesterday. ``There is not a recovery that is about to happen.''

To contact the reporter on this story: Bob Willis in Washington bwillis@bloomberg.net

Last Updated: June 19, 2007 15:19 EDT

Top Searched States for Real Estate

(Courtesy of Mia at AOL)

Jun 18th 2007 3:06PM

I have lived in the Washington, D.C., metro area for almost 10 years. That is an eternity for me! I used to move every four to five years. So once in a while, I get the itch to look at other cities and states to see what's out there. But for one reason or another, I always end up staying here.

I was curious to see what states people search for when they're looking to move. It's no surprise that Florida real estate and North Carolina real estate are at the top. The warm weather and low cost of living certainly help. It could also be people looking for a second home. However, I was surprised to see that Maine real estate made it second on the list -- is there something about Maine that I don't know about?

For now, I think I'll stay in the D.C. area since it is a nice place to live. The humidity doesn't bother me and there are plenty of good restaurants around. People are generally friendly -- probably those Southerners who moved up north (although technically Washington, D.C., is in the south). Most importantly, my family and friends are in the area, and that's a huge incentive to stick around here.

How about you? Do you constantly look at real estate in other states? If you recently moved out of state, why did you move? Or, maybe you have your own list of states you're checking out ... if so, please share!

Top searched states for real estate on AOL Search:
1) Florida real estate
2) Maine real estate
3) North Carolina real estate
4) Arkansas real estate
5) Hawaii real estate
6) Tennessee real estate
7) Texas real estate
8) Delaware real estate
9) Utah real estate
10) Arizona real estate

Featured Listing: 85 Cressingham Lane, (Chambers Glen) Powell, 43065

Featured Listing of the Day - 1674 Ramblewood Avenue, Columbus (43235)

Featured Listing of the Day - 5226 Dierker Road, Columbus (43220)

Featured Listing - 4275 Olentangy Boulevard, Clintonville, OH 43214

Columbus Housing Resale Statistics from the Board of Realtors - April 2007 vs. April 2006, Month and YTD

Wanted: 250 to 400 tillable acres within a one hour radius of Columbus, Ohio

I have a client that is interested in finding 250 to 400 acres of tillable farm land for agricultural purposes. The acerage does not need to be contiguous parcels of land, but the parcels should be in relatively close proximity to each other. The acerage should be no further that a one hour drive from central Columbus.

Please contact me directly if you have any properties that meet the criteria listed above:

Vito Boscaino
Owner / Realtor / MBA
Help-U-Sell North High Realty
4485 North High Street
Columbus, OH 43214

614.447.3050 (office)
614.571.9054 (mobile)
614.447.3051 (facsimile)

email: northhighrealty@helpusell.com

Featured Listing - 5438 Roche Drive, Columbus, OH 43229

Featured Listing - 2719 Lancaster Kirkersville Road, Lancaster, OH 43130

Featured Listing - 209 Lake Bluff Drive, Columbus (Worthington), OH 43235

Don't let your ARM break you

See that adjustable-rate mortgage pain coming and plan accordingly

By Jennifer Openshaw
Last Update: 7:49 PM ET Apr 24, 2007

LOS ANGELES (MarketWatch) -- You went a little large with that 2005 home purchase. It felt good. You bit off a lot in the form of a large adjustable-rate mortgage to get there, but you made it happen. The low 3.75% intro rate really helped. You knew it would eventually go higher, but hey -- home prices would go higher, and so would your income.

The problem is, it didn't happen.

Well, your income did rise, but so did your expenses: higher energy costs, growing family, rising taxes. Now about those home prices -- you know the rest of that story. See how home prices are flagging.

Now what? The honeymoon is about to end, and you're bracing yourself and your family for the inevitable. Your mortgage payment is about to go up, maybe by hundreds of dollars. And now is not a good time to join the stampede of foreclosures, preforeclosures, short sales and other forms of dire and unintended consequences.

What do you do?

Coverage of home buying and selling, housing prices, mortgage information and home improvement.

Panic? Probably not. Sure, it's a financial setback to see any cost go up a lot. But the secret to weathering any storm is to see it coming -- and plan accordingly. A lot of energy has recently gone into helping underwater homeowners avoid or deal with impending foreclosures.

Foreclosures? I'm guessing many of you will feel the pain or rising payments, but aren't in foreclosure land. You're not a subprime borrower. With a little planning and some modest sacrifices, you'll get over the hump. Here's how:

Know where you stand

The first step is to pick up the phone (or go in person) to your lender for exact figures. How big is the adjustment, when is it coming, and what will the next one be? Don't be reluctant. Human nature tells us to stick our heads in the sand when something bad happens financially. But know that lenders want you to plan and may even help.

Also, understand the full impact. Worst case, you might be looking at an extra $500 in interest payments after the reset. But for most it's tax deductible; the "net" impact is less.

If you plan far enough in advance, you may be able to save enough to get you over the hump. A $500/month adjustment is $6,000 a year. Not chump change, but not and an enormous sum, especially after tax effects are considered (in a 30% federal/state bracket, that $6,000 only costs you $4,200). If you could save enough to buy the home in the first place, you can probably save a good part of that $4,200 if you put your mind to it.

Find additional income sources

Obviously, if your costs go up, one solution to the problem is to expand your income. One way is to rent a room to a friend, relative, or insider. Not forever -- just until you can get your budget balanced again.

Or, find a small second job. Even a part-time retail job can pull $500 a month for about 15 hours a week. That goes a long way towards the reset, and you'll get a nice store discount besides (but don't spend it all!)

Refinance

I'm normally not a big advocate of bill consolidation loans, mainly because once smaller debts are wiped clean they have a way of reappearing. But consolidation can be a good way to offset a reset.

Why? Because reduced interest costs on credit-card and other high-cost debt can cancel out the increase in ARM interest, keeping your total interest costs relatively unchanged. This approach has risk, but makes sense with discipline.

The best idea, according to Eric Margolias, CEO of mortgage broker Source4HomeLoans, is to refinance into a fixed loan if at all possible. Fixed rates have stayed relatively constant, and with the ARM you remain exposed to rate increases. Prepare by fixing your credit, shopping at places like LendingTree.com and keep in mind that the percentage of fixed-rate applications being rejected is on the rise.

But for peace of mind -- and future financial prosperity -- "fixed" is probably where you should be anyway. Get there if you can.

Keep it in perspective

Margolias is adamant about looking at the bright side. Don't look at your ARM as a loan that got more expensive, but rather one that gave you a healthy discount in the beginning. You saved $6,000 a year initially on that $300,000 loan.

Tax implications aside, that's a big number -- where else can you get a discount large enough to buy a late model used car? It probably helped you get the home in the first place.

And finally, even if you don't successfully escape your ARM, history shows you're still in great shape. Two decades ago any mortgage under 10% seemed like a bargain. Today's interest rates -- even at the high end -- are among the lowest in history.

And that, as I see it, is the real bargain.

Jennifer Openshaw, author of the upcoming book, "The Millionaire Zone," is CEO of winningadvice.com. She is also host of ABC Radio's "Winning Advice with Jennifer Openshaw" and appears frequently on such shows as the CBS Early Show and Good Morning America. E-mail her at Openshaw@winningadvice.com.

Article courtesy of MarketWatch 04.24.07

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Spruce Up Your Home To Sell

By Mary Dalrymple
April 19, 2007

This article is part of our Subprime Survival Guide.

With housing sales slumping in many parts of the country, anyone forced to move at this less-than-opportune moment faces a challenge -- how do you get the best price for your humble abode when buyers can afford to be pickier than a diva in a shoe store?

One trick to making your home seem more attractive than all the rest is to, well, make it more attractive than all the rest. The experts call this staging. You can hire a professional to do the job for you, or you can do much of the work yourself.

Start with some criticism

If you have a few opinionated friends (and who doesn't) and a couple of free weekends, you can make major improvements without shelling out a lot of money. It could be just like one of those home and garden television shows, but without the chummy banter among the thin, well-dressed designers. Start by asking your opinionated friends to come over and walk through the house as though they were potential buyers. Ask them to point out anything that might turn off a home shopper. Don't take their comments personally. Everyone who comes to look at your home will walk through a critic. Better to hear the bad news now than suffer the consequences by settling for a lower price, or by watching your house sit on the market too long.

With your friends' list of complaints in hand, tackle the job. Next, get rid of clutter. We all have it, and we get used to looking at it. It's time to banish it. Think in terms of making your home look like the picture-perfect rooms in those glossy magazines. What makes them so alluring? To begin with, your husband's shoes aren't strewn all over the floor, and the dining room's not piled high with junk mail and dusty knick-knacks.

Empty it out

Remove things that overwhelm visitors with your personality. We know your collection of porcelain dalmatian dogs is charming, but it may interfere with buyers trying to imagine themselves living in the house. Along these lines, experts recommend you remove all your family photos. It's my humble opinion that one or two well-placed snapshots give the warm impression that your home made your family happy and can do the same for others.

Consider removing some furniture if your house is stuffed to the gills. To keep costs low, resist the urge to put everything in self-storage. Give away or sell anything you know you won't use in your new home. Don't pile it all into the basement or into a closet. Buyers will look in your closets, your kitchen cabinets, your garage, your basement, and probably even your underwear drawer. Almost nothing's off limits.

Scrub-a-dub-dub

Then, clean. Clean like you've never cleaned before. Pretend Martha Stewart and your mother-in-law will stop by at the same time to inspect for cobwebs in the corners, dust on the mini-blinds, and streaks on the windows. Your potential buyers will consider your house well maintained if it looks sparkling. Even old kitchens and bathrooms can look newer if they're scrubbed to a shine.

Also, go through your home with a bloodhound's nose. Now is the time to eliminate the musty odor in the bathroom and eradicate any scent suggesting that Misty the cat likes to hang out in the basement. I recently found myself charmed by a house for sale in my neighborhood for no other good reason than the scent of freshly baked chocolate chip cookies hanging in the air.

Freshen it up

If you've been to many local open houses, you've probably realized that first impressions count, and that means your front yard and front door should be inviting. Even if you're not a green thumb, planting a few colorful annuals can cheer up an entrance. (Just pull them out if you can't keep them looking healthy.)

Anything, including the front door, can look fresher with a new coat of paint. Even urbane city dwellers who know a screwdriver only as a drink with orange juice can usually manage to paint. If you're not that handy, this can be one of the less expensive jobs for a professional. Make your priority any room that has decor you can date. Take note if your opinionated friends say something like, "That's so mid-1980s country kitchen."

Now is also the time to fix all the "quirks" that make your house your home. Fix the leaky faucets and running toilets, the broken stair rail, the loose doorknobs, and all the other little things that buyers won't want to do themselves.

Watch your budget

Like many household improvements, this one can get expensive quickly if you let it. Before you know it, you could be thinking about buying that new sofa you've been eying and upgrading all your kitchen appliances.

But remember -- you don't want to give all your extra home profits to Lowe's (NYSE: LOW) or Home Depot (NYSE: HD). Don't get carried away if you don't want to spend a lot of money on this project. Put some elbow grease into the job -- by cleaning and getting rid of clutter -- before you start the projects that cost you money. Then set a budget and do whatever gives you the most bang for your buck. Put repair jobs for obvious problems and paint at the top of the list. Flip through some of those glossy magazines for inspiration, and if you need some help, visit the Fools on the Building & Maintaining a Home discussion board. You can also learn to Be a Smart Owner from the Home and Mortgage center.

If you're contemplating more extensive repairs or renovations, check out these other Foolish articles:

Fool contributor Mary Dalrymple hopes to avoid all that cleaning by never moving, and she welcomes your feedback. Home Depot is an Inside Value recommendation. The Motley Fool has a disclosure policy.

Columbus - March 2007 Home Sale Statistics from the Columbus Board of Realtors

March 2007 Home Sales

Finally, home prices inching up

(April 18, 2007) After nine consecutive months of negative home price appreciation, central Ohio home prices are again headed in the right direction. The average price of a home sold in March was $168,586, up 2.3 percent from one year ago according to the Columbus Board of REALTORS®.

"The average price of a home was up 2.0 percent in February and now 2.3% in March," said Brad Bennett, President of the Columbus Board of REALTORS®. "As 2006 was the only year on record where the average home price appreciation fell, the turnaround is a welcome relief to all home owners."

Although January home sales were up 12.2 percent, February sales fell almost two percent and March sales followed up with a drop of 16.1 percent from last year. Year to date, there have been 5,101 home sales in the first quarter, down 4.6 percent from 2006.

"We anticipated the drop in closings for March," says Bennett. "It's a direct reflection of the record low temperatures and snow emergencies we experienced back in January and early February which kept most of us indoors as much as possible. As a result, home showing activity and consequently offers to purchase homes dropped significantly."

There were 5,200 homes listed in March, up almost one percent from last year. This puts the number of residential homes for sale at 17,699 which is 10.7 percent higher than were on the market at the end of first quarter 2006.

According to Bennett, "we added over 52 percent more homes to the market in March as compared to February. This is partly due to the traditional 'coming out' season, but also due again to the weather in February which put the chill on listing activity as well."

"Now is definitely a great time to buy a home. There is an excellent selection of homes to choose from and interest rates are still very competitive. And real estate is unquestionably the best long term investment," adds Bennett.

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Scratch-free hardwood floors possible

Tips on sanding, staining, applying finish
Friday, April 13, 2007 By Paul Bianchina Inman News

Q: I have older hardwood floors, and I want to remove scratches and lighten the color. I would also like to redo the paneling in my den. Do you have any ideas on how to do this? --Marsha H., via e-mail.

A: Removing the scratches and changing the color of your hardwood floor will require that the floors be sanded and refinished. The basic process is as follows: All of the furniture is removed; the floors are sanded down far enough to remove the scratches and the original stain color; the sanded wood is thoroughly vacuumed and wiped to remove dust; new stain is applied and allowed to dry (the wood can also be left its natural color, with no stain); then two to three coats of clear finish are built up, allowing each coat to dry before applying the next one.

For the least hassle and the best overall results, I would recommend that you have a pro come and do the refinishing. However, if you're patient and ambitious, you can certainly do the work yourself. All of the sanding equipment you need can be rented at any rental center, and the stain and finish materials are available from any good paint store or home center. If you want to take a shot at this yourself, I would suggest that you check out your local bookstore or library for a book containing complete, step-by-step instructions.

As far as the paneling is concerned, you have several options. You can remove the old material and replace it with new paneling; you can lightly sand the old paneling, then prime and paint it; you can apply new paneling or new drywall directly over the old paneling; or you can cover the old paneling with a base sheet and then wallpaper over it. A lot depends on the condition of the old paneling, how it was installed, lights, outlets, windows and other obstacles that need to be worked around, and what the final result is you want to achieve.

Q: I bought a newly built home in 2003 that has central heating and cooling, with all of the ducts in the attic. In the winter, it is hot upstairs and cold downstairs, while in the summer the upper story does not get cool while the downstairs is freezing. The builder said there are baffles in the ducts so the warm and cold air could be proportionately distributed, but I have been unable to locate these baffles. I currently have to open and close different registers depending on the season. Do you have any other suggestions for balancing the system? --Karen L., via e-mail.

A: Warm air will naturally rise and cold air will naturally fall, so having all of the ducts located in the attic can cause the problems you're referring to. As warm air is produced, it will want to naturally stay in the upper floor, leaving the lower floor colder. The opposite is true when cold air is produced. For that reason, a better configuration is to have a balance of ducts in both the attic and under the floor.

You mentioned that you have spoken to the builder. I would call him again and ask that he come over and show you exactly where these baffles are and how to operate them. You might also ask who the original HVAC contractor was, and have them come out, explain the baffles and rebalance the system for you. Other factors that might help would be relocating the thermostat and/or the return air duct, but both of those might be difficult to do at this point.

If rebalancing the system doesn't help -- and given the configuration of the ducts, it probably won't -- I would suggest that you install one or more reversible, ceiling-mounted paddle fans.

The fans will help with air circulation, pushing warm air down from upstairs and, when reversed, pulling cold air up from below.

Q: What exactly is HVAC? I have heard the term a lot, but I don't really know what it means. --Wyndye F., via e-mail.

A: HVAC is an acronym for Heating, Ventilating and Air Conditioning. It refers to the systems that handle all of the building's heating needs, including the furnace and duct work; air conditioning, including all of the air conditioning equipment and related ducts; ventilation, including fans, kitchen ventilation and ducts; and all of the related exhaust vents for any equipment that requires them. An HVAC contractor is one who installs, services, or otherwise works with any or all of these systems.

Remodeling and repair questions? E-mail Paul at paul2887@hughes.net.

When to Call a Listing Agent

If you’ve ever bought or sold a home, you know that being a successful real estate agent is a full-time job — and then some.

In fact, between the preliminary research, evening and weekend showings, and post-sale paperwork, some agents are essentially on call 24/7.

Most real estate agents would probably suggest you call as soon as you’ve decided to sell your home. That way they can offer advice about pricing, home improvements, and other pertinent matters. And, for some home sellers, that may be the best way to go.

DIY to a Point - However, it is possible to make some decisions before you dial — especially if you’re thinking of doing some of the work yourself. Depending on your skills and sense of adventure, here are some of the tasks you might consider doing in advance of contacting an agent:

Preparation: Are you handy or do you know someone who is? Cleaning, de-cluttering, and simple touch-ups can add new shine to even the oldest homes. (Your agent won't really help with this — it's your elbow grease!)

Valuation: Check out your Zestimate and compare it to the listing prices of other homes for sale in your neighborhood.

Exploration: Real estate types call it " pre-marketing," and it refers to gauging the interest in your home before you list it. Mention you’re selling at parties or the local grocery store. You never know who might be looking. If you find a buyer this way, you might save money in agent commissions.

Presentation: Are you willing to show the house yourself or would you rather someone else handled it?

Negotiation: If you’re comfortable dealing with offers, counter-offers, etc., you may only need assistance once you’ve accepted an offer.

Then there’s probably the most important question of all: How much time are you willing (and able) to spend on the above? Some sellers have both the time and the inclination to do a lot of the work themselves; some have one but not the other; and others would rather pay somebody else to do it all.

There are no right or wrong answers, of course, and the idea isn’t necessarily to bypass real estate agents. Rather, it’s to determine the point at which you’d be better off having one. Depending on how you respond, you may want to call an agent from the get-go, somewhere down the line, or not at all.

(Article courtesy of Zillow)

The Facts About FSBO's

"A close look at "For-Sale-By-Owner" (FSBO) data from NAR's 2006 Profile of Home Buyers and Sellers.

Each year a small army of home sellers throw caution to the wind and “go it alone” — without the assistance of a licensed real estate professional. This ever-decreasing band of risk-takers, ventures into the land of pricing, marketing, screening, scheduling, showing and paperwork, with the goal of saving some money. It's often an experience they find less than rewarding.

The numbers (if not the sellers) tell the story. In 2006, just 12 percent of sellers chose the FSBO (“For Sale By Owner”) route, down from 13 percent the previous year, according to NAR’s 2006 Profile of Home Buyers and Sellers. This is down from about 20 percent in 1987. But more telling than the decline in FSBOs is the fact that 40 percent of all FSBOs sold their homes to someone they knew prior to the transaction. This means that only 7 percent of all home sales are open market FSBO transactions. The rest are simply unrepresented sellers in private transactions.

From NAR's 2006 Profile of Home Buyers and Sellers

Eighteen percent of FSBO sellers indicated that preparing the home for sale was the most difficult task when selling without the assistance of an agent, followed closely by understanding and performing paperwork (16 percent) and selling within their desired time frame (15 percent). As for profit — after all is said and done, FSBOs don’t always come out with fatter wallets.

Again, the numbers tell the truth. Homes sold with the help of a real estate professional in 2006 sold on average for 32 percent more than FSBO sales. The median FSBO selling price in 2006 was $187,200, compared with $247,000 for agent-assisted transactions. "

If you currently have your home for sale, on a For Sale By Owner basis (FSBO), or are considering doing so, please call me for a no obligation discussion on how our marketing system can help to sell your home faster while potentially saving you thousands versus a standard 6% real estate transaction.

The best of both worlds: Lower costs and a faster property sale. We maximize your ability to retain and liquidate the equity in your property. Help-U-Sell real estate and marketing professionals get the job done.

Vito Boscaino
Help-U-Sell North High Realty
Owner / Realtor / MBA

Why home-ownership shortcuts will lead to longer recovery

The following article includes what I believe are some very valid concepts that help to explain why the current sub-prime mortgage mess will lead to a significant increase in foreclosure activity, and why this will also cause a much slower recovery in the housing market, than what many "experts", including the National Association of Realtors, would like consumers to believe.

For those of us in Central Ohio, the ultimate impact will be far more dire than many would like to admit. With low to non-existent new job creation in the state, coupled with the continued loss of existing manufacturing jobs related to the automotive industry, capped with excessive sub-prime loan origination over the past several years, I would posit that Ohio can expect of wave of foreclosures of "tsunami like proportions" over the next two to three years. This will undermine property valuations in every community in the state. It will not be a question of how much can I expect my property to appreciate over the next several years? But the exact contra of that, in that the question will be how much will the property values depreciate and for how long?

This will in the near term trigger a cyclical series of movements by home owners who will not have considered selling otherwise, but well might consider selling "now" in order to cap the downside risk of diminishing property values over the next three to five years. This "added" inventory will further soften the market. The only realistic way out of this impending disaster is for the government to reduce the tax burden on businesses and consumers and to create incentives for existing businesses to move into the state, or for entrepreneurs to start companies. Unfortunately, the new governor has already started trying to raise taxes which will only further fuel the number of jobs that are fleeing the state.

As an added downward risk, unless government, at all levels, takes significant "cost" our of the bureaucratic infrastructure, many government entitities will find themselves loosing significant revenues from property taxes as the assessed value bases will decline, and those in foreclosure, when not paying mortgages, will most certainly not be paying taxes as well. Of course, the government, at all levels will have an initial knee-jerk reaction to fill the gap by increasing taxes on the rest of us. This will only further increase the exodus of jobs and constitutents to more tax friendly environments.

While this appears to be an "overly dark" assessment of the near-term real estate and economic climate in the State of Ohio, I firmly believe that what we can expect to see down the road will look more like this scenario, rather than less.

Vito Boscaino
Owner/ Realtor / MBA
Help-U-Sell North High Realty

"Guest perspective: An insider's view on the subprime mess
Wednesday, April 04, 2007By Steven Krystofiak

Editor's note: Steven Krystofiak offers an insider's take on what's been unfolding in the subprime mortgage industry. But he is no industry apologist. Stay tuned for a series of articles from Krystofiak on Inman News in coming weeks.

Every year there is a natural progression of future first-time home buyers, usually consisting of people in their late 20s to mid-30s. These people have obtained financial stability with savings and steady employment, which is a healthy precursor to buying a first home.

In recent years far too many people took popular shortcuts to obtain their homes. These shortcuts are in stark contrast to healthy real estate practices that have a long, traditional, proven track record.

In many cases, these new highly popular loan products were the only way for first-time home buyers to obtain a home. These shortcuts were misnamed "affordability products" and would have been better described as "obtain-ability products." Long-term affordability, which should be a goal for both consumer and lender, is not associated with these toxic shortcuts.

The home-obtainer-ship shortcuts included "stated-income loans" (which encouraged consumers to lie about their income on mortgage applications), zero down payments, negatively amortized loans, interest-only loans, and short-term suicide loans where the fixed loan period is only two or three years commonly tacked on with an equally long prepayment penalty. Many times the menu of these options would be coupled together.

People who took shortcuts should have waited, and were only able to obtain a home because of the risky loans that will be the culprit of their foreclosures in the coming months and years to follow. Many people facing foreclosure should have waited one, two or even three years before starting the home-buying process.

Communities, the media and industry insiders built up the courage to the would-be home buyers with such rhetoric as, "If you don't buy now you will be priced out forever," and "Real estate prices only go up," and "You can't afford not to buy a home," and "If you buy one property you can make $50K a year, so why not buy two, three or four more properties and
make even more?"

Lastly, I end with my favorite quote that came from a winner in a real estate game show: "This (market) is not a bubble; bubbles are for bathtubs."

The hype and hysteria we have seen for the past few years gave comfort to people wanting to take out these loans. But with foreclosures sure to happen in droves just around the corner, these people otherwise would have been the ones helping us get out of the future impending home debacle we will continue to experience in 2008, 2009 and 2010.

With these recently foreclosed people now out of the real estate market in 2009, where will that natural progression of home buyers come from? With foreclosure or bankruptcy on their records there will be a lack of qualified candidates to become first-time home buyers in the future. This will cause the future recovery to take longer than in previous real estate corrective cycles.

First-time home buyers are the key to a good real estate market. An old rule of thumb is that with every first-time home buyer entering the market there is a filtering up, which creates three more transactions. A large reason the real estate cycle of the last five years has been so successful is because banks have been able to provide toxic mortgages to first-time home buyers. This has kept the succession of real estate sales going and going like the Energizer bunny.

But as many of you are now thinking, "I haven't seen that bunny on TV for years." There lies the problem -- this market can't keep going.

The market needs more first-time home buyers for it to be successful. Without them, in coming years the real estate market will go the way of the Energizer bunny. In the future, you will think back just like with that commercial and say to yourself, "Oh yeah, I haven't seen home-price appreciation in years."

Steven Krystofiak is a mortgage broker based in California. He is president of the Mortgage Broker Association for Responsible Lending, an advocacy group.

(Read Krystofiak's previous articles, "What is a subprime loan? It depends on whom you ask," and "High-risk loans enable buyers to obtain, not afford homes.")"

Tough New Rules Limit Refinancing Options

By Peter G. Miller

RISMEDIA, March 30, 2007-Imagine driving along the highway. You run over some glass and a tire goes flat. It's no problem because there's a spare in the trunk.

For the past several years real estate buyers have had a financial spare tire, a back-up system that was always there if times got tough. But now that spare tire is about to disappear, a vanishing act that will surprise some borrowers and bankrupt others.

What happened?

The "smart" play in real estate between 2001 and 2006 was to buy as much property as possible, finance with little or nothing down and then make the smallest allowable monthly payments.

Such a strategy made sense in a world where home values "always" rose and lenders provided ideal forms of financing, loans where initial monthly payments equaled no more than the cost of interest and sometimes less.

But now the game has changed. Freddie Mac — a major buyer and packager of mortgages — has announced that starting in September it will substantially change the way it purchases subprime adjustable-rate mortgages (ARMs). From this point forward loans with little down and tiny payments up front are going to be much tougher to get.

Freddie Mac will not buy subprime loans unless the borrower is qualified to pay for the loan at its fully-indexed and fully-amortizing rate and not merely an upfront and low-ball "teaser" rate.

Freddie Mac will require stronger proof of financial capacity. For most borrowers this will mean showing tax returns and W-2 forms.

Freddie Mac wants subprime lenders to collect money each month to assure that property taxes and insurance are being paid.

"Right now," says Jim Saccacio, chairman and CEO at RealtyTrac.com, a leading online marketplace for foreclosure properties, "the new Freddie Mac standards apply only to subprime loans, mortgages used to finance borrowers with high-risk credit records. However, the potential for excess risk also exists for loans for more-qualified borrowers. The result is that borrowers in every credit category would be smart to assume that mortgage standards are about to tighten throughout the marketplace."

Freddie Mac's rules are important because they create big profits for lenders. Freddie Mac buys loans from lenders-lots of loans. According to The New York Times the company has purchased subprime loans worth $184 billion.

The catch is that Freddie Mac only wants loans that meet its standards. If you're a lender you want to meet the requirements of Freddie Mac and other mortgage buyers because then your loans can then be quickly sold. Once sold, the cash you receive can be used to create new loans, new fees and new profits.

While the new Freddie Mac standards will plainly impact new borrowers, the real marketplace worry concerns those who now have loans but will need to refinance in the next few years.
Between 2001 and 2006 millions of properties were financed with interest-only and option ARM financing, loans which allowed borrowers to make low monthly payments during initial start periods, the first few years of the loan. Borrowers with such financing know-or should know-that once initial start periods end the loans can only be continued with far higher monthly payments, in some cases payments that will double.

Despite the potentially bankrupting impact of such larger monthly payments most borrowers did not worry and with some reason: As start periods ended properties could be refinanced so borrowers could get another few years of low monthly payments.

Now, however, the ground rules have changed.

First, if the original loan was obtained with a "stated income" mortgage application that contained-shall we say, "generous" and unchecked income estimates-new applications will demand verifications and proof. Without evidence of real income, borrowers will be unable to refinance.

Second, if the original loan application was obtained with a full-documentation application that had every number checked and verified.

In practical terms, suppose buyer Dixon qualified to borrow $200,000 in 2005. He now has the same income and credit, he can document everything, but his loan application will be judged on his ability to pay the real monthly cost of the loan and not just a payment based on an up-front teaser rate. The result? It may be that he can only borrow $175,000 in 2007.

This means Dixon cannot refinance unless he can also pay down a substantial chunk of his existing debt in cash-$25,000 in this example. Without the additional cash Dixon is effectively locked into his existing loan-the very loan that he doesn't want to pay or perhaps can't afford to pay once the "start" period ends.

For some borrowers the new rules mean existing loans-especially recent loans-cannot be refinanced. Unfortunately the alternatives to refinancing may also be unworkable because larger payments may be unaffordable; in slowing markets homes may not sell at a profit and rents may be insufficient to cover monthly mortgage costs. For too many borrowers, it will no longer be possible to delay mortgage problems by refinancing, an option that could have prevented foreclosure and bankruptcy.

Are the new standards too harsh? Did Freddie Mac do the right thing?

"Freddie Mac," says RealtyTrac's Saccacio, "deserves credit for being the first to make a terribly tough choice. It's the right decision, one that will be painful now but a strategy which will ultimately result in far fewer foreclosures, a reduced number of lender failures and smaller investor losses."

Peter G. Miller is the author of the Common-Sense Mortgage and is syndicated in more than 90 newspapers.

February 2007 Columbus Board of Realtor Statistics

Report finds subprime loan servicers practicing forbearance

Long-term benefits of modifying loan terms a matter of debate
Thursday, March 15, 2007 By Matt Carter Inman News

A new report by Standard & Poor's Ratings Services details steps subprime loan servicers are taking to help borrowers avoid foreclosure, but doesn't attempt to gauge how successful those efforts will be.

With estimates of more than $500 billion in adjustable-rate mortgages expected to reset to higher interest rates this year, the willingness of lenders to work with debtors to avoid foreclosure could mean the difference between a soft and hard landing for some U.S. housing markets in 2007.

Loan servicers, who not only collect payments from borrowers but also handle defaults, foreclosures and the sale of real estate-owned properties, can "minimize losses to investors while providing assistance to thousands of homeowners in dire financial trouble," the Standard & Poor's report said. There's plenty of incentive for lenders, too, since the foreclosure process can cost $40,000 per home or more.

But subprime loans -- which can include "exotic" mortgages like interest-only and pay-option adjustable-rate mortgages, as well as hybrid 2-28 loans and 80-20 piggybacks -- are more complex to administer than 30-year fixed-rate mortgages, the report noted.
Some borrowers have complained that it's difficult to communicate with their lender, and that some are unwilling to discuss alternatives to foreclosure such as modified loan terms or a short sale. Standard & Poor's said discussions with loan servicers about their efforts to work with borrowers were "encouraging."

"Sound, proactive management, along with ingenuity, planning, and investment in staff and technology have put most servicers in a solid position to help borrowers work through the substantial difficulties they may be facing," the report said. "All of the servicers we contacted said curtailing defaults and engaging in early-stage loss mitigation are paramount for minimizing investor losses and keeping borrowers in their homes"

The point of the report, said Standard & Poor's Servicer Analyst Robert Mackey, is that "major servicers really understand that early intervention and loss mitigation is a much better way to address this" than proceeding directly to foreclosure.

J. Michael Collins, president of Ithaca, N.Y.-based MortgageKeeper Referral Services Inc., said that when borrowers get into trouble, "they tend to panic."

From his perspective, "Servicing could improve, so that people are not scared of the lender."
MortgageKeeper helps lenders find help for troubled borrowers by maintaining a database of nonprofits in 15 cities that provide counseling and assistance. The company has received "a lot more inquires lately," Collins said. "There are a lot of folks in the industry trying to figure out solutions."

Subprime loan servicers seem to be moving more quickly than prime lenders in adopting a "customer-oriented" approach in response to the current rise in loan delinquencies and defaults more quickly than prime lenders, Collins said.

"There is probably more they could do in the early stages, and be less confrontational," Collins said. "Many are starting to go in that direction."

Servicing loans can be a labor-intensive job, and some lenders outsource the job to companies that rely heavily on loan processing software and overseas call centers to reduce costs.
"I think a lot of folks think of loan servicing as a cost," Collins said. "When the goal is minimizing costs, they miss that this is a place where you can get a lot of added value."

In the long run, cost-cutting measures could actually increase expenses if more loans go into foreclosure.

"If I'm a borrower, and get shunted to a call center overseas, how much do I feel the lender trying to work with me?" Collins said. "This sort of laser-like focus on cost-cutting can result in worse borrower behavior, and less likelihood of getting those payments and a resolution."
Mackey said lenders understand the importance of loan servicing.

"Any staff reductions you're reading about (in the mortgage lending industry) today is on the origination side," Mackey said. "The servicers are adding staff because of the complexity and the volume of loans having trouble."

In his report for Standard & Poor's, Mackey found that many loss-mitigation departments are trying to identify troubled borrowers in the early stages of delinquency, reviewing accounts that are current to determine if they may be headed for trouble. Servicers are trained to spot problems based on conversations with borrowers, assigning them risk profiles that help loan administrators make early contact.

Standard & Poor's found that Saxon Mortgage Services Inc. calls and writes borrowers facing ARM resets, and offers repayment plans to those with escrow shortages beyond the traditional 12-month period.

When a loan is still in the early stages of payment default, "Our staff is attempting contact every other day until the customer is reached and a status on the account is obtained and hopefully a payment taken or a short-term repayment plan established a promise to pay is made," Saxon executive vice president Stella Hess told Standard and Poor's.

Saxon has reduced the number of accounts each agent handles, allowing them to devote more time to borrowers in need of consultation, Hess said.

Before referring any delinquent loan to a foreclosure attorney, a committee at Saxon conducts a review to verify the company has taken every possible step to mitigate a loss and stave off foreclosure.

GMAC ResCap Vice President Mitch Oranger told Standard & Poor's the company is sending staff to cities around the country with high foreclosure rates.

The company aims to make early contact with troubled borrowers, which can require verifying borrower information and authorizing skip-tracing even as a new loan is being boarded to its system, Oranger said.

In 2003, ResCap partnered with the City of Chicago, Neighborhood Housing Services of Chicago, the Federal Reserve Bank of Chicago, and others to form HOPE, a loss-mitigation effort that has expanded to 10 cities.

ResCap's foreclosure prevention team is also providing similar services in 12 other markets where foreclosures are rising and local partners want to provide local counseling to homeowners.
At Irvine, Calif.-based Option One Mortgage, all loans are eligible for loss mitigation, even those with first-payment defaults. Option One has opened satellite offices in areas with high foreclosure rates such as Detroit, Columbus, Ohio, Atlanta, Houston and Philadelphia.

Collins said Mortgage Keeper is talking to its lender clients about expanding its database of counseling and assistance programs for borrowers to another 10 cities. In discussions with lenders on where the need is greatest, California, Tennessee and Florida have emerged as likely candidates, Collins said.

Although Standard & Poor's did not attempt to gauge the effectiveness of efforts to assist borrowers, a report released Tuesday by the Center for American Progress looked at several foreclosure prevention programs.

The programs examined in "From Boom to Bust: Helping Families Prepare for the Rise in Subprime Mortgage Foreclosures," included a mortgage foreclosure program in the Minneapolis-St. Paul area.

The program, created in 1991, provided counseling for 4,200 households and mortgage assistance to a smaller number.

A 2005 study found that 60 percent of households receiving services and 70 percent of those that received assistance loans were current on their mortgages 12 months after receiving services.

Most homeowners receiving services were able to reinstate their mortgages in approximately 9.5 months and pay back their assistance loans, and the rate of foreclosure by families served by the program dropped from 11 percent to 6.8 percent.

But the drop could have been because of the growth of nontraditional loans offered to borrowers with no equity and a state law prohibiting creditors from collecting deficiency judgments, which made lenders more willing to restructure loan terms.

Some experts think efforts by loan servicers to mitigate losses may have contributed to the current crisis in subprime lending, by obscuring the true risk of securities backed by mortgages and sold on Wall Street.

In a recent paper, "How Resilient Are Mortgage Backed Securities to Collateralized Debt Obligation Market Disruptions?" Joseph R. Mason and Joshua Rosner point out that loss mitigation may have long-term risks, citing studies that suggest the rate of re-default FHA loans with modified terms may be as high as 25 percent.

The Department of Housing and Urban Development requires servicers of FHA-guaranteed loans to attempt loss-mitigation strategies, Mason and Rosner note. Government-sponsored entities Fannie Mae and Freddie Mac have reported a success rate of nearly 50 percent in such efforts, they write.

"Given that subprime servicers have implemented some of the most aggressive approaches to servicing delinquent loans, it would be surprising if their workout ratios have not kept pace with the (GSEs)," they say.

These mortgages can be placed in pools of loans that back securities purchased by Wall Street investors, who may not be fully aware of the added risk of default, Mason and Rosner said.

"While the industry and HUD have frequently stated the social benefits and business savings of loss mitigation, scant data exists to analyze the ultimate effectiveness of these programs," they wrote.

As a result, historical data on delinquency and default may understate risk. That, combined with the lack of loan-level data about loss-mitigation efforts makes it difficult for investors in mortgage-backed securities to properly gauge their risk.

The rollover of nonperforming loans is considered one of the main causes of the savings-and-loan crisis of the 1980s, they noted, and can "create greater systemic risk" in the banking and financial industries.

The Standard and Poor's report, "Subprime Loan Servicers Step Up Loss Mitigation Efforts To Avoid Foreclosures," recognized such dangers.

If forbearance plans and loan modifications "are not prudently underwritten, delinquencies will only worsen," the report concluded. "Competent mortgage servicers should focus their most seasoned default management personnel on loss-mitigation negotiations, and that staff should receive continuous training. Senior management should closely monitor recidivism rates and forbearance break rates to ensure that the decisions being made by staff are sound and provide long-term solutions."

"I hope borrowers understand that it's always their best bet to contact the lender sooner rather than later," said MortgageKeepers' Collins. "The consumer psychology is often, 'I can take care of this tomorrow.' The longer they put it off, the harder it's going to be."

***

What to Expect from a Home Inspection

Agents frequently discuss home inspections with home buyers, since inspections are a valuable tool for them to use in deciding if they can afford a prospective home in its current condition. But inspections are also valuable tools for sellers, who can use pre-listing inspections to develop a check list of repairs to make before the home goes on the market – and while there are no time constraints relating to a pending transaction. Even sellers who don’t have time for repairs can benefit from a pre-listing inspection, because they’ll be able to anticipate what the buyer’s inspection will uncover and can use that knowledge with their Realtor® to set the best price possible.

Sellers frequently ask their agents how they can prepare their home for a buyer’s inspection. Aside from holding a pre-listing inspection, remind sellers that they can take the following steps to ace a buyer’s inspection:

Outside impressions: Advise the seller to clean the home’s exterior, and remove soil or mulch from contact with exterior siding. They’ll want to clean roofs or gutters, and double-check how water flows from downspouts and other pipes. Sellers should trim trees and bushes and remove roots that are near the home’s exterior or foundation. They may also wish to paint or repair weathered siding, bricks, and trims around doors and windows. All external wall penetrations should be caulked.

Interior efforts: Tell sellers to clean and replace heating and cooling filters or, at the very least, clean them. They’ll need to test smoke detectors and replace burned-out light bulbs. They should clean the chimney, fireplace, or wood stove, and have furnaces and air conditioners serviced. Moving furniture or storage belongings may be necessary so that an inspector can easily access attics, crawl spaces, the garage, and areas of the basement that contain major home systems. Sellers should keep utilities running if the home is vacant, and make sure windows will open and shut properly. Sellers may want to add insulation and ventilation to attics and make sure crawl spaces are dry.

Bathroom and kitchen work: Sellers will want to make sure plumbing works without leaking or perpetually dripping. They may also need to caulk around tubs or other fixtures. They should check that ventilation systems (range hood, bathroom fans or ventilation systems) work, and clear under-sink areas so an inspector can access pipes.

Gather documents: Before listing the home, sellers may want to organize service records and warranties for appliances in one place. This can help an inspector or buyer see what repairs were made to various home systems and how often or well various home systems and appliances were maintained. Sellers may wish to make a note of any warranties that are transferable to a new owner.

© 2005-2007 WIN Home Inspection. WIN Home Inspection is a registered trademark of World Inspection Network International, Inc., a franchisor of home inspection services.

A flood of foreclosures, but should you invest?

Experts caution potential buyers to do their homework
By Amy Hoak, Marketwatch

CHICAGO (MarketWatch) -- The number of homes in or nearing foreclosure is growing, and some investors are taking advantage of the bargains created.

But even with a steady stream of distressed properties coming on the market, jumping into foreclosure investing is dangerous, especially if you are not familiar with the process or new to real estate investing.

"Some people are using the phrase 'tsunami;' there's going to be a tsunami of foreclosures," said Dave Jenks, co-author of "The Millionaire Real Estate Investor." "For the people who are pros at dealing with foreclosures and have the infrastructure of information and wherewithal ... they will take full advantage of this."

Consider these recent statistics: 1.05 percent of mortgages were in the foreclosure process in the third quarter of 2006, according to the Mortgage Bankers Association. The foreclosure rate increased from 0.99 percent in the second quarter; the rate was 0.97 percent in the third quarter of 2005.

And RealtyTrac reported last week that the number of homes entering the foreclosure process increased by 19 percent in January, compared with December's numbers. Compared with January 2006, the number of homes in the process is up 25 percent. In 2006, a total of 1.2 million homes entered the foreclosure process, 42 percent more than 2005.

See Top Cities for Foreclosures

While there are opportunities to purchase homes at reduced prices in many markets, they're "cautious opportunities," said John Anderson, owner/broker of Twin Oaks Realty in Crystal, Minn., a suburb of Minneapolis.

Above all, you can't assume that just because a home is heading for foreclosure means that it is automatically a good deal, Anderson said. Remember, even for pros, foreclosure investing involves some risk, as does any purchase of "real estate as an investment, as opposed to a home (in which to live)," said Rick Sharga, vice president of marketing at RealtyTrac.

Doing the math

The transaction has to make sense financially, figuring in the costs of getting the property back into marketable condition, the value it's going to have at resale and the length of time it's going to take to find a buyer -- if you do, in fact, plan on reselling immediately instead of holding it to rent out or live in. It's also important to know if there are liens on the property.

Adding to the complexity of the investment are the various state and county foreclosure laws and regulations throughout the country. "This is hard work," said Daryl White, a foreclosure investor in Valencia, Calif. "Forget about 'If I can do it, you can do it'" lines from late-night television infomercials, he added. White, a subscriber of Foreclosures.com, a foreclosure listing service and educational Web site, uses a spreadsheet to figure the costs associated with investing in a particular property. When his analysis is complete, he can decide what to pay for the property.

The goal, he said, is to buy at 30 percent below the after-repaired market value -- half of the discount allows him to cover such expenses as holding costs and repairs while the other half earns him a profit. The formula is taught through Foreclosures.com. In the "changing market" he's in, near Los Angeles, he has to factor in that houses are taking about three to five months to sell, which adds to his holding costs, he said. But even in a cooling market, a home that is priced right will sell, said Alexis McGee, president of Foreclosures.com. It's important, she said, to pay careful attention to prices of comparable houses that are selling in a particular neighborhood to get an idea of what return an investment can bring. In fact, many who have had success in real estate investing will also recommend not depending on a strong market for a good return, Jenks said. "Most of the really good investors will tell you never rely on appreciation to make a deal work."

Homeowners in trouble

There are a couple of key reasons for the uptick in foreclosures, said Sharga, whose site also lists homes in the foreclosure process. For one, a slower housing market has stretched out the time it takes for a home to sell, making it tougher for families who must sell to strike a deal in time to avoid the foreclosure process, he said. Also at play is the rise in interest rates on adjustable-rate mortgages, at times squeezing "people who have overextended themselves in the first place."

Those looking to buy a home in the foreclosure process can do so during a few different stages. Some investors, including White, prefer purchasing homes prior to the actual foreclosure. Others make the investment later in the process, at a foreclosure auction. If the property is unable to be sold by the bank at a desired price, an investor can deal with the institution in buying what is called a real estate owned property, or REO. Each point has its own complications, so tread slowly and do your homework first, Anderson said. He recommends beginners start out by sitting down with a real estate agent who has experience in the arena, someone who has done it before.

Dealing with a preforeclosure, for example, often involves negotiating with a distressed homeowner -- and doesn't always shape up to be a comfortable situation."They (homeowners) don't want to be bothered or may not be as reasonable as they are under normal circumstances," Sharga said.

On top of that, there are a number of "foreclosure rip-off artists" who have taken advantage of people when they're most vulnerable, he added. White said he's often battling a negative image because people "don't see the white knight part of it," when, in fact, the sale of a preforeclosure home could help homeowners keep negative marks off their credit histories and also get at any remaining equity.

As a Realtor working with investors, Anderson said his first thought is to try and find a way to keep the homeowner in the house. If a sale must take place, he recommends the seller have fair representation before proceeding -- to ensure they get a fair deal.

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