Month: February 2009

Reducing Mortgage Interest Deduction on Families Making Over $250,000


President Obama’s budget proposal to reduce the amount of mortgage interest deduction on families earning over $250,000.00 a year is a major impediment to a real estate recovery. The National Association of Realtors is unequivocally opposed to this plan. The average house price in the Newton/Brookline area is $900,000.00 or so. A $250,000 salary barely lets you afford the average house here. If this is plan enacted it will cause a secondary round of price depreciation and cause more havoc with an already fragile banking system. The NAR is going to do everything it can to prevent this from passing. In the coming days I will post a link to so you too can get involved. The housing market needs your help.

Real Estate is Local; Know Your Market


The Case Shiller index was released and although Boston performed quite well compared with other parts of the country, Newton performed even better. Here are the numbers; the median single family home price dropped 20.2% during January in all of Massachusetts when compared to sales during the same period a year earlier. Boston prices were down 1.3% from the year earlier, the best performing city of the 20 tracked. Newton was up about 16%! The median price of a home during the month of January 2008 was $667,500, January of ’09 was $800,000. The number of sales dropped from 44 in ’08 to 25 in ’09.
Do I really think the market is up 16%? No I don’t, but the numbers don’t lie. I feel the biggest impediment to an absolute recovery is the high end market. The high end market is languishing for sure, there is too much uncertainty with the stock market, job security, and bonuses to propel those buyers to take the plunge. On a positive side we are seeing a definite increase in relocation business. Some of the Universities and hospitals are hiring.
My final word is know your market.
Here is the link for the Globe article.
http://www.boston.com/business/markets/articles/2009/02/25/house_sales_battered_again_in_january?mode=PF

Talking Taxes


Does the Boston Globe have a thing against Newton? When was the last time you opened the paper and there was a positive article about Newton. Yesterday the Globe trashed talked Newton about how fiscally irresoponsblie the city is and how the taxes are so high… blah blah blah….so I did a little digging. Many will not be happy about this including my husband, but Newton’s tax rate isn’t high enough. Take a look at the facts; Newton has a tax rate of 9.96 per thousand.
Wellesley 9.47
Weston 11.02
Wayland 16.37!
Concord 11.90
Carlisle 14.04
Needham 9.96
Brookline 10.69
Watertown 12.24
Arlington 11.92
Winchester 11.27
Lexington 12.97
Belmont 11.89
Waltham 11.30
Sudbury 15.29
Newton has one of the lowest tax rates around and the city provides the most services. If I lived in Sudbury I could pay a tax rate of 15.29 and drive my smelly garbage to the dump on a hot humid Saturday afternoon, or pay a private company to dispose of my garbage for $30-50 per pickup. Newton sounds better all the time.

Location, Location, Location Is Still Most Important Factor In Real Estate


The old adage of location, location, location is back in vogue.  Judging from yesterday’s article in the Home section of the Boston Globe the old reliable towns have suffered the least in home prices.  The truth is, there is a reason why certain towns retain a cache, yes, yes, good schools are important, but is that the only reason?  When I drive around Newton, Brookline, Wellesley and Weston you see thriving town centers, ok maybe not Weston, but you see a history in these towns.  Let’s talk about Newton first; Newton has a symphony orchestra, a music and ballet school an established Art Center, a phenomenal library, 4 colleges and a fabulous commute to Boston or Logan.  If I decide I want to go to Boston, I just go, I can be there in 12 minutes by car or I take the Green Line.  The outer suburbs; going to Boston becomes an event.  Wellesley has probably the best downtown and a slew of new restaurants along with the Library, shopping…Brookline has a very involved community, different villages offering different things appealing to young and old.  When I meet a new buyer I always try to get a feel for what they like, while cautioning them that you are buying more than a house you are buying a lifestyle.  Many young buyers get caught up with the BIG HOUSE and BIG YARD, but that is all they have in outlying suburbs.  You meet people just like yourself, upwardly mobile with good jobs who think the American dream is a bigger house and yard, but is a big house and yard all you want from where you live?  No thriving downtown, no libraries, symphonies etc…why…because the towns are too new, all the money is spent getting the schools and infrastruture up to speed.  I believe the most important quality a vibrant town offers is its older citizens.  These are the people that fought for the libraries, the schools, the arts, even the zoning restrictions. I can’t tell you how many interesting people I have met just walking the dog.  You cannot meet your neighbors if you live on a 2 acre property at the end of a cul-de-sac.  You can’t walk into town and have a cup of coffee at the local coffee shop or bakery because people don’t linger at Dunkin Donuts.  What makes strong communities?– the businesses in town that are second and third generation, the art and book stores that have recently opened, the hair salons, the upscale and ordinary clothing stores owned by people who live here. Many owners live here but their employees may not, but they can get here by public transportaion. And most definitley, all the retired people who don’t want to leave because it’s so comfortable here, their friends and grandchildren are here, and yes, the Museum of Fine Arts is only 12 minutes away.

What has Congress Done for Newton Housing Market?


Well the federal stimulus package was passed by Congress yesterday, but will any of it help the local housing market?  The most important piece of the bill regarding real estate was raising the loan limit on conforming loans from $417,000 to $523,750 in Greater Boston.  The average price of  a home in Newton is somewhere around $900,00 and $1,000,000 in Brookline so a $523,750 cap seems perfect, right?  Apparently, Congressman must already have or want a home on the Vineyard or Nantucket because the loan limit there is $729,750.  These new rates are also in a category called “expanded conforming”- translation- they can be changed, hopefully the limit will be made higher.  Presently the conforming rate is around 5 1/2% the expanded conforming rate is 5.74% and the jumbo is around 6 7/8%: a huge difference in mortgage payments. 

What does all this mean for Newton?  If the average price of a home is $900,000, a buyer would have to have a 42% down payment equivalent to approximately $375,000 to qualify for the expanded conforming rate.  Well that seems doable doesn’t it?  It was not unusual a few years back for this to be common because housing prices were rising; buyers sold homes at much higher prices than they paid and used the additional equity as a down payment for their next house.  This is simply not happening now;  while Newton/Brookline have been spared a huge drop in values, values are off from their peak in 2005.  Savings accounts have been decimated, jobs are being eliminated, bonuses cut, food/clothing prices are rising.  We need more relief. We need to impress upon our Congressman and Senators that we need the relief here in the western suburbs, raise the conforming rate back to $729,000 like it was part of last year.   A million dollars may buy a mansion in the mid west – here, you simply get a nice house.

Margaret Szerlip Joins Sotheby’s International Realty


I am delighted to announce that I have joined the office of Sotheby’s International Realty here in Newton.  I am energized about the prospect of working with Marcia Karp, Susan Liberman and Margie Kern.  They have successfully owned Karp, Liberman, and Kern for 23 years before merging with the Sotheby’s network in 2006.  These three women are some of the most respected women in the local real estate market.  This partnership allows me to collaborate with knowledgeable professionals, along with a fabulous staff, and have the power of the Sotheby’s trademark behind us.  Sotheby’s is committed to providing highly personalized services in combination with global capabilities.  I look forward to working with them and you.

Fannie Mae bends rules to make financing easier


Is help on the way?
Fannie Mae to Loosen Rules for Home-Loan Refinancing (Update2)

By Jody Shenn

Feb. 5 (Bloomberg) — Fannie Mae, the mortgage-finance company under U.S. government control, will loosen rules for homeowners seeking to lower their loan payments by refinancing.

Fannie Mae will drop some credit-score requirements, reduce income-documentation standards and waive the need for appraisals in some cases, according to a notice yesterday to lenders posted on the Washington-based company’s Web site. The changes apply to loans that the company owns or guarantees.

The company, which accounts for more than 40 percent of the $12 trillion in U.S. residential mortgage debt, is seeking to break a “logjam” in refinancing and allow more homeowners to take advantage of near-record low interest rates, according to Brian Faith, a Fannie Mae spokesman. The increased flexibility for consumers isn’t large enough to significantly harm mortgage- bond investors and mortgage insurers, analysts said.

“This is not yet the no-appraisal refi wave that many have feared,” Matt Jozoff and Brian Ye, mortgage-bond analysts at New York-based JPMorgan Chase & Co., wrote in note to clients yesterday.

Fannie Mae’s appraisal change doesn’t mean borrowers with less than 20 percent home equity can forgo mortgage insurance, the analysts said. That’s because Fannie Mae will likely use automated models to check home values listed on applications before offering to waive appraisals, the analysts said.

The company’s DU Refi Plus program will start April 4.

Aiding Borrowers

“To allow more borrowers to take advantage of today’s historically low interest rates and help the lending community break the logjam in mortgage refinancing, the company is extending its refinance offerings,” Faith said in an e-mailed statement. The program “will streamline” refinancing “for potentially millions of current mortgage holders,” he said.

While Fannie Mae, smaller rival Freddie Mac and the companies’ regulator are considering permitting borrowers to refinance even when the consumers owe more than their homes’ worth, they also must consider “the various hurdles and unintended consequences,” Federal Housing Finance Agency Director James Lockhart said in a Feb. 2 interview.

Fannie Mae’s changes will include allowing borrowers seeking to take out a loan that is 80 percent of the value of the home or less to qualify for refinancing with credit scores below its 580 minimum. Consumer credit scores as measured by Fair Isaac Corp. range from 300 to 850.

Easing Documentation

The program also lowers income-documentation requirements to one current pay stub, according to the notice.

The U.S. took control of Fannie Mae and McLean, Virginia- based Freddie Mac in September as their losses threatened to further roil the housing market. The government agreed to inject as much as $200 billion of capital to protect investors in their roughly $6 trillion of corporate debt and mortgage bonds.

The average rate on a typical 30-year fixed mortgage rose to 5.25 percent in the week ended today, according to Freddie Mac. Rates are up from 4.96 percent three weeks ago, a record low, and down from 6.46 percent in the last week of October.

Under their government charters, the companies must have borrowers or lenders buy mortgage insurance or other forms of so- called credit enhancement if their down payments or home equity are less than 20 percent. Mortgage insurers cover all or some of lenders’ losses on defaulted debt.

Mortgage-bond holders who paid more than face value for the debt may incur losses if refinancing means the securities are repaid faster than expected, cutting the value of the premium coupons on the bonds. More than 95 percent of Fannie Mae or Freddie Mac-guaranteed fixed-rate mortgage securities are trading above face value, according to Bloomberg data.

Unfounded Concerns

“Absurd” concern about faster prepayments being potentially enabled by quick Fannie Mae and Freddie Mac policy changes can be seen in the only about 1-percentage-point gap between prices for Fannie Mae’s 4.5 percent and 5 percent mortgage bonds, Ken Hackel, head of fixed-income strategy at RBS Greenwich Capital Markets, wrote to clients today.

Fannie Mae’s changes are “unlikely to have a material effect on prepayments,” Laurie Goodman, a senior managing director at Austin, Texas-based Amherst Securities Group LP, wrote in a report today. Derek Chen and Nicholas Strand, Barclays Capital mortgage-bond analysts in New York, agreed.

“We think the overall impact on borrower refinance-ability and prepayments is marginal,” they wrote in a note to clients.

While lenders won’t be required to make contractual promises about the value or condition of homes under Fannie Mae’s Refi Plus program, they will still be required to represent that all data submitted to the company’s computer underwriting program are accurate, according to the notice.

Faith said that the company will “expedite the refinancing process for Fannie Mae-owned loans by, under certain conditions, leveraging our automated risk assessment capabilities to validate the current market values in lieu of traditional appraisal or property inspection requirements.”

To contact the reporter on this story: Jody Shenn in New York at jshenn@bloomberg.net

Last Updated: February 5, 2009 12:07 EST

Loan Modifications


 

I read many real estate blogs and subscribe to multiple financial journals, I thought this is a well written article by Elizabeth Weintraub from Sacramento, California, explaining the loan modification process in a clear and concise manner.  A link to her site…http://elizabethweintraub.com/

 I believe loan modifications will prevent foreclures and this is why. Nobody wants to admit it, but the lenders are making loan modifications seem confusing and difficult. Perhaps it’s an effort to discourage applications? If you’re considering a loan modification, the first thing you should do is pick up the phone and call your lender to find out if you qualify.

If you do not qualify, and can no longer afford to make your monthly mortgage payments, then call a short-sale specialist and put your home on the market as a short sale. Many lenders are placing a 3- to 4-month moratorium on foreclosures, so this will give you extra time to get that home sold.

The criteria for a loan modification is tight. Many banks insist on the following qualifications:

  • Existing loan origination date prior to Dec. 31, 2007 
  • Existing subprime loan (fixed or adjustable) or Option ARM
  • Loan-to-value ratio above 75%
  • Owner occupied as primary residence
  • Employed homeowner
  • Existing mortgage payments exceed 31% of gross monthly income.

However, if you qualify for a loan modification, you can assemble the paperwork the lender wants by putting together the following package:

  • 2 years of W2’s 
  • 2 years of tax returns
  • Financial Statement that lists assets and liabilities
  • Last 2 pay stubs
  • Hardship letter

Don’t pay a company to do this for you. Do it yourself.

If you are successful, a loan modification may give you:

  • A lower mortgage balance. 
  • An interest rate between 2% and 4%.
  • A loan term of 30 to 40 years.
  • A low monthly mortgage payment.
  • Elimination of negative amortization and / or a waiver of prepayment penalties and fees.

Newton Housing Supply and What is Selling


A brief synopsis of the Newton housing supply and what is selling.  At the present time there are a total of 135 single family homes for sale; a very low number.  There are also 23 homes under contract, the breakdown follows:

FOR SALE

16 – $319-$499

40-  $500-$749

27-  $750-$999

11-  $1,000K-$1,249K

11-  $1,250K-$1,499K

5-   $1,500K-$1,749K

7-  $1,750K-$1,999K

11-  $2,000K-$3,000K

7-  $3,000K-$8,950K

UNDER CONTRACT

5-  $319-499

9-  $500-$749

5-  $750-$999

3-  $1,000K-$1,249

0-  $1250K-$1,499K

1-  $1,500K-$1,747K

0 above $1,650K

Not surprisingly, given the financial markets’ decline and job losses at many financial firms, there are a lack of buyers at the high end.