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I'll be out of town from Thursday through Tuesday without regular Internet access -- yes, I'm already hyperventilating, thanks -- but you'll get your How-to Monday, never fear. All hail the power of scheduled posting.
Try to keep the housing market from doing anything interesting while I'm gone, OK?
Ohio and Michigan make the top three, as one would expect, but No. 1 might be a surprise. Here's the top 10 on Lansner's misery index:
1. Mississippi
2. Michigan
3. Ohio
4. Indiana
5. Wisconsin
6. Georgia
7. South Carolina
8. Kentucky
9. Louisiana
10. Arkansas
U.S. District Court Judge Paul L. Friedman’s ruling will keep the regulation banning seller-financed assistance from going into effect today as planned, according to the court filing. AmeriDream's press release is here.
AmeriDream is one of the nonprofit organizations that offers down payment help to low- and moderate-income buyers getting mortgages insured by the Federal Housing Administration. The nonprofits get their money from the homes’ sellers, which HUD has criticized because a higher-than-average percentage of the borrowers end up in foreclosure.
This comes despite a 20 percent drop in residential construction. BusinessWeek has an on-the-one-hand, on-the-other from economists:
Back-to-back GDP gains of nearly 4.0% for the past two quarters show "the economy is incredibly resilient" in the face of the credit problems that rocked the markets in August, Edward Lazear, Chairman of the Council of Economic Advisors, said on CNBC. The impact of rising oil prices was mitigated by a strong labor market and, most importantly, by particularly strong growth in U.S. exports, which has been aided by expansion in the global economy, he said.However, "while the economy statistically looks very good, it feels much worse than the numbers indicate," writes Ken Kim of Stone & McCarthy Research Associates. "The headwinds the economy faces grew stronger in the third quarter and show no signs of abating anytime soon. The economy continues to be supported by solid consumer spending and booming exports, but we wonder how much longer the consumer can continue to carry the load."
Economic growth was solid in the third quarter, and strains in financial markets have eased somewhat on balance. However, the pace of economic expansion will likely slow in the near term, partly reflecting the intensification of the housing correction. Today’s action, combined with the policy action taken in September, should help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and promote moderate growth over time.
The benchmark interest rate that the Fed can lower, raise or leave be affects what banks charge other banks for overnight loans, and therefore what people and businesses pay for loans and mortgages. That rate is at 4.75 percent now.
A survey released this month found that agents are rushing to try blogs -- online journals -- and social-networking sites such as Facebook for advertising purposes. Coldwell Banker Real Estate announced in March that it had opened an office in Second Life, the online "virtual world." There are firms that send listing information to prospective buyers' cell phones and give the agent a heads-up.
I quote Joel Burslem, founder of the Future of Real Estate Marketing blog, but could fit only a fraction of the interesting things he said into the story. Herewith are some of his answers to my questions about what people are (or should be) doing to market homes:
--Get the listing information in as many places as you can. "Now there's multiple destinations where people are going to find real estate online these days, anywhere from Trulia to Zillow to Realtor.com to Craigslist," Burslem said.--Create a video tour. "You don't even necessarily have to hire a camera crew and do any kind of professional editing," he said. "Most people's pocket digital cameras shoot decent enough web video."
--Blog. Whether you're an agent or a homeowner, you can blog about your community -- your block, even. For Realtors, there's the benefit of being able to "demonstrate that they're the expert without having to say it outright," Burslem said. On a related note, Realtors can also Be The Expert by answering questions on sites like Trulia and Zillow.
--Experiment. Realtors are trying social-networking sites, for instance. "I can't point to any particular success stories yet, ... because it seems like it's a fairly new thing that most of us are trying to wrap our heads around," Burslem said.
Of course, marketing can do only so much. Lenn Harley, broker at Homefinders.com, which works with buyers in Maryland and Virginia, says the key nowadays is choosing the right asking price. "That's critical," she said. "That's absolutely critical."
Live Baltimore, the nonprofit that promotes city living, is holding a renovation seminar this Saturday from 10 to 11:30 a.m. at the Enoch Pratt Free Library at 1251 Light St. You can see more details here, along with the other free seminars it offers.
Keep in mind you'd have to pre-register.
The rally is scheduled for 11:30 a.m. on Lawyers Mall in Annapolis.
EDIT on 10/31: It's been changed to 9:30 a.m. See new post.
The index, as Wonk readers will recall, measures 20 large metro areas and Baltimore is not among them. But Washington is, and the index shows prices there falling 7.2 percent year-over-year. That's seventh-worst among the 20 metros.
“At both the national and metro area levels, the fall in home prices is showing no real signs of a slowdown or turnaround,” Robert J. Shiller, chief economist at MacroMarkets LLC, said in a statement.
The Fed surprised financial markets Sept. 18 by making a larger-than-expected half-point cut to its benchmark federal funds rate, the rate banks charge each other for overnight loans. It serves as the basis for a wide array of lending rates in the broader economy.
The Fed funds rate is 4.75 percent now.
Paulson said authorities have been successful in containing the subprime crisis and that its impact appears to have been limited.But he acknowledged that the subprime crisis was not yet over.
"Six months ago people were more optimistic that in the housing market we have hit the bottom. We haven't hit the bottom yet," he said. It's going to "take a while to work our way through this."
Of course, a complicating factor in all this is the huge uncertainty over where people will settle when the jobs relocate here. Some may choose to commute long-distance or work via telecommuting for a while, easing the strain on gridlocked highways and crowded classrooms. Where the newcomers end up buying or renting homes ultimately depends on the cost and availability of housing, the quality of schools, job opportunities for other household members and other factors.
Tim Wheeler, who's been answering the questions, will take more as they come in. You can email brac@baltimoresun.com.
Since the 110th Congress opened for business in January 2007, the largest subprime lenders and their trade associations have spent nearly $29.4 million lobbying the federal government. In addition, they have donated $2.4 million in political action committee (PAC) contributions to Members of Congress and the national political parties.Mortgage industry donations have moved toward the Democrats since they took control of Congress. From January to June of this year, the industry gave $1.23 million to Democrats and $1.21 million to Republicans.
No surprise that home sellers trying to drum up interest are offering to pay some of that expense: It's thousands of dollars. And those costs are higher than average here, according to a survey by Bankrate.com. Read on for details ...
Bankrate.com's survey of states measured costs in a ZIP code in each state's largest city -- in our case, Baltimore.
The company estimates closing costs on a $200,000 home at just under $6,260 here, vs. $3,680 nationwide. The difference? Taxes.
Ryan W. James, senior mortgage banker at First Horizon Home Loans in Timonium, says the survey results sound about right for the Baltimore area. He finds that closing costs add up to about 3 percent of the sale price in the suburbs and 3.5 percent in the higher-tax city -- with an important caveat.
City buyers can bring down their closing costs if they qualify for one of the various tax credits in Baltimore, such as historic or new-construction. (Live Baltimore lists some here.)
"If you shop smart, it can really make a huge difference in your closing costs and your monthly payments," James said.
Speaking of shopping smart: Beware if your closing costs are way above that 3 to 3.5 percent mark. It could be that you have an "exorbitantly high" property tax bill, or your lender might be hitting you with a lot of points and fees, James said.
Housing Development Finance Corp., the Indian lender part owned by Citigroup Inc., said second-quarter profit rose 76 percent on demand from homebuyers in the world's fastest-growing major economy after China. ...Borrowers have withstood nine increases in interest rates since October 2004 as salaries rise in the $906 billion economy and the government offers tax rebates to homebuyers. Wages may grow about 15 percent this year, the fastest in the Asia-Pacific region, according to Hewitt Associates Inc., a U.S.-based human resources company.
The recent survey shows that bathroom and kitchen remodelings and additions remain highly valued by buyers. But the survey also shows returns on recent home improvements at the time of resale have dropped dramatically in the Baltimore area.Overall, the return in 2005 - when home values skyrocketed without home improvements - averaged 99 percent in Baltimore. That's down to 68.8 percent in the 2007 survey, said Sal Alfano, editorial director of Remodeling magazine.
It's part of a national trend in which the average cost recouped nationally was 70 percent, down 12.5 percent since 2003.
"With the downturn in late 2005 and 2006, it affected the resale value," Alfano said. Remodeling costs went up. House prices went down. "You put those two things together and the resale value drops," he said.
Bart Harvey, chairman of Enterprise Community Partners, covered the spectrum of affordable housing when I interviewed him for my story about the Columbia nonprofit, in today's paper. Alas, I only had 30-or-so inches of space to play around with. Here, the sky's the limit.
So, dear Wonk readers, I bring you one of the more interesting -- and controversial -- ways Harvey suggested the government could ramp up its funding for affordable-housing development: Stop handing out so much in mortgage-related tax breaks.
"If you look at the mortgage interest deduction over time, ... it's up to $80 to $100 billion, depending on what you include," Harvey said.
Seventy percent of Americans don't file for that tax break, he said. Most of the benefits go to the comfortably -- or very comfortably -- affluent, he said.
It's seen as one of the untouchables in the tax code. Harvey knows this. But he notes that Britain got rid of theirs. He figures the U.S. could take the lesser step of erecting a ceiling on the value of that break.
"Why couldn't we apply this toward our housing needs?" he asked. "If you limited it to some reasonable level and allowed for high-cost areas across the country, you have $40 to $50 billion a year -- which is about what you need if you want to solve affordable housing [problems]."
I've got a story running in Sunday's paper about Columbia-based Enterprise Community Partners, the affordable-housing giant. Here's a tidbit I couldn't fit in: Jim Rouse, who founded the organization with wife Patty, originally intended to call it something else.
The Robin Hood Trust.
As chairman Bart Harvey tells the story, the longtime developer went with Plan B because John Gardner, founder of Common Cause, said: "I'll go on your board if you change your name."
The first one does seem like classic Rouse, doesn't it?
Jumping on the bandwagon in true lemming fashion: The Wonk has a Technorati Profile now.
You can put the blog in your favorites, if you'd like. Just click here:
You know you want to.
What is a reasonable yield spread premium?Warren: Around 1 percent. Well, it depends on your loan amount. Generally, $2,500 to $3,500 is a good fair commission -- you can see the commission by adding the yield spread premium plus the origination fee. Maybe double that for a million-dollar loan. ...
The way to shop is to make three phone calls and ask just one question, one smart question: Can I get a Good Faith Estimate? Tell them please be sure to include the yield spread premium.
There's probably nothing here that will come as a big surprise. If you say you've got an adjustable-rate mortgage and you're staying up at nights worrying about the future because you think your credit is shot, it tells you to get help now.
On the other hand, it's a reminder for homeowners -- assuming the daily news isn't reminder enough -- to think carefully about what sort of mortgage they actually have.
Thanks to mortgage trainer Christopher Cruise for pointing it out.
The report predicts that lenders will foreclose on about 25,000 homes in Maryland -- a $2.7 billion loss in property value, both directly and indirectly. (Studies say foreclosure hurts the value of nearby homes, too.) The committee estimates the local loss in property taxes at $19 million.
I compared the foreclosure predictions to 2006 household numbers for an apples-to-apples way to stack Maryland against the nation. If the committee is right, we'd see about 12 subprime foreclosures for every 1,000 households in Maryland. The nation's rate is about the same.
California, which had a bigger boom and is experiencing a bigger bust, would have 14.5 subprime foreclosures per 1,000 households. Ohio, which has economic problems on top of housing woes, would have about 16 for every 1,000.
It was the first quarterly loss for the lender in 25 years.But the Calabasas, Calif.-based company said it will be profitable in the current quarter and in 2008, as it restructures its business to take advantage of the current market.
People who can afford the $500,000 to $2 million price for such boats have been more insulated than most from a troubled housing market and other downturns in the economy, people in the boating industry say.
His work will initially be funded through a grant from the city's philanthropic Goldseker Foundation."I would have been happy to stay here forever in some sense," Rutkowski, 60, said yesterday. "But every once in a while, you need to refresh and renew, and this is just a tremendous opportunity to take what I've learned, presumably, and make good things happen, to continue."
The nasty older sibling added that since Ken and Barbie never insured the dollhouse, they would have no recourse in the event of fire, flood, or stomping.
The Onion picked Dayton in foreclosure-wracked Ohio as the dateline.
Thanks to InmanBlog for pointing it out.
In fact, the prior three months saw huge downward revisions, and economists say this uncertainty will likely continue, particularly as builders see a rise in cancellation rates.
From the press release:
The 35,000 member group is taking out multiple full page advertisements in the Baltimore Sun, the Washington Post, the Capital, the Gazette of Politics and Business, and the Maryland Daily Record.The advertisement features an open letter to the Maryland public from MAR president Carole A. Maclure. ...
“Fixing the budget is necessary. Another tax on housing and property is a big mistake,” reads the headline. “Call your representatives today in the Maryland General Assembly and urge them to vote “NO” on new real estate taxes,” the letter urges.
The Realtors say state and local governments have added or increased more than 20 housing-related taxes and fees in the last five years.
The proposal is part of O'Malley's plan to raise $2 billion in revenue to deal with a state budget shortfall.
That estimate is far higher than the Bush administration’s prediction in September of 500,000 foreclosures, which in itself would be a tidal wave compared with recent years. ...The Joint Economic Committee estimates that the lost of real estate wealth just from foreclosures on subprime loans will be about $71 billion. An additional $32 billion would be lost because foreclosed homes tend to drive down the prices of other houses in the neighborhood.
Tip of the hat to Calculated Risk for noticing this.
On a related note, Bankrate.com added foreclosure-help suggestions to its site today, including possible do's and definite don'ts if you find yourself in trouble.
The bad news? Only because August's sales numbers were revised downward.
The federal government, which released the numbers this morning, said the seasonally adjusted annual rate of sales last month was 770,000 homes, vs. 735,000 in August. Its original estimate for August was 795,000. (And, as The Big Picture blog points out, the so-called increase is well within the survey's margin of error.)
Sales fell about 23 percent compared with September of last year, the government estimated.
On the other hand, the inventory of unsold homes shrank. About 520,000 homes were for sale at the end of last month, down 15,000 from August and 40,000 from a year ago.
But -- there's always a "but" nowadays, isn't there? -- a growing number of those unsold homes are finished and sitting empty, rather than planned or under construction.
I feel like that old Simpsons sketch.
The task force recommended enacting a broader criminal statute for mortgage fraud and requiring that lenders and mortgage originators report fraud to the state.They also suggested codifying that lenders wait 90 days before filing a foreclosure action after a borrower defaults, and lengthening the amount of time before a sale can take place. Another proposal would require that brokers be able to demonstrate that each mortgage, particularly a refinanced loan, provides a tangible net benefit to the borrower.
The president of the Maryland Association of Mortgage Brokers, Charles DiPino, is a member of the task force. Smitherman reports that "his group would like to see the standard applied to everyone who extends a loan."
Why, you ask? Bankrate.com says:
More jitters about the housing market and its effect on the economy drove mortgage rates lower. Bank earnings brought a renewed focus to mortgage delinquencies and concerns about the credit markets helped drive investors into the safe haven of long-term government bonds. Fixed mortgage rates are closely related to the yields on Treasury securities.
Freddie Mac's weekly survey of rates isn't up yet, but you can see past weeks here.
We have an adjustable mortgage which is going to go up in October 2008 and want to refinance it before it does. We also have around $25,000 worth of loan and credit card debt that we would like to consolidate in one home equity loan. Both me and my wife have good credit scores, not exceptional, but not bad. What do you recommend we do first? The re-fi or the home equity?
I'll bet other people are weighing their mortgage options right about now, too, so I posed the question to Ethan Ewing, president of California-based Bills.com. His suggestion:
Take care of it in one fell swoop, refinancing and rolling the $25,000 in debt into the mortgage -- but only if there's enough equity in the house.The other caveat: "You've got to have some fiscal discipline," he said. That is, don't roll your debt into your home mortgage if it will just tempt you to run up more debt.
He suggests a 15-year fixed-rate mortgage when people refinance if they can manage it -- because you'll pay off more of the principal sooner -- but a 30-year fixed-rate is fine, too.
Mr. and Mrs. Joe have a year before their rate adjusts. But Ewing thinks they ought to refinance soon, never mind the predictions that the Federal Reserve wants to lower rates further.
"I'll tell you, rates are really low right now," he said. "They shouldn't wait. ... There's just no guarantees that in a year, rates are going to be that low."
Hope that's helpful, Joe.
Got a question -- or other advice for Joe? Comment away.
The seasonally adjusted annual rate of sales was a little more than 5 million. This time last year, it was 6.2 million.
Inventory has continued to climb as well. At the current pace of sales, it would take 10.5 months to strike deals on all the homes listed, the Realtors said. It was under 7.5 months this time last year.
MarketWatch notes that the inventory of single-family homes hit a 20-year high.
The NAR blamed the drop on the credit crunch, which intensified in August. "Some of the cancelled transactions will move forward as buyers apply for other loans," Lawrence Yun, NAR's senior economist, predicted in a statement.
Prices were also down last month. The average sales price dropped about 3 percent, to just under $258,000. The median price -- which represents the typical home, the one in the middle -- fell a bit more, about 4 percent.
Read on for a chart from Wachovia graphing how unsold home numbers have risen. (You'll see that they peaked in July. But because the pace of sales keeps slowing, the months needed to strike deals for all that inventory continues to rise.)
Source: Wachovia
Twice the U.S. experienced year-over-year declines in residential construction—1967 and 1995—but did not slip into recession.Standard & Poor's Equity Research predicts more pain for the housing sector but no recession.
S&P Economics believes we will avert economic disaster primarily because of the aggressiveness of the Federal Reserve, with its expected continuing rate-cutting and liquidity infusion efforts. We also believe the weakness in the U.S. dollar will aid U.S. exporters, and the restatement of August's employment data, as well as strength in September's results, will help consumers feel less anxious about their jobs and lessen the effect on consumer confidence.
"Canton can't hold a candle to Dundalk," said County Executive James T. Smith Jr., to a round of applause. "It's really on a roll."
Residents of the Baltimore County community aren't so sure they're hot competition for the industrial-turned-chic city neighborhood.
"They're looking for people to move from Canton," said Joe Amann, 58, a Dundalk native who works at Happy Hon Bookstore. "But I don't think Dundalk has the amenities. We don't have a nice grocery store or a movie theater."
"By consistently harping on negative news regarding the economy, the media hopes to make the public think that the country is going into the tank," said a reader.
Said another: "Regarding the housing data, what about the many millions of sub-prime mortgages that are performing and the households who would not be homeowners without these loans?"
Countrywide has been under fire since early July -- it has had difficulties with loan financing, its chief executive has been criticized for selling hundreds of millions of dollars in stock and it faces pressure from the government to help keep people from losing their homes.
I'm trying to find out how many of these eligible mortgages are local. Let me know if you get an offer, will you?
The IMF says:
Subprime delinquencies on the 2006 vintage have exceeded delinquencies on loans originated in 2000 at comparable seasoning (loan age)—the worst performing vintage in the recent past—and are expected to rise further if the historical pattern holds. Loans originated in 2007 do not have sufficient seasoning to gauge overall performance, but the loan attributes are similar to those issued on loans in 2006. Thus, some of the same risk layering characteristics endemic to the 2006 vintage appear to have persisted at least through the first half of 2007, despite reportedly tighter underwriting standards.
Calculated Risk pulled another chart from the report that shows scheduled resets for adjustable-rate mortgages. Click here to see it.
Mortgages that meet the high-cost definition are subject to the Home Ownership and Equity Protection Act (HOEPA), which -- according to the FTC -- "prohibits equity stripping and other abusive practices in connection with high-cost mortgages."
From the mortgage brokers' press release:
NAMB is concerned many lenders will decide not to make loans that cross the proposed HOEPA threshold, which would make many consumers vulnerable as interest rates rise.[NAMB President George] Hanzimanolis likened this provision to government sanctioned 'red-lining.' "These restrictions are going to cut off credit to people who are generally in lower economic areas who deserve and need credit," he concluded.
The association says it is in favor of other provisions of the legislation, such as national standards for loan originators and a straightforward disclosure of fees.
The Congressmen sponsoring "the Mortgage Reform and Anti-Predatory Lending Act of 2007" also have a press release, issued today:
“This bill represents a significant step forward to clean up and prevent a number of the questionable practices that, unfortunately, took hold in the mortgage lending industry in the last several years. I hope the industry will embrace the changes and allow the bill to move forward quickly” said Rep. Melvin Watt.
I'll be happy to resurrect the digest later, if enough people -- that is, at least a handful -- want it back.
There are auctions aplenty for homes nowadays, many foreclosures but not all ("RELOCATION FORCED SALE, OWNERS WILL SACRIFICE PRICE" screams the listing for one scheduled this week).
Here's how to track them down.
A.J. Billig & Co. lists its upcoming auctions online.
So does Alex Cooper Auctioneers -- main page of listings here, with a link to the auctions scheduled for this week here.
Auction Brokers, the auction house run by the founder of Investors United School of Real Estate, has its listings here.
Express Auctions apparently separates its listings of foreclosure auctions from its regular auctions.
Those aren't the only auctioneers in the area, let alone what you can find online (I recently stumbled upon 2RealEstateAuctions.com, which compiles eBay real estate auction listings from across the country).
A word to the wise: If you decide to try to buy -- or sell -- at an auction, do your research first to understand what fees, if any, you'll be expected to pay. Alex Cooper has a 12-page purchase agreement for its auctions, which you can find on its site.
Typical suggestions include repainting (or re-wallpapering) in neutral colors, cleaning or replacing carpeting, and essentially removing everything that makes the house look like yours rather than a model home. (Unless your place looks like a model home, in which case -- why are you wasting your time reading home staging tips?)
I recently interviewed Tressa Manna, a Realtor with ReMax Sails in Baltimore, but wasn't able to fit her thoughts on staging into the home-sales story I was working on. Now seems like an opportune time to share.
Manna often does her own staging with inexpensive furniture that caught her eye. “It’s all about balance and scale and creating a fresh space," she said.In general, "less is better," she said. The point is to let buyers "be able to envision their own possessions in the property.”
Can you stage a place that isn't vacant, I asked?
“It’s difficult to stage an occupied home because their goods are there," Manna said. "If they don’t have someplace to put their items, we usually just ask them to keep their house as streamlined as possible. Remove clutter, remove personal pictures, take things off the refrigerator, knickknacks -- put them in closets, put them in boxes. Have the house almost look like no one lives in it."
Oh, and speaking of model-home homes:
"We have a listing now just north of Patterson Park and the sellers have fantastic taste, and people come in and ask, 'Does someone live here or is it staged?'" she said. "So that’s a compliment to the seller.”
The housing market in this city of 14 million adjacent to Hong Kong is among the first casualties of China's efforts to cool an economy it fears may be overheating.Faced with surging inflation, shaky loans and a stockmarket bubble that has grown by more than 400 per cent in two years, the Chinese Government in recent months has been pulling all the policy levers at its disposal to control growth.
The slump in the American housing market brought on by higher interest rates and subprime housing loans “has not affected Malaysia yet,” Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz said.
“If you look at price-to rent-ratios or price-to-disposable income ratios, these have increased significantly more in the UK and some other European markets than in the US,” said Charles Collyns, deputy research director at the IMF.
Others are skeptical, saying the UK has little available new housing and a small inventory of rentals.
Performance of U.S. homebuilders vs. S&P benchmarks
Standard & Poor’s Capital IQ put together this chart, which gives you a snapshot of how investors have run away from homebuilders' stock. The key is hard to see, I know: Purple is the S&P 500 Homebuilding Sub-Industry Index, red is the major U.S. homebuilders and blue is the S&P 500 index as a whole.
The law firm "failed to forward consumers’ payments to their creditors, including approximately $240,000 of consumers’ payments that were used by the firm to pay its own debts," the attorney general's press release says.
Are they worth the time?
Please chime in to say whether you find them useful or not. There's so many ways to get news nowadays, it could easily be redundant.
Also feel free to offer up opinions about what else you'd like to see. Comment below or email me at jamie.smith.hopkins (at) baltsun (dot) com.
The possible sale could be more lucrative than what the residents, some of them elderly and thinking about selling anyway, could get on their own. Many were excited by an offer of more than $3 million a home. That was taken off the table and replaced by lower offers, but they're still higher than what many homes would bring on the open market.AFFORDABLE: The Washington Business Journal reports that D.C. "is considering a fee on new commercial construction to fund more affordable housing." The nation's capital is so pricey that many people who work there live elsewhere -- in the Baltimore metro area, for example.But the sale also poses a dilemma: How do you assess the value of a rare cluster of single-family houses so close to high-quality shops, restaurants and condominiums? How best to calculate the less tangible sense of a community that could be flattened in days by a bulldozer?
In the end, he turns to a more Biblical allusion:
I think mortgage people feel guilty of the sins of sloth and pride.Sloth, because they were passive. Bankers stood between eager (and uninformed) borrowers and greedy (and amoral) Wall Streeters, and they didn't say no to either. ...
Pride, because everyone along the chain -- homebuyers, mortgage brokers, mortgage bankers, real estate investment trusts, investment banks, rating agencies and hedge funds -- everyone thought they were being awfully clever.
"This cycle was really quite different and the boom was driven importantly by the growth of the subprime market and the securitization of those markets," Poole told a monetary policy conference hosted by the St. Louis Fed in his honor."(It) all worked as long as house prices were rising -- and it all collapses when house prices stop rising. Obviously, this segment of the market, it is going to be a long time before it comes back," Poole said.
The company said it based its ranking of Baltimore on a below-average foreclosure rate, a low unemployment rate and "solid" wage growth.
Never let it be said the Wonk does not pass along good news. (On the other hand, there are several Florida metro areas on the least-risk end of the scale, so the state of the local housing market must not weigh too heavily in the calculation.)
Read on for First American's ranking of the most and least risky of the 100 largest markets it tracks -- and wave to our neighbors to the south.
Highest-risk markets
1. Detroit, Mich.
2. Warren, Mich.
3. Youngstown, Ohio
4. Dayton, Ohio
5. Toledo, Ohio
6. Cleveland, Ohio
7. Grand Rapids, Mich.
8. Memphis, Tenn.
9. Akron, Ohio
10. McAllen, Texas
Lowest-risk markets
1. West Palm Beach, Fla.
2. Orlando, Fla.
3. Ft. Lauderdale, Fla.
4. Norfolk, Va.
5. Washington, D.C.
6. Phoenix, Ariz.
7. Bethesda, Md.
8. Richmond, Va.
9. Salt Lake City, Utah
10. Honolulu, Hawaii
Here's another way to look at housing affordability -- the Maryland Association of Realtors' first-time homebuyer index, a calculation that uses the income a first-time buyer is likely to have (rather than the average wage overall) and the price of a starter home. The most recent index is for the second quarter, April through June.
First-time buyers had just under half the income they'd need to purchase a typical starter home, according to the index.
Thanks, Kevin of the Baltimore Housing Bubble blog, for pointing it out. Last I checked, it hadn't been updated for months.
So: $939 works out to a little more than $4,000 a month before taxes. How much of that would you need to spend if you bought the average Baltimore-area home in March, priced at just under $307,000?
About 46 percent. (It's over 50 percent for the average home in Maryland.)
That's assuming a 6.5 percent interest rate on your mortgage and a 5 percent down payment. And the figure doesn't include escrow -- the annual property taxes and insurance.
You'll hear different advice about how much of your before-tax income to spend on housing, whether purchase or rental, but the definition of "affordable" is usually in the neighborhood of 28 to 30 percent a month.
At least a couple working in average Maryland jobs could have swung a purchase of that average March home.
Mortgage rates fell for the second time in three weeks, but the move down was modest. The benchmark 30-year fixed-rate mortgage dropped 1 basis point to 6.49 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point.
Rates remain a bit higher than they were a year ago.
"The problem then becomes that you have to deal with the NIMBY factor - not in my back yard," said Knapp, whose organization lobbies on legislative and policy issues for the state's 23 counties and the city of Baltimore. "When you try to concentrate growth, you get significant citizen resistance."PROBE: The SEC is investigating sales of Countrywide stock by the CEO of the mortgage company, the AP reports today.
The Securities and Exchange Commission's informal inquiry into Countrywide Financial Corp. Chief Executive Angelo R. Mozilo has been under way for a while, a person familiar with the matter said Wednesday. The person spoke on condition of anonymity because the probe has not been made public.
DEVELOPMENT: John Fritze and I have a story today about the developers of two major redevelopment projects asking the city for infrastructure aid, mostly in the form of tax-increment financing -- a method of funding in which the city sells bonds to pay for such work as road-building and then repays the borrowed money with property taxes from the new development.
Turner Development Group is requesting $90 million in tax increment financing for Westport, a mixed-use development set to bring homes, offices, shops and a hotel to an old industrial area on the Middle Branch of the Patapsco River.The partnership developing Harbor Point, another mixed-use waterfront project on formerly industrial land near Fells Point, is asking for $163 million, most of it in tax increment financing and the rest from parking revenue bonds.
Overall, the number and percentage of mortgages in default or foreclosure rose sharply from the second quarter of 2005 through the second quarter of 2007 to levels at or near historical highs, but there was significant variation among market segments, loan types, and states. The overall default rate grew by 29 percent, reaching a point at which just over 1 in every 100 mortgages was in default, almost a 28-year high. The foreclosure start rate did reach a 28-year high, rising by 55 percent. The subprime market experienced substantially steeper increases in default and foreclosure start rates than the prime or government-insured markets, accounting for two-thirds or more of the overall increase in the number of loans in default or foreclosure during this time frame.
“Builders in the field are reporting that, while their special sales incentives are attracting interest among consumers, many potential buyers are either holding out for even better deals or hesitating due to concerns about negative and confusing media reports on home values,” said NAHB President Brian Catalde.
Feel free to take a show of hands in the comments about whether your Wonk is negative, confusing or both.
Households heating with electricity can expect bills to be about 50 percent more than a year ago - assuming no adjustment for weather variances - as a result of Baltimore Gas & Electric's rate increase in June.The federal government projected last week that average U.S. homes heating with natural gas would pay 10 percent more this winter, while those burning fuel oil could expect to pay 22 percent more. But since that report was released, concerns about tightening supplies coupled with tensions along the Iraq-Turkey border have pushed crude oil above $87 per barrel, and heating oil for November delivery has reached a record $2.34 per gallon.
PAULSON: Remember the treasury secretary's comments yesterday? Here's a story:
After months of downplaying the nation's mortgage mess, Treasury Secretary Henry M. Paulson Jr. conceded yesterday that it represents "the most significant current risk to our economy" and called for Congress and private mortgage companies to move more quickly to help.
FED: Remember Fed Chairman Ben Bernanke's comments this week? Here's a story about the stock market reaction:
Wall Street sank for a second-straight session yesterday after Federal Reserve Chairman Ben S. Bernanke said the slumping housing market remains a "significant drag" on the economy.
MORTGAGES: More decreases in new loans to come, the AP says in a story:
The nation's more than $2 trillion home mortgage business won't halt its current slide anytime soon, with mortgage originations expected to fall 18 percent next year and decline another 6 percent in 2009, the Mortgage Bankers Association predicts.
The Treasury Department just put up Secretary Henry M. Paulson Jr.'s comments at Georgetown University Law Center on the housing and mortgage markets. (Why yes, as of this moment, the transcript does call him "Paulosn.")
Here's a taste of the speech, which he gave this morning:
We need simple, clear, and understandable mortgage disclosure. We must identify what information is most critical for borrowers to have so that they can make informed decisions. At closing, homebuyers get writer's cramp from initialing pages and pages of unintelligible and mostly unread boilerplate that appears to be designed to insulate the originator or lender from liability rather than to provide useful information to the borrower. We can and must do better.The most critical facts, including potential future monthly payments, should be on a single page in clear, easy-to-understand language, to be signed by the borrower and the lender. In my judgment, this may have prevented many of the problems that we are seeing today.
The Federal Reserve is leading on this issue through a comprehensive review of the disclosure regime underlying the Truth in Lending Act. As part of this review, the Federal Reserve is engaged in extensive consumer testing to determine what types of disclosures provide the best information to consumers.
In 2006, nearly one-third (30 percent) of all people living in renter-occupied housing units lived elsewhere a year earlier. The moving rate for people living in owner-occupied housing units was 7 percent.
Census also said that 62 percent of movers didn't leave their county.
"The market has definitely slowed down dramatically from what it was when we were under construction," said James D. Campbell, a principal with the Station North builder, Somerset Development Co., which originally had projected homes would be sold out by now at prices up to $450,000. Instead, it has reduced to $299,900 a home with hardwood floors in the kitchen, a slate-surround electric fireplace with remote; a security system and a full-size stackable washer and dryer.
On the other hand:
The 414 Water Street project, which is nearing completion with 312 units, reportedly is almost sold out. The 120-unit The Vue in Harbor East, where condos started in the $300,000 range, has sold briskly from the start. Only six to eight are left, said Bob Rubenkonig, a spokesman for developer Struever Bros.
LAYOFF: Laura Smitherman reports on another lender laying off workers:
Aurora Loan Services LLC, the mortgage-lending subsidiary of Lehman Brothers Holdings Inc., has laid off 160 employees in Gaithersburg as the parent company moves to scale back its home-loan business in response to turmoil in the industry and in the secondary market where investors trade mortgage debt.
LOANS: An AFL-CIO study suggests that "nearly half of homeowners with ARMs don't know how their loans will adjust, and three-quarters don't know how much their payments will increase if the loan does reset," a St. Louis Post-Dispatch story says.
What? You don't?
Fine. Be that way. Here's an excerpt:
Conditions in financial markets have shown some improvement since the worst of the storm in mid-August, but a full recovery of market functioning is likely to take time, and we may well see some setbacks. In particular, investors are continuing to reassess the risks they face and have not yet fully regained confidence in their ability to accurately price certain types of securities. The ultimate implications of financial developments for the cost and availability of credit, and thus for the broader economy, remain uncertain.
If you want more than an excerpt but less than a speech, here's an AP story for you.
A taste:
[Patrick] Killelea's blog, Patrick.net, is a portal of housing pessimism. ... "Usually the positive news comes from people who are trying to take your money," he said.
Citigroup saw mortgage-backed security losses of $1.56 billion in the third quarter, more than the bank estimated two weeks ago, because mortgage delinquencies accelerated in September, CFO Gary Crittenden said.Also higher than previously estimated was the bank's boost in loan-loss provisions, which came to $2.24 billion. Crittenden said consumer credit continues to deteriorate.
Wachovia's economists just released their monthly commentary on the housing market, and it comes with graphs, charts and maps (all right, map) galore for the discerning wonk. (Click on the PDF link for "Housing Chartbook -- October 2007.")
Speaking of investors, Wachovia has this to say about their effect on housing:
Existing home inventories remain high and part of this glut reflects new homes purchased by speculators that had expected to flip them before construction was completed. Many investors are unable to cut prices much from current levels while builders can cut their prices on competing homes or add amenities, which is one reason existing home inventories remain high and prices remain sticky.
Investors -- rehabbers, landlords and plain speculators -- flooded into Baltimore City during the housing boom, sure they were getting great deals. So have they flooded right back out now that sales have dropped, prices are flat and some of them have defaulted on their loans?
Nope.
The number of homes they're buying has decreased, but not back to pre-boom levels. I tracked activity in the first half of recent years with data from the state Department of Assessments and Taxation, which notes whether purchasers are regular homeowners or "non-owner-occupiers":
Perhaps you're wondering why the overall decline in homes sales isn't as dramatic as the Metropolitan Regional Information Systems numbers suggest. (Good eye, if so.) The most obvious explanation is that these represent all sales, not just ones listed with an agent. If you know of another reason, let me know.
Or perhaps you're wondering why I didn't make a graph showing how the percentage of investor buys has changed. Actually, I did. So there.
Read on ...
Again, that's looking at the first half of those years, not the full year.
I'm curious to hear your thoughts about why investor buying remains at an elevated level and what this means for the city. Comment here or just drop me a line at jamie.smith.hopkins (at) baltsun (dot) com -- replacing the "at" and "dot" with the appropriate symbols, of course. Death to spam.
The effort is intended to help SIVs that need to sell securities do so in an orderly manner. Bank and government officials are concerned that if these vehicles are forced to dump billions of dollars worth of debt in the coming weeks, it could cause a repeat of the crisis that rattled markets in August and sent the cost of mortgages and other loans soaring.
FORECLOSURES: The Atlanta Journal-Constitution reports that RealtyTrac, whose foreclosure reports are relied on across the country, showed an inaccurately high increase from June to July for Georgia. The newspaper found that the company's figure of 12,602 foreclosure actions in July counted more than 2,000 properties twice "and sometimes more":
There is little dispute that Georgia faces a foreclosure crisis, but the company's July report overstated the magnitude of the problem. After a preliminary investigation, the company said Friday that its data show foreclosure filings in July actually rose by 14 percent -- not by 75 percent.SALES: Lorraine Mirabella reported over the weekend (how did I miss this?) that Pulte Homes, hoping to attract buyers in a worsening market, is throwing a "monster" sale in local communities with incentives "that include selling at cost and guaranteeing the purchase of buyers' current dwellings."
"We figure this is an appropriate treat for homebuyers who may find market conditions a little spooky right now," wrote Melanie Hearsch, a spokeswoman in Pulte's corporate office in Bloomfield Hills, Mich., in an e-mail.
Walkscore -- as the name implies -- scores addresses based on how walkable they are to businesses, institutions and amenities. The website aims to help prospective homebuyers and renters weigh their options. ("Buying a house in a walkable neighborhood is good for your health and good for the environment," the site says.)
My suburban home scored 37 out of 100. I thought it would do better: The community is a pretty walkable place as suburbs go, with a shopping center and a variety of things to do.
The bigger surprise: My childhood home in Columbia, that "new town" designed to be walkable, got an even worse 31.
So I tried 501 N. Calvert Street, The Sun's address -- hey, I feel like I live here some days. Score: 86 out of 100. Lots of things in walking distance when you're near downtown.
Keep in mind the site's information might not be 100 percent accurate. The Sun, for instance, is on the amenities list under the category of "libraries." (There's plenty to read in the building, I'll give them that.)
Here's what the site says about its scores, which are based on "as the crow flies" distances:
90 - 100 = Walkers' Paradise: Most errands can be accomplished on foot and many people get by without owning a car.70 - 90 = Very Walkable: It's possible to get by without owning a car.
50 - 70 = Some Walkable Locations: Some stores and amenities are within walking distance, but many everyday trips still require a bike, public transportation, or car.
25 - 50 = Not Walkable: Only a few destinations are within easy walking range. For most errands, driving or public transportation is a must.
0 - 25 = Driving Only: Virtually no neighborhood destinations within walking range. You can walk from your house to your car!
Barbara Russell, the village's Columbia Association board member, said two-thirds of the county has no subsidized housing, while Oakland Mills has more than its share. What Oakland Mills needs, she said, is more high-end housing.Russell is advocating what until now has been political heresy in Howard: allowing public water and sewer lines west of the current boundary to permit more townhouses and apartments to be built farther west. The ban on public utilities in the western county was meant to preserve farmland, she said, but instead of doing that, it has merely allowed hundreds of large homes on 3-acre lots.
HOME SALES: The Arizona Republic reports that more than half the ZIP codes in the Phoenix metro area have seen a drop in median home prices:
Several of the newer suburbs farther out such as Queen Creek, Surprise and Avondale posted double-digit drops in median home prices. Central Valley ZIP codes in west Phoenix and Glendale with more-affordable homes and established neighborhoods fared better, largely a result of little room for new building and shorter commutes.
FORECLOSURE: The New York Times has a short piece on avoiding foreclosure. It notes:
The interest rates on some two million adjustable-rate mortgages will be reset over the next two years, according to an estimate from the Department of Housing and Urban Development, and of them, about 500,000 are expected to go into default.
GREEN HOMES: In The Sun's real estate section today, Andrea Siegel has a story about real estate agents who specialize in environmentally friendly homes. That part of the market is growing large enough that the Greater Baltimore Board of Realtors "recently began talking with the Metropolitan Regional Information Systems Inc. about adding a green heading to home listings, similar to what is available for listings in Oregon."
RENTERS: I missed this until just now, but The Wall Street Journal said in a story last week that renters are now feeling the effects of mortgage problems, never mind that they don't have mortgages:
Across the country, a rising number of landlords are falling behind on mortgage payments, sending their properties into foreclosure, according to legal-services attorneys, local officials and financial experts -- and in many cases, their tenants are being forced out of their homes. Often, the tenants' first inkling of trouble occurs when they get a letter from the bank directing them to leave the premises.
The sector has lost at least 76,000 jobs nationwide since peaking at 500,000 a year ago, according to federal data released this month. And more cuts have been announced. If the industry's numbers fall back to 2002 levels, when home sales were similar to what they are today, 137,000 jobs would vanish, rivaling the 146,000 jobs lost in the airline industry in the four years following the Sept. 11, 2001, terrorist attacks, said Mark Zandi, chief economist at Moody's Economy.com.
SELLERS TAKE NOTE: The Los Angeles Times reports that homeowners trying to sell are affected by banks marketing foreclosures and builders pushing to move product.
Home builders have excess inventory and are making deals left and right, ... often undercutting the listing prices of existing homes' owners who are trying to sell in the same development or nearby.
STATE BUDGETS: The Atlanta Journal-Constitution, reporting on Georgia's finances, says that states "across the country, from California to Florida, are facing budget problems for the first time in years because of the slumping housing market and slow sales tax collections."
FHA BAN: I follow up on an earlier blog post with a story in today's paper about Gaithersburg-based AmeriDream fighting a soon-to-be-enacted ban against a certain kind of down payment assistance for FHA-insured loans. HUD, which oversees FHA, intends to stop accepting deals in which borrowers get down payment assistance from charities funded by money from home sellers:
Holden Lewis, who follows mortgage and real estate matters for Bankrate.com, said there's been talk of banning the practice for almost as long as it has been allowed. The debate comes down to a value judgment, he said: If 15 percent of the homeowners end up in foreclosure, is it better to ban the assistance altogether to avoid that or continue it for all the buyers who don't end up in trouble?
The Department of Justice's antitrust division has launched a website about competition in the real estate industry. It says buyers who once felt compelled to go to full service real estate brokerages can now pick and choose services from discount rivals:
Just as the Internet has made it easier for consumers to save money by directly purchasing plane tickets and stocks, it is now making it feasible for home sellers and buyers to do more of the work themselves and pocket the savings.
The website pages include a comparison of fees, laws by state (including Maryland), and anti-competitive practices.
"The residents of East Baltimore have been promised many things over the last few decades," said Leslie Lewis, 41, a lifelong resident of the area who will be relocated for the construction. "There have been other projects that have come through and yet they have all failed."
Meanwhile, Beazer Homes USA said yesterday that employees had "violated certain U.S. Department of Housing and Urban Development ... regulations, particularly in relation to Down Payment Assistance programs." The New York Times reports that:
Beazer’s statements came as it reported that sales of new homes plunged in the third quarter. It also said it would restate several years of financial statements, with changes going back to 1999, because it had improperly used reserves to first hide earnings and then to overstate them.
The Washington Post reports on new Commerce Department numbers showing a U.S. economy "in transition":
The weak housing market is making consumers spend their money more carefully. That in turn means that retailers import fewer goods from abroad, lowering the trade deficit.Simultaneously, the slower U.S. economy and lower interest rates mean that the dollar is less valuable compared with other currencies than it was a few months ago. That makes U.S. goods cheaper and exporters more competitive than they have been in recent years, creating a source of growth that will ease the pain of the housing crunch.
By the way, Post staffers will be answering questions about the Washington-area housing market in a live chat at 1 p.m. today. Go here to ask one.
Holden Lewis of Bankrate.com has a piece about that soon-to-be-enacted ban on seller-financed down payment assistance for FHA loans. (Click here to see my blog post about Maryland-based AmeriDream's lawsuit to stop the ban.)
And remember those foreclosure numbers from yesterday? Read more about them in my story today, which notes that impending auctions and bank repossessions are increasing more quickly in Maryland than nationwide:
"The picture in Maryland is a troubling picture, and we cannot deny that. In virtually every corner of the state, foreclosure events have increased dramatically," said Thomas E. Perez, the state secretary of labor, licensing and regulation. "Given that there are so many adjustable-rate mortgage loans that are going to adjust upward in the near future, I'm very fearful that it will be some time before the problem truly abates."
High-rate mortgages accounted for 29% of the total number of home loans originated last year, up from 16% in 2004.
They were 32 percent of all loans in Maryland last year.
The paper's website has interactive maps here.
Lloyd Fox / Sun staff
RealtyTrac released numbers today showing foreclosure "events" in Maryland last month -- default filings, notices of impending auctions and new bank-owned foreclosures -- increasing nearly fivefold from a year earlier. That's about 2,800 properties in danger of foreclosure or newly foreclosed upon.
But here's the thing: The company's grand total is almost certainly lower than reality. That's because it has a hard time getting timely default notices from most courts in the state, so this part of the foreclosure process is being tallied only in some counties.
RealtyTrac, a California-based firm that acts as an online marketplace for foreclosed properties, believes it has good numbers in Maryland for the auction notices and homes taken back by lenders. So those are the figures to look at.
They're depressing, too, unless you're on the hunt for bargain buys.
More than 1,700 auction notices were issued in the state last month, triple the number in September of last year. And about 220 properties were taken back by lenders because no one else bought them at auction, a tenfold increase.
It's an improvement over August, though, when both categories were about 10 percent higher.
RealtyTrac doesn't put year-over-year comparisons on its press releases for these individual categories, only the grand total, so keep that in mind if you track foreclosure trends. The "NFS" category -- notice of foreclosure sale -- is where the overwhelming majority of Maryland's auction notice numbers will be, though you may see a few under "NTS" (notice of trustee sale). REO -- for real estate owned -- is the category showing properties newly taken back by the bank.
Perhaps you think this is a hassle and the grand totals are close enough? Check out this graph comparing 2006 totals (called "foreclosure events") in the Baltimore area to 2006 default notice filings from the courts, which I pulled this year for a story. By rights, the grand totals ought to be bigger than the number of default notices because they include all steps of the foreclosure process, but instead they're much smaller:
Baltimore-area housing sales fell last month to the lowest level for a September in at least nine years, as the turmoil in the mortgage industry hit the slumping market full force.
Laura Barnhardt reports on angst in Baltimore County's Bowleys Quarters community about plans to put condos where an old marina now stands:
How strong are feelings running in Bowleys Quarters? The local community association has endorsed the proposal - and opponents say they will push to impeach the group's president at what is expected to be a stormy meeting tonight.
The Washington Post reports on "mansionization" in Prince George's County:
Prince George's officials, hoping to curtail the number of large houses springing up in the county's older communities, are drafting legislation that would require some homeowners to secure a special permit for large additions and would set new height limits for houses.
And watch out for email scammers: Symantec, an infrastructure software company, says it has seen "a marked increase in spam directed towards homeowners and prospective homeowners offering refinancing, home equity loans, and actual houses." (Thanks, Consumerist, for pointing that out.) Symantec says:
First, the spammer needs to collect personal information from the recipient to evaluate whether they are eligible for an offer. This is information they can turn around and use to their advantage for further spamming.
In addition, lenders tried to make up for declining mortgage volumes by originating mortgages that charged customers higher rates.
Meanwhile, the Bush administration announced today that 11 large mortgage servicing companies and a variety of other industry players have agreed to join a new coalition to keep foreclosure numbers down. The AP reports:
Treasury Secretary Henry Paulson said the initiative would boost financial companies' efforts to help an estimated 2 million homeowners whose introductory mortgages with low rates are resetting at much higher rates, just as the housing industry suffers through its steepest downturn in 16 years.... Paulson said the new coalition had created an "aggressive plan to reach more homeowners and help them find a way to stay in their homes." That plan includes special toll-free numbers that the mortgage service companies have set up along with mass mailings to inform people of their options.
Democrats, the AP reports, say the effort isn't aggressive enough to deal with the scope of the impending problem.
The eighth straight downwardly revised forecast from the National Association of Realtors calls for U.S. existing home sales to be 10.8 percent below last year as housing market woes persist. Sales of new homes, meanwhile, are expected to finish 2007 at the lowest level in a decade.
Home sales fell about 30 percent across the Baltimore metro area, while average prices rose almost 2 percent to $314,850.
Prices were up slightly in Anne Arundel, Baltimore City, Baltimore County and Carroll, but down about 4 percent in both Harford and Howard.
Get a letter from a previous landlord describing your positive payment history and photocopies of rent checks. If your credit report is improving, get a copy of that to show.
Metropolitan Regional Information Systems is due to release September home sales numbers for the area today.
Oh, the anticipation.
EDIT at 10:20: All right, stop those engines and save your gas. MRIS expects go hit go on the numbers somewhere in the neighborhood of noon to 2 p.m.
The land bank concept, which will be unveiled today by Mayor Sheila Dixon's administration, would eliminate red tape faced when a city-owned property is put up for sale - such as the requirement for an appraisal - to speed a process that some say can hamper redevelopment.
The city owns about 10,000 vacant properties, many seized as part of then-Mayor Martin O'Malley's Project 5000 effort.
In a Bloomberg survey published today, economists predict the nation will not slip into a recession but will feel a greater economic drag from the housing market:
Sales of furniture, appliances and building materials will slow as plunging home sales and falling property values erode consumer confidence, economists said. The Federal Reserve will follow last month's interest rate cut with a quarter-point reduction before the end of December, the survey shows.
And I report today on federal largesse in Maryland, which gets billions from Uncle Sam -- a large chunk to contractors located here. Richard P. Clinch with the University of Baltimore warns that what goes up can come down. He uses the recession of the early '90s as an example:
Because of a cutback in defense spending, the state got hit harder than most, with the impact rippling to companies such as home builders, Clinch said.
Remember some of the overly optimistic things people said about the housing market at the end of the boom and beginning of the downturn? The Surviving the Crash blog has a video comparing these nuggets to quotes by experts right before and after the stock market crash of 1929. It's "Housing Bubble vs. Great Depression."
Thanks to Baltimore Housing Bubble for pointing it out.
Seen any other housing-related videos -- depressing, cheery or just plain funny? I'm all ears.
The Charlotte, N.C.-based bank -- Florida's largest and Central Florida's third-largest -- is projected to lose $700 million from its leveraged home loans and $300 million in direct mortgage write-downs, Sanford Bernstein analyst Howard Mason told The Financial Times.Figures also indicate JPMorgan Chase will take at least $2 billion in mortgage-related charge-offs in its upcoming quarterly report, the analyst said.
Larry Carson follows up today on the story of a Howard County couple who sold their home and 3.2 acres to a developer in the face of condemnation threats by the county, which wanted the land so the developer could build a road. At the time, James and Maria Oliver were told that any land left over would be commercially worthless open space.
But now, with the road complete, Maple Lawn developer Stuart J. Greenebaum confirmed that a Sun Trust bank is set to rise on a portion of the Olivers' former property as part of a new shopping center along the east side of Maple Lawn Boulevard, a major thoroughfare through the neo-traditional community.
If you’d rather know the typical asking price of unsold homes on the market rather than the typical price of the ones that sell -- a useful bit of information nowadays -- then you’re in luck. HousingTracker.net collects that data. You can check out trends in the Baltimore metro area or other major metros, plus a calculation of housing affordability.
The median asking price in the Baltimore area was $308,000 as of Oct. 1. That's down a fraction of a percent from a month earlier and about 9 percent off from a year ago.
Ben Engebreth, software developer and real estate hobbyist, started the site for a simple reason.
He was tracking the statistics anyway to satisfy his curiosity. (We here at Real Estate Wonk approve.) Three years ago, he was living in one of the hotspots of the housing boom -- Los Angeles -- and thought asking prices might give an indication of where things were headed.
Two years ago, figuring that asking prices were worth tracking in a variety of metro areas, he launched the site. It pulls data from the Realtors' multiple listing services.
"It’s a very rough measure of things, but it’s a timely measure of things," said Engebreth, who now lives in New York. "What it’s trying to do is just make a weekly inspection of listings available in a given metropolitan area, with the assumption that there might be some insight that you would get from being able to look at trends in price and inventory.”
He adds: "I don’t mean for it to be the be-all, end-all site -- I don’t have perfect faith in the numbers. You can get better numbers by contacting local people. But you still have the problem that those numbers aren’t published very often and you can’t look at a big picture and look at all places with any reasonable timeliness. It’s one of those trade-offs. The more often you’re able to look at something, usually the less perfect it becomes, but I think it adds value."
The U.S. housing bust is like a leaking ship. You may still be able to stay afloat, depending upon where and how bad the holes are.
The AP reports on the growing problem of homeless families in Massachusetts, one of the few states with government numbers on families in shelters:
About 1,800 homeless families were in Massachusetts shelters last week -- up from 1,400 in June 2006 and just under 1,200 in June 2005, according to state figures. There are more families in shelters now than at any time since the inception of the state's family shelter program in 1983, according to the Massachusetts Coalition for the Homeless.
The Washington Post reports on builders selling homes in the Washington area like "car dealerships and department stores": by slashing prices. It offers the example of Won-Ki and Janice Choi, who were interested in a Ryland house priced at $536,449. The company put the house up for auction:
The minimum bid for the 2,068-square-foot Fairfax County home was $429,999. Won-Ki Choi wrote his name down minutes before the auction was scheduled to end at 3 p.m. He was the only bidder.
Columnist Kenneth Harney writes about proposed changes to the "phantom income" tax penalty -- which hits some who lose their homes to foreclosure -- and two other possible tax-related adjustments that would affect homeowners.
June Arney reports on a new development in tax sales:
A judge has called a hearing to examine whether homeowners are being charged excessive legal fees and expenses in tax-sale foreclosure cases in Baltimore, where an estimated 3,500 such cases are pending.
Rona Kobell writes about a controversial Eastern Shore land preservation deal and the "charming, high-energy Louisiana native" behind it.
The Washington Post has a story about creative home-selling strategies, such as rent-to-own and seller financing.
And the Contra Costa Times reports on one effect of the housing slowdown in Oakley, Calif.:
Drivers passing by Almond Grove Elementary School off Carpenter Road will not hear the sounds of children playing or see parents dropping off students. After the sudden slowdown in the housing market, there weren't enough students from area subdivisions to fill the campus, so it will stay unused until new homes start selling again.
Half of young workers are priced out of home ownership because the house price boom has pushed even modest properties out of their reach in hotspots in London and the South West of England.
The affordability study, done by Hometrack, can be found here.
The Labor Department released jobs data this morning, noting a rise in the unemployment rate to 4.7 percent last month from 4.6 percent in August but somewhat better news on the job creation front. The AP reports:
The new job market snapshot released by the Labor Department on Friday showed that employers boosted payrolls by 110,000, the most in one month since last May. In an encouraging note, the economy actually added 89,000 jobs in August. That marked an improvement from the net loss of 4,000 that the government first estimated.
But construction companies cut jobs by 14,000 last month and by more than 100,000 over the last 12 months, the government said.
And The Los Angeles Times has two interesting stories today (well, OK, more than two, but two related to the housing market). One reports on a housing crunch in China, where prices have risen to levels many workers can't afford:
Of Shanghai's 20 million residents, 2 million to 3 million are thought to be part of the city's "floating population." There may be jobs for them, but where to live is another matter.
It's reached the point of "collective rentals," where people -- 17, in one example -- crowd into the same apartment.
The other Times story says the too-loose lending standards of 2006 actually worsened in the beginning of 2007:
The sub-prime loans backing mortgage bonds created early this year are going bad even faster than those issued in early 2006, a year that set a record for delinquencies on such loans, according to two new studies.
Meanwhile, I report today on an analysis of federal data showing that African-American borrowers in Maryland actually bought slightly more homes last year than in 2005, and that the drop among Hispanic borrowers was only modest -- at a time when overall sales fell sharply. Some cheer the thought of more homeownership. Others, noting that more than 40 percent of African-American and Hispanic buyers got subprime loans last year, are worried:
The Center for Responsible Lending, which has criticized loan terms given to subprime borrowers, says that about one in five U.S. and Maryland homeowners who got subprime loans last year will end up losing their homes. It was a particularly bad lending year, the center said, with "extremely stretched" borrowers put in loans they could ill afford just as the housing market was taking a turn for the worse.
The bill revises the bankruptcy code to help homeowners facing default and foreclosure, biting into already hard-hit profits at mortgage lenders. The House also approved reducing taxes of some strapped homeowners by $650 million while eliminating a tax break that had been available on the sale of second homes.
And tomorrow I'll have a story about some significant home buying trends in 2006. Here's a taste:
Home sales in Maryland dropped sharply last year, but black buyers proved the exception.
They took out slightly more loans for home purchases than they did in 2005, a marked contrast to the big decrease in buying among white and Asian borrowers, according to an analysis of federal data released Thursday by Genworth Financial Inc. and Compliance Technologies Inc. Whites took out 23 percent fewer loans, while loans to Asian borrowers fell 35 percent -- among the biggest drops in the nation for both groups.
News round-up ...
The New York Times reports today in a story about Baltimore that "the fallout from the housing downturn is already showing up as a setback in this struggling city’s effort to reinvent itself as a robust commercial center, one in which a spruced up and rebuilt downtown has attracted new residents, particularly young people, as well as more office workers."
And former Gov. Parris N. Glendening, the "architect" of the Smart Growth law in Maryland, speaks up for it after a report suggested it hasn't had much impact on sprawl, Tim Wheeler reports today.
Existing home sales in Toronto are on pace for a record year, led by the red-hot condominium sector, according to the Toronto Real Estate Board.
The news came only hours after Credit Suisse Group said problems in the mortgage market will linger as long as 18 months. It announced a fresh round of layoffs in its commercial mortgage-backed securities division, mostly in New York.
The state Department of Labor, Licensing and Regulation put out a reminder today that Jan. 1 is the deadline for home inspectors to have licenses in hand -- a new requirement. There are details and a FAQ here.
Home inspectors must have a high school diploma or equivalent, finish an approved education program lasting at least 48 hours and show proof of at least $50,000 in general liability insurance. The license costs $400 -- plus a one-time, $50 application fee -- and must be renewed every two years.
The state tells me that it takes roughly a month to get the license in hand once you've applied, assuming you have all your ducks in a row. So you might not want to apply on, say, Dec. 21 if you don't want a state-enforced unpaid vacation in January.
The penalties for operating without the license could include jail time and fines of up to $5,000, the state says. So far, it's received about 470 applications.
This year, it began requiring licenses for mortgage brokerage loan officers, too. The idea behind both laws is to give consumers some way of sorting the professionals from the bad apples. The state can revoke the licenses for bad behavior.
A California real estate consulting company keeps a "housing cycle barometer" as a way to judge whether markets are overpriced, at least compared with their own history. John Burns Real Estate Consulting's index tracks income, home prices and mortgage rates from 1981 onward and assigns metro areas a number from 0 to 10 each month. Zero means it's the cheapest time to buy in that 26-year span. Ten is the most expensive.
Guess where Baltimore stands ...
Yes: It hit 10 in June. The area has since fallen to 9.6 in July, mainly because mortgage rates improved a bit, the company said. That ranks the Baltimore area 5th highest among the 169 metros the company tracks. (First through fourth are Santa Barbara, Seattle, Los Angeles and Portland.)
That doesn't mean our housing costs relative to income are among the worst in the nation. For that measure, the area ranks 57th.
Still, locals have to spend a lot: A single worker would have to shell out 42 percent of before-tax income, according to the barometer's measure. It calculates annual housing costs in this way: payments on the mortgage, assuming a buyer put 20 percent down, plus one-seventh of that down payment. The company says it does so because the average person remains in a house about seven years, and it wants to account for the cost of the down payment.
The 20 percent down payment alone would require the average buyer to save nearly a full year's pay -- again, before taxes.
Steve Dutra, a vice president with John Burns Real Estate Consulting, says the last time Baltimore area housing costs were close to the 40 percent mark was in 1982. Then, he said, "you had 16 to 17 percent mortgage rates."
Records turned over to a federal grand jury investigating municipal tax-sale auctions show that two of Maryland's largest tax-sale investors didn't bid against each other for properties during the past four years in Montgomery County.
The subpoena, the story says, "was issued on the same day in August that the FBI conducted simultaneous raids at two Baltimore County real estate offices, seeking evidence of restraint of trade in tax sales."
Most local counties and cities hold an auction once a year to sell off the rights to collect property owners' unpaid tax bills and similar debts.
News round-up, a bit late -- been busy today.
Melissa Harris reports that the state has begun an effort to track all ground rents, an estimated 115,000 in the city, Baltimore County and Anne Arundel. It's part of the continuing effort to reform an unusual system that has lost some residents their homes over small unpaid bills, a little-known problem The Sun exposed in a series last year.
Harris' story today says ground rent owners "have until September 2010 to complete a two-page form identifying each holding, or else lose their investments."
Meanwhile, Kelly Brewington and John Fritze report today that the Census Bureau has revised its 2006 numbers and -- for the first time in more than half a century -- Baltimore City has not lost population. The estimates show the number of residents up by 897 from the year before, rather than down by about 8,700. Grand total of people in the city: 640,961.
Maybe.
As the story notes:
There is no "margin of error" for estimates, but a 1993 study for the bureau found that estimates in 1980 and 1990 were roughly 4 percent off actual counts for cities over 50,000 in population. The increase announced yesterday would fall well within that percentage.
Ah, "margin of error" appearing in a front-page article. It does my number-crunching heart good.
I typically write a story about housing trends at a ZIP-code level every six months. But there's no reason I can't crunch, say, July data just for you.
So I did. I'm thoughtful that way.
The numbers come from Metropolitan Regional Information Systems, which runs the local multiple listing service. That means for-sale-by-owner and many new home sales are not included.
Another wonkish caveat: I've included only those ZIP codes that had at least five sales in July 2007 and five sales in July 2006, to try to get rid of as many apples-to-oranges comparisons as possible. But even with that culling, I see some areas with huge changes that might be about very different types of homes selling this July vs. last July, rather than market swings. (Crownsville dropping from $800,000 to $380,000? Now there would be a bargain. And a news story.)
Right, then. On to the stats!
Here's a link to home-price changes by ZIP code in the Baltimore metro area, ranked in ascending order: Download file
And a link to sales changes, also in ascending order: Download file
And finally, a list of the most and least expensive areas, by average sales price: Download file
If you've got a hankering to see where, exactly, a certain ZIP is located -- the Baltimore City ZIP codes are just labeled "Baltimore," after all -- then check out the ZIP code maps here, on the Maryland Department of Planning site.
And, of course, you can look up ZIP codes one at a time at MRIS to see other information, including median price and average days on market. (Keep in mind that the sales and average price numbers will probably be slightly different than the ones in my files. MRIS says it sends me its list of all home sales after it puts ZIP data online, which means more time for agents to add or correct sales information.)
I don't have August yet, but I'll crunch it when I get it if I'm not doing so just for my own amusement. I'm a wonk, but even I have limits.
The National Association of Realtors said this morning that pending home sales in August were down 6.5 percent from the month before and fell more than 20 percent from a year earlier. It was a record low for the NAR's index, which began in 2001, the Associated Press says.
The Realtors association said it could see the effects of the credit crunch that came to a head in August, affecting not only subprime borrowers but also those getting so-called "jumbo" loans of more than $417,000. Here's what Lawrence Yun, the NAR's senior economist, says in a statement:
Fewer contracts were being written because of mortgage availability issues, and a separate internal survey of our members shows more than 10 percent of sales contracts fell through at the last moment in August, primarily the result of canceled loan commitments. ... The impact was greater in high-cost markets that are more dependent on jumbo mortgages. In some areas, as much as 30 percent of signed contracts were falling through in August when the credit crunch problem peaked.
Yun says the problem is "less severe" now, “though jumbo loan rates are still higher than they would be under normal conditions."
Investors who supply the money that a variety of lenders use for mortgages are leery of jumbo loans in this new, trickier lending environment, mainly because they no longer feel comfortable with loans that Fannie Mae and Freddie Mac won't buy. That's driven up interest rates.
Because the pending home sales survey is national, there's no data on Maryland. But it's a state with a lot of higher-cost houses.
The Mortgage Bankers Association says about 11 percent of loan applications in Maryland are for jumbo mortgages. Only seven states and the District of Columbia have higher shares.
Edit at noon: Just talked to Walter Molony, a spokesman for the Realtors association, and he said the Baltimore area isn't feeling the jumbo-loan problem keenly. It's not that no local folks are affected -- you can find plenty of pricey homes here -- but the average price of resales is about $325,000, well below the jumbo mark.
The more expensive Washington area, however, is among those markets that took a bigger hit, he said.
"It's been a fairly broad impact in higher-cost areas," Molony said. "We're looking for a gradual improvement in the fourth quarter."
It's the end of an era -- no longer can Baltimore City landlords toss tenants' possessions onto the street after an eviction. Not legally, at least.
John Fritze reports in an online version of a story to run in tomorrow's paper:
Under the new law, ... landlords are required to give a tenant two weeks' notice before the eviction. If the tenant's belongings are in the unit at the time of eviction, the landlord may take them to a landfill or donate them, but they may not be left on the streets. Landlords who violate the law would face a $1,000 fine.
AmeriDream Inc. of Gaithersburg said today that it is suing to stop the U.S. Department of Housing and Urban Development from banning a type of down payment assistance the nonprofit gives to homebuyers.
HUD said earlier this year that the assistance -- in which nonprofits provide the down payment help to a buyer and then are reimbursed by the seller -- is "a contributing factor of increased risk in our portfolio" of loans. In plain English: It's contributing to defaults and foreclosures. The agency said the proportion of foreclosures on homes whose owners got such assistance is more than twice that on other loans insured by the Federal Housing Administration.
But AmeriDream says in its suit that the ban "is contrary to the clear intent of Congress, HUD's own historic practices and interpretations, and governing judicial precedents." It says it has since 1999 provided more than 200,000 down payment "gifts" -- an average of $3,600 each -- to low- and moderate-income homebuyers. (The median income was about $50,000.)
Without seller-financed down payments, AmeriDream says, fewer homebuyers could make the required 3 percent minimum down payment on FHA-insured loans and might turn to subprime mortgages. That's bad for buyers and FHA, the nonprofit said.
Back in May, when HUD was considering a ban, I talked to Vincent P. Quayle, executive director of the St. Ambrose Housing Aid Center in Baltimore. He thought the practice should be banned because he believes it doesn't do buyers any favors. "The seller would just raise the price" on the house to make up for the money being contributed to a nonprofit, he said.
On a related note: Sellers nowadays, looking for an edge in a slow market, are making contributions directly to buyers -- no nonprofits involved. They're often helping with closing costs, though the effect can help a buyer free up cash for a down payment. See my Sunday story if you missed it and want details.
The Maryland Department of Housing and Community Development -- reacting to rising foreclosures and the expectation of worse to come -- said today that it is giving almost $1.2 million to homeownership counseling agencies helping residents in trouble. (See "What's New" column on the right side of the home page.)
The money, to be spread among 17 groups, is part of the state's Home Owners Preserving Equity (HOPE) initiative.
Falling behind on your mortgage payments, or afraid you will? You can call 877-462-7555 for information about HOPE. Got a complaint about lending practices? Call the state Department of Labor, Licensing and Regulation, 888-784-0136.
The National Center for Smart Growth Research and Education at the University of Maryland says in a study today that it can't tell why the state's Smart Growth law isn't having much effect on sprawl because the government hasn't tracked its spending on the infrastructure that fuels development. (The press release and report can be found at the top of the group's website.)
According to the study, Tim Wheeler reports in a story today, "officials through two administrations did a poor job of monitoring whether state funds for building roads, sewers and other public improvements were spent in designated growth areas, as the law intended."
"Smart Growth," a 10-year-old law and a concept that has advocates across the country, refers to building in already established communities. "Sprawl" usually means the opposite -- bringing new homes and other development to more rural areas.
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