Subprime Woes? Here comes FHA

Every cloud DOES have a silver lining! For those of use with less than perfect credit, the recent free-fall of the Sub Prime lending market has been a cause for concern.

What does this all mean to the average home buyer? Here's a breakdown:

WHAT TYPE OF BORROWER ARE YOU?

PRIME: Have perfect to near-perfect credit and can document their income and assets; get lowest mortgage ratesUsually a credit score in the mid-600s* and above.

ALT-A: Either have good credit but difficult-to-document income or assets or have some negative credit problems, but can document income and assets. Usually a credit score from the 600s* and above.

SUBPRIME: Bad or no credit. Usually a credit score below the low 600s*.

*Variables are credit, income, collateral and debt.

WHO'LL HAVE TROUBLE GETTING A MORTGAGE?

• People with no credit, bad credit and high debt.

• People with marginal credit who have trouble documenting their assets and income.

• Homeowners with marginal credit, low assets and little or no equity who are trying to refinance out of an adjustable-rate mortgage.

• Investors who have been buying properties with low or no down payments and minimal assets.

In today's Strib Kenneth Harney expalins that the FHA Loan program that used to be such a market force in the past are now poised for a come-back:

But here's some potentially helpful news: There is a mortgage source that is actually expanding its business nationwide for credit-impaired and first-time home purchasers. That source is the golden oldie of the mortgage arena -- the Federal Housing Administration (FHA), which recently has seen a doubling of customers refinancing out of private, subprime loans into its insured mortgage programs.

There's good reason: The FHA doesn't have problems with Wall Street investors who now see subprime mortgage bonds as toxic. The FHA's bonds, by contrast, are gilt-edged and backed by the federal government, so there's no shortage of mortgage money.

Equally important: FHA-insured loans are more consumer-friendly than subprime, and come with interest costs roughly 3 percentage points below directly comparable subprime mortgages.

There are drawbacks, of course. FHA mortgage maxPublishimums top out just under $363,000. In the very highest-cost markets, an FHA loan will only let you buy a modest starter home. Yet in more typical markets nationwide, the FHA's limit does not pose a problem. And the FHA's maximum loan amounts are likely to increase.

Bipartisan legislation to raise the loan ceiling to the full Fannie Mae-Freddie Mac limit -- currently $417,000 -- is expected to be introduced on Capitol Hill shortly, and appears to have support for passage this year.

You can read more about the FHA Program here: LET FHA LOANS HELP YOU. I am sure you will be hearing a lot about this come-back in the coming months.

Blue skies ahead!

Subprime Reforms to Have Slight Market Impact

The Latest from NAR:

Tighter underwriting standards on subprime loans will have a short-term impact on the housing market, says the NATIONAL ASSOCIATION OF REALTORS®.

However, that impact will be softened if Congress enacts legislation to expand the roles of Fannie Mae, Freddie Mac, and the Federal Housing Administration. The legislation would provide more housing opportunities to families that have low incomes or live in pricey metropolitan areas, NAR says.

NAR praised the House Financial Services Committee Thursday for approving a bill to reform government-sponsored enterprises (GSEs). The bill would overhaul the regulatory structure for the nation’s housing finance GSEs that include Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. The legislation now moves to the full House of Representatives for approval.

Slight Sales Drop Expected

David Lereah, NAR’s chief economist, predicts that tighter underwriting practices may cause total home sales to fall by about 100,000 to 250,000 nationally, or no more than 3 percent a year over the next two years.

“Foreclosures are increasing inventories in certain local markets,” Lereah says. “The projected flood of foreclosures are problematic and will add to the already loose housing supply in some local markets, but these local markets are exhibiting healthy economic activity, enabling them to be able to absorb increases in foreclosures."

Lereah says more households will wait to make a purchase until they have a stronger financial base and can afford a down payment, he says. These households may seek mortgage loans from a revitalized FHA, from lenders making loans that meet Fannie Mae and Freddie Mac standards, and from other lenders offering affordable mortgage options to subprime borrowers, Lereah adds.

Lereah: Don’t Overreact

Subprime problems may be manageable, as they're occurring against a backdrop of cyclically low mortgage rates and a growing, healthy economy, where jobs and liquidity are plentiful in the marketplace, Lereah says.

Therefore, Lereah warned against overreaction to the situation. “Tougher lending standards imposed by the marketplace and the regulators are necessary, but we need to be mindful of overcorrection,” he notes. “Responsible lending practices are what the doctor ordered, not practices that cause a credit crunch.”

NAR President Advocates for Reform

NAR President Pat Vredevoogd Combs has led a campaign to modernize and revitalize the FHA mortgage insurance programs, providing subprime borrowers with a safe and affordable alternative to problematic loans and aiming to bring stability to the subprime market.

“FHA mortgages can help meet the demand for subprime mortgages and help fill the gap in the mortgage market left by the decline of subprime and nontraditional products," Combs says. "A few simple changes can make a big difference."

She says NAR supports increasing FHA loan limits, allowing risk-based pricing of mortgage insurance premiums, and reducing down payment requirements to reflect the current mortgage market.

Minneapolis Water Stinks!

"Experts" like Larry David's wife Laurie and Martha Stewart insist the tap water is actually safer and more regulated than bottled water. And yet...I don't like tap water. Then I read this in the Strib - that the A "swampy, musky, fishy" scent coming from the faucet is "not harmful." Musky!? Fishy?! Not harmful?! Is that the standard for potable water? I am curious who drinks water from the tap and who ruins the earth like I do with my cases of bottled water. I remain dubious of "filters" and other such devices. Water, water everywhere and not a drop (that doesn't smell musky) to drink...

Edina Realty teams up with Cyberhomes.com

Searching Locally & Nationally Just Got Easier!

Cyberhomes.com features ALL active Edina Realty listings with each agent’s contact information ….unlike Zillow.com. So we will know when someone has interest in your home!

Cyberhomes.com is one of the largest, most complete, current and detailed property databases available. It includes more than 100 million property, ownership, sales, and mortgage records, covering more than 85% of the United States population.

Plus our Home Value Tool is powered by Cyberhomes™ which provides mapping functionality and easy search options for consumers.

Search your present, future or currently listed home and check out this cool new feature today!

Weekly Market Activity Report

Here's the latest from the Minneapolis Area Association of Realtors:

Buyers continue to exercise restraint as the Twin Cities housing market moves through its post-boom correction phase. New purchase agreements (pending sales) for the week ending March 17 were 14 percent behind the same week last year with a little more 800 new sales, while new listings on the market grew by 10 percent for the same year-over-year comparison. There are currently roughly 29,000 single-family housing units for sale in the Twin Cities market; 19 percent of this total inventory is new construction.

Edina Realty Joins Minnesota March FoodShare Campaign

For the fourth year in a row, Edina Realty will be taking part in the March Minnesota FoodShare campaign. Throughout March, our offices will serve as drop sites for this annual food drive. Items in need include canned or packaged foods; baby items including diapers, formula and cereal; and sundry basics such as toilet paper, shampoo, laundry and dish soap, toothpaste and toothbrushes.

Last year, Edina Realty agents and employees donated a total of 8026.80 pounds of food and $16,828 in cash for a total of 24,854.80 pounds and dollars. Our goal this year is to top 30,000 in cash and food donations!

The March campaign is Minnesota’s largest food and cash drive to fill the state’s food shelves. Today, food shelf usage is at an all time high. Let’s do our part to help combat hunger in our communities!

Contact Me if you are interested in making a donation. Thanks!

Baby & the Bathwater

I have to say I am not a huge fan of new construction. I find a lot of it to be...well...cheap and artificial. I am a big fan of 1920's architecture - Arts & Crafts in particular.

However, since the birth of our first child my wife and I have been looking at our Craftsman in a new way. While we adore our hardwood floors and built-ins the term "kid friendly" does not really apply. Soon - before we know it- our darling Lily will be on her feet and on the move and the small bedroom nursery we carpeted for her last summer will no longer be enough to contain her (or ease our fears!).

So I found myself reading this article -From the Ground Up - from the Saturday Strib with renewed interest. I could really identify with the couple in the article (they are also not big fans of new construction) but they found an Architect (Michael Huber) and a builder (Corey Benedict) who seemed to share their aesthetic and desire to create a "green" home.

Homeowner Jason Hammond started a BLOG about his experiences which I expect I will become an avid reader of.

It's true what they say, a new baby really does change everything. Stay tuned...

Existing-Home Sales Post 'Surprising' Gains

More Good News from NAR:

Existing-home sales rose strongly in February reaching the highest level since last April, and follows a healthy gain from January, according to the NATIONAL ASSOCIATION OF REALTORS®.

Total existing-home sales — including single-family, townhomes, condominiums, and co-ops — rose 3.9 percent to a seasonally adjusted annual rate of 6.69 million units in February from a downwardly revised level of 6.44 million in January. Still, the numbers are 3.6 percent below the 6.94 million-unit pace in February 2006.

Nevertheless, last month’s increase was the biggest monthly rise in three years — sales last rose 3.9 percent in March 2004.

David Lereah, NAR’s chief economist, says the strong gain is a bit of a surprise.

“Some of the rise in home sales may be from mild weather that brought out shoppers in December, but fundamentals have improved in the housing market and buyers see a window now with historically-low mortgage interest rates and competitive pricing by sellers,” he says. “Even so, winter storms last month discouraged shopping, and buyers were chilled with the third coldest February on record. These unusual weather patterns mean home sales that close in March may decline before rebounding later this spring.”

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 6.16 percent in the last week, down from an average of 6.29 percent in February. The 30-year fixed rate was 6.22 percent in January, and 6.25 percent in February 2006.

NAR President: Median Home Price Distorted

The national median existing-home price for all housing types was $212,800 in February, down 1.3 percent from February 2006 when the median was $215,700. The median is a typical market price where half of the homes sold for more and half sold for less.

NAR President Pat Vredevoogd Combs says the median home price currently is distorted. “Over the last year, we’ve seen declining sales in many high-cost areas but rising activity in lower cost markets,” she says. “This change in the geographic composition of sales means we aren’t getting apples-to-apples comparisons in median home prices from a year ago.”

Other indices examining sales of the same properties over time, such as the OFHEO House Price Index, have been showing price gains; however, the OFHEO index is limited to conventional financing.

“What’s really happening is probably somewhere in between the different measures, but home prices are soft — a year ago we were still seeing bidding pressures and double-digit price growth,” Combs says. “Overall, home prices should rise slowly this year, and many buyers have an opportunity now that was only a dream during the five-year boom.”

A Closer Peek at Sales

Some other key findings from NAR's latest housing report:

• Total housing inventory levels rose 5.9 percent at the end of February to 3.75 million existing homes available for sale. That represents a 6.7-month supply at the current sales pace compared with a 6.6-month supply in January. Raw inventories peaked last July at 3.86 million, and supplies topped at 7.4 months in October.

• Single-family home sales increased 3.7 percent to a seasonally adjusted annual rate of 5.88 million in February, from 5.67 million in January. But those sales numbers are 3.4 percent below the 6.09 million-unit pace in February 2006. The median existing single-family home price was $211,100 in February, down 1.5 percent from a year ago.

• Existing condominium and co-op sales jumped 5.3 percent to a seasonally adjusted annual rate of 810,000 units in February, from a level of 769,000 in January. February sales are 5.2 percent below the 854,000-unit pace in February 2006. The median existing condo price was $225,400 in February, up 0.5 percent from a year earlier.

Regional Snapshot

Here's a closer look by region of existing-home sales in February:

Northeast: existing-home sales surged 14.2 percent to a level of 1.21 million in February, and are 3.4 percent higher than February 2006. The median existing-home price in the Northeast was $265,900, down 1.4 percent from a year earlier.

Midwest: existing-home sales rose 3.9 percent in February to a level of 1.58 million, but are 1.9 percent below a year ago. The median price in the Midwest was $157,000, down 1.3 percent from February 2006.

South: existing-home sales increased 1.6 percent to an annual sales rate of 2.58 million in February, but are 4.4 percent below February 2006. The median price in the South was $175,900, down 2.9 percent from a year ago.

West: existing-home sales went unchanged in February, holding at an annual pace of 1.32 million. Sales are 9.6 percent lower than a year ago. The median price in the West was $337,100, up 2.2 percent from February 2006.

The Twin Cities are Growing!

Today the Strib had a cover story that was noteworthy for several reasons.

1.) It was about Real Estate

-and-

2.) It was positive!

In this era of Gloom & Doom Bubble Bursting Oblivion I will take good pub whenever we can get it!

The story is about how recent census data seems to back up what most of us who have been watching already know: people are moving into the urban core at a faster rate than they are "fleeing" to the suburbs.

This is good news as any civic planner will tell you - cities are only as strong as their cores.

There were a number of reasons cited as to why this is the case an principal among them has been the recent condo boom downtown. There is no question that this has had a major impact. However, I remain dubious of "trendy" Real Estate deals and we have already seen kind of a backlash in that market. For my money, single family homes are still the horse to ride in terms of a long term investment.

A lot of the clients I serve are choosing to live in the Twin Cities because of the close proximity to arts, culture, non-chain restaurants, locally owned shops, parks, lakes, and other features some of which are just not a part of the Suburban experience--especially the "non-chain" part. Also the light rail continues to have a positive impact. People really hate the ever worsening traffic that they face in a daily commute.

So, it's different strokes for different folks and at this point it seem that more and more folks are opting for the urban experience.

And that is good news for all of us!

Free Tree Workshops and $15 Trees

The City of Minneapolis and the Tree Trust are making 1,500 trees available to all Minneapolis residents to help replace trees damaged by storms and disease in recent years.

Residents can order one tree per address and can choose from six varieties: Cathedral Elm, Autumn Brilliance Serviceberry, Bur Oak, Cockspur Hawthorn, River Birch and Austrian Pine. See examples of the the trees at www.treetrust.org.

The cost of the tree is $15 and must be ordered by April 15. You may order your tree online at www.treetrust.org or stop by the NENA office for a tree order form. You may also call 651-644-5800 for the form and other information.

NENA encourages residents to also attend one of the Tree Trust's free workshops on tree planting, care and info on the latest tree pests. The closest workshop is Thursday, March 29 from 6:00 p.m. to 8:30 p.m. at the Nokomis Recreation Center, 2401 E. Minnehaha Parkway.

Weekly Market Activity Report

Here's the latest from MAAR:

After a brief halt in the Twin Cities housing market caused by the snowfall deluge of early March, buyer and seller activity returned to levels that closely mirrored pre-storm market activity. For the week ending March 10, new listings were behind the same time last year by 5 percent and new purchase agreements (pending sales) were behind by 20 percent for the same year-over-year comparison. The total inventory of homes for sale continues to grow as we enter the active spring market, but its growth remains slower than seen in the frenzied spring ramp-ups of 2004 and 2005.

Story of the Year so far...

Not a shock to anyone watching but the story of the year so far in real estate is not the "soft landing" or "bubble pop" (depending on who you ask) of the Real Estate Market but rather the stunning collapse of the Sub Prime Lending Market.

This will have huge implications for years to come and will definitely come home to roost with fewer sales. It's simple, if people with less than stellar credit are unable to qualify for loans than there will be fewer buyers in the mix.

Not good. Not good at all.

My Hope is that the FHA program will re-emerge as a real player for First Time Buyers and others who don't qualify for A+ programs.

A few years ago FHA were very popular and now I seldom see them. Here's some info on the program:

Let FHA Loans Help You

FHA loans have been helping people become homeowners since 1934. How do we do it? The Federal Housing Administration (FHA) – which is part of HUD – insures the loan, so your lender can offer you a better deal.

• Low down payments
• Low closing costs
• Easy credit qualifying

What does FHA have for you?

Buying your first home?
FHA might be just what you need. Your down payment can be as low as 3% of the purchase price, and most of your closing costs and fees can be included in the loan. Available on 1-4 unit properties.

Want a fixer-upper?
FHA has a loan that allows you to buy a home, fix it up, and include all the costs in one loan. Or, if you own a home that you want to re-model or repair, you can refinance what you owe and add the cost of repairs - all in one loan.

Financial help for seniors
Are you 62 or older? Do you live in your home? Do you own it outright or have a low loan balance? If you can answer "yes" to all of these questions, then the FHA Reverse Mortgage might be right for you. It lets you convert a portion of your equity into cash.

Want to make your home more energy efficient?
You can include the costs of energy improvements into an FHA Energy-Efficient Mortgage.

How about manufactured housing and mobile homes?
Yes, FHA has financing for mobile homes and factory-built housing. We have two loan products – one for those who own the land that the home is on and another for mobile homes that are - or will be - located in mobile home parks.

Ask an FHA lender to tell you more about FHA loan products.
Find an FHA lender

Need advice? Contact a HUD-approved housing counselor or call
(800) 569-4287.

Need help with your down payment? State and local governments offer programs that can help. Find a program near you.

Weekly Market Activity Report

Here's the latest from MAAR:

Unsurprisingly, the Twin Cities housing market found it difficult to battle through the monumental snowfalls seen during the week ending March 3. With schools and offices closed throughout the metropolitan area due to the inclement conditions, buyers and sellers followed suit. Compared to one year ago when weather conditions were relatively normal, new listings fell by 23 percent and pending sales fell by 28 percent. Time will tell just how much of this decline can be attributed to meteorology rather than general market conditions. This week's edition of the MAAR Weekly Market Activity report includes updated March 2007 figures for the Housing Affordability Index (HAI) and the Housing Supply Outlook (HSO). The HAI grew to 141 due to another dip in interest rates and a slight decline in home prices. As our market continues to work through its post-boom correction period, housing affordability is making important improvements. Home prices, interest rates and consumer income will affect the HAI. The HSO grew to 7.0 months, which means it will take approximately 7.0 months for the current supply of available properties to sell. The market is considered balanced when there is roughly a 5-month supply of homes available for purchase. Previously owned homes have 6.4 months of supply, while newly constructed homes have 10.5 months of supply.

HGTV's House Hunters is Coming to Our Town

One of the offshoots of the recent Housing Boom has been the proliferation of T.V. shows. From simple home improvement to "flipping that house!" it is amazing how fascinating we all seem to be with our homes. Moreover, as a Nation of Voyeurs, shows that feature people doing exotic things like playing poker, eating bugs for cash, and...buying homes have been all the rage. So, if you've ever had the urge to be a Reality (or in this case "Realty") T. V. Star... now is your chance! Here's the scoop from the info I received:

HGTV's "House Hunters" is coming to town! They are seeking Realtors® and their clients to participate in the show. Currently in its seventh year, "House Hunters" is a half-hour documentary style television program that tracks the emotional journey of home buyers as a real estate agent helps them search for a home and make a purchase. They also feature the homeowners after they move in, enjoying their new place.

Feel free to Contact Me for more info or check out the House Hunters FAQ. If anyone is interested let me know, it might be fun -plus the Buyers are paid $500.

Oak Street Cinema for Sale

I Lost it At the Movies...

Peter Scholtes has a rather depressing article over in City Pages about the Oak Street Cinema being put up for sale by the Minnesota Film Arts.

I would love to be in a position to buy this place. I would install Al Milgrom as El Presidente for Life and give him carte blanche to program the place as he saw fit. The man is a genius when it comes to finding obscure gems from the world's cinema.

I have many fond memories of this place. I saw some of my friend's films premiere here. I saw Elliot Gould give a Q & A about working with Robert Altman on "The Long Goodbye" one of my all time faves.

I certainly hope that whatever happens Al lands on his feet...like he always does!

Edina Realty voted "favorite women-friendly realty service"

In its annual survey of the “best of the best” for women in the Twin Cities, Edina Realty was voted “favorite women-friendly realty service” by the readers of the Minnesota Women’s Press.

Edina, Minn.—March 7, 2007 – In its annual survey of the “best of the best” for women in the Twin Cities, Edina Realty was voted “favorite women-friendly realty service” by the readers of the Minnesota Women’s Press.

In the publication’s 10th annual readers’ poll, readers chose their favorite people, places and things for women, from realty companies to restaurants, car dealerships to computer games. Included in the section called “On the Home Front,” Edina Realty is listed among the readers’ favorite garden centers, women-friendly realtors, hardware stores, insurance agencies, home remodelers, and handywomen.

“As far as [our readers] are concerned, the state’s dominant realty company is one of the best,” the editors wrote. “Edina’s website is tops – it includes all properties on the Multiple Listing Service (MLS), and you can search by neighborhood, zip code, price, type of home and more. This Minnesota-based company has 32 metro offices and a total of 3,400 realtors.”

Why Drive when you can Walk or Bike?

This article in today's Strib caught my eye. It's about the push from community leaders to get us out of our cars and onto our feet - or on our bikes. Perhaps it's Spring Fever but as someone who spends a lot of time driving people around in my car - I have to say this sounds like a great idea.

I have to admit that sometimes as I am driving along the River Road I get annoyed that a "pack of cyclists" -looking like they just missed the cut at the Tour de France- are drifting into traffic when there are paved paths just feet away.

Then I take a deep breath and remember that when I am pedaling around on my Schwinn Cruiser (white sidewalls baby!) I am frequently frustrated by the tight confines these paths provide, especially when you are sharing the lane with walkers, joggers, dogs, strollers and the like.

Truth be told there is really plenty of space for all of us. And if we just take a moment and slow down we will likely found we really can enjoy the ride.

Here's a link to information on the Midtown Greenway Coalition. I think it's vitally important for all of us to realize that it is because of the efforts of groups like these that the Twin Cities is one of the most pleasant places to live the country...as long as we all learn to give a wide berth and a smile!

Weekly Market Activity Report

Here's the weekly twin cities real estate update from MAAR:
Buyers and sellers in the Twin Cities residential real estate market aren't immune to historic snowfalls and blizzard conditions. For the week ending February 24 when the region saw the first of two monumental winter storms, new purchase agreements (pending sales) held relatively steady with the previous week rather than taking part in the annual uptick we typically see in late February. Compared to the same time in 2006, pending sales were 16 percent behind and new listings were 4 percent ahead. MAAR expects a similar stagnation to persist in next week's numbers due to the second stronger storm system seen in the first few days of March. This week's edition of the MAAR Weekly Market Activity Report features an updated Supply-Demand Ratio (SDR) for March 2007 of 5.77. This means that there are approximately 5.77 homes on the market for every projected buyer in the month of March. The SDR typically reaches its lowest point in March of every year before rising alongside seller activity in the spring market. Compared to one year ago, the SDR for March 2007 is 29 percent higher.

Condo Bust Hits the Suburbs

"In the 'burbs, you buy a cornfield, put up some houses or a Home Depot, run a piece of asphalt to it, and you're set," he said. "But we're just now figuring this new stuff out."

It seems the Condo Bust has hit the suburbs.

I have to say I am not surprised. I have often scratched my head at the shear volume of condos being built is some rather remote areas (Champlin and Farmington jump quickly to mind,) It's like watching someone play Sim City in sandbox mode...but once you start the reality clock, things quickly go sour. It's not that these are "bad areas" it's just that they don't lend themselves very well to the typical condo buyer's lifestyle. People who would rather walk than drive to a late dinner. People who enjoy the hustle and bustle of the street.

It seems builders have put the cart significantly ahead of the horse in this case. Of course, the costs of building condos where the resources already are (i.e. shops, theaters, etc...like downtown Minneapolis) is significantly higher. So they find cheap land in the suburbs or more frequently exurbs and they must just figure that once the people are there, the resources they want and need will follow suit.

Maybe so. But it may take a lot longer than new buyers are willing to wait...