Real Estate and Beyond

FEBRUARY 2, 2010

Real Estate Outlook: Jumps and Gains

By Kenneth R. Harney

You can take your economic cues from the Federal Reserve Board’s latest assessment…or you can take them from the nation's consumers directly, as measured by the Conference Board's monthly Consumer Confidence survey.

Both are now essentially saying the same thing: The economy is surely but steadily getting stronger, consumers feel better than they have in months about their prospects; but, the ongoing concern -- and it's a big one -- is unemployment and creating new jobs.

The Consumer Confidence index -- which is based on interviews with 5,000 households per month -- hit its highest mark in more than a year. At the same time, Federal Reserve Board announced its decision to hold interest rates at their low current levels, and observed that the economy is still very much in recovery mode -- a slow healing process that the Fed doesn't want to diminish by raising rates.

Meanwhile, the federal government's latest numbers on home prices should definitely make consumers more confident when it comes to home purchases and whether the down-cycle has come to an end.

The Federal Housing Finance Agency's monthly home price index showed an average national seasonally-adjusted gain of seven tenths of a percent, including a big two percent jump in the Western states.

The Standard & Poor's Case-Shiller monthly home price index also rose in 14 of the 20 major markets it tracks. That was the sixth consecutive month of price improvements from Case-Shiller, which, as you may recall, used to be the most negative price index of all.

Housing sales numbers came in low during December -- a decline which had been widely forecast by analysts. The National Association of Realtors reported that home resales fell by nearly 17 percent for the month.

Lawrence Yun, Chief Economist for the Association, said that was caused primarily by the overloading of sales in September, October and November, as first-time buyers rushed to complete purchases before the expiration date for the $8,000 tax credit.

The earlier sales took all the oomph out of closings at the end of the year.

Nevertheless, select markets did see some big jumps in sales: In Florida, for example, sales of single family houses were up by 33 percent for the month compared with the prior year, and condo sales gained an amazing 91 percent!

At the same time, mortgage financing continues to be a big plus in the equation as well: Rates were stable last week -- five percent for 30-year fixed loans and 4.3 percent for 15-year loans -- according to the Mortgage Bankers Association.

Better yet: applications for new loans to purchase homes jumped by 3 percent last week.

> MORE INFO: Realty Times

FEBRUARY 1, 2010

Washington Report: State of the Union

By Kenneth R. Harney

Where will housing and real estate issues rank on Washington's priority list for the upcoming election year's legislative calendar?

If President Obama's state of the union address was any guide -- don't look for much in the way of new or dramatic initiatives from his administration. Most of those efforts apparently happened last year.

The President barely mentioned housing in his 71 minute speech -- though he did acknowledge that “home values have declined” and noted that “we cut taxes for first time home buyers.”

The tax credit program, however, is set for expiration mid year. Some real estate group leaders privately are suggesting the credit program might need to be extended again to prevent a sharp drop-off in sales.

But there's currently little support for that in Congress…and the President gave no hint that he would even consider such a move.

Obama did pledge to “step up” efforts to assist financially distressed homeowners through “refinancings” that can move them “into more affordable mortgages.”

The two major federal programs aimed at helping out troubled borrowers, both begun last year, have been criticized for the relatively modest numbers of consumers they've assisted and the high re-default rate among some borrowers whose loans were refinanced or modified.

The President's reference to a “step up” in those efforts could be a hint that the government might be moving toward encouraging loan modifications that provide principal reductions to borrowers who are deeply underwater -- something that's been resisted by lenders and mortgage investors.

Consumer groups say only outright debt reductions can stem the tide of foreclosures -- projected at close to 3 million additional filings this year -- and strategic walk-aways from devalued properties.

The President did appear to support continuation of tax credits and rebates for energy conservation in houses -- some of which are set to expire at the end of the year.

What the President never mentioned, however, is one of the hottest home mortgage issues facing Congress this year: What to do with ailing financing giants Fannie Mae and Freddie Mac.

House Financial Services Committee Chairman, Barney Frank, sent shockwaves through Washington's housing and mortgage groups last week when he announced that his committee expects to introduce legislation that would effectively kill the two home mortgage investors in their current form.

Frank offered no blueprint on what might replace Fannie and Freddie -- which together account for well over half of all mortgage financings in the U.S. and play key roles in the Obama administration's current refinancing and loan modification efforts.

The President, for his part, was silent on the matter.

> MORE INFO: Realty Times

Jenn Klarman, SRES®, Realtor®, Long & Foster Real Estate, Inc.

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