By NANCY SARNOFFCopyright 2009 Houston Chronicle
April 4, 2009, 9:05PM
Check out your neighborhood's prices here
Housing values in nearly two-thirds of more than 2,000 Houston-area neighborhoods declined or stood still last year, according to an annual home price analysis commissioned by the Houston Chronicle.
“That’s unusually high. In good years, we usually have many more up than down,” said Crawford Realty Advisors’ Evert Crawford, who conducted the study in conjunction with the University of Houston’s Institute for Regional Forecasting.
Overall, the median price per square foot of a single-family home fell 2 percent in 2008 to $72.71, marking the first time it has dropped into negative territory in 14 years.
A year earlier, the median price rose 1.5 percent, according to the study, which evaluated 56,012 homes sold through the Multiple Listing Service in Harris, Fort Bend, Montgomery, Galveston and Brazoria counties. About 18 percent of those were new.
Other survey highlights:
• • Sales activity dropped in all counties for non-foreclosure transactions. All counties showed a rise in sales of foreclosed homes.
• • High median price increases were found in parts of The Woodlands, the Inner Loop, Memorial and southwest Houston just outside the 610 Loop.
• • The highest median price increase by school district was in Spring Branch ISD.
• • The ring between the Loop and Beltway 8 experienced the most softness, falling 7 percent, compared to the regions inside the Loop and outside the Beltway.
Part of what’s been dragging down home values are the high numbers of homes sold out of foreclosure, which rose substantially in 2008.
While high oil prices helped bolster the local economy through much of 2008, Hurricane Ike, the stock market plunge and a ballooning credit crisis during the latter part of the year took a toll.
Home sales were off 16 percent, as would-be buyers couldn’t qualify for mortgages or were too scared to make any big purchases amid an uncertain economy.
“Why would you go out and commit yourself to that much debt when jobs are a question mark? A lot of people have reason to wonder,” Crawford said.
Leslie Winston isn’t taking any chances. She’s selling her family’s house in an attempt to live debt-free throughout the recession.
“What I keep hearing is we haven’t seen the worst of it,” said Winston, who recently put her four-bedroom Meyerland house on the market.
When it sells, she and her husband plan to pay off their debt and rent a home closer to their church and daughter’s school inside the Loop.
“If over the next year the market takes a nose dive, we’ll be in a great position to buy,” Winston said.
Hopeful signs
Relatively speaking, Houston’s housing market hasn’t seen anything like other cities nationwide that saw huge price run-ups and are now seeing double-digit drops.
And federal efforts to stem foreclosures and stimulate sales are providing hope.
Almost everyone who showed up at a recent open house in Eldridge Park was a first-time buyer who had heard about an $8,000 federal tax credit, according to listing agent Amy McGee of Coldwell Banker.
Record-low interest rates should also help boost sales this spring and summer, said broker Ronnie Matthews. “That’s the one thing that can drive people,” said Matthews, owner of RE/MAX Legends. “If they’re comfortable with their job, now’s a pretty good time to buy.”
Still, he’s seeing more asking prices drop.
Chris Blayney put a contract on a house in Bear Creek after the owner lowered the price by $10,000. “It looked like they hadn’t had a whole lot of offers,” Blayney said.
Some would-be buyers are still skeptical. Cindy Clifford started looking last year in the Montrose area. But she noticed houses lingering on the market, and then she started hearing about more people losing jobs.
“I’d hate to buy a house and the market drops,” said Clifford, who owns a public relations firm. She’s taken herself out of the market for now.
Tax assessments falling
The tax man has acknowledged the down market, too. The Harris County Appraisal District said nearly half of homeowners in the county saw their property values decline this year. A third saw no movement.
The total value of the 860,000 homes assessed so far has fallen by about 2.5 percent from last year, chief appraiser Jim Robinson said last month. It’s the first time property values have declined or stagnated since the 1980s.
Patrick O’Connor, president of the property valuation and consulting firm O’Connor & Associates, pegs the start of the slump to the decline in oil prices. He anticipates further declines until the national economy and global financial markets begin to moderate. “Unfortunately it seems the bad news keeps coming,” he said. “It doesn’t seem like we’ve seen the end so far.”
Friday, April 17, 2009
Thursday, April 16, 2009
THE MOVIE, AMERICAN VIOLET, TELLS THE STORY OF THE DECEIT OF THE DRUG WAR
FOR IMMEDIATE RELEASE
Houston, Texas, AMER ICAN VIOLET, a Samuel Goldwyn film is scheduled to be released April 17, 2009; in certain parts of the country, however, it will be viewed in Houston, Texas on Monday & Tuesday, April 20th & 21st , 2009 at Regal Edward Greenway 24 Theater located at 3839 Weslayan St., Houston , TX 77027, beginning at 7:00 p.m. No admission fee.
Black United Fund of Texas, COTER , Gift of Life Drug-Free, Black Women for a Changing Society, and the Multi Cultural Film Festival are joined by Councilman Jarvis Johnson in hosting a very informative passionate movie about the pain of deciet that can kill a family, destroy trust, terminate faith, unravel a community and create pandemonium in a city when the law wears blinders with ear muffs and law and order, is out of order.
This film points out 95% of criminal convictions in this country are the result of plea-bargains, not jury trials. While the film is based on a specific case, the story it represents is hardly unique or isolated, and the film’s release presents an exceptional opportunity to explore how the drug war has become the new Jim Crow.
American Violet is based on real events and set in a small Texas town in the midst of the 2000 Bush/Gore Presidential election. AMER ICAN VIOLET tells the astonishing story of Regina Kelly (played by newcomer Nicole Beharie), a 24 year old African-American single mother of four who is wrongfully swept up in a drug raid. Despite the urgings of her mother (Academy Award® nominee Alfre Woodard), and with her freedom and the custody of her children at stake, she chooses to fight the powerful district attorney (Academy Award® nominee Michael O’Keefe) and the unyielding criminal justice system he represents. Joined in an alliance with an ACLU attorney (Tim Blake Nelson) and former local narcotics officer (Will Patton), Regina risks everything in a battle that forever changes her life, and the Texas justice system. AMER ICAN VIOLET also stars Emmy Award® winner Charles Dutton and Xzibit.
We are inviting organizations, elected officials, all churches and historically black colleges to support this film. Our hope is to create an arena for open discussion about how these judicial practices impact African Americans and their communities.
Talent from the film will be on hand for a Q&A to inspire feedback from the audience and lead the discussion, Tim Disney - director of the film and Regina Kelly - woman who inspired the film.
Please be there early showing begins at 7:00 p.m. There will be no admission as to why it is imperative to RSVP; seating is limited.
Regal Edward Greenway 24
3839 Weslayan St., Houston , TX 77027
MONDAY, APRIL 20TH @ 7:00PM
RSVP to http://us.mc835.mail.yahoo.com/mc/compose?to=avhouston@bazanpr.com or 1.888.246.7164-ext.709
TUESDAY, APRIL 21ST @ 7:00PM
http://www.youtube.com/watch?v=Qv8Jq09qU1Q
Houston, Texas, AMER ICAN VIOLET, a Samuel Goldwyn film is scheduled to be released April 17, 2009; in certain parts of the country, however, it will be viewed in Houston, Texas on Monday & Tuesday, April 20th & 21st , 2009 at Regal Edward Greenway 24 Theater located at 3839 Weslayan St., Houston , TX 77027, beginning at 7:00 p.m. No admission fee.
Black United Fund of Texas, COTER , Gift of Life Drug-Free, Black Women for a Changing Society, and the Multi Cultural Film Festival are joined by Councilman Jarvis Johnson in hosting a very informative passionate movie about the pain of deciet that can kill a family, destroy trust, terminate faith, unravel a community and create pandemonium in a city when the law wears blinders with ear muffs and law and order, is out of order.
This film points out 95% of criminal convictions in this country are the result of plea-bargains, not jury trials. While the film is based on a specific case, the story it represents is hardly unique or isolated, and the film’s release presents an exceptional opportunity to explore how the drug war has become the new Jim Crow.
American Violet is based on real events and set in a small Texas town in the midst of the 2000 Bush/Gore Presidential election. AMER ICAN VIOLET tells the astonishing story of Regina Kelly (played by newcomer Nicole Beharie), a 24 year old African-American single mother of four who is wrongfully swept up in a drug raid. Despite the urgings of her mother (Academy Award® nominee Alfre Woodard), and with her freedom and the custody of her children at stake, she chooses to fight the powerful district attorney (Academy Award® nominee Michael O’Keefe) and the unyielding criminal justice system he represents. Joined in an alliance with an ACLU attorney (Tim Blake Nelson) and former local narcotics officer (Will Patton), Regina risks everything in a battle that forever changes her life, and the Texas justice system. AMER ICAN VIOLET also stars Emmy Award® winner Charles Dutton and Xzibit.
We are inviting organizations, elected officials, all churches and historically black colleges to support this film. Our hope is to create an arena for open discussion about how these judicial practices impact African Americans and their communities.
Talent from the film will be on hand for a Q&A to inspire feedback from the audience and lead the discussion, Tim Disney - director of the film and Regina Kelly - woman who inspired the film.
Please be there early showing begins at 7:00 p.m. There will be no admission as to why it is imperative to RSVP; seating is limited.
Regal Edward Greenway 24
3839 Weslayan St., Houston , TX 77027
MONDAY, APRIL 20TH @ 7:00PM
RSVP to http://us.mc835.mail.yahoo.com/mc/compose?to=avhouston@bazanpr.com or 1.888.246.7164-ext.709
TUESDAY, APRIL 21ST @ 7:00PM
http://www.youtube.com/watch?v=Qv8Jq09qU1Q
Monday, April 13, 2009
Many ineligible for 'Home Affordable' refi's
This article describes the refinance part of the program, which applies only to mortgages owned or guaranteed by Fannie Mae or Freddie Mac.
Purpose: The objective of the refinance program is to allow borrowers to refinance who otherwise find it impossible or excessively costly because of declines in the value of their properties. Under the program, loan balances can range up to 105 percent of current property value, but in all other respects, borrowers must meet conventional underwriting requirements: their existing payments must be current; they cannot have more than one 30-day-late payment in the previous 12 months; and their income must be sufficient to cover the new payments.
Pricing: Interest rates under the program are "market rates," but what that means exactly is hard to say. It is not clear, for example, whether the agencies will charge more for a 90 percent loan that does not have mortgage insurance than for one that does. Whatever it means, we can be sure that prices will fluctuate from day to day, and that the prices loan originators quote to borrowers will include varying markups and fees on top of the prices at which they sell to the agencies. Markups will be particularly high on loans held by Freddie Mac, which will accept only those loans refinanced by the lender now servicing them.
Mortgage Insurance: An unusual feature of the program is that any mortgage insurance on the existing loan will be carried forward to the new loan. (Ordinarily, mortgage insurance is terminated when a loan is paid off and, if required, a new policy is issued on the new mortgage). The mortgage insurers have to agree to this arrangement, but since it is clearly in their interest, that should not be a problem.
This is a sensible idea, because it prevents a sudden drop in insurance premiums to the beleaguered mortgage insurers, and it also provides a way to comply with the rule that any loan acquired by Fannie or Freddie that exceeds 80 percent of property value carry mortgage insurance or its equivalent.
Borrowers who weren't required to obtain mortgage insurance on their original loan won't need insurance when refinancing, even if their loan-to-value ratio now exceeds 80 percent.
Rationale of the 105 percent Loan Cap: Capping the loan balance at 105 percent of value presumably is based on a judgment that borrowers with adequate income and a good payment record are not going to default just because they owe 5 percent more than their house is worth. That makes sense. What doesn't make sense is that borrowers with more than 5 percent negative equity are not eligible for the refinance program at all, and can't get their problem fixed by a loan modification under the second part of MHA, which is discussed next week.
Eligibility: In its documentation, Treasury states that eligible borrowers must occupy their homes, a provision I criticized last week. Interestingly, Fannie Mae's description of the program indicates that second homes and investor-owned properties are eligible, contradicting the Treasury. Let's hope Fannie prevails. Eligible structures can have up to four dwelling units so long as the borrower lives in one of them.
The home can have a second mortgage, the balance of which is not counted in the 105 percent cap, but the second mortgage lender has to agree to remain in a second lien position. Some second mortgage lenders charge a fee for stepping aside, so this could pose a problem in some cases.
Borrowers are not allowed to withdraw cash from the transaction, even to pay off other debts. However, they are allowed to include settlement costs in the new loan balance.
By far the most questionable eligibility rule is the one that restricts the program to borrowers whose mortgages are held by the agencies or are in a security guaranteed by them. Borrowers had no control over which investor ended up with their loan, yet this crap shoot now separates those who are and those who are not eligible for the program. Is there a good reason for excluding the other half of the market?
Questionable Rationale For Limiting the Program: As noted above, the agencies must obtain mortgage insurance on any loan they purchase that exceeds 80 percent of property value. Their regulator, the Federal Housing Finance Agency, has stated that the agencies will be in compliance with this rule when they refinance loans they already own or guarantee because they are already responsible for any default losses on these loans, and the refinance does not increase that risk. This rationale would not apply to loans owned by other investors.
However, the agency would also be in compliance with the 80 percent rule if it purchased loans held by other investors that now carry mortgage insurance that the insurer has agreed to transfer to the refinanced loan. This is also true of loans that originally met the 80 percent rule and still do. In a financial crisis, the net should be as wide as possible.
In any case, those borrowers who can take advantage of the program should. To see if you qualify, go to MakingHomeAffordable.gov.
The writer is professor of finance emeritus at the Wharton School of the University of Pennsylvania. Comments and questions can be left at www.mtgprofessor.com.
Purpose: The objective of the refinance program is to allow borrowers to refinance who otherwise find it impossible or excessively costly because of declines in the value of their properties. Under the program, loan balances can range up to 105 percent of current property value, but in all other respects, borrowers must meet conventional underwriting requirements: their existing payments must be current; they cannot have more than one 30-day-late payment in the previous 12 months; and their income must be sufficient to cover the new payments.
Pricing: Interest rates under the program are "market rates," but what that means exactly is hard to say. It is not clear, for example, whether the agencies will charge more for a 90 percent loan that does not have mortgage insurance than for one that does. Whatever it means, we can be sure that prices will fluctuate from day to day, and that the prices loan originators quote to borrowers will include varying markups and fees on top of the prices at which they sell to the agencies. Markups will be particularly high on loans held by Freddie Mac, which will accept only those loans refinanced by the lender now servicing them.
Mortgage Insurance: An unusual feature of the program is that any mortgage insurance on the existing loan will be carried forward to the new loan. (Ordinarily, mortgage insurance is terminated when a loan is paid off and, if required, a new policy is issued on the new mortgage). The mortgage insurers have to agree to this arrangement, but since it is clearly in their interest, that should not be a problem.
This is a sensible idea, because it prevents a sudden drop in insurance premiums to the beleaguered mortgage insurers, and it also provides a way to comply with the rule that any loan acquired by Fannie or Freddie that exceeds 80 percent of property value carry mortgage insurance or its equivalent.
Borrowers who weren't required to obtain mortgage insurance on their original loan won't need insurance when refinancing, even if their loan-to-value ratio now exceeds 80 percent.
Rationale of the 105 percent Loan Cap: Capping the loan balance at 105 percent of value presumably is based on a judgment that borrowers with adequate income and a good payment record are not going to default just because they owe 5 percent more than their house is worth. That makes sense. What doesn't make sense is that borrowers with more than 5 percent negative equity are not eligible for the refinance program at all, and can't get their problem fixed by a loan modification under the second part of MHA, which is discussed next week.
Eligibility: In its documentation, Treasury states that eligible borrowers must occupy their homes, a provision I criticized last week. Interestingly, Fannie Mae's description of the program indicates that second homes and investor-owned properties are eligible, contradicting the Treasury. Let's hope Fannie prevails. Eligible structures can have up to four dwelling units so long as the borrower lives in one of them.
The home can have a second mortgage, the balance of which is not counted in the 105 percent cap, but the second mortgage lender has to agree to remain in a second lien position. Some second mortgage lenders charge a fee for stepping aside, so this could pose a problem in some cases.
Borrowers are not allowed to withdraw cash from the transaction, even to pay off other debts. However, they are allowed to include settlement costs in the new loan balance.
By far the most questionable eligibility rule is the one that restricts the program to borrowers whose mortgages are held by the agencies or are in a security guaranteed by them. Borrowers had no control over which investor ended up with their loan, yet this crap shoot now separates those who are and those who are not eligible for the program. Is there a good reason for excluding the other half of the market?
Questionable Rationale For Limiting the Program: As noted above, the agencies must obtain mortgage insurance on any loan they purchase that exceeds 80 percent of property value. Their regulator, the Federal Housing Finance Agency, has stated that the agencies will be in compliance with this rule when they refinance loans they already own or guarantee because they are already responsible for any default losses on these loans, and the refinance does not increase that risk. This rationale would not apply to loans owned by other investors.
However, the agency would also be in compliance with the 80 percent rule if it purchased loans held by other investors that now carry mortgage insurance that the insurer has agreed to transfer to the refinanced loan. This is also true of loans that originally met the 80 percent rule and still do. In a financial crisis, the net should be as wide as possible.
In any case, those borrowers who can take advantage of the program should. To see if you qualify, go to MakingHomeAffordable.gov.
The writer is professor of finance emeritus at the Wharton School of the University of Pennsylvania. Comments and questions can be left at www.mtgprofessor.com.
Tuesday, February 24, 2009
What Obama Stimulus Means for Texas
President Obama's Economic Recovery Act is incredibly good news for Texas and for Houston, at just the right time. According to the Texas Legislative Budget Board and other analysis, Texas stands to receive:
At least $17 and up to $37 billion in overall funding;
$6.2 billion for education, which includes $3 billion for Houston-area schools and $158 million for HISD;
$5.8 billion for Health and Human Services, for Medicaid, food stamps, foster care, adoption and other services;
$2.8 billion for transportation;
$1.3 billion for Pell Grants to Texas students;
$1 billion for job search assistance and training and for child care;
$161 million for criminal justice;
$1 billion for housing.
The Economic Recovery Act is already working in Texas. Upon President Obama's signature, the Texas Associated General Contractors of Texas said 5,000 Texas jobs would be saved this month and that 5,000 jobs previously lost will be rehired this spring. Overall, the stimulus plan is expected to help create or save 269,000 jobs in this state.
Texas makes out so well under the Obama stimulus plan because, as noted above, we have so many needy citizens. While state leaders often brag about our low taxes and tight budget, we continue to provide too little to tens of thousands of needy and middle class Texans.
To examine the Economic Recovery Act in detail, go to: http://www.recovery.gov/
At least $17 and up to $37 billion in overall funding;
$6.2 billion for education, which includes $3 billion for Houston-area schools and $158 million for HISD;
$5.8 billion for Health and Human Services, for Medicaid, food stamps, foster care, adoption and other services;
$2.8 billion for transportation;
$1.3 billion for Pell Grants to Texas students;
$1 billion for job search assistance and training and for child care;
$161 million for criminal justice;
$1 billion for housing.
The Economic Recovery Act is already working in Texas. Upon President Obama's signature, the Texas Associated General Contractors of Texas said 5,000 Texas jobs would be saved this month and that 5,000 jobs previously lost will be rehired this spring. Overall, the stimulus plan is expected to help create or save 269,000 jobs in this state.
Texas makes out so well under the Obama stimulus plan because, as noted above, we have so many needy citizens. While state leaders often brag about our low taxes and tight budget, we continue to provide too little to tens of thousands of needy and middle class Texans.
To examine the Economic Recovery Act in detail, go to: http://www.recovery.gov/
Tuesday, February 17, 2009
America's Emptiest Cities
Vacancy rates in these spots spell lots of empty neighborhoods.
Call it a modern-day tale of two cities.
For decades, Las Vegas, ripe with new construction and economic development, burgeoned into a shimmering urban carnival. Detroit, once the fulcrum of American industry, sagged and rusted under its own weight.
These days, it's the worst of times for both.
Las Vegas edged Detroit for the title of America's most abandoned city. Atlanta came in third, followed by Greensboro, N.C., and Dayton, Ohio. Our rankings, a combination of rental and homeowner vacancy rates for the 75 largest metropolitan statistical areas in the country, are based on fourth-quarter data released Feb. 3 by the Census Bureau. Each was ranked on rental vacancies and housing vacancies; the final ranking is an average of the two.
Cities like Detroit and Dayton are casualties of America's lengthy industrial decline. Others, like Las Vegas and Orlando, are mostly victims of the recent housing bust. Boston and New York are among the lone bright spots, while Honolulu is the nation's best with a vacancy rate of 5.8% for homes and a scant 0.5% for rentals.
Still, empty neighborhoods are becoming an increasingly daunting problem across the country. The national rental vacancy rate now stands at 10.1%, up from 9.6% a year ago; homeowner vacancy has edged up from 2.8% to 2.9%. Richmond, Va.'s rental vacancy rate of 23.7% is the worst in America, while Orlando's 7.4% rate is lousiest on the homeowner side. Detroit and Las Vegas are among the worst offenders by both measures--the Motor City sports vacancy rates of 19.9% for rentals and 4% for homes; Sin City has rates of 16% and 4.7%, respectively.
"It's a mess," says Vegas developer Laurence Hallier. "Right now, things are just frozen. Everybody's scared."
Hallier, 40, knows from experience. His $600 million Panorama Towers complex was a tremendous success at its inception three years ago. The first of his four planned residential skyscrapers sold out in six months; the second, which opened in 2007, sold out in 12 weeks. As the third tower neared completion last fall, Hallier had sold 92% of its units. Then the recession hit, and only half the units ended up closing. Hallier says it will take years to break even, and plans for the fourth tower have been delayed indefinitely.
There are others who've made--and lost--far worse gambles on Vegas property. In 2007, Israeli billionaire Yitzhak Tshuva and partner Nochi Dankner paid $1.25 billion to buy a 34.5-acre site on the Strip, with plans to build an $8 billion mega-casino modeled after New York's Plaza Hotel. By November, the value of the lot had plummeted to $650 million--half what they paid for it. Groundbreaking on the casino has been pushed back to 2010, and today, the land may be worth less than the $625 million Tshuva and Dankner borrowed to buy it.
The Plaza debacle is emblematic of the problems afflicting millions of property owners in Vegas and around the country--and can explain, in large part, the origins of America's housing crisis.
As real estate prices skyrocketed during the boom, consumers took out massive loans to buy homes, assuming values would continue to rise. Instead they took a nosedive, especially in places like Las Vegas, Florida and Phoenix, where the housing boom had created excess inventory and so-called "bad loans" were rampant. Many homeowners suddenly found themselves with properties worth far less than the mortgages they'd taken out. In the worst cases, banks foreclosed, leaving people without homes--and with more debt than they'd had to begin with.
The situation in places like Las Vegas is bad enough, but Detroit's problems run much deeper. Though its vacancy rates are marginally better than Sin City's, Motown has been on the empty side for decades. An industrial boomtown during the first half of the 20th century, Detroit's population swelled from 285,000 in 1900 to 990,000 in 1920, reaching a peak of 1.8 million in 1950.
But starting in the 1960s, Detroit began a precipitous decline. Detroit's population is now 900,000--half what it was in the middle of the century--and many of its neighborhoods languish in varying states of decay. Most scholars blame rapid suburbanization, outsourcing of manufacturing jobs, and federal programs they say exacerbated the situation by creating a culture of joblessness and dependency.
Yet after more than half a century, countless scholars, politicians, community organizers developers and nonprofit workers have been unable to come up with a solution to fix Detroit.
Will Las Vegas eventually suffer the same fate? "I don't think Vegas is overbuilt," says Hallier. "Despite what everybody says, Vegas still has 2 million people."
Time will tell if this sort of optimism is warranted. Cynics who've witnessed Detroit's decline might liken Hallier's opinions to another Dickens oeuvre: Great Expectations.
In Depth: America's Emptiest Cities
Source: http://realestate.yahoo.com/promo/americas-emptiest-cities.html
Call it a modern-day tale of two cities.
For decades, Las Vegas, ripe with new construction and economic development, burgeoned into a shimmering urban carnival. Detroit, once the fulcrum of American industry, sagged and rusted under its own weight.
These days, it's the worst of times for both.
Las Vegas edged Detroit for the title of America's most abandoned city. Atlanta came in third, followed by Greensboro, N.C., and Dayton, Ohio. Our rankings, a combination of rental and homeowner vacancy rates for the 75 largest metropolitan statistical areas in the country, are based on fourth-quarter data released Feb. 3 by the Census Bureau. Each was ranked on rental vacancies and housing vacancies; the final ranking is an average of the two.
Cities like Detroit and Dayton are casualties of America's lengthy industrial decline. Others, like Las Vegas and Orlando, are mostly victims of the recent housing bust. Boston and New York are among the lone bright spots, while Honolulu is the nation's best with a vacancy rate of 5.8% for homes and a scant 0.5% for rentals.
Still, empty neighborhoods are becoming an increasingly daunting problem across the country. The national rental vacancy rate now stands at 10.1%, up from 9.6% a year ago; homeowner vacancy has edged up from 2.8% to 2.9%. Richmond, Va.'s rental vacancy rate of 23.7% is the worst in America, while Orlando's 7.4% rate is lousiest on the homeowner side. Detroit and Las Vegas are among the worst offenders by both measures--the Motor City sports vacancy rates of 19.9% for rentals and 4% for homes; Sin City has rates of 16% and 4.7%, respectively.
"It's a mess," says Vegas developer Laurence Hallier. "Right now, things are just frozen. Everybody's scared."
Hallier, 40, knows from experience. His $600 million Panorama Towers complex was a tremendous success at its inception three years ago. The first of his four planned residential skyscrapers sold out in six months; the second, which opened in 2007, sold out in 12 weeks. As the third tower neared completion last fall, Hallier had sold 92% of its units. Then the recession hit, and only half the units ended up closing. Hallier says it will take years to break even, and plans for the fourth tower have been delayed indefinitely.
There are others who've made--and lost--far worse gambles on Vegas property. In 2007, Israeli billionaire Yitzhak Tshuva and partner Nochi Dankner paid $1.25 billion to buy a 34.5-acre site on the Strip, with plans to build an $8 billion mega-casino modeled after New York's Plaza Hotel. By November, the value of the lot had plummeted to $650 million--half what they paid for it. Groundbreaking on the casino has been pushed back to 2010, and today, the land may be worth less than the $625 million Tshuva and Dankner borrowed to buy it.
The Plaza debacle is emblematic of the problems afflicting millions of property owners in Vegas and around the country--and can explain, in large part, the origins of America's housing crisis.
As real estate prices skyrocketed during the boom, consumers took out massive loans to buy homes, assuming values would continue to rise. Instead they took a nosedive, especially in places like Las Vegas, Florida and Phoenix, where the housing boom had created excess inventory and so-called "bad loans" were rampant. Many homeowners suddenly found themselves with properties worth far less than the mortgages they'd taken out. In the worst cases, banks foreclosed, leaving people without homes--and with more debt than they'd had to begin with.
The situation in places like Las Vegas is bad enough, but Detroit's problems run much deeper. Though its vacancy rates are marginally better than Sin City's, Motown has been on the empty side for decades. An industrial boomtown during the first half of the 20th century, Detroit's population swelled from 285,000 in 1900 to 990,000 in 1920, reaching a peak of 1.8 million in 1950.
But starting in the 1960s, Detroit began a precipitous decline. Detroit's population is now 900,000--half what it was in the middle of the century--and many of its neighborhoods languish in varying states of decay. Most scholars blame rapid suburbanization, outsourcing of manufacturing jobs, and federal programs they say exacerbated the situation by creating a culture of joblessness and dependency.
Yet after more than half a century, countless scholars, politicians, community organizers developers and nonprofit workers have been unable to come up with a solution to fix Detroit.
Will Las Vegas eventually suffer the same fate? "I don't think Vegas is overbuilt," says Hallier. "Despite what everybody says, Vegas still has 2 million people."
Time will tell if this sort of optimism is warranted. Cynics who've witnessed Detroit's decline might liken Hallier's opinions to another Dickens oeuvre: Great Expectations.
In Depth: America's Emptiest Cities
Source: http://realestate.yahoo.com/promo/americas-emptiest-cities.html
Tuesday, September 9, 2008
FHFA has placed Fannie Mae and Freddie Mac into Conservatorship
As you know, in a truly historic event yesterday, Treasury Secretary Paulson and Federal Housing Finance Agency Director Lockhart announced that “FHFA has placed Fannie Mae and Freddie Mac into conservatorship.” The government (FHFA) will now be managing Fannie Mae and Freddie Mac for the foreseeable future.
Below are some thoughts on this historic event…..
Overview
To stabilize and to stimulate the housing and financial markets, the Federal Government is taking the following key steps.
· The GSEs will be allowed to increase their MBS portfolios through the end of 2009
· Treasury will be initiating a program to purchase GSE mortgage-backed securities (through December 31, 2009)
· Treasury has established a new secured lending credit facility which will be available to Fannie Mae, Freddie Mac and the Federal Home Loan Banks
We believe that Treasury Secretary Paulson and the Bush Administration determined Fannie Mae and Freddie Mac were unable to perform their housing missions at a time when they were most needed because the GSEs were trying (unsuccessfully) to address safety and soundness issues associated with raising capital. As a result of this plan, Treasury has indicated that the GSEs will now not be under any pressure to sell assets.
In the short-term, we expect mortgage liquidity should improve. Rates should decline as the risk spreads built into the GSE pricing (due, in part, to fear of potential GSE failure) should be reduced if not eliminated. The extent of the decline will depend on what happens to Treasury yields in the coming days.
Without capital constraints in the near term and based on Secretary Paulson’s comments (see below) , we believe the new Fannie and Freddie will likely rollback at least some of their price increases and loosen underwriting requirements to some extent. It will be curious to see the MI reaction to this government intervention as their tightening of guidelines will now be “front and center” in the effort to expand mortgage financing availability.
We also believe Secretary Paulson’s call to examine the guaranty fee structure could lower those fees across-the-board. It will be interesting to see if the government-controlled GSEs will implement a Ginnie Mae-type flat fee structure and at what level.
On a longer term basis, there will be a “heavyweight” debate next year and beyond about the future size and structure of the GSEs (e.g. public or private entities). That debate will not occur until the new Congress and Administration take office next year.
Why did Treasury/FHFA take this action?
It appears to us that Treasury/FHFA lost confidence in Fannie Mae and Freddie’s Mac’s ability to support the housing recovery while, at the same time, addressing their safety and soundness responsibilities by preserving and raising capital. Below are some of Secretary Paulson and Director Lockhart’s remarks which lead us to this conclusion.
Director Lockhart said:
“Their market share of all new mortgages reached over 80 percent earlier this year, but it is now falling. During the turmoil last year, they (the GSEs) played a very important role in providing liquidity to the conforming mortgage market. That has required a very careful and delicate balance of mission and safety and soundness. A key component of this balance has been their ability to raise and maintain capital. Given recent market conditions, the balance has been lost. Unfortunately, as house prices, earnings and capital have continued to deteriorate, their ability to fulfill their mission has deteriorated. In particular, the capacity of their capital to absorb further losses while supporting new business activity is in doubt. Today’s action addresses safety and soundness concerns. … The result has been that they have been unable to provide needed stability to the market. They also find themselves unable to meet their affordable housing mission. Rather than letting these conditions fester and worsen and put our markets in jeopardy, FHFA, after painstaking review, has decided to take action now. “
Secretary Paulson said:
“I attribute the need for today’s action primarily to the inherent conflict and the flawed business model imbedded in the GSE structure and the ongoing housing correction”. He added that he has “long said, the housing correction poses the biggest risk to the economy”.
“Our economy and our markets will not recover until the bulk of this housing correction is behind us. Fannie Mae and Freddie Mac are critical to turning the corner” and that “the primary mission of these enterprises will now be to proactively work to increase the availability of mortgage finance including by examining the guaranty fee structure with an eye toward mortgage affordability”.
Comment
We have all seen the steps that Fannie Mae and Freddie Mac have taken to preserve and raise capital throughout this year. These measures have included raising prices on mortgages and tightening underwriting guidelines. As everyone is also aware, they have been aggressively trying to put back loans to seller-servicers who, in turn, are going back to originators.
Secretary Paulson in particular appeared to conclude that GSEs cannot serve two masters (i.e. its housing mission and its shareholders) during the housing crisis.
What does this mean?
To state the obvious, we are in uncharted waters. This plan is not a “silver bullet” that will address the underlying problems (i.e. record mortgage delinquency and foreclosures) that caused the need for this unprecedented action. MBA’s National Delinquency Survey last week indicated that over 9% of all mortgages are either delinquent or in the foreclosure process. While the new GSE approach to mortgage availability will increase the number of potentially eligible borrowers, it will likely not have any significant impact on affordability (borrowers must still qualify and make downpayments) in those markets where house prices increased the most during the “housing bubble” until house prices and borrower incomes are in line. With this as a caveat, below are our immediate thoughts.
· Short term goals
Two of the immediate goals of this action are: 1) “to increase the availability of mortgage finance” as Secretary Paulson said and 2) to lower mortgage interest rates through the Government guarantee of GSE debt.
· Long term objectives
On a longer term basis, the Government’s action yesterday raises the fundamental question about the government’s role in housing going forward. Secretary Paulson deferred the discussion of this question and the “flawed GSE business model” ( i.e. serving two masters ---public and private objectives) to the next Administration and Congress.
In this update, we will focus on short-term impact since the debate about the GSEs’ future structure and size will depend on who wins the election and the make-up of the Congress.
Short term Impact
For the housing industry, the short-term impact of the Government takeover appears to be positive.
· Mortgage rates should decline
· Liquidity should be increased
o GSEs should loosen standards (somewhat)
o GSEs should reduce fees including guaranty fees
· Some housing experts feel house price may stabilize sooner and the level of further house price decline will be moderated as a result
Potential Impact
· There could be a mini-refinance boom if the rate decline materializes.
o Hedging of servicing portfolios and pipeline problems will have to be addressed
There are many questions to be answered in the coming days and weeks:
(Here is a couple)
· How will the MIs react?
o Their underwriting and pricing policies will be “front and center” if the GSEs take the actions we expect
· What will the new Fannie/Freddie management’s policy be on buybacks? Will they be more reasonable? If so, credit policies may relax!
· On g-fees, will the GSEs pursue the Ginnie Mae approach (uniform g-fees across the board)?
· What will be the new GSEs do with respect to lender relationships (preferential pricing, etc.)?
Jillian Sorensen
Account Executive
Franklin American Mortgage Company
Below are some thoughts on this historic event…..
Overview
To stabilize and to stimulate the housing and financial markets, the Federal Government is taking the following key steps.
· The GSEs will be allowed to increase their MBS portfolios through the end of 2009
· Treasury will be initiating a program to purchase GSE mortgage-backed securities (through December 31, 2009)
· Treasury has established a new secured lending credit facility which will be available to Fannie Mae, Freddie Mac and the Federal Home Loan Banks
We believe that Treasury Secretary Paulson and the Bush Administration determined Fannie Mae and Freddie Mac were unable to perform their housing missions at a time when they were most needed because the GSEs were trying (unsuccessfully) to address safety and soundness issues associated with raising capital. As a result of this plan, Treasury has indicated that the GSEs will now not be under any pressure to sell assets.
In the short-term, we expect mortgage liquidity should improve. Rates should decline as the risk spreads built into the GSE pricing (due, in part, to fear of potential GSE failure) should be reduced if not eliminated. The extent of the decline will depend on what happens to Treasury yields in the coming days.
Without capital constraints in the near term and based on Secretary Paulson’s comments (see below) , we believe the new Fannie and Freddie will likely rollback at least some of their price increases and loosen underwriting requirements to some extent. It will be curious to see the MI reaction to this government intervention as their tightening of guidelines will now be “front and center” in the effort to expand mortgage financing availability.
We also believe Secretary Paulson’s call to examine the guaranty fee structure could lower those fees across-the-board. It will be interesting to see if the government-controlled GSEs will implement a Ginnie Mae-type flat fee structure and at what level.
On a longer term basis, there will be a “heavyweight” debate next year and beyond about the future size and structure of the GSEs (e.g. public or private entities). That debate will not occur until the new Congress and Administration take office next year.
Why did Treasury/FHFA take this action?
It appears to us that Treasury/FHFA lost confidence in Fannie Mae and Freddie’s Mac’s ability to support the housing recovery while, at the same time, addressing their safety and soundness responsibilities by preserving and raising capital. Below are some of Secretary Paulson and Director Lockhart’s remarks which lead us to this conclusion.
Director Lockhart said:
“Their market share of all new mortgages reached over 80 percent earlier this year, but it is now falling. During the turmoil last year, they (the GSEs) played a very important role in providing liquidity to the conforming mortgage market. That has required a very careful and delicate balance of mission and safety and soundness. A key component of this balance has been their ability to raise and maintain capital. Given recent market conditions, the balance has been lost. Unfortunately, as house prices, earnings and capital have continued to deteriorate, their ability to fulfill their mission has deteriorated. In particular, the capacity of their capital to absorb further losses while supporting new business activity is in doubt. Today’s action addresses safety and soundness concerns. … The result has been that they have been unable to provide needed stability to the market. They also find themselves unable to meet their affordable housing mission. Rather than letting these conditions fester and worsen and put our markets in jeopardy, FHFA, after painstaking review, has decided to take action now. “
Secretary Paulson said:
“I attribute the need for today’s action primarily to the inherent conflict and the flawed business model imbedded in the GSE structure and the ongoing housing correction”. He added that he has “long said, the housing correction poses the biggest risk to the economy”.
“Our economy and our markets will not recover until the bulk of this housing correction is behind us. Fannie Mae and Freddie Mac are critical to turning the corner” and that “the primary mission of these enterprises will now be to proactively work to increase the availability of mortgage finance including by examining the guaranty fee structure with an eye toward mortgage affordability”.
Comment
We have all seen the steps that Fannie Mae and Freddie Mac have taken to preserve and raise capital throughout this year. These measures have included raising prices on mortgages and tightening underwriting guidelines. As everyone is also aware, they have been aggressively trying to put back loans to seller-servicers who, in turn, are going back to originators.
Secretary Paulson in particular appeared to conclude that GSEs cannot serve two masters (i.e. its housing mission and its shareholders) during the housing crisis.
What does this mean?
To state the obvious, we are in uncharted waters. This plan is not a “silver bullet” that will address the underlying problems (i.e. record mortgage delinquency and foreclosures) that caused the need for this unprecedented action. MBA’s National Delinquency Survey last week indicated that over 9% of all mortgages are either delinquent or in the foreclosure process. While the new GSE approach to mortgage availability will increase the number of potentially eligible borrowers, it will likely not have any significant impact on affordability (borrowers must still qualify and make downpayments) in those markets where house prices increased the most during the “housing bubble” until house prices and borrower incomes are in line. With this as a caveat, below are our immediate thoughts.
· Short term goals
Two of the immediate goals of this action are: 1) “to increase the availability of mortgage finance” as Secretary Paulson said and 2) to lower mortgage interest rates through the Government guarantee of GSE debt.
· Long term objectives
On a longer term basis, the Government’s action yesterday raises the fundamental question about the government’s role in housing going forward. Secretary Paulson deferred the discussion of this question and the “flawed GSE business model” ( i.e. serving two masters ---public and private objectives) to the next Administration and Congress.
In this update, we will focus on short-term impact since the debate about the GSEs’ future structure and size will depend on who wins the election and the make-up of the Congress.
Short term Impact
For the housing industry, the short-term impact of the Government takeover appears to be positive.
· Mortgage rates should decline
· Liquidity should be increased
o GSEs should loosen standards (somewhat)
o GSEs should reduce fees including guaranty fees
· Some housing experts feel house price may stabilize sooner and the level of further house price decline will be moderated as a result
Potential Impact
· There could be a mini-refinance boom if the rate decline materializes.
o Hedging of servicing portfolios and pipeline problems will have to be addressed
There are many questions to be answered in the coming days and weeks:
(Here is a couple)
· How will the MIs react?
o Their underwriting and pricing policies will be “front and center” if the GSEs take the actions we expect
· What will the new Fannie/Freddie management’s policy be on buybacks? Will they be more reasonable? If so, credit policies may relax!
· On g-fees, will the GSEs pursue the Ginnie Mae approach (uniform g-fees across the board)?
· What will be the new GSEs do with respect to lender relationships (preferential pricing, etc.)?
Jillian Sorensen
Account Executive
Franklin American Mortgage Company
Wednesday, April 30, 2008
Fed cuts rates as economy slumps, hoping to stop recession
WASHINGTON - Scrambling to shore up the faltering economy, the Federal Reserve cut interest rates to the lowest point in nearly four years Wednesday as the nation teetered on the edge of recession.
Wall Street rallied at first but then pulled back, concerned that the reduction might be the last for a while.
In fact, the Fed's trim was smaller than those of recent months amid indications the central bank might pause to see if months of powerful rate-cutting medicine and billions of dollars in stimulus checks will be enough to lift the country out of its slump.
Chairman Ben Bernanke led a divided Fed, in an 8-2 vote, in slicing its key rate by one-quarter percentage point to 2 percent.
In turn, the prime lending rate for millions of consumers and businesses fell by a corresponding amount, to 5 percent. The prime rate applies to certain credit cards, home equity lines of credit and other loans. Both rates are the lowest since late 2004.
The Federal Reserve, which has been dropping rates since last September, turned much more forceful early this year when housing, credit and financial problems worsened. Rate reductions in January and March alone marked the most aggressive intervention in a quarter-century in an effort to re-energize consumers and businesses.
Enthusiastic Wall Street investors drove the Dow Jones industrial average up more than 178 points — lifting it above 13,000 for the first time since early January — right after the Fed action. Then traders' caution returned, and the index ended the day 11.81 points below where it started.
Although the Fed didn't take another reduction off the table, a growing number of economists believe the central bank is winding down its rate-cutting campaign. Barring another hit to economic growth, they believe rates probably will stay where they are — perhaps through the rest of this year — in part because the Federal Reserve is concerned that further cuts could join with galloping energy and food prices and spread inflation dangerously higher.
By all accounts, the country's economic health is fragile.
The economy crawled ahead at a pace of just 0.6 percent from January through March as housing and credit problems forced people and businesses to hunker down, the Commerce Department reported hours before the Fed's action. Growth had been just as feeble in the prior quarter.
Job losses for the first three months of the year neared the staggering quarter-million mark, and a government report on Friday is expected to show that employers shed jobs again in April. The unemployment rate, now at 5.1 percent, also could creep higher in April and hit 6 percent early next year, analysts say.
"Recent information indicates that economic activity remains weak," the Fed said. "Household and business spending has been subdued, and labor markets have softened further. Financial markets remain under considerable stress, and tight credit conditions and the deepening housing contraction are likely to weigh on economic growth over the next few quarters."
Two members — Charles Plosser, president of the Federal Reserve Bank of Philadelphia, and Richard Fisher, president of the Federal Reserve Bank of Dallas — opposed cutting rates Wednesday, a crack in the usually unified front the Fed often shows the public.
Both men have a reputation for being especially vigilant about fighting inflation. At the Fed's previous meeting in March, they opposed cutting rates by a whopping three-quarters point and preferred a smaller reduction.
"The Fed didn't completely shut the door on rate cuts but they closed it part way," said Mark Zandi, chief economist at Moody's Economy.com. "I think the overall message was they've done a lot already to help the economy and think this will be enough. But they stand ready to do more if that is needed."
Source: www.yahoo.com , April 30, 2008, Associated Press
Wall Street rallied at first but then pulled back, concerned that the reduction might be the last for a while.
In fact, the Fed's trim was smaller than those of recent months amid indications the central bank might pause to see if months of powerful rate-cutting medicine and billions of dollars in stimulus checks will be enough to lift the country out of its slump.
Chairman Ben Bernanke led a divided Fed, in an 8-2 vote, in slicing its key rate by one-quarter percentage point to 2 percent.
In turn, the prime lending rate for millions of consumers and businesses fell by a corresponding amount, to 5 percent. The prime rate applies to certain credit cards, home equity lines of credit and other loans. Both rates are the lowest since late 2004.
The Federal Reserve, which has been dropping rates since last September, turned much more forceful early this year when housing, credit and financial problems worsened. Rate reductions in January and March alone marked the most aggressive intervention in a quarter-century in an effort to re-energize consumers and businesses.
Enthusiastic Wall Street investors drove the Dow Jones industrial average up more than 178 points — lifting it above 13,000 for the first time since early January — right after the Fed action. Then traders' caution returned, and the index ended the day 11.81 points below where it started.
Although the Fed didn't take another reduction off the table, a growing number of economists believe the central bank is winding down its rate-cutting campaign. Barring another hit to economic growth, they believe rates probably will stay where they are — perhaps through the rest of this year — in part because the Federal Reserve is concerned that further cuts could join with galloping energy and food prices and spread inflation dangerously higher.
By all accounts, the country's economic health is fragile.
The economy crawled ahead at a pace of just 0.6 percent from January through March as housing and credit problems forced people and businesses to hunker down, the Commerce Department reported hours before the Fed's action. Growth had been just as feeble in the prior quarter.
Job losses for the first three months of the year neared the staggering quarter-million mark, and a government report on Friday is expected to show that employers shed jobs again in April. The unemployment rate, now at 5.1 percent, also could creep higher in April and hit 6 percent early next year, analysts say.
"Recent information indicates that economic activity remains weak," the Fed said. "Household and business spending has been subdued, and labor markets have softened further. Financial markets remain under considerable stress, and tight credit conditions and the deepening housing contraction are likely to weigh on economic growth over the next few quarters."
Two members — Charles Plosser, president of the Federal Reserve Bank of Philadelphia, and Richard Fisher, president of the Federal Reserve Bank of Dallas — opposed cutting rates Wednesday, a crack in the usually unified front the Fed often shows the public.
Both men have a reputation for being especially vigilant about fighting inflation. At the Fed's previous meeting in March, they opposed cutting rates by a whopping three-quarters point and preferred a smaller reduction.
"The Fed didn't completely shut the door on rate cuts but they closed it part way," said Mark Zandi, chief economist at Moody's Economy.com. "I think the overall message was they've done a lot already to help the economy and think this will be enough. But they stand ready to do more if that is needed."
Source: www.yahoo.com , April 30, 2008, Associated Press
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