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What Is Unfolding South of the Border Toronto, Ontario www.uspropertyshop.com firstname.lastname@example.org Page |2 November Got Off To a Good Start Bill Seeks To Entice Foreigners To Buy U.S. Homes With Visa Offer (http://www.huffingtonpost.com/2011/10/20/visa-house-real-estate_n_1021582.html) The government may turn to foreigners to shore up the weak housing market. A bill co-authored by Senators Charles Schumer (D-N.Y.) and Mike Lee (R-Utah) aims to use the appeal of U.S. residence visas to entice foreigners to buy American homes, according to The Wall Street Journal. If passed, the bill would offer a U.S. residence visa to any foreigner who makes a cash investment of at least $500,000 in U.S. residential real estate. "This is a way to create more demand without costing the federal government a nickel," Schumer told the WSJ. Foreign demand for American homes has been growing as prospective American buyers remain skittish. Foreign purchases of U.S. residential real estate rose 24 percent to $82 billion in the year ending in March 2011 compared to the year before, according to the National Association of Realtors. Both low housing prices and a weak U.S. dollar have made American real estate an enticing bargain for foreign investors, according to a Capital Economics report cited by DSNews.com. For example, American homes now are more affordable for Canadians than at any time in the past 35 years. Total foreign sales of U.S. homes were split between recent immigrants and people living outside the U.S., according to the National Association of Realtors, indicating that many foreign homeowners buy with the intent of moving to the U.S. As many as 60 percent of China's wealthy have emigrated or are considering doing so, according to a recent Bain study cited by The Financial Times. In an increasingly uncertain investing environment, some foreign buyers have found a safe home for their money in the U.S.' best-known streets, such as Fifth Avenue and Pennsylvania Avenue, said Jay Koster, president of Americas Capital Markets for Jones Lang LaSalle, in an interview with Reuters. Miami-Dade housing prices up 12.5% on non-distressed sales (http://www.miamiherald.com/2011/08/03/2343966/miami-dade-housing-prices-up-125.html) Miami-Dade County home prices are up 12.5 percent this year—if you don’t include the thousands of distressed properties currently dragging down the market, a new report found. Excluding foreclosures and distressed properties, Miami-Dade County has the fastest rebounding home market in the country this year, with prices up 12.5 percent since January, a new report from real estate research firm CoreLogic shows. But with foreclosures and short sales accounting for more than 50 percent of home sales, overall prices are up only 0.9 percent since January in Miami-Dade. In Broward, overall prices have fallen 3.2 percent since January, according to the report, which uses an index of single-family home prices for June. Non-distressed prices in Broward are down 0.4 percent. ―The difference between the overall [home prices] and our index excluding distressed sales indicates that the price declines are more concentrated in the distressed sales market,‖ Mark Fleming, chief economist for CoreLogic, said in a statement. Year-over-year figures are more bleak: Since June 2010, home prices are down 7.3 percent in Miami-Dade County and down 7.4 percent in Broward. Since 2006, home prices have fallen more than 55 percent. Page |3 Still, with inventory now declining, homebuyers who want a non-distressed property are facing diminishing supply and quickly rising prices, said Alicia Cervera Lamadrid, managing partner of Cervera Real Estate. ―Prices are going up—there’s less inventory,‖ she said. ―We’re seeing staggering absorption. It’s a little worrying that we’re running out of inventory.‖ Sans foreclosures, South Florida’s real estate market is appreciating significantly faster than more stable markets like Washington, D.C., and California’s San Francisco Bay Area. After South Florida, the strongest non-distressed market this year is the San Jose metro area, where prices are up 9.9 percent since January. In Washington, D.C., non-distressed prices are up 2.6 percent this year. In terms of sales, South Florida’s housing market has soared this year, with foreign buyers flocking to the region to purchase properties at steep discounts and with all-cash offers. Sales of existing homes are on pace to break a record, according to mid-year data from the Miami Association of Realtors. As a result of the sales bump—along with a severely slowed foreclosure process due to court document irregularities discovered last fall—inventory levels have fallen precipitously. There are about 30,000 properties for sale in Miami-Dade and Broward counties, down from 45,000 last year. ―It’s all about supply and demand,‖ said Ron Shuffield, president of Esslinger-Wooten-Maxwell Realty. ―The fact that we’re at six months of supply is really the sign that we’re turning this corner.‖ Despite the positive trend lines, distressed properties, popular among cash investors, continue to put downward pressure on the overall market, with foreclosures selling for discounts of about 30 percent. As more of those homes begin to be released onto the market in the second half of the year, prices could decline further, economists say. Foreign Purchasers Keep the Momentum and Good News Flowing Foreign buyers see value in U.S. real estate (http://www.theglobeandmail.com/globe-investor/investment-ideas/foreign-buyers-see-value-in-us-real- estate/article2140863/singlepage/#articlecontent) As an alternative investment, U.S. real estate may never look so attractive to Canadians again. Sunny havens such as Fort Myers, Fla., have seen property values plummet as much as 50 per cent since the start of 2007, while the value of the loonie has soared about 15 per cent during the same period. Add to the mix near record- low lending rates – not to mention the capricious stock market – and you have conditions snowbirds wouldn’t even have dared to dream about just a decade ago. In fact, parts of the U.S. residential market look so beaten up that investors from emerging markets have begun to snap up properties, with Brazilian buyers particularly interested in Miami recently. ―The basic idea [of buying U.S. real estate] makes sense for Canadians. The dollar is strong and the U.S. market has had a major collapse,‖ says Scott Baker, portfolio manager at MacNicol & Associates Asset Management, a Toronto-based investment firm. For the first time since the property market cracked in 2007, some popular markets, such as upscale neighbourhoods in Los Angeles and Miami appear to have bottomed out. Page |4 But overall house prices are still falling across the U.S. because of downward pressure from foreclosures, of which there are still approximately 1.6 million in the pipeline today, Mr. Baker says. That means investors need to do their homework. ―Across the U.S. there is still a fair amount of stress,‖ he says. ―The market is in a long process of bottoming.‖ House prices across the U.S. have declined steadily since 2007, and the average value has fallen 31.5 per cent over the last four years, according to the S&P/Case-Shiller National Home Price Index. Average home prices across the United States are back where they were in the middle of 2002. Mr. Baker says there are attractive investment opportunities in U.S. residential real estate for investors who take the time to research local markets. His firm’s MacNicol 360 Degree U.S. Realty Income Fund has holdings in Indiana, Illinois, Georgia and Florida. He favours the southeast over the western U.S. because the prices tend to be lower and the economic and population growth prospects look stronger. Not only are valuations reasonable by historical standards, but demand for rental properties has risen as families are forced out of homeownership. This situation has created an opportunity for investors to generate income from their investment. ―People still have to live somewhere. They are renting, and rents are rising across the nation by more than inflation,‖ he says. ―Every time there is another foreclosure you can bet that someone will have to rent.‖ A Canadian interested in a retirement or recreational property in Florida, for example, would likely be able to generate a small annual return of between 1 per cent and 6 per cent in today’s market, Mr. Baker says. The low prices have certainly piqued the curiosity of a lot of Canadians. A survey released in March by Leger Marketing on behalf of the Bank of Montreal reported that one in five Canadians are ―interested‖ in buying a U.S. property. Florida has always been a favoured location of Canadians. And although the region has experienced some of the biggest valuation drops of anywhere in the country, popular areas such as Miami and Fort Lauderdale are beginning to see prices firm up again as money moves back in from Brazil, Venezuela and Europe. Foreign buyers are doing a lot of the deals in Miami Beach. Andy Katz, of WiseCat Realtors, says 90 per cent of his clients buying local properties come from outside the country, including Canada, Italy, Britain and Dubai. Canadians, he adds, appear to move more slowly than other foreigners because they are searching for exceptionally good deals or hesitant about their financing. The Miami area has seen home prices tumble as much as 50 per cent off their early 2007 highs. But local activity has picked up dramatically in recent months, with foreclosure and short sales comprising about 16 per cent of deals today, down from 47 per cent at the start of the year. (Short sales are stressed sales where the bank does not actually foreclose on a property). ―A lot of buyers come in expecting great discounts today. But those days are gone. 2009 was the best time to buy,‖ Mr. Katz says. Foreclosure properties were regularly selling with 50-per-cent discounts. Today, they sell at discounts of between 20 per cent and 28 per cent, he said. At the moment, the best deals in the Miami area are in South Beach, an area where the properties on average are older. There are currently 172 properties listed under $150,000 and 50 per cent of them are within walking distance to the beach. Generally, these are small, art deco-style, low rises. Their monthly maintenance fees run $320 or less and the sizes range from 240 square feet to 440 square feet. Page |5 Mr. Katz strongly advises that buyers who want to rent out their property use a local management service, which charges about 20 per cent of annual rental income. Not only does it remove the headache of trying to oversee tenants from thousands of kilometres away, but it allows owners to navigate local bylaws. Miami Beach, for example, has restricted rental policies, limiting the number of times most condos can be rented out to just twice a year. That makes it very hard to generate short-term income. Some local management firms will actually walk renters in and out of a building to present them as ―friends‖ of the owners, he says. Financing U.S. housing purchases has always been a challenge for Canadians, and conditions became exceptionally tough during the recession. Laura Parson, a mortgage specialist with Bank of Montreal based in Calgary, suggests clients take equity out of their Canadian homes through a second mortgage – essentially a line of credit. The bank will also facilitate pre-approval status for clients with its U.S. subsidiary, Harris Private Bank. U.S. banks had closed their windows to foreigners looking for mortgages, but they have begun to realize that if they want to get the market cleaned up they have to support these buyers. They are increasingly willing to provide mortgages in cases where a foreign buyer puts down a minimum of 40 per cent to 45 per cent, Mr. Katz says. His advice to any Canadian shopping in the U.S. is to find a local mortgage broker who will work with at least half a dozen banks, otherwise, he says, the broker is unlikely to be able to negotiate a deal. U.S. banks are ―coming out of their cave and lending money‖ again, says Dale Walters, chief executive officer of Keats Connelly, a cross-border wealth management firm in Phoenix. In recent months, some have developed lending processes specifically for Canadians, realizing that they are generally a good base of customers. He suggests Canadians look at using the U.S. operations of the Royal Bank, National Bank or Desjardins Group. By borrowing from a U.S. institution, investors remove the currency risk that comes with having their loans in Canadian currency and any rental income in U.S. dollars. Mr. Walters, author of the recently published book Buying Real Estate in the U.S.: The Concise Guide for Canadians, warns that investors in U.S. housing need to protect themselves from litigation by forming limited liability partnerships. An LLP would shield Canadian assets from any law suit arising from an accident on the property, he says. The Canadian love affair with Florida 8: percentage of all resale homes in Florida bought by Canadians, 2010 $2.1-billion: value of homes, in U.S. dollars, bought in Florida by Canadians, 2010 $50-billion: estimated maximum total value of Florida residential real estate owned by Canadians $150,000: median price of homes purchased by Canadians, 2010 89: percentage of Canadians who paid for their Florida real estate purchases in cash, 2010 500,000: estimated number of Canadians who own a home in Florida, including timeshares 62: percentage of snowbirds who own a property in Florida 59: percentage of Canadians who use their Florida property as a vacation home 18: per cent of Canadians who rent their property as an investment Source: National Association of Realtors, Florida Association of Realtors, Americas Market Intelligence, Consulate General of Canada in Miami Page |6 Canadians home in on Florida real estate http://www.canada.com/travel/Canadians+home+Florida+real+estate/5691628/story.html Canadian buyers continue to snap up Florida real estate, according to a recent survey of foreign buyers produced by the National Association of Realtors on behalf of the Florida Realtors association. The survey tracked foreign buyers for a 12-month period from mid-2010 to mid-2011. "For that period, one in four Florida homes was purchased by a foreigner, and the largest single country represented was Canada," says John Tuccillo, chief economist for Florida Realtors. "Canadian sales represented 10 per cent of all home sales in the state during that period." Canadian buyers were looking for bargains with the median price of homes purchased at a little over $151,000 U.S. More than 90 per cent of those deals were completed strictly with cash. Almost two-thirds of Canadian buyers targeted homes in five locations - Tampa-St. Petersburg-Clearwater, Miami- Fort Lauderdale-Miami Beach, Orlando-Kissimmee, Naples-Marco Island, and Cape Coral-Fort Myers - all in the southern half of the state that was hit particularly hard by the housing downturn. The price of a typical South Florida condo has fallen by 45 per cent since 2005, says Tuccillo. "There's still strong demand at both ends of the price spectrum," he says. "We're seeing a lot of activity on the part of investors with a long-term view in the lower half of the market. The demand for higher-priced properties has also held up reasonably well." Canadians represent about 30 per cent of buyers in Naples, a popular Gulf Coast destination. "We're smaller than Miami and the beach is very accessible," says Tom Doyle, a realtor with Sun Realty in Naples. "There's no retail area blocking off the waterfront - you can't get a tattoo on Naples Beach." Doyle says Canadians typically snap up two-bedroom condominiums built in the late 1980s and early '90s near the beach at an average of $150,000. Right on the beach, though, "it's a sellers market, with homes going for up to $22 million," says Doyle. Doyle says Naples housing prices are stabilizing as demand rises. "Our inventory is half what it used to be and anything worthwhile gets snapped up, most of it in cash transactions," he says. "You can't buy anything at the price it sold for last year." The Fort Lauderdale super-luxury market is also rebounding, says Kelly Drum, partner in that city's family-owned Drum Realty. "The market was a little flat, but it's coming back with properties in the $4 million to $20 million range in our listings," he says. Drum notes that property owners in the Fort Lauderdale luxury market are under little pressure to sell. "These are typically people who have an interest in simply putting their money someplace else," says Drum. "Properties that might have attracted $15 million in 2006 and 2007 may only sell for $10 million today, so the challenge is getting the owners to list the property to reflect the reality of today's markets." In June of 2010, Drum sold a property to a Toronto buyer for $7.64 million. "It was a spectacular property with water on three sides - like its own private island," he says. "The gentleman purchased it just for the land and tore down a 15,000-sq.-ft house to build a new 18,000-sq.-ft home." According to U.S. real estate information specialist Trulia, the median price of all properties sold in the Fort Lauderdale market was $160,000 during the quarter ending in September. That's up almost 12 per cent over the same time last year, but down slightly since the previous three months. Page |7 Drum doesn't deal in distressed real estate but notes that foreclosure sales are still common in the lower-end market. "If I was a Canadian buyer, I'd come down with cash," says Drum. "A cash buyer competing with a mortgage contingency buyer could still walk away with a property at a discount, even if that buyer was willing to pay list. Cash commands very attractive deals in this market." Although geographically part of South Florida, Key West is a market all to itself. Expect to invest hours in travel time from the mainland, either by car, air or ferry. "In Key West, all real estate is in the high end," says Cory Held, a realtor with Preferred Properties/Coastal Realty in Key West. Stately luxury homes ranging to about $10 million grace the community's Old Town, while renovated homes ranging from $500,000 to $2 million are found in New Town. The community remains under a Rate of Growth Ordinance that sees few new properties entering the market and limiting supply. "High-end properties used to move much more quickly," says Held. "Now properties selling at $2-million may remain on the market for a year or two - bearing in mind that might be a small house on a small property in Key West." Two years ago, Held sold a 5,400-sq.-ft home "that looked like Tara" with pool, two guest houses and beach access for $1.76-million. It had previously sold for $5.4 million. By comparison, a similarly appointed 3,440-sq.-foot home, with two guest houses, four bedrooms, four and a half baths, pool and library has been offered at $2,999,999. "I'm currently working with a couple out of Toronto who own a condo unit here and they're looking at buying something else," says Held. "I'm encouraging them to hold onto it as an income property and to buy an additional property. I'd advise any Canadians entering this market to come with a certification of funds and to buy literally as high as you can afford. Key West remains very desirable and prices will definitely bounce back." There are bargains to be found throughout Florida, although it might mean looking beyond your ideal location. Tuccillo's advice to Canadian buyers: "Look for a lower-priced home in a good location that's accessible to water and golf courses. If you can't afford a location like Naples, move a little north to the Fort Myers-Cape Coral area to find bargains." Florida bound (http://www.leaderpost.com/business/South+Florida+market+offers+bargains+persistent+Canadians/5626404/story. html) Canadian buyers continue to snap up Florida real estate, according to a recent survey of foreign buyers produced by the National Association of Realtors on behalf of the Florida Realtors association. The survey tracked foreign buyers for a 12-month period from mid-2010 to mid-2011. "For that period, one in four Florida homes was purchased by a foreigner, and the largest single country represented was Canada," says John Tuccillo, chief economist for Florida Realtors. "Canadian sales represented 10% of all home sales in the state during that period." Canadian buyers were looking for bargains, with the median price of homes purchased at a little over US$151,00. More than 90% of those deals were completed strictly with cash. Page |8 Almost two-thirds of Canadian buyers targeted homes in just five locations - Tampa-St. Petersburg-Clearwater, MiamiFort Lauderdale-Miami Beach, Orlando-Kissimmee, NaplesMarco Island, and Cape CoralFort Myers - all in the southern half of the state that was hit particularly hard by the housing downturn. The price of a typical South Florida condo has fallen by 45% since 2005, Mr. Tuccillo says. "There's still strong demand at both ends of the price spectrum," he says. "We're seeing a lot of activity on the part of investors with a long-term view in the lower half of the market. The demand for higher-priced properties has also held up reasonably well." Canadians represent about 30% of buyers in Naples, a popular Gulf Coast destination. "We're smaller than Miami and the beach is very accessible," says Tom Doyle, a realtor with Sun Realty in Naples. "There's no retail area blocking off the waterfront - you can't get a tattoo on Naples Beach." Mr. Doyle says Canadians typically snap up two-bedroom condominiums built in the late 1980s and early 1990s near the beach at an average of US$150,000. Right on the beach, though, "it's a sellers market, with homes going for up to $22-million," Mr. Doyle says. "You could get $8-million for a beachfront shack, and buyers looking in that range are relatively price insensitive." Mr. Doyle says Naples housing prices are stabilizing as demand rises. "Our inventory is half what it used to be and anything worthwhile gets snapped up, most of it in cash transactions," he says. "You can't buy anything at the price it sold for last year." The Fort Lauderdale superluxury market is also rebounding, says Kelly Drum, partner in that city's family-owned Drum Realty, in business since 1952. "The market was a little flat, but it's coming back with properties in the $4-million-to-$20million range in our listings," he says. Mr. Drum notes that property owners in the Fort Lauderdale luxury market are under little pressure to sell. "These are typically people who have an interest in simply putting their money someplace else," says Mr. Drum. "Properties that might have attracted $15-million in 2006 and 2007 may only sell for $10million today, so the challenge is getting the owners to list the property to reflect the reality of today's markets." In June of 2010, Mr. Drum sold a property to a Toronto buyer for $7,640,000. "It was a spectacular property with water on three sides - like its own private island," he says. "The gentleman purchased it just for the land and tore down a 15,000-square-foot house to build a new 18,000sq.-ft home." According to U.S. real estate information specialist Trulia, the median price of all properties sold in the Fort Lauderdale market was $160,000 during the quarter ending in September. That's up almost 12% over the same time last year, but down slightly since the previous three months. Mr. Drum doesn't deal in distressed real estate but notes that foreclosure sales are still common in the lower-end market. "If I was a Canadian buyer, I'd come down with cash," says Mr. Drum. "A cash buyer competing with a mortgage contingency buyer could still walk away with a property at a discount, even if that buyer was willing to pay list. Cash commands very attractive deals in this market." Although geographically part of South Florida, Key West is a market all to itself. Expect to invest hours in travel time from the mainland, either by car, air or ferry. "In Key West, all real estate is in the high end," says Cory Held, a realtor with Preferred Properties/Coastal Realty in Key West. Page |9 Stately luxury homes ranging to about $10-million grace the community's Old Town, while renovated homes ranging from $500,000 to $2-million are found in New Town. The community remains under a rate of growth ordinance that sees few new properties entering the market and limiting supply. "High-end properties used to move much more quickly," says Mr. Held. "Now properties selling at $2-million may remain on the market for a year or two -bearing in mind that might be a small house on a small property in Key West." Two years ago, Mr. Held sold a 5,400-sq.-ft home "that looked like Tara" with pool, two guest houses and beach access for $1.76-million. It had previously sold for $5.4 million. By comparison, a similarly appointed 3,440-sq.-foot home, with two guest houses, four bedrooms, four and a half baths, pool and library has been offered at $2,999,999. "I'm currently working with a couple out of Toronto who own a condo unit here and they're looking at buying something else," says Ms. Held. "I'm encouraging them to hold on to it as an income property and to buy an additional property. I'd advise any Canadians entering this market to come with a certification of funds and to buy literally as high as you can afford. Key West remains very desirable and prices will definitely bounce back." Government Agencies, Initiatives, and Tracking Indexes Show Improvements in Tandem Case-Shiller Continues to Record Improvements in Annual Price Changes (http://www.dsnews.com/articles/index/case-shiller-continues-to-record-improvements-in-annual-price-changes- 2011-10-25) The annual rate of change in home prices continues to show improvement, according to Standard & Poor’s. Data released Tuesday by the agency show the 20-city composite and 10-city composite readings of the S&P/Case- Shiller index for August came in below their year-ago levels by 3.8 percent and 3.5 percent, respectively. The previous month, S&P reported a 4.1 percent and 3.7 percent annual decline. Sixteen of the 20 cities covered by the index posted improved annual returns compared to July’s data. Los Angeles and Miami saw no change, while Atlanta and Las Vegas saw their annual rates of change fall deeper into negative territory. At -8.5 percent, Minneapolis posted the lowest year-over-year return, but has improved in each of the last three months. Detroit and Washington D.C. were the only two cities to see positive annual returns of +2.7 percent and +0.3 percent, respectively. The closely watched Case-Shiller index posted a 0.2 percent increase in August versus July for both the 20-city and 10-city measurements, marking the fifth consecutive monthly gain. Ten of the 20 cities in the index saw home prices rise for the month. ―There was some weakness in the monthly statistics, as 10 of the cities post price declines in August over July,‖ said David M. Blitzer, chairman of the index committee at S&P Indices. ―In the August data, the good news is continued improvement in the annual rates of change in home prices.‖ P a g e | 10 Blitzer went on to explain, ―In spring and summer’s seasonally strong period for housing demand, we cautioned that monthly increases in prices had to be paired with improvement in annual rates before anyone could declare that the market might be stabilizing. With 16 of 20 cities and both composites seeing their annual rates of change improve in August, we see a modest glimmer of hope with these data.‖ As of August 2011, Blitzer says the crisis low for the 10-city composite was back in April 2009. It was more recent for the 20-city composite – the double-dip recorded in March 2011. Both readings are now about 3.9 percent above their cycle lows. The Midwest is one region that really stands out in terms of recent relative strength, according to Blitzer. Chicago, Detroit, and Minneapolis have all posted very sharp monthly increases going back to May. Blitzer notes that these markets were some of the weakest markets during the crisis, particularly Detroit. But as of August 2011, Detroit is the healthiest when viewed on an annual basis. It’s up 2.7 percent versus August 2010. Prices there are still back to their 1995 levels, but Blitzer says the recent pickup in the U.S. auto industry may finally be providing Motor City a much-needed boost. As seen in S&P’s past few monthly reports, there were large revisions across some of the metropolitan areas included in the study. In particular, Washington D.C. was the most affected in August. Freddie Mac sells record-number REO at 94% of market value (http://www.housingwire.com/2011/11/14/freddie-mac-sells-record-number-reo-at-94-of-market-value ) Freddie Mae sold a record number of real estate owned properties in 2011 and got pretty decent pricing on most of them, according to Tracy Mooney, senior vice president of single-family servicing and real estate owned properties at Freddie. Mooney said in a blog post Monday that the majority of REO sales at the government-sponsored enterprise are going to owner-occupants. "While we have always been open to selling to investors, our strategy is to limit the concentration of investor sales in any given area," Mooney said. "In addition, we do not typically consider any offers that require significant discount pricing." Mooney said the success of the pricing system hinges on stellar property preservation. Within three days of the occupant leaving the house is cleared, cleaned and secured. The property is then continually landscaped to try to preserve or improve neighborhood-wide valuations. "We sold a record number of single-family REO homes in the first nine months of 2011 — more than 80,000 — and we are selling more homes than we are taking in through foreclosure," Mooney said. "Thanks to our innovative sales strategies and top-performing broker network, our homes are selling in approximately four months — or about 120 days." Freddie had 59,600 REOs on its books with an estimated $10.4 billion in market value, at the end of the third quarter. The GSE received $72 billion to date from the Treasury and, so far, paid back $15 billion. P a g e | 11 Administration Announces Refinance Program for Underwater Borrowers (http://www.dsnews.com/articles/administration-announces-refinance-program-for-underwater-borrowers-2011-10- 24) It’s official. The Federal Housing Finance Agency (FHFA) unveiled a new, revamped government mortgage refinancing program Monday. The initiative involves a series of rule changes to the Home Affordable Refinance Program (HARP) to allow more underwater homeowners to reduce their mortgage debt by taking advantage of today’s rock-bottom interest rates. Mortgages backed by Fannie Mae and Freddie Mac, and originally sold to the GSEs on or before May 31, 2009 are eligible for the program. Under the revised HARP guidelines, the 125 percent loan-to-value (LTV) ceiling has been eliminated. Previously, only borrowers who owed up to 25 percent more than their home was worth could participate in HARP. That limitation has now been removed. The program will continue to be available to borrowers with LTV ratios above 80 percent. The new program enhancements address several other key aspects of HARP that industry participants say have restricted its impact, including eliminating certain risk-based fees for borrowers who refinance into shorter-term mortgages and lowering fees for other borrowers, as well as allowing mortgage insurers to automatically transfer coverage from the original loan to the new loan. In addition, Fannie Mae and Freddie Mac have done away with the requirement for a new property appraisal where there is a reliable AVM (automated valuation model) estimate already provided by the GSEs, and they’ve agreed to waive certain representations and warranties on loans refinanced through the program. Not only are loans eligible for HARP considered ―seasoned loans,‖ but a refinance helps borrowers strengthen their household finances, reducing the risk they pose to the GSEs. Thus, FHFA feels reps and warranties are not necessary for some of these loans. With Monday’s announcement, the end date for HARP has been extended from June 30, 2012 to December 31, 2013. The GSEs will release program instructions to lenders by the middle of next month, and FHFA expects some lenders will be ready to accept applications by December 1. Since HARP was rolled out in early 2009, approximately 1 million homeowners have refinanced their mortgage loans through the program. FHFA estimates that with the revised guidelines, another 1 million will be able to take advantage of the program. To qualify, borrowers must be current on their mortgage payments, but government officials believe by opening HARP up to more homeowners with higher thresholds of negative equity, it will help to prevent foreclosures by erasing the primary motivation behind strategic defaults. Economists at the University of Chicago Booth School of Business estimate that roughly 35 percent of mortgage defaults are strategic. Numerous industry studies have found that homeowners who owe significantly more than their home is worth are more likely to throw in the towel and walk away from their mortgage debt even if they have the ability to continue making their payments. ―We anticipate that the package of improvements being made to HARP will reduce the Enterprises credit risk, bring greater stability to mortgage markets, and reduce foreclosure risks,‖ FHFA stated in its announcement Monday. Fannie Mae and Freddie Mac also released statements in response to the announcement. Michael J. Williams, Fannie Mae’s president and CEO, called the program a ―welcome development.‖ P a g e | 12 ―By removing some of the impediments to refinance, lenders can more easily participate in the program allowing more eligible homeowners to take advantage of the low interest rates,‖ Williams stated. Charles E. Haldeman, Jr., CEO of Freddie Mac said, ―These changes mark another step on the road to recovery for the nation’s housing market.‖ What Do Realtors Have To Say? A Lot of Great Things! Housing to gradually improve in 2012, NAR economist says (http://www.housingwire.com/2011/11/11/housing-to-gradually-improve-in-2012-nar-economist-says) Gradual improvement in the housing market is expected next year, with existing-home sales edging up 4% to 5% and new home sales getting an even bigger boost off this year's record lows, the chief economist of the nation's largest real estate group said Friday. "Tight mortgage credit conditions have been holding back homebuyers all year, and consumer confidence has been shaky recently," Lawrence Yun, chief economist of the National Association of Realtors, said. "Nonetheless, there is a sizeable pent-up demand based on population growth, employment levels and a doubling-up phenomenon that can’t continue indefinitely." Yun, who made his comments during the annual NAR conference for real estate agents under way in Anaheim, Calif., projected gross domestic product growth of 1.8% for 2011, rising to 2.2% in 2012 with the unemployment rate declining to 8.7% by the second half of 2012. Mortgage interest rates, he predicted, would gradually rise from record 2011 lows to 4.5% by the middle of 2012. "Very favorable affordability conditions will dominate next year as well, which will probably be the second best year on record dating back to 1970. Our hope is that credit restrictions will ease and allow more homebuyers to take advantage of current opportunities." Existing-home sales are forecast to edge up about 1% this year. Based on NAR’s current projection model, existing- home sales would total 4.96 million in 2011. NAR is revising downward existing-home sales totals in recent years although it expects little change to previously reported comparisons based on percentage change. New-home sales for 2011 are projected at 302,000 this year, a record low, with expectations that they will rise about 23% to 372,000 in 2012. Housing starts are forecast to rise about 8% to 630,000 from 583,000 in 2011. With falling inventory, the median home price should rise in 2012, he said. "Home prices have yet to show a definitive stabilization pattern in most areas. Still, given an over-correction in prices, there likely will be moderate appreciation in 2012," Yun said. Richard Peach, senior vice president at the Federal Reserve Board of New York, said the economy continues to disappoint. "Among the significant structural impediments are the legacy of the housing boom and bust, and fiscal contrition at the state and local level." He promoted moving foreclosures by giving incentives to military service members. P a g e | 13 "My idea is to allocate certificates to 2.5 million service members who served in Afghanistan and Iraq that could be used as a down payment on a foreclosed home in the Fannie or Freddie portfolio," he said. This would help to absorb the inventory and stabilize the housing market. U.S. Will Remain a Nation of Homeowners (http://finance.yahoo.com/news/U-S-Will-Remain-Nation-iw-2856381331.html) ANAHEIM, CA--(Marketwire -11/12/11)- The U.S. will not become a nation of renters; there are just too many benefits, both financial and otherwise, to own versus rent. That's according to the combined findings of several recent studies presented during the "Buyer or Renter Nation?" session today at the 2011 Realtors® Conference & Expo. An analysis over a 31-year period across 23 metropolitan areas compared the ownership benefits in terms of appreciation and interest deductibility and the costs homeowners incur with down payment, taxes, insurance and maintenance. When it was assumed that renters reinvested any savings in rent (versus a higher monthly mortgage payment), maintenance and down payment, renters had a greater portfolio than buyers in 91 percent of the areas examined. However, when the model allowed renters to spend any savings rather than reinvest those savings, 84 percent of buyers came out ahead. "We knew that homeowners, on average, accumulate more wealth than renters," said Ken Johnson, editor, Journal of Housing Research at Florida International University. Johnson spoke at the session and conducted the analysis with Eli Beracha. "These findings indicate that homeownership is a self-imposed savings plan. Not everyone should own a home, but from a financial perspective, people who are planning to stay in a property over the long term can benefit from buying." According to the most recent data from the Federal Reserve Board, a homeowner's net worth is 45.9 times that of a renter's. Another analysis conducted by Johnson, Beracha, Hilla Skiba and Mark Hirschey determined that housing affordability is at record levels. Twenty-three states are at 30-year record levels of affordability based on price-to- income ratios, and all 50 states are at 30-year record affordability levels based on mortgage payment-to-income ratios. "Homeownership is more affordable today than at anytime over the last 30 years," said Johnson. Beyond the financial advantages of homeownership, Johnson also cited several studies that have demonstrated how homeownership enhances civic pride, improves voter turnout, increases personal happiness, reduces crime, and provides a better familial environment. "These findings are no surprise to Realtors®," said NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I. "We, like the nation's 75 million homeowners and many other who aspire to one day own a home, know homeownership is an investment in the future of our families, communities, and nation. That is why we will continue to fight for public policies that promote responsible, sustainable homeownership; we believe that anyone who is able and willing to assume the responsibilities of owning a home should have the opportunity to pursue that dream." P a g e | 14 The Realtor Reports and Expectations are Backed Up by the Data from the Cities Miami home sales spike 51% over last year (http://www.housingwire.com/2011/11/09/miami-home-sales-spike-51-over-last-year) Miami metro home sales in the third quarter jumped 51% from a year ago, according to the Miami Association of Realtors. Home sales, including existing single-family homes and condos, totaled 6,412, up from 4,239 last year. Existing condo sales increased 48%, and single-family home sales went up 47%. Statewide sales for Florida also saw an increase from last year, with single-family homes up 12% and condos up 13%. Nationally, the National Association of Realtors reported home sales fell 0.1% from the second quarter, though they increased 17% from a year earlier. Miami's home sales have increased 13 consecutive quarters dating back to the third quarter 2008, according to the local realtor association. "Strong demand from international buyers is fueling robust sales activity in Miami despite low consumer confidence and high unemployment," association chairman Jack Levine said in a Wednesday release. "Local sales are expected to set a record this year that should exceed the height of the boom in 2005." NAR chief economist Lawrence Yun predicted "double-digit price increase in Miami in 2012," according to the release. Average sales price in Miami-Dade County for single-family homes was $327,477 in the third quarter, up 19% from a year ago. Average condo sales price increased 21% to $232,158. Separate reports, however, paint a different pricing picture. Integrated Asset Services said Tuesday home prices in Miami were up 1.6% in the third quarter from the previous quarter, but down 9.9% from a year ago. Zillow (Z: 28.57 -4.99%) reported Miami housing values sat at $138,200 for the quarter, down 1.1% from the second quarter and 3.5% from the third quarter 2010. About 47% of homes in Miami were in negative equity, or borrowers who owe more than their homes are worth, according to Zillow. Florida Markets Dominate REALTOR.com Top Ten Turnaround Report Read more: Florida Markets Dominate REALTOR.com Top Ten Turnaround Report | REALTOR.com® Blogs (http://www.realtor.com/blogs/2011/11/16/florida-dominates-realtor-com-top-ten-turnaround-markets/) Though the past four years have seen many cities suffering from large numbers of foreclosures and a loss in home values, ten of these real estate markets are now leading the nation towards a general recovery and stability of the housing sector. P a g e | 15 Realtor.com’s Top 10 Turnaround Town Report, based on third quarter 2011 data, includes six Florida markets: Miami, Orlando, Fort Myers-Cape Coral, Fort Lauderdale, Sarasota-Bradenton, and Lakeland-Winter Haven. Each of these markets has experienced positive year-over-year median price appreciation, reductions in year-over- year median age of inventory and inventory counts, while also experiencing lower unemployment rates on a year- over-year basis. Florida’s success can also be tied to foreign buyers; the number of foreign buyers purchasing homes there increased from 10 percent in 2007 to 31 percent in 2011. Let’s take a closer look: Miami, FL: The number one town on the report, Miami has gone from being one of the first victims of the subprime crash to having a healthy inventory that is only half the size from a year ago. Today, Miami is only reporting one foreclosure for every 407 homes, compared to the national rate of one per every 213. And, condo sales have increased 79 percent in the first five months of this year, largely due to an influx of foreign investors. Orlando, FL: Ranked second on the report, Orlando leads the nation in the ratio of Realtor.com searches to listings. Inventory has also obtained a balance with demand. Foreclosures hurt the market in 2007-08, but foreclosures in Orlando were down 58 percent in September, compared to last year. Fort Myers-Cape Coral, FL: Median prices in Fort Myers-Cape Coral have increased almost 33% year-over-year, according to Realtor.com’s October 2011 Real Estate Trend Data. In addition, foreclosures are down–only one in 313 homes in September–while inventory has been reduced and foreign buyers have been attracted to the area’s real estate prices. The metro ranked third on the turnaround report. Fort Lauderdale: FL: A decrease in inventory coupled with an uptick in prices earns Fort Lauderdale the number five spot on the report. Inventory decreased almost 38 percent year-over-year, according to Realtor.com’s October data report. Prices have fallen about 46 percent since 2006, but are now going up. Sarasota-Bradenton, FL: A total of 11 percent of all foreign buyers in Florida are in Sarasota-Bradenton specifically. Number six on the turnaround report, the market has seen a list prices increase of more than 17 percent year-0ver-year and a decrease of inventory of 32 percent according to the Realtor.com October data. The market still has a long way to go, after losing more than 55 percent of home values from 2006 to the second quarter of 2011 due to foreclosures. Lakeland-Winter Haven, FL: A year ago, Lakeland-Winter Haven topped national foreclosure filing lists, but now the area’s distressed sale market share has decreased 46 percent. The area–ranked 7th on the turnaround list–has seen total listings decreased more than 36 percent year-over-year and median age of inventory decrease more than 17 percent, according to Realtor.com’s October data. Prices are also up 12 percent compared to last October. Realtor.com’s Top Ten Turnaround Town Report is compiled using a formula based on price appreciation, changes in inventory, median age of inventory, searches by Realtor.com visitors, and unemployment data. Apartment vacancy rate dips below 9% for 1st time in years (http://www.azcentral.com/business/realestate/articles/2011/11/02/20111102market-watch.html#ixzz1ejQkpD7e) The average vacancy rate at Phoenix-area apartment communities declined in the third quarter after a slight increase in vacancy during the previous quarter, according to real-estate services firm Colliers International in Phoenix. The vacancy rate dipped below 9 percent for the first time in years, causing rent prices to inch higher, according to the firm's analysis. The improvement in market fundamentals spurred continued investment in apartment properties, with several large projects changing hands. The 240-unit Level at Sixteenth, 1550 E. Campbell Ave., Phoenix, sold for $40 million, about $166,667 per unit. P a g e | 16 The 324-unit Ironhorse at Tramonto, 34807 N. 32nd Drive, Phoenix, sold for $30.5 million, or $94,136 per unit. The 224-unit Fountain Oaks, 1225 N. 40th St., Phoenix, sold for $8.3 million, or $37,054 per unit. The 120-unit Dobson Springs, 1325 W. Guadalupe Road, Mesa, sold for $5.4 million, or $45,000 per unit. The 101-unit Dobson Bay Club Apartments, 1331 W. Baseline Road, in Mesa, sold for $4.6 million, or $45,545 per unit. It was the sixth time during the past seven quarters in which vacancy decreased in Phoenix-area apartments, Colliers analysts said. The vacancy rate reached 8.8 percent as of the third quarter and is expected to reach as low as 8.4 percent by the end of the year. That's a significant drop from the average vacancy rate of 10.9 percent in the third quarter of 2010. Lease rates at local apartment communities have remained relatively flat but are expected to increase in 2012, the analysts said. During the third quarter, the average advertised rent price reached $779 per month, up slightly from both the second quarter of 2011 and one year earlier. While apartment vacancies should continue to decline, the firm said, landlords likely will see further competition as more investor-owned single-family homes are placed on the market as rentals.
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