Where Home Ownership Rates Are Highest

The national home ownership rate has held mostly steady this year, standing at 65.5 percent for the second quarter, according to recent U.S. Census Bureau data. The rate is 0.4 percentage points lower than the second quarter of 2011, but 0.1 percentage point higher than the first quarter of this year.

The home ownership rate has steadily fallen over the last few years since last peaking in the first quarter of 2005 at 69.1 percent.

 Home ownership rates are highest in the Midwest at 69.6 percent whereas home ownership rates are the lowest in the West, at 59.7 percent, according to the Census data.

Here’s a closer look at the home ownership rate among different demographics, according to the second quarter U.S. Census Bureau housing data:

•The home ownership rate is highest at 81.6 percent for those ages 65 years and over.
•The home ownership rate is lowest at 36.5 percent for those who are under 35 years of age.
•Non-Hispanic whites have the highest home ownership rates among the races at 73.5 percent, while the Hispanic home ownership rate was 46.5 percent and 43.8 percent for African Americans in the second quarter.
Source: U.S. Census Bureau

Bernanke Warns of Another Recession

Federal Reserve Chairman Ben Bernanke warned on Tuesday of threats to the economic recovery and the nation being at risk of slipping back into a recession.

Bernanke did offer a positive outlook for the housing market, however: He acknowledged the housing market is showing signs of improving, but he said that it it is contributing less to economic growth than it has in past recoveries.

Bernanke announced no new action by the central bank to try to stimulate the sluggish economy, although some analysts predict that before the end of the year the Fed will act to buy up more Treasury bonds, which could lower long-term interest rates even further from record lows.

In testimony to the Senate Banking Committee on Tuesday, Bernanke pushed lawmakers to reach a compromise on tax increases and spending cuts that are to take effect by the end of the year. He said that if lawmakers don’t approve the tax increases and spending cuts by then, it’s likely a “shallow recession would occur early next year.”

"The most effective way that the Congress could help to support the economy right now would be to work to address the nation's fiscal challenges in a way that takes into account both the need for long-run stability and the fragility of the recovery," Bernanke told the Senate Banking Committee. "Doing so earlier rather than later would help reduce uncertainty and boost household and business confidence."

Source: “Bernanke Offers Downbeat View of Economy, but no Action,” USA Today (July 17, 2012)

The Next Big Threat to Home Owners Looms

While the housing market is showing signs of picking up across the country, housing experts warn of a new concern for home owners: resetting home equity lines of credit.

Home equity lines of credit often require low payments in the initial years as home owners only pay the interest on these loans at the onset. But later on, these loans reset with higher payments when home owners have to start paying down the principal.

About 44 percent of home owners with home equity lines of credit through Wells Fargo have paid only the minimum amount due on these loans, reports The New York Times.

Many borrowers may soon see their home equity lines of credit reset with higher payments and those higher payments may be too much for some borrowers.

The Office of the Comptroller of the Currency recently warned of the danger these resetting payments could pose for many home owners across the country. The OCC warned that nearly 60 percent of all home equity line balances would require payments of both principal and interest between 2014 and 2017.

The report highlights three main threats home equity borrowers face: Rising payments as they begin to pay back the principal and not just the interest on these loans; the risk of rising interest rates (many of these loans have adjustable rates); and refinancing challenges “because collateral values have declined significantly since these loans originated.”

Many of the home owners have seen their property values decrease since they first took out the home equity loans.

“These are among the riskiest loans in any bank’s portfolio,” The New York Times reports. “As borrowers are pressed to pay principal and interest, write-offs are almost certain to rise.”

Source: “Here Comes the Catch in Home Equity Loans,” The New York Times (July 14, 2012)

5 Real Estate Scams You Need to Know About

Don't be duped by mortgage fraud. Here are a few common scams and the red flags you should look for in a transaction.
Mortgage fraud is pervasive: An estimated $4 billion to $6 billion in annual losses result from mortgage fraud, according to FBI reports. “An entire community can be damaged by mortgage fraud,” says Rachel Dollar, a lawyer from Santa Rosa, Calif., and editor of the Mortgage Fraud Blog. Mortgage fraud can lead to a spike in foreclosures, home values plummeting, and lenders raising their rates and fees to recover losses.

The crimes are often complex, involving several parties and occurring over multiple transactions. To protect you and your clients, educate yourself about mortgage fraud and be on guard for any warning signs in a transaction. You can start by reviewing these five scams, and then test your knowledge by taking our Mortgage Fraud Quiz.

1. The Foreclosure Rescue Scheme
The Scam: “Rescuers” promise cash-strapped home owners that they can save their home from foreclosure. The rescue, which involves paying upfront fees, can take multiple forms, such as the perpetrator obtaining a new loan on behalf of the owner or by having the owner sign over the home’s deed and then rent the home until they can repurchase it. Eventually, the home owner loses the home, either to foreclosure or the fictitious rescue company.

Red Flags: With foreclosure rescue programs, borrowers are often advised to sign over the title of their house to a third party, become renters of their home, not contact their lender, or send mortgage payments to a third party, according to Fannie Mae, which provides fact sheets on mortgage fraud.

2. Loan Documentation Fraud
The Scam: This fraud involves numerous schemes in which a borrower provides inaccurate financial information — such as about their income, assets, and liabilities — or employment status in order to qualify for a loan with lower rates and more favorable terms. Occupancy fraud is one growing area: Borrowers say they plan to live in the property when they actually intend to rent it.

Red Flags: Documentation may raise suspicion if the employer’s address is shown as a post office box, accumulation of assets compared to the person’s income appears too high or low, the new house is too small to accommodate occupants, the person has no credit history, or the application is unsigned or undated, according to Fannie Mae.

3. Appraisal Fraud
The Scam: A faulty appraisal — saying a property is worth more than what it really is — is connected to many types of mortgage fraud. It entails manipulating or overstating comparables, market values, or property characteristics in order to obtain a higher appraisal. The higher property appraisal, which generates false equity, is done by falsifying an appraisal document or using an appraiser accomplice to obtain the higher value.

Red Flags: Be skeptical of appraisals that are dated prior to the sales contract, list comparable sales that do not contain similarities to the property or are outside the neighborhood, the owner is not the seller listed on the contract or the title, or a third party participating in the transaction orders the appraisal, Freddie Mac warns.

4. Illegal Property Flipping
The Scam: This entails purchasing properties and reselling them at inflated prices. These scams usually involve faulty appraisals and inaccurate loan documents. The property is then refinanced or resold immediately after purchase for an inflated value. The home is purchased at a higher price, often by straw buyers working with the “flipper,” and eventually falls into foreclosure.

Red Flags: Some key things to look for are rapid refinancing of a property; the seller recently having acquired the title or acquiring the title concurrent with the transaction; an appraisal that comes in too high; a property that was recently in foreclosure being purchased at a much lower price than its sales price; or the owner listed on the appraisal and title not matching the seller on the sales contract, according to Fannie Mae.

5. Short Sales Schemes
The Scam: Borrowers owe more than the current value of their home so they fake financial hardship and no longer make their mortgage payments. An accomplice of the borrower then submits a low offer to purchase the property in a short sale agreement. The lender agrees to the short sale, unaware that it was premeditated. The property, after being purchased at the reduced price, is then often resold at the home’s actual value for profit.

Red Flags: The borrower suddenly defaults on the mortgage with no workout discussions with the lender, an immediate offer is made to a lender at a short sale price, the short sale offer is less than current market value, or a cash back is offered at closing to the delinquent borrower (disguised as “repairs” or other payouts, for example) and is not disclosed to the lender, according to Fannie Mae.

Survey: Americans See More Opportunity in Housing

While Americans are more pessimistic about the direction of the economy, their optimism regarding the housing market continues to grow, according to Fannie Mae’s June 2012 National Housing Survey. Low prices and record-low interest rates are helping to lift Americans’ views on housing, according to the survey.

“While consumers remain cautious about the general economy, their attitudes toward the housing market continue to improve,” says Doug Duncan, Fannie Mae’s chief economist. “Although this positive trend may be short-lived if the general economy falters, one might ask whether consumers are increasingly seeing the current environment as a unique opportunity to buy a home while home prices remain depressed, rental costs are increasing, and interest rates are near historic lows.”

Thirty-five percent of the Americans surveyed say they expect home prices to rise within the next year, with expectations that home prices will rise 2 percent within that time. That marks the highest increases since the survey began in June 2010.

Also, 73 percent of the Americans surveyed said that now is a good time to buy, which matches the highest number recorded since the survey began.

Source: “Housing Survey Shows Consumer Attitudes Demonstrative of Macroeconomic Indicators,” RISMedia (July 9, 2012)

 

Several Cities Declared ‘in the Clear’ from Downturn

Daily Real Estate News | Thursday, July 05, 2012
Nearly 30 cities are “in the clear” from dipping into another housing crisis, posting a “solid base” housing recovery, according to a new report released by Trulia

The “big six cities” that are seeing the most improvements in housing are: Denver; San Jose, Calif.; Pittsburgh; Little Rock, Ark.; Austin, Texas; and Colorado Springs, Colo., according to the report. Those cities posted gains in asking prices of 4 percent or more year-over-year and have seen their foreclosure rates decrease.

Those six markets “avoided the worst of the bubble,” says Jed Kolko, Trulia’s chief economist. “Those metros didn’t have big price declines that we saw in Miami, Phoenix, and Detroit — places that still have a lot of homes left in foreclosures."

Kolko says that Trulia defined “in the clear” in its report as markets with “positive year-on-year asking price growth and low or moderate share of homes in foreclosure.” The other 23 markets cited “in the clear” saw only slight price growth in comparison to the “big six,” Kolko told MSNBC.com.

The six markets saw the following increases in year-over-year asking price increases in June, according to the report:

1.Denver: 7.2 percent increase
2.San Jose, Calif.: 6.2 percent increase3.Pittsburgh: 5.1 percent increase
4.Little Rock, Ark.: 5 percent increase
5.Austin, Texas: 4.4 percent increase
6.Colorado Springs, Colo.: 4.3 percent increase
However, several cities posted even higher price increases in June, but the Trulia report still labeled them “at risk.” Those markets included Phoenix (18.9 percent); Miami (16.1 percent); Cape Coral-Fort Myers, Fla. (14.9 percent); and West Palm Beach, Fla (9.6 [ercent). Even though these markets have seen annual asking prices increase, the Trulia report notes they still have a high share of homes in foreclosure.

Source: “Some U.S. Metros ‘in the Clear’ of Housing Crisis,” MSNBC.com (July 3, 2012) and Trulia Price Monitor Report (June 2012)