Positive News

written by Tom Witzel

Last Updated: Monday, June 22, 2009

The Denver metro area ranks first in rebounding housing markets. The following criteria were used to determine the ranking: the available jobs, the growing population, the good weather, the number of first time buyers, the vital downtown area, and a well educated population.

Moody's Economy.com is predicting that job growth will return in the last quarter of this year and Ernie Goss an econmist from Creighton University said that business activity in Colorado improved in May to its highest level in several months.

The pending home sales index increased almost 7% in April, this is another good sign for our market.

May Housing Numbers

written by Tom Witzel

Last Updated: Monday, June 15, 2009

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Mortgage Rates

written by Tom Witzel

Last Updated: Monday, June 15, 2009

Yes, mortgages rates have risen substantially over the past three weeks, and we can't be sure when, or even if, they will come down. Mortgage rates are important, to be sure, but they are only part of the equation. Income and relative home prices matter too. On that front, average hourly wages continue to show incremental increases, while home prices continue to stabilize, and even rise, in many parts of the country.

Distinctions matter as well. Much has been made of the fact that lower interest rates mean more money in the pockets of borrowers. More money in the pockets of borrowers, in turn, means more money to spend to stimulate the economy. But let's not forget that it's a two-way street: The lender on the other end receives less income; thus, he has less income to spend. In other words, refinances with no equity extraction are really a wash in terms of aggregate demand for goods and services.

Mortgages used for purchases are another matter. If the house purchased already exists and the seller pays off a mortgage of the same or greater amount of the mortgage taken out by the purchaser, there is an increase in aggregate demand of brokerage and other fees collected in relation to the sale. If the house being purchased is a new one, then there is a net extension of credit and the value-added in the construction of the home is an addition to aggregate demand. In short, purchase mortgages have the greater ability to stimulate the economy, and the good news is that we continue to see an increase in purchase mortgages.

Home Buyer Tax Credit

written by Tom Witzel

Last Updated: Thursday, May 14, 2009

This week Shaun Donovan secretary of HUD announced that the tax credit could be used for a buyer's down payment which should help the housing market. The information listed below is a short summary of the tax credit. As always you should consult your legal and tax professionals to determine the effects upon your individual circumstances.

• The tax credit is for home buyers that have not owned a principal residence during the three year period prior to the purchase.
• The tax credit does not have to be repaid.
• The tax credit is equal to 10% of the home's purchase price up to a maximum of $8000.
• The credit is available for homes purchased on or after January 1, 2009 and before December 1, 2009.
• Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.

April Housing Numbers

written by Tom Witzel

Last Updated: Thursday, May 14, 2009

This set of numbers reflect the Denver Metro area numbers for April 2009, if you would like the numbers for your neighborhood call me at 303-808-2206 or email me (tomwitzel@remax.net) and I will put a report together for you.

March Housing Numbers

written by Tom Witzel

Last Updated: Tuesday, April 21, 2009

Interest Rates

written by Tom Witzel

Last Updated: Thursday, March 19, 2009

The following article was sent to me by Colorado Mortgage Alliance. 

The Fed is clearly doing “EVERYTHING” it can to stabilize the housing market and head off a prolonged period of deflation that would be difficult to break.

Of particular note: The Fed is substantially increasing its support of mortgage lending and housing markets.  The FOMC committed the Fed to buy an additional $750 billion in agency mortgage-backed securities, bringing its total purchases of these securities to $1.25 trillion this year. 

Moreover, the Fed will increase its purchases of agency debt by $100 billion to a total of up to $200 billion.  Both measures are designed to increase the ability of Fannie Mae and Freddie Mac to expand their balance sheet and reduce the cost of “conventional” mortgages.

If that wasn’t enough to get borrowers’ and lenders’ blood pumping, the FOMC threw in a kicker: they committed to buying $300 billion worth of long-term Treasury securities, an action they had signaled they were prepared to do at some time.  This is huge in my opinion, perhaps the policy impact of greatest importance.  The Fed is committing itself to monetizing the debt of the Federal government in order to push down general long-term interest rates and restart a refinancing wave.  Given the reluctance of foreigners of late to finance our growing federal deficit, this will be a necessary step toward recovery.  But the potential costs of this action are increasingly problematic.  It is like a cancer patient that is given a heavy dose of chemo and radioactive therapy to cure their cancer, but the patient first appears to get sicker with each passing day.  Renewed dollar weakness is likely.  Longer-term, the U.S. economy could face higher inflation and higher interest rates down the road.

The FOMC also said it is likely to expand the range of eligible collateral for the Term Asset-backed Lending Facility (TALF) to include other financial assets on top of the ones already promised.

Bottom-line, these actions by the Fed today certainly increase the chances of a housing bottom sometime this year, and a return to economic growth by year end.  Ten-year Treasury yields plunged by a half a percentage point shortly after the statement, which will drive significantly lower mortgage and corporate bond rates across the country.

Foreclosure Options

written by Tom Witzel

Last Updated: Monday, March 16, 2009

There are options other than foreclosure in the current housing market.

(1) Reinstatement: The borrower pays the lender the entire past due amount, plus late fees & penalties, by an agreed-upon date. This works best for solvent borrowers whose payment problems are temporary.

(2) Repayment Plan: The lender gives the borrower a fixed amount of time to repay past due payments by adding a portion of them to the regular payment. This works best for solvent borrowers who have missed a small number of payments.

(3) Forbearance: Mortgage payments are reduced or suspended for an agreed-upon period of time. At the end of that time, the borrower resumes regular payments plus a lump sum or additional partial payments for a number of months to bring the loan current. This works best for solvent borrowers who are facing a temporary income reduction.

(4) Loan Modification: The borrower and the lender agree to permanently change one or more terms of the mortgage contract to make payments more manageable. Modifications may include reducing the interest rate, extending the term of the loan, or adding missed payments to the loan amount. Some lenders may forgive or cancel a portion of the debt. Under the Mortgage Forgiveness Debt Relief Act of 2007, the forgiven debt may be excluded from income when calculating federal taxes owed, but it still must be reported on the federal tax return. This works best for solvent or insolvent borrowers who are facing long term income reduction or increased mortgage payments due to an adjustable rate mortgage.

(5) Sale: The homeowner sells the property and pays the lender the full amount due on the note. Some lenders may postpone the foreclosure proceedings if there is a pending sales contract or if the borrower lets them know they are putting the home on the market. This works best for solvent borrowers whose homes are worth as much as the loan balance plus any expenses related to selling the property.

(6) Short Sale: The lender allows the property securing a mortgage or deed of trust to be sold for less than the existing loan balance. A short sale is really a form of pre-foreclosure and occurs wen the lien holder agrees to accept less than what they are owed. This works best for insolvent borrowers & those whose homes are worth less than the amount of the mortgage.

(7) Deed-in-Lieu- With the lenders agreement, the borrower voluntarily transfers property title to the lender in exchange for cancellation of the remainder of debt. Although the homeowner loses his home and his equity,  a deed-in-lieu is less damaging to the borrowers credit than foreclosure. This works best for borrowers whose loan amount is equal to or greater than what the home would sell for.

(8) Bankruptcy: Personal bankruptcy is generally considered a last resort because the consequences are far reaching and long lasting. A bankruptcy stays on a credit report for 10 years, making it difficult to get credit, buy another home, purchase life insurance, or Even get a job. Still, for some, this legal procedure offers a fresh start to someone who cannot repay their debts. If a homeowner has a regular income, a Chapter 13 bankruptcy may allow them to keep their property. This works best for insolvent borrowers who cannot pay their debts.

(9) FHA & VA alternatives: Homeowners with an FHA or VA mortgage may have other foreclosure options and should contact FHA at fha.gov or VA at homeloans.va.gov.

Borrowers who are having trouble should always open the lines of communication with their lender and consult a Realtor, attorney and an accountant to decide which option is best for them.

Conference Call Thoughts

written by Tom Witzel

Last Updated: Thursday, March 12, 2009

I was very fortunate to be able to listen in on a call yesterday from some very astute people from the financial sector, the housing sector and a person that monitors what is going on in Washington DC.  As an overall view of the market that we are in all 3 individuals concurred that the housing industry has very broad implications for the entire economy. I believe that everyone is in agreement that the housing bubble burst due to overbuilding, low interest rates, and lower lending standards.  We know now that  lending standards have tightened considerably, we are trying to get rid of the over supply of homes and individuals are in the process of deleveraging.

One of the concerns for housing is high inventory of excess homes which is in the range of 1.3 to 1.5 million excess units on a national scale. The demand for homes is below the trend for the last several years and we may not start to see more demand until sometime in 2010.  The affordability index is at an all time high however people are very concerned about the economy and the fear of losing their jobs. The homebuilders are building fewer homes and in some areas of the country home prices are below the builders cost to build, this will help clear some of the excess inventory.  Time will address the supply and demand issue.

As far as what is coming out of Washington, there will be more proposals coming from the treasury department, the house of representatives has passed a bill allowing judges to rewrite mortgages commonly know as cram downs and the senate is debating this issue. There are plans in the early stages of trying to increase the number of people that can refinance their mortgage and there is a push to lower the interest rates more. the credit markets will continue to be tight however there is talk of suspending the mark to market accounting rule which many say will help the banks start lending again. Also the uptick rule may be reinstated which many say if these two things are done it will help the economy.

In my opinion a market clearing mechanism must be created to deal with the people that owe more than what their house is worth. That could take the shape of several different things, such as a uniform standard that all banks must follow with short sales, if this were to happen we could get rid of some of the excess inventory and reduce the number of foreclosures.

Home Buyer Tax Credit

written by Tom Witzel

Last Updated: Wednesday, March 11, 2009

I have been getting many questions about the tax credit for purchasing a home so this is what I have found out. First you must not have owned a home in the last 3 years. Second the home must be purchased between January 1, 2009 and December 1, 2009. The IRS has revised form 5405 so that if you want to you can claim the tax credit on your 2008 return. The credit is refundable...allowed in full even if it exceeds your tax bill for the year, however the credit will be recaptured if the home is sold within 3 years of the purchase. Visit federalhousingtaxcredit.com for more information and as always seek the advice of your tax professional.

Housing Numbers

written by Tom Witzel

Last Updated: Wednesday, March 11, 2009

The housing numbers for February 2009 compared to February 2008 are telling a story. The average days on the market for single family homes has decreased 3.6%. The number of new listings has decreased 23.6% and the number of active listings are down by 20.1%. The average sold price is also down by 15%.  I think the story the numbers are telling is this if you price your home right it is taking less time to sell, yes the price you get today is less than last year and for some that is a hard pill to swallow. I do believe that housing works like any other commodity that is it is subject to supply and demand.  I am hopeful that next year at this time we will have better news to report. I am sitting in on a conference call today and I am hopeful that I will have some good news to write about tomorrow.

Colorado Foreclosures Fall in 2008

written by Tom Witzel

Last Updated: Tuesday, March 10, 2009

The foreclosure activity fell in Colorado for the first time since the state began tracking foreclosures in 2003. Foreclosure sales totaled 21,301 in 2008 down 16% from 2007. Foreclosure filings declined by 2% to 39,307. The drop may be due to a foreclosure moratorium by lenders Fannie Mae and Freddie Mac also the Colorado Foreclosure Hotline certainly had an impact as well. While the numbers are still high I think we may be headed in the right direction.