Mortgages Becoming Easier to Obtain

In some parts of the country, borrowers with good credit are more likely to be able to borrow 95 percent of the purchase price than they were just a few months ago.

In Florida and other troubled markets credit remains tight and mortgage companies continue to scrutinize property appraisals, which makes it difficult for some borrowers to get financing. But in most areas of the country where prices are stabilizing or falling only slightly, standards are relaxing.

“We are starting to see...moderation," said Neil Librock, head of credit risk for Wells Fargo & Co.

Source: The Wall Street Journal, Ruth Simon (12/19/2009)

Tough Times Ahead for Commercial Investors

Commercial real estate won’t recover until late 2011 or 2012, according to a survey commissioned by PricewaterhouseCoopers.

The survey asked more than 100 real estate investors when they believe the industry will improve. The predominate sentiment in the industry was cautious—even negative.

Overall, survey respondents said that with $1.4 trillion of debt maturing by 2012, some owners will find surviving the downturn very difficult.

Pricing in the industry will be more influenced by government and regulatory policy than by occupancy levels or rents, said Robert White, President of Real Capital Analytics.

Investors also will find lower rents and falling tenant demand to be a challenge. Other troubling issues will include the worsening prospects for national retail businesses.

Source: Reuters News (12/18/2009)

New RESPA Rules Start Jan. 1

The government hopes that the revamped Real Estate Settlement and Procedures Act, which takes effect Jan. 1, will make it easier for home buyers to understand what’s going on at closing.

While some industry professionals are enthusiastic, others are dubious that these new regulations will really clear the fog.

"I think the net result is that it will cost consumers more because it will discourage shopping," said Hank Shulroff, senior vice president at Attorneys' Title Guaranty Fund. "The early disclosures are more transparent, but in the end the consumer is going to have less information about what it is they actually purchased, especially as it relates to title services."

Jeri Lynn Fox, president of the Illinois Association of Mortgage Professionals, finds the new procedures more, rather than less, confusing. “Whenever you have confused consumers, isn't that when the opportunity for them to be taken advantage of comes up?" she asks.

Source: Chicago Tribune, Mary Ellen Podmolik (12/18/2009)

Coming Soon: More Foreclosures

More than 1.7 million homeowners were verging on foreclosure this fall, making it likely that these houses will soon end up on the market one way or the other, driving down overall housing values.

"We're going to be dealing with high levels of distressed (sales) in the marketplace for at least a couple of years," says Mark Fleming, chief economist of researcher First American CoreLogic, which has been studying the problem.

Some real estate investment practitioners say they fear that this onslaught is coming.

"We've been in recovery mode for most of the year. How many foreclosures do they have to dump on the market to affect that? I don't know," says Deborah Farmer, owner of StarLight Realty in Tampa, Fla. "Any house priced under $225,000 will be affected by a large increase in foreclosures in this market."

Source: Associated Press, Alan Zibel (12/17/2009)

More Home Owners Walk Away

A growing number of home owners in Arizona, California, Florida, and Nevada—where prices have fallen the most—are walking away from their properties.

They are leaving the deal behind not because they can’t pay but because they don’t want to. A study by researchers at Northwestern University and the University of Chicago concludes that as many as 25 percent of defaults are driven by strategy, not necessity.

If many other people follow suit, “It’s going to be really difficult to prevent a cascade effect," says Paola Sapienza, a professor of finance at Northwestern.

Brent White, an associate law professor at the University of Arizona, points to actions by banks themselves to avoid staying in bad business deals as an example of why homeowners should make a decision "unclouded by unnecessary guilt or shame."

For instance, on Thursday, financial services firm Morgan Stanley announced that it is turning five San Francisco office buildings back over to its lender two years after it purchased them when the market was at its priciest. The buildings are estimated to be worth about half of what Morgan Stanley paid.

“This isn’t a default or foreclosure situation,” spokeswoman Alyson Barnes told Bloomberg News. “We are going to give them the properties to get out of the loan obligation.”

Morgan Stanley is apparently current on the loan, so this is what is known as a “strategic default.”

Some might ask: If strategic defaults are OK for banks, why aren’t they OK for ordinary homeowners?

Source: The Wall Street Journal, James R. Hagerty and Nick Timiraos (12/17/2009) and Bloomberg, Emily Friedlander (12/17/2009)

Foreclosures: Ten Reasons for Buyer Caution

Foreclosed homes aren’t always the best deal in town – even if they do come with a price tag that appears to be lower than some other homes in the neighborhood.

Here are 10 reasons why that is true, offered by Vince Mastronardi, president of On-Site Specialty Cleaning & Restoration in suburban Detroit.

No heat in the winter. When a home has been left unheated, buyers run a risk of damaged pipes.

Not removed but ripped. Thieves and even angry former owners can do a lot of damage when they depart with fixtures and key systems like heaters and air conditioners.

Peeling, bubbling, and discoloration. Water incursion isn’t always obvious, but these are signs.

Mold. Where there is water there is mold. Look inside cabinets, behind drawers, and around built-ins.

Blocked drains and pipes. Sewer backups can be expensive to fix.

Black cobwebs. This is the result of a malfunctioning furnace, common in properties where there hasn’t been maintenance for a long time.

Homemade and handy. Where renovations don’t look professional, check with the municipal authority. They may have been completed without permits and that could mean they have to be redone.

Fresh paint everywhere. What is the seller covering up?

Check the basement. Look for discolored subflooring, which can point to mold. And search for asbestos, common in older homes that haven’t been brought up to code.

Air quality. Include air and surface testing in a home inspection. It’s a few hundred dollars well spent.

Source: On-Site Specialty Cleaning & Restoration (12/16/2009)

Green Buildings Boast 3 Percent Higher Payoff

Commercial buildings with green certification rent for an average of 3 percent more per square foot, according to a study by John M. Quigley, a professor of economics and real estate at the University of California, Berkeley. Other studies come to similar findings.

The study further concludes that because of higher occupancy rates in green buildings, the effective rent premium is about 6 percent per square foot. And it says green buildings also command a higher sales price, in part because they use 10 percent less energy.

The study doesn’t consider the additional costs of building green buildings nor whether location plays a role.

Source: The Wall Street Journal/Real Time Economics, Keith Johnson (12/16/2009)