Banks Offer Incentives to Unload REOs

“Banks facing high inventories of REOs are turning to financial incentives in the hopes of accelerating sales of these often vacant, deteriorating properties.

For example, Fannie Mae and Freddie Mac are trying to liquidate its REOs, the National Mortgage News reports. By the end of 2010, Fannie Mae was authorizing lenders to offer the HomePath program for Fannie Mae REOs. In the program,   which is available to individual buyers and investors, home buyers do not need perfect credit and can put down as little as 3 percent of the property price, qualifying for a loan up to  97 percent of the purchase price.

Also, HUD’s National Community Stabilization Trust “First Look” program is providing competitive prices on REO properties and giving buyers priority access to these homes before they are broadly listed for sale.

Some cities are coming up with their own programs to stimulate sales. For example, JPMorgan Chase recently teamed with Detroit city officials to offer down payment assistance to police officers and city employees who purchase a vacant home in the city over the next two years. The first buyers will receive $25,000 in down payment assistance, while 60 other buyers will receive up to $15,000.

Source: “REO Incentives Accelerate,” National Mortgage News (Aug. 29, 2011)

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  Commerce Department estimated   new-home sales to a seasonally adjusted annual rate of 330,000 was well above the 316,000 pace expected by economists .

At the same time, in the wake of the expired tax credit,  the May  new-home sales  fell a revised 36.7%  to a record low 267,000 level compared with the previous estimate of a 32.7% fall to 300,000. New-home sales are down 16.7% compared with a year ago.

Perhaps jsut as significant, the months’ supply of homes on the market fell to 7.6 months in June from 9.6 months in May.

Median sales prices have fallen 0.6% in the past year to $213,400

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1. Eden Prairie, Minn.
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See the full list here Source: Money Magazine (07/10/2010)

The news is tempered by the rising inventory numbers which also rose 11.5% to an 8.2 month inventory and also by the expectations that seasonality as well as the expired tax credit may contribute to slow down sales in the months ahead.

Here is the NAR’s (National Association of Realtor’s ) press release:

Washington, D.C., May 24, 2010

WASHINGTON (May 24, 2010) – Existing-home sales rose again in April with buyers motivated by the tax credit, improving consumer confidence and favorable affordability conditions, according to the National Association of Realtors®.

Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, increased 7.6 percent to a seasonally adjusted annual rate of 5.77 million units in April from an upwardly revised 5.36 million in March, and are 22.8 percent higher than the 4.70 million-unit pace in April 2009. Monthly sales rose 7.0 percent in March.

Single-family home sales rose 7.4 percent to a seasonally adjusted annual rate of 5.05 million in April from a pace of 4.70 million in March, and are 20.5 percent above the 4.19 million level in April 2009. The median existing single-family home price was $173,400 in April, up 4.5 percent from a year ago.

Single-family median prices rose in 18 out of 20 metropolitan statistical areas reported in April from a year ago; six of the areas experienced double-digit increases. In data recently reported for the first quarter, 91 out of 152 metros saw price gains.

Lawrence Yun, NAR chief economist, said the gain was widely anticipated. “The upswing in April existing-home sales was expected because of the tax credit inducement, and no doubt there will be some temporary fallback in the months immediately after it expires, but other factors also are supporting the market,” he said. “For people who were on the sidelines, there’s been a return of buyer confidence with stabilizing home prices, an improving economy and mortgage interest rates that remain historically low.”

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 5.10 percent in April from 4.97 percent in March; the rate was 4.91 percent in April 2009.

Total housing inventory at the end of April rose 11.5 percent to 4.04 million existing homes available for sale, which represents an 8.4-month supply2 at the current sales pace, up from an 8.1-month supply in March. Raw unsold inventory is 2.7 percent above a year ago, but remains 11.6 percent below the record of 4.58 million in July 2008.

“Although inventory levels remain above normal and much of the gain last month was seasonal, the housing price correction appears essentially over,” Yun said. “In fact, a majority of the markets have seen price gains recently. A return to old-fashioned responsible lending and buying will help the housing market avoid disruptive and painful bubble-bust cycles.”

The national median existing-home price3 for all housing types was $173,100 in April, up 4.0 percent from April 2009. Distressed homes accounted for 33 percent of sales last month, compared with 35 percent in March.

NAR President Vicki Cox Golder, owner of Vicki L. Cox & Associates in Tucson, Ariz., said buyer traffic is mixed. “It looks like the level of home sales that close in May and June will stay elevated, but many buyers remain in the market even without the tax credit,” she said. “Some Realtors® tell us they are very busy with clients who are entering the market now as a result of improved conditions, while others are welcoming a slowdown from frantic market conditions in recent months.

“Buyers are focused on finding the right house and taking advantage of favorable affordability conditions. For many buyers, owning a home is a lifestyle choice. They want a place of their own to raise a family, build memories, and be part of a larger community,” Golder said.

A parallel NAR practitioner survey4 shows first-time buyers purchased 49 percent of homes in April, up from 44 percent in March. Investors accounted for 15 percent of transactions in April, down from 19 percent in March; the remaining sales were to repeat buyers. All-cash sales stood at 26 percent in April; they were 27 percent in March.

Single-family home sales rose 7.4 percent to a seasonally adjusted annual rate of 5.05 million in April from a pace of 4.70 million in March, and are 20.5 percent above the 4.19 million level in April 2009. The median existing single-family home price was $173,400 in April, up 4.5 percent from a year ago.

Single-family median prices rose in 18 out of 20 metropolitan statistical areas reported in April from a year ago; six of the areas experienced double-digit increases. In data recently reported for the first quarter, 91 out of 152 metros saw price gains.

Existing condominium and co-op sales jumped 9.1 percent to a seasonally adjusted annual rate of 720,000 in April from 660,000 in March, and are 42.3 percent above the 506,000-unit pace in April 2009. The median existing condo price5 was $171,000 in April, which is 0.6 percent below a year ago.

Single-family home sales rose 7.4 percent to a seasonally adjusted annual rate of 5.05 million in April from a pace of 4.70 million in March, and are 20.5 percent above the 4.19 million level in April 2009. The median existing single-family home price was $173,400 in April, up 4.5 percent from a year ago.

Single-family median prices rose in 18 out of 20 metropolitan statistical areas reported in April from a year ago; six of the areas experienced double-digit increases. In data recently reported for the first quarter, 91 out of 152 metros saw price gains.

Applications  for home purchase loans have fallen almost 20 percent over the past month despite low borrowing costs.

On the,  upside mortgage refinancing applications increased by 14.5 percent as homeowners scramble to take advantage of  rates hovering neared historic lows. According to the MBA average 30-year mortgage rates fell 0.13 percentage point last week to 4.83 percent just shy of the the record low of 4.61 percent established in  March 2009.

Almost 70% of all of lat week’s loan  applications were refinancing applications.

Michael Fratantoni, the  Mortgage Bankers Association Vice President of Research stated that ” The data continue to suggest that the tax credit pulled sales into April at the expense of the remainder of the spring buying season .”

According to Realtor Magazine the current demographics rival and even surpass the post WWII baby boom,  “Young households today represent a demographic block larger than even the baby boomers, and their entry into the housing market promises to help build” “an incredible real estate market in the future,””

Read article here

Yun’s prediction is predicated on his expectations that the national economy” , which is on track to expand by 3.1 percent this year after shrinking 2.5 percent last year”

Realtor magazine also warns that “The crisis in Greece could also be a preview of what the United States will face if it doesn’t turn its attention to deficit reduction.”

Read the entire article here

Experts expected a sales pace of 330,000. February’s results were revised upward to 324,000, but remained an all-time low. Sales had been especially weak over the winter, partly due to bad weather in much of the country.

The median sales price was $214,000, up more than 4 percent from a year earlier but down more than 3 percent from February.

The new home sales report reflects signed contracts to purchase homes rather than completed sales and thus gives economists a feel for how many buyers were out shopping for new homes in a given month.

The expiring tax credits played the lion’s share in boosting the numbers to the record levels . The government is offering an $8,000 credit for first-time buyers and $6,500 for current homeowners who buy and move into another property.

In order to qualify for the credits , buyers must have a signed contract complete by the end of next week and must complete the transaction by the end of June.

The Internal Revenue Service estimates thqt the program cost over $12billion .

Home sales increased a stunning 44% the South and 36 percent in the Northeast.

The inventory numbers are also encouraging . At the current sales pace, it would take 7 months to exhaust that supply. Most experts look at a 6 months supply as the optimum level from which housing can begin to increase in price..

Overall however , new home sales are down 70 percent from highs in July 2005, and many are worried that home sales will fall back to the back to the winter’s dismal levels after the tax credit runs out.

Click here to see the official Commerce Department Report