REAL ESTATE NEWS...Mortgage rates move higher for the seventh week in a row

By Kathy Orton

Mortgage rates carried on their steady ascent this week, moving higher for the seventh consecutive week.

Home loan rates are loosely tied to long-term bond yields, which have been on an upward march. The yield on a 10-year Treasury note climbed to 2.54 percent Wednesday, the first time it has been above 2.5 percent since September 2014. The day before the election, it was 1.83 percent.

The Federal Reserve’s decision to raise its benchmark rate had no effect on rates this week because it came too late in the week to be factored into the Federal Home Loan Mortgage Corp.’s survey. The government-supported mortgage-backer aggregates current rates weekly from 125 lenders from across the country to come up with a national average mortgage rate.

Historically, the central bank’s moves have little effect on mortgage rates. Last year, when the Fed raised the federal funds rate, mortgage rates rose initially before falling for six straight weeks.

“The good news is that lenders have been anticipating the Fed’s move and have baked the likelihood of a rate hike into their loan pricing, meaning that mortgage rates are unlikely to change dramatically from where they are today,” said Doug Lebda, founder and chief executive of LendingTree.

Still, many experts are predicting mortgage rates will continue to rise. Bankrate.com, which puts out a weekly mortgage-rate-trend index, found that almost two-thirds of the experts it surveyed think rates will move higher in the coming week.

“Historically, when the Fed has announced a rate hike, it has been beneficial for mortgage rates,” said Katy Parsons, a mortgage originator at Finance of America Mortgage. “But since the election, almost nothing has reacted the way we would expect.”

According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average rose to 4.16 percent with an average 0.5 point. (Points are fees paid to a lender equal to 1 percent of the loan amount.) It was 4.13 percent a week ago and 3.97 percent a year ago.

The 15-year fixed-rate average rose to 3.37 percent with an average 0.5 point. It was 3.36 percent a week ago and 3.22 percent a year ago. The five-year adjustable-rate average rose to 3.19 percent with an average 0.4 point. It was 3.17 percent a week ago and 3.03 percent a year ago.

“As was almost universally expected, the FOMC” — the Federal Open Market Committee — “closed the year with its one-and-only rate hike of 2016. The consensus of the committee points to more rate hikes in 2017,” Sean Becketti, Freddie Mac chief economist, said in a statement. “However, the experience of this year combined with the policy uncertainty that accompanies a new Administration suggests a wait-and-see outlook. … If rates continue their upward trend, expect mortgage activity to be significantly subdued in 2017.”

Meanwhile, mortgage applications decreased this week, according to the latest data from the Mortgage Bankers Association.

The market-composite index — a measure of total loan-application volume — slipped 4 percent from the previous week. The refinance index dipped 4 percent, and the purchase index dropped 3 percent.

The refinance share of mortgage activity accounted for 57.2 percent of all applications.

REAL ESTATE TIPS...What to disclose and not to disclose when selling your condo

By Ilyce Glink and Samuel J. Tamkin

The woman in the condo unit directly beneath me committed suicide a few months ago. I am planning to sell my unit, and her husband still lives in the condo below mine. Do I have to disclose her suicide to prospective buyers when I sell my unit?

While seller disclosure laws vary somewhat from state to state, the purpose of most of these seller disclosure laws is to inform potential buyers of residential real estate of known problems or defects that affect a home. We believe that legislators intended seller disclosure laws to pertain to physical characteristics of a home: the windows, roof, foundation, heating and cooling systems, plumbing systems, flooring and the like.

If you know your home has termites, you should tell the buyer. If the foundation has cracked and the home is shifting, you should tell the buyer. If your home has high levels of radon, you should tell the buyer. If your roof is shot and leaking, you should tell the buyer.

However, when it comes to matters that don’t affect the structure of the home, you might not have to disclose some of those items. For example, if you live in a homeowners association and the association has levied a special assessment, you might have to disclose that, but if you feel your home is haunted, you might not have to disclose that.

Homeowners die in their homes all the time. Some die from natural causes and others don’t. We don’t tend to believe that you need to disclose those matters to prospective buyers. And at least we don’t think seller disclosure laws were intended to cover those matters.

Still, when it comes to “stigmatized properties,” buyers might ask a seller whether a death occurred by suicide, AIDS or murder. While you may not be required to disclose that sort of information upfront, you are required to answer that question honestly. And in some states you may be required to disclose the information, although there is generally a time limit that applies to the disclosure. California law requires that sellers disclose deaths that occurred on the property three years before the sale. But for deaths that occurred before that time, there is no requirement to disclose.

Your situation doesn’t even affect your unit, the death occurred in a unit below yours. We don’t see how that situation affects your condominium value. While it’s unpleasant to know that it happened, and it’s quite regrettable, we don’t think it rises to the level that would require disclosure to the buyer.

Your real estate broker can give you further information on marketing your property; if you want further clarification, you should talk to a real estate attorney who practices law in the state in which the condominium is located.

REAL ESTATE TOPICS...Improved Affordability in Housing

REAL ESTATE TOPICS...How to find and finance bank-owned properties

By Hal Bundrick, NerdWallet

Home prices are still rising — they’re currently averaging just below all-time highs set in 2006, according to the Case-Shiller Home Price Indices. Combine that with slim housing inventory in many markets, and you may believe you’ve missed the opportunity to buy your first, or your next, home.

But bank-owned properties, also known as real-estate owned houses, could be an affordable option for first-time or move-up homebuyers. Lenders are anxious to unload repossessed properties, and without emotional ties, they’re often more inclined to sell a property below market value.

A ‘great investment’

"I was kind of homeless!" Sheila Asseline of South Lake Tahoe, California, says, laughing as she recounts her housing situation of five years ago. "I was living with my daughter and her husband because I had sold a house and hadn't found a replacement property."

But then she got a call from her real estate agent, telling her about a bank-owned house that had just been listed on the market.

"I just jumped on it because I thought it was going to be a good investment. And it turned out to be a great investment." With cash in hand from the sale of her previous home, Asseline acknowledges she was at an advantage. In fact, her offer on the house was accepted over a higher offer from another would-be buyer because that bid was contingent on obtaining financing.

"I found the process extremely simple," she adds. "I put in an offer, and [the bank] countered back, and I accepted it. It turned out to be really easy." Two weeks later, the sale closed.

After a few years, and kitchen and master bath updates, she sold the house and "did very well."

Where to find bank-owned properties

Real-estate owned houses aren’t found only in the most depressed real estate markets. In October 2016, the five markets that saw the highest REO sales on Hubzu, a home-auction website that sells lender-foreclosed homes, were:

1. Chicago

2. Baltimore

3. Washington, D.C.

4. New York City

5. Tampa-St. Petersburg

But with the housing crisis fading, are the best deals gone?

After declaring the foreclosure crisis over in September, real estate research firm Attom Data Solutions  noted a 27% increase in foreclosure activity the very next month. In addition, at the end of the third quarter, vacant bank-owned propertieswere up 67% from one year ago.

"Even in the best of times, there is some percentage of homes that get foreclosed," says Steve Udelson, president of Altisource Online Real Estate, which operates Hubzu.com. For buyers who aren't finding affordable homes in their target neighborhoods, it's well worth their time to investigate foreclosed homes, he adds.

REO properties are often found on multiple listing services. Websites like Hubzu.com, RealtyTrac and Auction.com list REO homes for sale and are good sources for hopeful homebuyers to tap.

It’s also worth asking your real estate agent about REO homes in your area.

A note about timing

While buying “distressed” properties can seem complicated, it’s really a matter of getting into the foreclosure process at the right time. There are basically three stages:

● Pre-foreclosure is when the owner of a property who has become late on mortgage payments receives a notice of default from the lender.

● A public auction is held if the loan defaults. This is when professional investors battle it out, making lowball offers. Many times, because the bids are too far below market value, the bank will simply repossess the property.

● A bank-owned sale or auction. This is where Udelson says potential homebuyers have the greatest opportunity. At this point, you have a seller who is motivated to sell. Banks want to get these properties off their books as soon as possible, he says.

One loan to buy and rehab

In recent years, financing has become more flexible. One federal loan program now allows you to buy a qualifying house and finance improvements and repairs as a part of the loan package to purchase the property; the Federal Housing Administration-backed 203(k) loan allows the mortgage to be based on the home’s value after the rehab, or the home’s purchase price and cost of repairs, whichever is less. Mortgage loan limits vary by location.

Many banks also offer conventional purchase-and-renovate loan packages.

REAL ESTATE NEWS...Case-Shiller: Home prices finally surpass record highs set a decade ago

By Brena Swanson

“Crossing this threshold is largely symbolic”

Home prices finally surpassed all-time highs set in July 2006 as the housing boom topped out. But despite the steady build up to this the past few months, the new high isn’t necessarily a win.

According to the latest data released Tuesday by S&P Dow Jones Indices and CoreLogic, the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, which covers all nine U.S. census divisions, recorded a 5.5% annual gain in September, up from 5.1% last month.

The 10-City Composite posted a 4.3% annual increase, up from 4.2% the previous month, while the 20-City Composite reported a year- over-year gain of 5.1%, unchanged from August.

On a monthly basis and after seasonal adjustment, the National Index recorded a 0.8% month-over-month increase, the 10-City Composite posted a 0.2% month-over-month increase, and the 20-City Composite reported a 0.4% month-over-month increase.

The chart below show the annual returns of the U.S. National, the 10 -City Composite, and the 20- City Composite Home Price Indices.

Click to enlarge

(Source: S&P Dow Jones Indices and CoreLogic)

David Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices, highlighted, “The new peak set by the S&P Case-Shiller CoreLogic National Index will be seen as marking a shift from the housing recovery to the hoped-for start of a new advance.”

However, there’s a significant divide when looking at each city individually.

“While seven of the 20 cities previously reached new post-recession peaks, those that experienced the biggest booms -- Miami, Tampa, Phoenix and Las Vegas -- remain well below their all-time highs,” Blitzer said.

The report stated that Seattle, Portland, and Denver recorded the highest year-over-year gains among the 20 cities over each of the last eight months.

In September, Seattle led the way with an 11% year-over-year price increase, followed by Portland with 10.9%, and Denver with an 8.7% increase.

In addition, 12 cities reported greater price increases in the year ending September 2016 versus the year ending August 2016.

“Crossing this threshold is largely symbolic,” Trulia Chief Economist Ralph McLaughlin explained. “After controlling for inflation, home prices in the U.S. are still about 20% below the peak.”

Similar to Blitzer, McLaughlin stated that the recovery is not even across the board.

 “The housing market recovery has been very uneven across the U.S. When controlling for inflation, markets that have reached their pre-recession peaks are few and almost exclusively in the West and South. And within those markets, it’s mostly high-end homes that have surpassed the peak,” McLaughlin said.

He added that while this is not so great news for homebuyers who have seen prices outpace incomes for most of the housing market recovery, it’s good news for homeowners who are no longer underwater.

REAL ESTATE TOPICS...Who's buying homes?

 

REAL ESTATE TOPICS...Yale's Robert Shiller: Now Is Good Time to Invest in Real Estate

Nobel laureate economist Robert Shiller of Yale University, who helped develop the S&P/Case-Shiller housing price survey, believes now could actually be the time to buy into the real estate sector.

He told FOX Business Network’s “Cavuto: Coast to Coast” that he wasn’t too worried about record-setting stocks and rising housing prices right now.

“Mortgage rates are still low and there could be an upswing—a continuation of the upswing we’ve seen since 2012,” Shiller said regarding the housing market.

“It seems like if you look at the bond market it’s not exactly the bubble story. But there are big turning points in the bond market,” said the 2013 Nobel laureate in economics, professor of economics at Yale University and the co-creator of the Case-Shiller Index of U.S. house prices.

“One of them was around 1979-1980 when Paul Volcker took over the Fed. And interest rates were way in the double digit range. And they’ve been just coming down ever since. It’s not just the financial crisis—it has been a long trend down. And now they kind of hit zero. They can’t go much lower recently,” he said.

Shiller added that with Donald Trump and his “very strong personality” about to move into the White House, there could be a reversal of the trend.

“We could be in for higher interest rates, both at long and short end,” he said, adding that since inflation is still “under control” the Fed won’t do any “reckless raise” of interest rates.

Meanwhile, the stock market’s rise to record highs after Trump’s presidential victory shows that investors are optimistic that the economy will improve as President Barack Obama leaves office, says Charles Gasparino, author and Fox Business Network senior correspondent

“His promise to cut both corporate taxes and red tape will translate into higher corporate profits so businesses can expand and create jobs,”Gasparino writes in the New York Post. “Real unemployment can finally decline not because people are dropping out of the workforce but because they’re actually working again.”

Trump will come into office with Republicans controlling the Senate and House of Representatives, making economic reforms a realistic possibility instead of prolonged gridlock. Under President Obama, the U.S. economy never exceeded 3 percent yearly growth for the first time since World War II.

“With the GOP controlling the House as well as the Senate, traders see real economic growth on the horizon, not just a Fed-induced stock-market bubble where interest rates are so low there’s no other place to put your money,” Gasparino says.

REAL ESTATE TOPICS...Can a real estate contract be binding if you don't put money down?

By Benny L. Kass

Q: Please resolve a dispute I have with my real estate agent. He says I need to post a money deposit in order to have a binding real estate contract, and I don't agree. He also said the oral promise of my seller to leave the piano in the house is not binding. Is that correct?

A: There is a very ancient legal concept called the statute of frauds. In simplified terms, and as it applies to real estate, this means that in order to have a binding contract to purchase (or sell) real estate, there must be a written document. Oral contracts will usually not be enforced by the courts.

In most jurisdictions in the United States, when a potential buyer makes a written offer to purchase a house, the seller has three options:

1. The offer can be accepted, in which case there is a contract.

2. The offer can be rejected.

3. The offer can be met with a counteroffer. This means that while the seller is interested in pursuing negotiations with the potential purchaser, the seller does not find all the terms of the original offer acceptable. .

If a seller makes a counteroffer, the buyer then has the same three options.

Most real estate transactions are smooth, and work out successfully. However, once in a while, a major dispute arises between the parties, and litigation starts. The first thing any court will want to determine is whether there is a valid contract.

In order to have a binding, legal contract, three basic elements are required:

1. An offer. Typically, the buyer makes an offer. It has been determined by many courts that an advertisement in the local newspaper offering a house for sale at a particular price is not an offer, merely an invitation for the public at large to make a bid (an offer) on the property.

2. Acceptance. The second element needed to make a contract binding is acceptance. Ultimately, there will either be no deal, or someone will accept an offer (or counteroffer) and there will be a contract. Acceptance must be in writing. In recent years, with modern technology, real estate forms can be accepted via fax or by email. However, to be on the safe side, follow any fax or email with a written document containing an original signature.

3. Consideration. This is an elusive concept. Generally, it refers to money. The buyers have put down a good faith money deposit with the broker (or with their attorney), and this constitutes good consideration.

However, what happens if no money is put down with the offer? Does this mean there is no binding contract even if the seller signs the offer? Not really, since consideration also has been interpreted to be "something of value." In this case, the buyer has stopped looking for another house, in the belief there is a binding real estate contract, and the seller has taken the house off the market, based on that same belief. Thus, there would still be a valid contract, although it is always wise to put down some money when you present an offer to purchase real estate.

The lesson to be learned: Put everything in writing. If you, as buyer, want certain items to be conveyed along with the house — such as the washing machine, curtains or even the piano — make sure these items are specifically listed in the sales contract. And conversely, if you, as seller, want to take certain fixtures with you, put that in writing as well.

Don't leave anything to faith — or to oral promises. I cannot guarantee you will get the piano.

REAL ESTATE NEWS...Blackstone's plan to cash in on a $10 billion housing bet

By JONATHAN BERR

Blackstone Group’s (BX) Invitation Homes, the country’s largest owner of single-family residences, is planning to go public next year. The goal is to monetize Blackstone’s nearly $10 billion investment in residential properties that began when the real estate market collapsed during the housing bust, sparking the worst U.S. economic downturn since the Great Depression.

Dallas-based Invitation announced its IPO plans in a confidential filing Tuesday with the Securities and Exchange Commission, according to a person familiar with the deal. Blackstone, whose real estate holdings top $100 billion, probably will sell very little of its stake in Invitation during the IPO. Invitation and Blackstone declined to comment for this story. Details of the IPO were reported earlier by The Wall Street Journal.

According to a recent report by financial services firm KBW, Blackstone rapidly vaulted to the top of the home rental market, acquiring 48,000 properties at bargain prices since April 2012, 70 percent of which are on the West Coast and Florida. Blackstone also was the first firm to issue bonds backed, or securitized, by thousands of rental payments. These are similar to the mortgage-backed securities that many blame for exacerbating the financial crisis. Invitation’s rivals in the home-rental business have also issued the securities.

“Many times, the kinds of homes that these firms are renting out may be larger, may have more high-end finishes than a comparable single-family rental home,” said Sarah Edelman, a housing market expert at the left-leaning Center for American Progress. “Traditionally, single-family rental has been among our more affordable sources of rental housing. There’s a risk here if you move more toward the luxury end, possibly at the expense of our more affordable [homes].”

KBW estimates that Invitation invests about $200,000 per home, which is above the $170,000 industry average, because it focuses on upscale real estate markets with good school systems that can command higher rents. The U.S. has approximately 16 million single-family rental homes, 45 percent of which are owned by investors with just one property, while 1 percent are in the hands of mega-owners with 1,000 or more houses, like Invitation. Larger players have been buying out smaller institutional investors in recent years. 

The timing of Invitation’s IPO also is curious. Several of its rivals, including American Homes 4 Rent (AMH), Starwood Waypoint Residential Trust (SWAY) Silver Bay Realty Trust (SBY), have been public for several years. Moreover, data from CoreLogic shows that home prices have surged 30 percent since 2010, making bargains harder to find. CoreLogic expects prices to rise another 5.4 percent over the next 12 months.

“It will be interesting to see how their profit model fares now that it’s not easy to scoop up affordable stocks,” Edelman said. “I do have concerns that when companies are locked into generating a certain return or in their effort to attract broad investment capital, they’ll need to push up rents.”   

Some media accounts have said some Invitation renters have faced substandard living conditions, but it’s hard to get a clear view of how Invitation operates. That’s because its holdings -- unlike multifamily dwellings such as apartment buildings -- are spread out, and tenants aren’t usually organized. Also, owners of single-family homes don’t have to meet standards as stringent as those their multifamily counterparts do, according to Edelman.

Another thing owners have going for them are the high prices for so-called starter homes in markets such as Miami and Atlanta that would normally attract first-time homebuyers. Said Edelman: “There will still be potential homeowners on the sidelines for some time.”

REAL ESTATE TOPICS... The Multigenerational Household