Pending home sales 'fell off a cliff'

It was expected, but not this bad.  Experts did suggest that home sales would drop once the homebuyer tax credit lapsed at the end of April, but no one expected it to be close to a shocking decrease.  According to the National Association of Realtors (NAR), pending home sales fell a whopping 30% in May. Their index, which measures signed sales contracts but not closed sales, plunged to 77.6 from 110.9 in April. It's even off 15.9% from a year ago when the nation was barely emerging from the recession. "The pending home sales report is a disaster," said Mike Larson, a real estate analyst for Weiss Research. "Sales fell off a cliff after the tax credit expired. It's the biggest monthly decline ever and the index is at its lowest level since NAR began tracking it in 2001." Lawrence Yun, NAR's chief economist downplayed the damage a bit. According to him, customers rushed into deals to claim the credit, borrowing from May sales. Once the economic recovery comes into full swing, housing markets will heat up. Those conditions include much lower home prices and extremely favorable mortgage interest rates. The question is when -- or if -- the job market will ever bounce back. "We're not creating jobs," said Larson. "The housing problems now are being driven by broad economic problems.

US employment figures continue to threaten 

Agreed, getting the economy back on track does mean a lot more than stimulus packages. Is the President listening? The patchy US economic recovery faces a crucial litmus test Friday when fresh unemployment figures are released. Most analysts say the ranks of jobless Americans are likely to have swollen to more than 15 million, pushing the unemployment rate from 9.7 percent to 9.8 percent. With the Congressional elections due in November, that does not sound good for the President. Unemployment is a crucial issue with voters and for the markets, as well.  With fears of a double dip recession in recent weeks looming, the Dow Jones Industrial Average lost more than ten percent of its value, over fears about the fate of the US economy.  Goldman predicts that payrolls shrunk by 100,000 last month, the first negative figure this year. Faced with an uncertain outlook and poor access to credit, US firms have been reluctant to rehire workers, as the private sector created just 41,000 jobs in May.  Congress is currently locked in a bitter debate over extending unemployment insurance for over one million workers and is likely to balk at a wider spending package.  Heidi Shierholz of the Economic Policy Institute, a Washington-based think tank, said "The private sector is not yet poised to takeover and sustain a robust recovery." Last week, the Labor Department reported that new jobless claims rose to 472,000, an increase of 13,000 from the week before. But Washington is now more focused on elections in which the national debt is also likely to feature prominently, and that may mean that some 1.7 million unemployed and their troubles will have to be ignored.

Home Buyers Get Tax Credit Closing and Flood Insurance Extensions

The National Association of Realtors® worked closely with congressional leaders on both sides of the aisle toward the timely passage of two bills to extend the home buyer tax credit closing deadline and reauthorize the National Flood Insurance Program. Both bills had cleared the House earlier and were passed by the Senate last night, heading for the President’s signature. The tax credit closing deadline and the NFIP reauthorization were extended to September 30. Extending the tax credit closing and flood insurance deadlines will help provide additional stability to real estate markets across the nation, NAR said. The passage of H.R. 5623, the Homebuyer Assistance and Improvement Act, applies the homebuyer tax credit closing deadline extension only to homebuyers who have ratified contracts in place as of April 30, 2010, but could not close before June 30. There will be no gap between June 30 and the date the president signs the bill into law. Senate passage of the National Flood Insurance Program Extension Act of 2010 (H.R. 5569), reauthorizes extension the NFIP until September 30, allowing currently stalled transactions to move forward. The bill is retroactive and covers the lapsed period from June 1, 2010, to the date of enactment of the extension. Any new policy applications or renewals that were signed and submitted during the lapsed period will be effective from the date of application. In the case of waiting periods, the waiting period will start from the date of application.

Diana Olick - Housing's Powerful Lobby Surges Ahead

“Last week, at the monthly lockup for the existing home sales report, the Realtors' chief economist, Lawrence Yun, told reporters that if the closing date wasn't extended, 180,000 home buyers who signed contracts by April 30th, would lose the tax credit due to delays in closing. He blamed these delays on the tough mortgage market, new appraisal rules and the still-complicated short sale process (when a home is sold for less than the value of the loan). So Congress tried to attach a three month extension on the closing date to other legislation last week, but those bills never passed. But the powerful troika of Realtors, builders and mortgage bankers pushed full speed ahead, rallying the troops. So, lo and behold, before midnight last night, a stand-alone measure made its way through the Senate, as the House had passed it the day before. The Realtors alone are one of the most powerful lobbying forces in Washington, number one in spending in the real estate industry and 13th out of all industry lobbyists. Add the National Association of Home Builders and the Mortgage Bankers Association, and you get a force that spent $5 million in just the first quarter of this year and is on pace to break last years $27 million tab. Many Realtors also moonlight as state legislators, city council members, mayors and school board presidents; if you think members of Congress don't understand that, think again. Housing represents a lot of jobs, plain and simple, and now is a critical time for the industry. The home buyer tax credit and its extension and its closing extension were all the result of this powerful lobby. Now, as Congress looks forward to tackling mortgage behemoths Fannie Mae and Freddie Mac, you can bet these three associations will be buying their lobbyists new shoes for walking the hill. Government may be trying to extricate itself from the business of housing subsidies, but the industry has no such plan. Get ready for a surge in K Street spending, as housing builds itself back from the ground up.”

Swinging Short Sale Discounts

Short sale discounts from regular retail home prices are varying widely from market to market in the US, according to RealtyTrac, an online foreclosure marketplace. This week, RealtyTrac released a report that foreclosure sales took up 31% of all home sales in the US through Q110. According to the report, there were 88,000 pre-foreclosure sales, often short sales, in Q110, for an average discount from retail home prices of 14.7%. By comparison, REO discounts in the US averaged 34%. But while some are seeing large short sale deals above the 14.7%, others are not.  Bill Gassett, a broker with RE/MAX Executive Realty in Hopkinton, Mass., said he’s seeing slightly different numbers, suggesting that short sale discounts vary differently even within states. “There are amazing discounts right now for buyers in the Bluffton/Hilton Head Island market if they are willing to pursue a short sale,” said Tisha Chafer, a real estate agent with Century 21 Southern Lifestyle Properties in Bluffton, S.C. Bluffton is on the very southern-most tip of South Carolina. “If you are patient and can handle dealing with the time it takes for the bank to process the file then you will be rewarded at the end with a property that you were able to purchase at a great price,” she added. Walter Mueller, a broker at Exit Realty Charleston Group said the listing price is set differently depending on which lender a broker is working for. Some want the listing price set at market value. Others want it listed at the amount of the mortgage balance, while others still have no preference. But Mueller said buyers are becoming more aware of the opportunities short sales and REO provide.

Fannie’s Appraisal Policies Updated

Fannie Mae updated its selling guide to provide additional appraisal-related guidance. The new policy addresses issues identified with appraisals after reviewing many mortgage loan files. Fannie will now require interior photographs of specific rooms and areas of the house in the appraisal report. The GSE provided guidance on when an appraisal is considered deficient and when a lender can make changes to the opinion of market value based on underwriter judgment, automated valuation models or other methodology. The policy changes take effect for all mortgage loan applications dated on or after Sept. 1, 2010. Additionally, the GSE provided guidance on appraisers' use of foreclosures, short sales and builder sales as comparable. Fannie clarified that appraisers must be selected based on knowledge of specific geographical markets, access to appropriate data and sufficient experience. Specifically, Fannie said, a qualified employee of the lender may contact the appraiser to provide additional information or explanation about the basis for a valuation.