The form is called the Sellers Energy Consumption Evaluation Form.  It is four pages of very detailed information about the sellers’ energy usage and disclosure of any energy efficient appliances such as, furnaces, hot water heaters, light bulbs or lack thereof.

In the long run, it is probably a very good idea to highlight energy efficiency as homeowners become more aware of energy costs.  Unfortunately, the form is an information gathering device, given to a buyer who does not know how to interpret the information let alone know how to apply it to their purchase. 

It is up to the buyer to determine if the home they are buying is competitive with other homes in terms of energy efficiency.  I think it is only reasonable as the form becomes more common and is used more, that sooner or later one can reasonably expect to see a variance in property values (added or subtracted) based on their “greenness”.

The form makes no distinction whether Grandma has been living in the home, along with her four grandchildren, all under age 12 (imagine keeping Grandma’s room really warm and doing the laundry every day); compared to a similar home with just one couple that travels and works long hours and spend their weekends at their lake home (i.e. very little energy usage).   

It is suggested to all homeowners to start making changes now, while and when affordable, to start making those all-important energy efficiency upgrades.  For homeowners with homes over 15 years of age, I know that your HVAC (heating & cooling) systems work just fine, it may be well worth a serious look into the new hot water tanks or tank less systems,  as well as the new furnaces that are on the market today. Keep an eye out for the Energy Star label as an indicator of an energy efficient appliance.

Going green benefits all of us but with the new law it would be a shame to lose value in your home only because you did not know about the new law and its reasonable future effects on the market.  True, it may never affect a homes’ value but based on past experience, as buyers become more aware, it is reasonable to expect them to become much more sensitive to the age of HVAC systems, hot water tanks, appliances, lighting etc.

Questions?  Call me at 775-828-3292 or email me at david@dmorris.com and I can send you a copy of the new form.

Quote of the week… “I’ve been blamed for just about everything that’s wrong with this country.”–Elvis Presley

We who work in the real estate and mortgage industries know exactly how Elvis felt. The same people who unfairly blamed us totally for the recession now look to us alone for signs the economic recovery has taken hold. They might want to remember the health of the housing market is directly dependent on the health of the jobs market, which is not under our control. In any case, everyone felt better last week when January Housing Starts were UP a surprising 14.6%. Even though starts are down 2.6% from a year ago, this still shows builders are more hopeful going forward. The boost came from multi-family units, though single-family starts were off a mere 1% for the month.

A lot of home buying activity is due to the affordability now out there. The National Association of Home Builders (NAHB) and a major bank reported their index shows home affordability in Q4 of 2010 at its highest level in 20 years. Their measure found that 73.9% of the new and existing homes sold in Q4 were affordable to families making the national median income of $64,400.

Business tip of the week… A big part of success is not giving up. Studies show that one trait shared by all very successful people is perseverance. They are persistent, determined, tenacious, pursuing a goal far beyond the point where the average person gets discouraged.

There’s good news in the latest housing market forecast for 2011 from the National Association of Realtors (NAR). After dipping 4.8% last year, sales of existing homes are predicted to grow 7.9%  this year, to 5.3 million. The gain for 2012 is forecast to be a little less, up 4.5%, to 5.53 million. The existing home median price went up 0.3% in 2010, a nice recovery from the 12.9% price drop of 2009. For 2011, the NAR sees it rising 0.5%, to $173,000, then another 2.4%, to $177,900, in 2012.

New home sales are forecast to come back more briskly, up 17.7% in 2011, following their 15.5% drop in 2010. The 2012 projection is for a strong 51.1% sales gain, to 565,000 homes. The median price for new homes, which gained 2.2% last year, should go up another 1.8% in 2011, to $224,700, then 1.9% in 2012, to $229,000. The NAR’s chief economist says this rebound in home sales does depend on an improvement in the jobs market. Affordability also matters and in Q4 of 2010 housing was the most affordable on record, according to NAR numbers going back to 1971. The NAR feels the current situation of low home prices along with low interest rates should continue.

Nevada homeowners should be aware that property deeds and supporting documents can be obtained from the local county recorder’s office where these documents were originally filed for much less than the service being advertised.

“Consumers must be aware that official documents can be obtained from federal, state or local sources for little or no cost by applying directly to the agency involved,” said Attorney General Catherine Cortez Masto. “Many companies offer to supply documents and papers for a fee, taking advantage of unsuspecting or uninformed consumers.”

Before sending money to a company offering services dealing with goverment agencies, consumers should always contact the government agency named first. Consumers will often find the services can be obtained directly from that agency with little or no cost. In addition, the Better Business Bureau maintains a website, www.bbb.org, that provides information concerning companies doing business around the United States. Be cautious when dealing with a company not listed with the Better Business Bureau. In addition, entering the company’s name in Google, Bing or Yahoo search will often reveal information that the company is operating in a fraudulent or dishonest manner. When dealing with a non-local company, it is wise to do your internet search homework first.

While no determination has been made regarding the legitimacy of Title Compliance, any advertisement that urges quick action raises red flags. Questions regarding this matter can be addressed to the Nevada Attorney General’s Bureau of Consumer Protection at 775-684-1169.

*This type of fraudulent business practice may also be applied to companies advertising guaranteed results with loan modification. Please be very cautious with this type of service as well. The David Morris Group is available to help if you are interested in seeing the deed on your home. We can help obtain a copy for you, at no cost, through our local title companies. Please call us any time at 775-828-3292.

The 4.5% fixed-rate mortgage is here, although more than 14 months late. That magic number, or a close approximation, was reached recently, when Freddie Mac reported a 30-year rate of 4.54%. The possibility first arose in early 2009, when the government began mass-purchasing mortgages from Fannie Mae and Freddie Mac to prop up housing. Just about everyone predicted the rates would hit what builders and real estate agents call a “sweet spot” in a few months, and the housing recovery would begin, especially if consumer confidence had recovered to prerecession levels as well.

“What gets people buying again?” asked mortgage broker Peter Buchsbaum of Arlington Capital Mortgage in Horsham, Pa. “The answer is confidence—confidence in the value not falling and confidence they’ll still have a job.”

Even if behind schedule, the 4.5% rate has arrived, but in an environment that buyers perceive as anything but inviting.

Consumer confidence fell again in July, and why? Jobs and sagging real estate values.

“People will start buying houses again when they feel securely employed, house prices are rising, and they can make low down payments,” Bankrate.com columnist Holden Lewis said. “I don’t see any of those conditions coming anytime soon, at least in most parts of the country,” Lewis said. “Job security is the most important factor.”

Suburban homebuilder Marshal Granor said that “when we went under 6 percent, I was amazed and excited, but 4.5 percent artificially increases affordability. If rates start to climb, it will severely dampen already-spotty sales.”

Moody’s Economy.com chief economist Mark Zandi concurs. “The key to more homebuying is more jobs,” he said. “Once job growth kicks in earnestly, household growth will ramp up, and so will demand.”

Zandi added that despite these “extraordinarily low rates,” many prospective buyers have little savings for a down payment and tattered credit scores.” The securely employed appear to be nibbling at the bait, however.

“There’s a new group of buyers just entering the market because of the low rates,” said Art Herling, regional vice president of Long & Foster Real Estate, although the weather is keeping them “from totally getting into the buying mood.”

Buchsbaum also reports “a greater influx of buyers than past summers.”

Philadelphia Realtor Fred Glick compared the economy to a driver with his “feet on both the accelerator and the brake at the same time.”

“Until the jobs are produced, the banks start lending, and the underwriting guidelines start to make sense, we’ll be caught in this conundrum,” Glick said.

What about home prices?

Although the Case-Shiller Home Price Index rose again in May, economists believe that prices nationally will drop 6-8% more through the end of the year.

May’s increase, economists say, is attributable to the federal tax credit that expired April 30, and to seasonal buying patterns that typically boost prices.

The indexes are three-month moving averages, “so May’s readings reflect transactions in 20 markets that closed in March, April and May,” IHS Global Insight economist Patrick Newport said. With the credit gone, “we expect them to rise for two months, then start to decline,” with recovery in 2011.

That means a lot of buyers will remain on the sidelines until prices level off completely. The lowest fixed interest rates in 50 years won’t be enough to draw them in.

“Many people are bottom-fishing,” Herling said.

On the other hand, “People are starting to view houses as places to live and build equity over time, not financial assets where they can make a killing,” said economist Joel L. Naroff of Holland, Pa. If that is the case, demand for housing would rise much more moderately. “Add to that the lack of equity and the difficulty in qualifying for a mortgage, and the outlook for sales is not great,” Naroff said.

Interest rates are rock-bottom because the economy is rock-bottom. As more investors shift their money out of a volatile stock market and to the safety of Treasurys, rates will drop further, at least in theory.

Assuming “the debt crisis abates and the economy doesn’t double-dip, both of which seem more than likely,” Zandi expects rates to close in on 5% by year’s end and over 6% next year.

“I wouldn’t bet my mortgage payment on rates remaining this low for a long time,” Lewis said. “If I were refinancing, I would lock now instead of floating in hopes of rates falling further. I think there’s a greater possibility of rates rising than falling.”

Here are three great reasons why it’s still a great time to buy real estate and make smart investments in a down market.

Low Home Prices
Although there is widespread agreement in the industry that the housing market has reached the bottom, home prices aren’t expected to spike upward. Instead, they’re likely to skip along the bottom into 2011. They will continue to decline in some markets and creep up in others. As long as buyers remain diligent in the home search over the coming months, possible pricing fluctuations won’t have a dramatic effect on their property options.

Low Interest Rates
Interest rates on 30-year, fixed-rate mortgages hit a five-month low of 4.93% in May, and as of early June the rates were holding steady below 5%. Financial concerns over the growing debt crisis in Europe have stemmed discussions in the U.S. of raising rates. The historically low rates will save home buyers thousands and thousands of dollars over the life of a loan, which arguably is reason enough to enter the market.

Other Tax Benefits
The U.S. Home Buyer Tax Credit was temporary, but there are other tax benefits that buyers can continue to count on for the foreseeable future. Property taxes, mortgage interest payments and mortgage insurance premiums are qualified deductions that can help reduce many homeowners’ tax liability. For eco-conscious homeowners, purchasing energy-efficient appliances and making other green upgrades can mean a tax credit up to $1,500. For more information, be sure to visit www.irs.gov or consult a tax professional.

Don’t miss your opportunity to take advantage of the best buying conditions the market has seen in decades. There are plenty of deals to be had in our local Reno/Sparks market. We are the experts that can help you find the right deal for you!

-DMG

Some analysts feel the homebuyer tax credits artificially boosted the housing market by pushing forward home sales that would have happened later. Others feel most buyers would have bought anyway. In any case, there’s now concern about a coming drop in sales. Well, June sales figures should still benefit from activity spurred on by the tax credits. And tax credit sales should even help monthly reports through September, now that buyers in contract on April 30 have been given until September 30 to close.

Nonetheless, we ought to keep an eye on monthly Pending Home Sales, which track signed contracts that turn into sales a few months out. Even though we may have a sales dip after the tax credit, the fact remains that near historic low mortgage interest rates are getting people back into the market. These rates, combined with today’s prices, have made homes more affordable than they’ve been in years, letting many buyers move up to better neighborhoods with more choices.

But buyers shouldn’t wait. The National Association of Realtors chief economist sees the median home price rising nationally 2% to 3% this year. The NAR’s CEO feels sales will pick up in the fall and that the down-cycle has run its course. The chief economist at Moody’s Economy.com also believes the housing crash is nearly over. And we all know mortgage rates won’t stay at their current levels indefinitely. In other words, this could be one of the best times to buy a home in decades.

MortgageOrb.com, Sunday 02 May 2010 – 22:00:02

Fannie Maehas announced new standards for the purchase and securitization of adjustable-rate mortgage (ARM) products. The company says it is changing its eligibility criteria to protect consumers from potentially dramatic payment increases and to help ensure that borrowers who hold these types of mortgages can sustain them beyond the initial interest-rate period.

“Our goal is to make sure consumers can sustain their mortgages and remain in their homes over the long term, while helping our lender partners offer a range of mortgage products for qualified borrowers,”says Marianne Sullivan, senior vice president of single-family credit policy and risk management at Fannie Mae. “These policy changes reflect our intention to continue providing liquidity to different market segments by ensuring that support for ARM products remains in appropriate circumstances.”

For ARMs with initial periods of five years or less, Fannie Mae will require that borrowers be qualified at the greater of the note rate plus 2% or the fully indexed rate (i.e., index plus margin).

Fannie Mae will continue to make available an interest-only loan product, but will change its qualification criteria. The maximum loan-to-value ratio cannot exceed 70%, the borrower’s credit score must be 720 or higher and the borrower must have a minimum of 24 months of liquid asset reserves remaining after loan closing.

Balloon mortgages, which typically offer lower initial interest rates but leave a significant balance due at maturity, will no longer be eligible, except with special approval from Fannie Mae.

All loans not meeting the new guidelines must be purchased as whole loans on or before Aug. 31, or delivered into mortgage-backed security pools with issue dates on or before Aug. 1, the agency says.

SOURCE: Fannie Mae

© 2007 Zackin Publications, All Rights Reserved

Click here for the Reno March 2010 Monthly Market Report

In short, things are looking up! The median home price is $175,500, which is an increase over both January and February of this year. The number of homes sold also had a big spike in March of this year which is a great indicator to help determine the absorption rate of properties and if the available inventory is headed back to a healthy level, which it is.

Possibly one of the most interesting statistics is the Sold-to-Asking Price-Ratio. This ratio shows how much of the original list price was achieved in the final sale. Even as far back as March of 2009, this ratio has not been lower than 96%. As of March 2010 this ratio jumped up to 97.9%, meaning sellers are getting near, at or over their asking price at closing.

This is critical for buyers to understand that the days of “wiggle room” are over. It’s time for buyers to write serious offers and be prepared to pay asking price for a home they really love. From my perspective, this can be attributed to the large number of short sales being purchased. Short sale banks are not accepting low offers and more often than not are countering at a higher price based on the value they receive through an appraisal.

I am an optimist. If these numbers continue on this path, we could see some great progress this year in our local market place. We still have a ways to go before we are really out of the woods, but the light at the end of the will get brighter every month.

Banks and investment banks played with the US economy and profited mightily at the expense of America on the whole.  Regardless if you were conservative and never played in the housing boom, you were used by the banking industry and are now worse off for it. 

On Saturday the Reno Gazette-Journal ran a front page story “Rescue may miss many who need it”. First, let me say in essence that the paper is correct.  Bank of America is recognizing that 45,000 very sick homeowners are going to lose their homes.  The real issue is that those 45,000 are the nearly dead and it is the 16 million homes underwater that need to be focused on and until all banks step up to the plate, housing is flying south for a very long and bitter winter. 

I want to acknowledge just how difficult acting on the problem really is.  The banks have woven a web of curious networks between insurers, investors, servicers and others with protections, profits and liabilities that can be hard to understand.  Despite the problems we are facing, some are profiting from the chaos, not least the very assorted banks and investment banks that brought on the disaster to the American people.

On one hand the commonly held belief, still held by many, is to let the cleansing process work itself out.  Many homeowners that never bought during the boom, or have free and clear homes, are heard to shout this sentiment out and cast all that are in trouble as dilatants that have received their just rewards for not being smart like them.   Without a question in 2006-2007 tens of thousands of people lost their homes that should never have ever received a loan.  But now we are talking about 2010.   We are talking about people that bought homes in 2007, after the “bubble burst”, fully qualified for a home, put 20% cash down and today are underwater!  We are also talking about homeowners that purchased homes in 2001, well before the much talked about “bubble” and put 20% cash down and today have homes that are underwater.  Our market has rolled back well beyond the stupidity of 2003-2006, back to 1998-1999 values.

In the Saturday RGJ article titled “Rescue may miss many who need it”, University of Nevada, Reno economist Tom Cargill said of the new Obama plan “it’s a terrible waste of taxpayers’ money. It uses taxpayers’ money to support bad decisions made by people to buy homes they can’t afford.” Personally, I highly disagree.

We are looking at homeowners that now realize that they are $200,0000-$500,000 upside down in their homes. These were all qualified buyers, who all put down 20% or more and are underwater.  Mr. Cargill, please tell these tens of thousands of Nevada homeowners tough luck and that they made bad decisions.  Please tell them to forget that they owe more money than most and to go out and become consumers again and run up their credit cards and spend money so the economy can grow and the banks can profit and they just need to suck it up and in 7-12 years, if they are lucky, their homes just might, maybe have some equity in them.

What needs to be done?  I suggest the radical notion of the following:  protect the principal, protect the investors, encourage homeowners to pay off their principal loan balances.  First, work with all homeowners that have homes underwater and who are current on their payments.  Move all loans to a .5% interest based on a 15 year amortized loan.  Years 1-5 are at .5%, years 6-8 are at 4%, years 9+ are at 6%.

Example:  A $300,000 loan @ 5.5%/30 years has a P.I. payment of $1,703 per month.  .5% has a payment of $1,730 per month.  The point here is that many homeowners are short selling as much as they realize that it will easily be 10 years before they have equity but can make the payment.  With a 15 year loan not only do we have free and clear homes in 15 years in a mere 5-7 years, the loans will have been paid down so much that with no appreciation whatsoever in the housing market the homeowner will have equity. 

For those homeowners that are not current they can be offered 20, 25, 30 year loans.  In the same example the loan payment would drop over $800 per month on a 30 year loan.  If that does not save the homeowner then per Mr. Cargill they truly overbought or their income has been cut so much that foreclosure is their only option. 

 Drastic?  Not really.  Homeowners take homes off the market, principal is preserved, fewer homes for sale, better chance for stabilization.  Better stabilization and growth, better tax income for the city, better confidence in an individual’s personal financial position, the more likely they are to spend money. The more money they spend the more taxable income to the state, the more confidence homeowners have about themselves, the more likely to buy services, the more services they buy, the more companies can expand and hire. The more people that have jobs the better the economy and so on.

What about the federal government and the bailout money?  Well obviously .5% for 5 years is a bit painful for the banks so that money goes to give the banks/investors a 2% additional return for years 1-5.  When a seller sells in years 1-5 they pay to the federal government a percentage of the profits, if any, as a form of repayment.

Investors get their principal, banks stop write- downs, banks stop paying tens of thousands of employees to handle bad debt, banks save hundreds of millions of dollars on foreclosure costs and write-offs, homes come off the market and prices stabilize.