Home Owners are Tapping Into Equity, Again

Home Owners are Tapping Into Equity, Again. Image courtesy of Stuart Miles / FreeDigitalPhotos.net

Home equity lines of credit surged nearly 20 percent compared to a year ago and are now at the highest level since the 12 months ending in June 2009, according to RealtyTrac’s Home Equity Line of Credit (HELOC) Trends Report. HELOC origination’s comprised 15.4 percent of all loan origination’s nationwide during the first eight months of the year, the highest percentage since 2008.

“This recent rise in HELOC originations indicates that an increasing number of home owners are gaining confidence in the strength of the housing recovery and, more importantly, have regained much of their home equity lost during the housing crisis,” says Daren Blomquist, vice president at RealtyTrac.

Nearly 10 million home owners nationwide, representing 19 percent of all home owners with a mortgage, have regained at least 50 percent equity in their homes, RealtyTrac data shows. Meanwhile the percentage of home owners with severe negative equity has fallen from 29 percent in the second quarter of 2012 to 17 percent in the second quarter of this year, Blomquist notes.

Despite home equity lines of credit rising significantly in the past year, they still remain 76 percent below the 2006 peak reached during the housing boom, RealtyTrac notes.

Among the nation’s largest metro areas tracked, 49 out of 50 posted year-over-year increases in HELOC originations for the year ending June 2014 (the lone exception was Rochester, N.Y.).

The following metro areas had the largest year-over-year increases in HELOC originations:

• Riverside-San Bernardino, Calif.: +87.7%
• Las Vegas: 85.1%
• Cincinnati: 81%
• Sacramento, Calif.: 65.1%
• Phoenix: 60.1%

Source: RealtyTrac

Why the West Coast is Key to Every Market

Why the West Coast is Key to Every Market. Image courtesy of kancp26 / FreeDigitalPhotos.net

For a glimpse of where the overall housing market may be heading, look west, according to report from Clear Capital.

After all, the West boasts some of the largest metro markets in the nation. When its housing markets boomed a few years ago, other markets across the country soon followed. When the downturn struck, many Western cities felt the shake up first.

Lately, the West has posted a significant drop in distressed sales, as fewer properties fall into foreclosure. In 2009, slightly more than half of all sales in the West were from distressed properties; that has since fallen to just over 12 percent.

Investors have been branching out, particularly reaching into other markets in the South and Midwest as they sniff out for more bargains.

Clear Capital analysts explain that the West is seeing sharper drops in home price appreciation than some other parts of the country.

“That is why the West is really that leading indicator, the canary in the coal mine, because as the West goes, both on the downturn and in the recovery, we’ve seen the rest of the country go as well,” says Alex Villacorta, vice president of research and analytics at Clear Capital.

But some economists view the easing in appreciation from last year as a healthier overall sign for the housing market.

“Many of those Western markets overshot equilibrium by a lot,” says Mark Fleming, a CoreLogic economist. “Now we are moving toward things driving the housing market the way they used to.” He says those factors include demand, an improving economy, and more jobs.

Source: “Home Prices Headed for a Triple Dip,” CNBC (Oct. 7, 2014)

Where Mansions Are Half the Price

Where Mansions Are Half the Price. Image courtesy of xedos4 / FreeDigitalPhotos.net

Some home buyers looking for a discount are eying the historic stock in their area, finding they may possibly be able to fetch a bargain on a historic mansion, The Wall Street Journal reports. In many old industrial cities in the Midwest and Northeast, real estate professionals are reporting an uptick in listings of inexpensive historic homes.

“Typically built during manufacturing boom times, many of these properties fell into disrepair as local economies faltered, giving today’s buyers an opportunity to pick up a palatial abode on the cheap,” the Journal notes.

Luxury will come at different price tags, depending on your location. But in St. Louis’ historic Visitation Park neighborhood, a fully renovated 11,448-square-foot home boasting six bedrooms and four-and-a-half bathrooms is on the market for $649,000. In Detroit, an eight-bedroom, seven-bath 5,605-square-foot Mediterranean-style mansion, built in 1917, is listed for $365,000. In Toledo, Ohio, a 10-bedroom, eight-bathroom 18,198-square-foot Victorian home, built in 1887, is listed for $284,777. The home is even listed on the National Register of Historic Places.

“The places where we see this [kind of property] are in markets that historically had a lot of industry and a lot of money but slower economic growth recently and, therefore, more affordable housing,” Jed Kolko, chief economist at Trulia, told the Journal.

Some buyers are lured to the character of the historic homes. “We love historic homes: the older craftsmanship, the materials, the style, the design — just their personalities,” says Stephen Economy, who purchased a four-bedroom Arts and Crafts-style house for $225,000 in a historic area of Detroit.

But some home owners may purchase these “bargain mansions” and then over-renovate, which can put them at a disadvantage when they go to sell, real estate professionals say. St. Paul, Minn., home owner Ethan de Naray recently listed his six-bedroom 5,500-square-foot home for $849,000 after putting $1.2 million into the home’s renovation. He restored the original details to the homes, from the moldings to the exterior wood shake siding, while also adding in more modern amenities like a movie theater, game room, and bar.

“There are obviously different types of remodels, and I kind of went overboard with this one and put a lot of time and energy into it, and the end result was, I kind of priced myself out [of the market] on some level,” he told the Journal.

Listing agent Jim Seabold of Coldwell Banker Burnet in Minneapolis says there can be big losses from renovating these mansions if home owners overspend. “In some of the larger homes, we’ve seen $2 million losses,” he says, estimating that around 15 percent to 20 percent of the homes in the Summit-University neighborhood there have been “renovated to the point that [the owners] are losing money.”

Source: “Bargain Mansions: Luxury for Less,” The Wall Street Journal (Oct. 3, 2014)

Could This Mortgage Product Change Lending?

Could This Mortgage Product Change Lending? Image courtesy of renjith krishnan / FreeDigitalPhotos.net

Two mortgage executives are hoping to overhaul the 15-year mortgage, making it more readily available to low and moderate-income people. They say the changes will help borrowers build equity at a much faster pace than they would with a standard loan.

Edward Pinto, a resident fellow at the American Enterprise Institute, and Bruce Marks, who heads the Neighborhood Assistance Corp. of America, have created a new product called the Wealth Building Home Loan. The new product has generated buzz since being introduced at a mortgage conference in North Carolina in early September. The loan will initially be available through NACA’s 37 offices, with plans to pilot it at other institutions in the coming months. NACA acts as mortgage originator for Bank of America.

The Wealth Building Home Loan is a 15-year mortgage with a fixed interest rate that requires little or no down payment and has no additional fees. In originating the loans, underwriters pay more attention to a borrowers’ income than the borrowers’ credit score. They will also ensure that borrowers have enough money left over after they make their mortgage payment to cover other monthly expenses, reducing the risk of foreclosure in case a financial setback strikes.

Typically, the monthly payment on a 15-year loan is higher than a 30-year loan, since the loan amortizes faster. In order to make the monthly payments more affordable, however, the Wealth Building Home Loan will have an offering rate that is about three-quarters of a percentage point below the 30-year FHA rate. Borrowers can bring the rate down even further. For example, for every 1 percent of the loan amount the borrower has as a down payment, the interest rate will be lowered by half a percentage point, with the possibility of bringing it to zero.

The Los Angeles Times cites an example of a $6,000 down payment on a $100,000 mortgage at 3 percent, which would bring the rate to zero. That means all of the borrower’s monthly payment would go toward the principal, not interest.

Pinto and Marks say the aim was to create a product that would allow low and moderate-income borrowers to build wealth, and get them away from high-risk loans.

“This is an opportunity to spend a little more each month but build wealth much more rapidly,” Pinto says. “But even better, there is only a small probability of going into foreclosure. If house prices should go down, you’re covered because you have some equity to fall back on.”

Source: “Loan Gives Low-Income Borrowers a Chance to Build Equity Fast,” The Los Angeles Times (Oct. 5, 2014)

Luxury Buyers Are Spending Mega Bucks in These Markets

Luxury Buyers Are Spending Mega Bucks in These Markets. Image courtesy of Sira Anamwong / FreeDigitalPhotos.net

The high-end residential real estate market remains strong point and plays a big role in the housing recovery. Nearly half – 48 percent – of all wealthy consumers recently reported that they plan to purchase a luxury home within the next 12 months, according to a survey of consumers with a net worth of at least $5 million conducted by Coldwell Banker Previews International program and the Luxury Institute. For affluent individuals under the age of 35, the percentage of those planning to buy a luxury home in the next year jumps to whopping 81 percent. This group of affluent Millennials also reported the highest average purchase price of all age groups at $7.8 million, according to the survey.

So where are luxury buyers’ targeting their home search? Coldwell Banker’s survey identified the following 10 U.S. cities as having the highest number of luxury home sales valued at $1 million or more during the last 12 months through June 2014:

1. San Francisco: 2,485 (the number of home sales valued at $1 million-plus)
2. Los Angeles: 2,170
3. New York: 2,145
4. San Jose, Calif.: 1,119
5. Houston: 981
6. Chicago: 972
7. Naples, Fla.: 964
8. Miami: 933
9. San Diego: 927
10. Washington, D.C.: 878

In the $10 million-plus sales category, New York, with 58 home sales valued at $10 million-plus and Beverly Hills, Calif., with 28 home sales of $10 million-plus led the pack.

What Are Luxury Buyers Looking For?

Location is no longer the top search criteria among luxury buyers, particularly the younger generations, according to the survey. With the ability to work remotely becoming an option for a growing number of people, only 25 percent of the under-35 age group indicate that location dominates their home search criteria. The under-35 group factors in lifestyle considerations instead, with 75 percent saying that dictates their choice of which home to buy, according to the survey.

The demand for eco-friendly homes is growing, too. Nearly one-third of all wealthy buyers under the age of 45 surveyed said a “green” or “LEED certified” home was more important to them than it was just three years ago. Twenty-one percent of all wealthy buyers say they want to purchase an eco-friendly home, a significant jump up from 7 percent in 2013.

Twenty-five percent of luxury home buyers also view a fully automated, high-tech home as a greater priority. For 37 percent of respondents under the age of 35 and 30 percent of those with a net worth of more than $10 million, safe rooms were also found to be a top priority.

Source: Coldwell Banker Previews International/Coldwell Banker (Oct. 1, 2014)

Banks Accused of Falsely Reporting Foreclosures, Bankruptcies

Banks Accused of Falsely Reporting Foreclosures, Bankruptcies. Image courtesy of Stuart Miles / FreeDigitalPhotos.net

A federal judge has refused to throw out a lawsuit by borrowers who claim that their banks wrongfully notified credit reporting agencies that thousands of home owners had gone through bankruptcies or foreclosures.

The judge said that Wells Fargo and Citigroup will have to face accusations in court from borrowers who accuse the banks of allegedly providing inaccurate information to a credit reporting agency and jeopardizing consumers’ ability to get new loans.

A spokesman for Citigroup denied the allegations, and a spokesman for Wells Fargo had not yet responded to media calls for comment.

The lawsuit, filed by borrowers, alleges reporting inaccuracies to credit-reporting agency Experian after borrowers sold their homes in a short sale. A group of mortgage customers from Citigroup and Wells Fargo are accusing the banks of failing to report the transactions as short sales to Experian but instead reporting them as foreclosures or bankruptcies. They also allege in the lawsuit that the banks failed to correct the reports when they were disputed and that the inaccurate reporting greatly impacted borrowers’ credit scores. Experian was also named as a defendant in the lawsuit, accused by borrowers of failing to properly investigate when borrowers complained.

Source: “CitiMortgage, Wells Lose Bid to End Lawsuit Over Credit Reports,” Reuters (Oct, 1, 2014)