Thursday, November 23, 2006
Saturday, November 18, 2006
Conforming Loan Limits Will Remain the Same
It looks like the Office of Federal Housing Enterprise Oversight will not reduce the current $417,000 conforming loan limit for a single family home in 2007. They may raise it if necessary, or let it stand for 2007. If prices drop they will average that against the 2007 levels when deciding the 2008 conforming loan limit.
That's good news for housing from the financing perspective, as it will hopefully keep housing at a more affordable level with favorable interest rates for mortgages.
That's good news for housing from the financing perspective, as it will hopefully keep housing at a more affordable level with favorable interest rates for mortgages.
Wednesday, November 15, 2006
Gifted Down Payments
So Mom & Dad are finally coming through and giving you the down payment for a brand new New York City apartment. That's great! There's a couple of things to be aware of when applying for a mortgage with a gifted down payment.
In a perfect world, you would receive the gift funds at least 3 months before you plan to purchase the apartment. Underwriting rules for full documentation mortgages require that a borrower show 2 months (occasionally 3 months) of your most recent bank statements showing enough liquid cash for the down payment and the closing costs with no large deposits. A large deposit is defined as any unusual deposit greater than 2% of the purchase price of your apartment. So if mom and dad kick down the cash after you've signed the contract of sale, you may not qualify for a full documentation mortgage since there will definitely be a large deposit in your bank account.
This would also be the easiest way to get around the asset requirements required by the Board of Directors in a cooperative purchase.
If they just can't part with the money until they are sure you aren't going to spend it recklessly at Barney's and the Darkroom, then you'll have to be prepared to document the down payment as gift funds.
This is done by having the donor (mom and dad in this case) sign a statement that they are giving you the money and will not require it's repayment. Additionally they will have to show 2 months of the bank statements of the account that they emptying to give you the funds to prove their ability to give the money without you having to pay it back. I find that parents rarely want to comply with this last step.
So the best move is to either have an extremely high credit score to override the showing of assets or prove to mom and dad that you can handle having the money in your bank account for a few minutes without running to the Nike store.
There is another sneakier way too. Simply put your name on mom and dad's nest egg account that holds that precious down payment money making it a joint account in your name as well as theirs.
In a perfect world, you would receive the gift funds at least 3 months before you plan to purchase the apartment. Underwriting rules for full documentation mortgages require that a borrower show 2 months (occasionally 3 months) of your most recent bank statements showing enough liquid cash for the down payment and the closing costs with no large deposits. A large deposit is defined as any unusual deposit greater than 2% of the purchase price of your apartment. So if mom and dad kick down the cash after you've signed the contract of sale, you may not qualify for a full documentation mortgage since there will definitely be a large deposit in your bank account.
This would also be the easiest way to get around the asset requirements required by the Board of Directors in a cooperative purchase.
If they just can't part with the money until they are sure you aren't going to spend it recklessly at Barney's and the Darkroom, then you'll have to be prepared to document the down payment as gift funds.
This is done by having the donor (mom and dad in this case) sign a statement that they are giving you the money and will not require it's repayment. Additionally they will have to show 2 months of the bank statements of the account that they emptying to give you the funds to prove their ability to give the money without you having to pay it back. I find that parents rarely want to comply with this last step.
So the best move is to either have an extremely high credit score to override the showing of assets or prove to mom and dad that you can handle having the money in your bank account for a few minutes without running to the Nike store.
There is another sneakier way too. Simply put your name on mom and dad's nest egg account that holds that precious down payment money making it a joint account in your name as well as theirs.
Tuesday, November 14, 2006
Existing Home Sales Ease
Also according to the National Assocation of Realtors:
Existing-home sales eased in September, as did the number of homes available for sale – indicating the housing market is stabilizing. Total existing-home sales dipped 1.9 percent to a seasonally adjusted annual rate of 6.18 million units in September. This pace was 14.2 percent down from a year earlier. David Lereah, NAR’s chief economist, said: “Considering that existing-home sales are based on closed transactions, this is a lagging indicator and the worst is behind us as far as a market correction – this is likely the trough for sales.”
Existing-home sales eased in September, as did the number of homes available for sale – indicating the housing market is stabilizing. Total existing-home sales dipped 1.9 percent to a seasonally adjusted annual rate of 6.18 million units in September. This pace was 14.2 percent down from a year earlier. David Lereah, NAR’s chief economist, said: “Considering that existing-home sales are based on closed transactions, this is a lagging indicator and the worst is behind us as far as a market correction – this is likely the trough for sales.”
Pending Home Sales Level Off
According to the National Assocation of Realtors:
Home sales are expected to hold fairly steady in the months ahead, according to the latest reading on pending home sales. The Pending Home Sales Index, based on contracts signed in September, slipped 1.1 percent to a level of 109.1, following a 4.7 percent gain in August. The September index was 13.6 percent down from a year earlier. David Lereah, NAR’s chief economist, said the index shows home sales will not be moving much in one direction or another.
Home sales are expected to hold fairly steady in the months ahead, according to the latest reading on pending home sales. The Pending Home Sales Index, based on contracts signed in September, slipped 1.1 percent to a level of 109.1, following a 4.7 percent gain in August. The September index was 13.6 percent down from a year earlier. David Lereah, NAR’s chief economist, said the index shows home sales will not be moving much in one direction or another.
Friday, November 03, 2006
Say What? Conforming Loan Limit May Decrease?
I saw this short article about the conforming loan limit (the maximum loan amount that Fannie and Freddie will purchase) may drop as the average price of homes nationally is dropping.
That decision will be up to the Office of Federal Housing Enterprise Oversight. But if the latest figures regarding home prices from the Federal Housing Finance Board are any indication, the ceiling on loans that can be purchased by Fannie Mae and Freddie Mac could slip next year, perhaps substantially.
The limit is based on the percentage change in the average price of both new and existing homes sold from one October to the next as measured by the FHFB, so the final word on the maximum for '07 is still a month away.
But according to the FHFB's latest survey, which was released last week, the average price of houses fell 2.9% in September, from $306,100 to $297,200. If that percentage decline is applied to the full year, the GSE loan limit would fall to $404,907.
But with home sales continuing to slow and the inventory of unsold homes continuing to build, the decline, if indeed OFHEO decides a lower limit is in order, could be even more drastic.
Over the last 12 months, the average price of houses has been lower than September's figure only once. That was in January, a traditionally slow month in the housing market, when the average was $295,700.
As recently as June, the housing finance board reported the average price as $317,900.
That decision will be up to the Office of Federal Housing Enterprise Oversight. But if the latest figures regarding home prices from the Federal Housing Finance Board are any indication, the ceiling on loans that can be purchased by Fannie Mae and Freddie Mac could slip next year, perhaps substantially.
The limit is based on the percentage change in the average price of both new and existing homes sold from one October to the next as measured by the FHFB, so the final word on the maximum for '07 is still a month away.
But according to the FHFB's latest survey, which was released last week, the average price of houses fell 2.9% in September, from $306,100 to $297,200. If that percentage decline is applied to the full year, the GSE loan limit would fall to $404,907.
But with home sales continuing to slow and the inventory of unsold homes continuing to build, the decline, if indeed OFHEO decides a lower limit is in order, could be even more drastic.
Over the last 12 months, the average price of houses has been lower than September's figure only once. That was in January, a traditionally slow month in the housing market, when the average was $295,700.
As recently as June, the housing finance board reported the average price as $317,900.
Wednesday, November 01, 2006
Bubble Schmubble
CNN Money came out with an article that says that New York City is one of the country's top five bubble proof markets. Limited availability and the fact that the city's financial sector can't stop making tons of money seems to be big factors in their assessment.
See the details from cnnmoney.com.
Top 5 Housing Bubble Proof Markets:
1. San Francisco - If developers were allowed to go all out with building on San Francisco’s Treasure Island, Presidio and the Marin Headlands across the Golden Gate Bridge, the price of housing would fall close to the cost of construction. But those pristine natural amenities are the product of one of the most anti-development political cultures in the country - and a perennial magnet for the highest earners.
2. Los Angeles - Along with San Francisco, Los Angeles was the first major metro in the United States to become “filled up” during the 1960s and 1970s because of geographic constraints and political restrictions on building. Three-quarters of new construction is now in-fill development, and much of it is high end. The gentrification is pricing out middle and lower income families, who are moving in-land.
3. Seattle - The newest graduate to join this elite class of super-expensive cities, Seattle is the least likely to hold its place. New zoning laws approved by the city council this year lift restrictions on building heights in the downtown core, and promise to generate $100 million worth of affordable housing.
4. Boston - Boston had the strongest wage growth of these cities through the tech bust and jobless recovery. Over the next five years, it will have the highest per capita income, next to San Francisco.
5. New York City - The force with which middle class households here are getting replaced by wealthier ones was reflected in the recent hysteria over the Tishman Speyer group’s $5.4-billion acquisition of 110 apartment buildings in lower Manhattan, the largest real estate deal in recent history. The apartment blocks are home to thousands of rent-controlled tenants who should have been priced out of the city years ago - and fear they now will be by market rents under the new owner.
See the details from cnnmoney.com.
Top 5 Housing Bubble Proof Markets:
1. San Francisco - If developers were allowed to go all out with building on San Francisco’s Treasure Island, Presidio and the Marin Headlands across the Golden Gate Bridge, the price of housing would fall close to the cost of construction. But those pristine natural amenities are the product of one of the most anti-development political cultures in the country - and a perennial magnet for the highest earners.
2. Los Angeles - Along with San Francisco, Los Angeles was the first major metro in the United States to become “filled up” during the 1960s and 1970s because of geographic constraints and political restrictions on building. Three-quarters of new construction is now in-fill development, and much of it is high end. The gentrification is pricing out middle and lower income families, who are moving in-land.
3. Seattle - The newest graduate to join this elite class of super-expensive cities, Seattle is the least likely to hold its place. New zoning laws approved by the city council this year lift restrictions on building heights in the downtown core, and promise to generate $100 million worth of affordable housing.
4. Boston - Boston had the strongest wage growth of these cities through the tech bust and jobless recovery. Over the next five years, it will have the highest per capita income, next to San Francisco.
5. New York City - The force with which middle class households here are getting replaced by wealthier ones was reflected in the recent hysteria over the Tishman Speyer group’s $5.4-billion acquisition of 110 apartment buildings in lower Manhattan, the largest real estate deal in recent history. The apartment blocks are home to thousands of rent-controlled tenants who should have been priced out of the city years ago - and fear they now will be by market rents under the new owner.
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