For a Lower Rate, Let Cash Do the Talking

Original Post Date: October 25, 2012

By: Annamaria Andriotis

When Aaron Schindler’s offer was accepted on a two-bedroom, two-bathroom co-op in New York’s Upper West Side, he figured he’d make a 30% down payment and borrow the rest. But his mortgage broker said a jumbo loan would come with a 4.65% fixed rate, costing thousands of dollars in extra interest payments. So Mr. Schindler, a financial adviser, put 45% down, trading a jumbo mortgage for a smaller 4.37% rate. “It was the perfect middle ground,” he says.

As luxury-home sales take off, some home buyers with deep pockets are using cash to dodge large mortgages. Some are making massive down payments in exchange for a smaller loan with a lower rate. Others are sticking to all cash.

“We’re seeing more and more cash buyers coming into the market in the jumbo arena—much more than we’ve previously seen,” says Jeff Gennarelli, president of Bridgeview Bank Mortgage Company, based in Lombard, Ill.

Why the change of heart? With yields on deposit accounts at record lows and concerns about future returns on equities, high-net worth home buyers are focusing on maximizing savings, says Jack McCabe, an independent housing analyst in Deerfield Beach, Fla.

Private jumbo mortgages—starting after $417,000 in most of the U.S. but at $625,501 in some pricier metro areas—charge higher rates than smaller home loans, averaging 4.04% compared with 3.54%, respectively, according to mortgage-info website Signing up for a fixed-rate $1.5 million mortgage, for instance, would cost nearly $1.1 million in interest over the life of the loan.

By increasing their down payment, borrowers save on interest while still taking advantage of tax benefits. Taxpayers can usually deduct interest payments on a total of up to $1 million of mortgage debt. In other cases, luxury-home buyers are ditching mortgages to get a leg up on the competition.

Sales of million-dollar homes are on the rise nationwide, and some buyers are encountering housing boom-era style bidding wars. Real-estate agents say luxury home sellers are more likely to accept an offer if it doesn’t rely on financing, a process that can delay the final sale.

In upscale Short Hills, N.J., Arlene Gonnella, an agent with Weichert Realtors recently sold a $2.2 million home to a buyer with an aggressive offer: cash for the full asking price.

Still, buyers have to weigh pros and cons to decide between cash, a small mortgage or a jumbo home loan. Here are some points to consider.

• Liquid assets: Buyers should consider a large down payment or paying all cash only if they’ll be left with enough liquid funds to cover expenses and goals over at least the next five years.

• Interest rates: The Federal Reserve plans to keep interest rates very low until at least mid-2015, meaning savers still have years of earning close to zero on their cash. Buyers will have to determine whether their cash might be put to better use in a home that will ultimately save them thousands in mortgage-interest payments.

• Local market conditions: Speak with local real-estate agents and check listing sites like Trulia TRLA +0.22%and Zillow Z +0.49%to find out how many luxury homes in the area sold recently and at what prices. If few homes have sold in the past six months or they’re selling well below the typical asking price in the neighborhood, that could lower the home’s appraised value, making it harder to get a jumbo mortgage.

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Home Prices Climb Across Country

Original Post Date: October 30, 2012

By: Conor Dougherty

The U.S. housing market continued to gain steam in August, with new data showing that home-price increases accelerated over the month while also spreading to more cities across the country.

The Standard & Poor’s/Case-Shiller 20-city home-price index rose 2.0% in August from a year earlier, an acceleration from the 1.2% annual increase in July and the fastest pace in two years, according to a report released Tuesday. Prices were up in 17 of the 20 metropolitan areas tracked by the index, compared with 16 in the report for July and three for January.

The housing recovery—which is being driven by a combination of rising demand, declining inventory and low interest rates—has been a bright spot in a sluggish economy still trying to find its footing.

Tuesday’s report was encouraging to economists because continued and accelerating price growth, at a time when prices gains are usually slowing down after the peak summer sales season, suggests the housing recovery has become self-reinforcing.

“This is a real recovery with legs,” said Ellen Zentner, an economist at Nomura Securities. “What’s especially encouraging is that price gains are deepening across the country.”

Though closely followed by economists and the markets, the Case-Shiller index is a lagging indicator of values—a moving average now two months old. Still, other home-value and home-price indicators suggest price gains have continued into September and October—a possible explanation for why consumer sentiment, though low by historical standards, continues to improve.

The U.S. housing market has recovered largely thanks to the declining number of foreclosures, bank sales and other “distressed” homes that sell at big discounts and drag down prices. Meanwhile, as the cost of homeownership has fallen to the point where monthly rent exceeds mortgage payments in some markets, there has been a surge in demand at the lower end of the market.

Still, with inventory dwindling and household incomes still under pressure, economists caution that price gains will soon flatten out if job and income growth don’t pick up.

Price gains generally have been stronger in markets that were hit hard by the housing bust. Leading the pack was Phoenix, where prices were up 18.8% from a year earlier. Detroit, Minneapolis and Miami all posted year-to-year gains above 6%. The three cities with year-to-year declines were Atlanta, New York and Chicago.

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New or upgraded real estate apps open more doors,0,848646.story

Original Post Date: October 7, 2012

By: Mary Umberger

For a while, it seemed as if the real estate industry was rolling out an app a day, each and every one promising to “revolutionize the way homes are bought and sold,” as their news releases routinely and breathlessly promised.

The hyperbole has abated a bit, and the pace of introductions seems to have slowed proportionately, but there’s still plenty of app activity because consumers have come to expect information about homes on demand. These days, house hunters routinely hit the streets armed with their smartphones, expecting to be able to stand in front of a house on Elm Street and learn everything from the listing price to the property taxes to the square footage in the powder room and more.

 So the apps are still coming. Here are a few that have debuted or have announced major upgrades in recent months:

• Zillow Rentals: OK, so it’s not a home-buying tool, but the rental market is hot, and the real estate industry realizes that in some markets renters might be the best game in town. This free application is among the newest on the market, designed for iPhone and iPod Touch. (An Android version was released earlier this year.) The app contains information on 100 million rental properties (including single-family homes), according to the company. It notifies renters when new properties matching their saved search criteria hit the market. It contains information on grocery stores, schools, etc., in the neighborhood. And it allows side-by-side comparisons of properties.

• RentCafe: This company has a suite of free tools for the iPhone, iPad and iPod Touch that search for rental properties, in addition to enabling other functions. Its most recent app introduction makes it possible for renters to make online payments and submit maintenance requests to participating landlords.

• Revestor: Property investment is also hot at the moment, and in addition to property search with details and photos, this free iPhone app promises to help the user compile data on estimated rents, potential cash flow and other factors that go into an investment decision, according to the company. The app has been available for the Miami, Las Vegas, Phoenix, San Diego, Los Angeles, San Francisco and Orange County markets for several months, and Revestor is rolling out data for other major markets around the country.

• House Hunter: In the sometimes endless trudge from property to property when you’re trying to find a home, at the end of the day it can be hard to keep them straight. House Hunter is a paid app ($3.99; there’s also a free, but more limited, “lite” version) that provides a list for tracking dozens of home features. Shoppers can rank each feature’s importance. In the Keeping Them Straight Department, you can also configure the app to award each home a score. For iPhone and Android.

• HomeSnap: Take a photo of just about any house (the company claims to have 90 million of them in its database) with your smartphone, and the app’s GPS functions will supply you details on current value, square footage, most recent sale price, taxes, schools and other critical info. For iPhone, iPad or iPod Touch (it says an Android version is coming soon). It’s the creation of Sawbuck Realty.

• HomeFinder: This popular app recently released an Android version, after the release of HomeFinder for iPhone. In addition to the usual capacities for near-instant access to details and data about properties for sale, it syncs between mobile device and computer, eliminating the need to conduct the same search twice, the company says.

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Mortgage refinances surge to highest level since April 2009,0,911793.story

Original Post Date: October 3, 2012

By: E. Scott Reckard

Refi madness is smoking hot.

Reacting to record low mortgage rates, borrowers seeking to lower their monthly payments signed up for lower-cost replacement loans last week in numbers not seen in 3½ years.

A Mortgage Bankers Assn. index of refinance applications jumped 20% last week compared with the week before. Applications to purchase homes were up by 4%, the trade group said in a weekly survey released Wednesday.

Rates were plummeting thanks to a new Federal Reserve program designed to stimulate housing and the economy by purchasing mortgage-backed securities. It was the third round of what’s known as quantitative easing, or QE3 as it’s known to Fed watchers.

Freddie Mac’s widely watched weekly survey pegged the average rate for a 30-year fixed home loan at 3.4% last week. That compared with 3.49% the prior week, 4.01% a year earlier, and a rate of well above 6% for most of 2008. said Wednesday that the overnight average rate for 30-year loans was 3.39%.

Not since April 2009, as the average 30-year rate crashed the 5% barrier, was demand for refinance loans so high, according to the Mortgage Bankers Assn. The trade group said rates for each of the five types of mortgages that it monitors dropped to record lows.

 “Financial markets continue to adjust to QE3, as the ongoing presence of the Federal Reserve as a significant buyer of mortgage-backed securities applies downward pressure on rates,” MBA economist Mike Fratantoni said in a news release.

The success of an Obama administration effort to encourage refinances was contributing to the surge, according to the mortgage bankers and a separate report Wednesday from Lender Processing Services, a mortgage technology and data provider in Jacksonville, Fla. 

Lenders traditionally wouldn’t refinance homes for borrowers whose home loans added up to more than 80% of the value of their homes.

But the latest version of the Home Affordable Refinance Program, or HARP, has spurred a boom in refis of these high loan-to-value mortgages if they are owned or guaranteed by the government-supported mortgage finance companies Freddie Mac or Fannie Mae.

Borrowers with little or no home equity can qualify for the HARP refinances only if they have made every mortgage payment on time for the past six months and have had no more than one late payment in the past year.

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A Motivated Seller by Any Other Name…

Original Post Date: October 4, 2012

By: Sanette Tanaka

Houses that real-estate agents describe as “move-in condition” sell 12% faster than homes listed without those words. “Starter homes” sell 9% faster. But be careful: A house called a “handyman special” sells about 50% faster, but the final price is 30% lower than listings that lack those words.

For the past decade, Paul Anglin, associate professor of real estate at the University of Guelph in Ontario, has been studying the effect of certain words in house descriptions.

One of the worst offenders is “motivated” sellers, which both lowers the sell price and slows the sale. Oddly, frantic pleas of “must sell” have no effect on sell time or price, Prof. Anglin says.

In a 2005 National Bureau of Economic Research study, words that depict distinct attributes—”granite,” “maple” and “gourmet”—correspond with higher sale prices. Words deemed “superficially positive”—like “clean,” “quiet,” “fantastic” and “charming”—are either ineffective or even hurt prices.

In a separate study, words that describe specific attributes are more likely to boost the selling price: Mentioning “garage” increases the sale price by 9.8%, “fireplace” by 6.8% and “lake” by 5.6%, says Thomas Thomson, a professor of real estate and finance at the University of Texas at San Antonio who co-wrote “Real Estate Agent Remarks: Help or Hype?”

Don’t mention minor improvements without citing more substantial ones. Bragging about your home’s recently painted walls or new carpet may decrease the final sale price, Prof. Thomson adds. These phrases may lead buyers to form overblown expectations, and they are disappointed after actually viewing it.

“It’s like putting lipstick on a pig. If you put lipstick on a pig, it’s still a pig,” he says.

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U.S. home prices rose 4.6% in August, biggest jump in six years,0,345007.story

Original Post Date: October 2, 2012

By: Tiffany Hsu

Home prices nationwide are recovering, making their largest leap in more than six years in August, according to a new report.

Prices soared 4.6% in August from the same month last year, the biggest year-over-year increase since July 2006, according to real estate data provider CoreLogic in Irvine.

And the gauge rose 0.3% from July for its sixth straight monthly increase.

All but six states are experiencing the gains, with only 20 of 100 major cities showing price depreciation, according to CoreLogic. In July, 26 major metro areas experienced slumps.

The overall increase is magnified by factoring out the weight of distressed sales, including short sales and foreclosures, CoreLogic said. The measure jumped 4.9% year over year and was up 1% from July.

The surging prices “bode well for a progressive rebound in the residential housing market,” said CoreLogic Chief Executive Anand Nallathambi.

“Sustained economic recovery in the U.S. requires a healthy housing market,” he said. “You cannot have a healthy housing market without price stabilization and ultimately home price appreciation.”

States such as Idaho, Nevada, Utah and Hawaii saw some of the largest price boosts. Arizona led the country with an 18.2% increase. California prices outpaced the national average, climbing 5.5%.

In Rhode Island, however, prices dipped 2.6%. Illinois, New Jersey, Alabama and Connecticut also had falling prices.

The national measure is still 26.7% below the pricing peak reached in April 2006. California has undergone one of the deepest plunges in the country, with prices sliding 37.7% from the high.

But several other reports recently have also suggested a steady upward trend. Last month, the government said the median price of new single-family homes was at a five-year high. A separate report from the Standard & Poor’s/Case-Shiller index noted four consecutive price increases.

Other data in the past few months have showed boosts in new housing starts and existing home sales as well as mortgage rates at record lows. Pending sales of existing homes, however, fell in August from a two-year high.

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