Architectural salvage shops offer great deals on unique, high-quality furnishings - if you know how to tell the treasures from the trash.
By Josh Garskof, Money Magazine contributing writer
January 30, 2009: 5:20 AM ET
(Money Magazine) -- If you've never set foot in an architectural salvage shop, you're missing out on an amazing world of bargains for house repairs and upgrades. A cross between a home improvement center and an antique store, these cavernous warehouses sell used, or "pre-owned," house parts, from french doors and ornate mantelpieces to like-new commercial-grade appliances.
Discover what you need at one of these emporiums and you'll spend just 25% to 50% as much as you would to buy the equivalent items new - if you could find comparable craftsmanship. The trick is distinguishing between the old stuff that's made with higher-quality materials and workmanship than today's products and the stuff that is truly, well, junk. These strategies will help.
Pick the right shop
There are two breeds of salvage yard. Some operate like high-end collectibles stores with only hand-picked prewar products - and lofty prices (you'll find those listed at bmra.org). And then there are nonprofit recycling centers, which carry materials from any era, including contemporary gear like Jacuzzi tubs and the water heaters needed to fill them. It's in the latter kind of shops - many of which call themselves ReStores - that you can hunt up truly unbelievable deals. To find nonprofit centers in your area, go to habitat.org and redo.org.
Stick with safer stuff
Alas, some of the most appealing older offerings at salvage yards - windows, faucets, toilets - may not meet today's building codes, at least not without modifications that could quickly trump any cost benefit. Safer categories of antique furnishings include light fixtures, bathtubs, radiators, shutters, doors and hardware, notes Brad Guy, a deconstruction expert who teaches demolition crews how to cherry-pick valuable materials from buildings before they're razed.
Get help before you go
If you'll be installing salvaged items as part of a straightforward DIY project, such as replacing a shattered glass door-knob with a perfect match or finding a set of kitchen cabinets to repurpose for a serious garage workshop, it's fine to fly solo. But if you're picking out a claw-foot bathtub, for example, you'll want to consult with your plumber about exactly what you need before heading to the salvage center, suggests Chicago remodeling contractor Ron Cowgill. That way, you know you're getting a tub that will fit in your bathroom - and meet plumbing code.
Be aware of extra costs
Before you grab that fantastic Victorian-era mantelpiece with peeling paint, be aware that the $400 to $800 you'll spend to strip off the old paint will likely strip away the cost savings over buying a new knockoff version. In fact, don't bring home any product with deteriorating paint, since it probably contains lead. If you're in the market for light fixtures, know that you'll also likely need to spend at least another $50 to have them rewired by an electrician or lighting shop.
There's usually no way to connect and test an appliance at the salvage center, so buy these items with the understanding that there's a chance they'll need a tune-up when you get them home. You might pay $2,500 for a pre-owned Viking range and end up shelling out $400 to $500 to get it in working order. But given that you'd probably spend around $6,000 to buy the appliance new, you'll still come out way ahead, notes Steve Feldman, president of Green Demolitions, an appliance resale store in Hawkins, N.Y.
Score a tax break
There's another way to take advantage of the salvage shop: as a supplier. Anytime you remove doors, radiators, vent covers, cabinets, sinks, tubs, patio pavers or other reusable materials from your home, donate the items to your local ReStore, and you'll get a tax deduction in exchange. The store may even pick it up and deconstruct it for free if you make a big enough contribution (at least a few thousand dollars).
As with clothing you bring to Goodwill, you tell the store the fair market value and get a receipt for that amount, which you can then write off as an in-kind charitable donation, says Minneapolis architect Ali Awad. (Many salvage yards display inventory on their websites, so you can gauge ballpark prices by doing a little surfing.) For big remodeling jobs, you may also get a discount from your contractor for needing less Dumpster space. And even the smallest salvage project will make you feel virtuous, since it fulfills all three tenants of being green: reduce, reuse and recycle.
TREASURE TROVE
Items that demand top dollar when purchased new, such as a porcelain farmhouse sink or glazed accent tiles, typically sell for 50% to 75% less at an architectural recycling center.Makeover your home - for 75% less
Friday, January 30, 2009
Thursday, January 29, 2009
10 Hot Trends in Home Design
By Melissa Dittmann Tracey
LAS VEGAS — Contemporary touches are what home owners and buyers desire in 2009, according to a panelist of designers at a session Tuesday on “Design Trends Marketplace” at the International Builder Show. Today’s minimalist design may mix straighter furniture elements, two different colors repeated throughout (e.g. white and green) and a mix of fun, bold accessories (such as a red chair) or a traditional element (such as an antique mirror).
Indeed, contemporary architecture is even spreading to suburbia (see examples from Agave’s energy efficient contemporary homes in Austin, Texas).
Here are some of the common design trends growing in demand.
1. Lighting options used as pieces of art in funky shapes (see examples: www.lightcrafters.com). A variety of lighting options can be used that are decorative yet functional.
2. Outdoor living that serves as an extension of the inside of the home with outdoors that boast comfortable seating, audio, TVs, a fireplace, and artwork to punch up the space.
3. Design accessories reflecting nature speak to buyers who are more aware of preserving the environment. For example, tree designs are popular, such as via an art sculpture, painting, or even reflected in a table (see www.palecek.com).
4. Green design elements, such as water-efficient appliances and LED lighting under the kitchen cabinets, continue to gain traction and offer cost savings.
5. His and her amenities are increasing, such as even separate garages and vanities with his countertop higher than her’s for a more custom look.
6. Car lifts offer compact storage of vehicles and are expected to grow in popularity as lot sizes grow smaller. A basement built under a garage can allow for the car to descend into the basement until you need it. Or a garage with a higher ceiling can stow the car above.
7. Windows can serve as focal points of a room as well as boost energy efficiency. Floor-to-ceiling windows can add drama to a room.
8. Wood in dark or light stains and in various materials are being used throughout homes. For example, wood details on the ceiling can enhance the architecture and Palmwood, which comes from coconut palms, can be used to add a featured wall in the room.
9. Mirrors add glamour to a room and help buyers see themselves in the space–literally. Mirrors add a focal point, enlarge rooms, and can be an important detail to include in homes (see www.mirrormatecommercial.com for examples).
10. More electronics are being sprinkled everywhere, such as iPod docking stations throughout the home and TVs in practically every room (e.g. kitchen, study, and bathrooms).
LAS VEGAS — Contemporary touches are what home owners and buyers desire in 2009, according to a panelist of designers at a session Tuesday on “Design Trends Marketplace” at the International Builder Show. Today’s minimalist design may mix straighter furniture elements, two different colors repeated throughout (e.g. white and green) and a mix of fun, bold accessories (such as a red chair) or a traditional element (such as an antique mirror).
Indeed, contemporary architecture is even spreading to suburbia (see examples from Agave’s energy efficient contemporary homes in Austin, Texas).
Here are some of the common design trends growing in demand.
1. Lighting options used as pieces of art in funky shapes (see examples: www.lightcrafters.com). A variety of lighting options can be used that are decorative yet functional.
2. Outdoor living that serves as an extension of the inside of the home with outdoors that boast comfortable seating, audio, TVs, a fireplace, and artwork to punch up the space.
3. Design accessories reflecting nature speak to buyers who are more aware of preserving the environment. For example, tree designs are popular, such as via an art sculpture, painting, or even reflected in a table (see www.palecek.com).
4. Green design elements, such as water-efficient appliances and LED lighting under the kitchen cabinets, continue to gain traction and offer cost savings.
5. His and her amenities are increasing, such as even separate garages and vanities with his countertop higher than her’s for a more custom look.
6. Car lifts offer compact storage of vehicles and are expected to grow in popularity as lot sizes grow smaller. A basement built under a garage can allow for the car to descend into the basement until you need it. Or a garage with a higher ceiling can stow the car above.
7. Windows can serve as focal points of a room as well as boost energy efficiency. Floor-to-ceiling windows can add drama to a room.
8. Wood in dark or light stains and in various materials are being used throughout homes. For example, wood details on the ceiling can enhance the architecture and Palmwood, which comes from coconut palms, can be used to add a featured wall in the room.
9. Mirrors add glamour to a room and help buyers see themselves in the space–literally. Mirrors add a focal point, enlarge rooms, and can be an important detail to include in homes (see www.mirrormatecommercial.com for examples).
10. More electronics are being sprinkled everywhere, such as iPod docking stations throughout the home and TVs in practically every room (e.g. kitchen, study, and bathrooms).
Wednesday, January 28, 2009
Existing-Home Sales Show Strong Gain In December
Existing-home sales rose unexpectedly while inventory declined, led by a surge of sales in the West, according to the National Association of Realtors®.
Existing-home sales – including single-family, townhomes, condominiums and co-ops – jumped 6.5 percent to a seasonally adjusted annual rate1 of 4.74 million units in December from a downwardly revised pace of 4.45 million units in November, but are 3.5 percent below the 4.91 million-unit pace in December 2007.
For all of 2008 there were 4,912,000 existing-home sales, which was 13.1 percent below the 5,652,000 transactions recorded in 2007. This is the lowest volume since 1997 when there were 4,371,000 sales.
Lawrence Yun, NAR chief economist, said home prices continue to fall significantly. “It appears some buyers are taking advantage of much lower home prices,” he said. “The higher monthly sales gain and falling inventory are steps in the right direction, but the market is still far from normal balanced conditions. Buyers will continue to have an edge over sellers for the foreseeable future.”
Total housing inventory at the end of December fell 11.7 percent to 3.68 million existing homes available for sale, which represents a 9.3-month supply2 at the current sales pace, down from a 11.2-month supply in November.
Yun said the market is underperforming and hurting the broader economy. “We’ve added 25 million people to our population over the past decade and housing affordability conditions are the best we’ve seen since 1973, but household formation is much lower than expected,” he said. “Consequently, there is a pent-up demand which could be unleashed with the right stimulus, including a non-repayable home buyer tax credit. The Obama administration and Congress need to move fast to stimulate a spring sales upturn which will help to stabilize home prices and set the foundation for a sustainable economic recovery.”
The national median existing-home price3 for all housing types was $175,400 in December, which is 15.3 percent below December 2007 when the median was $207,000. There remains a significant downward distortion in the current median from a large number of distress sales at discounted prices, currently 45 percent of transactions; the median is where half of the homes sold for more and half sold for less. For all of 2008, the median price was $198,600, down 9.3 percent from $219,000 in 2007.
NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said it’s an excellent time for first-time home buyers with good jobs. “The typical buyer plans to stay in their home for 10 years, which is the correct approach in today’s market,” he said. “With historically low mortgage interest rates, flexible sellers, a large inventory, and homes that are selling for less than replacement construction costs in much of the country, buyers who’ve been on the fence should take a closer look at today’s market.”
McMillan added that first-time buyers may want to consider an FHA loan, which offers downpayments of 3.5 percent on a safe 30-year fixed-rate mortgage.
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to 5.29 percent in December from 6.09 percent in November; the rate was 6.10 percent in December 2007. Last week, Freddie Mac reported the 30-year rate was 5.12 percent.
Single-family home sales rose 7.0 percent to a seasonally adjusted annual rate of 4.26 million in December from a level of 3.98 million in November, but are 1.4 percent below a 4.32 million-unit pace in December 2007. For all of 2008, single-family sales fell 11.9 percent to 4,349,000.
The median existing single-family home price was $174,700 in December, down 14.8 percent from a year ago. For all of 2008, the single-family median was $197,100, which is 9.5 percent below 2007.
Existing condominium and co-op sales increased 2.1 percent to a seasonally adjusted annual rate of 480,000 units in December from 470,000 in November, but are 18.4 percent below the 588,000-unit level a year ago. For all of 2008, condo sales dropped 21.0 percent to 563,000 units.
The median existing condo price4 was $181,400 in December, down 18.3 percent from December 2007. For all of 2008, the median condo price was $210,000, which is 7.2 percent below 2007.
Regionally, existing-home sales in the Northeast slipped 1.4 percent to an annual pace of 720,000 in December, and are 14.3 percent below December 2007. The median price in the Northeast was $235,000, which is 7.8 percent lower than a year ago.
Existing-home sales in the Midwest increased 4.0 percent in December to a level of 1.04 million but are 10.3 percent below a year ago. The median price in the Midwest was $140,800, down 11.4 percent from December 2007.
In the South, existing-home sales rose 7.4 percent to an annual pace of 1.74 million in December, but are 11.2 percent lower than December 2007. The median price in the South was $158,600, which is down 8.0 percent from a year ago.
Existing-home sales in the West jumped 13.6 percent to an annual rate of 1.25 million in December and are 31.6 percent higher than a year ago. The median price in the West was $213,100, down 31.5 percent from December 2007.
# # #
1The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months. Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity. For example, home sales volume is normally higher in the summer than in the winter, primarily because of differences in the weather and family buying patterns. However, seasonal factors cannot compensate for abnormal weather patterns.
Existing-home sales, which include single-family, townhomes, condominiums and co-ops, are based on transaction closings. This differs from the U.S. Census Bureau’s series on new single-family home sales, which are based on contracts or the acceptance of a deposit. Because of these differences, it is not uncommon for each series to move in different directions in the same month. In addition, existing-home sales, which generally account for 85 to 90 percent of total home sales, are based on a much larger sample – more than 40 percent of multiple listing service data each month – and typically are not subject to large prior-month revisions.
2Total inventory and month’s supply data are available back through 1999, while single-family inventory and month’s supply are available back to 1982. Condos were tracked quarterly prior to 1999 when single-family homes accounted for more than nine out of 10 purchases.
3The only valid comparisons for median prices are with the same period a year earlier due to the seasonality in buying patterns. Month-to-month comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns. Changes in the composition of sales can distort median price data. Year-ago median and mean prices sometimes are revised in an automated process if more data is received than was originally reported.
4Because there is a concentration of condos in high-cost metro areas, the national median condo price can be higher than the median single-family price. In a given market area, condos typically cost less than single-family homes.
Existing-home sales for January – including monthly revisions to sales rates for the past three years – will be released February 25. Each February, NAR Research incorporates a review of seasonal activity factors and fine-tunes historic data for the previous three years based on the most recent findings. Revisions will made to monthly seasonally adjusted annual sales rates for 2006 through 2008, as well as the inventory month's supply data. There will be no revisions to raw inventory or home prices aside from the normal prior month revisions.
Existing-home sales – including single-family, townhomes, condominiums and co-ops – jumped 6.5 percent to a seasonally adjusted annual rate1 of 4.74 million units in December from a downwardly revised pace of 4.45 million units in November, but are 3.5 percent below the 4.91 million-unit pace in December 2007.
For all of 2008 there were 4,912,000 existing-home sales, which was 13.1 percent below the 5,652,000 transactions recorded in 2007. This is the lowest volume since 1997 when there were 4,371,000 sales.
Lawrence Yun, NAR chief economist, said home prices continue to fall significantly. “It appears some buyers are taking advantage of much lower home prices,” he said. “The higher monthly sales gain and falling inventory are steps in the right direction, but the market is still far from normal balanced conditions. Buyers will continue to have an edge over sellers for the foreseeable future.”
Total housing inventory at the end of December fell 11.7 percent to 3.68 million existing homes available for sale, which represents a 9.3-month supply2 at the current sales pace, down from a 11.2-month supply in November.
Yun said the market is underperforming and hurting the broader economy. “We’ve added 25 million people to our population over the past decade and housing affordability conditions are the best we’ve seen since 1973, but household formation is much lower than expected,” he said. “Consequently, there is a pent-up demand which could be unleashed with the right stimulus, including a non-repayable home buyer tax credit. The Obama administration and Congress need to move fast to stimulate a spring sales upturn which will help to stabilize home prices and set the foundation for a sustainable economic recovery.”
The national median existing-home price3 for all housing types was $175,400 in December, which is 15.3 percent below December 2007 when the median was $207,000. There remains a significant downward distortion in the current median from a large number of distress sales at discounted prices, currently 45 percent of transactions; the median is where half of the homes sold for more and half sold for less. For all of 2008, the median price was $198,600, down 9.3 percent from $219,000 in 2007.
NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said it’s an excellent time for first-time home buyers with good jobs. “The typical buyer plans to stay in their home for 10 years, which is the correct approach in today’s market,” he said. “With historically low mortgage interest rates, flexible sellers, a large inventory, and homes that are selling for less than replacement construction costs in much of the country, buyers who’ve been on the fence should take a closer look at today’s market.”
McMillan added that first-time buyers may want to consider an FHA loan, which offers downpayments of 3.5 percent on a safe 30-year fixed-rate mortgage.
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to 5.29 percent in December from 6.09 percent in November; the rate was 6.10 percent in December 2007. Last week, Freddie Mac reported the 30-year rate was 5.12 percent.
Single-family home sales rose 7.0 percent to a seasonally adjusted annual rate of 4.26 million in December from a level of 3.98 million in November, but are 1.4 percent below a 4.32 million-unit pace in December 2007. For all of 2008, single-family sales fell 11.9 percent to 4,349,000.
The median existing single-family home price was $174,700 in December, down 14.8 percent from a year ago. For all of 2008, the single-family median was $197,100, which is 9.5 percent below 2007.
Existing condominium and co-op sales increased 2.1 percent to a seasonally adjusted annual rate of 480,000 units in December from 470,000 in November, but are 18.4 percent below the 588,000-unit level a year ago. For all of 2008, condo sales dropped 21.0 percent to 563,000 units.
The median existing condo price4 was $181,400 in December, down 18.3 percent from December 2007. For all of 2008, the median condo price was $210,000, which is 7.2 percent below 2007.
Regionally, existing-home sales in the Northeast slipped 1.4 percent to an annual pace of 720,000 in December, and are 14.3 percent below December 2007. The median price in the Northeast was $235,000, which is 7.8 percent lower than a year ago.
Existing-home sales in the Midwest increased 4.0 percent in December to a level of 1.04 million but are 10.3 percent below a year ago. The median price in the Midwest was $140,800, down 11.4 percent from December 2007.
In the South, existing-home sales rose 7.4 percent to an annual pace of 1.74 million in December, but are 11.2 percent lower than December 2007. The median price in the South was $158,600, which is down 8.0 percent from a year ago.
Existing-home sales in the West jumped 13.6 percent to an annual rate of 1.25 million in December and are 31.6 percent higher than a year ago. The median price in the West was $213,100, down 31.5 percent from December 2007.
# # #
1The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months. Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity. For example, home sales volume is normally higher in the summer than in the winter, primarily because of differences in the weather and family buying patterns. However, seasonal factors cannot compensate for abnormal weather patterns.
Existing-home sales, which include single-family, townhomes, condominiums and co-ops, are based on transaction closings. This differs from the U.S. Census Bureau’s series on new single-family home sales, which are based on contracts or the acceptance of a deposit. Because of these differences, it is not uncommon for each series to move in different directions in the same month. In addition, existing-home sales, which generally account for 85 to 90 percent of total home sales, are based on a much larger sample – more than 40 percent of multiple listing service data each month – and typically are not subject to large prior-month revisions.
2Total inventory and month’s supply data are available back through 1999, while single-family inventory and month’s supply are available back to 1982. Condos were tracked quarterly prior to 1999 when single-family homes accounted for more than nine out of 10 purchases.
3The only valid comparisons for median prices are with the same period a year earlier due to the seasonality in buying patterns. Month-to-month comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns. Changes in the composition of sales can distort median price data. Year-ago median and mean prices sometimes are revised in an automated process if more data is received than was originally reported.
4Because there is a concentration of condos in high-cost metro areas, the national median condo price can be higher than the median single-family price. In a given market area, condos typically cost less than single-family homes.
Existing-home sales for January – including monthly revisions to sales rates for the past three years – will be released February 25. Each February, NAR Research incorporates a review of seasonal activity factors and fine-tunes historic data for the previous three years based on the most recent findings. Revisions will made to monthly seasonally adjusted annual sales rates for 2006 through 2008, as well as the inventory month's supply data. There will be no revisions to raw inventory or home prices aside from the normal prior month revisions.
Tuesday, January 27, 2009
New Fannie, Freddie rules on the way
Regulator will issue new rules governing the mortgage finance company's portfolio holdings. Also coming, new capital requirements for Federal Home Loan Banks.
By Tami Luhby
NEW YORK (CNNMoney.com) -- The federal regulator of Fannie Mae and Freddie Mac will set new rules early next week governing the mortgage finance companies' portfolios, which play a crucial role in the nation's housing market.
The Federal Housing Finance Agency is required by Congress to issue regulations ensuring the companies' portfolios are backed by sufficient capital, while keeping in mind their ability to provide funding for the mortgage market by turninghome loans into securities. Their portfolios contain mortgages and securities backed by home loans.
The agency will also establish new capital rules for the 12 regional Federal Home Loan Banks, which provide much-needed low-cost funding for more than 8,000 banks nationwide. The home-loan bankshave suffered in the economic crisis and may have to reduce their lending to shore up their finances.
"The regulations will address items critical to the safety and soundness of the 14 government-sponsored enterprises, which play a vital role in the nation's mortgage market," said James Lockhart, the agency's director.
Analysts, however, say it's more important to determine the future of Fannie and Freddie, which were taken over by the federal government in September, than to issue portfolio regulations.
"What Congress decides to do with these two companies is the real question," said Jonathan Koppell, associate professor at the Yale School of Management.
Portfolio problems
Fannie and Freddie are the largest sources of funding for the U.S. housing market. They buy mortgages from lenders and either hold them on their books or bundle them into securities. The companies also buy mortgage-backed securities.
Their $1.7 trillion portfolios have long been a source of controversy. Regulators had capped the growth of the companies' portfolios after the pair emerged from accounting scandals earlier this decade in an effort to minimize their riskiness.
But as the mortgage crisis unfolded over the past two years, the federal government has leaned more heavily on Fannie and Freddie to keep the housing market afloat. With investors shying away from buying mortgage-backed securities, the two companies are essentially the only players in the arena nowadays. Regulators lifted the portfolio caps last March.
Fannie and Freddie, however, continue to suffer as delinquencies rise. On Friday, Freddie announced it would ask the U.S. Treasury for up to $35 billion more in assistance as it anticipates losses in its fourth-quarter results. The company has already drawn down $13.8 billion of the $100 billion in federal funds made available to it when it was placed into conservatorship in September.
Trouble at FHLB
Meanwhile, the agency must also set capital requirements at the Federal Home Loan Banks, which are owned by the 8,000 member banks but have an implicit government guarantee. Established during the Great Depression, the home-loan banks are the nation's largest source of residential mortgage and community development credit. They provide low-cost loans, called advances, to member institutions, taking collateral such as high-quality mortgage-backed securities in exchange. Banks nationwide have increasingly relied on the home-loan banks for crucial funding as other sources dry up.
But as the value of the mortgage-backed securities drops, the home-loan banks are facing a credit crunch of their own. Some have cut back their dividends. Others have announced they may fall below their current capital requirements.
If the Federal Housing Finance Agency ups the home-loan banks' capital rules, they may not be able to lend as much. But that may not be a bad thing, experts said.
"The problem of the last five years is that people were doing too much lending," said Thomas Stanton, a lecturer at Johns Hopkins University. "They cannot be as big as everyone would like."
By Tami Luhby
NEW YORK (CNNMoney.com) -- The federal regulator of Fannie Mae and Freddie Mac will set new rules early next week governing the mortgage finance companies' portfolios, which play a crucial role in the nation's housing market.
The Federal Housing Finance Agency is required by Congress to issue regulations ensuring the companies' portfolios are backed by sufficient capital, while keeping in mind their ability to provide funding for the mortgage market by turninghome loans into securities. Their portfolios contain mortgages and securities backed by home loans.
The agency will also establish new capital rules for the 12 regional Federal Home Loan Banks, which provide much-needed low-cost funding for more than 8,000 banks nationwide. The home-loan bankshave suffered in the economic crisis and may have to reduce their lending to shore up their finances.
"The regulations will address items critical to the safety and soundness of the 14 government-sponsored enterprises, which play a vital role in the nation's mortgage market," said James Lockhart, the agency's director.
Analysts, however, say it's more important to determine the future of Fannie and Freddie, which were taken over by the federal government in September, than to issue portfolio regulations.
"What Congress decides to do with these two companies is the real question," said Jonathan Koppell, associate professor at the Yale School of Management.
Portfolio problems
Fannie and Freddie are the largest sources of funding for the U.S. housing market. They buy mortgages from lenders and either hold them on their books or bundle them into securities. The companies also buy mortgage-backed securities.
Their $1.7 trillion portfolios have long been a source of controversy. Regulators had capped the growth of the companies' portfolios after the pair emerged from accounting scandals earlier this decade in an effort to minimize their riskiness.
But as the mortgage crisis unfolded over the past two years, the federal government has leaned more heavily on Fannie and Freddie to keep the housing market afloat. With investors shying away from buying mortgage-backed securities, the two companies are essentially the only players in the arena nowadays. Regulators lifted the portfolio caps last March.
Fannie and Freddie, however, continue to suffer as delinquencies rise. On Friday, Freddie announced it would ask the U.S. Treasury for up to $35 billion more in assistance as it anticipates losses in its fourth-quarter results. The company has already drawn down $13.8 billion of the $100 billion in federal funds made available to it when it was placed into conservatorship in September.
Trouble at FHLB
Meanwhile, the agency must also set capital requirements at the Federal Home Loan Banks, which are owned by the 8,000 member banks but have an implicit government guarantee. Established during the Great Depression, the home-loan banks are the nation's largest source of residential mortgage and community development credit. They provide low-cost loans, called advances, to member institutions, taking collateral such as high-quality mortgage-backed securities in exchange. Banks nationwide have increasingly relied on the home-loan banks for crucial funding as other sources dry up.
But as the value of the mortgage-backed securities drops, the home-loan banks are facing a credit crunch of their own. Some have cut back their dividends. Others have announced they may fall below their current capital requirements.
If the Federal Housing Finance Agency ups the home-loan banks' capital rules, they may not be able to lend as much. But that may not be a bad thing, experts said.
"The problem of the last five years is that people were doing too much lending," said Thomas Stanton, a lecturer at Johns Hopkins University. "They cannot be as big as everyone would like."
Monday, January 26, 2009
10 real estate myths for buyers and sellers
The truth about the housing market
In today’s uncertain market, fear runs rampant on both the buying and selling sides of the fence. Many myths need debunking. Here are five untruths held by buyers, and five held by sellers.
Buyer myth #1: The longer the house is on the market, the more you can negotiate.
When buyers ask, “How long has this property been on the market?” They think “six months” means they can negotiate the price down. It more often means the seller is stubbornly holding on to their price.
Buyer myth #2: The sellers today are desperate.
Most aren’t. Always ask why the sellers are selling. It’s the key to finding how motivated and anxious they are. “I’m being transferred to Dallas” is a very different answer than, “We’d like to find something bigger.” The first homeowner is hot to trot.
Buyer myth #3: You can’t buy a home today with less than 20 percent down.
FHA loans require only 3.5 percent down, and you can even ask the seller to pay the closing costs.
Buyer myth #4: You need good credit to get a good loan.
Once again, the FHA to the rescue! They’re happy to lend money to buyers with bad credit.
Buyer myth #5: You shouldn't buy before prices have bottomed.
You can’t sharpshoot the real estate market. Once you identify the “bottom,” prices have already moved up.
Seller myth #1: Now’s the absolute worst time to sell.
Not necessarily. It depends upon where you live. Many of the worst hit markets, like Las Vegas, Phoenix or San Diego, are already beginning to turn around. And if you’re a homeowner who wants to trade up, the loss you’ll take on your current home will be more than offset by the bargain you’ll get on the next one.
Seller myth #2: Never respond to a low-ball bid.
All buyers today feel obligated to put in low-ball offers to see if the seller bites. If you respond with a reasonable counter offer, most buyers can be convinced to come up in price and make the deal.
Seller myth #3: The first offer is never the best offer.
Most sellers believe that it’s smart to hold out for something better. But four times out of five, the first offer is the best you’ll ever see.
Seller myth #4: 'I can always reduce my price later.'
Sellers often price their home high for a few weeks just to test the market. But buyers shop by price bracket and if your house is in the wrong one, you’ll just help sell everyone else’s home while yours sits there overpriced. And reducing your price later in small increments puts you in the position of chasing the tide as it goes out.
Seller myth #5: Before you refinance, shop around.
You can if you want, but you’ll usually get the best deal from your current
In today’s uncertain market, fear runs rampant on both the buying and selling sides of the fence. Many myths need debunking. Here are five untruths held by buyers, and five held by sellers.
Buyer myth #1: The longer the house is on the market, the more you can negotiate.
When buyers ask, “How long has this property been on the market?” They think “six months” means they can negotiate the price down. It more often means the seller is stubbornly holding on to their price.
Buyer myth #2: The sellers today are desperate.
Most aren’t. Always ask why the sellers are selling. It’s the key to finding how motivated and anxious they are. “I’m being transferred to Dallas” is a very different answer than, “We’d like to find something bigger.” The first homeowner is hot to trot.
Buyer myth #3: You can’t buy a home today with less than 20 percent down.
FHA loans require only 3.5 percent down, and you can even ask the seller to pay the closing costs.
Buyer myth #4: You need good credit to get a good loan.
Once again, the FHA to the rescue! They’re happy to lend money to buyers with bad credit.
Buyer myth #5: You shouldn't buy before prices have bottomed.
You can’t sharpshoot the real estate market. Once you identify the “bottom,” prices have already moved up.
Seller myth #1: Now’s the absolute worst time to sell.
Not necessarily. It depends upon where you live. Many of the worst hit markets, like Las Vegas, Phoenix or San Diego, are already beginning to turn around. And if you’re a homeowner who wants to trade up, the loss you’ll take on your current home will be more than offset by the bargain you’ll get on the next one.
Seller myth #2: Never respond to a low-ball bid.
All buyers today feel obligated to put in low-ball offers to see if the seller bites. If you respond with a reasonable counter offer, most buyers can be convinced to come up in price and make the deal.
Seller myth #3: The first offer is never the best offer.
Most sellers believe that it’s smart to hold out for something better. But four times out of five, the first offer is the best you’ll ever see.
Seller myth #4: 'I can always reduce my price later.'
Sellers often price their home high for a few weeks just to test the market. But buyers shop by price bracket and if your house is in the wrong one, you’ll just help sell everyone else’s home while yours sits there overpriced. And reducing your price later in small increments puts you in the position of chasing the tide as it goes out.
Seller myth #5: Before you refinance, shop around.
You can if you want, but you’ll usually get the best deal from your current
Friday, January 23, 2009
30-year fixed rates climb back above 5%
Mortgage rates are on the rise for the first time since the Federal Reserve's decision to purchase mortgage backed securities in November.
Larissa Padden, CNNMoney.com contributor
NEW YORK (CNNMoney.com) -- Interest rates on 30-year fixed rate mortgages rose after an 11 week streak of declines.
Government sponsored mortgage lender Freddie Mac said Thursday that fixed rates on 30-year mortgages averaged 5.12% for the week ending Jan. 22. That's up from last week when is averaged 4.96% but still below 5.48%, which is where the rate stood at this time last year.
This is the first time interest rates have risen since the Federal Reserve announced it would purchase $500 billion worth of mortgage backed securities on November 25, 2008.
"Fixed-rate mortgages followed bond yields and edged up this holiday week," said Frank Nothaft, Freddie Mac (FRE, Fortune 500) vice president and chief economist in a release on Thursday.
"However, over the first three weeks of 2009, the 30-year fixed-rate mortgage was an average 0.25 percentage points below its monthly average for December 2008. As a result, the number of mortgage applications for refinancing was roughly about 86 percent of all conventional loans over the same time period."
The 15-year fixed rate mortgage was also up this week, averaging 4.8%, compared with an average of 4.65% last week. But that's still still down from a year ago at this time, when the 15-year FRM averaged 4.95%.
One-year Treasury-indexed adjustable-rate mortgages (ARM) rose as well and averaged 4.92% this week, up from 4.89% last week. At this time last year, the 1-year ARM averaged 4.99%.
However, five-year Treasury-indexed ARMs continued to fall this week. The 5-year ARM averaged 5.24%, down from last week when it averaged 5.25%. To top of page
Larissa Padden, CNNMoney.com contributor
NEW YORK (CNNMoney.com) -- Interest rates on 30-year fixed rate mortgages rose after an 11 week streak of declines.
Government sponsored mortgage lender Freddie Mac said Thursday that fixed rates on 30-year mortgages averaged 5.12% for the week ending Jan. 22. That's up from last week when is averaged 4.96% but still below 5.48%, which is where the rate stood at this time last year.
This is the first time interest rates have risen since the Federal Reserve announced it would purchase $500 billion worth of mortgage backed securities on November 25, 2008.
"Fixed-rate mortgages followed bond yields and edged up this holiday week," said Frank Nothaft, Freddie Mac (FRE, Fortune 500) vice president and chief economist in a release on Thursday.
"However, over the first three weeks of 2009, the 30-year fixed-rate mortgage was an average 0.25 percentage points below its monthly average for December 2008. As a result, the number of mortgage applications for refinancing was roughly about 86 percent of all conventional loans over the same time period."
The 15-year fixed rate mortgage was also up this week, averaging 4.8%, compared with an average of 4.65% last week. But that's still still down from a year ago at this time, when the 15-year FRM averaged 4.95%.
One-year Treasury-indexed adjustable-rate mortgages (ARM) rose as well and averaged 4.92% this week, up from 4.89% last week. At this time last year, the 1-year ARM averaged 4.99%.
However, five-year Treasury-indexed ARMs continued to fall this week. The 5-year ARM averaged 5.24%, down from last week when it averaged 5.25%. To top of page
Thursday, January 22, 2009
The lowdown on getting a low down payment loan
It's not easy for anyone to get a loan these days, but the Federal Housing Authority is still offering 3.5% down loans to borrowers who qualify. Here's how it works.
By Les Christie, CNNMoney.com staff writer
January 20, 2009: 6:51 AM ET
NEW YORK (CNNMoney.com) -- The credit crunch has made it hard for anyone to get a loan these days - and borrowers who can only make a small down payment are facing even tougher odds.
But it's not impossible to land a low-down payment loan. The Federal Housing Administration (FHA) is actually still offering 3.5%-down mortgages to qualified buyers, even as the subprime loans that these types of borrowers had traditionally relied upon have dried up.
The FHA has been flooded with applications; in 2008 it helped 630,000 borrowers buy homes, most of them using low-down payment loans.
"People can get an FHA loan with very little out of pocket," said George Hanzimanolis, a mortgage broker in Pennsylvania and past president of the National Association of Mortgage Brokers.
He recently arranged an FHA mortgage for a client last month for $242,500 on a $250,000 home. The interest rate came in at 4.75% for a 30-year fixed rate loan, yielding a monthly payment of only about $1,265 - just $15 more than the rent the buyer had been paying on a smaller home. The tax savings will more than offset that, as well as his property taxes and insurance.
No wonder the program is flourishing.
How to get an FHA-insured mortgage
Applying for an FHA loan isn't difficult, and the parameters for those who qualify are fairly straightforward. Start by calling a mortgage broker or an FHA-approved lender. You can search for an FHA lender on the Web site of the U.S. Department of Housing and Urban Development.
For lenders, income is the main factor in determining who qualifies for an FHA loan. The agency's guidelines dictate that that buyers spend no more than 31% of their gross income on mortgage payments.
Lenders do look at buyers' credit histories, but the interest rates that FHA borrowers pay aren't actually based on their credit scores, as they are for most home buyers, according to Keith Gumbinger of HSH Associates, a publisher of mortgage loan information.Instead,FHA borrowers get the same interest rate that any conforming borrower with a good credit score would receive.
One catch: Borrowers with scores of 500 or less are generally required to pony up a down payment of 10% rather than the 3.5% minimum.
The FHA also charges insurance premiums, which pay to cover any defaults. Borrowers pay an up-front fee of 1.5% to 2.5% of the dollar-value of loan, as well as an annual fee of 0.5%.
So a buyer of a $200,000 home would be expected to come up with a $7,000 down payment as well as $5,000 for the initial insurance premium. The borrower's monthly mortgage payment would come to about $1,096, including the 0.5% ongoing fee, at an interest rate of 5%.
And there is a limit to just how much can be borrowed. In most parts of the country, FHA borrowers may not finance more than $271,500. In high-cost areas like New York and California, the cap is $625,000 for single family homes. In Hawaii, the cap is as much as $721,050.
And there is even more help available to lower-income home buyers from the government-funded American Dream Down Payment Initiative program. That fund makes $200 million a year available to help low-income home buyers pay for down payments, or to make home repairs. To be eligible, a borrower's income must be no more than 80% their area's median income. And the grants may not exceed $10,000, or six percent of the home price, whichever is greater.
Good track record
After the FHA issues a loan, it has a strong track record of keeping its borrowers in their homes.
The agency's loans do have significantly higher delinquency rates than prime loans - almost 12% compared with 4.3% for prime, according to the Mortgage Bankers Association. But thanks to the FHA's well developed loss mitigation procedures, its delinquent loans rarely end up in foreclosure.
Fewer than 1% of FHA loans were foreclosed on during the third quarter of 2008 compared with 0.6% for prime loans. At the same time, more than 4.5% of subprime loans went into foreclosure.
The FHA keeps foreclosure rates low by working hard with delinquent borrowers, according to John Courson, president of the Mortgage Bankers Association.
"It does a lot of forbearance [postponing payments] and pays a lot of partial claims [one time payments from the insurance fund borrowers pay into] to keep foreclosure rates down," he said.
With access to credit so restricted these days, the fact that people can still obtain safe, affordable mortgages while putting very little money down provides a real boost to housing markets.
FHA loans are especially critical for first-time home buyers, who are considered by experts to be critical to getting housing moving again. When they buy homes from existing home owners, that allows those homeowners to trade up to more expensive homes. That's the kind of cycle that could help get the market going.
Says Hanzimanolis: "These loans are really helping to move real estate these days."
By Les Christie, CNNMoney.com staff writer
January 20, 2009: 6:51 AM ET
NEW YORK (CNNMoney.com) -- The credit crunch has made it hard for anyone to get a loan these days - and borrowers who can only make a small down payment are facing even tougher odds.
But it's not impossible to land a low-down payment loan. The Federal Housing Administration (FHA) is actually still offering 3.5%-down mortgages to qualified buyers, even as the subprime loans that these types of borrowers had traditionally relied upon have dried up.
The FHA has been flooded with applications; in 2008 it helped 630,000 borrowers buy homes, most of them using low-down payment loans.
"People can get an FHA loan with very little out of pocket," said George Hanzimanolis, a mortgage broker in Pennsylvania and past president of the National Association of Mortgage Brokers.
He recently arranged an FHA mortgage for a client last month for $242,500 on a $250,000 home. The interest rate came in at 4.75% for a 30-year fixed rate loan, yielding a monthly payment of only about $1,265 - just $15 more than the rent the buyer had been paying on a smaller home. The tax savings will more than offset that, as well as his property taxes and insurance.
No wonder the program is flourishing.
How to get an FHA-insured mortgage
Applying for an FHA loan isn't difficult, and the parameters for those who qualify are fairly straightforward. Start by calling a mortgage broker or an FHA-approved lender. You can search for an FHA lender on the Web site of the U.S. Department of Housing and Urban Development.
For lenders, income is the main factor in determining who qualifies for an FHA loan. The agency's guidelines dictate that that buyers spend no more than 31% of their gross income on mortgage payments.
Lenders do look at buyers' credit histories, but the interest rates that FHA borrowers pay aren't actually based on their credit scores, as they are for most home buyers, according to Keith Gumbinger of HSH Associates, a publisher of mortgage loan information.Instead,FHA borrowers get the same interest rate that any conforming borrower with a good credit score would receive.
One catch: Borrowers with scores of 500 or less are generally required to pony up a down payment of 10% rather than the 3.5% minimum.
The FHA also charges insurance premiums, which pay to cover any defaults. Borrowers pay an up-front fee of 1.5% to 2.5% of the dollar-value of loan, as well as an annual fee of 0.5%.
So a buyer of a $200,000 home would be expected to come up with a $7,000 down payment as well as $5,000 for the initial insurance premium. The borrower's monthly mortgage payment would come to about $1,096, including the 0.5% ongoing fee, at an interest rate of 5%.
And there is a limit to just how much can be borrowed. In most parts of the country, FHA borrowers may not finance more than $271,500. In high-cost areas like New York and California, the cap is $625,000 for single family homes. In Hawaii, the cap is as much as $721,050.
And there is even more help available to lower-income home buyers from the government-funded American Dream Down Payment Initiative program. That fund makes $200 million a year available to help low-income home buyers pay for down payments, or to make home repairs. To be eligible, a borrower's income must be no more than 80% their area's median income. And the grants may not exceed $10,000, or six percent of the home price, whichever is greater.
Good track record
After the FHA issues a loan, it has a strong track record of keeping its borrowers in their homes.
The agency's loans do have significantly higher delinquency rates than prime loans - almost 12% compared with 4.3% for prime, according to the Mortgage Bankers Association. But thanks to the FHA's well developed loss mitigation procedures, its delinquent loans rarely end up in foreclosure.
Fewer than 1% of FHA loans were foreclosed on during the third quarter of 2008 compared with 0.6% for prime loans. At the same time, more than 4.5% of subprime loans went into foreclosure.
The FHA keeps foreclosure rates low by working hard with delinquent borrowers, according to John Courson, president of the Mortgage Bankers Association.
"It does a lot of forbearance [postponing payments] and pays a lot of partial claims [one time payments from the insurance fund borrowers pay into] to keep foreclosure rates down," he said.
With access to credit so restricted these days, the fact that people can still obtain safe, affordable mortgages while putting very little money down provides a real boost to housing markets.
FHA loans are especially critical for first-time home buyers, who are considered by experts to be critical to getting housing moving again. When they buy homes from existing home owners, that allows those homeowners to trade up to more expensive homes. That's the kind of cycle that could help get the market going.
Says Hanzimanolis: "These loans are really helping to move real estate these days."
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