Fed ready to provide fresh aid to revive economy

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WASHINGTON (AP) – Jan. 29, 2009 – The Federal Reserve signaled that it stands ready to use new unconventional tools, or expand existing ones, to spur lending and consumer spending that could help lift the economy out of a painful recession.

The Fed also agreed Wednesday to keep the targeted range for the federal funds rate between zero and 0.25 percent for “some time” to help brace the economy. Economists predict the Fed will keep the funds rate, the interest banks charge each other on overnight loans, at that record low level through the rest of this year.

With its key lending rate to banks already near zero, the Fed pledged anew to use “all available tools” to revive the economy.

Specifically, the Fed said it is “prepared” to buy longer-term Treasury securities if the circumstances warrant such action. At its previous meeting in December, the Fed said it was merely evaluating that option.

Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, was the sole dissenter on this point. He wanted the Fed to move forward on buying the securities.

Doing so would help drive down mortgage rates and provide help to the stricken housing market, economists said.

For example, many 30-year fixed-rate mortgages and other home loans are pegged to the 10-year Treasury note. If the Fed were to buy that security, it would push down rates on mortgages connected to it. The same logic would apply to other Treasury securities.

“So many consumer rates are pegged to Treasury rates – homes, cars,” said Joel Naroff, president of Naroff Economic Advisors. “If the economy is to recover, consumers need to borrow and need to borrow at reasonable rates. The Fed made clear that it is prepared to make that happen.”

The Fed also said it “stands ready” to expand another program aimed at providing relief to the crippled mortgage market.

Under that program, the Fed is buying up to $500 billion in mortgage-backed securities guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae. It also has agreed to buy up to $100 billion of Fannie and Freddie debt.

Mortgage rates have fallen since the program’s announcement late last year. The Fed said it could buy more of these securities or extend the length of the program.

The Fed on Tuesday took steps to curb home foreclosures as required by a 2008 law. The relief would apply to mortgage assets the Fed is holding because of last year’s bailouts of Bear Stearns and insurer American International Group. Distressed borrowers could see the amount they owe on their home loan lowered or their interest rate reduced, among the options for help.

But borrowers have no way of knowing whether their mortgages are held by the Fed, because their loan payments are collected by other companies, known as loan servicers

The central bank also will be launching a program aimed at bolstering the availability of consumer loans. Under the program, which is expected to start in February, up to $200 billion will be made available to spur auto, student and credit card loans as well as loans to small businesses. To do that, the Fed will buy securities backed by those different types of consumer debt. The Fed also hopes that action will lower rates on those loans.

The Fed said Wednesday that it will assess whether the program should be expanded in size or scope. Fed officials previously have mentioned the possibility of expanding the program to provide financing for other types of securities, such as those backed by commercial mortgages.

Stuart Hoffman, chief economist at PNC Financial Services Group, took away this message from the Fed’s overall statement: “We’re going to throw all we have – including the kitchen sink – into supporting financial markets.”

Wall Street rose Wednesday on news that the government may take additional steps to assist the nation’s ailing banks. The Dow Jones Industrial average rose nearly 201 points, or about 2.5 percent, to 8,375.45.

Even as the Fed wants to use all tools available to battle the crisis, it is mindful that there are dangers: the potential to put ever-more taxpayers’ dollars at risk; sow the seeds of inflation in the future; and encourage “moral hazard,” where companies feel more comfortable making high-stakes gambles because the government will rescue them.

Fed Chairman Ben Bernanke and his colleagues are battling a three-headed economic monster: crises in housing, credit and financial markets that — taken together— haven’t been seen since the 1930s.

Despite the Fed’s aggressive rate-cutting campaign, a string of radical Fed programs and a $700 billion financial bailout program run by the Treasury Department, credit and financial markets are still stressed and far from normal.

“Conditions in some financial markets have improved, in part reflecting government efforts to provide liquidity and strengthen financial institutions; nevertheless, credit conditions for households and firms remain extremely tight,” the Fed said.

On the economy, the Fed struck a somber note, saying it had “weakened further” since its Dec. 16 meeting.

“Industrial production, housing starts and employment have continued to decline steeply as consumers and businesses have cut back spending,” the Fed said. “Furthermore, global demands appears to be slowing significantly.”

Looking ahead, the Fed anticipates “a gradual recovery in economic activity will begin later this year,” but cautioned that “the downside risks to that outlook are significant.”

The recession, now in its second year, could turn out to be the longest since World War II.

The U.S. unemployment rate bolted to a 16-year high of 7.2 percent in December and could hit 10 percent or higher at the end of this year or early next year. A staggering 2.6 million jobs were lost last year, the most since 1945, though the labor force has grown significantly since then. Another 2 million or more jobs will vanish this year, economists predict.

This week alone, tens of thousands of new layoffs were announced by companies including Boeing Co., Pfizer Inc., Caterpillar Inc., Home Depot Inc., Target Corp., Corning Inc. and Ashland Inc.

Meanwhile, consumer prices have been falling. At first that seems like a blessing for shoppers, but it if spreads to wages and already stricken prices for homes, stocks and other things for a long time, it could wreak more havoc on the economy. The country’s last serious bout of “deflation” was in the 1930s. Holding rates at record lows would help fend off any deflation risks.

Against that backdrop, the Fed raised the specter of deflation – but didn’t use the word. The Fed saw a risk that “inflation could persist for a time below rates that best foster economic growth and price stability in the longer term.”

With jobs disappearing, home values tanking, foreclosures soaring and nest eggs shriveling, consumers have sharply cut spending. That, along with the housing collapse, has played a big role in causing the economy’s backslide.

Many economists predict data will show the economy contracted at a pace of 5.4 percent in the final three months of last year when the government releases the gross domestic product report Friday. If they are correct, that would mark the worst performance since a drop of 6.4 percent in the first quarter of 1982, when the country was suffering through a severe recession. The economy is still contracting now – at a pace of around 4 percent, according to some projections.

Source: http://www.floridarealtors.org/NewsAndEvents/n2-012909.cfm

State Farm’s departure from Florida sparks scramble for coverage

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TALLAHASSEE, Fla. – Jan. 29, 2009 – The shopping has begun.

Some Florida residents aren’t waiting for State Farm Florida Insurance to tell them their policies won’t be renewed. They’ve started calling agents and insurers to check if other companies are willing to provide the coverage they are about to lose from State Farm.

The insurer Tuesday announced plans to discontinue writing property insurance in Florida in about two years. That’s 1.2 million policies – including 933,000 that cover single-family homes, condo and rental units and mobile homes – needing new insurers.

State officials say Florida’s insurance market can absorb most, if not all, of the policies that State Farm will drop. But not all insurers will sell windstorm coverage in risky coastal areas or take on older homes that are now on State Farm’s books.

That inevitably means the state-run insurer, Citizens Property Insurance, will get even larger. Citizens now has nearly 1.1 million policies, about half in South Florida.

“There’s going to be a mad scramble for coverage,” said Michael Letcher, whose online subscription service that helps homeowners shop for insurance saw traffic more than quadruple Tuesday.

Letcher’s survey found that about 40 companies are writing homeowners policies in Florida, with 25 companies generally per county. However, the number dwindles in coastal counties such as Miami-Dade and Broward. Most insurers have restrictive underwriting rules, he found. Many want homes built after 1995 and about two miles from the water.

A few insurers, like Hollywood-based Coral Insurance, are willing to cover older homes if they have been completely upgraded.

“Many clients are thinking it’s best to get out of Dodge before they get stuck in Citizens,” said Phil Lyons, an agent with InSource, an agency in Dadeland. He said several clients began approaching him Wednesday, asking about new coverage.

Robert Ritchie, president of American Integrity Insurance Group, said his company has the capital to support up to 150,000 new policies. The company has written about 23,000 new policies in South Florida in the past two years. It is one of the few Florida-based firms that cover mobile homes.

The Office of Insurance Regulation has 90 days to review the withdrawal plan State Farm submitted Tuesday. If it is approved, State Farm must give policyholders 180 days notice of nonrenewal.

OIR Spokesman Ed Domansky said regulators can ask State Farm to amend its plan if they believe dropping all these policies will cause major disruptions in the state’s insurance market.

At a November meeting of a task force studying ways to shrink Citizens, Belinda Miller, deputy insurance commissioner, said private insurers had the financial ability to take on as many as 1.2 million new policies.

State Farm’s departure from the Florida market will accentuate a trend that started after Hurricane Andrew hit South Florida in 1992. Back then, State Farm and Allstate Insurance dominated the insurance scene, controlling as much as 75 percent of the market.

But several major national insurers have bailed from Florida, claiming too much hurricane risk, inconsistent and intrusive state regulation and inadequate rates. Among the first to leave right after Andrew was Prudential.

Since the 2004 and 2005 hurricane seasons, many national companies have reduced their policy counts in Florida as well. Allstate and Nationwide have shed policies aggressively in the past four years.

The bulk of Florida’s insurance market is now in the hands of small local companies, with many opening their doors in recent years.

Many State Farm agents are expected to steer clients to Citizens. That’s because State Farm agents aren’t allowed to write policies for another home insurer except Citizens, so that allows them to hold onto customers.

These agents can offer clients a “multi-line discount” if they keep auto insurance policies with State Farm and place a homeowners policy with Citizens.

Other agents complain that State Farm’s ability to offer those auto insurance discounts gives them a competitive edge in cultivating automobile insurance business.

State Farm spokesman Chris Neal denied that agents steer policyholders and said they just point out who the best insurer is for the customer.

“Our agents are insurance professionals and they counsel their clients on the best options,” Neal said.

The Citizens Mission Review Task Force plans to suggest that lawmakers repeal the law passed last year that allows auto discounts for State Farm customers who buy Citizens policies.

Besides the urgency to shop for a new insurer, many longtime State Farm policyholders, like Linda Gonzalez of Pembroke Pines, feel betrayed. She has been a 40-year customer and never made a claim.

‘If they leave Florida homeowners high and dry, we will take all our other policies – auto, etc. elsewhere. No way will we continue to ‘support’ them with premiums.”

 

Source: http://www.floridarealtors.org/NewsAndEvents/n1-012909.cfm

Fannie Mae tries program to speed up ‘short sales’ in Orlando area

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ORLANDO, Fla. – Jan. 28, 2009 – Orlando is one of the leading metro areas in Florida for single-family-home resales, soaring past larger markets such as Miami, Fort Lauderdale and Jacksonville during the past year as local deals on distressed homes have mushroomed. Now the mortgage giant Fannie Mae is testing a small pilot program in Orlando to speed up some of those sales.

A “short sale” is a distress sale in which the lender agree to take less than the amount owed on the home’s mortgage, so it can avoid the costs of a foreclosure. The number of such deals has been rising in lock step with the surge in foreclosures the past year.

Orange, Seminole, Lake, Osceola and Volusia counties are among 11 counties in Central and Southwest Florida where about 300 homes have been preapproved by Fannie Mae for short sales. Orlando-area Realtors say they hope the program cuts the wait time on short-sale offers from months to weeks or even days – and prompts other lenders to move faster as well.

“Right now, short sales can take months and months until you get an answer back, and sometimes the answer is, ‘We’re not interested.’ This program will cut through that,” said Marty Hunt, an Orlando-area Realtor and president of the Mid-Florida Regional Multiple Listing Service.

The regional MLS, owned and operated by 13 Realtor associations in 10 counties, including the Orlando Regional Realtor Association, will flag the preapproved short sales so member agents can market them for quick sale. The pilot program, which began in late December, also is under way in Phoenix.

Hunt said the relatively small number of preapproved short sales in the Orlando area won’t do much to decrease the thousands of homes in some stage of foreclosure or already repossessed by banks. But if the pilot program works during the next few months, it would be extended and expanded, he said, and that would probably prompt other lenders to develop similar fast-track programs.

The pilot program crafted by Fannie Mae, formally known as the Federal National Mortgage Association, streamlines the process by getting all the research on a property and all the necessary clearances done in advance. In a typical short sale, an offer takes longer than a conventional sale to close because the offer must be cleared by multiple parties, and any negotiations on price can get lost in the blizzard of faxes and other paperwork.

Hunt said that if lenders decide upfront how much they are willing to accept, it would help move some of the record inventory now on the market, and that would help stabilize falling home values and boost consumer confidence.

“That’s critical to turning this around,” he said, noting that in some of the region’s newer subdivisions an estimated 50 percent to 60 percent of the homes on the market are foreclosures or short sales. The Fannie Mae pilot program will also include some listings in Polk, Hillsborough, southern Pasco, Manatee, Sarasota and Charlotte counties.

 

Source: http://www.floridarealtors.org/NewsAndEvents/n2-012809.cfm

Leading economic indicators, home sales rise

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NEW YORK – Jan. 28, 2009 – A flood of federal bailout money pushed a private research group’s monthly forecast of economic activity unexpectedly higher in December, while a decline in home prices boosted housing sales.

Existing home sales rose 6.5 percent in December to an annual rate of 4.74 million units, as the median home sales price plunged 15.3 percent to $175,400 from $207,000 a year ago. The decline is the largest year-over-year drop in records going back to 1968.

Separately, the New York-based Conference Board’s monthly forecast of economic activity increased 0.3 percent in December. Economists surveyed by Thomson Reuters had expected a 0.3 percent decline.

The group’s index of leading economic indicators had fallen 0.4 percent in November and a revised 1.0 percent in October.

If the jump in the money supply had been excluded, the index would have dropped a hefty 0.6 percent in December, said Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, N.Y.

The index is designed to forecast economic activity in the next three to six months based on 10 economic components, including stock prices, building permits, average weekly manufacturing hours and initial claims for unemployment benefits.

With most components falling steeply, the Conference Board said unemployment could rise to 9 percent from 7.2 percent as the country remains in an intense recession through spring.

Job cut announcements piled up Monday. Home Depot Inc. said it plans to eliminate 7,000 jobs while closing four dozen of its smaller home improvement stores. Sprint Nextel Corp. said it is eliminating about 8,000 positions as it seeks to cut annual costs by $1.2 billion.

The Conference Board’s leading economic index is about 5.0 percent lower than its most recent peak in July 2007. Over the last six months, a separate Conference Board index has seen its largest decline since 1980.

In home sales, buyers took advantage of dramatically lower prices, especially in distressed markets like California, Florida and Nevada, where foreclosures have swamped the market. Prices in the West dropped 31.5 percent from a year ago, according to a home sales report Monday from the National Association of Realtors.

“Buyers will continue to have an edge over sellers for the foreseeable future,” said Lawrence Yun, the organization’s economist.

For all of 2008, there were 4.9 million existing home sales, down more than 13 percent from a year earlier, and the lowest total since 1997.

 

Source: http://www.floridarealtors.org/NewsAndEvents/n5-012809.cfm

Florida’s existing housing market reflects mortgage, economic issues at year-end 2008

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ORLANDO, Fla. – Jan. 26, 2009 – Florida’s housing market mirrored the national trend in 2008, as mortgage industry troubles, unsettled financial markets, tightened credit and other economic issues impacted sales and prices. By year’s end, a total of 124,215 existing homes sold statewide, a decrease of 4 percent compared to 129,855 homes sold statewide in 2007, according to the latest housing data released by the Florida Association of Realtors® (FAR).Florida’s median sales price for existing homes was $187,800 at year-end 2008; a year previously, it was $234,300 for a 20 percent decrease. The median is the midpoint; half the homes sold for more, half for less.Florida homeowner intends to hold their property for 10 years. In 1998, Florida’s statewide median price was $104,700; at the close of 2008, the statewide median price is $187,800. Long-term homeowners continue to have the benefit of price appreciation, as well as a benefit that simply can’t be measured – a place to raise their families, make memories and enjoy their lives. A place to call home. And now, more than ever, consumers can rely on the expertise of Florida Realtors to help them meet the challenges of today’s marketplace, whether they’re looking for a home or the perfect place for a new business.”Florida’s metropolitan statistical areas (MSAs) reported increased existing-home sales for year-end 2008; at the same time, four MSAs showed gains in existing-condo sales. December marked the sixth consecutive month that a number of Florida markets noted higher sales activity.Florida’s year-to-year comparison for existing condos, a total of 37,797 units sold statewide at year’s end 2008, a decrease of 10 percent compared to 41,865 sold by year’s end 2007. The statewide existing condo median sales price was $164,400; at year-end 2007, it was $205,200 for a 20 percent decrease.

 

“Taking steps to energize and stabilize the real estate market is key to economic recovery,” says 2009 FAR President Cynthia Shelton. “Not only do strong housing and commercial property markets generate business, but they are essential to helping families build wealth and stability.

“Research shows that the typical

Five of

Economic issues are continuing to affect consumers and thus inhibit the housing market, according to Lawrence Yun, chief economist for the National Association of Realtors® (NAR). But in NAR’s latest housing outlook, he noted that the right economic stimulus package could help. “With a proper real-estate focused stimulus measure, home sales could rise more than expected, by more than 10 percent to 5.5 million in 2009, and easily begin to stabilize home prices in many parts of the country,” Yun said. “Stable home prices will, in turn, lessen foreclosure pressures and lay the foundations for a solid economic recovery as the nation’s 75 million homeowners regain confidence.”

In

The annual average interest rate in 2008 for a 30-year fixed-rate mortgage was 6.03 percent, down from the annual average rate of 6.34 percent in 2007, according to Freddie Mac. FAR’s sales figures reflect closings, which typically occur 30 to 90 days after sales contracts are written.

Among the state’s large to medium-size markets, sales of existing homes in the West Palm Beach-Boca Raton MSA remained basically level in the year-to-year comparison, with a total of 6,953 homes sold at year-end 2008 compared to 6,971 homes the previous year. The existing home median sales price was $302,800; at year-end 2007, it was $369,400 for an 18 percent decrease. In the year-to-year comparison for the existing condo market, a total of 6,075 units sold in the MSA at year’s end, up 7 percent compared to 5,674 condos sold the previous year. The market’s existing condo median price was $143,800; at year-end 2007, it was $198,000 for a 27 percent decrease.

 

Source: http://www.floridarealtors.org/NewsAndEvents/n3-012609.cfm

Freddie Mac to ask for billions more in funds

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McLEAN, Va. – Jan. 26, 2009 – Mortgage finance company Freddie Mac said Friday it will need an additional $30 billion to $35 billion in government aid as it copes with losses on loans the company backed during the U.S. housing bubble.

The company disclosed in a Securities and Exchange Commission filing late Friday that it expects its government regulator, the Federal Housing Finance Agency, to make the request from the Treasury Department.

It comes on top of the $13.8 billion the company received last year after it was seized by the government. Sibling company Fannie Mae has yet to request any such aid but has warned it may need to do so.

Federal regulators seized control of both companies in September after they faced mounting losses from the housing market’s bust. An agreement with the Treasury Department allows the government to invest up to $100 billion in each company.

The actual amount of the request will reflect the amount of losses the company sustained in the fourth quarter, Freddie Mac said in the filing.

The request suggests that losses are continuing for Freddie Mac, which posted a loss of $25.3 billion for the third quarter. In that report, Freddie Mac said that rising unemployment rates, tightening credit and deteriorating economic conditions caused the number of delinquent loans to rise, including prime loans made to borrowers with strong credit.

Meanwhile, Freddie Mac also disclosed that it settled a dispute with JP Morgan Chase & Co., which will now collect payments on mortgages previously handled by failed thrift Washington Mutual. The agreement settles a dispute with JPMorgan, which purchased Washington Mutual in late September for $1.9 billion.

 

Source: http://www.floridarealtors.org/NewsAndEvents/n4-012609.cfm

Loophole fix could reduce budget woes

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TALLAHASSEE, Fla. – Jan. 23, 2009 – Although the Florida Legislature slashed budgets for schools, children’s health care and living assistance for the elderly in its recent special session, it ignored a couple of easy fixes – loopholes in corporate tax law – that could have produced revenue to avoid some of the worst cuts.

In its regular session in March, facing an even bigger deficit in the coming year’s budget, the Legislature almost certainly will have to look at those and other ways to increase state tax revenue.

In the special session that ended Jan. 14, Democrats reacted angrily against the refusal of Republican legislative leaders to consider two measures in particular:

• Closing a loophole that lets corporations sell high-value properties without paying the documentary stamp tax that’s supposed to apply to all Florida real estate sales.

• Enacting laws that prevent corporations from “exporting” profit to other states, therefore avoiding Florida corporate income tax.

Those fixes could have produced an estimated $500 million in revenue, roughly what the Legislature cut from public schools, Democrats said.

“Even a few dollars would have been helpful in preventing some of the things we did that hurt people,” said Rep. Mark Pafford, D-West Palm Beach, who proposed legislation on the “doc stamp” tax. “It’s not a new tax, just closes a loophole people have been taking advantage of.”

Republican Gov. Charlie Crist says he thinks the Legislature cut more than they should have, and he may veto some cuts.

Republican legislative leaders gave several reasons why they wouldn’t consider any measures to increase revenue in the special session, called to fill a gap in the current year’s budget.

“The bottom line is our constituents have voiced very loudly, we cannot afford to pay more taxes right now,” said state Sen. Victor Crist, R-Tampa. “Seven percent of our constituency is on unemployment. The last thing we want is government digging deeper in our pocket.”

Victor Crist added that with even bigger budget cuts looming, the state wanted to hold back any revenue cards until the regular session in March.

“That’s going to be a very wrenching experience,” he said.

Concerning the doc stamp tax, he said, “We didn’t want to do anything to hinder an industry that has been brought to its knees.”

Asked why he opposed considering revenue increases in the special session, House Speaker Ray Sansom, R-Destin, told the Tribune: “We agreed that takes time for the committee process and to let citizens have input on what we’re doing. That really is a regular session issue.”

Democrats countered that closing the loopholes is a simple matter of tax fairness.

The loopholes

Homeowners pay the tax when they sell a home, 70 cents for every $100 of the price, or $1,750 for a $250,000 home.

In 2005, according to Democratic legislators, one Florida company sold six apartment complexes in a $300 million deal, but recorded the sale price as $60, avoiding a $2.1 million tax.

The trick: Putting the title to the real estate in a corporation, then selling the corporation instead of the real estate. The loophole, opened by a 2005 state Supreme Court decision, may cost Florida up to $200 million a year.

Even the Florida Association of Realtors is considering the issue, said President Cynthia Shelton.

“If this is fair and equitable, we’ll be for it,” she said.

The corporate tax loophole allows the Florida outlets of national companies to send some of their taxable income to sister companies in other states with lenient tax laws.

They do this by paying fees to those sister companies for such services as insurance or use of trademarks. Closing the loophole, state tax officials estimate, would gain the state $376 million a year.

Painful cuts

While the Legislature was refusing to consider closing those loopholes, it enacted cuts and trust fund raids the legislative leadership acknowledged were painful:

• About $480 million from public schools.

• $184 million from higher education.

• $1.875 million from Community Care for the Elderly, which provides in-home meals and living assistance for the elderly.

• Up to $700 million from the Lawton Chiles Endowment. It’s supposed to provide a perpetual source of interest income to pay for Community Care for the Elderly and for KidCare, health insurance for children of the “working poor” who don’t qualify for Medicaid.

Veto considerations

Charlie Crist has hinted he thinks lawmakers went too far in cutting education, but the only item he has mentioned vetoing is an $11 million cut that decreased a salary bonus for nationally certified teachers from 10 percent to 8 percent a year.

“This is just the first step,” state Senate President Jeff Atwater, R-North Palm Beach, said of the special session. “We’ll be beginning a new session in less than 60 days. We’ll need to take a look at revenue.”

He has told the Senate to review possible elimination of some sales tax exemptions, a measure often recommended in the past that could bring the state up to $4 billion a year, as well as other measures.

Jim Tait, a former Florida tax and budget office director and head of a tax reform advocacy group, said it’s past time for a review of the state’s tax structure.

State revenue, he said, has declined as a percentage of total personal income in the state, the best measure of taxpayers’ ability to pay. After hovering around 4.2 percent of total personal income for years through 2005, it’s now down to 3 percent, he said.

Meanwhile, the Legislature is forcing local governments and school systems to make up the difference with local property taxes.

A tax structure based solely on property and on sales of tangible goods is outmoded for the current global economy, he said.

“We don’t deal with services and information, we don’t deal with Internet sales. In the new information economy, we’re taxing in essence a declining base,” Tait said.

 

Source: http://www.floridarealtors.org/NewsAndEvents/n2-012309.cfm

Rents drop nationwide as vacancies spike

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WASHINGTON – Jan. 23, 2009 – The economic crisis has opened up opportunities for apartment tenants. The inventory of vacant apartments is expanding, and rents are dropping quickly in major metros across the country.

For renters with leases about to expire, it’s time to negotiate. Landlords are working extra hard these days to keep units filled.

Of course, your ability to hold on to an apartment – especially a luxury unit – depends on how secure you feel about your own job. Americans lost about 2.6 million jobs in 2008 [mostly in the final quarter of the year] and are likely to lose millions more this year. They are losing money on stocks and other investments and are cutting back on costs by downsizing and moving in with family members or roommates as they hunker down for a deep recession.

Landlords, as a result, are forced to offer discounts to fill vacancies. Apartment vacancies spiked in September after the collapse of Lehman Brothers and the eruption of the financial crisis.

Go for a long lease

“If you’ve got job, it’s a great time to be a renter and to sign the longest lease possible,” said Ron Johnsey, president of Axiometrics.com, a Dallas apartment data company.

BusinessWeek.com worked with Axiometrics to come up with a list of 25 large metros where rent declines accelerated most at the end of 2008. In Salt Lake City, where the economy had been holding up better than most cities, effective rents [including landlord concessions] fell 2.3 percent in the fourth quarter compared with the previous quarter. By comparison, rents were climbing 3.3 percent in the fourth quarter of 2007.

The New York metro area, including New York City and its New York and northern New Jersey suburbs, saw a 3.7 percent drop-off in effective rents in the fourth quarter [compared with a 0.5 percent increase in the fourth quarter of 2007], according to Axiometrics, which surveys landlords across the nation once a month.

The situation has changed dramatically in the expensive Manhattan market, where tenants are suddenly in control. The layoffs on Wall Street have forced landlords to cut rents; offer one, two, or even three months’ free rent; and pay the broker fee that the tenant would otherwise pay [often 12 percent of the annual rent].

Luxury high-rises hard hit

Vacancies are rising most in the high-end doorman buildings, particularly in the Financial District, said Daniel Baum, chief operating officer for the Real Estate Group NY, a residential sales and rental brokerage firm. But rents are falling all across Manhattan, in all price categories, he said. Some landlords have dropped rents as much as 20 percent to lure tenants, he said.

“The luxury high-rise market, especially new construction, is the one taking the worst hit,” Baum said. “There’s a building offering three months’ free rent in the Financial District.”

Victor Calanog, chief economist for apartment research firm Reis (REIS) said landlords nationwide are more motivated to cut rents than they were after the previous recession at the beginning of this decade. Landlords now are under pressure to keep tenants because vacancies are higher than they were in 2000 and so are the debt payments they need to cover. Too many vacancies, and some landlords are likely to face foreclosure, he said.

“I’ve never seen this kind of acceleration in decline,” Calanog said. “It’s somewhat sobering.”

 

Source: http://www.floridarealtors.org/NewsAndEvents/n4-012309.cfm

Eight tips for landing a mortgage

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WASHINGTON – Jan. 23, 2009 – Washington is doing all it can to get money flowing again in the housing sector. At around 5 percent, 30-year mortgage rates are at levels that haven’t been seen in, well, 30 years.

If you want to buy a home or refinance your existing loan, money is there. But would-be borrowers face new challenges they didn’t have during the housing boom. These include much tighter credit standards, fewer types of loans, and sinking property values that erase home equity. To figure out how to surmount some of these obstacles, we asked mortgage bankers and other real estate professionals for their tips on how to get a loan approved.

Here’s what they said:

1. Go to the government

Bank of America (BAC) does it. General Motors (GM) does it. Even AIG (AIG) does it. For home buyers, the biggest source of new loans has been government programs such as those run by the Federal Housing Administration [FHA] and the Veterans Administration [VA]. You can get such loans from almost any lender. Government-run programs will accept borrowers with lower credit scores and allow them to put as little as 3.5 percent of the purchase price down. There are local loan limits that knock out high-end home purchases, however. And borrowers will pay slightly more than with conventional lenders, due to mortgage insurance requirements.

2. Get your paperwork ready

No-documentation, low-documentation, stated-income, and “liar” loans are now – thankfully – relics of financial history. Gather all that documentation you hate to share. You’ll need to bring bank statements, brokerage statements, W-2 forms, and tax returns. Then, contact a lender to get prequalified for a new home purchase. That will help in your house hunting because you’ll know how much you can afford and you’ll look better to sellers who’ll know you have the financial firepower to close.

3. Get out of that adjustable-rate loan

With rates lower, it’s an excellent time to ditch those hybrid, optional-payment, adjustable-rate loans that will likely have you paying a lot more down the road when interest rates rise, if they haven’t done that already. “If you’re looking long-term, rates are so ridiculously low, I would do everything in your power to get refinanced,” says David Reed, a mortgage banker in Austin, Tex., and author of An Insider’s Guide to Refinancing Your Mortgage. “Get into a fixed-rate loan and get that [adjustable] equation out of your head.”

4. Consider paying up front to lower rates

With home prices sliding, having enough equity to qualify for the lowest rates can be an issue. David Kittle, a mortgage banker in Louisville, and chairman of the Mortgage Bankers Assn., says one of his customers recently missed qualifying for the lowest rate because an existing $7,000 home-equity loan knocked her from having 30 percent equity in her home to having 25 percent equity. By paying a $900 fee up front – 0.25 points, in industry jargon – she was able to get the loan that dropped her rate from 6.5 percent to 5 percent.

5. Boost your credit score

Credit scores matter more than ever, says Jason Bloom of Elliot Bay Mortgage in Bellevue, Wash. A few points weren’t a big issue during the boom. Now they can make a significant difference in your payments. Bloom says some steps you can take to improve your score are as simple as making sure you don’t have more than one-third of your maximum borrowing capacity outstanding on one credit card. Rather than cancel that old Macy’s (M) or Chevron (CVX) credit card you’ve left lying around, use them to make a few purchases. “I consider that like rotating your tires,” Bloom says.

6. Keep making those payments

There’s a school of thought that if you want to get your present lender to lower your payment – what bankers call a loan modification – the best way to get their attention is to stop making payments. Don’t do it, says Valerie Saunders, a mortgage banker in Clearwater Beach, Fla. Missing a payment by more than 30 days can have a huge impact on your credit score. You are much better off at least trying to refinance or negotiate a lower rate without being delinquent. “Your credit is something you control,” Saunders says. “A loan modification is something you can’t.”

7. Use the Web

Scott Happ, who runs the MortgageMarvel.com search site, figures there are now 1,000 lenders, from the Hudson Valley Federal Credit Union to Citigroup, that will give you rate and fee quotes online. Even so, Happ says, still try your local banks or, if you’re refinancing, your present lender. “They’re likely to know you best,” Happ says.

8. Don’t get too excited

Even with the recent dip in rates, if you’re thinking of refinancing you may find it easier just to keep your present loan. If your home fell in value, you may not have enough equity to qualify for the cheapest rates. If you’ve got an interest-only loan from a couple of years ago, notes Jeffrey Gundlach, chief investment officer of the TCW fund family, refinancing into a fully amortizing loan will likely increase your monthly payments.

 

Source: http://www.floridarealtors.org/NewsAndEvents/n3-012309.cfm

UF: Confidence in Florida real estate markets at new low

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GAINESVILLE, Fla. – An accelerating avalanche of bad economic news has swept over Florida real estate to sink confidence in the industry to its lowest level since a statewide survey of economic experts began three years ago, a new University of Florida report finds.

Name the segment of real estate – retail, offices, housing, condos and the consumer’s frame of mind – and the survey finds that with few exceptions belief in the market has sagged to lows seldom seen in the state, says Wayne Archer, executive director of UF’s Bergstrom Center for Real Estate Studies.

“The big news is that the recession and the latest shocks in the financial markets and automobile industry have finally taken their toll,” he says. “People not only foresee tough times in the short-term, but they’re also revising downward their longer-term future outlook.”

The most recent quarterly survey of Florida real estate trends completed in December suggests the investment outlook for various types of properties has sunk to depths not seen for three decades, Archer says.

“We’ve come a long ways down in three years to the point where we’re comparing the situation now to the recession of 1974,” he says. “What started with a mortgage crisis has spread to a general financial crisis and is now spreading to employment.”

The downturn in job rates has hurt retail more than any other real estate sector over the last quarter, Archer says. Except for free-standing big box stores, the investment outlook and rental occupancy rates are bleak for all forms of retail.

Growing fears on the part of consumers is contributing to the economic standstill, Archer believes. “You can’t pick up the newspaper without seeing another story about layoffs and I think that’s getting to consumers,” he says. “They’re prudently pulling in their financial resources, and as a result, things are dropping off very quickly on the retail front.”

A marked decline also is occurring with offices and is beginning to compete with retail in its severity, Archer says. As consumers buy less, one ripple effect is that firms are holding off on plans for growth and in some cases reducing staff to prepare for rough months ahead.

Falling Florida housing prices are expected to continue their decline, although surprisingly little change occurred in the sales volume of new homes, which is the component of the housing market the survey measures.

“I think there was some hope that housing prices had bottomed out three months ago, but it’s very clear now that we’re taking a lot more damage than anybody expected,” Archer says.

Expectations for condos can’t get much worse because things are already bad, Archer says. The condo market has always been volatile and is usually the first to suffer, sort of like the proverbial canary in a coal mine, he says.

“The financial problems are everywhere, but the state of the housing market and the employment picture varies significantly, with Gainesville perhaps the best off of the state’s metropolitan areas,” Archer says. “Generally, we see remarkably few foreclosures across North Florida compared to central and particularly South Florida.”

Lee County continues to be the “king” of foreclosures, with the Cape Coral-Fort Myers region experiencing the highest foreclosure rate among the nation’s metropolitan areas, and Osceola and St. Lucie counties suffering as well.

One positive sign is the recent dramatic increase in refinancing with the availability of 5 percent mortgage rates in mid-December, Archer says. If additional programs are put into place that allow 4.5 percent Federal Housing Administration mortgages for people who have difficulty making payments, it will do even more to stabilize the housing industry.

“In many cases, people haven’t been able to purchase because the financial system is paralyzed, and is either unwilling or unable to help them with transactions,” he says. “With no offers coming in, people who want to sell houses can’t sell them, and the prices go down.”

Apartment occupancy, which was up the previous quarter, reversed direction slightly in the most recent survey but is still more stable than other sectors of the real estate industry, Archer says. It could be that consumers are trying to save money by taking in roommates, creating less demand for apartment units, he says. “It’s a break for renters in being able to find better deals on apartments than they would have in the past.”

The latest survey – 13th in a series – is based on 381 responses, which is second only to the September survey with 392. The Survey of Emerging Market Conditions is the only Florida-centered survey of leaders and professional advisers in the real estate industry. In previous surveys, the investment outlook for various types of properties had remained steady.

 

Source: http://www.floridarealtors.org/NewsAndEvents/n3-012209.cfm