Owners who've seen a steep drop in their home's value shouldn't expect to get a break on their property taxes.
By Les Christie, CNNMoney.com staff writer
Last Updated: October 16, 2008: 2:48 PM ET
NEW YORK (CNNMoney.com) -- Housing prices have plummeted, but property tax bills probably won't budge.
This January, local tax authorities will begin to send out property assessments for 2009, telling homeowners what their property is valued at, and how much their tax bill is.
But many assessments won't reflect any of the steep home price declines that have been making headlines for the last year or so.
And even if property assessments do drop, property tax bills won't necessarily be any lower.
"I think you're going to see a lot more taxpayer protest this year," said Bruce Hahn, president of the American Homeowners foundation, a non-partisan consumer advocacy group.
A huge runup slows
Property taxes climbed relentlessly earlier this decade as home prices rose, according to Pete Sepp, spokesman for the National Taxpayers Union. This year Americans will pay more than $400 billion in property taxes, up about 25% from levels in 2004 and double what they paid ten years ago.
At best, says Sepp, those steep increases may start to level off.
Nevertheless, homeowners are already pressing assessors for lower tax assessments.
"For my first 25 years [as an assessor], nobody ever asked me to lower the assessment based on a home selling for less down the street. There are many such inquiries this year," said Ken Wilkinson, the tax assessor for Lee County Fla., which includes Cape Coral and Ft. Myers.
He estimates that 80% of county residents have seen the value of their homes decline. The median price of existing homes fell more than 25% in the 12 months ending June 30, according to the Housing Opportunity Index compiled by Wells Fargo (WFC, Fortune 500) for the National Association of Home Builders.
Home prices in Moreno Valley, Calif. a city of 187,000, have fallen by more than a third over the past two years, according to the same index. And that has many more homeowners clamoring for reassessments, according to Barry Foster, the city's economic development director.
But even if local prices are way down, taxpayers may not win a lower assessment, because there can be a big lag time between when the home sales used to calculate them take place and when the assessment is actually issued.
To calculate 2009 assessments, for example, assessors will use home sale prices from 2008 or even earlier, according to Sepp. Usually this works to taxpayers's advantage, since price increases take a while before they are fully reflected in assessments.
That's why it's typical for most homes to be under-valued, according to Bruce Hahn of the American Homeowners foundation. But that's also why many homeowners aren't likely to see their assessments shrink immediately.
Lower values, same bill
There's another reason why homeowners are unlikely to see any decrease in property tax bills. In some states, such as California, Washington State, Massachusetts and Idaho, taxes are based on the last resale price of the house. Even a home worth $500,000 in California may be taxed based on the sale price when it was bought 10 years earlier for $200,000.
"Because the assessment is based on acquisition value, it's difficult to get that re-evaluated," said Sepp.
That's why the market value of most homes in these states exceeds the assessed tax values. The owners with best case for a reassessment are the ones who bought at the top of the market and have seen their values drop by a third or more, like many of Moreno Valley's residents.
Even if citizens do receive a lower assessment - and this year Wilkinson expects to lower assessments for most taxpayers in Lee county, Fla., by 20% or more - their property tax bill may not shrink at all.
Tax collectors often raise tax rates to offset lower assessments to meet their budgets, which will be very strained this year. Assessments go down but rates go up so that the tax collections stay roughly the same.
"State and local governments depend very heavily on real estate taxes and they are reeling from a loss of revenues from sales taxes and other sources," said Bruce Hahn.
Once homeowners get their bills, they'll have several weeks to contest their assessments, according to Hahn.
He suggested they go online to real estate evaluation sites such as Zillow.com to determine how far property values have fallen in their communities. They can also cite comparable home sales for similar properties to make their cases.
"Some tax assessors have been very reasonable," said Hahn, "but others are under great pressure to keep revenues up."
Friday, October 17, 2008
Homebuilders: Confidence falls sharply
The National Association of Home Builders blames the financial crisis for the new low.
Last Updated: October 16, 2008: 2:18 PM ET
LOS ANGELES (AP) -- The business outlook among homebuilders plunged to an all-time low this month, as the U.S. financial crisis further sapped their confidence in a near-term housing market recovery, an industry trade association said Thursday.
The National Association of Home Builders/Wells Fargo housing market index, started in January 1985, tumbled three points to 14 in October. The index stood at 17 in September after registering a one-point increase in August.
Index readings higher than 50 indicate positive sentiment about the market. But the index has drifted below 50 since May 2006 and below 20 since April.
The Washington-based association said the latest builders' survey reflects its members reaction to the financial woes on Wall Street, rising unemployment and weakness in consumer confidence.
The group called on lawmakers to enact an economic stimulus package with incentives for homebuyers.
"The impacts of the record-breaking housing contraction have spilled over to other key sectors of the economy and weighed heavily on financial markets, and stabilizing housing is now the best chance we have to limit the severity of recession," NAHB Chief Economist David Seiders said.
Builders have been hurting from the combination of falling home prices, less demand for new and preowned homes, tighter lending standards and a torrent of foreclosed properties competing for buyers.
Major public builders such as D.R. Horton Inc. (DHI, Fortune 500), Lennar Corp. (LEN, Fortune 500), and Toll Brothers Inc. (TOL, Fortune 500), have seen their stocks hammered as housing woes have deepened.
A housing stimulus package signed into law by President Bush this summer failed to spark the kind of home buying spree many builders had hoped for. Some major builders have said the plan's temporary $7,500 tax credit for first-time home buyers was ill-conceived because it essentially worked out to a 15-year, interest-free loan.
Some builders also decried the cancellation this month of programs that let sellers channel down payment money to cash-strapped home buyers via charities. The programs were eliminated by Congress because homebuyers who used them had high default rates.
The latest index marks deepening pessimism among builders in just a few weeks. Last month, the trade association's president, Sandy Dunn, waxed far more optimistic, remarking that builders were sensing home sales were nearing a turning point.
At the time Seiders projected sales would likely stabilize by year-end.
Builders' October survey responses reflected a far less rosy outlook.
Their gauge of current sales conditions fell three points to 14, traffic by prospective buyers dropped two points to 12, and sales expectations over the next six months plunged nine points to 19, the NAHB said.
Declines in builder confidence were seen across the United States, with the biggest drops in the Northeast and South, where confidence declined by four points.
The index reflects a survey of 446 residential developers nationwide, tracking builders' perceptions of current market conditions and expectations for home sales over the next six months.
Shares of Fort Worth, Texas-based D.R. Horton fell 62 cents, or 8.5%, to $6.70 in morning trading Thursday.
Miami-based Lennar's shares were down 53 cents, or 6%, to $8.23, while shares of Toll Brothers were down $1, or 5.4%, to $17.62.
Last Updated: October 16, 2008: 2:18 PM ET
LOS ANGELES (AP) -- The business outlook among homebuilders plunged to an all-time low this month, as the U.S. financial crisis further sapped their confidence in a near-term housing market recovery, an industry trade association said Thursday.
The National Association of Home Builders/Wells Fargo housing market index, started in January 1985, tumbled three points to 14 in October. The index stood at 17 in September after registering a one-point increase in August.
Index readings higher than 50 indicate positive sentiment about the market. But the index has drifted below 50 since May 2006 and below 20 since April.
The Washington-based association said the latest builders' survey reflects its members reaction to the financial woes on Wall Street, rising unemployment and weakness in consumer confidence.
The group called on lawmakers to enact an economic stimulus package with incentives for homebuyers.
"The impacts of the record-breaking housing contraction have spilled over to other key sectors of the economy and weighed heavily on financial markets, and stabilizing housing is now the best chance we have to limit the severity of recession," NAHB Chief Economist David Seiders said.
Builders have been hurting from the combination of falling home prices, less demand for new and preowned homes, tighter lending standards and a torrent of foreclosed properties competing for buyers.
Major public builders such as D.R. Horton Inc. (DHI, Fortune 500), Lennar Corp. (LEN, Fortune 500), and Toll Brothers Inc. (TOL, Fortune 500), have seen their stocks hammered as housing woes have deepened.
A housing stimulus package signed into law by President Bush this summer failed to spark the kind of home buying spree many builders had hoped for. Some major builders have said the plan's temporary $7,500 tax credit for first-time home buyers was ill-conceived because it essentially worked out to a 15-year, interest-free loan.
Some builders also decried the cancellation this month of programs that let sellers channel down payment money to cash-strapped home buyers via charities. The programs were eliminated by Congress because homebuyers who used them had high default rates.
The latest index marks deepening pessimism among builders in just a few weeks. Last month, the trade association's president, Sandy Dunn, waxed far more optimistic, remarking that builders were sensing home sales were nearing a turning point.
At the time Seiders projected sales would likely stabilize by year-end.
Builders' October survey responses reflected a far less rosy outlook.
Their gauge of current sales conditions fell three points to 14, traffic by prospective buyers dropped two points to 12, and sales expectations over the next six months plunged nine points to 19, the NAHB said.
Declines in builder confidence were seen across the United States, with the biggest drops in the Northeast and South, where confidence declined by four points.
The index reflects a survey of 446 residential developers nationwide, tracking builders' perceptions of current market conditions and expectations for home sales over the next six months.
Shares of Fort Worth, Texas-based D.R. Horton fell 62 cents, or 8.5%, to $6.70 in morning trading Thursday.
Miami-based Lennar's shares were down 53 cents, or 6%, to $8.23, while shares of Toll Brothers were down $1, or 5.4%, to $17.62.
Mortgage rates spike - leap size tops '87
Rates saw the biggest weekly jump since 1987 - analysts predict 30-year fixed mortgage rates will climb higher, and pin the hike on government rescue efforts.
By Les Christie, CNNMoney.com staff writer
Last Updated: October 16, 2008: 6:22 PM ET
NEW YORK (CNNMoney.com) -- Low mortgage rates, the one bright spot in a devastated housing market, are on a rapid rise.
Freddie Mac reported Thursday that the average 30-year fixed-rate mortgage has hit 6.46% - up from 5.94% the week earlier. That represented the largest weekly increase since April 1987, when the 30-year rose 0.84 points.
Bankrate.com also charted the spike. The investment Web site reported that the average interest rate on a 30-year, fixed-rate mortgage jumped to 6.74% on Wednesday from 6.2% the Wednesday before.
Translation: A borrower with a $200,000 mortgage would pay about $1,225 a month at 6.2%, and $70 more, $1,295 at 6.74%.
Mike Larson, an analyst with Weiss Research who participates in Bankrate.com's weekly mortgage rate surveys, expects to see rates top 7% in the next six months, and then turn back down.
That would be quite a bit higher than rates have been, but it's no disaster.
Keith Gumbinger of HSH Associates, a publisher of mortgage information, attributes the rate increase to the massive federal bailout. To fund the rescue and the new government guarantees, Treasury must sell a raft of new Treasury bills to raise money.
"Who even has the cash to buy them all?" he said. "The Treasury has to offer higher interest rates to sell."
And mortgage rates tend to move in conjunction with those 10-year Treasury yields, which rose rapidly during the past week, up to more than 4% Wednesday from below 3.5% the week before.
The spread - the difference between Treasury yields and mortgage rates - also expanded a bit, according to Bankrate.com.
Unintended consequences
There may be another factor at work sending rates skyward, according to FTN Financial Group analyst, Jim Vogel.
The cost of financing mortgages will grow for the biggest buyers of mortgage debt, Freddie Mac (FRE, Fortune 500) and Fannie Mae (FNM, Fortune 500), thanks to the plan for the Federal Deposit Insurance Corp. to back the newly issued, unsecured debt of some banks.
By guaranteeing bank debt, the government is making that debt more attractive for investors, and consequently creating more competition for Fannie and Freddie when they look to sell their own securities. To compete for buyers, the mortgage giants will have to raise their own yields - and to pay for that they'll have to charge borrowers higher interest.
"In theory, I think that could be correct," said Mark Zandi, chief economist for Moody's Economy.com, who is also an adviser to John McCain's presidential campaign. "But in practice, whether it means that rates will rise is an open question. There's a strong demand for really safe assets these days and Fannie and Freddie bonds are just a step removed from Treasurys."
If there's enough demand for ultra-safe investments like Fannie and Freddie bonds, Zandi says, they may not have to boost their yields all that much to attract investors.
Zandi pointed out that the difference between Treasury yields and 30-year mortgage rates is very high right now, more than 2% compared with 1.5% normally. That's because investors fled to risk-free Treasurys when the markets panicked.
But eventually, he says, the government rescue may send mortgage rates down and narrow that spread. "If that helps bring down the general angst, than mortgage rates should fall," he said.
Gumbinger expects rates to stay higher for several more months, as financial markets and lending take some time to return to normal. But he doesn't see the current spike as the beginning of the end of affordable mortgages.
"Rates should probably settle back down," he said. "We should see an easing of credit availability and that should put downward pressure on rates."
By Les Christie, CNNMoney.com staff writer
Last Updated: October 16, 2008: 6:22 PM ET
NEW YORK (CNNMoney.com) -- Low mortgage rates, the one bright spot in a devastated housing market, are on a rapid rise.
Freddie Mac reported Thursday that the average 30-year fixed-rate mortgage has hit 6.46% - up from 5.94% the week earlier. That represented the largest weekly increase since April 1987, when the 30-year rose 0.84 points.
Bankrate.com also charted the spike. The investment Web site reported that the average interest rate on a 30-year, fixed-rate mortgage jumped to 6.74% on Wednesday from 6.2% the Wednesday before.
Translation: A borrower with a $200,000 mortgage would pay about $1,225 a month at 6.2%, and $70 more, $1,295 at 6.74%.
Mike Larson, an analyst with Weiss Research who participates in Bankrate.com's weekly mortgage rate surveys, expects to see rates top 7% in the next six months, and then turn back down.
That would be quite a bit higher than rates have been, but it's no disaster.
Keith Gumbinger of HSH Associates, a publisher of mortgage information, attributes the rate increase to the massive federal bailout. To fund the rescue and the new government guarantees, Treasury must sell a raft of new Treasury bills to raise money.
"Who even has the cash to buy them all?" he said. "The Treasury has to offer higher interest rates to sell."
And mortgage rates tend to move in conjunction with those 10-year Treasury yields, which rose rapidly during the past week, up to more than 4% Wednesday from below 3.5% the week before.
The spread - the difference between Treasury yields and mortgage rates - also expanded a bit, according to Bankrate.com.
Unintended consequences
There may be another factor at work sending rates skyward, according to FTN Financial Group analyst, Jim Vogel.
The cost of financing mortgages will grow for the biggest buyers of mortgage debt, Freddie Mac (FRE, Fortune 500) and Fannie Mae (FNM, Fortune 500), thanks to the plan for the Federal Deposit Insurance Corp. to back the newly issued, unsecured debt of some banks.
By guaranteeing bank debt, the government is making that debt more attractive for investors, and consequently creating more competition for Fannie and Freddie when they look to sell their own securities. To compete for buyers, the mortgage giants will have to raise their own yields - and to pay for that they'll have to charge borrowers higher interest.
"In theory, I think that could be correct," said Mark Zandi, chief economist for Moody's Economy.com, who is also an adviser to John McCain's presidential campaign. "But in practice, whether it means that rates will rise is an open question. There's a strong demand for really safe assets these days and Fannie and Freddie bonds are just a step removed from Treasurys."
If there's enough demand for ultra-safe investments like Fannie and Freddie bonds, Zandi says, they may not have to boost their yields all that much to attract investors.
Zandi pointed out that the difference between Treasury yields and 30-year mortgage rates is very high right now, more than 2% compared with 1.5% normally. That's because investors fled to risk-free Treasurys when the markets panicked.
But eventually, he says, the government rescue may send mortgage rates down and narrow that spread. "If that helps bring down the general angst, than mortgage rates should fall," he said.
Gumbinger expects rates to stay higher for several more months, as financial markets and lending take some time to return to normal. But he doesn't see the current spike as the beginning of the end of affordable mortgages.
"Rates should probably settle back down," he said. "We should see an easing of credit availability and that should put downward pressure on rates."
Commercial Briefs
MBA (10/13/2008 ) Murray, Michael
Centerline Capital Group, a New York-based commercial real estate investor, and ZAIS Group, a Red Bank, N.J.-based structured products manager, formed a new venture to pursue investments in the commercial mortgage-backed securities market. ZAIS Group spoke last summer with Centerline about co-investment opportunities. Both firms said attractive opportunities exist in the commercial real estate debt markets.
The new venture would allow Centerline to "deploy the capital necessary to realize the high-quality investment returns still available in the current marketplace,” said Mark Brown, senior managing director and head of CMBS and commercial products business group at Centerline Capital Group.
John Jardine, managing director at ZAIS Group, said the CMBS sector provides some of the best risk-adjusted returns in the commercial real estate investment market. “We believe the appropriate strategy is to focus on private, 144a securities, conduct a fundamental re-underwriting of every asset within a loan pool and leverage Centerline’s proprietary systems, exchanging real-time asset and market information with our servicing partner,” Jardine said.
Centerline Capital Group, a New York-based commercial real estate investor, and ZAIS Group, a Red Bank, N.J.-based structured products manager, formed a new venture to pursue investments in the commercial mortgage-backed securities market. ZAIS Group spoke last summer with Centerline about co-investment opportunities. Both firms said attractive opportunities exist in the commercial real estate debt markets.
The new venture would allow Centerline to "deploy the capital necessary to realize the high-quality investment returns still available in the current marketplace,” said Mark Brown, senior managing director and head of CMBS and commercial products business group at Centerline Capital Group.
John Jardine, managing director at ZAIS Group, said the CMBS sector provides some of the best risk-adjusted returns in the commercial real estate investment market. “We believe the appropriate strategy is to focus on private, 144a securities, conduct a fundamental re-underwriting of every asset within a loan pool and leverage Centerline’s proprietary systems, exchanging real-time asset and market information with our servicing partner,” Jardine said.
CMBS Delinquencies Consistently Rising
MBA (10/13/2008 ) Murray, Michael
Loan delinquencies in commercial mortgage-backed securities were up nearly 13 basis points after the first three quarters of this year to 0.52 percent—0.58 percent excluding defeasance loans, based on numbers from Citigroup Securities, New York.
CMBS delinquencies seem to be increasing each month as the credit crisis starts feeding into the general economy, said Darrell Wheeler, head of CMBS at Citigroup.
“The lack of new supply is also leading to a net run-off of outstanding balance, which would tend to raise the headline delinquency rate," Wheeler said. "However, the rate still remains low for now when compared to historical delinquency rates, and dramatically different from the high rates of the subprime residential market. If the economic slowdown is prolonged, we expect to see rising delinquency rates from these low levels, possibly to the 1 percent to 1.5 percent range in early 2009 and 2 percent to 3 percent sometime in 2010.”
However, Realpoint LLC, Horsham, Pa., said more than 35 percent of delinquent unpaid balances in CMBS through August came from transactions issued in 2005-2006 vintages, and more than 20 percent of all delinquencies were found in 2006 transactions.
With 13 percent total delinquency included in the 2007 vintage, more than 48 percent of CMBS delinquency in August came from 2005-2007 vintage transactions, Realpoint's research said.
Nearly 1.4 percent of 65,028 CMBS loans in Citigroup’s universe included delinquencies of 30, 60 and 90 days, one foreclosure and loans for special servicing. They accounted for more than $10 billion out of a total of more than $714.7 billion. Citigroup’s CMBS universe consists of publicly issued, fixed-rate CMBS conduit, fusion, lease-backed, large loan and seasoned loan transactions.
After five straight months of increases, Realpoint showed August’s delinquent unpaid balance for CMBS dropping slightly to $4.07 billion through from a trailing 12-month high of $4.203 billion through July. Special servicing exposure, however, increased to $6.88 billion in August from $6.45 billion in July for $10.95 billion in delinquencies and special servicing.
Total unpaid balance for all CMBS pools reviewed by Realpoint was $862.6 billion in August, down from $863.6 billion in July, with August's delinquency ratio at 0.47 percent, down slightly from 0.49 percent in July and 0.48 percent in June.
"What is more concerning, however, is that the delinquency percentage through August 2008 is up 18 basis points or 62 percent above the 0.29 percent reported one-year prior in August 2007. The increase in both delinquent unpaid balance and delinquency ratio over this time horizon reflect a slow but steady increase from historic lows through mid-2007," said Frank Innaurato, managing director at Realpoint.
CMBS delinquency by unpaid balance increased 29 percent from January’s $3.16 billion and up 84 percent from a six-year low of $2.21 billion in March.
“While both the 30-day and 60-day delinquent loan categories decreased, the distressed 90+-day, foreclosure and REO categories grew for the ninth straight month—up 43 percent since January 2008,” Innaurato said.
Delinquencies also increased in August along with $70.7 million in liquidations reported across 18 loans. Liquidation activity slowed after increases in June and July, due to slowdown from the current credit market climate.
“We expect that these high liquidations, however, are a clear response to increased loan workout and delinquency pressures being placed on special servicers, and may be a precursor to increased distressed asset money returning to the market,” Innaurato said.
Based on Realpoint’s numbers for August, highest loss severities in 2007 were found in industrial and healthcare collateral while multifamily collateral was highest by balance before liquidation. Citigroup showed multifamily as the only sector with current elevated delinquency rates at 1.6 percent in September.
“We recently wrote about the issues facing apartments under rent controls that were aggressively underwritten assuming conversion rates that have not materialized,” Wheeler said.
CMBS delinquencies in Michigan remained elevated at 2.50 percent as the domestic auto sector continued to struggle, but Tennessee and Georgia showed a spike in their rate during September as well, Citigroup said.
Texas, Florida and Michigan—the top three states ranked by delinquency exposure for the past 10 months through August—collectively accounted for 39 percent of CMBS delinquencies, based on Realpoint's research.
Loan delinquencies in commercial mortgage-backed securities were up nearly 13 basis points after the first three quarters of this year to 0.52 percent—0.58 percent excluding defeasance loans, based on numbers from Citigroup Securities, New York.
CMBS delinquencies seem to be increasing each month as the credit crisis starts feeding into the general economy, said Darrell Wheeler, head of CMBS at Citigroup.
“The lack of new supply is also leading to a net run-off of outstanding balance, which would tend to raise the headline delinquency rate," Wheeler said. "However, the rate still remains low for now when compared to historical delinquency rates, and dramatically different from the high rates of the subprime residential market. If the economic slowdown is prolonged, we expect to see rising delinquency rates from these low levels, possibly to the 1 percent to 1.5 percent range in early 2009 and 2 percent to 3 percent sometime in 2010.”
However, Realpoint LLC, Horsham, Pa., said more than 35 percent of delinquent unpaid balances in CMBS through August came from transactions issued in 2005-2006 vintages, and more than 20 percent of all delinquencies were found in 2006 transactions.
With 13 percent total delinquency included in the 2007 vintage, more than 48 percent of CMBS delinquency in August came from 2005-2007 vintage transactions, Realpoint's research said.
Nearly 1.4 percent of 65,028 CMBS loans in Citigroup’s universe included delinquencies of 30, 60 and 90 days, one foreclosure and loans for special servicing. They accounted for more than $10 billion out of a total of more than $714.7 billion. Citigroup’s CMBS universe consists of publicly issued, fixed-rate CMBS conduit, fusion, lease-backed, large loan and seasoned loan transactions.
After five straight months of increases, Realpoint showed August’s delinquent unpaid balance for CMBS dropping slightly to $4.07 billion through from a trailing 12-month high of $4.203 billion through July. Special servicing exposure, however, increased to $6.88 billion in August from $6.45 billion in July for $10.95 billion in delinquencies and special servicing.
Total unpaid balance for all CMBS pools reviewed by Realpoint was $862.6 billion in August, down from $863.6 billion in July, with August's delinquency ratio at 0.47 percent, down slightly from 0.49 percent in July and 0.48 percent in June.
"What is more concerning, however, is that the delinquency percentage through August 2008 is up 18 basis points or 62 percent above the 0.29 percent reported one-year prior in August 2007. The increase in both delinquent unpaid balance and delinquency ratio over this time horizon reflect a slow but steady increase from historic lows through mid-2007," said Frank Innaurato, managing director at Realpoint.
CMBS delinquency by unpaid balance increased 29 percent from January’s $3.16 billion and up 84 percent from a six-year low of $2.21 billion in March.
“While both the 30-day and 60-day delinquent loan categories decreased, the distressed 90+-day, foreclosure and REO categories grew for the ninth straight month—up 43 percent since January 2008,” Innaurato said.
Delinquencies also increased in August along with $70.7 million in liquidations reported across 18 loans. Liquidation activity slowed after increases in June and July, due to slowdown from the current credit market climate.
“We expect that these high liquidations, however, are a clear response to increased loan workout and delinquency pressures being placed on special servicers, and may be a precursor to increased distressed asset money returning to the market,” Innaurato said.
Based on Realpoint’s numbers for August, highest loss severities in 2007 were found in industrial and healthcare collateral while multifamily collateral was highest by balance before liquidation. Citigroup showed multifamily as the only sector with current elevated delinquency rates at 1.6 percent in September.
“We recently wrote about the issues facing apartments under rent controls that were aggressively underwritten assuming conversion rates that have not materialized,” Wheeler said.
CMBS delinquencies in Michigan remained elevated at 2.50 percent as the domestic auto sector continued to struggle, but Tennessee and Georgia showed a spike in their rate during September as well, Citigroup said.
Texas, Florida and Michigan—the top three states ranked by delinquency exposure for the past 10 months through August—collectively accounted for 39 percent of CMBS delinquencies, based on Realpoint's research.
Residential Briefs
MBA (10/13/2008 ) Palaparty, Vijay
Freddie Mac Suspends Foreclosures Hurricane in Ike Areas
Freddie Mac, McLean, Va., ordered servicers to suspend all foreclosure sales on properties with Freddie Mac-owned mortgages in federally declared disaster areas caused by Hurricane Ike in Texas and Louisiana. The suspension will extend from October 8 to December 31 and include mortgages that were in default prior to Hurricane Ike.
Servicers will be required, after the suspension ends, to consider individual circumstances in determining whether to extend additional foreclosure relief or to proceed with foreclosure. The announcement only applies to properties with Freddie Mac-owned mortgages in Texas or Louisiana counties, municipalities or parishes that were declared federal disaster areas and where federal aid in the form of individual assistance is available.
HUD Hosts Regional Housing Summits
HUD will host three regional housing summits across the country to help launch HUD's new Neighborhood Stabilization Program. It will invite state, city and county leaders to address the country's urgent and long-term housing issues including how to deal with abandoned foreclosed properties within their communities. The summits will take place on October 10 in Los Angeles; October 14 in Columbus, Ohio; and October 16 in Orlando.
Freddie Mac Suspends Foreclosures Hurricane in Ike Areas
Freddie Mac, McLean, Va., ordered servicers to suspend all foreclosure sales on properties with Freddie Mac-owned mortgages in federally declared disaster areas caused by Hurricane Ike in Texas and Louisiana. The suspension will extend from October 8 to December 31 and include mortgages that were in default prior to Hurricane Ike.
Servicers will be required, after the suspension ends, to consider individual circumstances in determining whether to extend additional foreclosure relief or to proceed with foreclosure. The announcement only applies to properties with Freddie Mac-owned mortgages in Texas or Louisiana counties, municipalities or parishes that were declared federal disaster areas and where federal aid in the form of individual assistance is available.
HUD Hosts Regional Housing Summits
HUD will host three regional housing summits across the country to help launch HUD's new Neighborhood Stabilization Program. It will invite state, city and county leaders to address the country's urgent and long-term housing issues including how to deal with abandoned foreclosed properties within their communities. The summits will take place on October 10 in Los Angeles; October 14 in Columbus, Ohio; and October 16 in Orlando.
Declining Economy Puts Brakes on Remodeling
MBA (10/13/2008 ) Palaparty, Vijay
Remodeling activity among homeowners declined 15 percent this year—mostly in areas where homeowners have less equity—according to a report from Remodelormove.com, Sunnyvale, Calif. Eighty-four percent of respondents said possibility of a recession affected their remodeling plans.
Homeowners reported an average of $190,000 in home equity and average home value of $390,000—up by $140,000 and $342,000 respectively. The report, 2008 Remodeling Sentiment Report, corresponded with the U.S. Remodeling Permit Activity Report, also from Remodelormove.com, which showed an increase in the average cost of a remodel in markets with most expensive homes and a decrease in regions with average- and below average-priced homes.
“Homeowners who choose to remodel their homes may find this a good time,” said Dan Fritschen, real estate author and principal researcher. “With new home construction at low levels, more materials and labor are available for remodeling than several years ago, resulting in shorter project schedules and often lower project costs.”
Eighty-one percent of respondents said they plan to start their home remodel this year nonetheless.
Decline in home equity line of credit originations could be one reason for the slowdown. Benchmark Consulting International, Atlanta reported a 26.4 percent decrease in HELOC originations between the first and second quarters among small/medium-sized lenders. Applications decreased 33.8 percent, though from a book-to-look perspective, borrowers' interest found renewal in the second quarter, with the rate rising by 5 percent to 49 percent from 44 percent in the first quarter.
“With tightening of credit standards, tougher underwriting guidelines and less direct marketing focus, it is understandable why applications are down so significantly,” said Brian King, senior vice president at BenchMark Consulting.
In July, Harvard University’s Joint Center for Housing Studies reported a decline at an annual rate of 11.1 percent in home improvement activity.
Nicolas Restinas, director of the Joint Center for Housing Studies said the slumping economy and struggling housing sector will drag spending on home improvements. “Households are reluctant to undertake major improvements in the context of falling prices,” he said.
McGraw-Hill Construction, New York, however, reported that building green is advantageous, even in a down market. Forty percent of builders reported that building green eases marketing; 16 percent said it is much easier.
“Green building has definitely reached its upper tipping point,” said Harvey Bernstein, vice president of industry analytics, alliances and strategic initiatives at McGraw-Hill Construction. “Builders can no longer ignore the market advantages of green building. Especially considering today’s market and current economic situation, builders need to differentiate themselves from their competitors and hold steady or prosper in the down economy. Green building gives builders opportunity to expand their market share and ride out this economic slump.”
In 2009, 21 percent of builders expect 90 percent of projects to be green and that 60 percent of homebuyers will pay more for green homes.
Remodeling activity among homeowners declined 15 percent this year—mostly in areas where homeowners have less equity—according to a report from Remodelormove.com, Sunnyvale, Calif. Eighty-four percent of respondents said possibility of a recession affected their remodeling plans.
Homeowners reported an average of $190,000 in home equity and average home value of $390,000—up by $140,000 and $342,000 respectively. The report, 2008 Remodeling Sentiment Report, corresponded with the U.S. Remodeling Permit Activity Report, also from Remodelormove.com, which showed an increase in the average cost of a remodel in markets with most expensive homes and a decrease in regions with average- and below average-priced homes.
“Homeowners who choose to remodel their homes may find this a good time,” said Dan Fritschen, real estate author and principal researcher. “With new home construction at low levels, more materials and labor are available for remodeling than several years ago, resulting in shorter project schedules and often lower project costs.”
Eighty-one percent of respondents said they plan to start their home remodel this year nonetheless.
Decline in home equity line of credit originations could be one reason for the slowdown. Benchmark Consulting International, Atlanta reported a 26.4 percent decrease in HELOC originations between the first and second quarters among small/medium-sized lenders. Applications decreased 33.8 percent, though from a book-to-look perspective, borrowers' interest found renewal in the second quarter, with the rate rising by 5 percent to 49 percent from 44 percent in the first quarter.
“With tightening of credit standards, tougher underwriting guidelines and less direct marketing focus, it is understandable why applications are down so significantly,” said Brian King, senior vice president at BenchMark Consulting.
In July, Harvard University’s Joint Center for Housing Studies reported a decline at an annual rate of 11.1 percent in home improvement activity.
Nicolas Restinas, director of the Joint Center for Housing Studies said the slumping economy and struggling housing sector will drag spending on home improvements. “Households are reluctant to undertake major improvements in the context of falling prices,” he said.
McGraw-Hill Construction, New York, however, reported that building green is advantageous, even in a down market. Forty percent of builders reported that building green eases marketing; 16 percent said it is much easier.
“Green building has definitely reached its upper tipping point,” said Harvey Bernstein, vice president of industry analytics, alliances and strategic initiatives at McGraw-Hill Construction. “Builders can no longer ignore the market advantages of green building. Especially considering today’s market and current economic situation, builders need to differentiate themselves from their competitors and hold steady or prosper in the down economy. Green building gives builders opportunity to expand their market share and ride out this economic slump.”
In 2009, 21 percent of builders expect 90 percent of projects to be green and that 60 percent of homebuyers will pay more for green homes.
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